Ryan Anderson - Your "Motivated" Mortgage Broker!

ryan.anderson@mortgagegrp.com 204-479-0775

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August 21, 2019
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Let me help you find the best fit to a mortgage product.

There are several factors to consider when making a mortgage decision. From terms and rates, to flexibility and type of mortgage, I will assess your unique needs and present the best options.

 

TMG / Castle Mortgage products include;

  • An Open Mortgage - allows you the flexibility to pay off some or the entire mortgage at any time, without penalty. Interest rates are usually higher and are tied to the Bank Prime. Mathematically, this product is most popular for short term mortgage needs. For example; flipping or breaking the mortgage within a 6 month period.
  • A Fixed Mortgage - offers you the security of locking in your interest rate for the term of your mortgage, so you know exactly how much principal and interest you will be paying on the mortgage every month. The length of terms range, however, most lenders and banks provide discounted rates at 3 year, 5 year and 10 year terms. Fixed rates and variable rates are not connected. The fixed rates are connected and fluctuate according to the bond rates. The fixed product is best for someone who is on budget or doesn't want to worry about future mortgage changes. Taking a 5 year fix can also help qualify for a higher mortgage amount. Break penalties on fixed terms are most often calculated on IRD (Interest Rate Differential) or 3 months interest - whichever one is greater. The most important thing to understand before signing for a fixed mortgage, is how the bank calculates their IRD and if there are any other restrictions. If they compare their posted rate, to their discounted rate there can be a large percentage difference which would be added onto your break penalty if you sold or refinanced early. This could cost you hundreds or thousands of dollars extra in penalties, in comparison to a bank or lender which calculates and compares discount to discount rates.
  • Variable Rate Mortgage - allows you to take advantage of today's low Prime Rate. Most variable rate products are set below prime and terms range from 1 to 5 years. The interest rate could fluctuate as the Bank Prime Rate changes. You can lock in your mortgage to fixed term, without any additional costs. There are strategies to set your payments higher and pay off your mortgage faster. The break penalty on a variable is almost always a 3 month interest penalty.
  • Secured Line of Credit - allows you to access the equity in your home whenever  you choose. Rates are tied to prime, usually slightly above prime. Required payment on the balance is interest only, making it a good choice where cash flow may be important. A secured LOC is at a lower interest rate compared to an unsecured line of credit. It's similar to an open mortgage, where you can pay it off anytime and used best when needing large amounts of money for short periods of time. Adding on a secured LOC can also be useful if you have equity in your home but can't or if it costs too much to break your mortgage.
  • 2nd Mortgage - typically refers to a secured loan or mortgage that is subordinate to another loan against the same property and interest rates are much higher, due to the higher risk of the lender. The only time a second mortgage would be used, would be for short term financing until your credit or situation improves.
  • Private Mortgage - in this instance you don't borrow from a bank, you borrow from another person or group of investors. Typically, used for a short term, higher interest arrangement and can be tied with a 2nd mortgage.
  • Commercial Mortgage - similar to a residential mortgage, except the collateral is a commercial building or other business real estate, not residential property. In addition, commercial mortgages are typically taken on by businesses instead of individual borrowers.
  • Investment / Rental Properties - Most rental properties now require a minimum of 20% down payment. Most lenders and banks are comfortable allowing ownership of up to 4 to 6 properties. Residential mortgages are for those properties with 1 to 4 doors, such as a Duplex, Triplex and Fourplex. Anything bigger than that, is considered a commercial property and has it's own guidelines. Typically, you can use a percentage of future rental income, anywhere from 50% to 80% on the property towards qualifying. For those with multiple properties, each bank has it's own rental worksheet and guidelines of what income they will use to qualify. Some will allow the rental to be placed in a corporation or holding company name. Interest rates are not as important for rentals, as you can typically write off the interest charged on your income taxes. Please contact me for more specifics.
  • Build Mortgages - If you decide to build a home, there are two ways to finance the build. One is a completion mortgage and the other is a draw mortgage. A Completion mortgage is one where the deposit is given to the builder upfront, and then the builder builds the home until complete and a mortgage is put in place at that time. The advantage is that you don't have to start paying the mortgage right away and you have access to many lenders with as little as a 5% down payment. The disadvantage is that not many companies offer this option, especially custom home builders. With that,  you don't always get as many custom choices. The alternative is a Draw Mortgage. For most draw mortgages, you'll need at least 20% down payment, although there are exceptions. A deposit will be required up front, but what's most important to find out, is whether or not the land is included in the total price. If you are able to purchase the land upfront, then you would only pay land transfer tax on the land price, vs the total purchase price. That difference in land transfer tax is usually thousands of dollars. If the land is paid upfront, you can use the land value towards the down payment. There are then usually 3 to 4 draws at each different building stage and an appraisal can be required at each, before more money is advanced. The advantage is that you get to build a custom home. The disadvantage is that not everyone can afford to pay for the land upfront, especially if money needed for the build is tied up in your current home equity. Lines of credit and land loans are available for this reason, and you have to qualify. There's not many lenders that offer draw mortgages and even fewer than do it properly. There can also be additional costs associated with delays, interest paid on the draw portions and upgrades or unexpected costs. For build mortgages, it's best to talk to a experienced licensed mortgage broker in person before you make any big decisions to ensure you are properly prepared.  The key is to ensure everything is set up correctly right from the start.


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