Turn the house you like into the Home you will buy!

Government restrictions on refinance guidelines have reduced the equity homeowners can access for renovations. High ratio buyers especially, in a market with slow growth value, may wait years before the house has appreciated enough that an 80% Loan to Value refinance provides any money. If home buyers want to do upgrades the time of purchase may be the only opportunity where they can add the cost of the renovations to the mortgage.

Use the Purchase plus Improvements to:

• Add a new or updated kitchen
• Develop the basement for more living space
• Update or replace the carpeting or maybe adding hardwood
• Add a garage or workroom
• Add a media room or “man cave”
• Add an additional bathroom
• A new roof
• A more efficient central air or furnace system
• Add new siding, eaves or fascia
• Replace or updating doors and windows
• Add major landscaping

If the property isn’t exactly what you want: renovate, add, or upgrade it!

There are specific requirements for the purchase plus improvements program, please call to learn the details. Exceptions to the generally understood parameters are available.  Renovating up front may be a buyers best option.

What Mortgage Insurance Means for You

Mortgage insurance is an insurance policy which compensates lenders or investors for losses due to the default of a mortgage loan. Mortgage insurance can be either public or private depending on the insurer. There are three mortgage insurers-Canada Mortgage and Housing (CMHC-public), Genworth (GE-private) and Canada Guaranty (CG-private). A purchase with less than 20% down payment will always require mortgage insurance, and at times a lender will require a purchase of 20% or more down payment to be insured.

CMHC:

• 100% backed by the government
• Maximum $600 Billion in exposure across Canada

Genworth:

• 90% backed by the government
• Maximum $300 Billion in exposure across Canada

Canada Guaranty:

• Canadian owned by the Ontario Teachers’ Pension Plan along with National Mortgage Guaranty Holdings. Previously owned by AIG
• 90% backed by the government
• Maximum $300 Billion Exposure

Insurer Guidelines and Restrictions:

CMHC

• CMHC will only allow one insured mortgage per person; this means a client who may have had a mortgage for 15 years that was originally insured through CMHC may not be able to co-sign for their children through CMHC if that mortgage has not since been refinanced to remove the original CMHC insurance.
• CMHC does not insure mortgages for Rental Pool Buildings or where there is a high percentage of nonowner-occupied units
• CMHC will not insure age-restricted buildings
• CMHC will consider buildings with post-tension cables or condo conversions
• Will not insure purchases $1,000,000 or higher
• 25-year amortization only

Genworth & Canada Guaranty

• Both insurers will consider two insured mortgages, but the file must be very strong, and the properties must have good equity positions
• Both will consider insuring age-restricted buildings
• Neither insurer will consider insuring properties that have post tension cables
• They will not insure in complexes involving rental pools or where there is a high percentage of nonowner-occupied units
• Will not insure purchases $1,000,000 or higher
• 25-year amortization only

If at any time you have questions or concerns, please do not hesitate to email or call myself.

A variable interest rate loan is a loan in which the interest rate charged on the outstanding balance varies as the lenders’ prime interest rates changes. When this occurs, your payments will vary as well (as long as your payments are a blend of principal and interest).

A Fixed interest rate loans are loans in which the interest rate charged on loan will remain fixed for that loan’s entire term, no matter what market interest rates do. As a result, your payments being the same over the entire term.

When a loan is fixed for its entire term, it remains at the market interest rate. Generally speaking, if interest rates are relatively low, but are about to increase, it could potentially be better to lock in your loan for a term at that fixed rate. Depending on the terms of your agreement, your interest rate on the new loan will stay the same, even if interest rates climb to higher levels. On the other hand, if interest rates look like they are going down, then it would be better to have a variable rate loan. As interest rates fall, so will the interest rate on your loan.

We are seeing variable rates being lowered due to slowing mortgage growth. 

Fixed Interest Rate or Variable Rate Loan?

This discussion is about comfort level, and flexibility to adjust to the changes in the economic market. The borrower must consider the amortization period of a loan as well. The longer the amortization period of a loan, the greater the impact a change in interest rates will have on your payments.

Adjustable-rate mortgages (ARM) are beneficial for a borrower in a decreasing interest rate environment, but when interest rates rise, then mortgage payments will rise sharply.

A good way to mitigate this is to take a Variable rate mortgage but set your payments higher than the minimum payment required. For example, Prime; Right now, prime is at 3.45%, but you can get a 5-year ARM at prime -1.09% (2.36%). If you were to take the ARM but set your payments at prime, you would be making 1.09% more in payments to your mortgage principle on day one. If prime were to rise or fall your payments would stay at 3.45%; you would just be making more or less extra payments against your mortgage principle. The only way your payments would change is if you chose to change them, or the Prime rate goes above 3.45+1.09% (prime rate would have to go to 4.54% for your payments to go up.)