Buy now and pack up your mortgage with you.

One of the biggest hurdles for most move-up home buyers is having to pay huge mortgage discharge fees and penalties for breaking an existing home mortgage early and taking out a new one. So what happens to most home buyers, is they delay purchasing that dream home, sometimes for years, until the end of the term of their mortgage.

The good news is you don’t have to wait. It is possible to transfer your mortgage from one home to another. This practice is known as a mortgage “Port”. Porting your mortgage is when a homeowner transfers their mortgage from one property to another. An example of this option would be when you have sold your current home and purchased a new home. 

Porting can be a valuable tool if the interest rate on your current mortgage is no longer offered on the market.  Conversely, if the current mortgage rates are lower than the rate that you have, you may not want to port your mortgage. However, you will also need to consider if there are  penalties for breaking your mortgage early if you choose not to port it.
 
On a cautionary note, some lender mortgages allow Ports and some do not.  So if you plan on using this feature and moving during the term of the mortgage, then is important to know if this is a feature of your current mortgage. 

Even if you are not planning on moving in the short term mortgage "Portability" can still be an important feature.  Circumstances change: from careers to kids to the relationship with the co-owner, we never know what the future may hold.  More often than not, many buyers who port their mortgage did not plan on porting it when they first got their mortgage, but the feature ends up saving them thousands in penalty costs.  The next time you get a mortgage make sure to ask your mortgage broker if the mortgage he is recommending is portable. A good mortgage broker should tell you which mortgage products allow porting, and which do not. 

So what happens if you need a bigger mortgage on your new home? When a mortgage is ported, it is very common that you will require a larger loan than exists on your current residence.  This is not an issue.  Your Broker can offer what is referred to as a “blend and extend” or “blend to term” depending what works best for you. This is essentially a weighted average between the existing mortgage amount and interest rate and the additional funds you require at the current mortgage rate.

Example:
Existing Mortgage:  $100,000
Interest rate: 2.5%
Require: $150,000 (so $100,000 will be ported and $50,000 will be ‘new money’)
Current Interest rate: 3.0%
Therefore, the new mortgage will result as a $150,000 mortgage with a blended rate of at 2.9%.

In conclusion, portability is a feature offered on many mortgage loans and allows you to move your current mortgage from your existing home, which has sold, to a new property you have purchased.
 
The pros of mortgage portability are:

1. If your current mortgage rates are better than mortgage rates currently offered, you can keep your better rate.
2. Breaking a mortgage early can result in penalties. It is sometimes better to “Port” your existing mortgage to your new home instead.
3. It is also possible to increase the amount of your mortgage when you port it.

Mortgage portability is not for everyone. Some lenders do not allow mortgage portability or in some cases porting your mortgage would not be financially beneficial. Each lender has their own conditions for mortgage portability. To see if porting is right for you, contact Steven Porter, Mortgage Agent with Mortgage Architects. There is no obligation, so call today.

Steven Porter, Mortgage Agent – Mortgage Architects | 905-875-2582 | steven.porter@mtgarc.ca | www.1800Mortgages.ca

What are the Benefits of Debt Consolidation using home equity?

Consolidating debt with a home equity line of credit (HELOC) or by using 2nd mortgages is a simple strategy to implement and has multiple benefits. Consolidating debt from various sources into a single loan means that you can amortize a single monthly payment over a fixed period of time at much lower mortgage rates of interest. Some of the advantages to this strategy include:

1. Consolidate debt to pay more principal and less interest and reduce debts faster. 
2. Decreased monthly payments improve your cash flow so you can stop playing catch up and start getting ahead. 
3. Instead of juggling multiple bills, you make one payment each month – freeing up time and reducing stress. 
4. Get multiple creditors and collection agencies off your back.

Benefits of Second Mortgage
 

Second mortgages come with a wide range of benefits for borrowers. Being able to get rid of high-interest debt, repairing credit, completing home renovation projects, funding college, and starting up a business are just a few of the things that can be done with a second mortgage.

What is a Second Mortgage?

Second mortgages are loans that can be applied to either residential or commercial buildings.

These loans sit in the second position, behind the first mortgage loan on the property.

Second mortgages can be easily obtained once the property owner has built up enough equity in their home or business.

By tapping into the equity already accumulated, home and business owners can borrow from money that is already theirs.

Has your property value recently gone up? Or do you nearly have that first mortgage entirely paid off?

Contact me to see how much of your equity you can tap into.

Posted by Steven Porter. Steven is a licensed Mortgage Agent with Mortgage Architects and a retired licensed, real estate broker with 30 years experience in residential real estate. He can be reached at 1-905-875-2582; steven.porter@mtgarc.ca or online at 1800Mortgages.ca

Prequalified or Pre-Approved for a Mortgage? The Shocking Facts

The first words of advice you'll hear when beginning your search as a homebuyer are "get prequalified or pre-approved  for a mortgage." The misleading fact about these two terms is that they are not interchangeable. 

When I actively practiced real estate brokerage, many times the terms Prequalify and Pre-Approval were brought up in the same breath by many lenders and so-called real estate industry experts. That meant they were the same thing to many real estate agents who in-turn advised their clients accordingly. 

After leaving real estate sales and entering a career in mortgage lending with one of the major banks, I LEARNED A SHOCKING TRUTH. Although Banks typically tell consumers and Realtors that they do mortgage Pre-Approvals, the fact of the matter is THEY DO NOT! At the very most, the bank will prequalify a potential borrower (depending who you're face to face with) and provide a rate hold certificate. Unfortunately, it's not worth more than the paper it's printed on. 

What does that certificate mean to you, the homebuyer? "Absolutely nothing." Buying a house armed with your new certificate and falsely thinking to yourself you have the mortgage in your back pocket is truly nothing short of betting on a craps shoot. 

"So what is the difference between a Prequalification and a proper mortgage Pre-Approval?" First, it depends on whose doing a prequalification for you. My experience with the bank was if you've got a down payment, a job and a pulse you're prequalified. Here's you guaranteed rate certificate. "What are your really getting?" The bank's current mortgage rate for the next "X" number of days, subject to: "read the fine print below", income and employment verification, down payment confirmation, credit history, etc. etc. Remember banks work for the banks. So, if you come back a month later with your Agreement of Purchase and Sale in hand (by the way this is only when most banks will run the numbers for you) and you don't qualify, you don't get the mortgage. "Next".

Admittedly, very few lenders provide mortgage Pre-Approvals. The process actually involves the lenders underwriter going through the same motions as if you had actually bought a home and applied for a mortgage. Income and employment are confirmed, downpayment, credit history and debt service ratios reviewed, etc. If everything meets the lender's approval. Then, essentially the lender ear-marks the mortgage funds for the prospective borrower to be advanced upon the purchase and closing of a home. With this type of mortgage Pre-Approval, the borrower is pretty much assured he is going to get a mortgage usually subject an appraisal. There is a cost to lenders preforming a mortgage pre-approval. The lender absorbs these costs on the expectation of receiving the future business. However, like many things, due to abuse lenders limit the use of this service typically to preferred brokers. 

There is a common misconception among homebuyers and real estate salespeople that once you're pre-approved for a mortgage, you don't need a "Condition of Mortgage Financing Approval" in your Offer to Purchase. A Pre-Approval does not guarantee you're going to get a mortgage, especially if you've only been prequalified without the benefit of supporting information. There are many variables the lender needs to consider approving you for a mortgage after you've made an offer. Things like the house itself, location, appraised value, etc. 

Congratulations! You were in a multiple offer on a property and you won the bidding. You only paid $10,000. over asking and that's still in the range you were Pre-Approved for. SURPRISE! The appraiser estimates the property is valued $10,000. under what you offered and the lender will only lend against the appraised value. So unless you've got the extra money under you mattress, you're not going to be able to close the deal. My advice to you is include a condition in your offer to purchase subject to you obtaining a mortgage. 

"How long do I need for a condition of finance in my offer?" Good question. This period can vary and is reflective of how well you've completed your mortgage shopping due diligence prior to shopping for a home. For example, the time typically allotted for satisfying a condition of financing approval in an offer is 5 banking days. As a homebuyer, if you have not met with a mortgage planner before to making an offer on a home, that means the broker and the lender only have five days in which to obtain all your necessary supporting documents from you including employment letters, pay statements, tax documents, contracts, appraisal, etc. If you happen to be self-employed the list is even larger and five days may not be enough time to obtain and review everything. Not to mention, if you didn't do your proper due diligence and  your financing is not approved, the seller and the sellers agent won't be impressed and will most likely loose confidence in your real estate agent for not ensuring you did your homework. Compare this scenario if you had gone the Pre-Approval route. You would have already submitted all your documents to the lender through your mortgage broker. Therefore the lenders conditions of mortgage approval would typically be limited to the review of the Agreement of Purchase and Sale, an appraisal of the property if required and approval by the mortgage insurer if it is an insured mortgage. The turn-around for approval in this case could be as quick as 24 hours.

The take-away here is "Buyer Beware". Do your due diligence and plan your home purchase. Start first by sitting with a licensed mortgage broker/agent. They work for you. Ask about the benefits of a proper Mortgage Pre-Approval. At the very least, provide all the necessary documents to your Broker/Agent and have him properly prequalify you. Ask him whether or not you need to include and condition of financing approval in an offer to purchase a home. Ask Why or Why Not? 

Armed with your Pre-Approval Certificate or at least, the confidence of being properly prequalified for a mortgage, find a good real estate agent that actively works in the area you wish to buy in. Better still, if you don't know a good Realtor, ask your mortgage broker/agent for a recommendation. Mortgage Brokers/Agents regularly work together with Realtors and are more than happy to refer you to two or three good Realtors they have successfully done business with in the past.

Visit http://www.stevenporter.ca/solutions/ShoppingAids and download my easy Mortgage Checklist to begin your home search. Or email me, I'm always available to answer your questions. 

Steven Porter, CRMS ABR SRES CNE is a licensed Mortgage Agent with the Mortgage Architects. Steven is also a licensed, non-selling real estate broker, Accredited Buyer Representative and Seniors Real Estate Specialist with 30 years residential, commercial and investment  real estate experience. Steven works with together with Realtors across the west GTA in a noncompeting capacity, assisting customers and clients achieve financial independence through home ownership. Steven can be reached at 1-905-875-2582 or EMail at steven.porter@mtgarc.ca

Broker miffed by rate shopping advice

A recent article on a wide-reaching personal finance magazine plugged the benefits of rate shopping; but did it ignore some important pieces of the mortgage puzzle?
“Want to save more than $53,000 on the purchase of a home? Then be prepared to comparison shop for the best mortgage rates and terms,” a recent MoneySense article reads. “According to a new RateHub_ca survey, consumers that shopped around for the best rates saved $53,089 (based on a $500,000 mortgage, amortized over 25 years)—the difference between a lender’s posted mortgage rate and the discount rate, over a five-year term.”
According to the article, clients who shop around save an average of 2.23% by using the popular rate site, which amounts to over $50,000 for a $500,000 mortgage.
And while brokers acknowledge rate shopping helps homebuyers save on rate; it could cost them in the long-run. Something the MoneySense article fails to mention.
“I think people tend to focus on rate because it’s one of the few things they understand when it comes to getting a mortgage,” Mike Maguire, a broker with Mortgage Wise Financial told MortgageBrokerNews.ca. “Rate is not the be-all and end-all; terms matter as well.”
Those terms could include hefty penalties that cost clients thousands, Maguire said.
“What will really save clients money is finding someone who will take the time to meet with you and understand your wants and needs,” Maguire said. “My opinion is clients should deal with someone who has their best interest at heart.”
That opinion is echoed by Alyssa Richard, founder of the aforementioned RatebHub_ca.
“Online doesn’t replace the need to speak to financial experts,” she told the Ottawa Citizen, “but it does empower you.”
That message is sometimes lost, however, in the mortgage information overload from personal finance sources that often seem to focus solely on rate. 

by Justin DaRosa - Mortgage Broker News

The lesson home buyers should take from RBC’s mortgage rate hike

The Globe and Mail
Published Wednesday, Jan. 06, 2016

There’s just one reason for the strength of Canada’s housing market – low, stable mortgage rates.

Rates are still low, but the stable part is in question after Royal Bank of Canada announced a small but still significant round of mortgage rate increases that will take effect Friday. Other banks will likely adjust rates as well, after a brief period of letting RBC draw fire as the first to move.

RBC will increase borrowing costs on special offers for fixed-rate mortgages with terms of two to five years by 0.1 of a percentage point. For example, the five-year fixed rate will rise to 3.04 per cent from 2.94 per cent, enough to increase monthly payments on a $400,000 mortgage amortized over 25 years to $1,901 a month from $1,881.

Higher payments aren’t much of an issue – for now. Despite economic weakness that argues for stable or possibly even lower borrowing costs, mortgage rates appear to be facing upward pressure. Nothing startling, mind you. But the days of stable five-year fixed rates tucked nicely under the 3-per-cent threshold may be coming to an end at your neighbourhood bank branch.

Lenders are facing higher costs for financing mortgages as a result of new mortgage market rules introduced last year by federal regulators. As well, unsettled financial market conditions are forcing lenders to pay higher rates on the money they raise to lend out as mortgages. Canadian consumers are used to mortgage rates that closely track the state of the economy. But today’s mortgage market is more complex than that.

Fortunately, competition in the mortgage business is intense. If there’s one lesson home buyers and owners should take from RBC’s rate increase, it’s to never get a mortgage without cross-checking rates with at least one other source, preferably a mortgage broker with access to multiple lenders. A quick survey of mortgage brokerage firms Wednesday found five-year fixed rates as low as 2.44 per cent, which handily beats RBC’s special prerate increase offer of 2.94 per cent.

A tip for people who plan to buy a house in the busy spring period: Lock in a mortgage rate now to eliminate the risk you’ll be caught by any rate increases ahead. On the Ratespy.com website, some lenders are holding their comparatively low current rates through early April or May.

There are lots of alternative mortgage lenders that beat the banks not just on rates, but also with much less onerous penalties if you have to break a mortgage before it matures. Also, you don’t have to negotiate with these lenders. There’s no need to get a line of credit or bring your investments over to get the best rate on a mortgage.

Another message to take from RBC’s rate increase is that variable-rate mortgages are losing some of their appeal. In addition to raising costs on fixed-rate mortgages, RBC announced that the special offer on its five-year variable-rate mortgage will move to prime minus 0.1 of a percentage point from prime minus 0.25.

Fixed-rate mortgages have been the most popular lately, but there has until now been a case for going with the variable-rate option. Variable-rate mortgages are priced off the prime rate, which is influenced by the Bank of Canada’s benchmark overnight rate. The central bank is nowhere close to raising rates, which means variable rate mortgages appeared to be safe from increases in the short term. Now, we see that this isn’t the case. Both fixed and variable rates are still low in today’s mortgage market, but maybe not stable.


by ROB CARRICK

Purchase Plus Improvements Home Purchase Program

Ever watched HGTV's "Income Property", "Property Brothers" or "Love It or List It"? Wonder how these folks can afford to tackle some of these projects? Well I'm about to tell you the secret . . . the "Purchase Plus Improvements" or "Re-Finance Plus Improvements" mortgage financing solution.  


 The "Purchase Plus Improvements Program" can help qualified home buyers make their home just right for them, with tailored improvements, immediately after taking possession of their purchased property. All this can be done with one manageable mortgage and with only 5% down-payment. 

 

Here's how the "Purchase Plus Improvements" program works. First, the program is available for property purchases containing up to two dwelling units with only a minimum 5% down-payment and  up to four dwelling units, i.e. triplexes and fourplexes with a minimum 10% down-payment of the combined purchase price and improvement amount.

This program may be used for fixer-uppers requiring major repairs such as a new roof, driveway, septic or well. Or for improvements such as a new kitchen, bathrooms or basement apartment. The key is the improvement must add value to the property. An important point to also note is improvements exceeding either 20% of the homes purchase price or $40,000. require a full appraisal of the home.

Down-payments may come from personal savings, RRSP withdrawal, non-repayable gift, sweat-equity, existing home equity, proceeds from the sale of a property, Government Grants or a combination.

This program is "mortgage insured" and is offer by the three major mortgage insurers, CMHC, Genworth and Canada Guaranty. Therefore, like any home purchase with less than 20% down-payment, mortgage insurance premiums will apply and home buyers will need to meet the financing guidelines of these insurers as well as the lender.

With the "Purchase Plus Improvements" program, the mortgage loan is calculated on the property's "As Improved Value". Therefore, keep in mind the minimum down-payment required will be a percentage of the "As Improved Value" not the purchase price.

Planning and preparation are always important as improvement funds are NOT typically advanced until after the improvement is complete and inspected. Therefore the home buyer will need to arrange trade credit and/or have access to funds for deposits, draws, etc. Also, improvements usually require completion within 90 days of closing. So make sure you take this into consideration when booking a contractor and scheduling delivery of materials.

It's always prudent to obtain written estimates of the improvements and verify that they are eligible under the program prior to finalizing (removing the condition of financing approval) the purchase. Let your Realtor know you plan to use the
"Purchase Plus Improvements" program fro your purchae. They can help you and the Mortgage Agent with the arrangements.
The following is a simplified example of how the "Purchase Plus Improvements" program may work for an improvement of less than 10% of the purchase price of a home and a maximum of $40,000.

• An accepted Agreement of Purchase and Sale on a home for $400,000. The home buyer is providing a 5% down-payment.
• The improvement is a new kitchen. A written quote for $30,000. and specs is obtained between acceptance date of the offer and the deadline for the "Condition of Financing" Approval.
• The Appraiser is contacted by the Mortgage Agent prior to the financing condition's deadline. The home is appraised “As Is” for $405,000 ($5,000 more than the purchase price) and estimates the “as-improved” value, as per the quote for $440,000. The mortgage loan amount is always the lesser of appraised or the purchase price, so therefore maximum loan amount is $430,000. ($400,000. purchase price plus $30,000. for the improvement value)
• Considering a 5% down-payment (95% loan-to-value), the maximum mortgage loan will be $408,500. and the required down payment $21,500.
• At closing, the home buyer's lawyer pays the Seller the $400,000. original purchase price as follows: 95% of $400,000 ($380,000) authorized by the Lender plus $20,000 (5% of $400,000.) of the home buyers' down-payment. The home buyers' Lawyer retains, in trust $30,000., the balance of mortgage loan and down-payment funds.
• Once the home buyer takes possession of the property, work on the kitchen can commence. Once completed, regardless of whether the kitchen comes in over or under budget or even a if different contractor is used, as long as the work is completed to the original specifications as confirmed by the Appraiser, $30,000. is available for release by the lawyer. It is important to note that if the project comes in over budget, the home buyer will be responsible for the difference.

When saving and budgeting for a down-payment for a home purchase, keep in mind you'll need to budget an additional 1.5% to 2% of the purchase price for closing costs. i.e.: legal fees, adjustments, land transfer tax, property tax holdbacks, etc. Read my post:  "What you can expect for closing costs" for more information on this subject. 

Already own a home you need to fix up to keep or resell and don't have the cash or the equity in your home? The "ReFinance Plus Improvements" program may be your answer.

You don't have to settle. Own your "Dream Home" with the "Purchase Plus Improvements" or the "Refinance Plus Improvements" programs. Contact me before you start looking at homes or refinance.

Author, Steven Porter, Mortgage Agent - Mortgage Architects. www.StevenPorter.ca; steven.porter@mtgarc.ca; 1-905-875-2582