The following are changes that have been made by the Federal Government you will need to be aware of:
February, 2010: Responding to concern that some Canadians were borrowing too much against the rising value of their homes, the government lowered the maximum amount Canadians could borrow in refinancing their mortgages to 90 per cent of a home’s value, down from 95 per cent. The move also set a new 20-per-cent down payment requirement for government-backed mortgage insurance on properties purchased for speculation by an owner who does not live in the property.
January, 2011: The Conservative government under Stephen Harper tightened the rules further, dropping the maximum amortization period for a high-ratio insured mortgage to 30 years. The maximum amount Canadians could borrow via refinancing was further lowered to 85 per cent.
June, 2012: A third round of tightening brought the maximum amortization period down to 25 years for high-ratio insured mortgages. A new stress test was also introduced to ensure that debt costs are no more than 44 per cent of income for lenders seeking a high-ratio mortgage. Refinancing rules were also tightened for a third time, setting a new maximum loan of 80 per cent of a property’s value. Another new measure limited the availability of government-backed insured high-ratio mortgages to homes valued at less than $1-million.
When you refinance your mortgage, you usually pay off your original mortgage and sign a new mortgage. With a new mortgage, you again pay most of the same costs you paid to get your original mortgage. These can include an appraisal fee, the CMHC or GE insurance premium (where applicable) and any existing mortgage discharge penalty. The lender for the existing mortgage will charge you a penalty if the mortgage is paid prior to the end of the term.
The amount of penalty that you will pay is either: three months interest penalty or the interest rate differential; whichever of these two figures is greater. If you are paying off your mortgage before the maturity date, most lending institutions charge three months interest penalty. Your present mortgage balance is multiplied by your current interest rate and multiplied by three Interest Rate Differentials. The interest rate differential means the difference between the interest rates on your mortgage contract compared to the rate at which the lending institution can presently re-lend the money.
To find out the exact amount of the penalty you should contact your current mortgage lender.
The basic fundamental of refinancing is to reduce your unsecured high interest rate monthly payments into a secured low interest rate mortgage or loan payment. Your Bank rate on unsecured debt is higher than on your mortgage in order to compensate for the higher risk of loss if you default. We have an extensive network of institutional and private lenders who can approve mortgages based on different levels of employment stability, income, credit history, appraised value and marketability of the subject property. We deal with three categories of lenders:
- “A” lenders; whose lending decisions are based on income (provable), credit report, property value and marketability that will fit their low risk lending guidance, providing the best discounted rate.
- “B” lenders; whose decisions are based on the financial logic that “the deal should make sense”, meaning the lender will analyze the necessity and reasons for refinancing as well as to what degree the refinancing will help the borrower to improve their financial position. It will also depend on the lender’s attitude toward refinancing. Lender will look for past credit history as well current employment income and stability.
- “C” lenders; private lenders for unqualified deals where the lending decisions are strictly based on property value, marketability and current income (no historical proof-of-income requirements); rather, the lender would like to logically see how the mortgage payment would be paid.
“A” lenders will provide the best-discounted variable or fixed mortgage rates with the best options in the market.
“B” lenders’ lending rates are based on the credit risk factor of the borrower (credit score from Equifax or Trans Canada). These lenders’ lending decisions for self-employed borrowers who can not verify their income are based solely on the credit report. If the score is over 640, first mortgage rate is from PRIME RATE allowing second mortgage up to 85% of market value of secured property for refinancing or 90% for purchases. There is no required NOA, Business statements.
“C” lenders are for borrowers with slow credit and past bankruptcies whose credit score is below 500. The lender’s decision for lending up to 85% is based on the value and marketability of a secured property and the borrower’s ability to support the mortgage payments based on current income. Our lender products are: First and second mortgages – up to 100% of the market value of the property. Slow credit and past bankruptcies up to 90% based on the appraised value of property and current income of the borrower that will support the mortgage payments. 100% refinancing of the market value of a property based on the borrower’s household income verification and credit report (minimum score from 500). Contact us for more options.
Business Line of Credit
If you have been an established business owner for at 2 years, you can get a Business Line of Credit for up to $30,000.00. Longer, and you may be eligible for as much as $100,000.00. We can connect you with a Business Line of Credit – based on your credit history (minimum score of 700) without any need for a business plan or financial statement. This product is provided by an “A” lender.
In today’s financial market, every institution has its specific and chosen lending guidelines. At Genesis Associates, our service is in finding you the right lender for your unique situation. We have extensive experience in arranging qualified and unqualified deals. Even if you are experiencing weak credit or low income, give us a call and we will attempt to secure the funds you require. We will find the best lender for your current financial picture, accounting for such things as your properties equity, your past record and even your promise of performance.
Self-Employed and Self-Contracting
As the recent trend in self-employment continues, there are increasingly more people finding it difficult to qualify for mortgage financing. We can help by working with you to present a proper financial picture to obtain a successful approval. We have a number of lenders who will lend funds based on your credit history up to 90% of the market value of secured property for refinancing and up to 90 % for purchases.
There is no need for proof of income. The decision will be based on the financial logic that “the deal should make sense”.
Financing Bad Credit Problems, Past Bankruptcies, Unqualified Deals
Did you know that some of the banks would never approve a discharged bankrupt application while others may? Different credit problems, we will find the lenders that best suit your current financial picture and provide you with a successful approval. At Genesis Associates, a mortgage consultant will prepare reasons for credit problems, restructure a new payment plan and submit it to the lenders to get you approved!
The easiest way to reduce the interest costs on a mortgage is to pay it off sooner. Here are four ways this can be done:
- Increase Payment Frequency – Contact us about how paying weekly or bi-weekly, rather than monthly, can save a significant amount of interest.
- Prepay – Some institutions offer up to 20-25% of the original principal amount of your mortgage anytime during each year of the term of the mortgage, without penalty or administration fee. Contact us for more info.
- Increase Payments – Once each year during the term, institutions offer mortgage payments that may be increased by up to 15-20% of the payment originally established for the term of the mortgage without penalty or administration fee. Contact us for more info.
- Amortization Period – Simply defined, this period of time, measured in years, is the maximum length of time it would take to completely pay off a mortgage. By reducing the amortization the mortgage payments will increase; however, the total interest paid against the mortgage will decrease. Contact us for a direct comparison.
If you are thinking of refinancing your high-rate first mortgage, you might want to consider either a low fixed-rate 5-year term mortgage, or a fixed-rate or adjustable-rate mortgage with cap or no cap on interest rate increases and line of credit. You might want to switch to a fixed-rate mortgage or to an adjustable-rate mortgage where there are many options that can reduce your mortgage amount during the term.
If you are thinking about refinancing your mortgage and all credit card and loan debts, there are two options you may want to consider:
Option 1. Discharge the first mortgage and arrange a new first mortgage with a lower interest rate. Remember, if a new first mortgage amount is higher than 75% of the market value of a secured property, then a CMHC or Genworth Insurance premium will apply.
Homeowner mortgage loan insurance premiums vary according to loan-to-value ratio.
Effective July 14, 2003
|Loan Amount as a % of the Value of the Home (LTV)||Purchase Premium on Total Loan||Premium on Increase to Loan Amount for Portability and Refinance *|
|Up to and including 65%||0.50%||0.50%|
|Up to and including 75%||0.65%||2.25%|
|Up to and including 80%||1.00%||2.75%|
|Up to and including 85%||1.75%||3.50%|
|Up to and including 90%||2.00%||4.25%|
|Up to and including 95%||3.25%||4.25%|
* For Portability and Refinance, the premium is the lesser of two amounts: the premium on the increase to the loan amount or the purchase premium on the total loan. In the case of Portability, a premium credit may be available under certain conditions to reduce the purchase premium.
Note: Contact us for premium surcharges and other terms and conditions which continue to apply.
You can pay this premium in a single lump sum (saving interest on this charge), or add it to your mortgage and include it in your monthly payments.
This service is cost-free; the lender pays us for this service, so your cost for arranging a new mortgage is only the solicitor fee and either appraisal or CMHC or GE insurance premium. Sometimes solicitor fees or appraisal fees are absorbed either by the mortgage broker or the lender.
Option 2. Leaving the first mortgage as it is and arranging a second mortgage (up to 100% of market value of property). This option is used if there is a discharge penalty on the first mortgage or for some financial reason the credit report is damaged. A second mortgage rate starts from PRIME plus 2.5%, and is determined mainly by credit history and market value of property. The higher the ratio of the second mortgage amount to the market value of the property, the higher the interest rate.
If you are self-employed, have declared bankruptcy in the past, or have slow credit, we have institutional and private lenders who will lend up to 85% of the market value of a secured property and interest rates will depend on the borrower’s credit risk factor and current employment income and stability. We also have lenders whose lending decisions are based simply on whether or not the deal makes financial sense. The costs of refinancing through second mortgages are the lender and broker fees, appraisal fee and solicitor fee. All of these costs are paid on the closing date except the appraisal fee.