Here is a link to a recent email I got on how to prep for getting a mortgage
https://eximius.malink.ca:8111/Public/EE/11613372
Step 1 - Your Credit Score
Whether you qualify for a mortgage through a bank, credit union or other financial institution, you should be aiming for a credit score of 680 for at least one borrower (or guarantor), especially if you are putting under 20% down. If you are able to make a larger down payment of 20% or more, then a score of 680 is not required.
If your credit score does not meet the minimum requirements, there are a number of things you can do to improve it and your future financial success, including:
• Paying your bills in full and on time. If you cannot afford the full amount, try paying at least the minimum required.
• Pay off your debts (such as loans, credit cards, lines of credit, etc.) as quickly as possible.
• Stay within the limit on your credit cards and try to keep your balances as low as possible.
• Reduce the number of credit card or loan applications you submit.
• Considering an Alternative Lender (or B Lender) if you are struggling with credit issues.
I can help review your credit score and provide you with options for your mortgage needs.
Step 2 - Your Budget
When considering your budget, it is important to look at the purchase price budget, as well as your cash flow budget. Being house rich and cash poor makes for a no-fun home! The home price based on your cash flow budget may be dramatically different from the budget home price you qualify for. Not only does having a budget help you to understand your purchase price range and help you to find an affordable home, but it can also help you to see any gaps or opportunities for future savings. This will be instrumental when you become responsible for mortgage payments.
Step 3 - Your Down Payment
The ideal down payment for purchasing a home is 20%. However, we understand in today’s market that is not always possible. Therefore, it is important to note that any potential home buyer with less than a 20% down payment MUST purchase default insurance on the mortgage, and they must have a minimum down payment of 5%.
The down payment on your home could come from your own savings such as a savings account or RRSPs. Thanks to the federal government’s Home Buyers’ Plan, potential first-time home owners are able to leverage up to $35,000 of your RRSP savings ($70,000 for a couple) to help finance the down payment. A gift of a down payment from an immediate relative is also acceptable. If your down payment comes from TFSA or RRSP, the bank will want 90 days of statements to ensure the funds are accounted for. Gifted funds rarely require 90 days of proof.
Step 4 - Your Mortgage Options
Rate is only ONE of the many features in selecting the best mortgage product that meets your financial goals. With access to hundreds of lending institutions, I am familiar with a variety of mortgage products allowing them to help find the best mortgage for YOU! Plus, unlike banks, mortgage agents are a third-party service focused on YOUR needs. This means that you can get the best rates and unbiased advice all for FREE from someone whose only goal is helping you achieve your dream of home ownership.
Step 5 - Your Paperwork
When you apply for a mortgage, you will typically need to provide a standard package of documents, which almost always includes:
• Your government-issued personal identification
• One month of recent pay stubs from any applicants who will be listed on the loan
• Letter of employment
• Your most recent two years’ worth of personal CRA tax filings and financials (if incorporated)
• Three months of bank account statements
• Your down payment (minimum 5%)
• Documentation to explain any unusual (generally non-payroll) large deposits or withdrawals
Step 6 - Your Pre-Approval
To have the best success with your mortgage, it is recommended that you get pre-approved! This can be done through your Mortgage Professional to ensure that you get the best mortgage product FOR YOU, from the best rate to the best term agreement. Pre-approval helps verify your budget and allows your real estate agent to find the best home in your price range.
• Pre-approval guarantees the rate offered and locks it in for up to 120 days. This protects you from any increases in interest rates while you are shopping (phew!).
• Pre-approval lets the seller know that securing financing should not be an issue, which is beneficial in competitive markets!
Quick Tip: Don’t forget about the closing costs! These range from 1 to 4% of the purchase price and should be factored into your budget.
Step 7 - You’re Ready to Shop
You made it!! Once you have your down payment and have qualified for a pre-approved mortgage (your credit score is in order and all documentation has been provided), you are ready to start searching for your perfect home. If you’re stuck, I would be happy to give you recommendations for a realtor, if you don’t have one already.
Mortgage Renewal Coming Up
"When it comes time to renew your mortgage, most lenders will send you a renewal letter when there is 3 to 6 months remaining on your term. While nearly 60% of borrowers simply sign and send back their renewal without ever shopping around for a more favourable interest rate, I would urge you to take a moment to check out your options.
Most standard mortgages are on a 5-year-term, meaning the market rates could be very different from the time you initially began your term to today! Despite this, lenders tend to provide higher rates on renewals versus new clients as typically the ease of renewal will prevent you from seeking out new rates. But, with my help, finding a better rate is not as difficult as it sounds - and it could end up saving you a couple hundred dollars a month!
It may turn out that your bank is offering a great rate, in which case you can simply submit the renewal! However, I urge you to take this opportunity to contact me about finding a lower rate to ensure you aren’t missing out. As your trusted mortgage advisor, I have access to dozens of lenders and hundreds of rates allowing me to narrow down the best options for you.
If your mortgage is coming up for renewal in the next 3 to 6 months, and you want to find out what lower rates may await you, contact me today! I can help you find the best option for where you are at in your life now and help you to ensure future financial success. I promise you will thank yourself for reaching out!
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Hello February!
This month, we are talking about what you need to know about second mortgages and we have some fun family day ideas for you!
Gord Davis
Mortgage Agent
Brokerage #12728
38 Antares Drive Suite 500 Ottawa ON K2E7V2
#EX_INSTAGRAM_URL#
What to Know About Second Mortgages
A second mortgage is a mortgage that is taken out against a property that already has a home loan (mortgage) on it. Generally people take out second mortgages to satisfy short-term cash or liquidity requirements, have an investment opportunity or to pay off higher-interest debts (such as credit cards and student loans) that a second mortgage might offer.
If you are considering a second mortgage for any reason, here are a few key points to keep in mind:
Second Mortgages and Home Equity: Your second mortgage and what you can qualify for hinges on the equity that you have built up in your home. Second mortgages typically allow you to access up to a max of 80% of the home value; very few lenders will consider a second mortgage over 80% of the home value.
For example, if you are seeking an 80% Loan-to-Value loan (“LTV”):
House Value
$850,000
80% LTV (maximum mortgage amount)
$680,000
less: First Mortgage
($550,000)
Amount Available Through Second Mortgage
$130,000
Second Mortgages and Interest Rates: When it comes to a second mortgage, these are typically higher risk loans for lenders. As a result, most second mortgages will have a higher interest rate than a typical home loan. There is also the option of working with alternative and private lenders depending on your situation and financial standing. Keep in mind, typically lenders who offer a second mortgage are private lender MICs (Mortgage Investment Companies) – in addition to some trust companies and credit unions. For major banking institutions, you would need to hold your first mortgage with them in order to be considered for a second mortgage.
Second Mortgage Payments: One advantage when it comes to a second mortgage is that they have attractive payment factors. For instance, you can opt for interest-only payments, or you can select to pay the interest plus the principal loan amount. Work with your mortgage broker to discuss options and what would work best for your situation.
Second Mortgage Additional Fees: A second mortgage often comes with additional fees that you should be aware of before going into the transaction. These fees can vary widely but often are a percentage of the mortgage. Other fees to consider include appraisal fees, legal fees to set up the second mortgage and any lender or broker administration fees (particularly with alternative or private lenders).
Second mortgages are a great option for many homeowners and, in some cases, may be a better solution than a refinance or a Home Equity Loan (HELOC). If you are interested in learning more or want to find out if a second mortgage is right for you, don’t hesitate to reach out to me today.
Family Day Ideas
For those who celebrate Family Day, we thought we would highlight some ideas for special things you can do with your loved ones, and remind them how much you care!
Below are a few ways you can celebrate Family Day this year:
No matter how you spend it, I hope you have a wonderful Family Day and I wish you and yours the best to come.
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Economic Insights from Dr. Sherry Cooper
What a year this has been. In the face of red-hot inflation, the Bank of Canada raised its policy rate by a whopping 400 basis points to 4.25%. First to cool was the housing market, where buyers moved to the sidelines and mortgage rates surged.
Home prices fell, especially in Toronto and Vancouver. The economy appears to have slowed, and inflation has fallen to 6.8%--down from 8.1% earlier this year. But core inflation is sticky, and wages are rising rapidly. The Bank of Canada is adamant it will beat inflation to the 2% target level, even if it causes a recession.
As we move into 2023, I expect at least one more rate hike—probably a mini one—and then a pause. But the Bank will not cut the policy rate next year. A mild recession will ensue, home prices will fall somewhat further, and by 2024 the economy will begin to recover, and buyers and sellers in the housing market will re-engage. Inflation won’t go back below 2%, and interest rates will not return to pre-COVID levels.
The Canadian economy has never been so interest sensitive. Debt-servicing costs are at record levels. Many will feel the pinch when their mortgages renew in the coming years. The unsustainable housing froth of the pandemic years will not return. Still, the underlying value will be solid as the Canadian population snowballs owing to the rapid influx of immigrants.
Post-Holiday Debt Consolidation
The holidays are a season of giving and often times, households can often find themselves carrying some extra debt as we enter the New Year.
If you happen to be someone currently struggling with some post-holiday debt, that’s okay! Whether you’ve accumulated multiple points of debt from credit cards or are dealing with other loans (such as car loans, personal loans, etc.), you are likely looking for a way to simplify your payments – and reduce them.
Rolling them into your mortgage could be the perfect solution. In fact, consolidating other forms of debt into your mortgage has multiple benefits, including:
• Helping you pay off your loans over a longer period of time
• Allowing for reduced interest rates when compared to a credit card
• Being easier to track with one single payment per month
• Reduce your total monthly outlay of debt repayments
If you’re still not sure if this is the right solution for you, here is an example… if you have $30,000 of credit card debt, you are probably paying approximately $600 per month and $500 per month of that is likely going directly to interest. If you let me help you to roll that debt into your home equity and monthly mortgage, your payment for this $30,000 portion would drop down around $175 per month, with interest charges closer to $140 per month. That is huge savings!
While debt consolidation through refinancing will increase your mortgage, the benefits can be well worth it when it comes to interest savings, time and stress. Keep in mind, you’ll need a minimum of 20 percent equity in your home to qualify for this adjustment.
If you are looking for a way to simplify (or get out of) debt, reach out to me today! I would be happy to take a look at your current mortgage and walk you through the debt consolidation process, or help you come up with an alternative option that may help suit your needs.
Alternative Lending
When traditional lenders (such as banks or credit unions) deny mortgage financing, it can be easy to feel discouraged. However, it is important to remember that there is always an alternative!
If you’re seeking a mortgage, but your application doesn’t fit into the box of the big traditional institutions, you’ll find yourself in what’s commonly referred to in the industry as the “Alternative-A” or “B” lending space.
These lenders come in three classifications:
• Alt A lenders consist of banks, trust companies and monoline lenders. These are large institutional lenders that are regulated both provincially and federally, but have products that may speak to consumers who require broader qualifying criteria to obtain a mortgage.
• MICs (Mortgage Investment Companies) are much like Alt A lender but are organized in accordance with the Income Tax Act with an incorporated lending company consisting of a group of individual shareholder investors that pool money together to lend out on mortgages. These lenders follow individual qualifying lending criteria but tend to operate with an even broader qualifying regime.
• Private Lenders are typically individual investors who lend their own personal funds but can sometimes also be a company formed specifically to lend money for mortgages that carry a higher risk of default relative to a borrower’s situation. These types of lenders are generally unregulated and tend to cater to those with a higher risk profile.
All classifications noted above price to risk when it comes to a mortgage. The more broad the guidelines are for a particular mortgage contract, the more risk the lender assumes. This in turn will yield a higher cost to the borrower typically in the form of a higher interest rate.
Before considering an alternative mortgage, here are some questions you should ask yourself:
1. What issue is keeping me from qualifying for a traditional “A” mortgage today?
2. How long will it take me to correct this issue and qualify for a traditional lender mortgage?
3. How much do I have to improve my credit situation or score?
4. How much do I currently have available as a down payment?
5. Am I willing to wait until I can qualify for a regular mortgage, or do I want/need to get into a certain home today?
6. Is this mortgage sustainable? Can I afford the larger interest rate?
7. Can I exit this lender down the road in the event the lender does not renew or I cannot afford this alternative option much longer?
If you are someone who is ready to go ahead with an alternative mortgage due to a weaker credit score, or you don’t want to wait until you’re able to qualify with a traditional lender, these are some additional questions to ask when reviewing an alternative mortgage product:
1. How high is the interest rate? What are the fees involved and are these fees paid from the proceeds, added to the balance or paid out of pocket
2. What is the penalty for missed mortgage payments? How are they calculated? What is the cost to get out of the mortgage altogether?
3. Is there a prepayment privilege? For example, are you able to avoid penalties if you give the lender a higher mortgage payment once a month?
4. What is the cost of each monthly mortgage payment?
5. What happens at the end of the term. Is a renewal an option and what are the costs to renew if applicable
6. What is the fine print?
When it comes to the alternative lending space, things can get complex. Contact me today if you’re considering an alternative lender and I can help you source out various mortgage products, as well as review the rates and terms to ensure it is the best fit.
https://stocks.apple.com/AAuMY5CjAQBytV9ITLIB-zA
https://www.visualcapitalist.com/700-year-decline-of-interest-rates/