Unimor Capital Corporation

Tag: mortgage

  • 3 Tips That Could Save You Thousands on Your Mortgage

    3 Tips That Could Save You Thousands on Your Mortgage

    Sean Cooper wiped off his $255,000 mortgage in exactly three years and two months, at age 30. He took on two extra gigs, in addition to his daytime job as a pension plan analyst in Toronto. He lived in the basement of his own house, while tenants “thumped around upstairs.” And he threw every spare penny at his quarter-million loan. Two years later, Cooper is mortgage-free and has written a well-reviewed book about it. But he is still working 70-hour weeks and living in the basement. The goal now, is to amass enough cash to retire extra early, if he so chooses.

    Clearly, the workaholic, frugal lifestyle suits him. And clearly, Cooper isn’t your average homeowner. But the advice he has is aimed at the more common species of mortgage-holder. You know, the kind with one job, and possibly a family, as well as a taste for things like work-free weekends, vacations and the occasional dinner out.

    It’s advice to which Canadians should pay particular attention now, as interest rates begin what most economists believe is a gradual but potentially long march upward. If you’ve been coasting along with your mortgage payments, now is the time to kick it into high gear. And if you’re looking to get a new mortgage or renew the one you have, doing some research is more important than ever.

    Cooper saved around $100,000 in interest with his extreme mortgage pay-down plan. You probably won’t be able to replicate that, but might still be able to shave thousands off your own mortgage interest by following his top three tips:

    1. Shop around – and not just for the lowest rate.
    Of course, you should get the lowest interest rate that you can. But rates aren’t the only thing to consider when comparing options. The point is to get the best deal, he notes, which isn’t necessarily the same thing as the lowest price. In addition to interest rates, pay attention to what Cooper calls the three P’s:

    • Prepayment privileges: As interest rates rise, a bigger chunk of your mortgage payments will go toward interest rather than the principal. That’s why it’s important to get a mortgage that will allow you to make large lump-sum contributions and increase your monthly payments if you decide to pay down your debt faster.
    • Penalties: What would happen if you were to break your mortgage? That’s a question every mortgage applicant should ask themselves. People wind up having to break their mortgage for any number of reasons: they move, they get divorced, they lose their jobs. And that can cost them thousands of dollars in mortgage penalties, which is why it’s important to look at the fine print.
    • Portability: Speaking of mortgage penalties, one way to avoid them if you move is to have a portable mortgage. This means you can transfer your mortgage to your new home and combine it with a new loan, if necessary.

    2. Make lump-sum payments whenever you can.
    Here’s a crucial nugget about lump-sum payments: Unlike your regular monthly installments, all the money goes toward reducing your principal. That’s why Cooper advises making lump-sum payments whenever you can. If you have no spare cash in your budget, you could still use what Cooper calls “found” money: A one-time bonus at work, an inheritance, gifts of money, or even your tax return.

    3. Accelerate your mortgage payments.
    The most painless way to ramp up your mortgage payments and shorten your amortization period is switching from monthly to so-called accelerated bi-weekly payments. For example, for a $300,000 mortgage, your monthly payments would be $1,418. If you switch to a simple bi-weekly arrangement, your payment is calculated as $1,418 × 12 months/26 weeks = $654. You’ll be saving a little bit in interest but not much.

    Accelerated bi-weekly payments, on the other hand, are calculated as follows: $1,418 × 12 months/24 weeks = $709. Your payment is slightly higher, covering the equivalent of a 13th monthly mortgage installment every year. Over time, that makes a substantial difference. In Cooper’s example, it saves $15,393 in interest and shrinks the amortization period by almost three years.

  • 5 Ways to Pay Off Your Mortgage Faster

    5 Ways to Pay Off Your Mortgage Faster

    Purchasing a home is a major accomplishment, but with these 5 Ways to Pay Off Your Mortgage Faster, paying off your mortgage as early as possible will be the best investment you can make. Below are a few easy ways you can pay off your mortgage faster:

    1. Accelerated bi-weekly payments
    Instead of paying your mortgage on a monthly basis 12 times per year, pay your mortgage every two weeks for a total of 26 payments each year.

    Example: A $300,000 mortgage paid on a monthly basis with a 3% interest rate over 25 years will cost you $125,920.44 in interest. However, if you increase your payment frequency to accelerated bi-weekly payments, you will shave nearly three years off of your amortization schedule, and save $16,058.57 in interest.

    2. Round up your mortgage payments
    Make no mistake: Every dollar counts when it comes to paying off your mortgage. The quicker you can pay off your mortgage, the more you will save in interest. A painless way to make your mortgage disappear faster is to round up your mortgage payments. So if your accelerated bi-weekly mortgage payments are $543, consider rounding up to $600 instead. The extra $57 will do wonders to your mortgage balance and chances are you will barely notice a difference in your monthly budget. If you receive a raise, instead of increasing the cost of your lifestyle in the short term, consider throwing the extra amount you make onto your mortgage instead.

    Example: Bi-weekly payments on a $230,000 mortgage with a 2.75% interest rate over 30 years would be $468.53. Increase those bi-weekly payments by just $31.47 to $500, and you’ll shave nearly six years off of the amortization schedule.

    3. Put ‘found’ money towards your mortgage payments
    Unexpected sources of money such as a birthday cheque from a relative or a bonus at work are considered sources of ‘found’ money. ‘Found’ money can be easily applied to your mortgage without any impact to your budget because it wasn’t money you were expecting or counting on. Consider increasing your RRSP contributions, and then put your income tax refund directly towards the principal of your mortgage.

    Example: A one-time payment of $5,000 on a $250,000 mortgage at 3.75% over 30 years will decrease your mortgage amortization by over 12 months.

    4. Make a lump sum anniversary payment
    Most banks will allow you to make an extra mortgage payment each year, which is applied directly to the principal. Taking advantage of this by making a lump sum payment, even if it’s as small as $100 a year, is a great way to chip away at your mortgage.

    Example: An annual lump sum payment of $250 on a $400,000 mortgage at 3.50% over 25 years, combined with a bi-weekly payment frequency will decrease your mortgage amortization by over 3.5 years.

    5. Stay informed
    Once you have a mortgage and start making your payments, it can be easy to just forget about it because it’s an automatic payment. To be an informed homeowner, you need to keep up-to-date on interest rates and new mortgage options. You could potentially save a ton of money just by understanding what your options are.

    Example: Let’s say that interest rates have dropped since you took out your mortgage a few years ago, but you are in the middle of a five-year fixed term with your bank. By understanding what the penalties are for breaking your mortgage, and reapplying for a lower interest rate, you could potentially save thousands of dollars over the long run.

    While paying down your mortgage early will mean less interest paid over the lifetime of the mortgage, and a shorter amortization schedule, it’s not always the best decision for every homeowner. For example, if you have high interest debt on a credit card, no emergency fund savings, or if you haven’t started saving for retirement yet, the interest you would save on your mortgage will not be as beneficial to you as dealing with other financial issues. Armed with information and commitment, these tips will help you pay off your mortgage faster. The freedom that being completely debt-free brings is a dream for many Canadians, so take the time to do some calculations and figure out what options are right for you.

     

  • Closing Costs: What You Can Expect

    Closing Costs: What You Can Expect

    It is important to be fully aware of all the costs involved in buying a home, preferably before you go house hunting. Knowing in advance what these additional ‘costs’ are, over and above the down payment that you might have, will help you plan for a smooth closing and avoid any unpleasant surprises. You should allow at least 2% of the purchase price for closing costs, although they could be as high as 4%.

    Below is a comprehensive list of closings costs that you might incur, but remember that they are only estimates and should be used as a guideline.

    Legal Fees & Disbursements
    A lawyer will charge a fee for their professional services involved in drafting the title deed, preparing the mortgage, and conducting the various searches. The disbursements, on the other hand, are out-of-pocket expenses incurred, such as registrations, searches, supplies, etc… The actual fee that the lawyer will charge will depend entirely upon the deal between you and your lawyer. Be sure to ascertain exactly what this will amount to in a worst-case situation. A typical purchase transaction for a $200,000 property with one mortgage will range between $800 to $1,200, including disbursements. We recommend you call one or two lawyers and obtain a quote directly from them including both their fee and estimates of disbursements before choosing which one you’d like to use.

    Land Transfer Tax
    There is usually a land transfer tax that is charged on closing when the property is transferred to your name and it can vary depending on the price of the home, whether or not you are a first time home buyer and which city you live in. Learn more about Land Transfer Tax Ontario.

    Mortgage Insurance
    You should budget for insurance on your new home. Insurance costs can include default mortgage insurance, homeowners insurance, mortgage life insurance and title insurance.

    Property Tax & Prepaid Utilities Adjustments
    At the time of a sale, the lawyer for the buyer must confirm that local taxes have been paid up to date. If they are, a Tax Certificate is issued, from which any adjustments can be made – usually requiring the buyer to compensate the seller for any prepaid taxes. If they are not up to date, the municipality requires that the seller pay them off from the proceeds of the sale. Therefore, remember that if the previous owner has prepaid property taxes or other utilities for the year, they will be credited the prepaid portion on closing. If they paid all their taxes by April, expect a large adjustment cost on closing.

    Property Appraisal
    If your lender requires an appraisal report to be completed, it will have to be done before they hand over any mortgage money. They want to be assured that the property is worth what you are either paying for it, or valuing it for, and the cost normally ranges between $150 to $300 depending upon the location and complexity of the property.

    Home Inspection
    A report commissioned by a property owner or purchaser, usually to verify the condition of a property prior to the ‘firming up’ of a Real Estate transaction. The scope and detail may vary, but most reports indicate the specific problem and the cost to repair. Depending on the size and location of the property, a home inspection is around $300.

    Interest Adjustment (IA)
    If you arrange to make your mortgage payments monthly on the first day of the month, and your transaction closes after the first day of the month, your lender may charge you interest on closing up to the first theoretical payment date, called the Interest Adjustment Date (IAD). Your mortgage agent will calculate this for you. Remember, that all mortgages are paid in arrears so if your possession date is June 1st, and you choose to pay monthly, then your first payment will be July 1st. In this example there is no Interest Adjustment payable. However, if you moved in on May 29th, with your first payment on the first of the month, your first payment would still be July 1st, but there will be a three day Interest Adjustment (from May 29th to the ‘official start date’ of June 1st).

  • How to Budget for the New Year

    How to Budget for the New Year

    New Year’s resolutions come and go. A sad and small amount often work out like you’d planned and the rest are forgotten about, or perhaps regretted later on. Losing weight and creating a budget are two of the most common New Year’s goals.

    This year, you can shake off old habits and create new ones that last. The key is being realistic and using a system that works. Only you can decide how to budget your money, but with a little guidance from a financial expert and Mint software, you can set those plans in motion and keep track of your daily progress.


    Baby Steps to Get Out of Debt

    Nationally-syndicated radio talk show host and financial expert Dave Ramsey advises clients and listeners to get out of debt first and foremost, then build wealth. His is one of the simplest, most effective budget approaches, and nearly anyone can follow it. Ramsey explains what he calls the “7 Baby Steps” as a journey to debt control and ultimately living debt free. Each of the steps should happen in order, and include:

    • Start an emergency fund
    • Pay off debt
    • Build your emergency fund
    • Invest
    • Save for college (if applicable)
    • Pay off mortgage
    • Build wealth & give to charity

    There’s a method to the order. Your emergency fund is there to rescue you in case of a dire circumstance. Everyone needs this fund. It’s for those unexpected things that fall into your lap when you’re not looking. Start with $1,000, and you’re covered for some of the smaller things that life can throw your way.

    “Pay off debt” is a small statement, but it’s sometimes an enormous feat of dedication and endurance. This baby step is near the top of Ramsey’s list for a reason — you can’t make much financial progress for yourself while you’re building someone else’s wealth. He suggests paying off the smallest debts first, then working toward larger ones.

    Next comes building your emergency fund to a healthy level. Time was; 3 months’ pay was plenty. It could carry you over in case of job loss, medical bills, or other large, unexpected emergencies. Ramsey recommends a more generous approach, with 6 to 9 months’ pay set aside. Build this up, and you’re ready to tackle the next baby step.

    Investments, college fund, paying off your mortgage, and ultimately building wealth are the last items on the list. You might need an advisor before stepping into investments, and a college fund might not be important to your family for any number of reasons. Paying off a mortgage, if you have one, is that last big hurdle before debt-free living. After that, you build wealth and live generously.


    Mint Can Help You Handle the Particulars of Budgeting

    Getting out of debt is important. But when you drill down, there is a lot more to think about. While you’re saving for an emergency fund, paying off credit cards, and thinking about retirement, you’re still receiving utility bills and buying groceries. Mint software will help take your overall budget course and pull it into sharp focus. You can see an overview just as easily as you can review a single transaction. This gives you control that you might not have otherwise.

    It’s the daily activities that can sometimes cause budgeting hassles. Spending too much at the grocery store, dining out, splurging when you should be saving — all of these, and other things, can throw you off track. With Mint software, that never has to happen, at least not without your knowledge.

    Mint software has all of your budgeting needs, such as setting financial goals, tracking income and expense trends, receiving bill notifications, and bank account alerts, rolled into one tidy, user friendly package. You can start out the New Year with the same plans as last year, or you can make 2017 your year to live with less financial stress and more control than you’ve ever had.

  • Are You Ready for Homeownership?

    Are You Ready for Homeownership?

    Are you ready for homeownership? Is purchasing a home on your list of goals? If so, assess how close you are to making your real estate dreams come true. This basic, Yes/No quiz will tell you if you’re ready for homeownership.

    1. Are you familiar with the housing market in your preferred neighbourhood?
    Start perusing the real estate pages and Realtor.ca well in advance of your house-hunt, so you know what properties sell for. There’s nothing worse than meeting an agent, only to discover the average price of homes in your preferred community is double what you were hoping.

    2. Do you know how much you can afford to spend on your first home?
    You want to start your home search pre-approved for a mortgage. Find out ahead of time how much that mortgage will most likely be by using Genworth Canada’s How Much Can I Afford calculator which factors your income, debt and other expenses into mortgage and monthly payment amounts.

    3. Have you saved at least a 5% down payment towards your first home?
    The good news is you don’t need a sizeable down payment to buy your first home. Conventional mortgages require a down payment of 20% of the purchase price, but mortgage insurance, you can buy with as little as 5% down.

    4. Do you have regular income, whether you are salaried or self-employed?
    Conventional lenders favour borrowers with salaried income, but we recognize many Canadians are self-employed. We have many lenders that are geared towards self-employed borrowers. If you’ve got a two-year history of managing your credit and finances responsibly, you can qualify without traditional income verification.

    5. Have you got a handle on your consumer debt?
    If you’re carrying a high debt load, it could hinder your ability to meet your financial obligations as a homeowner. Your monthly debt repayments (housing, car, credit cards, lines of credit etc…) should not exceed 40% of your household’s gross monthly income. If you’re carrying more than that, be aggressive about paying it down so you’re set up for success when you do buy your first home.

    6. Do you have credit history?
    Lenders look at your credit history to determine if you’re a reliable borrower. Refraining from credit cards altogether is counter-productive. If you’re hoping to buy your first home this year, establish good credit history by acquiring a standard credit card. Use it for small purchases and pay off the full balance each month.

    7. Do you have a healthy credit score?
    Poor credit history makes it harder to get mortgage approval. Always meet your monthly minimum payments on time, but don’t stop there. Be aggressive about clearing your credit card debt, or at least bringing each credit card balance to under 35% of its credit limit. If you’re recovering from bankruptcy, apply for a secured card to help re-establish a pattern of responsible borrowing.

    Scoring:

    If you answered YES to 4 or more, you’re probably ready to start your home search! If you scored under 4, you may need a bit more time to prepare yourself for homeownership.

  • Rent or Buy, Which is Right for You?

    Rent or Buy, Which is Right for You?

    Rent or Buy? It’s a question many people struggle with, and, it’s important to know if you truly want to own a home before you’re firmly entrenched in the home buying process. To help you decide better, here are some things to consider…

    PROS

    A Sound Investment
    If you choose a home that you can afford, the payoff can be great. When you make a mortgage payment each month, you build equity in a place of your own (unlike a rent payment). Equity is the difference between the value of the home and your outstanding mortgage. The longer you stay in your home (and the more payments you make), the more equity you’ll have, and, unlike most things you buy, a home will almost certainly increase in value over time, which builds even more equity.

    A First Step
    As you build up equity in your current home and comfort level in being a home owner, it may be easier to move up to another home in the future.

    Satisfaction & Security
    As a homeowner, you can decorate and renovate your home any way you like. You don’t have that luxury as a renter. Owning a home also gives you a new sense of pride in your surroundings. Your family may also feel strong ties to your community.

    CONS

    Higher Costs
    When budgeting, you’ll have to factor in more than your monthly mortgage payments. You should consider things like maintenance and repair expenses.

    Tying Up Cash
    You home will probably increase in value as time goes by, but don’t count on getting a big return quickly. If you need to sell your home during the first few years of homeownership, you could lose money given the various costs involved, such as realtor fees and possible penalties for breaking your mortgage before your term is up.

    No Guarantees
    There’s no guarantee your house will increase in value, especially during the first few years. Although, historically, over the longer term, homes will have proven to increase in value.

  • How You Can Benefit from Other Home Buyers’ Mistakes

    How You Can Benefit from Other Home Buyers’ Mistakes

    Most homeowners admit to making at least one mistake when they purchased their home, according to the 20th Annual RBC Home Ownership Poll. Listed below are the top mistakes made by first-time home buyers:

    The Property Needed Work
    Even those buyers with home inspections encountered issues after they moved in.

    Not Having a Bigger Down Payment
    A small down payment meant that many buyers found themselves overwhelmed by the costs of keeping a home.

    Not Getting a Home Inspection
    By skipping this step, some buyers found themselves faced with astronomical repair costs. Particularly those who had purchased older homes with ancient plumbing and wiring.

    Not Knowing the Closing Costs
    Some ill-informed buyers didn’t account for additional costs such as the land transfer fees, the title fee, lawyer’s charges etc…

    Not Getting Pre-approved for a Mortgage
    By not obtaining a pre-approval, many home buyers fell for homes that were out of their price range.

    Falling in Love with the Wrong House
    Buyers found they ignored obvious structural or electrical problems because the home had 10’ ceilings or a great stone fireplace. Beware of buyer’s remorse.

    Not Checking the Market Value of the Neighbourhood
    Some purchasers paid too much for homes that were renovated above and beyond neighbouring properties. This may price them out of the market when it comes time to sell.

    Focusing on Interest Rates
    New buyers felt compelled to buy because mortgage rates were low. Experts recommend buyers focus on the mortgage product that works for them instead of just trying to score a super-low rate.

  • What Do Mortgage Lenders Look For?

    What Do Mortgage Lenders Look For?

    When lenders like banks and credit unions are assessing your ability to qualify for a mortgage, they will look at two factors.  First, they want to make sure you have the ability to make the mortgage payments.  Second, they want to measure your willingness to make the mortgage payments.  These two factors are categorized and are simply known as the Five C’s of Credit.

    Following is a brief explanation of each of the Five C’s:

    Capacity
    Are you able to repay the loan? This is the most critical of the Five C’s. Lenders assess your capacity by reviewing your debt and payment history, something usually found on your credit report.

    Capital
    This is the amount of money that you have to invest in the property yourself. A lender likes to share some of the financial risk with the borrower. Under some circumstances, a lender will grant a loan with little or no capital if there is exceptional strength in the other four C’s.

    Character
    This is a grey area. It’s an impression of how trustworthy you are to repay the mortgage. Lenders look at your length of employment to establish how secure you are, and they will look at your ability to save and to manage your credit as keys to your character.

    Collateral
    This is a guarantee in the form of security for the loan. In the case of a mortgage, it’s the property itself.  Collateral can also come from a third party who will guarantee the loan.

    Credit
    This is your credit history. This is essentially the only way a lender can predict your willingness to make future payments.

  • What Does ‘Pre-Approval’ Mean?

    What Does ‘Pre-Approval’ Mean?

    Getting pre-approved by a lender makes it easier for buyers to find the home they want within their price range. However, it does not guarantee you’ll get the mortgage. It is simply a certificate saying that through a quick calculation of your finances, the lender has determined what you can afford.

    During the pre-approval, the lender will also fix the interest rate, which is usually good for between 60 and 90 days. If a better rate promotion occurs during the buyer’s fixed period, the buyer is usually eligible for that as well. It is likely the pre-approval will lead to a mortgage, but there have been situations when this has not been the case. The best way for buyers to ensure success is to understand what the lenders look for and to be prepared. Another way is for buyers to work with their mortgage broker, who can flag any potential challenges.

    A lender will determine a buyer’s debt load by calculating the Gross Debt Service (GDS) Ratio and Total Debt Service (TDS) Ratio. The GDS Ratio is the proposed housing costs, including mortgage payments, taxes, heating costs and 50% of condo fees, if applicable, and shouldn’t be more than 32% of the buyer’s gross monthly income. TDS calculations take into account all the buyer’s other debt obligations and shouldn’t be higher than 40%.

    Once a buyer has made a conditional offer on a home, the lender will gather all the documentation required to approve the mortgage, including a credit report. Other items a lender will need are a letter from an employer confirming the buyer’s salary, information about other sources of income, bank accounts, loans and other debts, proof of financial assets, sources of the down payment and deposit, and proof that the buyer has the funds for closing costs.

    Problems can crop up during the mortgage approval process. For example, the buyer’s credit score may be too low, the buyer might not have the right source for the deposit funds or the closing costs may not have been deposited in an account. The buyer’s GDS and TDS ratios might also be too high.

  • What to Consider Before Your Mortgage Renews

    What to Consider Before Your Mortgage Renews

    Have you explored all your options?
    Once you receive your mortgage renewal statement, there’s nothing easier than simply signing on for another term. But while this may make sense in many cases, your family or financial situation may have changed. We can look for opportunities that could better meet your needs.

    Are you comfortable with your payments?
    If you’ve been feeling financially strapped each month making your mortgage payments, this could be the time to reduce them to a more manageable level. On the other hand, if you’re earning more, why not pay down your mortgage faster, saving thousands in interest!

    Do you need cash flow for other things?
    Your priorities may have shifted since you first bought your home, and your cash flow needs to shift too. Things like paying for a child’s education, planning a career change, or a major purchase may call for spending money on things other than your home. You may be able to refinance your mortgage to take this into account.

    Can you handle fluctuating rates?
    Some homeowners are nervous about any hikes in interest rates, while others are comfortable to go with the flow. Rates are tough to predict. It’s best to base your decision on your personal situation, not what you read in the news. We can help you decide whether to opt for fixed or variable rates.

    Will you sell soon?
    If you are likely to sell soon, consider a shorter term mortgage or one that has more flexible terms so you’re not penalized if you sell your house before the mortgage comes due.

    Are you thinking about a major renovation?
    You know that projects such as a new kitchen or an addition can make your home more valuable. But the cost of having the work done can tie up a lot of money. Before you renew, look at all your financing options, which may include getting an additional line of credit or keeping your mortgage payments low so you can have money on hand to finance the renovations.

    When do you want to be ‘mortgage-free’?
    If you’re planning extended time away from work or perhaps an early retirement, it may make sense to pay down your mortgage sooner, rather than later. While increasing your payments will raise your monthly payments now, ultimately you will save on interest and can prepare for that fabulous mortgage-free lifestyle!

    Could you use your home equity to fulfill other goals?
    Refinancing a mortgage can be one way to free up cash you need for other things, which could even include buying another property. Mortgage renewal time is an ideal occasion to review all your options.

    Have your insurance needs changed?
    If your financial situation has changed since you first took out your mortgage, review whether you need the same level of insurance in place to cover mortgage obligations.

    Are you getting the best rates & terms?
    In a competitive mortgage environment, your good credit history can make refinancing work to your advantage. We analyze mortgage markets daily to ensure you don’t miss any money saving opportunities.