Tag Archives: Financial Planning

What are Blended Mortgages?

Blend your mortgage to improve your rate.

Quite a few people are wondering how to lower their current mortgage costs.

Generally, the mortgage penalties you incur to break your mortgage are set up as the greater of three months interest or the value of your Interest Rate Differential. If you’re going to break your mortgage, try and do it when your mortgage is sitting in the “sweet spot”– this is when your rate is not high enough to trigger IRD and thus you’re only required to pay the three months interest penalty.

Unfortunately, the sweet spot rarely comes at a convenient time. Also, most people will have trouble ever fitting into this scenario if their rate is over 4 %. If this is your situation, speak with your low mortgage rate planner about a blended mortgage. There are two options that most banks will offer:

Blend and Extend or Blend to Term

Under a Blend and Extend option, the bank will give you a brand new term at the current rate but ‘blend’ in your penalty to your new rate.

The Blend to Term option is the same idea but your term remains as is. For example, you would end up with the same two years left but at a lower rate with the penalty blended in.

If you are in that “sweet spot” a good Canadian mortgage broker will show you calculations on just how much you can save by breaking your best mortgage rate. If you’re subject to an IRD, a good planner will go over what blended options are available to you and take into account your time frame and overall goal to help you select the option that’s the best fit.

Mortgage Transfers

What you will need to know.

Are you planning to transfer your mortgage to another property? If you’re trying to sell, chances are you still have a mortgage on the home you currently own. So what happens to your existing mortgage when you want to move on from your current home and purchase a new one?

Well, the reality is you still must repay the remaining mortgage balance, and this will need to be either paid off or transferred to your new home. You will also need to consider that since you are repaying your mortgage early, if you do not have an open mortgage, you may be required to pay a prepayment penalty.

Ask Your Lender

Here’s some information you should speak with your best mortgage rate lender about:Question mark

  • What amount do I have remaining on my mortgage balance?
  • Can the buyer assume or take over my mortgage? If so, what are the requirements for the buyer?
  • Am I able to pay off the total mortgage balance? If so, is there a prepayment penalty?
  • Can you transfer this mortgage to my new property?

Sometimes your lender will waive the penalty if you or the buyer takes out a new Canadian mortgage rate with them. Getting the answers to these questions in writing will avoid any unpleasant surprises later on.

Still have questions? Not a problem, speaking with a low mortgage rate specialist can help you determine what’s best for your personal situation. It’s free and there are no obligations.

Mortgage Life Insurance

Is this coverage right for you?

Scrabble MortgageAnother thing to take into consideration during your low mortgage rate shopping process is Mortgage Life Insurance, which is different than Mortgage Default Insurance.

What is Mortgage Insurance?

Mortgage Insurance is also referred to as mortgage life insurance and creditor insurance. In Canada, banks use post-claims underwriting for Mortgage Insurance. They only confirm that you qualify after you submit a claim.

Here are a couple of reasons why you ought to take a look at options aside from Mortgage Insurance:

Coverage decreases with time.

While your premiums remain the same throughout of your mortgage, the coverage you’re receiving is in fact decreasing with your Canadian mortgage rate balance.

Coverage is not eternal.

Your mortgage insurance will simply last as long as the “term” of your mortgage.

The lender is the beneficiary.

Assuming that your claim has been approved, the lender is the recipient and the money goes straight into their pockets.

What’s the Alternative?

Another choice is to purchase Term Life Insurance. With Term Life Insurance your coverage does not decrease with time, you’re approved in advance, and the money goes straight to you.

Term Life Insurance

The most common types of term life insurance for mortgage protection are 10-year, 20-year, and 30-year terms. These products charge consistent premiums for that time period. No medical examinations in the middle, no re-qualifying, and no surge in premiums.

Life Insurance Benefits

Individual term life insurance products are not tied to your mortgage.

Name Your Own Beneficiary

Plus, the majority of term life insurance policies in Canada have what’s referred to as a conversion privilege. This enables you to trade in your term life insurance policy for a permanent life insurance policy– without a medical examination.

Other advantages of life insurance consist of:

Discounts are offered based on your health and your family history.

Premiums are taxed at a much lower rate.

Versatile– you can switch mortgage lenders and take the coverage with you if you move or you can convert a term policy into a permanent policy.

Policy terms do not alter and in most cases the policy premiums are guaranteed.

If you’re shopping for mortgage insurance, you ought to consider life insurance as an alternative option.

Shop Around

Compare life insurance rates to the mortgage insurance rates provided by your bank.

Top It Up

Think about purchasing or topping up an individual life insurance policy to cover your best mortgage rate instead of utilizing mortgage insurance.

Speak with an Expert

Speak with a licensed insurance broker, not just your mortgage broker, to get insight on coverage.

Seller’s Market vs. Buyer’s Market

Understanding the housing market

Have you ever wondered who decides how much a house is worth and how they do it? The market is influenced by a variety of factors, all adding to the final asking price. A few of the factors include:

  • Tempo of the market – the speed at which homes are currently selling
  • Confidence in the economy – prices have the tendency to go up when confidence is high
  • Competition within the market – a packed market tends to result in lower prices
  • Financial Institutions – a professional appraiser will determine the property’s lending value
  • Insurance Companies – a broker will calculate the property’s replacement value
  • The buyer and the seller – ultimately, buyers and sellers decide the final purchase price, which in turn influences the market

buy sellSeller’s Market vs. Buyer’s Market

Instability in the market scares people– sometimes right out of moving. A better understanding of the market will help you choose the best time to sell.

Cycles in the market are strongly influenced by the economy. The economy can produce both a shortage and a surplus of housing. In a seller’s market many buyers are competing for a limited number of houses. Prices on houses tend to be higher in a seller’s market. Conversely, in a buyer’s market there are plenty of houses to choose from. This surplus of housing can slow rising prices, as well as cause price reductions, which can ultimately impact your low mortgage rate.

Knowing the market is an important factor when selling or buying a home. Be sure to research the current market and best mortgage rate, or hire a real estate professional who is aware of the complexities.

Canadians take, on average, 11 months to plan their Canadian mortgage rate home purchase and 88 percent indicate that they have a good sense of how much they can afford. (Source: CAAMP).

Buy First, or Sell First

This is one of the biggest concerns for sellers. Unless you time both the purchase and sale perfectly, you could end up in one of two scenarios: living in a motel temporarily, or paying two mortgages at the same time. Neither sounds very appealing. Here are a few things you can do to avoid this dilemma:

  • Make it ‘conditional’ that your offer to purchase stands only if your current home sells. However, in a hot market (i.e. seller’s market), the seller could reject your offer for a more suitable one.
  • If you receive an offer, negotiate the closing date until the sale of your home is complete. Again, this could lead to a withdrawal of the offer if it does not work with the potential buyer’s schedule.

 

For Sale By Owner – How Does This Change The Home Buying Process?

The DIY guide for selling and buying a for sale by owner property

female teen girls holding notepad with pros consWhen it comes to selling your home, a growing number of people are opting for the do it yourself approach.

The private sale of homes is becoming relatively common thanks to advances in Internet technology and an increase in For Sale By Owner (FSBO) companies.

If you are successful in making the sale, you could save yourself a real estate commissions of 3-5 percent.

How For Sale By Owner Works

Generally, private sellers will make use of one of the various For Sale By Owner network websites. These companies will provide different service plans to assist you in selling your home. Standard plans consist of exposure through their website, lawn signs, and a personalized consultation with sales representation. The premium plans provide additional advertising support (i.e. in local papers, or real estate magazines), and they perform a competitive market analysis.

According to research studies, 45 % of Canadians would consider bypassing real estate agents to sell privately with the guidance of a real estate lawyer. A good lawyer can make all the difference for a private seller.

This system also weighs heavily on the communication between the seller and their lawyer. A lawyer is best equipped to manage situations of legal concerns.

Considering Selling Your Home Privately?

When it comes to deciding whether to try and sell your home without the services of a real estate professional, consider the following:

The Pros

  • You could possibly save thousands of dollars in commission fees.
  • You’ll be able to maintain control over all aspects of the sale.
  • You’ll have the flexibility to show the house at your own convenience.
  • You have the opportunity to highlight, from your experience, everything your home has to offer to prospective best mortgage rate home buyers.
  • More buyers are internet savvy and are familiar with private sales sites, as well as online auctions and complimentary classified websites.
  • If you pass some of the savings onto the buyer you open up your reach to buyers at lower price points.

The Cons

  • Prospective buyers might not find your home.
  • Real estate agents understand the market and what price points will sell.
  • Upfront advertising costs, without any guarantee of visibility.
  • Potential low mortgage rate buyers have to call you.
  • No one to prepare agreements or advise you on negotiating.
  • You might have to negotiate a commission for the real estate agent of a potential buyer.

·        The Safety of an Agent

For many, a real estate agent is the most comfortable choice when making such a substantial transaction. They can guide you through the process and negotiate the sale on your behalf.

Essentially, only you can make the decision if the service of an agent is worth the fee.