Mortgage Information

Mortgage Basics

What is a mortgage?

A mortgage is a loan that uses a property as security to ensure that the debt is repaid. The borrower is referred to as the mortgagor, the lender as the mortgagee. The actual loan amount is referred to as the principal, and the mortgagor is expected to repay that principal, along with interest, over the repayment period (amortization) of the mortgage.

A mortgage can be used for financing many different things, including:

• Purchasing or constructing a new home
• Purchasing an existing home
• Refinancing to consolidate debts
• Financing a renovation
• Financing the purchase of other investments
• Financing the purchase of investment property

Since a mortgage is a fully secured form of financing, the interest you pay is usually less than with most other types of financing. Many people use the equity in their homes to finance the purchase of investments. Using a Secured Line of Credit, or a fixed-rate mortgage, the interest costs are lower, and they can even write off those interest costs against their taxable incomes.

SIMPLE GLOSSARY OF MORTGAGE TERMS Here is a simple glossary of mortgage terms. To help you find the term you are looking for quickly, simply click on the letter below. For example, to find the "mortgage", click the letter "M". A B C D E F G H I J K L M N O P Q R S T U V W X Y Z A Agreement of Purchase and Sale: The legal contract a purchaser and a seller go into. We recommend that you have your offer prepared by a Real Estate Professional that has the knowledge and experience to satisfactorily protect you with the most suitable clauses and conditions. Amortization Period: The number of years it takes to repay the entire amount of the financing based on a set of fixed payments. Appraisal: The process of determining the value of a property. Assets: What you own or can call upon. Often used in determining net worth or in securing financing. Assumption Agreement: A legal document signed by a buyer that requires the buyer assume responsibility for the obligations of an existing mortgage. If someone assumes your mortgage, make sure that you get a release from the mortgage company to ensure that you are no longer liable for the debt.   B Blended Payments: Equal payments consisting of both an interest and a principal component. Typically, while the payment amount does not change, the principal portion increases, while the interest portion decreases. C Canada Mortgage and Housing Corporation (CMHC): CMHC is a federal Crown corporation that administers the National Housing Act (NHA). Among other services, they also insure mortgages for lenders that are greater than 80% of the purchase price or value of the home. The cost of that insurance is paid for by the borrower and is generally added to the mortgage amount. These mortgages are often referred to as "Hi-Ratio" mortgages. Closed Mortgage: A mortgage that cannot be prepaid or renegotiated. Closing Date: The date on which the new owner takes possession of the property and the sale becomes final. Conventional Mortgage: A mortgage up to 80% of the purchase price or the value of the property. A mortgage exceeding 80% is referred to as a "Hi-Ratio" mortgage and the lender will require insurance for that mortgage. Collateral: An asset, such as term deposit, Canada Savings Bond, or automobile, that you offer as security for a loan. Credit Scoring: A system that assesses a borrower on a number of items, assigning points that are used to determine the borrower's credit worthiness. D Demand Loan: A loan where the balance must be repaid upon request. Deposit: A sum of money deposited in trust by the purchaser on making an offer to purchase. When the offer is accepted by the vendor (seller), the deposit is held in trust by the listing broker, lawyer, or notary until the closing of the sale, at which point it is given to the vendor. If a house does not close because of the purchaser's failure to comply with the terms set out in the offer, the purchaser forgoes the deposit, and it is given to the vendor as compensation for the breaking of the contract (the offer). E Equity: The difference between the market value of the property and any outstanding mortgages registered against the property. This difference belongs to the owner of that property. F First Mortgage A debt registered against a property that has first call on that property. Fixed-Rate Mortgage: A mortgage for which the interest is set for the term of the mortgage. G Gross Debt Service (GDS.) Ratio: It is one of the mathematical calculations used by lenders to determine a borrower's capacity to repay a mortgage. It takes into account the mortgage payments, property taxes, approximate heating costs, and 50% of any maintenance fees, and this sum is then divided by the gross income of the applicants. Ratios up to 32 % are acceptable. Guarantor: A person with an established credit rating and sufficient earnings who guarantees to repay the loan for the borrower if the borrower does not. H Hi-Ratio Mortgage: A mortgage that exceeds 80% of the purchase price or appraised value of the property. This type of mortgage must be insured. To avoid the cost of the insurance, a 1'st mortgage up to 80% is arranged and a 2'nd mortgage for the balance (up to 90% of the purchase price). Home Equity Line of Credit: A personal line of credit secured against the borrower's property. Generally, up to 75% of the purchase price or appraised value of the property is allowed to be borrowed with this product. I Interest Adjustment Date (IAD): The date on which the mortgage term will begin. This date is usually the first day of the month following the closing. The interest cost for those days from the closing date to the first of the month are usually paid at closing. That is why it is always better to close your deal towards the end of the month. Interest-Only Mortgage: A mortgage on which only the monthly interest cost is paid each month. The full principal remains outstanding. The payment is lower than an amortized mortgage since once is not paying any principal. M Mortgage: A mortgage is a loan that uses a piece of real estate as a security. Once that loan is paid-off, the lender provides a discharge for that mortgage. Mortgagee: The financial institution or person (lender) who is lending the money using a mortgage. Mortgagor: The person who borrows the money using a mortgage. O Open Mortgage: A mortgage that can be repaid at any time during the term without any penalty. For this convenience, the interest rate is between 0.75-1.00% higher than a closed mortgage. A good option if you are planning to sell your property or pay-off the mortgage entirely. P P.I.T.: Principal, interest, and property tax due on a mortgage. If your down payment is greater than 25% of the purchase price or appraised value, the lender will allow you to make your own property tax payments. Portable Mortgage: An existing mortgage that can be transferred to a new property. One would want to port their mortgage in order to avoid any penalties, or if the interest rate is much lower than the current rates. Prime: The lowest rate a financial institution charges its best customers. Prepayment Penalty: A fee charged a borrower by the lender when the borrower prepays all or part of a mortgage over and above the amount agreed upon. Although there is no law as to how a lender can charge you the penalty, a usual charge is the greater of the Interest Rate Differential (IRD) or 3 months interest. Principal: The original amount of a loan, before interest. R Rate Commitment: The number of days the lender will guarantee the mortgage rate on a mortgage approval. This can vary from lender to lender anywhere from 30 to 120 days. Renewal: When the mortgage term has concluded, your mortgage is up for renewal. It is open at this time for prepayment in part or in full, then renew with same lender or transfer to another lender at no cost (we can arrange). S Second Mortgage: A debt registered against a property that is secured by a second charge on the property. Switch: To transfer an existing mortgage from one financial institution to another. We can have this arranged for you at no cost to you. T Term: The period of time the financing agreement covers. The terms available are: 6 month, 1,2,3,4,5,6,7,10 year terms, and the interest rates will be fixed for whatever term once chooses. Total Debt Service (TDS) Ratio: It is the other mathematical calculations used by lenders to determine a borrower's capacity to repay a mortgage. It takes into account the mortgage payments, property taxes, approximate heating costs, and 50% of any maintenance fees, and any other monthly obligations (i.e. personal loans, car payments, lines of credit, credit card debts, other mortgages, etc.), and this sum is then divided by the gross income of the applicants. Ratios up to 40 % are acceptable. V Variable-Rate Mortgage: A mortgage for which the interest rate fluctuates based on changes in prime. Vendor Take Back (VTB) mortgage: A mortgage provided by the vendor (seller) to the buyer. TOP

Mortgage Closing Costs

Now that you know what you can afford, the next step is to determine the additional costs of the home-buying process. According to CMHC and GE Capital, one should have, in addition to the down payment, at least 1.5% of the purchase price for closing costs (we say 2-2.5%, just to be on the safe side). The costs vary across provinces, and for that matter, cities.

Below you will find a brief explanation of these costs, yet it may not include all items required specific to your property, or the area in which you have purchased. This is a guideline, but your lawyer can provide a fairly close estimate, and is the best resource.

Appraisal Fee:

The appraisal provides the lenders with a professional opinion of the market value of the property. This cost is normally the borrower's responsibility and it ranges as low as $200 for a drive-by appraisal to as much as $350 for a full appraisal, and the average being $200, plus H.S.T./G.S.T. Occasionally, the costs could be slightly higher for larger, custom-built homes, or homes in remote parts.

Home Inspection Fee:

A professional inspection of the home, top to bottom, is for the benefit of the buyer, therefore, that's who absorbs the cost. A typical home inspection can cost anywhere from $250-$350, but our opinion is that they are well worth the investment. New home buyers may not worry about it, but a definite must for buyers purchasing properties older than 5 years. When hiring a home inspector, make sure the inspector has liability insurance, just in case a mistake is made.

Fire Insurance:

All mortgage lenders will require a certificate of fire insurance to be in place from the time you take possession of the home. The amount required is generally at least the amount of the mortgage or the replacement cost of the home. This cost can vary on the property size and extras being insured, as well as the insurance company and the municipality. The cost can vary anywhere from $250-$600 for most properties.

Land Survey Fee Or Title Insurance Fee:

A recent Survey of the property is usually required by the lender, and if one is not available, it normally costs anywhere from $600-$900 for a new survey. In lieu of the Survey, most lenders today will accept Title Insurance, at a much lower price of approximately $225.

Legal Costs and Disbursements:

A lawyer or notary will charge a fee for their professional services involved in drafting the title deed, preparing the mortgage, and conducting the various searches. The disbursements, on the other hand, are out-of-pocket expenses incurred, such as registrations, searches, supplies, etc., plus G.S.T/H.S.T.

Land Transfer Tax:

Most provinces charge a land transfer tax, payable by the purchaser, and the amount varies from province to province. This tax is based on the purchase price (refer to mortgage ABC's for exact calculation).

New Home Warranty:

In many provinces, new homes are covered by a new home warranty program. The cost to the purchaser for this warranty is approximately $600 and should the builder default or fail to build to an agreed-upon standard, the fund will finish or repair the deficiencies.

Mortgage Application and Processing Fee:

On a high-ratio insured mortgage (mortgages above 75% of the purchase price), the mortgage insurer (CMHC or GE Capital) charges a fee of $165-$185 for applying and processing the file, as well as appraising the property. On new homes, this fee drops to $75.

Closing Adjustments:

An estimate should be made for closing adjustments for bills that the seller has prepaid such as property taxes, utility bills, and other charges. Any bills after the closing date are the purchaser's responsibility. Your lawyer/notary will let you know what they are exactly once the various searches have been completed.

G.S.T./H.S.T.:

On the purchase of a newly constructed home, G.S.T/H.S.T. is payable, but make sure you know who pays this, you or the builder. Therefore, on the offer, the purchase price will say "Plus G.S.T/H.S.T." or "G.S.T/H.S.T. Included", and who gets the G.S.T/H.S.T. new home rebate. A lot of builders have included this cost into the purchase price so that the buyer does not have to come up with that at closing. (As well, this tax is also charged on all professional fees).

Mortgage Credit Rating

Your credit rating is a measure of your credit-worthiness or in other words, your record of borrowing and repayment. Without a credit rating, few institutions will lend you money.

Governed by provincial laws, the credit bureau - the clearing-house of information on consumers' use of credit - provides a credit history, which is a list of facts about how you handle debt. This information is gathered from financial institutions, retailers and other lenders. Most of your credit information remains on your file for seven years. In addition to negative information, positive information is also reported on your file.

Here is how to build a good credit rating:

• Pay your bills promptly, especially credit cards.
• Borrow only what you need and what you can afford.
• Try to pay off loans on time and as quickly as possible.

Not only does it help your credit rating, you also save valuable interest costs.

Checking Your Credit Rating

As a consumer, it's your right to know your credit rating. Credit can be denied based on inaccurate or insufficient information. You may want to check your file if you aren't sure of your credit rating, if you are refused credit or if you plan to apply for a large amount of credit such as a mortgage. You can get a copy of your credit report through one of the many credit bureaus across Canada for free or for a nominal charge.

Here are some guidelines:

• Contact your local credit bureau, which you can find in the yellow pages.
• Call to find out how you can review your file. You'll be asked to provide identification to ensure the confidentiality of your file. A written report may take two to three weeks.
• If you notice any errors and can offer written proof, your file will be changed immediately. If you can't supply written proof, give the facts to the credit bureau, which will then investigate. If your facts are confirmed, your file will be updated.
• If you see an error but proof cannot be found, what happens next depends on where you live. Each province has its own legislation relating to credit bureaus. The information you are challenging may be taken off your file or a note may be added, saying the information is "in dispute".
• If an error has been corrected, the credit bureau must notify members who have inquired about you during previous months (as required by provincial law).

Dealing with a Credit Crisis?

Chances are you have a credit problem if you:

• Can't make your minimum monthly payments on your credit cards,
• Take cash advances for living expenses,
• Aren't sure how much you owe and
• Never seem to be out of debt.

Here are some tips to help you recover:

• Put away all of your credit cards.
• If you have several debts, consider consolidating them into one consumer loan. You'll save on the interest rate alone, especially if your debt is from credit cards.
• If slow payments are affecting your credit rating, consider contacting your creditors to see if you can make alternative arrangements. Be honest with your creditors. Let them know you're in difficulty and work with them to find the best way to meet your financial obligations.
• Try and figure out how you got into debt and stick to a plan to prevent it from happening again.
• Re-evaluate your spending habits and lifestyle.
• Seek the advice of a credit counselor if you can't sort things out yourself. There are several not-for-profit credit counseling agencies across Canada . An experienced counselor will sit down with you to look at your situation, discuss your options and help you develop a course of action.
• When you begin to recover financially, consider keeping only one credit card. It will be easier to track your spending and you won't have the collective credit limit to tempt you.

Mortgage Features

Choosing A Term You Can Live With

What term should you take? That's a good question. Before you look at the issue of term specifically, there are things you should consider:

When you're looking at term and interest rates, look also at what you can live with in terms of payment amounts, because trying to predict where interest rates are going is a tough job. There are many forces that affect Canadian interest rates - economic, political, domestic, and international.

Predicting interest rates is very much a gamble and one should be prepared to keep a close eye on the market.

Here's a suggestion: If you feel that rates are at a point you can live with and you want to guarantee that rate as long as possible, go with a long term (5 years, 7 years, and 10 years). If interest rates appear to be rising, take advantage of the lower rate for as long as possible, and remember, if you sell your property, you can take the mortgage with you to the new property or have someone assume the mortgage. It could prove to be a great selling feature if you have an assumable mortgage at very low rate.

If rates appear to be falling, you can choose a shorter term (6-month convertible or variable-rate mortgage) that offers the flexibility to lock-in to longer term at any time, just in case the rates start going the other way.

Fixed vs. Variable Rate Mortgages

With a fixed-rate mortgage, the interest rate is set for the term of the mortgage so that the monthly payment of principal and interest remains the same throughout the term. Regardless of whether rates move up or down, you know exactly how much your payments will be and this simplifies your personal budgeting. In a low rate climate, it is a good idea to take a longer term, fixed-rate mortgage for protection from upward fluctuations in interest rates.

A variable-rate mortgage (also called adjustable-rate) provides a lot of flexibility, especially when interest rates are on their way down. The rate is based on prime and can be adjusted monthly to reflect current rates. Typically, the mortgage payment remains constant, but the ratio between principal and interest fluctuates. When interest rates are falling, you pay less interest and more principal. If rates are rising, you pay more interest and less principal, and if they rise substantially, the original payment may not cover both the interest and principal. Any portion not paid is still owed, or you may be asked to increase your monthly payment. Make sure that your variable-rate mortgage is open or convertible to a fixed-rate mortgage at any time, so that when rates begin to rise, you can lock-in your rate for a specific term.

Closed and Open Mortgages - What's the Difference

An open mortgage allows you the flexibility to repay the mortgage at any time without penalty. Open mortgages are available in shorter terms, 6 months or 1 year only, and the interest rate is higher than closed mortgages by as much as 1%, or more. They are normally chosen if you are thinking of selling your home, or if expecting to pay off the whole mortgage from the sale of another property, or an inheritance (that would be nice).

A closed mortgage offers the security of fixed payment for terms from 6 months to 10 years. The interest rates are considerably lower than open, and if you are not planning on any one of the above reasons, then choose a closed mortgage. Nowadays, they offer as much as 20% prepayment of the original principal, and that is more than most of us can hope to prepay on a yearly basis. If one wanted to pay off the full mortgage prior to the maturity, a penalty would be charged to break that mortgage. The penalty is usually 3 months interest, or interest rate differential (I.R.D. - please refer to glossary for detailed explanation).

Buy first or sell first?

Which comes first--the purchase or the sale--is the greatest dilemma facing homeowners planning to move-up.

If you choose to buy first, make sure the offer to purchase is conditional on selling your current house. That way, if you sell your house, both deals proceed; if not, the deal is off, and you won't be stuck with two homes. Selling first though will give you considerable peace of mind.

Knowing how much money you'll get on the sale will help you establish a price range for the new house. Selling first allows you to negotiate the purchase more vigorously, too, since unconditional offers carry a lot more weight with sellers.

Market conditions are another important consideration in deciding which route to follow. In a seller's market, you'll probably do better selling after you've bought, but in a buyer's market, it makes more sense to sell.

If you obtained an insured mortgage after April 1'st, 1997, the premium you paid on the mortgage is now portable to another property (if you closed before this date, it is not portable, meaning that if you bought another home and your mortgage needed to be insured, you must pay the applicable premium again.

Amortization

The Amortization Period is the number of years it would take to repay the entire mortgage amount based on a set of fixed payments. The longer the amortization, the more interest is paid over the life of the mortgage. Therefore, when choosing the amortization period, careful planning should be done to meet your cash flows. Remember, the amortization can be easily shortened after the closing, by simply making arrangements to increase your payments.

MORTGAGE FEATURES - To Help You Become Mortgage-Free Faster



Monthly, bi-weekly, or weekly payments?

Once you have the mortgage amount, rate and amortization period, your monthly payment can be calculated. Now is the time to decide how often you want to make your payments, because by selecting the right payment frequency could literally mean thousands of dollars in savings. For example, on a $100,000 mortgage at 8% interest, amortized over 25 years, the monthly payments would be $763.21. However, by simply switching to bi-weekly payments (every two weeks) with payments of $381.61 (half of the monthly payment), there would be a saving of $30,484 in interest! Weekly payments of $190.80 will save $30,839 in interest, and you will be mortgage free in the 19'th year.

You notice that there is very little difference between weekly and bi-weekly payments, however. If you have other payments throughout the month, bi-weekly may be less stressful and easier to budget. If you are self-employed or commissioned, and your income varies greatly from week to week, it may be easier to pay monthly and use your prepayment privileges to knock the amortization period. Also, not all weekly and bi-weekly payments work the same as above. Let us show you how to manage your mortgage to your best advantage.

Prepayments - Extra Payments against Principal

This is one of the most important features to look for when you are getting a mortgage. Having the prepayment privilege that works to your specific needs could mean a difference of thousands of dollars over the life of your mortgage. Although all financial institutions offer some form of prepayment privilege, the amount and how it can be applied varies from one to another. Some offer only up to 10%, once per year, and on the anniversary date. Then there are others that offer as high as 20% per year, and prepayments can be done throughout the whole year as long as the total does not exceed 20%. Ideally, you should work your prepayment privilege as often as possible throughout the year. Saving aside to make that big prepayment is not the best strategy. We have found that the small, regular prepayments will get you quicker to that mortgage burning party (I hope we're invited).

(TIP: Put your tax refund to good use. The average tax refund for Canadians in 1995 was $1,000. Even this amount will pay large dividends over the life of the mortgage)

Often times most mortgage shoppers are only looking at rates and overlooking this interest saving feature. That is why it is important to have a mortgage specialist make some recommendations for your specific needs. Not only can we find you the lowest rates, we can also get you the features that will work to your advantage.

Increase Your Regular Payment

The secret to borrowing is borrow early in your life. The reason is that the future value of the dollar decreases. Why we are bringing up this fact is that when you borrow early, your payments are set. As time goes, our incomes increase (hopefully), but our mortgage payments stay the same, provided you locked-in to a long term, fixed mortgage. Therefore, in the future we may be in a position to increase our payment on the mortgage, regardless if you are paying weekly, bi-weekly, or monthly. Any increase in payment is directly going to pay down the mortgage, thus saving you thousands down the road due to the effect of interest not compounding on that amount for the life of the mortgage. Neat little feature.

Again, this feature varies from bank to bank. Some allow increasing payment up to 10%, and others as high as 25% per year, some up to 15% only once in the term of the mortgage. If you increased your payments, should the need arise, you can go back to the original payments as well. A mortgage specialist will run a "Mortgage Reduction" model for you and make some recommendations.

Double-Up on Payments

A few lenders will allow you to double-up on your payments, and the extra payment goes directly in the principal. If you double-up once in the year, you have just achieved the benefits of the weekly or bi-weekly mortgage. This is a neat little feature for someone who prefers the monthly payments but wants the results of the weekly and bi-weekly payments. And some lenders allow you the flexibility to skip a payment if you have made a double payment previously. This defeats the purpose, but when times are tough, a neat little feature to have.

Early Renewal Option

This is a great feature to have when interest rates are on a rise. If you are locked-in to a term and the mortgage will be maturing in months or years down the road, and the mortgage rates are on a rise, you can renew your mortgage before the maturity and lock-in the low rates for a new term. You may not even have to pay anything out of pocket and still save over the term, especially if rates move up considerably.

Portable Mortgage

If you want to take your mortgage with you when you move, you can if your mortgage has a clause that allows you to do that. This option allows you to continue your savings on your lower rate if the going rates are higher, as well as avoid any penalties if you were to break that mortgage. If you need a larger mortgage for the new property, your existing mortgage amount can be increased. As for the associated costs, since a new mortgage document must be registered on title, legal fees and normal appraisal fees would be applicable.

Assumable Mortgage

If you are moving and don't want to take your mortgage with you, or you are selling and not buying, an assumable feature will allow the buyer(s) of your property to take over the mortgage, providing they meet the lender's qualifying criteria. By doing so, you will not pay any penalties as you are not breaking the mortgage contract. In fact, if your interest rate is lower than those available at the time, your assumable mortgage suddenly became a great selling feature for your property.

A word of caution here: Just because someone assumes your mortgage does not necessarily mean you are off the hook for the responsibility. You must get a release from the Mortgage Company to ensure that you are no longer liable for it. Some mortgage companies automatically offer a release, but with others, you must make the request, and do it through your lawyer.

Mortgage Life Insurance (optional)

Since your home is likely your single largest investment, you may want to protect that investment. Many financial institutions offer mortgage life insurance at an affordable and competitive price, and the requirements for eligibility are usually quite simple to meet. If you or your co-borrower (if you choose joint coverage) die, the insurance company will pay off your mortgage. Also, some institutions now offer job-loss and/or disability insurance to borrowers. The best thing to do in making a decision about how to insure your mortgage is to have an insurance agent work out the figures for a private term insurance and mortgage life insurance.

Types of Mortgages

• Pre-Approved Mortgage
• Conventional Mortgage
• High-Ratio Mortgage - CMHC / GE Capital Insured
• First Mortgages
• Open Mortgages
• Closed Mortgages
• Fixed-Term Mortgages
• The Adjustable Rate (A.R.M.) Mortgage
• Secured Lines of Credit
• Equity Mortgages
• Multiple Term Mortgages
• The 6 Month Convertible Mortgage
• All-Inclusive-Mortgage (A.I.M.)
• Bridge Financing

Pre-Approved Mortgage

A Pre-Approved mortgage is a Free and No-Obligation deal that lets you know before you go looking for your home or signing an offer to purchase, how much you can afford to borrow based on your qualification and personal credit rating. We'll arrange for you the most competitive rates with longest rate guarantee period that goes up to 120 days - if rates go higher, your rate will not be affected, and if rates go lower, you get the lower rate. This protection is solely responsible for savings thousands of dollars for many people who obtained a pre-approval and the rates increased afterwards.

Too often in the past, the mortgage was left to the very end, but with our Online Pre-Approval or by simply e-mailing us, we can take care of this important process within hours. Once you are Pre-Approved, you can confidently negotiate an offer on a home. A seller also prefers to negotiate an offer of a purchaser who has been pre-approved. With more lenders, lower rates, and no-cost, no-obligation, make us your choice for your pre-approval.

Conventional Mortgage

A conventional mortgage is a loan that does not exceed 80% of the purchase price or appraised value of the home, whichever is less. This type of mortgage does not have to be insured against default.

High-Ratio Mortgage - CMHC Insured / GE Capital Insured

A high-ratio mortgage is a loan that is above 80% and up to 95% of the purchase price or appraised value of the home, whichever is less. These mortgages must me insured against loss by either Canada Mortgage and Housing Corporation (CMHC), a Federal Government Corporation, or GE Capital, a private insurer. The premiums can be added to the mortgage amount or paid at closing, and are as follows:

For Mortgages Up To:	80%	No Insurance Required
For Mortgages From:	75.1-80%	Premium is 1.00%
	80.1-85%	Premium is 1.75%
	85.1-90%	Premium is 2.00%
	90.1-95%	Premium is 3.25%

If you obtained an insured mortgage after April 1'st, 1996, the premium you paid on the mortgage is now portable to another property (if you closed before this date, it is not portable, meaning that if you bought another home and your mortgage needed to be insured, you must pay the applicable premium again.) NOTE: This insurance is for the benefit of the lender against default. It is very costly and there is another way we can arrange a mortgage for you with a low down payment. That is with a 1'st mortgage and a 2'nd mortgage. For your unique situation, it may be less costly to consider this option.  Banks, on the other hand, cannot offer you this option as they cannot provide secondary financing over 75% of the purchase price or value of the property.

First Mortgages:

A First mortgage is the first debt registered against a property that is secured by a first "charge" on the property. If a default on the mortgage occurs, the first lender has first right on the property to recover the outstanding principal and interest costs, and any other costs incurred during the process. Second Mortgages: A second mortgage is a debt registered after a first mortgage has been registered. In most cases, the interest charged on the second is higher than the first, reflecting the higher risk to the lender, but over a short term, still more cost effective than paying the high cost of the CMHC/GE Capital insurance premium. They can be used to finance up to 90% of the purchase price or value of the home.

Open Mortgages

An open mortgage allows you the flexibility to repay the mortgage at any time without penalty. Open mortgages are available in shorter terms, 6 months or 1 year only, and the interest rate is higher than closed mortgages as much as 1%, or more. They are normally chosen if you are thinking of selling your home, or if you are expecting to pay off the whole mortgage from the sale of a another property, or an inheritance (that would be nice).

Closed Mortgages

A closed mortgage offers the security of fixed payments for terms from 6 months to 10 years. The interest rates are considerably lower than open, and if you are not planning on any one of the above reasons, then choose a closed mortgage. Nowadays, they offer as much as 20% prepayment of the original principal, and that is more than most of us can hope to prepay on a yearly basis. If one wanted to pay off the full mortgage prior to the maturity, a penalty would be charged to break that mortgage. The penalty is usually 3 months interest, or interest rate differential (I.R.D. - please refer to glossary for detailed explanation).

Fixed-Term Mortgages

With a fixed-rate mortgage, the interest rate is set for the term of the mortgage so that the monthly payment of principal and interest remains the same throughout the term. Regardless of whether rates move up or down, you know exactly how much your payments will be and this simplifies your personal budgeting. In a low rate climate, it is a good idea to take a longer term, fixed-rate mortgage for protection from upward fluctuations in interest rates.

The Adjustable Rate Mortgage (A.R.M.)

The Adjustable Rate Mortgage (A.R.M.) provides a lot of flexibility, especially when interest rates are on their way down. The rate is based on prime minus 0.375% and can be adjusted monthly to reflect current rates, and for the first 3 months of the mortgage, a large discount on the rate is given as a welcoming offer. Typically, the mortgage payments remain constant, but the ratio between principal and interest fluctuates. When interest rates are falling, you pay less interest and more principal. If rates are rising, you pay more interest and less principal, and if they rise substantially, the original payment may not cover both the interest and principal. Any portion not paid is still owed, or you may be asked to increase your monthly payment. This mortgage is fully convertible at any time without any cost to you, if you choose a 3 year term or greater, and offers a 20% prepayment privilege at any times throughout the year. While traditionally, banks offer variable mortgages up to 75% of the purchase price or the value of the home, we can go up to 90% with this product.

Secured Lines of Credit

Use the equity in your home that you have built up to purchase investments (where interest costs would be deductible against the earned income), finance home renovations, buy a car, or any other reasonable needs, with rates as low as prime. They can be arranged up to 75% of the purchase price or value of the home, and should you need more, we can arrange another secured line of credit as a Second mortgage up to 90%. Accessing the available credit is as simple as writing a cheque, or using the issued credit and/or debit card. You do not have to draw the money until you need it, and once you make a withdrawal, you can pay of your balance at any time or make monthly payments as low as interest only. As you pay down the balance, you have that much more available credit (revolving credit).

Being a secured product, there are the normal legal and appraisal fees that are applicable. From time to time, there are promotions where a lender will cover for part or all of these costs.

A word of caution:

Although these lines are very flexible and versatile products, great caution and care should be taken. It is very easy and very tempting to use it for everything whereas normal restraint would have been exercised, and suddenly, there are thousands of dollars more that have to be repaid.

Equity Mortgages

These are mortgages that are assessed on the equity of the home (market value minus the mortgage amount). They can be as high as 75% of the purchase price or value of the property and if more is required, we can look at a small Second mortgage. These are generally offered to applicants that do not meet the normal income and/or credit qualifying guidelines. You may have little or no income verification, self-employed, and/or your credit may be less-than-perfect.

Multiple Term Mortgages

If you wanted the lower rates of a short term mortgage but wanted the security of a long term, why not choose both. Yes, "build your own mortgage" product. You can split your mortgage in to as many as 5 parts, all having different terms, rates, and amortizations, but one total monthly payment. This way, you are spreading the risk. But, be prepared to be "hands-on" and watch the market very carefully here. This is not for everyone, as the time and stress levels are quite high.

The 6 Month Convertible Mortgage

When rates are on their way down, or you may feel that they will in the near future, a 6 month convertible mortgage offers you the short term commitment at fixed payments, with an added advantage that while within the term, the mortgage is fully convertible to a longer term from 1 year to 10 years.  At the end of the 6 month period, the mortgage becomes fully open, where one can renew with the existing lender or transfer to another lender. Even though it is offered at many financial institutions, there are differences from one to the next.

All-Inclusive-Mortgage (A.I.M.)

The AIM mortgage takes care of everything automatically. For Purchases, it includes: Solicitor's legal fees and standard disbursements to close the purchase and mortgage; Title transfer; Title Insurance from LandCanada for the clients; CMHC application fee or Appraisal fee; 1% Cash-Back to cover Land Transfer Tax; Registration of Deed and Mortgage. For Refinances, it includes: Legal fees and standard disbursements to prepare and close the mortgage; Title Insurance from LandCanada; CMHC application fee or appraisal fee; 1% Cash-Back; Registration of new first mortgage; Registration of discharge of existing first and second mortgage. The minimum term available is a 5 year term.

Bridge Financing

Bridge financing refers to a special, short-term loan needed to cover the time gap when two properties, both firm sales, are involved and the closing dates don't match. The property being purchased closes before the one that was sold. There is a small set-up fee charged by the lender to have the bridge loan arranged, plus the cost of the interest as now you are carrying both properties for a short time. The rate charged on the bridge loan is about 2-3% above the bank's prime.

Mortgage Refinancing / Renewing

Refinancing is the process that pays the existing mortgage and/or any other legal claims against the property and sets-up a completely new mortgage(s). There are many reasons as to why you should consider refinancing your mortgage:

Consolidate debts:

If your monthly bills have gotten out of control, you might be able to refinance your home and pay them off. The advantage of doing this is to lower your total monthly payments. You should have a mortgage specialist review your situation and make a recommendation.

Refinance a First & Second Mortgage into a new First:

If you have two mortgages on the same property, you can combine them into a new first mortgage, as long as the total amount does not exceed 90% of the value of the property. If the new mortgage is over 75% of the value of the property, normal CMHC/GE Capital premiums and guidelines apply, and one thing to remember here is that only outstanding amounts can be combined - any discharge penalties and costs must be paid separately at closing (please note that we have cash-back programs to help with these penalties).

Financing a Renovation:

If you are doing major renovations (spending over $15,000), it could be less painful monthly with a mortgage as opposed to a loan or line of credit.

Financing the purchase of other investments:

You can use the equity in your home to finance the purchase of investments, and also benefit from the lower carrying costs of a secured line of credit or mortgage and also write-off the interest costs against the taxable incomes.

Financing the purchase of investment property:

If you have the equity and have a desire to be a landlord, you could take equity out of your property by refinancing the mortgage to use towards the purchase of an investment property. This is also called leveraging of your assets.

Financing children's education:

The best thing we can do for our children is be good role models to them, teach them to be responsible citizens, and give them a good base with a good education. With the high cost of many things nowadays, as well as education, it is sometimes difficult to have that kind of money in the bank, but you many have it in the form of equity in your home. Education is something they will never lose on.

To refinance your mortgage today to your advantage, simply APPLY ONLINE NOW with no obligation whatsoever.

Closing Costs related to Refinancing:

The regular costs related to the refinancing process are: appraisal ($150-$214), legal fees & disbursements ($700-$1000), title insurance if survey not available ($225), CMHC/GE Capital Premium if mortgage is high-ratio (this cost can be added to mortgage), PST when CMHC/GE Capital premium is required, and any discharge penalties.

You should review your mortgage on a regular basis and keep up with new products and offers that are available - they may save you a bundle. When you break your mortgage contract to renew your mortgage at a new rate and a new term, you are faced with a prepayment charge to reimburse your financial institution for the lost interest income. Typically, this prepayment charge is based on the greater amount of either 3 months interest or the interest rate differential (IRD).

Early Renewal

Whether or not you should early-renew your mortgage depends on several factors. If the current rates are lower than the rate you have, compare the prepayment charge against the savings by having the lower rate, and this will point the way. Or, if you believe that interest rates will be higher at your existing renewal date, you can renew early to protect yourself from higher rates.

One thing to remember if you decide to early renew, is the prepayment charge will have to be paid up front. If there is room, you can add it to your mortgage, but you will have to go through a lawyer to redo the mortgage, and this cost will have to be taken into consideration when deciding which way to go. Some financial institutions will blend both rates for the new term.

Remember that we have the CASH-BACK programs that could pay for your prepayment charge. The savings in some situations run into the thousands of dollars.

Re-examine your mortgage from time to time, and at least once a year. There are thousands of dollars that could be saved in many situations, but they go unnoticed.

Switching / Renewing

When the mortgage is about to mature, most lenders will mail out their renewal agreements around 30 days before the mortgage matures. Often, this causes a lot of grief for many people, especially if rates start to climb just before the mortgage comes due.

We can guarantee your rates up to 120 days (4 months) before your mortgage comes due, and this service is free and with no obligations. Just this protection could and has saved thousands of dollars for our clients. Let's get it working for you, too.

When your mortgage is due for renewal, it's a great opportunity to make sure that you've got the right mortgage for your present needs. Since the mortgage is fully open at this time, this is the perfect opportunity to pay down your mortgage. Whatever you can afford, even a small amount, will have a significant impact in terms of interest you will save over the life of the mortgage. It is also a great opportunity at this time to consider a more frequent payment method, such as bi-weekly or weekly, if you are not already doing it. And of course, choosing the new term is important.

Another step you can take to save thousands of dollars in interest is if at renewal the rates are lower than the rate you just had, and you are comfortable with making those payments, keep the payments the same at the lower rate and start planning for the mortgage-burning party.

Mortgage Rates

Term	1 Year	2 Years	3 Years	4 Years	5 Years	10 Years
Best Rates*	2.75%	2.99%	3.19%	3.19%	2.79%	4.19%

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