we are committed MORTGAGE BROKERS IN HAMILTON

For most people buying a home is the biggest investment that they will ever make. This is why it is so important to understand just how mortgages work before committing yourself. At Certified Mortgage Brokers, Hamilton, we pride ourselves in helping our clients to make the best choices.

A residential mortgage is a secured loan where the property serves as collateral. This means that the mortgage holder has the right to sell the property if you fail to make repayments as agreed. The proceeds of the sale are then used to cover the amount owed.

With a residential mortgage the lender agrees to lend you a sum of money. This is known as the principal. Over the term of the mortgage you will make periodic repayments as agreed. These will cover the monthly interest and a portion of the principal. In this way, you pay off the full loan over the amortisation period.

You may choose either a fixed or variable interest rate. Fixed interest rates are very popular in Canada as they offer borrowers the certainty of unchanged interest rates and repayments over the term of the mortgage. Variable interest rates, on the other hand, move along with the prime interest rates. On the positive side variable rates are cheaper over the longer term.

Another choice that you will have to make in negotiating your mortgage is whether to opt for an open or closed mortgage. An open mortgage offers repayment flexibility, allowing early payment of the principal amount without incurring penalties.

A closed mortgage offers lower interest rates but place limits on repayments. With a closed mortgage you will attract penalties for breaching the payment limits as stipulated in the agreement.

By getting a second mortgage you can let the equity that you have accumulated in your home start working for you. A second mortgage is a loan secured by your home against which you already have a primary mortgage.

Home equity is the difference between the amount that you owe on the property and its market value. Equity grows over time. As the value of property grows so does the equity in your home. The down payment on your property and monthly repayments that you make also add to your home equity. A portion of every repayment that you make goes against the principal once the interest is paid.

You can use up to 85% of your home equity to secure a second mortgage. The interest on the second mortgage is higher than that on the first, but it is a lot lower than the interest on any unsecured debt that you may have.

Most people take a second mortgage for the following reasons;

• To renovate or extend their homes
• To make an investment
• To educate their children
• To consolidate more expensive unsecured debt.

Second mortgages offer home owners the benefit of easily obtaining a relatively large sum of money at a lower cost than a personal loan or credit card.
If you don’t need a lump sum payment you could also consider a Home Equity Line of Credit or HELOC, a revolving credit agreement secured by your home. You withdraw what you need and pay interest only on the amounts that you have used.

A reverse mortgage allows you to get money from your home without having to sell it. To be eligible for a reverse mortgage you and your spouse must be 55 years or older, and your home must be fully paid-up.

If you still have existing loans secured by your home you can use the funds received from the reverse mortgage to pay it off. The house that secures the loan must be your primary residence. This means that you must live in it for at least six months every year. If you are married both you and your spouse will be listed on the mortgage.

With a reverse mortgage, you can apply for a loan of up to 55% of your home equity. How much you will get will depend on your age and on the appraised value of your home. If you’re approved for a reverse mortgage you can take a single lump sum payment or you can take the money as you need it.

You don’t have to pay back your reverse mortgage unless you move out or sell your house. Alternatively, the house will be sold when the last partner dies. The proceeds are then used to pay off the principal and the accumulated interest on the loan.

If you want to you can pay back the reverse mortgage, but you could incur penalties if you pay it off early.

The interest rate on a reverse mortgage is typically higher than on a regular mortgage. It is, therefore advisable to seek advice from your mortgage broker before you sign on the bottom line.

When you refinance your mortgage, you negotiate a new mortgage with new terms and conditions and a new interest rate. You then use the funds to settle your old mortgage.

There are many reasons why borrowers choose to refinance their mortgage. We’ve listed them below.

• To take advantage of reduced interest rates. If you have not completed the term of your current mortgage you may face penalties. You should not let the threat of penalties put you off. Although they may be quite substantial, the savings on interest rates may make it worth paying the penalties.
• To take advantage of the equity in your home. You can cash in up to 80% of the equity in your home and use it to renovate your home, consolidate debt and save on high interest debt, or fund your children’s education.

There are several ways that you can refinance your mortgage

• New mortgage – You can take out a new mortgage with new terms and conditions.
• Blend and extend – You can add to your current mortgage and combine the rates of the two. Be aware that the interest rates of these types of mortgage tend to be higher than a straight mortgage.
• Home Equity Line of Credit – a type of revolving credit, when you have a HELOC you can borrow as and when you need the cash. You are committed to paying interest only over the term of the loan. If you pay back the capital you may borrow it again as you choose.

Buying a house for the first time is an exciting time in anyone’s life. It is also a commitment that many people face with considerable trepidation. Knowing what to expect does help to reduce the anxiety.

As a first-time home buyer in Canada you are entitled to a number of incentives which make it easier to break into the property market. If you haven’t lived in your own home or that of your spouse or common law partner for the last four years you may qualify for all or some of the incentives listed below:

• The First Time Home Buyer’s tax credit will give you $750 of tax relief to assist with land transfer costs, legal fees and disbursements.
• The Home Buyer’s Plan allows you to access up to $25,000 of your registered retirement savings plan RRSP and you’re exempt from tax. Your partner can draw a similar amount from their RRSP. Bear in mind that the money must have been in the fund for at least 90 days before the sale goes through. You will have to repay the money to the fund within the next fifteen years or pay the tax.
• Land Tax Rebate both local and provincial rebates are available depending on where you are buying.
• GST/HST refund if you are buying a newly built home.
• The CMHC First Time Home Owner Incentive Scheme was launched in September 2019. To qualify you
  • Must earn less the $120,000 per annum.
  • The amount that you may borrow may not exceed $480,000
  • You must make a minimum down-payment

You must repay the amount within 25 years or on the sale of the property whichever comes first.

For many people taking a loan from a conventional bank is simply not an option. Reasons range from a poor credit record, to unconfirmable income and unconventional properties. Private mortgages allow people who don’t qualify to follow their property investment dreams.

Private mortgages are secured loans that run for periods of six months to three years. They are interest only loans. No payment is made against the principal until the mortgage has reached term or is paid up.

Unlike conventional banks, private bankers are interested less in the credit rating of the borrower than in the market value of the property that will serve as collateral against the loan.

Because private mortgages carry more risk for the lender, they attract higher interest rates than a conventional mortgage. the rate that you will pay will depend on your circumstances and factors related to the property. Fees are incurred when signing up for a private mortgage. You should budget for between 1% and 3% of the loan amount. It is possible to include the fees in the mortgage.

Private lenders specialise in various markets and your broker will match you up with a lender who will understand your needs and will tailor a product to suit you. He will also help you to devise an exit strategy that will allow you to change to a conventional mortgage at the end of the term.

Factors that private lenders look at:

• The appraised value of the property
• Your income
• A down payment of at least 15%

Commercial mortgages are typically taken out by businesses who wish to purchase commercial property rather than residential property.

Most people are familiar with residential mortgages so it is useful to compare the two.

The interest rate on a commercial mortgage is typically substantially higher than on residential properties. This is because they are riskier for the lender, given that repayment is dependent on the success of the business.

Applying for a commercial mortgage is also a lot more complicated than a residential application, because the business is assessed and not the individual. It, therefore, takes a lot longer to obtain approval for a commercial mortgage. It can take as much as a year to get approval.

At between three and ten years the term of a commercial mortgage is typically shorter than a residential mortgage.

The loan to value ratio of a commercial mortgage is generally lower. This means that less of the capital outlay is covered by the loan. The ideal range is between 65% and 80%.

Criteria for approving a commercial mortgage:

• The creditworthiness of the business and the business owner
• The size of the down payment, the bigger the better.
• Financial statements and forecasts
• Appraised real estate values
• A survey of the property.

Interest rates on commercial mortgages differ significantly between businesses and industries and it is very difficult to make rate comparisons. A mortgage broker can help you to navigate through the complexities of a commercial mortgage and ensure that you get the best interest rates.