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What's the Advantage of Making Extra Mortgage Payments? The advantage of making extra mortgage payment seems rather straightforward – every payment that you make on your mortgage helps you cut down the term of your mortgage and save thousands of dollars on interest rates. Experts have calculated that just one extra payment a year can cut as much as five years off your mortgage. In other words, by adding a little bit extra cash against your mortgage each month, you will be able to pay off your principal faster and drastically reduce the amount of interest that you owe the lender in the future. For instance, if you have drawn a mortgage loan of $100,000 for a term of thirty years and the interest rate has been fixed at seven percent, you can save as much as $34,000 on interest for the period of your mortgage by adding as little as fifty-six dollars to your monthly payment. You have to bear in mind, however, that making extra monthly payments does not reduce the amount of your future payments; neither does it exempt you from late payment fees if you skip some payments. In conditions of stagnant real estate market with falling property prices and soaring interests, you have good reasons to try and pay your mortgage ahead of its term. On the other hand, the faster you pay off your mortgage loan, the less the credit risk you will be exposed to. Hence, paying off your mortgage ahead of schedule will have an entirely positive effect on your credit score. Having already discussed why it is a good idea to make extra payments against your mortgage, let us now focus on the “how to” aspect of this question. If you find it difficult to make extra cash each month which to put against your mortgage loan, you don’t need to worry: there are plenty of belt-tightening, money-saving tips that work just as well. First and foremost, you have to understand that a credit card is a false friend of those who want to pay off their mortgage earlier. It is rather obvious that you have to refrain from using your credit card as much as possible and when you do, you should use it wisely and responsibly. Use your credit card only in case of emergencies: paying medical bills or urgent home repairs count as opposed to front row tickets for the Super Bowl. Curing your depression through debt accumulationmay actually add more stress to your worries (and definitely to your pocket). In addition, paying off your mortgage earlier should be an inseparable part of your long-term strategy to get out of debt and live a stress-free life. In this line of thought, before attacking your largest loan, i.e. your mortgage, you may consider getting rid of other small debts such as car and aircraft leasing plans and consumer loans. Such a move will leave you with more free cash each month to put against your mortgage and repay it quicker. Remember that each dollar that you put against your mortgage today can save you thousands of dollars on accumulated interest in the long run. Centum Liberty Mortgages Corp. Sam Ansari, Principal Mortgage Broker Tel: 416-356-6310 Sam_Ansari@centum.ca How to Pay a 30 Year Mortgage in 10 Years: You may find it surprising that it is actually possible to cut the pay-off term of a thirty-year mortgage by one third or more. Moreover, it is possible to do this without any refinancing, higher monthly expenses or signing up for a debt consolidation program. On the other hand, homeowners have good reasons to desire an early payment of their mortgage loans – calculations show that by paying off a thirty-year mortgage in ten years or less, one can save close to quarter of a million dollars on interest rates. Keep reading if you are looking for advice on how to save a fortune on extra fees and bulky annual interest rates by paying off your mortgage well ahead of its term. Payment toward Outstanding Balance: The first steptowards the early repayment of your mortgage is to put extra funds against the balance as soon as you can. In other words, you can significantly lower your interest cost by putting more cash towards the principal. The Front-load Problem: However, the sadtruth is that an insignificant amount of what you pay off during the first year of your mortgage goes towards the principal. This is due to a negative phenomenon called front loaded interest, which can reach the breath-taking 500 percent over the first year mortgage. In other words, if you pay off $10,000 in the first year, slightly over 1,000 dollars will go against the principal and the rest will go in the bank’s pocket. It is typical for most mortgage lendersin the United States and Canada to front-load the interest over the first years of their customers’ mortgages. You need to know that the front-loading problem will deepen if you sell or refinance your mortgage over the first three or five years. Reduce Debt: In order to be able to put more money against the principal, you have to reduce your other debts. In this line of reasoning, you should try to use your credit cards sparingly and refrain from shopping sprees and reckless spending. Think of the many occasions when you’ve purchased a luxury item and tried to return it a couple of days later. Each time you are about to buy something that is beyond your means (you obviously can’t afford it since you use credit), think of emergency situations where you really need the money. Switch to Saving Mode: If you have a bulkymortgage to pay off, you’d better switch your mind to saving mode. You already have a huge reasoning, you should try to use your loan to service - visiting Paris is not a wise investment of your income. By cutting down unnecessary expenses you will be able to apply the saved money to the payment of your mortgage. It will be even better, if you look around for a better-paid job, even though that may sound too optimistic in times of economic crisis, or find some other way to increase your monthly incomes. You have one of two options or both – save and earn more. Centum Liberty Mortgages Corp. Sam Ansari, Principal Mortgage Broker Tel: 416-356-6310 Sam_Ansari@centum.ca What are Short Term Loans: Short tem loans are lending instruments offered by various crediting institutions for a set period of time, e.g. 60 days. The maturity date of the loan can be between 60 and 120 days starting from the date the loan was granted. However, short term loans given out by banks may have a term between 1 and 3 years, with the term depending on the borrowed amount and the lending institution. Many loan providers require collateral but again, this depends on the borrowed amount. If the loan is smaller, the bank is less likely to request collateral. The application process may take some time as the creditor will look at the borrower’s credit history, making sure that he or she has the ability to repay the loan. If an individual applies, the lending institution will normally require pay stubs; with businesses, the cash flow history will be reviewed. In both cases, the credit core (the business credit score or the personal one) may be factored in deciding whether to grant the loan. Business loans come with specific payment plans. For example, if a business owner borrows to even out his or her cash flow, the lending institution will expect to have the amount repaid as soon as the business has received the money from customers. When short term loans are borrowed for inventory purposes, the debt should be repaid in full once one sells the inventory. In general short term loans are suited for both, existing and new business enterprises. When creditors deal with new businesses, they will prefer to grant short term loans because these are less risky, compared to long term ones. When applying for a secured loan, the creditor will require collateral such as equipment, property, or accounts receivable. If the business entity disposes of substantial assets and can use them to secure the credit, there is a good chance it gets a better term and interest rates. However, it should be noted that short term loans normally come with higher interest rates. Being usually fixed, these will not rise. Also, given the fact that the loan is to be paid off quickly, one will spend less on interest in contrast to long term loans. Some people confuse business lines of credit with short term loans. In the first case, one pays off the balance and may borrow more when required. With the second instrument, the borrower receives a fixed amount of money, in the form of a lump sum. One cannot borrow more once the full amount is paid back. The demand loan is a type of short term loan with maturity of up to six months. This borrowing instrument is atypical because it doesn’t have a fixed repayment date and carries a floating interest that will vary depending on the prime rate. The credit provider can call the loan for repayment at any time. In view of the credit history of the borrower, the demand loan can be secured or unsecured. Centum Liberty Mortgages Corp. Sam Ansari, Principal Mortgage Broker Tel: 416-356-6310 Sam_Ansari@centum.ca What is Line of Credit: The line of creditrepresents an arrangement between a customer and a crediting institution, typically a bank, establishing a maximum loan balance to be maintained by the borrower. With this instrument, the clients are permitted to draw down at any point of time, but they should not exceed the maximum, specified in the agreement. Lines of credit come with some advantages over regular loans, with the interest rate not being charged if the credit line is left unused. Moreover, one can borrow when money is needed. Depending on the requirements of the crediting institution, the credit line may be provided in the form of demand loan. In this case, if there is an outstanding balance, it has to be repaid immediately at the request of the financial institution. Credit lines are basically sources of credit extended to individuals, business enterprises, and government and non-government institutions. Lines of credit can be of several types: export packing credit, demand loan, overdraft protection, purchase of commercial bills, discounting, term loan, and others. In basic terms, they represent bank accounts that are to be tapped readily at the discretion of the borrower. He or she pays interest only on the amounts withdrawn. In addition, the credit line can be unsecured or secured by collateral. Very often, lines of credit are granted to creditworthy clients who experience liquidity problems. In this case, the borrowing instrument is referred to as a personal line of credit. This term is also employed to denote the customer’s credit limit which is the maximum allowed credit the customer can borrow. The cash credit represents a form of credit with a short term, extended to a company. Banks provide such type of financing only against collateral required to secure the borrowing. With the security being provided, the recipient of the loan is permitted to draw continuously from the bank. However, there is a set limit specified by the lender. Home equity lines of credit are types of revolving credit where one’s home guarantees the loan. With real estate being among the most valuable assets, the majority of home owners will request a home credit line only for big items such as emergency medical bills, home improvements, college education, etc. A home equity line of credit is not and should not be used to cover one’s day-to-day expenses. With this type of borrowing instrument, one is approved for a specified amount. Most creditors will set the line’s credit limit by taking a certain percentage (for example, 75 percent) of the property’s appraised value and deduct from it the outstanding balance on the existing mortgage. On determining one’s credit limit, the creditor will take into account one’s capacity to repay the borrowed amount (both, interest and principal). The lender will look at one’s income, repayment history, amount of debt, and financial obligations to different lenders. When the client’s application is approved, the client borrows at his or her convenience. Normally, one uses special checks to draw on the credit line. Other means can be used under some plans, and there may be a requirement to borrow a minimum amount whenever drawing on the line. Centum Liberty Mortgages Corp. Sam Ansari, Principal Mortgage Broker Tel: 416-356-6310 Sam_Ansari@centum.ca Personal Loans Do you need a personal loan? There are two types of personal loans -securedand unsecured personal loans. The most popular personal loans are those that are short-term and unsecured. These loans are quick and easy to obtain. Why would you want to take out a short-termpersonal loan? These loans are best used for emergency funds. If you reallyneed cashunexpectedly and do not have any money saved or extra money, you may need a personal loan. These loans can be used to cover a small and unexpected expense. Perhaps your car needs repairs or your furnace stopped running. Short-term andunsecured personal loansare usually very easy to obtain. They will not be for a very high amount of money. In some cases you can secure one of these loans without the lender even running acredit check. They may just require that you have an income or earn at least $1000 or more each month. Your paycheck or other form of income will serve as the security for the loan. Personal loans used to be very limited. Now you can apply for apersonal loanat most banks, credit institutions and other financial institutions. The Internet has made personal loans even easier toobtain. Theseloans can be as close as the touch of your fingertips. Before applying for a loan, you may want to check your credit. Get yourcredit reportto make sure that there are no errors and so that you can see what the lender is going to see. Do not be discouraged if your credit is not the best. Even if you havebad creditor not credit at all, you can still get apersonal loan. You will find that most lending institutions have similar policies and requirements for loans. Even so you will want to do research and compare your options. By doing so, you can find the best loan and best offer for your needs. Short-term and unsecured personal loans are usually very easy to obtain. They will not be for a very high amount of money. In some cases you can secure one of these loans without the lender even running a credit check. They may just require that you have an income or earn at least $1000 or more each month. Your paycheck or other form of income will serve as the security for the loan. Personal loans used to be very limited. Now you can apply for a personal loan at most banks, credit institutions and other financial institutions. The Internet has made personal loans even easier to obtain. These loans can be as close as the touch of your fingertips. Before applying for a loan, you may want to check your credit. Get your credit report to make sure that there are no errors and so that you can see what the lender is going to see. Do not be discouraged if your credit is not the best. Even if you have bad credit or not credit at all, you can still get a personal loan. You will find that most lending institutions have similar policies and requirements for loans. Even so you will want to do research and compare your options. By doing so, you can find the best loan and best offer for your needs. Unsecured loan Unsecured loanor signature loan is a borrowing that doesn’t have collateral. Most banking and financial institutions in Canada offer unsecured loans. Unlike secured loans which are granted against security (car or real estate), banks extend unsecured loans on the basis of one’s income and credit rating. Persons with steady incomes and good credit ratings have higher chances of being approved for unsecured loans. Because these loans don’t comewith collateral, they are granted at higher interest rates to compensate for the greater risks. Unsecured loans may be granted for various purposes such as home renovation or vacation. In addition, Canadian banks offer lines of credit that allow business entities to get financing which is not backed by collateral. Funding may be obtained for the purchase of office space or equipment, company car, etc. Bank of Montreal offers various options for borrowing among which personal or unsecured loans. While no collateral is required, potential borrowers have to prove a solid history of timely repayments on previous loans. The minimum amount for unsecured loans is $5,500 and the repayment term is typically between one and five years, although it can be expanded in some cases. Interest rates are determined on the basis of one’s credit history and may be variable or fixed. Thebankalso offers insurance policy on the loan in case that personal issues make the loan repayment difficult. Toronto Dominion Bank also grants personal loans, with conditions based on income, employment history, overtime, bonuses, and income coming from other sources, among others. In addition, the bank examines the borrowers’ expenses, rent,mortgage payment, and credit history. Canadian Imperial Bank of Commerce offers unsecured loans for home renovationsand purchase of furniture, vacations, and investments, among others. Borrowers have the option to pay a part of the debt or the full amount at any time. As a further benefit, the bank reduces the interest rate for borrowers who make frequent payments. Repayments may be done monthly, semi-monthly, bi-weekly or weekly so that they coincide with one’s payment period. The minimum amount for unsecured loans is $3,000 and they come with variable or fixed interest rates. The variable rate is determined by the prime lending rate of the bank. In addition to unsecured loans, Canadian Imperial Bank of Commerce offers unsecured lines of credit for business entities. As part of the requirements, companies should have been in business for a period of more than two years and own a share of at least 20 percent. The borrowed amount should be between $100,000 and $250,000, intended to cover the purchase of equipment, to meet operating needs on a daily basis, or to boost seasonal cash flows. Royal Bank of Canada also offers unsecured loans to individuals who plan to make an investment or need money to make small or large purchases. Loans come with fixed or variable rates and a wide array of repayment options – from weekly to monthly. The bank also offers unsecured lines of credit with a credit limit ranging from $5,000 to $50,000. Interest rate depends on the financial standing of the borrower. Bank of Nova Scotia offers unsecured loans of up to $50,000. The terms of loans vary between one and five years while rates are fixed, and payments don’t change with rise in the interest rate. Borrowers should always bear in mind that compared to secured loans, unsecured ones are typically more expensive. If unsecured loan is the only option, persons should first shop around rather than accept the first offer. It is better to compare the offers from several banking institutions. This may help in saving considerable amount of money in interest. Secured Loans in Canada Secured loans refer to larger amounts of borrowed money that are secured by collateral. Secured loans are preferred by creditors because they give greater security than unsecured ones. Lenders have guarantees that if borrowers default on their loan, their property may be used to recover the borrowed amount of money. For this reason, lenders offer more flexible terms while granting them. Car loans are one example of secure loan whereby the vehicle acts as collateral. With mortgages, one’s home is the tangible asset that serves as collateral. Borrowers can only pledge a property or car of their own. When banks extend secured loans, they undertake credit check to make sure that the borrower is pledging a property of his possession. The five largest banks in Canada (Canadian Imperial Bank of Commerce, Bank of Montreal, Toronto Dominion Bank, Royal Bank of Canada, and Bank of Nova Scotia) have different lending policies with regard to secured loans and lines of credit. In Royal Bank of Canada, secured loans come with one of the lowest interest rates compared to other types of credit. The loan is borrowed either against the equity of one’s home or by pledging some form of investment. This may be cash, stocks, government bonds, or guaranteed investment certificates. Toronto Dominion Bank also grants secured loans under more favorable conditions. However, upon extending a loan, the bank assesses the value of the offered collateral. The value of certain assets tends to fluctuate while other assets loose value with time. For this reason, some forms of collateral are given preference over others. Toronto Dominion Bank places greaterweight on guaranteed investments and real estates in comparison to other forms of collateral such as vehicles, equity investments, machinery and equipment. However, the bank also takes into consideration the client’s relationship with the bank. Borrowing history is assessed as part of the credit granting process. Canadian Imperial Bank of Commerce offers secured loans to companies that have been in business for a period of more than two years. The so called Small Business Home Power Credit is offered to business clients with borrowing needs of at least $50,000 who can use a residential property on the territory of Canada as collateral. Canadian Imperial Bank of Commerce offers competitive interest rates and flexible repayment structure for clients who have more than twenty percent equity in their residential property, can prove upcoming expenses related to the operation of their business, and look for ways to save on borrowing. Finally, the product comes with a variable rate of interest which is determined by the prime rate of Canadian Imperial Bank of Commerce. It fluctuates with changes of the prime rate. Bank of Nova Scotia offers asset secured loans that are available to both, institutions and individuals. The minimu amount that can be borrowed in the form of an asset secured loan is $500,000. The loan availability depends on the asset that is offered as collateral. Furthermore, the tenure of the loan is determined by factors such as reasons for borrowing, amount of the loan, and type of security. The interest rate varies depending on the loan approval date and the prevailing rates on the market. Bank of Montreal also offers asset based lending to middle size companies. The amount granted in the form of commercial lines of credit varies between $25,000 and $250,000. Commercial lines of credit are available to Canadian nationals who have run profitable business enterprises for a period of at least 2 years. They have to prove the profitability of their business by showing realistic income statements. Holding companies, non-profit organizations, real estate developers and operators, as well as non-residents are non eligible for the commercial lines of credit program of Bank of Montreal. Centum Liberty Mortgages Corp. Sam Ansari, Principal Mortgage Broker Tel: 416-356-6310 Sam_Ansari@centum.ca How to Clear Credit Card Fraud From Credit Reports: Credit card fraud is a term used to describe any instance of unauthorized use of someone else's credit eligibility to purchase goods and services in favour of a third party. And while for a handful of crooks credit card fraud may be a prosperous business, it is certainly a growing concern for the rest of humanity. Identity theft is by far the most dangerous type of credit fraud, closely followed by credit card fraud. In the case of identity theft, personal financial information is used for various illegal activities such as credit crimes. Credit card fraud occurs when someone gets an unauthorised access to your credit card details and uses this information to incur multiple charges on your card. If you have fallen victim to identity theft or credit card fraud, read the following guide on what you need to do. Contact the Credit Agencies As a first step towards the clearing of a credit fraud from your credit report, you need to contact some of the big credit agencies available in your country and ask them for a copy of the latter. They will provide it free of charge. Examine Your Credit Report Once you’ve got it, you have to examine it carefully to detect any unfamiliar charges or names of dealers on your statement. You have to also look for accounts that you just can’t remember opening, however hard you may try, or any inquiries about your credit that you apparently have not filed. Finally, make sure that your personal information such as your full names, social security number and address are accurate. Inform Local Authorities Alert the local authorities if you notice any illegal credit activity on your credit report and prepare all the documents you’ll need to prove your legitimate transactions. Talk to Your Creditor As a forth step, you have to notify the credit card issuer that you have fallen victim to credit card fraud. Do not forget to follow up with a letter once you have contacted them over the phone. It is a good idea to keep track of all formal and informal correspondence with the issuer. Don’t forget to request them to freeze all activities on the suspected accounts. Request Replacement Card Remember that a credit card fraud can be cleared only through active cooperation between you and your credit card issuer. If you notice unauthorized charges on your card, call your credit card company immediately and request a replacement card. Even if you are not a victim of fraud, keep track of all charges. Contact a Lawyer You may also contact a lawyer or an attorney to find out what the legal venues of protection are in your country of residence. Take all legal actions in accordance with the existing anti-fraud laws. In most cases, you will have to file a dispute on the identified fraud and support your claim with all the necessary documents and additional information to prove your case. You have to also alert the local authorities if you suspect that your social security number has been or is being used to draw credits on your name. When you report a credit fraud to the police, ask the officer on duty to give you acopy of the report that you can use to prove the fraud to your creditor. Request New Credit Report Having taken all of the necessary actions to clear a credit fraud from your credit report, you need to request a fresh copy of the latter in a few months or so to make sure they have taken effect. Centum Liberty Mortgages Corp. Sam Ansari, Principal Mortgage Broker Tel: 416-356-6310 Sam_Ansari@centum.ca How to do a Personal Budget: Preparing a budget is a great way to manage your personal finances. Many people feel that they may not need a budget; however having one will lead to greater financial stability no matter if you feel you do not make enough money to budget. Making a budget is a simple process to do and will only require a little time to make. To begin, gather all your financial records, such as bank statements, bills, etc. This will allow you to get exact amounts of what you spend monthly. The fixed expenses are those bills and finances that do not change from month to month such as rent, mortgage, credit card bills, and so on. The variable expenses will be those amounts that change from month to month, such as gasoline, groceries, and other expenses that do not occur every month. Next, record all of your income. For those who have a set pay check from week to week this is simple. Remember to include all the income you may receive including the income from dividends you may receive or other sources. Now that you have all of your records and income at hand start a list of what you spend on a monthly basis. Remember to look at your financial records to make sure you write down every expense. This will help you analyze your budget better if you have everything written down. Next, total both your monthly income and your monthly expenses. If your expenses are less than your income, you are doing an excellent job at budgeting. If the expenses are more than your income, your next step is to analyze your spending. When analyzing your spending, you need to look at what you are spending this money on. If you find the bulk of your spending is contributed to dining out or frivolous things, then these aspects can be cut to make ends meet. There are numerous ways to lower some of your variable expenses; eating out can be counteracted by eating more at home, which may increase your grocery bill. However, there are numerous ways to cut this also, such as using coupons and buying sales items. If you find that you need even more cutting in your expense column, the fixed expenses are harder to cut. However, if you rent you may look into a roommate, which would allow other expenses, such as electric, cable and water to be reduced as well. For those who own their home, shopping around for a lower interest rate on your mortgage will also help lower some of the expense. Once you have your budget in place, review it monthly. This will help you to analyze if your spending is getting better or worse, and will also give you a better idea of where you money is going. It will also help for you to figure out where you need improvement or if you are on track with your expenses. Centum Liberty Mortgages Corp. Sam Ansari, Principal Mortgage Broker Tel: 416-356-6310 Sam_Ansari@centum.ca Collateral Loans How to Build Collateral for Loans: Collaterals in the form of property are often required to secure the repayment of financial obligations. The collateral represents an asset pledged by the recipient that protects the lender against a default on the loan. In case the recipient is unable to pay off his or her debt, he or she forfeits the asset that was pledged as collateral. Individuals who are building or repairing their credit scores will need collateral in order to obtain a loan. In general, the higher the value of the pledged asset, the larger the loan is. You may build collateral by saving or earning profit from the ups and downs on the financial market. If you need collateral to secure a loan, it is better to first review you credit history. Request a credit report from one of the credit reporting agencies (e.g. Equifax or TransUnion) and examine the report for inaccuracies and errors. You can get a free-of-charge report from each credit agency once per year. The next step is to assess your assets. Cash is certainly an asset you can use as collateral. You can deposit your money into a certificate of deposit and expect that the creditor will lend around eighty percent of the value of your cash. If you don’t dispose of sufficient cash, you have to consider other types of assets such as the equity in your vehicle, life insurance cash value, stocks, or other investment instruments. The creditor will need to verify the value of your assets and will probably lend up to fifty percent of the value of your collateral. Another source of collateral is equity in real estate, typically your house or condo. The creditor might only lend around fifty percent of the equity in your house, and only if the loan, together with your mortgage, amounts to less than eighty percent of the home's value. Avoid loans that are secured by real estate. You risk losing your estate if you cannot meet your financial obligations. After you have obtained a loan, try to pay it as quick as you can. To build a collateral value, the loan you are paying off should be small compared to the asset value. Make payments often and come up with a budget that will help you retire the debt. You can look for software programs, websites, and books that will teach you how to prepare a budget. There are some lenders and financial products on the market you should avoid. If possible, don’t take car title loans: you risk losing your car on missing a single payment. Be careful about going into debt and don’t use the services of fly-by-night creditors. When you sign the loan contract, read the fine print and if unsure of what the terms and conditions say, look for professional advice (you may take the contract to a lawyer or another professional with expertise). If you consider finding a co-signer, keep in mind that in the case of default, the other party will be fully liable for your financial obligations. Centum Liberty Mortgages Corp. Sam Ansari, Principal Mortgage Broker Tel: 416-356-6310 Sam_Ansari@centum.ca Credit Reports Guide to Canadian Credit Reports: Imagine a document that can affect whether or not you will get a mortgage for a new home, a loan for a new car or will impact how high of an interest rate you will have to pay for a loan. There is such a document called your credit report. Your credit report contains information about your financial history and performance with creditors. From the first time you borrow money or apply for credit, a credit file is created. Lenders including banks, credit unions and retailers send information about your financial transactions to credit reporting agencies. There are four types of information found in a credit file. It will contain identification information. This includes your name, verification of social insurance numbers and date of birth. It will also include your address, some previous addresses, marital status, where you are employed and previous employers. The credit file will contain credit information. Some credit accounts include bank loans, retailer credit and credit card issuers. A variety of information about these accounts may be found in the credit information. There can be information on the payments made, the balance on the loans and credit and past due amounts. Public record information will also be found in a credit file. This is any information found in court records. This can be information about collections, bankruptcies, judgments and etc. The credit file will also show inquiries that are made on a person’s credit history when they apply for new credit. If there are too many recent inquiries on your credit report, some lenders see this as a sign that you are overextending yourself. There are resources for you to access your credit rating. Knowing your credit rating can be used to your advantage. If you have great credit, you can negotiate better interest rates. In the long run, a lower interest rate can save you thousands of dollars. If you find that your credit report is not good, you can start working to repair your credit. First, you can make sure there are no errors on your credit report. Then, you can locate the areas where you need improvement so you can work towards a better credit rating. Accessing your credit report will allow you to see what lenders will see. You can obtain a free report each year from a credit company. This can be done by mailing a request for your report. Another way to access your credit report is by using the Internet. You can do so quickly and inexpensively. Remember your credit report contains important information that can have a major impact on your life. Knowing your credit rating can be a great help. If you have good credit, you can work with lenders to receive the lowest interest rates possible. On the other hand, if your credit is poor, you can identify your weaknesses and begin working to repair your credit. The two major Credit Reporting Agencies in Canada are Equifax Canada Inc. and Trans Union of Canada Description: Credit Reporting Agency in Canada, Credit Report, credit score Equifax Canada Inc: Address: P.O.Box 190, Station Jean-Talon City: Montreal ZIP: HIS 2Z2 Province: Quebec Phone: 1-800-865-3908 Fax: 514-355-8502 Web Site: https://www.econsumer.equifax.ca/ca/main?forward=/view/common/template.jsp&body=/view/home/home.jsp Email:email@example.com Trans Union of Canada: Description: Credit Reporting Agency in Canada, Credit Report, credit score Address: P.O.Box 338 L.C.D.I. City: Hamilton ZIP: L8L 7W2 Province: Ontario Phone: 1-800-663-9980 Web Site: http://www.transunion.ca/ca/home_en.page Centum Liberty Mortgages Corp. Sam Ansari, Principal Mortgage Broker Tel: 416-356-6310 Sam_Ansari@centum.ca Student Loan Student Loans: Funding your college education can seem a little overwhelming. There are many options to help you pay for your education. If you already have loans a school loan consolidation may help. You may be eligible for a government student loan. The two sources for these loans are the federal government and the provincial or territorial government. To apply you will need to complete an application in your home province each year. The purpose of these loans is to supplement other financial resources you are using to pay for your education. You will not necessarily be granted a loan but it cannot hurt to apply. Are you eligible for a Canadian Student Loan? Have you thought about consolidating student loans? Any Canadian citizen or permanent resident of Canada who is an undergraduate or graduate student enrolled in 9 credit hours or more each semester can apply for a government loan. These loans can take at least 4-6 weeks to process. You should apply early for a student loan. If you apply for a loan online, do not forget your password. You may even want to write the password and keep it in a safe place. It is a long process to retrieve a forgotten password. For all OSAP transactions, you will need to present your Social Insurance Card and a valid photo ID. Make sure you have this with you. If you are an Ontario student, you can use the online application to apply for a loan. There is no application fee and you can apply at osap.gov.on.ca. From the website, you can also print a paper application to complete. Another option is to visit the Financial Aid Office at your school for a aper application. However, you will need to pay a $10 fee if you do so. Assuming you are approved for a loan there are some things you should know. Your loan will be interest free while you are attending school. However, the loan will start to accrue interest once you are out of school. Your loan will not enter repayment until after six months of the completion date. However, if you would drop below a 60% full course load while attending college, then you will need to start paying on your loan. When you have completed your education, you may be eligible for interest relief or debt reduction assistance. Centum Liberty Mortgages Corp. Sam Ansari, Principal Mortgage Broker Tel: 416-356-6310 Sam_Ansari@centum.ca First Time Buyer Advice First Time Home Buyers Advice: Buying a home is very exciting. However, it can also be a stressful time and seem overwhelming to the first time buyer. Before making the decision to buy a home, you should make sure it is the right time. Are you financially ready for the responsibility of home ownership? Take some time to consider your net worth, your current monthly expenses and your amount of total debt. When you go to see a lender about obtaining a mortgage, you will need to know your net worth anyway. Subtract your total liabilities from your total assets to figure out your net worth. Once you figure out your net worth, total debt and monthly expenses, you can estimate how much you can afford to spend for your mortgage payment each month. A general rule of thumb is that your monthly household expenses (costs such as your mortgage payment, taxes and heating expenses) should be no more than 32% of your gross monthly income. Your must also consider your debt. It should not be anymore than 40% of your gross income. Debt will include household costs, other loans, credit card payments and any other debt you may have. Also, when determining how much you can afford to pay for a house, you will need to consider your monthly income, debt and also the interest rates you will pay and the amount of money you can put down on a house. A mortgage consultant and other lending associates can help you to determine the highest monthly payment you can comfortably afford. After doing your calculations, you might find that it may be difficult for you to obtain a mortgage. The cost of housing expenses or your debt may exceed the amounts looked favorably upon by lenders. If this is the case, there are things you can do to start working towards improving your chances of being approved for a home loan. You can work to pay off some of your other debts, save more money towards a down payment or consider searching for a house that is of a little lower cost. Your credit score will play an important role in whether or not you are approved for a mortgage. Before applying for a mortgage, you should order a copy of your credit report. Check over the report to make sure it is accurate. If you do not have much of a credit history established yet, you will want to begin building one. You can apply for a credit card with good interest rates for example. Make some small charges on your card and pay the balance each month as the bill comes in. If your credit is less than perfect you can begin to re-establish good credit. Be sure to make all your debt payments on time. You may also want to consider credit counseling. If you are still unable to obtain a mortgage, you can find out if you have anyone who would be willing to co-sign on the loan. Again, if you meet with a lender or mortgage specialist, they can obtain a copy of your credit report so that they can advice you of your options. Once you determine how much money you can afford to pay each month, you may want to get pre-approved for a mortgage. By doing so, the lender will consider your financial situation and tell you the highest mortgage that you will be able to afford. This will give you an idea of the price you can pay for a new home. You will then know what price range of houses you can look at when searching for your home. Happy house hunting! Centum Liberty Mortgages Corp. Sam Ansari, Principal Mortgage Broker Tel: 416-356-6310 Sam_Ansari@centum.ca Invest In Real Estate How to Invest in Real Estate: Although investing in real estate provides higher investment returns, it is a more complicated way of investing compared to investing in mutual funds, stocks, or bonds. You have to find the best real estate property to invest in, choose the best deals, and sell at a higher price. Understanding Real Estate To understand how real estate investment works, it is a good idea to take a look at how renting a property works. It is the duty of the property owner to pay the taxes, the cost of maintenance, and the mortgage associated with the property. When the owner decides to rent the property, he or she will charge enough to cover the cost of maintenance, the taxes, and the monthly mortgage payments. Sometimes, he or she may charge more to gain profit, but only to the extent the quality or value of the property justify a higher rent. When the mortgage is paid in full, the rent payment turns into pure profit, less the maintenance cost and taxes, which are subtracted. However, there are certain risks involved in real estate investment. One, for example, is having an irresponsible tenant who does not pay rent regularly or does damage to the property. The worst case scenario is to have no tenants at all. Under these circumstances, the owner has to find other ways and means to pay off the mortgage. One of the best strategies for investing in real estate is to find a suitable location that is perfect for the goal in mind. Therefore, it is wise to establish if the property will be used for residential or commercial purposes. When picking a location, make sure that it is ideal for business or residence purposes. Unlike investing in stocks and bonds that sit on the investor’s account waiting for returns, real estate investment requires patience and long term commitment to maintaining the property. In addition, a property owner needs to face the dilemmas experienced by tenants. One of the main problems includes maintenance. Sometimes, it is much better to hire a maintenance man to cover repairs on the property. Investing In Real Estate There are many different types of real estate investment options to choose from. First, you can invest money in the buy-and-rent type of investment as described above. However, it may be wise to invest in a real estate investment group or groups. This option works more like a mutual fund where you do not have to do the dirty work. The group pools money from the investors as to buy and rent several real estate properties. The group will be handling everything - from advertisement to getting tenants, maintenance, and everything else. Since the group manages the properties, it will subtract a certain percentage of the profit and distribute the remaining profit equally among the investors. Another way to invest in real estate is to trade properties. Investors buy some property, make certain improvements, and sell it for a higher price to gain profit. They may wait for the value of the home to increase before selling it to prospective buyers. This process is called flipping. Centum Liberty Mortgages Corp. Sam Ansari, Principal Mortgage Broker Tel: 416-356-6310 Sam_Ansari@centum.ca Mortgage Pre-Payment Privileges Mortgage Pre-Payment Privileges What are Pre-payment privileges?Pre-payment privileges are simply the right to pre-pay a specified amount of the principal balance of your mortgage without incurring any penalties. Most fixed term or closed mortgages will contain a clause allowing for full or partial payment of the principal, separate from the regular payments called for under a mortgage agreement. The pre-payment amount allowed with most lenders will vary from 10% to 25% of the total mortgage amount annually. In addition, some lenders will allow you to increase your mortgage payment amounts. This may or may not contribute to your annual pre-payment allowance. Let's look at pre-payment options in a little more detail: Increasing Payments: Most lending institutions will allow you to increase the amount of your mortgage payment. Some allow an increase only once per year, others only once per term, and some as often as you wish. The amount of this increase varies from lender to lender but is typically 10% to 25% of your current monthly payment. For example: If your present mortgage payment is $1,000 per month you may be able to increase it to $1,200 per month ($1,000 X 20% = $1,200). The extra payment amount reduces a greater amount of your mortgage principal and therefore pays your mortgage off faster. We would be happy to discuss the current policies of the different lending institutions with you. Feel free to give us a call. Additional Payments: Most lending institutions will allow you to make additional payments. This can mean a one time lump sum payment, or several lump sum payments throughout the year. Often this can be done in conjunction with increasing your regular payments. You may have heard of "Double-Up" payments. This simply means doubling the amount of your payment for as long as you wish ($2000 instead of the usual $1000). The total amount you can pay additionally in a year will vary, but usually cannot exceed the pre-payment privilege amount for that year. The pre-payment privilege amount is always pre-set and ranges from 10% to 25% of the original principle balance. Lump Sum Payments: Most lending institutions will allow you to make large lump sum payments against your mortgage principal. These amounts are principal only and reduce the balance owing rapidly. The amounts vary by institution; some are up to 25% of the original mortgage amount. So if you borrowed $120,000 originally, they will allow you to pay up to $30,000 in a lump sum payment. This is usually allowed on only one occasion per year. Each institution has different rules on the amount and frequency in which yo can pay down your mortgage. Some lenders combine the totals from 'additional mortgage payments' with 'lump sum payments'. We would be happy to discuss the current policies of the different institutions with you. Shortened Amortization: When you acquire a mortgage, you must decide on a term (typically 1, 3, 5 or 10 years) and an amortization (usually 25, 30 or 35 years). Once your term is complete, you must renew your mortgage and can renegotiate your interest rate and amortization period. Depending on your current financial status and the going interest rates, you may wish to lower your amortization. This typically works best if interest rates are the same or less than what you were previously paying, or if your financial status is a little bit better than when you first signed the original term. For example, imagine you signed a 5 year term with a 25 year amortization. After your first 5 year term was complete you would have 20 years left on your mortgage. If you could afford a slightly higher payment, you could renew this mortgage and sign another 5 year term but this time with only a 15 year amortization. This would shave 5 years off your total repayment time. In this way, a reduction in your amortization will result in your mortgage being paid off sooner and saving you thousands. All the amortization period really does is determine your monthly payments. The bigger you choose to make your payment amount, effectively the smaller the length of time (amortization) it will take to pay off your total debt. Mortgage Renewal time is always the best time to consider adjusting your term and amortization. Mortgage Wise Financial will be able to analyze your particular situation and make recommendation on how to pay off your mortgage faster and save you money, lots of it! If you have specific questions or wish to discuss your personal situation please Contact Us Today! Centum Liberty Mortgages Corp. Sam Ansari, Principal Mortgage Broker Tel: 416-356-6310 Sam_Ansari@centum.ca How Much Home Can You Afford? How Much Home Can You Afford? When you buy a house, you aren’t just paying the purchase price. You also have to be prepared to pay all the other costs that come with buying, owning and maintaining a home. To help you find out how much home you can afford,we offer the f ollowing tips on some of the hidden costs that come with homeownership: ??If you’re like most Canadians, the biggest expense in owning a home will be your monthly mortgage payments. The cost of a mortgage depends on the size of your down payment (the amount of cash you are prepared to put down as a deposit to buy the home). ??If you can only afford a down payment of less than 20 per cent of the purchase price of a home, you will likely need to buy mortgage loan insurance. ??One of the next largest expenses for homeowners is annual property taxes. These are taxes that all homeowners have to pay each year, based on how much their homes are worth. Property taxes can vary from one home to another, and from municipality to municipality. When you are buying a home, the real estate listing should tell you how much the property taxes will be. ??When you buy a house, it is usually a good idea to hire a lawyer (or notary in Quebec). Your lawyer or notary will find out if there are any outstanding debts or any other problems with the home. The lawyer will also pay the land transfer tax for you. Land transfer tax is a tax charged by the government whenever you buy land in Canada. It is usually between one to four per cent of the home’s purchase price. ??Lawyers can be expensive, so ask ahead of time how much they will charge, and don’t be afraid to shop around. To find a good lawyer, ask friends for ecommendations, or call the local bar association and ask for the names of lawyers in your area who specialize in real estate law. ??You may also have to pay for a property appraisal, which helps your mortgage lender determine how much they are willing to lend you to buy the property. ??You should also hire a home inspector to inspect the home. The home inspector’s role is to inform you about the property’s condition. The home inspector will tell you if something is not functioning properly, needs to be changed or is unsafe. You will also be informed of repairs that need to be made and maybe even where there may have been problems in the past. ??As a homeowner, you will be responsible for paying for all of the utilities to heat, light and power your home. Ask your realtor or the current owner how much these utilities will cost each month. Put aside some extra savings each month to cover the cost of repairs and upkeep for your home. ??You will also need to get property insurance to insure your home and its contents in case of fire, theft or vandalism. In fact, most lenders will insist that you insure the home before they will approve a mortgage loan. ??In most cases, you will have to reimburse the person who sells you the house for any utilities or property taxes that they have prepaid beyond the closing date. ??In addition, if you are buying a condominium, you will have to pay a monthly condo fee. This fee helps to fund the operating costs of the condominium, as well as any major or minor repairs that the condominium might need in the future.
Centum Liberty Mortgages Corp.
Sam Ansari, Principal Mortgage Broker
Mortgage Glossary Mortgage Glossary A | B | C | D | E | F | G | H | I | J | K | L | M | N | O | P | Q | R | S | T | U | V | W | X | Y | Z A Amortization: The period of time, often a maximum of 25 years, required to reduce the mortgage debt to zero when all regular blended payments are made on time and provided the terms (payment and interest rate) remain the same. Appraisal: A process for estimating the market value of a particular property. Appreciation: The increase in value of something because it is worth more now than when you bought it. Approved Lender: A lending institution authorized by the Government of Canada through CMHC to make loans under the terms of the National Housing Act. Only Approved Lenders can negotiate mortgages that require mortgage loan insurance. Assumption Agreement: A legal document signed by a homebuyer that requires the buyer to assume responsibility for the obligations of a mortgage by the builder or the previous owner. B Blended Payment: A mortgage payment that includes principal and interest. It is paid regularly during the term of the mortgage. The payment total remains the same, although the principal portion increases over time and the interest portion decreases. C Closed Mortgage: A mortgage that cannot be prepaid or renegotiated before the term's end unless the lender agrees and the borrower is willing to pay an interest penalty. Many closed mortgages limit prepayment options such as increasing your mortgage payment or lump sum prepayment (usually up to 20% of your original principal amount). Closing Costs: Costs in addition to the purchase price of the home, such as legal fees, transfer fees and disbursements, that are payable on the closing day. They range from 1.5% to 4% of a home's selling price. Closing Date: The date at which the sale of a property becomes final and the new owner takes possession. CMHC: Canada Mortgage and Housing Corporation. A Crown corporation that administers the National Housing Act for the federal government and encourages the improvement of housing and living conditions for all Canadians. CMHC also develops and sells mortgage loan insurance products. Conditional Offer: An Offer to Purchase that is subject to specified conditions, for example, the arrangement of a mortgage. There is usually a stipulated time limit within which the specified conditions must be met. Commitment Letter/Mortgage Approval: Written notification from the mortgage lender to the borrower that approves the advancement of a specified amount of mortgage funds under specified conditions. Conventional Mortgage: A mortgage loan up to a maximum of 80% of the lending value of the property. Typically, the lending value is the lesser of the purchase price and market value of the property. Mortgage loan insurance is usually not required for this type of mortgage. Counteroffer: If your original offer to the vendor is not accepted, the vendor may counteroffer. This means that the vendor has amended something from your original offer, such as the price or closing date. If a counteroffer is presented, the individual has a specified amount of time to accept or reject. Credit Report: The main report a lender uses to determine your creditworthiness. It includes information about your ability to handle your debt obligations and your current outstanding obligations. Curb Appeal: How attractive the home looks from the street. The first impression you have of a home is important. A home with good curb appeal will have attractive landscaping and a well-maintained exterior. D Deed: A legal document that is signed by both the vendor and purchaser, transferring ownership. This document is registered as evidence of ownership. Default: Failure to abide by the terms of a mortgage loan agreement. A failure to make mortgage payments (defaulting the loan) may give cause to the mortgage holder to take legal action to possess (foreclose) the mortgaged property. Delinquency: Failing to make a mortgage payment on time. Deposit: Money placed in trust by the purchaser when an Offer to Purchase is made. The sum is held by the real estate representative or lawyer/notary until the sale is closed and then it is paid to the vendor. Depreciation: The decrease in value of something because it is now worth less than when you bought it. Down Payment: The portion of the home price that is not financed by the mortgage loan. The buyer must pay the down payment from his/her own funds or other eligible sources before securing a mortgage. It generally ranges from 5% to 20% of the purchase price but can be more. E Easement: This is where someone else has the right for access to or over another person's land for a specific purpose, such as a driveway or public utilities. Equity: The difference between the price for which a home could be sold and the total debts registered against it. Equity usually increases as the mortgage is reduced through regular payments. Market values and improvements to the property may also affect equity. Estoppel Certificate: Also called a certificate of status, it is a certificate that outlines a condominium corporation's financial and legal state. Fees may vary and may be capped by law (does not apply in Quebec). F Foreclosure: The legal process where the lender takes possession of your property and sells it to cover the debts you have failed to pay off. When you default on a loan and the lender feels that you are unable to make payments, you may lose your home to foreclosure. G Gross Debt Service Ratio (GDS): The percentage of the borrower's gross monthly income that will be used for monthly payments of principal, interest, taxes and heating costs (P.I.T.H.) and half of any condominium maintenance fees. H High-Ratio Mortgage: A mortgage loan higher than 80% of the lending value of the property. This type of mortgage may have to be insured - for example by CMHC or a private company - against payment default. I Interest: The cost of borrowing money. Interest is usually paid to the lender in regular payments along with repayment of the principal (loan amount). Interest Adjustment Date (IAD): A date from which the accrued interest on the mortgage advance is calculated and paid in your first regular payment. This date is usually one payment period before the first regular mortgage payments begin. L Lien: A claim against a property for money owing. A lien may be filed by a supplier or a subcontractor who has provided labour or materials but has not been paid. Loan-to-Value Ratio: The ratio of the loan amount to the lending value of a property expressed as a percentage. For example, the loan-to-value ratio of a loan for $90,000 on a home which costs $100,000 is 90%. Lump Sum Prepayment: An extra payment, made in lump sum, to reduce the principal balance of your mortgage, with or without penalty. A closed mortgage typically restricts the amount and frequency of the prepayments you can make. With an open mortgage, however, you can make a lump sum prepayment at any time without penalty. Making prepayments can help you pay off your mortgage sooner and ultimately save on interest costs over the life of your mortgage. M Maturity Date: The last day of the term of the mortgage. On this day, the mortgage loan must either be paid in full or the agreement renewed. MLS - Multiple Listing Service: A multiple listing service is a real estate agents' cooperative service that contains descriptions of most of the homes that are for sale. Real estate agents use this computer-based service to keep up with properties they are listing for sale in their area. Mortgage: A mortgage is a security for a loan on the property you own. It is repaid in regular mortgage payments, which are usually blended payments. This means that the payment includes the principal (amount borrowed) plus the interest (the charge for borrowing money). The payment may also include a portion of the property taxes. Mortgage Life Insurance: Mortgage life insurance provides coverage for your family should you die before your mortgage is paid off. This insurance can be purchased through your lender and the premium added to your mortgage payments. However, you may want to compare rates for equivalent products from an insurance broker. Mortgage Loan Insurance: If you have a high-ratio mortgage (more than 80% of the lending value of the property) your lender will probably require mortgage loan insurance, which is available from CMHC or a private company. Mortgage Payment: A regularly scheduled payment that is often blended to include both principal and interest. N Net Worth: Your financial worth, calculated by subtracting your total liabilities from your total assets. Warranty (New Home Warranty Program): A guarantee that if something covered under the warranty needs to be repaired it will be. If the builder doesn't repair it, the repair will be made by the organization that provided the warranty. All provinces and Yukon Territory have New Home Warranty programs for newly built homes. However, there are currently no such programs in Nunavut or the Northwest Territories. O Offer to Purchase: A written contract setting out the terms under which the buyer agrees to buy the home. If the Offer to Purchase is accepted by the seller, it forms a legally binding contract that binds those who have signed it to certain terms and conditions. Open Mortgage: A mortgage that can be prepaid or paid off or renegotiated at any time and in any amount without interest penalty. The interest rate on an open mortgage is usually higher than a closed mortgage with an equivalent term. Operating Costs: The expenses that a homeowner has each month to operate a home. These include property taxes, property insurance, utilities, telephone and communications charges, maintenance and repairs. P Principal: The amount that you borrow for a loan. Each monthly mortgage payment consists of a portion of the principal that must be repaid plus the interest that the lender is charging you on the outstanding loan balance. During the early years of your mortgage, the interest portion is usually larger than the principal portion. P.I.T.H.: Principal, interest, taxes and heating - costs used to calculate the Gross Debt Service ratio (GDS). Property Insurance: Insurance that you buy for the building(s) on the land you own. This insurance should be high enough to pay for the building to be re-built if it is destroyed by fire or other hazards listed in the policy. Property Taxes: Taxes charged by the municipality where the home is located based on the value of home. In some cases the lender will collect a monthly amount to cover your property taxes, which is then paid by the lender to the municipality on your behalf. R Reserve Fund: This amount is set aside by the homeowner on a regular basis so that funds are available for emergency or major repairs. Setting aside 5% of your monthly take-home pay will give you a well-funded reserve. S Survey or Certificate of Location: A document that shows property boundaries and measurements, specifies the location of buildings on the property and states easements or encroachments. T Term: The term of a mortgage is the length of time that the mortgage conditions, including the interest rate you pay, are carried out. Terms are usually between six months and ten years. At the end of the term, you either pay off the mortgage or renew it, possibly renegotiating its terms and conditions. Title: A freehold title gives the holder full and exclusive ownership of the land and building for an indefinite period. A leasehold title gives the holder the right to use and occupy the land and building for a defined period. Title Insurance: Insurance against loss or damage caused by a matter affecting the title to immoveable property, in particular by a defect in the title or by the existence of a lien, encumbrance or servitude. Total Debt Service Ratio (TDS): The percentage of gross monthly income required to cover the monthly housing payments and other debts, such as car payments. V Vendor Take Back Mortgage: This is where the vendor rather than a financial institution finances the mortgage. The title of the property is transferred to the buyer who makes mortgage payments directly to the seller. These types of mortgages, sometimes referred to as take-back mortgages, can be helpful if you need a second mortgage to by a home. Centum Liberty Mortgages Corp. Sam Ansari, Principal Mortgage Broker Tel: 416-356-6310 Sam_Ansari@centum.ca SERVING MORTGAGE AND FINANCIAL NEED FOR ALL ONTARIO CITIES AS BELOW: Richmond Hill, Toronto, Mississauga, York, Durham, London, Milton, Oakville, Kingston, Kitchener, Hamilton, Barrie, Waterloo, Guelph, Peterborough, Orangeville
Frequently Asked Questions:
Frequently Asked Questions:
How much can I afford to pay for a home?
What is a Home Inspection?
What is the minimum down payment that you need to make when purchasing a home on a mortgage?
What is Mortgage Loan Insurance?
What is a Conventional Mortgage?
What is a High-Rate Mortgage?
What is a pre-approved mortgage?
What is the benefit of getting pre-approved?
Can I qualify for a mortgage if I have been declared bankrupt?
What is the documentation required to obtain a mortgage?
How will child support and alimony affect my mortgage qualification?
What is the difference between a fixed rate mortgage and a variable rate mortgage?
Answers How much can I afford to pay for a home? To find out how much you will be able to pay for your new home, you need to analyze your taxable income along with the amount of debt that you have to pay off through monthly payments. If it is your main residence that you are going to purchase, calculate approximately 32% of your income to make the mortgage payment, property taxes and heating costs. Next, you need to calculate 40% of your taxable income and from that, deduct all of your other monthly payments such as car loans, credit card bills and other such debts. The lesser of these two calculations will be used to determine how much of your income may be used towards housing related payments, including your mortgage. Apart from what the ratios tell you, you should make calculations of your own to determine how much you can afford. If the payment amount you are comfortable with is less than 32% of your income you may want to settle for the lower amount rather than stretch yourself financially. Make sure you take all other expenses into consideration too so that you can easily afford the basic luxuries. What is a Home Inspection? Should I have it done? A home inspection is a visual examination of a house by a qualified professional to determine the overall condition and value of the home. When conducting a proper inspection, an authorized home inspector should check all the major components of the house such as the roof, ceilings, walls, and floors along with other systems such as the electrical connections, heating, plumbing and drainage and weather proofing. The inspector usually gives the results of the inspection in writing to the home owner within 24 hours of the inspection. It is always advisable to get a home inspection done before making a purchase decision. A thorough inspection is likely to clear a majority of the doubts that you might have when purchasing a home. The inspection gives an idea about the quality of the construction and indicates whether any major repair work will be required. This allows you to calculate all the add-on costs before making the final decision. An inspection will definitely give you a more secure feeling about your purchase decision by removing most of your doubts. What is the minimum down payment that you need to make when purchasing a home on a mortgage? In most cases, you will need to pay a minimum of 5% of the house value as a down payment. 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. As a rule, at least 5% of the down payment must be from your own cash resources or a gift from a family member. This cannot be a borrowed amount. Several programs are available in the market that allow some alternate sources of down payment. The CMHC is one organization offering such programs. Certain lenders also accept gift money from a family member or friend as a down payment. However, such a sum needs a signed letter from the donor stating that it is a gift and not a loan. For any down payment that is less than 25% of the total value, a loan insurance from either the CMHC or GE is required. What is Mortgage Loan Insurance? Mortgage Loan Insurance is an insurance cover provided to a lender against default on mortgage installments, when the down payment amount is less than 25%. Like any other insurance, mortgage loan insurance too requires premium payments. The premium amount can vary between 0.5% to 3.75%, depending on the insurance provider and how much of the purchase price is financed by the mortgage; greater the down payment, lesser will be the premium. Mortgage loan insurance is distinct from Mortgage Life Insurance as the latter guarantees that your remaining mortgage at the time of your death will not be a burden to your estate. What is a Conventional Mortgage? A conventional mortgage is one in which the down payment amount is equal to more than 25% of the purchase price (or where the loan value is less than 75%). Such a mortgage normally does not require mortgage loan insurance. What is a High-Rate Mortgage? A mortgage which is greater than 75% of the purchase price or appraisal, whichever is less, is known as a High-Ratio mortgage. A High-Ratio Mortgage requires mortgage loan insurance. Premiums for a mortgage loan insurance can range from 0.5% to 3.75%, depending on the value of the mortgage. What is a pre-approved mortgage? What is the benefit of getting pre-approved? A pre-approved mortgage is one that provides an interest rate guarantee from a lender for a specified period of time (usually 60 to 90 days) and for a set amount of money. The pre-approval is calculated on the basis of information provided by the borrower and is subject to certain conditions being fulfilled before the mortgage if finalized. These conditions usually include factors such as a written confirmation of employment and income among other things. Many brokers prefer it when their clients have a pre-approved mortgage as this gives a clear idea of the affordable price range when hunting for a new home. The benefits of getting a pre-approved mortgage are many. First of all, pre-approval gives you an idea of what you can afford, making your search for a new home much simpler. It also does away with the tension of trying to find out what your monthly installments are going to be. Probably the greatest advantage of getting a pre-approved loan is that it allows you to lock in a rate. As the lender guarantees a fixed rate when pre-approving the mortgage, the borrower can secure that same rate even when the market prices climb up. In case a situation arises where the interest rates fall below those that were pre-approved, the lenders usually offer the lower rate. Can I qualify for a mortgage if I have been declared bankrupt? Some lenders may consider you eligible for a mortgage even though you have faced bankruptcy. However, this decision may vary from lender to lender and will greatly depend on the circumstances surrounding the bankruptcy. Certain measures can be taken by the prospective borrowers to improve their credit rating. Approach your mortgage broker for details. What is the documentation required to obtain a mortgage? To make your mortgage application process as simple and lucid as possible, it is advisable that you collect all these documents beforehand so as to avoid any interruptions later. • Personal information and identification such as your drivers license or passport. • Job details, including confirmation and proof of income. • Your sources of income. • Proof of financial assets. • Information and details of all your bank accounts, loans and other debts. • Source and amount of down payment. • Proof of source of funds for the closing costs (usually about 2.5% of purchase price) How will child support and alimony affect my mortgage qualification? If you are paying child support and alimony to another person, generally the amount paid out is deducted from your total income before determining the mortgage amount that you would qualify for. If you are receiving child support and alimony from another person, the amount paid to you will be added to your total income before determining the mortgage that you will qualify for. However, you will be required to produce a regular receipt for the same for a set time period as specified by the lender. What is the difference between a fixed rate mortgage and a variable rate mortgage? In a fixed rate mortgage, the interest rate is pre-determined at the beginning of the loan term, which can range from 6 months to 25 years. The advantage of this type of mortgage is that it offers a security of knowing your monthly payments beforehand and allows you to plan accordingly. In a variable or floating rate mortgage, the payments are fixed for a period of one or two years but the interest rates can fluctuate every month depending on the market conditions. If the interest rates drop, more of the payment goes towards reducing the principal; if the rates go up, a larger portion of the monthly payment goes towards covering the interest. The interest rate is based on a predetermined formula which is in-turn based on the prime-lending rate. Centum Liberty Mortgages Corp. Sam Ansari, Principal Mortgage Broker Tel: 416-356-6310 Sam_Ansari@centum.ca OTHER LINKS Ontario Real Estate Association The Real Estate Council of Ontario (RECO) Toronto District School Board The Canadian real Estate Association Go Transit CN Tower Toronto City of Toronto Ministry of Education York Region transit York Tourism Town of Richmond Hill City of Newmarket City of Aurora City of Whitchurch & Stouffville City Of Markham City Of Vaughan The Weather Network Toronto Public Library Toronto Sports Network Centum Liberty Mortgages Corp. Sam Ansari, Principal Mortgage Broker Tel: 416-356-6310 Sam_Ansari@centum.ca SERVING MORTGAGE AND FINANCIAL NEED FOR ALL ONTARIO CITIES AS BELOW: Richmond Hill, Toronto, Mississauga, York, Durham, London, Milton, Oakville, Kingston, Kitchener, Hamilton, Barrie, Waterloo, Guelph, Peterborough, Orangeville Major Cities Name Population Census (C) 2011-05-10 1 Toronto 2,615,060 2 Ottawa 883,391 3 Mississauga 713,443 4 Brampton 523,911 5 Hamilton 519,949 6 London 366,151 7 Markham 301,709 8 Vaughan 288,301 9 Kitchener 219,153 10 Windsor 210,891 Cities & Towns The population of all cities and towns with more than 10,000 inhabitants (plus some selected municipalities) in Ontario by census years. Name Status Population Census (C) 1981-06-03 Population Census (C) 1991-06-04 Population Census (C) 1996-05-14 Population Census (C) 2001-05-15 Population Census (C) 2006-05-16 Population Census (C) 2011-05-10 Ajax Town 25,475 57,350 64,430 73,753 90,167 109,600 Amherstburg Town ... ... 19,273 20,339 21,748 21,556 Aurora Town ... 29,454 34,857 40,167 47,629 53,203 Barrie City 38,423 62,728 79,191 103,710 128,430 135,711 Belleville City 34,881 45,069 46,195 46,029 48,821 49,454 Bracebridge Town ... 12,308 13,223 13,751 15,652 15,409 Bradford West Gwillimbury Town ... 17,702 20,213 22,228 24,039 28,077 Brampton City 149,030 234,445 268,251 325,428 433,806 523,911 Brant (Paris) City ... ... 29,800 31,669 34,415 35,638 Brantford City 74,315 81,997 84,764 86,417 90,192 93,650 Brockville City 19,896 21,582 21,752 21,375 21,957 21,870 Burlington City 114,853 129,575 136,976 150,836 164,415 175,779 Caledon (Bolton) Town 26,645 34,965 39,893 50,605 57,050 59,460 Cambridge City 77,183 92,772 101,429 110,372 120,371 126,748 Chatham-Kent Com ... ... 109,350 107,341 108,177 103,671 Clarence-Rockland City ... 15,753 18,633 19,612 20,790 23,185 Clarington (Bowmanville - Newcastle) Com 32,229 49,479 60,615 69,834 77,820 84,548 Cobourg Town ... 15,079 16,185 17,172 18,210 18,519 Collingwood Town 12,064 14,382 15,596 16,039 17,290 19,241 Cornwall City 46,144 47,137 47,403 45,640 45,965 46,340 East Gwillimbury (Holland Landing - Sharon) Town ... 18,367 19,770 20,555 21,069 22,473 Elliot Lake City 16,723 14,089 13,588 11,956 11,549 11,348 Erin Town ... 7,561 8,024 11,052 11,148 10,770 Essex Town ... ... 19,437 20,085 20,032 19,600 Fort Erie Town 24,096 26,006 27,183 28,143 29,925 29,960 Georgina (Keswick) Town ... 29,746 34,777 39,263 42,346 43,517 Gravenhurst Town ... 9,988 10,030 10,899 11,046 11,640 Greater Sudbury (Grand Sudbury) City ... ... 165,336 155,219 157,857 160,274 Grimsby Town 15,797 18,520 19,585 21,297 23,937 25,325 Guelph City 71,207 88,444 95,821 106,170 114,943 121,688 Haldimand (Cayuga - Caledonia - Hagersville) City ... ... 42,041 43,728 45,212 44,876 Halton Hills (Georgetown) Town 35,190 36,816 42,390 48,184 55,289 59,008 Hamilton City ... ... 467,799 490,268 504,559 519,949 Hawkesbury Town 9,877 9,713 10,162 10,319 10,869 10,551 Huntsville Town ... 14,997 15,918 17,338 18,280 19,056 Ingersoll Town ... ... 10,502 10,977 11,760 12,146 Innisfil (Alcona - Lefroy - Gilford) Town ... 21,249 24,711 28,666 31,175 33,079 Kawartha Lakes (Lindsay) City ... ... 67,926 69,179 74,561 73,214 Kenora City ... ... 16,365 15,838 15,177 15,348 Kingston City ... ... 112,605 114,195 117,207 123,363 Kingsville Town ... ... 18,409 19,619 20,908 21,362 Kitchener City 139,734 168,282 178,420 190,399 204,668 219,153 Lakeshore (Belle River - Tilbury) Town ... ... 26,127 28,746 33,245 34,546 LaSalle Town ... 16,628 20,566 25,285 27,652 28,643 Leamington Town ... ... 25,389 27,138 28,833 28,403 Lincoln (Beamsville) Town 14,196 17,149 18,801 20,612 21,722 22,487 London City 254,280 311,620 325,669 336,539 352,395 366,151 Markham Town 77,037 153,811 173,383 208,615 261,573 301,709 Midland Town ... ... 16,347 16,214 16,330 16,572 Milton Town 28,067 32,075 32,104 31,471 53,889 84,362 Mississauga City 315,056 463,388 544,382 612,925 668,599 713,443 Mississippi Mills (Almonte) Town ... ... 11,069 11,647 11,734 12,385 Napanee (Greater Napanee) Town ... ... 14,994 15,132 15,400 15,511 Newmarket Town 29,753 45,474 57,125 65,788 74,295 79,978 New Tecumseth (Alliston) Town ... 20,344 22,904 26,141 27,701 30,234 Niagara Falls City 70,960 75,399 76,917 78,815 82,184 82,997 Niagara-on-the-Lake Town ... 12,945 13,238 13,839 14,587 15,400 Norfolk (Simcoe) City ... ... 60,534 60,847 62,563 63,175 North Bay City 51,268 55,405 54,332 52,771 53,966 53,651 Oakville Town 75,773 114,670 128,405 144,738 165,613 182,520 Orangeville Town 13,740 17,921 21,498 25,248 26,925 27,975 Orillia City 23,955 25,925 27,846 29,121 30,259 30,586 Oshawa City 117,519 129,344 134,364 139,051 141,590 149,607 Ottawa City ... ... 721,136 774,072 812,129 883,391 Owen Sound City 19,883 21,674 21,390 21,456 21,753 21,688 Pelham Town ... 13,328 14,343 15,272 16,155 16,598 Pembroke City 14,026 13,997 14,177 13,490 13,930 14,360 Petawawa Town ... ... 15,304 14,398 14,651 15,988 Peterborough City 60,620 68,379 69,742 71,446 75,406 78,698 Pickering City 37,754 68,631 78,989 87,139 87,838 88,721 Port Colborne City ... 18,766 18,451 18,450 18,599 18,424 Port Hope Town ... ... 15,446 15,605 16,390 16,214 Prince Edward (Picton) City ... ... 25,046 24,901 25,496 25,258 Quinte West (Trenton) City ... ... 41,676 41,366 42,697 43,086 Richmond Hill Town 37,778 80,142 101,725 132,030 162,704 185,541 Sarnia City 50,892 74,167 72,738 70,876 71,419 72,366 Saugeen Shores (Port Elgin - Southampton) Town ... 11,838 12,084 11,388 11,720 12,661 Sault Ste. Marie City 82,697 81,476 80,054 74,566 74,948 75,141 St. Catharines City 124,018 129,300 130,926 129,170 131,989 131,400 St. Thomas City ... ... 31,407 33,303 36,110 37,905 Stratford City ... ... 29,007 29,780 30,516 30,886 Tecumseh Town ... ... 23,151 24,289 24,224 23,610 Temiskaming Shores (Haileybury - New Liskeard) City ... 11,663 11,257 10,630 10,442 10,400 Thorold City ... 17,542 17,883 18,048 18,224 17,931 Thunder Bay City 112,486 113,946 113,662 109,016 109,160 108,359 Tillsonburg Town 10,487 12,019 13,211 14,052 14,822 15,301 Timmins City 46,114 47,461 47,499 43,686 42,997 43,165 Toronto City ... ... 2,385,421 2,481,494 2,503,281 2,615,060 Vaughan City 29,674 111,359 132,549 182,022 238,866 288,301 Wasaga Beach Town ... 6,457 8,698 12,419 15,029 17,537 Waterloo City 49,428 71,181 77,949 86,543 97,475 98,780 Welland City 45,448 47,914 48,411 48,402 50,331 50,631 Whitby Town 36,698 61,281 73,794 87,413 111,184 122,022 Whitchurch-Stouffville Town 13,557 18,357 19,835 22,008 24,390 37,628 Windsor City 192,083 191,435 197,694 209,218 216,473 210,891 Woodstock City ... ... 32,253 33,269 35,822 37,754
Principal Mortgage Broker, Lic# M08009393
Centum Liberty Mortgages Lic# 12088
Cell: 416-356-6310 Tel / Fax: 905-881-4990
Address: 7163 Yonge St., Suite 220 Thornhill, On L3T 0C6