What is Mortgage Loan Insurance?

Mortgage Loan Insurance is just that — insurance from a trusted third party, which protects lenders against default on a mortgage loan by a homeowner. In Canada, Mortgage Loan Insurance is generally required whenever a homebuyer has less than 20% of the purchase price available as a down payment. Because the lender is protected, they are able to offer mortgage financing even if you have a smaller down payment, at a rate of interest that is comparable to the lower rates typically reserved for homebuyers with a larger down payment. To obtain Mortgage Loan Insurance, an insurance premium must be paid based on the total amount of the loan (the purchase price minus the down payment). This premium can be paid in a lump sum, or added to your mortgage and included in your monthly payments.

How Much Does it Cost?

In general, the larger your down payment, the lower your premiums will be. The exact premium will be calculated when you apply for a mortgage. But to give you a general idea, the current Mortgage Loan Insurance premiums charged by CMHC are: Size of down payment (as % of purchase price)*

Insurance premium (as % of total loan)**

15% to less than 20% 1.75%

10% to less than 15% 2.00%

5% to less than 10% 2.75% or 2.90%***

* Mortgage Loan Insurance from CMHC is also available for loans of less than 80% of the purchase price.

** Premiums in Ontario and Quebec are subject to provincial sales tax. The provincial sales tax cannot be added to the

loan amount.

*** The rate of 2.90% is for mortgage loans where the down payment is funded through non-traditional sources, such as

borrowed funds, gifts, 100% sweat equity or lender cash back incentives.

For an additional premium, CMHC Mortgage Loan Insurance is also available for loans with extended amortization periods. The additional premiums are: Loan with amortization period greater than 25 years and up to 30 years: +0.20% Loan with amortization period greater than 30 years and up to 35 years: +0.40% For example, if you are buying a $200,000 home with a down payment of $10,000 (or 5% of the purchase price) amortized over 25 years, the Mortgage Loan Insurance premium would be 2.75% of your $190,000 loan, or $5,225. If you chose to extend the amortization to 30 years, an additional premium of 0.2% or $380 would be charged.

How the Current Value of Your Home or Property is Assessed

The value of a property is determined by a number of different criteria, each of which can influence how much your home is currently worth. These criteria range from the square footage and the age of your home, to its location, construction quality, architectural features and even the number of bathrooms. It is important to remember that a property valuation is not a fixed or permanent number. It is simply a snapshot of what your home is worth today, in relation to current market conditions and what other, similar properties are selling for. This value can change over time based on improvements to the property, as well as changes in your neighbourhood and the overall housing market.

Property Valuation and Mortgages

When applying for a mortgage, your Mortgage Professional will ask you a series of questions about your property. This information will help establish the property value, a critical element for determining the amount of your mortgage loan.

If you are buying a home, for example, your mortgage application will include the purchase price along with a detailed description of the property. For refinancing, the lending value will be established after considering recent sales in your area, the latest municipal value assessment and any significant improvements you have made to the property. If you want to add the cost of any planned improvements to your mortgage application, be sure to provide all of your plans and cost estimates. To help the process go as quickly and smoothly as possible, use the attached worksheet to identify and collect the information you will need to complete your mortgage application.

A Professional Appraisal

A professional appraisal may be required if a more in-depth assessment of the value of your property is needed.

This process includes a professional assessment of the property’s physical and functional characteristics, a detailed comparison of the home to recent comparable sales in nearby areas, and an assessment of current market conditions affecting the property. It is important to allow the appraiser access to the property in a timely manner, in order to minimize the time required to obtain financing. From time to time, the property value assessment will not support the loan amount requested. Should this happen, talk to your Mortgage Professional, realtor or other members of your team of homebuying professionals to explore the options that are available to you.

Property Information Worksheet

Your Mortgage Professional will require the following property-related information to complete your mortgage or refinance application. If you are purchasing a property, simply provide your Mortgage Professional with the following documents where this information can be found:

-Realtor description sheets

-MLS Listing®

-Purchase Agreement

-Municipal property assessment

-Former appraisal, if available

-If applicable, identify planned or recent improvements in the Improvements to Property section.

What is a Credit Score

Your credit score is a number that illustrates your financial health at a specific point in time. It also

serves as an indicator of your financial past, and how consistently you pay off your bills and debts.

This is one of the factors mortgage professionals consider in qualifying you for a mortgage.

How to Check Your Credit Score

To find out your credit score, contact Canada’s two credit-reporting agencies: Equifax Canada at

www.equifax.ca and TransUnion Canada at www.transunion.ca.

For a fee, these agencies will provide you with an online copy of your credit score as well as a credit

Report – a detailed summary of your credit history, employment history and personal financial

information on file. You can also obtain a free copy of your credit report by mail. If you find any errors

in your report, notify the credit-reporting agency and the organization responsible for the inaccuracy

immediately.

If You Do Not Have a Credit Score

It’s important to begin building a credit history as early as possible. You can begin to build one by

applying for – and responsibly using – a credit card. Your financial institution or mortgage professional

can help.

How to Improve Your Credit Score

Demonstrating your ability to manage credit is key to maintaining a good credit score. There are a

number of things you can do to improve your credit score. These include:

Always pay your bills in full and on time. If you cannot pay the full amount, try to pay at least the

required minimum shown on your monthly statement.

Pay off your debts (such as loans, credit cards, lines of credit, etc.) as quickly as possible.

Never go over the limit on your credit cards, and try to keep your balances well below the limits.

Reduce the number of credit card or loan applications you make.

Once your credit score has improved, work with your mortgage professional to obtain a mortgage that works for you.

Find Out More

To find out more about credit scores and reports, visit the Financial Consumer Agency of Canada

website at www.fcac-acfc.gc.ca and download or request a free copy of their guide, Understanding

Your Credit Report and Credit Score. This guide provides practical, straightforward information on how

to obtain and understand your credit report and score, as well as how to build and maintain a good

credit history.

With so many people rushing to lock in fixed rates, many lenders are seeing record volumes.  As a result, underwriting delays are widespread.  

In many cases, application turnaround times are five or more business days.  Reports of certain low-rate lenders with two week backlogs in their queues. Also with many Realtors in Alberta insisting that their buyers are Pre-Approved it is creating a log jam for lenders. If you have all of the required documentation it is much easier for the lender to issue a quick pre-quilification certificate.

Remember that all high ratio deals are subject to CMHC and Genworth approval regardless of your pre-approval. It is important to note that CMHC and Genworth do not do Pre-Approvals and only work on live files.  

Normal approval times vary, but have traditionally been 1-2 days, sometimes even same-day. 

Application Tips:

• If you are purchasing a property and need to lift conditions quickly, make sure to keep the above in mind. Service levels are high so plan ahead 
• If you want a highly competitive rate, ask the property vendor for five days minimum to arrange financing.  (Consulting a mortgage planner beforehand will help you gauge the required approval time.) Often you will be able to submit a rate hold for 120 days without an application
• If you need a pre-approval, be prepared to wait 5+ business days in many cases.
• Have your documentation (job letter, pay stubs, etc.) on hand to minimize approval time.
• If you are just looking for a rate hold, often a name and number can secure your rate for up to 120 days 

On the plus side, once your application is submitted to a lender, that lender will guarantee you get that day’s rate if you are approved.  This generally applies regardless of how long it takes for the lender to issue an approval.

www.canadianmortgagetrends.com

TD was the first of the Big 5 today to announce a rate increase.  Canada’s second largest bank is hiking rates as follows:

• 5-year posted fixed rate:  5.85%, up 0.40%
• 4-year posted fixed rate:  5.14%, up 0.30%
• 3-year posted fixed rate:  4.65%, up 0.50%

That 5-year move is the biggest increase in almost a year.

TD also announced it is lowering its 1-year rate by 0.15%.

If history is a guide, the other large banks will likely announce their own increases in the next 24 hours.

Assuming the banks all move their 5-year posted rates to 5.85%, that will amount to a 0.60% increase in the last nine days.  On a $200,000 5-year mortgage with 25-year amortization, that equates to over $5,700 more interest over five years.

If there’s one bright side, it’s that IRD penalties will potentially fall for certain people who are breaking their fixed-rate mortgages early.

If  you still have not saved your rates contact me TODAY for a 120 day rate hold, offer ends june 10th at 11:00pm eastern time

Two-year bond yields also broke to the upside. That may lead to upcoming rate increases on shorter-term mortgages, which have been insulated from rate hikes for several months.

If you’re shopping for a fixed mortgage, be safe and get your application in soon.

TD Canada Trust is increasing the 5,6,7 and 10 year Fixed mortgage rates and has also changed the rate for the 10 year special offer to 5.45%, these rates are effective midnight June 3rd, 2009 EST

This may be the time to lock in, what is your current rate?

THOMASINA BARNES

From Friday’s Globe and Mail

March 13, 2009 at 11:09 AM EDT

• 8988 HUDSON ST., UNIT 306
• ASKING PRICE: $239,900
• SELLING PRICE: $234,000
• PREVIOUS SELLING PRICE: $158,900 (2004)
• TAXES: $958 (2008)
• DAYS ON MARKET: five
• LISTING AGENT: Keith Roy, Macdonald Realty

Low interest rates mean low mortgage payments, a combination that is bringing buyers back to the market, agent Keith Roy says.

“Most people don’t care about the price of the home as much as they care about the monthly payment for owning the home,” he says.

“With interest rates at historic lows and prices down year over year, first-time buyers and renters are returning to the market.”

Enlarge Image

The suite sold to a first-time buyer after the first open house.

While the unit is small, the new owners were “attracted by the modern design and steel construction” of the five-year-old building, Mr. Roy says.

The bachelor suite also has reclaimed fir floors, a gas fireplace and stainless steel appliances. “Even though it is only 470 square feet, this unit is well laid out and has a separate area for the bed, a walk-in closet and large soaking tub,” he says.

The loft-style apartment also has 10-foot ceilings, granite countertops and a balcony for barbecues.

Other amenities include ensuite laundry, an underground parking stall, a three- by six-foot storage locker and communal bike room.

A $136 monthly maintenance fee covers garbage pickup, gardening, hot water and the maintenance and use of an in-house fitness centre.

“You should not be fooled by size,” Mr. Roy says. “The new owners of this suite found true value and will pay less than $1,000 a month to own this home.”