Yesterday, Ottawa issued a statement saying that feel it is necessary to tinker with mortgage rules again. Here's the skinny, and how it will effect you and the greater market.
1. They will no longer insure Secured Lines of Credit
This shouldn't effect much of the mortgage market at all. I'm not totally against lines of credit. They work in some situations. I do believe that the current state of the market makes more sense for a variable rate mortgage and some careful planning to avoid paying a penalty. Further to this, very few lines of credit have government insurance on it, so it shouldn't put any kind of ripple into the market.
2. Reducing the amount to be refinanced from 90% to 85%
This is a further measure to last year's decision to go from 95% to 90%. Basically, this means that you have to have at least 15% of equity left if you want to refinance your home. In my experience, few people want to pay an additional premium, so most people refinance to 80% Loan to Value anyway. This is probably a wise move, because if income or job situation changes, selling a house with 15% equity should prove easy. This does mean that some borrowers who use their home equity like an ATM Machine will have to change some spending habits.
3. Reducing the Amortization from 35 Years to 3o Years.
This is also a further measure to two years ago, when the length of the mortgage was reduced from forty years to thirty-five years. This probably will have the most significant impact on the industry, as this will change the average mortgage by about $100 per month. I'm not really sure if this really does a lot to reduce the risk, except it does decrease the total debt load on the average household. Of course, you can also expect to be paying your mortgage off a little sooner.
Even with the change in amortization, these are relatively small changes and do more to reduce the risk for companies like CMHC, Genworth or Canada Guaranty, should borrower default happen.
Tuesday, January 18, 2011
Sunday, October 17, 2010
Why you should think about using Private Money?
A lot of people think mortgage brokers offer loans that have high upfront fees and heavy interest. Clearly, this is not true, but it doesn't mean that we still don't have these loans avaialble. Is there ever a time that its a good idea to use them? Private Lenders exist for a reason. Here are some of them:
1. Pending Bankruptices
If your home is in bankruptcy and you are equity rich, using a private lender is a very good idea to stay in your home. Another advantage with private lenders is that you can have your mortgage prepaid, which means no payments are required till the end of the term. Make sure that you have a good equity postion and can afford the payments.
2. Doing a Big Renovation
When your using a progress draw from a bank the process can be lengthy and the interest rate is higher than most "A" rate mortgages. Also construction loans require payments during the process where many people are required to service a rent payment or other living arrangements. A lot of borrowers simply find private loans easier.
3. Fix and Flips
Private Loans are great products for investors. There are no TDS and GDS requirements, and the ability to borrow money over and over again is a very easy solution.
Private loans are just like any other mortgage product. There are not bad loans, just bad for some situations.
1. Pending Bankruptices
If your home is in bankruptcy and you are equity rich, using a private lender is a very good idea to stay in your home. Another advantage with private lenders is that you can have your mortgage prepaid, which means no payments are required till the end of the term. Make sure that you have a good equity postion and can afford the payments.
2. Doing a Big Renovation
When your using a progress draw from a bank the process can be lengthy and the interest rate is higher than most "A" rate mortgages. Also construction loans require payments during the process where many people are required to service a rent payment or other living arrangements. A lot of borrowers simply find private loans easier.
3. Fix and Flips
Private Loans are great products for investors. There are no TDS and GDS requirements, and the ability to borrow money over and over again is a very easy solution.
Private loans are just like any other mortgage product. There are not bad loans, just bad for some situations.
Saturday, September 11, 2010
Want to buy a dumpy house? Check Out the Purchase Plus Improvement Program
There is no question that the today's real estate market causes us to be more creative when it comes to buying a home.
Picture this common scenario. You get pre-qualified for a mortgage, and you go out to start buying homes with your realtor and discover that the house you can qualify for needs some work! You barely have money for a downpayment, let alone the $20,000 extra to fix up a home. Many home buyers hang their head and resort back to renting.
There is another way.
A lot of lenders offer the Purchase Plus Improvement Program. It's very simple. When you buy a home, you are able to get some additional renovations tacked right onto the mortgage. The only stipulations are that it cannot include appliances and the lender usually will only advance the funds when the project is done. A purchase plus improvement program can be used up to 95% Loan to Value
Most houses have only cosmetic issues, and with a little extra money and elbow grease you'll have your own home and likely a very strong equity position.
Picture this common scenario. You get pre-qualified for a mortgage, and you go out to start buying homes with your realtor and discover that the house you can qualify for needs some work! You barely have money for a downpayment, let alone the $20,000 extra to fix up a home. Many home buyers hang their head and resort back to renting.
There is another way.
A lot of lenders offer the Purchase Plus Improvement Program. It's very simple. When you buy a home, you are able to get some additional renovations tacked right onto the mortgage. The only stipulations are that it cannot include appliances and the lender usually will only advance the funds when the project is done. A purchase plus improvement program can be used up to 95% Loan to Value
Most houses have only cosmetic issues, and with a little extra money and elbow grease you'll have your own home and likely a very strong equity position.
Saturday, August 28, 2010
Mortgages for the Self-Employed
When someone is self-employed, it may be difficult to show income, as a lot of the income that they recive in written off.
Here are some options for the self-employed borrowers that are available:
1. Fully Qualified Self-Employed Application
As income fulcates for a self-employed individual, this application involves taking the last two years NOA, and using that number as the qualifying income. Many lenders will either offer a 15% gross up of the income, or allow add-backs for things like car expenses. Recently, National Bank in an effor to get away from Stated Income (Discussed Below) is offering a fully qualified application that allows a 75% TDS. This means that 75% of your income can be used towards debt payments. A fully qualfied self-employed application has the ability to qualify for a downpayment as low as 5%.
2. Stated Income for Self-Employed Applications
Basically for this type of application, the borrower is required to state or give an approxmeite idea of their income situation. The amount must be reasonable. A higher than normal credit score is required, and a mimium of two years as a self-employed employee is required. It is only permissable to put no less than !0% down on a property that is being purchased. It is possible to be able to qualify for a loan sooner, if you become self-employed in an industry that you were already working in.
Without question this is perhaps one of the most common scenriors that you must use a mortgage professional.
Here are some options for the self-employed borrowers that are available:
1. Fully Qualified Self-Employed Application
As income fulcates for a self-employed individual, this application involves taking the last two years NOA, and using that number as the qualifying income. Many lenders will either offer a 15% gross up of the income, or allow add-backs for things like car expenses. Recently, National Bank in an effor to get away from Stated Income (Discussed Below) is offering a fully qualified application that allows a 75% TDS. This means that 75% of your income can be used towards debt payments. A fully qualfied self-employed application has the ability to qualify for a downpayment as low as 5%.
2. Stated Income for Self-Employed Applications
Basically for this type of application, the borrower is required to state or give an approxmeite idea of their income situation. The amount must be reasonable. A higher than normal credit score is required, and a mimium of two years as a self-employed employee is required. It is only permissable to put no less than !0% down on a property that is being purchased. It is possible to be able to qualify for a loan sooner, if you become self-employed in an industry that you were already working in.
Without question this is perhaps one of the most common scenriors that you must use a mortgage professional.
Sunday, August 22, 2010
Things You Didn't Know Your Mortgage Could Do
When we think of a mortgage, there are several things that come to mind. What is the interest rate? How long is the term? How much will my payments be? But, did you know that lenders are adding new perks to mortgages all the time? Here are some great features that lenders are offering:
1. Cash back Mortgages
Most lenders offer some variation of this program. Basically, this program means that a lender will give you cash back at the closing to be used for things like closing costs, furniture, renovation costs, and even the down payment. The amount that a lender will offer with this program varies from 3% to 8%. However, the program isn't all roses as usually lenders will charge a higher interest rate on the mortgage.
2. Warranty Insurance
There are a few lenders that are offering free home warranty on things on your house if something goes wrong in your first year of home ownership.
3. Green Mortgages
With a move towards more eco-friendly products, mortgages are no different. Usually, the approach is that once the house is completed with eco-friendly renovations, there is cash back given to the borrower.
4. Portability
A lot of people worry about what happens if they decide to move and change houses. They may even avoid moving in an effort to not have to pay the enormous mortgage penalty. Portability allows you to move your mortgage over to a new property with the same rate and terms.
Just like any other type of product on the market, there are plenty of mortgage products to choose from and compare. Make sure to contact a mortgage professional to make sure you get the best "perks" possible on your mortgage.
1. Cash back Mortgages
Most lenders offer some variation of this program. Basically, this program means that a lender will give you cash back at the closing to be used for things like closing costs, furniture, renovation costs, and even the down payment. The amount that a lender will offer with this program varies from 3% to 8%. However, the program isn't all roses as usually lenders will charge a higher interest rate on the mortgage.
2. Warranty Insurance
There are a few lenders that are offering free home warranty on things on your house if something goes wrong in your first year of home ownership.
3. Green Mortgages
With a move towards more eco-friendly products, mortgages are no different. Usually, the approach is that once the house is completed with eco-friendly renovations, there is cash back given to the borrower.
4. Portability
A lot of people worry about what happens if they decide to move and change houses. They may even avoid moving in an effort to not have to pay the enormous mortgage penalty. Portability allows you to move your mortgage over to a new property with the same rate and terms.
Just like any other type of product on the market, there are plenty of mortgage products to choose from and compare. Make sure to contact a mortgage professional to make sure you get the best "perks" possible on your mortgage.
Sunday, August 1, 2010
Behind on Your Mortgage Payments?
Let's face it, times are tough. Sometimes you may find yourself unable to meet your financial obligations. If this happens, its' important to be proactive, so you will be able to avoid losing your home and damage to your credit.
Here's are some vital steps you need to take.
1. Evaluate Your Commitment
Before anything else you need to be honest if you can afford your mortgage payment should times change, you will need to closely follow the following steps, but if you decide you have gotten yourself in a situation where you are too overlevarged. You will need to list your home for sale immediately. Even if you are unable to make any payments at all, the foreclosure process will take a long-time to complete, so you have some time to be aggressive and sell the house quickly, while having the least long-term repercussions.
2. Talk to your lender
No matter what your situation is talk to your lender and explain it. The longer that you leave the payments unpaid without talking to the lender the harder it will be for them to make a payment arrangement. Let them know when you expect to be back at work or when you expect for you situation to change. Any missed payments will be required to be made up over a short period of time to bring you back current. Some lenders have a capitalization program that can be used to skip your payments. The payments are added to the end of your term. Make sure that any payment arrangement that you make is realistic and that you follow it exactly how its agreed upon.
If you are falling behind, time is off the essence and your lender will be more inclined to help if you are honest and timely in dealing with it.
Here's are some vital steps you need to take.
1. Evaluate Your Commitment
Before anything else you need to be honest if you can afford your mortgage payment should times change, you will need to closely follow the following steps, but if you decide you have gotten yourself in a situation where you are too overlevarged. You will need to list your home for sale immediately. Even if you are unable to make any payments at all, the foreclosure process will take a long-time to complete, so you have some time to be aggressive and sell the house quickly, while having the least long-term repercussions.
2. Talk to your lender
No matter what your situation is talk to your lender and explain it. The longer that you leave the payments unpaid without talking to the lender the harder it will be for them to make a payment arrangement. Let them know when you expect to be back at work or when you expect for you situation to change. Any missed payments will be required to be made up over a short period of time to bring you back current. Some lenders have a capitalization program that can be used to skip your payments. The payments are added to the end of your term. Make sure that any payment arrangement that you make is realistic and that you follow it exactly how its agreed upon.
If you are falling behind, time is off the essence and your lender will be more inclined to help if you are honest and timely in dealing with it.
Saturday, July 24, 2010
Picking Your Mortgage Term
Time is very valuable asset and when choosing a mortgage selecting an acceptable mortgage term could save you thousands.
Typically, lenders offer terms from anywhere from 6 Months all the way to 25 Years.
Essentially, the mortgage term serves as the time that you are locked into the mortgage agreement. The most important part of the agreement of the term is the mortgage rate. This is why you should choose the best possible term to meet your needs, as you may pay a major penalty for breaking it.
The following things should be considered:
1. Economic Conditions
Lenders set lower rates for smaller terms if they believe that at the end of your term mortgage rates will be higher. Avoid the short-term low rate, and opt for the longer term of five years if this is the situation. Alternatively, if interest rates are believed to decrease, consider a shorter term.
2. Think about how long your mortgage is required for.
Consider how long you will need your current mortgage for, are you planning on selling in two years? Plan on having only a two year term. It is also a good idea to think about when you will need to refinance, as you will avoid a heavy penalty by locking into a term that coincides with this.
Most clients lock in for terms of about five years. There are terms that are longer, but the luxury of having them is not likely to yield more savings than depending on the ebb and flow of the market.
Typically, lenders offer terms from anywhere from 6 Months all the way to 25 Years.
Essentially, the mortgage term serves as the time that you are locked into the mortgage agreement. The most important part of the agreement of the term is the mortgage rate. This is why you should choose the best possible term to meet your needs, as you may pay a major penalty for breaking it.
The following things should be considered:
1. Economic Conditions
Lenders set lower rates for smaller terms if they believe that at the end of your term mortgage rates will be higher. Avoid the short-term low rate, and opt for the longer term of five years if this is the situation. Alternatively, if interest rates are believed to decrease, consider a shorter term.
2. Think about how long your mortgage is required for.
Consider how long you will need your current mortgage for, are you planning on selling in two years? Plan on having only a two year term. It is also a good idea to think about when you will need to refinance, as you will avoid a heavy penalty by locking into a term that coincides with this.
Most clients lock in for terms of about five years. There are terms that are longer, but the luxury of having them is not likely to yield more savings than depending on the ebb and flow of the market.
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