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Mortgage prep

Planning for a mortgage? What you need to know and how a Mortigo Mortgage Team can help!

Buying a home

We make buying easy. Start your home buying journey with Mortigo Mortgage Team and let us guide you through your mortgage process.

refinancing

Many reasons to consider refinancing. Lower your payment, remove mortgage insurance, or do home improvement projects. Let us guide you through every stage of your journey.

Mortgages in "general"

Benefits of using a mortgage professional. How much does it cost?
Home Equity, Mortgage Life Insurance, Business for Self (BFS).

FAQ

Got mortgage question? Meet Mortigo, the little mortgage mythbuster! Mortigo is here to answer all of your questions about obtaining a mortgage through a licensed professional! Scroll down to see the FAQ’s. Don’t see your question? E-mail her at Hello@mortigo.ca

Calculators

Coming soon

Mortgage prep 

Understanding your credit score

One of the important factors in home ownership is understanding things like your credit score.  Some people don’t pay much attention to this metric until they begin the mortgage discussion! However, you will find that your credit score is one of the most important factors when it comes to qualifying for a mortgage at the best rate – and with the most purchasing power.

Whether you qualify for a mortgage through a bank, credit union or other financial institution, you should be aiming for a credit score of 680 for at least one borrower (or guarantor), especially if you are putting under 20% down. If you are able to make a larger down payment of 20% or more, then a score of 680 is not required.

If you are not sure what your current credit score is, you can find out through Canada’s two credit-reporting agencies: Equifax Canada and TransUnion Canada. Once you have your credit score, always double check that there are no mistakes and ensure you dispute any problems if applicable.

What If I Don’t Meet The Minimum Credit Score?

If your credit score is accurate, but does not meet the minimum requirements, you will want to look at your current debt. Home ownership is an incredible investment, but it is also costly. Fortunately, there are a number of things you can do to improve your credit score as well as your future financial success, including:

  • Paying your bills in full and on time. If you cannot afford the full amount, try paying at least the minimum required as shown on your monthly statement.
  • Pay off your debts (such as loans, credit cards, lines of credit, etc.) as quickly as possible. Work on paying the ones with the smallest amount owing first and work your way towards the larger amounts.
  • Stay within the limit on your credit cards and try to keep your balances as low as possible.
  • Reduce the number of credit card or loan applications you submit.

There is also the option of going with an Alternative Lender (or B Lender) if you are struggling with credit issues. Mortigo Mortgage Professional can help review your credit score and provide you with options for your mortgage needs.

Determine your budget

Now that we have talked credit, it is time to consider budget! We know, we know… but we promise, you’re almost there!

When talking budget, it is important to consider the purchase price budget, as well as your cash flow budget. Being house rich and cash poor makes for a no-fun home! The home price based on your cash flow budget may be dramatically different than the budget home price you qualify for.

The benefit of a budget is two-fold. Not only does it help you to understand your purchase price range and help you to find an affordable home, but it can also help you to see any gaps in your budget or opportunities for future savings. This will be instrumental when you become responsible for mortgage payments.

Secure your down payment

For those of you who don’t know, your down payment is the amount of money you need to put down on your new home. Once you have determined your budget, you will have an accurate idea of the final cost of the home you can afford and what you will be intending to spend. This will allow you to estimate your down payment and start saving! The ideal down payment for purchasing a home is 20%. However, we understand in today’s market that is not always possible. Therefore, it is important to note that any potential home buyer with less than a 20% down payment MUST purchase default insurance on the mortgage, and they must have a minimum down payment of 5%. For example: If your budget for purchasing a home is $500,000 then you would be looking to produce a down payment of $100,000 ideally or $25,000 minimum with insurance. If your budget is over $500,000, keep in mind the minimum down payment will be 5% for the first $500,000 and 10% for the remaining portion. If you end up purchasing a home that is over $1 million, you will be required to put 20% down.

Sources Of Down Payment

The down payment on your home could come from your own savings such as a savings account or RRSPs. Thanks to the federal government’s Home Buyers’ Plan, potential first-time home owners are able to leverage up to $35,000 of your RRSP savings ($70,000 for a couple) to help finance the down payment. A gift of a down payment from an immediate relative is also acceptable. Quick Tip: If your down payment comes from TFSA or RRSP, the bank will want 90 days of statements to ensure the funds are accounted for. Gifted funds rarely require 90 days of proof. It is always a good idea to check with a Mortgage Professional for qualifying criteria and availability to ensure your source of down payment is eligible.

Closing Cost

After you have secured your down payment, it is also important to mention that you will need to have the closing costs available upon finalizing the purchase of your new home. These costs can range between 1 – 4% of the purchase price.

Understand your mortgage options

When it comes to mortgages, there can be a lot to know! Do you go with a fixed-rate mortgage or a variable-rate? What are the terms? What are the penalties? Which is the best payment frequency? With so many questions and so many lender options, it can be hard to find the best solution for you. That is where a Mortigo Mortgage Professional can help.

Rate is only ONE of the many features in selecting the best mortgage product that meets your financial goals. With access to dozen  of lending institutions, Mortigo Mortgage Professionals are familiar with a variety of mortgage products allowing them to help find the best mortgage for YOU! Plus, unlike banks, mortgage agents are a third-party service focused on YOUR needs. This means that you can get the best rates and unbiased advice all for FREE from someone whose only goal is helping you achieve your dream of home ownership.

Have your paperwork in order

When you apply for a mortgage you will typically need to provide a standard package of documents, which almost always includes:

  • Your government-issued personal identification
  • One month of recent pay stubs from any applicants who will be listed on the loan
  • Letter of employment
  • Your most recent two years’ worth of personal CRA tax filings and financials (if incorporated)
  • Three months of bank account statements
  • Your down payment (minimum 5%)
  • Documentation to explain any unusual (generally non-payroll) large deposits or withdrawals

Get Pre-Approved!

To have the best success with your mortgage, it is recommended that you get pre-approved! This can be done through Mortigo Mortgage Professional to ensure that you get the best mortgage product FOR YOU, from the best rate to the best term agreement.

While getting pre-approved might sound boring (and you might be asking ‘why can’t I just get approved instead!?’) there are actually a host of benefits which will make searching for your perfect home that much easier.

  • Pre-approval helps verify your budget and allows your real estate agent to find the best home in your price range. Quick Tip: Don’t forget about the closing costs! These range from 1 to 4% of the purchase price and should be factored into your budget.
  • Pre-approval guarantees the rate offered and locks it in for up to 120 days. This protects you from any increases in interest rates while you are shopping (phew!). Make sure to ask exactly how long your pre-approval is good for!
  • Pre-approval lets the seller know that securing financing should not be an issue, which is beneficial in competitive markets!

Protecting Your Pre-Approval

While nothing is fully approved until the property is presented to the lender and signed off, there are ways to help protect your pre-approval and ensure the rates and terms are guaranteed upon final financing. In order to do this, we suggest you:

  • Refrain from having additional credit reports pulled once you have been pre-approved
  • Refrain from applying for new credit, closing off credit accounts or making large purchases until after the sale is complete
  • Be prepared to show a paper trail – any unusual deposits in your bank account may require an explanation.

Start shopping!

You made it!! Once you have your down payment and have qualified for a pre-approved mortgage (your credit score is in order and all documentation has been provided), you are ready to start searching for your perfect home. Your Mortgage Professional can give you recommendations for a realtor, if you don’t have one already.

Closing Tips

  • Clean up your debt and credit score. These two things will carry you through your financial life, so it is important to learn the right habits and put the work in now.
  • Get pre-approved! It is worth it.
  • Stick to your budget! You went through a lot of effort to prepare it, so don’t look at anything over your budget (even if that house has a REALLY great pool!).
  • Don’t forget about closing costs and additional fees! Leave room in your purchase price for these things.
  • Ask questions! Anything you are unfamiliar with or are uncomfortable with, ASK! That is what your Mortgage Professional and realtor are here for.

Mortgage questions?

Got mortgage question? Meet Mortigo, the little mortgage mythbuster! Mortigo is here to answer all of your questions about obtaining a mortgage through a licensed professional! Scroll down to see the FAQ’s. Don’t see your question? Call us, Schedule a call, meeting or E-mail her at Hello@mortigo.ca

Buying a Home

First time homebuyer

Being on the path to purchasing your first home is one of the most exciting and most rewarding moments in life! While people don’t always dream of the perfect mortgage, we do grow up dreaming of a white picket fence and our dream home. Even if you imagined your dream home as a 6-bedroom mansion, we all have to start somewhere!

 

This first-time home buyer section will take you through the important steps and considerations for your first home, including:

  • Determining whether you are ready for home ownership
  • Costs of home ownership
  • The process of buying your first home
  • Securing your down payment
  • Mortgage pre-qualification and pre-approval
  • Financial Approval
  • Closing day

Let’s get started.

 

Before you jump on in, there are some things you should ask yourself. As amazing as it is to be a first-time home buyer, it is important to remember that this is likely the largest financial decision you will ever make. There are a few questions you can ask yourself to make sure you’re ready to take this incredible leap!

  1. Are you financially stable?
  2. Do you have the financial management skills and discipline to handle this large of a purchase?
  3. Are you ready to devote the time to regular home maintenance?
  4. Are you aware of all the costs and responsibilities that come with being a homeowner? Let’s find out!

 

There are two major costs associated with home ownership – let’s make sure you’re ready to take it on!

Upfront Costs: The initial amount of money you need to buy a home, including down payment, closing costs and any applicable taxes.

Ongoing Costs: The continued cost of living in a home you own, including mortgage payments, property taxes, insurance, utility bills, condominium fees (if applicable) and routine repairs and maintenance. It is also important to keep in mind potential major repairs, such as roof replacement or foundation repair, that may be needed now or in the future. In addition, if you choose a property that is not hooked up to municipal services (such as water or sewer) there may be additional maintenance costs to consider.

 

Regardless of whether you choose a mortgage professional or traditional bank, the first step begins with your down payment.

The minimum down payment on any mortgage in Canada is 5 percent but putting down more is beneficial whenever possible as it will lower the amount being borrowed. However, if you can only afford the minimum that is perfectly okay! Just remember, if you are putting down less than 20 per cent to purchase your home, default insurance will be mandatory to protect the investment.

Ideally, individuals looking to purchase their first home will have built up a nest egg of savings that they can apply towards a down payment. However, we know this is not possible for everyone so if you don’t have it all saved, don’t worry! Besides being a vital savings plan for retirement, RRSPs can be a great resource for first-time home buyers and can be cashed in up to $35,000 individually towards a down payment. In fact, most mortgage professionals will tell you nearly half of all first-time buyers use their RRSPs to help with the payment. Those first-time buyers who choose this option will have 15 years to pay it back and can defer these payments for up to two years if necessary. Always remember though, deferring a payment can increase the time to pay off the loan and you will still owe the full amount!

Another option for securing your down payment is a gift from an immediate family member, typically a parent. All that is required for this is a signed Gift Letter from the parent (or family member providing the funds) which states that the money does not have to be repaid and a snapshot showing that the gifted funds have been transferred.

 

Once you have your down payment and are ready to realize the dream of owning your first home, you must get pre-qualified!

This process provides you with an estimate of how much you can afford based on your own report of your financial situation. The benefit of this is that it sets the baseline for a realistic price range and allows you to start looking for that perfect home within your means! Now this process is not a mortgage approval, or even a pre-approval but it helps to establish your budget. You must supply an overview of your financial history (income, assets, debt and credit score) but the real requirements come with the pre-approval process where you submit your actual documentation.

 

While this may seem similar to pre-qualification, the pre-approval process requires submission and verification of your financial history to ensure the most accurate budget to fit your needs.

As a result, getting pre-approved can help determine:

  • The maximum amount you can afford to spend
  • The monthly mortgage payment associated with your purchase price range
  • The mortgage rate for your first term

 

Not only does getting pre-approved make the search easier for you, but helps your real estate agent find the best home in your price range. Temptation will always be to start looking at the very top of your budget, but it is important to remember that there will be fees, such as mandatory closing costs, which can range from 1 to 4% of the purchase price. Factoring these into your maximum budget can help you narrow down a home that is entirely affordable and ensure future financial stability and security.

Getting pre-approved doesn’t commit you to a single lender, but it does guarantee the rate offered to you will be locked in from 90 to 120 days which helps if interest rates rise while you are still shopping. If interest rates actually decrease, you would still be offered the lower rate. Another benefit to pre-approval is that, when it comes time to purchase, pre-approval lets the seller know that securing financing should not be an issue. This is extremely beneficial in competitive markets where lots of offers may be coming in.

 

Protecting Your Pre-Approval

  • Refrain from having additional credit reports pulled once you have been pre-approved
  • Refrain from applying for new credit, closing off credit accounts or making large purchases until after the sale is complete
  • Be prepared to show a paper trail – any unusual deposits in your bank account may require explanation. Also, if your down payment comes from savings, the bank will want 90 days of statements to ensure the funds are accounted for.

You’re almost there! Financial approval is the last step to getting your mortgage and buying your first home! You will need to keep in mind that just because you are pre-approved, it doesn’t guarantee that the final mortgage application is approved. Being entirely candid with your home-buying team throughout the process will be vital as hidden debt or buying a big-ticket item during your 90-120-day pre-approval can change the amount you are able to borrow. It is best to refrain from any major purchases (such as a new car) or life changes (such as changing jobs) until after closing and you have the keys to your new home!

 

Phew, you made it. Closing day is one of the most exciting moments where all the house hunting and paperwork really pays off! It is on this day that you will want to make use of your lawyer or a notary.

 

To complete the process of closing the sale, your lender gives your lawyer the mortgage money. You would then pay out the down payment (minus the deposit) and the closing costs (typically 1 to 4% of the purchase price). Typically, this payment is done through a bank draft, which will require a bank run ideally 10 days before closing, which is then brought to the lawyer on your closing date. From there, the lawyer or notary then pays the seller, registers the home in your name and gives you the deed and the keys!

 

Congratulations, you are now a home owner!!

New to Canada

Canada has seen a surge of international migration over the last few years and, with all these new faces in town wanting to plant roots in this great country, we wanted to touch base on some of the details surrounding mortgages and how new immigrants can qualify to be homeowners!

 

Buying a house is an exciting step for anyone, but it is especially so for individuals who are new to the country. As daunting as it may seem, purchasing a home is completely possible with a little knowledge and preparation.

 

If you are new to Canada and looking to get a mortgage, connect with a Mortigo Mortgage Professional today for expert advice and options that best suit you!

 

If you are already a Permanent Resident or have received confirmation of Permanent Resident Status, you are eligible for a typical mortgage with a 5% down payment – assuming you have good credit.

Some additional criteria for qualifying includes:

  • Must have immigrated or relocated to Canada within the last 60 months
  • Must have a valid work permit or obtained permanent residency
  • All debts held outside of the country must be included in the Total Debt Servicing Ratio (GDS/TDS)
    • Rental income earned outside of Canada is excluded from the GDS/TDS calculation
  • Guarantors are not permitted
  • Owner-occupied properties if putting less than 20% down payment

For Permanent Residents with limited credit, or individuals who have not yet qualified for Permanent Residency, there are still options! In fact, there are several ‘New to Canada’ mortgage programs through CMHC, Sagen™ and Canada Guaranty Mortgage Insurance, which cater to this group of homebuyers.

 

New To Canada Programs

To qualify for these New to Canada programs, you must have immigrated or relocated to Canada within the last 60 months and have had three months minimum full-time employment in Canada.

For individuals looking for 90% credit, a letter of reference from a recognized financial institution OR six (6) months of bank statements from a primary account will be required.

If you are seeking credit of 90.01% to 95%, you will need to produce an international credit report (Equifax or Transunion) demonstrating a strong credit profile OR two alternative sources of credit demonstrating timely payments (no arrears) for the past 12 months. The alternative sources must include rental payment history and another alternative, such as hydro/utilities, telephone, cable, cell phone or auto insurance. 

 

Another option for New to Canada residents, depending on your residency status and credit history, are alternative lenders such as B-Lenders and MICs (Mortgage Investment Corporation). It is important to note that alternative lenders will require a down payment of 20%.

Alternative lenders cater to individuals which lack a strong credit history, or a guaranteed income (recent immigrants, or the self-employed, for instance). As a result, these lenders generally have lower entry qualifications, which are offset by higher interest rates. 

 

Why Is Alternative Lending Necessary?

  • CRA arrears 
  • Income issues such as non-traditional income as with self-employed borrowers
  • Credit issues such as low credit score, credit arrears, current mortgage or even bankruptcies 
  • Unexpected liens on title 
  • Foreclosure situations 
  • Unique financing needs/opportunities

If you do not qualify for the New to Canada programs, or a standard mortgage, reach out to a Mortigo Mortgage Professional and they can help you navigate the alternative options! 

 

Using a mortgage professional will help to ensure you understand your options and they can help you determine the best program and mortgage choice for you. Before you talk with a mortgage professional, there are a few things you need to know when it comes to submitting an application – and getting approved – for your first mortgage in Canada:

Supporting Documents! 

If you’re new to the country and have weak credit, supporting documents will come in handy. These may include: proof of income, proof of 12 months’ worth of rental payments or letter from landlord, documented savings, bank statements and/or letter of reference from a recognized financial institution. These documents all paint the picture of whether or not you are a safe investment for a lender.

Build your Credit Rating!

This is one of the most important aspects to getting a mortgage as credit rating determines your reliability as a borrower and will determine your down payment rate. One of the best ways to build your credit is by getting a credit card that you use and pay off each month. Paying other bills such as utilities, cell phones and rent can also contribute to your credit score and reliability.

Start Saving! 

One of the most expensive aspects of home ownership is the down payment, which is an upfront cost and one that is vital to securing your future. As mentioned, the down payment can be as little as 5% to 10% depending on your status. However, if you’re paying $500,000 or more for your home, the minimum down payment will be 5% for the first $500,000 and 10% of any amount over $500,000 – regardless of your residency status.

Choose a Mortgage Provider! 

Once you are ready to get your mortgage, it is best to contact a Mortigo Mortgage Professional who can help you determine the best mortgage solution to suit your needs. They may even be able to find you some extra savings!

 

 

Second property

So, you are looking to purchase a second property! Congratulations! This is an incredible opportunity and we are here to help provide you with the keys to success to expand your financial portfolio and ensure stability for the future. 

 

Before you launch into this purchase there are a few things you should know, such as how to purchase a second property by tapping into existing home equity, the differences in requirements for vacation vs. rental or investment properties and who can qualify.

 

In the case of purchasing a secondary property, most lenders will allow you to borrow money against the equity you have in your current home and use it as a down payment for a second home. Before jumping in, it is important to understand the different financing options to determine which route best suits your circumstances and property goals.

 

Refinancing

One option for tapping into your home equity for the purpose of purchasing a secondary property, is to refinance your mortgage. Essentially, mortgage refinancing means getting a reevaluation on your home and then redoing your mortgage based on the current value. This will allow you to tap into the equity your home has built over the years, and pull out the extra funds for a down payment on your secondary property.  Keep in mind, when using some of your current equity, it will increase the principal amount and the interest payments on your mortgage as the mortgage is now refinanced at a higher amount.

 

HELOC

There is a second option to unlock your home equity, which is through a line of credit or a HELOC, which stands for “Home Equity Line of Credit”. This option allows you to borrow money using the equity in your property, with the property as collateral. 

A HELOC serves as a revolving line of credit to allow the borrower to access funds, as needed, letting you utilize as much (or as little) equity as required. HELOC payments are unique as they are interest only payments versus regular mortgages, which have both Principal Interest and Tax added on. Another benefit to utilizing a HELOC is that you will only pay interest on the amount you actually use! This can provide financial breathing room, especially during tight months. That said, if you do choose to pay the interest as well as a portion towards the principle, it can help you pay off the loan much faster. 

You can utilize a HELOC by tying it to your existing mortgage or applying for it separately.

In Canada, you are able to borrow up to 65% of your home’s value using this method. However, keep in mind, your HELOC balance AND current outstanding mortgage cannot exceed 80% of your home’s value when added together. 

 

Vacation Property

Buying a vacation property is essentially like purchasing a second home. The minimum down payment remains 5% of the purchase price and will require the same processes as your first mortgage. If you are purchasing a non-winterized vacation home, or will not have year-round access, then you will be required to put down 10%.

It is also important to note that if you plan to use your vacation home to provide rental income as this will have different requirements.

 

Intention to rent

If you are purchasing a secondary property – whether a vacation home or investment property – there are a few differences if the intention is to rent. Before you look at purchasing a rental property, there are a few things to consider:

  1. The minimum down payment required is 20% of the purchase price, and the funds must come from your own savings; you cannot use a gift from someone else.
  2. Only a portion of the rental income can be used to qualify for and to determine how much of a mortgage you can afford to borrow. Some lenders will only allow you to use 50% of the income added to yours, while other lenders may allow up to 80% of the rental income while subtracting your expenses. This can have a much higher impact on how much you can afford.
  3. Interest rates will usually have an added premium on them when the mortgage is for a rental property versus a mortgage for a home someone intends on living in. The premium can be anywhere from 0.10% to 0.20% on a regular 5-year fixed rate.

Rental income from the property can be used to debt service the mortgage application, but do bear in mind that some lenders will have a minimum liquid net worth requirement outside of the property.

Along with the added monthly cash flow, rental properties have an added benefit of being able to write-off interest on ANY money used for the rental, even if it is pulled from your primary home’s equity. Also, if you do eventually want to sell this property, do note that it will be subject to capital gains tax. Your accountant will be able to help you determine potential write-offs and required tax payments if you do decide to sell in the future.

 

You might be surprised to learn that you don’t need to be one of the uber rich or make six figures to have second properties. You just need to have knowledge, determination and a financial plan!

When it comes to purchasing a secondary property, whether for investment, rental or vacation, it can be a great opportunity! Before taking on a secondary property, you will need to have your down payment in order (whether from savings or home equity) based on the minimum requirements. It is also important to have a sufficient credit score to qualify (680 or higher) for a conventional mortgage. However if your credit score has not reached 680, there are still options. Alternative or B Lenders can be great solutions for individuals with credit challenges, while still helping you purchase your dream home!

In addition to the down payment, you will also need to pass the stress-test to prove that you can financially carry both mortgages. Also to keep in mind, there may be potential barriers with lenders as most will limit the number of mortgages within a portfolio. If this is only property number two or three, you shouldn’t have any concerns. However, as you expand your portfolio, you may run into a limit at five properties (at which point you would be considered a commercial file).

 

 

Moving?

Life is constantly changing, from your career to your family, as we climb up the ladder of life. With these life changes, your current home may no longer be working for you.

If you’re feeling cramped in your tiny apartment or have a little one on the way, it may be time to consider moving on up! For those of you who feel that your current home is too big, or requires too much maintenance, then now might be a good time to scale down!

Regardless of the reason you are looking to move from your current digs, there are some things to consider, such as your current mortgage and potential costs of moving.

If you are wanting to up- or down-size your home, and are doing so during your current mortgage cycle, there are a few things to keep in mind. The first, is that making any change to your mortgage during your mortgage term is considered “breaking” the mortgage.

 

PORTABILITY

If your mortgage is portable, moving up and scaling down will be much simpler. If you are unsure of the term, “porting” your mortgage refers to taking your existing mortgage (including your rates and terms) and transferring it from the original property to another. This can only be done if you’re purchasing a new property at the same time you’re selling your old one. However, unlike mortgage refinancing, porting does not require you to break your mortgage or pay penalties.

 

CONSIDER THE PENALTIES

Whenever you break your mortgage, there are penalties associated with that as it is a contract. Depending on the type of mortgage you have (variable vs. fixed-rate) and how much time is left (1-year, 2-years, etc.) will determine the level of penalty. Typically, these are calculated in one of two ways:

Interest Rate Differential:

In Canada there is no one-size-fits-all rule for how the Interest Rate Differential (IRD) is calculated and it can vary greatly from lender to lender. This is due to the various comparison rates that are used. However, typically the IRD is based on the following:

  • The amount remaining on the loan
  • The difference between the original mortgage interest rate you signed at and the current interest rate a lender can charge today

Ideally, you will want to be aware of what your IRD penalty would be before you decide to break your mortgage as it is not always the most viable option.

Three Months Interest: 

In some cases, the penalty for breaking your mortgage is simply equivalent to three months of interest.A variable-rate mortgage is typically accompanied this penalty.

 

Re-Qualifying

If you are unable to port your mortgage, you would need to re-qualify for a new mortgage at the current rates offered by lenders and would be subject to government changes – including recent “stress test” rules.

If it has been a while since you bought your first home, you may be unfamiliar with the “stress test”. If you are purchasing a new home, with a new mortgage, it is important to understand what this test is as it is a requirement to qualify.

The Stress Test was originally introduced in October 2016 for insured mortgages (down payments of less than 20%), but as of January 1, 2018 this now includes all mortgages, regardless of down payment percentage. This test determines whether a home buyer can afford their principal and interest payments, should interest rates increase. It is based on the 5-year benchmark rate from Bank of Canada or the customer’s mortgage interest rate plus 2% – whichever is higher.

When it comes to moving on up, it can be extremely exciting – and rewarding – as long as you consider all the costs. When up-sizing, some of the costs to consider include:

  • Costs to sell your current home
  • Purchase price on the new home
  • Property Transfer Taxes
  • Realtor fees (typically 2.5-5% of the homes selling price)
  • Home ownership costs

If you are moving up from a condo or apartment to a single-family home, you will save on strata fees; but it is important to realize that you will now be responsible for all of the maintenance of your home. To ensure financial success, it is a good rule of thumb to save one percent of your new home’s purchase price, per year, for maintenance. For instance, if you purchase a $600,000 new home then you would want to ensure $6,000 per year in savings.

Making the move to a larger home is both an exciting and daunting process – but it is entirely doable with the right preparation. 

Moving On UP!

When it comes to moving on up, it can be extremely exciting – and rewarding – as long as you consider all the costs. When up-sizing, some of the costs to consider include:

  • Costs to sell your current home
  • Purchase price on the new home
  • Property Transfer Taxes
  • Realtor fees (typically 2.5-5% of the homes selling price)
  • Home ownership costs

If you are moving up from a condo or apartment to a single-family home, you will save on strata fees; but it is important to realize that you will now be responsible for all of the maintenance of your home. To ensure financial success, it is a good rule of thumb to save one percent of your new home’s purchase price, per year, for maintenance. For instance, if you purchase a $600,000 new home then you would want to ensure $6,000 per year in savings.

Making the move to a larger home is both an exciting and daunting process – but it is entirely doable with the right preparation. 

Scaling Down

Moving to a larger house is not the only time that things can change with your home and mortgage. Sometimes there comes a point when owning a home becomes a little too much to handle or maybe you’re an empty-nester and no longer need three extra bedrooms. Whatever the reason, downsizing is a great option when you no longer need a full-size home. Perhaps you want to swap your two-story family home for a rancher, or maybe a cute little apartment or townhouse! Just as there are many options for individuals looking to move on up or expanding families, there are just as many options for those individuals that are looking to scale down. 

For those homeowners who are fortunate enough to now be mortgage-free and looking to scale down, you could be sitting on a gold mine! 

Regardless of your current situation there are some costs that go with selling your existing home and moving to something smaller or more affordable. These costs include:

  • Realtor commission fees, which range from 2.5 to 5 percent of the home selling price
  • Closing costs and legal fees, which are 1 to 4% of the purchase price on the new home
  • Miscellaneous costs such as moving expenses, upgrading appliances and/or buying new furniture
  • If you are moving into a condominium or townhouse, there are potential strata fees to consider – even if you are mortgage free

 

Reverse Mortgage

Most individuals looking to scale down are looking to do so for retirement or because they are now empty-nesters. However, if you are looking to downsize simply due to being unable to manage your mortgage or maintenance costs, there is an option called a “Reverse Mortgage”. A reverse mortgage is a loan secured against the value of your home. It is exclusively for homeowners aged 55 years and older and enables the homeowners to convert up to 55% of the home’s value into tax-free cash! With a reverse mortgage, you maintain ownership of your home and can use the loan to cover costs or pay out debts. The loan would need to be repaid in the event that you choose to move and sell the current home.

Refinancing

Refinancing

Life happens. Whether you are facing financial emergency, wanting to improve your financial situation, put more into your investment portfolio or simply wanting to spoil yourself with a long overdue trip, mortgage refinancing can be the answer – when done properly!

Refinancing your mortgage refers to the process of renegotiating your current mortgage agreement for a variety of reasons. Essentially, refinancing allows you to pay off your existing mortgage and replace it with a new one.

There are a variety of reasons to consider mortgage refinancing, including but not limited to:

  • You want to leverage large increases in property value
  • You want to get equity out of the home for upgrades or renovations
  • You want to expand your investment portfolio
  • You are looking to consolidate your debt
  • You have kids headed off to college
  • You are going through a divorce
  • You want a better interest rate
  • You want to convert your mortgage from fixed to variable (or vice-versa)

Mortgage refinancing can result in a host of great benefits, such as reducing financial stress and helping get you back on track for your financial future! Some of the larger benefits include:

 

ACCESS A LOWER INTEREST RATE

As mentioned above, one reason to refinance your mortgage is to get a better rate – this is especially true when done through a mortgage professional. On average, a Mortigo mortgage professional has access to over 60 lenders! This allows them to find the best mortgage product for your unique needs, versus traditional banks that only have access to their own mortgage offerings. Plus, using a mortgage expert allows you to benefit from their advice at typically zero cost to you.

 

CONSOLIDATING YOUR DEBT

There are many different types of debt from credit cards and lines of credit to school loans and mortgages. But, did you know that most types of consumer debt have much higher interest rates than those you would pay on a mortgage? Refinancing can free up cash to help you pay out these debts. While it may increase your mortgage, your overall payments could be far lower and would be a single payment versus multiple sources. Keep in mind, you need at least 20 percent equity in your home to qualify.

 

MODIFYING YOUR MORTGAGE

Life is that it is ever-changing and sometimes you need to pay off your mortgage faster or change your mortgage type. Maybe you came into some extra money and want to put it towards your mortgage or maybe you are weary of the market and want to lock in at a fixed-rate for security. Always be sure to talk to your mortgage professional about potential penalties.

 

UTILIZING YOUR HOME EQUITY

One of the biggest reasons to buy in the first place is to build up equity in your home. Consider your home equity as the difference between your property’s market value and the balance of your mortgage. If you need funds, you can refinance your mortgage to access up to 80% of your home’s appraised value!

As with everything, refinancing comes at a price! If you are experiencing a financial rough-patch or one of the previously mentioned situations and think that refinancing your mortgage could be the right solution, there are a few things to know.

The first and most important thing to understand about mortgage refinancing is that if you opt to refinance during your term, it is considered to be breaking your mortgage agreement. As with any contract, there are associated penalties for breaking them and it could end up being quite costly. If at all possible, it is always best to wait until the end of the mortgage term before any refinancing is conducted.

Beyond the penalties, there are a few additional things to know about mortgage refinancing such as:

  • It allows you to tap into 80 percent of the value of your home.
  • It requires re-qualification under the current rates and rules, which includes passing the “stress test” again
  • No default insurance is required, which could give you more lender options
  • There is typically an appraisal cost and legal fees for the new mortgage agreement

Talking to a Mortgage Professional about refinancing can provide you access to even greater rates and mortgage plans to best suit your needs and what you are trying to accomplish through your refinancing strategy. The best part? Their services won’t cost you a penny. 

Renew

When it comes time to renew your mortgage, most lenders will send you a renewal letter when there is around 3 months remaining on your term. While nearly 60 percent of borrowers simply sign and send back their renewal without ever shopping around for a more favorable interest rate, this is actually the best time to check out your options. 

Since your term is ending, this is a great time to shop the market or redo your mortgage WITHOUT PENALTY! If you have been wanting to switch your mortgage from fixed to variable-rate (or vice-versa), or want to move to a different lender or try for a lower rate, your Mortigo Mortgage Professional can help!

Do be advised, if you are considering switching lenders, you will need to inquire about any existing life insurance or other policies that you have, as this could be affected if you change lenders. You should also be aware that and NEW insurance could be more expensive as you are re-applying and your circumstances (age, health) will have changed since your initial mortgage term and insurance plan was signed.

A Mortigo Mortgage Professional can help answer all your refinancing questions – and more – as well as shop the market to find you a better rate! With access to over 60 lenders, they are able to quickly compare mortgage rates and products and help you make the switch!

Reverse mortgage

Reverse mortgages continue to gain popularity for Canadian homeowners aged 55 plus. One reason for the increased popularity of the reverse mortgage is simple necessity. Many retired Canadians are looking for options to increase their cash flow either by paying-out other debts, or by accessing cash to help with everyday life expenses. In addition, Canadians have a growing preference to remain in their homes for as long as possible. Doing so may require costly renovations and upkeep. Whatever your need, a reverse mortgage might be a great solution!

 

There are two Canadian Schedule I banks that offer reverse mortgages: Equitable Bank and Home Equity Bank. Both banks’ reverse mortgage products are similar in their design and function. We can help you determine which is better suited to your needs.

 

Reverse mortgages are designed for Canadians who are 55 and older. The goal is to allow these individuals to tap into the equity of their home to assist in comfortable financial living. However, the difference is that once a reverse mortgage is in place, borrowers are not required to make regular payments. This provides access to a considerable inflow of cash, with the flexibility of optional payments. The only time payment will be required is when you sell or move out of your home.

The payout of the mortgage at this time would consist of the original principal balance, plus the accrued interest and any fees incurred since inception. Hence, it’s a reverse mortgage because you don’t make payments and the balance increases with the accrued interest, as opposed to reducing like a traditional mortgage. Fear not, the equity historically is still maintained or even grows as the appreciation value is generally higher than the interest accrual.

While the focus of a reverse mortgage is on older individuals, this is also a great option for individuals wanting to assist their elderly parents. Instead of selling and moving to a care home or assisted living, some individuals prefer to stay where they are familiar and instead opt for in-home care. A reverse mortgage is a terrific way to access the equity in the home, month by month, to pay for those care costs.

 

Reverse mortgages are designed to allow you to access up to 55% of your home’s equity, thereby allowing you to convert your home equity into cash. This can be done as either a one-time lump sum payment, or you can choose to structure it to receive monthly payouts. The money received through a reverse mortgage can be used to pay off existing debts, gift money to family, expand qualify of life, add safety features to the home, or expand your investment portfolio.

You can also switch your existing mortgage dollar-for-dollar to eliminate payments and increase cash flow.

 

The benefits of a reverse mortgage don’t just stop at the ability to cash in on your home’s equity! In fact, these benefits also include:

  • No monthly mortgage payments
  • No income or credit qualifications
  • Very low / little paperwork required
  • Title and ownership of property remain in homeowner’s name
  • Flexible options to break term early and to pay interest off monthly, if preferred
  • Penalty waived in the event of death or care home placement to preserve the estate

If you think a reverse mortgage might be the right option for you or your parents, contact a Mortigo Mortgage Professional today to discuss your current situation and how this increasingly popular mortgage option can help.

 

Misconceptions About Reverse Mortgage

 

With a Reverse Mortgage, You No Longer Own Your Home
FALSE. You always maintain title, ownership and control of your home. The reverse mortgage lender simply has a first mortgage on the title.

You Will Owe More Than the Value of Your Home
FALSE. Most reverse mortgages come with a “No Negative Equity Guarantee” the notes as long as the homeowner has met the required obligations, the amount you will have to pay on the due date will not exceed the fair market value of your home.

Reverse Mortgages are Expensive
FALSE. Much like a conventional mortgage, an appraisal of your property and independent legal advice is required for a reverse mortgage and will be similar to the costs you would incur on a regular payment mortgage. However, beyond this the only additional fees are a one-off closing and administration fee. When compared to the cost of moving to another home, the reverse mortgage is a much more affordable option.

Reverse Mortgages Have Higher Interest Rates
DEPENDS. While interest rates are typically a bit higher than a traditional mortgage, the difference is not excessive. In addition, it is important to remember that monthly mortgage payments are not a viable option for most retired Canadians. In addition, there are many who struggle to even qualify for a traditional mortgage. For these reasons, many retired Canadians are choosing reverse mortgages over conventional solutions.

You Can’t Pass on Your Home
FALSE. Another myth is that your children won’t be able to inherit your home if you utilize a reverse mortgage. This is not the case as your heirs will always have the option of keeping the property by paying off your reverse mortgage after you pass away. Plus, if you have a “No Negative Equity Guarantee” in your reverse mortgage contract, then if the mortgage amount due is more than the gross proceeds from the sale of the property, the lender will cover the difference between the sale price and the loan amount. Therefore, you will never owe more than the fair market value of the home.

CHIP

We understand. HomeEquity bank is the only bank dedicated to empowering older Canadian homeowners with smart, simple ways to use the value of their home during retirement.

For over 25 years The Canadian Home Income Plan (CHIP) our reverse mortgage solution has helped thousands of older homeowners enjoy more financial flexibility without having to sell or move. CHIP might be the solution for you.

Steve Ranson,

President and CEO HomeEquity Bank

 

Features of a CHIP Reverse Mortgage

  • Homeowners age 55 and older
  • No payments are ever required
  • No Income qualifications
  • No Credit requirements
  • Qualify for up to 50% of the value of the home
  • Money can be received as a lump sum, or over time or combination
  • Owner maintains title
  • They can sell or move at anytime
  • Receive the money tax free

Not sure?

if you are an existing homeowner but not sure the best option for you, contact Mortigo Mortgage Professional today for expert advice. 

Mortgages in “general”

Benefits of using a mortgage professional

While a bank only offers the products from their particular institution, licensed mortgage professionals send millions of dollars in mortgage business each year to Canada’s largest banks, credit unions, trust companies, and financial institutions; offering their clients more choice, and access to hundreds of mortgage products!

 

As a result, clients benefit from the trust, confidence, and security of knowing they are getting the best mortgage for their needs.

Whether you’re purchasing a home for the first time, taking out equity from your home for investment or pleasure, or your current mortgage is simply up for renewal, it’s important that you are making an educated buying decision with professional unbiased advice.

 

 

How much does is cost?

From the first consultation to the signing of your mortgage, our services are free.

Home equity

Canadians purchase homes for a variety of reasons. Some want the stability of owning their own home, while others also look at home ownership as an investment vehicle. No matter what the reason, the truth is that home ownership has proven itself to be a good stable investment over time, and one which many Canadians are profiting from.

While many people have chosen to purchase their first home during these times of lower interest rates, there has also been a large movement to refinance home loans and pull out equity for home improvements, investments, college expenses, and even high interest debt consolidation. Canadians have been borrowing against their home’s equity in record numbers, taking out billions of dollars in cash each year.

In years past, many saw their homes as a shelter of safety, yet today, they are more than ever before, willing to borrow against the equity owned in their homes to further their investment portfolios, get out of debt, send their children to university, make improvements to their home, or even boost their RRSP contributions. Where home equity was once sat upon, today it is often used to one’s advantage.

While removing equity from your home can be a good idea, you should do so with caution and fully understand the benefits and possible risks. The best thing you can do is to consult a licensed mortgage professional and financial planner to discuss opportunities to make your home’s equity work for you

Business for Self (BFS)

Many Canadians have successful small business ventures and would not trade the lifestyle for anything in the world. However, many begin to question their lifestyle and business choices when they first attempt to obtain financing for their home, or even something as simple as a new credit card or vehicle. The nature of self-employment income can sometimes leave the self-employed looking like poor credit risks, even though they may actually have a more stable source of income than those who are working 9 to 5 for an employer.

Thankfully, Canadian mortgage lenders are starting to understand the importance of self-employment in our culture, and are making great mortgage programs available to the self-employed to finance their primary residence and even their vacation homes.

Mortigo Licensed mortgage professionals are experts at assisting self-employed individuals with getting a mortgage, and they will ensure you get the best mortgage available through one of Canada’s largest lenders.

Obtaining a mortgage if you’re self employed has never been easier, and you will be excited to learn that the mortgage products available today are structured to help you succeed in your business and your personal life.

Mortgage life insurance

Buying a home is one of the single largest purchases you will make in your lifetime. At Mortigo we also believe it is an investment in you and your family’s financial future… an investment that needs to be protected.

45% of uninsured Canadians included life insurance among their top five financial priorities and 21% ranked it in their top three – yet they still have no coverage.

76% of parents said they worry about their family’s financial situation in case of their death according to a recent Ipsos Reid report.

What would your family do if something unfortunate happened and they were left to make the mortgage payments on their own?

Mortgage Protection Insurance protects your investment while helping secure your family’s financial well being in the event of death of you and/or your spouse. Should something tragic result in the passing of you or your spouse, the mortgage on your home would be paid off, allowing surviving family members to use other existing insurance to carry on with life, maintain their lifestyle and recover from your loss.

The mortgage insurance offered through Mortigo has some great features that traditional bank mortgage insurance doesn’t provide. That includes portability – so when it is time to renew your mortgage you won’t lose your coverage (or have to re-qualify) no matter how many times you change homes or lenders in the future – and premiums don’t increase with changes in health or as you get older.

In addition, Mortgage Protection Plan includes two vital insurance products for your mortgage protection: Life Insurance and Total Disability Insurance.

With this coverage in place, your mortgage is protected not just in the event of death, but also if a serious accident or illness leaves you unable to work. Most traditional term life policies only cover you in the event of death.

HOW TO APPLY

Your Mortigo mortgage professional can walk you through the ins-and-outs of mortgage life insurance, the applicable costs, as well as provide you with instant coverage and a money back guarantee, just in case you choose alternative coverage and cancel your policy within 60 days.

We Have Great Answers

Ask Us Anything

Main differences between Mortigo and a bank.

 

A bank requires you to negotiate the rate against their trained specialists while Mortigo Mortgage Advisor offers the best rate available for any desired product/lender we work with up front. That’s why we have access to compare rates from 60+ lenders, including rates from banks such as Scotiabank, TD, etc.

 

You don’t pay us a dime.

 

You easily get your lowest rate with your best mortgage fit.

Mortigo is absolutely free! Mortigo revenue comes from our lending partners, they pay Mortigo directly for each mortgage funded in exchange for helping them acquire customers.

We access over 60 lenders offering a wide range of mortgage products with best rates to suit your budget.

You may have noticed, banks are not always champions of efficiency or transparency. You will commonly encounter lengthy processes, paperwork, in-person meetings, branch visits, etc. All these costs add up. Between the bank’s overhead costs, and a borrower’s opportunity cost, the traditional process is needlessly expensive. 

That’s why most banks rely on mortgage brokers to distribute their products. It’s a simple and efficient way to ‘outsource’ the effort. It may seem counterintuitive, but it is actually quite expensive for a bank to offer you a mortgage, and then make sure you qualify for it.

Mortigo takes the idea of a mortgage broker to another level with its technology-first approach. The efficiency we all gain through our technology translates into better rates for you!

The mortgage stress test was first introduced by the federal government in 2017. The rules applied to both insured and uninsured mortgages. Initially, it required prospective homebuyers to qualify for a mortgage rate which is the higher of the following:

The Bank of Canada five-year rate (currently 5.04%).

The rate offered by your lender, plus 2%.

Starting in April 2020, homebuyers applying for insured mortgages (meaning their down payment was less than 20% of the value of the property), will only need to quality for the higher of the following:

The weekly 5-year rate on all insured mortgages, plus 2%.

The rate offered by your lender plus 2%.

Mortgage term: A mortgage term refers to the length of time your mortgage contract is in effect before it is eligible for renewal. Mortgage terms in Canada can range anywhere from one to 10 years, but the most common mortgage term is five years.

Amortization period: The amortization period is the amount of time it will take you to pay off your entire mortgage. In Canada, the maximum amortization period is 35 years. But, if your down payment was less than 20% and you were required to purchase mortgage insurance from the Canadian Mortgage Housing Corporation, then your maximum amortization period is 25 years.

In Canada, there are a number of different ways to structure a mortgage.

Mortgages can vary depending on the term length, rate type and whether the mortgage is open or closed. Regardless of whether you have a fixed-closed, fixed-open, variable-closed or variable-open mortgage, term lengths can range from anywhere between one year and 10 years. The most common term length in Canada is five years.

 

Fixed-closed mortgage: A fixed-closed mortgage is a mortgage contract where the rate is fixed and the homeowners are not allowed to pay off their mortgage loan early without incurring a penalty.

 

Fixed-open mortgage: A fixed-open mortgage is a contract where the rate is fixed, but the homeowners are allowed to pay off their mortgage early without incurring a fee.

 

Variable-closed mortgage: A variable closed mortgage refers to a mortgage contract where the homeowners have a variable mortgage rate but can’t pay off their mortgage early without incurring a prepayment penalty. This type of mortgage rate fluctuates with market conditions.

 

Variable-open mortgage: Lastly, a variable open mortgage allows homeowners to pay off their mortgage early without incurring a prepayment penalty. However, their rates will fluctuate with market conditions.

There are generally two types of mortgage rates you can select from. The first and more common option among Canadians is the fixed mortgage rate, which is set at the beginning of the mortgage term and can’t be changed until the term ends and the contract is renewed. The second option is a variable mortgage rate, which fluctuates according to market conditions.

Your credit score can range anywhere from 300 to 900 in Canada, and a credit score of 750 is considered excellent. In order to obtain a mortgage and buy a home, most lenders will require you to have a credit score at least within the 600-700 range. A higher score will net you a lower mortgage interest rate in Canada.

score the lowest mortgage rate on your first try!

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