As per new government regulatory changes:

If the term of your mortgage is less than five years, or if it is a variable interest rate mortgage (VIRM) or is a HELOC the greater of the 5 year Benchmark Rate (5.85%) or the customer/capped rate is used as the qualifying rate.

If the term is a fixed rate and equal to or greater than 5 years, the actual customer rate capped rate is used as the qualifying rate.

What is the Benchmark Rate:

The Benchmark Rate is defined as the Chartered Bank-Conventional Mortgage 5-year rate that is the most recent interest rate published by the Bank of Canada in the series V121764 as of 12:01 AM (Eastern Time) each Monday and can be found on the Bank of Canada website.

Effective tomorrow april  9, self employed borrowers with more than 3 years in the same business will be required to provide third party income validation to qualify for CMHC‘s Self employed product. For those recently self employed people, may continue to apply for CMHC Self employed product without a traditional third party validation of Income, subject to a maximum loan-to-value of 90% for home purchases and 85% for refinances

If you would like to know more about self employed products give me a call, advise is always free.

1. All borrowers will need to meet standards for five-year fixed-rate mortgages regardless of whether they’re seeking a loan with a lower rate and shorter term.  Meaning, if clients are applying for a variable rate mortgage, that it is as low as 2.15 per cent now, they will be qualify as if they are applying for a 5 year- fixed-rate mortgage.
2. Canadians can withdraw when refinancing to 90 per cent of the value of their homes, from the current 95 per cent.  This rule might have a negative effect on people that are looking to consolidate debts or struggling for higher interest payments in other credit products; they will have to wait until the house value goes up to pull more equity.
3. 20 per cent down payment for government-backed mortgage insurance on investment or non-owner occupied properties. Borrowers who are buying properties, but they are not going to live in, will need minimun 20  per cent down payment rather than 5 per cent.

Maximum 35 years amortization remains the same and minimum down payment is still at 5 per cent. Not big changes at all. 

Finance Minister Jim Flaherty said that new rules encourage “moderation” in the market but as responsible mortgage specialists we have been advising our clients to consider payments as if they are paying for a 5 year fixed mortgage when they decide to go for a variable rate mortgage.

For instance, experts are saying to re evaluate the length of the mortgage loan; most likely they will be considering some reduction from the current 35 year amortization to mortgages no longer than 25 or 30 years amortization like years ago. Also, they would evaluate increasing down payment amount from current 5%.  Not  to mention,  mortgage conditions will be harder for clients with bad credit scores and those that are trying to buy investment properties.

Other options came up suggesting creation of rules that will tell the banks how to evaluate  clients.   For example clients that are going for a 3 years fixed  rate, that is lower than a 4 or 5 years fixed rate, would be evaluated as if they are applying for a 5 years fixed rate mortgage.

What  the experts  are trying to do is just to make sure that clients aren’t borrowing more money than they can handle in case rates increase.  

Let’s wait and see what our finance experts decide in the next coming days.

During the last year we have experienced a tremendous economic crisis that affected us all. It is so hard to avoid hearing from friends or family that someone was laid off or is looking for a job and can’t find one. In this hard economy, one would normally think that house prices are going down and that mortgages are easy to come by as banks try to get anybody they can into their ranks. The sad truth is that this is not the case.One of the most important reasons why banks in Canada have made it through this recession almost intact is because of extreme caution when issuing credit. Even though this may anger some people and frustrate others, this is the reason why Canada was one of the countries less affected by the global recession and economic crisis.

This time of economic turmoil has not only been bad news. Interest rates have gone down to historic lows, and many people have taken advantage of the low rates to purchase a new home or obtain a new mortgage. For those who have a mortgage standing from years past and are looking into the current low rates with a gleam of envy, there is some excellent news too.

If you have a mortgage and would like to take advantage of the current low rates in the market, you can ask me about refinancing options, which not only will give you the opportunity to take advantage of the current rates, but may even in fact help you lower your debt.

During the last months, I have been approached by several of my clients that wanted to take advantage of the low rates and we have been able to create plans and refinance their mortgages.

But all this is not going to last forever. The rates are expected to go up this year and refinancing may get tougher to obtain.  Ask me now and let’s discuss your best options!

Think about it for a minute. Low rates have been going all year 2009. Housing prices have gone down and up and down and up again. Mortgage rates are now going up and seem to maintain that trend. There are new taxes on the way that will increase the cost of purchasing a house. You have a mortgage from previous years with a much higher rate. When will you take a leap to refinancing your mortgage and take advantage of the current low rates?

If you think you are ready for looking into refinance options, you need to visit your local mortgage specialist or even better, give me a call and I’ll come to you, at no cost, to advice you on how to take the leap and enjoy lower rates and lower debt.

Be sure to have all your information ready. Prepare your current mortgage information and details so we can review and discuss the best options available to you today.

Don’t take long! Mortgage rates are going up and will continue to go on that trend for 2010.

“By Randy Selzer

The Ontario Government recently enacted legislation which will implement the much-dreaded HST Tax. This new tax will take effect on July 1, 2010. The HST tax will effectively combine the Provincial Sales Tax of 8% percent with the Federal GST Tax of 5% percent, to create a new “harmonized” total tax of 13% percent. This new tax will be applicable to many real estate services which hitherto only had one or the other tax applied. The HST will result in a 13% tax on new home construction, but my post today will concern those ancillary costs pertaining to the buying and selling of resale residential real estate properties in Ontario…

First, the good news….there is no HST tax payable on the sale of a resale home (residential). So the single largest dollar amount exchanged is not taxable under HST.

However, under the harmonized sales tax (HST), home buyers and sellers will have to pay extra tax on a range of services associated with the real estate transaction: services such as legal fees, moving costs, real estate commissions and home inspection fees. Currently, consumers only pay the 5% Goods and Services Tax (GST) on these services.

In a nutshell, after July 1, 2010, if you are a seller, there will be a 13% percent tax payable on the real estate commission you pay – currently there is only the 5% percent GST payable on this fee. Your lawyer’s fee will also be subject to the 13% percent HST, as will the cost of a Condominium Status Certificate.

If you are a buyer, any Home Inspection you pay for will be subject to the 13% percent HST. And so will the cost of movers hired. In addition, the cost of the CMHC premium for “high-ratio” mortgages has traditionally been taxable for PST – this amount will now be taxable for the full 13% percent HST.

So one can see that, with the introduction of the HST, whether you are buying or selling a Resale Home in Ontario, costs will be going up.

A press release from the Ontario Real Estate Association earlier this year summarized some of these changes which will take place – the example that they used was for a resale house priced at $360,000, and it was determined that the HST would add over two thousand dollars in new taxes to closing costs. Please note, these taxes are in addition to the Land Transfer Taxes which exist for both the Province and the City of Toronto. OREA calculated that, in total, the HST would add $313 million annually in new taxes to resale home transactions.

CURRENT TAXES PAID, VERSUS THE NEW COMBINED HST TAX PAYABLE, ON A HYPOTHETICAL $360,000 REAL ESTATE TRANSACTION:

(1) CMHC premium of 2.75% for mortgage with a 5% down payment on a $300,000+ home.
(2) Consumers currently pay the 8% PST on mortgage insurance premiums.
(3) Real estate commissions are negotiable – 5% used in this example.
(4) Ministry of Finance, Public Accounts, 2007/2008.
(5) Altus Group, “Economic Impact of MLS(R) Home Sales,” June 12, 2007

This is also another reason to purchase your dream home now, before the new HST changes take effect and the cost of purchasing becomes higher.

So, if you are ready to purchase a home or refinance your existing mortgage, choosing the right mortgage may not be quite as simple as it may seem. When searching for that lender, keep in mind the following considerations:

Know what you are getting

Understand the products available and its pros and cons. It is highly important to understand the differences between a fixed rate and an adjustable rate. The adjustable rates are usually as they tend to be lower than fixed rates, however, they fluctuate with the market and if the rates were to increase, so your rate may increase. Talk to your mortgage expert, as they can help you choose the right rate and even develop a plan for your mortgage. Ask what the benefits are and what the best strategy is.

Also, consider that due to market’s restrictions, most lenders offer a competitive product, meaning that most will be similar and the differences in rates will usually be minimal. Look for the APR, which is the Annual Percentage Rate. The APR takes into account not only the interest rate but also points, broker fees, and certain other credit charges that you may be required to pay, expressed as a yearly rate. Seek a knowledgeable mortgage specialist as this is what really distinguishes them. The value of an expert mortgage adviser can be far more important than the difference in rates.

And finally, if you are required to purchase mortgage insurance, check the cost and tally it with the rest of your fees and interests to do a full comparison between products.

Think about the Length of your Loan

Think about the length of your loan when shopping for a mortgage. There are many options to choose from and most consumers get mortgages between 20 and 35years long. The longer your mortgage is, the lower the monthly payment and higher the total cost. You need to consider your plans for the property and your capacity to pay. Currently, the Canada mortgage rates are lower on shorter mortgage terms compared to long-term mortgages.

Choose a trustworthy lender

Be careful when choosing a lender. You really want to get an experienced and professional lending institution; usually banks are your best option. In fact, most Canadians prefer banks for their mortgages. With the recent event in the US and their mortgage market, you may want to steer away from cheap lenders with not enough reputation or respectability.

Are there any Payment Options?

Most mortgages require a monthly payment. Review the different payment options and plan accordingly. On a previous post I talked about the benefits of taking biweekly payments. Read it and keep that in mind when shopping for your next mortgage. Some lenders have facilities that enable you to pay your debt faster with more frequent payment plans. Some allowed for changing the frequency or paying lump sums in advance, others are rigid and punish lump sum payments. Adding just a little extra to the principal on your payment, such as in an accelerated bi-weekly payment plan, can save you thousands. To save money over the life of your loan, look for a lender that offers non-traditional repayment options. Just one word of advice, check the fees charged when choosing these options, as these can make the savings less beneficial.

You are committing to paying your mortgage for many years, take some serious time and thinking to shop around with various banks and private lenders offering loans.

When you are shopping around for mortgages, give me a call, I’m a professional mobile mortgage specialist and I will help you with this important decision, every step of the way.

As soon as we get a mortgage, pretty much like every credit, we would love to be rid of it. We are always looking for ways to save interests and fees and if possible to finish paying faster. In mortgages, the fear is bigger as we are now looking possibly 10, 20 or 25 years to pay it off, it seems to stretch forever. Actually, most don’t even consider possible to have a life without paying mortgage and think of this as a far off dream. The reality is that there are ways to save time and pay your mortgage much sooner than you ever considered without breaking your savings. It all depends on who you get the mortgage with, the conditions in it and a little bit of willingness to make it happen.

If your mortgage lender allows it, the following are some simple and very effective ways to save years and money from your mortgage:

Make lump-sum payments whenever possible.

Apart from other options, most banks offer opportunities to make lump-sum payments on a mortgage. If you can make at least a lump-sum payment of just 2% of your mortgage, this is all it takes for most people to pay off their mortgage years ahead of schedule. Great opportunities to take advantage of this strategy are annual bonuses or tax refunds. And again, you get to save interests.

Go from monthly to biweekly or weekly.

Most people choose to pay their mortgage on a monthly basis. One option for you may be to switch your payments to a biweekly or weekly payment. As a result, you’ll actually make 26 or 52 payments a year. Technically, you will end up paying a couple of weeks more in the year and it will really not affect your expenses too much, but it can definitively reduce your mortgage interests and its length.

Weekly and bi-weekly mortgage payments is one way of forced savings and these options are very attractive for people whose employment pay days match the payment periods.

Choose a shorter period of amortization

In addition to the strategies listed above, some people choose to reduce their amortization period from the industry-standard 25 years to 10, 15 or 20 years instead. This will give you slightly higher mortgage payments but very important interest savings over time. Consider a slightly higher mortgage, maybe even look at it as rent increase and over time, you will finish paying your mortgage much faster and the significant savings will allow you to do more with your money.

Pay more to pay less.

Depending on your financial institution, some allow for changes in the amounts of mortgage payments which translate into saving interest and reducing the mortgage’s life.  This will save money and reduce the length of your mortgage.

TD Canada Trust allows its customers to increase their payments by up to 100% of their regular payment amount at any time throughout the term of the mortgage. Most people find that it is quite easy to adjust their lifestyle to a slight increase in their mortgage payments and this is one of the reasons I recommend getting your mortgage with TD.

If you have a mortgage and are looking for a way to save time and money, contact me, your local mortgage specialist. I’ll be glad to meet with you to discuss other possibilities and options tailor suited to you.

Buying a home is something that you may want to consider carefully with a very clear plan and strategy. This plan should have clearly defined steps to follow and you should follow them thoroughly. Before jumping head first into a purchase, this analysis can help you avoid future headaches and difficulties. The realtors, the sellers or the banks are not good sources for this consideration. This is a personal decision and you should carefully consider it in detail.

The basics

First, think about setting a sufficient amount of money for your down payment. The minimum requirement to put down is at least 5%. If you are able to strategically set aside enough money for a 10 or even a 20% for the down payment, this could prove a strategy that will save you lots of interest and improve the home you could get.

Understanding your spending pattern from month to month is important as this will definitively help you plan for purchasing your home.

After you purchase your home, there will be additional monthly expenses. If you know your spending pattern, it will be far easier to be prepared for these additional costs on a monthly basis.

Most people save less than 5% of their income. To buy a home, you need to be able to save over 5% of your income. To do this, you first need to put everything down in paper. Every expense and all income sources, this will not only help you plan a budget, but it will also help you with your taxes when the time comes.

Understanding your spending pattern

To understand your spending pattern, you need to review at least the last 3 or 4 months income and expenses. This will give you a very good idea of what is your way of spending. Include all your household income and expenses.

To achieve this, just create a list of all your income and expenses. This Budget Planner is an XLS file that will help you in the calculation.

Managing your budget – Living fully within your limits

To save money for a new house and for having an easier life in regards to money, you need to gradually take control of all your expenses and trim what is excessive. Reducing your monthly expenditures will also come in handy after purchasing your home to allow you to afford other costs involved with home ownership.

As usual, the first things to work on are your current balances on credits (auto, credit cards, and other loans). It is wise to strongly reduce or completely eliminate these expanses as possible. The main reason is that interests accumulated and paid for these balances is usually high and not tax deductible.

One way of relieving yourself of debt is by using your savings, if you have some. What you earn in interest from the savings accounts very likely does not compensate for the interest you are losing on your debts, plus the interest earned in your savings is taxable (with exception of the Tax Free Savings Accounts – TFSAs). Before you do this, ensure that you have access to emergency funds from family or friends.

Another option, in case you cannot pay off your debt, is considering looking into getting lower interest rates to refinance all of your debt. And once you’ve done this, try reducing your spending in order to use your savings to pay your debts. And when possible, close your credit card accounts. I know it’s hard, but credit cards are money wells and with a good budget planning, not really necessary.

After you’ve dealt with debts, go over your spending list and trim down items that are not necessities. Focus your spending on value. Little changes can add up to become great savings.

After analyzing your spending habits, there are 3 possible conclusion you may end up having:

Too much: After analyzing your habits, some people realize how little luxuries add up and become huge expenses. At this point, you must consider trimming down all those little luxuries so you can get in budget and save for your dream home.

Just enough: You are smart with your money and you manage to save enough each month. This excellent as puts you closer to your goal. Just consider that after your home purchase there might be additional expenses to deal with.

Supersaver: You are one of those rare people who manage to save a lot of your earnings and this usually means that you can stretch your expenses on a house and very likely, borrow more money than you thought.

So, how much do you need to save?

The answer for this question is tricky. It is important to consider saving money for other things besides the home. It is wise to have at least three months worth of living expenses in a TFSA at all times as a minimum. Before purchasing your first home, it is important to have money saved for other necessities. If you know your saving goals and have a clearly defined plan you should be able to purchase a home faster and better.

It isn’t necessary to know exactly what you are going to do for the next 20 years, it is just about having an idea of what you want. Even if you don’t want to retire, you should leave some money aside just in case.

The Down Payment

It may be daunting to set aside 20% of your dream home cost for a down payment. But, you may be able to save enough for 5, 10, or 15% and still be in good shape.

Besides the home principal, you should also consider other costs, like home inspections (never purchase without one), renovations that may be needed and very important, the closing costs. These costs vary depending on different factors, but it should be safe considering about 4,000 dollars in closing costs and taxes.

If you need more information in regards to all the expenses related to purchasing a home and methods for obtaining a favourable credit, contact a mortgage specialist like myself. I would be very glad to help you reach your dreams.