Introduction to Mortgages

Windsor Mortgage Broker

Conventional Mortgage (Uninsured)

The mortgage amount does not exceed 80% of the property’s value.  Therefore, a purchaser is supplying a minimum of 20% of the purchase price as a down payment. 

Hi-Ratio (Insured)

The mortgage amount exceeds 80% of the property value. Purchaser is supplying a down payment of 5% to 20% of the purchase price. Lenders will require the mortgage to be insured to provide them with default insurance. 

Gross Debt Service Ratio – GDS

The total of your Principle + Interest + Property taxes (PIT), + 1/2 condo fees + heating costs. This value should not normally exceed 32% of your gross incomes. 

Total Debt Service Ratio – TDS

The total of your above payments from GDS + payments to personal loans, credit cards, line of credits should not normally exceed 40% of your gross incomes. 

Term

Fixed rate mortgages range from 6 month to 10 years – Interest rate will not change during term. With variable rate mortgages the interest rate will change based on changes to your Lenders Prime Rate, which are effected by the Bank of Canada’s Prime rate.

Amortization

The actual number of years that it takes to pay off your entire mortgage. Can be up to 25 years on hi-ratio (insured) mortgages and up to 35 years on conventional (uninsured) mortgages. 

Mortgage Insurance (C.M.H.C./Genworth/CG)

Premiums are charged and added to your mortgage based on the loan to value ratio.

NOTE: Loan to value is based on the lower of the purchase price or the appraised value. 

For example:  

  • $200,000.00 – Purchase price 
  • ($10,000 00) – less 5% Down Payment
  • $190,000 00 – Mortgage Required (95% LTV)
  • $7,600.00  – plus 4.00%
  • $197,600.00 – Total Mortgage Advance 
  • Owning a Rental
  • Purchase and Improvements
  • Title Insurance
  • Managing Your Credit

Windsor Mortgage Broker

If you are interested in increasing your regular monthly cash flows, paying down your mortgage quicker and providing yourself with capital growth, owning a rental property may be for you!

You have the ability to pay less tax by deducting expenses from your income. These include:

  • Utility Bills (if included in the rent)
  • Maintenance Fees and Upgrade Expenses
  • Property Management Fees
  • Insurance Premiums
  • Best of all – your Mortgage Interest and Property Taxes

Mortgage Agent London Ontario

The many different kinds of Rental Properties are: 

  • Condos
  • Townhouses
  • Single Family Homes
  • Duplexes
  • Triplexes
  • Four-plexes 
  • Large Apartment Buildings

Mortgage Refinance London

Does the home you are purchasing require upgrades or renovations? Will a new roof, central air, a new furnace, upgrades to the electrical or plumbing system, new doors, windows, a new kitchen or bathroom, or any other renovation increase the value of the home?

With a Purchase Plus Improvements mortgage product you can add the cost of these renovations to your mortgage at the time of purchase.   This is how it works.

At the time that you’re submitting your mortgage application for approval, you provide a written quote from a licensed contractor detailing the improvements with estimated costs.

Your application is submitted and approved for a mortgage in the amount of the purchase price plus the improvements.  The lender will instruct your solicitor to hold back the cost of the renovation work. Once the work has been completed, the increase in the value of the home will be confirmed by an appraiser. It is then that the lender will instruct the solicitor to release the held back funds to you to pay your contractor. 

You have found a home to purchase for $150,000, you have a 5% down payment, and would like to add $25,000 worth of improvements. 

  • Purchase Price of Home = $150,000.
  • Contractual Estimate of Improvements = $25,000. 
  • $150,000 + $25,000 = $175,000. 
  • Lender and Insurer Must Approve Home Value of $175,000. 
  • Minus 5% Down Payment of $8,750.
  • Total Mortgage Amount = $166,250.

Investment Property

Your Lawyer will register your mortgage for the amount of $166,250 but be instructed to hold back $25,000. Once your Contractor completes the improvements within 90 days, an Appraiser will confirm the completion and your lawyer will be instructed to release the $25,000 held back so you are able to pay your contractor.

Everyone is a winner! The purchaser is happy because they got $25,000 of improvements done to the home, with payments spread out over the amortization of the mortgage. The lender is happy because they now have a mortgage on an improved home!

Mortgage Agent London Ontario

Title insurance is an insurance policy that protects you, the homeowner, against challenges to the ownership of your home OR from problems related to the title to your home. The policy provides coverage against losses due to title defects, even if the defects existed before you purchased your home. A title defect is a problem with the title which prevents free and clear ownership.  

There are many types of defects such as encroachments (from neighbouring properties), unpaid liens, etc. Title insurance policies protect you for as long as you own the property. It protects against a number of risks that a solicitor’s opinion on title may not cover.  

These risks include:

  • Title fraud and forgery, which results in someone claiming to own an interest in the title to your land.
  • Encroachments that would be disclosed by a new survey (for example, a neighbour’s deck partly on your land).
  • Easements – the right acquired for access to or over another person’s property for a specific purpose, such as for a driveway or public utilities and upon purchase you may be unaware of these easements.
  • Zoning non-compliance (i.e. where the property use does not meet the local municipal by-laws) OR when someone else is claiming to have an interest in your land (i.e. a previous owner of the property not being discharged from title).

Title insurance is generally purchased when you buy your home or when you refinance it, although it can be purchased any time after you buy your home. You will only make one premium payment when you first buy the insurance. Your lawyer can explain the coverage further and can order the policy on your behalf.

Windsor Mortgage Broker

  • Payment History – This accounts for about 35% of your credit score. Carrying balances from month-to-month and missing payments are two factors. Other factors include the number of missed payments – 1 missed payment in 8 -10 months is not bad, and how long the payment was outstanding matters.  TIP: Pay the minimum by the due date.
  • How Much is Owed – This looks at the total outstanding balance in relation to the total of all credit limits and accounts for 30% of the credit score. TIP: Pay down your debt to at least 30% of the global loan limits. 
  • Account History – The length of time your credit account(s) have been active accounts for 15% of the score. The older the credit, the higher the value TIP: It is best to cancel newer credit accounts before older ones.   
  • Recent Inquiries – This accounts for 10% of your score. Too many inquiries can send a message that a client may need money, which has a negative impact on your credit score. A client ordering his or her own credit report has no impact 
  • Type of Credit –  This accounts for 10% of your credit score. Credit is either revolving (credit cards) or installment (car loans). Higher credit scores are given to people with a blend of credit from various sources.

Collection or Bankruptcy – This has a negative impact on your credit score. Once discharged from a bankruptcy or a consumer proposal, clients can rebuild their credit.

Our Mortgage Services: First Time Home Buyer Or Building | Mortgage Pre-Approval | Debt Consolidation Mortgage | Refinance Or Home Renovation Mortgage | Vacation Property Mortgage | Investment Property Mortgage

Spencer Murray Mortgages offers Mortgage services to clients across London, Sarnia and Windsor, Ontario.

Contact Spencer Murray Mortgages to go over your options