Chances to Get a Second Mortgage with Bad Credit

If you need funds quickly, but don’t have cash in the bank and can’t get a loan, borrowing on your property is a good next option.

In fact, getting a second mortgage in Toronto is usually cheaper than a loan because you are using equity in your home as security for the borrower.

Second Mortgage in Toronto

However, there are certain steps you can take to improve your chances of getting a second mortgage. If you have applied for a loan and been refused, you’ll know the reason why—and it’s most likely bad credit history.

First, use one of the three main online credit bureaus to find out what your credit score is. By checking out your credit rating, you should be able to pinpoint the problem and possibly fix it. For example, if you are weighed down with credit card debt, find a way of paying it off. Or, at the very least, increase your monthly repayments.

How to Take Out a Second Mortgage

Now, let’s take a look at the options. The first one is to take out a second mortgage, using the equity in your house as security against the second loan. If your bank or current mortgage lender won’t give you a second mortgage, then shop around. The best place to start is with a decent mortgage broker, who will have access to many different sources of funding, including online banks and financial firms.

When it comes to a second mortgage, 99 percent of the time you will pay a higher interest rate than the rate on your first (primary) mortgage. Your repayments will likely be higher, too. Don’t just take the first mortgage on offer. If the terms don’t work for you, such as a high interest rate or high payments, then ask the broker to seek out alternatives. You need to find a second mortgage that works for you and within your budget.

Finally, with this first option, you will likely be in the position of making two mortgage payments a month. That can stretch your finances and make covering your monthly expenses challenging.

Cash-Out Refinance Loan

The second option is to consider a cash-out refinance loan. This option is a new mortgage loan that replaces your current mortgage and, in addition, gives you the sum in cash that you want to borrow. The interest rate is going to be higher, and your monthly payments will be higher too. That means you have to think through this option carefully. If you suddenly lost your job, how would you make the second mortgage payments, as well as your day-to-day living costs?

If, after exploring every option for a second mortgage, you can’t find a lender, think about asking someone to co-sign your loan. This means that the co-signer will be responsible for the debt if you fail to make your payments.

Get the Facts Before You Borrow

Despite everything we’ve said above, you may find that the interest rates on the second loan are in fact lower, depending on the current interests rates and the economy.

Whatever you decide to do, check out the overall costs, conditions, and terms. And if something is confusing or doesn’t make sense, be sure to ask questions. At Northwood Mortgage, we will help you find that second mortgage in Toronto—even if you do have a bad credit rating.

source: northwoodmortgage.com

How To Choose Between a Variable or Fixed Rate Mortgage

The difference between fixed and variable rate mortgages has narrowed over the last few years. Fixed rate mortgages have the advantage of peace of mind, as the payments are fixed monthly. However, their rates have also been steadily increasing in recent years. In comparison, variable rate mortgages tend to be lower in their rates, but also include additional risks. As a result, determining which to go with can provide a nerve-racking and daunting task. Here, we will help you choose between a variable or fixed rate mortgage by assessing your risk tolerance, lifestyle, and income.

Rewards vs Risk

As mentioned, variable rate mortgages, which also go by the names adjustable rate mortgages, tend to entice prospective homeowners with their lower base interest rates when compared to fixed-rate mortgages. However, the initially lower interest rates also have their drawbacks, as interest rates are subject to change without notice. As a result, volatile market conditions can cause interest rates to rise exponentially, placing a greater financial strain on buyers who aren’t prepared to absorb the additional costs.

As a result, you need to determine whether or not you can afford a possible interest rate increase in the future before deciding which choice is better for you and your family. For instance, if you think you’ll be able to afford a sudden 2% increase in interest rates, then a variable rate mortgage may be the right choice. To better determine which option will suit you, you need to assess your current income and potential future earnings. If your current job has room for advancement then you may be able to whether any interest increase storms in the not too distant future.

Mitigating Risk

You can actually take advantage of a variable rate mortgage while also mitigating some of the risk by fixing your monthly payments at an amount that is higher than the required minimum payment. In other words, if you simply make the minimum monthly payments then a variable rate mortgage may not be right for you, as you may be unable to take the hit of a marketed interest rate increase in the not too distant future.

This is why many financial advisors recommend that borrowers set their payments at the current 5-year fixed rate. This will allow borrowers to have a buffer in the event that rates rise in the future. In addition, they will be able to benefit from the lower variable interest rate as they will be able to allocate more of their payments in order to pay down the principal.

In other words, you’ll be able to benefit from your prepayment privileges while also staying ahead of your amortization payments. Another advantage is that you’ll be able to lock in for the remainder of the term in the event that interest rates do rise, essentially providing you with the best of both worlds.

Understanding Market Volatility

It doesn’t really matter whether you have a dozen doctorates in economics and finance or just a high school diploma. Trying to determine the ebbs and flows of interest rates is virtually impossible. Some borrowers may opt to stick with a variable rate mortgage when interest rates are low and then switch to a fixed mortgage rate when they notice interest rates start to increase.

However, most financial experts advise against this strategy due to the volatility of the market. The safe bet is to think of your long-term financial goals and needs. That is, if you think you will save more money on average over the long-term by going with the initially lower interest rates of a variable rate mortgage, then chose it.

Analyzing Conversion Rates

If you are currently under a variable mortgage plan then check to see the conversion rates, as well as whether or not you can convert it to a fixed rate at any time. If you can convert at any time with your current plan then find out the interest rate you would obtain if you were to switch out for a fixed mortgage option. Also, don’t just settle for the posted rate. That is, the posted rate may be 5.69% but a little sleuthing may help you obtain a lower fixed rate, such as 3.69%

Opt-In for the Popular Choice

Many Canadians end up choosing a fixed 5-year term when deciding on which mortgage scheme to go with. Also, the drop in rates, as well as the narrowing of the spread between variable mortgages and fixed rate mortgages, have only made choosing a fixed rate mortgage plan even more appealing to many Canadians.

The general rule of thumb is that when fixed-rate interest rates are within a point of their variable rate counterparts, then going with fixed is the way to go. As of this writing, the differential was within 1 percentage point. Many young families with children opt for the fixed mortgage option because it is the safer bet. Having a fixed rate means that families can budget easier and more effectively and plan for the length of their mortgage term. If you are the type of person who always chooses an extended warranty plan when you purchase a new gadget or appliance then it recommended that you choose a fixed mortgage option for that additional peace of mind.

Don’t Decide Alone

Deciding on whether to go with a fixed term mortgage or a variable term mortgage is not an easy task, and should not be taken lightly. Volatile market conditions and an uncertain job market can prove dire for some first-time homeowners, so your best bet is to plan a meeting with your financial advisor to determine which option is best suited for your unique needs. They will be able to better assess your finances, your future goals, both career and family in order to recommend the best mortgage solution for you and your loved ones.

For more more information about choosing the right mortgage for you, call Northwood Mortgage on +1 (888) 495-4825 or contact us here.

source: northwoodmortgage.com

Owning VS. Renting: Which Is Better For You?

It’s quite common to get frustrated when renting. After all, you’re paying often expensive rent each month, sometimes even putting work into the property, and while it does cover your accommodation, once you move out you’ve got nothing to show for it. If you own your home however, your monthly mortgage payments are similar to paying rent except they are going directly towards your own home: your own investment. Once you own your home outright, it’s a huge asset, especially in a city with such a high and competitive real estate market.

 Many people, if financially able, would choose owning a home as the money they put into accommodation goes directly into the property, their own investment. There are, however, considerations to take into account whether renting or owning. Depending on your lifestyle, owning may not be right for you even if you do have the cash for a down payment.

In this article, we’ll take a quick look at some of the pros and cons of owning versus renting.

Owning

Advantages to owning a home include:

    Owning a home gives you a sense of stability and of ownership. Many people grow up imagining they will one day own property. If you want to settle and start a family, owning a home can give you the stability to do so.

    Buying a house is likely the largest purchase you will ever make. While it takes time to pay off a mortgage, a home is a good investment, one which you can also keep in the family should you choose.

    If you own, you have more freedom when it comes to renovations and home improvements. No more dealing with potentially difficult landlords.

    There are certain tax deductions you can make as a homeowner, such as deductions on property tax and on interest paid.

Potential disadvantages include:

    You will have to spend more money. Even though your mortgage payments may be the same or less than paying rent, there are still considerable expenses, especially in the first few years of home ownership. This can include such expenses as utilities, insurance, and property tax. Make sure you fully understand the expenses before you buy. A mortgage broker can help advise you in that regard.

    Having a mortgage and owning a home is a big commitment, both financially and timewise. If you plan on moving around or travelling a lot, homeownership may not be right for you.

Renting

Advantages of renting property include:

    Renting can give you more flexibility. Usually after a year long lease, leases change to month-to-month which can give you the flexibility you need if you are unsure of your future living situation.

    As a renter, you will not have to pay for many repairs as those fall under the responsibility of the landlord.

    Rent is often cheaper than a mortgage, and you don’t pay property tax.

While disadvantages include:

    You must obey the landlord’s rules, which may, for instance, forbid pets.
    There are limitations on the appearance of the home and home decor.
    Zero return on your investment.

If you are considering making the move from renting to owning, consult a mortgage broker today. A mortgage broker can help you understand the market and assess your financial situation to help you determine if owning is right for you. Contact one of our mortgage professionals today to set up a consultation!

source: northwoodmortgage.com

Selling and Buying a New Home? Here are Your Options

For many homeowners, the purchase of a new home is dependant on the sale of their old one. While it would be ideal for the selling of your old home and purchase of your new home to happen at exactly the same time, the dates rarely line up like that. You may have sold your current home but are still searching for a new one. Or, you may have found the perfect property but are lacking a buyer for your current home. Selling and buying a new home can be daunting; fortunately, you do have options, and it can be done!

Sell First

There are some benefits to selling your home before buying a new one, the biggest one being that you will know exactly how much you can afford on the new home. If you don’t sell first, you may be overly optimistic about the value of your home and buy something you can’t actually afford. Or, you may lowball your new home and be disappointed when you find out what you could have had! Selling first will give you certainty about what you can afford, which is a great position to be in when buying.

Selling first means you’ll only have one mortgage payment—on the new home—rather than have to juggle two mortgages. However, some homeowners don’t like the uncertainty of selling their home without having somewhere else lined up. Selling first means you would have to find accommodation, whether with relatives, friends, or with a rental. You would also possibly have to put your belongings into storage, which can be a big hassle.

Buying First

Buying a home before selling your old home gives you lots of time to plan your move. However, buying first means you could end up paying two mortgage payments at once if your current home isn’t paid off. Whether or not you can afford this depends on your financial situation. If you can afford it, buying first is a good way to ease the selling process by taking the pressure off finding a new place.

Rent Your Old Home

If you feel you aren’t able to afford two mortgage payments but have found a new home you don’t want to miss out on, you could move into the new home and rent out your old property. While this requires the added pressure and stress of finding tenants, and being a landlord, it can be really helpful for paying off your mortgage and alleviating the financial stress of owning two properties.

These are just a few of the options available when it comes to selling and buying a new home. If you are considering selling and buying, speak to a mortgage professional to see what kind of potential expenses you can expect. Contact our experts today to set up a consultation!

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

What Is A Variable Rate Mortgage?

When mortgage shopping, many buyers think that a fixed rate mortgage is the only way to go. However, a variable rate mortgage may actually save buyers money in the long run, although it can be riskier. Here’s how variable rate mortgages work:

 As opposed to a fixed rate mortgage, which is a flat rate paid throughout the mortgage term, without fluctuating interest fees, a variable rate mortgage is based on lender prime rates, and will fluctuate with the bank’s interest rates. If you are considering a variable rate mortgage, it’s best to speak to a mortgage expert as they will have a thorough understanding of the current interest environment.

While a fixed rate mortgage allows for better financial planning and eliminates the chance of any surprise, there are some reasons why a variable rate mortgage may be a better option. For one, if you know the lender’s rates are currently low, and you’re planning to only own the property for a short time, a variable rate mortgage may help you save money. Other possible perks of variable rate mortgages include:

    -If interest rates are expected to fall, you could capitalize on that in the future.

    -More flexibility: The penalty and extra interest fees are much harsher on a fixed rate mortgage if the mortgage is broken. The interest will be less on a variable rate mortgage.

    -Although it’s not without risk, variable rate mortgages have been proven to save Canadians money over time.

    -With a fixed rate mortgage, your payment won’t change even if interest rates drop significantly.

There is really only one risk to variable rate mortgages, which is the risk that interest rates will rise suddenly. This is, however, unlikely, as banks will try to avoid raising rates in order to avoid public backlash.

If you are considering a variable rate mortgage, you should be able to still cover your payments should there be a raise in interest rates. If you are able to afford the risk, then a variable rate mortgage can definitely save you money. If interest rates are currently low, and you want greater flexibility with your mortgage, then a variable rate mortgage can give you that.

Since there is risk and more complexity involved with a variable rate mortgage, it’s important to seek out the advice of mortgage experts to guide you in the right direction. Northwood Mortgage can help you with all your mortgage needs, whether you choose a fixed or variable rate mortgage. Contact us today with any questions about how we can help you, or apply now!

source: northwoodmortgage.com

Fixed Rate Mortgages: Should You Choose A 15-Year Or A 30-Year?

Once you’ve decided that you want a fixed rate over a variable rate mortgage, you then have to determine if you want 15 or 30 years. Taking on a loan for 15 years may seem impossible to some people, while others may think that’s just the right amount of time needed to pay it off. Generally, Canadians opt for anywhere from 25 to 30 years for their mortgages, but that doesn’t mean you have to too.

Fixed rate mortgages: 15 years

With 15-year fixed rate mortgages, you have the advantage of paying off the loan faster. Once you’ve paid off your mortgage, you can focus on putting money aside for other things like your retirement, children or grandchildren’s educations, vacations, etc. You’ll also save money on interest since you’ll pay more interest over 30 years than you will over 15. For example, 4% interest on a $200,000 home is $66,288 over the course of 15 years. The same amount of interest on the same property for 30 years is $143,739. Finally, with a 15-year loan you can build up the equity in your home quicker because you’re taking less time to pay off your loan.

Fixed rate mortgages: 30 years 

For fixed rate mortgages at 30 years, you’re looking at increased time to pay back your loan. You’re also looking at a lower monthly payment but, as aforementioned, more interest to pay over the 30 years. However, when you have lower monthly mortgage payments to make, you can save more money to put towards retirement, credit card payments, etc. With a 30-year mortgage you get to keep more cash in your pockets, but you will be putting less towards your mortgage. You can also make extra mortgage payments over the course of the 30 years to reduce the balance, but watch out for prepayment penalties.

Are the monthly payment amounts really that different?

With fixed rate mortgages at 15 years, you’d think that the monthly payments would be double those of 30 years. This isn’t usually the case. Let’s use the same example as before with the $200,000 mortgage at 4% interest. The 30-year monthly payments would be about $950. The same mortgage with the same interest at 15 years would see a monthly payment of about $1,450. That’s less than double with a difference in monthly payments of approximately $500.

Which one is right for you?

When it comes to choosing a 15- or 30-year fixed rate mortgage, you must evaluate your financial situation. Sit down with your mortgage broker and lay everything on the table. Your broker can help you make the decision as to which one is right for you by reviewing your financial situation and explaining in detail what your monthly payments will be, the interest and how you can manage a 15-year vs. a 30-year loan.

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

Can I Get Out Of My Mortgage Without A Penalty?

There are many reasons you may need to break a mortgage. Life is unpredictable, and perhaps a five year closed mortgage seemed like the right choice at the time, but as we all know circumstances can change. Maybe you need to sell earlier than you thought, or maybe you found a cheaper rate somewhere else. Unfortunately, getting out of a closed mortgage can result in paying a penalty fee, and these can cost thousands, or even tens of thousands of dollars.

Protect Yourself From The Beginning

When it comes to signing a mortgage, the language that’s used in the documents can be complicated and difficult to understand, especially for an inexperienced buyer. In this way, you can get stuck paying penalties larger than you expected, or not being able to get out of the mortgage at all.

Though it can seem daunting, it’s worth learning how to read legal documents. When it comes to your mortgage, or anything involving substantial amounts of money, it’s imperative that you know exactly what you’re agreeing to. Even if you use a lawyer to go over these documents with you, don’t completely let them take the reins. You should understand every detail of what you’re signing, and you should be able to use these details to foresee any future issues.

It’s useful to calculate mortgage penalties before you find yourself in a position where you have to get out of your mortgage. The more prepared you can be, the better.

How Do I Calculate Penalties?

There are online penalty calculators available, but it is recommended that you calculate the penalty yourself so you know what you should be paying.

There are two methods you can use to calculate what you will be paying, but whichever of the two is higher is the one you should be prepared to pay.

• Three Months’ Interest: Your next three mortgage payments plus interest.
• Interest Rate Differential: The current rate of however many years you have left on your mortgage, subtracted from your original rate and multiplied by your mortgage balance.

Using these methods you can easily calculate what your penalty should be. Again, do this in advance, so you can plan ahead before it becomes an emergency.

By ensuring you understand the agreement you’re entering into, and calculating possible penalties you can stay on top of your mortgage and avoid unpleasant surprises. While you can’t exactly get out of a mortgage penalty-free, you can take steps to make sure you’re not paying any more than you have to.

source: northwoodmortgage.com