Mortgage types

Mortgage It Right!

Kelleway Mortgage Architects

Examples of available Mortgage Types:
High Ratio
Zero Down Payment
Cash Back Mortgages
Stated Income - Mortgages for "Business-for-Self" People
                                    (and some Salaried Employees)

Types of Terms and Interest Rates:
Fixed Rate
Variable Rate
Conventional Mortgages 

Your down payment must be 25% or more of the purchase price of the home.

Conventional mortgages are available for new and existing homes. Conventional mortgages are available for up to 75% of either the purchase price or the appraised value of the property - whichever amount is lower.

Conventional mortgages have the lowest borrowing costs because they do not have to be insured against default.

Ideal for:
  • Residential purchases up to 75% of appraised value
  • Long-term borrowing needs
  • Purchases with high dollar value that require repayment over a longer term
  • Home renovations

A conventional mortgage does not exceed 75% of the purchase price of the home. Mortgages that exceed this limit must be insured against default, and are referred to as high-ratio mortgages.

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High Ratio Mortgages

Buying With as Little as 5% Down
You can buy a home for as little as 5% down payment under two major programs administered by CMHC, a Federal Crown Corporation, GE Capital Mortgage Insurance Co., a private sector insurer, and AIG United Guaranty, another private sector insurer that has just recently entered the Canadian market.

The regular CMHC/GE Capital Programs allow you to obtain a mortgage of up to 95% of the purchase price. It can be used by any qualified borrower who is not a first-time homebuyer, who has at least 5% as a down payment, or who wishes to purchase a home whose value is above the "ceiling" established in that area for the First Home Loan Insurance Program.

Generally, CMHC requires one year of job stability for the 5% down payment program. However, the one year minimum requirement may be waived at the discretion of the lender.Other important factors to consider are the job type and the down payment amount. With a higher down payment, the chances of obtaining a high ratio mortgage increase significantly.

Depending upon the percentage of down payment to be used, CMHC and GE charge the following one-time insurance premium to you, the borrower. This premium can be added to the mortgage without affecting the Loan To Value ratio (LTV).

% Financing ------------- Insurance Premium on Total Loan
(Loan Amount as a % of the Value/Purchase Price of the Home)
90.1%-95% ------------- 2.75 / 2.90%
85.1%-90% ------------- 2.00%
80.1%-85% ------------- 1.75%
75.1%-80% ------------- 1.00%
65.0%-75% ------------- 0.65%
Up to 65% --------------- 0.50%

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Zero Down Payment

Buy a Home with Zero Down

There is a new mortgage in Canada that will allow you to finance 100% of your new home purchase. You can also use this mortgage product to refinance the full value of your home for renovations, debt consolidation, or other purpose.

The customers that can benefit with mortgage are first-time home buyers and those who do not have sufficient down payment for their home purchase.

The mortgage is up to 104% of the property’s appraised value.

You must have a clean credit history (No previous bankruptcies or any late payments in the last two years.) You must have stable employment (Two years in the same line of work is preferred.) 

There are several benefits of the zero down payment mortgages, including:

  1. Zero down payment mortgages allow renters to purchase a property rather than waiting several years to accumulate the money for a down payment.
  2. Zero down payment mortgages could allow borrowers to pay down higher interest debt.Instead of using a down payment for the purchase, use the down payment to pay down credit cards, which usually are at a much higher interest rate.

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Cash Back Mortgages

Get CASH when you get a mortgage

Cash back mortgages give you the flexibility that extra cash can provide. The amount of cash back is based on the size of the mortgage and the length of term you choose.

But you must be very careful. Some of the promos used by banks to entice you to take a mortgage may seem very appealing but the long term effect could be costly.

For example, a 5% cash back may seem great on closing, but a 1% discount in your rate may save you considerably more over the 5 years. It is important to look at the numbers. I have the systems available to compare your options and ensure you get the mortgage that fits your needs best.

Some clients can qualify for cash back at the maximum broker discounted rates, which is an excellent way to pay down higher interest rate debt.

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Stated Income Mortgages

Mortgage approved based only on Stated Income
If you are self-employed, you may have experienced difficulty when applying for mortgage financing. I understand that significant business revenue does not always translate into significant personal income after you have claimed all your allowable business expenses on your tax return. In some cases, you may have shown little or no taxable income from your business.

Qualified borrowers can get approved with no need to provide pay stubs, job letters, Notice of Assessments, or T4s

Target customers:

  • Self-employed contract and seasonal
  • Self-employed commission
  • Self-employed small business owners
  • Self-employed Professionals
  • Switching between jobs
  •  Some salaried occupations (call me to discuss)

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Fixed Rate Mortgages

Get the security of a fixed interest rate for the life of your mortgage
A Fixed Interest Rate Mortgage offers a fixed interest rate for 1, 2, 3, 4, 5, 7, 10, 15, or 18-year terms.

Fixed Rate Mortgages give you the security of knowing that your interest rate won't change during the term you select. You can even increase your payments without affecting the interest rate you pay. That's just one of the ways you can be mortgage-free faster.

Although the proportion of principal and interest paid each month varies from payment to payment, the total payment remains the same, which makes budgeting easy for homeowners.

The main advantage of a fixed-rate mortgage is that the borrower is protected from sudden and potentially significant increases in monthly mortgage payments if interest rates rise. Fixed-rate mortgages are easy to understand and vary little from lender to lender.

Now is an excellent time to consider a fixed rate mortgage. Today's market practically guarantees a low mortgage rate, and a fixed rate mortgage can insure you benefit from these low rates for the full term of your mortgage. Although your initial payments may be higher than with a variable rate mortgage, you will receive the security of a fixed monthly payment for the life of the loan, regardless of rising interest rates.

A fixed rate mortgage is perfect for anyone who likes to budget monthly expenses and plans to keep their home for several years. To find out more about fixed rate mortgages, fill out this Contact form or call Kelleway Mortgage Architects at (604) 476-0053 or 1 866 476 0053.

After knowing your goals, I will work with you to discover if a fixed rate mortgage is right for you.

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Variable Rate Mortgages

Take advantage of interest rate changes
Take out a 3-year or 5-year Variable Rate Mortgage and you can pay LESS THAN PRIME for the full life of your mortgage. That can add up to thousands in savings!

With a variable rate mortgage, the interest rate fluctuates with money market trends. This is sometimes referred to as a floating rate mortgage.

Your actual payments may not change during the term but if rates go down, more of your payment is applied toward the principal.

But what if prime goes up?
Depending on the lender, you can have the option to lock-in your interest rate by converting to a Fixed Rate Mortgage at any time. The term must be longer than the number of years remaining on the Variable Rate Mortgage's term. When you decide to convert, you automatically get mortgage broker discounted rates – not bank posted!

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 Convertible Mortgage

A low-rate mortgage with added flexibility
This is a short-term mortgage with a fixed interest rate and the flexibility of converting to a long-term closed mortgage at any time.

The convertible mortgage could be for you if any of the following apply:

  • your mortgage is 50% to 75% of the home's value
  • you want to minimize the risk of varying payment amounts, while keeping your options open
  • you think interest rates will decrease gradually in the short term

The mortgage is convertible to a longer-term closed mortgage ranging from 1, 2, 3, 4, 5, 7, or 10 years, either Fixed or Variable, and without any prepayment costs.

If you like to take advantage of interest rate fluctuations, a short-term Convertible Mortgage is for you. This mortgage lets you benefit from the typically lower interest rate of a short-term mortgage, with the option of converting to a longer closed term at any time – at no cost to you!

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Open or Closed Term Mortgages

 An Open Term Mortgage provides the maximum flexibility
When you have some extra money, it's often a good idea to pay down your mortgage, in order to save on interest costs. An Open Mortgage lets you prepay any amount of your mortgage any time prior to maturity without a penalty.

It may be ideal for you if you are expecting to receive additional funds during the course of the mortgage and want to pay down the mortgage before the term ends. It's also a good option if you are planning to sell your home and not port the mortgage to another home.

A Closed Term Mortgage offers the lowest rates
Closed mortgages involve a strict repayment schedule of a specific amount with optional limited lump sum payments and payment increases. However, this is the most common type of mortgage term offered in today's market.

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Short versus Long Term

In deciding between a long or short term mortgage, the benefits of either depend on the direction interest rates are going.

If you expect rates to fall...
If you think interest rates are going to fall, a shorter term mortgage would make more sense. Firstly, interest rates on short term mortgages are generally lower than rates on longer terms. Secondly, getting a shorter term mortgage allows you to quickly renew at lower rates once your existing term runs out.

If you expect rates to rise...
Locking into a long term rate is beneficial if you think that interest rates are going to rise over a number of years. The question of course, is to determine how long you should set the term.

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Readvanceable Mortgages

A readvanceable mortgage allows you to take advantage of the equity you've built up in your home. You can increase your mortgage balance without having to re-register your mortgage.

Typically, you can re-advance up to 75% of the current appraised value, or in other cases, you may also be able to re-advance up to the original principal amount borrowed.

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Secured Lines of Credit

 A line of credit is an agreement by a financial institution to loan money to a borrower up to an agreed upon maximum. Interest is only charged on the money that is actually withdrawn from the line of credit.

With a secured line of credit, the loan is secured by the equity you have in your property. This self-managed form of credit allows you to have access to the money you need, when you need it.

If you make a number of payments each month - such as a credit card payment, a loan payment, or a payment to a retail outlet - you may want to look into consolidating this debt into one payment through a line of credit.

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Split Mortgages

Split mortgages are a type of mortgage that is composed of more than one component. For example, one part of the loan may be comprised of a fixed rate mortgage while a variable rate line of credit is used for the remainder.

This type of mortgage would be useful in customizing to the clients needs. However, while the client would get all the advantages of the mortgages incorporated into the split mortgage, they will get all the disadvantages as well.

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Second Mortgages

A second mortgage is a mortgage granted when there is already a mortgage registered against a property. If the borrower defaults and the property is sold, the second mortgage is paid only after the first has been settled.

In the past, second mortgages were considered for individuals who could not afford an adequate down payment or needed cash in a hurry. However, consultation with a professional financial advisor is recommended prior to taking up this course of action as this may result in a level of indebtness that is difficult to reduce and support. While a borrower may be able to put additional mortgages on their property, with each succeeding mortgage, there is more risk of default involved, which results in the lender charging a higher interest rate.

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Progressive Draw (Builder's Mortgage)

A Builder's Mortgage allows a client to build a home and pay for it in stages, rather than paying the full amount of the home in advance. The approval process, payment terms and downpayment are all based on the expected "completed" value of the home. This often requires an appraisal as well as quotes from construction professionals.

This type of mortgage can also be used to finance ongoing renovations to a property.

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rates subject to change without notice
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