Mortgage Renewal | Negotiate Terms For Alberta’s Best Rates

Renew Your Mortgage With The Mortgage Group Inc In Calgary, Alberta For The Best Rates & Terms

Quick Facts On Mortgage Renewal In Calgary & Morgage Term Length

● A Mortgage Term Typically Lasts Up To 5 Years, Even For A 30 Year Mortgage Product
● A Mortgage Renewal Must Be Processed Every Time A Mortgage Term Expires
● You Can Renew With The Same Bank Or Find A New Bank With Better Terms
● Your Bank Can Refuse To Renew If Your Financial Situation Has Significantly Changed For The Worse
● If Your Bank Refuses To Renew, They Must Do So At Least 21 Days Before The Term Expires
● Using The Mortgage Group Inc Associates Is How To Get The Best Mortgage Rates In A Renewal

Many people in Calgary don’t fully understand the mortgage terms they agreed to. One of the most misunderstood and feared processes in the life of a 30-year mortgage is mortgage renewal.

A Mortgage Term is generally about five years long, with the expectation you will renew it five times in the life of a 30-year mortgage product. So you should probably understand this straightforward process if you are going to go through it five times, right? 

If you read to the end of this post, you will feel reassured that there is nothing to fear about renewing your mortgage. However, you will also understand what is required to make this process as painless as possible.

The Mortgage Group Inc can help you get the best mortgage rates in Calgary if you contact us about your upcoming renewal.

An Opportunity To Resolve Painful Mortgage Terms In Your Favour

Mortgage Renewal is your opportunity to change banks, negotiate new terms with your current bank, or access additional financial products that make your day-to-day life more manageable. 

Most people think that banks have all the leverage during a mortgage renewal, but that’s just not true. Especially when you have a professional mortgage associate on your side from The Mortgage Group Inc. If you have great credit, a good job and no new debts, it is really you who has the leverage, even as a senior or young family.

When you contact us, we take on all the hassles associated with renewal and negotiations, turning it into a cost savings opportunity for you. Best of all, there is no out-of-pocket cost when you ask us for help.

We work with several banks which provide financing in the Calgary area, and we know how to find the best deals. It could take you weeks to speak with representatives from just a handful of banks. With our help, we can take care of it for you and save you time. Call us now for assistance.

How Does Mortgage Renewal Work?

Most lenders are open to negotiating a renewal when the mortgage term expires in less than 120 days. Four months before the end of your mortgage term, reach out, and we can assist you with the renewal process.

We recommend you leave the negotiation to a mortgage professional in Calgary. We skillfully negotiate mortgages for the best results. 

If you negotiated yourself and were denied a mortgage renewal or your interest rates are going up, your federally regulated banking lender must inform you of the denial at least 21 days before the expiry of the current mortgage term. 

That gives you enough time to contact us and have us find you a lower-tier lender with less stringent stress tests. In that situation, time is of the essence, and we urge you to reach out now. If you wait too long, we may not be able to fix your situation. 

How To Get The Best Mortgage Rates In Calgary, Alberta

Mortgage associates at The Mortgage Group Inc are specially trained professionals who have experience brokering mortgage renewals, reverse mortgages, traditional mortgages, refinances and more in the Calgary area.

Often, you will get amateur results if you research and negotiate the mortgage terms yourself. It is always recommended to use a professional to get the best mortgage rates and terms in Calgary.

Please contact us now for a consultation. You can do so through a site form below, by clicking contact us at the top navigation bar of this page, or by calling us now at (403) 571 – 8142

If you need help negotiating terms, give our mortgage advisors a call. Contact our team at The Mortgage Group Inc. here

Rising Fixed Mortgage Interest Rates In Canada

rising interest rates

If you’re a homeowner on a fixed-rate mortgage, you may have recently noticed that mortgage lenders and banks have raised the fixed interest rate. Over the last month, many different mortgage lenders and banks have raised their fixed mortgage interest rates, which will affect your monthly mortgage payments. Worried about how these rising interest rates will affect you? Keep reading below.

Rising Mortgage Interest Rates By Bank/Lender

Are you wondering exactly how the rates have changed? Here are some major banks and lenders that have recently made changes to their fixed and variable rates.

TD

  • 5 Year Fixed (HR): From 2.74% To 2.94%
  • 5 Year Fixed: From 2.84% To 3.04%

RBC

  • 5 Year Fixed: From 2.94% To 3.19%
  • 3 Year Fixed: From 2.69% To 2.94%
  • 5 Year Variable: From 1.65% To 1.70%

Scotiabank

  • 5 Year Fixed: (HR): From 2.74% To 2.94%
  • 5 Year Fixed: From 2.84% To 3.04%
  • 3 Year Fixed: From 2.64% To 2.89%
  • All eHome Rates Increased By 30 Basis Points (BPS)

BMO

  • 5 Year Fixed (HR): From 2.82% To 2.92%
  • 5 Year Fixed: From 2.99% To 3.09%
  • 3 Year Fixed: From 2.69% To 2.84%

CIBC

  • 5 Year Fixed (HR): From 2.82% To 2.92%
  • 5 Year Fixed: From 2.99% To 3.09%

NBC

  • 5 Year Fixed: From 2.94% To 3.09%

How Will Changes To The Fixed Mortgage Rate Affect Me?

Many Canadians are confused about exactly how the changes in these interest rates will affect them. If you already have a mortgage, you don’t have to worry about the changes in the rates. Because your mortgage is on a fixed rate, your payments are based on what the rate was when you first signed your mortgage.

If you are looking to buy a home and are about to get a brand new mortgage, this could affect whether or not you choose to get a fixed-rate mortgage or choose a variable-rate mortgage. While fixed-rate mortgages have been extremely popular among Canadian homeowners, with the recent raises in interest rates, some Canadians are wondering whether or not it’s the right choice.

Typically, variable-rate mortgages have lower rates than fixed-rate mortgages as they’re less risky for lenders. However, depending on the market, it is sometimes less beneficial for owners to pay a premium on their fixed-rate mortgages, as they could save a chunk of money by being on the variable rate instead.

However, many Canadian homeowners prefer the security and reliability of knowing exactly how much they’ll be paying on their mortgage every month so that they can budget the right amount. Additionally, if variable rates do start to rise, having a fixed-rate mortgage can save you money in the long run.

If you’re wondering what the right choice of a mortgage type is for you or what will change for your mortgage payments with these new rates, make sure you talk to a mortgage adviser. They can advise you best on your specific case.

What About My Variable Rate Mortgage?

If you have a variable rate mortgage, you could potentially look at an interest rate rise in the next couple of months. In addition, variable rates are forecasted to rise over the next year, so you can expect to pay more on your mortgage. Exactly how much more depends on your lender. Your mortgage adviser can help with any questions once they announce the rise in rates.

This also means that getting a variable-rate mortgage might not be the right choice for individuals looking to become new homeowners, despite the rising fixed-rate mortgages. While your mortgage adviser can’t predict exactly how the rates are going to change, they can certainly assess your situation and help you decide what the best mortgage type and terms are for lifestyle.

Have questions about the rising mortgage interest rates? Contact our team at The Mortgage Group Inc. Our experienced mortgage associates are more than happy to help answer your questions. 

What Happens If I Lose My Job After My Mortgage Preapproval?

unemployment mortgages

When you’re considering buying a house, it’s always important to be prepared for things like loss of employment. With the current state of the economy and the ongoing pandemic, many Canadians wonder if this is the right time to buy a house. What exactly are the consequences for their mortgage if they lose their job? More importantly, what happens if you lose your job after you are already preapproved for a mortgage?

Employment & Your Mortgage

Like any other type of loan, mortgage lenders want to see a consistent employment history with consistent income. In addition, they want to make sure that once they’ve approved you for your mortgage that you’ll be able to make your mortgage payments in full and on time. 

 

You’ll have to provide documentation proving your employment status and history. Your mortgage advisor or lender will let you know precisely what you need to provide to prove your employment history.  

What Happens If You're Already Preapproved?

If you’ve already been preapproved for a mortgage by a lender or are currently in the process of purchasing a home and you lose your job, you need to let your lender know immediately. If you hide that you have lost your job, this is considered fraud. 

 

There are a few scenarios where you will still be able to go through with your home purchase and requalify for your mortgage. For example, if you were to get another job right away and in the same field as your last one, you would be able to requalify. 

 

Your loan might not be exactly the same, but your mortgage advisor will be able to help you walk through the steps necessary to requalify. However, if your new job has a probationary period, it’s possible that you won’t be approved when you requalify. It’s better to wait until after your probationary period ends. The lender may require that you have passed your probationary period to requalify for your mortgage. 

job loss

If you have a co-signer on your mortgage and their income is high enough to qualify without you, you might still be able to go through with your mortgage. Of course, it’s essential to let your co-signer know that you’ve lost your job, but most mortgage lenders will allow you to proceed as expected in this case. 

 

The last situation where you might be able to proceed with your home purchase as expected is if you have other forms of income. If you have another significant and consistent income form, your lender may consider proceeding as normal. For example, if you have income from investments, rentals or retirement, these forms of income can be considered. 

What If I'm Only Temporarily Laid Off?

During the pandemic, workers were being temporarily laid off due to restrictions in many cases. So, can you proceed with closing on a house if you’re temporarily laid off? Most lenders will typically want to take a “wait and see” approach to see if you’re called back to work before closing on your purchase.

Can I Use Employment Insurance For My Mortgage?

Typically, you cannot use Employment Insurance (EI) as a form of income to qualify for a mortgage. This is not considered a reliable source of income, and most lenders will not approve someone without a steady job. Sometimes, lenders will make an exception if you’re a seasonal worker or work in industries like fishing or construction, where it is cyclical. 

 

In these cases, you’ll have to prove that you’ve been working for at least two cycles. However, this is not an ideal situation for most mortgage lenders, and it’s possible they won’t approve your mortgage application.

Speaking With Your Lender

The most important thing to do once you’ve lost your job is to speak with your mortgage associate. They’ll be able to tell you whether or not they can continue with your mortgage loan or what steps you’ll need to take to requalify.

If you’re not sure what to do, give our mortgage advisors a call, and we can help provide some insight into your situation. Contact our team at The Mortgage Group Inc. here.  

What Is Mortgage Insurance & Do You Need It?

When buying a home, there are many things you need to do and lots to learn about the mortgage process. From the application process to interest rates, it can feel overwhelming. Now, you’ve come across the term mortgage insurance. What is it? Do you need it? Who can help you through it? These are some questions we’ll answer in this article.

What Is Mortgage Insurance?

You may have come across a few variations of mortgage insurance. First, let’s talk about mortgage default insurance. Sometimes it’s also referred to as mortgage loan insurance.

 

So how does it work? If you put down less than 20% on your down payment, you are required to have mortgage insurance. A lower down payment means a higher ratio mortgage. As a borrower, this puts you at a higher risk than someone who puts down a higher down payment. Your lender wants protection if you cannot make your payments. 

Down Payment

Homes in Canada purchased under $500,000 require a minimum 5% down payment. For homes between $500,000 and $1,000,000, you need to put a down payment of 5% on the first $500,000. and 10% on the balance. Lastly, homes over $1,000,000 require at least a 20% down payment on the purchase price. Thus, a million-dollar home does not qualify for mortgage insurance. 

Benefits

With that said, there are many benefits for new homeowners. For example, mortgage insurance allows Canadians to buy a home without a large down payment. This helps lower the barrier for those who want to become a homeowner but might not have enough funds put away in savings. If you can produce a 5% down payment, you can begin your homeowner journey. The 5% can come from your savings, a gift from family, RRSP’s or investments.

 

Mortgage insurance protects the lender. Therefore, it helps more people qualify as a borrower. In addition, it ensures mortgage funding availability during slumps in the economy.

Where Can I Get Mortgage Insurance?

In Canada, there are three mortgage insurance companies that work with lenders. This includes the Canada Mortgage and Housing Corporation (CMHC), Sagen Financial, and Canada Guaranty.

mortgage insurance

Premium Cost

The insurance premium is calculated based on the loan to value ratio.  You are responsible for this cost. You can either pay the premium in a lump sum or have it added to your total loan amount.

For example, your loan-to-value could be up to 95%. That means you should expect roughly a 4% premium on your total loan. Keep in mind that Manitoba, Quebec, and Saskatchewan have provincial sales tax as well. In this case, you must pay the PST upfront.

Can I Avoid Mortgage Insurance?

If you want to avoid paying the cost of the premium, there are a few ways to do so. As mentioned earlier, a down payment of over 20% means you do not need mortgage insurance.

 

You can increase your down payment amount in a few ways. The first is through monetary gifts. A gift from a family member could help you put down more in your down payment. If you are a first-time homebuyer, you may take money out of your RRSP. The Home Buyers’ Plan allows you to withdraw up to $35,000 tax-free. 

 

Lastly, you may consider purchasing a less expensive home to pay a larger down payment.

Mortgage Life Insurance

Do not confuse mortgage default insurance with mortgage life insurance. When you take out or renew your mortgage, they might offer you this optional coverage. Similar to default insurance, you will pay a premium that’s added to your mortgage payment. You can purchase life insurance through your lender or another insurance company. This gives you the freedom to look at what’s the best option for you.

Coverage

Life has many unexpected moments. Understanding your coverage can greatly help your loved ones. If you lose your job, become critically ill, become injured or disabled, or pass away, the insurance can help pay off your mortgage. If you have dependents or a spouse, this could take off financial strain if something happens to you.

However, other forms of insurance may already help cover this. Carefully go through your policies because you may already have them under your employer.

Consulting A Broker

With so many options available, how do you know what’s best for you? Working with a mortgage broker can help. It can be easy to miss the fine print on insurance documents or be unsure of what coverage you qualify for. By factoring in your personal goals and needs, they will help you better understand your mortgage insurance.

For more professional advice on mortgage insurance, contact our team at The Mortgage Group Inc. We will assist you every step of the way with any and all of your mortgage needs.

Is My Credit Score Good Enough For A Mortgage?

credit score

When was the last time you checked up on your credit score? If you’re thinking of buying a home, now might be a good time to do so. In this article, we go over how a credit score impacts your ability to get a mortgage. You’ll find out what a good credit score is and ways to improve it so you can qualify for a mortgage the first time.

How It’s Calculated

They calculate credit scores based on what you do with your available credit. Payment history makes up the highest percentage at 35%. In other words, your history plays a big role, and it’s important to keep up with your regular payments. This includes credit cards, lines of credit, and car or student loans.

How You Use Your Credit

The next important factor in calculating a credit score includes how much you owe. Depending on your current payments for various loans, your lender will determine whether you can take on more. For example, you could be maxing out on your credit cards. A lender may see this as high risk because they don’t believe you can pay for a new loan on time.

 

Credit utilization looks at the percentage of the debt you have compared to the available credit. Staying below 35% of your available credit shows you’re not maxing out and can help you achieve a higher credit score.

credit score

Credit History

Other factors that go into calculating a credit score include the length of your credit history. The longer the history, the easier it is to build a solid credit score. 

 

The amount of new credit applications also plays a role. For example, opening multiple new credit accounts could reduce your score because it shows a struggle in keeping up with payments. 

 

Lastly, the type of credit used, and any record of bankruptcy, are also considered. 

What Is A Good Credit Score?

Here is a breakdown of credit score standing based on Equifax’s scoring system. Scores between:

• 300-559 Are Poor

• 560-659 Are Fair 

• 660-724 Are Good 

• 725-859 Are Very Good 

• 760-900 Are Excellent 

 

In Canada, Equifax and TransUnion are the two main credit bureaus. Although both calculate their scores slightly differently, they help provide the same information. Banks, credit card companies, insurance companies, landlords, employers, car leasing companies, and retailers can then view your information. 

 

Most major banks allow you to view your score for free online. Periodically checking your score will give you a better idea of where you stand and how to improve. For a more in-depth report, you can request one from Equifax or TransUnion. In addition, you can request to see your credit report. This report provides information on your payment history, bankruptcies, types of credit, and more. Obtaining a credit report will not impact your score.

Why Credit Score Matters

Credit score matters because it shows how trustworthy you are. From a lender’s perspective, they only want to work with those they know will make their payments on time. In other words, you’ll have more options, flexibility and likely be approved for your mortgage with ease.

The higher your credit score, the more likely a mortgage broker will be able to find the lowest rate available.  In the long run, this can help save thousands on your mortgage payments.

Although it varies, credit scores above 650 allows your mortgage broker to obtain a mortgage approval from a Prime lender. Scores above 650 mean you are a lower-risk borrower, and lenders will be more willing to give you a loan. If you feel like yours could improve, there are a few ways to help increase your credit score.

How To Increase Your Credit Score

The simplest way to increase your credit score is to pay your bills on time. This includes credit cards, cell phones, student loans, or car payments. Skipping or paying late will reflect poorly on your overall score. If you cannot make your payment on time, contact your lender. They may extend your payment due date.

 

As mentioned earlier, a good score means having a longer credit history. Even if you have a credit card you hardly use, don’t cancel it. The longer the credit history, the better chances you’ll have of building a better score.

Qualifying For A Mortgage

Although credit score matters, it accounts for only part of the big picture. Throughout the mortgage preapproval process, you want to maintain a good credit score as well. If possible, wait to apply for new credit. This includes buying a new car, appliances, or any other loans because they will increase your total debt. Avoid applying for multiple mortgage applications in a short period. This could flag you as a credit seeker. A mortgage broker has access to numerous lenders and will be able to find you the lowest rate available.

Talking To A Mortgage Broker

A mortgage approval can take anywhere between two days to two weeks. However, working with a mortgage broker can help make the process faster and easier. If you’re not sure where your overall standing is for getting a mortgage approval, they can help. They can help you see the big picture by taking in all factors, including your credit score. In addition, they’ll come up with a customized plan for your mortgage preapproval and give you the right advice to get you on the right track.

Are you ready to apply for a mortgage? Contact us today to talk to any one of our experts here at The Mortgage Group Inc. 

Should You Pay Off Your Mortgage Early Or Invest?

Where should my money go? When you’re paying off your home, this is a valid question to have. Often, new homeowners aren’t sure whether to put all their money towards their mortgage or split it up and invest as well. Today’s article outlines some key points you should consider for both paying early and investing. 

When To Pay Off Mortgage Early

You may have extra cash because of various circumstances and aren’t sure where it should go. We understand that the day you don’t make mortgage payments anymore will be a monumental one.

Benefits

There are a few reasons people choose to pay off a mortgage early. The first benefit is that you will have greater financial freedom sooner. Knowing you don’t have to make any more payments can benefit one’s overall mental health. Additionally, you can use your money for other things, such as saving for retirement or planning the next big purchase.

 

The next reason is to save money on interest. One way to pay off your mortgage faster is through lump-sum payments. In essence, you contribute a large, single payment instead of instalments. Paying off your mortgage early can also build equity. 

Considerations

While there are many benefits, it’s important to consider the drawbacks. With that said, consider what other debt you have. Make a list of everything you are currently paying off to help you get organized.

 

Current housing market interest rates are low. You might be paying off a new car or have student loans on top of your mortgage. These types of debt could have interest rates higher than your mortgage. You may want to hold off on putting all extra funds toward your home. Prioritizing other forms of debt could also help you save on interest in the long run.

 

Although you may have extra cash now, that may not always be the case. Never put all your money toward your mortgage at the expense of emergency funds. You should leave rainy day funds untouched.

When To Invest

Next, let’s take a look at what it means to invest your extra money. This will depend on where you choose to invest. Investing in stocks gives you more financial freedom than if you were to put it towards your mortgage. In other words, you can sell or move funds you invest, but you can’t take money out of your mortgage without refinancing

 

You could also sell your stocks and put that extra money toward your mortgage for the best of both worlds.

investment

Considerations

Of course, there is always a risk when investing in the stock market. You must be willing to take risks when investing because there is no guarantee. Ask yourself whether investing is something you see yourself doing for the long haul or if you’re looking to make quick extra cash. Ultimately, this depends on your risk tolerance. 

 

If you prefer a low-stakes approach, it’s important to ask yourself how much you’re willing to invest. With long-term investing strategies, such as a mutual fund or an ETF portfolio, you could potentially see more returns from compound interest than your mortgage interest rate.

 

Lastly, investing will be more work than paying your mortgage. For your mortgage, you simply put more funds toward it. However, with the stock market, you will need to carve out more time researching and paying attention to fluctuations if you don’t already do so.

Mortgage Refinance

If you’re hoping for a lower rate or change your mortgage type, you may want to refinance your mortgage. Refinancing can also help you access the equity in your home. However, be sure to check the penalty fee first.

 

A refinance means breaking and starting a new mortgage. You can either get a new lender or stay with your current one. By getting a lower rate, you can help speed up the payment process. You can save on interest rates and also pay off your home faster. In turn, you could use the money you save and put it towards investments.

Final Thoughts

The money you choose to invest won’t be going toward your home at the end of the day. You’ll still have your mortgage to pay off if you spend all your extra cash in the stock market. Therefore, we suggest being strategic with your funds. Split your money in both directions.

 

For those who prioritize shorter-term and low-risk scenarios, put more funds toward your mortgage. If you’re looking for something long-term, consider adding more money towards a tax-exempt investment account. If you’re not sure what ratio to do this in, consider speaking to a mortgage broker. 

Working With A Mortgage Broker

Paying off your mortgage sooner means you won’t have to worry in the future. However, you might have other forms of debt that also need attention. Having investments provides flexibility in where and how you divide your money. With that said, there’s no guarantee with the stock market, and you should consider how big of a risk-taker you are.

 

If you’re still unsure how to handle your mortgage or what your options are, talk to a mortgage broker. They can provide personalized advice that best first your needs, budget, and lifestyle. For example, you could qualify for a refinance. In addition, perhaps you are interested in other forms of investments. Investing in real estate could be another option you could discuss with your mortgage broker. 

Wherever you are on your financial journey, our team at The Mortgage Group Inc. is there for you. Find out how to get a personalized plan by contacting us today.  

Should I Work With A Mortgage Broker?

working with a mortgage broker

To put it simply, yes, you should work with a mortgage broker. There are many benefits to working with one that we will highlight below, and we aren’t saying that just because we’re mortgage brokers. At the end of the day, we’re here to make your life easier. Below, you’ll find four reasons why you should work with a mortgage broker.

What Does A Mortgage Broker Do?

What exactly does a broker do? There are several services offered that go beyond mortgages. First, a broker does not lend you money. Instead, they help find you a lender at the best possible rate. Think of them as a middle person between you and potential lenders. On the flip side, a mortgage lender is the one who lends you money. These lenders include banks, credit unions, mortgage companies, or loan companies.

Some services offered include:

  • Mortgage Pre-Approval Assistance
  • Reverse Mortgages
  • HELOC (Home Equity Line of Credit)
  • Assisting Newcomers To Canada
  • Investment, Second Or Vacation Property Assistance
  • Helping Self-Employed & Business Owners

When Should I Work With One?

The most obvious time is when you’re applying for a mortgage. When applying for anything, you can expect a lot of mundane and confusing paperwork to follow. Doing all that prep work only to be denied or told it’s wrong can be extremely frustrating. 

 

Therefore, most people turn to a broker when applying for a mortgage. However, as we mentioned above, there are many other instances where a broker can be helpful. 

 

Everyone has a unique situation. The process for getting your first mortgage will look different than your second. Additionally, there are many opportunities to apply for incentives. For example, you could qualify for local or federally backed incentives. You don’t want to skim over any details when applying for a mortgage, and your broker can help you identify all the incentives you’re eligible for.

Questions To Ask

Just like finding the right lender, it’s important to find the right broker. Be sure they’re qualified and experienced. Don’t hesitate to ask questions before working with them. Ask what their application process looks like and which lenders they work with. A good broker wants to find you the best rate based on your situation. They will take the time to get to know you and your financial situation.

Save Time

Mortgage brokers can help you save time in more ways than one. First, you won’t need to shop around yourself. Second, they have connections with many different lenders, meaning you’ll get the best rate. Another way they will save you time is with the paperwork. Applying for a mortgage requires a lot of paperwork and verification, which your broker will help you with.

Some documents required for a pre-approval include:
• Income
• Signed Credit Consent form so that we can obtain your Credit Report
• A list of your assets
• Confirmation of Employment
• Confirmation of the Down Payment

For many, this list can look overwhelming. However, when you have a broker on your side, they’ll be sure to help keep you on the right track.

No Extra Costs

Mortgage brokers work with lenders, which means there is typically no fee charged to you. Depending on the situation, there could be a broker lender fee. Sometimes certain lenders charge a fee. If this is the case, you will be notified ahead of time.

Get A Lower Mortgage Rate

As mentioned earlier, brokers know what’s available. Therefore, they can find rates from lenders you otherwise wouldn’t. This can save a lot of time for you as well. Instead of researching and going to multiple lenders yourself, they can do it in a fraction of the time. When you can compare multiple lenders at once, the decision-making process will be much faster and easier.

Unbiased Advice

A good broker provides unbiased options and advice. They understand the difference a lower rate will be in the long run. Having a lower rate means lower payments. Therefore, you can confidently call yourself a homeowner and reach financial freedom sooner when you choose to work with a mortgage broker. 

 

They can also provide advice on the likelihood of approval. Mortgages have different rates and eligibility requirements. This is why getting a mortgage pre-approval is important. A mortgage pre-approval shows how much you could qualify for. You will then see the maximum mortgage amount you could get. We recommend doing this early so you know how much you can afford. When applying for pre-approval, be sure to ask how long you are guaranteed that rate. A trusted broker won’t waste your time with mortgages or lenders that aren’t right for you. 

Why Wait?

Applying for a mortgage takes time. As we mentioned above, a broker can save you time. You could also save a lot of money. You can compare multiple options at once rather than finding them yourself. Whether you’re a first-time homebuyer or looking at a vacation property, a mortgage broker can be there for you. Once you gather the necessary documents, they can get the ball rolling.

At The Mortgage Group Inc., we offer mortgage solutions. We help make the mortgage process easier by offering efficient and friendly service to all our clients. Contact us today to start your pre-approval application. 

What Is An FHA Loan & Should I Get One?

fha loan

Have you ever heard of an FHA loan? Perhaps while looking through various mortgage options, this term has come up. This article will explain everything you need to know about FHA loans. Furthermore, you’ll learn about similar incentives offered in Canada. Below, we highlight the Canadian equivalent to an FHA loan. Lastly, we go over some key points to help you decide whether it’s right for you.

FHA Loan

An FHA loan stands for the Federal Housing Administration loan. As the name suggests, this is a federally backed mortgage. They offer this loan to low-to-moderate income earners in the United States of America. 

 

There are a few key benefits to this loan. The first being a lower minimum down payment. Those who qualify can still get mortgage approval. The second benefit is a lower credit score. This is great news for those who may not have the best credit score. Many conventional loans will require an average credit score of 620. However, with an FHA loan, the score is 500. Compared to a conventional loan, an FHA loan offers a down payment assistance program.

FHA Loan Equivalent In Canada

With that said, what is the equivalent of the FHA loan in Canada? Luckily, there are options available to those who qualify. 

First-Time Home Buyer Incentive

Similar to the FHA loan, the First-Time Home Buyer Incentive is tied to the Government of Canada. By that, we mean the Government of Canada has a shared investment. You may wonder how or why that would be the case. Let’s take a further look at the incentive.  

Who Qualifies?

Above all, the borrower must be a first-time homebuyer. In addition, they must be a Canadian citizen. Permanent residents and those who can work in Canada also qualify.

Next, they must have a household income of less than $120,000. $150,000 if the home you are purchasing is in Toronto, Vancouver, or Victoria

Lastly, your borrowing has a maximum. It cannot exceed four times your household income. Therefore, it would be $480,000 in Alberta. That means the average price of the home would be between $500,000 and $600,000. However, this also depends on the down payment.

fha loans

Qualification Changes

Before we move onto the benefits, here’s another important note. Qualification changes depending on where you’re buying. Toronto, Vancouver, and Victoria have the most expensive housing markets in Canada. Therefore, the government has increased the maximum household income to $150,000. You can also borrow up to four and a half times your income instead. This qualification change makes it easier for more Canadians to buy a home. 

First-Time Home Buyer Incentive Benefits

There are three major benefits to this incentive. Because it’s a shared-equity mortgage, the Government of Canada offers five or ten percent for a newly constructed home. Second, the incentive offers five percent for a resale home. Lastly, there is a five percent for first-time buyers of a resale mobile home. 

 

So, what does this mean? As mentioned earlier, the Government of Canada shares the investment in the home. That means first-time buyers may not have to save as much. This makes it more affordable for those who may not have enough savings for a down payment. Further, it can help lessen future mortgage payments. 

Is It Right For Me?

Another factor to consider is repayment. You would therefore pay the incentive amount of either five or ten percent. They base payments on the property’s fair market value during that time. You must repay the incentive after 25 years or when you sell the property. 

 

During this time, you may repay the incentive in full without a pre-payment penalty. This can be convenient if your financial situation changes. You find yourself with extra money and want to put it towards your payment. You can repay without worrying about additional charges. 

 

Don’t worry if you don’t qualify for the First-Time Home Buyer Incentive. There are other incentives to consider. They offer these incentives on both a local and national level. Buying a home is one of life’s biggest purchases. Taking advantage of an incentive can lessen financial strain. 

Talk To A Mortgage Broker

We hope this article gives clarity to what an FHA loan is and the Canadian equivalent. When it comes to a mortgage, there are many hurdles to overcome. Terminology and the fine print can make it difficult to understand what’s best for you. Further, each incentive has a different list of qualifications. Working with a mortgage broker can help ease the pressure. 

 

To put it simply, mortgage brokers bring borrowers and lenders together. Based on your financial situation, they can find you the best interest rates. Mortgage brokers can provide more options because they work closely with lenders. Some of these could be ones you otherwise won’t have access to. Need a second opinion, advice, or guidance? Your broker will work with you to make sure you find a real financial solution.

At The Mortgage Group, our specialized team is ready to assist you with any of your mortgage needs. Find out how you can get the best rate by contacting us today. 

Terms Of A Mortgage, What They Are & What To Pay Attention To

terms of mortgage

In this article, we will give you the information you need on the terms of a mortgage. First, we explain what they are, then go over how this affects the cost. Lastly, we point out the key things to pay attention to when choosing a mortgage term. 

What Are The Terms Of A Mortgage?

So, what exactly is it? A mortgage term is the amount of time your mortgage contract is active. This period shows how long your financing will last. The terms of a mortgage will impact the overall cost, interest rate, and regular payment amount. 

 

Terms can vary from a few months to over five years. After each cycle, you will have the option to renew your mortgage if you cannot pay off the entire sum. However, you can finish paying off the whole sum of your mortgage during that period.

Mortgage Amortization

With that said, the mortgage amortization period is the time it takes for you to pay off all your mortgage. Mortgage amortization factors in interest rate to provide you with an estimate of what your mortgage cost will be. 

 

If you’re about to buy a new home, online calculators can help. They can give you an idea of various amortization scenarios. The calculator will do this by factoring in different mortgage rates.

 

To put it simply, the mortgage term period will have a set date to renew. On the other hand, the amortization period indicates how long it takes for you to pay off your home. 

 

Mortgage Term Types

The terms of a mortgage will affect your interest rate. By that, we mean that you will have different interest rate options based on the length of your mortgage. Below, we list the three kinds of mortgage terms. Each comes with benefits and considerations you should pay attention to.

What Kinds Are There?

Let’s discuss the terms of mortgage based on type. There are three kinds, each based on the interest rate. Many Canadians opt for a five-year mortgage term and amortize it over twenty-five years. In Canada, the current maximum amortization period, for an insured mortgage, is 25 years. It is 30 years for a conventional mortgage.

Shorter-Term Mortgage

These mortgages are less than five years. In other words, you will renew your mortgage every few months or up to every five years.

A shorter term mortgage means dedicating more time to signing a new mortgage. Interest rates could change, meaning there is less stability. You could score a better rate but prepare yourself for something higher.

Longer-Term Mortgage

A longer-term mortgage means having a term of over five years. Some choose this for the sake of ease. They know their current conditions will not change for many years. This type of stability makes it easier to budget because you know exactly what you’ll be paying for the years to come. 

 

However, there is less flexibility with this option. You could potentially continue paying a higher rate even if interest rates drop. Lastly, this option is not for someone who frequently moves because you may be subject to pay a considerable pre-payment penalty. There may be options to port and avoid a penalty so please speak to your mortgage advisor.

Convertible Term Mortgage

Lastly, we will mention the convertible term mortgage. Some shorter-term mortgages can be extended to a longer, fixed-rate loan. This can be beneficial if interest rates fall. 

How Does This Affect Cost?

As mentioned above, the terms of a mortgage affect the interest rate for a specific time. A fixed interest rate means your rate will stay the same throughout the term period. A variable interest rate means it could change during the term, should rates fluctuate.  

 

When making your decision, think about what your current life situation is like. Although we can’t predict the future, try to imagine what your life will be like in the next five or ten years. Do you plan on living in this home long-term? Does your current job frequently have you transferring cities? Are you planning on having children? Additionally, there are also many unexpected life costs. Try to consider and imagine various scenarios before choosing your mortgage term. 

 

Luckily, first-time homebuyers can qualify for incentives that can help reduce financial strain and fast-track you to being a homeowner. 

Penalties

Always read the fine print in your mortgage contract. Renegotiating could mean paying the penalty. Additionally, you could pay pre-payment penalties if you pay all your mortgage before the end of the term. Asking an expert like a mortgage broker can help you better understand your contract.  

Choosing A Mortgage Broker

While we hope this article provided some insight, you may have some looming questions. With that said, a mortgage broker is here for you. They can assess and provide further insight into the terms of a mortgage. Therefore, you will be better equipped to pick the best one for you.

As Calgary-based mortgage brokers, our team offers personalized mortgage solutions for you. Fill out our online application form today, and we’ll do the rest! 

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.