B Lender Mortgage: What Are the Pros and Cons?

First, let’s understand the difference:

As mortgage professionals, we refer to the 3 major tiers of lending as: A lender mortgage, B lender mortgage or private lender mortgage. If this terminology sounds familiar it’s because, over time, these terms have become quite mainstream, even beyond industry professionals.

A lender mortgage: Refers to any mortgage funded through traditional lending sources (i.e. major banks or tier-A broker channel bank)

B lender mortgage: Refers to any mortgage funded through non-traditional banks/lending sources, but still governed by B-20 guidelines (i.e. Trust companies, tier 2 banks, monoline institutions & credit union)

Private lender mortgage: Refers to mortgages funded through sources not governed by B-20 (i.e. Mortgage Investment Corporation (MIC), numbered company/registered corporation or individual lenders)

Pros and Cons of a ‘B lender mortgage’:

Pros and cons can vary from client to client, so to keep things simple, we’ll limit the pros and cons of a B lender mortgage to 3 major points for each.

Pros:

  • A ‘B lender mortgage’ offers a clear solution for clients who need financing but do not qualify through traditional banks for reasons such as: nature of income, high debt servicing ratios, previous mortgage arrears, poor/blemished credit, past bankruptcies or consumer proposals, non-traditional down payment sources, etc.
  • A “B lender mortgage” is typically funded on 1 to 3 year terms (rather than 5 year terms) offering the borrower future flexibility to improve their circumstances and easily transition back to traditional lending sources without hefty penalties.
  • B lender mortgages are less stringent on qualification guidelines and allow much more leniency on: debt servicing ratios (thus allowing higher affordability), less than perfect credit scores, non-conforming sources of income (ex. Business for self, commission, bonus, part time, contract) and varying down payment sources.

Cons:

  • It’s no secret that B lender mortgages come with a higher price tag in 2 ways: Interest rate and closing costs.
  • B lender mortgages often require a property appraisal for all mortgage (regardless of purchase or refinance) whereas A lender mortgages do not (or at least do not 90% of the time). We wouldn’t refer to this explicitly as a con… but it is an added cost of closing.
  • A ‘B lender mortgage requires a minimum down payment of 20%. For refinances, this often isn’t a hurdle for borrowers. However, for purchases it can easily affect buyers drastically if the buyers planned only for the minimum down payment requirements of 5%, 10% or even 15%.

Since a B lender mortgage isn’t advertised as generically as your traditional bank mortgage, it will be hard to seek out the necessary information you need pertaining to rates, term/conditions and underwriting requirements.

We’ll get that information for you though. Call us today (905) 455-5005.

 

What is a Reverse Mortgage?

We hear the term and we hear it often, but many of us have a hard time understanding exactly what it is. What is a reverse mortgage?

What is a reverse mortgage? A reverse mortgage is a mortgage product available to home owners 55+ years of age (all applicants on title would need to fit this age bracket in order to qualify). There must be sufficient equity in the home and not all banks will offer this product. The reverse mortgage allows you to use the equity in your home with no payment obligations.

What is a reverse mortgage used for? The uses are really endless. A reverse mortgage allows qualified home owners to cash out a portion of their equity (the debt free portion of their home) to a maximum of 55% of the current home value.  The home value is determined by the bank by way of an appraisal or assessment. Typically, no payments are due on the reverse mortgage until sale of the home or transfer of the title at which point the accumulated interest payments on the reverse mortgage will be due as a lump sum. You can choose to receive the money in either a lump sum, or installments.

What is a reverse mortgage benefit? The biggest benefit of a reverse mortgage is that you can get money in hand while keeping ownership of your home. Selling your home should not be the only way to use the equity you’ve worked hard for. Getting a regular amortized mortgage requires a significant amount of income, income in which your OAS, GIS or CPP may not cover. How else would one pull out the equity from their home without depending on the help of family and friends?  No payments are required on this mortgage and the income generated by this reverse mortgage is not taxed nor does it affect the benefits you may currently be receiving.

What is a reverse mortgage disadvantage? One of the major disadvantages of a reverse mortgage is that unlike a regular amortized mortgage, a reverse mortgage will decrease your equity over time rather than increase it. The reason for this is because even though there are no regular payments due on your reverse mortgage, there is an interest rate associated with borrowing the money and the interest will accumulate over the course of time you have it thus becoming due on the sale or transfer of title. On a positive note, you’ll still continue to gain natural appreciation in your home. The costs and interest rate on a reverse mortgage can be expectedly higher than your typical mortgage as well and may include costs such as (appraisal, independent legal advice, application fee, etc.).

Things to keep in mind and things to ask your broker:

Keep in mind – There are other options to obtain equity from your home, some more affordable than others. You may not be able to pull out as much equity as a reverse mortgage is willing to offer, but it doesn’t hurt to try. Other ways of obtaining equity could be; line of credit or regular mortgage, downsizing by selling and purchasing a less expensive home, selling your home to a family member with the right of living there continuously, etc.

Don’t forget to ask us about – What are the final costs associated with obtaining a reverse mortgage? What happens if you move or die? What are the penalties to break the reverse mortgage at the time of selling? How long do you have to repay the reverse mortgage loan once breaking and selling?

We have much more information to share, so make sure to speak with us before making a decision. Contact us today to learn more.

How Real Families in the GTA Saved Money with a Mortgage Refinance in 2021

Lots of homeowners, like you, are searching for mortgage refinancing this year – which comes as no surprise given record low mortgage rates and record high home values! Depending on your current mortgage status, a mortgage refinance is likely to help you achieve your goals sooner than later. Here are a few real examples of mortgage refinances that helped borrowers just like you.

Scenario 1: In March 2021, we helped clients with a mortgage refinance to 80% of their home’s equity. This represented over $100,000 in equity take out. The additional funds were used as a deposit toward a new construction property in Cambridge expected to be completed towards the middle of 2022. This was a shorter-term strategy and allowed the clients to provide a deposit to the builder they otherwise would not have had available. The mortgage term was 1 year and will allow them to break prior to the closing of their new home completion. This refinance was less costly and more financially sound than a second mortgage. They also used some of the funds to clean up some minor credit card debt.

Scenario 2: In April 2021, we completed a mortgage refinance for clients who had $75,000 – $80,000 in unsecured debt (credit cards, retails cards, lines of credit, student loan). Their minimum monthly payments on all unsecured debt alone, was approximately $2000/month. All debt was cleared thanks to a mortgage refinance and the client’s credit is no longer suffering due to high utilization/late payments. Here’s the kicker – despite a now larger mortgage, the client’s cash flow increased by $1000/month and now they’re back on track for a better financial future. This was truly a win-win for them.

Scenario 3: Just this week (at the time of writing), we refinanced a couple out of a B lender and helped them achieve their goal of getting into a traditional bank with a much lower mortgage rate. We helped these clients with their financing in early 2019 and put them on a 2-year term with a B lender due to some credit issues at that time. We promised them that with their cooperation, we’d eventually get them out of a B lender – and we did. We spent the last 2 years helping guide them to credit recovery and they were extremely cooperative and appreciative of our advice/tips. As a result, they now had the good credit scores/history to be accepted by any creditor they want and are saving thousands on interest for the years to come.

 

With the ever-changing banking rules and regulations, and the most recent proposal of mortgage stress test changes (expected to take effect mid 2021), selling your current home and upgrading to larger home may be more difficult than in any of the years prior. If that isn’t bad enough, factor in financial difficulties brought on by Covid-19. But there are some really amazing solutions for you! A mortgage refinance can be useful in many more ways than we’ve discussed here. Maybe you need to refinance from a traditional bank to an alternative lender… or maybe from an alternative lender to a traditional bank. It can be used to pull out equity, to renovate your home, to help family through tough times, or to simply get a better mortgage rate.  Surely, you’d like to know how a mortgage refinance can help you, right?  Call us at (905) 455-5005.

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Reverse Mortgages – Is it Right for You?

One misunderstood mortgage solution that exist in the market is a Reverse Mortgage. Some boldly claim (without deep knowledge in the subject matter), that a reverse mortgage is a scheme to take your home away from you. And if that were true, the government would have stepped in long ago, as the institutions offering reverse mortgages are heavily regulated by government authorities (OSFI). We believe that many people are set to believe this because unlike a typical mortgage, whereby your principal is reduced over time, a reverse mortgage increases in principal (hence in ‘reverse’). Now on the surface, that may not sit well with homeowners but let’s take a deeper look.

Firstly, reverse mortgages are catered for homeowners at the age of 55 and older, who have either paid off their home in full or have a relatively low outstanding mortgage balance relative to the market value of their home.

Now, it’s true that with a reverse mortgage, the balance of the mortgage grows over time, but that’s only because mortgage payments are voluntary by the homeowner (rather than mandatory like traditional mortgages). The bank will not require you to make monthly installments, and whatever interest accrues will just be added to your outstanding mortgage balance. However, if you choose to make monthly installments, the same will not occur. The obvious benefit of not making a payment is that you are effectively increasing your monthly cashflow (tax-free) so that you can finance other aspects of your lifestyle, whatever that might be.

“But I don’t want to lose my equity and reverse mortgages will do that, no?”

In a way yes but let’s take a closer look. If your home is “free and clear” (meaning no mortgages(s) owing), the only way to tap into that equity would be by refinancing your home with a traditional mortgage or by selling your home. Now if you were to refinance your home with a traditional mortgage, you would have used up a portion of your equity too, and are also now required to make regular payments to it. This would affect your monthly cashflow and so, if you are retired on fixed income, you might end up using the very funds you received to help make those payments. On the other hand, if you were to sell your home to maximize your cash out, you would certainly get a lump sum of cash, but of course, you now need somewhere to live. Perhaps you decide to rent, and if that were the case, then once again you’re back to making monthly payments to the landlord, among the other stresses and costs that come with moving. Similarly, if you were on fixed income, you might end up tapping into the proceeds from the sale and overtime, slowly deplete your equity through each mortgage transaction. In either scenario, you are still depleting your equity because you are slowly decreasing the cash that you would receive from the refinance or sale of your home at a later date.

 

Okay so I get it now, its not a bad option…but will they ever kick me out of my home?

With a reverse mortgage, the bank will NOT take your home from you. A reverse mortgage is paid out when; you decide to sell your home OR if you eventually pass. In fact, a major benefit of a reverse mortgage is that you get to continue to live in your home. For most homeowners, especially those that have lived in their homes for many years, the last thing they want to do is to leave. Homes tend to anchor important memories that have established over time in the hearts of homeowners and their loved ones. To most people, this is a priceless quality that they want to continue to hold on to and cherish.

Like always, we encourage you to give us a call to discuss any questions you may have or to simply learn more about Reverse Mortgages and their benefits – (905) 455-5005

 

 

Variable Mortgage Rates – Variable Mortgage Rates Canada

Variable mortgage rates are a hot topic and have been for several months now (as of writing – August 5th, 2020). The Bank of Canada key interest rate (policy rate) now sits at a level last seen in over a decade, since the most recent 3 key interest rate cuts took place between March 4th and March 27th (1 planned cut followed by 2 emergency cuts). Subsequently, the banks’ prime lending rate has dropped from 3.95% to 2.45%. What does this all mean?

As a result, those currently under variable mortgage rates are reaping the benefits immediately. Variable rates have dropped, and mortgages have become more affordable. Homeowners are finally seeing reductions in their monthly mortgage payment after 3 years of prime rate increases, followed by 18 months of a steady 3.95% prime lending rate.

For further context, the price of variable mortgage rates is directly tied to the banks’ prime lending rate. As you have likely noticed, variable rates are typically priced at a discount (ex. ‘prime minus 0.50%’). In other words, you can take the banks prime lending rate and subtract the contract discount given (ex. 0.50%) to determine the rate being offered at any given time. Historically speaking, variable mortgage rates are more favourable than fixed mortgage rates.

But currently, we are in a recession. Does that change anything?

We have tumbling markets and a bumpy recovery ahead of us. In fact, the worst, in terms of economic impact, has yet to come according to some analysts. All speculative of course. The question you likely need to know is: Are variable rate mortgages, or fixed rate mortgages, best for me right now?

First and foremost, variable mortgage rates are for more risk tolerant borrowers. Why? Simply put, uncertainty in rate fluctuations does exist. As your variable mortgage rates fluctuate with the prime lending rate, you can imagine that this rate choice is not for the faint of heart. However, rates tend to stay low when the economy is messy, so if you agree with analysts’ projections that we are heading into a much deeper recession, variable is way to go for the next 3-5 years.

Two pros if you are willing to give variable mortgage rates a shot:

  1. By default, variable mortgages yield the lower of the 2 possible penalty clauses (3 months interest rather than interest rate differential), thus making them more attractive
  2. Variable mortgages (through most banks) allow you to lock into current market fixed terms anytime throughout the duration of your term (good escape clause)

If you are considering variable mortgage rates over the traditional fixed terms, here are two recommendation we’ll make to help ensure you’re not swinging in the dark:

  1. Market watch: Keep a good eye on the market and keep up to date with economic outlooks whenever you can. Most times, if something volatile is happening, a skim through the latest financial headlines will clearly indicate this.
  2. Build a trusting relationship with your broker: That’s us! We have the resources to help. And while we can’t predict the future, we can provide industry insight and trend to help make decisions with more confidence

 

We have all the information you need of variable mortgage rates… or any rates for that matter, among a broad and deep knowledge of everything related to mortgage financing. Call us today at (905) 455-5005.

2020 Popular Search Term – Lowest Mortgage Rates Canada

According to trending mortgage search terms in Ontario (2020), Ontarians are looking for information on the lowest mortgage rates. Here is what you need to know to get the Lowest Mortgage Rates Canada:

To ensure that you can get the lowest mortgage rates Canada, you need to KNOW a few things and you need to DO a few things! This will require some effort and discipline on your part, but if you keep this top of mind, there’s no doubt that you’ll be able to get the lowest mortgage rates available at any given time.

  1. No credit slip ups! – Credit is a huge component to how mortgages are priced. To a degree, the higher the credit score, the lower the interest rate. If we could deem one variable to be more important than any other when trying to get the lowest mortgage rates, credit would be that variable because it’s the one you (as the borrower) have full control over. Credit scores are important, but it’s only half the battle folks. Since the bureau reports so much data over so many years, its important to make sure your history is clean (and for 18-24 months at the least). If you need tips on improving blemished credit, we can help with this.
  2. Down payment – Believe it or not, yes, this has some bearing when it comes to getting the lowest mortgage rates Canada. Most borrowers do not know this. Anything less than 20% or anything greater than 35% yields the lowest mortgage rates. Under these two scenarios, the mortgage is ‘insurable’ (default insurance that is) thus allowing the bank to price your mortgage rate even lower (usually with applicable promos). This scenario only applies to purchases of course.
  3. Term – The lowest mortgage rates are dependent on the length of term chosen. With most banks, 5-year terms are usually discounted more than 1-4 year years terms… while a few banks might favour their 1-4 year pricing. Explore all options between 1-7 years to really make an informed decision if the mortgage rate is your primary focus.
  4. Amortization – In most cases, the lowest mortgage rates will be applied to 25-year amortization or less. Anything greater than 25-year amortization (26 – 30 years) will yield a higher mortgage rate (or rate ‘premiums’ as the banks refer to)
  5. Rate type – Depending on the market at the time you’re seeking out your mortgage options, the lowest mortgage rate will be dependent on which type of rate you choose – fixed mortgage rate or variable mortgage rate. It’s rare to see both types on par with one another. If you favour the lowest rate over all other factors involved in the decision-making process, you will be more inclined to choose the type of rate that has the lowest offer at that time.
  6. Negotiation – This applies mostly to mortgage renewals, but negotiation comes into play when getting the lowest mortgage rate. Don’t just accept the first renewal offer … heckle them down, use leverage, use comparisons… even use threats (but keep it strictly business!)

 

Finally, how will you know when you’re getting the lowest mortgage rates Canada? When you feel content. It’s a simple as that. If you don’t feel confident in being able to do this on your own, that’s what we do daily! We’re always happy to help educate and provide the guidance necessary to get you the best! Call us now at (905) 455-5005.

Mortgage Brokers Near Me?

We get it, you’re looking for someone to help you with your mortgage needs and just like when searching for other goods & service providers, you want to find someone near you because…. well, it’s naturally ideal.

But the when it comes to “Mortgage Brokers near me”, you’d be surprised to learn that your proximity to a mortgage broker may not be necessary when looking for a suitable and experienced mortgage broker to serve your needs. This is especially true in our current times of social distancing and other lockdown measures that we are encouraged to take to protect of communities.

In fact, all Mortgage Brokers near me (including myself) are licensed by the Financial Services Regulatory Authority (FSRA) of Ontario, which means we’re all licensed to broker mortgages in all of Ontario. Also, since most of our work can be conducted remotely via telephone, email, web sessions, etc., the idea of finding mortgage brokers near me becomes less relevant to the fulfillment of your mortgage needs.

At CMS Canadian Mortgage Services, we have been breaking the barriers of distance for our clients by operating as a mobile brokerage since 2012. Our process has always allowed us to offer services that accommodate our clients in their respective lives. Whether we meet in person or through virtual means, our primary objective is to provide you with the right solutions to meet your needs. So, the next time you search mortgage brokers near me, remember that the closest broker to you may not be the one to get you the best possible solution.

Don’t be afraid to click on CMS Canadian Mortgage Services because even if we’re not the closest to you, we can help you just the same and possibly more efficiently! (905) 455-5005

Our service areas include (but not limited to):

Brampton, Mississauga, Etobicoke, Toronto, Milton, Caledon, (and most of the Greater Toronto Area)

Prime Rate Canada: Important Dates/Changes to Make Note Of

October 2018 to March 2020 – Prime Rate Canada: 3.95%

 

Change (March 4, 2020) – Bank of Canada cuts it’s key interest rate by 0.50% (half a percentage point) to 1.25% from 1.75% as an attempt to soften the economic impact of the Covid19 outbreak.

Result – Prime Rate Canada: Drops from 3.95% to 3.50%

 

 

Change (March 13, 2020) – As the pandemic worsens, Bank of Canada delivers an emergency rate cut by another 0.50% (half a percentage point) from 1.25% to 0.75%… a level last seen in August 2017.

Result – Prime Rate Canada: Drops from 3.45% to 2.95%

 

Change (March 27, 2020) – The economy takes a huge hit and panic kicks in as governments start taking stricter control over the Covid19 pandemic. Bank of Canada delivers another emergency rate cut, again by 0.50% (half a percentage point) from 0.75% to 0.25%… a low last seen in 2008-2009

Result – Prime Rate Canada: Drops from 2.95% to 2.45%

 

It’s no coincidence that the Key Interest Rate and Prime Rate Canada have dropped amid the pandemic. The pandemic poses great threats to the economy… something we’re all experiencing by this point in time.

But what does a drop on the Prime Rate Canada mean for you, and what questions should you be asking industry professionals if you have a mortgage or are looking to purchase? Should you choose a Fixed or Variable rate as a result of the new Mortgage Prime Rate?

Watch our video and give us a shout for more information. (905) 455-5005

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