Category: Mortgage loans

What Every Canadian Must Know About Top Mortgage Rules This 2018

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Changes in mortgage rules in Canada have been made effective since January 2018. These will affect every Canadian who plans on buying a new home for this year and the years to come up until new rules will be implemented in the future. While there are many changes that have been implemented, a few of the major ones that you should take note of when going for a mortgage are the following:

Loan to value ratio must be improved by lenders

This rule applies to mortgage lenders other than credit unions and private mortgage lenders. Alongside having a more improved loan to value ratio, these lenders must also be aware of the critical risks they will be exposed to when lending. It is important for them to learn how to respond to these risks in an appropriate manner. As soon-to-be Canadian homeowners, you must take note that these lenders have been ordered to have internal risk management protocols to help them deal with these risks and those of highly priced markets that exist in the Canadian market.

Restrictions are given to transactions that appear to avoid limits on the loan to value ratio

Mortgage lenders except those of credit unions and private lenders are not allowed by law to make arrangements with other lenders for transactions that appear to have been designed in order to avoid the limitations of the loan to value ratio. For instance, you make an application through a lender and that lender can only avail up to 70% of the 80% LTV. That lender will look for a third-party lender that can give the remaining 10% LTV. This is what is prohibited by the new mortgage rules for 2018.

Uninsured mortgages will use a new minimum rate

If your mortgage is uninsured then you will need to qualify for a mortgage that has a new minimum rate. There is a benchmark rate given by the Bank of Canada for five years. The rate to qualify may also be based on the contractual mortgage rate of the lender with an additional rate of 2%. In the past, consumers are qualified with the rates offered by that of the lender. Don’t worry because you will still pay according to your lender’s rate. It is just that the qualification process which will feature a higher rate of calculation.

Rules affect those applying for renewal or refinancing

Canadian homeowners looking to refinance or renew their existing mortgages will have to take note that they are affected by these new sets of rules too. While the laws become stricter for them, it has to be noted that the new rules will apply only to those whose mortgages have been granted by financial institutions that are regulated by the federal system. You have to undergo the stress test as when you applied for your mortgage the first time. This is to assure your lenders that you are still capable of paying the mortgage. These rules are not as strict when it comes to your private lenders.

In case you are looking for second mortgage in Montreal, it will be good to know how your privileges are affected by these new rules. Ask questions and get educated about these laws!

Categories: Mortgage loans

How To Qualify For A Mortgage This 2018

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Are your efforts spent on finding a good mortgage offer bearing no fruits? As the clock ticks, times are equally changing. If you keep a close eye on current events, you have probably heard of the new mortgage rule expected to toughen things up this year. However, amid the mind-boggling happenings and as a borrower, you can still find the best current mortgage rates for yourself.

Think It Is Hard?

Good news. We have listed a step-by-step guide to lead you through the process of acquiring a mortgage. First, you need to find out what has really changed in order to identify your loopholes. Some huge changes in the qualification processes have been affected in the last few years. It is therefore prudent to seek information on the changes. The main point here is to look at things differently.

As directed by the office of the Superintendent of Financial Institutions (OSFI), all federally-regulated mortgages in Canada are subject to a stress test. Before, only high ration mortgage-borrowers with a 20% or less down payment were subjected to the stress test.

As per the new rules, to qualify, homebuyers must attain higher interest rates than the one given by the mortgage provider. The current 5.14% Bank of Canada’s rate is lower than the new qualification targets with a gap of about 2% points.).

While, the mortgage rate may vary, the hypothetical rate would stagnate at 5.14%, translating to a 20% loss they would pay prior to the stress test. Also, rising interest rates is yet another factor that may dim your chances to qualify for a great offer. A few weeks ago, the Bank of Canada announced a rate increase of 1.25%. This decision not only triggered upticks in bank prime rates but to the variable mortgage rates as well. Despite the hard-pressing stress test, there is still a way out to get your dream home provided you plan broadly.

Qualifying For A Mortgage

If you can secure a good deal, you will as well save on your payments. Contrary to the widely held misnomer that you need up to 20% to qualify for a mortgage loan, the rates can swoop to as low as 5% through mortgage default insurance. To have a round-up idea of what may fit into your budget, have a look at the mortgage affordability Calculator. And since there are many things associated with costs, do not rush when making final decisions. Reach out to a trusted and credible mortgage professional for clear direction since there are many other factors that may impact your affordability.

Next, your mortgage lender should give you a pre-approval form. The forms indicate how much mortgage you can qualify for, which helps to estimate the monthly rates. The forms allow you to lock an interest rate up to 120 days. That way, in case the rates shoot within the pre-approved time-lines, you are still guaranteed the lower, pre-approved mortgage rate. Before initiating the process, put together all your documents to expedite the process and avoid inconveniences. Also, order a credit report to counter-check the information to avoid any inaccuracies.

Keeping pulses with your credit score prior to contacting a mortgage professional will keep you informed of the possible rates. Remember also that you will have to provide documents to prove your employment, identification, ability to pay the down payments, closing costs and information about your debts and assets. Your mortgage professional may also demand additional documents.

Categories: Mortgage loans

Reviewing Your Mortgage Renewal Options

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Sometimes, days fly so fast, especially when you are paying off your mortgage. There will come a point in your life when you may be given the opportunity to renew. Before engaging into mortgage renewal, however, you have to consider a set of factors that may affect your decision. Rates may be higher based on what is current in the market. There are times that it can be lower though if you are lucky enough. You have to review your mortgage renewal options first if you want to take advantage of the offer. Here are things to take note of in the process.

Be familiar with the renewal process

If you are busy, you might not really be aware it is time to renew unless you get the renewal statement which is given at least about 21 days before the existing mortgage term ends. The statement contains every piece of vital information you must know including the amount still to be paid for the principal loan, the term and the interest rate. You have the option to either pay the current mortgage in full or renew it for another term.

The offer itself is already tempting. Take note that it is important to find better options and rates in the market. You might also want to consider if you will switch from the current bank or lender at renewal time. When making a decision, it is important to know that you have control over the mortgage renewal process.

Do you really need the mortgage?

This is one question that should be brought to mind before signing the mortgage renewal letter. Actually, you should have reconsidered all these things months before the end of your current mortgage term. Make your own research and do some paperwork. The advantage of renewing an existing mortgage includes the fact that you do not have to go through the same process as when you applied for an initial mortgage.

Alongside this question, you have to ask some other questions regarding mortgage renewal. Can you possibly increase your mortgage payment amortisation so that you will be able to pay the entire amount sooner and at a lesser interest rate? Are the rates lower than the previous one? Can payment frequency be changed? Did your lender or broker deliver a good job with regards your mortgage? Do you want to consider debt consolidation?

Take this as a time to reassess your financial situation

You have to consider mortgage renewal time as a period to assess your current financial situation. It is not just about looking for a good interest rate that will make paying entirely easier for you. You should also rethink about the various mortgage options that you have and compare and contrast one from the other. You have to make sure that you are getting into a win-win situation should you consider to renew your mortgage.

Have you considered getting into debt consolidation mortgages in Montreal instead of renewing the mortgage that you have? If you do, then give us a call. We can help you come up with a better decision when applying for new mortgages.

Categories: Mortgage loans

Credit Score Basics You Should Know Before Getting A Mortgage

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Credit scores are some of the most critical variables when applying for a mortgage. They accurately provide a picture of the creditworthiness of an individual. This can be used to determine factors including the upper limit that one can borrow as well as mortgage terms including the interest rate. Of course, many other factors also come into play, including the state of the current housing market. That said, it’s important to know all about credit scores and how they can affect your mortgage, as well as how you can optimize them to get the best loan terms possible. Some of these include:

There are multiple ways to assess your creditworthiness 

In order to compile your credit rating, there are more than one credit bureaus that can be consulted. these include TransUnion, Equifax and Experian. When looking to apply for a mortgage and want to check your credit score as part of your preparation, you need to check the score that each of these bureaus have. Not all mortgage lenders will depend on credit score data from one particular lender. Doing this will give you the most accurate position of your credit standing.

Checking your credit score is easy

Most people have the impression that checking a credit score is a highly technical procedure that requires professional help. However, as long as you have an internet connection, you can visit any of the credit rating bureaus, and then go through their details on how to check your credit score. Some regions make it a policy that every credit bureau should provide one free credit report to an individual per annum. In other areas, you may have to pay a small fee to do so. The fee is usually minimal, and most people can afford it. Depending on the bureau you check from, you can have the results instantly, usually via email.

Credit details are continually changing 

There are many things that affect your credit rating, including how promptly you service your loans. You should not depend on very old data as part of the process of planning for application for a mortgage in Montreal. You should always go for the most recent data, which can be gotten in a few minutes online. Good credit scores can be used as part of negotiations for better interest rates and other mortgage features.

Credit scores are analyzed in bands 

credit score

Credit scores are usually not analyzed as single numbers, but in ranges. For instance, according to the FICO scoring model, a rating of more than 800 is considered as exceptional, while a score of 740 to 799 is very good. Once you get your credit rating, you should find out where in the range it falls. This provides better interpretation of the score.

Whether you want to apply for a mortgage in Montreal or simply want to find out what your credit score is, these are some of the things you should know beforehand especially if you have never checked your scores before.

The Interplay Between Inflation And Mortgages

A mortgage is a long-term commitment. For this reason, you should always aim to get a mortgage that suits your status; it should not make you strain financially or be unsustainable. Finding a mortgage favorable to you involves issues including having a good credit rating. It is also important to understand how external factors will affect your mortgage. This can be used to make decisions including what type of mortgage to get and when to apply for the mortgage.  One that is poorly understood by many is inflation.

What does inflation mean?

Inflation is a word that is thrown around regularly, and is used as one of the markers of a country’s economic status. In most economies, the prices of goods and services within the country slowly rises. The rate at which this happens is referred to as inflation, and the current rate in the country is around 1.5%. inflation is usually measured on a monthly basis, but having annual inflation data is a better way of understanding the health of the economy.

Inflation can be measured in many ways, the most common of which are Retail Prices Index and Consumer Prices Index (CPI). For a particular type of goods or services, a CPI of 2% would mean that the average price for these would have risen by 2% compared to the previous year. Many mortgage lenders in Montreal will use inflation as one of the variables used in setting the mortgage rate for clients.

How it affects your mortgage 

Inflation has an increasingly significant impact on business decisions, including mortgages. Banks tend to take measures to stabilize inflation, and this is usually by controlling interest rates. For instance, if it is expected that inflation will rise by 1.5% in the next year, the country’s Central Bank could decide to increase interest rates by the same amount in order to counter the expected rise. The increased cost is passed on to customers. In this scenario, you will end up having to pay more interest for your mortgage. The opposite can also occur.

The issue of variable interest rates 

In some cases, it is a good idea to get a mortgage with a variable interest rate. These have an interest rate that changes according to a predetermined time frame. In determination of the new interest rate, the lender will often consider inflation as a major factor influencing this rate. The downside is that if the economy is doing badly over an extended period, interest rates could keep rising, making servicing the loan more demanding.

What you can do about it 

As an individual, there is little you can do to influence inflation. However, you can use your knowledge of it to ensure that you end up with a sustainable mortgage. For instance, if it becomes apparent that the interest rates might go up for an extended period of time, you could refinance your mortgage and get a fixed rate mortgage. This will set your interest rate at the current rates, and this will not be affected by future runaway inflation if it occurs.

Categories: Mortgage loans

Lessons To Learn From The Biggest Mortgage Mistakes

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For many people, a mortgage is the biggest debt that is carried in their lifetime. This is because buying a home can be very expensive and not so many people are financially good enough to do so. As such, it is advisable to do some research before taking a mortgage. Learning a few things that help you avoid pitfalls has never been more important. You do not want to pay more than you ought to for a mortgage. Neither do you want to lose your home due to failure to pay on time. Here are lessons that you can learn make from some of the biggest mortgage mistakes.

Adjustable-rate loans do not always work

It is true that fixed-rate loans are no longer the cheapest option. This may tempt you to settle for adjustable-rate loans. However, adjustable-rate loans are usually suitable if you are planning to move out of your home after three years. If you are going to stay in your home for seven years or more, you are better off with a fixed-rate loan. You may wonder why.

First, mortgage rates are usually fair enough. Most people can afford them. A fixed-rate loan keeps you from refinancing. On the flipside, adjustable-rate loans may fluctuate over time causing you to pay more when the rates hit the roof.

Knowing home ownership costs

You should know that the amount of money that you pay to acquire a home is not reflective of its true cost. Start by checking the mortgage amortization schedule. This will give you a clue on the total amount interest and principal you will be required to pay. It can actually be eye-opening to know that borrowing an amount of $200,000 will cost you double the amount when you make the final payment. Therefore, you should make use of the mortgage calculate to estimate payments over the life of your loan. In addition, get information on property tax system from mortgage companies in Montreal to determine when they increase and by what percentage.

You are the decision-maker

The truth of the matter is that a lender is not always a good judge of the house that you can afford. Relying on a bank to set a price range may not turn out to the best thing. Technically, banks qualify you for a loan based on your gross income. They barely take account of other important things such as utilities, insurance, child care among other expenses. Create a budget that allows you to enjoy affordable monthly payments. According to financial experts, you should not spend more than 30% of your gross income on principal, taxes, interest and insurance.

Updating your credit score

It is important to check your credit report regularly.  Careful examination of your credit report helps you to avoid mistakes that may jeopardize things. More often than not, these mistakes lead to loan rejection or even higher mortgage rates. Check the credit at least 6 months prior to applying for a mortgage loan. This will give you plenty of time to fix errors.

Something else to note is that it is not always good to act like the deal is sealed before closure. Do not resign from employment. Do not open new credit cards either. With more debt, you cannot borrow more. Lenders want to be sure you can your debt without failure.

Categories: Mortgage loans

Five Common Myths About Mortgage

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One of the most unavoidable things when it comes to buying a home is the application process in mortgage. Though there is an exception to this, especially if you are wealthy and have the capacity of buying your dream home. In addition to this, you can make a full time payment for it. Nevertheless, today there are five common myths or misconceptions about mortgage loans that you should be aware of. This misconception has brought a lot of confusion for many who have planned to own their own home. So, these are some of the myths that you shouldn’t be believing:

The highest credit score will be used by your lender

credit score

In this situation, there are two things to consider. The first is, the medium of your three credit scores (from Equifax, TransUnion and Experian) will be used and not the highest. Secondly, you shouldn’t be surprised if your lender uses the lower middle scores among the two when you are buying a home as a co-borrower. For example, you have 720 as the middle, then your co-borrower has a score of 680; in this case, your lender may fix your terms and interest rate on the lower score.

Your quoted rates are the final rates

Unless you have locked your rate, the one you are quoted is just an estimate. You have to look out for your dream home before locking in your rate. This is necessary because rates are constantly changing daily. The rate is connected to the property and the borrower. There is one exception to this and this is when you opt for refinancing. You can lock your rate in the process early by giving your lender sufficient information.

Adjustable-rate loans are less superior when compared to fixed-rate mortgages

Adjustable-rate mortgage (ARM) have stigma attached to them as a result of fluctuation in the interest. Because of safety and stability, many borrowers are given a fixed rate loans. Before making the final decision, you should consider the following questions. What is my plan in staying in this house? Perhaps, your answer is less than five years. Under this situation, an adjustable rate mortgage is better because you have the opportunity of saving more each month. There are a lot of mortgage companies in Montreal that help their clients in choosing which is better.

Real estate agents are impartial in their work with you

Since borrowers are at liberty to choose their preferred lender, lenders can also be recommended by the real estate agents. These real estate agents are more trusted to work and handle various issues that may arise during the process.

No good load without 20% down payment

According to orthodox wisdom, you need to make a down payment of not less than 20 percent to buy a home, but mortgage loans aren’t conventional always. There are a lot of loan options available that may not require a down payment of 20%. Piggyback loan is a sure way in avoiding this issue. A piggyback loan has a first and second mortgage. The first is 80% of the value of the home, which is the 20 % that is paid and the second covers the remaining balance. Before finalizing, ensure you ask your lender of the various options available to you.

Categories: Mortgage loans

Combating The Different Struggles Of Acquiring A Mortgage

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Any time you are struggling with finances, life seems not to be moving. This is especially the case if you are thinking of acquiring a mortgage. The truth is that struggles will always be there. But you have a real chance of acquiring one even when there are such struggles in life. You only have to be informed and work over or around them, to give yourself a better chance as you present your papers for a mortgage application.

Whether you have a bad credit score or a lower income, financial institutes always try to come up with a way to make things work for the maximum number of people. Let’s look at some of the ways to combat issues that may hinder mortgage acquisition:

When your credit score is poor

credit score

The detailed report about your financial past, how well or poorly you have managed your credit card and how well you are at paying back debt gives financiers a pretty good idea about where you stand with loan applications. Coupled with many other factors, they can easily make a good judgment on how well you are equipped at paying back, if a mortgage comes your way.

With a poor score, they are at risk. But you really want that house, right? If so, you will first need to step back and start improving your credit scores. Many resources are available at how to do this, but at the end of the day, it is your money spending that needs to be worked on. Get the right advice and start working on the money management as soon as yesterday.

When you have a lower income

For lenders, the affordability of the payment to your mortgage is very important. They will not lend unless you have the muscle to repay. So what is the fate for people lower income? It is important for both you and the lender to examine and judge what the total income you have is, considering your bills and cost of living. Afterwards, you can easily check the affordability of a mortgage to a certain house. If it stretches you too thin, you can do a bit more research about more options of less expensive houses.

When you have a small deposit

Smaller deposits for mortgage acquisition are not a very good start. It should be noted that you need to have at least 5% of the house’s cost as a deposit to have a good chance of paying lower interests to the house. That said, it is prudent to start saving your money early. You can also reach out to institutes that give you some help in doing the deposit, so that you can eventually have the upper hand with the house.

Self-employed applicants

These are one of the hardest groups of people to award a mortgage to for financiers. For you to be given one, you must prove that you are stable in your business. This means that you must present your tax returns to the institute over the last 3 years, offer chartered accounts and give detailed projections about your business. This does not mean that it is impossible to get a mortgage, though you will need the help of a mortgage dealer to work you through such details, so why not get one?

Categories: Mortgage loans

Top Reasons To Buy A House That Costs Lesser Than Your Budget

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Buying a house can really get you so excited and when you are jumping with much anticipation, you become so engrossed at the beautiful houses that you see without actually looking back at the expenses that will come with the purchase. Sometimes, since you are so in love with a certain property that you have come across with during your search, you will tell yourself “I am ready to get the mortgage needed to buy this.”

Are you really ready for that type of investment? What if it costs you more than you can afford? Well, your lender will definitely jump for joy with this scenario. This will definitely mean more money for them. Besides this obvious answer, there are different reasons behind why you should buy a house that costs less than you can afford.

Buying less than you can afford will benefit you more in the future

Buy A House

Gone were the days when you can be made to believe that the more expensive home will mean more value for you in the future. This may be true in the past considering that land was once a very limited commodity. The belief that housing prices will always appreciate in the future is just part of theory. The truth is you might end up losing more if you pay more especially if you do not plan of staying in that home for a long time, say in the next 10 years or so.

It can save you in all other expenses once you move in

Many times, the price speaks for the size of the home you are going to purchase. The more expensive the home is the bigger or more spacious it will be. It can also mean more modern amenities inside the property as the case may be. With these conveniences added to the cost that you are going to pay for, expect more expenses to come in as well. Everything will be higher starting from insurance premiums and property taxes to utility bills. It can even mean more cost on repair, upgrade and replacement.

It can mean better savings for your children’s future

When buying a home for your family, it follows that you will consider the needs of your kids. Many times, you presume your children need more space where they can move around and play whenever they want to. Remember though that this is just the short-term part of the picture. You have to think long-term when the best interest of your child is at stake. Therefore, if you buy a larger home with a more expensive price tag to it, you will end up paying more on your mortgage rather than saving more for your child’s future.

Getting the home that you are in love with can mean more expenses on your part. You then have to weigh in and make sure you only get the property that costs less than what you can afford. In doing so, it will be good to take a closer look at your mortgage opportunities through the help of a broker who can help do the math for you.

Categories: Mortgage loans

Mortgage Rules: Second Homes Vs. Investment Properties

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So you are planning to acquire an investment home. Or probably are ready to purchase a second home. But do you know that these two property types are quite different where their purchase is concerned? To start with, getting a mortgage loan to purchase an investment property is costly, and the whole application process is complicated.

Investment properties

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Financial institutions often charge clients higher rates for investment properties as these are deemed a business venture. The main reason for this is that borrowers are borrowing to acquire investment properties for renting out or even selling for a profit. These loan types are considered riskier than those that are availed to ordinary homeowners. Since the borrowers won’t be staying in their investment premises, the majority of lenders believe they might abscond from their payment obligations if they suddenly find themselves financially incapacitated.

The higher than normal interest rates offer additional protection to the lenders. Moreover, most of the lenders require borrowers to pay a higher down payment – normally at least 30% of a home’s final sales figure, when they receive a loan to purchase an investment property. In this case, it is critical to differentiate whether you are buying an investment premises or a second home.

Like mentioned above, premises owners normally don’t live in their investment properties. Instead, they rent them out all through the year. Sometimes, they might even plan on holding their premises until they appreciate enough in value to allow them to dispose them off for a healthy profit. Unlike second homes, investment properties could be situated near their owner’s main residences.

Can an investment property be a second home?

Second homes are properties in which owners live in them for a given duration of time each year. Simply put, second homes can be deemed to be vacation properties. If their owners don’t live in them on a regular basis, lenders then consider them as investment properties. For a property to meet the criteria of being termed as a second home, then it must be some distance away from your primary residence. In this case, it must be more than fifty miles away from your main dwelling.

Is it worth it tricking the lenders so as the get a given mortgage product?

Since all investment properties attract higher interest rates, some borrowers are tempted to try tricking their mortgage loan provider by claiming that their investment property is in fact a second home. This way, they can then lease their premises and earn a healthy income without incurring a higher interest rate in mortgage payments. In actual sense, this is a mortgage fraud, and if a property owner is found out, they he or she could face stiff penalties. Mortgage fraud is a growing problem around the country, and mortgage loan providers are well trained to discover mortgage applications that seem to be for investing purposes although they made to look like second homes so as for the borrowers to obtain better interest rates.

All in all, you can’t own two vacation homes in the same location, even where most of the dwellings there are deemed second homes. People that own more than one vacation homes in one location therefore are required to consider the second premises as investment properties.

Categories: Mortgage loans

6 Questions You Should Ask Yourself About Reverse Mortgage

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Recent studies show that seniors retire with more debt than they can afford and less earnings. If you find yourself in this bracket, then seeking a reverse mortgage can present you with a better option. In as much as they are available to retirees or those planning for the same, you should ensure that you analyze your situation well. This means that you should ask yourself some fundamental questions.

Do you have substantial home equity?

bestmortgagemontreal

If you do not own your home or cannot be able to pay off your mortgage with the proceeds you will receive with the reverse mortgage, then it probably isn’t suitable for you. Your equity will depend on your home value, reverse mortgage interest rates and your age. Thus, you will need to contact several reverse mortgage lenders who will be able to provide you with a quote.

Are there other cheaper options?

The biggest advantage that you will receive in this form of mortgage is that you will not be required to make monthly payments. Thus, even with your low income and a poor credit score, you will be able to get approved for this loan. As good as this, you will have to contend with a higher interest rate. Thus, you should consider other forms of getting finances such as:

• Taking a part-time job

• Renting a section of your house

• Selling and moving to a cheaper home

• Seeking government’s assistance

• Traditional home equity loan

Should you use your home equity?

Since reverse mortgages can get you out of a tight spot, you should try and hold off until the right moment presents itself lets you use it only to regret that there was no need for it. For instance, when you are paying off your medical bill, you could consult your bankruptcy lawyer to give you advice on how you can use your debt situation to discharge it. This will enable you to preserve your home equity for a more dire time.

How long will you be staying in your home?

Since your lender will be sending you letters to sign and return to confirm you are still living there, you should determine whether you will be at your home for the entire mortgage period.

If you happen to fall sick and have to be moved to another home where you can specialized care, you will have to contend with the loan became due and payable immediately. Therefore, you should assess your situation very carefully.

Have you discussed this reverse mortgage with your spouse?

You should ensure that your spouse is aware of all the requirements and stringent rules that relate to the mortgage. This means that they will need to be in the house, lest it be sold once they move to recover the money if they are unable to.

Have you discussed it with your family?

Since your child or whoever you live with might see it as a risk since their home might be lost in case something happens, you should discuss these matters with your family members and hear their opinion.

All in all, you should evaluate all these questions relating to reverse mortgages before you take it out since it can have grave consequences should you fail to make payment when it falls due.

Categories: Mortgage loans