​A private mortgage is a type of loan that's mainly given by private lenders, as opposed to the banks and credit unions. However, more and more private-type mortgages are being offered by financial institutions these days, so there's no longer really much of a difference between the two types.

Private mortgage rates are usually higher than those you'd find with a regular bank, because private lenders generally have less money available to lend. This means they need to charge interest rates that are higher in order to make a profit. A private mortgage won't be right for most people, since it can take longer to get approved for a private mortgage loan and the interest rate is likely to be much more than you'd pay by going through a bank.

A private mortgage will usually have a shorter amortization period than a typical home loan or could be completely interest only, which can also add a lot more interest to the total interest load. An amortization is just how long it takes for you to pay off your mortgage loan. It's based on the total amount of money you borrowed and how much interest you'll pay over the term of your mortgage. A private mortgage will have an amortization period that's usually between 0 and 20 years, whereas a bank loan will probably be 25 to 30 years long at most.

Private mortgage lenders can also charge fees such as lender fees, private mortgage interest and private mortgage loan registration. The lender will send you a breakdown of these fees in the form of a mortgage commitment. If you have arranged a private mortgage through a mortgage brokerage, there will also be broker fees.

Private mortgages can be closed or open. If they are closed, this means you cannot prepay the mortgage within the term, and if you break it earlier than expected, you will have to pay a mortgage penalty. If you choose an 'open' private mortgage, you can pay off the loan at any time without a penalty.

Since private mortgage lenders are not banks but usually individuals or corporations, they adhere to different laws. This is important for issues such as non-payment or delinquency. Whereas a bank may require the payments to be at least three months in arrears to launch a power of sale, a private lender could launch one as early as being a month in arrears.

Although a private mortgage can be expensive, it can also be the perfect short-term financing solution for a person who cannot approach a major bank or B lender for mortgage financing.

It's best to speak with a specialized mortgage professional who can guide you to the right private lender. Since major banks don't deal directly with private lenders, mortgage brokers would be your best option for information.


Do you have mortgage questions? Book a free consultation today ----> https://calendly.com/sarahcoluccimortgage.
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Sarah A. Colucci, Senior Mortgage Agent
Mortgage Edge, Broker 10680/Direct: 647-773-4849
www.coluccimortgages.com

STEP 1: DO THE MATH When refinancing, the biggest factor in determining whether refinancing makes financial sense is the difference between the interest rate on your current loan and what a new lender will offer you.

The math is pretty simple. The refinanced loan amount divided by the new interest rate equals your monthly savings. For example, if you are refinancing a $200,000 mortgage with an interest rate of 6.125% and the refinancing lender is offering a rate of 4.50%, your monthly savings will be $131.43, or $1,650 annually (assuming a 30-year loan with even monthly payments). If you plan on living in your home for the long term, refinancing to lower your interest rate can more than pay for itself.

STEP 2: CHOOSE A LENDER The refinancing process includes choosing a new lender – not just any lender with the lowest advertised rate. You want to choose a lender who will work with you throughout the refinancing process. You should also explore working with a mortgage broker to save you time when shopping for the best mortgage products available.

STEP 3: GATHER YOUR DOCUMENTS You will need to gather several documents when refinancing. These include a copy of your identification, your most recent pay stubs or tax returns, and any other documentation related to your earnings and assets. There are also several legal documents you will need to have prepared by a lawyer.

STEP 4: REFINANCE YOUR LOAN The refinancing process also involves refinancing your loan with the new lender. This will take a couple of weeks to complete, during which time you will be expected to continue making payments on your previous mortgage.

STEP 5: CLOSE THE LOAN Once refinancing is complete, you will have to sign a new mortgage agreement with the lender and have your new mortgage registered against the title to your property. Your old mortgage will be discharged off of title. Your lender will also notify your previous lender of the refinance. And you're done! You now have one simple monthly mortgage payment instead of two.

Do you have mortgage questions? Book a free consultation today ----> https://calendly.com/sarahcoluccimortgage.

Sarah A. Colucci, Senior Mortgage Agent
Mortgage Edge, Broker 10680/Direct: 647-773-4849
www.coluccimortgages.com

In this blog post, we will discuss 3 great reasons to refinance your mortgage.

You may be able to qualify for a lower interest rate than what you are currently paying on your home loan.

Refinancing is a great option if you want to save money on your mortgage payments and free up cash flow each month. Usually, it makes sense to refinance if you are trading a higher interest rate for a lower interest rate. 


Mortgage refinancing is often an option for people with mortgages that have variable or adjustable rates because they have more flexibility in setting the terms of their refinanced loan.

Unlike many fixed rate mortgages, breaking a variable rate mortgage is only three months' worth of interest. The low penalty gives borrowers flexibility to refinance to accomplish debt consolidation or extract funds from their home's equity for renovations. 


It may allow homeowners the opportunity for more favourable refinancing terms such as longer repayment terms, lower monthly payments, etc.

Borrowers may extend their amortization period to reduce their monthly mortgage payments through refinancing. An amortization period cannot get extended once in a closed mortgage, so refinancing can help accomplish this to free up cash flow.


Do you have mortgage questions? Feel free to call or write.


Sarah A. Colucci, Mortgage Agent 
Mortgage Edge, Broker 10680
Direct: (647) 773-4849
Email: sarah.colucci@mortgageedge.ca 
​

On the surface, it may make sense to hammer down your mortgage balance to become mortgage free as soon as possible. After all, not having a mortgage means you will have more cash flow each month without the burden of mortgage payments. 

The only way to pay off your mortgage early is to make more than the minimum principal and interest payments, which you can accomplish by increasing your monthly mortgage payment or making lump sum payments throughout your mortgage term. When you put extra money towards your mortgage, you automatically decrease its amortization period, therefore becoming mortgage-free years earlier.  

When mortgage interest rates are low, however; it may not make sense to focus on paying your mortgage down by using your extra cash because your money could earn a higher rate of a return in a savings account or through other investments (provided they are not volatile).  Therefore, by using extra cash to pay down a debt that has low interest instead of saving at a higher interest rate, you inadvertently shrink your potential assets.  

Something really important to consider is potential unexpected financial problems and what that means for you. If you put all of your cash into paying down your mortgage faster, you may put yourself at higher risk of mortgage default even if you have a small mortgage balance remaining. If you’re unable to pay your mortgage, the bank can launch a power of sale or foreclosure regardless of how much equity you have. However, if you save the extra money and direct it into investments or in a bank account that earns higher interest, you essentially protect yourself against financial distress, mortgage default and losing your home to the bank. 

In the end, you can use all the money you save to pay off the mortgage at once instead of using extra cash flow each month to chip away at it. Of course, if your mortgage has a higher interest rate –more than what you would earn in the bank or through other investments, it may make sense to pay your mortgage off early by increasing your payments. 

Alternatively, you can balance personal finance using both ideas. You can save your money while also increasing your mortgage payments in order to reduce your amortization period. 

Do you need a mortgage plan? I can help you structure your mortgage in a way that helps you free up more cash flow each month. 

Please call or write today.

Sarah A. Colucci
Mortgage Agent, Lic. M14000929
Mortgage Edge, Broker 10680
Direct: (647) 773-4849
Email: sarah.colucci@mortgageedge.ca 

​

In Canada, you can purchase your primary residence with as little as 5% down, provided the purchase price does not exceed $1 Million. To break it down a little more, you will require at least 5% of the first $500,000 and an additional 10% of the rest provided the home purchase does not exceed $1 Million. 

As far as investment or rental properties, however, mortgage lenders require at least a 20% down payment. 

Buying a second home. 

If you’re in the market to buy a vacation home or a second home, then you may be pleased to learn second homes and vacation homes do not require a down payment of at least 20%. You can purchase these types of properties  with as little as a 10% down payment. The loan amount must be at least $150,000 and cannot exceed $1 Million 

Investment property mortgages use rental income to qualify when your income may not be enough to service the additional mortgage loan you are requesting. However, when applying for a mortgage on a vacation property or to finance a second home, mortgage lenders will not use rental income or cash flow to help you qualify. Your income will need to service the mortgage payments. 

Second home programs can consider 2-4 season cottage properties, second homes for family members like children going away to school, for example, and more. Second home programs also consider recreational or seasonal properties (a plus for anyone in the market for these unique types of properties).

Do you need good credit to buy a second home or vacation property?

Because high-risk mortgage insurance companies facilitate the second home program, you will need a good credit score. 

But rest assured, you will also have access to the best mortgage interest rates under the second home program. 

A mortgage broker can help you with the second home program if you are in the market to add to your real estate collection. 

Please do not hesitate to call or write. 

Sarah A. Colucci
Mortgage Edge, Broker 10680
Direct: (647) 773-4849
Email: sarah.colucci@mortgagedge.ca 


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Searching for the perfect home can become exhausting, especially when you know there are multiple offers being submitted by other potential buyers and further realizing with each attempt at another property your offer may not get accepted. It’s frustrating not knowing what the magic number is going to be and potentially having to take sudden risks like going over your budget.

If this struggle continues for long, you may feel annoyed, discouraged or even decide it’s best to sit out on home buying altogether.

In reality, buying a home should be a fun experience and one where you can happily search for your dream home ––a property that meets all your expectations. But when it’s a seller’s market, you may end up finding this experience overwhelming and sometimes, a complete nightmare.

So, how can you avoid the headache of buying a home in a heated real estate market and still have an enjoyable and successful experience?

 
Understand Your Maximum Purchase Price

One way that almost ensures you will run in a complete circle during a home search is not understanding your bottom line. It’s easy to use an online mortgage qualification tool and assume you know the maximum purchase price you qualify for but using this method can seriously hamper your chances of successfully purchasing a home. 

Online qualification tools are not personalized and only run a generic calculation without factoring in your employment income, credit score and monthly liabilities. If you rely on this method alone to determine your bottom line, you may find you will have to abandon your offer to purchase in the end because you may not actually qualify.

Car loans, student loans, lines of credit, etc. can all reduce your purchasing power and therefore must get included in your pre-approval application to avoid disappointment. 

Also keep in mind that using an online qualification tool may even underestimate your purchasing power, causing you to miss out on buying a property more suitable that costs more.

When you get an official pre-approval which is signed off on by a major financial institution, you can be confident in your bottom line. You will narrow down the price points you can afford and customize your home search, which increases your chances of finding the right home and having your offer accepted.

Speak to your mortgage broker about the property you plan to put an offer on.

Mortgage brokers don’t just offer pre-approvals to help increase your chances of having your offer accepted, they also offer guidance on each potential property you want to put an offer on.

Property taxes vary depending on the property and that can add or take away from your pre-approved mortgage amount. For example, if property taxes end up being lower than what was estimated, you may qualify for a larger mortgage. On the flip side, if property taxes are more, this can reduce the amount of mortgage you qualify for. Again, the more you narrow down your bottom line, the more successful you will become in finding the right home. Mortgage brokers can help you. 

Make sure you disclose ALL income to your Mortgage Broker. 

When trying to determine the perfect price point through a pre-approval, it’s important to disclose all of your income. You may not know that the Canada Child Benefit, for example, is an acceptable form of income and can help you qualify for a larger mortgage. Be sure to learn about all the forms of acceptable income to increase your chances of home buying success.

Write a heartfelt letter to the seller and attach it to your offer. 

At first, you may think that writing a sentimental letter to the seller about why you are the best purchaser for their home is a little corny, but when there is fierce competition that seems to focus on price, sometimes the reasons can overcome the dollar amount. Many sellers get attached to their property. They like to feel that the person buying their home really cares about it and will treat it well. Try writing a letter about the reasons you love their home and attach it to your offer!

Don’t give up.

It is difficult even for real estate gurus to predict the real estate market with accuracy, so don’t let failed offers discourage you. Yes, it can feel hopeless at times but the real estate market moves in cycles and it can flip to a buyer’s market on a dime. Just think, there are many homes that meet your criteria in the queue to be listed, and you WILL find the right one for you!  

​Do you have mortgage questions?

Please feel free to call or write.

Sarah A. Colucci, Mortgage Agent Lic. M14000929
Mortgage Edge, Broker 10680
Direct: (647) 773-4849
​Email: sarah.colucci@mortgageedge.ca 

There’s a new theory out there and it includes paying your mortgage off early using a home equity line of credit, otherwise known as a HELOC. Many have claimed success using a HELOC to pay off their mortgage in a record amount of time.

Does it work?

When reviewing the technical aspects of this theory, it appears it’s an exceptional way to become mortgage-free in a record amount of time and save money but when putting it to practical use; it seems to be a far-fetched concept that is too good to be true for many.

But let’s look at the strategy in more detail and consider the likelihood of it succeeding.

First, here are some things that must be in place in order for this strategy to be successful:
​

1. You must have positive cash flow, meaning your monthly income exceeds your expenses by a fair amount. 
2. During the months you allocate, your entire paycheque must get put towards your mortgage plus the rest of your expenses such as credit cards and unsecured lines of credit. 
3. You must refinance your existing mortgage to include a HELOC, which stands for a Home Equity Line of Credit which is a portion of the mortgage that is revolving credit. HELOCs are usually interest-only (Prime plus a determined percentage) and completely “open” –– no penalty to pay off early. 
4. You must have credit cards with a longer grace period (35-45 days).
5. When your credit card’s grace period ends, you must transfer your credit card balances to your home equity lines. 
6. When you get paid again, you pay off your home equity line balance instead of your mortgage. 
7. Your next pay cheque is then used to once again pay off your mortgage. 
8. Repeat cycle. 

Here’s an example of this method in action. 

Let’s say you have a $300,000 mortgage and a home equity loan secured against your house, and your next paycheque is approximately $5,000. One month, you decide to apply your entire paycheque to the mortgage. Of course, this would immediately lower your mortgage balance to $295,000. Then, let’s say, that month your non-housing expenses amounted to $2,000 using your credit card. 

So, you decide to pay $1,000 using your home equity line of credit. You also decide to pay your credit card balances with your home equity line as well. At the end of the month, you will owe $3,000 on the home equity line of credit and $295,000 on your mortgage BUT your credit card now has a zero balance. 

Then, the next month comes along and your $5,000 paycheque gets applied to the $1,000 you used from your home equity line of credit and the $2,000 you used for living expenses, also on the line of credit. The remaining $2,000 reduces the Home Equity Line balance to $1,000. 

Now, let’s look at what happens in the third month. Your $5,000 paycheque arrives and so you use $1,000 to pay off the rest of the HELOC, $2,000 for your living expenses, and $1,000 for the mortgage.  

This would leave you with an extra $1,000 that you could carry over into the next month. Of course, in the next month, you could repeat the original cycle and take your $5,000 cheque and lower your mortgage to $290,000.

This strategy basically allows you to pay off your mortgage 10-15 years earlier than expected because you would make an extra annual mortgage prepayment of $20,000 or more. 

Realistically, this strategy is too complex to be a practical way to pay off your mortgage faster. After all, living expenses come up when they come up and there is no way to predict how much you will need every single month. 

Using this method to pay off your mortgage also means you're constantly using both secured (mortgage) debt and unsecured (credit cards) debt to manage your finances which means there isn’t much room for savings and you could risk paying higher interest on your HELOC since HELOC rates are higher than closed mortgage interest rates.

The other problem is most people do not actually have this much discipline, but if you do, kudos to you (you would really need to have complete control of your personal finances). 

In reality, because life is unpredictable, it can become very difficult to keep this monthly routine going year after year. Eventually, most people would fall off this cycle and live within their paycheque. Also, if someone loses their job or if some unforeseen situation comes up like the requirement to complete home improvements, it may throw off the entire plan.

The other risk is in constantly using credit cards because if you suddenly can’t pay off their balances, it ends with unnecessarily racking up high-interest credit card debt that can become impossible to pay off. In fact, most people end up refinancing to complete a debt consolidation just to get away from the infamous credit card trap. 
Also, playing with debt in this way is ultimately like playing with fire and one never knows when and if they will get burned. And, of course, there are better (and safer) ways to pay your mortgage off sooner.

Refinance your mortgage to a lower rate. 

You can accomplish paying your mortgage sooner through refinancing at a lower rate (provided you have equity in your home), consolidating higher-interest debt, using additional cash flow to prepay your mortgage, which ultimately reduces your amortization period making you mortgage-free sooner. 

You can also make regular principal payments that range from $100 (minimum prepayment required) to 25% of the original principal balance each year without a penalty. 

Another way to reduce your amortization is to change your monthly mortgage payments to bi-weekly, accelerated payments. By shortening your payment frequency to 26 payments, one extra mortgage payment a year goes towards reducing the principal balance and is free from any interest. 

You can always try using a line of credit HELOC to prepay your mortgage in a record amount of time but if it doesn’t work, make sure you exercise all the other ways to pay your mortgage off sooner. 

----->I'd love to read your thoughts on this. Please comment below.

I love helping people with their mortgage financing and real estate, please call or write if you have questions. 

Thanks, Sarah.


Sarah A. Colucci, Mortgage Agent Lic. M14000929
Mortgage Edge, Broker 10680
Direct: (647) 773-4849
Email: sarah.colucci@mortgageedge.ca 


Sarah Colucci is an independent mortgage professional who works with a variety of borrowers and mortgage lenders in Ontario. It is her job to assess a borrower's current financial situation and place them with the best lender that can complement both their short- and long-term goals in real estate and in life. 

Sarah works to produce solutions that her clients can be proud of. She has extensive experience in real estate and mortgage origination and further specializes in a variety of mortgage products for the many unique borrowers that exist and who often find they don’t fit into rigid banking policies. 

Sarah promises to be truthful and give honest assessments based on her experience and knowledge, and acts with integrity and honour, always doing what she believes is the right thing to do. 

Many financial experts, real estate gurus, and those that consider themselves seasoned investors, all have different opinions about being mortgage-free. But whether you want to stay mortgage-free or access your home’s equity to purchase more property always remains a personal choice because there is no right or wrong answer.  

There are, however, a few questions you should ask yourself if you are planning on paying off your mortgage and purchasing more property. 
​

1. What is the current value of your property?
2. What are the current interest rates?
3. How much do homes appreciate in the area you want to buy?
4. How would owning (and selling) additional property affect your income taxes?
5. How much equity/inflation are you expecting to occur?
6. How much money do you want to make on further investments?

Rental Property Scenario

Let’s say your current home is worth $950,000. You will be mortgage-free in the next year or your current mortgage is very small and manageable, let’s say around $150,000. The current interest rates are around 2%, and you’ve determined the area you are considering appreciates about 12% each year.  

If you purchased an investment property for $550,000 and put $200,000 down, you would have to increase your existing mortgage balance to $350,000. Your monthly payment would be approximately $1,292 per month. You would also have to mortgage the new property for $350,000, which would amount to the same monthly mortgage payment, approximately $1,292 per month. 

In a year, your mortgage payments (inclusive of principal and interest) would amount to $15,504 on each property. However, if the area appreciates 12% each year, your value would increase by $66,000 on the rental property. Now, let’s say the area in which your primary home is located appreciates 11% per year on average, which would amount to $104,500. So in this case, based on market appreciation year after year, you would earn $170,500 in equity and pay $31,008 in mortgages, yielding you a profit of $139,492 each year (give or take).

Given the low-interest rates, the current market value, and rate of appreciation (which you must back up with market research), it seems to make financial sense to keep investing provided you have the appetite. Also, keep in mind, I did not use rental income in this example, which could offset further costs associated with owning the rental property.  

On the flip side, if you choose not to purchase an investment property, your principal residence would still increase in value and your mortgage payment would be lower because you wouldn’t need to increase the balance to access a down payment. You wouldn’t have to worry about capital gain’s tax as you would when selling an investment property. Depending on your income level and tax bracket, it may be too expensive when selling an investment property based on the amount of capital gain’s tax the Government would require you to pay.  

Also, you wouldn’t have to worry about depreciating assets and what that means for the mortgages you hold.

After all, “Equity” is a subjective term and depends on market value, which is dictated by economic factors like supply and demand but also the global and domestic economy. Should some financial disaster occur, the equity appreciated could scale down or vanish completely, which could affect your ability to repay the mortgage loans taken out on each property. Although this occurrence would be historically rare (since most if not all properties bounce back in value when the market recovers), it is still a possibility worth your consideration.  

Realistically, however, rental properties provide a retirement fund because eventually, rental income pays off the mortgage, and the property generates passive income. Most Canadians incorporate rental properties into their retirement plan and consider rental income a form of an emergency fund. 

Also, if you are mortgaging your primary residence to make investments, the interest paid can become tax deductions, offsetting the amount of taxes you would pay on rental income, for example.  

In conclusion, many people dream of the day when they are mortgage or debt-free, but in reality, when mortgage rates are at record lows, it can make sense to mortgage or invest to seize the opportunity to build healthy assets. Also, owning a rental property can provide extra money to save or pursue further investments whether or not they are in real estate.  

Building a real estate portfolio can also offer peace of mind and help you weather the storm in the future or even offer a comfortable retirement. 

These types of financial decisions must get made with serious contemplation through honestly and accurately answering the critical questions mentioned above.

I would be happy to help you run the numbers or map out a plan that you envision for your future. Please call or write. 

Sarah A. Colucci, Mortgage Agent Lic. M14000929.    
Mortgage Edge, Broker 10680
Direct: (647) 773-4849
Email: sarah.colucci@mortgageedge.ca



Do you need help with conducting market research? I want to tell you about Purview. Purview is a land titles system we currently use to verify title ownership, legal descriptions, liens and mortgages registered, and the estimated value of a specific property. Purview also estimates yearly appreciation levels based on geographic location and sales. I would be happy to consult with you and help you conduct market research in this regard. 

Buying a house today has become challenging since most conventional mortgage lenders have stricter guidelines including the requirement to have good credit. Therefore, you may wonder if it’s at all possible to buy real estate with poor credit or “bruised” credit. 
 
The good news is people are purchasing a home every day with poor credit history, and therefore, it is possible for you to get into the real estate market, which can also inadvertently set you on a path to improve your credit score in the near future. 
 
There are different mortgage loans available that are accessed only through mortgage brokers that service borrowers with bad credit. The lenders that offer these "bad credit mortgage loans" are called Alternative Lenders. 
 
Alternative lenders, also known as “B” lenders, can consider borrowers with bruised credit while still offering competitive mortgage interest rates within the alternative lending space. Some borrowers think alternative lenders are the same as private lenders that charge very high interest rates, but this is not the case.
 
Alternative lenders are financial institutions, and most times, they are sister companies of major prime banking financial institutions and just service borrowers with bad credit. 
 
How much a down payment does a purchaser require if they have bad credit?
 
In Canada, the minimum down payment required is 5% of the first $500,000 purchase price and 10% on the remaining purchase price, not exceeding $1 Million. Purchase transactions that have less than a 20% down payment must be insured through one of the three high-ratio mortgage insurance companies in Canada.
 
Unfortunately, these insurance companies will only insure mortgage applications from borrowers who have good credit scores. Therefore, if you have bruised credit and less than 20% down payment, you may need a cosigner that has better credit to help you get a home loan. 

However...
 
if you have at least 20% of the purchase price, whether in the form of personal savings or a financial gift from an immediate family member OR you have at least 20% in available equity, if you are an existing homeowner looking to refinance, approaching an alternative lender is a good idea. 
 
Does an alternative lender have to be forever?
 
Just because you get a mortgage with an alternative lender today DOES NOT mean you have to stay with one forever. In fact, I usually allow people time to improve their credit scores and monthly payments by recommending a shorter-term alternative loan and working to repair their credit in the meantime. 
 
Picking a one to two-year mortgage term, for example, can help you improve your credit bureau so that when your mortgage comes up for maturity, you can go back to a regular conventional lender to get a better interest rate and lower your mortgage payment. 
 
Alternative lenders can be a bandaid while your credit score improves. 
 
Should you choose an alternative lender to refinance? 
 
Sometimes borrowers need to refinance their existing mortgages but for some reason have developed poor credit and are in a different financial circumstance than when they originally got the mortgage.
 
If you are in this situation, you may not need to refinance with an alternative lender if you are already with a prime mortgage lender like a bank or monoline lender. There are lines of credit products available that can be a short-term fix to high-interest debt relief (e.g. credit cards), which you can use until your existing mortgage matures. These alternative lines of credit can also allow you time to improve your credit bureau. 
 
In conclusion, you can definitely purchase a house with bad credit, but it’s important to consult a professional to weigh out your options and help you make the smartest choice. 
 
Also, some borrowers think they have bad credit bureaus when in fact, their credit is acceptable, so it’s always best to check on this through a professional before signing any mortgage contract. 
 
Do you have mortgage questions? Please call or write. I would be happy to assist you in your mortgage endeavour. 
 
 
 
Sarah A. Colucci
Mortgage Agent, Lic. M14000929
Mortgage Edge, Broker 10680
Direct: (647) 773-4849
Email: sarah.colucci@mortgageedge.ca