Too often in the past, the mortgage was
left to the very end, but with our Online Pre-Approval or by simply
e-mailing us, we can take
care of this important process within hours. Once you are
Pre-Approved, you can confidently negotiate an offer on a home. A
seller also prefers to negotiate an offer of a purchaser who has been
pre-approved. With more lenders, lower rates, and no-cost,
no-obligation, make us your choice for your pre-approval.
Conventional Mortgage
A conventional mortgage is a loan that
does not exceed 80% of the purchase price or appraised value of the
home, whichever is less. This type of mortgage does not have to be
insured against default.
High-Ratio Mortgage - CMHC Insured / GE
Capital Insured
A high-ratio mortgage is a loan that is
above 80% and up to 95% of the purchase price or appraised value of
the home, whichever is less. These mortgages must me insured against
loss by either Canada Mortgage and Housing Corporation (CMHC), a
Federal Government Corporation, or GE Capital, a private insurer. The
premiums can be added to the mortgage amount or paid at closing, and
are as follows:
| For Mortgages Up To: |
80% |
No Insurance Required |
| For Mortgages From: |
75.1-80% |
Premium is 1.00% |
| |
80.1-85% |
Premium is 1.75% |
| |
85.1-90% |
Premium is 2.00% |
| |
90.1-95% |
Premium is 3.25% |
If you obtained an insured mortgage
after April 1'st, 1996, the premium you paid on the mortgage is now
portable to another property (if you closed before this date, it is
not portable, meaning that if you bought another home and your
mortgage needed to be insured, you must pay the applicable premium
again.) NOTE: This insurance is for the benefit of the lender against
default. It is very costly and there is another way we can arrange a
mortgage for you with a low down payment. That is with a 1'st mortgage
and a 2'nd mortgage. For your unique situation, it may be less costly
to consider this option. Banks, on
the other hand, cannot offer you this option as they cannot provide
secondary financing over 75% of the purchase price or value of the
property.
First Mortgages:
A First mortgage is the first debt
registered against a property that is secured by a first
"charge" on the property. If a default on the mortgage
occurs, the first lender has first right on the property to recover
the outstanding principal and interest costs, and any other costs
incurred during the process. Second Mortgages: A second mortgage is a
debt registered after a first mortgage has been registered. In most
cases, the interest charged on the second is higher than the first,
reflecting the higher risk to the lender, but over a short term, still
more cost effective than paying the high cost of the CMHC/GE Capital
insurance premium. They can be used to finance up to 90% of the
purchase price or value of the home.
Open Mortgages
An open mortgage allows you the
flexibility to repay the mortgage at any time without penalty. Open
mortgages are available in shorter terms, 6 months or 1 year only, and
the interest rate is higher than closed mortgages as much as 1%, or
more. They are normally chosen if you are thinking of selling your
home, or if you are expecting to pay off the whole mortgage from the sale of a
another property, or an inheritance (that would be nice).
Closed Mortgages
A closed mortgage offers the security of
fixed payments for terms from 6 months to 10 years. The interest rates
are considerably lower than open, and if you are not planning on any
one of the above reasons, then choose a closed mortgage. Nowadays,
they offer as much as 20% prepayment of the original principal, and
that is more than most of us can hope to prepay on a yearly basis. If
one wanted to pay off the full mortgage prior to the maturity, a
penalty would be charged to break that mortgage. The penalty is
usually 3 months interest, or interest rate differential (I.R.D. -
please refer to glossary for detailed explanation).
Fixed-Term Mortgages
With a fixed-rate mortgage, the interest
rate is set for the term of the mortgage so that the monthly payment
of principal and interest remains the same throughout the term.
Regardless of whether rates move up or down, you know exactly how much
your payments will be and this simplifies your personal budgeting. In
a low rate climate, it is a good idea to take a longer term,
fixed-rate mortgage for protection from upward fluctuations in
interest rates.
The Adjustable Rate Mortgage (A.R.M.)
The Adjustable Rate Mortgage (A.R.M.)
provides a lot of flexibility, especially when interest rates are on
their way down. The rate is based on prime minus 0.375% and can be
adjusted monthly to reflect current rates, and for the first 3 months
of the mortgage, a large discount on the rate is given as a welcoming
offer. Typically, the mortgage payments remain constant, but the ratio
between principal and interest fluctuates. When interest rates are
falling, you pay less interest and more principal. If rates are
rising, you pay more interest and less principal, and if they rise
substantially, the original payment may not cover both the interest
and principal. Any portion not paid is still owed, or you may be asked
to increase your monthly payment. This mortgage is fully convertible
at any time without any cost to you, if you choose a 3 year term or greater,
and offers a
20% prepayment privilege at any times throughout the year. While
traditionally, banks offer variable mortgages up to 75% of the
purchase price or the value of the home, we can go up to 90% with this
product.
Secured Lines of Credit
Use the equity in your home that you have
built up to purchase investments (where interest costs would be
deductible against the earned income), finance home renovations, buy a
car, or any other reasonable needs, with rates as low as prime. They
can be arranged up to 75% of the purchase price or value of the home,
and should you need more, we can arrange another secured line of
credit as a Second mortgage up to 90%. Accessing the available credit is
as simple as writing a cheque, or using the issued credit and/or debit card.
You do not have to draw the money until you need it, and once you make
a withdrawal, you can pay of your balance at any time or make monthly
payments as low as interest only. As you pay down the balance, you
have that much more available credit (revolving credit).
Being a secured product, there are the
normal legal and appraisal fees that are applicable. From time to
time, there are promotions where a lender will cover for part or all
of these costs.
A word of caution:
Although these lines are very flexible and
versatile products, great caution and care should be taken. It is very
easy and very tempting to use it for everything whereas normal
restraint would have been exercised, and suddenly, there are thousands
of dollars more that have to be repaid.
Equity Mortgages
These are mortgages that are assessed on
the equity of the home (market value minus the mortgage amount). They
can be as high as 75% of the purchase price or value of the property
and if more is required, we can look at a small Second mortgage. These
are generally offered to applicants that do not meet the normal income
and/or credit qualifying guidelines. You may have little or no income
verification, self-employed, and/or your credit may be
less-than-perfect.
Multiple Term Mortgages
If you wanted the lower rates of a short
term mortgage but wanted the security of a long term, why not choose
both. Yes, "build your own mortgage" product. You can split
your mortgage in to as many as 5 parts, all having different terms,
rates, and amortizations, but one total monthly payment. This way, you
are spreading the risk. But, be prepared to be "hands-on"
and watch the market very carefully here. This is not for everyone, as
the time and stress levels are quite high.
The 6 Month Convertible Mortgage
When rates are on their way down, or you
may feel that they will in the near future, a 6 month convertible
mortgage offers you the short term commitment at fixed payments, with
an added advantage that while within the term, the mortgage is fully
convertible to a longer term from 1 year to 10 years. At the end of the 6 month period, the mortgage becomes fully
open, where one can renew with the existing lender or transfer to
another lender. Even though it is offered at many financial
institutions, there are differences from one to the next.
All-Inclusive-Mortgage (A.I.M.)
The AIM mortgage takes care of everything
automatically. For Purchases, it includes: Solicitor's legal
fees and standard disbursements to close the purchase and mortgage;
Title transfer; Title Insurance from LandCanada for the clients; CMHC
application fee or Appraisal fee; 1% Cash-Back to cover Land Transfer
Tax; Registration of Deed and Mortgage. For Refinances, it
includes: Legal fees and standard disbursements to prepare and close
the mortgage; Title Insurance from LandCanada; CMHC application fee or
appraisal fee; 1% Cash-Back; Registration of new first mortgage;
Registration of discharge of existing first and second mortgage. The
minimum term available is a 5 year term.
Bridge Financing
Bridge financing refers to a special,
short-term loan needed to cover the time gap when two properties, both
firm sales, are involved and the closing dates don't match. The
property being purchased closes before the one that was sold. There is
a small set-up fee charged by the lender to have the bridge loan
arranged, plus the cost of the interest as now you are carrying both
properties for a short time. The rate charged on the bridge loan is
about 2-3% above the bank's prime.
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