Quick Mortgage Tips for Home Loans, Equity Loans, Reverse Loans, Cash-Out Loans and Refinance Loans

by: Chris Robertson

If you're considering a mortgage loan, you might be wondering what options are available. Today, there are many options besides the conventional methods of obtaining a mortgage. Whether you're applying for a home loan for a new home, a refinance loan, an equity loan, a HELOC, or a reverse loan, you should be aware of what each loan entails.

Buying a New Home:

When buying a new home, you'll need to be approved for a new home loan through a lender, or ask the seller to finance the home for you. Before applying at a lending institution, research your options. Determine how much "house" you can afford. Use online mortgage payment calculators to figure what the payments would be for different home loan amounts. Then, you'll know what price range you can shop within, and whether or not you can afford the payments. Remember, your income/debt ratio must fit within the lender's guidelines to qualify for a conventional loan. Healthy and "Not-so-healthy" Credit Scores If you have an excellent credit score, then your income/debt ratio along with the investment capital you have available will be the main factors in determining home loan availability. However, if there are flaws in your credit history due to non-payment or repossession, you will be limited in the type of home loan you can obtain. But don't lose heart. Many homebuyers whose credit is "not-so-great" do qualify for non-prime loans. Non-prime loans can be a bit higher-priced than prime loans or have higher interest, but you might still be able to buy your dream home!

Creative Financing:

Don't settle for conventional loans if you don't have to. There are many creative ways to finance a new home loan. If you do not have the needed investment capital or a down payment, some lenders will finance the down payment for you as well as the closing costs. If not, the seller might be willing to finance part of the loan to cover these costs. This can work even if the seller doesn't have extra "money to lend!" Explain to the seller that it could be advantageous to him because of income taxes. He might much rather claim an income of $100,000 than $120,000! Spreading out payments for $20,000 of the loan amount over a period of five or ten years could make a huge difference on his taxes due for that year. Consult with an accountant to find out if this could work in your situation.

Unusual Types of Home Loans:

If you're worried about budgeting with a new home loan payment each month, try a FlexPay loan where several monthly payment options are available to you every month. These options include interest only payments, full-amortized payments, and minimum payments. There are also bi-weekly mortgages for paying more toward your premium each year through a bi-weekly payment schedule. Hard Money loans are also available when there is a large amount of equity built up in a home. The loan approval is based more on the home or property's value than the borrower's credit history or job/salary history.

Refinance Loans:

If you plan to refinance your home, there are several options. A refinance means you are re-evaluating the terms, payments and interest of your loan. You might refinance to simply get the interest rate or payment lowered. Or, you might want to keep a little cash out for yourself as well. This is called "Cash-out" refinancing. Cash-out loans are made when you want to refinance your home for more than is owed on it. For instance, you owe $60,000, but want to refinance for $80,000. You'll pocket the additional $20,000 to use for home repairs, remodeling or whatever else!

Reverse loans are available for those over 62 years of age who own their home free and clear or have much equity built into it. They can receive a monthly payment, a lump sum or a line of credit. This does not have to be repaid until the borrower moves or passes away. Then, the estate can be sold to pay the note. Another option for leveraging your home equity is to create a HELOC (home equity line of credit) that is secured by the equity in your home. HELOCs can be used to pay debts, make purchases, or anything else. Be aware, however, that the interest rate can fluctuate monthly. Now that you are armed with many options for obtaining a home loan or refinancing your mortgage, check with an online lender to find out what plan will work best for you. Use the available tools and calculators to do some budgeting on your own as well. You'll be moving in that new dream home in no time!

by: Chris Robertson

Mortgage Refinancing

By: Rituraj

You might think that deciding to refinance a mortgage requires only a quick comparison of loan interest rates. Unfortunately, that’s not really true. Refinancing is trickier than that! Fortunately, three useful rules of thumb can often help you make sense of refinancing opportunities.

Rule 1: Don’t Ignore Total Interest Costs

You really want to use refinancing as a way to reduce the total interest cost you pay. While that sounds simple in principle, it is sometimes difficult to do. The interest costs you pay are a function of the interest rate, the loan balance, and the loan term period. When people refinance, they tend to focus solely on the loan interest rate. But they often don’t pay as much attention to the loan term or the loan balance. When you use refinancing—even refinancing at a lower interest rate—to increase your borrowing or to extend the time over which you borrow, you often aren’t saving money.

Rule 2: Trade Expensive Money for Cheap Money

For refinancing to make economic sense, however, you do need to swap higher interest rate debt for lower interest rate debt. This calculation, however, is tricky. To make an apples-to-apples comparison, you must look at the annual percentage rate that will be charged on your new loan—this is the best measure of the new loan’s interest rate cost—and then compare this to the loan interest rate on your old loan. You don’t want to compare interest rates on the two loans nor do you want to compare annual percentage rates on the two loans. Again, just to make this perfectly clear: You want to compare the loan interest rate on the old loan to the annual percentage rate on the new loan. When the annual percentage rate on the new loan is lower than the loan interest rate on the old loan, then you are truly paying a lower interest rate. Comparing annual percentage rates with loan interest rates seems confusing at first. But note that you would pay only interest on your old or current loan, so that’s all you need to look at in terms of its costs. With a new loan, however, you would pay both interest and any origination or closing cost fees. The annual percentage rate wraps the interest rate charges and setup charges, origination charges, and closing cost fees into one interest rate-like number.

Rule 3: Don’t Lengthen the Repayment Period

Be careful that you don’t extend the length of time you borrow by continually refinancing. For example, one common rule of thumb states that every time interest rates drop by two percentage points, you should refinance your mortgage. However, there have been times in recent history when following this rule would have had you refinancing your mortgage every few years. This could mean that you would never get your mortgage paid off.

By: Rituraj

THE TOP 5....

Here are the TOP 5 Reasons to Deal with a Mortgage Broker

1. Product Selection

Mortgage brokers have access to many different mortgage products as well as success to a variety of mortgage options for customers with previous credit issues, self employed persons and even bankruptcies.

2. Mortgage Brokers Represent You

As your representative, brokers find the absolute best mortgage solution for you. We don't work for lenders or banks, your best interest is a mortgage broker's number one priority!

3. Market Knowledge

Mortgage brokers have the training, experience and local market knowledge that will help customize the best mortgage solution for you while helping you understand the mortgage process - which can be complicated for some.

4. Mortgage Focus

Mortgage brokers search for the best combination of pricing, interest rates, discounts, conditions and overall value for you. Your focus is our focus.

5. It's A FREE Service!!!!!!

Mortgage brokers are not paid by you. They are compensated for their services by receiving a commission from the lender. We don't get paid until you have the mortgage solution that works best for you!

These are just a few reasons why it makes sense to choose a mortgage broker for your next home purchase, mortgage renewal or to help consolidate current debt. Contact me today to ask about the full benefits of having a mortgage broker do all the leg work for you!

~ The Right Mortgage For You ~

FIXED OR VARIABLE INTEREST RATE?

In very broad terms, home buyers who chose a fixed interest rate mortgage take comfort in the knowledge that their interest rate is fixed (or "locked in") for the the full term of the mortgage and their principal and interest payments will remain constant for a specific period of time. But not all fixed interest rate mortgage customers are the same. Some prefer to choose a very short term for their mortgage (as short as six months) in order to get a lower interest rate. Others are more comfortable choosing longer terms, such as two or five years. What they all have in common is the need for something more predictable.

Home buyers who choose a variable interest rate are usually more apt to accept a little risk in hopes of lowering their overall cost of borrowing. With most variable (or changing) interest rate mortgages, your interest rate may vary from month to month. Variable rate mortgages have typically had lower interest rates than long-term fixed interest rate mortgages. When interest rates change, the payment amount remains the same. However, the proportionate amount that is applied toward interest and principal will change. If interest rates go down, more of the mortgage payment is applied to the principal balance owing. This can help a homeowner pay off the principal portion of a mortgage faster.

NO DOWN PAYMENT?

Many Canadians find themselves able to afford the cost of owning their own homes but not having enough of a down payment to make a purchase.

As mortgage brokers, we can offer you the opportunity to purchase a new home, without the strain of having to come up with a down payment. If a lack of a down payment is keeping you from buying a home - you should talk to a mortgage broker immediately about their "No down payment mortgage" options. If you can cover your closing costs, this mortgage solution may be exactly what you've been looking for! We can help you buy the home you want, with the savings you have now. Contact me to find out how the "No down payment mortgage" may be right for you!

RENEWING YOUR MORTGAGE

Although a mortgage is one of their most important financial decisions, many Canadians don't put as much thought into renewing their mortgage as they should. We, however, see your mortgage renewal as a unique opportunity to make sure it reflects your current needs. Are you considering paying off your high-interest credit card debt or loans, or are you interested in financing a home renovation, dream vacation, recreational or investment property? Contact a mortgage broker today to discuss how you can save money on your next re-finance.

SHOULD YOU USE YOUR RRSPs?

Today, about 50% of first-time home buyers use their RRSP savings to help finance a down payment. With the federal government's Home Buyers' Plan, you can use up to $20,000 in RRSP savings ($40,000 for a couple) to help pay for your down payment on your first home. You then have 15 years to repay your RRSP.
To qualify, the RRSP funds you're using must be on deposit for at least 90 days. You'll also need a signed agreement to buy a qualifying home.
Even if you have already saved for your down payment, it may make good financial sense to access your savings through a special home buyers plan. For example, if you had already saved $20,000 for a down payment - and assuming you still had enough "contribution room" in your RRSP for a contribution of that amount you could move your savings into a registered investment at least 90 days before your closing date. Then, simply withdraw the money through the a special home buyer's plan.
The advantage? Your $20,000 RRSP contribution will count as a tax deduction this year. Use any tax refund you receive to repay the RRSP or other expenses related to buying your home.
While using your RRSP for a down payment may help you buy a home sooner, it can also mean missing out on some tax-sheltered growth. So be sure to ask your mortgage broker whether this strategy makes sense for you, given your personal financial situation.

Every situation is unique and there are different options for each case - that's why mortgage brokers are there for you as a free service!