Fixed or Variable-Rate Mortgage?

If you are rate shopping, you’ll notice that the lowest available rate will be for a variable mortgage, which is why we are often asked “what does variable mean and how is it different from a fixed-rate mortgage?”

 With a variable mortgage, your rate will move in conjunction with your lender’s Prime lending rate, which in turn tracks the Bank of Canada’s rate, and will typically be quoted as Prime minus a specified percentage. Unless you have an economic ouija board, you won’t be able to predict what kind of rate ups and downs might be ahead of you.

 With a fixed-rate mortgage, your payments are fixed for the term of the mortgage, which offers stability.  Fixed-rates are usually better suited to first-time buyers or those who haven’t owned a home for a very long period. Ask yourself these questions: Do you like or need to know exactly what your payment is going to be over a longer period of time? Do you want to avoid the need to watch rates? Do you have less than 20% down? If you answered “yes” to all or most, a fixed-rate mortgage could be the better choice for you.  

 A variable-rate mortgage is best suited to people who have a flexible budget and can tolerate slightly more risk. Ask yourself these questions: Do you watch market conditions? Can you handle any rate increases that could increase your payment? Do you have more than 20% equity in your home? If you answered “yes” to all or most, a variable-rate mortgage might best suit your needs. Most variables allow you to exercise an option to “lock in” a fixed rate at any time for the remaining portion of your mortgage term or longer. You can also set up your payments at what they would be if you took the higher rate, which helps you pay down your mortgage faster, and creates a financial buffer for you if rates rise later. 

 If the uncertainty of a variable rate is going to give you sleepless nights, you’re in good company. Many Canadians prefer the certainty of a fixed-rate mortgage. They know exactly how much they will pay over the term of their mortgage, and they can plan accordingly… with no financial surprises.  However, lower-rate variable mortgages with a strong Prime minus offer give you the potential to save a lot on interest. And, if your circumstances change and you need to get of out of your mortgage, you will appreciate the lower penalty to get out of a variable versus a fixed-rate mortgage.  

 Your best option is to get professional and personalized advice.  We would be happy to help you determine which option is best suited to your needs.

 

5 Reasons to refinance

For many Canadians, their home is a terrific repository of wealth. Home equity can build nicely by chipping away at payments and through increasing home values. Accessing home equity through a refinance (min 20% home equity) has for years been an easy, low-cost way to get needed funds. Various new mortgage rules and “stress-testing” has made refinancing more complicated, but it’s a strategy that continues to make good financial sense for certain homeowners that qualify. Here are five reasons why:

  1. Fresh start. If you have too much high-interest debt, you may be able to roll everything into one manageable monthly payment on a low-interest mortgage. Then you get a financial re-set, and can potentially save thousands of dollars in interest.
  2. Dream home. If you’ve found the perfect cottage, chalet, or the retirement home of your dreams, refinancing may be the way to make that purchase happen now if you’re not quite ready to sell your primary residence.
  3. Renovate. Renovating your home is often a less expensive option than moving. And the right renovations can improve the quality of your life and increase the value of your home.
  4. Wealth building. A rental property can give you a great wealth building opportunity and a source of retirement income. Or you may want to invest in a new business venture.
  5. Large expenditures. You may be able to get the funds you need for major expenses (tuition, wedding etc.): a much better strategy than loading it all onto high-interest credit cards.

We have access to dozens of lenders, including alternative lenders that are not subject to the new rules and have less stringent qualification guidelines. If you are interested, we can provide you with a personalized analysis so you can determine whether a refinance makes sense. Our job is to help you pay down debt, build wealth, create financial security, and enjoy life to the fullest!

Prepare Early For Your Mortgage Renewal

Simply put, it’s become a lot more complicated to renew a mortgage in Canada. Some clients are surprised to discover they don’t qualify for the best rates with their current lender, or that they can’t switch their mortgage to a new lender for a better rate. Our advice? Start preparing early. Here’s why:

New accounting rules called IFRS 9 (IFRS stands for International Financial Reporting Standard) will cause lenders to pay closer attention to any warning signals that clients may have trouble paying their mortgage. As a result, if your lender feels your risk has increased i.e. perhaps your credit score has slipped, they may then offer you a higher rate at renewal, even if you have never missed a payment.  

Do you have an “uninsured mortgage”? If you want to switch to a new lender for a better rate, that new lender will need to qualify you using the new .”stress test”, which may affect your ability to move your mortgage, and giving your lender no incentive to offer you the best rates at renewal. We can help you understand your options. One of the things we’ll look at is whether we can switch your mortgage to a lower-rate insurable mortgage: a move that could offer huge savings over the long term. Not sure if your mortgage is insured or not? We can find that out for you.

Mortgage rate trends. While fixed rates are higher today than they were a year ago, many lenders are offering exceptionally low rates on their variable rate mortgages. In addition to offering the ability to save on interest, a variable mortgage can be significantly less expensive to get out of should you need to.

It’s critical that you work with a mortgage expert like Brian at Yhard Mortgages who has access to more than 50 different lending options, including credit unions that aren’t subject many of the same rules. So as soon as you hear from your lender about your mortgage renewal, get in touch with us! Or let’s have a conversation about credit improvement tips or discuss the potential impact of changes in your personal situation like reduced household income

Why variable rates are creating a surge in Mortgage activity

This Spring we’re seeing lenders getting aggressive with their pricing for variable rate mortgages: a sign that lenders are fighting for market share, making it a great time to be shopping for a mortgage!

First a reminder of the difference between fixed vs variable.  Fixed rates are often well suited to first-time buyers or those who haven’t owned a home for long because they want to know with absolute certainty what their payment will be for a set number of years.  A variable mortgage has an interest rate that will move in conjunction with your lender’s Prime rate, which in turn tracks the Bank of Canada’s overnight rate, and will be expressed as “prime minus x percent.”  If the Bank of Canada raises or lowers its rate, then you’ll likely see that reflected in your mortgage payment.

Right now, lenders are shaving off those variable rate mortgage offers: creating some of the best rates we’ve seen in many months. Consider the advantages:

1.        Save big on interest. It’s true that your payments could go up if the Bank of Canada’s rate starts to move up. But it would have to go WAY up to wipe out the savings you’d get from some of the current deep “prime minus” variables being offered right now.

2.        Build a buffer. You can set up your payments at what they would be if you took the higher fixed rate, which helps you pay down your mortgage faster, and creates a financial buffer for you if rates rise later.

3.        Easier to get out. If your circumstances change and you need to get out of your mortgage – a situation that happens more frequently than people anticipate -- you will appreciate the lower penalty to get out of a variable vs a fixed mortgage.  You could save thousands!

4.        Lock in later. Most variables allow you to exercise an option to “lock in” a fixed rate at any time for the remaining portion of your mortgage term or longer.

I’ve even got clients breaking their existing mortgages to take advantage of this sudden crop of very low variable rates being offered right now.

It’s not for everyone. But the possibility of big savings is out there right now, and it won’t last forever. Get in touch with us at Yhard Mortgages and we can review the numbers to see if it’s something you should be taking advantage of.

 

Nearly half of existing mortgages in Canada are due for renewal in 2018

Nearly half (47%) of all existing mortgages will need to be renewed this year according to a recent report by CIBC Capital Markets.  A typical year the renewal rate is 25-35%.

This significant increase in renewals comes at the same time mortgages rates are increasing.  Five year fixed rates are up approximately 0.70% from the same time last year.

Under the new tighter guidelines known as B20 that started earlier this year homeowners must now prove they can service the mortgage debt at a qualifying rate of the greater of the contractual mortgage rate plus 2% or the 5 year benchmark rate published by the Bank of Canada currently at 5.34%.

What does this all mean?  Interest rates still remain incredibly low & your options when your existing mortgage is up for renewal is incredibly high.  We highly recommend contacting us at 902-401-8143 to discuss your mortgage renewal options and help to get you thru this B20 Stress test.

Who should get a mortgage pre-approval?

A mortgage pre-approval can be an important part of your pathway to building wealth, giving you a real-world picture of your options: that is, your opportunities as well as your limitations.

A mortgage preapproval will tell you how much you qualify for (you may be pleasantly surprised), what your mortgage payments will be, and you’ll get an interest rate that will be held for a specific time period, like 120 days. 

If you are purchasing a new home, then you’ll be shopping with a full wallet! You’ll know exactly what you can afford. You want to avoid reaching too far financially for a house you’ve fallen in love with, but you may also discover that you’re ready for the house of your dreams and didn’t know it. A mortgage pre-approval tells you that.

In other words, a mortgage preapproval is always a good idea.  Remember, of course, that a preapproval isn’t a mortgage approval.  Make sure you have a financing condition in place when purchasing because your property needs to be assessed by your lender during the mortgage approval process.  You’ll need to provide the necessary information such as the offer to purchase, MLS listing, and any other documents required by the lender so they can assess the property.

Additionally, any planned financing might fall through if your circumstances change. So be careful with changing jobs, adding debt or missing payments, co-signing another loan, or using your downpayment money. You want to keep your financial situation squeaky clean while you’re getting ready to finance.

Can you get a mortgage if you have experienced a bankruptcy?

The short answer is YES, you could qualify for a mortgage!!!  Please read on to learn about Yhard Mortgages recent clients who are now very proud proud first-time homeowners.

Last month Yhard Mortgages was able to secure a mortgage for clients who had only been discharged from bankruptcy a mere 11 months ago. 

Traditionally once consumers have been discharged from a bankruptcy they start thinking about re-establishing their credit, so they can finance a home in the future.

Traditional mortgage companies commonly referred to as “A” mortgage lenders look for a minimum of two active tradelines (credit cards, loans, lines of credit) and these tradelines need to be open for a minimum of two years with no late payments. 

These Yhard Mortgages clients had not begun to re-establish any credit at all & had only been discharged for 11 months.  Yhard Mortgages was able to arrange a mortgage for the clients thru a “B” lender at a slightly higher rate than a traditional “A” lender.

The clients and their 2 kids are now enjoying their spacious home in a wonderful neighborhood.

Providing the clients follow the plans laid out by Yhard Mortgages they will get back to a traditional “A” lender when their term expires in 2 years.

Do you or someone you know have slow credit now or perhaps in the past that is preventing home ownership?

Give us a call we would love to speak with you to arrange a mortgage now or get a plan in place for a home purchase in the future.

Call 902-401-8143 to learn more. 

Questions to ask or review with your lawyer before purchasing your house.

 

1.  How much do you charge and what am I getting for this service?

Not all lawyers charge the same, although generally legal fees for closing a home purchase are in the same range.

2. How many times should we expect to meet?

Generally, most lawyers will meet with you at least two meetings. Visit your lawyer a week or two ahead to determine the scope of what is happening, to get things in order and determine your balance due on closing. You will then meet again on closing day or the day before.

3. Review lawyer’s fees and disbursements.

The fee is the time a lawyer will spend doing things like your title search and meeting with you. Disbursements are the hard costs: preparing the file, time spent by a law clerk, travel, photocopying and incidentals. Your lawyer should clearly outline both.

4. What is the cost of title insurance?

Title insurance protects the homeowner against things like title defects, fraud, forgery and zoning noncompliance. Buy it once and it protects you as long as you own your home. “Although you don’t have to buy it, almost all homebuyers do because it can protect you against a number of issues that may arise.

5. What should I bring to my appointment when we close the mortgage?

You’ll need government issued photo identification like a driver’s license or passport. “This is required by the Law Society’s ‘Know your Client Rule’ to prove that you are who you say you are.”

6.. What is the statement of adjustments?

This document outlines of all your closing costs – things like tax adjustments, extras and upgrades and represents an entire list for the final amount due on closing. Be sure your lawyer walks you through this document..

7. What are some things I need to know about closing if I’m buying a condo?

Ask your lawyer to review what’s covered in your condo fees. “Also, be aware that when you purchase a newly built condo, there are two closings: one when your unit is move-in ready and then a final closing once the building has been registered and you take over full ownership.

 

Five credit habits that can help to increase your credit bureau score

Your credit score is essentially your passport to financial opportunities. With a possible range of 300 to 900, your score tells lenders what kind of a risk you are likely to be as a borrower. A low credit score can prevent you from getting the lowest mortgage rate, or even from getting a mortgage at all. But here’s the thing, this important factor in your mortgage negotiation is entirely within your control. That’s why it’s important to know the key credit behaviors that can boost your score or keep it high:

1.      On time, all the time. The single biggest factor in your credit score is having a timely bill payment history. Never let a bill get past due. That one habit is your single biggest game-changer. Set up automatic payments if that will help.

2.      Know your limits. Your credit score is based on your balances relative to your available credit. Look at your credit limits and try not to use more than 30 per cent of the available amount. If your limit is $10,000, try to never let the card go higher than $3,000.

3.      Don`t let it happen. Don’t ever let any bill go to Collections, even if it’s for a small or disputed amount. These black marks on your credit are hard to erase. If it’s happened, be prepared to explain why, and be sure it’s paid in full and reported to Equifax.

4.      Be selective. When you’re asked - would you like to apply for our Store Card to save $X dollars on your purchase today - don’t do it; the high rate that goes with that card isn`t worth your savings on that particular purchase.

5.      History is important. Make sure you do have a credit history. You may have a low score because you do not have a record of owing money and paying it back. You can build a credit history by using a credit card.

If you are wondering how to polish up your credit, we would be happy to review your situation and outline your best options for credit improvement. If you want to get a mortgage while you work on bettering your score, we can also advise how that may be possible

What is a Reverse Mortgage?

A reverse mortgage can be the difference between selling your home and living the comfortable retirement that they’ve worked so hard for.

The CHIP Reverse Mortgage is a loan secured against the value of the home. There are no regular mortgage payments – meaning you can allocate the money towards what you really need it for. If you would like to learn more, please contact us at 902-401-8143.

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