Monday, August 29, 2011

Ontario Mortgage Rates - Part 5 --- What is a fixed mortgage rate?

In Ontario, a fixed mortgage rate is a mortgage where the interest rate stays the same for the term of the mortgage loan.

A fixed rate mortgage is a safe option because you know that your mortgage payment will not change during the term of the mortgage. Families who live on a tight budget are better suited to a fixed term mortgage as it ensures that there are no surprises.

A fixed rate mortgage usually bears a slightly higher interest rate then a variable rate mortgage. The interest rate is fixed based on the term of the mortgage so the shorter the term, the lower the interest rate.

Banks and other major financial institutions generally want customers to lock into a 5 year fixed rate mortgage because it yields them the most interest and it is locked in, so they know that the customer is theirs for at least 5 years.

Now as I mentioned, it all depends on you, your budget and your lifestyle. If you are living on a tight budget, don’t plan on moving for the next 5 years and want to guarantee your mortgage and interest rate, a fixed rate mortgage is right for you.

On the other hand if you have lots of surplus cash flow in your budget, low debt and want to pay off your home fast, opt for a variable rate mortgage which generally carries a lower interest but also comes with the risk that if mortgage rates go up, yours will too!

Whether you chose a fixed rate mortgage or a variable rate mortgage, if you want to pay off your mortgage quickly, outside of choosing the type of interest, you can also do other things to speed up the process of paying down your mortgage.

You don’t have to choose a 30 year amortization. Did you know that reducing your mortgage amortization by 5 years will only increase your mortgage payment slightly but will save you 10‘s of thousands in interest?

Also consider accelerated mortgage payments as another way to pay more to your mortgage principal.

When planning for a mortgage, always consider the benefits and risks to the mortgage products you are considering so that you make the most informed choice. It's not always about the lowest Ontario mortgage rates. It's also important that you commit to a mortgage you can afford to repay, at terms you can live with. For more information about fixed rate mortgages please visit http://www.gtamortgagematters.com/

Monday, August 22, 2011

Ontario Mortgage Rates - Part 4 --- How to Get Approved for a Mortgage at the Lowest Mortgage Interest Rate

If you are looking to purchase a home you must be thinking about how to get approved for a mortgage at the lowest possible mortgage interest rate. Different lending institutions offer different mortgage interest rates to applicants based on the risk that they represent as a potential client.

Usually financial institutions that offer CMHC mortgage insurance offer the lowest interest rates. That is because if your mortgage is CMHC insured and you default, CMHC will pay the bank for any shortfall. That’s not to say that CMHC won’t try to collect the money back from you in the future.

This means that if you want to get approved for a CMHC insured low interest mortgage you will have to satisfy CMHC’s requirements as well as the banks. Both CMHC and the bank have common criteria.

1. You must be able to prove your income.

2. You must demonstrate stability.

3. Your income to debt service ratios must be in line.

4. You must have the minimum required down payment.

5. You must meet their credit score requirements.

Generally a financial institution will want to see that you have had the same income source for the past 3 years. They will sometimes request your tax assessments as evidence. If you are employed they may ask for a job letter and paystub.

Your debt service ratios consist of two numbers, your GDS and TDS. Your TDS is your “total debt service ratio” This is the amount of your monthly income that is consumed by your housing payments and payments to debt divided into your gross monthly income expressed as a percentage. CMHC and most lenders will require that your TDS does not exceed 42% (with your new mortgage).

Your GDS is your “gross debt service ratio” which is the amount of your monthly income that is consumed by your housing payments alone, against your gross monthly income, expressed as a percentage. CMHC and most lenders will require that your GDS does not exceed 32% (with your new mortgage).

You must be able to prove that you have the required down payment or if you are refinancing, that you have the sufficient equity.

Finally, the minimum credit score required to be approved for a mortgage at a bank is 680. Set that as your benchmark if you want to get approved for Ontario’s lowest mortgage interest rate. For more information about how to get approved for a mortgage at the lowest mortgage interest rate please visit http://www.gtamortgagematters.com/

Monday, August 15, 2011

Ontario Mortgage Rates - Part 3 --- When are mortgage rates going up?

When are mortgage rates going up? This seems to be the question on everyone’s mind, especially those with variable rate mortgages.

Ontario mortgage rates change depending on the state of the economy. Interest rates can be affected by the local, national and global economies. The Bank of Canada sets the lending rates for Canada and then financial institutions calculate their interest rates based on that.

When unemployment rates are high and the economy is struggling interest rates will be lower. When the economy is stable and growing Ontario mortgage interest rates will go up.

There have been reports that the economy in Canada has been improving, however we still have a huge manufacturing sector. So as our dollar increases, the currency exchange rates make manufacturing products here less affordable.

When you boil it down, a stronger Canadian Dollar is a bad thing for Canada’s manufacturing sector. Add to it other financial turmoil, for example If Greece fails, and the end result will be an even stronger Canadian Dollar. On top of that, if the United States doesn’t get their finances in order, the Canadian Dollar will see a further surge upward.

Sometimes the Bank of Canada can raise their interest rates 2 or even 3 times and you may hear that the economy is improving but that doesn’t always mean that interest rates are going to go up. In fact we think that they are going to stay the same, or even go back down depending on what happens with Greece.

The good news is, the time is right to seize the day while Ontario mortgage rates are still at historic lows. Not only is it more affordable than ever to purchase a home, if you already own one, there are lots of ways that you can still take advantage of these low Ontario mortgage rates.

You can obtain a home equity loan to consolidate debt and work towards becoming completely debt free. You could complete a long overdue home renovation or purchase a vehicle. The sky is the limit. If you were planning a big ticket purchase your home is a great way to raise money to finance it at low interest rates.

It’s hard to predict when Ontario mortgage rates are going to go up so the best thing to do is obtain the right mortgage that works within your budget, so that if mortgage rates do go up, you are prepared. For more information about when Ontario mortgage interest rates are going up please visit http://www.gtamortgagematters.com/

Monday, August 8, 2011

Ontario Mortgage Rates - Part 2 --- When to lock into a fixed rate mortgage

When to lock-in to a fixed rate mortgage is a tough decision that should be thought through. An individual’s housing payment is usually the largest monthly payment in their budget.

Ontario Mortgage rates have been low for a long time so those who have chosen variable rate mortgages have enjoyed less mortgage interest than their counterparts, who selected the safer, fixed rate mortgage option.

Variable mortgage rates are great when interest rates are low. The difficulty occurs if mortgage rates go up. For example, a family who is living paycheque to paycheque should not have a variable rate mortgage.

Fixed rate mortgages have slightly higher interest rates but because the interest is fixed, so is the monthly mortgage payment. Families who have fixed rate mortgages do not have to worry that if interest rates increase so will their mortgage payment.

People choose variable rate mortgages because the rates are lower, low Ontario Mortgage Rates means lower monthly payments and more repayment to mortgage principal.

Variable rate mortgages fluctuate with the Bank of Canada’s lending rate. The Bank of Canada adjusts its lending rate according to the state of the economy. They consider not only the national economy but also the world economy.

For example, some have speculated that because the Canadian economy is doing better that interest rates will continue to rise (the Bank of Canada has raised its lending rate 3 times in the past year).

It is true that in Canada the economy has seen some improvement. However, this doesn’t mean that rates will continue to go up. In fact many believe that they will stay the same or perhaps they may even go down.

Many experts, including us, believe that in fact they will stay the same or even go down. With continued instability in countries such as Greece and the United States (debt talks), the Canadian Dollar will only continue to strengthen. This will hurt our manufacturing sector and local economy simply because no one wants to manufacture here when the exchange rate is so high. This in turn will result in The Bank of Canada leaving their lending rate as is or perhaps even reducing it in the near future.

The best way to try to predict when to lock into a fixed rate mortgage is to do lots of research and stay on top to the news. Establish a relationship with a mortgage broker who can let you know what you may expect with respect to Ontario Mortgage Rates and how to react. For more information please visit http://www.gtamortgagematters.com/

Tuesday, August 2, 2011

Ontario Mortgage Rates - Part 1 --- What is a Variable Rate Mortgage?

Trying to find the lowest Ontario mortgage interest rates? Whether you are looking to purchase a home or refinance it, the interest rate on your mortgage is important. Your mortgage interest rate will dictate how much interest you pay during your mortgage term and how much your mortgage payments will be.

There are two main types of mortgage interest rates in Ontario – fixed and variable rate mortgages. This article is about variable rate mortgages.

An Ontario variable interest rate mortgage is a mortgage where the rate is periodically adjusted to float with the Bank of Canada lending rate. Variable rate mortgages are also referred to as adjustable-rate mortgages.

If the Bank of Canada raises its lending rate, the financial institutions will adjust the interest rates of their variable rate mortgage customers accordingly.

When the Bank of Canada’s lending rate is low, Ontario Mortgage Rates are low. Variable rate mortgages carry risk because if the Bank of Canada’s lending rate increases, so does their mortgage rate and thus so does the monthly payment.

The reason individuals take the risk and choose variable rate mortgages is because variable rate mortgages are lower interest than fixed mortgages. Less interest means more of your monthly payments go to principal and your monthly payments would be less.

You can negotiate a variable rate mortgage that carries a provision that enables you to lock in your mortgage at any time. This way you can test out the waters with your variable rate mortgage while Ontario mortgage interest rates are low and then lock-in your mortgage rate if you think interest rates are going to increase.

Variable rate mortgages are best suited for those who have an aggressive goal of paying down their mortgage. This would be an individual with a lot of cash flow, one who is prepared to make more than their minimum mortgage payment each month.

Someone who is running a tight budget is not suited for a variable rate mortgage. The individual’s mortgage payment would increase in accordance with an increase in the mortgage rate so if their budget was tight to begin with, it could cause a major financial problem.

If you want to have the best Ontario mortgage rates, it pays to have a relationship with a good mortgage broker, one who works with all the banks, watching lending rates and ensuring that you always have the right mortgage and the best deal. To find out more about Ontario mortgage rates and variable rate mortgages please visit http://www.gtamortgagematters.com/