Variable Versus Fixed Mortgage Rates

“How Do You Decide On a Variable Mortgage Rate Versus a Fixed Mortgage Rate?”

If you look over the last 5 years, its hard not to argue why variable mortgage rates should be preferred over fixed mortgage rates. For instance, the variable rates have been lower and because they’re variable, interest rate drops provide an instant benefit. And because they’re open for repayment, you don’t have any penalties associated with early repayment.

But this is also the benefit of hindsight. Yes, people who have stuck to variable rates in recent history have saved themselves some money. But will this trend continue into the future?

Fixed mortgage rates provide cash flow stability for the period of time (1 to 5 years) you lock the rate in for. You’re not going to be able to take advantage of interest rate drops but you’re also protected against the rate spiking up. And even though prepayment penalties tend to exist on all fixed rate mortgages, some programs offer very generous prepayment privileges such as paying up to 20% of the original mortgage amount down each year above and beyond your required mortgage payments.

The financial future speaks to capital market instability and the threat of continuing rate increases. And while we haven’t seen much of this yet, the threat of rising rates that stay up remains.

So choosing variable mortgage rates versus fixed mortgage rates for a residential mortgage has very much to do with your personal preference and personal risk assessment of the future.

From a cash flow point of view, a variable rate right now saves you money versus the longer term fixed rates. But if you’re cash flow depends on the current variable rate to pay your mortgage each month, what happens if rates spike up?  Can you afford to be living on the edge with a variable rate?

From a future financial planning point of view, are you expecting to earn significantly more money in the coming years or come into additional funds that could be used to pay down your mortgage? If this is the case, a variable rate likely makes more sense than a fixed rate.

So besides your preferences and financial planning, the other side of the coin is can you afford the risk of the interest rate significantly moving against you? If you can’t pay your mortgage at a higher rate, you could lose your house or fall into higher cost personal debt trying to make the cash flow work.

Right now, you could argue both ways which is better, variable or fixed, and in both cases the argument can be sound.

It comes down to a personal choice as to your own opinion of where you think the market is going and what you’re personal cash flow is going to look like over the next 5 years.

The best way to figure out what is the best fit for you at any point in time is to discuss your current requirements and preferences with a licensed mortgage broker so you can better evaluate the pros and cons of different variable mortgage rate programs and fixed mortgage rate programs.

Click Here To Speak With Toronto Mortgage Broker Joe Walsh

Residential Mortgage Application Process

“Here’s The Basic Residential Mortgage Application Process That Applies To All Mortgage Applications”

One of the best ways to make the residential mortgage process go as smoothly as possible is to be prepared for what you’re likely going be asked by various mortgage lenders.

The basic residential mortgage process can be broken down into these three steps:

First, you’re going to be asked to complete a personal profile or application form. Some of the information required will vary from lender to lender, but all will require you to provide at least the following:

• Your full and proper name,  current address of residence, date of birth, and social insurance number.
• The name of your present employer, the time you’ve worked there, and your current salary or wage.
• A personal networth statement listing out all the assets you own and all the debts you owe including credit cards, lines of credit, loans, and mortgages.

The last part of the application form will include an authorization statement that allows the lender to access your personal credit report as part of the application process.  By signing and dating the application form you are confirming that the information provided is accurate and that you are providing your consent for the mortgage provider to access your personal credit profile.

The second part of the application process is to confirm your income, down payment, and property value. Here are the most common verification steps:

• Employment verification.  This can be done via an employment letter from your employer and/or a copy of your of your most recent pay stubs.  In addition you may be asked to provide a copy of your last years T4 slip and/or a copy of the last notice of assessment you received from CRA.  For self employed individuals,  the last three notices of assessment are typically required and potentially the financial statements of the business.
• For a real estate purchase,  a copy of the purchase and sale agreement along with any available real estate listing information will be required to validate the transaction.  If you’re also selling your existing home at the same time, then a copy of the sale agreement would also need to be provided along with the statement of mortgage if a home mortgage is outstanding.
• Down payment.  The amount of the down payment will need to be verified via bank statements.  If the down payment is coming out of your savings, then the last 3 months of bank statements will be required to verify the build up of funds.  Any gifts or donations will have to be supported by the provider indicating that the funds are not required to be repaid.
• For real estate purchases where at least 20% of the purchase price is paid in cash, a real estate appraisal will be required as these mortgages will not be covered by mortgage insurance.

Once all the documentation has been received and verified, the last step in the residential mortgage application process is the mortgage approval.  The mortgage lender will provide  a written mortgage approval  for you to review and sign.  In addition to signing off on the mortgage approval, you will also have to provide a void cheque  for setting up a preauthorization payment, and the contact information of your lawyer.

The lawyer will receive all the legal documents and mortgage instructions which he or she will review with you prior to your execution of the legal documents that will complete the mortgage process.

Click Here To Speak To Toronto Mortgage Broker Joe Walsh

Mortgage Product Confusion

“Trying To Figure Out What Residential Mortgage Program Is Best For You Can Be Extremely Confusing”

The Canadian mortgage market has evolved considerably over the last decade with more information more readily available to consumers and more mortgage programs and features to try and attract your business.

Because mortgage decisions tend to be the largest individual financing decisions that most people make, there can (and should) be a great deal more scrutiny that goes into the comparison process from one mortgage option to the next.

Add to more competition and more choice is the fact that the average person tends to have more of an opinion on mortgage products, mortgage companies, and mortgage strategies. So when you’re actively seeking a mortgage for real estate purchase, construction, renewal, or consolidation, there is no shortage of information and points of view to go around, whether you want it all or not.

So, yes more information is good as everyone wants to make an informed decision in order to create the most benefit for themselves and their families.

But at the same time, you still need to wade through all the information, make sense of it, and still make a good decision.

And while many of the major banks have gotten more aggressive promoting their own mortgage products and services, the goal of much of this information overload is to try and capture your collective attention so whatever decision you choose will stay within in the confines of a major lender’s marketing funnel.

For the average person who perhaps only goes through a residential mortgage process once every 3 to 5 years, the information assimilation process can be very difficult to understand.

The best solution in my opinion is to select an experienced mortgage broker that you trust, who you believe will will work in your best interest and will invest the time necessary to answer all your questions, look at all the relevant options in the market that pertain to your situation, and help you make the best decision possible.

This has become a process where a third party guide can provide considerable value in terms of both time and money savings as well as stress reduction.

If you’re in need of a residential mortgage product, or just planning ahead, please give me a call so we can discuss your requirements, get your questions answered, and go over the most relevant mortgage financing options together.

Click Here To Speak With Toronto Mortgage Broker Joe Walsh

Anatomy of a Fast Mortgage Loan

“To Get a Toronto Fast Mortgage Loan in Place, Here’s The Essential Elements That Are Required”

If you’re in need of a Toronto fast mortgage loan, then there are a number of things you’re going to require to get something in place in the time you have available to work with.

First, when we’re talking about a fast mortgage loan, we’re speaking in terms of getting a residential mortgage committed and funded in from 2 to 7 days. The typical period required from start to finish is 2 to 3 weeks.

Second, you need to have all your paper work in order so that there are no delays trying to procure documents or complete agreements. If you’re trying to purchase a property, you’re going to need a completed purchase and sale agreement or properly executed offer to purchase. While a recently completed property appraisal may not be essential, it will likely be required if you’re looking at financing more than 50% of the cost of the real estate. You will also need immediate access to any down payment that may be required.

Third, you’re going to need to be working with a private mortgage lender that makes it a practice to provide a fast turnaround on these types of residential mortgage financing requests. The private lender is likely going to have to be working in your region already in order for them to get comfortable with the subject property value in the least amount of time. The lender may need to come and do a property inspection as well, so the closer the real estate is to the private lending source the better.

Fourth, the transaction is going to have to be executed, registered, and disbursed through a lawyer that is available and prepared to bring your deal to the top of their pile.

Fifth, and perhaps most important, you will need to be working with a Toronto mortgage broker that is experienced at bringing everything together in the time required. Most private lenders work through mortgage brokers, so this is typically the best way to locate the right type of mortgage sources. Mortgage brokers that work with private mortgage lenders will also have relationships with real estate lawyers that can get the legal work completed.

If you require a Toronto fast mortgage loan, give me a call so I can quickly assess your situation and provide relevant mortgage options with a few hours. If I can’t help you, I’ll tell you right away so we’re not wasting the limited time you have available.

Click Here To Speak With Toronto Mortgage Broker Joe Walsh

Toronto Construction Loans Heating Up

“As The Summer Goes on Toronto Construction Loans Can Be Harder To Find”

We are now into July.

Happy Canada Day!

And the construction season is in full swing. This also places a high demand on available construction financing sources, which are primarily provided through private lenders.

Different from bank or institutional construction mortgage lenders, private mortgage lenders have a finite lending pool available to them. So as more and more construction projects are committed in the market, the potential available pool of private mortgage construction funds can go down and go down significantly for a period of time.

This is not to say that there will actually be a shortage of private mortgage constructions loans in a market as large as Toronto, but the available sources may start providing less than optimal rates and terms based on supply and demand.

Like any market, when there is more supply than demand, the suppliers are going to increase the prices or strengthen the terms in their favor. And because construction financing is very regionally supplied and very project specific, the supply and demand balance can get out of wack for a period of time.

So if you’re planning a construction project for this summer that is going to require private mortgage construction financing, I would recommend that you get your construction financing arranged sooner or later to avoid any of these seasonal anomalies that can happen with the local money supply.

The best way to make sure you’re getting the best available deal is to work with a construction mortgage broker that places construction loans in your area for the size and type of project your undertaking or in the middle of. Mortgage brokers focused on construction will have a much broader access to construction loans in Toronto versus those that occasionally dabble in construction financing.  If their sources run out of money for a period of time, they may end up redirecting you to less appealing options.

If you have a Toronto construction loan requirement for a project you’re planning or in the middle of, give me a call as soon as possible so I can quickly assess your requirements and see what construction financing options we can get locked in for your summer building schedule.

Click Here To Speak With Construction Mortgage Broker Joe Walsh