Tuesday, November 17, 2015

Ask A Mortgage Broker?

The second of our interviews with Joe Sammut, Mortgage Planne
with Mortgage Architects an established national Mortgage Brokerage. They help homeowners ask the right questions, compare mortgage rates & privileges, design a mortgage based on the clients' needs. They understand how to make mortgages work for buyers. Joe and his Mortgage Gate Team of professionals are committed to making their clients' mortgage experience an effortless and rewarding one. 

Chantal: Tell us about the current market situation and what is going on with rates?

Joe: There are some interesting rate wars happening in the marketplace today.  Lenders are dropping rates to attract borrowers, but not always telling the whole story.  It is a case of Borrower Beware! Many of the cut rate mortgages today have drastically reduced features and benefits, as well as restrictions that tie borrowers to the lender.  Consumers, in the quest to get the lowest rates, are handcuffing themselves to some very poor quality mortgage products. 

Chantal: When should a buyer choose a variable rate over a fixed rate?

Joe: Today the Variable Rate Mortgage is as attractive as ever and is a suitable product for borrowers with the financial security to withstand any rate increases that could occur throughout the term of the mortgage. 

However, no buyer should neglect to realize the attractiveness of Fixed Term Mortgages today as well.  If you are happy with a great rate for a set period of time...a Set it and Forget it type scenario...then this can be the way to go.

Chantal: What is the difference between an open mortgage and a closed mortgage? 

Joe: Because an Open mortgage comes without penalty to break the mortgage at any time, it also comes at a premium.  The lender does not know when you will be repaying the mortgage and therefore put a premium on the rate offered in order to make the most money in the shortest amount of time.  Again, the attractiveness of this product is the flexibility to break the mortgage without penalty. 

A Closed Fixed mortgage is subject to the greater of 3 months interest penalty or an Interest Rate Differential penalty should the borrower choose to discharge the mortgage prior to maturity.  A large penalty may affect decisions regarding the mortgage and force a borrower to stay with a lender to avoid it.

A Closed Variable mortgage is only ever subject to a 3 month interest penalty and can prove to be a less expensive or restrictive option if an early payout is necessary.  However, as we mentioned earlier, it is important to understand what may happen in a rising rate environment.

Chantal: What documents does a buyer need to prepare to meet with you?

Joe: We ask clients to have some items on hand at the time they apply for a mortgage.  It is best to have these prepared as they begin their search for the perfect property, because once it is found, things can move quickly.  Consider keeping these ready:

·         Two pieces of ID for each applicant, one piece must be picture
·         A copy of their most recent paystubs
·         A job letter from their employer where available.
·         Most recent two years tax returns and Notice of Assessments available
·         Articles of Incorporation or Business License if they are self employed
·         Name of Lawyer
·         Proof of Down payment by way of most recent 3 months bank statements, investment statements.  Keep in mind, all statement must show the borrowers name if they are being printed through online banking.

Chantal: Should we save up 20% down payment for a conventional mortgage or use our 5% and take a high ratio mortgage?

Joe: Times have definitely changed in terms of “saving up” for a first home purchase.  In a fast moving market, time can be expensive.  Rate increases and appreciation in value can be a huge factor in deciding not to wait too long.

A 20% down payment will avoid the insurance premium of up to 3.6%, a savings of $17,100.00 (added to the mortgage) on a purchase of $500,000.00. 

On the other hand, you need to consider the time required to save an amount equal to 20% down payment, possibly while continuing to pay rent.  In the current market, the appreciation in value could far exceed the cost of mortgage insurance.  Keep in mind that rates are at the lowest point they have ever been.  No one can predict just how long they can take advantage of low interest rates.

Chantal: Thank you Joe, we're going to do this again real soon. 

Remember, if you have any questions for Joe, just email us at mail@chantalvaillancourt.com. 

For more info on selling your condo or buying a new one, and for info on the current condo market, contact us by email on the right side menu or call us at 416-322-8000.

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