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If you have ever been granted a mortgage, you are probably familiar with terms like Prepayment Penalty and APR, which is an abbreviation for Annual Percentage Rate.
To remind you, a prepayment penalty is applied when you end your mortgage agreement early, and the APR represents the annual cost of borrowing, including any fees or extra costs linked to your mortgage deal. Statistics indicate that many borrowers do terminate their mortgage agreements early and incur prepayment penalties, which increase their overall borrowing costs. However, the expense of ending your mortgage agreement is not frequently addressed at the time of obtaining your mortgage approval. Prepayment penalties vary depending on factors such as the length of the term, mortgage amount, interest rate, remaining time in the mortgage contract, type of mortgage (fixed or variable rate), and the specific lender. Unfortunately, there is no universal prepayment penalty that applies to all situations. Canadian chartered banks often have expensive methods for calculating prepayment penalties on fixed-rate mortgages, which can burden consumers financially when trying to exit these contracts. In contrast, monoline lenders tend to use more favorable methods that can save you money if you exit early. You may be wondering why Canadian banks are more expensive in this regard. Let me explain. The Interest Rate Differential (IRD) calculation is used to determine penalties for fixed rate mortgages. The IRD measures the difference between your interest rate and the rate the bank can charge for a new mortgage of the same term, starting from the current date to the end of your original term. Big banks use "posted rates" – which are typically higher than the discounted rates they actually offer their customers - to calculate the IRD. This results in a much larger differential, and thus, the prepayment penalty is higher. In contrast, monoline lenders (accessed through mortgage brokers), which specialize in mortgage lending only, use their discounted rate rather than some artificial posted rate. This tends to result in a much smaller prepayment penalty. Therefore, when calculating your annual percentage rate, you must consider and factor in your potential (and likely) prepayment penalty and how your mortgage lender calculates it. In the end, prepayment penalties from Canadian Chartered Banks usually tend to amount to a much larger APR making the interest rate seem much less competitive when actually considered. Do you have a question about your mortgage or exiting your existing mortgage? There are loopholes available to avoid having to pay prepayment penalties and I would be happy to discuss them with you. Sarah Colucci, Mortgage Agent Sherwood Mortgage Group, Broker 12176 Direct: (647) 773-4849 www.coluccimortgages.com #mortgages #mortgagebroker #realestate #mortgageadvice #torontorealestate #mortgagetips #money #financialadvice #banks
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Maybe you've recently been approved for a mortgage loan or are considering changing your current mortgage payment frequency. I can help you understand the differences between monthly and bi-weekly accelerated payments.
Monthly payments are as straightforward as they sound - every month, you make one payment, which is a fraction of the principal amount owed, plus the interest component. This is a steady approach to paying off your mortgage, and spreading the cost of the mortgage evenly over the year. Bi-weekly accelerated payments, however, divide the monthly payment in half and require this amount to be paid every two weeks. Since there are 52 weeks in a year, this results in 26 payment, or the equivalent of 13 full monthly payments, each year. This method ends up amounting to one extra mortgage payment annually, which has the effect of paying down your mortgage principal more quickly, thus reducing the amount of interest paid over the life of the mortgage. Now, whether you choose monthly payments or bi-weekly, accelerated payments all depends on your comfort level and financial situation. You must consider the opportunity cost of the additional payments under a bi-weekly accelerated plan. If these funds could be invested at a higher rate, for example, you may choose to opt for monthly payments and invest the difference. However, if you're rate is high, or if investment opportunities are not available, a bi-weekly, accelerated payment may be more advantageous. You can change your payment frequency as needed. If the current frequency is not benefiting you, feel free to make a change without any issues. You must make sure to determine whether various payment frequencies are available when choosing a mortgage lender. If you have any questions, I would be more than happy to help you. Sarah Colucci, Mortgage Agent Sherwood Mortgage Group, Broker 12176 Direct: (647) 773-4849 www.coluccimortgages.com #mortgages #mortgagebroker #interestrates #paymentfrequency #savings #mortgageadvice #homeowners #torontorealestate #realestate #moneytips If you've recently separated from your partner, you may be wondering if you need a Separation Agreement to get a mortgage, and if it's absolutely necessary.
Here is the information you need. When obtaining a mortgage loan, lenders need to assess your liabilities, and that it includes any support payments like child or spousal support. Without an official Separation Agreement, there is no way for a mortgage lender to ascertain all of your liabilities. Spousal and child support are monthly financial obligations that must be taken into account when qualifying for a mortgage, as they could potentially disqualify you depending on the amount. After a separation, you will need a copy of your finalized Separation Agreement detailing the division of assets, responsibility for support payments, and the payment amounts. It is important to have this document prepared and finalized promptly after a separation to prevent any delays in closing your mortgage transaction, particularly in a spousal buyout situation or when purchasing real estate. If you need guidance on this process, I would be more than happy to help you. Sarah Colucci, Mortgage Agent Sherwood Mortgage Group, Broker 12176 Direct: (647) 773-4849 www.coluccimortgages.com #mortgagebrokers #separation #spousalbuyout #mortgages #divorce #mortgageadvice #realestate #homeowners #torontorealestate Is your mortgage up for renewal? Here's what you should know.
A couple of months before you maturity date (the end of your mortgage contract), your lender will likely mail or email you a renewal agreement, which gives you some renewal options. You do not have to re-qualify on mortgage renewal if you decide to renew with your lender. Usually, just signing the renewal document is enough. If you want to determine whether there are better interest rates available or if you feel the rate you were offered is too high and not competitive, you can shop around. When renewing your mortgage, we can simply switch your lender and transfer the mortgage, and the new lender pays for the legal fees and any appraisal on your property, if it's required. This way, you are not out-of-pocket on the expenses and received the benefits which are lower interest payments and a more affordable monthly payment. When you're renewing your mortgage and just signing back with your lender, you cannot extend the amortization period back out to twenty-five or thirty years which would give you a lower monthly payment. You cannot consolidate any debts you may have. You cannot negotiate any of the terms. Unfortunately, due to higher rates and mounting credit card debt, just renewing a mortgage and signing back with the lender are not feasible options for many people. Depending on your financial situation, and the fact that you're now renewing into double the rate you had, you may want to explore lower payments and debt consolidation. In this case, we would treat it as a refinance, and you would need to re-qualify for the mortgage loan. Re-qualification does not have to be a painful process and it actually isn't most of the time, provided you can have your documents available. Most times, the standard income documentation is needed along with a copy of your property tax bill. Re-qualification can be confirmed in as little as twenty minutes during an appointment. Feel free to get in touch with me today. Most times, lenders are willing to fight for your business and offer competitive interest rates, while also seeing you in a better financial position for the next few years. Sarah Colucci, Mortgage Agent Sherwood Mortgage Group, Broker 12176 Direct: (647) 773-4849 www.coluccimortgages.com #mortgagebroker #mortgagerenewal #interestrates #debtconsolidation #realestate #mortgageadvice #financialadvice |
By: Sarah ColucciSenior Mortgage Agent, Level 2, Lic. M14000929, Categories |
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Address411 Queen St.
Newmarket, ON L3Y 2G9 Sarah A. Colucci, Mortgage Agent Lic. M14000929 Sherwood Mortgage Group Licence # 12176 |
TelephoneDirect: 647-773-4849
Email: [email protected] |
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