Mortgage Broker advantage

The Mortgage Broker Advantage

 

Increasingly, Canadians are turning to mortgage brokers for their first and next mortgage, taking advantage of the value and convenience of their services.  A 2011 study conducted by CMHC (Canada Mortgage & Housing Corp) found that 48 per cent of first-time buyers completed their transaction with a mortgage broker, up from 45 per cent in 2009 and 35 per cent in 2007.

 

One of their most compelling reasons to work with a mortgage broker is that they have access to a wide range of lending sources, making it significantly easier to match borrowers with the mortgage product that best suits them. When you’re dealing directly with one financial institution, you just don’t know if you’re getting the best deal because they’ve only got their own menu of products to offer you.

Michelle Natareno
Mortgage Agent
519-675-8798

Watch out for the collateral charge Mortgage

Watch out for the collateral charge mortgage.

It sounds like a good idea… and sometimes it is. A “collateral charge mortgage” is offered by several Canadian banks. Here’s how it works: the bank registers the mortgage for more than the value of the home at closing. The benefit: it can be easier to tap into your equity later. However, it also has the effect of, well, locking you in to the lender.

We’re not always big fans of the collateral charge mortgage – because we’re all about keeping your options open. Collateral charge mortgages are very difficult to transfer to another lender. So you might see a great rate or mortgage feature at another lender… but it’ll cost you; generally, you would need to start from the beginning and pay new legal fees.

The reason so many Canadians are choosing independent mortgage brokers is for choice and expertise. We don’t believe that lenders should tie the hands of home buyers. Not sure what your lender has offered you, or want a second opinion? Give us a call. Maybe you’ve got a good deal. Or maybe not!

Michelle Natareno

Mortgage Agent

519-675-8798

Will You pay a penalty if you transfer your mortgage?

Switching mortgage lenders for a lower rate

 

With today’s historically low rates, many Canadian homeowners are looking for advice as to whether they should move their mortgage for a better rate. You can switch to another lender at any time, although renewal is often when homeowners decide to transfer their mortgage.  Some typical questions you may have:

 

Will I pay a penalty if I transfer my mortgage?

There are no fees or payout penalties if you switch at mortgage renewal, otherwise there likely will be a penalty, although often paying the penalty to get a lower rate can save thousands.

If there is a penalty, what will it be?

Generally, you can expect to pay the greater of either a) three months’ interest, or b) the interest-rate differential (IRD). With the IRD, your lender will expect you to pay the equivalent of what they will lose by releasing you from your mortgage and lending the money at current rates.  Often penalties can be rolled into the new mortgage so you don’t have to be out of pocket. 

 

What happens when I transfer my mortgage?

Once you are qualified, your current mortgage balance and remaining amortization period are transferred to your new lender at the new rate, which your mortgage payment will be based on. 

 

Can I use this opportunity to increase my mortgage for some needed funds?

Yes. Without incurring fees, our lenders will permit you to add on to the new mortgage as long as you don’t exceed the original mortgage amount.  Although each lender is different, you can typically add $2,000 and in some cases $5,000. You also have the option of a total refinance if you need more, but you will be subject to fees similar to those incurred with registering a new mortgage.

 

How long before my mortgage renewal date should I start the process?

You should think about switching your mortgage 120 days before your mortgage renewal. Many lenders provide a 120-day rate guarantee.  This also provides ample time to complete the process and avoids any last minute decisions.

 

A common myth is that switching your mortgage for a better rate is difficult. It’s actually an easy mortgage transaction. Let me show you how!

Michelle Natareno

Mortgage Agent

519-675-8798

It may be time for a Mortgage Review

It may be time for a Mortgage Review!

Life doesn’t stand still, which means your mortgage needs may have changed. Here are some reasons to bring your mortgage in for a professional review:

1.      You’re ready to buy – next home, investment property or vacation home.

2.      You’ve got too much high-interest debt. 

3.      You want to discuss how you can pay your mortgage off faster.

4.      If you are going through a separation or divorce.

5.      You are interested in your renovation financing options to create your dream home.

6.      You want to discuss a new variable, fixed or hybrid mortgage – part fixed and part variable.

7.      You have a major expense.

If you haven’t had a professional look at your mortgage in the last 12 months, give us a call so we can set up a no-obligation review!

Michelle Natareno

Mortgage Agent

519-675-8798

Smart debt management gives first-time homebuyers an edge

Smart debt management gives first-time homebuyers an edge

 

Warning bells that Canadians are too overextended on debt might be keeping some potential buyers up at night. Although home debt is ‘smart’ debt, it’s a huge financial decision and there is a lot to think about. That’s why professional advice is recommended when making one of the most important financial decisions that most Canadians will make in their lifetime. 

 Homebuyers want to take advantage of today’s low rate environment but it’s hard to sort through all of the options out there and get the right combination of mortgage features, privileges and rate that is best matched to their needs. The right mortgage goes beyond just the rate--it’s important to also consider term, prepayment options, refinancing penalties, restrictions, and fees.

Good planning for the purchase of a new home is also essential, especially for first-time homebuyers who may be tempted to over-stretch their capacity.  Work with a mortgage broker to build your home buying budget that includes considerations of your lifestyle, closing costs, and home ownership costs beyond the monthly mortgage payment. Having a realistic budget to start will bring you confidence, knowing that you are not overextending yourself.

As for the all-important downpayment, there are a few options to consider for first-time homebuyers who may have smaller amounts to start:

1. The Home Buyers' Plan (HBP) - first-time homebuyers can withdraw individually $25,000 or $50,000 with a spouse tax-free from their RRSPs, provided they adhere to the repayment plan.
2. Gifted downpayment from a parent or blood relative – can be a source of funds as long as the homebuyer receives in writing that they are not required to pay the money back at any time. 
3. Start off small – the dream house may be priced too high, so a starter home might be the right option for a first-time homebuyer. A smaller home or maybe a house just outside of the expensive area will help get a foot in the door. The homebuyer can take advantage of the low interest rates to pay off the home quicker and use the equity from the first home to buy the dream home later.

 

Mortgage brokers can also provide strategies that will help you pay the mortgage off faster and shave thousands off interest costs. For instance, your broker may advise you to set your payments now at rates that could be expected at your renewal date so you pay down more principal and don’t experience payment shock should rates be higher at renewal. 

 

There’s so much to consider. Professional advice can get you into the market to start your wealth building with smart debt and can save you thousands over the course of your mortgage.

 

Michelle Natareno

Mortgage Agent

519-675-8798

 

 

Financial Rock and Roll!

Financial Rock. And Roll.

We all want a solid financial rock under our feet when we retire. The problem is… it can be hard to save for retirement, especially if you are struggling to pay a mortgage, car loan and credit card debt.

The solution? Roll it up. You may be able to roll your existing high interest debt into your mortgage. You’ll be shocked by what you can save in interest.

Let’s say you now have a $175,000 mortgage, a $25,000 car loan and $25,000 in credit cards. That’s a total debt load of $225,000.

As long as you’ve got the equity in your home, you can roll that debt into a new $233,000 mortgage (that includes a charge to break the existing mortgage: a fee that is often well worth the savings) and you could knock about $921 OFF your total monthly debt payment. That’s huge.

Here’s where you can start building your financial rock:

Talk to us about adding an additional $25,000 to your mortgage so you can make an RRSP contribution (assuming you have contribution room).  Even with the extra amount on your mortgage, your new monthly payment is STILL $803 per month less. Better still, you’ll be eligible for a $10,000 tax refund for your contribution (assuming a 40% marginal tax bracket).

Now that you’ve got a lower monthly payment and maybe a tax refund, see if you can put some of that extra money against your mortgage principal or into an RESP or TFSA.  Roll up your debt. Build your financial rock for retirement. That’s rock and roll, baby!

*3.5% current mortgage, 3% new mortgage, 25 year am. Credit cards 19.5% and car loan 7%, both at 5 year am. OAC. Subject to change. For illustration purposes only.

 

 

Michelle Natareno

Mortgage Agent

59-675-8798

michelle@4dfinancial.com

 

Never Miss Great Tax-Time Freebies!

Never miss great tax-time freebies!

Here are two tax-time advantages available for upcoming first-time buyers and those who took the plunge last year.

1. The 90-day boost. If you’re buying your first home now and it’ll be at least 90 days before your move, let’s talk. The Federal Home Buyers’ Program (HBP) and a tax refund can boost the funds you have available for your purchase. First, make as big an RRSP contribution as you can – up to your contribution limit or $25,000 per person. You can even use your downpayment savings for this.  Big RRSP contribution means a great 2014 refund. Then, after 90 days, you can go back into your RRSP and redeem your contribution under the HBP program. So you’ve got your original downpayment funds back PLUS a nice fat tax refund. You’ll need to pay the withdrawn funds back on a repayment plan, but this strategy can make a substantial difference in the affordability of home ownership!
2. $750 for first-time buyers. Don’t leave money on the table if you bought your first home last year! You may be able to take advantage of the Home Buyers Tax Credit (HBTC) when you file your tax return. The $5,000 non-refundable HBTC provides up to $750 in federal tax relief. You qualify if neither you nor your spouse (or common-law partner) have owned and lived in another home for the past five years. For more information, visit the Action Plan website at www.actionplan.gc.ca/en/initiative/first-time-home-buyers-tax-credit.

 

Michelle Natareno

Mortgage Agent

519-675-8798