Mortgage Management…

General Mark Goode 22 Apr

When you purchase a home, you are most likely investing in the largest asset that you will ever own. Likewise, you are probably also taking on the largest debt you will ever have. The following is not intended to discourage home ownership. In fact, for many, it is the best financial decision they will ever make.

A home is so much more than just a financial decision; it is the place where you will spend a fair part of your life. A place where families are raised and memories created. However, most people don’t realize what the true cost of their home is. This can be best illustrated with an example of a pretty average scenario.

Consider a young couple who purchase a home and secure a $250,000 mortgage at an interest rate of 5% amortized over 30 years, which would create a monthly payment of $1,334 a month. I beg you not to state that 5% is too high an interest rate based on the rates being offered today. Five per cent is a very reasonable rate to use over a 30-year period and if anything is on the low side for a 30- year average. Check out the Bank of Canada site to see the average posted five-year fixed rate from 1951 to present , What you will see is that rates have not spent much time below the 5% mark.

Going back to our example, it is shocking to learn that the $250,000 mortgage as noted above actually has interest costs of more than $230,000. So when we consider the true cost of what was actually paid for the home we must add the down payment plus $480,000 (principal and interest cost).

For this example, let’s say that the purchasers put down 20% and were left with a $250,000 mortgage. This means a home that cost $312,500 and required a down payment of 20% or $62,500, plus the $480,000 of principal and interest charges over the life of the mortgage, results in the true cost of the $312,500 home being $542,500.

So now that I have shed some light on the true cost of a mortgage, this doesn’t mean there is reason to be too upset. The bright side of all of this is that there are many actions you can take which are especially effective in the early years of a mortgage that can dramatically reduce interest costs.

The first is to increase your monthly payment. In the above example, increasing your monthly payment from $1,334 to $1,454 reduces your amortization from 30 to 25 years. This is such a small sacrifice when you look at the benefits. Yes you are paying an extra $120 a month, but you save a whole five years of paying the $1,334. Think about that; $1,334 multiplied by 60 months (five years) is $80,040, not to mention all that you could do with an extra $1,334 a month for five years.

Most mortgages not only come with the benefit of allowing you to increase your regular payment by up to double, but many also allow lump-sum payments annually that go directly to principal. Consider again the above example, but this time you have some extra money and you are not sure what you should do with it. Let’s say this extra amount is $5,000. In this case, if you put $5,000 down on your mortgage in the early years you will take off more than a year in payments.

Let’s say that the likelihood of having an extra $5,000 burning a hole in your pocket is not a likely scenario for you. In this case, consider switching your payments from monthly to weekly or bi-weekly. This is a great autopilot tactic to produce the same effect as putting down the $5,000 lump sum, meaning in both scenario’s you will eliminate five years worth of payments. The weekly or bi-weekly payments schedule actually sneaks an extra payment per year (roughly) from you, which ends up reducing the number of years you have to pay you mortgage.

There are a number of small changes or combinations of changes that you can make to pay off your mortgage sooner and pay less in interest. Talk to your mortgage broker and ask for some advice. It could save you thousands.

Jed Levene is a founding partner with Georgian Bay Financial Inc., a planning and investment/ insurance firm serving our area. He can be contacted at jed@georgianbayfinancial.com.

 

Mortgage Man – Dominion Lending Centres | Ph: 705-326-8523 | Fx: 705-326-8645 |  www.markgoode.ca | FSCO# 12254 | 180 Memorial Avenue | Orillia, ON L3V 5X6 |
    
 All credits and copyrights to their respective owners. 
Reposted Articles may have been altered or edited from Original post Orillia Packet & TImes
~ Corin Payie ~ MMDLC

Understanding A PRE-Approval!

General Mark Goode 21 Apr

1. Pre-approvals aren’t created equal.
Many lenders don’t review your qualifications when issuing a pre-approval. They provide only a rate guarantee, subject to later approval. (Mortgage advisers should always disclose this.)

“I would caution consumers when a lender only holds a rate, versus asking for documents and confirming qualification,” says Rob Regan-Pollock, a mortgage broker with Invis. “It’s heartbreaking to be told by a lender they cannot qualify after being told they were ‘pre-approved’.”

2. Advice goes only so far.
Mortgage advisers can “pre-qualify” you to confirm that you meet general guidelines, but only a lender’s underwriter can confirm that your income, down payment, purchase agreement, property information, credit and debt ratios meet their full approval

Unless you have a 20 per cent down payment from your own resources, rock-solid employment, provable income, pristine credit, and low debt, then pick a lender that reviews your application and preferably your documentation before granting its pre-approval.

3. Appraisals are the missing link.
Appraisals aren’t done at the pre-approval stage. But they’re mandatory for getting a mortgage. The issue, of course, is that you can’t get an appraisal on a home you haven’t found yet. And that’s the big risk with pre-approvals. If the lender’s or mortgage insurer’s valuation appraisal reveals that you overpaid, or the property has defects, it can render your pre-approval worthless. That’s why you’re always wise to insert financing conditions in your purchase offer (or at least appraisal conditions) or get an appraisal before you make an offer.

Adding a financing condition is especially important if you’re putting down less than 20 per cent, which typically requires an insured mortgage. That’s because default insurers like CMHC don’t even look at pre-approvals. They can decline you or your property for any number of reasons, leaving those without financing conditions at risk of not closing, losing their deposit and being sued.

4. Don’t over-rely on appraisers.
Even if you get an appraisal before making your offer, “you can’t rely on appraisers to identify every problem with a property,” says Jason Upton, president of Aedis Appraisals. That’s especially true for condos where most appraisers (due to cost and time constraints) won’t review condo board minutes, condo finances and engineering reports. That’s where risks like special levies, reserve deficiencies, legal problems or structural issues can turn up, all of which can kill a lender’s interest and make a pre-approval worthless.

5. Your actions after pre-approval matter.
Beware that missing payments, adding debt, changing jobs, moving around your down payment money or co-signing for someone, among other things, can void your pre-approval.

6. Pre-approvals don’t come with the best rates.
Statistically, only around one in six pre-approved homeowners actually take the mortgage they got pre-approved for. But the lender still has costs (like rate hedging and application processing costs) for the five in six pre-approved mortgages that don’t close.

Given this expense, pre-approvals don’t typically come with the best pricing. They’re often 0.10 to 0.15 percentage points above market rates – which is peanuts compared to your costs if rates soar and you’re not pre-approved.

That said, the best mortgage rates are often for 30- or 45-day closings. Check rates 30 days before closing. If they’re more than 0.10 percentage points below your pre-approval rate, ask your lender to match them. If they won’t, consider re-applying elsewhere. But avoid trading a flexible mortgage for a restrictive one that’s only marginally cheaper. Homeowners routinely underestimate their need for refinancing flexibility later.

7. Sometimes waiting pays.
If you’re very well qualified, a mortgage broker can sometimes time the submission of your pre-approval to get you better rates. “If rates are flat or trending down, the discussion with the client becomes one of monitoring the market and not actually submitting the file until they are within the window of [rate] specials,” Mr. Regan-Pollock says.

8. Reset if appropriate.
If rates have stayed low and you’re still actively home hunting, reset your pre-approval every 45 to 75 days. This extends your rate hold, protecting you if rates jump before you close. If your lender restricts rate resets, you might need to look elsewhere.

9. Get a second pre-approval, if needed.
Lenders don’t issue more than one pre-approval at a time. So if 45 to 60 days have elapsed, rates have jumped, and you need more time to find a home, consider getting a second pre-approval elsewhere. On the other hand, if you know you won’t close within your original pre-approval’s time frame, save time and try to reset the rate hold period with the existing lender.

10. Features matter.
Choose the pre-approval with the longest rate hold (e.g., 120 days), the deepest discount rate, full underwriting and the best mortgage features (i.e., good prepayments, a fair penalty, good port and refinance policies, etc.). Only a minority of lenders meet this criteria.

 
Mortgage Man – Dominion Lending Centres | Ph: 705-326-8523 | Fx: 705-326-8645 |  www.markgoode.ca | FSCO# 12254 | 180 Memorial Avenue | Orillia, ON L3V 5X6 | 
    â€¨ All credits and copyrights to their respective owners.  â€¨Article may have been altered or edited from Original Post. 
Corin Payie MMDLC



Shopping for the best rates? Here’s how to do it right!

General Mark Goode 14 Apr

RATE SHOPPING?

Here’s the inside scoop on how to do it right!

First:  Make sure you are working with an experienced professional mortgage broker and underwriter.  The largest financial transaction of your life is far too important to place into the hands of someone who is not capable of advising you properly and troubleshooting the issues that may arise along the way.  But how can you tell?

Here are four simple questions your lender absolutely must be able to answer correctly.  If they do not know the answers…RUN…DON’T WALK…to a lender that does!

 

  1. What are mortgage interest rates based on?

The only correct answer is the Bank of Canada rate for variable mortgages and mortgage backed securities, specialized mortgage bonds, or Government of Canada Long Bonds for fixed rates.  A professional mortgage originator ought to at least know the basics of how your interest rate is determined.  Do not work with a lender who has their eyes on the wrong indicators, or worse yet, has no idea what the indicators even are.  At Canada Mortgage Direct we constantly review these indicators and you can therefore be confident in our ability to suggest sound mortgage strategies up front and to manage your mortgage for the long term.

 

2.  How will rising interest rates in the coming years effect me if I take a fixed rate product?

Most lenders will mistakenly answer that if your rates are locked in then rising rates in the future will not affect you.  This is an incredibly dangerous thought process.  What will happen to your payments at renewal if rates rise from their current emergency low levels to a more normal level 2% or more higher then today? This is called your payment shock and it is incredibly risky to your long term financial health.  Working with a lender who pro-actively manages your mortgage and notifies you when rates rise with a suggestion on how to minimize payment shock is not only smart it saves you thousands of dollars.  Let me show you how.

 

3.  What strategy are you recommending and why?

The key here is the word “strategy”.  If a lender cannot clearly articulate the strategy behind their recommendations to you then they are simply quoting a rate, and quite frankly anyone can do that.  On your largest investment make sure you are dealing with someone who has a solid financial plan that is considering your overall financial wellness for you.

 

4.  What commitment are you giving me to personally manage my mortgage over the long term?

This is the most critical question of all.  Many lenders, especially bank personnel, have no desire or ability to proactively manage your mortgage over the long haul.  How can you take advantage of changing markets in the future if no one is watching them for you? Who will ensure you don’t miss an opportunity to renegotiate?  If you are considering a variable rate mortgage why would you do this with someone who is not committed to keeping an eye on it?  At Canada Mortgage Direct we truly believe our real job begins when your mortgage funds.  Anyone can sell you a mortgage but only truly committed mortgage professionals can manage that mortgage over the long term.  With this long term management approach we can significantly reduce your total cost of home ownership, isn’t that the point?

 

BE SMART…ASK QUESTIONS…GET ANSWERS!

 

More than likely this is one of the largest and most important financial transactions you will ever make.  You might do this only four or five times in your life…but we do this every single day, and have been doing it for 18 years!  It is your home, and your future.  It’s our profession and our passion.  We’re ready to work for your best interest!

 
Mortgage Man – Dominion Lending Centres | Ph: 705-326-8523 | Fx: 705-326-8645 |  www.markgoode.ca  | FSCO# 12254 | 180 Memorial Avenue | Orillia, ON L3V 5X6 | 
All credits and copyrights to their respective owners.  â€¨Article may have been altered or edited from Original Post. 
Corin Payie  MMDLC 

Scotchmints.com

 

Finance Home or Cottage Improvements with your Home Equity

General Mark Goode 7 Apr

 

 

 
Mortgage Man – Dominion Lending Centres | Ph: 705-326-8523 | Fx: 705-326-8645 |  www.markgoode.ca | FSCO# 12254 | 180 Memorial Avenue | Orillia, ON L3V 5X6 | 
    â€¨ All credits and copyrights to their respective owners.  â€¨Article may have been altered or edited from Original Post. 
Corin Payie MMDLC

 Scotchmints.com

Brush up on your homeownership skills and knowledge FREE SEMINAR

General Mark Goode 1 Apr

Homeownership Education Week
Seminar and Live Webcast  April 8, 2014  9:00 a.m. – 11:00 a.m. (ET)

Join us for two-hours of informative and educational insights featuring leading Canadian economic and housing industry experts for a discussion on current homebuyer trends and demographic shifts, and the impact they are having on today’s real estate and financing environments.

http://www.meetview.com/genworth20140408/

This event is being held live for customers in the GTA on April 8 and simultaneously broadcast via webcast for customers across Canada.

Agenda:
 
 The Trends Changing Today Into Tomorrow

  • Linda Nazareth, economist, author, broadcaster

Genworth Canada Annual Homebuyer Survey Results

  • David MacDonald, VP, Environics Research Grou

Industry Panel Discussion

Tara Perkins, Real Estate Reporter, The Globe and Mail, will moderate an engaging discussion among industry experts including:

  • Stuart Levings, COO, Genworth Canada
  • David MacDonald, VP, Environics Research Group
  • Henrietta Ross, CEO, Canadian Association of Credit Counselling Services 
  • Laura Leyser, Sales Representative, RE/MAX a-b Realty Ltd., Brokerage 

This event is being held live for customers in the GTA on April 8 and simultaneously broadcast via webcast for customers across Canada.

To register for the in-person GTA event, please click here.
 
 

Mortgage Man – Dominion Lending Centres | Ph: 705-326-8523 | Fx: 705-326-8645 |  www.markgoode.ca | FSCO# 12254 | 180 Memorial Avenue | Orillia, ON L3V 5X6 |
    
 All credits and copyrights to their respective owners. 
Reposted Articles may have been altered or edited from Original post
~ Corin Payie ~ MMDLC

Scotchmints.com