Mortgage

Whether you are buying your first home, trading up to a larger home, building your dream home, or even trading down once the kids are out on their own, a house is probably the single biggest investment you will ever make.
As almost everyone who is buying a home will need financing, they are also interested and often need guidance on what to look for in a mortgage and how they can pay the least amount of interest over the term of the mortgage. This site is designed to help answer some of your questions. To let you know how much you can afford to spend and what your payments will be, suggest ways to save thousands in interest over the life of the mortgage, and present the special programs that some borrowers could participate in and save from.

What is a mortgage?

A mortgage is a loan that uses a property as security to ensure that the debt is repaid. The borrower is referred to as the mortgagor, the lender as the mortgagee. The actual loan amount is referred to as the principal, and the mortgagor is expected to repay that principal, along with interest, over there payment period (amortization) of the mortgage.

A mortgage can be used for financing many different things, including:

• Purchasing or constructing a new home
• Purchasing an existing home
• Refinancing to consolidate debts
• Financing a renovation
• Financing the purchase of other investments
• Financing the purchase of investment property

Since a mortgage is a fully secured form of financing, the interest you pay is usually less than with most other types of financing. Many people use the equity in their homes to finance the purchase of investments. Using a Secured Line of Credit, or a fixed-rate mortgage, the interest costs are lower, and they can even write off those interest costs against their taxable incomes.

Mortgage Refinancing and Renewing

Refinancing is the process that pays the existing mortgage and/or any other legal claims against the property and sets-up a completely new mortgage(s). There are many reasons as to why you should consider refinancing your mortgage:

Consolidate debts:

If your monthly bills have gotten out of control, you might be able to refinance your home and pay them off. The advantage of doing this is to lower your total monthly payments. You should have a mortgage specialist review your situation and make a recommendation.

Refinance a First and Second Mortgage into a new First:

If you have two mortgages on the same property, you can combine them into a new first mortgage, as long as the total amount does not exceed 90% of the value of the property. If the new mortgage is over 75% of the value of the property, normal CMHC/GE Capital premiums and guidelines apply, and one thing to remember here is that only outstanding amounts can be combined – any discharge penalties and costs must be paid separately at closing (please note that we have cash-back programs to help with these penalties).

Mortgage Credit Rating

Your credit rating is a measure of your credit-worthiness or in other words, your record of borrowing and repayment. Without a credit rating, few institutions will lend you money. Governed by provincial laws, the credit bureau – the clearing-house of information on consumers’use of credit – provides a credit history, which is a list of facts about how you handle debt. This information is gathered from financial institutions, retailers and other lenders. Most of your credit information remains on your file for seven years. In addition to negative information, positive information is also reported on your file.

Here is how to build a good credit rating:

• Pay your bills promptly, especially credit cards.
• Borrow only what you need and what you can afford.
• Try to pay off loans on time and as quickly as possible.

Not only does it help your credit rating, you also save valuable interest costs.

Checking Your Credit Rating

As a consumer, it’s your right to know your credit rating. Credit can be denied based on inaccurate or insufficient information. You may want to check your file if you aren’t sure of your credit rating, if you are refused credit or if you plan to apply for a large amount of credit such as a mortgage. You can get a copy of your credit report through one of the many credit bureaus across Canada for free or for a nominal charge.

Here are some guidelines:

• Contact your local credit bureau, which you can find in the yellow pages.
• Call to find out how you can review your file. You’ll be asked to provide identification to ensure the confidentiality of your file. A written report may take two to three weeks.
• If you notice any errors and can offer written proof, your file will be changed immediately. If you can’t supply written proof, give the facts to the credit bureau, which will then investigate. If your facts are confirmed, your file will be updated.
• If you see an error but proof cannot be found, what happens next depends on where you live. Each province has its own legislation relating to credit bureaus. The information you are challenging may be taken off your file or a note may be added, saying the information is “in dispute”.
• If an error has been corrected, the credit bureau must notify members who have inquired about you during previous months (as required by provincial law).

Dealing with a Credit Crisis?

Chances are you have a credit problem if you:

• Can’t make your minimum monthly payments on your credit cards,
• Take cash advances for living expenses,
• Aren’t sure how much you owe and
• Never seem to be out of debt.

• Put away all of your credit cards.
• If you have several debts, consider consolidating them into one consumer loan. You’ll save on the interest rate alone, especially if your debt is from credit cards.
• If slow payments are affecting your credit rating, consider contacting your creditors to see if you can make alternative arrangements. Be honest with your creditors. Let them know you’re in difficulty and work with them to find the best way to meet your financial obligations.
• Try and figure out how you got into debt and stick to a plan to prevent it from happening again.
• Re-evaluate your spending habits and lifestyle.
• Seek the advice of a credit counselor if you can’t sort things out yourself. There are several not-for-profit credit counseling agencies across Canada. An experienced counselor will sit down with you to look at your situation, discuss your options and help you develop a course of action.
• When you begin to recover financially, consider keeping only one credit card. It will be easier to track your spending and you won’t have the collective credit limit to tempt you.