I have had quite a few inquiries lately on people having trouble financing large purchases so I figured a post was needed.
First and foremost I will explain how default mortgage insurance comes into play. If you are purchasing a home that cost $999,999 you can get away with putting down as little as 5%. If the purchase price of the home is $1,000,000 you have no choice but to put down 20%. This may not seem fair; which I do agree, but the governments angle is to protect the Canadian housing market. If something does go wrong, high end homes are the first to crash and crash harder.
Houses in this bracket only make up about 0.1% of homes sold in Canada so it is a very small bracket of consumers. For the people that do fall in this bracket keep reading and I will explain the financing options.
ALL LENDERS ARE DIFFERENT. I made this statement bold and capitalized because one of the biggest misunderstandings in the mortgage world is all banks are the same. In reality, if your current lender says no you do not qualify, it does not mean another lender will not do the deal. Obviously your lender is not going to tell you to go the bank next door.
Generally at some point each lender has a maximum loan to value they will lend on. For example, X lender says we will finance up to 80% of the first million then 60% of the rest. So if you are purchasing a home at 1.5 million they will finance 80% of $1,000,000 which is $800,000 and 60% of $500,000 which is $300,000 for a total of a $1,100,000 mortgage. You would need to come up with a $400,000 down payment.
Some lenders will use 80% of the entire amount up to 2 million or even higher. So in the 1.5 million purchase the down payment required would only be $300,000. Down payment requirements also vary on the type of property; if it is a farm or a rental, is it in the city or rural area?
Rates can vary quite a bit at this level, often times consumers may be a little perplexed when they are not receiving the best rates advertised. Some lenders will offer best rates on these mortgages and others consider them high risk even if you have 800 credit score and provable income.
At this level of purchase you really want to make sure you read the fine print, beware of collateral mortgages unless you understand them and this is what you want, and make sure you understand the pre-payment privileges and penalties. Not knowing and signing something unfavourable could literally cost you tens of thousands of dollars.
One thing that also helps a lot if you are working with a broker, do not be shy about admitting net worth, this is a huge part making your application favourable. Would you lend a million dollars to someone who barely has enough money to cover closing costs? Disclose any assets you have it will only help.
If you are using self declared income don't sweat it, there are still ways to get this done.
One last thing to keep in mind, financing at this level requires a broker who really knows what they are doing. There can be massive savings in payments from lender to lender, you want to make sure you are using a very large volume brokerage that does business with many lenders.
If you have any questions don't hesitate to contact me which ever way works best for you,
Till next time, have a great day.
Ron Miller
905-667-0699
1-855-684-8326
ron.miller@butlermortgages.com
YouTube Hamilton
Broker
@HamiltonBroker
Tuesday, December 18, 2012
Wednesday, November 14, 2012
Divorce and Mortgages
The purpose of this post is to inform consumers that you can refinance up to 95% in a divorce situation if one spouse wishes to buy out the other from the matrimonial home. The relationship could also be common law, you do not have to be legally married.
It is a process that not many lenders are willing to do with the new mortgage rules maxing refi's at 80%. In fact most people in the industry do not even know it can be done. There has been a provision put in place by the family law act allowing one spouse to take over the home from the other. Because of the 80% refinance rule families were forced to sell their home in order to split up the equity, which is really unfair especially if children were involved. With this new rule it can make the transition for children much easier.
There must be a legal separation agreement in place in order to do this.
Any equity that is left over can be used to pay off the other spouse if that is in the agreement.
Of course you have to fully qualify on your own with acceptable credit and income. Alimony and child support do qualify as acceptable income.
The existing equity is used as the down payment and closing costs.
It is expensive enough getting seperated or divorced especially if you have to pay huge real estate fees. Average commission in selling a home is 5% + HST, it is much cheaper if one of you can keep the home.
If you are in this situation and would like to know more feel free to contact me which ever way works best for you. You can also fill out the mortgage application if you wish to get started right away, I will contact you immediately, provided I am not golfing. If you prefer doing things in person I have an office in Mississauga as well as Hamilton or I can meet you at your home.
There is no charge from me on this type of mortgage provided we can use an "A" lender and a minimum 5 year term is used. There may be an appraisal required, not always. Also a lawyer must handle the transaction. We walk you through the whole process, it is actually quite simple.
I can only service clients in Ontario Canada. If you are in another province feel free to ask for a mortgage agent in your area and I will do my best to find one.
Till next time, have a great day.
Ron Miller
ron.miller@butlermortgages.com
YouTube Hamilton Broker
@HamiltonBroker
It is a process that not many lenders are willing to do with the new mortgage rules maxing refi's at 80%. In fact most people in the industry do not even know it can be done. There has been a provision put in place by the family law act allowing one spouse to take over the home from the other. Because of the 80% refinance rule families were forced to sell their home in order to split up the equity, which is really unfair especially if children were involved. With this new rule it can make the transition for children much easier.
There must be a legal separation agreement in place in order to do this.
Any equity that is left over can be used to pay off the other spouse if that is in the agreement.
Of course you have to fully qualify on your own with acceptable credit and income. Alimony and child support do qualify as acceptable income.
The existing equity is used as the down payment and closing costs.
It is expensive enough getting seperated or divorced especially if you have to pay huge real estate fees. Average commission in selling a home is 5% + HST, it is much cheaper if one of you can keep the home.
If you are in this situation and would like to know more feel free to contact me which ever way works best for you. You can also fill out the mortgage application if you wish to get started right away, I will contact you immediately, provided I am not golfing. If you prefer doing things in person I have an office in Mississauga as well as Hamilton or I can meet you at your home.
There is no charge from me on this type of mortgage provided we can use an "A" lender and a minimum 5 year term is used. There may be an appraisal required, not always. Also a lawyer must handle the transaction. We walk you through the whole process, it is actually quite simple.
I can only service clients in Ontario Canada. If you are in another province feel free to ask for a mortgage agent in your area and I will do my best to find one.
Till next time, have a great day.
Ron Miller
905-667-0699
1-855-684-8326ron.miller@butlermortgages.com
YouTube Hamilton Broker
@HamiltonBroker
Tuesday, October 30, 2012
Best Mortgage Rates
The purpose of this post is to bring awareness about how dangerous some of the low interest rate mortgages being advertised are.
It is a very wise idea to shop around for the best mortgage rates, after all it can save you thousands over the term of your mortgage.
Recently a personal friend called about the renewal notice he received from his current lender. They actually offered him 5.29% for a 5 year term; insane. We renewed him at 2.99% with friendly terms. His mortgage was for 200k which worked out to a savings of $15,058 over 5 years. Even a 0.1% difference could save $616.80 over 5 years, better in your pocket than the banks.
Having said that it is equally important to pay close attention to the terms and to make sure you fully understand what you are signing. There are many terms to look at, below are a couple of the majors.
The two major pitfalls you should be looking for are:
1. How is the penalty calculated if you decide to break your mortgage?
The majority of 5 year term mortgages are broke before the renewal date arrives. Knowing this you always want to have an out, even if you do not plan on selling. Occasionally unforeseen circumstances may arise and you do not want to be at the mercy of a bank. They show no mercy.
You want to ask your mortgage officer or broker for an example if you broke your mortgage in 2 years what your penalty will be and how it is calculated. A lot of these discounted rates base the calculation on the current posted rate. Imagine you signed up for the 2.99% and in 2 years decide you need to sell the home or refinance for whatever reason. Your penalty could be calculated on 5.29 (current posted rate) - 2.99 (current discounted rate) = 2.30%. So you will pay a penalty of 2.3% on your remaining mortgage balance for 36 months. If for example you have a 200k mortgage, your penalty could potentially be $13,800. Pretty damn scary.
There is no set way that any lender must base their penalty calculations. To protect yourself always ask what the comparison rate will be in case you do have to break your mortgage. Generally what you are looking for is a comparison rate that is fair and based on current discounted rates. For example if you decide to break your 5 year 2.99% in two years your want to see your lender comparison rate be the current 5 year discounted rate or the 3 year discounted rate. With interest rates as low as they are now, most likely you will end up with just a 3 month interest penalty. If the comparison rate is the posted rate, run and run very fast, this is not a good deal.
2. Is your mortgage going to be registered as a collateral mortgage?
Please click on the link for a little more detail on what a collateral mortgage is. In a nut shell, they are bad bad bad. The only people who should be obtaining a collateral mortgage are people in a strong financial position.
Quick scenario ~ Let's say you have a 200k mortgage and a bank signs you up with a collateral mortgage. Then they offer you a line of credit to go with it, you also get a car loan and a Visa down the road. Now your renewal date has arrived so you decide to shop around because you were offered a lousy rate, say 5.29%. A broker offers you 2.99%, great lets get started. At some point it is discovered you have a collateral mortgage and didn't even know it. Well a collateral mortgage is not transferable, it must be handled as a refinance (lawyer fees). Also we now find out your line of credit, car loan and Visa are all charged against your home. The only way to handle your file is if you pay off all your other debts against the home first or throw all the debts into the new mortgage. Problem!!! There is not enough equity to refinance everything and you don't have enough available cash to pay out all the other debts. Guess what??? Yep you guessed it, you are going back to your original lender and accepting the lousy rate. You have been euchred, not a good feeling.
Remember, terms are just as important as rate.
I really hope this posts will help out a lot of people, I am a little dramatic in this one but it is so crucial that you are getting your mortgage from someone that is trustworthy, as well knowledgeable in the industry. And wants to see repeat business and referrals from your friends and family in the future. Use a good and reputable mortgage broker.
Please reply or discuss, ask some questions.
Till next time, have a great day!
Ron Miller
ron.miller@butlermortgages.com
YouTube Hamilton Broker
@HamiltonBroker
It is a very wise idea to shop around for the best mortgage rates, after all it can save you thousands over the term of your mortgage.
Recently a personal friend called about the renewal notice he received from his current lender. They actually offered him 5.29% for a 5 year term; insane. We renewed him at 2.99% with friendly terms. His mortgage was for 200k which worked out to a savings of $15,058 over 5 years. Even a 0.1% difference could save $616.80 over 5 years, better in your pocket than the banks.
Having said that it is equally important to pay close attention to the terms and to make sure you fully understand what you are signing. There are many terms to look at, below are a couple of the majors.
The two major pitfalls you should be looking for are:
1. How is the penalty calculated if you decide to break your mortgage?
The majority of 5 year term mortgages are broke before the renewal date arrives. Knowing this you always want to have an out, even if you do not plan on selling. Occasionally unforeseen circumstances may arise and you do not want to be at the mercy of a bank. They show no mercy.
You want to ask your mortgage officer or broker for an example if you broke your mortgage in 2 years what your penalty will be and how it is calculated. A lot of these discounted rates base the calculation on the current posted rate. Imagine you signed up for the 2.99% and in 2 years decide you need to sell the home or refinance for whatever reason. Your penalty could be calculated on 5.29 (current posted rate) - 2.99 (current discounted rate) = 2.30%. So you will pay a penalty of 2.3% on your remaining mortgage balance for 36 months. If for example you have a 200k mortgage, your penalty could potentially be $13,800. Pretty damn scary.
There is no set way that any lender must base their penalty calculations. To protect yourself always ask what the comparison rate will be in case you do have to break your mortgage. Generally what you are looking for is a comparison rate that is fair and based on current discounted rates. For example if you decide to break your 5 year 2.99% in two years your want to see your lender comparison rate be the current 5 year discounted rate or the 3 year discounted rate. With interest rates as low as they are now, most likely you will end up with just a 3 month interest penalty. If the comparison rate is the posted rate, run and run very fast, this is not a good deal.
2. Is your mortgage going to be registered as a collateral mortgage?
Please click on the link for a little more detail on what a collateral mortgage is. In a nut shell, they are bad bad bad. The only people who should be obtaining a collateral mortgage are people in a strong financial position.
Quick scenario ~ Let's say you have a 200k mortgage and a bank signs you up with a collateral mortgage. Then they offer you a line of credit to go with it, you also get a car loan and a Visa down the road. Now your renewal date has arrived so you decide to shop around because you were offered a lousy rate, say 5.29%. A broker offers you 2.99%, great lets get started. At some point it is discovered you have a collateral mortgage and didn't even know it. Well a collateral mortgage is not transferable, it must be handled as a refinance (lawyer fees). Also we now find out your line of credit, car loan and Visa are all charged against your home. The only way to handle your file is if you pay off all your other debts against the home first or throw all the debts into the new mortgage. Problem!!! There is not enough equity to refinance everything and you don't have enough available cash to pay out all the other debts. Guess what??? Yep you guessed it, you are going back to your original lender and accepting the lousy rate. You have been euchred, not a good feeling.
Remember, terms are just as important as rate.
I really hope this posts will help out a lot of people, I am a little dramatic in this one but it is so crucial that you are getting your mortgage from someone that is trustworthy, as well knowledgeable in the industry. And wants to see repeat business and referrals from your friends and family in the future. Use a good and reputable mortgage broker.
Please reply or discuss, ask some questions.
Till next time, have a great day!
Ron Miller
905-667-0699
1-855-684-8326ron.miller@butlermortgages.com
YouTube Hamilton Broker
@HamiltonBroker
Thursday, March 22, 2012
Why Use a Mortgage Broker?
In all honesty I probably should have also rolled up into the title "Why Realtors refer Mortgage Brokers" and "What Does a Mortgage Broker Do". Maybe even add in "Which Mortgage Broker Do I Use". Basically all of the above is what this post is about.
Anyone that has followed the mortgage market for a few months has seen rates go up and down, this bank has the best rates, now its this bank, and then there is the bombardment of mortgage brokers and agents all contesting that they have access to the best rates. Well it is true that banks and wholesale finance lenders take turns winning the rate war and most of them are accessible through the mortgage broker market. What is a bit of a myth is that one broker has the best rates over another. Having said that, it is true that some brokers do get discounts from certain lenders for high volume and a high success rate for funding ratios (deals submitted vs deals closing). But you have to be able to fit the model that particular lender is looking for.
So, you want to pick a brokerage that is large enough to receive special treatment from several different lenders, because their volume is so large. For the perfect model mortgage seeker (good income, down payment and credit) our lender of choice varies from month to month depending on who has the best rates and terms at the time.
Not everyone fits into the perfect model that banks seem to love. This is really where the importance of a good mortgage broker comes in. Seriously, I cannot stress enough how crucial this is. And this is why your Realtor may have referred you to a mortgage broker. If you do not receive a pre-approval certificate, or are told no if you ask for one, you may want to look elsewhere for your financing. When I give a pre-approval that Realtor knows they are not wasting their money and spending time away from their family showing homes. Yes Realtors have lives, they are people and it costs them a lot of money and time to help someone find a home, so they want to be certain you are solid.
Your Realtor is helping you purchase the largest item and your biggest investment you will ever make in your life. Give them the love they need to go to bat for you. Do not hide stuff and think you are at war with them, they are on your side and you will benefit by becoming a team with them. If you are in the Southern Ontario area, I have a lot of excellent Realtors I have a relationship with, that I would happily refer for you.
Now, why use a mortgage broker? I can be reached by text, by office phone, by cell phone, by email, by bbm, on weekends and evenings and I enjoy it. Why seasoned Realtors usually refer a mortgage broker instead of a bank is because they are aware of the many variables required to qualify and that all banks have different variables. Here is a short list:
Feel free to post a comment or question. If you would like to talk to me about mortgages or get the name of a good Realtor, feel free to contact me whichever way works best for you.
Ron Miller
ron.miller@butlermortgages.com
YouTube Hamilton Broker
@HamiltonBroker
Anyone that has followed the mortgage market for a few months has seen rates go up and down, this bank has the best rates, now its this bank, and then there is the bombardment of mortgage brokers and agents all contesting that they have access to the best rates. Well it is true that banks and wholesale finance lenders take turns winning the rate war and most of them are accessible through the mortgage broker market. What is a bit of a myth is that one broker has the best rates over another. Having said that, it is true that some brokers do get discounts from certain lenders for high volume and a high success rate for funding ratios (deals submitted vs deals closing). But you have to be able to fit the model that particular lender is looking for.
So, you want to pick a brokerage that is large enough to receive special treatment from several different lenders, because their volume is so large. For the perfect model mortgage seeker (good income, down payment and credit) our lender of choice varies from month to month depending on who has the best rates and terms at the time.
Not everyone fits into the perfect model that banks seem to love. This is really where the importance of a good mortgage broker comes in. Seriously, I cannot stress enough how crucial this is. And this is why your Realtor may have referred you to a mortgage broker. If you do not receive a pre-approval certificate, or are told no if you ask for one, you may want to look elsewhere for your financing. When I give a pre-approval that Realtor knows they are not wasting their money and spending time away from their family showing homes. Yes Realtors have lives, they are people and it costs them a lot of money and time to help someone find a home, so they want to be certain you are solid.
Your Realtor is helping you purchase the largest item and your biggest investment you will ever make in your life. Give them the love they need to go to bat for you. Do not hide stuff and think you are at war with them, they are on your side and you will benefit by becoming a team with them. If you are in the Southern Ontario area, I have a lot of excellent Realtors I have a relationship with, that I would happily refer for you.
Now, why use a mortgage broker? I can be reached by text, by office phone, by cell phone, by email, by bbm, on weekends and evenings and I enjoy it. Why seasoned Realtors usually refer a mortgage broker instead of a bank is because they are aware of the many variables required to qualify and that all banks have different variables. Here is a short list:
- Some lenders do not like self-employed.
- Some lenders will actually gross up self-employed income to qualify for more.
- Some lenders include baby bonus, others don't.
- Some will let you use your car allowance to qualify.
- Some will actually tell you your bonus doesn't count as income.
- Some don't like commission income.
- Some don't like contract workers.
- Some want perfect credit.
- Others will accept the bare minimum.
- Some have cash back, most don't.
- Some let you purchase two homes with 5% down.
Feel free to post a comment or question. If you would like to talk to me about mortgages or get the name of a good Realtor, feel free to contact me whichever way works best for you.
Ron Miller
905-667-0699
1-855-684-8326ron.miller@butlermortgages.com
YouTube Hamilton Broker
@HamiltonBroker
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