22 Jul

WHAT DO YOU NEED TO KNOW ABOUT THE RECENT 1% RATE HIKE?

Posted by: Yen (Frank) Feng

Bank of Canada announced to increase its overnight rate by 1% on July 13, 2022. Here are some tips you should know:

What if I have a fixed-rate mortgage?

No changes to your current mortgage.

What if I have a variable mortgage?

1. If you have a variable rate mortgage, no changes in the payment. Only the portion towards principal and the amortization change.

2. If you have an adjustable-rate mortgage, your mortgage payment will adjust accordingly.

How much does this rate hike increase in payment?

Your mortgage payment may increase by about $54 per month per $100K mortgage balance.

How much do I qualify now?

The stress test qualifies for a higher rate either 5.25% or contract rate + 2%. This rate hike of 1% will decrease your borrowing amount by nearly 10%.

Should I still choose a variable mortgage?

Choose a variable mortgage if you prefer the flexibility with the minimum penalty.

Should I still choose a fixed mortgage?

Choose a fixed mortgage if you prefer stability with possibly higher penalty costs.

Should I still be looking to buy a home?

If you are in the market to purchase a home, then the answer is YES. Remember you are buying the home, not the interest rate. Also, higher rates lead to less buyer competition, you may be seeing greater opportunities than before.

Still have questions about mortgages? I have the solution. Let’s chat about your mortgage inquiries TODAY !!

26 May

The Rate Debate

Mortgage Tips

Posted by: Yen (Frank) Feng

What are variable and fixed-rate mortgages?

Fixed mortgage is a fixed interest rate for a set term with fixed payments.
Variable-rate mortgage fluctuates with the Prime Rate. It can mean fluctuations in your payment or the interest portion on a set payment plan.

Historical Trends

In the last ten years, the prime rate has gone from 2.50% to 3.95% and now sits at 3.20% as of May 2022. Due to recent events (e.g. covid pandemic), the rate has seen a downturn providing benefits to new borrowers.

The Benefits

People who qualify for variable-rate mortgages can take advantage of lower rates. If you have flexible payments, you may see your monthly payment drop following decreases in the prime rate.

If you have a fixed payment plan, you pay more on your principal loan each month if the rate drops. The extra money towards the principal can make a substantial difference over a 25 or 30-year mortgage.

Some people may not prefer the potential fluctuations with a variable rate mortgage. Or, they may not have wiggle room in their budget for any changes in mortgage payments. Thus, a fixed-rate mortgage would be the best choice for these clients.

Case Study

Michelle and Josh have a $400,000 mortgage with a variable-rate at Prime minus 0.5 (giving us 2.70%) with set payments at $1,831.95 monthly. The mortgage matures in the next two years. They are considering locking in for a new five-year fixed-rate at 4.59%. The new payments would be $2,233.95 monthly. Michelle and Josh are also considering moving to a bigger home in the next couple of years.

Michelle and Josh do not have to feel pressure to lock in today. It is more beneficial to keep the remaining variable rate for two years. If they set the payments based on 4.59% or $2,233.95 monthly, they would pay an extra $402 on their mortgage per month. In two years, their savings on interest is $9,648 less than staying at the fixed rate.

Another benefit to variable-rate mortgages is a lower penalty. If Michelle and Josh choose to sell before the term ends, the penalty is typically only three months of interest. As opposed to much heavier interest rate differential (IRD) calculations used to determine fixed-rate mortgage penalties.

Is your mortgage maturing soon and not sure what to do? I can provide tips for your existing mortgage and assess the right strategy for your money. Let’s chat today.

15 Jan

10 Mortgage Mistakes

Mortgage Tips

Posted by: Yen (Frank) Feng

It is an exciting time to purchase a home and get approved for a mortgage. However, things can change in life before the completion date. Any changes in your credit usage and score could affect the mortgage amount you qualify for.

Before reversing your mortgage approval status or jeopardizing your financing, here are the 10 mortgage mistakes you should be aware of:

OVERSTATE YOUR APPLICATION

Be honest on your mortgage application – provide accurate information on your income, properties owned, debts, assets, and your financial past. Even you have been through a foreclosure, bankruptcy, or consumer proposal, you should disclose this upfront to avoid any undesired last-minute surprises.

I THINK I CAN

Many people assume they will be approved for mortgages. However, the first step is to get an actual pre-approval from the bank. Most pre-approvals have validation for 120 days. In case you are not home hunting tomorrow, your pre-approval will come in handy if a new home comes in an unexpectedly future.

MY BANK TAKES CARE OF ME

It is easy to simply sign up with your existing bank. However, you could be paying thousands more than you need to without even knowing it. With access to multiple lenders and financial institutions, a mortgage professional can help you find a mortgage with the best rate and terms to meet your needs.

NO DOWN PAYMENT

Your down payment is an important part of homeownership. It reduces the overall mortgage amount you need and increases the amount of equity right from the start. It also shows the bank you are serious about. The minimum down payment is 5% (with mortgage insurance) for homes under $500,000. A 20% down payment is recommended to avoid paying mortgage insurance.

CHANGING JOBS

It is important not to change jobs if you are in the middle of the approval process. Banks prefer to see an established employment history as this indicates your financial stability. You should wait for any major career changes until after your mortgage has been approved and have the keys to your new home.

YOLO

Getting additional loans while you are currently in the midst of finalizing a mortgage application can drastically affect what you qualify for. This can even jeopardize your credit rating. You should save any big purchases, such as a new car, until after your mortgage has been finalized.

CREDIT OVERUSE

Mortgage financing is contingent on your credit score and your current debt. Do not go over any limits on your cards or lines of credit, or miss any payment dates. This will affect whether or not the lender sees you as a responsible borrower.

TOO MUCH DEBT

Overusing credit cards or lines of credit can put you at risk for debt overload. Also, large purchases such as a new car can push your total debt servicing ratio over the limit (how much you owe versus how much you make), making it impossible to receive financing. Before you start considering a new home, make sure your current debt is under control.

LARGE DEPOSITS

The bank requires a 90-day history of all down payments and funds for the mortgage when purchasing a property. Any deposits outside of your employment or pension income will need to be verified with a paper trail – such as a bill of sale for a vehicle, or income tax credit receipts. Unexplained deposits can delay your mortgage financing or put it in jeopardy.

MARRYING INTO POOR CREDIT

Your partner’s credit can affect your ability to get approved for a mortgage. If there are unexpected financial issues with your partner’s credit history, make sure to discuss them with your mortgage broker before you start shopping for a new home.

If you are currently looking to start the process, reach out to me today to ensure that you do things the RIGHT way to succeed with your home purchase.

3 Aug

Moving on UP!

Lifestyle

Posted by: Yen (Frank) Feng

Life is constantly changing from your career to your family as we climb up the ladder of life. With these life changes, your current home may no longer be working for you. When you find yourself cramped in your tiny apartment or have a little one on the way, it may be time to look at moving on up!

Affordability

There are many things to consider before moving to a larger home. For instance, whether or not you can afford to make the move and buy something bigger

If you are planning to upsize during your current mortgage cycle, you will be breaking the mortgage. As result, you will have to go through the entire qualification process again for your new mortgage. There may be penalties depending on the term in your mortgage.
Some mortgages may be portable from your existing to the new home. This would make the transition smoother. Be sure to check your mortgage agreement for more details.
If you are unable to port your mortgage, you would need to re-qualify for a new mortgage. The new mortgage would be done at the current rates offered by lenders. Also, this would be subject to government changes – including recent “stress test” rules.
If it has been a while since you bought your first home, you may be unfamiliar with the “stress test”. The government introduced the “stress test” rule on October 2016 for insured mortgages (down payments of less than 20%). On January 1, 2018, the policy was updated to apply on all mortgages regardless of down payment percentage. This test determines whether a homebuyer can afford their principal and interest payments when interest rates increase. It is based on the 5-year benchmark rate from Bank of Canada or the customer’s mortgage interest rate plus 2% – whichever is higher.

Taxes and Fees

The next thing to consider are taxes and fees. There may be large Property Transfer Taxes and you would also pay realtor fees on the sale of the home you are leaving behind. These fees are typically between 2-5% percent of the home’s selling price.

The Cost of Home Ownership

Beyond the costs associated with the sale of your current home and purchasing a larger residence, the costs of home ownership rise in proportion to the home you live in. If you are moving up from a condo or apartment to a single-family home, you will save on strata but will become responsible for all of the maintenance of your home. As a rule of thumb, it is best to save 1% of your new home’s purchase price, per year, for maintenance. For instance, if you purchase a $600,000 new home then you would want to ensure $6,000 a year in savings.

Making the move to a larger home is both exciting and daunting. However, it is entirely doable with the right preparation! No matter what stage you are at with your home, a mortgage professional can help. Not only can I offer expert advice, but guidance as you move on up the property ladder. I also have your best interests at heart and will work to ensure future financial success so you can continue living the life of your dreams!

21 Jul

Are You Ready for Home Ownership?

Mortgage Tips

Posted by: Yen (Frank) Feng

Most people know they need a stable employment and a down payment to purchase a home. There are a few other factors which may help you realize you are ready. Perhaps even earlier than you thought! Here are four main things that can help you determine if you are ready for home ownership:

DOWN PAYMENT AND ONGOING COSTS

Potential homeowners tend to focus on having enough down payment only. You should also be able to manage the mortgage payments and ongoing maintenance. My Mortgage Toolbox app from Dominion Lending Centres (https://www.dlcapp.ca/app/yenchifrank-feng) has some great calculators to help and determine what you can afford. If you have enough down payment and can manage the costs, you are ready to house-hunting!

GOOD CREDIT

As most people know, credit score plays a major role in qualifying for home purchase. A good score means the credit score is 680 or higher. If your credit score is below 680, you will more likely be paying higher interest rates. That means you will have to pay higher payments or could be denied all-together. It is vital to have your credit score in order to get the best mortgage product and rate before the home buying journey. A mortgage professional can help you to get on the right track in the shortest time possible. Sometimes all you need are a few subtle changes or debt consolidation. Your credit score will improve within a couple months.

NO OTHER LARGE, UPCOMING EXPENSES

Do you plan on buying new vehicle in the next year? Are you thinking of starting a family? Are you considering going back to school? You may think you can afford to purchase a home right now, it is vital to be honest about your future plans. What does your life look like in 1 year? 5 years? or 10 years? If you know that you are not planning on incurring big expenses that you need to factor into your budget anytime soon, then it may help you decide to buy a home.

DISCIPLINED

Budgeting is one of the most important factors for purchasing a home. You have to know what you can afford – and stick with it! It is easy to be tempted by a gorgeous 6 bedroom home or a backyard pool or private community. But at what cost? Are you ok to go all-in and leave you scrambling each paycheck or derail any plans of future financial stability? It is worth rethinking. A good understanding of what you NEED in a new home versus what you WANT is important. This is a good step towards determining what you are looking for and planning a budget that suits your needs. This will ensure you can continue to live comfortably.

These are just four signs that you may be ready to purchase a home. If you are seriously considering buying or selling, talking with me. I can help to ensure you have the best experience when it comes to buying a home!

16 Jul

The Mortgage Financing Process

Mortgage Tips

Posted by: Yen (Frank) Feng

The number one question for any home buyer to the mortgage process is “what does this process entail?”. Here is a simple outline to give you an idea of the process and help you understand what to expect as you embark on your home buying journey!

STEP 1: BE PREPARED

Before meeting with your mortgage professional, it is important to prepare the following information prior to the meeting. Your mortgage professional will help to determine what you qualify for and the best mortgage product for you:

Your employment history
Proof of address and your address history
Government-issued photo ID with your current address
Proof of income for your mortgage application
Down payment proof (amount and source)
Savings and investments proof
Details of current debts and other financial obligations

STEP 2: GET PRE-APPROVED

Getting pre-approved is one of the best things any home buyer can get. Mortgage pre-approval requires verification of your financial history. This can help you determine your price range, understand the monthly payment and provide the rate for your first term.

It is important to note that pre-approval does not mean an approval. The bank may not have fully reviewed your documentation and may still need the approval of a mortgage insurer. However, it does have a lot of benefits that can give you a “leg-up” in your search!

BENEFITS OF PRE-APPROVAL

It is important to get pre-approved. This helps to determine your price range and guarantees the interest rate for 90-120 days while you search the perfect home. Plus, the rate will be adjusted down with any market reductions.

When it comes time to purchase, pre-approval also lets the seller know that securing financing should not be an issue. This is extremely beneficial in competitive markets where lots of offers may be coming in.

Quick Tip: Being entirely candid with your home-buying team throughout the process will be vital! Hidden debt or buying a big-ticket item during your 90-120 day pre-approval can change the amount you are able to borrow. It is best to refrain from any major purchases (such as a new car) or life changes (such as changing jobs) until after closing and you have the keys to your new home!

STEP 3: HIRE A REALTOR

In today’s competitive real estate market, it can be very difficult to acquire property WITHOUT the help of a realtor. One of the reasons realtors are integral to the home buying process is that they can provide access to properties that are not 0n the MLS website. They can gain access to information about homes that may come onto the market before a listing is even signed.

Most importantly, realtors understand the INs-and-OUTs of the home buying process. They know how to be successful in your endeavors to purchase a home. Also, they can guide you through the process from the first viewing to having your offer accepted.

STEP 4: SHOP THE MARKET & MAKE AN OFFER

Once you have found the property that meets your needs, you will put in an offer. The offer may be accepted or be countered. This process can go back and forth until you reach an agreed price with the seller. To start home shopping today, check out the listings on Rew.ca!

STEP 5: OFFER IS ACCEPTED

Once your offer is accepted with the condition of financing, you will need to do a few things to finalize the sale:

Ask for a realtor intro between your mortgage professional and realtor.
An appraisal may be required. This will be determined and arranged by your mortgage professional.
Send in any remaining documents required for financing (income confirmation, down payment confirmation, etc).
Arrange a home inspection.
Receive the bank’s approval on property and final approval letter.

STEP 6: REMOVE CONDITIONS

At this point, your financing is in place and you are ready to proceed with the purchase.

STEP 7: LAWYER’S OFFICE

You will be asked to provide any money that is to be used as your down payment. This is not the deposit already with your realtor. Typically, you will go in 1-2 days prior to the completion date.

Before you start on your home buying journey, be sure to take advantage of the expert advice that I can offer. As an expert in mortgages, I can help walk you through the process and find you the best mortgage product to suit your unique needs! The best part? It will not cost you a penny! Mortgage professionals are paid out by the banks when they register a new contract. Therefore, all that matters is finding YOU, the client, the best possible mortgage.

11 Feb

Why uses a mortgage broker?

General

Posted by: Yen (Frank) Feng

Mortgage brokers provide CHOICE…. if you only approach one mortgage lender, you will only ever know the rates and terms that one bank has to offer. It would be like just looking at one house before making an offer to purchase! Yes, they all have four walls, a roof and some similar features, yet each home has unique differences and details that can prove to be very important. By looking at many homes, you found the one that is just right for you. By considering many available lenders and mortgages, your government licensed mortgage broker can find the one that is perfect for your situation.

What is mortgage broker?

Mortgage professional is an independent mortgage consulting service. Unlike your traditional experience, a mortgage broker can quickly understand your mortgage situation and provide you with the most suitable product.

Why uses a mortgage broker?

1. Save time and money: Rather than going to different banks, setting up new appointments with different banks and potentially lowering your credit score, your mortgage broker is your one-stop shop to resolve all the legwork. Usually you will only need one meeting (in person or a phone call) with your mortgage broker. The rest will be handled in emails. More time saving is more money to your pocket.
2. Lower interest rate: Most mortgage brokers receive volume discounts from their top lenders and this means you can have access to a lower rate.
3. No fees*: In most cases, you do not need to pay additional fee to your mortgage broker. Your mortgage broker is compensated directly from the bank or lender.
4. Unbiased advice: Unlike the banks focus on their best interest, your mortgage broker works for YOU.
5. More options: Not all mortgages are the same and many mortgages require creative yet strategic lenders from outside of your traditional banks. A mortgage broker typically has access to over 20+ lenders (or more, depending on the mortgage firm). This means a mortgage broker can provide more solutions than your existing option and possible with a better rate. (That’s money saving!)

Are you ready for the next step? Call me today and let me show you the options!