Getting a mortgage is a big commitment for any homeowner and it can be tough to find the right mortgage for your current situation. But it’s even harder to predict what your needs will be years down the line. When things change, sometimes your mortgage needs to change as well, which is why it’s important to know your options when breaking a mortgage contract.
Why break your mortgage contract?
There are many reasons to consider renegotiating your mortgage. One of the most common reasons homeowners break their mortgage is a change in finances, but other factors can also play a role. These can include:
If you’ve decided to renegotiate and get a new mortgage, you’ll need to complete a mortgage stress test. This is to prove that you’re able to afford your new interest rate.
Pros and cons of breaking your mortgage
There are sometimes significant costs in breaking a mortgage. It’s important to have a thorough understanding of the terms of your contract, so that if things change, you’re aware of your options. If you’re unsure, speaking to your current lender about your course of action is a good first step. And while there are usually fees associated, the benefits of breaking a mortgage can sometimes outweigh the costs.
Some of the benefits of renegotiating can include:
Possible downsides of breaking your mortgage include:
Although breaking your mortgage contract isn’t always the right choice, in some cases it makes the most sense for homeowners to renegotiate. By speaking with a qualified mortgage broker about your current contract, financial situation, and long-term plans for your property, you can build a plan to get the right mortgage rate for you.
If you’ve decided to break your mortgage contract, there are two options in securing a new rate.
Option 1: Renegotiating with your current lender
Depending on the institution you have signed with, you may be able to extend your mortgage and secure a better rate. This is called early renewal, or sometimes the blend-and-extend option. This is because your old interest rate is blended with the rate of your new term. Depending on your lender, you might avoid having to pay a prepayment penalty, but administrative fees might still apply.
By law, your lender must be transparent on how it calculates your interest rate. By being proactive and factoring in all costs of breaking your mortgage, you can determine if your current lender still suits your needs. If not, it’s time to start shopping around for a new lender.
Option 2: Changing lenders
Sometimes when considering renegotiating, you’ll find a more favourable interest rate at a different institution. To sign with a different lender and secure a better rate, you’ll need to pay the prepayment penalty to your current lender and break your contract. This penalty can be pricey, so make sure to calculate how much you’ll save with the new rate, versus how much you’ll pay your current lender in fees.
A lower interest rate doesn’t necessarily mean you’ll save money. Breaking your mortgage contract can mean lots of administrative fees and penalties, some of which might take you by surprise if you haven’t done your homework. By consulting a qualified mortgage broker, you can get an expert’s opinion on your current finances and the going rates, helping you write a roadmap for your financial future.
If you have any questions about blended interest rates, prepayment penalties, or breaking your mortgage contract, don’t hesitate to contact Milka Lukacevic and the experts at The Mortgage Centre today.
Each year, thousands of mortgages are renewed in Canada. If your mortgage term is coming to an end in the next few months, it’s time to start thinking about renewing your contract. Fortunately, renewing your mortgage doesn’t necessarily mean you’ll be paying the same rate as before. In fact, your mortgage renewal can be an opportunity to negotiate with your lender, or even renew with a different institution for a better rate.
Whether you’ve signed for a term of one year, five years, or even longer, almost every homeowner will need to deal with the mortgage renewal process at some point. That’s why it’s so important to understand the steps in renewing, as well as your options in getting the best rate possible.
If your mortgage is with a federally regulated institution, the first step in the mortgage renewal process will be receiving a renewal notice.
Understanding your renewal notice
By law, your lender is required to issue you a renewal notice at least twenty-one days before the end of your term. Your mortgage renewal notice should have the same type of information as your mortgage contract, including:
This renewal notice will likely have a contract that you can sign and send back, locking you into another term with your lender.
For many homeowners, this renewal notice is the end of the line for them. More than half of Canadian mortgagors will accept the renewal with their current lender, and sign themselves onto another term without negotiating. In fact, most lenders bank on this fact. Many don’t want to deal with the ‘hassle’ of negotiation, and so your lender won’t offer the most generous terms, hoping that you’ll choose convenience over a better rate.
And the truth is, many people take this option – it seems so much simpler than re-qualifying for a mortgage with a new lender. But if you choose to sign your current lender’s renewal contract, you could be leaving a significant amount of money on the table.
Your mortgage renewal is the perfect opportunity to reassess your situation, and see if the terms of your contract are still working for you. If you’re considering making a change before your next mortgage term, there are some questions to ask yourself:
By answering these questions, it should become clear whether or not a new term with your lender is going to work for you. It’s not always easy to do this – looking so far into the future can be a challenge. Consider speaking with a mortgage broker to help you answer these questions, and explore new options for your next term.
For many of us, situations change, and the terms of our mortgage contracts are no longer ideal. This is why it’s so important to shop around the mortgage market before it’s time to renew, and ensure you get the best rate. You’re well within your right to negotiate with your current lender, and sometimes this is the best course of action. Loaning institutions will want to keep you signed on with their contract, and will often give you a break on your new term in the interest of keeping your business.
However, there may be a different institution with a rate that can’t be beat, or a contract that is otherwise more suitable. In the short-term, switching lenders can cost you money. There are more fees and charges, such as for appraisals or administrative costs, which can make switching lenders feel intimidating. However, if you sit down with your finances and the going rates, you might find that making the change can save a lot more money down the line.
If you’re not planning on moving anytime soon, you’ll be living in your home for years to come, paying down your mortgage as you go. If you have a long time before your mortgage is amortized, think of switching lenders as a long-term investment. Although there might be initial fees, the savings of a lower interest rate will add up over time, and more than pay for the upfront costs of switching lenders. As well, bear in mind that a lender may be willing to swallow some of these costs to get you in the door, so don’t forget to negotiate your terms, whether you’re switching or not.
Getting help from the pros
For many, the mortgage renewal process is a stressful time, with lots of questions and the worry that you’re not getting the best deal. That’s why it can be such a relief to sit down with a qualified mortgage broker, a professional that understands the mortgage market and process inside-out.
A mortgage broker can walk you through your current term, and compare it to what’s currently available from your lender and others. They will also take a look at your finances, and make projections on what kind of contract will work for you down the line. And while doing your own research is a crucial first step in locking in the best rate for your next term, nothing can replace getting help from the pros. So if you still have questions about the mortgage renewal process, reach out to Milka Lukacevic and the team of mortgage experts at The Mortgage Centre.
Let’s face it, no one really likes paying down their mortgage. Although it’s exciting to finally find your dream home, and even better to be paying a great rate on it, it’s most exciting for it to be paid off. By finding a mortgage with prepayment privileges, you can have that satisfaction and accomplishment of making your final payment that much sooner. Here’s how.
How do Prepayment Privileges work?
A prepayment privilege is an available option in some mortgages that allows you to pay more than the specified rate. Exact prepayment rate options vary amongst lenders, and some go as high as 20/20. Meaning that, in addition to a lump sum of up to 20% of your mortgage, you can up your usual payment by 20% as well.
Increasing your monthly payment:
Imagine you’ve just started making payments on a new home, worth $475,000. At the regular rate of 2.44%, this comes to a monthly payment of $1,583.33. Assuming your mortgage is amortized over 25 years, after 5 years of regular payment, you’ll have 20 years left, and have paid $69,499.80.
But, if you were to make your regular payment with a 20% increase, your monthly payment would go up to $1900 a month. After five years at this increased rate, you would have paid $114,000, and have cut roughly five years off of your mortgage amortization!
Increasing your monthly payments is a great way to slowly but surely speed up the process of paying off your mortgage. However, an additional 20% to a mortgage every month isn’t feasible for many homeowners. This is where lump sum prepayment privileges can come in handy.
Lump sum payments:
One of the advantages of prepaying for your mortgage with lump sums, is that the payment goes directly to the principal of the mortgage. What does this mean? For starters, you’ll immediately be paying less for interest in your monthly payments. Your amortization period will also decrease, just like it would if you were to increase your monthly payment.
Using the example above, you could hypothetically pay $95,000 a year for five years, and have your mortgage paid off twenty years earlier than you otherwise would. In an ideal world, we’d all be able to take advantage of this option. However, not everyone is able to put so much money toward a mortgage at one time. This is why most lenders offering prepayment privileges will allow lump sums to be paid in increments as low as $100.
Lump sum payments are a great option for those looking to pay off their mortgage as quickly as possible, without committing to an increased monthly rate. Major financial events such as promotions, bonuses, and inheritances can all be perfect opportunities to make lump sum payments on your mortgage, and to get one step closer to total financial freedom.
Choosing a mortgage
In general, a mortgage with prepayment privilege options can provide you with greater flexibility in how you pay your mortgage. However, every financial situation is unique, and some mortgages can be more or less suitable, depending on the needs of the homebuyer. If you’re already doing your research on prepayment privileges, you’ve taken the first step to ensure your success in finding the perfect mortgage.
For customized, specialized, and qualified mortgaging consultation and advice, look no further than Milka Lukacevic and the experts at The Mortgage Centre. We’re ready to help you secure the home, rate, and mortgage of your dreams, contact us today.
When it looks like rain, do you pack an umbrella? We all plan ahead, just in case things don’t work out as anticipated. Why should your mortgage, probably the most significant financial move of your life, be any different? A mortgage stress test is an analysis of your planned mortgage rate, possible increases in interest rates, and refinancing possibilities. These factors are compared to your anticipated income, allowing you to look ahead and see what you will able to afford. If you’re ready to get started with finding the right mortgage for you, a mortgage stress test is the
What is a mortgage stress test?
How do you find out the minimum monthly payment you’ll need to afford to qualify?
When calculating a stress test, there are many factors to consider. Current and future employment, changes in income or expenses, and shifting families can all play into the final figure of what you’re able to afford. Not only will complying with this test qualify you for the right mortgage, it will provide you with security and peace of mind throughout the term of your mortgage contract.
If the mortgage stress test is sounding a bit… stressful, don’t worry. Canadians everywhere face difficulties when applying for a mortgage due to a lack of research and preparation. If you’re looking into how to calculate your own mortgage stress test, you’re well on your way to owning a home, with financial stability and a great rate to boot. If you have questions about your mortgage rate, the Bank of Canada’s qualifying rate, stress tests, or anything else in the world of becoming a homeowner, don’t hesitate to contact Milka Lukacevic and the TMK team at The Mortgage Centre today!
If you’re in the market for a new home, you’ve probably heard talk of working with a mortgage broker. Many buyers, especially those in the market for the first time, make the mistake of purchasing without a broker, costing them time and money down the line. At the same time, many buyers opt to get their mortgage through their bank, which can potentially stop you from getting the best available rate. Here are just a few reasons why you should consider working with a mortgage broker.
There are lots of factors that may affect the mortgage that you and your broker decide upon. For instance, if you plan to move away in a few years, you may want to look at portable mortgages. Or perhaps you anticipate a major change in income in the next few years (pregnancy, a child moving away for school, or a promotion at work), in which case an interest-only loan, or adjustable rate mortgage may be more appropriate. Your case has countless facets and variables that make your mortgaging situation unlike any other. It deserves a careful and personal touch in whoever is securing your mortgage.
If you’re ready for your mortgaging needs to be addressed in an efficient, personalized, and helpful manner, look no further than Milka Lukacevic at The Mortgage Centre. You can count on The Mortgage Centre to provide objective, useful advice, that will help you get approved, and moved into your dream home, all the sooner. If you have any questions, or are ready to get started, don’t hesitate to contact Milka Lukacevic at The Mortgage centre today.
As long as you owe a balance at the end of your mortgage term, you will be required to renew it. Each renewal offers the opportunity to identify your financial goals and adjust or re-mortgage to find one that works for you. Here are some of the most important steps to take when it’s time to renew your mortgage.
1. Plan ahead
Most lenders will let you start an early mortgage renewal process 120 days (about four months) before the end of your current term. Make a note of this day in your calendar and be prepared to get started on finding a new rate. If you’re not ready to sit down with a mortgage broker, you can start researching online to see the options available to you. The more information you have, the more likely it is you can find a good rate for your household. For more information on finding a better rate, take a look at 5 Tips for Your Mortgage Renewal.
2. Identify any changes in your financial goals
Whether the birth of a child or a raise in salary, financial changes and challenges happen in every household. Your mortgage renewal date is the perfect time to reflect on your goals and any changes that have occurred since signing on to your last mortgage rate. If you’re planning to move in the next five years, want access to equity, or are retiring soon, you should factor these goals into any conversation with lenders, banks, and mortgage brokers.
3. Make a list of your ‘mortgage musts’
In tandem with any changes in your financial goals, identify if your needs for a mortgage have changed in your last term. Some of the questions you should be asking yourself are:
If the answer to any of these questions is yes, changes might be needed for your mortgage when you renew. Give special consideration to monthly prepayment options and penalties, as well as refinancing.
4. Be ready to renew within a month of the end of your term
Your current lender is required by law to send you a renewal notice, within a minimum of twenty-one days of the end of your term. This notice will have a renewal offer for the lender’s lowest posted rate,
which is guaranteed up until the maturity of your mortgage. However, your research should tell you whether or not this is the best rate available on the market. If your current lender’s offer doesn’t beat other options on the market, you have the right to negotiate a rate match.
5. Make your choice!
You’ve done your research, identified your financial goals and your ‘mortgage musts,’ and know what you’re looking for in a mortgage rate renewal. Whether you decide to stay with your current lender after a rate negotiation, or go through the process of switching renewals, it’s important to be decisive and to act in your best interest.
If you need help in identifying the best mortgage renewal option for you, get in touch with our team to get started today. Milka Lukacevic is your trusted and local Port Coquitlam mortgage broker.
For most Canadians, the biggest monthly expense is their mortgage payment, however, many homeowners opt to automatically renew their mortgage when their term is up. Rather than getting stuck in a mortgage that doesn’t work for you, take the opportunity to shop around. Here are five tips to get the best rate for your next mortgage renewal:
1. Start early!
Many mortgage holders make the mistake of starting their search for a new rate too close to the end of their term. This limits your options considerably and can sometimes leave you paying even more than before. For the best results, start looking four to six months before the end of your term, since this is the maximum amount of time that most lenders will guarantee a rate. If your current lender raises your rate, you have an option to fall back on, and if they drop it, you can use your options to negotiate a better rate.
2. Advocate for yourself
If you find a better rate, don’t be afraid to negotiate with your bank. If you don’t ask for a change in your monthly mortgage payment, the banks will happily charge you the same amount that you’ve been paying. Banks will also sometimes be more accommodating in negotiations if you’re willing to transfer accounts and investments to them (e.g. an RRSP).
3. Focus on all negotiable options
When looking for a new mortgage rate, many homebuyers get stuck in the trap of focusing solely on their interest rate. Other factors, such amortization period, rate type (fixed versus variable), and payment schedules can save you time and money down the line. When comparing mortgage options, ensure you’re looking at all these aspects to find the best mortgage renewal plan for you.
4. Do your research
Before even starting negotiations with your bank, do your homework on all the available rates that other lenders are offering. The more options you find, the more leverage you will have in negotiating your rate with a bank. Ensuring you are well-informed in considering mortgage options is a great way to find a better rate without the hassle of switching lenders.
5. Use a mortgage broker!
If you are inexperienced in the field of mortgage options, or simply don’t have the time to research and negotiate with various lenders, consider working with a trustworthy mortgage broker. A broker can do the hard work of research and negotiation, saving you money on your mortgage renewal. According to the Bank of Canada, homebuyers using a mortgage broker often pay less than those without.
Whether you’re renewing a mortgage or looking into getting your first mortgage, get in touch with your local Port Coquitlam mortgage broker, Milka Lukacevic.
For a first-time homebuyer, getting a mortgage is one of the most important steps. Many people getting their first mortgage may be entering with some unrealistic expectations. At The Mortgage Centre, we’re committed to helping every one of our clients own their dream home – that’s why we’ve compiled this list of expectations versus realities of getting a mortgage.
Expectation: You’ve saved enough for your down payment!
Reality: Often, first-time homebuyers come to their mortgage broker after saving for a number of years to amass a down payment, and learn that they’ve come up short. This can be a result of setting sights on a property that’s out of their price range, or having an unrealistic idea of how much a down payment should be.
As a general rule of thumb, for houses with a price of less than $500 000.00, you should be aiming to save at least 5% of the total price. Over 500,000 the minimum down payment requirement slightly changes ( 5% on the first 500K, and then increases to 10% of the remainder) Ideally, if you have 20% of the house price as a down payment you can avoid having a high ratio mortgage, as well as avoiding mortgage insurance premiums and have the option to chose a longer amortization period of 30 years rather than 25 years.
Expectation: Once you have a down payment, you’re ready to buy!
Reality: Though it’s easy to pull the trigger on buying a home the moment you’ve saved enough for a down payment, there are other costs that can be easy to forget. Some of these associated costs include:
These costs can rack up an additional 1-2% of your home’s price, so make sure to account them into your financial planning.
Expectation: Paying a mortgage is no different from paying rent.
Reality: When comparing your monthly rent costs to a monthly mortgage payment, at first glance it can seem like there won’t be a change! What many first time homeowners forget, however, is the hidden costs associated with upkeep and maintenance of owning your own home. When you own your home, you can’t rely on landlords or maintenance staff to take care of home repairs anymore – whether it’s as simple as changing a light bulb or is a larger fix.
To get a better idea of the monthly costs of owning a home, renters should try to practice saving additional money after paying other bills. Have a sit down with your budget, and factor in an additional 3-8% of your monthly costs to “practice” the strain of paying for your own home.
Expectation: The mortgage you qualify for is how much you should pay!
Reality: This can be one of the most dangerous misconceptions for new homeowners. When you get your pre-approval, it can be easy to start looking for homes at the max of your approved limit. By looking for homes that are below your qualified loan amount, such as properties needing renovations or other work, you can save lots of money and minimize your loan from the bank. If you keep an open mind during your house-hunt, you can find savings that can make all the difference down the line. A qualified real estate professional can assist you in narrowing down your searches to include the things that are most important to you in your search for your dream home.
With so many caveats in the mortgage process, it can be discouraging as a first time homebuyer in 2018 – but by following the tips in this guide, and saving diligently with realistic goals, your dream home is within your reach! If you need advice on how to attain your dream home and the mortgage process, call your Port Coquitlam mortgage broker Milka Lukacevic at the Mortgage Centre TMK TEAM
For all your Port Coquitlam mortgage brokerage needs, contact Milka Lukacevic at The Mortgage Centre.
When it comes to choosing the right Vancouver mortgage broker for you, it’s important to feel trusting and comfortable. In order to find you the best mortgage plan, a broker needs to learn as much about you and your finances as possible. Don’t hesitate to give your broker access to your financial statements and credit reports; the more they know about you, the more assistance they can be.
Here are five questions that YOU can ask your broker to learn more about your options in selecting a mortgage.
1. What’s the right type of loan for me?
Depending on a broker’s assessment of your finances, different loan types may be more appropriate than others for your income. Some of the most common loan types are:
Although a fixed-rate loan carries the cost of higher interest charges, the benefit comes in the form of a stable rate for the entirety of the loan. A fixed-rate loan allows for more accurate financial planning for the entire time of your mortgage repayment.
An adjustable-rate mortgage (ARM) loan starts with a fixed initial rate, after which the rate will ‘adjust,’ usually annually. ARM loans have the benefit of a lower initial rate, ideal for homebuyers with less up-front cash. However, the uncertainty of future adjustments after the initial period can make financial planning more challenging.
An interest only loan does not contain principal, meaning that the mortgage holder only pays the interest rate for a certain period of time. After this point (sixty months into a thirty year mortgage, for instance), the loan will be amortized to a higher monthly payment, without changing the total balance. This loan type is suited for first-time homebuyers, who may struggle with the initial months of mortgage payments compared to rental costs.
2. What can I expect my interest and annual percentage rates to look like?
An annual percentage rate, or APR, is calculated with an algorithm that factors in your interest rate with other lender fees, divided by the length of your loan’s term. Although an APR can provide valuable insight into some loan types, note that there’s no accurate way to calculate APR for an adjustable rate mortgage. In the case of an adjustable interest rate, ask your broker about:
3. What is my loan estimate?
Your broker must provide you with a loan estimate, which is an accurate outline of the costs associated with securing a loan. These estimates are typically delivered upon completion of your application, so ensure that you provide your broker or lender with:
4. What other costs can I expect to pay?
There are some costs and fees with getting a mortgage than can be difficult to predict without experience in mortgage application. Some of these ‘hidden fees’ include:
Make sure to ask your broker about these costs ahead of time, so that you aren’t met with any financial surprises down the line.
5. How much should I put on a down-payment?
Among many first-time homebuyers, there is an assumption that the larger the down-payment, the lower the mortgage rate. However, it is sometimes possible for a 5% down payment to receive the same monthly repayment rate as a 20% down payment. A mortgage broker can help you find the right amount to balance your current savings with your anticipated income down the line.
There are many things to consider when choosing a mortgage broker. You deserve the peace of mind that comes with being in good hands when making the largest financial decision of your life.
If you have any questions about loan types, down-payments, or anything else to do with securing a mortgage, get in touch with your local Port Coquitlam mortgage broker, Milka Lukacevic.
Whether you’re buying your first home, or an investment property in Vancouver, budgeting for a mortgage is crucial. Many buyers, especially first-time homebuyers, avoid this crucial step. There are many reasons you might be nervous to break down the numbers and take a look at your budget, whether it’s a lack of financial know-how, or reluctance to set limits on your spending. However, budgeting for a mortgage is an invaluable step in gaining long-term security, and ultimately, your dream home.
Although setting a budget may force you to tighten your belt in the short-term, you will experience the long-term benefits of financial freedom, and paying off your mortgage faster. Outlining a clear and accurate budget can help you to consciously make or break habits that will save you money, getting you moved in all the sooner. In many cases, taking the first step to establish a budget is the hardest part. Here are some simple steps to get started in tracking your spending and building savings for a mortgage.
1. Understand where your money goes
With so many of our daily purchases being made with debit or credit cards, finding records of where your money goes has never been easier. To start, take a look at your bank statements; at the very least, you should be looking at the last six months of your spending. The farther back you analyze your spending, the more accurate your budget will be for the coming months or years. Take note of recurring purchases, such as bills, groceries, and car payments. Combine this daily spending with larger one-time purchases, such as vehicle repairs and program enrollments. Although these larger purchases are less predictable, patterns often emerge given enough time.
2. Compare your spending to your income
When you have a comprehensive list of your spending for the last six to twelve months, compare it to your household’s annual income. If you’re making more money in this period than you’re spending, great! From there, consider saving for your mortgage to be just another expense, just as you would for your weekly grocery shop. Calculate the maximum amount you can comfortably contribute to your mortgage fund and stick to it as much as possible. Budgeting requires a lot of discipline, and the more consistent you are about your saving, the sooner you’ll be moving into your new home.
3. Find ways to maximize your savings
If you’ve crunched the numbers, and your maximum monthly savings won’t be enough to get a mortgage on your timeline, it’s time to make some changes. This is one of the hardest parts of setting a budget: identifying places where you can cut back or minimize costs in your day-to-day spending. Whether it’s the price of fueling more than one vehicle, paying for parking, or your weekly lunch on the town, there are probably places in your spending habits that can be improved to help you meet your financial goals. At the same time, make changes that are meaningful to your net income. The thirty-cent
difference between red and green grapes will probably not factor heavily into your ability to save for a mortgage. Negotiate your phone, utility, or credit card bills, consider taking public transit to work, make lunch and coffee at home rather than eating out. With enough time and discipline in changing these habits, you will notice more and more money left over at the end of the month. Resist the urge to splurge and do your future self a favour by saving it.
4. Change your perspective on spending
Many view their spending as a matter of expenditure – whether they can afford it or not. However, the truth is, every purchase is a trade-off. Whether you’re exchanging money for time or comfort, make sure that every purchase is justified, and remember your long-term goal of debt-free homeownership. Most financial experts agree that spending wisely is far more important to wealth accumulation than employment income. In other words, when it comes to accumulating savings for a mortgage, the change starts with you.
If you have any questions about budgeting for a mortgage, or if you’re looking for a mortgage approval, contact Milka Lukacevic, your trusted Port Coquitlam Mortgage Broker today.