One big reason that our banking system has fared better during the current worldwide economic instability is largely due to the regulation in our banking industry.
In Canada, in order to qualify for a residential mortgage with a “bank”, with less than 25% down payment, the bank must ensure that the mortgage is high ratio insured. While GE also offers high ratio mortgage insurance, the majority of high ratio mortgages that are insured in Canada are insured by CMHC.
Even if a bank approves your mortgage (or has a strong desire to) and CMHC declines the application for high ratio mortgage insurance, the bank will not be able to grant you the mortgage. This has opened up a whole marketplace of alternative lenders that offer high ratio mortgages. A lender, who is not regulated by the Chartered Banks Act, can fund a high ratio mortgage without residential mortgage insurance.
Your most affordable high ratio mortgage option will most often be offered by a bank and insured by CMHC.
We mentioned the fact that if residential mortgage insurance with CMHC is declined, the bank will not be able to finance your mortgage. When you apply for a mortgage, the bank will submit an application for high ratio mortgage to CMHC.
CMHC has firm lending guidelines and requirements that include that the applicant has good credit, good stability, and verifiable income. CMHC will insure a high ratio mortgage when the applicant has had a past history of bruised credit, provided they have at least two years of strong, re-established credit.
If you own your home and want to refinance, CMHC will high ratio insure a residential mortgage and refinance up to 90% of the property’s value, if the applicant qualifies. In the case of a refinance, this makes obtaining a mortgage much easier because where CMHC insurance is present; banks will often not require an appraisal of the property at an additional expense to the borrower.
CMHC’s residential mortgage insurance premium can range from .5% up to 4.5% depending on how much insurance is required. When the residential mortgage being insured represents a lower loan to value, the CMHC insurance premium is less, and when it represents a higher loan to value, the CMHC residential insurance premium is higher. CMHC high ratio mortgage insurance is added to the mortgage and blended into your monthly mortgage payments.
For more information about residential mortgage insurance with CMHC and when it is required to obtain a high ratio mortgage please contact Paul Mangion at GTA Mortgage Matters by calling 1 (877) 234-8275 or by visiting http://www.gtamortgagematters.com/
Monday, September 26, 2011
Tuesday, September 20, 2011
How to Shop for a Mortgage in Toronto without Ruining Your Credit
The biggest mistakes that individuals make when shopping for a mortgage are over shopping and under planning. Here are some tips on how to shop for a mortgage in Toronto, without ruining your credit.
Before you start looking for a mortgage, you should first think about if you qualify for a mortgage. This starts with requesting your credit report from Equifax. Your credit score is important because if it is less than 680, your mortgage options will be greatly reduced.
If you want to shop for a mortgage and have less than a 25% down payment, you will need CMHC mortgage insurance to qualify for a mortgage with a bank. When a mortgage is insured by CMHC, the applicant must apply with both the bank and with the CMHC. Usually the bank will submit your CMHC insurance application to them on your behalf.
Both the CMHC and the bank will require the following:
1. That your housing payments (with your new mortgage) do not exceed 32% of your gross income.
2. That your housing payments (with your new mortgage payment) and your payments to credit/debt do not exceed 42% of your gross income.
3. They will want to see good stability.
4. They will want to see proof of your income.
5. Most banks will require a minimum credit score of 680. However, the CMHC will often insure a high ratio mortgage when the applicants credit score is as low as 620.
If you do not satisfy the above basic criteria, you still have mortgage options in Ontario. Because the CMHC will insure a high ratio mortgage for someone who doesn’t meet the banks minimum criteria, there are a number of credit unions and trust companies that offer more flexible lending criteria.
The planning part of preparing to purchase a home should include reviewing your personal finances and credit to ensure you can obtain financing. There is nothing worse than falling in love with a home you want to purchase, only to learn you cannot get a large enough mortgage to make the purchase.
When the time comes to obtain a mortgage pre-approval, do not go from bank to bank applying for mortgages trying to get the best deal. Many folks don’t realize that each applicant for credit is reported to the credit report and too many applications for credit in a short period of time can actually reduce your credit score.
Your best bet is to establish a relationship with a local Mortgage Broker, one who deals with all the banks. If you are worried that you may face challenges qualifying for the mortgage that you want, when looking for a Mortgage Broker, ask them if they are capable of dealing with all types of credit and income. In most cases, the bank will pay your Mortgage Broker, so there is huge value to taking advantage of a resource that can shop the best deal for you. For more information about how to shop for a mortgage in Toronto without ruining your credit visit http://www.gtamortgagematters.com/
Before you start looking for a mortgage, you should first think about if you qualify for a mortgage. This starts with requesting your credit report from Equifax. Your credit score is important because if it is less than 680, your mortgage options will be greatly reduced.
If you want to shop for a mortgage and have less than a 25% down payment, you will need CMHC mortgage insurance to qualify for a mortgage with a bank. When a mortgage is insured by CMHC, the applicant must apply with both the bank and with the CMHC. Usually the bank will submit your CMHC insurance application to them on your behalf.
Both the CMHC and the bank will require the following:
1. That your housing payments (with your new mortgage) do not exceed 32% of your gross income.
2. That your housing payments (with your new mortgage payment) and your payments to credit/debt do not exceed 42% of your gross income.
3. They will want to see good stability.
4. They will want to see proof of your income.
5. Most banks will require a minimum credit score of 680. However, the CMHC will often insure a high ratio mortgage when the applicants credit score is as low as 620.
If you do not satisfy the above basic criteria, you still have mortgage options in Ontario. Because the CMHC will insure a high ratio mortgage for someone who doesn’t meet the banks minimum criteria, there are a number of credit unions and trust companies that offer more flexible lending criteria.
The planning part of preparing to purchase a home should include reviewing your personal finances and credit to ensure you can obtain financing. There is nothing worse than falling in love with a home you want to purchase, only to learn you cannot get a large enough mortgage to make the purchase.
When the time comes to obtain a mortgage pre-approval, do not go from bank to bank applying for mortgages trying to get the best deal. Many folks don’t realize that each applicant for credit is reported to the credit report and too many applications for credit in a short period of time can actually reduce your credit score.
Your best bet is to establish a relationship with a local Mortgage Broker, one who deals with all the banks. If you are worried that you may face challenges qualifying for the mortgage that you want, when looking for a Mortgage Broker, ask them if they are capable of dealing with all types of credit and income. In most cases, the bank will pay your Mortgage Broker, so there is huge value to taking advantage of a resource that can shop the best deal for you. For more information about how to shop for a mortgage in Toronto without ruining your credit visit http://www.gtamortgagematters.com/
Monday, September 12, 2011
Low Interest Mortgage Loans – How Long Can You Hold Your Low Interest Mortgage Approval?
Low interest mortgage loans are available to those who want to purchase or refinance their homes.
If you are thinking about buying a home, it makes the most sense to make sure you can obtain a mortgage before you start house shopping. You will also want to be sure that you understand the extent of your mortgage closing costs to ensure that you have the liquidity to go through with the purchase.
Do not go from bank to bank applying for mortgages. This will result in multiple credit inquiries on your credit report and will reduce your overall credit score. This alone could disable your ability to get approved for a mortgage.
Go to a Mortgage Broker, one that deals with all the major banks. They will be able to:
- Pull your credit
- Review your credit applications
- Tell you what you qualify for
- Negotiate with the banks
- Obtain a low interest mortgage pre-approval on your behalf
Most Mortgage Brokers can negotiate with the bank to hold your mortgage interest rate for 120 days.
Depending on your credit and income, you will need between five to ten percent of the purchase price as a down payment. If you are obtaining a CMHC mortgage, you will have to prove where your down payment money came from.
If you are planning to purchase a home, you will also need to consider the following “other closing costs” you will incur when purchasing a home.
1. It is always prudent to have a property inspector go in and do a home inspection on a property you are planning on purchasing. The cost of an inspection is approximately one thousand dollars.
2. You will have to obtain Fire Insurance Coverage on the property. This is often cheapest when bundled with other insurance policies, such as car insurance.
3. Real estate legal fees will be incurred both on your property purchase and on your mortgage closing. Many Real Estate Lawyers can offer you a bundle deal that covers both closings.
4. Finally, you will need to have enough money set aside to cover your land transfer tax which could be 1-3% of the property purchase value.
Your closing costs will vary depending on the location of the property you are purchasing. Step one in the process of planning to purchase a home is to establish a relationship with a good Mortgage Broker. For more information about low interest mortgage loans and how long you can hold your low interest mortgage approval visit http://www.gtamortgagematters.com/
If you are thinking about buying a home, it makes the most sense to make sure you can obtain a mortgage before you start house shopping. You will also want to be sure that you understand the extent of your mortgage closing costs to ensure that you have the liquidity to go through with the purchase.
Do not go from bank to bank applying for mortgages. This will result in multiple credit inquiries on your credit report and will reduce your overall credit score. This alone could disable your ability to get approved for a mortgage.
Go to a Mortgage Broker, one that deals with all the major banks. They will be able to:
- Pull your credit
- Review your credit applications
- Tell you what you qualify for
- Negotiate with the banks
- Obtain a low interest mortgage pre-approval on your behalf
Most Mortgage Brokers can negotiate with the bank to hold your mortgage interest rate for 120 days.
Depending on your credit and income, you will need between five to ten percent of the purchase price as a down payment. If you are obtaining a CMHC mortgage, you will have to prove where your down payment money came from.
If you are planning to purchase a home, you will also need to consider the following “other closing costs” you will incur when purchasing a home.
1. It is always prudent to have a property inspector go in and do a home inspection on a property you are planning on purchasing. The cost of an inspection is approximately one thousand dollars.
2. You will have to obtain Fire Insurance Coverage on the property. This is often cheapest when bundled with other insurance policies, such as car insurance.
3. Real estate legal fees will be incurred both on your property purchase and on your mortgage closing. Many Real Estate Lawyers can offer you a bundle deal that covers both closings.
4. Finally, you will need to have enough money set aside to cover your land transfer tax which could be 1-3% of the property purchase value.
Your closing costs will vary depending on the location of the property you are purchasing. Step one in the process of planning to purchase a home is to establish a relationship with a good Mortgage Broker. For more information about low interest mortgage loans and how long you can hold your low interest mortgage approval visit http://www.gtamortgagematters.com/
Wednesday, September 7, 2011
Canadian Mortgage Interest Rates, Going Up or Down?
It appears as though there is constant speculation as to whether Canadian interest rates will go up or down. Interest rates have been low for so long and many consumers have been taking advantage of low interest variable rate mortgages.
Canadian interest rates were originally reduced to historic lows after the attacks on the World Trade Centre in 2001. Into the mid 2000’s, the Bank of Canada began to inch interest rates upwards, but the recession that began in 2008 forced the Bank of Canada to bring the national lending rate back down.
They have remained low for the past 3 years, however in the past the Bank of Canada has raised interest rates 3 times.
When the Bank of Canada begins inching up interest rates, those who have variable rate mortgages begin to question whether or not it might be time to lock in.
A variable rate mortgage is one that floats with prime. If interest rates go up, so will the interest rate on a variable rate mortgage and in accordance so will the monthly mortgage payments. Many folks who have low interest variable rate mortgages will closely monitor the Bank of Canada’s announcements. This is because many variable rate mortgage products carry an option to lock-in.
This is one reason why we often write about the topic of whether or not Canadian interest rates will stay low or go up.
If you want to determine whether or not interest rates may go up, rather than paying attention to the Bank of Canada, pay attention to the strength of the Canadian dollar. A large part of Canada’s economy and Ontario’s economy is tied to the manufacturing sector. We export a lot of products. However, when our dollar is strong it makes it more expensive for other countries to trade with us.
Compared to the currency from other countries we currently have a strong Canadian dollar, and this is due to Canada’s strong bank system. Economic instability in countries around the world will only continue to strengthen our dollar. While Standard and Poor's recently announced that it was downgrading the U.S.’s world credit score from AAA to AA, it has been announced that Canada will continue to maintain its AAA world credit score status. This is yet another indicator that our dollar will continue to soar.
Unfortunately this also means that we could lose a lot of jobs in the Canadian and Ontario manufacturing sectors. This reason alone may be one reason that the Bank of Canada decides to leave interest rates where they are (as they did in their most recent interest rate announcements) or even lower it. There are other economic indicators that the Canadian mortgage interest rates will continue to stay low, therefore now is a better time than ever to take advantage of a low interest variable rate mortgage.
For more information about Canadian mortgage interest rates please visit http://www.gtamortgagematters.com/
Canadian interest rates were originally reduced to historic lows after the attacks on the World Trade Centre in 2001. Into the mid 2000’s, the Bank of Canada began to inch interest rates upwards, but the recession that began in 2008 forced the Bank of Canada to bring the national lending rate back down.
They have remained low for the past 3 years, however in the past the Bank of Canada has raised interest rates 3 times.
When the Bank of Canada begins inching up interest rates, those who have variable rate mortgages begin to question whether or not it might be time to lock in.
A variable rate mortgage is one that floats with prime. If interest rates go up, so will the interest rate on a variable rate mortgage and in accordance so will the monthly mortgage payments. Many folks who have low interest variable rate mortgages will closely monitor the Bank of Canada’s announcements. This is because many variable rate mortgage products carry an option to lock-in.
This is one reason why we often write about the topic of whether or not Canadian interest rates will stay low or go up.
If you want to determine whether or not interest rates may go up, rather than paying attention to the Bank of Canada, pay attention to the strength of the Canadian dollar. A large part of Canada’s economy and Ontario’s economy is tied to the manufacturing sector. We export a lot of products. However, when our dollar is strong it makes it more expensive for other countries to trade with us.
Compared to the currency from other countries we currently have a strong Canadian dollar, and this is due to Canada’s strong bank system. Economic instability in countries around the world will only continue to strengthen our dollar. While Standard and Poor's recently announced that it was downgrading the U.S.’s world credit score from AAA to AA, it has been announced that Canada will continue to maintain its AAA world credit score status. This is yet another indicator that our dollar will continue to soar.
Unfortunately this also means that we could lose a lot of jobs in the Canadian and Ontario manufacturing sectors. This reason alone may be one reason that the Bank of Canada decides to leave interest rates where they are (as they did in their most recent interest rate announcements) or even lower it. There are other economic indicators that the Canadian mortgage interest rates will continue to stay low, therefore now is a better time than ever to take advantage of a low interest variable rate mortgage.
For more information about Canadian mortgage interest rates please visit http://www.gtamortgagematters.com/
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