August 16, 2018

Variable vs Fixed Rate Mortgages Or The Hybrid Mortgage

It is important to know at the outset that if you select a fixed rate term, the longer the term the higher the interest rate.  You can think of it as an insurance premium that protects you from future rate increases.

There is a lot to consider when deciding what mortgage term suits your needs.  The first consideration should be your tolerance to risk and your ability to sleep at night.  If you are going to worry about where rates are going and how that is going to effect your day to day life or your budget could not withstand an increase in payments, choosing a variable rate mortgage is probably not for you.
Many studies have been done and found that variable rate mortgages cost less over the term of the mortgage however your payment can change as interest rates fluctuate.   
The hybrid mortgage offers you a combination of fixed and variable rate within the 1 mortgage package (ie you could put half your mortgage in a fixed rate and half in a variable rate).  You can also have different amortizations for each segment of the mortgage.  
As of today, the best 5 year fixed rate I can obtain is 3.89% and Prime – .80% (3% – .80%) or 2.2% for a variable rate mortgage.
There isn’t one mortgage product that is best suited for everyone, each individual has different needs and criteria.  Call me to discuss which option best suits your needs.

Colleen Saunders is a 20 year veteran in the mortgage industry, serving Mississauga, Burlington, Oakville and Toronto and offering all mortgage related services such as 2nd mortgages, private mortgages and more.

To contact Colleen, please fill out the form on our site or call 416-459-2406

Should You Break Your Mortgage

Interest rates are about to increase again and a number of us keep thinking if there is ever a good time to lock into a fixed rate or switch to a variable rate or just purchase a home.  Here is some information to help you through this dilemma.

The big hurdle of getting out of your current mortgage is the interest rate prepayment penalty.  Your current lender will charge you the greater of 3 months penalty interest or what they call the interest rate differential (IRD).  This is based on the difference between the original mortgage interest rate and the rate the lender could charge today for the remaining term of the mortgage.  At this point, the key question is: what is the current interest rate and time remaining until maturity.  Generally speaking, if there is less than 2 1/2 years remaining in the term, it makes sense to refinance.  

Variable rate mortgages follow the same principle and most variable rate mortgages have just a 3 months interest penalty and not a IRD.   If you have a current mortgage rate at Prime (currently 3%) + 1%, totalling 4% and you can now get a rate of Prime – .80% totalling 2.2%, you will be saving 1.8% (or just over 40% off the current rate) and that is a lot of interest savings!  

If you have other debt to roll into your mortgage, it even makes more sense because typically other debt are at rates well above the mortgage rates.

I can help you run the numbers and determine “Is it worth breaking my mortgage and what will it cost me”.   Let me Point You In The Right Direction.

Colleen Saunders is a 20 year veteran in the mortgage industry, serving Mississauga, Burlington, Oakville and Toronto and offering all mortgage related services such as 2nd mortgages, private mortgages and more.

To contact Colleen, please fill out the form on our site or call 416-459-2406

You Have Purchased Your Home, Now What!

The day has finally arrived, you are going to take possession of your new home.  Closing day can be a busy and exciting time.  Fear of the unknown, ‘what do I do now’ can detract from the excitement of owning your new home.  Ensure the following has been completed.

  1. FINALIZE MORTGAGE DETAILS:  Speak with your broker the day before the house closes to make sure all paperwork is in order
  2. GET THE DEPOSIT READY:  Depending on what type of investment you are using to make the down payment, make sure assets that needed to be liquidated are available and in your account
  3. SPEAK WITH YOUR LAWYER:  Have a meeting at least the day before closing to go over the final numbers and details and review the mortgage before you sign.  You should also review documents relating to ownership of the property and conditions of purchase.
  4. DO THE DEED:  A deed is a legal document signed by the vendor and purchaser that officially transfers ownership of the home and is registered in your name.  Your real estate lawyer should provide this document to you for signing.
  5. SET UP UTILITIES:  A week before you close, book appointments to have your cable, TV and utilities set up.
  6. GET YOUR INSURANCE IN ORDER:  Have home insurance in place for the closing date and be familiar with the details of your policy.
  7. SORT OUT YOUR MOVE:  Although you may want to do the entire move yourself, there are benefits to entrusting this job to professional movers.  Do some research before you decide what works best for you.
Careful planning is required to ensure there are no major glitches on closing day, especially if you are buying, selling and closing on the same day. 

I deal with a number of contractors and professionals that will ensure your closing process will go more smoothly.  Please call me anytime.

Tips On Home Repair And Maintenance

Home ownership is a long term commitment and requires ongoing maintenance and care.  In order to increase the value of your home and help protect your investment, be sure to stay ahead of home repairs.

Home repairs occur year round, so keep these seasonal maintenance tips in mind:

  1. Conduct a energy audit on your home and make small changes that can save you big money on utilities.
  2. Monitor snow build up on roofs, balconies and decks.  Ensure your eaves troughs are not breaking away from ice build-up.  Icicles off the roof indicate poor insulation.
  3. Review your fire safety plan and design an escape route.  Ensure all walkways are clear of snow and ice.
  1. Check your septic tank, if applicable.  Ensure it is maintained to avoid digging up a full tank in the depths of winter
  2. Replace batteries in your smoke and CO2 detectors.  Change your batteries when you adjust your clock for Daylight Savings Time
  3. Clean all windows to allow more natural light in.  Vacuum screens to remove dust.
  4. Empty eaves troughs and ensure that drainage areas are clear.  Use leaves from the gutters as compost for your garden
  5. Change air filters
  1. If you are considering a renovation, conduct a background check on contractors. The Ministry of Consumer Services website or the Better Business records notices of delinquent businesses based on consumer complaints, show action taken and any charges laid.

  1. As with the spring, check your batteries in the smoke and CO2 detectors.  As part of your winter preparations, empty gas from lawnmowers, tune up or sharpen blades  on snow removal ie. shovels and blowers.
  2. If you have a wood burning fireplace, make sure the chimney is clean and clear of creosote buildup, this will help you avoid chimney fires 
  3. Turn off all outside water sources to avoid freezing
  4. Service your furnace
If you need a referral for servicing/maintenance on your home, I have a list of reputable contractors to assist you in this regard.  Call me anytime.

Understanding Your Financial Tolerance

A good way to avoid financial pitfalls is to plan ahead and be realistic.  
Understanding your financial picture will help you reconcile what you want with what you can actually afford.  Here are 5 suggestions to assist you in making that decision

1-  Calculate Your Net Worth – determine your total assets and then subtract your outstanding debts.  This will give you a clear picture of your financial health.  
2-  Verify The Mortgage That You Can Afford – once you know your down payment, calculate what you can afford as a mortgage payment and this will help you determine how large a mortgage you can carry.  Your mortgage payment will depend upon your amortization period, term, type of mortgage ie fixed or variable rate, weekly/monthly, etc. and your down payment.
3-  Save For Your Down Payment – the higher your down payment, the lower your monthly mortgage costs will be.  In Canada, the minimum down payment is 5% and if you put less than 20% of the total purchase price, you will require mortgage default insurance.  This insurance premium ranges from 1% – 2.75% based on the amount your are borrowing in relation to the purchase price.  
4- Contemplate Other Costs – keep in mind other costs over and above the purchase price.  There are home inspection fees (approx. $500), appraisal fees (if required approx. $300), legal fees (approx. $1,500), land transfer tax (approx. 1.5% of the purchase price), house insurance and hook up fees of utilities, etc.  Research these costs to avoid any surprises and build them into your budget.
5 – Learn To Budget – getting into the budgeting habit is a great way to prepare for purchasing your new home.  It will help you understand where your money is being spent and how much you can afford for your mortgage payment.

If you know anyone that could benefit from my vast knowledge of working out a budget and qualifying them for their home purchase, please call me anytime.

This week is Homeownership Education Week provided by Genworth Financial which is the largest private mortgage insurer in Canada.

Colleen Saunders is a 20 year veteran in the mortgage industry, serving Mississauga, Burlington, Oakville and Toronto and offering all mortgage related services such as 2nd mortgages, private mortgages and more.

To contact Colleen, please fill out the form on our site or call 416-459-2406