Understanding The New Mortgage Stress Test Rules

new mortgage stress test rules

The new mortgage stress test rules are now in effect for Canada as of June 1, 2021. With the mortgage rates so low during the Covid-19 pandemic, the government thought it would be useful to reinforce the protocol for the stress test.

They want to ensure new homebuyers can handle payments with the increase in cost if the mortgage rates rose significantly during their next renewal. It is a way for preparing for the worst-case scenario to be sure that you won’t get caught off guard and end up losing your home and investment.

What Is A Stress Test?

A mortgage stress is used to determine whether you can actually afford your mortgage at a qualifying rate. When people sink their money into a huge investment such as a home, it can stretch budgets thin. Leaving little room for the unknown when it comes to their finances.

The stress test demonstrates a hypothetical bad scenario for the buyer before they make a considerable investment. It uses variables such as losing your job, income reduction, rising interest rates, etc. It’s a way to determine how much you could still afford to pay if any of these situations occurred.

The Stress Test Formula

understanding the stress test

It’s regardless of your down payment.  Lenders will now use the greater of, the Bank of Canada’s 5-year benchmark rate or the contract rate plus 2%.

Qualifying

In order to qualify for a mortgage in Canada, you will need to pass this stress test. However, private lenders, mortgage investment corporations, and other alternative lenders don’t need to abide by the stress test. Though, you’ll still need to prove your creditworthiness and have a stable income that shows you can afford what you’re looking to qualify for.

When & Why Was The Stress Test Implemented In Canada?

Canada implemented the stress test due to growing concerns that the mortgage industry was increasing too quickly. They didn’t want Canada’s overall economic stability to be at risk. So, in 2018 the mortgage stress test came into effect when the federal bank regulator, the Superintendent of Financial Institutions (OFSI), decided it would be wise to create regulations that would ensure Canadians would only spend within their means.

New Stress Test Rules

stress test qualifying rate

So, what are the new stress test rules, and how can you prepare for them as a new homebuyer at this time?

The stress test’s new guidelines are more challenging than before, but that is to ensure those applying for a mortgage will be able to continue making payments in this new hot market without struggle.

New Benchmark Minimum Qualifying Rate

The Bank of Canada’s new benchmark minimum qualifying rate for uninsured mortgages is at 5.25%, up from 4.79%. This means the increase in housing sales in Canada’s market will hopefully start to cool off. It takes the heat off cities in Canada where bidding wars, skyrocketing prices and a burst of sales were standard throughout the pandemic.

However, this new rate could make it much harder for new homebuyers to acquire a mortgage and get the ball rolling on a home investment. Still, they say it will help guarantee the Canadian economy stays stable.

Preparing For The Harder Rules & Your New Home Purchase

new home buyers

This increase in the qualifying rate isn’t enough to completely shut would-be homebuyers out of the market. It won’t increase costs but limit what some are allowed to borrow, which could be a strain on some folks.

For example, if the maximum mortgage you were approved for was calculated at $500,000, you’ll presently get approval for $480,000. Meaning, now you’ll need an extra $20,000 to make up the difference. So prepare to save a little more if you want to acquire the same loan.

Calculate your mortgage stress test here.

Don’t let the new rules stop you. There is still plenty you can do to get into a home of your own.

Other Things You Can Do:

  • Continue Saving & Work Hard
  • Opt for a smaller starter home that fits within the new guidelines
  • Work on increasing your credit score. The best mortgage rates go to those with the highest credit scores
  • Reach Out To One Of Our Professional Mortgage Brokers With Any Questions About Financing, Mortgages & Affordability

For any questions or concerns regarding the new mortgage stress test or anything mortgage and loan-related, contact us today at (403) 571-8142. We are ready to help you open the next chapter of your life. We will work with you to get you into a home, even with the more difficult stress test in place.

How To Take Advantage Of The Calgary Real Estate Boom With A New Mortgage

calgary real estate

If you regularly walk through your neighbourhood, you might notice a house listed for sale last week has already sold this week. With a booming Calgary real estate market, now might be the time for you to join in as a buyer. In this article, you will first read all about how the market got to where it is. Then we’ll go over a few key reasons single-family homes are in high demand. Lastly, we explain the mortgage pre-approval process so you may take advantage of the current market. 

How Did We Get Here?

So how did we get here? How and when exactly did the Calgary real estate market start booming again? Despite the pandemic, current trends show the market will remain strong throughout 2021. Three things factor in building the housing demand in Canada, including: 

 

• High Rates Of International Immigration (Excluding 2020)

• Low-Interest Rates 

• Growing Middle-Aged Millennial Population 

 

The Calgary real estate market has seen high demand for single-family homes. Many young families or couples want to take advantage of low mortgage rates. However, with demand much higher than supply, this can cause stress for potential homebuyers. Many feel the urgency to make decisions swiftly in fear of losing out on their new dream home. Moreover, the Canadian Real Estate Association states the number of newly listed properties rose by 7.5% from February to March. While the market remains hot, they forecast fewer sales for 2022.

Single Family Home Demand

Single-family homes are in high demand. Due to the Covid-19 pandemic, we are all spending a lot more time at home. With many working from home, the shift to investing in personal space has risen. This means single-family detached homes are in high demand. Many are also considering moving out of the downtown core. Instead, they’re looking for a more spacious, quiet neighbourhood. 

 

It’s no secret that financial strain has hit many individuals especially hard this past year. Those who are minimally affected may have found their overall spending has gone down. With no holidays abroad or other large expenses, this money may go towards a down payment.

calgary real estate

Other Ways To Enter The Market

There are other ways to take advantage of the market without having to move. For example, a second or vacation home. With low-interest rates, you could find your weekend getaway home. 

 

Buying a rental property is another way to create wealth. A minimum down payment of 20% of the purchase price is required. Our team has assisted many Calgarians with this investment strategy.

Qualifying For A Mortgage

As we mentioned, buyers are taking houses off the market at record speed. Being prepared before you go property hunting is important. Please make sure you get a mortgage pre-approval first. You’ll need to organize several documents. A pre-approval shows how much you may borrow. 

Why Get A Mortgage Pre-Approval?

Due to current Calgary real estate demand, you’ll want to do everything you can to be an attractive buyer. With low mortgage rates, competition for a home can be high. Showing you did your homework and proving you have been pre-approved for a mortgage will set you apart. 

 

Pre-approvals help to make the financing process go more efficiently and smoothly. It reduces the potential for any unnecessary stress as well.

 

A pre-approval could also make negotiations easier. When the sellers knows you’re pre-approved, they could be willing to compromise—advocate for yourself. You could get what you’re asking for with a better price and terms. 

calgary real estate

Working With A Mortgage Broker

Making the biggest financial decision of your life is no small task. The added pressure to move quickly can make things extra stressful. So why make it more stressful by trying to do it yourself? Work with a mortgage broker to secure the best mortgage rate for your situation.  

Why Choose A Mortgage Broker?

First, they have extensive insider knowledge of the fluctuating market Buyers are snatching up homes faster than before, meaning you need to come prepared.

 

They will help you through the process of qualifying for a mortgage. Our team will guide you through the process each step of the way. You don’t want to feel disappointed finding your dream home, only to be turned down. 

 

By filling out a simple online mortgage application, your broker can get right to work. This will also cut back the time you may spend trying to get everything together yourself. Meaning you can get out in the market faster. 

 

A mortgage broker also plays an important role in ensuring you get your loan. They can help negotiate with various lenders, so you don’t have to. Additionally, they can get you the rate that best fits your needs because they know the industry.

Ready to jump into Calgary’s real estate? At The Mortgage Group Calgary, we offer personal mortgage solutions. Contact us today to start working with one of our expert brokers.

Mortgage Payment Changes

mortgage changes

You’ve been making your regular mortgage payments, as always, with no real hiccups. However, one day, you notice your payments are changing. What’s causing that? Why did my mortgage payment go up? We understand this can be an alarming realization, but not to worry. Today, we will explain why and how mortgage changes happen. 

Property Tax Changes

A change in property tax could mean a change to your mortgage payment amount. Property taxes are fees that go toward funding essential services in your city. They calculate this tax depending on your home’s assessed value. Expect to see it fluctuate over the years. Property taxes are either paid directly to your municipality or through your mortgage. Check and see which option you are currently paying with. Some also prefer paying their property taxes monthly, while others prefer one yearly payment. 

First-time Homebuyer's Property Tax

Your lender may collect this tax amount through your monthly mortgage payment. For first-time homebuyers, your lender will want to do this on their behalf. This is to ensure you are making the correct payments. Another reason is that lenders often require you to have 20% equity or more. As a first-time homebuyer, your down payment will be less than 20%. 

 

The nice thing about this method is that you don’t have to think about it. They will estimate and withdraw the amount as your mortgage payment. With that said, because they make a generous estimate, the amount you pay will probably be higher than your actual taxes. This extra money will go toward future payments. Therefore, you may see fluctuations in payment amount based on property tax calculations. 

mortgage changes

Fixed Versus Variable Mortgage

The two standard mortgages are the fixed interest rate and variable interest rate. You know your interest rate or regular payment amount won’t change in a fixed interest rate mortgage. That’s because you’re locked into a fixed interest rate for the entire term of your loan. This option can be beneficial when interest rates are low. Some prefer the stability and ease this type of mortgage offers. Budgeting can be simpler because you always know how much to save for your monthly payment. 

Variable Interest Rate Mortgage

If you have a variable interest rate mortgage, you could see some mortgage changes. This type of mortgage is usually why you might notice fluctuations in the amount you owe. There are a few reasons people choose a variable rate mortgage. One being if you believe interest rates will stay the same or drop over the term. However, this may not always be the case, meaning it can be riskier than a fixed-rate mortgage. Variable-rate mortgages change based on the market interest rate. This is what’s called the “prime rate.” In other words, an increase to the prime rate could mean an increase in your monthly mortgage payment. However, in the long run, people generally pay less interest in a variable rate mortgage.

Mortgage Refinance

If you recently refinanced your mortgage or are considering doing so, expect to see mortgage changes. A mortgage refinance means that you stop your current mortgage in exchange for a new one. This could be either with your current lender or a new one. There are many reasons someone might choose to do so. For example, you might want a lower interest rate to save money. However, you will have to pay a penalty fee. Another benefit is the ability to access the equity in your home or changing interest rate type. As mentioned above, you may want to change your fixed rate to a variable rate mortgage or vice versa. 

 

While there are pros to refinancing, the cons may not be worth it. Make sure you do your research and think of the long-term as well. If you are considering refinancing your mortgage, contact a mortgage broker. They can provide advice and help you make a decision that is right for you. 

 

mortgage changes payment changes

Mortgage Deferral

When you cannot make your regular mortgage payments, a deferral can help. For catching up on these payments, you typically have two options. The first is a repayment plan. If you find mortgage changes, that is because they have added your missed payments to your current payment. 

 

Reinstatement and forbearance are other options. You and your lender or broker have agreed to suspend your payments temporarily. Usually, you will pay a lump-sum amount down the road to make up for it. 

Conclusion

Property tax changes, variable interest rate mortgages, mortgage deferral, and a mortgage refinance are four reasons for mortgage changes. Each come with their unique benefits and disadvantages. Whether you’ve recently made a change or are considering changing things up, know you don’t have to navigate it alone. Mortgage brokers are there to help you. From penalties to complex language, it can be difficult understanding your mortgage. Brokers know the field and have the prior experience to back it up. Let them take the stress off, so you can confidently make the best choices for you.

 

At Mortgage Group, we focus on mortgage solutions by factoring in your financial situation. Contact us today to get in touch with any of our expert brokers. Let us help you navigate your mortgage. 

Qualifying For A Mortgage

qualifying for a mortgage

Ready to open the next chapter of your life? The idea of buying a home is both exhilarating and full of unknowns. But before we get to the buying, let’s first talk about qualifying. If you have been considering applying for a mortgage, then you’re in the right place. Today we are going to give you the low-down on qualifying for a mortgage. This article will include tips and tricks to help you get it right the first time.

Where To Begin?

Let’s start by discussing where to begin. Qualifying for a mortgage depends on many factors, and the process can look different for everyone.

First, we will discuss some of the paperwork you will need to get. Next, we will outline the mortgage pre-approval process. We have also included some things you will want to avoid. Lastly, we discuss how and why a credit score is vital for qualifying for a mortgage.

Organize Those Documents

This is arguably one of the most important tips. When it comes time to apply, you will need several documents. Having this all organized in one file will make your life much easier. A mortgage broker can help make sure you have all the documents needed for qualifying for a mortgage.

First is proof of employment. A current pay stub is proof you have enough income that can go towards mortgage payments.

A letter of employment from your employer is another form of proof your lender will want. This letter is to ensure your job title, income and length of time employed are correct.

For those who are self-employed, you will need to show notices of assessment, T1 Generals and Business Financial Statements.

qualifying for a mortgage

Mortgage Pre-Approval

We recommend this step because it shows the greatest mortgage amount you could qualify for. A lender will look at the documents we mentioned above and review your credit report. This way, they can calculate the maximum amount to lend and at what interest rate. That is why we recommend organizing your documents early. Other documents you should gather include:

  • Identification
  • Proof Of Assets, For Example, Your Car
  • Information About Your Debt, Such As Student Loans Or Credit Debt

Before you shop around, getting the pre-approval will show you how much you can afford. Many realtors won’t want to show you houses without this pre-approval. Therefore, it is important to get this done early. Online mortgage qualifier calculators can help give you a general idea.

Things To Avoid

Once they have pre-approved you, avoid making any major purchases. You want your financial situation to stay the same until your loan is finalized. Changes could mean you risk loan rejection.

Another thing to avoid is changing or quitting your job. Documents on proof of employment are key to helping you attain mortgage approval. Now is not the time to change career paths.

When qualifying for a mortgage, you will also want to avoid applying for new forms of credit. You want your debt level and available credit to remain the same.

Essentially, anything to do with finances should stay the same during the mortgage pre-approval process. Once you have successfully moved into your new home, you can change things around.

Mortgage Lender Or Mortgage Broker?

For a mortgage pre-approval, you will either go to a mortgage lender or mortgage broker. Both have different steps and methods.

A mortgage lender will lend the money directly to you. Mortgage lenders commonly include banks, credit unions, loan companies, or mortgage companies.

Mortgage brokers will find a lender for you, they do not lend money to you. With so many options, brokers have access to more information than the average person. You will have more choices at more competitive rates. Not only that, but brokers can get special deals and add-ons at no cost to you. Overall, they help make the process much easier for you.

Improve Your Credit Score

Lastly, let’s talk about credit score and why it’s important. A credit score summarizes the credits you use and whether you make your payments on time. This includes credit cards, loans, and financing plans. Building good credit history means making your payments on time.

Bad credit history, or no credit history at all, means it’ll be harder to borrow money. You can see your credit score through Borrowell, or Credit Karma.

A lender will check your credit history through a credit-reporting agency. Another way a lender sees you have a good credit rating is by looking at your loans. Having different types of loans shows them you are reliable and responsible. For example, you may have credit cards, a car loan, and a student loan. Building a good credit score takes time. This is because you must build trust through regular payments.

To Sum It Up

Qualifying for a mortgage can be a relatively simple process when done correctly. Mortgage brokers have the expertise and experience to help get you there. They will work with you so that qualifying for a mortgage isn’t a daunting process. With an online mortgage application form, simply fill out the information and let a broker do the rest.

In conclusion, paperwork is key. After organizing your documents:

  • Get A Mortgage Pre-Approval
  • While Waiting For Approval, Avoid Any Changes To Your Job Or Financial Situation
  • Check Up On Your Credit Score To See Where You Stand

For expert advice on qualifying for a mortgage, our team at The Mortgage Group Inc. is here to help. We will be with you every step of the way and help get you the best rates in Calgary. Contact us today for a consultation.  

Lump-sum Mortgage Payments

lump-sum payment

As a homeowner, paying off your mortgage as quickly as possible might be one of your top priorities, and for a good reason. There are many benefits to paying off your mortgage faster. One way people achieve this is through lump-sum payments. However, there are a few things to think about before making a lump-sum mortgage payment.

What is it? Is it right for me? The following will provide a few factors to consider on whether it’s right for you.

What Does Lump-sum Mean?

As the word suggests, a lump-sum means a large amount of money. You pay this money in a single payment rather than in instalments. A lump-sum payment is often paid more than once. This means you could pay it once or twice a year. Everyone’s financial needs and situations are different. Thus, speaking to a mortgage broker will help you create a personal plan.

How To Pay In A Lump-sum

We understand that life is full of unexpected moments. This may include cash flow from an inheritance, selling property, or a salary increase. With this new money, you may want to consider putting it towards your mortgage in a lump-sum. Doing so will help you pay off your mortgage faster and reduce the total amount of interest.

lump-sum payments

Advantages

Next, we will highlight some advantages to paying off your mortgage sooner with a lump-sum. If you’re not sure where to start, ask yourself some questions. Start by asking:

  • Why Am I Interested In A Lump-sum Payment?
  • What Are My Priorities?
  • How Much Can I Afford?
  • How Much Can I Put Towards A Lump-sum?
  • Where Will This Money Come From?

Financial Freedom

This one is a prime concern for many. Paying off your mortgage sooner provides greater financial freedom. Once you pay off your mortgage, you can use that money towards other things. Financial independence also allows you to prioritize your money in new ways. Think retirement or other investments. If financial freedom is your main priority, then a lump-sum mortgage payment will help you get there sooner.

Pay Less In Interest

As mentioned above, lump-sum payments mean paying less interest. Unlike regular payments, where you pay the interest, this is one way to save big over time. Online mortgage calculators can help give you an idea of how much you can save in the long term based on lump-sums.

Things To Consider

Putting all your eggs in a basket can be risky. Make sure you aren’t dipping into other forms of savings. Even if you make a lump-sum payment, ensure you still have emergency funds. If you don’t have a clear idea of how much to pay, take time to first think about it. Each year will also look different, so don’t sweat it. You may have extra means to put towards a lump-sum some years, while others you might not. Remember that you can only put a limited amount of money toward your mortgage. You can find this total in your contract.

lump sum payments

Timing

Make sure you know when you can make lump-sum payments. Usually, they will be on certain dates during the term, and either before or at the end of your term. Unlike your current monthly or biweekly payments, lump-sum payments aren’t obligatory. Check your contract to see specific dates.

Lump-sum payments will look different depending on how far along you are. In other words, the amount may vary depending on how long you’ve had your mortgage. Some years you may want to put more money towards your payments, while other years it could be less.

Self-employed

Are you self-employed or run a home business? If that’s the case, you might want to consider otherwise. When you are self-employed, a part of your mortgage interest may become tax-deductible. To put it another way, you may be able to subtract part of your mortgage interest to help reduce your taxable income.

Mortgage Brokers Are Here For You

While nobody can predict the future, talking to a mortgage broker will help you navigate what to do. Paying in a lump-sum has many benefits and works for many. However, it might not be right for everyone. Everyone has a unique financial situation. If a lump-sum doesn’t sound right to you, but you still want to pay off your mortgage faster, they can provide options. Increasing monthly payments, for example, could be one place to start. If you are currently making monthly mortgage payments, switching to biweekly could also be an option. A personalized plan is a great way to see it all on paper. Instead of imagining it, having it in front of you will give you the confidence to navigate your mortgage.

Ready to take charge of your financial future? Our team at the Mortgage Group Calgary will help with all your housing and mortgage needs. Our brokers are experts in their field and are here to help you get on track. Contact us today for a consultation.  

Spousal Buyouts

Negotiating spousal buyout

When The Relationship Ends, But You Still Have A Mortgage

According to the Vanier Institute of the Family, the average marriage lasts about 13.7 years before a divorce. Going through a separation or divorce can be challenging legally and emotionally. There’s no easy way to say goodbye, especially when you share a home with the person you are saying goodbye to. 

 

Many separating couples don’t know about spousal buyouts and how it can help make the process easier. Whether you’re divorcing or separating from your partner, or just thinking about it, these buyouts let one partner “buy out” the other person on the mortgage.  

 

Most buyouts are between spouses or common-law partners, but some can be between friends or family who have bought a house together. This is why spousal buyouts are also referred to as “co-borrower buyouts.” Whatever your situation looks like, both parties must have the right information to move forward. 

What Is A Spousal Or Co-Borrower Buyout?

The buyout works by primarily refinancing your home up to 95% to buy out the other owner’s equity share and pay off joint debt. The stress of carrying debt can impact your mental health. The buyout allows both parties to alleviate any stress that their joint debt may be causing and start fresh. A buyout can also come in handy in situations where selling the property isn’t optimal.

Meeting With A Mortgage Broker

For a spousal or co-borrower buyout to work, several qualifications need to be completed. When you’re ready to separate, it’s essential to speak with a mortgage broker right away about your options. A broker can help you to determine if you qualify for a buyout, and if not, what might work instead.  

spousal buyouts

Considerations

The first thing that needs to be done is for both parties to decide who will keep the property. This is a decision that can only be made by the two parties. If both partners can’t come to an agreement, a buyout won’t be possible. Other options, like selling the property, might work best in this situation. 

 

The person buying out the other must make sure that they can afford to own the home. Both parties contribute income to shared expenses in many situations, but after a buyout, the buyer will need to pay for expenses such as mortgage payments by themselves.  

 

If you have talked it over with your partner and amicably decided on who wants to keep the home and is financially able to do so, you’re ready for the next step: meeting buyout qualifications.  

Qualifications

One thing to know is that all parties must be current registered owners on the title to qualify for a buyout. Another vital requirement to be eligible for a buyout is to have a finalized separation agreement. The agreement includes crucial information, like spousal or child support payments. The lender needs to see this agreement and make sure all net assets are allocated. 

 

A buyout is like a private sale, and as such, it is necessary to have a full property appraisal. This appraisal is ordered at the time of the buyout approval, so don’t worry about getting it done ahead of time. If done ahead of time, it likely won’t be usable because your lender often has specific requirements and appraisers they want during this process.  

 

The End Result

In the end, the buyer will have the home, and the other owner can take the equity from the buyout to find a new place to call home. 

 

If you are a divorcing or separating from a partner and are interested in learning more about options, including buyouts, reach out to our team at the Mortgage Group Inc. Our Calgary mortgage brokers are always happy to help you find the best solution. 

 

What To Do If You Get Behind On Mortgage Payments?

behind on mortgage payments

With many Calgarians still laid off from their jobs due to the pandemic, making ends meet isn’t easy. Bills may be piling up and not enough income is rolling in. Due to this, you may be behind on your mortgage payment. However, we have options for you to avoid foreclosure during these challenging times and can help get you back on track.

Deferrals

Many banks and lenders are still allowing deferrals during this difficult time if you are struggling to make ends meet due to the ramifications of COVID-19. Banks have reported that 90% of people seeking mortgage deferrals during COVID-19 have been approved. By having the ability to defer, thousands of people will save money to purchase necessities.

“Together, all these facilities should improve liquidity and funding conditions for lenders, which will help businesses and households access the credit they need. It will also help Canadians benefit more from our monetary stimulus during the recovery period.” Ephraim Vecina – MortgageBrokerNews.ca

Though these deferrals are incredibly helpful in uncertain times, such as this pandemic, it doesn’t come without strings. The interest added back onto the mortgage will add up and need to be paid back once the deferral period ends.

For more information on mortgage deferrals, call your bank, lender, or broker to get full details.

If you are still struggling with your mortgage due to other circumstances, we have some options for you to help get you back on your feet.

behind on mortgage payments

Call Your Mortgage Broker Or Lender

The first thing you need to do is call your Calgary mortgage broker or lender. If you start getting behind on payments don’t ignore it and assume you can catch up on your own. Assisting in times like these is part of what mortgage brokers and lenders are there for.

Since a house foreclosure is such an expensive process most lenders will be willing to work with you.

Two Common Methods For Catching Up On Mortgage Payments

The two most common methods for helping you catch up on your mortgage payments are a Repayment Plan and Reinstatement and Forbearance.

Repayment Options

A repayment plan is best used for a temporary setback, such as job loss or lay-off. The way it works is that the missed amount of payments is split up over a set number of months and added to your existing mortgage payment.

Reinstatement & Forbearance

This process is when your broker or lender agrees to suspend your mortgage payments temporarily. You will both agree on a plan to get your account back up-to-date. However, you will be expected to make up for all of the missed payments, usually in one lump-sum amount.

This option does forgo the right to pursue foreclosure while it is in use.

Changing Mortgage Terms

Maybe things have changed for longer than you were anticipating. If this is the case, it may be worth looking into changing your mortgage’s terms to ensure that foreclosure doesn’t occur and you can stay on top of your payments.

falling behind on mortgage payments

Modifying Your Mortgage

Occasionally your broker or lender will allow you to modify the terms of your existing mortgage that is getting you in over your head. If you choose this option, your broker or lender will provide you with a better interest rate, or the length of your mortgage will be extended to lower your overall monthly payment.

Lowering Payments

To help lower monthly payments, you can see what else got rolled into your mortgage payment. Extra’s and add ons can include local taxes, property insurance, and private mortgage insurance (Canada Mortgage and Housing Corp. (CMHC), needed when your down payment is less than 20% of your home’s value.) If you can get one of these lowered it can save you a substantial amount on your monthly payments.

Refinancing Options

If you cannot adjust the terms of your mortgage, refinancing may be in your best interest. Refinancing allows you to take out a new loan, one with monthly payments more suitable to your financial situation. You can then use these funds to pay off your existing mortgage and pay off the new monthly payments with ease.

Downsizing

If all else fails and you are still struggling to pay your mortgage on time, you may have to consider selling your home. Homeowners can make a short sale, where the lender agrees to sell the house for less than you owed to ensure that your home’s foreclosure doesn’t occur. This way, you are still left with something and can consider purchasing a smaller home for a lower price with a lower mortgage or consider renting, depending on the financial situation you are left with.

 

For more information on how you can get your mortgage payments back in order, contact The Mortgage Group. We are here to lend more than just mortgage advice. We want to lend a helping hand, too. 

Knowing Your Options For A Home Equity Line Of Credit (HELOC)

Home equity line of credit

When it comes to understanding how to consolidate your debt, knowing all of your options is a good start. Many Canadians struggle with debt, be it credit card, car payments, student loans, and especially mortgage payments. We understand how difficult it can be to manage all of this all while taking care of yourself and your family.

Restructuring

credit debt

The first step in understanding how to get back on track by organizing your life to make your debt payments manageable. For this a mortgage advisor is the best place to start. If the option is right for you, they can help you obtain your home equity in order to help pay off your debt. They can also help you restructure your spending habits to make sure you can stay out of debt and make your home equity line of credit (HELOC) count.

Your HELOC will still need to be repaid; however, when you are only paying one payment, with one interest rate, it can drastically reduce stress. Causing things to be less overwhelming, not having multiple bill payments with various interest rates coming in.

What is a Home Equity Line of Credit (HELOC)?

  • Maximum loan-to-value (LTV) = 65% of appraised value
  • It is a line of credit secured by way of a collateral mortgage on the title to your home/property. The interest rate is set by the Prime Rate and is much lower than a personal unsecured line of credit. Maximum Loan-to-Value (LTV) is 65% of appraised value.

Determining Your Equity

Your home Equity is based on the difference between your home’s value and the unpaid balance of your existing mortgage. Home equity has the potential to raise in worth by one of two ways, either you pay your mortgage down and the difference grows, or the value of your home increases.

A stand-alone HELOC has a maximum Loan-to-Value (LTV) of 65%, and a mortgage has a maximum LTV of 80%. You can have a mortgage and HELOC under one charge on a title, going to an LTV of 80%. Just remember, you will need to subtract the amount still owing on your mortgage!

How to Qualify For a Home Equity Line Of Credit

HELOC key

According to the Financial Consumer Agency of Canada, in order to qualify for a home equity line of credit you will require:

A minimum down payment or equity of 35% if you want to use a stand-alone home equity line of credit as a substitute for your mortgage.

Lender Requirements

Your lender will have requirements before you can be approved for a home equity line of credit which include:

  •  A Satisfactory Credit Score
  • Proof Of An Appropriate & Stable Income
  • A Suitable Level Of Debt Compared To Your Income

In order to qualify for a Home Equity Line Of Credit, you will need to pass a stress test. This is to ensure that you can afford payments at a higher rate than the rate of your contact to avoid problems if rates increase. The lender wants to be sure you can pay it off.

Rates

HELOC’s are not necessarily subject to the same rate fluctuations as mortgages. HELOC’s are always set with a prime, which means that they fluctuate, but your mortgage can either have a fixed or variable rate.

Potential Benefits Of A HELOC:

Mortgage relief

One of the main benefits of debt consolidation is that it will buy you time and emotional release from current debt pressures. Studies have shown that the stress of too much debt can impact more than your mental health, and it can also be affecting other parts of your life.

HELOC Requirements:

  • Minimum Payments Required = Interest Only. Can Be Paid In Full At Anytime With No Penalties.
  • Readvanceable – The HELOC Can Be Paid In Full & Used Again At
  • Anytime As Needed- Maximum Flexibility
  • Low Interest Rate

A HELOC only has a minimum payment requirement of the interest and will allow you to address your budget and free up your cash flow before making principal payments. By refinancing and being serious about making and keeping to your budget, you can achieve a debt-free lifestyle! While refinancing can extend your mortgage’s life, it can get you onto the path of being debt-free a lot sooner.

home equity, money in your pocket

For more information on a home equity line of credit (HELOC), talk to a mortgage professional. They can help way your options to determine the best course of action for getting your bills and various payments under control with a HELOC. Here at The Mortgage Group, we are here to help you with all of your mortgage questions and concerns. Including, those regarding home equity. Contact us today to better understand how we can help you obtain your home equity line of credit.

Handling Debt Consolidation With Mortgage Refinancing

mortgage refinance

Understanding Home Refinancing

Many Canadians are facing high levels of personal debt. Whether it is from credit cards, vehicle purchases, loans, or more. Adding a mortgage onto all that debt can become an exhausting weight to carry! 

 

If you are finding that your debt load is becoming too high, there are options available. One of the first steps to take is to speak with a financial advisor. They will be able to provide you with insight into what steps you can take, how long it will take to pay everything off, and how to create a budget or plan for debt repayment. 

 

If you own your home, you have more options available than people who don’t. A big reason for that is that the longer you own your home, the more equity you are building. That equity can then be used to help you get back on your feet. As a homeowner, reach out to your local mortgage broker first. They will help you find ways to lessen your debt while still keeping your home. 

mortgage refinancing credit card

Home Refinancing

One option you should consider is refinancing your mortgage and using your home equity to consolidate your debts. This is commonly referred to as mortgage refinance. You can achieve this in two ways, a mortgage or a standalone Home Equity Line of Credit (HELOC). Refinancing for a home equity line of credit means you can borrow 65% of your home’s appraised value, while a mortgage refinance allows you to borrow 80% of the appraised value. 

Talking To A Mortgage Professional

Admitting that your debt has gotten out of hand can be overwhelming, with many people not knowing a refinance is available as a solution to help manage debt. Mortgage Associate Lori Grill says there is no need for embarrassment. 

 

“I’m not giving you any more debt, we’re just going to make it easier for you to pay it back,” says Grill.  

 

A professional mortgage broker will help you find ways to restructure your life and spending habits. Having one monthly payment to make is much more manageable than making multiple payments at higher rates.

mortgage refinancing debt

Potential Risks To Understand

Debt consolidation has many benefits, such as buying you time and providing an emotional release from current debt pressures.

 

By consolidating the debt from other sources like personal loans or credit cards, you agree to pay it over a longer period of time. This means your debt repayment will take longer than it would have originally.  

 

“You’re going to extend the life of this debt you have,” says Grill.  

 

The length of time it takes to pay off your mortgage in full is called amortization. The amortization period is discussed with your mortgage broker at the time of approval. Your mortgage broker reviews the payments and makes a decision on what would be best for your cash flow. When you consolidate your debt into your mortgage, you are taking debt payments that could be paid off in a few years and including them in your amortization, which can be 20-30 years.

 

Ultimately, it will depend on your individual situation. 

 

It wouldn’t be wise to use refinancing as a way to continue living a lifestyle that may not be sustainable. It is more like a Band-Aid solution that should be used as an opportunity to address your financial goals and reach a debt free lifestyle. By reorganizing your personal spending habits and paying off large amounts of debt you acquired, you would have otherwise struggled with, such as student loans or credit card.

Things to Consider Before Consolidating Debt:

If This Is The Right Fit For You

Before you rush out and refinance your mortgage, you need to determine if it is necessary to achieve your goals. Would it be possible to pay your debts by other means, such as savings? If you decide debt consolidation is right for you, considerations that need to be made include flexibility, fees, interest rates and terms and conditions. You should also determine what credit limit you will need.  

mortgage refinancing options

Planning For The Future

You will need to decide how you’re going to use the money you’re borrowing and create realistic budgets for yourself. Creating and sticking to a repayment plan is key.  

 

Mortgage interest rates will change as market interest fluctuates. According to the Bank of Canada, interest rates are low and expected to stay that way for a while. However, they will not always be this way. Considerations need to be made for how future interest rate increases may affect your plans. Thinking that you have done it once and can do it again if you need to is the wrong mindset to get into. Lenders may not be willing to assist a second time, so don’t count on it. 

Potential Costs

Something to consider beforehand is the costs that are involved with refinancing your mortgage for debt consolidation. These costs could include appraisal fees, a title search, title insurance, and legal fees. There may also be payout penalties on your existing mortgage. Often you can capitalize these costs into the mortgage, so it’s not an out-of-pocket expense.  

 

With the recent state of the economy due to COVID-19, more homeowners are looking at refinancing their mortgage. If you need a mortgage broker in Calgary to assist you with refinancing or debt consolidation, reach out to our team at The Mortgage Group. Our brokers are always happy to help you find the best solution. 

How You Can Make The Most Out Of The Economy Re-Opening

Economy re-opening

With the Canadian economy re-opening after COVID-19, and public health measures being relaxed, we are finally starting to feel semi-normal again. We have begun thinking optimistically about what summer has in store for us. Everyone is happy to be setting the country on a path back to having lunch on patios and shopping for things we don’t necessarily need, but we want. It is time to treat yourself for living in isolation this long.

As for Alberta, we weren’t hit as hard as other provinces such as Ontario and Quebec and are starting to enjoy life’s little luxuries outside of our homes. Since Stage 1 of re-opening is long underway and Stage 2 launched on June 12th, this increased mobility rate will help boost our economy greatly.

Economic Growth After COVID-19

lockdown ending

As more and more people feel safe and are allowed to open their business and venture outside the expectation is it will have a positive effect on the economy. More people will be letting loose and buying more, putting money back into the province. The longer the shock of no economic turnover, the higher risk we will have of consumer insolvencies.

With Stage 2 now underway, the Alberta Government has allowed more businesses and services to re-open. Though physical distancing requirements and some restrictions are still in place.

Stage 2 – What Can Re-Open With Restrictions?

• K-12 Schools, For Requested Diploma Exams & Summer School, Following Guidance
• Libraries
• More Surgeries
• Wellness Services; Massage, Acupuncture & Reflexology
• Personal Services (Esthetics, Cosmetics Skin And Body Treatments, Manicures, Pedicures, Waxing, Facial Treatments, Artificial Tanning)
• Movie Theatres & Theatres
• Community Halls
• Team Sports
• Indoor Recreation, Fitness & Sports, Including Gyms & Arenas
• Pools For Leisure Swimming
• VLTs In Restaurants & Bars
• Bingo Halls & Casinos (But No Table Games)
• Instrumental Concerts
• Provincial Campgrounds At Full Capacity

Stage 2 Events & Gatherings Can Be Larger

• 50 People Maximum: Indoor Social Gatherings, Including Wedding & Funeral Receptions, & Birthday Parties
• 100 People Maximum: Outdoor Events & Indoor Seated/Audience Events, Including Wedding & Funeral Ceremonies
• No Cap On The Number Of People (With Public Health Measures In Place):
• Worship Gatherings
• Restaurant, Cafes, Lounges & Bars
• Casinos
• Bingo Halls
• More Flexibility For ‘Cohort’ Groups – Small Groups Of People Whose Members Do Not Always Keep 2 Metres Apart:
• Households Can Increase Their Close Interactions With Other Households To A Maximum Of 15 People
• Performers Can Have A Cohort Of Up To 50 People (Cast Members Or Performers)
• Sports Teams Can Play In Region-Only Cohorts Of Up To 50 Players (Mini-Leagues)
• People Can Be Part Of A Sports/Performing Cohort & A Household Cohort At The Same Time

For all of this information and more, go to Alberta.ca/alberta-relaunch-strategy.

Economic Strength

economy

Our economy was strong before we entered into this pandemic, and we saw how resilient it was. However, we know the shutdown can’t last forever. Therefore, making gradual economic steps towards re-opening, as we are currently doing is crucial to the health of the Canadian economy’s financial foundation.

Though Calgary’s market will pick up quickly in the beginning, with people excited to finally leave their homes. It will take some time for society to fully stabilize.

Investment Purchases To Come

rising investements

However, once things start to stabilize, you’ll see that more people will begin investing in larger purchases, such as cars and property.

The housing market may have been tricky to navigate during the global pandemic. But with the economy re-opening, the housing market gearing up, and mortgage rates not rising, it is an excellent opportunity for people to finally get their foot in the door for owning a home. Plus, lingering home listings that weren’t being picked up during the pandemic will have a better opportunity to be purchased.

If you are looking into purchasing a home, The Mortgage Group Calgary is committed to providing you with the best home buying experience. We know buying a home is a big deal, especially after a global pandemic. After all that, getting a home loan shouldn’t be a hassle. At The Mortgage Group, our Calgary mortgage brokers are here to help you get your foot in the door to your brand new home.