Thursday 31 January 2013

Transitioning from Renter to Homeowner



Transitioning from renter to homeowner is one of the biggest decisions you’ll make throughout your lifetime. That’s why it’s essential to surround yourself with a team of experts – including both a mortgage and real estate professional – to walk you through the steps to home ownership, answer all of your questions and concerns, help you decide what kind of home you can afford and get you pre-approved for a mortgage.

With interest rates still hovering around “emergency” levels – low rates never before seen by your parents and even your grandparents – now is an ideal time for first-time homebuyers to embark upon homeownership.

Down payment
The main reason many renters feel they can’t afford to purchase a home has to do with saving for a down payment. But there are many solutions available today that can help first-time buyers with their down payments.

Many lenders will allow for a gifted or borrowed down payment. And of those lenders that will not provide this alternative, many offer cash-back options that can be used as a down payment.

Better yet, there are programs available from some financial institutions where they will offer a “free down payment” or a “flex down”. Of course, you will end up paying about 1% more in your interest rate, but the program will help you get in the homeownership door and start accumulating equity earlier. You must, however, stay with the original lender for the full initial five-year term or else you’ll have to pay the down payment back.

Last year, a $5,000 increase was made to the RRSP Home Buyers’ Plan, meaning first-time homebuyers can now withdraw up to $25,000 from their RRSPs for a down payment – tax- and interest-free.

And if you’re part of a couple making a home purchase together, you can each withdraw up to $25,000 from your RRSPs.

Educating and coaching
There’s an endless amount of information available to prospective homeowners – through the Internet, friends, family members and anyone willing to voice their opinion on a given subject. What you really need, therefore, is education and coaching as opposed to being bombarded with more information.

Speaking to a mortgage professional in order to obtain a pre-approval prior to setting out home shopping can help set your mind at ease, because many first-time buyers are overwhelmed by the financing and buying processes, and often don’t know what it truly costs to purchase a home. Real examples can go a long way in showing you what it costs to buy a home in your area versus what you’re currently paying in rent. For instance, if a renter is currently paying $800 per month, with that same payment (including taxes) they could afford to buy a $120,000 home. And assuming real estate values increase 2% per year over the next five years, the new homeowner would have accumulated $27,000 in equity in their home. If they continue renting, however, this $27,000 has generated equity in someone else’s home.
  

For inquiries as to how Dominion Lending Centres Griffin Financial Group can help assist you with your mortgage experience

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Call us at 705-745-3522
Toll Free at 866-488-3522



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Wednesday 30 January 2013

Mortgage Comparison Calculator

Determining which mortgage provides you with the best value is more than simply comparing monthly payments. Use this calculator to sort through the monthly payments, fees and other costs associated with getting a new mortgage. By comparing these important variables side by side, this calculator can help you pick the mortgage that works best for you.





Glossary of Terms

Mortgage amount: : Original or expected balance for your mortgage.

Mortgage amount: The total amount for this mortgage.

Interest rate: The interest rate on this mortgage.

Mortgage amortization: The number of years over which you will repay this mortgage. The most common amortization for mortgages are 20 years and 25 years.

Fees: Any fees that should be included in the APR calculation. These fees can vary by lender, but at a minimum usually includes prepaid interest.

Mortgage payment: Monthly principal and interest payment (PI) using semi-annual compounding.

Equivalent monthly payment: The sum of periodic payments for a year divided by 12 months.

Accelerated weekly and bi-weekly payments: Accelerated weekly and accelerated bi-weekly payment options are calculated by taking a monthly payment schedule and assuming only four weeks in a month. We calculate an accelerated weekly payment, for example, by taking your normal monthly payment and dividing it by four. Since you pay 52 weekly payments, by the end of a year you have paid the equivalent of one extra monthly payment. This additional amount accelerates your loan payoff by going directly against your loan's principal. The effect can save you thousands in interest and take years off of your mortgage.

The accelerated bi-weekly payment is calculated by dividing your monthly payment by two. You then make 26 bi-weekly payments. Just like the accelerated weekly payments you are in effect paying an additional monthly payment per year.

Annual percentage rate (APR): A standard calculation used by lenders. It is designed to help borrowers compare different loan options. For example, a loan with a lower stated interest rate may be a bad value if its fees are too high. Likewise, a loan with a higher stated rate with very low fees could be an exceptional value. APR calculations incorporate these fees into a single rate. You can then compare loans with different fees, rates or different amortizations. It is important to note that the APR calculation for mortgages can be less than the stated rate. This is due to the way interest is compounded in Canada. All mortgages calculated with this calculator use semi-annual compounding which produces a lower APR than a mortgage compounded more frequently such as monthly, or weekly.



For inquiries as to how Dominion Lending Centres Griffin Financial Group can help assist you with your mortgage experience

Visit our websites:

Call us at 705-745-3522
Toll Free at 866-488-3522



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Tuesday 29 January 2013

Maximizing Mortgage Prepayments




Canadians seeking a sure-fire investment return should look no further than their mortgage. Paying it down as quickly as you can will, in most cases, result in a stellar return on your investment.

Prepayment options are worth exploring because paying down even a small amount of principal (the true cost of the mortgage loan minus the interest) has huge benefits over the life of a mortgage.

Mortgages are front-loaded when it comes to interest meaning, in the early years, most of the money you pay goes toward paying the interest on the amount you borrow as opposed to the principal.

For instance, if you borrow 95% of your home’s value, you’re paying $3 of interest for every $1 of principal you pay. So, by paying an extra $1 of principal, that’s $3 less you’ll have to pay in interest, at least in the early stages of a mortgage.



Range of prepayment options
There are a variety of ways to make prepayments work to pay down your mortgage faster. We can discuss your specific needs, but following are some general rules.

Most lenders allow you to make a lump-sum payment of anywhere between 10% and 25% of the value of your mortgage per year. The lump-sum payment is based on either the original amount you borrowed or the amount currently outstanding. Since mortgages decrease with each payment, it’s best to negotiate a lump-sum payment option based on the original amount you borrow. That way, if you come into an inheritance, a big bonus or save a large sum of money, you can pay down the largest amount possible.



Another factor to consider is when you can make a lump-sum payment. Some mortgages allow prepayments during the year, while others permit it only on the anniversary date. Still others allow you to make prepayments on the day you make your regular payment.
If you can’t pay the maximum prepayment amount, it’s still worth your while to at least make some extra payment, even if it’s a few thousand dollars each year. 


 



That will still save you thousands of dollars in interest payments.
Another prepayment option involves taking advantage of flexible payments. Most lenders allow you to increase your regular payment up to a set maximum, such as 15%, while others allow you to double up your payments.




If, for instance, you have a $1,000 per month mortgage payment and increase it by 15% to $1,150, you could shave off as much as five-and-a-half years on a $200,000 mortgage.
You can also pay off your mortgage faster by moving to a different payment schedule. Instead of making monthly payments, make them biweekly or even weekly. Using an accelerated mortgage – where you make payments every two weeks as opposed to twice a month – you actually make one extra payment in the calendar year. By paying more and paying faster, you reduce your principal earlier, which lowers the amount of interest you pay.
Another option is to round up your mortgage payment from, say, $766 to an even figure such as $800, because any extra little bit goes toward the principal.
As always, if you have any questions about paying off your mortgage faster or about your mortgage in general, I’m here to help!

For inquiries as to how Dominion Lending Centres Griffin Financial Group can help assist you with your mortgage experience

Visit our websites:

Call us at 705-745-3522
Toll Free at 866-488-3522



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Monday 28 January 2013

Examining Revenue Property Options






Given the current national credit-crunched lending environment and the slowing real estate market – which has shifted to a buyers’ market – coupled with lower interest rates, now is an ideal time to invest in the purchase of revenue property.

After all, although the real estate market slowdown has seen prices drop and interest rates dip, rental income has not wavered – making now an optimal time to start building your revenue property portfolio or continue adding to your existing list of properties.

In order to take advantage of this opportunity, the key is to work with a mortgage broker, like Dave Griffin, who is an expert in this niche and can provide you with a wealth of knowledge and ongoing information that will help you make informed investment decisions and feel at ease throughout each purchase.

Your mortgage broker offers an invaluable service to real estate investors because, if the mortgages on your investment properties are not set up properly from the on-set of each venture, you will not be able to get future financing – a necessity for continuing to build your portfolio of revenue properties.

Your mortgage broker who is an expert in dealing with real estate investors know that a portfolio approach must be taken to ensure future financing for those looking to purchase revenue properties. Dave Griffin will ask you in detail about your specific property investment goals and develop a game plan for the next five or 10 years based on these goals.

Your mortgage broker can work with you in order to determine where you currently stand in terms of your real estate goals, where you need to be to meet those goals and the steps involved to get you there.

Keep in mind, however, that your plan should be revisited with your mortgage broker at least annually to ensure you’re still on track.

A team of Experts

A mortgage broker who specializes in helping clients acquire revenue property is also likely to partner with other investment property experts, including real estate agents, lawyers, accountants, insurance agents and contractors, to name a few, which enables your mortgage professional to provide valuable information to you through this knowledge network they have created.

By forming ties with other trusted experts, your mortgage broker is able to provide you with a one-stop shop for meeting all of your real estate investment needs.

Your mortgage broker can also help direct you to other organizations that will offer you further insight into your real estate investment needs. If you join groups such as the Real Estate Investment Network (REIN) or even a local Rental Owners and Managers Society (ROMS), for instance, you can receive a wealth of added knowledge catered to your revenue property needs.

So before you begin building your revenue property portfolio, ask Dave Griffin of Dominion Lending Centres Griffin Financial Group what he can do to cater to all your real estate investment needs.


For inquiries as to how Dominion Lending Centres Griffin Financial Group can help assist you with your revenue mortgage experience

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Call us at 705-745-3522
Toll Free at 866-488-3522



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Monday 14 January 2013

Does Breaking Your Mortgage Make Sense?




With mortgage rates still hovering at historic lows, chances are you’ve considered breaking your current mortgage and renewing now before rates begin to rise.
Perhaps you want to free up cash for such things as renovations, travel or putting towards your children’s education? Or maybe you want to pay down debt or pay your mortgage off faster?
If you’ve thought about breaking your mortgage and taking advantage of these historically low rates, feel free to give me a call or send me an email to discuss your options.
In some cases, the penalty can be quite substantial if you aren’t very far into your mortgage term, but we can determine if breaking your mortgage now will benefit you long term.
People often assume the penalty for breaking a mortgage amounts to three months’ interest payments so, when they crunch the numbers, it doesn’t seem so bad. In most cases, however, the penalty is the greater of three months’ interest or the interest rate differential (IRD).
The IRD is the difference between the interest rate on your mortgage contract and today’s rate, which is the rate at which the lender can relend the money. And with rates so low these days, the IRD tends to be greater than three months’ interest. Because this is a way for banks to recuperate any losses, for some people, breaking and renegotiating at a lower rate without careful planning can mean they come out no further ahead.
Keep in mind, however, that penalties vary from lender to lender and there are different penalties for different types of mortgages. In addition, the size of your down payment and whether you opted for a “cash back” mortgage can influence penalties.
While breaking a mortgage and paying penalties based on the IRD can result in a break-even proposition in the short term, if you look at the big picture, you’ll see that the true savings are long term – as we know that rates will be higher in the years to come. Your current goal is to secure a long-term rate commitment before it’s too late, and here lies the significant future savings.
As always, if you have questions about breaking your mortgage to secure a lower rate, or general mortgage questions, I’m here to help!





For inquiries as to how Dominion Lending Centres Griffin Financial Group can help assist you with your mortgage experience

Visit our websites:

Call us at 705-745-3522
Toll Free at 866-488-3522



Connect with us!