Practice your mortgage…

What exactly do I mean by that? Well, if you’re a first-time buyer and just beginning to explore the housing market, chances are you’re currently renting or living with family, and very likely paying less than you will be going into your new home. For this reason, I strongly suggest you start getting used to your new mortgage payments sooner than later.

Let’s suppose you’re paying $1,600.00 monthly rent and planning on buying a home for $500,000.00 with a 10% down payment plus typical maintenance fees and taxes your new monthly payment would be approx. $2,600.00. I’d encourage you to start paying yourself the difference between your current rent and your new monthly payment, then deposit that $1,000.00 into an on-line savings account.

Why? For starters you’ll get used to the amount that will eventually be your real housing payment. If that isn’t compelling enough in itself, consider that you’re also be putting away extra money to help with your new purchase down payment, pay your closing costs or treat yourself to something special.

The Sooner you start “practicing your mortgage”, the better…

Already a home owner and looking to buy up? The same principle applies. Once you’ve determined the monthly mortgage payment on your new home, increase your existing mortgage payment by that amount. You’ll be better prepared for the realty of your new payment and paying down your mortgage faster in the meantime.

Any of the 2,500 Dominion Lending Centres mortgage professionals across Canada are happy to help you work through these and other mortgage related scenarios and tips, so please get in touch.

SHAUN ZIPURSKY
Dominion Lending Centres – Accredited Mortgage Professional
https://dominionlending.ca/news/practice-new-mortgage/ 

I recently met a couple that took out a reverse mortgage to purchase a house in Hamilton, ON. Their daughter was attending McMaster University, and was just starting her post-graduate degree.

After spending close to $25,000 over 4-years in rent, her parents decided to get into the landlord business!

Here’s how the numbers worked out:

• Clients 58 & 60 years old
• $3M home in Oakville, ON
• Approved for $600K reverse mortgage
• McMaster Rental Property – $2375 monthly rental income (daughter lives rent free), or $28,500 rental income per year
• CHIP Reverse Mortgage Interest – $28,500 (4.75%)

Now at first glance, it looks like these freshman landlords will simply break-even as interest expense is equal to rental income.

But there are a few considerations:

• Daughter is living rent-free – parents are saving $5700/year in rent
• CHIP Reverse Mortgage Interest is tax deductible against total taxable income
• $3M Oakville home – if it increases in value long-term, by only 1% per annum, this will cover the interest expense & more
• The flexibility of deciding how much or how little interest payments to make on their reverse mortgage puts these clients in an enviable cash-flow position.

House rentals are not for everyone as they tend to be a “hands on” investment. But for the right client, rental properties can be a lucrative opportunity as part of a diversified investment portfolio.

To learn more about how this CHIP Reverse Mortgage can work for you, contact the mortgage professionals at Dominion Lending Centres.
 

Every mortgage secured by a property will be registered with the land title office.There are two ways your mortgage can be registered on title: Standard charge or collateral charge.  Not long ago, most lenders registered all mortgages as a standard charge.  In recent years, some lenders – mainly the major big banks – have moved towards using the collateral charge.

When choosing your mortgage it is vital you fully understand the terms you are agreeing to. Choosing the right mortgage can protect your interest now and in the future.  Let’s focus on the major differences between the two charges/liens that your mortgage can be registered as.

STANDARD CHARGE MORTGAGE

A standard charge mortgage is registered for the amount of your mortgage only.  A standard charge mortgage allows you the freedom to freely move lenders at renewal time without incurring legal fees.  As a borrower, you want to be in a standard charge mortgage because it gives you the leverage to shop options at renewal.

A standard charge mortgage allows you to borrow more in the form of a second mortgage or a home equity line of credit (HELOC).  As you pay down your mortgage you can access the equity you’ve gained.

COLLATERAL CHARGE MORTGAGE

A collateral charge mortgage is registered on title for more money than you require to close.  For example, a $500,000 mortgage might be registered on title as a $600,000 charge.  The lender will tell you this is beneficial because it makes it easier to access the home equity without incurring legal fees.

The major downside of a collateral mortgage becomes evident at your maturity date.  If you want to change lenders in order to obtain a better product or rate, you are on the hook for legal fees.  This often deters borrowers from moving lenders and they can feel “forced” to take whatever renewal rate their current lender is offering.

With a standard charge mortgage, in most cases, the new lender will cover the charges under a straight switch(no new money) in order to earn your business.  This means no fees to you and the ability to shop for the best mortgage.

Navigating through the mortgage process alone can be tricky.  Dominion Lending Centres has access to multiple lenders and we can help ensure you receive the perfect mortgage.

BRENT SHEPHEARD
Dominion Lending Centres – Accredited Mortgage Professional
https://dominionlending.ca/news/8-things-avoid-buying-home/