Category: Mortgage

Mortgage Brokers in Toronto

There are many mortgage brokers in Toronto but only a handful have the knowledge and experience you need. It is important to work with someone who has had years of experience working with different lenders and using multiple types of lending products. From straight forward deals known as “cookie cutter” to the more complex and difficult mortgages , a good broker will have knowledge of both sides of the business.  Different types of clients over the years gives a mortgage broker the experience to handle both sides of the client spectrum.

Find a mortgage broker that has good reviews as well, preferably posted on trusted sites. A good review is important in finding a quality mortgage broker who is professional and cares about their clients. A home purchase , mortgage refinance or mortgage renewal is an important transaction and you need the experience of the best mortgage broker in Toronto . Also keep in mind that experience brings trusted contacts for other professionals you may need such as a real estate lawyer, financial planner, accountant , real estate agent , etc. You can typically get good referrals from someone who has been in business for at least 10 years or so.

A mortgage broker will have many more product options and choices of mortgage products than a bank branch employee.  When you visit your bank, they only have that bank’s line of products and rates to serve you with. This limits your choices and is not an effective way to shop for your mortgage. A broker has many options available not just with mortgage rates , but with products, terms , features and benefits. A mortgage should be tailored to your needs and not to the banks. Think about shopping for a mortgage like shopping for a TV. Do you only want to be able to choose from one TV manufacturer? Or do you want a wide selection of products to compare ?  Using a mortgage broker gives you this advantage versus dealing with your own bank and only one set of mortgage options.

Mortgage consumers in Toronto and Canada are using mortgage brokers at an increased rate. They see the value of having the choice of multiple lenders and products. As well, the services offered are free of charge in almost all cases. Mortgage lenders will compensate the brokerage for sending them a new client. So you don’t pay for the services a broker provides you.

The best option in Toronto and the GTA is using a mortgage broker. Contact me today for more information and how I can help you .

 

Payoff Your Mortgage Faster

Pay Off Your Mortgage Faster

One of the highest financial priorities of Canadian homeowners is to pay off their mortgage as quickly as possible. Paying down extra principal in the early years can shorten the life of your mortgage
and dramatically lower the interest you’ll pay over the long haul. “Pay-Off Tips” below describes some of the most effective methods that you can apply based on your situation.

1. Mortgage payments made with After Tax Cash

More Canadians are becoming aware that since mortgage interest is not tax-deductible in Canada you are making mortgage payments of both principal and interest with money that you’ve already paid tax on “after tax dollars”. This makes it even more important to eliminate the drainage of disposable income as soon as possible!

2. Prepayments give great return on investment

For example, if you pay an average of 4% in mortgage interest, for each $1,000 by which you reduce your mortgage principal, you will save $40 in after tax cash every year. If you are paying taxes at a marginal rate of 40%, you have to earn $66.67 each year to pay the interest on every $1,000 of principal outstanding…a heavy burden, but also a tremendous implied benefit to reducing this balance. In fact, the example shows that the “return on investment” for making prepayments on your mortgage is 6.67% before tax and 4% after tax far better than most fixed return investments (bonds, GICs, etc.).

3. Increase your payment annually to the most you can afford

The upside is that most lenders will allow you to reduce it again to the previous level if it turns out to be too great a burden or your circumstances change.

4. Utilize your RRSP-driven tax rebate as a mortgage prepayment method

Even if you can only prepay annually, make sure these funds are set aside for that purpose. Many Canadians will borrow (at prime) to buy an RRSP to ensure the maximum rebate. When applied to the mortgage principal, this refund is a “gift that keeps on giving”. Combining the refund with the tax-free interest earned on the RRSP over the subsequent years will quickly outpace the short-term interest costs of the RRSP loan.

5. Increase the frequency of your payments

Make accelerated bi-weekly payments to get a “free” principal reduction equivalent to one full mortgage payment every year painlessly. Unless you are paid weekly it makes little sense to make weekly payments. All you’d be doing is making a smaller payment, and deferring the difference for a week.

6. Make use of double-up privileges wherever possible

Tell yourself that you will “skipa-payment” whenever necessary… then skip only when you absolutely must.

7. Round your payments up

By adding even a nominal amount of say, $10 per payment, the amount of interest you are saving will be unbelievable, and the extra money relatively painless to part with.

8. Pay a lump sum whenever possible

By decreasing the principal of the mortgage, your payments will not be allocated as much to interest in the future, thereby accelerating your freedom to mortgage-free life.

9. Keep payments the same when mortgage rates have fallen

If the payment amount has not been a problem so far, then keep it the same thus paying down the principal faster.

10. Raise payments in line with increased income on an after-tax basis

If your income increases, don’t keep your mortgage payments the same. Although the disposable income may be fun to spend on unnecessary luxuries in the short-term, the long-term benefits of being mortgage free faster and saving those interest payments will far outweigh the short-term curtailing — just pretend that your income did not increase and maintain your usual lifestyle.

Don’t waste your hard-earned money on interest! These methods have allowed many people to shorten their mortgage life by years in a very short period and enjoy a greater lifestyle for a longer period.
Pay Off Your Mortgage Faster

Mortgage Rates – Choosing a Fixed or Variable Rate Mortgage

Mortgage Rates – Choosing a Fixed or Variable Rate Mortgage

 

One of the most important aspects of choosing a mortgage is choosing a fixed rate, or variable rate loan. Most advisers will tell you to seek out fixed rate mortgages because they provide stability. With fixed rate loans, you will always know what your interest rates are going to be, which makes the size of your payments much more predictable over time. However, adjustable rate mortgages are, on occasion, lowered by lending institutions, which means that you are giving up the chance of paying a lower rate when you choose a fixed rate mortgage.

Fixed Rate Mortgages

A fixed rate mortgage has a set interest rate that will never change throughout the term of your loan. Your payment will always stay the same during this time period, even though the amount of principal can lower continually from one month to another. In fixed rate mortgages, the first years of the loan will typically be spent paying down your interest payments. Most fixed rate mortgages in Toronto start at 25 or 30 year amortizations.

Fixed rate mortgages are ideal because it gives you some stability, and allows you to protect yourself from sudden and unexpected rises in toronto mortgage rates. They are also much simpler for the average consumer to understand, which makes them ideal for those that are shopping for their first home. Although the interest rate of the loan is fixed, the interest that you end up paying will be directly influenced by the term of the loan. In a 30 year mortgage term, you will pay substantially more in interest than you would with a 20 year mortgage. So while it might seem ideal to choose the longest loan term as you possibly can in order to reduce your monthly payment, you will pay for that decision in the amount of interest that you pay over time.

Variable Rate Mortgages

A variable rate mortgage is a loan that has the interest rate change over time. These loans have interest rates that are typically set below the prime rate in Canada, but do not provide the stability and predictability that you will find in a fixed rate loan. Typically, most variable rate loans are going to have a period of time in which the interest rate does not change, and then after that time period, the rate may change.

This is beneficial for financial institutions and lenders because it allows them to change their interest rates over time to better reflect the value in the market. It also benefits borrowers because they receive an interest rate that is below market value for a set amount of time at the beginning of the loan (typically 5 years). The shorter the term or rate period, the lower the initial interest rate in most cases. This is an ideal situation for someone that is planning on paying off their mortgage quickly.

Whether you choose a fixed rate or a variable rate for your mortgage, the most important thing you can do is educate yourself on both systems and have a deep understanding of the benefits and issues with both. The type of mortgage that you choose should directly reflect your personal circumstances, and reflect your own fiscal situation.

Secured Line of Credit or HELOC

The secured line of credit has become a popular option in Canada besides a fixed or variable rate mortgage. This is because the main feature of the line of credit is it’s flexibility. Borrowers can use the available credit limit to purchase items or investments, etc. and then pay back the loan freely or without penalty. Interest is only charged on the balance owing , not the credit limit. The main disadvantage of a credit line is that it carries a slightly higher rate of interest than a variable rate mortgage or a fixed rate mortgage.

 

 

What a Toronto Mortgage Broker Can Do For You

5 Things a Mortgage Broker Does For You That Your Banker Can’t

 

When you decide to use a mortgage broker rather than dealing directly with the bank, you instantly gain access to their wealth of knowledge and information. Mortgage brokers in Toronto and Canada are there to provide assistance, advice and recommendations for their clients. Most people do not understand their mortgages or the interest rates, terms and options associated with them. By working with a mortgage broker, you greatly increase your chances of getting the lowest mortgage rate available and understanding mortgage products and terms better than before. Mortgage brokers know the ins and outs of the industry and as a client of theirs, you always know that you’re in good hands.

#1- Provide you with a greater understanding of mortgage rates and products

When purchasing a home or refinancing an existing mortgage, an experienced mortgage broker will assist you to make the process go smoothly.  Bankers typically don’t have the experience to inform their clients about the true loan process in Canada or the finer details of mortgage products .  Without talking to a mortgage broker, you risk not having all the info and advice you need to make an informed decision about your mortgage for a home purchase, refinance or renewal.  When you deal with a qualified mortgage broker, you will receive only the best information , important advice and tips. Better yet, it’s completely honest information because the broker values your business more than a bank employee.

#2 – Negotiating a better mortgage rate for you

Your mortgage broker will use your excellent credit history and employment record to obtain a lower rate mortgage for you from the lender. The negotiating process that the broker uses with a mortgage lender will save you a considerable amount of money, so you absolutely need the services of a mortgage broker. The consultation services a broker can offer you could literally save you thousands of dollars throughout the length of your mortgage.


#3 – An evaluation of your credit and employment history and what it means to the lenders

When you apply for a loan, your credit and employment history are essentially “put under the microscope.” They have to evaluate you as an individual and determine whether or not you are qualified for a mortgage and what the approved amount will be. Your mortgage broker will look over these facts with you and tell you what they mean. If you have a strong credit history, that can help you qualify for a larger loan, but your mortgage broker might not suggest using the full approval amount.  Mortgage brokers commonly run into banks that are negligent with their approval process and provide customers with loans that are well beyond their capacity to repay. The mortgage broker will examine your credit and employment history and determine what a realistic mortgage is for you.

#4 – A clear understanding of the mortgage options and strategies available to you

A mortgage broker has detailed information about the many types of lenders that can provide you a mortgage. This means a mortgage broker can provide you with more than one mortgage option. This is something that a banker cannot provide. When you consult with a banker, you are limited to the mortgage options of that specific bank. Mortgage brokers simply provide more options and that means better prices. By comparison shopping, your mortgage broker will find you the lowest interest rate mortgage loan. They can also offer you strategies for paying down your mortgage sooner and managing existing unsecured debt payments.

#5 – Review your mortgage every year and provide insight into refinancing, renewals, etc.

Refinancing is a way to reduce your mortgage payments and save money. Typically, a homeowner will refinance their mortgage when they can save money on interest or debts. If you currently have a higher interest rate than what you could obtain if you refinanced your home, then refinancing a mortgage might be a smart option for you. However, interest rates and terms can be tricky to understand and it’s a good idea to have a mortgage broker by your side to review the options for you.

Variable Rate Mortgages Gain Popularity

Mortgage brokers in Canada have been arranging Variable Rate Mortgages for borrowers during 2013 at an increased pace. Due to economic conditions, the Bank of Canada has kept the prime rate at 3.00% for an extended period of time and will most likely leave the interest rate as is until 2015. There have been several economic indicators that have sent some dark clouds over the Canadian Economy. Major layoffs by large corporations in Canada and an increasing unemployment rate are causing the government to keep rates low as they have no choice but to try and increase economic activity.

Variable rate mortgages are now being borrowed at an average of 2.5% – 2.7% , between mortgage brokers and banks. The best offers are coming from mortgage brokers in the Prime minus 50 basis points range. A Variable rate mortgage is also attractive because the penalty discharge the mortgage in full later on is always less expensive and less risky , compared to a fixed rate mortgage. With a VRM, there is no interest rate differential. The calculation is based on a 3 month interest penalty.

This is a key factor when deciding on a mortgage, as limiting the mortgage penalties and fees is always advantageous.

The interest savings on a variable rate can be substantial compared to today’s fixed rate average of 3.9%.. A full 1% difference can save thousands in interest payments over a 5 year term. Even if the Bank of Canada were to raise interest rates .50% every year, which is highly unlikely,  the variable rate mortgage would still come out ahead.

5 Year Fixed 3.94% Rate Monthly Payment Interest Paid Balance
Year one 3.94 1306.93 9663.04 243,979.88
Year two 3.94 1306.93 9423.51 237,720.23
Year three 3.94 1306.93 9174.44 231,211.51
Year four 3.94 1306.93 8915.48 224,443.83
Year five 3.94 1306.96 8646.21 217,406.88
Total Paid 78,415.80 45,822.68
5 YearPrime -75 Rate ( .50% increase/yr) Monthly Payment Interest Paid Balance
Year one 2.25 1089.03 5,521.67 242,453.31
Year two 2.75 1149.01 6539.18 235,204.37
Year three 3.25 1208.45 7489.74 228,192.71
Year four 3.75 1267.17 8,375.40 221,362.07
Year five 4.25 1325.00 9,197.21 214,659.28
Total Paid 72,463.92 37,123.20

 

$ 5951.88 LESS in Monthly Payments over 5 years

$ 8,699.48 LESS in Interest Paid Over 5 Years

Balance will be $ 2747.60 LESS with the variable mortgage

WANT TO SAVE EVEN MORE?

Use your 20/20 Prepayment privileges to increase your monthly payments and/or apply partial lump sums with each payment and watch the savings grow and your balance decrease!

Although we can’t predict when Prime rate will rise or how fast – taking advantage of a lower interest rate upfront could save you thousands of dollars in the long run.