Mortgage Calgary

There are many stresses associated with homebuying – both financial and emotional. And frankly speaking, it doesn’t help that the process comes with its very own foreign language. While your mortgage broker can help de-mystify these terms, it helps to have a bit of a primer on what some of these terms mean. After all, it’s your money and your home we’re talking about; as a Mortgagor, you have a right to understand what you’re reading. (You didn’t know you were a mortgagor? Read on)

We’ll start with Amortization and Term. Both refer to periods of time in the life of your mortgage, and you’ll want to be sure that you understand the difference.

The amortization of your mortgage is the length of time that would be required to reduce your mortgage debt to zero, based on regular payments at a specified interest rate. The amortization period is typically 15, 20 or even 25 years, although it can be any number of years or part-years. You could establish that you are able to make a certain payment each month of say $950 for your $130,000 mortgage at 5.5%. In this case, your amortization period will be just under 18 years. Or you could tell your broker that you’d like to be mortgage-free in just 10 years. With an amortization period of 10 years at the same interest rate, your $130,000 mortgage will cost you about $1,407 per month. That’s a tougher monthly payment, but you would save thousands of dollars in interest. (More than $35,000, in fact.) As you arrange your mortgage, then, keep in mind that your amortization period may be fairly long – although the shorter you can make it, the less you’ll wind up paying for your home in the long term.

The term of your mortgage will typically be shorter. The term is the duration of your mortgage agreement, at your agreed interest rate. This will be a very specific length of time, although you will have several choices. A six-month mortgage is a very short-term mortgage. A 10-year mortgage will be one of the longest terms, generally with a higher rate of interest to represent the higher degree of uncertainty in the economic outlook. After your mortgage term expires, you will need to either pay off the balance of the mortgage principal, or negotiate a new mortgage at whatever rates are available at that time.

Now, back to the term Mortgagor. This is one of three very similar terms: Mortgagee, Mortgagor, and Mortgage. A Mortgagee is the lender of the money: a bank, company, or individual. A Mortgagor is the borrower: the person or persons (or company) that is borrowing the money, and who will pay it back to the mortgagee. The Mortgage, of course, is the legal document that pledges the property as a security for the debt.

- Sherry Jenkins is a Mortgage Consultant with Mortgage Intelligence. Feel free to contact her at (403) 804-3694 or www.mortgage-choice.ca.

Where the heck does it all go? Youre looking at your T4 slip from last year, or maybe your most recent pay stub. Sure, many people wish that those numbers after the dollar sign were a little higher, but its the vanishing act that alarms you most. Tax time is especially sobering; you can see how much money you made, but your credit card is still maxed out and you dont have much to show for a years income.

If youre looking for the holes in your wallet, start by making a list of your debts. Are your credit cards teetering at the top of their limits? Do you make regular use of your overdraft protection at the bank? Do you have escalating tax liabilities? What about any department store cards? And quick what was the interest rate on those balances last month? Have you added it up? Many Canadians are startled to see how much they are actually paying to service their debt.

Industry Canada, which monitors consumer data, reports interest rates for department store credit cards as high as 28%. Even competitive-rate credit cards will often run at 18% or more. And this is at a time when the lowest mortgage rates are dropping below 5%.

Why do the banks and department stores charge such high rates? These are unsecured debts, meaning that if you default on the debt the lender has no easy recourse to recover the money. Not surprisingly, they charge a higher rate sometimes a MUCH higher rate to compensate for the higher risk that an unsecured debt represents. A house is considered a reliable security, so mortgages often offer the best rates available anywhere.

Consider this, then. If you have equity in your home, you can take advantage of attractive mortgage rates to save a bundle on interest charges. Compare current mortgage rates with the rates charged on your other debts. Get some professional advice on whether it might pay to do some refinancing and roll your other debt, such as credit card debt and tax liabilities, into your mortgage. You can consolidate your debt into fewer payments, save some money on interest, and improve your cash flow.

You have a few options: A secured line of credit could provide you with funds up to 75% of the value of your home, minus any mortgage debt on the home. You can look forward to a substantial reduction in the interest rate, and all you need to pay each month is the interest. You can do the math on this comparison yourself, or talk to a mortgage professional. If you are carrying credit card debt, youll be shocked at what you can save with a secured line of credit.

You could also consider increasing your existing mortgage. If your mortgage is coming up for renewal, this is the perfect time to reorganize and consolidate your debts at todays excellent rates. Even if you are in the last year or two of your mortgage, it may make sense to re-negotiate your mortgage now and roll in your other debt at a low rate. Or, you may be able to benefit from this kind of debt consolidation through a second mortgage.

- Sherry Jenkins is a Mortgage Consultant with Mortgage Intelligence. Feel free to contact her at (403) 804-3694 or jenkins.s@mortgageintelligence.ca

We’ve all heard the old stories. A successful, self-employed Canadian who can work wonders in his or her professional life can’t manage to secure a decent mortgage for a home. It strikes us as both ridiculous and unfair – given that nearly one Canadian worker in six is now self-employed. After all, these are some of the most independent and ambitious people in the country.

Thank goodness that times have changed for the self-employed. Policy changes at the Canadian Mortgage and Housing Corporation (CMHC) have begun to acknowledge the contribution and financial status of self-employed Canadians.

These days, self-employed homebuyers have the same access to mortgages as their salaried counterparts. It doesn’t matter what the nature of your income structure: whether you work on contract, whether your work is seasonal, or whether you’re a small business owner or an independent professional.

Now, newly self-employed Canadians can also get credit for their past work experience. Until early this year, you needed to demonstrate at least two years of employment in your own business, but that rule has been changed. Now, if you have two years experience in your field of expertise – whether you were salaried or self-employed – you can meet the new CMHC standard.

The new guideline is great news for self-employed Canadians who have extensive experience in their chosen field, but who are newly in business for themselves in that field. For example, maybe you’ve been building cabinets for years in a salaried workplace, and have decided to step out on your own. Now you can get credit for your experience.

The CMHC guidelines specify that you should be performing essentially the same function with the same skill requirements for your past experience to qualify. For the tens of thousands of Canadians pursuing their dream of self-employment in their field of expertise, the new guideline is great financial news.

The CMHC guidelines apply to any mortgage insured by CMHC, from any institution. It’s worth noting, of course, that some lending institutions are friendlier to the self-employed than others. Many lenders are still most comfortable with the traditional parameters for verifying employment and income. A steady stream of pay stubs is the simplest method of assessing your ability to service the mortgage debt.

If you’ve been self-employed for a few years, your lender may want to see detailed financial statements for the most recent years. That can be a problem. An astute business owner with a good accountant will be working hard to minimize taxable income for the business: a smart financial strategy. But according to traditional lending formulas – that business strategy could flag you as a high-risk borrower.

The most flexible and innovative lenders have discarded the old formulas for their self-employed clients. Some of the best mortgages for self-employed Canadians don’t even require proof of income. You could qualify for your mortgage simply on your own good credit and employment history.

If you’re self-employed, or considering taking the plunge into business for yourself, the latest mortgage news is encouraging. Check out your options and get the credit you deserve.

- Sherry Jenkins is a Mortgage Consultant with Mortgage Intelligence. Feel free to contact her at (403) 804-3694 or jenkins.s@mortgageintelligence.ca

Last week, Seniors Money International became just the second company in Canada to offer reverse mortgages. Canadian Home Income Plan Corp., or CHIP, has offered reverse mortgages for the last 20 years without competition. So what does all this mean for you?

Lets start out by looking at what exactly a reverse mortgage is by contrasting it to a normal mortgage. In a mortgage the homeowner makes a monthly payment to the mortgage lender. After each payment, the homeowner’s equity increases within his or her property. At the end of the term, the mortgage is paid in full and the property is released from the lender. In a reverse mortgage, the home owner makes no payments and all interest is added to the lien on the property. If the owner receives monthly payments, then the debt on the property increases each month.

A reverse mortgage is appealing to seniors because they can get money for their house without having to move. Let’s face it, selling your house and moving to a new one is a daunting task for anyone, espicially for older people.

In an interview with CBC, a CHIP official was quoted as saying, “The debt (from a reverse mortgage) will increase and it will double every seven to eight years. That’s a financial fact.” In addition to the compounding debt, there are initial costs of setting up the reverse mortgage, which is usually at least $1000.

So what are your alternatives if you want money but don’t want a reverse mortgage? Consider taking out a line of credit with the house as collatoral (called a reverse mortgage line of credit), or rent out a portion of your home. If you don’t mind moving, consider downsizing to a smaller home or simply rent an apartment.

Many experts say only consider a reverse mortgage as a last option. Critics of the financing option say it takes advantage of seniors who don’t want to leave their homes and often don’t fully understand what they are getting into. Regardless of your choice, be sure to educate yourself on all aspects of the reverse mortgage.

Is a reverse mortgage right for you? If you answer “no” to any of these, you may want to seek other options.
• Does owning a house benefit you more then living in an apartment would for now and in the future?
• Can you accept the fact that your debt from your reverse mortgage can double in less then seven years, thanks to compounding debt?
• Can you cover all home expenses, including taxes, and insurance? If not, the lender may be able to demand full mortgage
repayment!
• Do you know all of the options besides a reverse mortgage that are available to you? Do you know the market value of
your house right now?