Tag Archives: Best Mortgage Rate

How to Prepare For Mortgage Rate Increases

Can your budget handle a rate increase?

There is a bunch of talk about Canadian mortgage rate increases. The single biggest investment most Canadians make is their home; this represents almost 40% of the average family’s total assets. The big problem at the moment is that many Canadians are living in homes they won’t be able to afford once interest rates start to rise. Right now The Bank of Canada’s overnight rate is 1% – this prime rate went above 20% in 1981! What would happen to your home and mortgage if rates were to go up tomorrow?

Tip # 1: Pay Down Your Principal

If rates are increasing, the best plan is to lower your principle. The two most common ways to tackle this is by:

Switching from Monthly to Rapid Bi-Weekly

Switching from monthly mortgage payments to bi-weekly payments could help you save thousands of dollars in interest.

Making Lump Sum Prepayments

Try making lump sum prepayments or doubling up your payments whenever possible. This will help you tackle your debt quickly and efficiently.

Tip # 2: Plan for it Now

Open a savings account that you are able to pull from to pay for increases in your mortgage interest rate and payments down the road.

Tip # 3: Get Some Professional Advice

Speak with a mortgage professional about your options. You may be able to refinance now and lock in a low mortgage rate.

Tip # 4: Get Real About Your Debt

If you need to, downsize your home or consolidate your loans to protect yourself from rising interest rates. Most importantly, if you are shopping for a new home, calculate your affordability at a much higher interest rate – it’s the only way you can determine your chances of affording your home for the long term.

 

How to Negotiate Your Mortgage Rate

It’s time to start bargaining!

It goes without saying that you would like to secure the lowest possible mortgage rate. With that being said, negotiating your best mortgage rate will entail some homework. This way, you’ll be able to work out a fair request. Here are a few tips on how to negotiate the best Canadian mortgage rate.

1. Be Honest

Your mortgage agent will ask you a number of questions to see what best suit your needs. Tell the truth.

2. Ask Questions

If you’re confused about something, don’t hesitate to ask. Only a small group of people actually understand the ins and outs of mortgages, so don’t be shy!

3. Pay Attention to the Details

Don’t just look at the low mortgage rate your agent is offering. What prepayment options are available? Is the mortgage portable? What happens if you need to move or break the mortgage contract? Are there any transfer fees?

4. Challenge the Mortgage Rate

Ask your mortgage broker to compare mortgage rates at banks, local credit unions, and non-traditional lenders. It’s his or her job to find the rate that best suits your needs.

5. Don’t Lie

Chances are your mortgage specialist will know and you’ll ruin the relationship you’re trying to build.

6. You Can’t Get What You Don’t Ask For

Ask your mortgage broker about additional offers and bonuses.

7. Be Realistic

It’s important to note that your mortgage broker isn’t a miracle worker. Sometimes he or she won’t be able to find a lower rate. With that being said, just because you’ve had some financial hardships in the past doesn’t mean you can’t try to get a good deal! Work with your mortgage broker in order to review all available options.

How to Know When You’re Ready to Purchase a Home

Think you are ready to be a homeowner? Here’s exactly how you can tell!

1) You have a budget

Factor in homeowner’s insurance coverage, property tax, fees, upkeep costs, and the best  available home mortgage rate.

2) You have a sizeable down payment.

Generally, you’ll need a down payment worth 20 % of the house price.

3) You have a reliable source of income.

Getting a home is a long-term financial dedication, so you’ll require a steady income to cover those month-to-month mortgage payments.

4) You have an emergency savings fund.

If you have enough money to cover three to six months of your living expenses, you’re one step closer to being prepared.

5) You have your financial obligations under control.

Lenders like to ensure you’ll have more than enough money each month to pay your living expenses. Before they’ll give you a low mortgage rate, they take a look at your debt-to-income ratio.

6) Your credit report is in good condition.

You don’t have to have best credit to become a homeowner; however a good history can help you lower the interest payments on your Canadian mortgage rate.

7) You can make a long-term commitment.

Are you prepared to stay put for a minimum of three to five years? Normally, that’s how long you’ll have to keep the house in order to recoup your trading expenses.

8) You are prepared to become a property owner.

Don’t buy simply because you can. You have to ensure you’re ready.

How to Calculate How Much You Can Afford

Know what you can afford – get a mortgage pre-approval.

When it pertains to securing a mortgage, people would like to be aware of the amount of money they are able to borrow. The following are a few quick formulas to assist you to determine exactly what you are able to afford.

Loan to Value (LTV)

Lenders will only allow you to borrow a certain amount of the property value. This borrowing amount is known as the Loan to Value or LTV. LTV (%) = (the amount of mortgage loan) / (the value of the property).

You may borrow as much as 80 % of your property value (80 % LTV) without fretting about low mortgage rate default insurance fees, or as much as 95 % with default insurance fees. Whether you are obligated to pay CMHC or not, your mortgage rate loan insurance depends on your LTV.

Total Debt Service (TDS) Number

Your TDS number is the percentage of your gross annual income that is required to cover payments associated with your new home, plus costs linked with your other debts.

TDS = (Home expenses + Car Loans + Credit Card Debts + Other Loans) / Gross Income.

Your total debt service number (TDS) should not exceed 40 %. This provides you with a cushion in the event of a financial emergency.

Gross Debt Service (GDS) Number

Your GDS number is the percentage of gross annual income necessitated to cover payments connected with housing, including best mortgage rate payments, interest, property taxes, and heating.

GDS =(Annual Mortgage Payments + Property Taxes + Interest + Condo Fees + Heating) / Gross Annual Income.

Your gross debt service number (GDS) should not surpass 32 %.

Are calculations not your forte? Contact a mortgage broker today for personalized help.

How Accelerated Payments Can Fast Track Your Financial Freedom

Fast track your mortgage with these easy tips.

There are options available to help you enjoy a mortgage-free lifestyle sooner rather than later.

Let’s look at the Different Types of Mortgage Repayment Options

  • Monthly Mortgage Payments
    • The traditional mortgage payment; where the payments are made monthly on the same day each month.
  • Bi-Weekly Mortgage Payments
    • You make payments every second week on the same day.
  • Bi-Weekly Rapid Mortgage Payments
    • Also referred to as accelerated bi-weekly mortgage payments every two weeks and allow you to pay off your mortgage quicker by making an extra payment annually.
  • Weekly Mortgage Payments
    • Making an equal payment each week throughout the month.
  • Weekly Rapid Mortgage Payments
    • Similar to bi-weekly rapid best mortgage rate payments– you make slightly larger payments which in total is an extra payment being made throughout the year.

How does this save me money on my mortgage?

Paying off your low mortgage rate using either a bi-weekly rapid, or a weekly rapid payment schedule can save you interest. For instance, you would end up making 26 ‘half’ payments, the equivalent to 13 ‘full’ payments.

Being mortgage free five years sooner may be a reality!

Accelerated Payments are NOT for everyone

While accelerated Canadian mortgage rate payments prove to pay off your mortgage a lot sooner than traditional monthly payments and can save you thousands of dollars, it may not be for everyone.

With accelerated mortgage payments, you are quite literally accelerating to a future of living mortgage free and enjoying financial freedom.