Ask a Mortgage Question

I wanted to add this post to my blog because I want to answer some direct questions regarding Canadian mortgages that you may have.  When I review the topics that have been typed into search engines to find my blog I notice that your questions may not be completely answered with what you find.

So you can feel free to ask any mortgage question I will be sure to add a reply as soon as I can.  I will also be posting questions that people have asked their search engines and replying to them.

Purchase Plus Improvements

You can view all my videos on You Tube at HamiltonBroker.

This program is excellent if you are looking to do some renovations on your new home purchase.  Purchase plus improvements allows you to renovate the kitchen, install a new furnace or central air system, possibly your dream home is perfect except the roof is in dire need of repair.

It is really important for Realtors to be aware of as well.  Their clients found the perfect home but the kitchen is 25 years old, you can still make the deal work.  In this case it is really important to have a mortgage broker on their side that really knows how to put deals together.

So let's just say that you found the perfect home but you need a new kitchen.  Let your mortgage broker know that you want to do purchase plus improvements.  This does not change your pre-approval as long as you qualify for the extra amount.  Here is a brief step by step of the process.

1. Put in your offer and get it accepted.
2. During your 5 days you have to get financing approved.  Inform your broker that you want purchase plus improvements when you hand him/her your offer.
3. Get a quote ASAP to give to your broker for the work you want done from a licensed contractor. (Some lenders may want 2 or 3 quotes).
4. An appraiser will go to check the work you have requested and send their report to the broker or lender.
5. You get your approval for the purchase plus improvements.
6. On closing your lawyer will hold back the extra funds required for the improvements you want done.
7. Have your contractor complete the work and once it is done the appraiser will return and verify the improvements are completed, then at this point the lawyer will release the extra funds to you.

There is a few things to keep in mind.  Money will NOT be released until verification that the improvements are completed.  If you do not have a contractor who is willing to wait to get paid then this program will not work unless you can pay for everything up front first.  If you tell your broker that you want a new roof, than make sure that is what you fix.  You cannot turn around and say, well we changed our mind we wanted a new bay window instead.  Purchase plus improvements does not include appliances, a new pool or car.  It must be improvements to the home.  You can check out Genworth or CMHC is your want to read up a little more.

This program is really handy if you find your perfect home but just need a couple things updated.  If this is for you feel free to get a hold of me and I will see what we can do.

Ron Miller
905-667-0699

1-855-684-8326
ron.miller@butlermortgages.com    

Renewing your Mortgage Early, Cap It!!!

You can view all my videos on You Tube at HamiltonBroker.

Renewing a mortgage early usually happens when you want to take advantage of lower interest rates or you want to switch to a variable rate from a fixed.  Also a lot of financial savvy people will also purposely switch in the middle of their term simply to extent the low rates that they have.  If you have a variable rate and want to switch to a fixed and your current bank is not offering you a competitive rate, this is definitely a time to do a switch.  A family that plans on having a baby will also use this plan to secure low payments for a longer term, especially if they are going to lose an income if someone decides to stay home and look after the baby.  If you plan on getting pregnant and have a mortgage, plan wisely.

There are costs involved with switching early.  You will most definitely have at least a three month interest penalty.  Banks are even approaching their clients 6 to 8 months before their renewal is up and asking them to renew early and not even offering to waive the penalty.  The penalty may also be more than three months if you have a high interest rate than what is being offered at the time you are looking to switch.  In which case it will be an IRD penalty, interest rate differential.  This is the amount of money that the bank loses if you break your mortgage early.  If you have 18 months left on your mortgage and you have a 5% interest rate and the current rate is 4% you will be charged 1% on the remaining 18 months which will work out to around $3,000.  Depending on the size of the penalty and your long term savings or piece of mind will determine if you should renew early.  There is also a discharge fee or around $250 to release your current lenders charge from title.  If you do decide you wish to renew early call your bank and ask if they will waive all penalties and fees.  If they won't?  Because they can.  That is when you call me.  Why stay with them if they aren't looking after you?

These fees bring to the purpose of this post.  Some lenders will allow you to cap your mortgage to avoid having to pay these fees out of pocket.  Simply add the penalty on top of your current mortgage without having to refinance when you switch, "cap your mortgage".  The few lenders that allow this, do it for one simple reason, to get more business.  Because lenders allow the cap, it saves the additional costs of having to get a lawyer and it saves you from having to pay up front for your penalty and discharge fees.   There is limitations to how much you can cap, so contact me to see how it will work for you.

If you have any questions please do not hesitate to contact me or leave a comment.

Ron Miller
905-667-0699

1-855-684-8326
ron.miller@butlermortgages.com