Mortgage Penalties

Posted on November 8, 2011 by Finder Financial

Mortgage Penalties

Today I am here to chat about mortgage penalties. Why I’m getting a lot more questions about mortgage penalties from clients in the past couple of months? What is the normal mortgage penalty range you could expect? Also, will it be worth it for you to cancel your current mortgage, pay the penalty, and get something at today’s lower rate?

1. How come mortgage penalties seem to be coming up in the news?

You may have heard your friends and family talking about this. That’s because interest rates have remained so low for such a long time. Alot of people thought that interest rates were going to be rising back up over the past years and the economic situation just hasn’t allowed for that. Interest rates are still super low and people are finding that it’s a great time to be refinancing or to be switching out your mortgage. If you’ve got a higher interest rate of 4 or 5% and you’re looking at today’s interest rates at 2 or 3% and thinking “why am I paying 2% extra”?

An average mortgage penalty depends on the mortgage that you have. Every bank and lender is different in how they calculate mortgage penalties. They should have explained it to you when you got your mortgage and they should have gone through exactly what your needs are. If you wanted a long term mortgage, they should have explained exactly how the mortgage penalty is calculated, and that it could be a large penalty or if it’s only going to be very small, then you might be in something that’s perfect. If you’re now going to your bank and you’re checking and you’re surprised to find that you’ve got a really large mortgage penalty, something has gone wrong. You shouldn’t be caught off guard like that.

In general, for a variable rate mortgage you might get a 3 month’s interest penalty. So that’s just maybe 1.5 mortgage payments as a sort of a ballpark of what your penalty would be. For a fixed rate mortgage nowadays, it’s usually the interest rate differential, not always, sometimes it’s also the 3 months of interest. The interest rate differential is exactly what the name implies. It’s the difference between your interest rate and the current interest rate. If you’ve got a higher interest rate, you’re basically paying the difference to cancel your mortgage so your penalty could be as small as a couple thousand dollars and as high as 15-18 thousand dollars. Very large penalties could occur.

We did a blog post in the past regarding a poor gentleman who had an incredibly large mortgage penalty, so go back in the archives and look for that if you want to see what the upper limit of this is and be aware when you’re getting a mortgage. When you’re signing it on, exactly what penalties are calculated and if you’re ever going to run into the scenario, if you’re ever going to be susceptible to paying mortgage penalties, maybe you should be looking at a different mortgage product or term.

2. How do you know if your mortgage penalty is worth to pay off?

It’s pretty easy for us to calculate. I do suggest you contact your local mortgage broker to get the proper calculation or call us here at Finder Financial Services because you want to make sure that you’re taking into account the penalty itself as well.

If your penalty is going to be added into your mortgage, so even if you’re paying a lower interest rate, you’re now paying a larger mortgage amount, you’re paying more interest each payment, and each payment is going to be larger because you’re paying an extra 10 or 15 thousand dollars on the total mortgage.

A lot of people forget this. If you go to your bank and they do a comparison, a lot of times, this is missed out and you think that you’re getting a great deal, you’re going to be paying off your mortgage really quick, and your penalty is going to be paid off soon, but a lot of people have completely forgotten to take into account the penalty as well. It’s got to come from somewhere.

If you’re interested in this, just give us a call at 1-866-924-5244. I will be free to do a comparison calculation for you.

Posted in Mortgage Rules, Mortgage Tips, Mortgages Canada, Rates, Refinance | Leave a comment

You’re Invited – Upcoming Meetup: Financial Planning

Posted on November 8, 2011 by Finder Financial

Meetup! You’re Invited: Thursday, November 17th, 2011

Today I’m here to invite you for our next upcoming meetup. We are going to be meeting up on November 17th in Burnaby, BC.

We’re going to be chatting about financial planning. This has always been an interesting topic for us. We’ve got a great guest speaker lined up and we’ll share with you those details if you go to meetup page.

We wanted to chat about financial planning because the whole aspect of investing in real estate, buying a home for you to live in, is part of your financial planning. We wanted to know if in this strategy, would your real estate be something that you can count on as part of your retirement? Are other vehicles, like investments or RRSPs, better options than investing in real estate? How does that really fit into your future plans?

We’ve got an expert guest speaker lined up to join us on November 17. Check up our meetup page for the full details.

Financial Planning
Thursday, Nov 17th, 2011
2nd Floor – 3012 Boundary Road Burnaby, BC
Visit our website!


A quick Bank of Canada benchmark rate update:

The Bank of Canada benchmark rate did increase to 5.29%. If you’re not sure what that means, check out some of our old blogs, call us at 1-866-924-5244 to see how does a Bank of Canada benchmark rate change affects you. Are you making a down payment less than 20%? Are you making a 5% down payment or 10% down payment? This might really affect how much mortgage you can get. We’ll also tell you how you can get around that.

Posted in Event | Leave a comment

Average MLS® Resale Price for Local Markets

Posted on November 2, 2011 by kgrainger
Average MLS® Resale Price for Local Markets

City

September 2010

September 2011

Halifax

$ 240,092

$ 253,575

Saint John

$ 172,963

$ 169,290

Quebec

$ 247,184

$ 247,060

Montreal

$ 331,213

$ 352,581

Ottawa

$ 324,841

$ 337,109

Toronto

$ 427,269

$ 465,369

Hamilton/Burlington

$ 316,556

$ 352,581

Winnipeg

$ 222,598

$ 237,421

Saskatoon

$ 312,582

$ 311,057

Regina

$ 240,667

$ 272,295

Calgary

$ 401,080

$ 406,252

Edmonton

$ 325,060

$ 332,782

Vancouver

$ 679,381

$ 751,042

Victoria

$ 485,459

$ 493,522

Source: Canadian Real Estate Association

Posted in Uncategorized | Leave a comment

You’re Invited – Upcoming Meetup: First Time Home Buyer

Posted on August 31, 2011 by Finder Financial

Meetup! You’re Invited: Thursday, September 15, 2011

Today I am here to invite you to our next meet-up. We’re coming up to September 15, which is our next meet-up date.

We will be chatting about the first time home buyer process. As you know in the past, we’ve been chatting about things like leaky condos, condominium developments, landlord highs and lows if you are buying a place to rent out. A lot of the topics were more for people who are already in the home buying market, people who are already searching for a property.

After our last meet-up in July, we actually received quite a few requests for a first time home buyer seminar. So people who are wanting to know what are the home buying steps, what things to look out for, what you’re suppose to do before, during and after the process so that you don’t miss anything. You know where to ask questions from an expert if needed and where you should be doing your own research ahead of time.

First Time Home Buyer
Thursday, Sept 15, 2011
2nd Floor – 3012 Boundary Road Burnaby, BC
Visit our website!

Posted in Event | Leave a comment

Home Inspections and Appraisals

Posted on August 31, 2011 by Finder Financial

Home Inspections and Appraisals

Today I’m here to chat about a question I received from a client recently: how do home inspection and appraisal relate to a mortgage? Are they required, can you skip one if you have the other…basically, what’s involved there?

Home inspection:

Home inspection is pretty self explanatory. This is when you hire a licensed inspector to assess the property. They’re going to look at the condition of its parts, of what they can see, the mechanics of it: so the water heater (how good is it? Is it going to last?), the plumbing, maybe the roof (how long is it going to last and how old is it?), and make assessments based on that suggestion. If they know the roof is 20 years old, they may suggest that you will need to replace it in the next 2 to 5 years. All of these changes would affect the value of the property in your eyes.

In terms of a mortgage, home inspection does not usually come up unless there is something odd about the property that we notice or if there’s some interesting history that the lender or the insurer knows about. Even if you just have a purchase agreement and there have been a lot of price adjustments afterwards and there are notations for repairs or improvements. The lender might want to see a home inspection report just to make sure that these are regular maintenance items or just improvements and not indications of bigger problems in the future.

Appraisal:

An appraisal seems like it is more common in relation to mortgages, but that might not be the case. For an appraisal, you’re getting a licensed appraiser, they usually compare the value of this property to neighbouring properties to give you an objective third party assessment of what the value of this property should be.

You may have experienced this in the past where a lender asked you to get an appraisal for the property. We’ve actually now been able to negotiate with our lenders here at Finder Financial Services, that we do not need an appraisal in every single case. It use to be the norm, and now we’re trying to get away from that to pass the cost savings onto you. Lenders now have ways to do automatic valuations or computerized valuations so they generally know based on all the statistics what the value should be.

In more unique circumstances, for example, a foreclosure, if you’re bidding on a foreclosed property, an appraisal would be necessary and you would be required to provide that. Other than that, usually we can get rid of that process and save you some time and money.

If that’s interesting to you or you wanted to know more, just give us a call at 1-866-924-5244.

Posted in Mortgage Tips, Mortgages Canada | Leave a comment

RRSP Home Buyer Plan Credit

Posted on August 3, 2011 by Finder Financial

RRSP home buyer plan credit

Today we are here to talk about the RRSP home buyer plan credit that you can apply for. If you are looking for a property, it’s your first time buying a house, or you’ve owned a house in the past and you’re waiting to see how long you have to wait until you can use these credits again.

RRSP is one of the more popular home buyer plan credits that you can get. It’s very different from the other first time home buyer credit, which is the property transfer tax credit. Not only do they cover different things, but the qualification is completely different.

First thing about RRSP is that you can take out up to $25,000 from your RRSP account and use that to buy your property. It’s a nice savings, you put the money into RRSP, it is tax free so you have your tax money back, and now you can take it back out tax free and use it for your down payment.

The one thing to note is that it is $25,000 per person. If one spouse has been contributing money into the RRSP, but the other has not, then you can only take out $25,000 from the one person’s name. The other spouse cannot tag along and also take out $25,000 from that person’s account. Chat with your financial advisor and talk about setting up spousal RRSP accounts. Something where the funds that you have in RRSP are more equally divided amongst the different people so when you do need to take out the money, you can apply for $25,000 here and $25,000 there and receive $50,000 in total.

Qualification:

The qualification to be eligible to withdraw home buyer plan funds is very different. There is a 4 year limit. If you or your spouse have owned property in the last 4 years that you live in as your residence, then you are not eligible. It also encompasses you and your spouse together. So if you own the property, your spouse is not on title, but they are your spouse at the time and is within the last 4 years, then you are both not eligible for the RRSP homebuyer plan program. If 4 years has gone by, you sold all of your property, neither of you owned your residence, then you are eligible again to use this program.

This is quite intricate. If you’re curious about that or you’re not sure if you qualify or not, feel free to give us a call at 1-866-924-5244 and we’ll be happy to walk you through the steps. We’ll also let you know about some Government of Canada websites that can walk you through the requirements as well.

Posted in Mortgage Tips, Mortgages Canada, Personal Finances | Leave a comment

What Are the Risks of Co-signing?

Posted on August 3, 2011 by Finder Financial

What are the risks of co-signing?

Today I’m here to talk about what are the risks co-signing or acting as a guarantor for someone on their loan. Whether it’s a car loan, mortgage, or anything in between, there are some real risks that I wanted to address.

You’ve probably heard of this, a parent co-signing for their child to buy a car, or a family member co-signing for another relative to help them buy a house. These are obviously trusted family members or very close people that you know. You’re not out there co-signing for strangers whom you don’t know what their finances are like. It seems as long as you make your choice correctly, there’s not really any risk.

1. What if the other person doesn’t pay?

The first item that I wanted to bring to your attention is if the other person doesn’t pay, they default on their loan and you are now responsible for that debt. The part that seems to catch people off guard is that you are responsible for the entire loan. Not half, not a couple months worth of payment…you are now expected to pay back the entire amount. People don’t seem to expect that when they do get into trouble. Not to mention your credit is going to be affected & collections is going to come after you.

All round, it is a very unpleasant situation, especially if you are dealing with close friends or family members, how do you resolve it in an amicable way and not get yourself in more trouble?

2. What if I co-sign and I want to apply for a mortgage?

The second thing which is even lesser known is what if your friends or family members are making all of their payments? There’s no default, everyone’s credit is perfect, everybody is happy, but you did co-sign for this person and maybe they have a $500 per month car loan.

What if you decide to buy a house now and you need to apply for a mortgage? Even though this car does not belong to you, you don’t make the $500 per month payments, and you don’t get any benefit from this car, you are still responsible for $500 per month. Again, not half, not 2 or 3 months worth of payments, but the entire $500 per month.

What the lenders are going to do when they’re calculating your financial balance sheet is they’re going to say, okay, you already promised this $500. In case that other person doesn’t pay, we’re going to take $500 per month of your income and reserve it. Whatever is left of your income, you can use that to try to qualify for a mortgage. If you make $2000 per month, a quarter of your income is now gone and reserved, and they won’t let you use that in qualifying for a mortgage so you may end up with something a lot smaller than you had initially thought.

So if that’s of concern to you, or you want to know more, there are a lot of intricacies to this that we usually get into with mortgage prequalification, feel free to give us a call at 1-866-924-5244.

Posted in credit score, Mortgage Tips, Mortgages Canada | Leave a comment

How can I figure out if I qualify for a mortgage? Part 2

Posted on July 4, 2011 by Finder Financial

How can I figure out if I qualify for a mortgage? Part 2

Today we’re going to be talking about “How can I figure out if I qualify for a mortgage?” Part II. Today’s focus is more on pre-qualification and pre-approvals and I just wanted to let you know that there’s a lot of lingo and no standard definition for each of these things, so a pre-approval from a bank may mean something different than a pre-qualification or a pre-approval from me. So I’ll let you know what the actual aspects within a pre-approval are or a pre-qualification that you should look for in order to determine if what you have in your hands is actually sufficient for your needs.

1. Pre-qualification:
If you watched or read our last blog you know we’re looking for things like your income, your debts, and your credit history. We take all that information to form a picture of how much money you will be able to borrow and what interest rate you can get, and also the amortization period your payments will be structured within.

So to determine if you have a full pre-approval or pre-qualification done you will be able to get a piece of paper that says something like, based on all the information you actually qualify for a mortgage x amount. There is no range and there are no conditions, either you qualify for x amount or you don’t and maybe you’ll be provided with some suggestions for how you can become qualified for the amount you’re looking for.

2. Rate Hold:
A lot of you out there may have rate holds, but a lot of you may not because you might be thinking if interest rates go up a little bit you’ll get a rate hold then, but you won’t really bother to do it now.

There’s two things you’re risking without a rate hold. Number one is if interest rates are higher you pay more in your mortgage, but number two, I find a little more important, is that if interest rates are higher you actually qualify for a smaller mortgage amount. So think about this, if you’ve been out shopping and finding a house and you finally find your dream home and you go to finalize your mortgage, but interest rates are a little bit higher and you come up $10,000 short what are you really going to do at that time? You can’t get as much mortgage as you originally thought you could

3. Documentations:
You’ve provided all this information about your income, your debts, and your downpayment you do need to provide documentation in order to confirm these facts and if you wait until the very end, like a lot of people, to provide these documents and we find any surprises like if the numbers weren’t coming up the way we thought they were in our application and your employment status is a little bit different than you thought it was then at that point it’s too late you’ve already jeopardized your entire mortgage application if we cannot confirm these documents the way we think they should be written.

So if that’s confusing to you or you have additional questions give us a call and we’ll let you know if what you have in your hands is sufficient, or if it’s a pre-approval or pre-qualification or if you really need a second opinion.

Posted in Mortgage Tips | Leave a comment

How can I figure out if I qualify for a mortgage? Part 1

Posted on June 30, 2011 by Finder Financial

How can I figure out if I qualify for a mortgage? Part 1

Today we’re going to get a quick overview into “How can I figure out if I qualify for a mortgage?” A lot of you out there might not be sure what it is that we, mortgage coordinators, are looking for when we ask all these questions on your mortgage application; how much money you make, all of your past credit, credit cards, and all that stuff. These questions seem very invasive, but I’ll let you know what it is that lenders and banks are looking for when they’re asking you all these questions.

The three parts of qualifying for a mortgage are:

1. Your income:
Obviously you’re arranging a mortgage and you’re promising to repay a bank or lender, for example, the next five years. We want to look at not only how much money you make, but also your employment history, employment stability, and status. We want to know how reasonable it is to assume you will be able to make this amount of money for the next five years to pay off your mortgage.

2. Debts:
So obviously as money comes in, money goes out and at this point in your life you may have incurred some debts, like student loans, credit card debts, and even car loans and all the money that’s coming in is just going right back out to pay for those previous debts. This would indicate you don’t have much left over in order to arrange a mortgage and pay that as well.

3. Your credit:
This is sort of related to your debt, but not really. Credit is a history of your previous debts recorded in one easy to read place, now they look at how well you have been paying your previous debts, things like student loans, credit card, car loans, if you’ve ever missed any payments, if you’ve ever filed any bankruptcy or collections. What they do is they calculate all of those and assign a number, which ends up being your credit score. The higher the number the better, which essentially means when our banks and lenders look at your application, if it’s a nice high number, they are quite willing to lend you money because based on your past history, it is quite likely you will be able to repay this mortgage in the future.

Now obviously there’s some other issues like your downpayment, you do have to satisfy some downpayment requirements and once you are pre-qualified and you find yourself a property the property itself will also need to be looked at. The lender won’t lend you money if the house is going to fall over and be worth nothing in the next few years. If you have any questions please feel free to contact us and stay tuned for Part II of this topic coming soon!

Posted in Mortgage Tips, Uncategorized | Leave a comment

Finder Feed – Meetup! You’re Invited: Wednesday, June 22, 2011

Posted on June 2, 2011 by Finder Financial

Finder Feed – Meetup! You’re Invited: Wednesday, June 22, 2011

Today I’m here to invite you to our next meetup! We will be discussing presale developments in particular why not buy a presale development and also when you should buy a presale development.

We’ll be meeting up on Wednesday, not Thursday this time, June 22nd at 6:30 PM. The reason for the change is we were lucky enough to invite Vic Jang, our special guest, who will not be available on Thursday. He will be talking to us about presale developments because he’s been involved in quite a few of them over the last 20-30 years.

For myself I’ve always thought that presale developments are a great option, but in the past meetups we’ve been talking about leaky condos, foreclosures, estate sales and everything that might have a problem with it, but might get you a great deal. On the flip side I always thought that presales developments were great option because you get a brand new place nobody’s lived in it and it’ll be hassle free, worry free and you’ll pay today’s price for something two year’s later, and the price is sure to increased. Sounds like a great situation, but there are actually a lot of things you might need to look out for. If you are think about it you’re paying a deposit today, but there’s nothing there yet, no tangible apartment building for you to look at yet and you won’t know how well built the place will be or how reputable the developer is. We’re going to be sharing a lot of that information with you and after the meetup if you decide that you want to buy a presale development because you’re armed with more knowledge and you’re more comfortable with your decision you’ll know what to look out for, what questions to ask.

Make sure you remember to RSVP on our page because there will be a prize draw at the end of the night for those who have RSVP’ed online (the draw excluded people who are just drop-ins).

Posted in Event | Leave a comment