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Pre-Approved Mortgage
A Pre-Approved mortgage is a Free and No-Obligation
deal that lets you know before you go looking for your home
or signing an offer to purchase, how much you can afford to
borrow based on your qualification and personal credit rating.
At CanadianMortgageSource.com, we'll arrange for you the most competitive
rates with longest rate guarantee period that goes up to 120
days - if rates go higher, your rate will not be affected,
and if rates go lower, you get the lower rate. This protection
is solely responsible for savings thousands of dollars for
many people who obtained a pre-approval and the rates increase
afterwards.
Too often in the past, the mortgage was left
to the very end, but with our Online Pre-Approval or by simply
calling us at 416-410-2886, things just got very simple. We
can take care of this important process within hours. Once
you are Pre-Approved, you can confidently negotiate an offer
on a home. A seller also prefers to negotiate an offer of
a purchaser who has been pre-approved. With more lenders,
lower rates, and no-cost, no-obligation, make CanadianMortgageSource.com
your choice for your pre-approval.
Conventional Mortgage
A conventional mortgage is a loan that does
not exceed 75% of the purchase price or appraised value of
the home, whichever is less. This type of mortgage does not
have to be insured against default.
High-Ratio Mortgage - CMHC Insured /
GE Capital Insured
A high-ratio mortgage is a loan that is above
75% and up to 95% of the purchase price or appraised value
of the home, whichever is less. These mortgages must me insured
against loss by either Canada Mortgage and Housing Corporation
(CMHC), a Federal Government Corporation, or GE Capital, a
private insurer. The premiums can be added to the mortgage
amount or paid at closing, and are as follows:
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For Mortgages Up To:
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75%
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No Insurance Required
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For Mortgages From:
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75.1-80%
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Premium is 1.00%
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80.1-85%
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Premium is 1.75%
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85.1-90%
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Premium is 2.00%
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90.1-95%
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Premium is 2.75%
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A little-known benefit of CMHC-insured
mortgages:
When interest rates fall, many borrowers
want to renegotiate their mortgages but a few have the right
to do so, unless their mortgages are fully open. But if you
obtained a longer-term mortgage, insured by CMHC, you can
prepay it on payment of 3 months interest penalty - a lot
cheaper than the Interest Rate Differential (IRD), which is
the difference between the mortgage rate and current rates,
on the outstanding balance, for the rest of the mortgage term.
For example, if the difference in the interest rate was 2%,
and the outstanding mortgage amount was $100,000 (which is
locked in at 8%) and it had 2 more years to go until maturity,
the IRD penalty would be approximately $4,000, whereas the
3 months' bonus would be $2,000. (To help you with the payment
of the penalty, we have "cash-back programs" that
will give you up to 3% of the mortgage amount).
Also, if you obtained an insured mortgage
after April 1'st, 1997, the premium you paid on the mortgage
is now portable to another property (if you closed before
this date, it is not portable, meaning that if you bought
another home and your mortgage needed to be insured, you must
pay the applicable premium again. NOTE: This insurance is
for the benefit of the lender against default. It is very
costly and there is another way we can arrange a mortgage
for you with a low down payment. That is with a 1'st mortgage
and a 2'nd mortgage. For your unique situation, it may be
less costly to consider this option. At CanadianMortgageSource.com, our
computers can quickly do a "break-even" analysis
to your best advantage. Banks, on the other hand, cannot offer
you this option as they cannot provide secondary financing
over 75% of the purchase price or value of the property.
First Mortgages:
A 1'st mortgage is the first debt registered
against a property that is secured by a first "charge"
on the property. If a default on the mortgage occurs, the
first lender has first right on the property to recover the
outstanding principal and interest costs, and any other costs
incurred during the process. Second Mortgages: A second mortgage
is a debt registered after a a first mortgage has been registered.
In most cases, the interest charged on the second is higher
than the first, reflecting the higher risk to the lender,
but over a short term, still more cost effective than paying
the high cost of the CMHC/GE Capital insurance premium. They
can be used to finance up to 90% of the purchase price or
value of the home.
Open Mortgages
An open mortgage allows you the flexibility
to repay the mortgage at any time without penalty. Open mortgages
are available in shorter terms, 6 months or 1 year only, and
the interest rate is higher than closed mortgages as much
as 1%, or more. They are normally chosen if you are thinking
of selling your home, or if expecting to pay off the whole
mortgage from the sale of a another property, or an inheritance
(that would be nice).
Closed Mortgages
A closed mortgage offers the security of
fixed payment for terms from 6 months to 10 years. The interest
rates are considerable lower than open, and if you are not
planning on any one of the above reasons, then choose a closed
mortgage. Nowadays, they offer as much as 20% prepayment of
the original principal, and that is more than most of us can
hope to prepay on a yearly basis. If one wanted to pay off
the full mortgage prior to the maturity, a penalty would be
charged to break that mortgage. The penalty is usually 3 months
interest, or interest rate differential (I.R.D. - please refer
to glossary for detailed explanation).
Fixed-Term Mortgages
With a fixed-rate mortgage, the interest
rate is set for the term of the mortgage so that the monthly
payment of principal and interest remains the same throughout
the term. Regardless of whether rates move up or down, you
know exactly how much your payments will be and this simplifies
your personal budgeting. In a low rate climate, it is a good
idea to take a longer term, fixed-rate mortgage for protection
from upward fluctuations in interest rates.
The Adjustable Rate Mortgage (A.R.M.)
The Adjustable Rate Mortgage (A.R.M.) provides
a lot of flexibility, especially when interest rates are on
their way down. The rate is based on prime minus 0.375% and
can be adjusted monthly to reflect current rates, and for
the first 3 months of the mortgage, a large discount on the
rate is given as a welcoming offer. Typically, the mortgage
payments remain constant, but the ratio between principal
and interest fluctuates. When interest rates are falling,
you pay less interest and more principal. If rates are rising,
you pay more interest and least principal, and if they rise
substantially, the original payment may not cover both the
interest and principal. Any portion not paid is still owed,
or you may be asked to increase your monthly payment. This
mortgage is fully convertible at any time without any cost
to a 3 year term or greater, and offers a 20% prepayment privilege
at any times throughout the year. While traditionally, banks
offer variable mortgages up to 75% of the purchase price or
the value of the home, we can go up to 90% with this product.
Secured Lines of Credit
Use the equity in your home that you have
built up to purchase investments (where interest costs would
be deductible against the earned income), finance home renovations,
buy a car, or any other reasonable needs, with rates as low
as prime. They can be arranged up to 75% of the purchase price
or value of the home, and should you need more, we can arrange
another secured line of credit as a 2'nd mortgage up to 90%.
Accessing the available credit is as simple as writing a cheque,
the issued credit and/or debit card. You do not have to draw
the money until you need it, and once you make a withdrawal,
you can pay of your balance at any time or make monthly payments
as low as interest only. As you pay down the balance, you
have that much more available credit (revolving credit).
Being a secured product, there are the normal
legal and appraisal fees that are applicable. From time to
time, there are promotions where a lender will cover for part
or all of these costs.
A word of caution:
Although these lines are very flexible and
versatile product, great caution and care should be taken.
It is very easy and very tempting to use it for everything
whereas normal restraint would have been exercised, and suddenly,
there are thousands of dollars more that have to be repaid.
Equity Mortgages
These are mortgages that are assessed on
the equity of the home (market value minus the mortgage amount).
They can be as high as 75% of the purchase price or value
of the property and if more is required, we can look at a
small 2'nd mortgage. These are generally offered to applicants
that do not meet the normal income and/or credit qualifying
guidelines. You may have little or no income verification,
self-employed, and/or your credit may be less-than-perfect.
At CanadianMortgageSource.com, we'll say yes when your bank says
no.
Multiple Term Mortgages
If you wanted the lower rates of a short
term mortgage but wanted the security of a long term, why
not choose both. Yes, "build your own mortgage"
product. You can split your mortgage in as high as 5 parts,
all having different terms, rates, and amortizations, but
one total monthly payment. This way, you are spreading the
risk. But, be prepared to be "hands-on" and watch
the market very carefully here. This is not for everyone,
as the time and stress levels are quite high. Refer to the
section "Choosing a term that you can live with"
for some more suggestions.
The 6 Month Convertible Mortgage
When rates are on their way down, or you
may feel that they will in the near future, a 6 month convertible
mortgage offers you the short term commitment at fixed payments,
with an added advantage that while within the term, the mortgage
is fully convertible to a longer term from 1 year to 10 years,
at the drop of a dime. At the end of the 6 month period, the
mortgage becomes fully open, where one can renew with the
existing lender or transfer to another lender. Even though
it is offered at many financial institutions, there are differences
from one to the next - let a CanadianMortgageSource.com mortgage
specialist help you sort through the maze.
All-Inclusive-Mortgage (A.I.M.)
The AIM mortgage takes care of everything
automatically. For Purchases, it includes: Solicitor's
legal fees and standard disbursements to close the purchase
and mortgage; Title transfer; Title Insurance from LandCanada
for the clients; CMHC application fee or Appraisal fee; 1%
Cash-Back to cover Land Transfer Tax; Registration of Deed
and Mortgage. For Refinances, it includes: Legal fees
and standard disbursements to prepare and close the mortgage;
Title Insurance from LandCanada; CMHC application fee or appraisal
fee; 1% Cash-Back; Registration of new first mortgage; Registration
of discharge of existing first and second mortgage. The minimum
term available is a 5 year term. Please call a mortgage specialist
at CanadianMortgageSource.com for further details.
Bridge Financing
Bridge financing refers to a special, short-term
loan needed to cover the time gap when two properties, both
firm sales, are involved and the closing dates don't match.
The property being purchased closes before the one that was
sold. There is a small set-up fee charged by the lender to
have the bridge loan arranged, plus the cost of the interest
as now you are carrying both properties for a short time.
The rate charged on the bridge loan is about 2-3% above the
bank's prime.
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TYPES OF MORTGAGES