CERTIFIED MORTGAGE BROKERS IN MISSISSAUGA

Most young people dream of owning their own home. Many also face the prospect with some trepidation. Your first-time home buyer mortgage is, after all, one of the biggest financial commitments you are ever likely to make. The decisions that you make now can have far-reaching implications for a very long time. The licensed mortgage brokers at Certified Mortgage Brokers Mississauga have been helping young people to make these decisions for years.

Before you buy, there are a number of questions that you should answer.

What can you afford? Buying a home comes with many hidden costs not least of all property taxes, maintenance and utilities. You need to make sure that you have the funds to cover these. The joy of owning your own home can be quickly undone under the burden of growing expenses.

What is your debt to income ratio? In total your debts should not make up more than 40% of your income and housing no more than 32%. This will put limits on the property that you can afford to buy.

Your mortgage broker is trained to help you to navigate the various terms and conditions that pertain specifically to mortgages. Understanding these and applying them to your current and future financial plans and lifestyle choices could save you loads of money in the future.

He can work out for you exactly the mortgage for which you will qualify and the resultant repayments. He could even get you pre-approved to give you certainty and to hold the interest rates while you go house hunting.

Homeowners refinance their mortgages for any number of reasons. The main one is to take advantage of lower interest rates and save money. The opportunity for reduced rates may arise from a general drop in interest rates, or it could be due to the improved credit score of the mortgage holder. A lower interest rate could save you thousands of dollars over the term of the mortgage.

Another reason for refinancing your mortgage is to access funds for big-ticket items such as home renovations, education, or to take advantage of an investment opportunity. Consolidating high-interest debt is also a perfectly logical reason for accessing your home equity by refinancing your mortgage.  You can access up to 80% of your home’s equity when your refinance your mortgage.

Refinancing your mortgage means paying off the current mortgage including any penalties that you may incur and signing a mortgage with a whole new set of terms and conditions.

Your current mortgage may no longer suit your lifestyle or financial realities. By negotiating a new contract, you can align the mortgage with your requirements. Don’t let penalties put you off. It is possible to pay the penalties and still make financial gains. Contact your mortgage broker to find out whether refinancing makes financial sense.

You can choose one of three options when refinancing your mortgage

• Break the mortgage
• A Home Equity Line of Credit or HELOC which allows you to borrow as you need funds and pay back the interest
• Blend and extend by adding an additional mortgage to your current one and combining the interest rates.

Your mortgage broker can help you with the costs and benefits of each.

Mortgage renewals are a reality for most homeowners. Too many Canadians fail to use the opportunity to renegotiate their terms and conditions or their interest rates. More than 50% of Canadians simply sign and return the renewal. They have missed a perfect opportunity to save money.

When you renew your mortgage, your current mortgage is paid off, and a whole new contract takes its place. You will have been informed of the need to renew your mortgage at least three weeks ahead of time.

Those alert to the opportunities inherent in mortgage renewals will have started their research four months ahead of the renewal date. This is an opportunity to align your mortgage to your lifestyle and financial needs. If you’re not happy with the service from your current lender, this is also the right time to consider switching.

When your mortgage renewal comes up you should consider all of the following

• The term of your mortgage
• Whether to increase or reduce your repayments
• Fixed or variable interest rates
• Portability of your mortgage
• The effect of pre-payment penalties

Your mortgage broker can help you with advice and suggestions. He’ll know what it will cost to switch lenders. He can also ensure that you get the best rates, as he will have contact with numerous lenders and the power to negotiate the best terms and conditions on your behalf. Remember even a small drop in interest can save you thousands of dollars.

A private mortgage is a secured loan provided by private lenders or institutions rather than traditional banks. These types of loans are easier to access and are quicker too. They are ideal for people who have been turned away by traditional banks or who require funding quickly to take advantage of investment opportunities.

Private mortgage providers are not bound by the same rigid rules as the Big Six. The lenders are more interested in the market value of the property that will stand as collateral than they are in your credit score.

With a private mortgage, you can access up to 90% of the equity in your home. You will pay a slightly higher interest rate but this is a reflection of the higher risk. A private mortgage is an interest only short-term loan, typically lasting for terms of six months to three years.  They should be regarded as bridging finance and you should have an exit strategy when you enter into the loan.

Private mortgage loans provide solutions for

• People with a less than perfect credit score
• Self-employed people
• Unconventional properties that the traditional banks won’t finance
• Second mortgages used for debt consolidation, renovations or investments

Obtaining a private mortgage is a much more personal experience than a bank mortgage. Private lenders specialise in certain areas and will tailor your mortgage plan to suit your personal and financial needs.

Contact your mortgage broker if you require a private mortgage. Private lenders form part of their portfolio of lending partners.

A second mortgage, sometimes known as a home equity loan is a lien against a property that already has a first mortgage. Although the interest rates are higher than those on the first mortgage, second mortgages are popular products. They allow homeowners to cash in on the equity in their home so that they can consolidate more expensive unsecured debt, do renovations, or make investments.

If you are considering taking a second mortgage you should get a market valuation for your property. An estate agent will do this for no charge. It is advisable to get more than one valuation to ensure that you have an unbiased estimate of the value.

To work out the size of the mortgage for which you will qualify you can calculate the loan to value ratio or LTV. This is done by dividing the amount of money that is owed on the property by the estimated value of your property. The lower the LTV the better your chances of getting the mortgage that you require.

Most lenders will give you up to 90% of the equity in your home. They will, however, require an appraisal. You will have to pay the appraisal costs and closing costs. The term of your second mortgage is typically shorter than that of the first. They are usually also interest-only loans.

A second mortgage is subordinate to the first because if you default on your loan the first mortgage is paid off before the second. This makes the second mortgage riskier as the second mortgage holder runs the risk of not recovering all of his money.

Second mortgages are nearly always arranged with private lenders so you should contact your mortgage broker to negotiate the best deal for you.

There are many advantages to being self-employed, applying for a mortgage isn’t one of them. For the self-employed incomes are often unpredictable or difficult to prove. Businesses may do very well in some months of the year and then run into slow months. Mortgage providers like to see a steady consistent income. When they don’t see this, they see risk. Higher risk in the world of finance translates into higher interest rates.

You will be required to take your tax returns for the two years prior to your mortgage provider when applying for a mortgage. Some lenders may also want you to bring along your business registration documentation.

If you are able to prove your income to the mortgage provider, your application will be treated in the same way as an employed person’s mortgage application.

Mortgage providers use Debt to Income ratios to calculate what you can afford to repay and, by implication, what you may borrow. This is the second problem that you may face. Your income may be understated if, as any other rational business person would, you are deducting all allowable expenses on your tax return.

A private mortgage lender may be your solution. They are not bound by the stringent banking rules and they tend to be more interested in the value of the property than in the personal attributes of the applicant. A good mortgage broker will have a large portfolio of mortgage providers on their books and can partner you with a lender most suited to your circumstances.

Construction financing or a construction mortgage is what you’ll be looking for if you plan to build your own home or buy a home that a construction company is building as part of a new development.

There are two types of construction mortgage – a progress draw mortgage and a completion mortgage. A completion mortgage is usually used to pay for a new house that has just been built. The bank will pay the money to the construction company when you take ownership.

If you have a progress draw mortgage, the bank will make incremental payments as the contractor (or you) reaches certain predetermined milestones. During the construction, the lender will send an inspector to the construction site to confirm the progress of the project. The inspector then submits a report and the bank will make payment as each milestone is achieved.

The application for a construction mortgage is more complex than an application for a residential mortgage. Before you’ll get approval, you’ll have to submit plans and blueprints. Your lender will want to see your contract, your bill of costs and your timetable for completion. You’ll also have to make a larger down payment.

Construction financing is riskier for both you and the lender. Construction projects are complex. Things can go wrong and delays can happen. This is why you should have a contingency fund of at least 15% of the estimated cost of the construction.

Given the complexity and risk, you would be well advised to seek the assistance of a mortgage broker before you apply for construction financing.

A Home Equity Line of Credit or HELOC is a loan secured against the equity in your home. This is a flexible line of credit that allows you to draw up to an agreed limit at any time that you require it. You only pay the interest on the amount that you have borrowed and you don’t have to pay back the capital until you can. When you do pay back the principal you may borrow it again.

Because HELOCs are secured they usually have a lower interest rate than other types of credit. They offer a practical means to reduce your cost of debt. A HELOC could offer you a chance to consolidate your expensive unsecured loans such as credit cards and personal loans.

Interest rates are calculated on a daily basis. The interest rate on a HELOC is variable so it does mean that they are prone to interest rate changes which could leave you financially vulnerable when interest rates go up.

With a HELOC you can borrow up to 65% of the equity in your home. They offer an easy way to access funds as you require them.

It pays to shop around when you’re looking for a HELOC. Research has shown that mortgage brokers on average manage to negotiate better interest rates for their clients. This is because they have contacts with a large number of loan providers. They also have negotiating clout that could save you thousands of dollars.