mortgageratesintoronto
We are independent Mortgage Brokers and Mortgage Agents that work for you to get you the best type of mortgage at the best possible rates and terms.
Private mortgages are loans offered by individuals or private lending companies to people who do not qualify for a regular or traditional mortgage loan. These types of loans are not much different from regular mortgages except that funds come from a private source, which can be individual investors or groups of investors.
Private mortgage lenders have a higher risk tolerance for their borrowers, so documents to prove credit history and financial background are not given much weight when evaluating a potential loan. Lenders look mainly at asset values to assess a borrower’s ability to pay, and they treat mortgages as an investment opportunity in which they collect interest along the way.
Every homeowner knows that the best mortgage is no mortgage at all. So what can you do to pay down your mortgage faster – and save possibly thousands of dollars of interest at the same time? Consider these three strategies.
Pay more frequently
Many people choose a “traditional” payment schedule, paying their mortgage on a monthly basis. But switching to an accelerated weekly or bi-weekly (every other week) schedule will reduce your principal faster, because you make the equivalent of one month’s extra payment every year.
How much will you save? Assuming a $250,000 mortgage at 5.5% amortized over 25 years, changing from monthly to accelerated weekly payments will save you $37,863 in interest over the life of the mortgage (assuming interest rates stay the same) and you’ll own your home almost four years sooner.
Increase your regular payment
With a BMO mortgage, you can increase your mortgage payment by up to 20% of the original mortgage amount or up to 10% for a Low Rate Fixed closed Mortgage once each calendar year. lncreasing your regular mortgage payment – by even a small amount – can make a huge difference over the long term. For example, suppose you have a $200,000 mortgage at 5% amortized over 25 years. Your regular monthly payment is $1,163.
Now, suppose you top that payment up to $1,200. That’s just an extra $37 each month, but over the life of the mortgage, you’ll save $10,034 in interest and be mortgage-free after about 23 l/2 years instead of 25.
Make a lump-sum prepayment
With a BMO mortgage, you can prepay, in $100 increments, up to 20% of the original mortgage amount, or up to 10% for the Low Rate Fixed Closed Mortgage each calendar year, without charge. If you have the extra cash, it really pays to take advantage of this option.
Suppose you have a $180,000 mortgage at 4.75%, amortized over 25 years. lf you can prepay $10,000 at the end of the first year, you’ll save $19,229 in interest and be mortgage free almost three years ahead of schedule.
We can help you find the best way to pay down your mortgage faster based on your personal situation.
Knowing what you need is an important first step towards figuring out what the right mortgage is for you. Assess your needs based on these questions:
What kind of property are you buying?
Selecting the right property can be a great financial investment in the long-term. You can buy a house or condo using a combination of savings and mortgage financing to build a lot of equity and then rent out in future or sell and buy another home. You can also buy a house with suite income and use the rent to pay off your mortgage. If you buy a home that needs some renovation, a purchase plus improvement mortgage will allow you to pay for improvements and include all the costs in one mortgage. No matter what type of housing you choose, you must have a clear idea of how much you can afford for housing payment, including associated fees and property taxes.
How much down payment can you put on the property?
The amount of your mortgage loan equals the maximum home price minus the amount of your down payment. The larger the amount of your down payment, the smaller your mortgage loan, which will mean thousands of dollars of savings in interest charges. Pay as much as you can towards your down payment. If you pay less than 20% down payment, your home loan will be considered a high-ratio mortgage and you will be required to pay mortgage loan insurance.
How long do you plan to stay in this home?
If you plan to live in your home for 5 years or less, then you may want to keep options open for moving home. A portable mortgage may be a great flexible feature that may allow you to transfer your current mortgage to a new property. If you plan to settle in for the long haul, then portability is not an issue and you may want to consider a longer term fixed rate mortgage or a combination of fixed and variable terms.
How flexible are you in paying off your mortgage debt?
Is an open mortgage a better option for you or are you best suited for a close mortgage? Both definitely don’t give the option to pay your mortgage when you want to, but the difference between the two is the amount of flexibility they offer you in making prepayments, which can be making extra payments on the principal or paying off the full mortgage amount completely. These prepayments allow you to pay down your mortgage faster, saving you thousands of dollars in interest charges. An open mortgage can give you greater flexibility to make prepayments without any sort of restrictions or penalties. On the other hand, a close mortgage will offer lesser flexibility in that they can offer an option to make prepayments but only up to a certain amount and may include a prepayment charge which can amount to thousands of dollars.
What’s the best rate you can afford?
Is a fixed rate best or will a variable mortgage be a better option for the long term? When selecting an appropriate mortgage, it generally comes down to interest rates. Fixed and variable mortgages refer to how the interest rate is calculated and applied. If you want to play it safe, a fixed rate mortgage is the best choice. If you have reasons to want to take the risks involved with rates moving up and down, then you may find variable rate or adjustable-rate mortgages more advantageous to you.
What mortgage term is best?
Your mortgage payments and the amount of interest you pay will be determined to some extent by the term of your mortgage. If you want to own your home sooner, then you’ll want a short-term mortgage to pay off your mortgage the earliest time possible. A long-term mortgage may be a good choice if you do not expect to make any changes to your mortgage for more than a few years and you can lock in current interest rate for a longer period. Some lenders offer convertible mortgages, which lets you start out with a short term and then extend to a longer term with appropriate interest rates.
Keep in mind that the type of mortgage that offers the lowest rate may not necessarily be the best fit for your situation. Take the time to assess your needs and match them to the best possible option that offers a complete package of terms, conditions, rates and fees that fit your specific short- and long-term financial goals.
The very first step in obtaining a mortgage is to find out how much money you can borrow. It’s important that you know how much you can afford even before you begin looking for a house to help you stay on track and not get in over your head.
Are You Ready Financially?
Before going to any lender, take the initiative of evaluating your own financial situation first. You would be in the best position to determine how much debt you can take on. Take into account the following factors when evaluating your situation:
Total household income
Monthly expenses (car payments, bills, credit card payments)
Estimated monthly housing costs (mortgage payments, property taxes, property insurance, condominium fees, school taxes, utilities and maintenance costs)
Closing costs and other upfront costs (Legal/ notary fees, mortgage default insurance premium, appraisal fee, home inspection fee, title insurance) – Estimate closing costs to be about 1.5% to 4% of the price of your house.
Your down payment – If you pay down payment that is less than 20% you’ll be required to purchase mortgage default insurance which is added costs.
Cash reserves that can be put towards the house
Don’t forget to also factor in ‘planned expenses,’ which are any costs or payments that you know are on the horizon. For instance, you may be planning to have a baby soon so you will have to consider expenses related to having a baby as well as any adjustment that a maternity or paternity leave will have on your income.
After calculating the amount you are able to pay, think things through:
Are you comfortable with the amount you will be paying for years to come?
Can you afford to make payments and still be able to live the lifestyle that you want?
Can you afford payments and still be able to save up on other major concerns, such as college education, retirement, etc.
Will everyone be willing to change current spending habits, if necessary, to prioritize loan payments?
The process will help to mentally prepare you and your family for the huge financial responsibility ahead.
How Lenders Determine Your Affordability
Lending institutions have varying guidelines for approving loans that depend on the terms of each loan, although they follow standards set by Canadian government agencies. In general, loans are approved based on your ability to repay the loan and the value of the property. To look at this mathematically, lenders calculate your “debt service ratio.”
Lenders use two different debt service ratio calculations:
Gross Debt Service Ratio or GDSR – This is calculated based on your estimated housing costs (mortgage payments, taxes, heating costs, and condominium fees, if applicable) and gross monthly income. As a general rule, your GDS amount should not be more than 32% of your gross monthly income.
Total Debt Service Ratio or TDSR – This includes all your estimated housing costs plus all your current debt payments (car loans or leases, credit card payments, lines of credit payments, etc.). This number indicates your entire monthly debt load and should not be more than 40% of your gross monthly income.
Calculating your Mortgage
Mortgages are not simple to calculate at all. It involves a lot of compounding that’s worked out semi-annually according to the law, with the exception of variable rate mortgages. Working out the formulas can really leave you feeling nauseated. However, you can do this quite easily using a Mortgage Calculator which allows you to compare mortgages using different interest rates, principal amounts, amortization terms, etc.
Your mortgage specialist should be able to guide you through the entire mortgage process. He can help you understand terms and related costs, as well as calculate exactly how much you can afford to borrow, and recommend the best type that is right for your budget to keep your payments low and manageable.
A mortgage is a loan that you get to help you buy a home or any type of property. It’s probably one of the most significant financial decision you will ever make in your life, so understanding the basics of how it works and how it could impact your bottom line is critical in your decision making.
How Mortgages Work
Any type of mortgage consists of two parts – the principal, which is the amount borrowed and the interest, which is the amount charged for the money borrowed and is calculated based on the principal amount.
For every mortgage you pay, the amount is first applied to the interest and the rest is used towards the principal. In the first years, most of the payments will pay off the interest and only a small amount goes to the principal. As you keep paying, the mortgage balance decreases over time and more of your payment goes towards paying off the principal amount. The goal, therefore, is to pay off the principal amount as fast as possible so that you reduce interest payments and save money in the long run.
Factors that May Affect Mortgage Interest Rates
Banks and lenders have very specific interest rates. These rates are influenced by many different factors, such as:
The type of bank or mortgage lender you deal with
How much your credit score is and your overall credit history
How much is your annual income and total net worth?
What type of property is being mortgaged?
How fast do you need a mortgage?
How long will you pay off the mortgage loan?
How long is your mortgage term?
The very first step in obtaining a mortgage is to find out how much money you can borrow. It’s important that you know how much you can afford even before you begin looking for a house to help you stay on track and not get in over your head.
Are You Ready Financially?
Before going to any lender, take the initiative of evaluating your own financial situation first. You would be in the best position to determine how much debt you can take on. Take into account the following factors when evaluating your situation:
Total household income
Monthly expenses (car payments, bills, credit card payments)
Estimated monthly housing costs (mortgage payments, property taxes, property insurance, condominium fees, school taxes, utilities and maintenance costs)
Closing costs and other upfront costs (Legal/ notary fees, mortgage default insurance premium, appraisal fee, home inspection fee, title insurance) – Estimate closing costs to be about 1.5% to 4% of the price of your house.
Your down payment – If you pay down payment that is less than 20% you’ll be required to purchase mortgage default insurance which is added costs.
Cash reserves that can be put towards the house
Don’t forget to also factor in ‘planned expenses,’ which are any costs or payments that you know are on the horizon. For instance, you may be planning to have a baby soon so you will have to consider expenses related to having a baby as well as any adjustment that a maternity or paternity leave will have on your income.
After calculating the amount you are able to pay, think things through:
Are you comfortable with the amount you will be paying for years to come?
Can you afford to make payments and still be able to live the lifestyle that you want?
Can you afford payments and still be able to save up on other major concerns, such as college education, retirement, etc.
Will everyone be willing to change current spending habits, if necessary, to prioritize loan payments?
The process will help to mentally prepare you and your family for the huge financial responsibility ahead.
How Lenders Determine Your Affordability
Lending institutions have varying guidelines for approving loans that depend on the terms of each loan, although they follow standards set by Canadian government agencies. In general, loans are approved based on your ability to repay the loan and the value of the property. To look at this mathematically, lenders calculate your “debt service ratio.”
Lenders use two different debt service ratio calculations:
Gross Debt Service Ratio or GDSR – This is calculated based on your estimated housing costs (mortgage payments, taxes, heating costs, and condominium fees, if applicable) and gross monthly income. As a general rule, your GDS amount should not be more than 32% of your gross monthly income.
Total Debt Service Ratio or TDSR – This includes all your estimated housing costs plus all your current debt payments (car loans or leases, credit card payments, lines of credit payments, etc.). This number indicates your entire monthly debt load and should not be more than 40% of your gross monthly income.
Calculating your Mortgage
Mortgages are not simple to calculate at all. It involves a lot of compounding that’s worked out semi-annually according to the law, with the exception of variable rate mortgages. Working out the formulas can really leave you feeling nauseated. However, you can do this quite easily using a Mortgage Calculator which allows you to compare mortgages using different interest rates, principal amounts, amortization terms, etc.
Your mortgage specialist should be able to guide you through the entire mortgage process. He can help you understand terms and related costs, as well as calculate exactly how much you can afford to borrow, and recommend the best type that is right for your budget to keep your payments low and manageable.
A debt consolidation mortgage is a type of mortgage refinance that allows you to use valuable equity that you have in your home to consolidate all of your high-interest debts into one low-rate mortgage loan. In essence, the process allows you to merge all types of debt, including mortgages, credit card debts, credit lines, car loans, student loans, tax arrears, etc. into one loan that is backed by the equity in your property and is payable in easy and manageable terms.
If you are self-employed, you know the challenges in getting approved for a mortgage through most of the major banks. There are strict parameters the banks use to determine if you qualify for a mortgage. Unfortunately, many self-employed individuals do not qualify for mortgages as their earned income falls outside of the banks guidelines.
Although being self-employed and running your own business has many perks, getting approved for a loan or a mortgage is not one of them. The application process can be extremely stressful. I know that many entrepreneurs stress over going to their bank even for a mortgage renewal. What if they look at my finances and determine based on the new numbers they do not want to renew my mortgage? Even worse, what if they decide to lower my line of credit or credit cards as they feel I am more at risk.
When the renewal notice comes through from the bank, many self-employed individuals just accept the offered rate as they do not want to provide their financials. All the while knowing that they are likely paying a premium rate to stick with the status quo. Many are happy just to have the mortgage renewed.
Very simply, second mortgages are additional loans that are taken out against the same property. Let’s take for instance that your home has an existing mortgage on it, and you take out another loan on your home, the second loan is referred to as the second mortgage to the property.
In real estate, a property can have multiple loans or mortgages against it. A first mortgage can be followed by a second mortgage, then a third mortgage, and so on as necessary, although having more than two loans on the same property is very rare. The date on which the homeowner made the loan determines the order of the priority of the loan. This means that in case you default, your first mortgage has priority and it gets paid off first before any amount is put towards the second mortgage.
Types of Second Mortgages
The two main types of second mortgages are:
Home equity loans – You get a lump sum loan from a lender all at once, and repay it according to the agreed amount and time period. Interest for this type of loan are usually at fixed rates.
Home equity lines of credit –This works similar to a credit card, wherein you borrow the money as you need it up to a specified credit limit. Interests are typically set at adjustable rates.
How Much You Can Borrow
The amount that can be borrowed on a second mortgage is based on the equity in the home, which is equivalent to the current market value of the home or property less any remaining mortgage payments. Second mortgages and the subsequent loans on the same property have a higher risk of being paid out, depending on the equity. Hence, they often have a higher interest rate than first mortgages.
Loan Term
Terms for second mortgages are typically from as little as one year to up to 30 years. The shorter the loan term, the higher the monthly payment will be.
How to qualify for a second mortgage
A borrower must have over 20% of equity in the home or property and is able to pay the monthly payments on the second mortgage without exceeding current Total Debt Service Ratio (TDS), which should not be more than 40% of your gross monthly income.
