Archive for the ‘Mortgage’ Category

How the New Mortgage Rules Affect House Prices

Monday, April 12th, 2010

On Tuesday February 16th, 2010, Canada’s Finance Minister, Jim Flaherty, announced that the Government will be changing Canada’s mortgage regulations in effort to prevent potential mortgage borrowers from acquiring mortgages that they cannot afford. Due to the increasing concerns about consumers being attracted to low mortgage interest rates, especially borrowers who are securing variable-rate mortgages starting at very low levels, there are worries that many mortgage holders may not be able to afford the monthly mortgage payments which could result in a housing bubble. Flaherty announced that the Government will be implementing tougher restrictions regarding how banks go about approving mortgages. For people looking to purchase a new home, it is important to understand how the government mandated mortgage rules will affect home prices.

The goal of the new mortgage rules is to make sure borrowers are not taking on more debt that they can manage. Many experts believe that in the next couple of years home prices are likely to decrease thereby increasing the need for stricter mortgage regulations. Many economists note that the recent low home prices and low interest rates are eventually going to increase, but these new rules basically ensure the likelihood that the lower house prices will continue into 2011. In the coming weeks, it is expected that many people will hurry to acquire a mortgage before the rules kick in as the date the regulations come into effect is April 19th, 2010. After that, the housing boom will likely slow down as the market adjusts.

If you are in the market for a new home, this may be a good time to acquire a mortgage. It is important to remember that interest rates will eventually increase so you should create a long term financially stable mortgage repayment plan, especially if you have an adjustable interest rate. For instance, if you get an adjustable mortgage rate at 2% and in two years it rises to about 5.5%, this will cause a drastic increase in your monthly mortgage repayments. If possible, many real estate experts recommend a fixed rate mortgage with a larger down payment so that you will not be negatively impacted when rates increase.

The recent economic crisis has resulted in Government intervention in order to make sure the housing market does not crash. As the housing market stabilizes, home prices will eventually begin to rise. As well, as the economy rebounds, the current low prices being offered on many homes throughout Canada will not last. If you plan to purchase a home after April 19th 2010, it may be more difficulty to secure a mortgage as you will have to meet criteria that includes: a minimum down payment of 20 per cent will be mandatory for government-backed insurance property, the maximum you will be able to withdraw when refinancing your mortgage will be 90 per cent of the property’s value, and you will have to meet specific qualifying criteria for a five-year fixed rate mortgage.

If you have a secure job, good credit rating, and can afford the monthly mortgage repayments even when interest rates rise, this may be a good time to purchase a new home before the new mortgage rules become compulsory.

Analysts are expecting mortgage rates to rise and GIC rates to drop within the upcoming year. Read more about it on our blog.

Canada Mortgages FAQ:

Question: Why does mortgage payment history not appear on credit reports?
Curious – my Canadian mortgage does not appear on my credit report. I contacted the mortgage company, and they said they do not report, nor do most other mortgage companies in Canada. Surely, with a mortgage being the biggest thing we buy, our good payment history should be recorded? I’d imagine they would be quick to report any delinquent payments or foreclosures!

Answer: In Canada your mortgage history does not appear on your credit bureau unless it is setup as a line of credit. This shows up as a revolving credit line that is tied to the value of your property. Basically think of it as a large credit card but your house is the asset.
Your good payment history with a mortgage is shown when some lender may ask for a mortgage rating or current mortgage statement.
In most cases if your payments are going to be late on something, I’ve found that the last thing people want to be late on is their mortgages. People let credit card payments or loan payments slide or be late but most of the time unless things are in real trouble, your mortgage is usually the last thing you will be late on.

Question: How do I increase my Mortgage payments if the bank my mortgage is with is different from my regular bank?
If my regular day to day bank is though TD Canada Trust but my Mortgage is with Scotia Bank do I have to call someone to request doubling up on payment etc.

Answer: Register your account on the Scotia Bank website. The site will take you through the steps to pay your mortgage online electronically via your regular bank. If you have trouble registering your account, call the contact number listed on the website.

When online, you can make extra payments if you wish. Most banks also allow you to specify how to direct your extra payments, whether you wish to apply it to the principle of the loan or the escrow account.

Question: Can I file a quick/quit claim deed to remove my name from my parents house and can I do this from Canada?
My parents aged 55 and 60 are looking to release equity from their home using a life mortgage, so I need to be off the title, as the youngest applicant needs to be at least 55.

I am living in Canada now and my parents are in London.

Answer: The true answer here is that your parents will have to either call or visit the local municipality where the deed will be recorded and ask a very simple question, which is, what will they accept. The recorder of the deed will have the final say as to what they will accept to record the deed. With you being out of country, they may require you to actually show up at a consulate or embassy to get an official seal put on the deed. Make sure your parents tell whomever they ask specifically that you are in Canada getting a deed notarized and if the Canadian notarization will be sufficient to get the deed officially on record

Question: How to get ex to take over mortgage, she is not willing?
handed over the house, completely hers and she will not take my name off the mortgage. Can I force her to sell, can I stop paying the mortgage and let the bank take the house from her? There is a fair bit of equity in the house so the bank will get all of their money if they foreclose. And how many payments do I have to miss before they actually foreclose on the property? We are in Ontario, Canada. My lawyer was crap!

Answer: Those issues should have been settled with the divorce. My ex had to sign over a quit claim deed, but I couldn’t get his name removed from the mortgage until I refinanced. Banks don’t have to release you from the mortgage.

Question: Can I claim the mortgage interest in my tax return?
I’m in Ontario, Canada. I also want to know if I can claim the home and car insurance as an expenses. My main income is from rental properties.

Answer: It all depends, are you renting some or all of the house. If you are renting some or all you can claim part of the amount you are renting out (20%, 30%, 50% or 100%) you get the idea. If you are not renting out any portion of the house then mortgage interest on a principal residence is not a tax deduction in Canada.

As for the car if you have more than one rental unit in more than one location you could claim a part of the expenses on the car.

You may want to check out the CRA site, it should answer all your questions.

Question: If my mortgage is a variable rate, that is .9 below prime, should I look into locking into a fixed rate with?
Are rates soon to rise in Canada?

Answer: Variable rates are always a risk. Get fixed asap.

Question: Do I get a GST refund for being a first time home owner this year?
I really could do with it to be honest but I don’t know. I’m so new at all this. We live in b.c. Canada.

We bought our rented home. The mortgage is 340,000. We got it January 31 of 2010. Do we get any money back when we do our taxes? How do we find out?

Answer: Did you pay GST? GST is only is charged on new homes. If you were charged usually the builder is a registrant and he can get rebated. If you and your partner have not owned a home in the Five years prior to the purchase than next year you can claim the Home Buyers Tax Credit.

Question: Military draft In Canada?
What happens to an individual’s financial obligations (Mortgage Payments,Court Payments,Debts) if there is a military Draft in Canada? Because he/she will be called up, who will pay or take care of the financial obligations?

Answer: There has never been a military draft in Canada and it is anticipated that there never will be. We’ve never needed it before as Canadians have always answered the call of their Nation.

As far as IF there ever was one, the individual is still responsible for their personal debts. When a soldier is drafted they would be paid the wage appropriate to their rank and that is what they have to make due with. It remains an individual responsibility.

5 Tips on Choosing a Mortgage

Friday, February 26th, 2010

The most important investment you will ever make is buying a home. This is because it shelters you, it protects you, and it does take quite the bite out of your wallet. It is quite the incredible investment, but one that will benefit you for the rest of your life. However, you have to choose the right Canada mortgage for you. This means choosing the right bank, choosing the right mortgage package, and looking at the many aspects that can make or break you.

So here are 5 tips to help you choose the right mortgage for you:

- You first have to choose your financial institution. You may already have an institution in mind. If you do, make sure you check with them regarding their closing costs, application fees, inspection fees, and any other charges that they may add. Every institution is different and so are the Canada mortgage rates carried by each institution.

- Always compare interest rates. You have your base Canada mortgage rates, but each financial institution will have different criteria that determine your rate. They do base it off of your credit situation, amount of the loan, income, etc.

- You have to decide whether an adjustable rate mortgage or a fixed rate mortgage is the best for you. In an adjustable rate mortgage, the rate will change over time. This means you will have a lower payment in the beginning, but the payment will be higher in the end. You have to determine if this is something that you can afford to do. Some individuals cannot afford this, so they may lose their home if they default on their mortgage.

- Are you a first time homebuyer? Look into the options that are available to those buying for the very first time. There are certain deals that can be offered regardless of credit rating in many cases.

- If mortgage refinancing is what you need to do, then you should use the above tips when finding the right mortgage. When you refinance, you are usually doing it so that you can take advantage of some of the equity that you have built over time. You refinance for the value of your home, pay off your old mortgage, and you then get the difference in your equity back to do what you wish with. Just make sure that you are making the right decision and keep in mind that Canada mortgage rates can vary from institution to institution, even in mortgage refinancing.

These are all very important things to keep in mind when getting your new Canadian mortgage or in mortgage refinancing. You want to ensure that you are doing everything right from the beginning. That way you can make sure you have your home for many years to come. You don’t want to be one of these individuals taking out the variable rate mortgage for the low payment to find that they can’t pay it in the future. It is a rather disheartening situation. It also takes a toll on credit, on reputation, and leaves you wondering where you are going to live when the bank takes possession of the home.

So make sure you compare, you weigh your options, and that you feel good about your decision. You might be quite surprised how right your gut feeling can be about the mortgage you are looking at. If you don’t feel good about it, then don’t take it. And don’t forget that the Canada mortgage rates are not the same everywhere. This can be a huge determining factor when it comes to your mortgage.

Compare Canada mortgage rates from banks, mortgage brokers and other lenders with one quick search. When looking for a mortgage calculator, consider Rate Supermarket.

Mortgage FAQ:

Question: What is the process of mortgage renewal in Canada ?
Does one have to requalify each time the mortgage is up for renewal?

Answer: What will usually happen is your bank will send you a mortgage renewal about 6 months before the end of your current term. This will usually be at the banks posted rates, which will be about at least 1% higher than what is available.

You will have to re-qualify for a mortgage as basically you are getting a new mortgage, so you have to prove your income once more and maybe an appraisal if it’s not an insured mortgage

Question: Is municipal property tax deductible for tax returns in Canada? What about mortgage payments?

Answer: Municipal tax, no.

Mortgage payments, possibly. If you use your home for business purposes you can write off a portion of the interest paid to the mortgage, but that is under strict guidelines. You can also re-structure your mortgage debt to make it a tax deductible debt, however this depends how much equity you have in your come and it involves leveraging. Can be very rewarding financially, however if you don’t do it right CRA might refuse the deduction. Visit a Financial Advisor or Accountant that is familiar with leveraging to convert your mortgage or who is familiar with business deductions.

Question: Need answers about mortgage disability insurance in Canada?
My husband has been on disability since January 2008. We just found out that we have disability insurance on our mortgage so we put in a claim. Can anyone tell me if the insurance has to pay back all or any of our mortgage payments for the past year or does it just start when you claim or is there a time limit? Any information would be helpful.

Answer: Technically, they should pay everything since the time of the injury, however, if the insurance was bought through the lender or bank, then good luck (bank insurances cover mortgage payments directly meaning you don’t actually physically get any money, it just pays your mortgage). Insurances bought through lenders are very shady and you’ll be luck if they pay out at all.

Go through a liscensed insurance broker for all your insurances. Going to a bank for insurance makes about as much sense as going to a chef to fix your car.

Question: How Long Will It Take For An Immigrant To Build Enough Credit History To Get A Mortgage In Canada?

Answer: You need to show sensible use of credit, regular bill payment and bank account control, regular employment and some saving [use the tax free savings account].

Question: How do I start a mortgage investment corporation in Canada?

Answer: 1) First you need to be in the industry for 2 years.
2) Write and pass the FSU offered by Seneca College in Toronto (if you are inside Ontario )
3) Financial support
4) Office that can provide public service during normal office hours.

Question: In Ontario, Canada how much does a Mortgage broker get on average in fees from the lending institution?
I’m thinking of taking all of the training to become a mortgage broker and am wondering how much of a “salary” I can expect. Also if anyone knows how to get recognized by all of the banking institutions that would be great too.

Answer: If you work as a mortgage broker for an independent company you can make .5% of the loan amount. For a short time this was as high as 1.75% but it has fallen since 2006.
If you work for the big institutional banks, you will begin in their Phone Centers. You will get a salary instead of a commission. That is because the phone calls are all generated by the bank; not by your personal efforts. Most of those callers want to refinance. You get $30,000 a year.
You can’t get recognized unless you become a superstar mortgage originator. Then everyone will bid for your services

Question: Getting approved for a mortgage in Canada?
What do I need to get a mortgage and do I need to have my taxes done and up to date?

Answer: At a minimum, you will need 10% down (in this economic environment) for a first time home owner. As part of your documentation requirements, you will probably be asked to provide your last notice of assessment which would show that you don’t have taxes in arrears. Tax arrears would be considered as a debt owing against your household income when determining your ability to make the mortgage payments.

Question: I am looking for a bad credit mortgage in Canada?
I have outstanding loans that I would like to consolidate into my mortgage. Does anyone have any recommendations?

Answer: Talk to the financial institution that holds your mortgage first. A number of Canadian banks have recently brought out new products to help people who may not have perfect credit due to many different circumstances. If your bank isn’t able or willing to do this then I would start shopping around. Unlike a loan most banks expect you to shop around for a mortgage and you may be surprised at what they are willing to do to get your business.

Foreclosures and Houses With Multiple Mortgages

Friday, February 26th, 2010

Buying a foreclosure is a bargain, right? If you have been looking for a house for a while, you may have thought of this as an option to get more for your money. With Canadian mortgage rates at all time lows, many people are turning away from a Toronto refinance in exchange for selling their existing home and then buying a new one at the new, lower interest rate. With the abundance of foreclosures on the market, many buyers are considering looking at these properties in an attempt to get a bargain. Foreclosures can be bargain-priced, but what many buyers do not know is that they may end up paying more than the property is worth because it has more than one loan on it.

The Distressed Homeowner

Foreclosures come from distressed homeowners. Something, whether it be unexpected medical expenses or the loss of a job, made it impossible for the homeowner to continue paying his bills. As a result, the loan goes into default and the home is foreclosed on.

However, most homeowners will only stop paying their mortgage as a last resort. They usually try to find some other way to deal with their financial crisis. Sometimes, if they view their problems as temporary, they will choose to take out a second mortgage to pay some impending bill. It is not uncommon for a foreclosed property to have two or three mortgages or liens on in, and this can create a problem for buyers.

How Mortgages Are Paid in Foreclosure

Each province has its own laws about how sales of foreclosed properties will occur, but once the money is received from the new buyer, the liens against the property are paid in a similar fashion. First, any back taxes will be paid. Then, the primary mortgage will be paid. If there are any other mortgages, they will be paid third. There is often not enough money from the sale of the property to pay all debts, so some creditors are left with nothing.

What Happens to the Unpaid Debts?

The unpaid debts do not follow the property. Rather, they follow the buyer. However, on these properties, it is important to do a title search to make sure there are not any liens that are not properly cared for after the sale of the home. The buyer is responsible for paying the leftover loans, and the lenders cannot hold the property as security for the loan after the foreclosure sale.

How Multiple Mortgages Affects Foreclosure Buyers

Foreclosing on the first mortgage cancels the other mortgages as far as the new homeowner’s responsibility. However, the price of the property could be inflated to accommodate for the other mortgages, especially if they are with the same bank. If the home goes to auction, the starting price may be inflated, depending on the foreclosure laws in the province. If the property is bought before auction with a traditional purchase, the asking price may be inflated. This can make the property less of a bargain than the buyer might assume.

How can you combat this if you are trying to take advantage of the low Canada mortgage rates and numerous foreclosures on the market? First, do a title search on any property you are considering, and always purchase title insurance when buying a foreclosure. Then, be sure to have an appraisal done on the property to determine whether or not the asking price is, in fact, a bargain. If it is, do not be afraid of the second mortgages, as they will not be your responsibility. Take advantage of the low Toronto mortgage rates, get your Canada mortgage pre-approval, and put your bid in for your new home.

View the latest rates from the top Canadian companies. Use our mortgage rate calculator Canada to compare mortgage rates so you get the best mortgage rates and save money.

Foreclosures FAQ:

Question: How do home foreclosures work in Canada?
I’m interested in buying a home, and I keep hearing that my area (Windsor, Ontario) has a high foreclosure rate. How do I find these homes?

Answer: Call a realtor and ask about power of sale homes. It is the more frequent route in Ontario when people default on their mortgages.

Question: Where can I find foreclosures in Canada without paying a fee?
Specifically in the Hamilton area.

Answer: A google search will offer a few options. However, the paid services are far superior in timeliness of publications.

Question: How can I make money from Canada foreclosure listings?
Is there a good book or program or even training seminar that is reasonably priced, teaching people on how to profit from Canada foreclosure listing?

Answer: Your on the right track. With the current market situation there are many opportunities for savvy investors to take advantage. I’m not aware of a course as such but there are many books and EBooks that provide good, concise and relevant information. There is also a lot that are pure rubbish.

One of the better ones I’ve read is 10 Month Real Estate Millionaire. Don’t be fooled by the title, it’s going to take longer than 10 months but the information is relevant to today’s market place and touches on foreclosure opportunities.

Question: How do you find distressed properties & foreclosure properties in Canada?
I’m a Canadian looking for details on how I can search/find distressed properties or foreclosure properties in Canada.

Answer: Find a good realtor–he/she will find them for you. Otherwise search the MLS (Realtor.ca) and that would help you as well. Not all foreclosures are branded as foreclosures on the site so you would have to check Owner’s name on the listing, which isn’t available to the public. In the US the system is a little different, the public has access to land registry.

Question: How would foreclosure on a home I own in the U.S. affect my credit in Canada?
I was transferred to Michigan a year and a half ago, only to recently lose my job. I returned home to Canada yet I still have a brand new home in Michigan that nobody wants to buy. I’m considering foreclosing on it as I cannot afford to continue making payments, and I’m curious to know if my Canadian credit rating will be affected at all if I go this route.

Answer: From everything I’ve read so far Canadians moving to the US must re-establish their credit history, as do Americans moving to Canada. The two systems appear to be separate, and while in most cases this appears to work against people it might actually work in your favor.

That said I’d get in touch with a lawyer in the US to determine what the long term consequences are, and what the best course of action is. Or perhaps you could talk with the bank and see if you can work out a different payment schedule.

Question: How does an average person get their hands on bank foreclosure on properties?
How do you get information on bank foreclosures on anything from homes to auto,boats, motorcycles etc etc, the USA has them all the time/ what about here in Canada…. specifically Ontario?

Answer: Another option is to contact your local municipality. The township or city you live in should have a listing of the foreclosed properties in their jurisdiction. It is all public information. You will be able to find out which bank owns them with their contact information as well. From there, it is up to you.

Question: Is Canada having the same housing crisis as the US is?
Just wondering about the foreclosure rate and the declining market trends.

Answer: No, we’re not. Our sub-prime lending rules are stricter than those in the US, and as a result, we weren’t hit by the subprime crisis. Our banks are taking a hit though, as many of them invest in US mortgages, and have suffered losses due to the housing crisis in the US.

Question: I am interested in buying a foreclosure property in southern California?
I want to purchase a foreclosure property in California to live in. What should I do first, how do I begin the process? Do I contact banks, real estate agents or what? What are the common mistakes people make in dealing with foreclosure properties and what do I avoid? I am obviously a beginner at this and don’t even know how to start the process, any help would be wonderful! I’m a Canadian citizen and I live in Canada.

Answer: You need a US social security number to get a loan. But if you pay cash you can buy anything you want. You could even borrow the money in Canada as long as you showed up with cash in USA.

You can buy directly from the bank at their foreclosure “auction”. It is not a real auction because no one shows up. It is just a formality. The bank enters a bid for the amount they were owed by the previous owner (their borrower). They often tack on late fees and attorney fees. You have beat their bid to win and it is seldom worth the amount of the loan. But you could try. In the last 2 months, banks have started accepting lower offers. The sales are advertised in one local paper in the city of the foreclosure. You have to read all the papers to find the one. You don’t get to see the inside of the house you are buying and you don’t even get a key.

After that “auction”, the bank hires a realty agent and a For Sale sign goes up. You can find those homes online at sites like realtor.com. Or ask any friendly agent to email a daily list of repo’s. Then you buy one just like buying any other house. Except that the bank will do no repairs for you.

What You Should Know About Canadian Mortgages

Thursday, February 25th, 2010

If you are going to buy a home in Canada, you are going to need a mortgage, unless you have a store of money lying around to use to pay cash for your home. Before you sign on the dotted line for your mortgage, make sure you know what you are agreeing to. After all, your mortgage is a long-term financial agreement, so you should know as much as you can about it at the outset.

Basic Structure of a Mortgage

Since most people do not have the cash stores necessary to pay for a home in full, they will usually borrow money from a lender for the purchase of the home. The property in question is the collateral for the loan, which means that the bank or lender has the right to take the home if you do not pay the loan according to its terms.

A mortgage is considered an amortized loan. This means that you have a set number of years in which you must pay back the loan and the interest on it. In Canada, most loans are amortized for around 25 years, but this can vary based on the loan structure. The amortization period is separate from the term, which is the period that the interest rate is guaranteed. Sometimes the term and the amortization period are not the same, which means you will need to negotiate a new mortgage term when the first one is over.

Finally, a mortgage has an interest rate applied to it. This is the percent of the total loan amount that you will pay to the bank for the privilege of borrowing the money. Your goal should be to find a loan with the lowest possible interest rate.

Getting Approved

Once you have decided that you wish to buy a house, it is time to get approved for a mortgage. Shop around to find a lender with good rates, and then apply. Your approval will be based on the size of the loan, your credit rating, employment history, and current income, among other factors.

Making a Down Payment

Most lenders require you to make a down payment on the property you wish to buy. This shows them that you are responsible with your money and have a good intention of paying what you owe on the loan. It is generally recommended that you put down a 20 percent down payment. You can put down more if you wish. You can also put down less, but if you do you will have to buy mortgage insurance.

What is mortgage insurance? Under the Canadian Bank Act, federally regulated lending institutions, with a few exceptions, cannot provide loans that exceed 80 percent of the value of the home without purchasing mortgage insurance. This insurance protects the lender against the possibility of default, which statistics have shown is more likely when the borrower does not place at least 20 percent down on the home. The premium on the insurance policy is typically determined based on a percentage of the home’s purchase price. You will typically pay this premium as part of your loan payment each month. This allows you to purchase a home with as little as 5 percent down.

Your Monthly Payment

Your monthly mortgage bill is broken down into an interest payment and a principal payment. At the beginning of your loan, more of the payment goes towards interest than principal. This gradually shifts until you are paying mostly principal than interest at the end of the loan. If you wish, you can pay your loan off faster by paying extra towards the principal on the loan. Once you have paid off the entire principal balance on the loan, you will officially own your home.

Canadian mortgage rates comparison site. Listing over 500 rates from Canada’s top lenders and brokers. Visitors can compare mortgage rates with one quick search or compare credit cards.

Mortgage FAQ:

Question: Where can I find the right mortgage Canada?
How to find the right mortgage in Canada that’s right for me? I have my down payment.

Answer: You have to decide what’s right for you, variable or fixed, and what term 6 months or up to 7 years. And you have to decide on the amortization period, now a maximum of 35 years, but shorter is much better.

Talk to a mortgage broker or if you have a realtor see if they have some mortgage people they deal with. I like to have my first time buyers be in a fixed rate for at least 3 years.

Question: Can my sister who lives in the US cosign for my house mortgage in Canada?
I immigrated to Canada a few weeks back and am looking to buy a house but since I do not have a credit history in Canada, I won’t be able to get my mortgage approved. I was wondering if my sister who lives in the US can cosign for my mortgage?

Answer: If you don’t have a credit history in Canada, why would your sister? Credit histories tend to be international. If you can’t get a mortgage there is more than credit history going on.

Question: Gave false income info to obtain mortgage in Canada – will pay on time. Should I worry?
I am a Canadian citizen, buying a house in Canada. My mortgage broker told me he will provide the bank with some letters from an employer to prove my income is high and so the bank approved me for a decent mortgage. I will be making all my payments on time and all that. Shall I worry? Do you think the bank will find out?

Answer: You will probably be OK unless you default on the loan in the first year or two. Should you default during that time an audit would be pretty much automatic. Also a very small percentage of loans are audited just trying just to see if the lenders are following guidelines. I wouldn’t worry unless you end up not making the payments.

However I would be more concerned that you are dealing with a broker that would willingly participate in perpetrating a fraud on a bank. If I were you, I’d run away very fast from your mortgage broker and wait until you make enough money to carry a house.

Question: What is the best kind of mortgage insurance here in Canada?
Can anyone tell the pro’s & con’s of mortgage insurance here in Canada? I had been told there is private & bank insurance, are there better options and what would you recommend?

Answer: Totally depends on what your future needs may be. We have our basic insurance on our mortgage through the bank itself. In case of accident or death it is quicker and more efficient to use the banks policy. If you are adding on huge details and extras, then maybe you should shop around a bit more for a different carrier. There are many out here. Just go visit your local insurance agent and they will give you better ideas.

Question: Does anyone know how the mortgage business works in Canada?
I am in the mortgage business in NY and would like to explore getting into the business in Canada. Anyone have info?

Answer: Our Canadian Mortgage and Housing Corporation (CMHC) is the organization that deals with mortgages here in Canada. Occasionally, there are lending companies who will lend mortgage money to potential homeowners when they are denied by CMHC.

Question: Can you get a mortgage in Canada if I’ve got a mortgage in Ireland & are renting the house out in Ireland?
I’ve currently got a mortgage now in Ireland and are hoping to rent the property and migrate to Canada were my family and I hope to get another mortgage for a home were we can live.

Answer: There is a government program through CMHC that guarantees any mortgage for new immigrants. However, you must arrange 25% down payment. Check out the Canada Mortgage and Housing Corporation website for more details.

Question: I have $100,000 CAD. I want to borrow a further $190k for a property in Canada. Will I get a mortgage?
I am a non Canadian resident (from UK) but my wife is Canadian. We’re planning to move to Canada next year. The property in question is commercial with retail (ground floor) and flat/apt (rented) above. Any ideas which banks I should approach to get a mortgage?

Answer: You generally need a down payment of 25% on a property. If you’ve got $100K of $290 it shouldn’t be a problem. The five main banks are Royal Bank of Canada, TD Bank, Bank of Nova Scotia, Bank of Montreal, and CIBC. Also try ING Direct.

Question: What kind of Interest rates will I get with Bad Credit on a Mortgage in Canada?
I have been Discharged from Bankruptcy in 2005.

Answer: By discharged I am assuming that it was cleared off your credit history? If so, then your major problem in getting a mortgage is a lack of actual credit.

The first thing someone should do when considering to get a mortgage is to find out what is on their credit BEFORE they get to the bank. Go on to the Equifax site and request a copy for a small fee.

Once you have a hard copy of this report you can actually get to the business of seeing what the damage is. Review it to make sure that it is correct as it will list any and all credit “dings” and in some cases these items may be incorrect. From there you may be able to correct any errors by contacting the companies involved.

As for the effect a bad credit has when applying, it may disqualify you from any conventional or may result in special conditions and or increased rates by a few % points. The higher the risk the higher the rate.

Indicators of an Affordable Mortgage

Thursday, February 25th, 2010

For most people, one of their biggest dreams in life is to own a home. With so many mortgage options available, it can often be confusing figuring out what it means to acquire an affordable mortgage. There are a number of indicators that will tell you if a mortgage is affordable. Below is a list of indicators to help you determine if a mortgage is affordable.

1. Because of the current state of the housing market, lenders are now offering great deals on interest rates. Currently there are deals available where you can get a mortgage with an interest rate of around 5%. Many financial experts recommend acquiring a 15 to 30 year mortgage locked in at a low interest rate. The complete mortgage term could save a homeowner thousands of dollars. Locking the interest rate as a fixed-rate will normally have a term of 15 or 30 years. This will ensure your interest rates will not increase over the life of the mortgage. It is important to remember that the longer the mortgage term, the lower your interest rates. As well, the higher the mortgage that you obtain, the higher your monthly mortgage repayments will be. There are variable rates one can secure with their mortgage, but they fluctuate with the market. If the market is doing well, your interest rates will decrease, but if the economy starts to deteriorate your interest rates will increase.

2. Before applying for a mortgage, you first have to assess how much you can afford. You can determine how affordable your mortgage will be by using an online mortgage calculator. You will enter such information your income which will help determine how much you can actually afford to pay each month. Remember this is a base amount that does not include the cost associated with the purchase of the home. You will also have to put down a deposit. The higher the deposit, the lower your monthly payments will be.

3. Paying a monthly mortgage is not the only expense you have to consider. There will be other expenses such as utilities and home maintenance. It is also important to remember that you will have to consider additional expenses such as closing fees, title fees, attorney fees, taxes, registration fees, monthly homeowner insurance payments, etc.

A mortgage is probably the biggest financial commitment you will make in life. It is important to acquire an affordable mortgage to ensure that payments can be met even if your financial situation changes. Financing your mortgage is a serious life investment. The key to getting an affordable mortgage is to compare quotes from several different lenders to get a rate that is low and will not drastically increase if the market takes a down turn. As well, you should always read the fine print of the mortgage contract to avoid any future unexpected surprises that could affect your monthly payments. With the current incentives now being offered for mortgage seekers, this is a great time to find a great deal on a mortgage.

Whether you’re looking for mortgage rates or great GIC rates, with Meridian Credit Union you’ll have a customized financial plan that makes sense for you. Just for you.

Mortgage FAQ:

Question: Has anyone had a bad experience with reverse mortgage in Canada?
I am considering a Reverse Mortgage on my home. I’ve done my research, but I’ve never heard if anyone has had a bad experience.

Answer: If reverse mortgages in Canada are similar to reverse mortgages in the US, then you shouldn’t have a bad experience with it as long as you do your research. The loans can be pricey if they’re used for short term needs. Also, if you blow all of your money on vacations and non-essentials, that’s probably not the best use of your home equity. However, if you carefully plan and incorporate a reverse mortgage into your overall retirement plan, you shouldn’t have any bad experiences. Its a great product for some people, but its not for everyone.

Question: Can someone tell me about the mortgage industry?
What kind of mortgage loans does Canada have? Where is the best place so I can find a job being a mortgage professional?

Answer: Just about anywhere can hire you as a mortgage professional, as they work on commission and usually don’t get a salary. In the US if you work for a mortgage broker and not a bank, you will need a real estate license. A good way to get into the business is to start as a mortgage processor. That person takes care of the files and makes sure all the paperwork is in there before submitting the loan to underwriting. You can learn what you need to know as a processor, then when you know what you are doing, you can go on to originating the loans as a loan consultant. Beware of scam loan brokers, though. If anything looks fishy, get out of there. You could get in trouble along with the bosses if you work for a company that is doing anything illegal.

Question: Mortgage issue! Is it going to be alright?
So like the idiot I am, for the second time in about 8 months, I’ve forgotten to transfer money from one account to another in time for my mortgage payment coming out. and I’ve done it again today! I call the mortgage company and they said just to call them when it bounces next week and they will send the request again for withdrawal. Is it really not as big of a deal as I think? Last time when the same thing happened I called them the following week when I saw the 45 bucks deduction for it bouncing and they took it out that day.

Answer: You’re going to get dinged for the bounced check fee, so make sure you have enough in your account to cover it.

Bounced checks and late payments aren’t good for your credit score, but as long as you aren’t 90 days behind in your mortgage, the lender isn’t going to do much.

Question: Who has to pay the mortgage?
I’m from Canada and my husband and i have a mortgage. I am not on the deed, property or on the mortgage. My question is; In Canada if we were to get divorced would I be stuck with half the mortgage? Also would I be entitled to half of the money from the sale of the house or not? I don’t want anything from the house am just wondering if I get a clean break from the house with the mortgage.

Answer: If you are not a lendee, then you do not have to. But if the loan is in both of your names, you are equally liable for the loan.

Question: What are my rights….?
I lived with a woman for the past three years, and last week she asked me to leave and will not give me any financial assistance. What are my options? Please bare in mind, I contributed a significant amount to living expenses and mortgage payments my entire time there.

Answer: If you paid part of the mortgage you have a right to the money you paid, unless you never signed the contract for the house/apartment which was being bought. If you paid without your name on the contract then it’s your word against hers and you it’s up to you to decide whether you think that you could make a court believe that you made mortgage payments. If so I would claim for repayment.

As for living expenses, when people live together that is normal. Money invested in property (mortgages) are investments and you have a right to your contribution.

Question: Purchased a house & only obtained old survey/title of house under ex-owner name. how can I get 1 under my name?
I purchased a house in Quebec (Canada) and obtained Mortgage papers, the sale papers that I and ex-owners of the house signed on it as well as the old survey/title of the house which is under the ex-owner name. Was I supposed to have received one under my name? If not, where do I go to get it? How much does it cost?

Answer: If you took out a mortgage for the property, your lender will submit the property change to your area registrar of deeds etc. However, the new deed (at least in the U.S.) remains with the lender until the mortgage is paid off.

Question: Down Payment on House?
How much might I expect to pay for a down payment on a house that’s worth about $750,000 in the Vancouver, Canada area? (lower mainland) I’m thinking 10 year mortgage

Answer: I know for 30 year it’s usually around 10% or 12%. For a 10 year, you’re probably looking at 30% or more down. It mostly depends on your income and what sort of mortgage you qualify for.

Question: How easy/hard will it be for me to get a mortgage in Canada?
I am considering emigrating to Canada, and would much rather buy a property than rent. Would my lack of credit history in Canada affect my eligibility for a mortgage? I will have plenty of cash for a house deposit and expect to earn at least $60k per year, but don’t know if this would be enough to persuade lenders.

Answer: It really depends on where you are moving to. Unfortunately, you usually have to be working steadily at a job for 1 year before a bank will look at you. There are other financing options though.

If you have the down payment, they may look at you. Vancouver housing starts at $500,000.00

Different Kinds of Mortgage Rates

Wednesday, February 24th, 2010

Few people have ready cash to pay for a property up front. So if you want to buy a property, you have to find a lender to loan you the money. To get the loan, you will be required to pay interest, and this will add substantially to the cost of your property. It is therefore important to shop around and compare mortgage rates to find the best rate you can.

A fixed rate means that the rate of interest stays the same throughout the period of the mortgage. So if the interest rate is five percent, you will be paying five percent throughout, and so your payments will be the same throughout the term. This offers the advantage of stability, since you know how much you will be paying for your house on a monthly basis, and need not be surprised by sudden increases.

A variable interest rate means that the rate will fluctuate depending on the rates of the central bank. The fact that this varies means that your payments can go up or down for each payment. You might end up paying less than you would for a fixed rate mortgage if the interest rates are low, but if they rise then you have to pay more. This kind of mortgage should not be taken by those who are on a tight budget and cannot tolerate increases.

Having a good credit history is important to get lenders willing to lend to you. If you have paid off all your credit cards reliably, then financial institutions will feel that you will pay them back their money. If you have had problems with your credit, then you will be regarded as a risk and the only people willing to lend you money will charge you exorbitant rates of interest.

Banks have posted interest rates, but those with good credit histories should be able to receive preferred rates. You can try to negotiate as good a rate as you can with the mortgage officer.

Mortgage brokers obtain money from multiple financial institutions at low rates, and re-lend the money to individual parties. Many brokers can offer rates better than those offered by banks, so they are worth a look. But it is better to consider their reputations. It is better to deal with those who are accredited and belong to a professional organization that guarantees certain standards.

When arranging the loan, there are many payment options to choose from. Making more regular payments will allow you to pay less. So making bi-weekly payments to your mortgage is better than making monthly payments, even though the amount you are paying is the same, because you are paying off the interest more quickly. You can also choose from different terms. Five years is the standard, but you can choose to renew it in as little as a year, or for as long as ten years.

Mortgage rates vary a lot between institutions, so you would be wise to shop around before choosing one. Since you are being loaned such a large amount of money, even a fraction of a percentage point could save you thousands of dollars.

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Mortgage Rates FAQ:

Question: Your predictions about future 5 year fixed mortgage rates in Canada?
I really need to have some idea of what the fixed 5 year mortgage rates will be in 3 or 3.5 years. Right now they seem to be between 3.99% and 5.45%. In the future the rates will surely go up because Bank of Canada will have to slow monetary expansion and raise interest rates. So what do you think the fix. 5 year rates will be in 3-3.5 years? 7-8%? Or can it go up to all the way to 9-10% by 2013?

Answer: In the US, long term rates appear to be on an upward trend. Of course, it is impossible to predict with 100% accuracy. Just look at the US economy and consider whether rates can get any lower. Most economist think they will go up.

Question: How to negotiate best mortgage rate?
I’m a first time home buyer. What is the best way to negotiate mortgage rate? Is it good to get more than one pre approval from banks? If I get more than one pre approval, how badly it affect my credit rating?

Answer: Get one pre-approval from the lender who will offer you the best rate you can find. In order to receive the lowest interest rate, you must have excellent credit, a large down payment and few other liabilities. No negotiation – the rates are set by the lender based on what it costs them and the prevailing prime rate. You have to shop around for the lowest rate.

Question: Can I get a mortgage as a student here in canada?
I am a full time student. I already technically own my own condo (I say technically because my mother paid for it and it was just put under my name to get some tax cuts.) We didn’t take out a mortgage for this condo and paid for it in full. My question is, if I as a full time student, can get a mortgage to purchase another real estate property? I don’t have any student loans and my credit rating is 795. I have a part time job and earning rental income as well from the condo I “own”

Answer: Most likely, yes. If you can meet the lenders standards of 40% or less debt to income and have good credit, I’d bet yes. But depends on what you are buying, price, down payment, etc. Go to a good mainline lender and ask.

Question: I recently got married and am now thinking about investments. I have some ideas. Which do you think is best?
1. Purchase rental / investment properties in Wasaga Beach Canada. 5.25 to 6.95% mortgage rates. Have immediate family to maintain them / find and deal with renters.
2. Use a financial advisor to buy into EU funds. I have a friend who advises on this. Seems to be doing well.

Answer: All these ideas are off-the-wall unless you FIRST have:

1. An emergency fund of 8 months’ living expenses in cash, savings, money markets.

2. Maximized contributions to your 401k.

3. Have enough life insurance to provide for your family if you die prematurely.

4. Have adequate health insurance, homeowners insurance, auto insurance, and liability insurance.

5. Have a written will, living will, health care power of attorney and financial power of attorney.

After that, you can think about investing. Save 10-15% of your income every year. Don’t buy anything you can’t understand. Love the idea about rental properties, esp the ability to hand off day-to-day responsibility to your family and not do any work yourself.

Good luck. With your approach to risk-taking, you’ll need it!

Question: How much will interest rates go up to buy a house in the next 5 years in B.C. canada?
They are at an all time low so everyone is buying. There at roughly 3%. Were currently looking at getting our mortgage at 1100 a month with a fixed variable for 5 years. The house is after 15,000 down would be 335,000 canadian.

So we would like to know if anyone who reads the markets would possibly be able to tell us how much the interest rates could go up in the next 5 years. As most canadians know in the 80s is when people were losing their homes.

Answer: Nobody can answer this question… Too many economic variables. Don’t be surprised if fixed rates are close to 10% in 5 years from now. At that point you would want to switch to a variable rate. Historically variable rates have shown to be a better choice in the long run.

Question: Is it true that mortgage rates in Canada decrease at summer time every year and how much?

Answer: This is false. Mortgage rates are determined by the bond rates which are not seasonal at all.

Question: Are the mortgage rates dropping in ontario canada?
With the market dropping, it makes one wonder why the rate is at 6% for 5 years with banks still.

Answer: Perhaps mortgage rates depend to some extent on how risky it is to lend money. When the economy is not doing well. And there is more risk that some home owners will default on their loans. Then banks are reluctant to lend money. And banks decrease the demand for their loans by keeping mortgage rates high.

When banks begin to feel more confident about the economy and people’s ability to pay for their mortgages. Then they will start to decrease their mortgage rates.

No economic recession lasts forever. And there is a good possibility that mortgage rates may go down in a few years.

But how low the mortgage rates can go down also depend on the inflation rate. And if the inflation rate increases in the future. Then mortgage rates will likely go up from where they are today and not down, even if the economy starts doing better.

Question: If the Bank of Canada raises the prime lending rate, does that effect mortgage rates? ?
I have a fluctuating mortgage – NOT applying for a new one. Also, the U.S. have lowered interest rates by 1/2 points. How does THAT effect our mortgage rates?

Answer: Variable mortgage rates in Canada are usually set to adjust up and down with the bank’s prime rate. If the Bank of Canada rate were to rise, rates on your variable mortgage would certainly rise. Assuming your mortgage rate jumped from 5.25% to 9.8% (1% above prime), your monthly payment on $100,000 would jump from $596 to $881.

On the other hand if rates were to drop by 1%, from 5.25% to 4.25% (1% above prime), your monthly payment on $100,000 would drop from $596 to $540.

As we’ve seen in the news, banks do not have to adjust their rates the same amount as the Bank of Canada.

Lowering Mortgage Interest

Friday, February 12th, 2010

Homeowners will always find ways to get the best terms and deals in their mortgage application. Obviously, you will seek the best offer in terms of the most affordable rates that can be offered by your lender. But are you aware that you can still sweeten the deal by exploring the possibility of a bi-weekly payment arrangement to further lower the interest rate? It is actually a straightforward way of significantly reducing the total interest that you must pay for your mortgage.

A biweekly mortgage plan is a mortgage loan that provides for payments every two weeks instead of the usual monthly payment schedule. This is a payment mode that results to faster payoff of the loan principal and interest. Through this payment setup, a borrower is making 26 biweekly payments which is equivalent to 13 monthly payments in a year. This extra payment that the borrower makes results to significant savings in terms of the total interest paid for the mortgage loan.

You can significantly shorten the repayment period by a number of years and generate savings in interest. The amount that you can save will depend on the loan amount and the applied interest rate. However, you must understand that if you are not planning to stay in you home longer than 5 or 6 years, this payment mode will not have much impact.

Another reason why you have to consider biweekly mortgage is the convenience that you enjoy paying the same amount as that of loans paid monthly but divided in two smaller amounts paid every two weeks. But before you finalize your biweekly payment arrangement for your mortgage, you have to make sure that you can afford to pay the additional amount that is required each year for the entire repayment period.

The biweekly mortgage is actually a budget tool which homeowners can use to pace their payment mode while maximizing the potential savings that can be earned in the form of reduced interest payments. Mortgage companies normally charge a fee when borrowers opt for the bi-weekly mortgage. There are also companies that charge a set-up fee when traditional mortgage loans are converted to bi-weekly mortgage.

As an example, let us assume that you took out a $150,000 mortgage that will be amortized for 30 years at a fixed interest rate of 6% per annum. If you are going to adopt a monthly payment mode, your monthly amortization will be equivalent to $899. That total amount that you are going to pay for 30 years will be $323,968. The payment breakdown will be $150,000 return of principal and $173,968 interest payment.

On the other hand, if you are going to go for a bi-weekly mortgage payment, then your total interest payment will be reduced to $136,671. This means that you are save a total of 37,296 in interest payments.

All in all, biweekly mortgage is a practical payment for most homeowners. This is an ideal payment option especially for those fixed income earners who receive their income every two weeks. This allows you to spread out your mortgage obligation on the basis of the fixed schedule of release of your earnings. This makes it a lot easier for you to allocate the right amount of your income to pay your biweekly mortgage payment obligations. For some borrowers, this is a better option than paying a larger amount in one single go at the end of each month.

Before you make a go for an accelerated payment mode, it is important that you clarify with your lender all the incidental fees and charges for setting up a biweekly mortgage. Lending companies normally charge upfront and pre-payment fee. It is essential that you work the figures so that you will be able to determine the amount that you actually save.

Learn how to sell your own house here: For Sale By Owner.

If you’re looking to buy a home from an FSBO listing check here: FSBO Listings.

Mortgage Interest FAQ:

Question: Main house in Canada, is the mortgage interest deductible?
I work in US, but my family is in Canada, and we bought a house in Canada (no house in US). Wonder whether the mortgage interest paid is tax deductible.

Answer: Yes it is. However, you should talk to a professional as there could be a requirement for you to withhold 30% of the payment and then the bank would have to claim this back from the government. As no bank would want to do this, they would just increase your payment by enough to cover the withholding, which you would not want. So, talk to an expert first.

Question: Does interest rate affects mortgage in Canada?
My sister lives in France and she says their mortgage is locked in at the price of the time they buy the property. Is it like this in Canada?

Answer: You can have locked in mortgages in Canada and you can have flex able mortgages that have fluctuating interest rates. You can also have mortgages that fluctuate and when you like you can lock the rate and change the mortgage to a fixed rate.

Question: Mortgaging to start a business / Tax deductible interest in Canada?
I’ve got a business start up question, I’ve not been in Canada too long and I’m finding the Tax laws here a little daunting. If I mortgage my home to pay for my business start up, does the interest on that mortgage become Tax deductible? I’m not sure how it works in Canada, it might not be as straight forward as that, in fact I’m sure it’s not.

Answer: There is also another option. Some banks will give you a business loan “with a personal guarantee” So you can get your business loan with all of the taxation benefits of the loan, while you put your personal home up as collateral on the loan.

The more important thing this type of loan does is creates a separate paper trail for tax and business purposes. For example interest paid on the loan would be directly attributable to the business, therefore if you ever got audited by the CRA its much less likely that interest could be attributed to your person.

Question: Can I write off my mortgage interest payments if I’m renting out my basement?
I live in Canada and renting the basement in my principle residence. Would I be able to write off the total amount I paid for the year or only a portion?

Answer: CRA (Canada Revenue Agency) allows a percentage of all rental expenses equivalent to the percentage of the space that you are renting out in your home. This can be based on a “square” metre or food base of the total area. Expenses would include your mortgage interest , property tax, utilities, repairs, insurance, etc. If your basement area is equivalent to a third of your home you can claim a third of your expenses.

Question: In Canada, is a mortgage for land different than a mortgage for a house?
I am interested in purchasing some land that I will use for recreational purposes. It isn’t farm land and I won’t be building a home on it. I have the ability to put up to 75% down in cash, but I would rather only put 25% down. Can a traditional mortgage be used to purchase land? Are there any differences? I imagine land must be able to be financed somehow.

Answer: In Canada, raw land is usually tough to get a mortgage on through a normal bank. Banks will want 50% down or in some cases they don’t want to touch it unless you are going to build on it eventually.
Credit unions are more open to land but again, they will want 25% down at least.

Another way to get it done easier is if you have lots of equity in your house, refinance it to take the equity out and use that liquid cash to pay for the raw land. You will as well be able to get a lower rate because its a more tangible asset than just raw land.

Question: About ING Direct Canada mortgage rates. Are the posted rates negotiable?
I talked to their call centre rep and he said that all the rates on the website are 100% NOT negotiable.

Answer: The rates are usually not negotiable.

Question: Should I lock in my variable rate mortgage?
I live in Canada and right now the interest rate on my variable rate mortgage is very low. I don’t really think that interest rates will go any lower. I have 4 years left on my current mortgage. Should I lock in now?

Answer: There is no way to give a true answer without knowing all of the details of your transaction. It sounds like you want to refinance. If you only have 4 years remaining, then most of your payment right now is NOT interest. So, refinancing may hurt you more than help. I’d run it by a financial consultant (not from your bank but a different one, possibly independent) for the final word.

Question: How much are the interest rates in Canada expected to rise over the next few years?
I am locked into a 5 year mortgage at a rate of 4.49%. In looking around, I have a mortgage broker who can offer me prime – .1 % over a 5 year term–which would be 2.15%. My question is, if I were to pursue this avenue, are the interest rates projected to rise above 5% in the next 5 yrs or so? Additionally, how much longer will prime remain at 2.25%? It will cost approx $2000 to break the current mortgage–is it worth it?

Answer: Read all the fine print with mortgage brokers as they have many hidden fees and costs. Have you already forgot how the mortgage crisis started in the US?

As far as costs go every 1% less on interest rates can save you around $100 a month on payments (for a $200,000 mortgage). The rates are predicted to remain low until around 2012 now. So if you lock in that cheap right now you could come into a renewal at some high rates! I would talk with your financial advisor to see if it makes financial sense for you.

Real Estate Mortgage and RRSP – Is it a Good Mix?

Thursday, February 11th, 2010

A lot of people are interested in the option of using their RRSP in order to finance their home purchases. There are two ways by which this is done – through Home Buyers Plan or getting the home mortgage through RRSP. From the asset management standpoint, these options may not be a good idea. In this article, we will explore the consequential risk related to the home purchase and the possible ways that these can be prevented.

Limited Opportunity for Diversification

One the major downside of home investment is that it ties up much of your equity in one single asset. Most financial gurus emphasize the importance of diversification of the investment portfolio in order to smooth out earning potential and reduce the dips and peaks that characterize single asset investments. This is the main reason why it is wise to purchase mutual funds that are indexed. If you take hold of a few of every stock then you won’t have to worry much if one company takes a big hit, so long as there is a consistent uptrend in the market as a whole. The same rule applies to real estate investment. Aside from owning a variety of real estate properties, it is also essential that you purchase a REIT.

Once you make a purchase of a particular real estate property, you are in effect allocating a significant portion of your hard cash as investment on a single asset. Your net worth will be at the mercy of that single property. Once it goes down, your net worth will also take a dive. In general, this is not a sound business proposition, for your investment portfolio is not sufficiently diversified.

Some Great Opportunities in the Horizon

As a general rule, investing in real estate is not really bad. This type of investment is your safety net against inflation. If Canada is hit by double digit inflation, then the bonds and stock market will go on a nosedive. On the other hand, real estate property will not be directly affected by this economic condition and home prices will remain stable.

You will also enjoy substantial tax incentives when you go for real estate investments. For instance, you are exempted from paying capitals gains tax if you earn significant profit from your main residence. These are the major upsides of real estate investment.

Real Estate Investment – Its Impact on your RRSP

However, the big question that you have to answer is whether it is wise to divert the money in your RRSP to your real estate mortgage. In general, it is not a wise business decision. You want to create some semblance of diversity in your investment portfolio. And the potential earnings from your investment in real estate is likely less than your potential earnings if your funds are left in RRSP.

You are in effect degrading the level of diversification of your investment portfolio if you move your funds from your RRSP to your real estate mortgage. This is tantamount to making a bad situation worse. The home value is independent and immune from the dips and peaks in the stock market. There may be some instances where there will be a drop in the home value while stocks will go on an uptrend. Under a tight situation, banks will be forced to require higher down payment. If you have limited options, then you may have to liquidate some of your assets in order to cover the adjustment in the down payment.

This is the main argument why it is essential that we take the route of diversification. This also explains why you must not move your funds from RRSP to your real estate property.

Learn how to sell your own house here: For Sale By Owner.

If you’re looking to buy a home from an FSBO listing check here: FSBO Listings.

Mortgage FAQ:

Question: What Canadian bank is offering the lowest 10 year mortgage rate right now?

Answer: You should go to your bank and sit down with a mortgage specialist so they can work out the best deal for you. Rate shopping can sometimes be a good thing but you really should speak to a specialist so you don’t end up getting yourself stuck in something that changes later, or ends up being something you weren’t expecting. A lot of people are choosing to deal with mortgage brokers now as well because they can usually get much better deals than an actual bank branch can offer you (because they make commitments to banks and get deals from them).

But truly, the best thing you can do for yourself is go to YOUR bank and have a conversation with them. Tell them you’re looking for a mortgage, they want your business, they may be able to cut their rate to keep your business.

Question: Transferring a mortgage to the States?
I would like to know if there is a way to transfer a Canadian mortgage onto a us mortgage? Therefore the US bank will pay off my mortgage here and just add it on to the US mortgage. I don’t know if this is possible but you never know.

Answer: No. Mortgages and banking in Canada are subject to different regulations than the US. You will have to speak you your US lender about increasing your mortgage there, and then they can send a bank draft to pay out the mortgage here.

Question: Can you get out of a Canadian Mortgage?
My friend in her 20′s signed a 40-year mortgage with her mother for a home; the problem is she has a freeloading and abusive brother (along with his wife) who live at the home as well but refuse to help pay for it. This is causing her tremendous stress and grief. Her mother doesn’t want to sell, can she get her name off the mortgage? Who should she talk to?

Answer: No, she cannot get her name off the mortgage. Her mother would have to go to the lender and refinance the mortgage in her name alone based on her income alone.

Why does the mother allow the brother & sister-in-law to live there without contributing to the mortgage payment and household expenses? And how can a mother allow one child to abuse another? The mother holds the key to rectifying matters here. The daughter is pretty powerless in this dysfunctional situation since she took on the legal obligation of the mortgage.

Question: If you get a debt consolidation loan does it count against you when you apply for a mortgage later?

Answer: It significantly lowers your credit score and shows on the report that it is being handled by a credit counseling agency. You’d think they’d be glad you are paying your debt instead of filing for bankruptcy, but it does count against you in a major way.

Question: How are Canadian mortgages calculated? 3 times your salary?

Answer: The 3 times your salary is only a rule of thumb and a lot more has to do with how much money you have coming in vs. going out (aka debt ratio).

Question: Can a Canadian own or buy property in USA? How can one apply for mortgage in USA?
Can foreclosure homes in USA be purchased by Canadians?

Answer: Yes. As for the loan you apply with a lender providing proof you can afford it. A realtor in the US can help you.

Question: Are you able to add your car loan and school loan to a mortgage?

Answer: I don’t understand exactly what you are talking about. If you are refinancing your home and your home has equity in it then you can take out the equity to pay these other loans. You also can take a second mortgage on your home and use the total value of your home to pay other debts. You will then have two house payments. But you will be free from the other two loans.

Question: Financing property located in US with Canadian bank?
I am looking to buy a property in the US. However I want to mortgage if I can, with a Canadian financial institution because they’re just more regulated and safe than American banks.

Answer: TD has a lot of branches in the US now. However, you do not have to be nearly as concerned with how well the bank is run. After all, it’s not that the bank has YOUR money, it’s that YOU have the BANK’s money. I’d worry most about the interest rate.

Mortgage Options For First Time Home Buyers

Thursday, February 11th, 2010

Buying your dream home can turn into a stressful and overwhelming experience for first time buyers. There are just too many things that you have to take into consideration all at the same time. Foremost of your concern is your readiness to make a major investment and your capability to sustain the financial burden over a longer period of time.

One of the first things that you must do is to assess your financial position. You can do this by considering your personal net worth, your total debt and your monthly expenses. Your net worth is the basic information that you will need when you apply for a mortgage. It is also essential to take into account your current credit portfolio as well as your expenses in order to determine how much you can afford to pay for your dream home on a monthly basis.

* Fixed-Rate Home Mortgage

This is the type of home mortgage plans that bear interest rates that will remain unchanged for the entire term of the home mortgage.

* Variable Rate Home Mortgage

This is also known as adjustable rate mortgage. The interest rate of this type of home mortgage follows the movements and changes of prime rates by ICICI Bank Canada.

* Conventional Home Mortgage

This type of mortgage can be equivalent to but cannot exceed 80% of the value of purchased real estate property.

* High-Ratio Home Mortgage

This type of mortgage will only require a minimal down payment which is equivalent to at least 5% of the appraised value of the real estate property. This type of mortgage must be insured with the Canada Mortgage and Housing Corporation.

* No-Down Payment Home Mortgage

First-time home buyers can now have the opportunity of buying a home without any down payment. The CMHC as well as other lending companies are now offering this no-money down option for first-time homeowners. These mortgage plans are offered to home buyers that meet the minimum Beacon score of 600. Home buyers who avail of these privileges shall only be required to raise an amount equivalent to 1.5% of the price of the real estate property to cover the closing cost.

*Home Buyers Plan

Under this program, first-time home owners can withdraw a maximum amount of $20,000 from their Registered Retirement Savings Plan (RRSP). One unique feature of this program is that it is tax free, and you and your spouse or common-law partner can apply separately to double the amount that you can raise. You can use the amount to pay the down payment of the real estate property that you are planning to purchase and other purchase-related items.

Before you finally decide on the best mortgage option, it is crucial that you take into account other intangibles. For instance, seriously consider those mortgage plans that allow you to suspend or defer payment for a few months. This will give you some elbow room to manage your finances during times of emergencies. It is also crucial for first-time home buyers to get some help from home mortgage experts so that they can properly assess their options and determine what they can actually afford before starting their hunt for their dream home.

Find even more resources for FSBO here: FSBO Sellers Packages

If you’re looking to buy a home from an FSBO listing check here: FSBO Listings

Mortgage FAQ:

Question: How does the Canadian credit system work with regards to getting a mortgage?
How long do you have to build up credit for? Do you need to have maintained a certain amount of money in the bank for a certain period of time? Basically any info you can give me on getting a mortgage in Canada would be much appreciated; I might be relocating to Ottawa and could use all the help I can get!

Answer: Having a good credit rating and some savings is very useful in getting a mortgage, but the majority of the concentration is on whether or not you will be able to pay back the amount.

If you have relationships with any banks in Canada that helps as well. I work at a bank and I am well aware that if you have been with one of the banks for a significant period of time they are far more likely to approve you for a mortgage.

You can get mortgages with no money down, but having savings in the bank for a significant period of time does help as well.

Contact a mortgage broker, as they are specialized in ensuring that you will be able to get a mortgage. The Canadian system works much in the same way as the US one but functions at a much lower risk level, resulting in a lack of a sub-prime crisis here north of the border.

Question: Can I deduct mortgage interest paid on a Canadian home?
I am a US Citizen living and working in Canada. I purchased my home in 2007 and since I cannot deduct the interest paid here in Canada, I thought maybe I could get something on my U.S. taxes? But then again, does it even make sense if I have no US income?

Answer: In most cases, you will be able to exclude your foreign earned income form US taxation – you will, naturally, have to pay Canadian taxes, which are usually higher.

If you have US income from other sources even while living abroad that you need to pay taxes on, then you can itemize to reduce it. Nothing in IRS pub 936 (Home Mortgage Interest Deduction ) or pub 593 (Tax tips for citizens living abroad) suggests that a home must be in the US for mortgage interest to be deductible.

Question: What were Canadian interest rates in 1998 for mortgage, cars, credit cards and savings?
This is for a time capsule for the year 1998, so I’m just looking for some info to get an average idea.

Answer: In your local library there are archives for 1998 and you can check in ‘Globe and Mail’ or ‘Financial Post’ newspaper. You can also visit their website and check for archives. If you live in Toronto then visit Toronto Reference Library.

Question: How does a Canadian Citizen who relocating to the US with a new job offer able to obtain a US mortgage?
How does the past credit history in Canada looked up in the US? Is there a special area in the mortgage companies that deal with this kind of situation?

Answer: You just need a Visa, Social Security Number and credit. Most of the creditors are international. Have a U.S. Lender run your credit. It is not hard to get credit onto your report.

Question: Did the Canadian government offer a bank bailout to Canadian banks?
It appears that the Canadian government has offered up to 75 billion dollars to Canadian banks in order to buy up their risky mortgages through the Canadian Mortgage and Housing Corporation (CMHC). What do you think?

Answer: I don’t consider this to be a bailout, and it would be inaccurate to classify these mortgages as “risky.”

These mortgages were already guaranteed by the CMHC, making this a virtually risk-free endeavour. Traditionally the banks would have sold these mortgages to other banks. Because of the financial crisis, interbank lending has all but stopped.

The intention then is to free up the bank’s cash so they can continue to lend to consumers. It also ensures the banks continue to be competitive on a global perspective in light of the ‘real’ bank bailouts that have been occurring around the world.

Question: How do I remove ex spouse’s name from Canadian mortgage without refinancing?

Answer: Provide the bank with the decree nisi (final divorce decree) and disposition of marital assets. If it’s all yours, then with the divorce decree they may drop your ex off the loan.

Question: Can US residents buying Canadian property deduct taxes and mortgage interest on their US tax return?

Answer: Yes. US residents buying Canadian real property can deduct taxes and mortgage interest on their US tax return, subject to the same limitations as if it were a U.S. property (i.e. mortgage interest is limited to a principal or secondary residence and up to $1 million in mortgages). In addition, if the Canadian property is your principal residence, it will qualify for the U.S. home gain exclusion of $250,000 if single/married filing separately or $500,000 if filing a joint return.

You also need to consider the Canadian tax rules if this is a rental property (i.e. you will need to file a Canadian personal income tax return. If this a Canadian residence for you, Canada does not allow the deduction of home mortgage interest, but the gain is tax free. Also look at the Canadian-US income tax treaty which could subject you Canadian tax on the sale of the property in certain instances.

Question: What are the differences between Canadian mortgages and US mortgages?
I know that one difference has to do with taxes being deductible in one and not in the other? Can someone please explain that?

Answer: In the US the interest portion of the mortgage payment on your principal residence is a tax deductible expense, but you may have to pay capital gains tax upon the sale of your home.

In Canada you can’t deduct mortgage interest (some exceptions), but you don’t pay capital gains on the sale of your principal residence.

How to Get a Canadian Mortgage

Wednesday, February 10th, 2010

If you want to buy a house and you find that you are living in Canada then you have to consider the possibility of getting a Canadian mortgage. While it is something that you might not want, this is perhaps the only option that you are going to have. Mortgages are given on behalf of people by a bank when they want to buy a house. It is usually as a result of the fact that they do not have the ability to pay for the house themselves.

So the bank will front the money for the house and then the person on whose behalf they have done this will have to pay the bank back. Until they have done this with the full amount of interest as well, the house will actually belong to the bank and this is the way that it works all over the world.

So if you think about the Canadian market at present, you might be interested or surprised to hear that there are now five million people in the country that have mortgages out on their homes. This is as a result of the economic situation and it means that not all of these people were new home buyers, some of them have been forced to use a mortgage as a way of helping them survive as they did not have any other way of doing it. Right now you are also likely to find that interest rates are quite high and there are probably quite a lot of people who are questioning whether or not they have done the right thing in taking on more debt.

Deciding to take out a mortgage should not be a matter of a quick judgment. You should really make sure that you give yourself ample time to take a whole lot of factors into account. This does not mean that you are only going to look at the amount of money that you have borrowed. You also need to decide what amount of time you will take to pay it back and of course there is also the interest rate to take into consideration. The length of payback time and amount of money that you borrow are going to have a direct impact on the interest rate that you are likely to receive.

Given that the current state of the economy is not so good, there are many money lenders that have gone bust. In addition to this, the requirements for getting credit are now a lot stricter. All of this is good but could really slow down the way in which the market grows. This is something that now the Canadian Mortgage and Housing Corporation is there to stop. It provides insurance for those people that want to buy a residence using a mortgage. They don’t do it for a business though.

The Corporation does more than this though and is also a great source of accurate information on the housing market in Canada. They will also help to finance projects that are focused on the renovation of properties and promote the development of housing.

One could say that homeowners in Canada have a lot of things to be thankful for and this is true if you think about the fact that their mortgages are guaranteed. It is a great comfort in a time where there are many people that are just unable to get their act together financially. It is important to protect homeowners in this volatile market and this is what is happening in this country. If you want to get a Canadian mortgage then this is probably one of the best times to do it.

When you’re deciding to buy a house, some of the factors that you have to take into account are mortgage rates. As mortgage rate is important for home-buyers, GIC rate is important for investors. If you’re interested in a customized financial plan, remember to visit us.

Mortgage FAQ:

Question: How does US Citizen get Canadian Mortgage to build a home?
I’m trying to move to Canada in the next few years, and would like to build a home there. Already have property but having trouble finding financing to build on it as I am not a resident, have great US credit but no Canadian credit! Any recommendations on Banks that will consider my US credit history and not require a cosigner?

Answer: Get your citizenship and then you’ll have no problems finding a bank. Try Scotia, TD, BMO, RBC, or CIBC. Scotia, TD, and Bank of Montreal (BMO) are likely to be of most help for you.

Question: Can a Canadian obtain a mortgage from a US bank for a house in Canada?
With US mortgage rate dropping and a strong Canadian dollar, I am interested in finding out if I can have a portion or all of my mortgage from an American bank. Is this feasible?

Answer: Yes this is possible. Many banks lend in multiple countries. This is more prevalent in the residential market.

Question: Canadian mortgage deductable for US tax filing?
I am a Canadian citizen and own a house in Canada. I was wondering if the morgage interest for the canadian mortgage is deductable when I file taxes in US?

Answer: Yes, if you are filing resident tax return. This deduction is itemized deduction. You will take deduction only if your itemized deductions are more than your standard deduction.

Question: I’m relocating to Seattle from Toronto. Can Canadian obtain a mortgage and buy property straight away there?
We don’t have any mortgage in canada but we qualify for one anytime. Does the RBC Canada and RBC US connected somehow?

Answer: You likely will have to get a mortgage from the US branch of a Canadian bank as the US banks will not check your Canadian history.

Also it depends what visa you are on. Most US banks will not give you a mortgage if you are in the US on anything other than a permanent visa (green card). A TN visa or H-1B are not good enough as you are not guaranteed to stay in the US long enough.

RBC US is the Royal Bank. TD Waterhouse in the US is TD Canada Trust

Also most US car insurance companies will not check your Canadian driving history and they will treat you like a 16 year old new driver. In California, I found Mercury Insurance will check a Canadian driving history if you nag them.

Question: Can a US citizen working in Canada deduct US mortgage interest off a Canadian tax return?
I am a US citizen working full time in Canada with no income from sources outside of Canada. I own a home in the US and pay mortgage interest on a US loan. Is there any way this can be deducted from my Canadian return?

Answer: If this is personal use property, no. Canada does not allow a deduction for mortgage interest.

If this is commercial property (e.g. a rental on which you declare rental income), then the interest is a business expense. But since you say you have no income from sources outside of Canada, this is not the case.

Question: Does anyone know how to convert your Canadian mortgage to be tax deductible?

Answer: Mortgage INTERESTS (NOT CAPITAL) are tax deductible in Canada, however only for the portion of the building you RENT OUT. You cannot deduct mortgage interests for a house which is your residence. For example, if you own a duplex and you occupy 50% and you rent out the other 50%, fifty percent of your mortgage interests, along with many other rental expenses would be tax deductible. To know which expenses you can claim, visit the CRA website.

Question: Can you get a mortgage with a US bank for a Canadian property?
I’m purchasing a new home, and I’m wondering if I have any options with going with a US bank for the loan/mortgage. I am a Canadian citizen and the new home is in Canada.

Answer: By all means check but I would guess that reputable lenders would be leery of it. If you default it would be a big hassle for them to foreclose on a property in Canada. It sounds like US banks aren’t really keen to lend to anyone these days.

Question: What access to CDN assets does a US mortgage company have when a Canadian citizen defaults on a US mortgage?
We own a property in Florida that unfortunately does not make financial sense to try to keep. We will likely walk away from the house and default on the mortgage. What access will the mortgage company have to my assets here in Canada, and what are the possible repercussions?

Answer: I would ask an attorney this question. Typically, most states have laws that require a mortgage company to only one solution for the mortgage. If they opt to foreclose on the home, then any other option may not be viable. For example, in California that is what happens. A home can either be foreclosed on as the only remedy or the mortgage company can release the lien on the home and go after the owners other assets, but not both options together. Again, contact an attorney about this.