FAQ/Help
No,the lender is not under any obligation to renew your mortgage.
It does not 'automatically' renew. In fact if you have 'missed' or been late with any payments the lender could use this as an excuse not to renew with you. A loss of a job or a divorce may be another reason. But, in truth, no excuse is necessary for the lender to call your loan.This can not be understated. For example, it is common for businesses to find their commercial mortgages NOT renewed for any reasonable reason at the end of term. And this may be no fault of the business that paid their mortgage payments on time. A bank could refuse to renew because they don't like the economic climate of a particular geographic area or even a type of industry a business operates in. Think about the hardships suffered. For this reason alone it is critical for businesses and homeowners to obtain a quote from a mortgage broker 60 to 90 days before their current mortgage matures. This way if your current lender does not offer you a renewal you have a backup lender in the wings. If you use a mortgage broker you will often benefit with a lower rate anyway.
Often a lender will attempt to charge a renewal fee or tempt you to renew without a fee if you sign within a certain 'time offer' at their posted rates. Please keep it mind that if you use a mortgage broker it is very, very rare for you to ever pay a renewal fee. For all conventional residential mortgages there will not be a fee because the mortgage broker will shop the market for you and find a lender that doesn't charge a fee AND will beat your current lender's mortgage renewal rate!
Historically it was said that when interest rates are low you should take as long of a term as you can afford. When the interest rates are high you should take the shortest term and renew every 6 months or 1-year. This theory has been outdated by the new variable rate products, which offer the lowest rates available, but offer some more risk. It comes down to your individual situation, whether you don't mind the risk, or would rather pay slightly more for the saftey and security of a longer term.
Your amortization is the total length of time it will take you to pay off your mortgage. Often when you first get a mortgage it is amortized over 25 years. If you make your mortgage payments over 25 years your mortgage will be paid off. However, your amortization period will not stay constant because different borrowing terms at each renewal vary the amount of interest charged over your amortization period. The length of time to pay off your mortgage will be determined by the interest charge, the loan amount and the amount of payment you make. You should first qualify for a 25-year amortization and then change the amortization down to 15 years by making a larger monthly payment. A 15-year amortization is a great goal for everyone. A good rule of thumb is to pay down your mortgage by at least 1% each year from the original amount. Make your monthly payment and add in this "top up" amount. It is the amount of 'extra' payments that you make that reduces your principal, which saves you, interest charges. Another rule of thumb, when interest rates are low, is to make your mortgage payments as large as possible in your monthly budget. If interest rates rise by next renewal keep your mortgage payments the same and ride out the high rates by taking shorter renewal terms. This way you will get in the habit of making the same larger mortgage payment over time and by doing so will save thousands in interest charges.
It simply means that for the term of your mortgage the interest rate charged is a fixed amount and does not change during the term of your mortgage. If you look at our rate comparisons you will see this distinction between fixed and variable rates.
Compared to a fixed rate mortgage a variable interest rate 'floats'. Although the mortgage payment amount may stay the same the actual interest charged may change on a monthly basis. A drop in interest rates is great news for you and it will mean that more of your mortgage payment will go towards reducing your mortgage principle. If interest rates rise then less money will be used for reducing your principle and will instead be used for paying higher interest costs. If you think interest rates will fall over the next 3 to 5 years then purchasing a variable mortgage makes a lot of sense. With mortgages you pay a price for certainty. You generally pay more for a fixed rate mortgage because the lender is taking the risk as to what the rates will do by fixing the rate for you. You generally pay less for a variable rate mortgage because it is you that is taking the risk of uncertainty as to how interest rates will move - up or down. With low interest rates variable interest rate mortgages have become popular. Often it is possible to get a rate just over or under the bank prime rate!
Most variable mortgages give you the right to change to a fixed rate at any time. If you think the interest rise is not just a short-term fluctuation but will be a long-term trend then 'lock into' a fixed rate immediately. There is usually no charge for this great benefit.
An open mortgage gives you the most flexibility in making extra payments towards your mortgage principal and even lets you pay off your mortgage entirely whenever you wish to. If you have uncertainty in your life such as a serious illness, a looming separation or a possible job transfer to another city it is better to have an open mortgage. This way if you 'have to move' you can pay off your mortgage without any penalty. This could save you thousands in prepayment penalties. Warning! Not all-open mortgages are created equal. Check to see just how 'open' your mortgage is!
Compared to open a closed mortgage offers little to no privileges in paying off your mortgage early. You can not pay off your mortgage without attracting penalties, called prepayment penalties, from the lender. Warning! Not all closed mortgages are created equal check with your expert as to how your prepayment penalties are calculated. The difference between one lender definition of penalty to another lender is enormous. Long term mortgages are great for those who don't want to think about their mortgage rate and don't mind paying more for that privilege.
Yes,a good rule of thumb is whenever making a change will result in a 2% - 3% interest rate saving. This is so popular that it is even has a name - the 'break and run' strategy in the lending industry. The improved rate change will absorb any prepayment penalty over the next 5 years in any switch when the spread between the old rate and the new mortgage rate is great enough. Check with your expert to review your situation, as often he can find additional incentives or deals that reimburse some or all of your prepayment penalties. If you switch and keep your mortgage loan amount the same there are usually no legal fees involved - just a simple 'no fee' switch with the new lender.
No, if you switch from one lender to another at your renewal date there will not be any penalties whatsoever. If you switch before your maturity or renewal date there may be a penalty. If you have an open mortgage there probably will not be any charge. If you have a closed mortgage you will most likely have a cost. It is important to consult with an expert to determine whether or not a 'break and run' strategy will work for you. Often your penalties can be minimized when your expert finds a new lender anxious for your business. A new lender will often assist with incentives to lure you over to them. Sometimes the incentive can be a cash back offer that can be used towards any prepayment penalties, or a variable rate that shows enough savings to make back the penalty in a very short time.
Absolutely not. Do not chase newspaper headlines but do ask yourself why a change is occurring and whether or not it appears to be a long-term trend or a short term 'blip'. For example, it is not uncommon to see a dramatic interest rate jump due to a constitutional referendum or a fear of a heated economy. But it is short lived. Check with this website and others for updates on economic indicators that affect the rates.
Yes! This is one of the main reasons to have an expert handle your mortgage! You will have seen in Newspapers and in Bank Branches the posted rates. This is what the lenders are posting as their best rates available, they are "retail" rates. Your expert deals with the lender's head offices and gets their "wholesale" rates with discounts depending on the term from 1.00% or more off of posted! When you work with an expert there is only one credit report done. When you shop around at various lenders they all do one and this will effect your credit rating. Further, your expert knows where the deals are and the particular lending habits of the different lenders that would best suit your needs. The lenders know that when a Mortgage Expert is involved the deal will get placed and so they will actively bid to get it before a competitor does.
For conventional residential mortgages there is no fee paid by you. Instead the lenders pay a finders fee to the mortgage broker for bringing them business. For commercial properties a mortgage broker will charge fees but will always put this in writing before any work is commenced. In any case, ethics and laws bind a mortgage broker to state to you whether or not any fees will be charged and to put it in writing before any work is commenced. The mortgage experts will never charge fees for any conventional residential mortgage.
It is less stressful for you. The mortgage experts work on hundreds of mortgages, most people only have 2 or 3 in their lifetime. People feel intimidated and rarely feel courageous enough to play hard ball with negotiation on prepayment penalties, open versus closed options, rates and flexibility for repayment. Through volume the experts gets the best rates available, as well as the best products, tailor made for your individual needs. You not only receive the best mortgage, but you also have a mortgage expert working with you that you can call anytime for advise...they are on your side!
Whenever you need a mortgage loan that is greater than 76% of the current market appraised value of your home it is considered a high ratio or insured mortgage. You can borrow up to 95% value and only need to come up with a 5 percent minimum down payment. The Canada Mortgage and Housing Corporation (CMHC) insures the lender in case you default on your loan. You must pay for this insurance premium which is usually included on top of your loan. CMHC fees are as follows: for 5-9% down 3.25% of the mortgage balance, for 10-14% down 2.00%, for 15-19% down 1.75%, and for 21-24% down it is 1.00%. Rates for high ratio mortgages should be the same as a conventional mortgage, check with your expert for your situation.
Paying weekly or biweekly gets more money onto your mortgage over the year. This will add up to paying your mortgage down faster over the long term. If your mortgage payment was a $1000 a month, and you paid it weekly at $250/week, at the end of the year you would have paid $13,000 towards your mortgage as opposed to $12,000 paying monthly. If it fits your paydays, then take a weekly or biweekly payment. If it doesn't, pay monthly, and put an extra payment on once a year...you will get almost the same benefit!
Yes, but contact a professional life insurance broker who can properly advise you on the right amount of coverage for your total estate needs. Having enough insurance to cover your mortgage is just one of the expenses you will need to guard against. It is also extremely important to have a current last will and testament. Talk to your Mortgage Expert for a recomendation.
Instead of purchasing creditor insurance from the bank it is better to purchase private insurance from a licensed insurance agent. Creditor insurance has many restrictions and limitations. From a mortgage consultant's point of view, we are very concerned when your insurance is tied to your mortgage lender. What do you do if you want to switch to a more competitive lender at your next mortgage renewal? When you switch you will lose your creditor insurance. If you are unhealthy you may not qualify for another insurance plan elsewhere! This means you may be stuck staying with a lousy interest rate with the old lender just because you need to keep your insurance. This is poor planning that could cost you thousands of dollars. Keep the mortgage lender and your insurance separate from each other. Also, with creditor insurance once your mortgage is paid off it ceases to exist. There are many reasons why you may wish insurance coverage to continue for estate purposes and with private insurance you will have that option. Ask your certified financial planner or professional insurance agent for advice (see Links section).
Assuming that you are already making a mortgage payment 10% greater than necessary and you still have extra cash then we would answer the following way 1: if interest rates are high then pay off your mortgage more with additional payments 2: if your investment returns are 2% lower than your mortgage rate then pay down your mortgage more 3: if you are in a low tax bracket then pay off your mortgage. Otherwise, add to your RSP.
Possibly, If you are in a high tax bracket and have not taken advantage of your RSP room it is an excellent opportunity for you to buy a large amount of RSPs and obtain a large tax refund. Your new RSP portfolio could even be used as an income splitting tool to transfer wealth to your spouse with a spousal RSP. You would get the deduction and your spouse would get investments accruing in his or her name. At retirement, you and your spouse would both draw out pension income that would taxed at a lower rate than if being claimed by only one pensioner. Finally, you could use the tax refund to pay down your mortgage even further. Speak to a Financial Planner to look over your investment plan in detail (see links section).
Every mortgage has a start date and an end date. The end date is referred to the maturity date. The duration between the end date and start date is the term of your mortgage. You can choose terms of just 6 months, 1, 2, 3, 4, 5, 7, 10 or even a 25-year term. At the end of the term you can pay off your mortgage,accept the lender's invitation to renew it for another term period of your choice, or have Michael find the best product on the market and move your mortgage there.
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