Mortgage Myth # 4


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Higher Mortgage Rates With A Bigger Down Payment???

So you're ready to purchase a property and you're in a good enough financial position to come up with a 20% down payment (or greater) so you should expect the best interest rates available, right? Though this concept makes sense, it's simply not how the current mortgage market works. Why? Let me explain... In the beginning of 2017, the Office of the Superintendent of Financial Institutions (OSFI) instated new, greater capital requirements for mortgage default insurers to create a larger buffer for future mortgage defaults in an effort to provide more financial stability for Canada's mortgage market. By March 1st, 2017 insurance premiums were increased anywhere from 11% to 126% depending on the loan-to-value/size down payment. Everyone knows that buying a home with less than 20% down requires an insured mortgage and the borrower pays the premium. What most people don't know is that a lot of mortgage lenders (primarily non-bank lenders) still insure mortgages where...
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Collateral charges explained. Short and sweet.

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A collateral charge mortgage is a method of registering a mortgage on a property's title up to or above the value of the home with the purpose of making futuring borrowing against the home easier. In contrast, a regular mortgage is only registered against the property for the total amount borrowed. Ex: If your home value is $410,000 and you owe $307,000 the mortgage registered against your title may still be as much as $410,000 or even higher. The benefit is supposed to be that you can then borrow money from your home in the future without having to refinance your mortgage, meaning you avoid the legal process however, your lender may still charge a fee to advance additional funds. In order to borrow more you're still required to qualify and an appraisal is still needed which you may be required to pay for. The primary disadvantage to a collateral charge mortgage is that they can't be simply transferred to a new lender in order to take advantage of a better mortgage ...
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Mortgage Qualifying in Canada

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Here's how mortgage qualifying in Canada works (regulated by OSFI - Office of the Superintendent of Financial Institutions )... One can only qualify to spend up to 39% of their total household, gross income toward basic home expenses which include mortgage payments, property taxes and heating costs. It's important to know that exact calculations are only used for property taxes in this equation. An estimate of usually no less than $100/mth is used for heating costs and when it comes to mortgage payments, the BoC's 5 year benchmark rate of 4.64% is used instead of the actual rate which could be half that. So what all this math boils down to is that what one can actually qualify to spend about 30% of their gross income on mortgage payments but wait... That's assuming your credit is top notch. If you have more of an average credit score, you could be limited by another 5% less. AND this is all only if all your other debt payments (credit cards, car loans, lines of...
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