Mortgages Canada

Get a mortgage in Terrace British Columbia. Check daily interest rate updates from over 40 Canadian banks, lenders, trust, insurance companies and financial institutions. Sign up for updates and get rates delivered directly to your email.

How Credit Score Affects Your Terrace Mortgage Rate

The higher your credit score the lower mortgage rates you can get. The lower your credit the higher are the mortgage rates. The difference in mortgage rate adds up to several hundred dollars in monthly payments, so it’s very important to have lowest credit score possible. Check the graph below for relationship between credit score and mortgage interest rates:

$300,000 mortgage loan

Terrace Mortgage Closing Costs

Mortgage closing costs in BC will add up to several thousand dollars. Total amount comes up of 2% - 5% of home purchase price.

Equity Grabbing

Equity grabbing is a predatory lending technique used to gain peoples homes. With cash-out refinance, people with a lot of equity in their homes(own most of their homes, since they paid out most of the mortgage) can get a bigger loan then they had before, meaning they will get cash against the equity in their home. They can spend this cash the way they want it, however they will have to pay it back over time at an interest rate. Interest rates do not differ from those on the market, but this where the catch is.

Predatory lenders talk borrowers into cash out refinance without specifying overly high interest rates. Once people sign up for the loan, they do not suspect anything, only when it comes to paying back money they borrowed at 14-20% interest rates. As many people simply cannot afford it, they default on the mortgage(cannot pay it back) which leads to foreclosure(lender taking borrowers home as per contract). In the end people are left without their homes. This is called equity grabbing.

Watch out for any offers, either by contractors who go door to door and offer to fix your roof(do any other fixes) by offering a loan, or phone via calls.

Escrow

Money, property, deed(contract), documents held under the custody of third party company until both parties settle the contract. For example, Ron is selling his house to Alex. To make sure that both of them play fair and do not fraud each other, they agree on an escrow.

• Ron gives his keys and documents from his house to an escrow company.
• Alex gives his money to an escrow company
• Escrow company puts everything into a safe and issues 3 keys. It gives one key to Alex, one to Ron and keeps one key to itself.
• Safe cannot be opened without 3 unique keys.

Once Ron and Alex settle everything - transfer takes place. Escrow company is witness to the transfer and will not allow it if one party is not satisfied (since it has 3rd key). If everything is settled, everyone signs the documents and transfer takes place. Ron gets his money, Alex gets his house and escrow company collects a fee from both of them.

Here’s a list of document you will need to get a mortgage:

• Copy of the agreement of purchase and sale. This is a proof to the lender that offer on the property was accepted.
• Copy of the property or MLS listing
• Mortgage insurance information and fee. Different lenders have their own policies and procedures regarding this. There may be a need for another “mortgage insurance application”
• Copy of the appraisal report.
• Confirmation of Downpayment for new home being purchased. If the Downpayment will be coming from the proceeds of sale of an existing home, the borrower may be required to provide a copy of the most recent mortgage statement which includes name of the lender, mortgage reference number, approximate balance, current mortgage payment, and mortgage renewal date. An agreement of purchase of sale may also be required.
• Documentation for switching mortgage to a new lender. If borrowers are switching from one lender to the other this documentation will be needed:
• Fully completed credit application with verification of income
• Copy of most recent charge registered against the property
• Copy of the most recent insurance endorsement on the property
• Copy of existing Title to confirm Agreement to Purchase contract
• Property details. Borrower should have a copy of the appraisal. If not, an brief description of the property with info such as size, square footage, number of rooms and bathrooms, garage, heating type, zoning, etc.
• Copy of the most recent mortgage statement. Statement should include name of the lender, mortgage reference number, approximate mortgage balance, current mortgage payment, status of tax account and mortgage renewal date. The existing lender’s Annual Statement or Mortgage renewal document would be ideal for this purpose.
• Lender Switch/Transfer documents by borrowers(s). In addition a letter addressed to the existing lender requesting that mortgage documentation be sent to the new lender. Another letter is sent to the existing insurance company requesting a change of insurance endorsement in favor of the new lender.

Self Employed:

Who is considered self-employed? Whoever owns a company, is paid based on company performance, or whose ownership interest in a business is 25% OR GREATER, is considered to be self employed.

• T4 Tax Slip

If you are paid on commission or operator basis (taxi and truck drivers), you’re also considered self employed. Documentation varies depending on financial institution.

Self Employed Mortgage Documentation

• Copy of business financial statements, personal tax returns or corporate tax returns
• Copies of recent business bank statements to demonstrate cash flow
• Signed personal tax returns for the past 3 years, including schedules
• Signed year-to-date profit and loss statement and balance sheet
• Business credit report
• Articles of incorporation

Lenders will also want to know

• Income is regular, recurring and continuous.
• Independent verification of financial information is available
• Income is realistic given the type of business, experience and ability in comparison with other businesses in the same market.

Commission

• Signed personal income tax returns for the past 3 years, including all schedules and T4s, are usually required to assess a commissioned applicant income.

Mortgage Refinance Costs

Mortgage refinance closing costs add up to 2% – 5% of the money you’re borrowing.

How Much and How Soon Do I Save With Mortgage Refinance?

• To save money you must refinance with lower interest rate
• Saving starts only
• Interest rate must be at least 1% lower than the one have at the moment

In order to save on refinance you must calculate break even period. Break even period is when your monthly mortgage payment savings cover refinance closing costs, which takes several years. For instance, borrower refinanced from a 6% to 5% interest rate and now saves $150 per month. To get the refinance borrower had to pay $4000 in refinance closing costs out of his own pocket.

To calculate break even period, divide refinance closing costs by monthly savings. $4000 / $150 = 26,6. It will take 26,6 month or approximately 2 years for savings to start.

Mortgage: $150,000

Old interest rate: 7.86%

New interest rate: 5.12%

Length: 20 years

Closing Costs: $5200

The Break Even Period

Since closing costs were $5,850 let’s calculate the break even period.

$5,850 / $332 = 17,6 (approximately 17 and a half months).

During the first 17 and a half months period borrower will not save any money, but recover refinance closing costs. After that point borrower will start saving money.

No Cost Mortgage Refinance

There are 2 types of no cost refinances mortgages.

Adding Costs to Your Loan

If you refinance $100,000 and your closing costs are $3,000 lender can add it on top of the loan and give $103,000. You don’t pay for the costs right away, but gradually. Lenders charge interest on added amount.

Higher Interest Rate

Another way to avoid costs is to get higher interest then the best rate offered by the lender. Lenders simply adds the costs via interest rate.

We’re rolling out a 100% new MortgagesCanada.ca website, so there will be a small delay in blog postings.

Update includes

• 100% new design
• interest rate updates for over 40 lenders
• step by step guide on how to obtain a mortgage, qualification factors, payments and more.
• ability to sign up for interest rate updates via email or RSS reader
• SLL secure mortgage form

Please come back soon for an update.