Mortgage Renewal

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It’s Mortgage Renewal time

Is your mortgage coming up for renewal within the next several months? Don’t settle for less. If you don’t look around you’ll never know if your existing lender is offering you the best mortgage renewal package. This is where we come in. As a mortgage brokerage we shop around on behalf of our clients to make sure they get the best overall suited mortgage product for their mortgage renewal needs. And never compare yourself with another person’s mortgage as everyone’s personal situation could be different, which in turn will require customized approaches towards getting the right mortgage at mortgage renewal time.

mortgage renewal

 

 

 

 

 

 

 

 

 

Different Reasons for mortgage renewals

So you’ve been thinking lately about what to do with your mortgage. Contact us and lets think about it together. You’ve also heard that the lower your mortgage balance is the higher your home equity would be and the more money you can access from your home. That is true, as your mortgage balance decreases the percentage of the equity you can access from your home increases.

Here are some reasons why you should contact us:

  • You want to do a mortgage renewal for a better rate than what your current lender has offering you
  • You want to do a mortgage renewal to consolidate your debts and pay a lower interest rate on the new larger mortgage amount
  • You want to do a mortgage renewal with a new lender to add a home equity line of credit to your house
  • You want to do a mortgage renewal so you can change lenders to a new one because you’ve heard good things about them and like their offerings, or have other accounts with the new lender
  • You have other personal doing a mortgage renewal with a new lender

Perks to switch to a new lender

The lenders have internal perks, unadvertised for the general public for switching your mortgage that only the mortgage broker community knows about. For example, if we switch your mortgage the new lender could cover the legal, appraisal, and the discharge fees. Therefore not only are you benefiting with getting expert unbiased professional advice for your renewal from Trusterra Mortgage, you are also getting competitive mortgage rates, and are switching your mortgage at minimal cost to you.

 

If you recently got a new mortgage or renewed your existing one, you can always give us your details and let us know when to contact you for when the time comes to renew again by using our free Mortgage Renewal Reminder Service.

Ready to start or maybe you have some questions to ask first? Contact us and we’d be happy to help you.

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Home Equity Line of Credit

Home Equity Line of Credit

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What is a Home Equity Line of Credit?

A HELOC or Home Equity Line of Credit is a secured line of credit against your property. Just like a personal line of credit, which is unsecured, a home equity line of credit gives you access to a revolving line of credit but at a much lower interest rate than a personal line of credit.

home equity line of credit

More Equity on your home = More Home Equity Line of Credit limit

In Canada regulations limit how much you can be approved for a Home Equity Line of Credit. You can have a HELOC limit of up to 65% of the appraised value of your personal residence.  Therefore the faster you pay down your mortgage, or the more down payment you provide when purchasing your home the faster you can get access to the HELOC.

Where can you get a Home Equity Line of Credit?

All the Chartered Canadian Banks offer home equity lines of credits along with their portfolio of mortgage products. As well, some of the mortgage lenders, mono line lenders, also offer HELOC’s, but not all.

How do I get approved for a Home Equity Line of Credit?

When you apply for a mortgage is the time that your mortgage broker professional would also request for a HELOC for you. The approval of a home equity line of credit will be based on which lender you are applying to, your income to debt ratios, and whether there is enough equity in your home, or in another way to say it . . . how much mortgage you have in comparison to the value of your home.

You do not necessarily need to get a mortgage in order to be approved for a home equity line of credit. Should your home be free and clear, or if you have been living in it for a long time and the value in comparison to the mortgage balance is significantly greater, then you can also apply for a HELOC.

Why do I need a HELOC, what would I use it for?

A home equity line of credit can be a very handy and effective resource to have for when you need extra money at low interest rates. You can use your HELOC for many different purposes. Here are a few common ones:

– pay down high credit card debts

– use towards purchasing a second property or investment property

– a source of emergency money for when the need arises

– purchasing larger items that are expensive enough that you would not want to pay by cash

What is the interest rate for a Home Equity Line of Credit?

Home equity lines of credit interest rates are based on the lenders prime rate plus a certain percentage. With most lenders HELOC rates range anywhere from Prime +.50% to Prime +1.0% depending on the credit limit. The higher the limit the better the discount.

 

Have you been considering getting a Home Equity Line of Credit but not sure if you are qualified for one, or how much you can be approved for? Contact us and we would be happy to help you with your HELOC inquiry’s.

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Debt Consolidation

Debt Consolidation

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Debt Consolidation

The holiday season is over and now is the time to start thinking about all that spending you made during the last month or two. Well, if you own real estate, then there is a better option of doing a debt consolidation. debt consolidation

Many people will be stacking up high interest rate credit cards or using their personal line of credit’s to pay off their high interest rate credit cards, but even the unsecured personal line of credits that the banks offer have high interest rates.

If you own your own home and have been paying down the mortgage there is a good chance that you have built up value or equity in your property.

Equity is the amount of money worth on your home, when you take the appraised market value and subtract it from your current outstanding mortgage balance. Financial institutions in Canada, such as chartered banks and trust companies offer secured lines of credit or otherwise known as Home Equity Line of Credit HELOC up to 80 percent of the appraised value. In the financial services industry it is called Loan to Value LTV.

With today’s current Canadian prime lending rate of 3% HELOC’s are rated at Prime plus a percentage point. On average the Home Equity Line of Credit interest rates as of the date of this blog post are Prime + .50%. Is not this interest rate better than the 18 and above percent that you would pay with your credit cards?

A Mortgage Brokerage company such as Trusterra Mortgage would be in the best position to offer you professional and unbiased advise in the context of real estate and mortgages on how to manage your holiday debts and to help you start saving money and interest.

What are you waiting for? Contact us and let us help you to consolidate your accumulated debt and save on high interest rates.

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What is mortgage loan insurance

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Mortgage Loan Insurance

Source: Government of Canada Department of Finance

Mortgage loan insurance (which is sometimes called mortgage default insurance) is a credit risk management tool that protects lenders from losses on mortgage loans. If a borrower defaults on a mortgage, and the proceeds from the foreclosure of the property are insufficient to cover the resulting loss, the lender submits a claim to the mortgage insurer to recover its losses.

The law requires federally regulated lenders to obtain mortgage insurance on loans in which the homebuyer has made a down payment of less than 20 per cent of the purchase price (also called high loan-to-value mortgages). The homebuyer pays the premiums for this insurance, which protects the lender if the homebuyer defaults.

The Government backs insured residential mortgages in Canada. It is responsible for the obligations of Canada Mortgage and Housing Corporation (CMHC) as it is an agent Crown corporation. In order for private mortgage insurers to compete with CMHC, the Government backs private mortgage insurers’ obligations to lenders, subject to a deductible equal to 10 per cent of the original principal amount of the loan.

Since 2008, the Government has taken measured steps to strengthen the minimum standards for government-backed insured mortgages, including:

  • Requiring a minimum down payment of five per cent for owner-occupied properties and 20 per cent for speculative properties.
  • Limiting the maximum amortization period to 30 years.
  • Lowering the maximum amount Canadians can withdraw in refinancing to 85 per cent of the value of their homes.
  • Requiring that borrowers meet the standards for a five-year fixed-rate mortgage even if they choose a mortgage with a lower interest rate and shorter term.
  • Withdrawing Government insurance backing on lines of credit secured by homes.

These standards apply for mortgages on residential property with four units or less. They do not affect multi-unit buildings with five units or more.

 

Further Measures have been initiated by the Federal Government

The Government announced further changes to the standards for government-backed insured mortgages. These measures would apply to new high loan-to-value mortgages backed by the Government.

Limit the Maximum Amortization Period to 25 Years

The amortization period is the length of time it will take to pay off the entire mortgage loan. It is usually much longer than the term of the mortgage. A typical mortgage in Canada may have a term of five years or less during which a specific fixed or variable interest rate will apply, and the mortgage can be renewed at the end of the term.

The measure announced today will reduce the maximum amortization period from 30 years to 25 years for high loan-to-value mortgages, which are backed by government insurance. (Banks will still be able to offer 30-year amortization periods on low ratio—20 per cent or more down payment—mortgages, if they so choose.). For any given mortgage loan, a lower amortization period would result in a moderate increase in the monthly payment along with a significant reduction in the total interest paid over the amortization period. The following table illustrates the benefit of reducing the amortization period from 30 years to 25 years for a mortgage loan of $350,000.1

Interest Rate 30-Year Amortization—Monthly Payment 25-Year Amortization—Monthly Payment Difference in Monthly Payment—
25-Year vs. 30-Year Amortization
Interest Savings—25-Year vs. 30-Year Amortization
3 per cent $1,472 $1,656 $184 $33,052
4 per cent $1,664 $1,841 $177 $46,832
5 per cent $1,868 $2,036 $168 $61,765

 

Lower the Maximum Refinancing Amount to 80 Per Cent of the Loan-to-Value Ratio

Borrowers can refinance their mortgage and increase the amount of the loan secured against their home. The measure announced today will reduce the limit on refinancing from 85 per cent to 80 per cent of the value of the home. Reducing the maximum refinancing amount to 80 per cent follows the change from 90 per cent to 85 per cent in March 2011. Reducing the maximum loan-to-value ratio on refinancing will encourage Canadians to keep equity in their home and save through home ownership.

As an illustration, for a home valued at $350,000, refinancing at 85 per cent would allow the homeowner to access up to $297,500, whereas refinancing at 80 per cent would allow the homeowner to access up to $280,000. The lower refinancing limit means homeowners will keep an additional $17,500 in the equity of their home and at the same time save up to $5,200 in insurance premiums.

Limit the Gross Debt Service Ratio to 39 Per Cent and Total Debt Service Ratio to 44 Per Cent

There are two ratios commonly used to measure the risk associated with household debt: the gross debt service (GDS) ratio and the total debt service (TDS) ratio. The GDS ratio is the share of the borrower’s gross household income that is needed to pay for home-related expenses, such as mortgage payments, property taxes and heating expenses. The TDS ratio is the share of the borrower’s gross income that is needed to pay for home-related expenses and all other debt obligations.

Lenders must review a borrower’s debt service ratios before granting a mortgage loan. In 2008, the Government announced a 45 per cent TDS limit as part of the adjustments to the rules for government-backed insured mortgages. The measure announced today will limit the GDS ratio to 39 per cent and lower the maximum TDS ratio to 44 per cent. Setting a GDS limit and lowering the TDS limit will help prevent Canadian households from overextending themselves and reduce the number of financially vulnerable households.

Limit the Availability of Government-Backed Insured Mortgages to Homes With a Purchase Price of Less Than $1 Million

The measure announced today will establish that government-backed mortgage insurance is only available for a new high loan-to-value mortgage if the home purchase price is under $1 million.

Establishing a maximum allowable price will ensure that government-backed mortgage insurance operates the way it was originally intended: to help working families and first-time homebuyers. According to the Canadian Real Estate Association, the national average price (based on Multiple Listing Service sales activity) for a home sold in May 2012 was $375,605. This measure is expected to have a negligible impact on working families and first-time homebuyers as the vast majority of these borrowers purchase properties priced below the threshold. Borrowers purchasing homes priced at or above the maximum allowable price would require a down payment of at least 20 per cent.

Implementation of the New Framework started on July 9, 2012.

 


1 The mortgage loan amount used in the illustrative example represents approximately the size of the mortgage loan needed for an average house in Canada. According to the Canadian Real Estate Association, the national average price (based on Multiple Listing Service sales activity) for a home sold in May 2012 was $375,605.

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