Choosing a Mortgage That is Right for You

When you buy a home, you may only be able to pay for part of the purchase price. The amount you pay is a down payment. To cover the remaining costs of the home purchase, you may need help from a lender. The loan you get from a lender to help pay for your home is a mortgage.

With a secured loan, the lender has a legal right to take your property. They can do so if you don’t respect the conditions of your mortgage. This includes paying on time and maintaining your home. Unlike other loans mortgages are/may/will:

• be secured by a property
• have a balance owing at the end of your contract
• normally need to renew multiple times until you finish paying the balance in full
• must meet qualification requirements including passing a stress test
• need a down payment
• need to break your contract and pay a penalty
• typically for an amount in the hundreds of thousands of dollars

What to Consider When Getting a Mortgage

When you’re shopping for a mortgage, your lender or mortgage broker will provide you with options. Make sure you understand the options and features. This will help you choose a mortgage that will best suit you and your benefits.

This includes your:

• mortgage principal amount
• amortization
• payment frequency

Your Term:

The mortgage term is the length of time your mortgage contract is in effect. This consists of everything your mortgage contract outlines, including the interest rate. Terms can range from just a few months to 5 years or longer.

At the end of each term, you must renew your mortgage if you can’t pay the remaining balance in full. You’ll most likely be required to many terms to be able to pay everything off.

The length of your mortgage term has an impact on:

• your interest rate and the type of interest you can get (fixed or variable)
• the penalties you must pay if you break your mortgage contract before the end of your term
• how soon you must renew your mortgage agreement

How Your Mortgage Choices Affect Your Future

Mortgage lenders charge a penalty fee when you break your contract. If you sell your home, you could owe the lender thousands of dollars in penalty fees.

Options related to mortgage flexibility include if your mortgage:

• is open or closed
• is there a penalty to break the term
• how is that penalty calculated if broken
• is portable
• allows you to borrow more money if the mortgage is ported to another property that is being purchased
• is assumable
• has a standard or collateral security registration

Opened Mortgages (aka Secured Lines of Credit):

The interest rate in most cases is usually higher than on a closed mortgage with a comparable term length. This allows more flexibility if you plan on putting extra money toward your mortgage.

An open mortgage may be a good choice for you if you:

• plan to pay off your mortgage soon
• plan to sell your home soon
• think you may have extra money to put toward your mortgage from time to time

Closed Mortgages (aka Fixed and/or Variable):

Closed term mortgages usually limit the amount of extra money you can put toward your mortgage each year. Your lender calls this a prepayment privilege, and it is included in your mortgage contract. Not all closed mortgages allow prepayment privileges. This can vary from lender to lender.

A closed mortgage may be a good choice for you if:

• you plan to keep your home for the rest of your loan’s term
• the prepayment privileges provide enough flexibility for the prepayments you expect to make

It is PARTICULARLY important to have a clear understanding of the implications when it comes to choosing the right mortgage that’s best for you. It makes a significant difference in future planning and can impact you in incredibly substantial ways.

At GLM Mortgage Group, we know what questions to ask. We have relationships with the lenders that you know about and the lenders you don’t. We would be pleased to educate you on the financial options available to you. We want you to make the best decision possible on the mortgage that you are committing to. Call us anytime for a FREE consultation on the mortgage products available to you.

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Breaking Your Mortgage in 2022

In our previous blog from 2020 on Breaking Your Mortgage, Vancouver’s Top Mortgage Broker talked about how 6 out of 10 consumers will break their mortgage within the first 3 years of a 5-year term. That means that 60% of borrowers will break a 5-year term mortgage before it’s due. With the increase of individuals breaking their mortgages, we thought it would be beneficial for you to understand the full extent of updated implications that may happen if you choose to do so.

The current conditions of your mortgage contract may no longer meet your needs. If you want to make changes before the end of your term, you can break your mortgage contract. Outside of the pandemic, people need to break a mortgage for a variety of reasons.

Some of the most common reasons for Breaking Your Mortgage include:

• Sale and purchase of a new home (without a portable mortgage)
• To take equity out/refinance
• Relationship changes (ex. Divorce)
• Health Challenges or life/job circumstances have altered
• Interest rates have decreased

When interest rates fall, it may be tempting to break your existing mortgage and renegotiate a new one at a lower interest rate. Before you start the process of Breaking Your Mortgage, consider the pros and cons:

Pros

• you get a lower interest rate
• you may be able to pay off your mortgage faster if you keep your payments the same
• you can lock in the lower interest rate for the new term of the mortgage

Cons

• you could end up paying more in the long run because of fees and a prepayment penalty
• you may no longer qualify for a mortgage under the current economic conditions

The cost of Breaking Your Mortgage contract depends on whether your mortgage is open or closed. An open mortgage allows you to break the contract without paying a prepayment penalty. If you break your closed mortgage contract, you normally must pay a prepayment penalty. This could potentially cost you thousands of dollars.

Before committing to breaking your mortgage contract, find out if you must pay:

• Prepayment penalty and, if so, how much it will cost
• Administration fees
• Appraisal fees
• Re-investment fees
• Mortgage discharge fee to remove a charge on your current mortgage and register a new one

Unfortunately, trying to figure out what you’ll be charged for breaking a fixed-rate mortgage is very difficult and often leads to accidentally miscalculating the cost of their penalty. We recommend that if you have a fixed-rate mortgage and you need to break your contract, you speak with your lender or mortgage broker directly.

The penalty you’ll be charged for breaking a variable-rate mortgage is both significantly lower and easier to calculate. Unlike a fixed-rate mortgage, your penalty fee will always amount to 3-months’ worth of interest. Keep in mind though that all mortgage lenders calculate their penalties with their own equations, so while you can expect to pay 3-month interest, you should also expect some variation in cost.

Your prepayment penalty will be the higher of these two prepayment penalty fee calculations when Breaking Your Mortgage:

• Interest Rate Differential (IRD) – The IRD compensates your lender for the interest they are losing out on because you’re breaking your mortgage early. This is calculated by finding the difference between the amount of interest you’d be paying on your current term for both rates. However, it is important to note that Interest rates fluctuate; therefore, the interest rate you were given when you signed your mortgage contract may not be the same as the interest rate your lender could charge now.
• 3 Months Interest – As the name explains, this prepayment penalty fee is based on the amount of interest you’d pay in 3-months.

It is VERY important to have a clear understanding of the implications that may happen if you decide to go with Breaking Your Mortgage, and how they can affect you. It makes all the difference in future planning and can impact you in very significant ways.

At GLM Mortgage Group, we know what questions to ask. We have relationships with the lenders that you know about and the lenders you don’t. We would be pleased to educate you on the financial options available to you. We want you to make the best decision possible on the mortgage that you are committing to. Call us anytime for a FREE consultation on the mortgage products available to you.

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Federal Budget Updates 2022

This bright industry is constantly evolving and growing at a rapid pace. In our previous Federal Budget Updates blog from 2019, we had discussed updates that were made to the CMHC First Time Home Buyer’s Incentive Plan and Home Buyer’ plan RRP Increase. We will be diving a bit deeper into a few key updates from 2022. As one of the Top 3 Rated Mortgage Brokers in Vancouver, we would be more than happy to assist you with understanding the Federal Budget Updates 2022.

On April 7, 2022, the Deputy Prime Minister and Finance Minister, the honourable Chrystia Freeland, presented Federal Budget Updates 2022: A Plan to Grow Our Economy and Make Life More Affordable, to the House of Commons. No changes were made to personal or corporate tax rates, nor to the inclusion rate on taxable capital gains.

Some highlights that are included in this Federal Budget Updates are:

• Federal Budget Updates: Retirement Plans

  • Borrowing by Defined Benefit Pension Plans

    • Budget 2022 proposes to provide more borrowing flexibility to administrators of defined benefit registered pension plans (other than individual pension plans) for amounts borrowed on or after April 7, 2022

  • Reporting Requirements for RRSP’S AND RRIF’S

    • Budget 2022 proposes to require financial institutions to annually report to CRA the total fair market value of property held in each RRSP and RRIF at the end of the calendar year. This information would assist CRA in its risk-assessment activities regarding qualified investments held by RRSPs and RRIFs. This measure would apply to the 2023 and subsequent taxation years

  • Federal Budget Updates: Personal Measures

    • Homebuyer’s Tax Credit

    • By claiming this credit, first-time homebuyers can obtain up to $750 in tax relief as a non-refundable tax credit. Budget 2022 proposes to double the Home Buyers’ Tax Credit amount such that eligible homebuyers can access tax relief of up to $1,500. This measure would apply to acquisitions of a qualifying home made on or after January 1, 2022.

    • Multi-Generational Home Renovation Tax Credit

    • Budget 2022 proposes a new refundable tax credit to support constructing a secondary suite for an eligible person to live with a qualifying relation. An eligible person would be a senior (65+ years of age at the end of the tax year when the renovation was completed) or an adult (18+ years of age) eligible for the disability tax credit. A qualifying relation would be 18+ years of age and a parent, grandparent, child, grandchild, brother, sister, aunt, uncle, niece or nephew of the eligible person (which includes the spouse or common-law partner of one of those individuals). This tax credit would provide tax relief of 15% on up to $50,000 of eligible expenditures, providing a maximum benefit of $7,500.

    • Tax-Free First Home Savings Account (FHSA)

    • See below…

The Federal Budget Updates 2022 propose to create the Tax-Free First Home Savings Account to help first-time homebuyers save up to $40,000 for their first home. Contributions to an FHSA would be deductible (like an RRSP), and income earned in an FHSA and qualifying withdrawals from an FHSA made to purchase a first home would be non-taxable (like a TFSA).

The lifetime limit on contributions would be $40,000, subject to an annual contribution limit of $8,000. Unused annual contribution room would not be carried forward. Individuals would also be allowed to transfer funds from an RRSP to an FHSA tax-free, subject to the $40,000 lifetime and $8,000 annual contribution limits.

Withdrawals for purposes other than to purchase a first home would be taxable. However, an individual could transfer funds from an FHSA to an RRSP (at any time before the year they turn 71) or an RRIF on a non-taxable basis. Transfers would not reduce, or be limited by, the individual’s available RRSP room. Withdrawals and transfers would not replenish FHSA contribution limits.

Individuals would not be permitted to make both an FHSA withdrawal and a home buyers’ plan withdrawal concerning the same qualifying home purchase. If an individual has not used the funds in their FHSA for a qualifying first home purchase within 15 years of opening an FHSA, their FHSA would have to be closed. Any unused funds could be transferred into an RRSP or RRIF or would otherwise have to be withdrawn on a taxable basis.

The Federal Budget Updates would work with financial institutions to allow individuals to open an FHSA and start contributing in 2023.

 It is VERY important to have a clear understanding of what these Federal Budget Updates are and how they can affect you. It makes all the difference in future planning and can impact you in very significant ways.

At GLM Mortgage Group, we know what questions to ask about the Federal Budget Updates. We have relationships with the lenders that you know about and the lenders you don’t. We would be pleased to educate you on the financial options available to you. We want you to make the best decision possible on the mortgage that you are committing to. Call us anytime for a FREE consultation on the mortgage products available to you.

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Personalities of Your Mortgage- Blend & Extend

Asking the right questions is an important part of the mortgage process, it allows you to learn and understand which mortgage product is right for your situation! An important aspect of a mortgage is its flexibility and terms, such as how the penalty is calculated if you break your mortgage. Keep in mind that statistically, 70% (7 out of 10 people) of mortgages are broken within the first 3 years. As one of the Top 3 Rated Mortgage Brokers in Vancouver, we would be more than happy to assist you with understanding Blend & Extend products.

This could be due to a variety of reasons; in our previous blog on Personalities of Your Mortgage, we went over many personalities and now are going to focus on the Blend & Extend Products and avoiding the “pre-payment penalty”.

There is one popular and “under-utilized” option you can access to refinance and access your equity and/or get a lower mortgage rate, without having to pay the prepayment penalty. This product is called a Blend & Extend (Blended Mortgage) mortgage.

A Blend & Extend Mortgage is when you combine the mortgage rate from an existing mortgage with the mortgage rate from a new mortgage and blend them into a new rate that is somewhere in-between the two. Because you’re essentially “keeping” your existing mortgage rate in this new blended rate, rather than breaking your mortgage term altogether, you can avoid the prepayment penalty that comes with a typical refinance. With Blend & Extend mortgage, you wouldn’t get the absolute best mortgage rate on the market, but you also save your money on the penalty payment.

You could break your mortgage if you wanted to access a lump sum of equity and/or obtain a lower rate in a new mortgage. Breaking your mortgage means you’re paying off your current loan and setting up finance for a new mortgage. Doing this will result in a pre-payment penalty – and, depending on your mortgage rate and how much time is left in your mortgage term, it can add up quickly.

If you had a fixed-rate mortgage, your penalty would be the greater of three months’ interest or the interest rate differential (IRD). If you had a variable rate mortgage, your penalty would be three months’ interest. If the potential savings outweigh the penalty, or if the value to you in withdrawing that money is high, it might be worth paying the fee. However, there are still other options to consider.

Let’s say you owe $250,000 on your mortgage, and you have two years remaining on a 5-year term with a fixed rate of 4.50%. Through a refinance, you could take on a new 5-year fixed term at just 3.39%. However, to get that rate, you’d have to pay a prepayment penalty of $10,325.

To avoid that fee, you could instead blend your existing mortgage rate with the new mortgage rate, for a new 5-year fixed term at a rate somewhere between 3.39% and 4.50%. So, not only have you “blended” the two rates, you’ve also avoided having to refinance your mortgage and pay a penalty to do so. See below for example:

4.50^% existing rate    →   3.83^% blended rate  ←   3.39^% new 5-yr rate

If you had also decided to access some equity in this refinance and chose a Blend & Extend product, your blended rate would be even more weighted against current market rates, because your total mortgage amount, monthly payment and overall interest would’ve gone up, giving the lender more money from you in other ways.

 It is VERY important to get clear answers on what the terms of your Blend & Extend Mortgage are. It makes all the difference in future planning and can impact you in very significant ways. Of course, the rate is important. Whether it is a penalty to break, restrictions on porting or assumptions, or even an administrative cost. Always be sure to find out the specifics of Blend & Extend as well as all the various Personalities of Your Mortgage.

At GLM Mortgage Group, we know what questions to ask. We have relationships with the lenders that you know about and the lenders you don’t. We would be pleased to educate you on the financial options available to you. We want you to make the best decision possible on the mortgage that you are committing to. Call us anytime for a FREE consultation on the mortgage products available to you.

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Rent to Own Mortgage

A Rent to Own contract could be the answer for someone who is renting but is also having a hard time getting their down payment together. Rent to Own contracts usually are between 1 and 5 years long and can give the client the time they need to implement strategies on increasing their down payment or even improving their credit.  As one of the Top 3 Rated Mortgage Brokers in Vancouver, we would be more than happy to assist you with understanding Rent to Own Mortgages.

In the Lower Mainland, Rent to Own is becoming more popular as housing prices are increasing, and renting seems inevitable. In fact, there are properties that are being built with Rent to Own financing in mind.

Initially, the contract is signed just between the renter (the buyer) and the Landlord (the seller) that states an agreed price, length of time of Rent to Own, and market rent (typical rent of a similar property) with the excess going toward down payment (usually $200 – $400/month). The lender is not involved yet.

For example, market rent for your property goes for around $1000.00. You agree to pay the Landlord $1400.00/month. The extra $400/month goes into an account that the Landlord has in place for you for the down payment. This is a great example of  a Rent to Own situation.

Regardless of the lender, the Landlord must keep pristine records of the extra money coming in and can show the history of any excess deposit. When the Rent to Own is registered on title, there will be a clear indication as to how much of the monthly payments are directed toward the deposit.

The client will want to work with a team of property purchase professionals that will strategize Action Steps to make a seamless Rent to Own experience. The client`s team would be:

1. MORTGAGE PROFESSIONAL

• Get pre-approved! In the pre-approval process, the Mortgage Professional will be able to advise on improving credit or the need to increase employment income if need be.
• As well, the Mortgage Professional understands lender policies and guidelines for Rent to Own contracts and will be able to advise on how to properly set up the Rent to Own.

2. SOLICITOR/LAWYER

• Make sure that your lawyer is familiar with Rent to Own contracts and that they work closely with the Mortgage Professional who knows what the lender is going to expect. This relationship is very important and one that should not be overlooked.

The down payment continues to grow over the life of the Rent to Own contract. At any time, you can add lump payments to the down payment, simply by giving the Landlord a bigger rent check. Keep in mind, the Rent to Own contract could stipulate that the down payment is non-refundable. Make sure you read the fine print and work closely with your mortgage professional and lawyer so that you clearly understand the terms of your Rent to Own contract.

The bank does not get involved until the time the renter (the buyer) makes an offer to purchase to the Landlord (the seller). The person paying for the rent to own does not have to qualify for a mortgage at this point because the Landlord continues to carry the mortgage on the property.

Rent to Own Properties can also be facilitated through a company such as a condominium developer. For example, the developer could offer a Rent to Own contract when entering a rental lease with an owner-occupied property that the client wants to rent.

The client may be charged a contract fee upfront (for example $10,000) to enter the Rent to Own contract. At times all or a portion of this contract fee can be used toward the down payment pending on what has been negotiated within the Rent to Own contract.

Over the course of the Rent to Own some of the obstacles to financing you will consider are:

• How to improve your credit rating
• Consider applying for an RRSP loan to further establish credit and take advantage of tax benefits
• Consider refinancing any outstanding credit
• Consider job changes to increase employment income
• Consider other sources to increase down payment

Rent To Own contracts are more than just paying rent to the Landlord and applying the rent toward the purchase of the property. There are details that you need to know when entering into a Rent To Own Contract. If you need help setting up a Rent to Own contract or for more information regarding this topic please reach out.

GLM Mortgage | Dominion Lending Centres is here to walk your mortgage planning path with you. Give us a call at 604-259-1486 and find out what your mortgage options are!

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Mortgaging a Property via Assignment

Mortgaging a property via assignment is a contract provision included in some real estate transactions that allow the buyer to resell or transfer a property to another buyer before the deal’s closing date. As one of the Top 3 Rated Mortgage Brokers in Vancouver, we would be more than happy to assist you with understanding Mortgaging a Property Via Assignment.

This product was originally intended to give buyers a legal way of backing out of a purchase if for some reason their circumstances changed after they had put an offer on a property, instead of having to surrender their deposit. The clause was also meant to protect sellers, ensuring a sale would still go forward if another buyer could be found.

To qualify for a product like an Assigned Mortgage, there are some things you will want to first consider:

• Not all lenders offer to finance for Assignment Purchases
• Assignment Purchase products will contain the same features and conditions that you would expect of a traditional standard mortgage qualification
  • This means income and credit score requirements remain the same
• There will likely be additional documentation that will be required
  • Pertaining to the Purchase Contract and Contract of Assignment
• Some lenders will only finance on the original purchase price

The assignment clause allows real estate agents to sell a contract for a single property multiple times at increasingly higher prices as they make a commission on each transfer. Buyers in the middle also benefit by pocketing the difference between what they paid and the resale value. They also don’t pay any land-transfer taxes because the entire transaction happens before the deal officially closes, so the property is never technically in their possession.

The original seller receives less than what the property ends up being worth and the last buyer may be paying an inflated price, with the difference in value going to the real estate agent and the buyers in the middle.

The option of an Assigned Mortgage can be appealing to borrowers for a few different reasons:

1. Depending on how far along the process is, you could possibly be involved in choosing finishes of the property
2. Depending on your local market, you could score a good deal on an assignable property

The risk to individuals and developers, regardless of incorporation or not, is that the CRA is aggressive on assignments and will often investigate GST compliance long after the transaction has occurred. This leaves the taxpayer at high risk with a large tax liability if the sale of an assignment fee was not properly documented for GST purposes. As always, remember to consult a qualified tax professional with regards to your potential exposure and ensure that GST is reported correctly along the sequence of transactions.

Let’s look at this case study on Mortgaging a Property via Assignment together…

A real estate agent’s client reaches a deal to sell a property to an initial buyer for $1 million. The agent then takes that contract and resells it to a second buyer for $1.5 million. The agent in turn goes to a third and final buyer and sells the contract for $1.8 million.

For each transaction, the agent receives a commission. The initial seller receives $1 million minus the agent’s commission. The first buyer who bought the contract for the property for $1 million and sold it for $1.5 million pockets $500,000. The second buyer who bought the contract for $1.5 million and sold it for $1.8 million gets $300,000. The third buyer pays the land-transfer tax on the $1.8 million purchase price.

For any issues with Mortgaging a Property via Assignment please reach out and one of our Senior Broker Partners would be more than happy to assess your unique situation and give you the best advice.

At GLM Mortgage Group, we are with our clients for the entire journey. From the beginning, we can identify client needs, any possible roadblocks, and give a variety of tailored solutions.

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Bridge Financing

Bridge Financing, also commonly referred to as a “Bridge Loan”, is a way to help literally bridge the gap between closing on your current house and your new place. This product allows you to carry the mortgage on two properties for a specified amount of time and for typically a maximum of 90 days. As one of the Top 3 Rated Mortgage Brokers in Vancouver, we would be more than happy to assist you with understanding Bridge Financing.

How does Bridge financing work? These short-term loan products use your current home’s equity to cover some of the costs of your new home (for example, could be used for a down payment.) That way, you don’t have to miss out on your dream home while waiting on the cash from the sale of your current house.

What is the cost of Bridge Financing? You will be charged an interest rate on the amount of funds you are borrowing. This will be based on the lender’s prime rate and will vary. You can expect to pay prime plus 2-5%. You can also plan to pay an administrative fee. This will vary pending on the lender and can range from $200-$695.

Similar to most other financial decisions, there will always be advantages and disadvantages for Bridge financing. Here are a few things you should be aware of:

One of the most popular advantages of acquiring Bridge financing is financial flexibility. With this product, you will be able to use the equity you’ve built in your current home to secure the new purchase of your dream home. Since you will be able to access those funds via equity, you won’t have to stress about the sale closing of your current home before you close on your new home.

Although most terms for Bridge financing products are short, the interest rate will be similar to open rate mortgages, which are often higher than the interest rate you may have locked in with your current mortgage. If for some reason your sale agreement falls through on your current house, you may have to make up for the payments until a new sale is finalized.

To qualify for Bridge financing you will need:

• Have a current mortgage in good standing with equity
• A copy of the Sale Agreement for the home you’re selling
• A copy of the Purchase Agreement for the home you’re buying
• Valid pre-approval (with document review) with the lender of your choice

Like your home buying situation, your home financing needs are unique. Bridge financing may be the right solution for you if you would like the following…

• You’ve found your dream property and do not want to wait on submitting your offer
• You can’t afford a down payment without the money from your current home’s equity
• You want time between closing dates

If you’re a homeowner aged 55 and over, rather than taking out a regular Bridge loan, you could take out a CHIP Open Mortgage with HomeEquity Bank. The CHIP Open Mortgage can assist you in purchasing a new home when your existing property has not yet been sold.

Let’s have a look at this case study together…

• Meet the Ellis family, a couple in their early 70s who live in the Greater Vancouver Area in a home worth $1.3 million. Looking to downsize, they’re keeping an eagle eye on available properties on Vancouver Island, and finally find their dream home at a price tag of $550,000. Afraid to lose it, they act quickly to purchase the new place before selling their existing home — but don’t qualify for a large enough traditional loan, putting the dream they have for their future in jeopardy.
• This product is a CHIP Open Mortgage (A Reverse Mortgage with no pre-payment penalties) The couple was able to access $600,000, allowing them to purchase their new place outright and cover the costs of their move. With no repayments, the couple were able to properly prepare their home for sale and repaid the CHIP Open in full once the house sold.

Please reach out and one of our Senior Broker Partners would be more than happy to assess your unique situation and give you the best advice. At GLM Mortgage Group, we are with our clients for the entire journey. From the beginning, we can identify client needs, any possible roadblocks, and give a variety of tailored solutions.

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Pre-Approval VS Rate Hold

Pre-Approval VS Rate Hold… what are the differences? What are the benefits? Not even one Mortgage or Pre-Approval Process is the exact same as someone else’s. The Mortgage and Pre-Approval process are complex mazes of tiny puzzle pieces that must fit together seamlessly. Note that the puzzle pieces are constantly changing in this industry. Many lenders will pre-qualify and give Rate Holds to their customers, but that only gives you as a borrower, a general idea of the amount of the mortgage you could afford. However, when you are pre-approved, you’ll have a clear picture of the home you can afford and what you might pay each month.

As one of the Top 3 Rated Mortgage Brokers in Vancouver, we would be more than happy to assist you with understanding Pre-Approvals VS Rate Holds.

The “Pre-Approval Approach” is simply a more detailed process. You as a client will be sending in all requested documents for review (besides subject property.) The lender of your choice will have to approve your application based on information such as employment, current debts, down payment, and your previous/current credit history.

Something to keep in mind is that even if all four “pillars” are approved, it is NOT a guarantee that the whole application will be approved. The lender you chose will still need to meet all insurance guidelines if there is less than a 20% down payment.

Since the Pre-Approval process (compared to the Rate Hold process) is quite thorough, there are many benefits to this product. The biggest one is that you will have a general idea of what you can afford even before you shop for a home. Another commonly appreciated “pro” of a Pre-Approval process is that you can ask your Mortgage Broker any questions about current mortgage products on the market and get the best plan for you, before looking at any properties.

A few things to also consider while thinking of starting your Pre-Approval Process are:

• Pulling your credit in the Pre-Approval Process will cause a temporary decline in your credit score
• There is no 100% Guarantee on being approved after a Pre-Approval if circumstances for the borrower or subject property change

A Rate Hold is simply “locking in” a specific mortgage rate for a certain number of days. Most commonly, a general Rate Hold is for 120 days, but 30, 45, 60, and 90-day rate holds are also widely offered by various lenders. A “Rate Hold” only applies to fixed rates since variable rates are constantly fluctuating with the global economy. While the lender you are working with will guarantee a fixed rate for the duration of your “Rate Hold” period, this should NOT be seen as a guarantee that you’ll be pre-approved for the mortgage.

Locking in a fixed rate will come most in handy when mortgage rates are rising, you won’t have to worry since you have your “locked-in” rate. However, if rates decline, you will also have access to the lower mortgage rates that are currently on the market.

Now that we’ve discussed the “pros” here are a few things to consider:

• Not all lenders offer pre-approvals and rate holds
• Rate holds are often shorter for renewals and refinances
• Some promotional rates involve a “no float-down” policy, meaning the lender has locked-in rates that cannot drop, regardless of whether rates are falling in general

Most Rate Hold products are generally automated, which means nobody is even looking at your application. That means any documents you have sent in, won’t be reviewed at this point.

The system will analyze a few key pieces of data from the application like:

• Credit Score
• Loan to Value Ratio
• Name
• Birthdate

The best time for a “Rate Hold” would be for a borrower that is looking to make a Purchase or start a Refinance in the very near future, since the max Rate Hold is usually 120 days. The best Pre-Approvals and Rate Holds are the ones that come from your Mortgage Broker because they can analyze your needs and start underwriting right away. With their expert advice, together you can create a perfectly “tailored-to-you” plan.

If any of the products mentioned sound like something you may be interested in, please reach out and one of our Senior Broker Partners would be more than happy to assess your unique situation and give you the best advice.

From the beginning, we can identify client needs, any possible roadblocks, and give a variety of tailored solutions. If any of the products mentioned sound like something you may be interested in, please reach out and one of our Senior Broker Partners would be more than happy to assess your unique situation and give you the best advice. At GLM Mortgage Group, we are with our clients for the entire journey. From the beginning, we can identify client needs, any possible roadblocks, and give a variety of tailored solutions.

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Refinancing Your Home Investment in BC

Refinancing Your Home Investment in BC means that you are simply replacing your existing mortgage with a new mortgage on different terms. To find out if you qualify, your lender will calculate your “loan to value” ratio by dividing the balance owing on your mortgage and any other debts secured by your property into the current value of your property. If your “loan to value” ratio is 80% or under, you will most likely be approved. Similar to acquiring your first mortgage, the lender will also request to look at your monthly income and debts by requesting specific documents from you. As one of the Top 3 Rated Mortgage Brokers in Vancouver, we would be more than happy to assist you with your refinancing journey.

A few of the most common documents requested by lenders for Refinancing Your Home Investment are:

• Credit Bureau
• T4 Slips (2 years)
• Notice of Assessment (2 years, showing ZERO balance owing)
• Job Letter
• Most Recent Paystub
• Current Mortgage Statement (showing current mortgage balance)
• Recent Property Tax Bill

Across Canada, property values have jumped 34 percent since March of 2020. In B.C., locations outside of Vancouver saw the most increase, such as Chilliwack where assessments increased 36.5 percent in November, compared with 16 percent in Vancouver. With interest rates being at the “all-time low” and BC Home Assessments coming in at an “all-time high” it’s an interesting time to be on the market. This is where a Refinancing product can help you and your existing mortgage investment best. Refinancing is needed whenever you need or want to make changes to your mortgage agreement, whether your mortgage is up for renewal or not.

Some commonly made changes that require Refinancing Your Home Investment are:

• Increasing your mortgage amount to borrow money
• Changing your rate before the end of your term
• Changing the amortization period

There are several different solutions/steps to Refinancing your mortgage. We have provided two below that include breaking your current mortgage contract early and taking out a home equity line of credit, with your current lender. Each solution /step comes with unique benefits and features.

Breaking your Existing Mortgage Contract early

• This option is most common when you are looking to get a lower interest rate or access the equity in your home. To summarize, you would be replacing your existing mortgage with a new mortgage on different terms, with a new lender.

Add a Home Equity Line of Credit (HELOC)

• This type of product is most common when you are looking to access the equity in your home investment with your current lender and/or a new lender. A HELOC will work in a way that is like a credit card, but because this loan is secured to your home, interest rates are much lower.

There are many benefits that come with Refinancing Your Home Investment. These benefits can allow you to easily do things you previously weren’t able to do… Such as:

• Paying for a home renovation,
• Consolidating your current debts,
• Re-investing by purchasing a rental property
• Freeing up cashflow for various reasons such as paying for your children’s schooling/activities, medical expenses, any unexpected large expenses, etc.

To summarize the purpose and benefit of a Refinancing Your Home Investment…

• Potential to get a lower Interest Rate
• Potential to Consolidate Debt and Reduce your Monthly Debt Payments
• Allows you to switch to a Fixed or Variable Rate
• Accessing the Equity in your Home for various reasons such as home renovations and/or future reinvestment such as purchasing an investment property

In summary, you will need to make sure you factor in all the fees and costs before you take the next step in your Refinancing Your Home Investment journey. You will need to pay appraisal costs, legal fees, and possible pre-payment charges or penalties if you’re breaking your current mortgage early.

If any of the Refinancing Your Home Investment sounds like something you may be interested in, please reach out and one of our Senior Broker Partners would be more than happy to assess your unique situation and give you the best advice. At GLM Mortgage Group, we are with our clients for the entire journey. From the beginning, we can identify client needs, any possible roadblocks, and give a variety of tailored solutions.

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Personalities of Your Mortgage

Asking the right questions and understanding the Personalities of Your Mortgage is an important part of the mortgage process as it will allow you to understand which mortgage product is right for you! An important aspect of a mortgage is its flexibility and terms, such as how the penalty is calculated if you break your mortgage. As one of the Top 3 Rated Mortgage Brokers in Vancouver, we would be more than happy to assist you with understanding every personality of your mortgage.

Keep in mind that statistically, 70% (7 out of 10 people) of mortgages are broken within the first 3 years. This could be due to a variety of reasons, including life events: matrimonial breakdown, job transfer, downsizing, consolidation of consumer debts, or refinancing to take advantage of lower interest rates. If a mortgage is broken before the contract term (usually 5 years) there will be a penalty that you will need to pay. This is yet another reason as to why you should get to know the Personalities of Your Mortgage.

A variable-rate mortgage (one that fluctuates with the bank of Canada) depending on the lender, usually incurs a 3-month interest penalty. A fixed-rate mortgage (a set rate that is usually higher than a variable rate mortgage) incurs a penalty of the interest accumulated for the remainder of the term. For example, if you decide to sell your house in year 2 of the 5-year term, you will have to pay 3 years of interest to get out of the mortgage – which may be very costly! Depending on the Lender, you may not be able to break your mortgage at all! The terms surrounding the penalty are crucial to know before you commit to a specific mortgage.

Personalities of Your Mortgage- Prepayment privileges:

This means how much extra you can put toward your mortgage principal, both monthly and annually. Make sure to consider the minimum and maximum payment allowed. Depending on the lender, the payment amount might have specific parameters. In other words, the payment amount might be specified such as a minimum payment of $1000.00 monthly, or a maximum payment of 20% annually. If there is no flexibility in the mortgage product you may not be able to make any extra payments.

Personalities of Your Mortgage- Portable Mortgage:

As a family’s needs grow one may need to sell their existing property to buy another and it may be a good idea to port the existing mortgage to the new property. If portability is an option, you need to make sure you understand the restrictions tied to the portability of the mortgage product you are looking at. Depending on the lender there could be a time restriction such as having to sell your present home AND buy your new home within 30 days. Never be afraid to reach out and ask questions regarding the Personalities of Your Mortgage.

Personalities of Your Mortgage- Blend & Extend:

Another important question is that if you can port your mortgage, can you add further money to purchase your next property? This is known as BLEND AND EXTEND. This takes your present mortgage and its rate and adds new funds to the existing mortgage with the current rates to purchase the new home. It is a little more complicated but certainly can be done. The challenge with BLEND AND EXTEND is that your mortgage renewal dates can land on significantly different timelines and when it comes to selling and ending your mortgage there could be significant penalties to break if it is not set up wisely.

There are many Personalities of Your Mortgage, an important one is if it can be assumed which can make a property more desirable to a buyer. If interest rates have increased since you’ve bought the property it can be very advantageous for the buyer to purchase your property with an assumable mortgage. An assumable mortgage is transferred with no change in its terms. The buyer assumes all responsibility for repayment.

But be careful! The original lender needs to agree to this transfer and the buyer may be charged an assumption fee.

Now, to simplify a mortgage term you hear often, let’s talk about Amortization. This means the length of the mortgage if you were to pay it off with the present terms of the current mortgage contract. For instance, if you have a mortgage that is a 5-year term at a specific interest rate, the amortization is the amount of time it would take to pay off the mortgage using the specific payment outlined within the current contract.

If you have less than 20% down payment (or equity) your amortization period is legislated to 25 years. There is no amortization flexibility if you have less than 20% down payment (or equity). If you have more than 20% down payment (or equity) your amortization period can be extended to 30 years. The longer you amortize your mortgage, the smaller your payments are.

You will take that much longer to pay off your mortgage if you amortize for a longer period.

It is VERY important to get clear answers on what the terms of your mortgage are. It makes all the difference in future planning and can impact you in very significant ways. Of course, the rate is important. You don’t want to be paying more than you should be. But if the rate is too low, beware! If it is too good to be true, it probably is! There are likely some hidden costs that you don’t know about. Whether it is a penalty to break, restrictions on porting or assumptions, or even an administrative cost. Always ask questions and be sure to find out the “in’s and out’s“ and the Personalities of Your Mortgage.

At GLM Mortgage Group, we know what questions to ask. We have relationships with the lenders that you know about and the lenders you don’t. We would be pleased to educate you on the financial options available to you regarding the Personalities of Your Mortgage.  Call us anytime for a FREE consultation on the mortgage products available to you.

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