Tag Archives: Online Mortgage Broker

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:

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.

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

Seller’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.

Understanding Mortgage Insurance and CMHC

Do I really need mortgage insurance?

A down payment serves as a form of security– so the larger your down payment, the better. If you have a greater amount of equity built up in your home, unforeseen circumstances may be managed easier, and you’ll be less likely to default on your mortgage.

Lenders commonly group low mortgage rate shoppers that have a deposit between 5– 20 percent of the home purchase price into the “slightly higher risk” category. In order for the lender to protect against this increased risk, mortgage default insurance is required.

Best mortgage rate shoppers used to be able to secure 100 percent financing in Canada until October 2008 when the government stopped insuring zero down payment mortgages in an attempt to prevent a U.S. style housing crisis.

What is Mortgage Default Insurance?

Default Insurance, also referred to as mortgage loan insurance, offers protection to the mortgage lender. The lender generally requests this form of insurance for mortgage loans with a down payment of less than 20 %.

As of July 9, 2012, any Canadian mortgage rate requiring default insurance is capped at an amortization period of 25 years. This means 30-year mortgages are only a possibility for those placing more than 20 percent down (known as a conventional mortgage).

In the event that you default on your mortgage, the lender will go through the process of collecting the outstanding amount on the loan. If the outstanding loan is still not completely paid off after selling the home, then the insurer will likely provide the difference back to the lender.

Where do I get Mortgage Default Insurance?

This type of insurance is supplied by the government organization Canadian Mortgage and Housing Corporation (CMHC), along with private insurers.

What Will it Cost Me?

When the lender insures the loan, they transfer the insurance premium to the homeowner. The premium is a percentage of the mortgage value based on your Loan-to-Value ratio (LTV). This premium may be paid in a single lump sum or it can be included in your monthly mortgage payments. To calculate your Loan-to-Value ratio, take the mortgage amount and divide it by the property value.

Advantages of Having Default Insurance

It is a win-win situation for both the lender and potential homeowner as the insurance protects the lender and the borrower. The lender is able to provide the same great mortgage products and rates to borrowers that are at a slightly higher risk of default.

Disadvantages of Having Default Insurance

Default Insurance helps make it possible for a homeowner to buy a property with a lower down payment– this indicates they have little value in their home and they will end up paying even more interest on the home loan. If the homeowner would like protection they will need to purchase additional mortgage insurance.

Why Your Down Payment Matters

Is it actually that big of a deal?

All lenders assume that you will put some money down on your home purchase. The minimum down payment in Canada is 5 % of the purchase price. The amount of insurance expenses charged is relative to your best mortgage rate and your down payment amount. So keep in mind, the more cash you are able to save and put towards your down payment, the lower your mortgage monthly payments are going to be.

Down Payment Due Diligence

This ends up being considerably crucial if your credit history is less than spotless. Some lenders will likely disregard previous credit blemishes, not confirm earnings and various other financial conditions, if you have 35 % to 40 % of the purchasing price available upfront as part of your down payment.

What you may not know about your down payment is that this equity goes to the banks in the unfavorable event of foreclosure. For this reason, the bigger the down payment the more protection the banks have. Make sure to have your down payment available at least 30 days prior to applying for a mortgage loan.

Ways to Accumulate a Down Payment

If you have already spoken with low mortgage rate lenders and they have notified you that your down payment is not quite enough, make it a top priority to find a way to save your money such as postponing a brand-new vehicle or a vacation.

If you have sufficient equity in your RRSP, you are able to get a loan from this investment account in order to help improve your down payment. Canadians are allowed to borrow as much as $25,000 from an RRSP. In addition, down payment funds can be borrowed from a secured line of credit or can be given from a family member.

Why do Mortgage Rates Change?

Understand why rates change and how you can adapt to increases.

There are many factors that influence the health of the economy: unemployment, inflation, consumer confidence, and the housing market are just a few. Let’s take a look at the ways these factors are able to impact your mortgage rate.

Factors Affecting: Fixed Mortgage Rates

A fixed best mortgage rate usually moves in alignment with government bond yields of the same term.

Bond Prices and Bond Yields (Negative Relationship)

When bond prices increase, bond yields decrease, and when bond prices decrease, bond yields increase. Bonds are typically considered safer investments than stocks.

Bond Yield: the return an investor will receive by holding a bond to maturity.

Bond Yields and Fixed Rates (Positive Relationship)

Typically fixed rates have a positive relationship with bond yields. They increase and decrease together with bond yields.

Stock Market is Booming– Bond Prices Decrease, Bond Yields Increase, Fixed Rates Increase

Whenever the stock market is booming, investors are far more likely to make a higher return on investing in equities (i.e. the stock market) than investing in bonds. Thus the demand for bonds decreases, meaning that the price of bonds decreases, and the bond yield increases. Therefore, fixed rates will likely increase.

Stock Market is Dipping– Bond Prices Increase, Bond Yields Decrease, Fixed Rates Decrease

When the Canadian economy becomes less stable, investors generally have the tendency to invest in safer financial commitments such as bonds.

Factors Affecting: Variable Mortgage Rates

The overnight rate changes the cost of lending/borrowing short-term funds and therefore affects the Prime Canadian mortgage rate. The Bank of Canada regularly updates this rate based on economic conditions.

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