26 Jun

IS YOUR LINE OF CREDIT KILLING YOUR MORTGAGE APPLICATION?

General

Posted by: Trina Tallon

Some of the last round of changes from the government regarding qualifying for a mortgage were that if you have a balance on your unsecured line of credit, then to qualify for mortgage the lenders require that we use a 3% payment of the balance of the line of credit.

Simple math is,  if you owe $10,000 we have to use $300 as your monthly payment regardless of what the bank requires as a minimum. Given that the banks hand out lines of credit on a regular basis it is not uncommon for us to see $50,000 lines of credit with balances in the $40,000 range. That amount then means we have to use $1,200 a month as a payment even though the bank may require considerably less.

So what if it is a secured line of credit? Again we have clients telling us that they don’t have a mortgage only to realize they do have a Home Equity Line of Credit (HELOC). A home equity line of credit by all definition is a loan secured by property, the actual definition of a mortgage.

Again, it’s something the bank will require little more than interest payment on because it is secured. The calculation here can also upset the calculation for your next mortgage, as what is required by many lenders is to take the balance of the HELOC. Let’s say the balance is $200,000 and you convert it to a mortgage at the bench mark rate, which today is 5.34% with a 25-year amortization. That without any fees today is equal to $1202.22 per month, so what in the client’s mind may be a $400 or $500 dollar interest payment for the purpose of qualifying will be almost three times higher.

This one change to supposedly safe guard the Canadian consumer has lately been the thing we have seen stop more mortgages than just about anything else. If you have any question, contact me your  Dominion Lending Centres mortgage professional for answers.

Contact me for your best mortgage options 705.669.7798 or trina@ndlc.ca

#trinamortgages #mortgages #ndlc #freedomofchoice

#bestmortgageforme #executive #firstimehomebuyer

If you found this information valuable, I only ask that you share with your friends and family.

Copyright DLC

13 Jun

THE 5 MORTGAGE ELEMENTS- DECISIONS YOU NEED TO MAKE BEFORE YOU SIGN!

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Posted by: Trina Tallon

Before you buy a home there are a couple things you need to figure out first. One of the very first decisions you need to make is whether you want to work with a mortgage broker who is independent from the bank, or if you prefer, work with a financial representative from a specific bank. Next, you want to find a realtor that best understands your needs and wants.

From there, you and your realtor go through the laundry list of pros and cons as they relate to; type of neighborhood, type of building whether detached or attached, one, two, or three bedrooms, strata operated, resale potential, upgrades needed, local amenities, previous owners, the list goes on. Once you get an idea of the homes that tick the most boxes possible, writing an offer to purchase comes quick.

But what about your mortgage?

Unlike the list of requirements when it comes to someone’s potential home, a lot of people are only concerned about what the interest rate is when looking at their potential mortgage. If your price range was $500,000 for a 2 bedroom and you found one for $480,000, would you write an offer to buy without looking at those other requirements such as neighborhood, resale potential, upgrades needed, inspections, and previous owners?

There is a lot more that goes into a mortgage and understanding what differentiate one mortgage from another is very important for future borrowers to understand. The following are the 5 key elements borrowers need to be aware of before they sign and commit themselves to a lender and their mortgage product:

Privileges
Virtually every mortgage with every lender has some sort of privilege attached to it. A lot of the time it relates to pre-payment privileges. This can be extremely important because it allows you to increase your monthly payments, make lump sum payments, and change the frequency of your payments- all helping to pay down the principle portion of your mortgage and shave years off of unwanted interest. Why this is important to look at is because some lenders may only offer 10% pre-payment capabilities, while other’s 15%, and some 20%. With a $1,800 monthly payment that’s the difference between $180 against principle or $360. With an outstanding balance of $300,000 that’s the difference between a $30,000 lump sum payment against your principle or $60,000- a massive chunk that will take years and thousands of dollars more off your mortgage. Some lenders even offer the ability to skip a payment and double up on a payment.

Penalties
Nobody wants to pay a penalty for breaking their mortgage early (something 2/3 of people do in a 5-year fixed after the 2 year mark). That is why it is crucial for you to understand what your penalty will be IF you had to pay one. Some lenders use an IRD (Interest Rate Differential) penalty that takes into consideration term, outstanding balance, current rates, previous rates, and blends it all together into a formula. Other’s use three month’s interest and as you can probably guess, the IRD penalty is the more expensive one 99% of the time. IRD is usually applied to fixed term mortgages, variable rates more with three-month’s interest penalty. Big banks will almost always have a higher IRD penalty than monoline lenders because their formula accounts for posted rates, something usually much lower and offsetting with a monoline. A $12,000 IRD penalty with a big bank can be only $4,000 with a monoline for the same sized mortgage.

Interest Rate
The lower the rate, the lower than payment (assuming same amortization). What it really comes down to is picking the right term and choosing between fixed or variable, something a mortgage broker can be very helpful in explaining as it relates to your specific situation.

Portable Mortgage
This relates to a borrower’s ability to move their mortgage from one property, to another, even across provincial boarders. Some lenders like those big banks across Canada allow for this while it is harder when it comes to credit unions. If your job requires relocating and constant moving or travelling, this can be a very important factor.

Assumable Mortgage
Similar to portability, an assumable mortgage allows the person buying your home to take it over. This can result in avoiding pre-payment penalties or avoiding increased costs if downsizing. Not a feature commonly used but extremely beneficial when it is available, and you need it.

Connect with me your Dominion Lending Centres mortgage professional today to see which of these 5 topics most affects you and what lender offers the best solutions!

Contact me for your best mortgage options 705.669.7798 or trina@ndlc.ca

#trinamortgages #mortgages #ndlc #freedomofchoice

#bestmortgageforme #executive #firstimehomebuyer

If you found this information valuable, I only ask that you share with your friends and family.

Copyright DLC

5 Jun

REVERSE MORTGAGE – COMMON USES

General

Posted by: Trina Tallon

Here is the final blog in the REVERSE MORTGAGE series. If you missed the first two, you read them here and here:

Eliminate mortgage payment – Retired, or wanting to retire, but still have a mortgage and mortgage payment to make? Use a reverse mortgage to pay off the traditional mortgage, getting rid of that monthly payment.

Unexpected expenses – Home repairs, helping children, vehicle repairs, health care/home care, etc. A reverse mortgage gives you access to your tax-free equity whenever you need it. The equity can be used to pay for those expenses without the burden of adding a new monthly payment into your life.

Helping family – Home values have risen, and often the plan is to leave the house to children or grandchildren as an inheritance. A reverse mortgage is a way to access some of that inheritance money today, gift the money now and enjoy it with them as the family benefit much earlier in life.

Purchasing a new home – Some clients are moving to that just right, final home, but finding they cost more than anticipated. A reverse mortgage can be used to buy a new home, allowing clients to afford a much higher priced home, or keep more cash on hand.

Aging parents needing home care – As we age, sometimes a little additional help is needed to stay in the home. Instead of selling and moving to a care home or assisted living, some clients prefer to stay in the house and have in home care. A reverse mortgage is a terrific way to access the equity in the home, month by month, to pay for those care costs.

Tax free retirement funding – By using the home as part of the financial plan, clients can preserve investments, pay less tax, and often have a greater net worth in the end.

If you or a family member would like to learn more about reverse mortgages, contact me your Dominion Lending Centres mortgage professional.

Contact me for your best mortgage options 705.669.7798 or trina@ndlc.ca

#trinamortgages #mortgages #ndlc #freedomofchoice

#bestmortgageforme #executive #firstimehomebuyer

If you found this information valuable, I only ask that you share with your friends and family.

Copyright DLC