Author: cfcl_every

The heat in some of Canada’s housing markets and the new regulations by the Office of the Superintendent of Financial Institutions (OFSI), makes home ownership a little bit challenging for a first time homebuyer. To top it up, he or she has to choose between a big Bank or a mortgage broker for their mortgage needs.

In 2009 alone, many more people opted for representation by a mortgage broker. The figure was at 40%, an increase from 26% in 2003, according to CAAMP (Canadian Association of Accredited Mortgage Professionals).

Who is a Mortgage Broker? He or she acts as a connection between you (as the home buyer), and the potential lenders. They will provide you with assistance during the application process.

If you get a good broker, he or she will match you with a lender who is ideal for your needs. In that, you get to shop around for the best rates. On the other hand, if you choose to go to the bank, you will only have one option for the products they just offer.

If you play hardball, you may be able to get a lower rate than the one posted. A bank may, however, be in a better position to give you advice on your large financial needs. You should keep in mind that saving yourself a point of percentage, could be good in the long term.

What are the Benefits of a Broker?
• Shopping Around
Well, we believe that you want to secure the best deal available for you. A mortgage broker will negotiate and look around for the optimal contract, for your needs. He will strive to present you with the lowest rate, available in the market.

• A ray hope for borrowers with poor credit
Your credit score plays a vital role in whether or not you can access a mortgage product. Every mortgage broker has to stay up to date with the latest mortgage news in the industry. With this vast knowledge, the mortgage broker can advise you on the lenders who would consider your case.

• Exclusive deals
Some of the best deals within your grasp are not in the open market. A mortgage broker can help you find a suitable product for your needs. The will negotiate, on your behalf, for a better interest rate or a lower application fee, where needed.

A mortgage broker has access to lenders that the bank has not, and a bank only has access to itself. They provide you with a one-stop shop for your mortgage options. Choosing a mortgage option and signing your name to it, is a big financial decision. Make the right choice.

At the start of a New Year, many people strive to make New Year resolutions. Is becoming a homeowner on of them? Well, it may not be an exciting period for first-time homeowners as the new mortgage rules took effect, since the 1st of the year.

Previously, only applicants who had a down payment of less than 20%, had to pass a stress test. However, under the new rules, all home buyers will have to face the stress test. It is a way for the lender to determine whether the potential homeowner will be able to pay back the loan amount with interest, should the interest rates change.

Under these new guidelines by the OFSI (Office of the Superintendent of Financial Institutions), you will have to show that you can make mortgage payments at:
• The posted average 5-year rate by the Bank of Canada or
• A rate higher by 2% of the actual mortgage rate
These rules may affect those contemplating about refinancing or renewing their mortgage. Only those who will renew with their current lender, won’t.

Impact
First Time Home Buyers
Are you planning on going house hunting? Well, both uninsured and uninsured borrowers will have to face the stress test. In vetting your application for a mortgage, the lender will vet you using the five-year Bank of Canada, benchmark rate, or the at a 2% points higher than the contractual rate.
It implies that you may need to wait longer to get your dream house. That is by saving more for your down payment. Or you will have to settle for a cheaper home than the one you would have been able to buy, previously.

Mortgage Renewal & Refinancing
If you are renewing an existing contract that was in play before the implementation of the new regulations; this stress test won’t apply to you. However, for renewing borrowers who fail the stress test, you may have to stick with your existing lender. You won’t have the luxury of shopping around for better rates.
For those who may be considering mortgage refinancing as an option, with the new OFSI rules, you may have to settle for a much smaller loan. It is so, especially for those who are close to their borrowing limit.

Well, all your hopes of owning a home may not be lost. These rules only apply to financial institutions that are regulated federally. You can reach out to Expert Financial Corp, for insight on the mortgage products that may be suitable for you.

Before you start looking at houses as you start your home ownership journey, many will advise you to visit a lender’s office. But why? You wonder.

Mortgage pre-approval is a process where a potential lender goes through your documents, credit score, financial status and gives you a letter which indicates the amount of mortgage that you can qualify.

To learn more about this process, you can read through our article on Everything you need to know about pre-approved mortgages. In this article, we will cover the reasons why getting pre-approval before house hunting is essential.

  • To get a competitive edge

When house hunting, remember, you may not be the only one looking for a home. The real estate market is very competitive. You may hear people describe it as a buyer’s or seller’s market. When it’s referred to as a seller’s market, it implies that listed properties are scares and prices are high.

If you find a particular property that meets your desires, having a pre-approval from a potential lender will give you the upper hand.

  • Your offer may not be accepted

Once you place your offer on a real estate; your desire is to have the seller consider it. However, if you submit the offer without a pre-approval, many sellers just reject it. You need to put the right foot forward when you make an offer.

Sellers usually consider offers that come with a real pre-approval. That is one that the lender has verified your bank statements, credit score, tax returns, etc.

  • Know your status

Going through the pre-approval process is like paying a visit to the doctor for regular checkups. You need to understand where you stand so that you can comfortably go about the house hunting process.

Don’t let the fear of knowing your status keep you from getting pre-approved. Some people just don’t want to share their private information with a lender. But you need to know your situation to know the price range of houses that you can comfortably purchase.

If the 45 to 60 timeframe of the pre-approval elapses, you should consider getting a second pre-approval, especially if you need more time to find a home. Consult our mortgage broker to help you with the pre-approval process.

Have you heard of cash back mortgages? Well, this is a type of mortgage where the borrower receives a lump sum amount when the mortgage closes. When purchasing a home, on top of the down payment that you need to make, you may also have to set aside some cash for repairs, renovations or furnishing of the house.

A cash back mortgage option gives you the chance to cover this costs if you do not have extra money for this. Depending on the lender, you will receive a cash rebate of a certain percentage. It is usually between 1 to 7 %.

The average sum amount that many borrowers receive is five percent. The percentage is done on the difference between the home value and the down payment, i.e.

                       Cash Rebate= (Home Value – Down Payment) *Cash Back Percentage

 Characteristics of a Cash Back Mortgage   

  • It has a fixed interest rate

The interest rate is set over the term of the mortgage contract. The ability to have variable interest rates in a standard mortgage product can help the borrower to save interest in the long run. This flexibility is not possible with cash back mortgage.

  • Has higher interest Rate

Lenders have to receive compensation for the additional amount that you are paid up front. That’s the reason why these mortgage products almost always have a higher interest rate than the typical mortgage product.

  • Penalties

After few years of using the property, one may decide to sell it and use the proceeds to pay the mortgage back before its term expires. When you break the mortgage’s term early, you may have to pay back a portion of the cash back rebate or the full amount. It all depends on the contract.

How to Qualify

For you to qualify for a cash back mortgage, you will need to:

  • Prove that you have a steady income
  • Have a solid credit profile
  • Apply as owner-occupier

At Expert Financial Corp, we strive to match our clients with the optimal mortgage products that meet their needs. Reach out to us if you need a cash back mortgage with optimal interest rates.

Are you planning to buy or invest in a property? As you go viewing and asking around for the price range of different property that appeals to you, it’s ideal to have a Pre-Approved Mortgage.

What is Pre-Approval?

It is where the lender goes through your finances and uses that information to determine the maximum amount that they can lend you and the interest rate to charge you. The Pre-Approval process can be daunting to many, but with the right documents, you are set to get started.

The process includes:

  • Pre-qualification

    This stage is simply for gathering information on the state of your finances. You will need to look for a reliable and trusted mortgage specialist and discuss your finances. He or she will help you understand the options that are available to you.

  • Pre-Approval

    At this point, you will need to present your potential lender with the relevant documents, e.g.

    • Identification, proof of employment,
    • If you are self-employed, you will need to provide the lender with Notices of Assessment,
    • Confirmation of the down payment,
    • Information on your assets and investments,
    • Show that you are employed,
    • Liabilities

    The fate of your case is in the hands of the potential lender. They will use the information you have provided to determine the maximum amount they can give and at what interest rate. If you are successful, you will receive a letter of pre-approval.

    However, you should keep in mind that this is a promise and not a guarantee.

  • Approval

    If your application goes through, the lender will give you an approved mortgage amount that depends on the amount of down payment and the value of your home. Once you have the pre-approved mortgage, you can comfortably shop around for property that is in a lower price range.

    Benefits of Pre-Approval

    Having a pre-Approval is beneficial to you as a borrower, in that:

    • You will be able to estimate your mortgage payments
    • It gives you an idea of the amount of mortgage you qualify for
    • Depending on the lender, you could lock in an interest rate for 60 to 120 days
    • You will have realistic expectation of the price range of the property that you can afford to pay for
    • You will be more confident when you finally find the home of your desire

    As you wait for your application to be processed, refrain from acquiring new debt. It will change your financial position and status. Also, if you lose your job within this period, then, you will have to start the pre-approval process all over again.

We all seek to repay our debts in a short time, and when an opportunity presents itself in which you can clear our debts, we don’t think twice about, especially when we are in a position to. The same applies to homeowners.

Prepayment privilege is a situation where one can put more money towards repayment of the mortgage. However, if you go ahead and put more money than the maximum amount allowed, toward your mortgage, you may be liable to a prepayment penalty.

Go through your contract with the lender and discuss your options and terms of the contract, before you deposit any amount towards your mortgage. Depending on your lease agreement with your bank, you may be able to either:

  • Make a lump sum payment

    If you choose this option, you will be able to pay a lump sum amount to reduce the outstanding balance of your mortgage. This amount is in addition to the regular payments that you make, according to the terms of your contract.

    The amount that you can pay is limited as indicated in the contract. You need to discuss your prepayment options with the lender. This lump sum payment can be paid:

    • At the end of the term of your mortgage contract
    • At specified times during the duration of the contract
    • Or before the length of the contract elapses

  • Increase the amount of money that you pay regularly

    Another viable alternative is to raise the sum of money that you pay regularly. An increase even of a small amount can have a significant effect on reducing the time you need to repay the mortgage. The principles of prepayment apply here, too.

    You can only pay a limited amount as per the terms of your mortgage contract. If you increase the amount you pay, then, you will have to pay that amount, until the duration of the contract expires.

    There are other viable options borrowers could use to pay their mortgages faster. Such methods include sticking to the current monthly payments if you have the chance to renegotiate lower interest rates as you renew your contract. The other option is to choose an accelerated payment option.

    In this option, you can make weekly or biweekly payments in addition to the monthly payment that you make toward your mortgage.