There are a couple of options for the down payment for the purchase. You can use other investment assets if available, potential borrow from a friend or family member or use the Equity in your existing home by way of a Secured Line of Credit.  A secured line of credit can be added to your existing home for the down payment.  When you do eventually sell the home you then pay down the line of credit which is completely open.

I have implemented the secured line of credit strategy for a lot of my clients, so If things are not going to plan when trying to sell your home do not panic! We have options.

In my experience it is best to look at all the possible scenarios when setting up your mortgage pre-approval for the purchase, so you are prepared.  This will give you a piece of mind that you have a back up plan if needed

It typically takes two different lenders to implement this strategy, one for the line of credit refinance and one for the purchase mortgage so therefore another advantage to working with a mortgage broker who can access both lenders at the same time.

Contact me to find out more and to discuss a lending strategy for YOU.

At the end of last week CMHC announced they would lower their debt ratios limits on insured mortgages reducing an applicant’s borrowing power, so not what we would want going forward.

Debt Ratios Explained: 

When qualifying for a mortgage there are two debt ratios that a lender and insurer use to see how much an applicant can borrow.

GDS: which on insured mortgages is currently 39% of gross income includes the monthly mortgage payment, property taxes, heat, and condo fees (if any) and cannot be more then 39% of an applicant’s gross income.

TDS: is the same as GDS but will include other monthly debt payments such as car loans, credit cards etc.  This currently cannot be more then 44% of applicant’s gross income.  Once an applicant reaches either of these debt ratios, they have reached there maximum borrowing power.

The impact of CMHC lowering there debt ratios to GDS 35% and TDS 42% is roughly $30,000.00 in mortgage.  So, someone able to borrow $500,000.00 is now reduced to $470,000.00 using CMHC guidelines.

It is not all doom and gloom.  Right now, there are three insurers in Canada, CMHC, Genworth and Canada Guaranty.  The other two insurers have not to date made any changes.  Not all mortgage lenders use CMHC and some use two or all three insurers so that is why working with a mortgage broker makes sense to make sure your mortgage is submitted to the right lender and insurer allowing the maximum borrowing permitted.

This change is for CMHC Insured mortgages only so does not include refinances where one takes out new money,  20% or down payment on conventional mortgages or any mortgage outside of insurers guidelines.

Please do not hesitate to reach out with any questions.

We have seen some small up and down movement on fixed rates over the past couple of weeks.  This has been a result of the fluctuations in both the stock and bond markets and will continue like that until we get into more stable markets.  Fixed rates however still remain low and should continue to remain so for the foreseeable future.

The Variable Rate (The Bank of Canada Rate) has not changed since The Bank of Canada’s 1.50% rate reduction in March. There is still room for a possible further reduction which we could see later in the year.  Variable rates are at there lowest in 5 years.

The Real Estate Market is picking up with stronger purchases/sales in May.  We are not close to last years numbers but there is certainly a lot more activity which should continue as things open more and we get back to a normal world again.

Mortgage Product of the week:  Mortgage Switch is when you take your existing mortgage and move over to a new mortgage lender and product without adding on new money, so there is no lawyer or appraisal fee involved.  With rates as low as they are now there is tremendous opportunities to switch your mortgage.  If your mortgage is coming up for renewal, please do not just auto renew without exploring new opportunities and even If you are not up for renewal a switch mortgage could still work for you so let m know if interested.

Please do not hesitate to call or email me with any questions!

Given the current economic climate I know paying down your mortgage is not a priority for a lot of people right now but if not today then sometime in the future you can apply these strategies.

There are two main ways to pay down your mortgage.
• Accelerate your payment frequency to weekly or bi- weekly (both have the same affect) so you pay every other week or every two weeks. On a typically 25 Year amortization this strategy can shave roughly 3 years off your mortgage payments. Not bad for just a payment frequency change.
• Lump sum payments. You can apply lump sum payments by increasing your mortgage payment, applying a lump sum payment periodically or a combination of both.

Here are some examples.
• $500,000.00 mortgage say on a 5 Year fixed at 3.00% over 25 years. Current monthly payment $2366.23. Mortgage balance in 5 years $427,372.90. Amortization remaining 20 Years.
• Bi-weekly accelerated payment $1183.11 so half of the monthly payment above. Mortgage balance in 5 Years $414,521.14. Your mortgage balance is $12,851.76 lower. Amortization remaining 17 Years and 4 months.
• How about you increase that bi-weekly payment by just $50.00 so now the payment is $1233.11. Mortgage balance in 5 years $407,516.50. Now the difference between the initial monthly regular mortgage balance is $19,856.40 and that is just in the first 5-year term. Amortization remaining 16 years. Naturally you can increase your payment by more then $50.00 if you have the cash flow. Typically mortgage lenders will allow anywhere from 15% to 20% additional pre payment of the mortgage amount annually.

So, you do not have to win the lottery or be able to make large lump sum payments to pay down your mortgage faster and save thousands in mortgage costs.

Mortgage Refinancing
Currently we are seen a lot of volume in mortgage refinancing with most lenders back on schedule with there turn around times. Refinancing is used to consolidate debts to improve cash flow by lower your monthly debt costs, taken out equity for a purchase of some kind including down payment on a property, Adding on a secured line of credit for future use or obtaining a better interest rate on your mortgage. Depending on your mortgage you are in, the cost to break your existing mortgage can be as low as 3 months interest which is blended back into the mortgage.

If you are interested in exploring any of the above refinance options, please call or email me.

Robert Clancy
Residential and Commercial Mortgage Agent
————————————————-
SAFEBRIDGE Financial Group
Broker License #10524
Direct Line | 416-899-1467
Fax | 1866 385-4049
Facebook: https://www.facebook.com/bestratesmortgages/
E-mail | robert@safebridgefinancial.com
Website|www.bestratesmortgages.ca

Self Employed Mortgages
It is business as usual in the mortgage world although lenders are monitoring the current situation and implementing changes as they move along. For self employed borrowers the lenders will look at the industry of the borrower to get an understanding of how that industry maybe effected by the current economic situation. Remember when qualifying for a self-employed mortgage your last two years tax returns are used to qualify or if they are not strong enough then your last six months bank statements so a lender cannot call an employer for employment status. So, their approval judgement will be based on the income documents along with how the borrower’s industry is currently been affected.
Please reach out with any questions.

Thanks
Robert Clancy
Residential and Commercial Mortgage Agent
————————————————-
SAFEBRIDGE Financial Group
Broker License #10524
Direct Line | 416-899-1467
Fax | 1866 385-4049
Facebook: https://www.facebook.com/bestratesmortgages/
E-mail | robert@safebridgefinancial.com
Website|www.bestratesmortgages.ca

Reverse Mortgages
Reverses Mortgage and offered by several Institutions in Canada.

The Reverse Mortgage is geared towards borrowers aged 55 years or older who need to access cash flow by using the security in their homes but cannot qualify for a traditional mortgage based on income etc. No Mortgage payments are required over the life of the mortgage.

Benefits of the A Reverse Mortgage
The Reverse Mortgage is designed for Canadian homeowners age 55 years and older who want to live retirement on their terms. If you’re like most Canadian homeowners 55+, much of what you own fits into two categories – the equity in your home and the money you have saved. It is likely that the value of your home has grown over the years and makes up a large portion of your net worth. And while it is positive that your home has built value – this value is not accessible unless you decide to sell your home. The Mortgage allows you to access up to 55% of its value without having to sell your beloved home. And best off all, you don’t have to make regular mortgage payments until you eventually move or sell. Additionally, the money you borrow is tax-free and it does not affect the Old-Age Security or Guaranteed Income Supplement (GIS) benefits you may be getting. As the homeowner, you are required to maintain your home and remain current on property taxes and homeowner’s insurance. To recap, the Reverse Mortgage is suitable for people who don’t want to move but would like to improve their monthly cash flow. With the Reverse Mortgage you always remain on title and retain ownership and control of your home.

How can you use the Mortgage Funds?
The money received from the reverse mortgage can be accessed in one lump sum or in planned advances – it’s your choice! If you have an existing mortgage or home equity line of credit, the funds received must first be used to pay off the existing loans secured by your home. The remaining cash can be used for whatever you like – here are some example of how customers of the CHIP Program have used their money:
• Pay for home improvements or repairs
• Cover your regular expenses
• Pay for travel
• Pay for healthcare expenses
• Pay-off existing debts
• Help your children with an early inheritance
Read about how our customers have used their CHIP Plan funds with our customer reviews

Qualifying for the Reverse Mortgage:
• A Canadian homeowner
• Age 55 or older
• The home must be your primary residence
Please note: If you have a spouse, both of you must be at least 55 years or older and you must both be listed on the application
When you apply for the Mortgage the following will be considered:
• Your property type, condition and appraised value
• The location of your property
• You and your spouse’s age
In general, the older you are and the more equity you have in your home when you apply for the mortgage, the more money we should be able to lend you.

Repayment of A Reverse Mortgage
You are not required to make any payments on the Reverse Mortgage until you choose to move or sell your home. You are however, required to ensure that your property taxes and homeowners’ insurance are kept up to date. When you do decide to move or sell, the loan is repaid from the proceeds of the sale of the home. All remaining money belongs to you and your estate. On average, customers have over 50% of the value of their home left to enjoy after repaying the loan. The exact amount will depend upon several factors, including: the value of your home, the amount of your loan, and the amount of time that has passed since you took out the loan.

What Are the Pros and Cons of the Reverse Mortgage?
There are several factors to consider before deciding to proceed with a Reverse Mortgage.

Pros:
• If you draw out a lump sum you receive the reverse mortgage funds as tax-free cash.
• You stay in the home you love and maintain ownership and control of your home. All you must do is maintain your property and pay your property taxes and homeowners insurance.
• There are no monthly mortgage payments required until you decide to move or sell your home.
• The Reverse Mortgage is a non-recourse loan which means that at the time of repayment, you (or your estate) will never owe more than the fair market value of your home – if you have maintained your property taxes and insurance.
• It is your choice how you receive the funds from the Reverse Mortgage. You can receive it all at once in a lump sum or in scheduled advances over time – its up to you (monthly income plan)

Cons:
• Because there are no monthly mortgage payments required, interest rates for the Reverse Mortgage tend to be higher than that of a traditional mortgage option.
• The balance of the loan increases over time as does the interest on the loan.

New To Canada Mortgage

If you are a new immigrant to Canada, obtaining a mortgage has never being easier. You can qualify for a standard mortgage of up to 95% of borrowing. That is right, up to 95%! This program is open for all new immigrants with permanent residency, temporary residency, or a work VISA.
Guidelines for qualification are:
• Must have landed in Canada within the last 3 to 5 years (depending on lender)
• Must have full time permanent employment for over 3 months
• Must have a down payment of at least 5%
• For borrowers who do not have established credit in Canada must provide two sources of credit information such as rental agreement, phone bill, bank account etc. An international credit bureau can also be used pending lender stipulations

For more details or to obtain a pre-approval please contact:

Robert Clancy, AMP,
Mortgage Agent
SAFEBRIDGE Financial Group
Tel: (416)-899-1467
Fax: 1-(866)-385-4049
Email: robert@safebridgefinancial.com
www.bestratesmortgages.ca