Understanding Construction Financing Mortgages in Canada: A Comprehensive Guide

Understanding Construction Financing Mortgages in Canada: A Comprehensive Guide

Construction financing mortgages are an essential tool for homeowners and investors looking to build new homes or renovate existing ones. In Canada, construction financing mortgages are becoming increasingly popular, allowing individuals to build their dream homes or develop real estate projects. In this blog, we will provide a comprehensive guide to construction financing mortgages in Canada, covering everything from eligibility criteria to the application process. 

1.What is a Construction Financing Mortgage?  

  • A construction financing mortgage is a type of mortgage that provides financing for the construction or renovation of a property. This type of mortgage is typically used by individuals or investors who are building a new home or developing a real estate project. 

2.Eligibility Criteria 

  • Credit Score: Applicants for construction financing mortgages must have a good credit score to qualify for the mortgage.  
  • Income: Lenders will assess the income and employment status of applicants to ensure they have the financial capacity to repay the loan.  
  • Down Payment: Applicants must be able to provide a significant down payment, typically ranging from 20-25% of the total project cost.  
  • Property Appraisal: Lenders will require a property appraisal to ensure the value of the property being built or renovated is adequate to secure the loan. 

3.Benefits  

  • Customization: Construction financing mortgages allow homeowners to build their dream homes or investors to develop real estate projects according to their specifications.  
  • Competitive Interest Rates: Construction financing mortgages typically have competitive interest rates, making them an attractive option for borrowers.  
  • Control: With construction financing mortgages, borrowers have greater control over the project and can ensure that it is built according to their standards and vision. 

4.How to Apply for a Construction Financing Mortgage 

  • Determine Project Budget: Before applying for a construction financing mortgage, it’s important to determine the total project cost and budget accordingly.  
  • Find a Lender: Research and compare lenders offering construction financing mortgages to find the best terms and rates for your circumstances.  
  • Gather Required Documents: To apply for a construction financing mortgage, you will need to provide proof of income, employment status, down payment, and property appraisal.  
  • Get Pre-Approved: Pre-approval for a construction financing mortgage can give you a better idea of how much you can afford and what your interest rate and monthly payments will be. 
  • Finalize the Application: Once you’ve found a suitable lender and property, you can finalize your construction financing mortgage application with the lender. 

5.Tips for Success 

  • Plan Ahead: Careful planning and budgeting can help ensure the success of your construction project and reduce the risk of cost overruns or delays.  
  • Work with Professionals: Seek the guidance of professionals such as architects, builders, and lawyers to ensure that your project is built to code and meets all legal requirements. 
  • Communicate with Your Lender: Keep your lender informed of any changes or issues that may arise during the construction process to avoid any misunderstandings or delays. 
  • Monitor Progress: Regularly monitor the progress of your construction project to ensure it is being built to your specifications and within budget. 

Contact Capital Mortgages today to learn more about refinancing and how we can help you save money on your mortgage. Our team of experienced mortgage professionals is here to help you navigate the process and to find the mortgage solution that best meets your needs. Whether you are looking to lower your monthly payments, pay off your mortgage faster, or access equity in your home, we can help you explore your options and find the best mortgage solution for your unique situation. So, if you are thinking about refinancing your mortgage in Canada, don’t hesitate to contact us today! 

We here at Capital Mortgages in Ottawa look forward to assisting you with all your Ottawa mortgage needs. Contact us today by calling us at: 613-228-3888 or email us direct at: info@capitalmortgages.com

You can use these links to APPLY NOW or CONTACT US.

You can also click here.

The Pros and Cons of Refinancing Your Mortgage

The Pros and Cons of Refinancing Your Mortgage

Refinancing your mortgage can be a great way to save money on your monthly payments, pay off your mortgage faster, or access equity in your home. However, refinancing is not always the right choice for every borrower, and it’s important to carefully consider the pros and cons of refinancing before making a decision. 

Pros of Refinancing Your Mortgage

Here are some of the pros of refinancing your mortgage: 

1.Lower interest rate

One of the biggest advantages of refinancing your mortgage is the potential to lower your interest rate. By securing a lower interest rate, you can save money on your monthly mortgage payments and pay off your mortgage faster. A lower interest rate can also result in significant savings over the life of your mortgage. 

2.Shorter mortgage term

Another advantage of refinancing is the ability to switch to a shorter mortgage term. By opting for a shorter mortgage term, you can pay off your mortgage faster and save money on interest charges. However, it’s important to keep in mind that a shorter mortgage term may also result in higher monthly payments. 

3.Access equity in your home

Refinancing can also allow you to access equity in your home. If your home has appreciated in value since you first took out your mortgage, you may be able to refinance for a higher loan amount and use the extra funds for home renovations, debt consolidation, or other expenses. 

4.Change mortgage type

Refinancing can also give you the opportunity to change the type of mortgage you have. For example, you may be able to switch from a variable-rate mortgage to a fixed-rate mortgage, or vice versa. It’s important to carefully consider the pros and cons of different mortgage types before making a decision. 

Cons Refinancing Your Mortgage

Now, let’s take a look at some of the cons of refinancing your mortgage: 

1.Closing costs

One of the biggest drawbacks of refinancing is the cost. Refinancing typically involves paying closing costs, such as legal fees and land transfer taxes, which can add up to thousands of dollars. It’s important to carefully consider whether the savings from refinancing will outweigh the costs of closing. 

2.Longer break-even point

Another disadvantage of refinancing is the longer break-even point. The break-even point is the point at which the savings from refinancing outweigh the costs of closing. It can take several years for the savings from refinancing to offset the costs, so it’s important to carefully consider whether you will be in your home long enough to benefit from the refinance. 

3.Prepayment penalty

Some mortgages come with a prepayment penalty, which means that you will have to pay a fee if you pay off your mortgage early. If you are considering refinancing, it’s important to check whether your mortgage has a prepayment penalty and to factor this into your decision. 

4.Impact on credit score

Refinancing can also have an impact on your credit score. Applying for a new mortgage involves a credit check, which can temporarily lower your credit score. It’s important to understand how refinancing will affect your credit score and to take steps to maintain a strong credit score. 

Is Refinancing Your Mortgage the Right Choice?

In order to determine whether refinancing is the right choice for you, it’s important to carefully consider your financial situation and long-term goals. Here are a few questions to consider when deciding whether to refinance your mortgage: 

1.How long do you plan to stay in your home?

If you don’t plan on staying in your home for a long period of time, refinancing may not be the best choice. It can take several years for the savings from refinancing to offset the closing costs, so it’s important to ensure that you will be in your home long enough to benefit from the refinance. 

2.How much will you save with a lower interest rate?

A lower interest rate is one of the biggest advantages of refinancing, but it’s important to carefully consider how much you will save with a lower rate. Calculate the difference between your current interest rate and the new rate you are considering, and determine whether the savings will be significant enough to justify the closing costs. 

3.What are the terms of your current mortgage?

Before you consider refinancing, it’s important to understand the terms of your current mortgage. This includes the interest rate, mortgage term, and any prepayment penalties or fees. Understanding the terms of your current mortgage will help you determine whether refinancing is a good financial decision. 

4.What are the fees and closing costs associated with refinancing?

Refinancing can be costly, with closing costs and other fees adding up to thousands of dollars. It’s important to understand the fees and closing costs associated with refinancing and to determine whether the savings from refinancing will outweigh the costs. 

5.Do you have the financial resources to refinance?

Refinancing can be a financial commitment, and it’s important to have the financial resources to cover the closing costs and any other fees associated with the refinance. Consider factors such as your income, debts, and monthly expenses when determining whether you have the financial resources to refinance. 

6.Do you have a solid credit score?

A good credit score is important when it comes to securing a lower interest rate on your mortgage. If you have a strong credit score, you may be more likely to qualify for a lower rate and to save money on your mortgage through refinancing. If you have a lower credit score, it may be more difficult to qualify for a lower rate, and refinancing may not be as financially beneficial. 

 Conclusion

In conclusion, refinancing your mortgage can be a great way to save money on your monthly payments, pay off your mortgage faster, or access equity in your home. However, it’s important to carefully consider the pros and cons of refinancing before making a decision. Some things to consider include your long-term plans for your home, the potential savings with a lower interest rate, the terms of your current mortgage, the fees and closing costs associated with refinancing, your financial resources, and your credit score. 

If you are considering refinancing, it’s a good idea to consult with a mortgage broker or financial advisor to discuss your options and to determine whether refinancing is the right choice for you. A mortgage broker can help you compare rates and terms from different lenders, and can assist you in finding the mortgage solution that best meets your needs. They can also provide you with expert advice and guidance to help you make informed decisions. 

Contact Us Today

Contact Capital Mortgages today to learn more about refinancing and how we can help you save money on your mortgage. Our team of experienced mortgage professionals is here to help you navigate the process and to find the mortgage solution that best meets your needs. Whether you are looking to lower your monthly payments, pay off your mortgage faster, or access equity in your home, we can help you explore your options and find the best mortgage solution for your unique situation. So, if you are thinking about refinancing your mortgage in Canada, don’t hesitate to contact us today! 

 

We here at Capital Mortgages in Ottawa look forward to assisting you with all your Ottawa mortgage needs. Contact us today by calling us at: 613-228-3888 or email us direct at: info@capitalmortgages.com

You can use these links to APPLY NOW or CONTACT US.

You can also click here.

The Pros and Cons of Fixed vs. Variable Mortgage Rates

The Pros and Cons of Fixed vs. Variable Mortgage Rates

When it comes to choosing a mortgage, one of the first decisions you will need to make is whether to go with a fixed-rate mortgage or a variable-rate mortgage. Both types of mortgages have their own unique set of pros and cons, and it’s important to understand the differences in order to make an informed decision. Here is a breakdown of the pros and cons of fixed vs. variable mortgage rates.

Pros and Cons of Fixed vs. Variable Mortgage Rates

Pros of Fixed-Rate Mortgages

As the name suggests, a fixed-rate mortgage has an interest rate that remains fixed over the term of the loan. This means that the borrower will know exactly what their monthly payments will be for the duration of the mortgage. Some of the pros of a fixed-rate mortgage include:

  • Predictability: Because the interest rate remains fixed, the borrower knows exactly what their monthly payments will be and can budget accordingly. This can be especially beneficial for those who are on a fixed income or who have a strict budget.
  • Stability: A fixed-rate mortgage can provide stability and security, especially in times of economic uncertainty or when interest rates are volatile.
  • Potential for lower rates: Fixed-rate mortgages may offer lower interest rates compared to variable-rate mortgages, especially if the borrower is willing to commit to a longer term.

Cons of a fixed-rate mortgage include

  • Lack of flexibility: Because the interest rate remains fixed, the borrower is unable to take advantage of lower interest rates if they become available.
  • Potential for higher rates: Fixed-rate mortgages may offer higher interest rates compared to variable-rate mortgages, especially if the borrower is willing to commit to a shorter term.

Pros of Variable-Rate Mortgages

 A variable-rate mortgage, also known as a floating-rate or adjustable-rate mortgage, has an interest rate that can fluctuate over the term of the loan. The interest rate is typically tied to a benchmark such as the prime rate, and the lender has the right to adjust the rate based on changes in the benchmark. Some of the pros of a variable-rate mortgage include:

  • Potential for lower rates: If interest rates go down, the borrower may be able to take advantage of lower monthly payments with a variable-rate mortgage.
  • Flexibility: A variable-rate mortgage may offer more flexibility, as the borrower can choose to switch to a fixed-rate mortgage if interest rates become too volatile.

Cons of Variable-Rate Mortgages

  • Lack of predictability: Because the interest rate can fluctuate, the borrower may not know exactly what their monthly payments will be, which can make budgeting more challenging.
  • Potential for higher rates: If interest rates go up, the borrower may be faced with higher monthly payments with a variable-rate mortgage.
  • Risk of default: A variable-rate mortgage may be more risky, as the borrower could potentially default on their mortgage if the interest rate becomes too high.

It’s important to keep in mind that both fixed-rate and variable-rate mortgages come with their own set of risks and benefits. Choosing the right type of mortgage for your situation will depend on your individual financial needs and goals. If you are unsure which type of mortgage is best for you, consider seeking the advice of a mortgage broker or financial advisor. They can help you compare rates and terms from different lenders and find the mortgage solution that best meets your needs.

What to Choose?

When deciding between a fixed-rate and variable-rate mortgage, it’s important to consider your long-term financial goals and the stability of your income. If you are planning on staying in your home for a long time and have a stable income, a fixed-rate mortgage may be the right choice for you. This is because a fixed-rate mortgage provides predictability and stability, which can be beneficial for those who are on a fixed budget or who have a long-term financial plan.

On the other hand, if you are planning on staying in your home for a shorter period of time or if you have a variable income, a variable-rate mortgage may be a good option. This is because a variable-rate mortgage can offer lower interest rates and more flexibility, which can be beneficial for those who are looking to take advantage of lower rates or who may need to sell their home in the near future.

Conclusion

In conclusion, both fixed-rate and variable-rate mortgages have their own unique set of pros and cons. It’s important to consider your individual financial situation and needs when deciding which type of mortgage is right for you. If you are unsure which type of mortgage is best for you, consider seeking the advice of a mortgage broker or financial advisor. They can help you compare rates and terms from different lenders and find the mortgage solution that best meets your needs.

If you are considering a mortgage and are looking for guidance and support, contact Capital Mortgages today! Our team of experienced mortgage brokers can help you understand the differences between fixed and variable mortgage rates and find the best solution for your needs. Don’t miss out on the opportunity to make informed decisions about your home

 

We here at Capital Mortgages in Ottawa look forward to assisting you with all your Ottawa mortgage needs. Contact us today by calling us at: 613-228-3888 or email us direct at: info@capitalmortgages.com

You can use these links to APPLY NOW or CONTACT US.

You can also click here.

firm mortgage

Unlock Your Dream Home: Benefits of Acquiring a Firm Mortgage Approval

Unless you’re independently wealthy, buying a home will likely be the largest financial transaction of your life. It’s not surprising, then, that most mortgage applicants feel anxious about meeting lender criteria and qualifying for financing. But with the right information and strategy, even individuals with average credit can secure firm mortgage approval. Reduced interest rates, waived fees, and other incentives are standard features of firm mortgages. While these advantages aren’t available with every lender, they can substantially reduce the cost of borrowing. Firm mortgage terms also tend to have shorter repayment periods and lower monthly payments than typical loans. As a result, firm mortgages are almost always cheaper over the long term compared to variable rate loans. Whether you’re currently renting or hoping to buy in the near future, learning more about firm mortgages could lead to an improved financial outlook for your future home purchase.

What is a Firm Mortgage?

A firm mortgage is a type of financing that offers a specific rate and term. Unlike an adjustable rate mortgage (ARM), the interest rate and monthly payment on a firm mortgage won’t fluctuate over time based on the fluctuations of an external index. A firm mortgage is often used as a term to describe a loan that has been approved based on a borrower’s financial strength, not necessarily a specific type of loan. In other words, a homeowner with a firm mortgage might have a 30-year fixed rate mortgage loan, a 15-year fixed rate mortgage loan, or maybe even an ARM.

Why Should You Care About a Firm Mortgage?

Fixed-rate mortgages tend to be more stable than adjustable rate mortgages (ARMs), making it easier to forecast future home loan payments. ARMs can have high upfront fees, long application timeframes, and unsure future interest rates that make them a less desirable option. In addition to the convenience of knowing your monthly payment will remain the same for the life of your loan, a firm mortgage could qualify you for lower interest rates and reduced closing costs. If you’re in the market for a home loan, it could be the easiest path to securing firm mortgage approval.

What Are the Requirements?

Lenders may vary, but all reputable firms will conduct a credit check and review your current debt-to-income ratio (DTI). Your credit score may also be considered, but it’s not guaranteed that you’ll meet the minimum requirements for a firm mortgage. If your credit score and debt-to-income ratio are below average, you may still be able to secure approval by putting a down payment of at least 20 percent. Many lenders will also consider factors like your employment and length of residence in your area, so be sure to review your options carefully.

Strategies to Earn Approval

If your credit score is low or if you have high debt-to-income ratios, you may need to improve your financial standing before a mortgage lender will offer you a firm mortgage. Fortunately, there are a number of ways you can boost your credit standing and strengthen your application. Reduce Debt – The most obvious way to improve your debt-to-income ratio is to pay off as much debt as possible. Paying off high-interest credit cards and other unsecured debts will lower your debt-to-income ratio and improve your credit score. Getting a firm mortgage approval increases the likelihood that you’ll be approved for a higher loan amount, too. Increase Your Income – Another way to strengthen your application is to increase your income. If you’re working steadily, it’s possible to increase your income by applying for a promotion, getting a raise at your current job, or starting a side hustle.

Bottom Line

If you have average credit or have struggled to improve your credit score, you may be able to get approved for a firm mortgage. It is often a better choice anyway since it’s less risky than a variable rate mortgage. While it may take some time to improve your credit score, you can take steps now to improve your chances of getting approved for a firm mortgage. In most cases, lenders will also require a down payment of at least 20 percent to secure a firm mortgage.

We here at Capital Mortgages in Ottawa look forward to assisting you with all your Ottawa mortgage needs. Contact us today by calling us at: 613-228-3888 or email us direct at: info@capitalmortgages.com

You can use these links to APPLY NOW or CONTACT US.

You can also click here.

Capital Mortgages opened in January 1999 and has since serviced thousands of clients and arranged several billion dollars in mortgages in Ottawa area.

Tips For Listing Your Home In A Seller’s Market

It bears no need for repeating, but we’ll say it once again – Ottawa (and most of Canada) is experiencing the hottest ever real estate market in history. If you’re a property owner and are looking to move this year, there’s no better time to list your home and reap the rewards of your initial financial investment. It’s not uncommon to see homes selling for more than what is the asking price, due to the incredibly high demand we’ve been seeing. But that being said – it’s also not the rule.

Here are a few tips to set you on the right track when listing your home for sale:

1. Consider whether you have a new home to move into

This one may seem obvious, but considering how expensive prices have gotten, it’s worth having your next home lined up before deciding to sell yours. The goal is to make sure you have an option set in stone that meets your style, size and location specifications and that you won’t have to settle for a property that doesn’t meet these criteria if you don’t, due to current market pricing.

2. List your home just under market value

This is a strategy seemingly favoured by many realtors. While this strategy isn’t always necessary, it attracts more buyers and will likely spark a bidding war, for a lack of a better term, that will get you the offer you’d like – and fast!

3. Get ready to move quickly

Because of high demand and scarcity of properties for sale today, you might see buyers being willing to purchase your home in cash or with minimal financing. Be prepared for the process to move quickly and that you may close on your home’s sale in a very short period of time.

4. Manage your expectations

Just because it’s a seller’s market, it doesn’t mean that your home is automatically going to sell for more than the listing price. Many factors can influence your final sale price, including location, availability within your area or other homes in your neighborhood offering different features. Carefully evaluate each offer you receive, and don’t discount it immediately because it doesn’t meet your initial expectations.

 

If you are looking to purchase a new or secondary home this summer, please don’t hesitate to reach out to Capital Mortgages to get started on the pre-approval process and put your rate hold in place!

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Capital Mortgages opened in January 1999 and has since serviced thousands of clients and arranged several billion dollars in mortgages in Ottawa area.

The Benefit of Rate Holds

The term “rate hold” may be something you are familiar with if you have worked with us in the past. If not, it is a term that all prospective buyers should know!
 
A rate hold is offered by the majority of lenders to clients who are purchasing a new home and need a mortgage. The purpose of the rate hold is to secure the interest rate on your mortgage application for a certain time period. Often, these holds range from 90-120 days. Bear in mind, these are typically not provided for anyone refinancing their mortgage or looking to transfer it from one lender to another. Only those looking to purchase a home or establish a brand-new mortgage.
 
Once you have created an application with us, We can submit it to an available lender who is offering a rate hold on an interest rate you want to take advantage of – all without a property attached.
 
For an example of how a rate hold works, consider this. On day one you submit your application to a lender for a fixed interest rate of 2.64% for five-years. On day 60, that interest rate moves to 3.12%. As long as your mortgage closes in the next 60 days, you are protected and can keep your lower rate of 2.64%. Plus, if rates happen to trend downward, you can also take advantage of the lower interest rate.
 
This rate hold does not commit you to working with that particular lending institution, nor does it commit you to working with us. It also does not hurt your chances of receiving an approval down the road! All it does is protect the agreed upon interest rate for you while you shop the market, so you don’t have to worry about it increasing while you are hunting for your perfect home!
 
Once the 120 days expires, if you have not found that perfect home fit or want to take advantage of different interest rates, there is nothing stopping you from submitting another rate hold! It will just be subject to the current rates on the day of submission.
 
If you are looking to purchase a new or secondary home this summer, please don’t hesitate to reach out to Capital Mortgages to get started on the pre-approval process and put your rate hold in place!

 

Capital Mortgages opened in January 1999 and has since serviced thousands of clients and arranged several billion dollars in mortgages in Ottawa area.

Living In The City, Suburbs Or Countryside – Which Is Best For You?

As the time comes around for you to buy your first (or subsequent!) property, you’re likely looking at a few factors such as what kind of home you can afford, where you’d like to live and what the pros and cons are of the area you’ve considered. We meet so many city slickers who swear they would never consider moving to the suburbs, only to change their minds once they realize how much more space they’d get for their money and how nice it is to entertain friends in their backyards in the summertime.

Here are a few of the pros and cons when it comes to living in the city, suburbs or countryside.

Living in the city

Pros:

  • You can easily get by without owning a car and can opt for car sharing services when necessary
  • Likelihood of a quicker commute to work 
  • Excellent public transit
  • Lots of cultural attractions
  • Easy proximity to bars and restaurants
  • Consistent demand for city-based real estate means that you’ll build equity in your property

 

Cons:

  • You’ll get less space for the same price in comparison to suburban or rural areas
  • You might only be able to afford a condo instead of a full home
  • Nearly everything will be more expensive, from childcare to groceries
  • Higher property taxes
  • Less privacy and possible noise issues due to population density

 

Living in the suburbs

Pros:

  • More outdoor space (yards and gardens)
  • Higher proportion of households with children (if you have a similar lifestyle)
  • Good schools
  • More privacy yet still populated
  • Most amenities within a convenient driving distance
  • Lower housing costs and more space for your real estate dollar

 

Cons:

  • Longer commute to get into the city (if you work there)
  • Low walkability score
  • Will most likely need to own a car
  • Fewer arts and cultural attractions, entertainment options and dining venues

 

Living in the countryside

Pros:

  • Even lower housing costs and more space than the suburbs
  • Access to nature such as lakes, forests, walking paths and more
  • High air quality
  • Plenty of privacy

 

Cons:

  • Susceptibility to extreme weather (power outages, being snowed in)
  • Increased chances of a long commute to work, errands, entertainment and medical care
  • Less opportunities to socialize
  • Little to no public transport

 

Are you planning to buy a property soon and having trouble deciding which type of living suits you best? One of our mortgage brokers would be happy to discuss further with you and guide you towards the right choice. Call Capital Mortgages at 613-228-3888 today.

Capital Mortgages Inc is an independent brokerage in the Mortgage Centre Canada Network and one of Ontario’s leading real estate mortgage brokerages with offices in Ottawa and the valley.

10 Mortgage Terms Every First-Time Homebuyer Should Know

Buying your first home can be an overwhelming venture. If you are not financially-savvy, then terms such as ‘amortization period’ and ‘variable-rate mortgage’ may have you scratching your head in confusion. To help ease some of your worries, our expert team of brokers at Capital Mortgages have gathered together the top ten mortgage terms that every first-time homebuyer should know:

 

Amortization Period

The mortgage amortization period is the number of years it takes to repay the entire amount of the financing based on a set of fixed payments. Historically, the standard amortization period has been 25 years. However, shorter and, in some cases, longer time frames may be available depending on the amount of down payment you have available.

 

Mortgage Term

Not to be confused with the mortgage amortization period, the mortgage term describes the period of time your mortgage financing agreement covers. After the mortgage term has ended, you will have the choice to repay the remainder of the loan in full or renegotiate a new mortgage at current interest rates. The terms available are six months, or one, two, three, four, five, six, seven, and ten year terms, with the interest rates fixed for whichever length of term you choose.

 

Down Payment

When buying a home in Canada, a minimum down payment of 5 per cent of the purchase property value is required. In addition to the down payment, you must also be able to show that you have the capacity to cover other closing costs such as the legal fees and disbursements, appraisal fees and a survey certificate. At least 5 per cent of the down payment must be from your own cash resources and not a borrowed amount from a financial institution.

 

Principal

The principal describes the original amount borrowed in your mortgage loan, before interest. As you make regular mortgage payments, this number will decrease.

 

Gross Debt Service Ratio (GDS)

This is one of the mathematical calculations used by lenders to determine a borrower’s capacity to repay a mortgage. It takes into account the mortgage payments, property taxes, approximate heating costs, and a percentage of any condo maintenance fees, and this sum is then divided by the gross income of the applicants.  Maximum ratios based on your credit history range between 32 per cent and can go as high as 39 per cent.

 

Total Debt Service (TDS) Ratio

This is the other mathematical calculation used by lenders to determine a borrower’s capacity to repay a mortgage. It takes into account the mortgage payments, property taxes, approximate heating costs, and a percentage of any condo maintenance fees, and any other monthly obligations (i.e. personal loans, car payments, lines of credit, credit card debts, other mortgages, etc.) This sum is then divided by the gross income of the applicants. Ratios up to 40 per cent are acceptable.

 

Fixed Rate Mortgage

The interest rate for a fixed rate mortgage is locked in for the term of the mortgage. Payments are set in advance for the term, providing you with the security of knowing precisely how much your payments will be throughout the entire term. Fixed rate mortgages can be open (may be paid off at any time without breakage costs) or closed (breakage costs apply if paid off prior to maturity).

 

Variable Rate Mortgage

With a variable rate mortgage, mortgage payments and interest rates may fluctuate up and down during the term. Regarding variable rate mortgages with a fixed payment: if interest rates go down, more of the payment is applied to reduce the principal. If rates go up, more of the payment is applied to payment of interest. For variable rate mortgages with a variable payment: if interest rates go down, the payment goes down. If rates go up, the payment goes up. Variable rate mortgages may be open or closed. A variable rate mortgage provides you with the flexibility to take advantage of falling interest rates and to convert to a fixed rate mortgage at any time.

 

Conventional Mortgage

A mortgage up to 80 per cent of the purchase price or the value of the property. A mortgage exceeding 80 per cent is referred to as a “High-Ratio” mortgage and the lender will require insurance for that mortgage.

 

High-Ratio Mortgage

A mortgage that exceeds 80 per cent of the purchase price or appraised value of the property. This type of mortgage requires mortgage default insurance.

 

If you are still a little confused, or would prefer to talk to someone in person about securing your first mortgage, then do not hesitate to reach out to our team! With 20 years of experience in the mortgage business, we have the expert knowledge required to guide you effortlessly through getting your first mortgage and beyond.

 

The Difference Between Fixed and Variable Mortgage Rates

 

Do you know the difference between fixed-rate mortgages or variable (sometimes called adjustable-rate) mortgages? Each mortgage type is affected by different market conditions and each offers its own advantages or disadvantages.  One of the most important steps in financing your home is choosing which type of mortgage suits your individual situation best.

 

Fixed-Rate Mortgages

In Canada most mortgages are 5-year “fixed-rate” terms.  A fixed-rate mortgage has an interest rate that is “fixed” for the term of your mortgage.  It does not change. As a result, the mortgage payment will not vary and the amount of principle and interest paid is completely predictable.

The largest advantage of a fixed-rate mortgage is the protection from rising interest rates (since your rate is “fixed”). At the end of the term you would renew your mortgage at the rates that are in place at that time.  Like most homeowners, if you need to keep your payment within a budget this is the choice for you.

The potential drawback of a fixed-rate mortgage is that if interest rates decline you cannot easily take advantage of that.  It is also potentially more expensive to break this mortgage before your term matures.

 

Variable / Adjustable-Rate Mortgages

A variable or adjustable-rate mortgage is exactly what it says.  The interest will change (increase or decrease) based on market conditions.  Specifically, on what the Bank of Canada does with the Prime Lending Rate.  If they increase it your rate (and mortgage payment) will increase at the same time.  The same with a decrease.  Your mortgage payment in most cases does not remain the same.  The Bank of Canada meets eight times a year to determine this rate.

One of the biggest advantages to a variable rate mortgage is the potential interest cost savings.  Your interest rate is set based on a discount from the Banks Prime rate.  Today, the prime rate is 3.45%.  The average discount below that is .80% for a rate of 2.65%.  This is lower than fixed rates.  Because of the lower rate, your mortgage payment may be smaller.

However, the drawback of a variable rate mortgage is that if rates rise so does your payment and interest cost.  It is not predictable like a fixed rate mortgage is.  If you have a fixed budget, this may not be the product for you.

 

Your choice will depend on your own personal finances, current interest rates and market trends. If you need assistance in choosing which mortgage is right for you, please don’t hesitate to contact Capital Mortgages today.

 

Capital Mortgages specializes as a service-oriented brokerage that prides itself on integrity and maintaining a service level second to none in the industry.

What to do after a major storm damages your property

Are you wondering how to deal with a fallen tree that has damaged your home or property after a major storm? Here are some things to keep in mind:

Does Your Insurance Cover It?

Most home insurance coverage includes damage that results when your property is struck by flooding or a severe storm. It’s likely that you will be covered if a tree falls and damages any part of your house. If the insurance company finds that the tree was unhealthy or damaged before the storm struck, then you may not be covered. Moreover, if they could prove that the tree was weak and just about to fall, then it’s unlikely that you will be paid for compensation.

The Insurance Bureau of Canada recommends you check in with your insurance provider in getting the exact details of what’s included and excluded in your policy. If a tree falls on your property but doesn’t do damage, then it’s the homeowner’s responsibility to hire an arborist for the tree removal.

Wind Damage

It’s a good idea to do a quick inspection of the surrounding trees to check and see if they’re weak or about to fall. You also have the option to contact the city and have them carry out a tree inspection in your area. Remember to ask for permission from the municipality if you need to chop off branches from large-sized trees.

Neighbour’s Trees

For concerns regarding your neighbour’s trees and how it could fall and damage your property, it is best to call the city and discuss due to legality. Tree cutting companies may cut trees if they are found to be interfering with the power lines. If a tree falls and hurts an individual, you should immediately call emergency services.

The Aftermath Of A Storm

Once a storm has passed, it’s time to assess the damages. When you find that your house has been damaged by a tree, the first step is to determine the tree’s owner. If the tree is on city property, call and report it in. If it belongs to you or your neighbor, call an arborist to have it removed. Then call your insurance company and file a claim. Make sure to take photos and videos for visual evidence. Fallen trees that block the roads should be reported immediately. Trees that have fallen on power lines should be reported as well.

Renew your Mortgage with Ottawa Mortgage Broker: Capital Mortgages

These Numbers Are The Key To Understanding Your Finances

If you are interested in improving your financial well-being, it can be as easy as understanding some basic numbers. In fact, just a few sets of numbers are the key to understanding your finances today and in the future. Let’s take a closer look those numbers.

1. Net Worth

It’s simple to determine net worth. All you need to do is subtract debt from assets. For instance:

Assets

* Autos* Home* Home furnishings* Personal belongings* Savings account* Checking account* Investments (stocks, bonds, etc.)

Debts (Liabilities)

* Car loans* Home mortgage* Credit card debt* Student loans* Balance of any loans that remains unpaid

Once you discover net worth, it might be a negative number, and this is not good. To improve net worth you have two basic options:

* Increase assets* Lessen debts

2. Equity in the Home

Equity is one of the most important assets you can have. To determine equity, subtract the home’s current value (including appreciation and home improvements) from the mortgage balance. Here is an example. You owe $68,000 on a home and today it would sell for $145,000 (present market value). Subtract 68K from 145K and you get 77K. The home’s equity is an asset of $77,000. In some cases, you could have an “underwater mortgage” and this means you owe more than the property is worth.

To improve home equity, try these strategies:

* Upgrade the kitchen* Upgrade the bathrooms* Do your own improvement work to help increase greatly a home’s value.

3. Gross Earnings

If you receive a regular paycheck, gross income is the amount you’re paid before all payroll deductions. This is the number you must enter on your income tax forms each year. It is not the number to use when you make out a household budget. Instead, you will need to use another number.

4. Take Home Pay

This is also called net income and is the amount you end up with each payday. This is the amount you have to pay bills and all other expenses, and the figure you need for determining the household budget.

5. Monthly Expenses

Everything you must pay out each month is your total monthly expenses. It includes food, utilities, clothes, transportation, housing, and entertainment. This number is so important because you have direct control over personal spending, and it’s a good place to start when it comes to improving your financial picture.

6. Rate of Inflation

Inflation rates today have a huge effect on the future. You need to account for this number when you figure out a plan for the future and retirement. Remember, as inflation goes up, buying power goes down. The average inflation rate has been about three percent annually, but this can vary all the way from ten percent to almost zero.

When you plan for retirement, be sure to include an estimate of inflation over a period of years. Perhaps the best strategy is to overestimate, to ensure you’ll have enough for those golden years.

 

Pre-Qualified, Pre-Approved Mortages Ottawa, Ontario

Learn About Mortgage Penalties 6 Questions That Will Help You Avoid Them

The last thing you want to think about is any penalty you face if you have to break your mortgage. As many as seven out of ten borrowers with a 5-year fixed-rate loan find it necessary to make adjustments. Some people have to find a larger house while others face financial difficulties that force them to refinance. Regardless of the reason, a large number of homeowners might need to break their mortgage and may need to pay large financial penalties. If you are worried about mortgage penalties here are 6 questions that will help you avoid them and will give you something to consider.

In the financial world, this type of penalty is known as an Interest Rate Differential, or IRD. The penalty represents the amount borrowers are responsible for if they want to adjust their mortgages. Financial institutions used to intentionally make it difficult for borrowers to calculate penalties and many consumers were overwhelmed with the staggering cost. Regulations now require lenders to explain all penalty charges clearly in language that anyone can understand. They also have to post online tools that make it easy for users to calculate their penalties.

Despite improvements in the system, borrows may still have their costs affected by hidden factors. One example is if you received a discount when the lender approved the loan. The online calculator does not figure in the discount and its impact on your penalty. Here are some questions about penalties you should discuss with your Capital Mortgage broker.

Is my penalty based on discounted rates, bond yields or posted rates? Without this information, you have no idea what the bank bases your penalty on and will have no way to determine the cost.

If you remain my lender after I break the mortgage, are there any benefits for me. Will I be eligible for a penalty discount? Many financial institutions offer incentives to retain borrowers.

Do you use a nearest term or shorter-term rate to calculate the penalty’s comparison rate? A higher comparison rate will mean a lower IRD. Timing may also affect the penalty amount.

Is there a penalty for increasing my mortgage payment? You may want to pay off the debt sooner or make upgrades.

If I pay the penalty, is there an opt-out provision? Some borrowers are unable to opt out unless they sell the home.

How long are penalty quotes valid? This is good information to know if interest rates are decreasing.

Many people are interested in adjusting a mortgage. Contact our team at Capital Mortgages with any questions you have about this topic.

Pre-Qualified, Pre-Approved Mortages Ottawa, Ontario

What are the Causes of a Change in Mortgage Rates?

 

If you’re looking to buy a house in Ottawa, one thing that’s sure to be in your thoughts is the mortgage rate. Even more so, what impact it’s going to have on your monthly finances. Mortgage rates right now are about as good as they’re going to get, and you could be onto a real winner if you lock into them immediately. Even so, it’s vital to be able to plan for the future by understanding the factors that affect mortgage payments.

 

In Canada, there are several of these factors, which combine to produce an overall effect on rates. Just to give you an idea, here are some of the most important factors which have a bearing on Canadian mortgages:

 

 

 

* The state of the economy overall

* How well the Canadian housing markets are doing

* The Bank of Canada’s prime interest rates

* Bond rates set by the Canadian Government

* The current national inflation rate

* The unemployment figures across Canada

 

These are all individual factors, but together they can affect the rise in variable and fixed mortgage rates. How? Read on and find out!

 

1. Fixed Rates

 

This type of mortgage rate remains the same for the mortgage’s term – a length of time that is decided in advance. Because of this, you know the amount you pay will remain stable from year to year. The flip side of this is that you’ll have to pay a higher rate of interest. That means that the best time to pick a fixed-rate mortgage is when rates are at a low level.

 

The key factors affecting fixed mortgage rates are bond prices and yields. It works like this: when the price of a bond increases, its corresponding yield goes down. That means that a fixed mortgage rate will also fall. On the other hand, if the bond price decreases, its yield will go up, meaning that the fixed mortgage rate will increase as well.

 

2. Variable Rates

 

Unlike fixed rates, variable mortgage rates are dependent on the prime interest rate set by the Bank of Canada. In essence, these rates change each month, so the payment you’ll need to make will also change on a monthly basis. The downside of choosing this type of mortgage is the uncertainty about the overall payment, but because interest rates are generally lower than with a fixed-rate mortgage, many people prefer it .

 

The key factors affecting variable mortgage rates are alterations in the Bank of Canada prime rate or the overnight lending rate. For the most part, this is itself the result of the movement of short-term funds on a loan basis between one bank and another. When the prime rate goes up, so does the variable mortgage rate. The same applies in reverse: if the prime rate falls, the variable mortgage rate falls, too.

 

Experts right now forecast that mortgage rates will stay steady, and are unlikely to change by much in the next few months. For that reason, buying a home looks appealing at this time: low interest rates and attractive offers combine to provide good deals.

 

Pre-Qualified, Pre-Approved Mortages Ottawa, Ontario

Questions That Mortgage Brokers Get Asked Every Day

From our considerable experience dealing with clients every day, we have realized that while we deal with a vast amount of inquiries daily, there are about a dozen questions which are consistently asked by just about every other client. Here are some of the most common questions, as well as the right answer to each.

1. What is the lowest mortgage rate?

Many would be homeowners confuse a low interest rate with less interest payments. The truth however is that a low interest rate is only part of the formula used to determine how much interest you will end up paying. If you take a mortgage with a 0.1% lower interest, this will only end up saving you a few hundred dollars a year. A good mortgage strategy should promise you savings running into several thousand dollars a year on a typical mortgage.

2. When will interest rates go up?

If someone tells you they know exactly when interest rates in the market will go up or down, do not take them at their word. Not even the most economically savvy experts can predict market conditions with certainty over the short term. Admittedly, the prevailing view is that the weak global economy will certainly recover but this is likely to take some time. In short, interest rates will go up. It is all a matter of time.

3. How much mortgage do I qualify for?

There is no simple answer to the question of how much mortgage you qualify for. You should make the decision of how much mortgage you need by assessing your own financial situation. The rule of the thumb is a that in general mortgage lenders will approve a mortgage that is approximately five times the gross income of your family.

4. What is an ideal mortgage term?

This is all relative to your situation and that of your family. A mortgage term should take into consideration your budget expectations as well as personal financial profile. There are good reasons to take either a long-term or short-term mortgage but there is no one-size-fits-all mortgage term.

5. Isn’t it easier to just call my bank?

If you think of it, it is not in your bank’s interests when you go shopping around for a mortgage and comparing different plans. In the end, your bank is a mortgage supplier and not an educator. A mortgage broker on the other hand is a consumer just like you whom is better informed and more adept at assessing different deals.

6. How do Mortgage Brokers get paid?

As a rule, mortgage brokers earn their fees from the lender who finally provides your mortgage financing. There is the added benefit of the free mortgage information you get from the broker about the real estate market and more principles of the industry. It is a win-win arrangement for both you and the broker.

7. Will another lender pay my discharge penalties?

Many lenders are OK with paying or waiving your discharge penalty but the catch is that this can results in a higher mortgage rate. As a savvy borrower, you need to be informed and ask questions.

8. What do I do if my bank is calling me early about my renewal?

The major reason, actually the only reason, banks are eager for you to renew your mortgage early is so that you do not do more research and discover better terms elsewhere. This is when you need to pause and consider how financially effective your mortgage arrangement is.

Just keep in mind that at renewal time most lenders tend not to offer their best rates.

While this list of questions covers a few of the questions we receive from clients, it is not by any means all of them. You are welcome to email us with any questions you may have about your mortgage. You should have as much information as you need to make a sound financial decision when it comes to your mortgage.

 

At Capital Mortgages in Ottawa we strive to be your personal mortgage broker for life.

Why a home inspection is essential before buying

The purchase of one’s new home is often one of the largest investments made by
an individual during the lifetime. You want the purchase and the aftermath to be a
satisfactory experience. A wise action that should be taken before making the
home choice is to arrange for a home inspection. Not checking for defects can
cause costly and unpleasant surprises on closing and move-in day. Here are
some reasons why a home inspection is essential before buying.

The legal system has determined that two rules apply. In Canada, a seller
doesn’t have to point out defects that are visible to a prospective buyer. On the
other hand, the seller cannot make any effort to conceal obvious defects from
the buyer. To a prospective buyer, this conflict between the two side of this
issue can be confusing at best. It is particularly problematic if the buyer is
unfamiliar with the codes and regulation that apply in many locales.

When looking at a potential purchase, it is the buyer’s responsibility to perform
due diligence on the property before making an offer. The windows should open
and the artwork moved to check the walls behind. The rugs should be lifted and
any items on the counters should be moved to check for defects. Appliances
should work properly, electrical outlets should be live and the faucets
operational.

The list goes on and on. Many things which should be checked require
knowledge that a homebuyer would be unlikely to have. Even a contractor
brought in to look over the premises may be well qualified in one area such as
electrical wiring, but know nothing about roofing or foundations. For this reason,
a reliable and knowledgeable inspector is a must for protection against
extensive and costly problems with the property.

An inspector goes over every inch of the property. Compliance with health and
safety standards is checked and approved. Each of the results are shown to
potential buyers so that they are fully informed before the offer to purchase is
made.

When a buyer doesn’t see potential problems they can be costly. If the courts
determine that they should have seen the problems, there is an expensive
series of repairs or renovations that might be necessary. Conversely, if a legal
battle is settled in favor of the buyer, the seller may be responsible for extensive
damages and even criminal charges. These are some of the reasons why a
home inspection is essential before buying.

Just as your Capital Mortgage Broker for a referral of a Home Inspector in Ottawa. We would be glad to assist you.

At Capital Mortgages in Ottawa we strive to be your personal mortgage broker for life.

Vast majority now favour fixed-rate mortgages

While it looks like interest rates will remain low for some time, there has been a large swing from variable to fixed-rate mortgages over the past year, says a new report by the Canadian Association of Accredited Mortgage Professionals.

CAAMP’s annual report on the state of the residential mortgage market, released Monday, suggests that 79 per cent of the new mortgages taken out this year have been fixed-rate, 10 per cent have been variable, and 11 per cent are a combination.

That’s a significant shift from prior years, during which fixed-rate mortgages generally accounted for about two-thirds of the total, while variable or adjustable-rate mortgages were about one-quarter.

Canadians are likely locking in because of the very small difference between interest rates for variable-rate mortgages (which are in the neighbourhood of three per cent) and five-year fixed-rate mortgages (which are closer to 3.2 or 3.3 per cent, after discounts that the banks typically offer), the report says.

“The current spread of about one-quarter of a point is negligible compared to the average of 1.7 points during 2010 and 2011,” it says.

Meanwhile, the average mortgage interest rate for homeowners has fallen to 3.55 per cent, from 3.94 per cent a year ago. For homes bought this year, the average rate is 3.26 per cent.

The report, which is based in large part on an online survey of 2,018 Canadians by Maritz, also found that about six per cent of homeowners took equity out of their home in the past year. The average amount is estimated at $49,000, implying that $30-billion of equity has been taken out during the year.

But 87 per cent of Canadians have at least 25 per cent equity in their homes. Sixteen per cent of mortgage holders have increased their payments, 15 per cent have made lump sum payments, and 6 per cent have increased their payment frequency.