Mortgage Information

MORTGAGE OPTIONS:

Short Term Rates vs. Long Term Rates- Typically the shorter the term or guarantee of the rate, the lower the rate will be. But, this does not always happen, this is because it is dependent on the market place and economy. The up side of a variable rate is the strong potential for interest rate savings. The down side is the fact that you are accepting the interest rate risk without guarantee. If you are considering a variable rate mortgage you need to look at your own risk tolerance, and your cash flow available to deal with potential increased payment. Considering projections of rates and where we see interest rates heading can also be important in this decision.

Vendor Take Back Mortgage- If a buyer is having difficulty getting all the money to buy your home you could lend money to them. This type of mortgage is often used in a slower market and is an extremely complication process.

Portable Mortgages- This means taking your mortgage with you to your new home purchase without a penalty. 

Discharging you Mortgage – The majority of people pay of their mortgage from the proceeds from the sale of their home. If you have an open mortgage you can discharge your mortgage at any time without a penalty. If you have a closed mortgage you will have to pay a penalty. 

Buyer Mortgage Assumption – Only if your mortgage allows it, when a buyer purchases your home they can take over your mortgage. This is beneficial if your interest rate is lower than the current rates.

Bridge Financing - As the term implies, this “bridges the gap” between times when financing is needed. This is when there is a time lag between the sale of one property and the purchase of another, allowing you more flexibility. 

Bi-weekly and Weekly Payments- Most mortgages have the option to allow payments on a weekly or bi-weekly basis. This is beneficial for two main reasons. First, it can save you money as you can expect to pay off your mortgage about four years sooner. Secondly, you can simplify your budget by making the payment line up with when you are paid. 

Making Extra Payments- When you select mortgage companies, privilege payment options are something to look for. It is important that the privilege payment also be flexible to allow you to pay smaller payments on the mortgage and as often as you wish. 

Reducing the CMHC Fees on Your Purchase- When your mortgage is for more than 75% of the purchase price of a property, that mortgage must be insured by Canada Mortgage and Housing (CMHC) or GE Mortgage Insurance. The premium that is charged decreases as the down payment increases. If you put down 20%, you can avoid any additional insurance fee. 

Advantages of Bigger Down Payments- The larger the down payment, the lower the amount of interest you will pay over the life of your mortgage. Also, when you put at least 20% as a down payment on your purchase you can avoid the CMHC premium. 

Capital Gains Tax- You only have to pay capital gains tax if it was not your primary residence.