2 Jan

Is Your Mortgage Up For Renewal?

Mortgage Tips

Posted by: May Einarson

Mortgage Renewal Benefits.

Is your mortgage coming up for renewal? Do you know about all the incredible options renewing your mortgage can afford you? If not, we have all the details here on how to make your mortgage renewal work for you as we start to think about 2024.

Get a Better Rate

Are you aware that when you receive notice that your mortgage is coming up for renewal, this is the best time to shop around for a more favourable interest rate? At renewal time, it is easy to shop around or switch lenders for a preferable interest rate as it doesn’t break your mortgage. With interest rates expected to come down as we move into the New Year, taking some time to reach out to me and shopping the market could help save you money!

Consolidate Debt

Renewal time is also a great time to take a look at your existing debt and determine whether or not you want to consolidate it onto your mortgage. For some, this means consolidating your holiday credit card debt into your mortgage, for others it could be car loans, education, etc. Regardless of the type of debt, consolidating into your mortgage allows for one easy payment instead of juggling multiple loans. Plus, in most cases, the interest rate on your mortgage is less than you would be charged with credit card companies.

Start on that Reno

Do you have projects around the house you’ve been dying to get started on? Renewal time is a great opportunity for you to look at utilizing some of your home equity to help with home renovations so you can finally have that dream kitchen, updated bathroom, OR you can even utilize it to purchase a vacation property!

Change Your Mortgage Product

Are you not happy with your existing mortgage product? Perhaps you’re finding that your variable-rate or adjustable-rate mortgages are fluctuating too much and you want to lock in! Alternatively, maybe you want to switch to variable as interest rates start to level out. You can also utilize your renewal time to take advantage of a different payment or amortization schedule to help pay off your mortgage faster!

Change Your Lender

Not happy with your current lender? Perhaps a different bank has a lower rate or a mortgage product with terms that better suit your needs. A mortgage renewal is a great time to switch to a different bank or credit union to ensure that you are getting the value you want out of your mortgage if you are finding that your needs are not currently being met.

Regardless of how you feel about your current mortgage and what changes you may want to make, if your mortgage is coming up for renewal or is ready for renewal, please don’t hesitate to reach out to a DLC Mortgage Expert today! We’d be happy to discuss your situation and review any changes that would be beneficial for you to reach your goals; from shopping for new rates or utilizing that equity! Plus, we can help you find the best option for where you are at in your life now and help you to ensure future financial success.

 

Published by My Marketing Team

3 Oct

The Real Deal about Transfers and Switches.

Mortgage Tips

Posted by: May Einarson

The Real Deal about Transfers and Switches.

Most people who are thinking about a transfer or switch want to take advantage of a lower interest rate or to get a new mortgage product with terms that better suits their needs.

Up for Renewal?

If your mortgage is approaching renewal and you are considering a transfer or switch – great news! You won’t be charged a penalty. BUT you are still required to qualify at the current qualifying rate and need to consider potential costs around legal charges, appraisal fees and penalty fees (if applicable). In some cases, the lender will offer you the option to include these fees in your mortgage or even cover the costs for you.

Currently have a Collateral Charge Mortgage?

If you have a collateral charge mortgage (which secures your loan against collateral such as the property), these loans cannot be switched; they can only be registered or discharged. This means you would need to discharge the mortgage from your current lender (and pay any fees associated) before registering it with a new lender (and pay any fees associated).

Still locked into your Mortgage?

If you’re considering a transfer or switch in the middle of your mortgage term, you will likely incur a penalty for breaking that mortgage. Typically, transfers and switches are done to take advantage of a lower interest rate (and lower monthly payments), but you want to be confident that the penalty doesn’t outweigh the potential savings before moving ahead.

Things to consider for a transfer or switch:

  1. You may be required to pay fees associated with the transfer or switch, including possible admin and legal fees.
  2. You will need to requalify under the qualifying rate to show that you can carry the mortgage with the new lender.
  3. You will be required to submit documents that may include, but are not limited to, the following (depending on the lender):
  • Application and credit bureau
  • Verification of income and employment
  • Renewal or annual statement indicating mortgage number
  • Pre-Authorized Payment form accompanied by VOID cheque
  • Signed commitment
  • Confirmation of fire insurance is required
  • If LTV is above 80%, confirmation of valid CMHC, Sagen or Canada Guaranty insurance is required
  • Appraisal
  • Payout authorization form
  • Property tax bill

If your mortgage is currently up for renewal, consider reaching out to your DLC Mortgage Expert. Not only can they advise you of any penalties or fees that may be associated with your desired transfer or switch, but they also have the knowledge and ability to shop the market for you to find the best options to meet your needs. This extensive network of lender options allows brokers to ensure that you are not only getting the sharpest rate, but that the mortgage product and terms are suitable for you now – and in the future.

Created by My Marketing Team

11 Feb

Staying Out of the Penalty Box

General

Posted by: May Einarson

Published by DLC Marketing Team

February 1, 2022

Staying Out of the Penalty Box.

When it comes to mortgages, it is easy to focus on the rates and your current situation, but the reality is that life happens and when it does, rates won’t be the only thing that matters.

First and foremost, the most important thing to remember is that a mortgage is a contract. That means that there is a penalty involved if the contract is ever broken. This is something that every homeowner agrees to when you sign mortgage paperwork, but it can be easy to forget – until you’re paying the price.

why break your mortgage?

You’re probably wondering why you would ever break your mortgage contract? Well, you might be surprised to find out that 6 out of 10 mortgages in Canada are broken within 3 years and there are typically nine common reasons that this happens:

  • Sale and purchase of a new home
  • To utilize equity
  • To pay off debt
  • Cohabitation, marriage and/or children
  • Divorce or separation
  • Major life events (illness, unemployment, death of a partner)
  • Removing someone from title
  • To get a lower interest rate
  • To pay off the mortgage

It is always important to think ahead when signing a mortgage agreement, but not everything can be planned for. In that event, it is important to understand the next steps if you do indeed need to break your mortgage.

calculating penalties

Typically, the penalty for breaking a mortgage is calculated in two different ways. Lenders generally use an Interest Rate Differential calculation or the sum of three months interest to determine the penalty. You will typically be assessed the greater of the two penalties, unless your contract states otherwise.

INTEREST RATE DIFFERENTIAL (IRD)

In Canada there is no one-size-fits-all rule for how the Interest Rate Differential (IRD) is calculated and it can vary greatly from lender to lender. This is due to the various comparison rates that are used.

However, typically the IRD is based on the following:

  • The amount remaining on the loan
  • The difference between the original mortgage interest rate you signed at and the current interest rate a lender can charge today

In this case, these penalties vary greatly as they are based on the borrower’s specific mortgage and the specific rates on the agreement, and in the market today. However, let’s assume you have a balance of $200,000 on your mortgage, an annual interest rate of 6%, 36 months remaining in your 5-year term and the current rate is 4%. This would mean an IRD penalty of $12,000 if you break the contract.

Ideally, you will want to be aware of what your IRD penalty would be before you decide to break your mortgage as it is not always the most viable option.

THREE MONTHS DIFFERENCE

In some cases, the penalty for breaking your mortgage is simply equivalent to three months of interest. Using the same example as above – balance of $200,000 on your mortgage, an annual interest rate of 6% – then three months interest would be a $3,000 penalty. A variable-rate mortgage is typically accompanied by only the three-month interest penalty.

paying the penalty

When it comes to making the payment, some lenders may allow you to add this penalty to your new mortgage balance (meaning you would pay interest on it). You can also pay your penalty up front.

Whenever possible, if you can wait out your current mortgage term before making a change to your mortgage, it is the best way to avoid being stuck in the penalty box. If you cannot avoid a penalty, do note that, while only calculators can be great tools for estimates, it is best to call your lender or mortgage broker directly for the accurate number in the case of determining penalties.

If you are interested in finding out more, please contact me directly at mayeinarson@dominionlending.ca or call 250-240-1503.