Category Archives: Mortgage Questions Answered

What’s a Mortgage Deposit? Only Half of Canadians Know!

While many Canadians have a good understanding of financial services terms, a recent Angus Reid survey revealed that only 51 percent of respondents were confident they knew what a mortgage deposit was, with 48 percent admitting they were “not very confident” or “not at all confident” they understood the term. #cbrmr

It’s easy to see why there’s some confusion over the definition, as homebuyers often use the terms “deposit” and “down payment” interchangeably. While they both refer to money put forward in the home buying process, here’s some clarification of each term:

A deposit is comprised of the initial funds the buyer submits during the offer process to secure or commit to a property they wish to purchase, as a gesture of trust and good faith to the seller. It’s typically made at the time the offer is made, or upon acceptance of the offer. There’s no typical amount for the deposit, although in a hot housing market, an offer with a higher deposit could be more attractive to the seller.

If the seller accepts the offer, the deposit will typically be kept in a trust account — usually by the seller’s brokerage — until it becomes payable.

A down payment is the money the buyer pays to the seller to be eligible for financing once the offer is accepted. It’s a lump sum that’s paid out of the buyer’s pocket, not financed through a mortgage. When the time comes to close on the home, the deposit will go toward the down payment and will be credited toward the home’s purchase price.

Are you planning to make a move this summer? Call TheMashTeam at 905 430-6655 for the latest market update!

Retirement Resolutions

Is 2018 the year you or someone you know intends to retire? If so, a big part of that plan will likely involve some serious decisions about long-term housing.

Retiring from a paying job typically means an adjustment in your income, so here are some important points to think through before you take that important step:

Are you anticipating that you’ll be included in the 15 percent of Canadian seniors who still have an outstanding mortgage on their homes? If so, you need to recognize exactly how much extra money you’ll need in retirement in order to cover your housing costs.

If retirement is on the horizon but not yet imminent, you’ll want to work with a financial planner and mortgage professional to see what you can do to reduce or eliminate your mortgage debt before you retire. Bumping up your monthly payments now, while you’re still waiting, will help the debt disappear quicker. If you can reference to a lower interest rate but keep your monthly payments the same, you’ll also be able to chip away at your principal faster.

Consider if you still need your current space or if a smaller home would make more sense. A smaller space typically results in lower home operating expenses and less work to keep the household humming.

Please call The Mash Team to discuss all your downsizing options, whether that means a smaller house, a condo, or some other, more practical housing alternative to your current house. #CBRMR

Know Your Options


Life has a habit of throwing unexpected twists at us when we least expect them. While none of us should live our lives in a constant state of worry, it’s important to know that, should financial troubles from the loss of a job or other unexpected situations strike, you can count on the advice of your mortgage broker to see you through it.

Life changes involving illness, change of work status or change of marital status can affect your ability to make your mortgage payments, so if you anticipate a change in any of these things please call to discuss your payment options as soon as possible.

If you have to default on a payment, lenders can sometimes grant you temporary payment relief and give you options for a repayment plan, depending on the situation. Mortgagors with a good payment record can often work out a temporary agreement that will allow them to make reduced payments for a specified period of time.

Remember, lenders do not want you to default on your mortgage any more than you do. It is in everyone’s best interest for you to demonstrate good financial discipline when times are good, so you have the best chance of full cooperation from your lender if you ever run into difficulty.

Please call me if you anticipate needing a “Plan B” for your loan obligations!

Clean Credit

PhotoPlanning on moving this year, or applying for a loan? You’ll want to check your credit report before contacting your lender. But what happens if, upon review of the document, you discover it contains information that will negatively impact your credit worthiness; what can you do to improve your standing in the eyes of creditors?

First, check your credit report for omissions and errors. If you notice any errors, write to your reporting agency, outlining the reasons for your disputes and requesting that they investigate your claims. Be sure to enclose copies of any supporting documentation. The credit bureau will investigate your claims by contacting your creditors to verify the information you’ve supplied.

As for negative entries in your report that are accurate, know that bankruptcies and other entries such as late payments will remain on your report for a number of years. For accounts that have previously been past due, but which you’ve since paid off and maintained — they might comply if they see you’ve been handling the account positively.

Be persistent with both the creditors and your credit bureau in finding the source of any incorrect information and getting it rectified. If a correction can’t be made, you can request that the credit bureau include a brief explanation of your version of events next to the entry in question. Make sure the reporting agency sends you an updated report to confirm all the changes.

The Halves Vs. The Have-Nots


Today’s rising rents have prompted many a renter to contemplate the prospect of buying a property and putting their rent money into a mortgage instead, but the high price of buying real estate is often impossible for the solo buyer. So what to do? Some homeowner hopefuls enter into buy-sharing arrangements, where they split the property purchase with a friend or family member.

Co-owning a home can make an otherwise impossible dream a reality, but you and your co-buyer have to be prepared to continuously communicate with each other on a number of different levels. Here are just a few points to start the conversation:

  • Is the home purchase being split 50/50, with all expenses divided evenly between the two of you?
  • Are just one, or both of you going live in the home, or is to be just an investment property?
  • Are you looking for a move-in-ready property, or a fixer-upper?
  • If you buy a property that needs work, is this something you will do yourselves or will you hire tradespeople? Do you have the skills, time and budget to renovate?

Your first priority should be to secure independent legal advice. While you and your buddy get along and share the same dreams now, never lose sight of the fact that buying a home together is a long-term business deal, subject to legal obligations and responsibilities. Once you confirm your co-ownership agreement and sign the necessary paperwork, then you’ll be ready to move forward!

Where Do Extra Payments Go?


If you were lucky enough to get a raise earlier this year, or found yourself in possession of a one-time lump sum, you may have asked to have that extra amount applied directly to your mortgage. If you have a relatively new mortgage, you may be wondering why the interest portion of your monthly mortgage payment is not noticeably declining by now.

The reason is that the interest portion of your payment is calculated on the outstanding balance of your mortgage which, especially in the early years, makes up a significant portion of your monthly payments. As your mortgage term progresses and your principal starts to shrink, the amount of money that goes directly towards the principal increases while the amount that goes toward the interest declines.

Any time you make extra payments, they go directly toward reducing your overall principal balance, and with that lower principal you’ll pay less in interest overall and shave years off your mortgage.

Please ask for an example, based on any extra amount you may be able to put toward your mortgage on either a one-time or a monthly basis, of how much time AND money you could save!

For More Information, Contact The Mash Team!

How will RBC’s mortgage rate hike impact the Canadian housing market?

canadian-home-winterPhoto: Maëlick/Flickr

Even if Canada’s other big banks follow RBC’s recent mortgage rate increases — which came into effect today — with similar hikes of their own, it won’t have a substantial effect on the housing market, says one economist.

“I would suggest [the impact] would be marginal at best,” says Brian DePratto, an economist with TD Bank, in an interview.

“We’re still talking about extremely, extremely low interest rates by any historic precedent,” he adds. “Whether it’s 10 or 15 basis points here or there, I don’t see this as having any kind of major impact.”

RBC’s hikes are across several mortgage types, including two, three, four, and five-year fixed-rate mortgages, the rates for which increased 10 basis points, as well as five-year variable mortgages, which rose 15 basis points.

A consumer with a five-year fixed-rate mortgage on a home costing $456,186 — the most recent average Canadian home price, according to the Canadian Real Estate Association — will end up paying about $23 per month more, or $276 annually, now, the Toronto Star reports, as a result of the new rate of 3.04 per cent for these mortgages.

In an emailed statement to BuzzBuzzHome News, Erica Nielsen, RBC’s vice president of home equity financing, listed the reasons for the bank’s adjustments.

“The changes we’ve made to our residential mortgage rates reflect a number of factors (beyond the bond yield) including changes in market conditions driving increased short term funding costs and long term / wholesale funding costs,” she wrote.

Mortgage rates generally follow Canadian bond yields, says DePratto, the TD economist. “You kind of build your bonds out of mortgages within the mortgage market, so ultimately those mortgages become bonds,” he says.

“So when that market moves, people who are building those products, they need to reflect pricing that’s in line with those market moves.”

But these lending-rate changes come at a time when bond yields are dropping. DePratto says a recent Canada Mortgage and Housing Corporation (CMHC) move is a major factor for some mortgage rates not reflecting lower bond yields.

“There’s always unique pricing issues, but I think one of the core things are the changes to CMHC rules around securitization — so additional fees for mortgages coming out of CMHC,” he says, referring to changes CMHC detailed last month alongside increasing the minimum down payments on some mortgages.

“That’s sort of being wrapped into that overall price in a sense.”

Interest rate and how it affects you


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How to spot a bad financial planner

How to spot a bad financial planner

After what seems like a long period of saving money, you decide to put it towards an investment. You approach your financial planner and propose the idea of investing in a property. The financial planner is hesitant and suggests that it’s not a good idea.

Should you find yourself in this scenario, it’s no reason to panic or put off your property investment dreams. A financial planner’s concern about direct property investment may have more to do with their lack of knowledge in this area, as opposed to the asset class itself, says Owen Davis, of DFG Property Services.

“It’s natural for experts to stick to what they know well and are comfortable with. Many of the more traditional financial planners aren’t licensed to say, ‘go buy that actual property’ so they’ve never really developed an understanding of direct property.”

“Direct property investment is now firmly in the mix for most financial planners when crafting investment strategies for their clients. Clients can purchase properties in their personal name or inside their Super.”

Owen says it’s best to interview more than one financial planner about the types of investment strategies they specialise in.

“Like any professional advice, always get a second opinion before making major decisions and ensure you understand what’s being recommended.”

So what sort of characteristics should a good financial planner have?

Well, a good test is to ask the financial planner ‘What’s your opinion on direct property investment and using my super to invest in it?

If you see any of these telltale signs, Davis says it’s best to move on to somebody else:

They look blank or seem vague.

This is an indication they are uncertain or inexperienced with direct property investment.

They dismiss the idea outright.

If there’s no explanation of why it’s a bad idea for you specifically, they may be doing what’s easy and comfortable for them, rather than what’s best for you.

They say it’s a great idea, without saying why.

This can be a sign of a planner who is too eager to please and isn’t taking into consideration your personal circumstances before allowing you to invest.

“A good financial planner is always focused on what’s right for your personal circumstances, and they will make a concerted effort to find out what those are before giving advice,” says Davis.

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