5 Benefits on How to Protect Your Mortgage With Life Insurance

For potential homebuyers and current homeowners, a home is a costly investment with a long-term commitment. That's why every homeowner carrying a mortgage needs to get life insurance. Life insurance that covers a mortgage is called mortgage life insurance or mortgage protection insurance. This kind of insurance is designed to protect the lender, just in case they are unable to pay for their monthly mortgage fees. In this article, let's highlight five benefits on how to protect your mortgage with life insurance.

1. May protect homeowners due to sudden unemployment

With Canada's unemployment rate fluctuating every year, sometimes homeowners might face unexpected job loss due to termination or disability. The benefit of having mortgage life insurance alleviates the stress and financial burden related to unemployment by covering the period when the homeowner is out of work. At Northwood Mortgage, we offer a series of mortgage life insurance options that target the specific time frame if a homeowner loses their job, falls ill, or becomes physically disabled, causing unemployment.

2. May protect homeowners due to unexpected death

If the homeowner dies, the mortgage life insurance will cover the remaining amount left on the mortgage. Along with unemployment, death in the family can cause financial strain, especially when the homeowner passes away. Mortgage life insurance is a great benefit because homeowners are assured that after death, the mortgage will not become their family's responsibility.

3. Mortgage life insurance frees up your budget

When it comes to having mortgage life insurance, homeowners can free up their budget by the funds they get from other insurance policies. For example, the funds received from a personal life insurance or employer benefits could be used for payments on other financial obligations such as car payments, other bills, and university tuition. What would usually go towards the mortgage can be spent wisely on other expenses because the homeowner has mortgage life insurance.

4. Mortgage life insurance is convenient

Another benefit that mortgage life insurance offers is convenience. By covering unemployment, death, and other bills, it is an added layer of security in case unexpected circumstances should occur. With all its benefits, it is also easy to qualify. To purchase a mortgage life insurance policy, homeowners do not require to submit to a life insurance medical exam. This is a very convenient benefit to have for sickly individuals. In case the homeowner is denied life insurance due to medical illness, the homeowner with mortgage life insurance is financially protected.

5.Mortgage life insurance accommodates new homebuyers

For potential first-time homebuyers who can only afford a small down payment, getting mortgage life insurance can secure the home of their dreams. They can use mortgage life insurance through the Canada Mortgage Housing Corporation, which requires a 5% downpayment.

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As you can see, choosing a mortgage insurance policy should be decided carefully. However, investing in mortgage insurance can safeguard you and your family's future in the long run.

At Northwood Mortgage, we have an expert staff of mortgage agents specializing in life insurance and mortgages in Toronto, Brampton, Mississauga, and the GTA. We take the time to listen to your needs, and we cater our services to each client.

If you would like more information on mortgage insurance coverage and protection in Toronto and the GTA, we invite you to book a FREE consultation with one of our Northwood Mortgage agents by calling 416-969-8130 ext. 111, toll-free at 888-492-3690, or contact us here. Once we receive your request, one of our mortgage agents will contact you within 24-48 hours to arrange an appointment.

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A Guide to Real Estate Mortgages

Many people struggle with the decision to buy or lease a home. It’s important to know if you want to own a home before getting yourself entrenched in the process of a real estate mortgage.

But once you determine that you’re ready for homeownership, the next step is to choose a home you can afford. With each mortgage payment, you will be building equity in your own place. It’s essential to consult a mortgage professional to help you determine how much mortgage you can carry comfortably. This will help you evaluate your financial position and set achievable goals concerning the repayment timeline.

Whether you’re a first-time homebuyer or you want to ensure that you’re ready for your next property purchase, here’s a simple guide for the real estate mortgage process:

How much debt can you afford?

A mortgage has four components that affect the affordability of a property and the mortgage, namely: principal, interest, taxes, and insurance. The principal is the total worth of the property for which you hope to be financed. This is usually about 80% of the property’s value. The interest refers to the amount of money you pay the lender for financing your mortgage loan. Property taxes are paid in perpetuity, depending on the location of your home. Insurance is also a lifetime cost that depends on the value of your property.

Lending institutions and mortgage insurers use a formula to determine whether you can afford a mortgage. It can be assessed based on your gross debt service (GDS), which includes your total homeownership costs discussed above, including mortgage payments, property taxes, and other fees. The second measure is your total debt service (TDS), which includes the GDS and debt payments (credit cards, loans, lines of credit), relative to your income. In order to qualify for mortgage insurance, the maximum permitted GDS ratio is 39%, and the maximum allowed TDS is 44%.

How soon can you get the down payment?

For many Canadians, your home is the biggest single purchase you’ll ever make. Getting a mortgage allows you to stretch the payments out over a few years, so you don’t have to save the full $500,000 (national average home price) before moving into your own home. The minimum down payment required for a home is 5%, which translates to about $25,000.

Get Your Mortgage Pre-Approved

You must get a mortgage pre-approval before you can start looking for your new house. A pre-approved mortgage implies that the lending institution has already vetted you for a specific mortgage amount after investigating your financials, including credit rating and income. You will know how much you can spend, your interest rate, and even your monthly payments.

Mortgage pre-approval is the first step in your mortgage approval process and will allow you to move fast and place an offer, which is crucial in a competitive housing market. This, however, doesn’t mean that your mortgage is guaranteed. But if you make an offer on a home you’re interested in, the lender will assess its value to ensure it’s reasonably priced, update your application with specific figures from the property, and re-verify your financials before giving their final approval.

If you can’t put up at least 20% of the down payment, then you must get mortgage insurance. The final mortgage will then be signed off with the approval of the mortgage insurer.

Final Note

The mortgage pre-approval locks in the lender’s mortgage rate for a specific period of 60, 90, or 120 days while you look for a house. So, rising interest rates won’t affect the agreed rates during the period. Also, keep in mind that federal mortgage rules require all borrowers to pass a financial stress test of 200 basis points above the contracted rate (the 5-year Bank of Canada Benchmark) to qualify for a mortgage.

For more information on real estate mortgages, call Northwood Mortgages at 866-307-0747 or contact us here.

source: northwoodmortgage.com

What Happens After Your Mortgage Is Paid Off?

Fixed rate mortgages, variable rates, mortgage terms, payments schedules—these will all be things of the past when your mortgage is paid off. However, you can’t just make your final mortgage payment and forget about it entirely. There are steps to take when finishing paying off your mortgage. So, what happens after your mortgage is finally paid off?

 When Last Payment Is Done

After you’ve made the last payment on your mortgage, you’re still not home free. No matter the type (fixed rate mortgage, variable mortgage, etc.) making the last payment doesn’t clear your debt until the appropriate paperwork is filled out. You’ll also need to pay a discharge fee to the lender to fully rid yourself of the mortgage. The discharge fee removes the legal registration of the burden from the land titles from the lender. Depending on the lender the discharge fee can vary but it’s usually in the $350 range.

There is no law saying you have to pay the discharge fee immediately after making your last mortgage payment but you should do it within months. Without paying the discharge fee you will not be able to sell your home, transfer its title or obtain another mortgage.

Once the Mortgage Has Been Discharged

The lender will send a document to the registry office letting them know that your title is now clean and there is no longer a lien on your property. This means that if you sell your home, all the equity is fully yours. Then, you’ll need to look over your mortgage statement. Fixed rate mortgages, variable mortgages, all mortgages in fact, come with a statement. This is a document that is sent out twice yearly to show the balance, insurance rate, monthly payments and balance of tax account (if the taxes are paid with the loan) of the mortgage. When you receive this statement after making your final mortgage payment make sure it shows zero balance.

You’ll also need to verify that your credit report no longer contains your mortgage. Keep in mind that this could take a few months. Furthermore, if you had mortgage insurance with your loan, this will expire the moment the mortgage is paid off, so you don’t need to worry about it any longer.

The Final Steps

When you’ve paid off your mortgage in full, you are still required to pay property taxes. If your taxes were rolled into your mortgage, you’ll have to call your city and arrange to make the payments on your own. Now, it’s up to you whether you wish to borrow against the home again. You don’t have to take out fixed rate mortgages or traditional mortgages, you can take out a line of credit instead.

source: northwoodmortgage.com

8 Things To Know About Mortgage Insurance

If you’re in the process of applying for a mortgage or starting to shop around for one, you’re probably thinking about how you can get a low mortgage rate. However, there’s more to getting a mortgage than the rate. There’s also mortgage insurance, which is an important part of getting a home loan if you’re having trouble coming up with a decent down payment. Many Canadians are not aware of what mortgage insurance is. Below you’ll find eight important things to know about mortgage insurance.






    1. This type of insurance protects the lender against default and not the homeowner. Mortgage insurance is designed to ensure the lender is able to recoup costs should you default on your loan.

    2. Mortgage insurance is mandatory for borrowers who can only come up with a down payment for their home of less than 20% of the total. Furthermore, down payments cannot be less than 5%.

    3. The cost of mortgage insurance depends on the type of loan you’ve applied for and the amount of your down payment.

    4. Mortgage insurance is not the same as homeowner insurance. Homeowner insurance is put in place to protect your home and possessions against damages such as fire, theft, etc. Also, mortgage life insurance is different than mortgage insurance. Mortgage life insurance in designed to repay any outstanding mortgage payments should the homeowner find themselves on long-term disability or in the event of death.

    5. Insurance has nothing to do with getting you a low mortgage rate. To get a low mortgage rate you need good credit and a good mortgage broker because he or she will shop around for you to find a low rate. However, having mortgage insurance doesn’t hurt your chances of getting a low mortgage rate.

    6. There are only three places you can get mortgage insurance in Canada: CMHC, Genworth Financial and Canada Guarantee. Any other place offering mortgage insurance is a scam.

    7. Mortgage insurance costs the homebuyer 2.80%-4.00% of the total mortgage amount, but it does allow you to purchase a home with a lower down payment.

    8. You don’t have to pay the premium on mortgage insurance up front. The cost gets lumped in with your mortgage payments.

The best way to learn about mortgage insurance is to talk to your mortgage broker. While you’re at it, you can inquire about getting a low mortgage rate.

source:  northwoodmortgage.com

Mortgage Insurance Vs Life Insurance

People often see their homes as their biggest investment, and naturally they want to protect that investment. On the other hand, people also worry about what would happen to their loved ones if they were no longer around to care for them. For both of these situations, there is life insurance and mortgage insurance. Both types of insurance offer benefits, but they differ in their nature and eligibility criteria. If you are considering one or both forms of insurance, here are some things that you need to be aware of before making a decision.

Life Insurance

Life insurance is a smart move for many people who have dependents. However, life insurance does not often come without a rigorous application process. Age is a critical factor in the monthly premium you pay and you often have to undergo a medical exam. If you have had any previous complications, then that could work against you. In short, the younger and healthier you are, the better your chances of getting a good premium. However, for those who don’t qualify for life insurance but still want to protect their assets, they have to look at other options.

Mortgage Insurance

Mortgage insurance is usually offered by the same lender providing you with the mortgage. This form of insurance covers your monthly mortgage payments in case you can‘t pay them with your regular income. While mortgage insurance is much easier to secure than life insurance, there is a higher cost. Also, while the premiums don’t change as time goes by, the benefits are reduced as you pay down your mortgage. If you have trouble qualifying for life insurance but still want some form of protection, then mortgage insurance might be a more practical option. However, if you change your lender, your policy will also change.

Which Is Better?

Choosing between mortgage insurance and life insurance depends on your situation. If you know that you may not qualify for life insurance then mortgage insurance may be the next best thing. That said, there are many life insurance plans that offer flexibility and require little medical examination (often just a short questionnaire). So it is best to fully explore your options.

At Northwood Mortgage, our agents can help you find the best solution for your needs. Contact us today for a free consultation and let us see how we can help you protect your assets and your loved ones.

source: northwoodmortgage.com

5 Benefits Of Mortgage Insurance

Mortgage insurance is an insurance vehicle designed to protect the lender in case the owner of the mortgage is unable to pay for their monthly costs. But mortgage insurance can also work to benefit the homeowner as well. And in this latest article, our expert team highlights five of the top benefits of mortgage insurance.

1. Access to Better Interest Rates

    Because of the protection mortgage insurance offers lenders, it then allows the lending company to offer homebuyers access to better interest rates. This works to consolidate the cost of the home for the buyer.

2. Offers Access to the Marketplace for Many Buyers

    Homebuyers who are self-employed or don’t otherwise have access to steady income may also benefit from mortgage insurance. Mortgage insurance ensures that buyers outside the traditional marketplace can qualify for a low cost mortgage while keeping the lender’s interests protected.

3. Mortgage Insurance can be Transferred

    Another advantage of mortgage insurance is that it can be transferred from one property to another. This means that owners looking to purchase a new property can simply save their premiums over time and transfer their insurance to the new property. By maintaining this payment record over time, owners can show lenders they’re trustworthy, potentially limiting their future purchase costs.

4. Allows Buyers to Purchase with a Smaller Down Payment

    The use of mortgage insurance also now means that buyers with only a small down payment can enter the marketplace. Buyers can use insurance through the CMHC and will only have to pay 5% down on their property. This gives first-time buyers and others with limited resources the flexibility to enter the marketplace.

5. May Protect Buyers in Case of Job Loss

    The consistent payment of mortgage insurance premiums can help protect the homeowner in case they lose their income for a short period of time. This could be vital for Canadians with growing families, and offers a way to avoid the stress and financial hardship associated with a period of unemployment. Lenders now offer a series of insurance options to help specifically manage time when homeowners are out of work, ill or otherwise unable to pay their financing costs.

The mortgage insurance product is now offering millions of Canadians access to the wider real estate marketplace, by protecting lenders and safeguarding homes. To learn more on insurance and the benefits it provides to homeowners, contact our expert team today.

source: northwoodmortgage.com

Do Mortgages Cover Home Repairs?

Yes, they can. Most mortgage terms will allow buyers to make initial major renovations or repairs to the property. Many refinancing options not only permit, but also insist, that all refinanced funds to go towards home repairs.

Either option will allow you to perform home repairs, under certain conditions.

Not only can mortgages be used to cover repairs, but often, they should! Mortgages are typically the lowest-rate options for financing repairs. Mortgages pay for about 15% of Canadian home repairs, making them the most popular form of credit used in renovations.

The Policies

The Canadian Mortgage and Housing Corporation (CMHC) provides the majority of mortgage insurance to first-time buyers.

CMHC policies allow for home buyers to build equity into their homes by renovating them after purchase. To obtain additional funds in a mortgage, you will provide an estimate, preferably with quotes by contractors, for all the repairs in your home.

If you already own a home, you can pay for renovations through refinancing.

Refinancing for Renovations in Canada

With most lenders, you can refinance your home for up to 80% of its value, minus any remaining debt on your previous mortgage.

Because you have more equity, a refinanced loan will often have a lower rate than your original mortgage. In Canada, it is common to find refinancing options with rates under 3%.

This makes refinancing a much more attractive option for homeowners than lines of credit, credit cards, or personal loans.

Most credit cards now carry an interest rate of 18%, while loans are almost always over 4%. The increased rates are not a huge problem for people who intend to pay off the renovations in a few months, but they are extortionate when spread out over years or decades.

Let’s look at an example:

Imagine a kitchen renovation costing $12,000 by a family with an extra $200/month in the budget that increases with inflation. They obtain a typical home equity line of credit rate of 5%, compounded annually. Assuming 2% inflation, this will cost about $2200 in interest and will take six years to pay down.

If the same family chose a refinanced mortgage at a typical rate of 2.7%, will cost about $800 in interest and will take slightly more than five years to pay off.

This difference becomes even starker with lower monthly payments. A line of credit at $100 + inflation per month will run the family $6000 in interest over 15 years, while the same with mortgage refinancing will cost about $2000 over 11 years.

Mortgage refinancing is the most affordable way to pay for home repairs. Contact Northwood Mortgage to consider your options.

source: northwoodmortgage.com