Archive | September, 2012

Mortgage Insurance vs. Life Insurance

September 24, 2012

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While most mortgage brokers don’t deal directly with insurance, we are required to offer mortgage insurance to our clients when putting together mortgage financing.  Here’s a quick look at the differences between the two options.  If you have any questions about mortgage insurance versus life insurance, ask your mortgage broker and we can usually point you in the right direction (I have several insurance folks in town I work with that would be more than happy to help you get the coverage you need).

 

Mortgage insurance through a mortgage lender Term life insurance and critical illness insurance
Who does the insurance cover? Only the individual(s) listed on the mortgage. You, your partner and your children – you can protect your whole family, even those who are not responsible for paying your mortgage.
What does the insurance cover? Only the balance of your mortgage. Whatever you need it to cover. In addition to your mortgage, cover debts like your line of credit, credit cards, etc.
Who gets the benefit if I die or become seriously ill? The mortgage lender is automatically the beneficiary. You decide who gets the insurance benefit and how it’s used – to pay your mortgage, medical expenses or your child’s education – whatever is best for you and your family.
What happens as my mortgage balance decreases? The coverage amount decreases as the mortgage balance decreases. When the mortgage is paid off, the coverage ends. The amount of coverage you have stays the same for as long as you own your policy – unless you decide to change it.
What if I switch mortgage lenders? You may lose the coverage and might need to reapply. Your coverage stays the same – unless you decide to change it. Since your coverage is not tied to your mortgage, you can carry it with you if you move again.
What if I cancel my insurance? You lose all the money you paid for the coverage. Depending on your insurance, you may get some of the money back that you’ve paid in premiums.
What if I want to change my insurance? You can’t. You may have the flexibility to adjust the type and amount of your insurance, or even convert to a permanent solution.

 

Tim

Tim is a mortgage agent in Barrie who specializes in helping first-time home buyers. He works with a variety of lenders and can help customize a mortgage with the best rates & options that fit the needs of each customer.

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Can You Afford to Buy a Home?

September 17, 2012

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Article courtesy of Genworth Canada.

 

The first thing any prospective homebuyer needs to do is determine whether they can afford to buy the home they want.

Many people believe they have to save a large down payment. Thanks to mortgage insurance, there are various programs that enable homeownership with little or no down payment at all.

A down payment of 20 per cent or more will qualify you for a conventional mortgage. If it is less than 20 per cent, the mortgage must be insured with a mortgage insurance company, such as Genworth Financial Canada.

Mortgage insurance works by transferring the homeowner’s risk of default from the lender to the mortgage insurer. This benefits homebuyers by allowing them to obtain loans at lower interest rates than would otherwise be charged if the lender retained the risk of default.

Once you’ve determined how much you can put toward a down payment, it’s time to approach a qualified mortgage planner to discuss mortgage options available to you, and create a mortgage strategy that meets your specific needs and goals.

Most mortgage lenders look at five factors when determining whether you qualify for a mortgage loan: your income, debts, employment and credit history and value of the property you want to buy.

One of the first criteria a lender will consider is how much of your total income you’ll be spending on housing. This helps the lender decide whether you can comfortably afford to buy a home.

A lender will then look at your debts, which generally include house payments as well as other monthly obligations — such as loan payments, charge cards, and child support.

A history of steady employment, usually within the same job for several years, helps you to qualify. But a short history in your current job shouldn’t prevent you from getting a loan, as long as there have been no significant gaps in income over the last two years.

Good credit is very important in qualifying for a loan. It’s important that you have maintained all of your obligations in a timely manner. The lender will also want to know what the house is worth and the price you plan to pay.

The size of your down payment affects the amount of your monthly mortgage payments. A smaller down payment will mean your monthly mortgage payments will be higher, but it may allow you to buy sooner rather than later.

Mortgage payments for principal, interest and taxes should not generally exceed 30 per cent of your gross monthly income. Simply multiply your gross monthly household income by 0.30 to determine your maximum monthly payments. If your gross monthly income is $4,000, the maximum you can quality for is $4,000 x 0.30 = $1,200.00 a month to cover mortgage payments plus property taxes.

You should also remember that there are other expenses over and above your mortgage payments. These include the land transfer tax and legal fees to close the purchase of your home and other monthly-related expenses such as condominium fees, heat, hydro, water, property tax, moving costs, insurance and household maintenance.

Tim

Tim is a mortgage agent in Barrie who specializes in helping first-time home buyers. He works with a variety of lenders and can help customize a mortgage with the best rates & options that fit the needs of each customer.

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Renting to own

September 12, 2012

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You may have heard of this scenario: a seller wants to sell their house, and is willing to take rental payment for a set period of time with the tenant to have a first right to buy at the end of the period, usually one-two years. Good for everyone, right?

Well, maybe not. In rent-to-own scenarios, most buyers end up paying more in rent than they would in a traditional rental situation because they are paying a portion of the down payment as well. They also are often required to pay a down payment at the beginning of the contract, as well. And if they break the contract, depending on how it’s worded, they may get very little back.

If you are thinking of getting into a rent-to-own house, you should absolutely have the agreement reviewed by a lawyer before you sign to make sure that, if you decide at the end of the day that you don’t want to buy, all that extra money comes back to you.

Cesia

Cesia is a real estate lawyer at Wall-Armstrong and Green, a boutique law firm in Barrie focusing on real estate and estates. When she's not online, she can usually be found in her garden.

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Mortgage Monday Rate Update – September 2012

September 10, 2012

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We’re back into the swing of things after taking a week off last week – I hope everyone had a great long weekend last weekend.  Whether you like it or not, stats and numbers are a part of the world of mortgages. When rates change even the slightest of percentage points, it could cost or save you thousands of dollars. Every once in a while, here on the Mortgage Monday posts, I’ll update you on what’s going on in the world of mortgage rates. If this kind of stuff doesn’t really interest you, I won’t be offended if you just skim through it – I’ll try to make it as painless as possible. 😉

  • The Bank of Canada interest rate continues to hang out at 1.00%.  The most recent meeting was less than a week ago, and the next meeting is scheduled for October 23rd, 2012.
  • The Bank of Canada prime lending rate is also holding steady at 3.00%. It has also been holding steady since Fall 2010 – if the bank rate goes up, the prime lending rate will follow.  At the earliest, we’re probably looking at late 2012/early 2013.
  • The qualifying rate (the rate you would need to qualify at for a variable mortgage) for a 5-year mortgage is still at 5.24%.  Not many folks are getting into a variable mortgage these days (though we’re starting to see some better rates in the variable department now).
  • The current best variable rate (changes daily) is in the prime-0.35% (2.65%) ballpark, though many lenders are still currently offering ‘prime’ as their variable rate.
  • The current best 5-year fixed mortgage rate (changes daily) hasn’t really moved around much and is still in the area of 3.09% – again, always contact your mortgage broker for current best rates for your situation (and as we’ve talked about previously, The Best Mortgage Rate is Not Always the Best Option).
  • The “hot term” in Canada these days is still the full-featured, 10-year fixed mortgage with rates as low as 3.99% (check out my post from a couple of months ago on the 10-Year Mortgage Below 4% and a more recent one: Should You Consider a 10-Year Mortgage?). If you want to lock in for a decade and record-low rates, definitely take a look at locking in for 10 years at less than 4%.

If you’ve been following along with my rate updates, they are probably starting to sound pretty repetative.  Essentially, none of the numbers have changed from last month (again). While I’m happy to provide an update on what’s going on as rates, if you’re interested on getting personalized mortgage advice, speak to your favorite mortgage broker who can help you decide the best rates and options for you.

Tim

Tim is a mortgage agent in Barrie who specializes in helping first-time home buyers. He works with a variety of lenders and can help customize a mortgage with the best rates & options that fit the needs of each customer.

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