With the uncertainty of job loss racing through many people’s minds these days, taking a proactive approach to this issue by putting mortgage payments aside while you’re still actively employed can help set your mind at ease.
Planning for the future and potential job loss is one of the most important undertakings you can make to ensure you can pay your mortgage in an uncertain economy.
Dominion Lending Centres Mortgage Professionals often suggest you put money aside each pay period so you can place six to 12 months’ worth of mortgage payments into a short-term GIC as security for a possible job loss.
And, best of all, if your job remains secure, you can take the money out of your GIC and make a pre-payment back on your mortgage on your anniversary date, which can end up saving you thousands of dollars in interest payments.
Refinancing to access your home’s equity
But if it’s not plausible to save money each pay period, refinancing to access the equity you’ve already built up in your home is another valid option for planning ahead in uncertain times.
In addition to freeing up money to store future mortgage payments in a GIC, some of the money can also be used to pay off high-interest debt – such as credit cards – and get you and your family off to a fresh financial start.
You will find that taking equity out of your home to pay off high-interest debt can put more money in your bank account each month.
And since interest rates are at historic lows, switching to a lower rate may save you a lot of money – possibly thousands of dollars per year.
There are penalties for paying your mortgage loan out prior to renewal, but these could be offset by the extra money you acquire through a refinance.
With access to more money, you will be better able to manage your debt. Refinancing your first mortgage and taking some existing equity out could also enable you to make other investments, go on vacation, do some renovations or even invest in your children’s education.
Keep in mind, however, that by refinancing you may extend the time it will take to pay off your mortgage.
Options for paying your mortgage down quicker
There are many ways to pay down your mortgage sooner that could save you thousands of dollars in interest payments throughout the term of your mortgage.
Most mortgage products, for instance, include prepayment privileges that enable you to pay up to 20% of the principal (the true value of your mortgage minus the interest payments) per calendar year. This will also help reduce your amortization period (the length of your mortgage), which, in turn, saves you money.
Another way to lower the time it takes to pay off your mortgage involves changing the way you make your payments by opting for accelerated bi-weekly mortgage payments. Not to be confused with semi-monthly mortgage payments (24 payments per year), accelerated bi-weekly mortgage payments (26 payments per year) will not only pay your mortgage off quicker, but it’s guaranteed to save you a significant amount of money over the term of your mortgage.
If, for instance, you have a $100,000 mortgage, an interest rate of 5% and an amortization period of 25 years, your monthly mortgage payment would be $581.60 and your total payments for a year would be $6,979.20 ($581.60 x 12).
To understand the savings accelerated bi-weekly mortgage payments can make, take the monthly mortgage payment of $581.60 and divide it by two ($581.60 ÷ 2 = $290.80). Next, take that payment and multiple it by 26 to arrive at your total payments for the year ($290.80 x 26 = $7,560.80).
As you can see, by using the monthly mortgage payment plan, you’ve made payments totalling $6,979.20 for the year, while using the accelerated bi-weekly mortgage plan you’ve made payments totalling $7,560.80 – a difference of $581.60.
Basically, with accelerated bi-weekly mortgage payments, you’re making one additional monthly payment per year.
Using this example, you would reduce the amortization on your $100,000 mortgage from 25 years to just over 21 years and your total savings on interest over the life of the mortgage would be just over $12,000.
By refinancing now and paying off your debt or putting money aside for future mortgage payments, you can put yourself and your family in a better financial position.
About the Purcell Mortgage Team:
The Purcell Mortgage Team are an industry-leading pair of mortgage professionals who have been serving Calgary for several years. JoAnne Purcell was ranked within the Top 50 Canadian Mortgage Professionals in the CMP Magazine. If you are in need a reputable calgary mortgage specialist, please contact us today!
The Purcell Mortgage Team are experts on Calgary mortgages!
About the Purcell Mortgage Team:
The Purcell Mortgage Team are an industry-leading pair of mortgage professionals who have been serving Calgary for several years. JoAnne Purcell was ranked within the Top 50 Canadian Mortgage Professionals in the CMP Magazine. If you are in need a reputable calgary mortgage specialist, please contact us today!
The Purcell Mortgage Team are experts on Calgary mortgages!
Think You Cannot Get a Mortgage When You are Self-Employed? Think Again!
2009-11-02 | 13:19:25
Categories: calgary mortgage broker, mortgage advice
A common myth that is very prevalent is that people who are self-employed, or who work on a
commission basis, can not get a mortgage/have difficult time getting a mortgage. While this myth is true in certain situations, it is not a universal rule. In fact, obtaining a mortgage when you’re self employed can be a very streamlined and simple process assuming that you have certain things in order. There are many people in Calgary who are self-employed who enjoy the same access to mortgage products that those who are not self-employed do.
Things Necessary to Obtain a Mortgage When Self-Employed
As previously mentioned, it is possible to obtain a mortgage when you are self-employed or on commission. If you are newly self-employed the process will be different than if you have been self-employed for a number of years.
If you are newly self-employed (under three years) it is important to have the following in order:
- An excellent credit rating – Lenders will look at your “beacon score” first, before assessing other things such as equity, assets, down-payment, etc. A score of 600 or more is considered “good”, while a score of 680 or more is considered “excellent”. Unless you have a significant down-payment your credit will need to be very good. If it isn’t, you can raise your score by maintaining a low balance on your credit cards, paying more than the minimum payments on your loans, and reducing your overall debt to income ratio by eliminating debt. Unfortunately, this process does take time.
- Your last two NOA’s (Notice of Assessment) from Canada Revenue Agency – Your NOA is your proof to the lender that you have filed and paid taxes on the income that you are presenting to them. In many cases you will need to ensure that you have your last two NOA’s (at least), and that the income shown on your NOA matches what you are presenting to the lender, but with stated income mortgages offered by some lenders if your NOA’s do not match its not game over.
- A down payment – Unfortunately, most (if not all) lenders will not lend to someone who is self-employed without at least 5% of the purchase value as a down-payment. If you have excellent credit, a 5% down-payment should be sufficient (assuming you don’t have a large debt overhead). If your credit rating is still good (over 600) but not as high as it could be, a down-payment of 10% or more may be required.
If you have been self-employed for a number of years, and have maintained good credit, you will find that a good Calgary mortgage broker will be able to get you a mortgage without too much fuss. Remember, those who are self-employed are a larger risk for a lender since there is no guarantee of income.
What To Do If Your Local Calgarian Bank Turned You Down
You will find that banks do not like to offer mortgages to those who are self-employed as earnestly as they will to others. However, if you are using a mortgage broker who specializes in Calgary mortgages, your options are not as limited as they may seem. Remember, a bank is only able to offer you its particular set of products and services- this fact in itself can be very limiting. A mortgage broker is able to offer you a wide range of products and services that extend across a platform of multiple lenders.
If you aren’t sure if a mortgage broker will benefit you, read our article on what a good calgary-area mortgage broker can do for you.
About the Purcell Mortgage Team:
The Purcell Mortgage Team are an industry-leading pair of mortgage professionals who have been serving Calgary for several years. JoAnne Purcell was ranked within the Top 50 Canadian Mortgage Professionals in the CMP Magazine. If you are in need a reputable calgary mortgage broker please contact us today!
The Purcell Mortgage Team are experts on Calgary mortgages!
What A Good Mortgage Broker Will Do For You
2009-10-30 | 12:36:27
Posted: October 30, 2009 Categories: calgary mortgage broker, mortgage advice
Do you remember the days when getting a mortgage was easy? Simply show up to your favourite broker or banks office with a pay stub and a decent credit score, and after signing a few papers, you walked out the door with a mortgage! Okay, perhaps it was never that easy, but the global financial crisis has effectively ended the days of banks handing out 108% mortgages.
Lenders, in a bid to act more responsibly, have tightened their lending criteria. However, this doesn’t mean that you need a perfect credit rating or no outstanding debts to qualify for a mortgage. Being savvy, and following the advice of a good mortgage specialist, will net you a mortgage that is perfect for what you need it for (not all mortgages are the same). When it comes to home loans, knowledge is power.
Confused? Talk To Your Mortgage Broker.
If you are unsure about home loans it is always a good idea to talk to your mortgage broker. As with just about anything, there are many ways that you can borrow money- and that money doesn’t always have to come directly from a bank. Your mortgage broker is a specialist and knows the ins and outs when it comes to finding a suitable lender for you. Not only that, but your mortgage broker is a trained professional who knows the Calgarian marketplace.
Your goal as a home buyer is to find the ideal home for you needs. All factors, from price to square footage, play a role in that. Your mortgage broker can do a lot more than simply connect with you with a lender; mortgage brokers can offer sound financial advise in regards to lending products that are tailor made for your specific situation. After all, if you are a first-time buyer with no equity your product needs may be different than someone with a lot of equity built up.
How a Mortgage Broker Operates in Calgary
Calgary is a big city, both by geographical size and by population. Because of this fact there are dozens of mortgage brokers that can assist you in finding a lending solution. All mortgage brokers will follow a structured process:
- Initial consultation – Your mortgage broker will discuss your lending needs and circumstances based on the information that you provide. This consultation will determine your needs and long-term goals, ensuring that your mortgage broker finds the best lending solution for you.
- Rate negotiation – A good mortgage broker, such as the Purcell Mortgage Team, will not simply pick a lender for you. Instead, they will negotiate with lenders until they have a solution that fits your needs. Lenders, when vying for your business, will often give a mortgage broker interest rate cuts and drop various fees and charges- benefits that are not usually available to you without one.
- The Approval Process – Once your broker has found the right loan product for you the broker will complete the necessary paper work and send it off to the lender. You may need to provide some documents/information, but the majority will be handled by your broker. Most lenders will get back with a pre-approval within a few days, with a formal approval taking up to two weeks (depending on the lender).
About the Purcell Mortgage Team:
The Purcell Mortgage Team are an industry-leading pair of mortgage professionals who have been serving Calgary for several years. JoAnne Purcell was ranked within the Top 50 Canadian Mortgage Professionals in the CMP Magazine. If you are in need a reputable calgary mortgage broker please contact us today!
The Purcell Mortgage Team are experts on Calgary mortgages!