Mortgage Tips
NEW MORTGAGE RULES: AMORTIZATION
February 24, 2011
by Luke Wile, Calgary Mortgage Broker
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Maximum amortization period will be capped to 30 years from 35 years.
Affect on the borrower:
The change in amortization affects the home affordability in Canada. For some clients, a difference of over $27,000 on a $400,000 purchase price will not affect their future purchase. For others on a more fixed budget, the increase in amortization may place a stumbling block in their buying plans.
THINGS TO KNOW
An estimated 30% of new mortgages last year had 35-year amortizations, with first-time homebuyers being the most common clientele. Borrowers need to arrange signed lender approval by Thursday, March 17 to fall under today’s mortgage rules. Being pre-approved is not good enough. Current mortgages will not be affected.
FLEXIBLE DOWN PAYMENT OPTIONS
October 20th, 2010
by Luke Wile, Calgary Mortgage Broker
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A common question asked by my clients is, besides savings and investments, how else can I come up with enough money for a down payment? Saving enough cash to purchase a home can be difficult or even impossible for many people – despite being able to easily make monthly payments towards a mortgage.
Other Down Payment Options
Unsecured line of credit – up to 5% of purchase price Lender cash back – up to 5% of purchase price Secured lines of credit Monetary gift from a family member
Things to Know
- The above options are only for owner-occupied properties
- A lender assisted down payment does not have to be paid back, however it may result in a higher mortgage interest rate.
- The minimum down payment required for all home buyers is 5%
NEW TO CANADA?
October 14th, 2010
by Luke Wile, Calgary Mortgage Broker
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One of the most professionally satisfying transactions I do is helping individuals and families that have recently immigrated to Canada through the ABC’s of purchasing their first home. Through my extensive lender relationships, I can offer newcomers access to mortgage products with low down payments, regardless of their immigration status.
Things to Know
- Mortgage options are available to both permanent and non-permanent residents
- Clients must have a valid work permit or obtained landed immigrant status
- Minimum of three months full-time employment in Canada is required (corporate transfers exempt)
- Down payment of 5-10%
- Borrowers with diplomatic immunity are not eligible
- Canadian credit bureau is recommended; alternative alternative credit sources may be considered. Where available, lenders will obtain an international credit report. If not obtainable, lenders may request a letter of merit from the client’s financial institution in their former country of residence.
Best Advice?
At my brokerage, we have mortgage specialists that can speak French, Hindi, Punjabi, Russian, Spanish, Tagalog (Filipino), and Urdu. Even if English is not your first language, I can assist them with their financing needs, and with the help of my team, ensure they understand the entire process.
PURCHASE PLUS IMPROVEMENTS
September 21, 2010
by Luke Wile, Calgary Mortgage Broker
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Is your client having trouble finding the perfect home because they can’t live with the pink toilets, outdated kitchen or built-in fish tank? Consider talking to them about a Purchase Plus Improvements mortgage option to help them afford their renovations.
How it works
A Purchase Plus Improvements mortgage allows clients to purchase a home with a 5% down payment and finance renovations up to 10% of the current value of the property (some exceptions are available for renovations exceeding 10%). After a conditional purchase offer has been made, the client collects an estimate by a contractor for the improvements. During the mortgage application process, the client submits the list of planned renovations and contractor estimates to be approved by the lender.
Example
After a quick assessment with a mortgage broker, your client can afford a $330,000 home. If they want to purchase then renovate, search for a home between $270,000-300,000 to meet the $330,000 value.
Things to consider
- Make the conditional period longer than normal after making a purchase offer, to ensure enough time for a contractor estimate.
- Clients that choose to do improvements without a contractor must still get cost estimates for products used in the renovations and will not be reimbursed for their labour.
- Upon completion of the renovations, an inspection may be required by the lender at the cost of the client.
Common Misconceptions
- The owner is given funds upfront to renovate from the lender.
After submitting proof of payment, the client is reimbursed by the lender upon completion of the renovations.
- Purchase Plus Improvements mortgages are only available to owner-occupied homes.
This mortgage option is also available for secondary homes, like cabins and vacation properties.
- Improvements can only be made to existing properties.
Clients buying new construction homes can also finance additional upgrades not included by their builder.
AFTER THE HOUSE SELLS
September 14, 2010
by Luke Wile, Calgary Mortgage Broker
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One of the reoccurring questions I get from clients is, now that my home is sold, what do I do with my existing mortgage?
To make life easier for you, here is the basic run-down of what a seller needs to know about their current mortgage.
1. Porting a Mortgage – This allows the borrower to move to a new property without losing their existing interest rate and avoiding payout penalties. Each lender has their own policies for mortgage portability, but it is a built-in option many home owners do not know about, saving them money in the home transition process.
2. Blending Rates – Here’s another mortgage porting option for borrowers. If the current mortgage is not enough to cover the purchase of a new home, lenders will increase the mortgage amount and blend the new interest rate with the existing.
3. Payout and start over – If current interest rates are better today, it may be worthwhile for borrowers to payout their existing mortgage and pay early discharge penalties.
Early cancellation penalties:
- variable mortgages: borrowers are charged three months of interest
- fixed mortgages: borrowers are required to pay either three months of interest or an interest rate differential (IRD), whichever is greater. The IRD is calculated as the difference between the existing rate and the rate for the term remaining, multiplied by the principal outstanding and the balance of the term.
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