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Susan Lougheed

Susan Lougheed

Broker

Phone: 905.877.8262

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Buyer's Guide: Mortgage Calculators

If you’re thinking of buying a home or transferring or refinancing your existing mortgage, use these handy calculators to:
 

  • Figure out how much you can afford to spend on a home.

  • Determine what your mortgage payments will be.

  • Compare different ways of paying your mortgage off faster.

  • Add lump sum or top-up payments to your mortgage calculation.

  • See your amortization schedule (which provides a breakdown of principal and interest payments for the life of the mortgage)
     
  • Determine the amount of land transfer tax on your purchase (purchases in Toronto are subject to a provincial and municipal tax and first time homebuyer get a savings)


 

Land Transfer Tax Calculator

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Homebuyer's Guide: Mortgage Pre-approval

About a mortgage Pre-approval
A mortgage pre-approval is a written commitment from a lender that you will get a mortgage for a set amount at a set interest rate, locked in for 60-120 days, depending on the lender. The commitment is subject to a financial assessment and property appraisal. This service is always free and without obligation.

A pre-approved mortgage gives you an edge. Before you even start house hunting, you’ll know how much you can afford, your interest rate, and your monthly payments. With your financing already mapped out, you can concentrate on finding the right home in your price range.

A pre-approved mortgage shows you’re a serious buyer. In a situation where several people are bidding on the home you want, you may decide to offer the list price and beat out earlier offers.

Please contact me before you go to the bank as I can put you in touch with a great local contact.
 

Homebuyer's Guide: Helpful Financing Tips

Bi-weekly & weekly payment options

Most mortgages have the option to allow payments to be made on a weekly or bi-weekly basis. This option may be desirable for two reasons. The first is it can save you money as you can expect to pay off your mortgage about 4 years sooner. This can save you dramatically over the life of your mortgage. The other reason why these options are so popular is that if your employer pays you on a weekly or bi-weekly basis, you can simplify your budgeting by making the payment line up with the way you paid.
 

Making Extra payments

Paying extra amounts on your mortgage can make a big interest saving over time. When we select a mortgage company, privilege payments options are something that we look for. A 20% privilege payment will allow you to pay off up to $20,000 per year on a $100 000 mortgage. It is important that the privilege payment also be flexible to allow you to pay smaller payments on the mortgage and as often as you wish. An extra $1000 periodically paid on a mortgage can help you become mortgage free faster.
 

Reducing the CMHC fees on your purchase

When you require a mortgage for more than 80% of the purchase price of a property, that mortgage must be insured by Canada Mortgage and Housing (CMHC) or GE Mortgage insurance. The premium charged by these company`s decreases as the down payment increases. When you finance your property at 95%, a premium of 3.75% is added to the mortgage. By increasing the down payment to 10% of the purchase price the premium can be reduced to 2.5%. If you can put down 20%, you can avoid any additional insurance fee. Depending on your situation there are ways that you can structure this financing to avoid the CMHC or GE insurance premium.
 

Advantages of Bigger Down Payments

As mentioned above, when you put a 20% down payment on your purchase you can avoid the CMHC premium. More importantly the larger the down payment, the lower the amount of interest you will pay over the life of your mortgage. It is important to note that it may not be wise to stretch yourself to increase your down payment and end up borrowing on credit cards or a line of credit at a higher rate.
 

Short Term Rates vs. Long Term Rates

The options for mortgages available can be very confusing for most mortgage shoppers. Terms for mortgages vary between variable and fixed rate, 6-month terms to 10 year terms. Taking a variable or floating rate mortgage can have savings. Typically the shorter the term or guarantee of the rate, the lower the rate will be. This does not always happen, depending on the market place and the economy, but history has shown that short-term rates tend to be lower than long-term rates. The up side of variable rate is the strong potential for interest rate savings. The down side is the fact that you are accepting the interest rate risk without a guarantee. If you are considering a variable rate mortgage you need to look at your own risk tolerance, and your cash flow available to deal with potential increased payment. Considering projections of rates and where we see interest rates heading can also be important in this decision. Make sure you talk to an expert when you are making this decision.

Homebuyer's Guide: Mortgage terms explained

Mystified by all the financial jargon used to describe mortgages? Here’s a quick overview of key terms to help you understand the language - and make the process clearer and easier.

Mortgage. A personal loan used to purchase a property. You pledge the property being purchased as security for the loan.

Down payment. The portion of the purchase price that you pay initially as a lump sum; the rest is financed by your financial institution. A down payment is generally up to 25% of the purchase price.

Principal. The amount of your loan.

Interest. This is added to the amount you have borrowed to compensate the lender for the use of their money. Your mortgage is repaid in regular payments which are applied toward the principal and interest.

Term. The number of months or years the mortgage contract covers (typically six months to five years), during which you pay a specified interest rate.

Amortization. The number of years it will take to repay the mortgage in full. (This is usually longer than the term of the mortgage.) For instance, you may have a five-year term amortized over 25 years.

Equity. The difference between the value of your property and the amount you still owe on the mortgage.

Conventional mortgage. Offered to buyers who make a down payment of 25% or more of the appraised value or purchase price.

High ratio mortgage. Offered to buyers with a down payment of less than 25%. This type of loan must be insured against default by the federal government through an approved private insurer (the lender usually arranges this). The borrower pays a one-time insurance premium to the insurer (ranging from 0.5% to 3.75% depending on the size of the loan and value of the home; additional charges may also apply). The premium is usually added to the principal amount of the mortgage. If you default on your mortgage, the lender is paid by the insurer.

Fixed rate mortgage. Carries a set interest rate for a specific period of time (the term of the mortgage). The regular payment of the principal and interest remains the same throughout the term. The benefit of choosing this option is that you are protected if interest rates rise.

Open mortgage. Gives you the flexibility to make unlimited pre-payments or lock into a fixed term at any time. This loan’s interest rate changes periodically, and is tied to the prime rate. This type of mortgage is popular when interest rates are expected to fall or remain stable.

Portability. If you are selling your home and buying another, this option allows you to take your mortgage - with the same term, rate and amount - and apply it to your new house. If your mortgage isn’t portable, don’t sign for a longer term than you’re likely to stay in the house or you could wind up paying a penalty to break the mortgage agreement.

Assumability. This feature allows the buyer of your house to take over or "assume" your mortgage. If your mortgage has a fixed interest rate lower than current rates, it could be an attractive selling feature.