Why use a Mortgage Broker

As a dedicated mortgage professional, I can access numerous lending institutions offering unique mortgage products. First-time homebuyers or those either with a mortgage for renewal or looking to refinance, give us a call. You needn’t look any further as we offer great options as a one-stop broker.

Not all products are the same. Our goal is to reveal the options available for you in Canada, to offer superior mortgage products with reasonable terms and rates. The good news is that we don’t tether to any single lender giving me the freedom to help you find mortgage success without biased advice. Not only that – we will work hard with you to ascertain decisions for your future.

Feel free to ask me any questions you may have regarding mortgages, and I will promptly guide you to a fitting solution. Reach out to me – I am a licensed professional ready to advise.

Reviewing your mortgage is important

We have been blessed with low interest rates affecting lower mortgage rates. Have you thought about what happens to mortgage rates and how a household’s expenses go up when these rates rise?

Some mortgage thoughts to ponder:

  1. Variable mortgages. Variable-rate mortgages can be a good option when facing declining rates in the short term. And they can be risky if rates rise. Ask your mortgage advisor what mortgage plan suits your needs?
  2. When it’s time to renew your mortgage. Consider that you have a chance to work with an independent mortgage expert to save money. Watch for the letter that tells you it is time to renew or your notices coming in from your financial institution.
  3. Pay your bills and credit cards on time. Even phone company bills not paid can end up on your Equifax report. When applying for a new mortgage, your lender can see your credit score just when you need to appear in good standing as a responsible borrower.
  4. Don’t apply for credit everywhere. Avoid signing up for store credit cards because such applications trigger a credit inquiry. Too many inquiries make it look like you may be strapped for cash flow.
  5. Mortgage HELOC debt versus total debt. High-interest debt can be rolled into your mortgage if the interest rate is lower than your other loans. Plus, you may be able to include renovation costs in your new mortgage. Just be careful not to increase your HELOC (home equity line of credit) ratio close to your home’s value. There is always a temptation to use up your equity. Note: Talk to your mortgage advisor about the pros and cons of raising HELOC debt tied to your home if home values decrease dramatically or when bankruptcy occurs.
  6. Know your mortgage prepayment penalty. To get out of your mortgage early, the right mortgage with a lower penalty could save you a lot of money! Compare these penalties when shopping for your new mortgage with your mortgage expert.
  7. View mortgage pay-downs as an investment. A pay-down will pay it forward into your net worth. Thus prepayment privileges are essential! If you make monthly payments, consider paying your mortgage weekly or biweekly to reduce the amortization period.
  8. Give your mortgage an annual checkup. Keep your mortgage healthy – give it a yearly checkup. Even a minor tweak can better position your real estate planning.

Remapping your mortgage finances

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Plan your mortgage shopping. It is essential to plan regarding your mortgage. A mortgage specialist can help you review your needs looking at developing your most beneficial financial strategies. Over a year, you may have increased your credit card balances or taken on a car loan and find the increased payments difficult. A mortgage specialist can help you consolidate debt, and it may save you thousands.

Watch for your renewal date. When you get a letter indicating it is time for renewing your mortgage, call us for advice. You will have an opportunity to have us negotiate your best possible rate.

Work the math. We will work the numbers to guide you on getting more from your repayment process to build your home equity faster. Instead of paying your mortgage monthly, pay weekly or bi-weekly. A small change can save you thousands over time.

Are you looking for a bigger home? You may want to renovate or relocate. It is often less expensive to renovate than to relocate. Financing options are available to remodel a kitchen, bedroom, bathroom — whatever dream you may have in mind for your current home.

Consolidate wisely. When considering consolidating, good credit behaviours are essential. An excellent credit rating helps you qualify for the best mortgage rate. Don’t let your credit accounts exceed 30% of the credit available and pay your bills on time.

Significant goal planning prepares you. If you have substantial current needs such as funding education, a large purchase, investments, renovations, or paying down debt, your mortgage might be your most cost-effective financing option.

Source: Canada’s Economic Action Plan

Understanding Fixed versus Variable Mortgages

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Fixed Mortgage Rate: A fixed mortgage rate allows the home buyer to lock in a rate for the duration of the mortgage term, for example, over five years. The advantage of the fixed rate is that your rate will not fluctuate, and you can count on planning how much your mortgage payment will be for the term.

Variable Mortgage Rate: A variable mortgage rate means that the interest rate will change depending on the lender’s prime rate. For example, if your lender’s prime rate goes up or down, your mortgage payment will reflect that difference in interest during your mortgage term, which will affect your mortgage payment amount.

How to prepare to qualify for a mortgage

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When you apply for a mortgage, there are several questions that a lender may ask, for which you can prepare. They will want information relating to:

The primary information they will need.

1. Employment and income

2. A summary of your outstanding debts

3. Cash reserves, bank account cash, investments, and other assets

4. The down payment that you have on the property you are purchasing, and is it your own money

5. Will the loan also be to consolidate any debts

6. What will be the use of the property

7. What is the equity you now have in your current home, if applicable

Employment and income.

  • Who is your employer?
  • How much income do you make, and can you provide payment receipts/stubs?
  • How long have you been working at your job?
  • Is your income a salary or other income such as sales commission?

Your liabilities.

  • What are your outstanding debts?
  • What commitment level per month do you have to pay debts?
  • What is the cost per month for auto loans?
  • How much of your income goes to pay off credit cards, and what is the gross credit card debt?
  • How much money will be left after you pay for your down payment and closing costs?
    • If you are refinancing debt, how much debt will your mortgage cover and reduce your equity?

What you will use the real estate for:

  • Will this be your residence?
  • Will you rent a portion of the home out?
  • Is it an investment property?

Property type

  • A condominium?
  • A duplex?
  • A single dwelling?

Replies which can work in your favour:

  • I have steady employment with the same employer for two-plus years.
  • I carry little debt with a debt-to-income ratio of 25% or less.
  • The mortgage is only for a home purchase.
  • My down payment of at least 30% of the purchase price with my own money.
  • The cash reserves will pay several months of the mortgage payments once the property closes.

Replies which can work against you:

  • Self-employed or contract worker.
  • High debt with credit cards maxed out, with a total debt-to-income ratio of more than 30%.
  • We intend to renovate the property for rental use.
  • The liquid cash situation will be tight once all expenses are paid after we close the deal.

Be careful not to maximize your HELOC Debt

Consumers are shifting unsecured high-interest credit card balances and debts such as car loan balances to a low-interest Home Equity Line of Credit (HELOC). This transference happens on a larger scale when people consolidate their debts while backing them with their home value. Once your home secures this debt, it is no longer unsecured debt in your portfolio.1

You may indeed be able to save a sizeable chunk of interest by transferring debt from a high-interest credit card to a low-interest HELOC. For many, this works well insofar as they have an intelligent debt repayment plan in place.

When developing a financial strategy, assess all of your credit cards and other loans, including a Home Equity Line of Credit (HELOC). Total your combined debt while you weigh this against all of your retirement and your non-retirement assets.

A safety precaution always estimates your decisions about how they will impact your net worth statement when subtracting liabilities from assets. Adding in your HELOC debt with your portfolio of obligations gives you proportional insight into your actual net worth. Add your HELOC level of debt alongside your unsecured credit cards. Compare interest rates, fees, and other features and the time it will take to pay these loans all off (some calculators do a great job comparing this).

That said, be cautious using HELOC debt as quick loans for vacations, 2nd residences, extensive renovations versus selling and repurchasing a new home, vehicles, businesses, or investments. HELOC credit cards offered with most lines of credit will also reduce your home equity value.2 

This growing shift of unsecured credit card debt to HELOC debt enticed by lower interest rates (related to your mortgage) helps the lenders’ balance sheets because this debt, once transferred, becomes secured collateral against real estate assets then owned at a higher proportion by the bank. Taken to the limit, if the real estate market prices drop, your debt may surpass your home value — this happened in the 2007-8 mortgage debt crisis. Think seriously about reducing your debt portfolio, especially if you hold a lot of HELOC debt.

Many people are inadvertently reducing their home equity in the process of securing previously unsecured credit card debt while hinging it to and reducing their home value. When people sell their homes, they are often surprised that their home equity is considerably reduced after paying their mortgage. Why is this? You must pay all associated HELOC debt during the sale.

Source: Bank of Canada

1 Most credit cards are unsecured by any asset that you own. However, if you accept a credit card linked to your home which offers low interest, this may be secured against your home value. Many consumers are unaware of how this works.

2 If bankruptcy occurs, your home equity generally is safe unless it is secured against HELOC debt. Unsecured credit cards are often simply not necessary to repay should one seek bankruptcy protection. Always read your small print in all contracts. Don’t rely on sales discussions over the phone or in-person until you read the small print. It is only beneficial to a bank or financial institution to shift your debt from unsecured credit card debt to secured debt if bankruptcy ever does occur.

Mortgage planning to fit your financial strategy

As part of your overall financial strategy, consider your mortgage strategies to access financing, reduce risk, and protect your real estate investments.

A good mortgage plan helps you keep moving forward regardless of market volatility and allows you to weigh capital gains versus losses in your favour. When dealing with your largest single asset class, you need to prepare for the worst possible situations, such as family illness, job loss, or increasing interest rates.

Look at probable contingencies and ask:

  • Can I pay for the mortgage if other unexpected expenses arise?
  • Could I end up needing to sell my residence or investment property or cottage?
  • Can I weather a real estate market downturn that could reduce the value of my property by 5 or 10%?

Other important considerations:

  • Run amortization schedules 1, 2, and 3% higher than the current market rate to see if you can pay for a higher escalating monthly mortgage payment just in case the economy shifts.
  • Consider not locking in a mortgage (keeping it open or only using a line of credit with the freedom to govern principal payments). If you determine that your plan must allow you to take advantage of selling, you may avoid future penalties.
  • Assess risks associated with a property such as an old condo with a special assessment (offloading the expense to all the owners collectively).
  • If you are nearing retirement, where do you want to live? Ask questions relative to your lifestyle preferences: “Is shopping, a park, a library, or city-life within walking distance?” or “Is there a major hospital nearby, and access to an airport or major roads such as the 401?”

The financial arrangements for your real estate can be affected by external influences, such as interest rate movements, and personal factors, such as your income and your ability to gain loan approval. The bottom line is that you must service any mortgage debt and pay down the mortgage.

Let us help you assess your situation as we help plan your best mortgage fit to suit your circumstances.