Tag Archives: fixed vs. variable rate mortgage

What is a mortgage refinance, in plain english.

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How Does Refinancing Work

Refinancing works by giving a homeowner access to a new mortgage loan which replaces its existing one. The details of the new mortgage loan can be customized by the homeowner, include the new loan’s mortgage rate, loan length in years, and amount borrowed. Refinances can be used to reduce a homeowner’s monthly mortgage payment; to take cash out for home improvements; and, to cancel mortgage insurance premiums, among other uses.

What Is A Mortgage Refinance?

A mortgage is a loan used for real estate. They’re available via banks, credit unions, and online lenders. Hundreds of billions of dollars worth of mortgage loans are given each year.

But, mortgages aren’t one-size-fits-all. Mortgages can be customized.

For example, you can choose the number of years in your loan (i.e. term); you can choose the nature of your interest rate (i.e. fixed-rate or adjustable-rate); and, you can even choose what you pay in mortgage closing costs.

Your needs as a homeowner today, though, may be different from your needs tomorrow. In the future, you may not like mortgage terms you created for yourself.

Thankfully, there’s an option to change your mortgage loan terms. It’s known as a “refinance”.

To refinance your home means to replace your current mortgage loan with a new one. Refinances are common whether current mortgage rates are rising or falling; and you can get one from any lender you choose.

You’re not limited to working with your current mortgage lender.

Some of the reasons homeowners refinance include a desire to get a lower mortgage rate; to pay their home off more quickly; or, to use their home equity for paying credit cards or funding home improvement.

Refinances typically close more quickly than a purchase mortgage loan and can require far less paperwork.

If you have more questions about this article (or anything else) NEVER hesitate to get in touch, I’m happy to help.

Ground breaking mortgage changes coming!

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We are 5 days away for yet another change to our mortgage market.

As of the 17th, it’s getting harder to get the amount of money you may want for your mortgage.  Mortgage rules regarding qualification are right around the corner.  Rumor has it that 1 in 5 people will be affected.

Here’s how the rules work: 

For those wanting a short term fixed rate (1 – 4 years) or a variable rate or a line of credit mortgage, you qualify at the Canadian benchmark rate which is currently 4.64%.  You didn’t pay 4.64%, you just qualified at that rate.  The thinking is that if you qualify at this higher rate and the interest rate increases, you should still be able to afford the payment because you’ve qualified for less money.

If you took a 5 year fixed rate (or longer), you qualify at the contract rate; a conservative rate would be 2.49%.  Because you’re qualifying at this rate, you qualify for more money.

We typically think of high ratio insurance for those putting down less than 20% of the home’s value but in fact most lenders buy insurance for all their mortgages; even for conventional mortgages, but the consumer may not be aware of it because the lenders pay for it.

As of Oct 17th, the Canadian benchmark rate will be used for all mortgage qualifications that are backed by either high ratio insurance or low ratio (bulk pooled) insurance . Here are 3 examples of how it will affect clients.

All based on having little ancillary debt, so using 39% of gross income for your mortgage payment, property taxes and heat

Household income $50,000 gross. Old qualification amount =  $299,900

New qualification amount = $239,100

Household income $75,000 gross. Old qualification amount =  $466,500

New qualification amount = $372,000

        House income $100,000 gross. Old qualification amount =  $663,000

New qualification amount = $528,600

In the first example, you will qualify for $60,800 less.  In the second example you will qualify for $94,600 less and in the third example you will qualify for $134,400 less.

While lenders try to make sense of the rules, many are not lending for rental properties, nor doing stated income deals at this time.

New changes can create a little confusion, if you have any questions, never hesitate to give me call. I’m always ready to help.

Expect tougher mortgage rules by November

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Here we are again, more changes to the mortgage industry are heading our way, and soon.

Home buyers may feel the pinch as banks comply to stricter rules, but what will change and when…

How it will impact the Canadian home buyer?

As a federal regulator, OSFI’s requirement will impact banks and lenders across Canada. This means buyers in all markets will feel the impact of these changes, not just home buyers in hot markets, such as Toronto and Vancouver.

Banks and mortgage lenders will pass down the extra costs of these stricter regulations to the end user. This is done by either increasing mortgage rates or implementing tougher lending requirements for those applying for a mortgage.

For the average Canadian home buyer, then, this could mean that as early as November, it will either be:
→ harder to get a mortgage
→ mortgage rates will start to rise (even slightly)
→ or you won’t qualify for as large a mortgage as you would’ve prior to these new rules.

When will tougher rules take affect?

This announcement of the proposed new mortgage guidelines comes after more than six months of private consultations between OSFI and the banking sector. Now the public and other stakeholders have until October 18 to submit comments before any of these new guidelines take effect. Then the implementation of new mortgage rules will be phased in—some lenders, with a fiscal year-end of October 31, will need to enforce these stricter mortgage rules starting November 1, 2016, while lenders with a fiscal year-end of December 31, will enforce the new rules as of January 1, 2017.

But don’t expect changes in the mortgage or residential real estate market to stop here. This week, it was mentioned that additional measures may be needed to manage the risks associated with the “highly charged” Vancouver and Toronto housing markets.

Unfortunately hot markets cause change, if your contemplating buying, refinancing or renewing lets rock, I’m here to help answer any questions & help you into the best mortgage for YOUR needs 🙂

Mortgage Brokers vs. Bankers

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It is a mortgage tale as old as time… and one of the biggest choices that mortgage shoppers face when getting into the market is where to go….. broker or bank?

It can be a tough choice, many of us have been with our banks for years and it just seems easier to meet with the specialist there. Our parents went to the banks, your friend got a “great rate” at the bank and well, it just seems like the traditional thing to do.

Word is on the street that our society is taking a turn back towards “traditional” ways but before you make an appointment at your nearest financial institution, here are the top 5 reasons why mortgage brokers are just plain GREAT!

We offer mortgage plans that a banker does not have access to: Part of being an independent mortgage broker is that I am able to “shop around”! Banks only have typically about 3 products to offer, I can take your application to over 50 lenders and without a doubt find you the best rate and plan to suit YOUR needs.

We don’t turn our noses up at those with bad credit:  Mortgage brokers have flexibility and can often find a lender who will work with you.  Unfortunately, bankers have to adhere to their bank policies often placing restrictions on available options.

Flexible hours: Not a 8-5 person? No worries, I’m not either!! Now granted, if you call at 3 am you might have to give me a minute to fire up the Keurig but other than that, meeting outside regular business hours or at a location of your choice is not a problem!

Worried that you’re self employed? Don’t worry so am I: Banks can often times remind me of the government, there is not a lot of room for “grey area” black and white or nothing… If you are receiving your income from a non-conventional source ex: self employment, long term disability, alimony etc.  than have no fear. Brokers love the “grey area” in fact, we thrive in it. We keep ourselves up to date on the rules and the trends of the lending industry, knowledge is power and we will deliver your application to a lender who will happy to work with you!

We work for YOU: We offer a unbiased, free service to clients that helps them properly asses and understand the mortgage process. We love what we do and we like saving you money. We get down in the trenches, negotiate, shop around and provide options!

If I haven’t convinced you, feel free to give me call and get ready to be surprised.

Kelowna MortgageDave ~ Kelowna mortgage broker 🙂

They haven’t been built yet but Kelowna homes are being snapped up

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The current housing market in the country is a hot topic, and nowhere is it hotter than in British Columbia, so it might be surprising to hear that real estate is being snapped up and sold out within a matter of hours after hitting the market.

There is more than enough data to show that the real estate market in the Okanagan is unaffordable for most, prompting developers to come up with unique ideas. Micro suites, eco-friendly buildings, and ranchers are just some of the new developments popping up in places such Kelowna and Penticton and they are selling out faster than anyone expected.

Continue reading here…… story via Kelowna Now

Are you the right fit for a hybrid mortgage?

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“… Divide your investments among many places, for you do not know what risks might lie ahead.”– Ecclesiastes 11:2

That passage was written before 900 BC. That’s how long people have been talking about the benefits of diversification. Yet, three millennia later, 96 per cent of mortgage borrowers still put all of their eggs in one basket. They pick only one term and go with it.

Maybe its time to put your eggs in two baskets? Enter the “hybrid mortgage”.

A hybrid mortgage lets you split your borrowing into two or more rates. The most common example is the 50/50 mortgage, in which you put half your mortgage in a fixed rate and half in a variable rate.

Some hybrids let you mix the terms (contract lengths) as well. You might put one-third in a short fixed term, for example, and two-thirds in a long term. With certain lenders, such as Bank of Nova Scotia, National Bank, Royal Bank of Canada, HSBC Bank Canada and many credit unions, you can mix and match rates and terms in almost infinite combinations.

The point of a hybrid mortgage is to reduce your exposure to unexpected adverse interest-rate movements. If variable rates shoot up and you have half your borrowing in a long-term fixed rate, you’ll feel less pain than if you had your entire mortgage in a variable or shorter term. Conversely, if rates drop, you still enjoy part of the benefit.

Hybrid mortgages can fit the bill for folks who:

  • Are torn between a fixed and variable rate;
  • Think rates should stay low but who can’t bear the thought (or cost) of them soaring;
  • Want a lower penalty if they break their mortgage early (big penalties are a common curse of longer-term fixed rates);
  • Have a spouse who has the opposite risk tolerance.

So why, then, is only one in 25 borrowers choosing hybrids, a number that hasn’t changed much in years?

Well, for one thing, hybrids are misunderstood. They’re also insufficiently promoted, entail more closing costs and (often) have uncompetitive rates. But not always.

Continue reading here…..