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Types of Mortgages
- Pre-Approved Mortgage
- Conventional Mortgage
- High-Ratio Mortgage – CMHC / GE Capital Insured
- First Mortgages
- Open Mortgages
- Closed Mortgages
- Fixed-Term Mortgages
- The Adjustable Rate (A.R.M.) Mortgage
- Secured Lines of Credit
- Equity Mortgages
- Multiple Term Mortgages
- The 6 Month Convertible Mortgage
- All-Inclusive-Mortgage (A.I.M.)
- Bridge Financing
Pre-Approved Mortgage
A Pre-Approved Mortgage lets you know how much you can afford before you go looking a home. We’ll ensure the most competitive rates for a period up to 120 days. If rates increase, your rate will not be affected. If rates decrease, you are guaranteed the lower rate. This may save you thousands of dollars. Once you are Pre-Approved, you can confidently negotiate an offer on a home. Sellers usually prefer to negotiate an offer from someone who has been pre-approved. With more lenders, lower rates, and no cost, or obligation, make us your choice for your pre-approval. Back to top
Conventional Mortgage
A conventional mortgage is a loan that does not exceed 80% of the purchase price or appraised value of the home, whichever is less. This type of mortgage does not have to be insured against default. Back to top
High-Ratio Mortgage – CMHC / Genworth Insured
Canada Mortgage and Housing Corporation (CMHC): CMHC is a federal Crown corporation that administers the National Housing Act (NHA). Among other services, they also insure mortgages for lenders that are greater than 80% of the purchase price or value of the home. The cost of that insurance is paid for by the borrower and is generally added to the mortgage amount. These mortgages are often referred to as “Hi-Ratio” mortgages. Closed Mortgage: A mortgage that cannot be prepaid or renegotiated. A high-ratio mortgage is a loan that is above 80% and up to 95% of the purchase price or appraised value of the home, whichever is less. These mortgages must me insured against loss by either Canada Mortgage and Housing Corporation (CMHC), a Federal Government Corporation, or Genworth, a private insurer. The premiums can be added to the mortgage amount or paid at closing, and are as follows:
| For Mortgages Up To: 80% | No Insurance Required |
| 80.1-85% | Premium is 2.15% |
| 85.1-90% | Premium is 2.40% |
| 90.1-95% | Premium is 3.15% |
If you obtained an insured mortgage after April 1’st, 1996, the premium you paid on the mortgage is now portable to another property (if you closed before this date, it is not portable, meaning that if you bought another home and your mortgage needed to be insured, you must pay the applicable premium again.) NOTE: This insurance is for the benefit of the lender against default. It is very costly and there is another way we can arrange a mortgage for you with a low down payment. That is with a 1’st mortgage and a 2’nd mortgage. For your unique situation, it may be less costly to consider this option. Banks, on the other hand, cannot offer you this option as they cannot provide secondary financing over 80% of the purchase price or value of the property. Back to top
First Mortgages:
A First mortgage is the first debt registered against a property that is secured by a first “charge” on the property. If a default on the mortgage occurs, the first lender has first right on the property to recover the outstanding principal and interest costs, and any other costs incurred during the process. Second Mortgages: A second mortgage is a debt registered after a first mortgage has been registered. In most cases, the interest charged on the second is higher than the first, reflecting the higher risk to the lender, but over a short term, still more cost effective than paying the high cost of the CMHC/Genworth insurance premium. They can be used to finance up to 95% of the purchase price or value of the home.Back to top
Open Mortgages
An open mortgage allows you the flexibility to repay the mortgage at any time without penalty. Open mortgages are available in shorter terms, 6 months or 1 year only, and the interest rate is higher than closed mortgages as much as 1%, or more. They are normally chosen if you are thinking of selling your home, or if you are expecting to pay off the whole mortgage from the sale of a another property, or an inheritance (that would be nice). Back to top
Closed Mortgages
A closed mortgage offers the security of fixed payments for terms from 6 months to 10 years. The interest rates are considerably lower than open, and if you are not planning on any one of the above reasons, then choose a closed mortgage. Nowadays, they offer as much as 20% prepayment of the original principal, and that is more than most of us can hope to prepay on a yearly basis. If one wanted to pay off the full mortgage prior to the maturity, a penalty would be charged to break that mortgage. The penalty is usually 3 months interest, or interest rate differential (I.R.D. – please refer to glossary for detailed explanation). Back to top
Fixed-Term Mortgages
With a fixed-rate mortgage, the interest rate is set for the term of the mortgage so that the monthly payment of principal and interest remains the same throughout the term. Regardless of whether rates move up or down, you know exactly how much your payments will be and this simplifies your personal budgeting. In a low rate climate, it is a good idea to take a longer term, fixed-rate mortgage for protection from upward fluctuations in interest rates. Back to top
The Adjustable Rate Mortgage (A.R.M.)
The Adjustable Rate Mortgage (A.R.M.) provides a lot of flexibility, especially when interest rates are on their way down. The rate is based on prime minus 0.65% and can be adjusted monthly to reflect current rates, and for the first 3 months of the mortgage, a large discount on the rate is given as a welcoming offer. Typically, the mortgage payments remain constant, but the ratio between principal and interest fluctuates. When interest rates are falling, you pay less interest and more principal. If rates are rising, you pay more interest and less principal, and if they rise substantially, the original payment may not cover both the interest and principal. Any portion not paid is still owed, or you may be asked to increase your monthly payment. This mortgage is fully convertible at any time without any cost to you, if you choose a 3 year term or greater, and offers a 20% prepayment privilege at any times throughout the year.Back to top
Secured Lines of Credit
Use the equity in your home that you have built up to purchase investments (where interest costs would be deductible against the earned income), finance home renovations, buy a car, or any other reasonable needs, with rates as low as prime. They can be arranged up to 80% of the purchase price or value of the home, and should you need more, we can arrange another secured line of credit as a Second mortgage up to 85%. Accessing the available credit is as simple as writing a cheque, or using the issued credit and/or debit card. You do not have to draw the money until you need it, and once you make a withdrawal, you can pay of your balance at any time or make monthly payments as low as interest only. As you pay down the balance, you have that much more available credit (revolving credit). Being a secured product, there are the normal legal and appraisal fees that are applicable. From time to time, there are promotions where a lender will cover for part or all of these costs. A word of caution: Although these lines are very flexible and versatile products, great caution and care should be taken. It is very easy and very tempting to use it for everything whereas normal restraint would have been exercised, and suddenly, there are thousands of dollars more that have to be repaid. Back to top
Equity Mortgages
These are mortgages that are assessed on the equity of the home (market value minus the mortgage amount). They can be as high as 85% of the purchase price or value of the property and if more is required, we can look at a small Second mortgage. These are generally offered to applicants that do not meet the normal income and/or credit qualifying guidelines. You may have little or no income verification, self-employed, and/or your credit may be less-than-perfect. Back to top
Multiple Term Mortgages
If you wanted the lower rates of a short term mortgage but wanted the security of a long term, why not choose both. Yes, “build your own mortgage” product. You can split your mortgage in to as many as 5 parts, all having different terms, rates, and amortizations, but one total monthly payment. This way, you are spreading the risk. But, be prepared to be “hands-on” and watch the market very carefully here. This is not for everyone, as the time and stress levels are quite high. Back to top
The 6 Month Convertible Mortgage
When rates are on their way down, or you may feel that they will in the near future, a 6 month convertible mortgage offers you the short term commitment at fixed payments, with an added advantage that while within the term, the mortgage is fully convertible to a longer term from 1 year to 10 years. At the end of the 6 month period, the mortgage becomes fully open, where one can renew with the existing lender or transfer to another lender. Even though it is offered at many financial institutions, there are differences from one to the next. Back to top
All-Inclusive-Mortgage (A.I.M.)
The AIM mortgage takes care of everything automatically. For Purchases, it includes: Solicitor’s legal fees and standard disbursements to close the purchase and mortgage; Title transfer; Title Insurance from LandCanada for the clients; CMHC application fee or Appraisal fee; 1% Cash-Back to cover Land Transfer Tax; Registration of Deed and Mortgage. For Refinances, it includes: Legal fees and standard disbursements to prepare and close the mortgage; Title Insurance from LandCanada; CMHC application fee or appraisal fee; 1% Cash-Back; Registration of new first mortgage; Registration of discharge of existing first and second mortgage. The minimum term available is a 5 year term. Back to top
Bridge Financing
Bridge financing refers to a special, short-term loan needed to cover the time gap when two properties, both firm sales, are involved and the closing dates don’t match. The property being purchased closes before the one that was sold. There is a small set-up fee charged by the lender to have the bridge loan arranged, plus the cost of the interest as now you are carrying both properties for a short time. The rate charged on the bridge loan is about 2-3% above the bank’s prime. Back to top
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