Home owners who have lots of equity in their house, might be looking for ways to get access to that equity without having to re-finance their house every time a need arises for some additional money.
A mortgage with a line of credit portion is a great product for some. Here are some typical reasons why you might want to get access to your home equity: buy investments, stocks, bonds, RRSPs, renovate your home, pay for education costs, or other reasons.
The example below shows a total home value of $380,000 divided into three sections: the top portion means that 20% of your home value must remain as equity and cannot be financed. The middle portion represents the line of credit portion. The line of credit portion can go up to 80% of the value of the home. The bottom portion is your actual mortgage loan portion today, that you decide to convert over, when you move into this product. Using the example of a home owner who has a home valued at $380,000......This client has a mortgage balance right now, with a lender, at $210,000. By moving into the mortgage + line of credit product, the current mortgage amount of $210,000 is set up as either a FIXED mortgage, or a VARIABLE rate mortgage. The borrower can then use anything over this set mortgage amount, all the way up to 80% of the home value.
Home Value for this illustration is $380,000
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20% cannot be financed
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$ 94,000 MAX Line of Credit
portion Variable rate
**Prime + 1% **2.25% + 1% = 3.25%
Line of credit can be increased up to 80% of the value of the home
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Mortgage balance today $ 210,000
Variable rate 5 year term
Or
Fixed Rate 2, 3, 4, 5, 7, 9 and 10 year terms
5 yr fixed = 3.69%
variable = **Prime 2.25% + 0.80% 3.05%
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It is important to mention....... this kind of mortgage product requires a very disciplined borrower as reckless spending or improper investing strategies could have a very negative outcome, a higher debt and possibly the inability to re-pay the debt.
NOTE: Mortgage rates are effective as of May 17, 2009. **The variable rate amount can go up or down depending on current posted Prime Rate. Mortgage rates are subject to change without notice.
This blog was written by Elizabeth Blair, a licensed Mortgage Agent with Mortgage Edge in Richmond Hill, Ontario. Elizabeth services mortgage clients in Mississauga and all over the Greater Toronto area.
You can contact Elizabeth directly by phone at (905) 510-5785 by email at eblair@mortgageedge.ca or you visit her website at: www.missmortgage.ca
Elizabeth is licensed with the Financial Services Commission of Ontario and is also a Member of IMBA (the Independent Mortgage Brokers Association of Ontario) www.imba.ca Lic # M08005880 / Brokerage Lic # 10680
Are you buying a house and maybe just totally frustrated now, with your lender, and all of their requests for more documents?
Let me shed some light on a popular question about the whole requirement to provide “proof of down payment” and the real reasoning behind it.
All Canadian banks, have implemented very strict policies to cover this subject called, “Anti-Money Laundering”. These policies have recently been strictly enforced and monitored because of “mainly” the back-door terrorist financing. With this in mind, you can probably see why there is such vigilant watch placed on the movement of money, especially any border-to-border movement. Canadian laws have been put into place to ensure all banks and lenders comply and that they all have consistent standards to ensure that questionable activities and money transfers cannot occur.
As you know, purchasing a house requires the movement of a very large amount of money and therefore, the monitoring of mortgage funds, also falls under that same strict scrutiny. The lender will always need to know where the funds came from, where the funds reside now, and what is the exact ownership of those funds. As long as a borrower can provide legitimate documents (bank statements, investment accounts, and other proof) that they have sufficient funds, here in a Canadian bank account or investment account, to satisfy the down payment and the closing costs, then a lender is fine with this.
Here is what a mortgage lender will typically ask for:
If you are pulling funds from an existing savings or chequing account, the lender will want to see print-outs, with your full name and address, bank name, and account number, going backwards from the current date. That account should show your down payment plus your closing costs there, and that these funds have been accumulated there. If there are large transfers, into your account, these will need to be explained to the lender. For example: if a lender sees a large deposit of say $120,000 going into your bank account, the lender has the right to ask where it came from and be prepared to even go after additional documents to prove the movement of the money. Lets say, you have recently moved to Canada, from the USA. You sold a house in the USA, and you had a $120,000 deposit made into your bank account (from your sale proceeds). This $120,000 shows up on your 3-month bank statement window print-outs. Yes, the lender can ask you to provide the proof of the sale document (a copy of the sale agreement) and perhaps even a copy of the lawyer’s statement of adjustments which would clearly demonstrate what funds you would have left over from the property sale.
If you are pulling funds out of your investment accounts, the lender may want to see copies of those investment accounts.
If you are pulling funds out of an existing RRSP account, under the government Homebuyer’s Plan, you should provide a copy of the RRSP statement, plus a copy of the completed and signed RRSP withdrawal form.
As frustrating as the documentation process may seem to a borrower, it is really part of the extreme due diligence that lenders have had to put into place to protect their mortgage “book of business”. It is best to fully co-operate with your banker or broker and provide the documents that are being requested to ensure a smooth financing process.
This blog was written by Elizabeth Blair, a Licensed Mortgage Agent with Mortgage Edge in Richmond Hill, Ontario. Elizabeth services mortgage clients in Mississauga and all over the Greater Toronto area.
You can contact Elizabeth directly by phone at (905) 510-5785
by email at eblair@mortgageedge.ca
or you visit her website at: www.missmortgage.ca
Elizabeth is licensed with the Financial Services Commission of Ontario and is also a Member of IMBA (the Independent Mortgage Brokers Association of Ontario) www.imba.ca Lic # M08005880 Brokerage Lic # 10680 Head office is located at: 15 Wertheim Court, Suite 210, Richmond Hill, Ontario, Canada.
If you have a client who seems to be undecided on whether they should deal with their bank or a mortgage broker, here is a short summary of what some compelling truths are, around this subject.
A mortgage broker acts as a MEDIATOR or a representative between the client and the bank. Here are some straight-forward questions to present to a client:
a) what if something goes wrong?
b) who will represent you?
c) will you be able to navigate through escalation channels to get something done?
d) will you be able to successfully negotiate what you want on your own?
e) what if the lender says no?
f) how easy will it be for you to get the deal you want from another bank and on your own?
You may be asking, so how does a broker mediate between the client and the bank?
It is easy to quickly assess that any individual’s business, is truly like a small rain-drop in an ocean, for a bank but mot so with a broker’s office. Mortgage Broker offices generate enormous volumes of business for lenders and therefore with this huge purchasing power, comes privilege.
If for example, an office has 50 representatives, who are actively carrying on the business of dealing in mortgages. Lets say that each representative has placed 2 million dollars of mortgages with a particular lender. The brokerage now has a combined volume of 100 million dollars of business with that particular lender. Now that kind of business volume will make anyone sit up and pay attention, agree? So essentially the high volume brokerage has now secured some real benefits for the client:
1) the lender may now pass along additional mortgage rate discounts to those brokerages who have reached a particular sales volume;
2) a large brokerage will immediately receive dedicated focus and attention from individual lenders, for example, dedicated underwriters. A dedicated underwriter means that a submitted mortgage deal is reviewed quickly and this is essential to maintain the service level to the demands of a busy brokerage;
3) access to senior levels of management. When a lender has a particular brokerage that brings in substantial volumes of business, there is an extremely high importance level based upon that business unit and this is a simple formula. High volumes of business demand greater care as the brokerage now has the ability to move business elsewhere if service levels and satisfaction levels are not adequately maintained to satisfy the brokerage. For the client, this means that a difficult situation can be escalated quickly to senior management and issues can be reviewed and approved that an individual client would not easily be able to accomplish on their own.
This article was written by Elizabeth Blair, a Licensed Mortgage Agent with Mortgage Edge in Richmond Hill, Ontario. Elizabeth services mortgage clients in Mississauga and all over the Greater Toronto area. You can contact Elizabeth directly by phone at (905) 510-5785 by email at eblair@mortgageedge.ca or you visit her website at: www.missmortgage.ca Elizabeth is licensed with the Financial Services Commission of Ontario and is also a Member of IMBA (the Independent Mortgage Brokers Association of Ontario) www.imba.ca Lic # M08005880 Brokerage Lic # 10680 Head office is located at: 15 Wertheim Court, Suite 210, Richmond Hill, Ontario, Canada.
Mortgage rates.....you just keep coming down!
Realtors: If you have a client who needs a mortgage, please call me asap to get this great rate.
3.59% on a 5-year fixed rate - for Canadian applicants only and some conditions apply.
Elizabeth Blair, Mortgage Edge
Phone: (905) 510-5785
Email: eblair@mortgageedge.ca
Website: www.missmortgage.ca
License # M08005880
Hi all, I just created a new Group and would sincerely appreciate if you could take a moment to have a look and see whether you might consider joining. Thanks!
Here is a link to the site:
http://activerain.com/groups/mortgagemarketupdates
This notice was posted by Elizabeth Blair, Mortgage Edge.
www.missmortgage.ca
Elizabeth Blair at Mortgage Edge has maintained the highest integrity and commendable status, in an industry that is presently undergoing incredible scrutiny and change.
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