Changes to Insured Stated Income programs

Borrowing Guidelines for Insured Stated Income Programs in Canada are about to change

The borrowing guidelines for insured Stated Income Programs are about to undergo some major changes and these changes will be implemented effective April 9, 2010.

The changes are being announced by CMHC (also known as Canada Mortgage and Housing Corporation).    CMHC’s changes, as well as those announced by Finance Minister Jim Flaherty effective on April 19, 2010 are all attempts to help cool off the heated housing market which is now being driven by record-low interest rates.   More importantly, these new measures are required to protect borrowers from taking on more debt than they can afford especially as interest rate hikes are imminent.  While Canada still allows Stated Income programs here, they are becoming very rare in the U.S.  The massive number of defaults and foreclosures reported by the U.S. after the 2008 credit crisis were attributed mostly to Stated Income programs that were used to place under-qualified borrowers into mortgage loans that they could not afford.

While Canadian lenders continue to use the Stated Income programs here, customized for commissioned and self-employed borrowers, CMHC will now be scrutinizing those same applications using tighter underwriting criteria making the CMHC Self-Employed mortgage insurance program a little harder to access.

What exactly does Stated Income mean?

Stated Income means exactly that.   When a mortgage application is created, for a self-employed or commissioned applicant, and the entire income amount is not verifiable in traditional documents, for example a Notice of Assessment, the applicant may apply under the Stated Income program to allow an income adjustment to help qualify them for a home purchase or re-finance.   A real example might look something like this:

Mr.Thomas works as a Systems Analyst in Toronto.  He is purchasing a house based on his earnings alone as his wife is currently not working.  He earns $77,000 gross annually and his employment status is considered self-employed as he works as an independent contractor and bills the company directly for his time.  He is not on payroll.  He has worked in various departments for this same government organization, as a Systems Analyst, for the last two years.   To buy the home they want, this couple would need an income of $85,000 to qualify for the purchase.   On a traditional mortgage application, the couple would be declined and would not be able to purchase the home.   However, by utilizing the Stated Income program, the couple can qualify to buy this home with a 5% down payment and the income placed on the application would be “stated” on the application at a higher amount.  The couple has no other savings or funds available to them.  The income to qualify the applicants, would be entered at the amount of $85,000 instead of his actual income of $77,000, in order to qualify the buyers.

Here is an outline of the changes that will be implemented on any applications called Stated Income applications which pass through CMHC as an “insured” mortgage AFTER April 9, 2010 and how these changes would affect the particular applicants described above:

1.   Downpayment:  those who are purchasing a home, and who have applications classified as a Stated Income application, will be required to put down 10% rather than the 5% minimum required today.

Mr.Thomas and his wife, after April 9, 2010 must have a down payment equal to 10% of the purchase price, along with enough funds to cover closing costs.

2.  Tenure:   those who have been working in the same business for greater than three years, would not be eligible for the Stated Income program and therefore those in this category would have to provide proof of their income, for example, a Notice of Assessment.

Because Mr.Thomas had only been working as a Systems Analyst for the past two years in total, they could still apply under the Stated Income program and be eligible.   Had Mr.Thomas been working three years and 6 months, as a Systems Analyst, they could not qualify for the home they wanted.

3.  Documents:    documents will be requested and viewed by the lender to help determine the length of self-employed which are not always requested today.   The documents a lender may ask for:    a business license, proof of GST registration, articles of incorporation (if incorporated).

4.  Commission:     those who are collecting commission would no longer be eligible for the Self-Employed program.

Mr.Thomas is not paid on a commission basis, therefore, after April 9, 2010, he could still utilize the Stated Income program.

5.  Limits:   a re-finance will be limited to 85% loan-to-value instead of the current limit of 90% used today.

If Mr.Thomas decides to re-finance his home, in the coming years, while he is within the insured status range and assuming self-employed income is still their primary income, they will only be able to re-finance up to 85% of the value of their property.

It is important to mention that these program changes only affect those mortgages that are “insured” by the lender therefore, those mortgages that are not insured, could be reviewed differently from lender to lender and each lender would specify their underwriting criteria on a case-by-case basis.

© 2010 This article was written by Elizabeth Blair at Mortgage Edge on March 11, 2010. Elizabeth Blair services mortgage clients primarily in Mississauga and all over the Greater Toronto area

You can contact Elizabeth directly by phone at (905) 510-5785

by email at eblair@mortgageedge.ca

or you visit her website at:    http://www.missmortgage.ca

Elizabeth is licensed with the Financial Services Commission of Ontario and is also a Member of IMBA (the Independent Mortgage Brokers Association of Ontario) http://www.imba.ca

Lic # M08005880 / Brokerage Lic # 10680.  Head Office: Park Place Corporate Centre, 15 Wertheim Court, Suite 210, Richmond Hill, ON, L4B 3H7, Canada.

The Evil IRD Penalty

The IRD penalty (Interest Rate Differential) has become a very hot topic in the last year.  With the recent plunge in interest rates, many fixed rate mortgage holders, have contacted their banks to find out what it would cost to break their mortgage term in pursuit of today’s much lower mortgage rates.

Many are shocked to find out that the IRD penalty is so high, that breaking their mortgage has even become impossible for some as it would eat up any small amount of equity that they managed to build. If you are selling a home outright, add to this penalty amount, the real estate fees to sell, and many are completely trapped and unable to find the extra cash they need, in their home equity, to move away from the mortgage obligation.   The IRD penalties are often huge and in most cases are absolutely outrageous.

I have experienced the same feedback from my own clients, who have made these calls. A recent client discovered their penalty would be $20,000……..I compare this kind of penalty charge to a form of predatory lending…….perhaps similar to the behavior of a loan shark? Is that too strong a term to use? Maybe not when you consider that while the bank won’t break your legs, or threaten your family’s safety, their imposed IRD penalties could very well “cripple you financially” …..now you know why I compare it to loan sharking.

In difficult times, when many home owners are already struggling to make ends meet because of lost jobs, pay cuts, ex-spouses no longer receiving child support, others struggling to maintain support payments, and others with unexpected requirements to move a family out of a house, would it not make sense for banks to re-visit their IRD penalty policy and agree to settle for a 3-month interest only?   Everyone else has been expected to reduce their expectations, so why are the banks not doing the same for their customers, especially in light of the current financial devastation, being faced by many individuals and families today?!

Consumers and industry professionals need to stand up against the IRD penalty as it is quietly eroding and undermining the financial stability of many households who have decided to re-finance or to get out of a current fixed rate mortgage.

Here also, is a link to a website where there has been much lively discussion, about the IRD penalty, sponsored by Ms. Ellen Roseman, of the Toronto Star.   You will see many shocking personal stories of mortgage holders who have faced the reality of the IRD penalty.   It is even more shocking to see that our own government has done nothing to protect consumers, even after many have already written their personal stories to organizations like “Ombudsman Ontario”.   Here is the link:

http://www.ellenroseman.com/?p=414

I believe that there will be great negative fallout, for many home owners down the road, unless home owners are given the option to freely re-finance their mortgages to obtain lower rates now as rates remain low.   Once mortgage rates climb, those who are very new home owners, who took out 35-year amortizations 5 years ago, have accumulated little equity and at the same time increased their household debt-load, their ability to carry a mortgage renewal, at a higher mortgage rate, will be a huge challenge.

Government must step in and force banks to change the rules. The IRD Penalty should be illegal and banks should be limited to charge only the standard “3-month interest penalty” instead of the IRD penalty being used today.    I already see it choking many mortgage holders, today, who are simply looking to move out of a higher mortgage rate into a lower mortgage rate, or perhaps even get out of a mortgage obligation due to current financial pressures, for example, a lost job.

I just returned from visiting the States and read an article in the USA Today.   It discusses how Texas banks have held a strong position, based on their tight regulations, even when many other banks around them failed.    An especially interesting point, in this article, is that the state of Texas prohibits banks from charging high mortgage penalties …… Canadian banks should also be prohibited from using the IRD penalty calculation.   You can read the article in the USA Today, at the following link:
http://www.usatoday.com/money/economy/2009-12-28-texas-banks_N.htm

Ottawa is presently reviewing Canadian mortgage rules and may change financing rules to increase minimum down payments and decrease the extended amortization of mortgages (currently at 35 years) – these would be very positive moves to make.   Texas banks have done well and their tough guidelines governing the mortgage financing industry have been the very reason why a housing fallout there, has been minimal.

If you want to express your concern about the IRD penalty, and you live in Mississauga or Streetsville, you should write to the Honourable Bonnie Crombie, Member of Parliament, for Mississauga and Streetsville areas, to request that the Government work to remove the IRD penalty, in use today, by our banks.

Her email address is:
crombie.b@parl.gc.ca

This post was written by Elizabeth Blair, a licensed Mortgage Agent with Mortgage Edge in Richmond Hill, Ontario. Elizabeth services mortgage clients in Mississauga and all over the Greater Toronto area.
You can contact Elizabeth directly by phone at (905) 510-5785
by email at eblair@mortgageedge.ca
or you visit her website at: http://www.missmortgage.ca
Elizabeth is licensed with the Financial Services Commission of Ontario and is also a Member of IMBA (the Independent Mortgage Brokers Association of Ontario) http://www.imba.ca
Lic # M08005880
Brokerage Lic # 10680
Head office is located at: 15 Wertheim Court, Suite 210, Richmond Hill, Ontario, Canada.

What is a “closed” or “open” mortgage?

When you are shopping for a mortgage, you may hear the terms, CLOSED or OPEN mortgage.    Let me explain the difference between these two options so you can determine which one is better for you.

OPEN MORTGAGE An “open” mortgage means that the mortgagor (the borrower) can pay the mortgage off, fully, at any time, without a mortgage penalty.   A fully open mortgage is suitable for the following types of borrowers:

a) a property investor buys a property and has intention of selling it in a very short timeframe;

b) a borrower sets up this mortgage because they are expecting a large sum of money (for example, an inheritance or a work bonus) and will use that money to pay off the full mortgage loan amount;

c) a borrower who might be required to move on notice (perhaps due to a work relocation requirement) and would need to pay the mortgage off in full when the house sells.

d) you receive regular large bonus amounts, as an employee of your company, and you wish to apply these amounts to your mortgage anytime without the restrictions that might come on a lender’s regular pre-payment terms.

e)  or perhaps you do not want to be locked into any term, for your mortgage loan.

Note that, the mortgage rates, for fully OPEN mortgages are higher than those given for  “closed” mortgages.   For example, effective today November 24, 2009, a fully open variable mortgage rate, is available at Prime Rate Plus 0.80% = 3.05%

CLOSED MORTGAGE A closed mortgage means that the mortgagor (the borrower) is given a contract “term”.     If the borrower breaks the mortgage, before that contract term is up (known as the renewal date), the borrower must pay the mortgagee (lender) a full three months of interest penalty to get out of the contract (or IRD penalty).    Variable mortgage contract terms are available for 3 year terms and 5 year terms, right now.   A closed variable, 5 year term, mortgage rate is priced right now at between Prime Rate Minus 0.10% = 2.15% up to Prime Rate Plus 0.10% = 2.25%.   A closed variable, 3 year term, mortgage rate is priced at Prime Rate Minus 0.25% = 2.00%.

So you can see that there are specific reasons why a borrower would choose a closed mortgage over an open mortgage.

This post was written by Elizabeth Blair on November 24, 2009, a Licensed Mortgage Agent with Mortgage Edge in Richmond Hill, Ontario.  Elizabeth services mortgage clients all over the Greater Toronto Area.

You can contact Elizabeth by phone:  (905) 510-5785

Or email:    eblair@mortgageedge.ca

Visit her website at:     http://www.missmortgage.ca

Elizabeth Blair is licensed with the Financial Services Commission of Ontario and is also a Member of IMBA (the Independent Mortgage Brokers Association of Ontario) http://www.imba.ca

Lic # M08005880 / Brokerage Lic # 10680

Head office is located at:     15 Wertheim Court, Suite 210, Richmond Hill, Ontario, L4B 3H7

NEW Lower Mortgage Rates!

Here are hot new mortgage rates for you:

1.     Variable Rate Mortgage at Prime Rate – 2.25% **

2.     5 Year Fixed Rate – 3.75% **

If your mortgage loan amount is greater than $370,000, I can get you

3.59% ** on a 5 Year Fixed Rate.

**  Some conditions apply and subject to approval by the Lender.  Mortgage rates are subject to change without notice.

This post was written by Elizabeth Blair, a Licensed Mortgage Agent with Mortgage Edge in Richmond Hill, Ontario.

Elizabeth services mortgage clients in Mississauga and all over the Greater Toronto area.

You can contact Elizabeth directly by phone at (905) 510-5785

by email at eblair@mortgageedge.ca

or you visit her website at: http://www.missmortgage.ca

Elizabeth is licensed with the Financial Services Commission of Ontario and is also a Member of IMBA (the Independent Mortgage Brokers Association of Ontario) http://www.imba.ca Lic # M08005880 Brokerage Lic # 10680 Head office is located at: 15 Wertheim Court, Suite 210, Richmond Hill, Ontario, Canada.

HOT News: Lenders slashing variable discounts

Hot news for those who are looking for variable rate mortgages.   Here is the best deal available today:

Prime Rate plus 0.15%.  —> 2.40%

Wow, this is an excellent rate and is only available for mortgage terms of less than 3 years.

You pick a renewal date between March 19, 2012 and May 31, 2012.

This blog post was written by Elizabeth Blair, a Licensed Mortgage Agent with Mortgage Edge in Richmond Hill, Ontario.   Elizabeth services mortgage clients in Mississauga and all over the Greater Toronto area.

You can contact Elizabeth directly by phone at (905) 510-5785

by email at eblair@mortgageedge.ca

or you visit her website at: http://www.missmortgage.ca

Elizabeth is licensed with the Financial Services Commission of Ontario and is also a Member of IMBA (the Independent Mortgage Brokers Association of Ontario) http://www.imba.ca Lic # M08005880 Brokerage Lic # 10680 Head office is located at: 15 Wertheim Court, Suite 210, Richmond Hill, Ontario, Canada.

Start planning for your first home purchase

If you are thinking of buying a house soon, here are some good tips to help you get started:

1. Begin saving cash for your downpayment. The larger your downpayment, the lower your mortgage obligation will be. You can also place saved funds into an RRSP, and then cash them out to use towards your downpayment. Remember that an RRSP will also give you some tax benefits each year, as you save. Seek out the assistance of a good financial planner to help you towards that goal. Based on the Canada Revenue Agency Home Buyers’ Plan (HBP) guidelines, first-time home buyers can now withdraw from their Registered Retirement Savings Plan (RRSP) avoiding the requirement to pay taxes on the withdrawal amount. The new withdrawal limit is now $25,000 compared with the previous limit of $20,000. An individual, or an individual and their spouse, or common-law partner can combine their maximum limit to make a total HBP withdrawal of $25,000 each, thus bumping the maximum allowed HBP withdrawal to $50,000 for the pair.

Alternatively, you can begin saving a portion of your downpayment, with Canada’s new Tax Free Savings Account or TFSA. Please visit the following website link to learn more:

http://www.budget.gc.ca/2008/pamphlet-depliant/pamphlet-depliant2-eng.asp

2. All applicants on the mortgage should be using credit and be working towards building a credit history. Use credit, pay it off. Some examples of items that will develop your credit history are credit cards, line of credit, a car loan, a personal loan. Remember that if you do not have a credit history, when applying for a mortgage, your application may be categorized as a “higher risk”, thus the mortgage rate offered to you will also likely be higher.

3. Always pay your credit card bills, utility bills and anyone who provides you services ON TIME. Remember that if you do not pay other companies, that may have provided services to you, and you owe money to them, those same companies could file “collections” against you for those monies owed and these collections may get published on your credit report. Removing derogatory items from a credit report is a lengthy and tedious process which you will want to avoid. Maintaining a good credit score is especially important today, as we face a lending environment where underwriting guidelines have tightened up considerably making it much harder to qualify for a mortgage compared with a year ago.

4. Avoid running up too many balances on cards or too much debt: A common one I see is car loans. Car loans are much easier to obtain, however, when it comes time to apply for a mortgage, and you have combined monthly car payment obligations of $900 a month, it may greatly reduce your ability to qualify for the mortgage amount that you really wanted especially if you are carrying other credit cards and loan obligations as well. I always tell first-time buyer clients, to go out and buy the least expensive well-maintained used car they can find, pay cash for it, and drive it around until after they take possession of their home. After purchasing a house and understanding what the month-to-month expenses are, you will then know what you can comfortably afford on a car payment balancing this new payment along with the expense obligation that owning a house brings.

5. Do not sign up as a co-signer or guarantor for anyone else’s debt. If you do, you could be disqualified for a mortgage if you have a financial obligation to someone else’s debt. Even though you may only have co-signed, that debt obligation would have to be disclosed on your mortgage application and depending on what that amount is, you may not be able to qualify for the amount you need on your mortgage application.

6. Don’t switch jobs just before you apply for a mortgage unless you can wait out the probation period on the new job. If your new position does not have a probationary period, that would be fine with most lenders reviewing your mortgage application.

7. Be sure you understand the whole financing process when purchasing from a builder. Often qualifications are given by the ‘in-house’ lender at the builder’s office, but clients often walk away without ever really understanding what happens with their mortgage qualification down the road, for example, 18 months away or whenever their new home is ready and built. I recently received a phone call from a very distressed individual who made a deposit with a builder, over a year ago and was about to lose their deposit on closing date, because they could not now qualify for their mortgage, one month before possession date.

They thought that when they had that intial interview with the builder, that everything was completed then and the house belonged to her because she had already made progress payments of over $30,000 during the 12-month period. The lender could not approve the mortgage loan since the client’s financial status had changed and more debts had been accumulated since that original application was initiated. It is very important to remember that a lender reserves the right to review all applicant’s financial status (and can verify your debt status by retrieving a new credit report), right before your closing date, and if there is some substantial change in your financial status (for example, you purchased $30,000 of new furniture on your credit card) the lender could refuse to fund the mortgage regardless of what you may have signed or discussed when you visited that builder’s site initially. The lender can only refuse to advance mortgage funds if your new debts prevent you from “qualifying” for the mortgage. Ensure you read the fine print of that contract you sign, and understand that while you may have put down a large deposit with a builder, the house is not really yours until your financing is affirmed by the lender.

This blog was written by Elizabeth Blair, a Licensed Mortgage Agent with Mortgage Edge in Richmond Hill, Ontario. Elizabeth services mortgage clients in Mississauga and all over the Greater Toronto area.

You can contact Elizabeth directly by phone at (905) 510-5785

by email at eblair@mortgageedge.ca

or you visit her website at: http://www.missmortgage.ca

Elizabeth is licensed with the Financial Services Commission of Ontario and is also a Member of IMBA (the Independent Mortgage Brokers Association of Ontario) http://www.imba.ca

Lic # M08005880

Brokerage Lic # 10680

Head office is located at: 15 Wertheim Court, Suite 210, Richmond Hill, Ontario, Canada.

The Financing Clause

If you have been through the process of purchasing a home, you may have remembered a clause, at the back of your purchase agreement, that states something like this:

“ This offer is conditional upon the Buyer arranging financing within FIVE (5) banking days from acceptance of this Offer.”

Sometimes the financing timeframe is extended beyond five banking days, but more often, I typically see a 5-day window assigned.

The requirement to get your mortgage financing sorted out, within a set number of business days, is a very important time for the purchasing clients and for the real estate agents who represent both sides of the transaction, the buyer of the home and the seller of the home. Without financing, the purchase offer would be become null and void and the buyer’s deposit money is returned to the buyer.

As I have carefully navigated through several purchase deals and have organized financing for several clients, let me assure you that the time assigned to obtain the financing is often fully utilized and can even be a tight timeline to fulfill depending on factors which are often out of my own control. Let me take you through an outline of exactly what transpires during this very important timeframe so that you can clearly understand why the process can take this much time. I have allocated the financing process into a 10-step process.

Click here to review the 10-step process.

1. If the buyers have not yet started a mortgage financing application, they will need to make arrangements to provide full disclosure on a formal mortgage application. This would include their residential status, marital status, employment status, income, disclosure of current debts, and all other financial obligations, that the buyers may already have. The application is created and a credit report is retrieved.

2. Once the application is complete, it is then forwarded electronically, along with the attached credit report, directly to the chosen bank/lender.

3. The application is received by the lender and will be assigned to the lender’s underwriter. It is important to mention that underwriters receive many applications and so therefore the timeframe to receive attention on a submitted deal can be a day or two.

Once the underwriter has accessed the application, it is here that the application is carefully reviewed and considered. If the application has been carefully prepared, and there is no missing information, and details regarding the applicants have been carefully and properly documented, and a proper determination was made on the applicant’s ability to receive financing, the application would then receive approval by the underwriter.

4. The underwriter will prepare a mortgage commitment for the applicant(s).

5. Within the mortgage commitment, the underwriter will assign a list of conditions. These conditions will be outlined, within the mortgage commitment. A sample of these conditions might be:

a) applicants to provide proof of income;

b) applicants to provide recent pay stubs;

c) request for a full appraisal on the property;

d) confirmation of proof of downpayment…..etc.

6. Once the mortgage commitment is forwarded back to me, it is at this point that the clients are informed of the list of criteria that the lender has provided. The list of conditions would have to be carefully reviewed and as long as each item can be fulfilled, the possibility of the full approval is almost near. While it is preferable to gather documents before buyers enter into a purchase position, it is not always something the buyers fulfill up-front.

7. All documents required by the lender, per the mortgage commitment, are then forwarded to the lender for review.

8. The lender’s fulfillment administrator, will then carefully review all submitted documents.

9. If the lender’s fulfillment administrator has approved each document, then an approval on the documents would be provided.

10. It is only when the above items have been fulfilled that a decision is made to waive the financing condition, in the purchase document.

This blog was written by Elizabeth Blair, a Licensed Mortgage Agent with Mortgage Edge in Richmond Hill, Ontario. Elizabeth services mortgage clients in Mississauga and all over the Greater Toronto area.

You can contact Elizabeth directly by phone at (905) 510-5785

by email at eblair@mortgageedge.ca

or you visit her website at: http://www.missmortgage.ca

Elizabeth is licensed with the Financial Services Commission of Ontario and is also a Member of IMBA (the Independent Mortgage Brokers Association of Ontario) www.imba.ca

Lic # M08005880

Brokerage Lic # 10680

Head office is located at: 15 Wertheim Court, Suite 210, Richmond Hill, Ontario, Canada.

Mississauga – What exactly is mortgage loan insurance?

As a first time home buyer, you may have heard that you may have to pay a mortgage insurance premium.   

 

You will have to obtain mortgage loan insurance when you purchase a home and if your downpayment is LESS than 20%.  Remember that lenders do reserve the right to insure your mortgage even if your downpayment is greater than 20% and this decision is often based on the risk associated with the financing.    The key players that provide mortgage insurance in Canada today are CMHC, Genworth and AIG United Guaranty.   The newest insurer to join is AIG United Guaranty.   There may be more mortgage insurers joining the industry who may apply to the OFSI (Office of the Superintendent of Financial Institutions) to become mortgage insurers in Canada.  More competition will result in more choice and lower premium costs for Canadians who want to purchase a home.

 

Here is a sample breakdown to help you understand how a mortgage insurance premium is calculated for a buyer who wants to purchase a home with a 5% downpayment.

 

 

Price of home being purchased	(A)  $242,000
Your saved 5% downpayment	(B)  $12,100
Price less downpayment  (A) – (B) =	(C)  $229,900
Insurance Premium calculated for a 5% downpayment is 2.75% of amount $229,900   Total mortgage loan insurance premium is  à	(D)  $6,322.25
Total amount advanced to you by the Lender total mortgage amount   (C)  + (D)  =	$236,222.25
The lender who is reviewing your mortgage application will include the mortgage insurance premium (on your mortgage commitment) as part of your total mortgage loan and this is repaid over the term of your mortgage loan.   You can also pay this premium up-front, on closing date, if you prefer.

 

It is also important to point out that the mortgage loan insurance premium (calculated in example above) is also subject to provincial sales tax and this tax amount is not included in the total loan amount therefore you would have to pay this sales tax on your closing date.

 

Here below is a table that gives you an idea on what the typical mortgage loan insurance premiums are, but you should go directly to the various insurer websites to check the current insurance premiums when you are ready to buy.

The mortgage loan insurance premium charges are calculated as follows:

 

Financing Needed on the Purchase	Insurance Premium
Up to and including 65%	0.50 %
Up to and including 75%	0.65 %
Up to and including 80%	1.00 %
Up to and including 85%	1.75 %
Up to and including 90%	2.00 %
Up to and including 95%	2.75 %

 

 

You may be asking, so why do I need mortgage loan insurance, is it mandatory, and who does it protect?  

 

Why do I need mortgage loan insurance?   It is the lender who requires the mortgage loan to be insured.   The mortgage lender passes along the cost of insuring that mortgage, along to the consumer. 

 

Is mortgage loan insurance mandatory?   No.   There are a few mortgage lenders, on the market, who may provide you with mortgage financing without mortgage loan insurance but there will most certainly be a much higher interest rate offered as well as other administrative fees that could be added to the mortgage loan amount.   These other mortgage lenders can be accessed through the mortgage broker community.

 

Who does mortgage loan insurance protect?   Mortgage loan insurance is required by the mortgage lender because it protects the lender, if, the borrower, for some reason, cannot pay their mortgage.

 

This blog was written by Elizabeth Blair, a Licensed Mortgage Agent with Mortgage Edge in Richmond Hill, Ontario.  Elizabeth services clients in Mississauga and all over the Greater Toronto area.

 

You can contact Elizabeth directly by phone at (905) 510-5785

by email at eblair@mortgageedge.ca 

or you visit her website at:    www.missmortgage.ca

 

 

Elizabeth is licensed with the Financial Services Commission of Ontario and is also a Member of IMBA (the Independent Mortgage Brokers Association of Ontario) www.imba.ca

Mississauga – Pay off high interest debts

If you are already a home owner, you will likely have equity in your home.  Using that equity to pay off your consumer debts may be an option that will ease some of the stress of paying high interest debts over a long term.  Instead of paying your credit card debts at 18 – 28% interest, you may be able to consolidate that debt into your mortgage and pay it off at less than 6%.

 

Current Debt Position	Balance	Monthly Payment
1st Mortgage at 5.7 %  (amortization 19 years)	$220,000.00	$1,573.78
2nd Mortgage at 14%	$40,000.00	$469.55
Car Loan and Credit Cards	$18,857.00	$915.71
Total Mortgages + Car Loan + Credit Cards	$278,857.00	$2,959.04
New Debt Position	Balance	Payment
New Mortgage at 5.25% (amortization 19 years)	*$278,857.00	$1,926.60
2nd Mortgage at 14%	$0.00	$0.00
Car Loan and Credit Cards	$0.00	$0.00
Total Mortgage + Car Loan + Credit Cards	$278,857.00	$1.926.60
Total Monthly Saving:  $2,959.04 – $1,926.60 =		$1,032.44
*CMHC insurance fees and cancellation penalties may apply.  This example is illustrative only. Interest rates are subject to change without notice.

 

Consider above, a recent client with a mortgage balance of $220,000, a second mortgage at $40,000 and other debts totalling $18,857.  By consolidating the two mortgages, the car loan and the high interest credit cards, the client was able to reduce monthly payments and save $1,032.44 per month.  It is important to note that for this exercise to bear real financial fruit, this monthly saving should be applied to either an investment or as additional principal payments against the new mortgage.  All too often, the additional cash flow is consumed resulting in a similar crisis a few years down the road.

 

Such a consolidation will not only reduce monthly debt load but will improve and protect your credit rating, a major consideration for any Canadian seeking future loans.  Missed or late payments are not the only factors that can reduce your credit rating in the eyes of financial institutions, credit cards and lines of credit that are “maxed out” have the same negative impact.  You should always know, validate and protect your credit rating as much as your SIN number and credit cards.   When it comes time to renew your mortgage finance, you will be glad you kept your credit rating in good standing.

 

 

This blog was written by Elizabeth Blair, a Licensed Mortgage Agent with Mortgage Edge in Richmond Hill, Ontario.  Elizabeth services mortgage clients in Mississauga and all over the Greater Toronto area.

 

You can contact Elizabeth directly by phone at (905) 510-5785,  by email at eblair@mortgageedge.ca  or you visit her website at:    www.missmortgage.ca 

 

Elizabeth is licensed with the Financial Services Commission of Ontario and is also a Member of IMBA (the Independent Mortgage Brokers Association of Ontario) http://www.imba.ca

Keeping up with your growing list of contacts

When I decided to move into the mortgage financing business, I realized very quickly that there were a good number of people that I would be interacting with, on a daily basis……..lenders, clients, prospects, lawyers, appraisers, lenders, property inspectors, financial planners.  

 

It was after my first year, that my husband asked me how I was keeping track of everyone.   I pulled out the piles of business cards that I had been collecting over that first year and my husband shook his head in disbelief.  He told me that we were going to purchase a database management software program to help me get organized and I must admit that I was delighted to know that my own memory was going to finally get a break.

 

We purchased a software called ACT.  I went ahead and downloaded their 30-day trial version and by the 2^nd week of utilizing the software, I was hooked.  It was no longer a “nice to have” but moved to a “must have”.  Now in my third year of business, I know that I could not have possibly managed the contacts I have today.  I now have just over 600 contacts in my database and each day I add another name or two.  The software has allowed me to organize the data to retrieve customized reports and also help me to keep in touch with business partners, clients and prospects.

 

As my business continues to grow, I know that it was one of the best purchases I have ever made for my own business.

 

 

 

This blog was written by Elizabeth Blair, a Licensed Mortgage Agent with Mortgage Edge in Richmond Hill, Ontario.  Elizabeth Blair services mortgage clients in Mississauga and all over the Greater Toronto area.

 

You can contact Elizabeth directly by phone at (905) 510-5785,  by email at eblair@mortgageedge.ca  or you visit her website at:    http://www.missmortgage.ca 

 

Elizabeth is licensed with the Financial Services Commission of Ontario and is also a Member of IMBA (the Independent Mortgage Brokers Association of Ontario) http://www.imba.ca