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

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

Things You Should Know Before Going for a Second Mortgage in Toronto

If you own a home in Canada then you have probably have heard of a second mortgage at some point in your life. A second mortgage is similar to a first mortgage, in that it is a loan secured by your property. As time passes you will accumulate more and more equity on your property. A second mortgage is primarily intended to use the equity that you’ve accumulated over the years.

According to a report by Business Insider, almost 2 million Canadians have a second mortgage, and nearly as many that have a HELOC. Some Canadians will use their second mortgage in order to avoid having to declare bankruptcy. In any event, a HELOC, for those unaware, is also another form of a second mortgage, because it serves as a line of credit for home equity. In other words, the person will supplement a second loan over their first in order to access their equity. Below are some things that you should know before going for a second mortgage in Toronto.

Different Types of Second Mortgages

A revolving HELOC works similarly to a credit card. That is, the borrower will have access to equity in perpetuity as they continue to pay off the principal (what they owed previously) over the upcoming months and years. Moreover, a HELOC can be modified to become a closed second mortgage, which functions much like a loan for a vehicle. That is, the borrower will receive only one lump sum of money from their equity and they must pay it off in a gradual manner.

It should also be noted that it is difficult to qualify for a HELOC of any kind, because they tend to only be offered to those with an impeccable credit profile and who happen to live in a prosperous urban area. Hence, those who have a poor credit profile or have a meager income will only likely have one option at their disposal—a private mortgage.

The Two Main Reasons Why Second Mortgages are Used

The most popular reason why a second mortgage is used is to pay off a consumer debt that has high interest. Many homeowners will also use a second mortgage in order to upgrade their home for resale or to renovate it for their own recreational purposes. Leveraging a second mortgage is highly recommended at the moment because credit card interest rates are presently 15%. As such, you can save a large sum of money by opting for a second mortgage.

For instance, let us imagine that you owe $30,000 on your credit card. In such a scenario you would have to pay roughly $600 in minimum payments every month; This is of course assuming that a 3% minimum payment is required. Now, if your interest rate was 15% APR then you would owe $4,500 in interest charges after just one year has elapsed. This is before you even get to the principal amount that is owed. As can be seen, interest charges can make or break first time homeowners who aren’t too careful with their fiancees.

Due to the aforementioned problems, many Canadians turn to a second mortgage in order to pay off their credit card debts. The end result is that their interest rates will be reduced because their second mortgage is secured by their home, which serves as the primary asset in this case.

Remember that Your Home Will Be Used as Collateral

If you have decided to take out a second mortgage on your home you must remember that your home will actually be used as collateral to secure the loan. As a result, if you fail to pay it off then the lender can foreclose on your property the same way they could with your first mortgage. However, the tradeoff is in the significantly lower interest rates that you will be charged, as your home will serve as an asset that will back your loan.

Take Advantage of Interest Only Payments

It is possible to only make interest payments with many of the second mortgage products that various lenders offer their clients; this will allow you to have easier and more affordable access to your home before you opt to sell your house to the highest bidder. Your monthly payments will also be significantly lower.

To further illustrate, if you were interested in renovating your home before resale or are interested in renegotiating your first mortgage, then you could remodel your home using the funds procured from the second mortgage. You could also have the option to pay off the interest charges. Then after you are done giving your home a makeover you could then resell it at a higher price and then use some of the money that you’ve made to pay off your second mortgage.

Avoid Private Mortgage Insurance

When a person applies for a standard mortgage in Canada they need to acquire private mortgage insurance if they are unable to put a minimum 20% down payment on their house. The end result is that they will have to pay fees, known as Canadian Mortgage and Housing Corporation fees, which can actually be quite exorbitant.

For instance, if you were to take out a half a million dollar mortgage with a 5% down payment then you would have to pay 4% worth of Canadian Mortgage and Housing Corporation fees. In other words, you would need to pay almost $20,000 in fees because you weren’t able to make the minimum 20% down payment.

The good news is you can take out a second mortgage in order to avoid private mortgage insurance. Of course this also means that you will have to add additional expenses to your monthly budget but it can still be a more affordable alternative to having to pay private mortgage insurance fees.

If you would like to learn more about obtaining a second mortgage in Toronto, please visit our website or call us at 1-888-495-4825.

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

All About Fixed Rate Mortgage Penalties

Fixed rate mortgages are the most common, and the least risky, mortgage choice. As the name suggests, having a fixed rate mortgage means that you pay the same amount each month towards the principal, over the agreed-upon period of time.

Many homeowners choose fixed rate mortgages so that rising interest rates won’t affect their monthly payments. Additionally, a fixed rate mortgage offers easier planning for monthly expenses. Often, fixed rate mortgage plans last two to three years, but you can also get longer ones that last five to ten years.

Although fixed rate mortgages seem simple enough, there are some things to consider when choosing a mortgage, specifically what kind of penalties you may incur with a fixed rate mortgage. Fixed rate mortgages tend to be inflexible, and there are two main types of penalties you can incur…

Early Redemption Penalty

You may be subject to an early redemption penalty if you pay off your mortgage earlier than agreed upon. You may also have to pay an early redemption penalty if one of your repayments exceeds your overpayment allowance.

Early Repayment Charge

Many lenders include extended tie-in periods with fixed rate mortgages. This means that even once your mortgage period has ended, you must keep your mortgage with the same lender for a specific period of time. If you try to switch lenders, you will be subject to an early repayment charge.

You will also have to pay an early repayment charge should you try to get out of your current mortgage, for instance to switch to a different lender, or if you are selling your home. Your early repayment charge will usually be about 3-5% of your original loan.

Overall, a fixed rate mortgage will penalize you more harshly for exiting the mortgage before the agreed upon date. The penalties can be very costly, and often the wording in the contract is confusing, especially to first-time homebuyers. If you want more flexibility in your mortgage, a variable rate mortgage may be a better choice for you. While there is less predictability involved, a variable rate mortgage typically offers more options for homeowners when it comes to ending a mortgage or making repayments.

Choosing which mortgage solution is right for you can be downright confusing. Fortunately, our highly trained, professional mortgage consultants are here to help you with all of your mortgage questions and concerns! Please, contact us today to set up a consultation!

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

Everything You Need To Know About Mortgage Pre-Approval

Getting pre-approved for a mortgage is always good news for prospective homeowners. Unfortunately, many of them tend to mistake pre-approval for actual approval. Hence, it comes as a shock to many of them when they get turned down for a mortgage. Pre-approval is not the same as a final approval, so it is important that you appreciate the difference when looking to secure a mortgage.

Your pre-approved figure may not be your actual figure

It is fairly easy to get pre-approved for a certain amount; that is because lenders often don’t ask for extensive documentation in the pre-approval process. The pre-approval figure is merely an estimate of how much the lender could potentially give. The actual amount is only given after a thorough examination of the property in question and the financial status of the homebuyer. In the end, the amount the prospective homeowner qualifies for might not match the value of the house.

Pre-approved rates are not necessarily the best

Statistics show that most homeowners don’t end up taking the mortgage they were pre-approved for. Pre-approved rates are often slightly higher than the market rate, and this is assuming that you are pre-approved. It is best to check rates 30 days before closing, as they tend to be slightly lower than the market rate.

Your financial situation is crucial

Many lenders pre-approve you without asking for details about your financial situation. However, this will change when it is time for a formal approval. It is only when the lender gets a better idea of you financial situation that they will determine that you can get a mortgage at the pre-approved rate.

The property itself is important

Your financial situation is not the only thing lenders take into consideration. The property itself is also a big factor in whether you get the mortgage. The property might be overpriced, or it may belong to a certain category of buildings that the lender doesn’t approve for.

Pay attention to features

Pay attention to all the features that come with a pre-approval, such as rate holds, discounts, and penalties. Also, choose lenders that have a thorough vetting process for pre-approval. This way you will less likely end up with surprises in the end.

Getting pre-approved is useful, but it is not a guarantee of anything. It is actually quite possible to get a good mortgage without pre-approval. The best way to take advantage of pre-approval is to make sure you have your own finances in order and do as much shopping around as possible. For more information on pre-approval, contact us today.

source:  northwoodmortgage.com

Ways A Second Mortgage Can Help Your Financial Situation

Life happens – and there are things that may crop up that may put a serious damper on your financial situation. Owning your home can help mitigate these problems through the use of a second mortgage.

 Consolidating debt, for most people, is a reality in this economic climate. Homeowners with at least 20 per cent equity in their homes can apply for a second mortgage, which is a great way of working away at reducing your debt. It’s also an option when you need extra cash for things like medical expenses or renovations.

Do I qualify?
The interest rates on second mortgages are often higher than first mortgages, yet carry lower interest rates than credit cards. If you pay other debts on time and choose to get a second mortgage, you may find your credit score improving, a definite bonus!

Here are a few things lenders will look for in those who apply for second mortgages:

    Income. Are you gainfully employed? Or have a consistent source of income? Lenders will want proof that you’ll be able to make payments
    Equity. The more you have invested in your home, the better. A larger down payment for those buying a home is also a plus. The less risk a lender has to take, the better for you
    Credit score. A higher score equals lower interest rates
    The property. The investment needs to be secured by the lender if you are unable to make mortgage payments

The good and the not so good

On the plus side:


    Your first mortgage doesn’t need to be discharged, so you’ll have no penalties or fees
    Most carry a term of one year with only interest payments
    There are many choices of lending institutions, so financing can be more easily arranged
    If you’ve got a mortgage and a positive credit history, chances are you’ll be an ideal candidate
    You can use up to 80 per cent of your home’s value to arrange for the mortgage.

On the not-so-plus side:

    You’ll face higher interest rates
    Second mortgages may carry longer terms but repayment may be required sooner depending upon the terms of the loan
    There is a possibility of default, in which case the second lender has the option of purchasing the home


If you’re thinking a second mortgage may be an option for you, speak to the experts at Northwood Mortgage about your situation. Schedule an appointment and have all your questions answered.

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

How Student Loans Can Affect Your Mortgage Application

The latest figures show that almost $30 billion is owed by Canadian students in student debt. With many people going back to school in their adult years, this increasing level of student debt brings with it numerous challenges for the average Canadian student. This is clear when examining how student loans can impact your ability to buy or sell a home. And so within this article, we’ll look at how student loans might impact a buyer during their mortgage application process.

Your Debt to Income Ratio

When buying a home, your lender will calculate your debt to income ratio by adding up your monthly payments, along with your expected mortgage, and dividing the total by your monthly income. To qualify for a loan with most companies, your debt-to-income level should be less than 43%. For those with a $20,000 student loan looking to buy a house for $300,000 or more, this debt-to-income ratio could prevent lender approval.

You May Need a Higher Down Payment

In order to decrease their mortgage amount, and thus the amount they’ll be comparing with their income, buyers might consider using a higher down payment for their property. This might mean waiting a little longer to buy their dream home or selling another asset such as a business or a vehicle in order to increase their down payment amount.

Options to Decrease Mortgage Application Challenges

While student debt can have a significant impact on the mortgage application process, buyers do have numerous options available to help overcome these challenges. Let’s look at several steps buyers can take to mitigate the impact student debt has on their mortgage application:

• Consolidate Loans Into One

For those with numerous loans in addition to their student loan, such as a credit card, it can help to consolidate the loan into one loan repayment. This can reduce the overall cost thereby reducing the debt to income level for the mortgage applicant.

• Choose a Longer-Term Mortgage

Another way a person with student debt can reduce their long-term debt to income ratios is to choose a longer mortgage term. This will provide a longer period to pay off the mortgage, thereby decreasing month-to-month costs.

It’s important not to let student debt prevent you from moving forward on your home purchase! There are multiple avenues towards buying a new home for those with student debt. To learn more, speak with our trusted experts directly today.

source: northwoodmortgage.com

What Income Verification Methods Are Required When Applying For A Mortgage?

When applying for a mortgage, you will need to demonstrate to a lender that you have a substantial enough income to pay off the mortgage in the future. But how exactly can you reasonably prove your income? This article will detail the methods you can use to verify your income to a mortgage lender.

 Make Copies of your Records

The first step is to provide your lender with copies of your records that indicate your income. This means your two most recent pay stubs, your most recent checking account statement, your current savings account statement, and your federal income tax returns from the previous two years. This should provide your lender with enough information to accurately gauge your income and financial situations.

Debt and Loan Statements

Your income will not be the only factor that your lender will want to verify. Your mortgage lender will want to know about any debt obligations you have. As such, you should provide your lender with copies of your most recent credit card balance(s) as well as the most recent statements from any other outstanding loans you have, such as personal, auto, or student.

Provide Employer Information

Your lender may also request that you send them the information of your employer. This includes your employer’s name, your office or work address, and the phone number to the human resources department. Your lender might want to call to enquire about and verify how long you have worked there and what your salary is.

If you have Unverifiable Work

Many people who apply for mortgages have not been in steady employ in recent years. This can make getting a mortgage more difficult, but by no means impossible. If you have been in and out of work, have been working as a freelancer, or are self-employed, then you will have to take some extra measures to demonstrate your income. This usually means providing your lender with copies of more years’ tax returns, such as four or five. You may also want to provide bank statements going back several months or years.

Most Importantly, Be Honest

Remember, while it may be tempting to try to exaggerate your income in order to impress your prospective lender, this will ultimately only hurt you. Any competent and ethical lender doesn’t want to give you a mortgage you can’t repay and drown you in debt. Financial honesty and responsibility are always prudent.

source: northwoodmortgage.com

Should You Negotiate Your Mortgage?

Finally thinking about joining the homeowner club – negotiation is a key trick of the trade when it comes to mortgages. If you know the power of negotiation, you will save yourself a lot of hassle, money and time in the end.

Becoming educated on the home buying process and the financial aspects of it, can give you the upper hand. Remember the lenders are competing for your business, you don’t have to just settle for what you can get, you can get the best if you know your stuff.

3 Tips to help you negotiate your mortgage

• Calculate your finances.
It’s important that you are fully aware of your finances. Know your credit score and how much money you have in the bank. If you have a high credit score, try to maintain it. If your credit score is on the lower end, speak with your financial agent to find out the best way for you to improve it. Your finances play a major role in the amount of money you will be offered by lenders and if you are confident with your finances, you will make a better negotiator. Use a mortgage calculator to check out payment and interest options.


• Shop around – visit different lenders and listen to their offers.
Be prepared to visit a few lenders to find the best deal for you. They should lay out all of the information in a clear and concise way, so you will be able to understand 100% of what they are offering.


• Don’t make any impulsive decisions.
Think of the big picture – don’t rush it. Take time to think about the offers and what looks the most attractive to you.

There are many mortgage terms that lenders are usually willing to negotiate, but two of the main ones are:

1. The Amortization Period
Let’s start with what the amortization period is on a mortgage: it is the period of time it will take to repay your debt (mortgage) in installments on a regular fixed schedule. The amortization period makes a huge difference when it comes to your mortgage payments and the amount of interest that you will pay on the mortgage life.


2. Interest Rates
These rates vary but lenders are able to offers some customers ideal rates.

Speak with one of the experts at Northwood Mortgage to find the best mortgage for you.

source: northwoodmortgage.com

Hurdles Towards Getting The Best Mortgage Rate

Even if you try hard to get the most attractive rate and term for a mortgage, you still might only end up with the most favorable option available for someone in your situation rather than with the best option available in the marketplace.

In fact, depending on various factors, the difference between your rate and a superior rate could be numerous percentage points.

Since even a single percentage point difference can make a difference over the long haul, it’s in your best interests to learn about the obstacles to getting the best mortgage rates. Read on for some tips that will help you get ahead.


Low Credit Score

If your credit score is south of 680, you’ll fall short of the threshold needed to secure the best interest rates available. It’ll be even worse if, in addition to a low credit score, you also lack the ability to come up with a substantial down payment. Having good credit though, won’t be enough. You’ll also need to demonstrate a 24-month period of good credit with zero major delinquencies.

Duration of Rate Hold

Since the general rule of thumb is that the lowest interest rates tend to be available for so-called quick closes, you will only be able to benefit from this general policy if you hold a rate for less than a month.

Modest Salary

When it comes to getting the best rates, your income will be a factor. If you’re your own boss or cannot easily provide proof of stable income over a number of years, you may very well miss out of the most attractive rates. In addition, some lenders will insist that you table a larger down payment.

Higher Risk Properties

Another factor that can impact your rate is the nature of the property you are interested in purchasing. For example, there are lenders that will assess higher rates for condo units, cottages, and big multi-unit residences since these sorts of living spaces are viewed by some lenders as higher risk, non-standard properties.

All in all, it is very much possible to get a compelling mortgage rate if you’re willing to do a bit of searching, but as you’ve seen from the aforementioned points, there are some hurdles towards getting the best mortgage rates. Consider the aforementioned points and compare them to your own situation to ascertain whether or not you’re likely to qualify for the best rates.

source: northwoodmortgage.com

Mortgage Refinance Myths

Qualifying for refinancing is difficult. It isn’t necessarily easy for anyone, even with a good credit history. Nevertheless, refinancing your mortgage can be done, as long as you are eligible. By knowing the facts and avoiding the myths, you can better your chances of qualifying for a mortgage refinance.

The Biggest Myths

• Refinancing doesn’t come at any extra costs.
• You can’t refinance because it has been too long since you applied for refinancing or a mortgage.
• You will be losing equity or building equity will be a slower process.
• You have poor credit, so you can’t refinance.
• You will have to start your loan all over again.
• You must refinance through the same banking institution.
• You should own your home for many years before refinancing.
• It isn’t worth it to refinance.

Mortgage lenders and brokers hear all types of misconceptions while they are talking to their potential clients. Allowing these misconceptions to stand in the way of you refinancing can hinder both your financial state and the state of your current mortgage, which is why it’s best to learn about these common mortgage refinancing myths.

If you are unsure if refinancing is a right decision for you, consult with an expert. In most cases, refinancing is a wise choice. Nevertheless, it isn’t for everyone and you will want to learn more about what refinancing entails before you decide to apply. Refinancing could very well lower your interest rate and make it easier for you to pay off your home quicker.

Very rarely will you have to worry about paying any out of pocket expenses for refinancing. Nor will you have to be concerned with prolonging the amount of time it will take to pay off your refinancing loan. The purpose of refinancing is to shorten that timeframe and to focus on paying off the home even sooner with a lower interest rate. Prior to applying for refinancing, make sure you pay attention to the average percentage rates during the time. Always apply when the rates are low.

The benefits of applying for a refinancing loan greatly outweigh the cons. You could end up saving a lot of money as long as you play your cards right. Remember, you don’t have to go through the same banker to refinance although it may be the quickest way considering the bank will know your ability to pay the payments on time. For more information on how you can save through refinancing, contact Northwood Mortgage today.

source: northwoodmortgage.com

Is it Hard to get Approved for a Mortgage if You’re Self-Employed?

In today’s entrepreneurial-focused economy, a lot of people have left their cubicles to pursue a path of self-employment. In a lot of cases, this means more money and a more flexible work environment!





Unfortunately, in spite of all the perks to self-employment, there are also a few pitfalls—one of those being the ability to easily qualify for a mortgage. Self-employment doesn’t make getting a mortgage impossible, but it does make it more challenging.

With the right steps and savvy, getting a mortgage can be just as easy for you as it is for someone with a high-paying desk job, but the steps you’ll have to take to get there will just be slightly different.

What to Expect

Unfortunately even if you’re bringing in as much money annually as somebody with a traditional, stable job, a lot of lenders will be wary of offering you a mortgage. This shouldn’t turn you off from obtaining a mortgage. Yes you’ll have to do a bit more shopping around for the right mortgage broker, but it’s absolutely possible.

How to Improve Your Odds

Due to the general bias of mortgage lenders towards self-employed prospective homeowners, you’ll want to beef up your application a bit if you want to be taken seriously.

Here are a few ways to do exactly that:

Improve Your Credit Score

Whether you’re applying for a mortgage or a student loan, the higher the credit score, the bigger the loan and lower the interest. Do everything you can to build up the highest credit score possible before you start the mortgage application process.

Offer a Large Down Payment

    The larger the down payment, the less likely you are to default on your loan and walk away. This will eliminate a lot of the risk that mortgage lenders might feel. You’ll also need to borrow less money, which lenders find favorable.

Save up Cash Reserves

    If you can show lenders that you have a stacked emergency fund, they won’t have to worry about what is going to happen if your self-employment income decreases before you’ve paid off your mortgage.

Establish a Track Record

    You’ll have a harder time being taken seriously if you’ve only been successfully self-employed for a few months, no matter how successful you’ve been in that time period. It’s best to build up a positive track record of self-employment for at least two years before applying in order to get the best mortgage rate.

Provide Documentation

    Every piece of documentation helps when you’re applying for a mortgage as somebody who is self-employed. Tax returns, profit and loss statements, and balance sheets will all show that you’re being transparent and will improve mortgage lender’s trust in you.

Overall, the path to securing a mortgage as a self-employed individual might take a bit longer, but it’s most definitely a possibility.

If you’re self-employed and are looking to explore your options with mortgages, contact Northwood and see what we can do for you!

source: northwoodmortgage.com

Is There an Age Limit to Qualify for a Mortgage?

Many people are under the impression that once you reach a certain age, you won’t be able to qualify for a mortgage. Although there is some logic tied to that myth, it doesn’t make it true.

 In fact, as long as you’re a legal adult (over the age of 18), it’s illegal for a mortgage lender to decline you based on your age—regardless of being 21, 60, or 99-years-old, you can’t be denied a mortgage because of your age.

But this isn’t to say that mortgage lenders are obligated to offer you a loan. Even if you’re in the prime of your life, you’ll have to prove to your lender that you can afford your mortgage and that the odds of you going into foreclosure are slim.

Here are the factors that lenders do look at:

Debt to Income Ratios
Most lenders expect that your total monthly debts will equal no more than 36 percent of your gross income. This includes credit card payments, student loans, and of course, your estimated mortgage payments.

For this reason, it’s most beneficial to pay off the rest of your debts before you apply for a mortgage. It will greatly increase your chances of securing the mortgage you need.

Income

Mortgage lenders also want your mortgage to take less than 28 percent of your monthly income. In other words, the more money you’re bringing in per month—the more likely you are to get approved for a mortgage loan.

This is where age can make a difference. Not necessarily in terms of the chances of you getting a loan, but rather, when it comes to what income you’re including.

For most people between the ages of 20-50, the majority of their monthly income will come from their employee salary. On the flipside, many people retire in their 50s and 60s, after which their income will mainly be comprised of pension payments, high interest savings incomes, investment incomes, and other sources.

Credit Rate
No matter how old you are, the most important part of your mortgage payment is going to be your credit score. As is the case with any loan, the higher your credit score, the more credit you’ll be able to secure. Most mortgage lenders consider anything above around 740 to be a good credit score.

If you’re currently falling below that, try to increase your score as much as possible before applying for a loan. You can do this buy using credit, and making regular large payments to bring down your debt at a favorable rate.

source: northwoodmortgage.com