3 Things To Know About Mortgages For Overseas Properties

There are many good reasons to invest in property overseas. You may want to use the property as a vacation rental or as a vacation home for yourself and your family. Your child may be going to university overseas, and you may be thinking about buying a property as an investment where they are studying. Getting a mortgage for an overseas property is different than getting a mortgage in your country of residence, however, and there are some things to consider.

1. Hire an Expert

Even if you are experienced in buying real estate, the rules are often quite different when it comes to buying overseas. The best thing to do would be to find a local real estate agent in the country where you want to buy, who is experienced when it comes to dealing with overseas buyers. By working with a local agent, you can better understand the local laws and regulations when it comes to home purchasing and financing.

2. Getting Financing is Challenging

Obtaining a mortgage for an overseas property can be challenging. If you have a credit score from a foreign country, it won’t be counted overseas. You will have to obtain a mortgage from a bank in the country you are purchasing in, and the application process will be similar to that in your home country. You will still have to prove income and provide all other supporting documents. As a foreign buyer, you will likely be unable to get low mortgage rates.

Experts recommend you buy your first couple properties overseas outright, as it is unlikely you’ll be able to get a loan. Once you have a bit of a portfolio overseas, it will be easier to get a loan for future purchases.

3. You Can Leverage Your Current Property

While it’s difficult to get a mortgage from a foreign bank, some homeowners use the equity on their current residence to finance a purchase overseas. Speak to a mortgage broker about obtaining a home equity loan or refinancing in order to finance an overseas’ property. Refinancing can be tricky, so it’s best to seek the advice of a professional.

Buying a home overseas can be very rewarding. If you choose to use it as a holiday rental, you can make a good income. If you are moving overseas yourself, it’s a great investment and a good way to diversify your portfolio. While it is more difficult to get a mortgage and to get low mortgage rates overseas, it isn’t impossible. Of course, your ability to find low mortgage rates will differ depending on where you are buying. If you are considering buying a property overseas, contact one of our mortgage experts today for more information and advice!

source:  northwoodmortgage.com

Purchasing Or Refinancing A Home? How to Play it Safe

When it comes to purchasing or refinancing a home, you want to play it safe because mortgage fraud is something you definitely don’t want to get caught up in.

Mortgage fraud takes places when a person intentionally provides erroneous data on a loan application in a bid to get a mortgage that he or she probably would not have qualified for had he or she entered accurate information on the loan application. You need to be aware of this sort of crime so that you don’t fall prey to con artists.


What is Mortgage Fraud? 


Various sorts of mortgage fraud exists. One very popular one involves a criminal finding an unsuspecting person with good credit to serve as a so-called straw buyer. As part of this scheme, the crook will seek to have the straw buyer place his or her name on the home mortgage form. The con artist may, in exchange for the straw buyer’s assistance, promise to pay a sum of money or offer some other incentive.

Although the promised payday may prove alluring to the straw buyer, the truth of the matter is that the straw buyer will be the one left to shoulder responsibility should the mortgage default. If it’s proven that the straw buyer understood that he or she will fully engaged in fraudulent activity, he or she could be forced to cover any post-property sale shortfall, and could also be dealt criminal charges.

How Can You Remain Safe From Mortgage Fraud?

Fortunately, there are plenty of ways to steer clear of mortgage fraud. For example, you should refuse to accept any payment or reward offered to place your name on a mortgage application unless you plan to buy the property in question.

Another tip is to work only with real estate agents and other industry professionals. You also need to, among other things, keep your personal information private. Nefarious people who have access to your personal information can potentially use ID theft in order to commit mortgage fraud — without your knowledge.

Don’t fall victim to mortgage fraud. When purchasing or refinancing a home, be sure to go through the proper channels to get your business taken care of properly. If you work with industry professionals, steer clear of too-good-to-be-true offers from potential con artists and guard your personal information. This way you’ll be able to safely purchase or refinance your home.

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

What are Cash Back Mortgages?

When it comes to choosing a mortgage, there are many possibilities. A cash back mortgage is often recommended to first-time homebuyers because it gives you exactly what its name states: Cash back – money in your pocket to use as you please.

 How do cash back mortgages work?
With a cash back mortgage you will need to come up with a down payment – like any other mortgage – but you will be entitled to a lump sum after your mortgage closes.

What can I use my cash for?
This is entirely up to you. Most people use the money to help them with moving, closing costs, land transfer tax, lawyer’s fees or renovations – basically things required to get them into their new home.

How is the amount of cash calculated?
The amount you receive is based on the size and term of your mortgage. This translates to roughly 5-7% of its value with a maximum of $20,000.

When do I get access to my cash?
Usually, you are given access to your cash directly following the closing of your mortgage. This works out well for most people since they need these funds to cover the expenses that go along with moving, renovations, and other similar factors.

What are the benefits of this type of mortgage?
Besides using the advanced cash to pay for fees and taxes associated with moving, you can also use the money to apply it towards your mortgage as an immediate prepayment of the principal.

What are the drawbacks of a cash back mortgage?
If you break your mortgage terms before it’s reached maturity, you will unfortunately have to pay back the cash you received along with the standard penalty that goes along with refinancing. Also, rates are higher with cash back options and they are not available for variable rate mortgages.

Is this type of mortgage right for me?
Cash back mortgages aren’t ideal for every homebuyer, but the Canadian housing market is conducive to different types of mortgages that suit every kind of buyer. If you’re a first-time homebuyer, a cash back mortgage may be better suited to you because it can help pay for the expenses linked with purchasing a home.

Northwood Mortgage can advise you on which type of mortgage products will work for your particular situation. Your mortgage should fit your needs because it’s your home and your money. Talk to our experts today to find out more!

source: northwoodmortgage.com

What Options do Brokers Offer that Banks Don’t?

Brokers versus Lenders

A broker’s job is not just to provide a mortgage; it is to find the best possible mortgage for a client’s situation among multiple lenders.

A good broker will shop around between many different banks and credit unions to find the best mortgage product for the client. This is a fundamentally different service from banks or other lenders.

While a broker’s purpose is to find the best mortgage for a client, a bank’s purpose is to sell the client on the bank’s products.

Advantages of Going through a Broker

Mortgages are complicated affairs with many hidden costs. Many first-time home buyers choose mortgages strictly based on rates. However, they end up getting fleeced by fees, pay restrictions, and refinance policies.

This is especially true for people with variable income or bad credit, who need more flexible mortgage options. A broker can help find a mortgage product specifically designed for any needs.

Best of all, a mortgage broker has a good understanding of value, and can find the best new offers from a variety of lenders. Every time a new mortgage product is rolled out by a lender, brokers across the country analyze and evaluate its value for their clients.

Additional Options through a Broker

Specifically, the options provided by a broker, as opposed to a bank, include:

    Choice between different lenders
    Negotiation of rates with lenders
    Neutral consultations and assessments

Rising Popularity of Brokers

The recession may be over, but capital is still tight. Bank rates have continued to increase for the past few years. CRBC and TD in particular have both hiked their rates across the board. This has made homeownership very difficult for many Canadians.

The good news is that many brokers can still find the deals among the rising rates.

Lesser-known monolines, or dedicated mortgage lenders, have tried to gain an advantage over the big banks by providing lower rates. It’s difficult for laypeople to find the right monoline for them, but brokers have the skills to find monoclines with both lower rates and appropriate terms.

The public is noticing the better mortgages obtained by brokers. Brokers now account for about one third of new mortgages. Among people who have already gone through the mortgage process with a bank, most choose to refinance using a mortgage broker.

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

Benefits of Paying off your Mortgage Early

Even when you get the best deal possible on your mortgage, having those monthly payments loom over your head can be enough to stress out even the most financially sound.

So what happens if you find yourself in a situation with more money than you expected at this point in your life? Should you invest it, spend it, or pay off your mortgage?

Early mortgage repayment is not for everyone, or every situation. However, if you can afford early repayment, there are several benefits for your life and financial situation.

1. 1. Net Income Increase
A common reason why people are delaying their repayments is the low interest rate on their mortgage. When your rate is only slightly above inflation, it’s extremely attractive to keep refinancing it indefinitely and use that money for investing.

There’s one problem though: the reason that mortgage rates are so low is because investment returns in general are low.

Investors across the world are finding that there are few profitable places to put their money these days. Even riskier investments often barely return enough to keep step with inflation.

Take a good look at your investments. How many of them produce a return equal to the cost of your mortgage, at no risk? If you look at your mortgage repayment as a form of investment, you might see that putting money into it has a greater and more reliable effect on your income than your investments.


2. 2. Fewer Fees
Refinancing a mortgage requires a payment of closing fees. Although refinancing at a lower rate can be attractive, the fees add up over a lifetime.


3. 3. Simple Finances
A general rule in life is that more investments means more work. Investing in property, stocks, or even RRSPs can eat up your time by forcing you to go to meetings, watch the markets, and manage your portfolio.

Paying your mortgage off can increase your income and free up your time.


4. 4. Payment Freedom
Changing careers while under a mortgage is extremely stressful. It is difficult to risk striking out on your own when you have debt to service. Freeing yourself of monthly payments can give you the freedom to pursue your dreams.

Some of these benefits are financial, some are psychological. Both types can greatly increase your quality of life.

source: northwoodmortgage.com

Home Mortgage Refinancing Tips For A Smarter You

The beauty of an economic downturn is cheap credit.  It’s ironic, because cheap credit is one of the main causes of this collapse in the first place!  That said, for those of you with mortgage debt, now is a great time to call your local bank and check up on rates.  Refinancing can be a daunting process, but it shouldn’t be with the right representative and proper frame of mind.

I recently refinanced one of my rental properties and now is a good time to share with you some key things to think about and assess.  Hopefully by the end of this article you will be able to make an informed decision and save lots of money as a result!

INFLATION

Knowing when to refinance is like being a bond trader.  Bond traders obsess over inflation assumptions, and you should have at least a basic assumption as well.  Clearly, there has been tremendous monetary expansion recently, which should ultimately lead to higher inflation.  Basic economic theory says that for every new $1 dollar bill printed, there will be a $1 increase in prices in the overall basket of goods eventually.  The key word is eventually, which could be decades away.

People have been waiting for higher inflation, and therefore higher rates for the past decade.  Ironically, those with short-term fixed mortgages (ARMs) are this century’s winners, because rates are resetting at equal to lower levels than when they were originally fixed!

Inflation has been coming down now for over 25 years, and I see little reason to expect inflation to suddenly jump higher given the tremendous output gap in the economy.  If inflation does start rising, at least you know that your assets are by definition also rising in nominal value.

The figure to watch is the 10-year US treasury yield.  Currently at 3.4% 2% 1.6% (as of 6/22/12) the yield is hovering close to the lows of the past decade.  Meanwhile spreads between treasury yields and bank mortgage rates have narrowed since the crisis.  Most long term duration mortgages are related to the 10-yr bond yield, hence whenever you see the stock market crashing,watch bond prices rise, and yields fall.  This is the exact time to call your mortgage broker.

DURATION


Now that you have made an assumption on inflation, you should consider matching your fixed rate duration with the time you plan to hold or pay off the loan. For example, if you plan to hold onto your property forever, but need as long a time to pay off the mortgage as possible, it behooves you to take out a 30-year fixed mortgage.  Your base case scenario is that in 30 years, you will pay off your mortgage in full, but I suggest you pay extra when you can to save on long term interest costs.

On the other hand, if you plan to only keep your property for 5 years, or plan to pay off the mortgage in 5 years, it makes more sense to take out a 5/1 ARM (adjustable rate mortgage), especially if you think inflation stays benign.

Given the yield curve is upward sloping, longer duration loans have higher interest rates.  This is a tautology for the most part, except during times of extreme economic duress, where the yield curve flattens, or inverts given people want their money as liquid as possible.  Assuming a normal upward sloping yield curve, you will pay a higher rate for a longer duration mortgage.

Current 30-yr conforming mortgage rates are roughly 4.75%-5.25% 4.25%, 3.875% while 5/1 ARMs (5 years fixed and floating thereafter) are at 4-4.25% 3.125% 2.625% as of 6/25/2012.  This is why I encourage all of you to check for the latest mortgage quote on your property for free if you have not done so in the best 6 months.  Rates have continued to go lower and you will save a lot of money!

REFINANCING COSTS

The are a bunch of costs that go into refinancing which unfortunately eat into the savings of refinancing.  The way to think about costs is to get the total cost of refinancing divided by the monthly savings of refinancing to see how many months it takes to break even.

For example, let’s say it costs $3,000 to refinance a $400,000 loan from 5.25% to 4.25%.  Your monthly payment goes from $2,375 down to $2,135 for a savings of $240.  Take the $3,000 in refinancing costs divided by $240 = 12.5.  In other words, it takes 12.5 months for you to start benefiting from a refinance.

If you plan to take 360 months (30 yr fixed) to pay off your mortgage, your actually savings would be $83,400 (347 months X $240) making the $3,000 cost to refinance a no-brainer.  Ironically, you save less if you pay off your loan quicker from a refinancing stand point.

You should also ask your broker what the cost would be to refinance at a higher rate.  In this example, you could get a “credit” to your costs if you refinanced for 4.75% instead of 4.25%, thereby having less money leave your pocket.  The general rule of thumb is that if you plan to stay in your house for over 5 years, and it costs no more than 20 months until you break even, you should refinance.

30-YEAR FIXED vs. ADJUSTABLE RATE MORTGAGES


The benefit of a 30-year fixed loan is that you know what your payments are for 30 years.  The payment will never change, only the mix between principal and interest.  As a long term fixed loan, you pay up for the “privilege” of security.

With a 5 year ARM for example, you pay a lower interest amount in exchange for not knowing what your mortgage rate will be in year 6.  Good thing is that there is generally a 5% cap increase.  The bad thing is, your payments could literally more than double going from a 4.25% interest rate in this example to 9.25%!

If you took out the 30-year fixed mortgage, in year six you will still be at 5.25%.  Hence, having a strong belief where inflation and therefore interest rates are going is important.

People think that adjustable rate mortgages are dangerous and bad.  It’s just not true.  An ARM is a wonderful option to save you money by allowing you to pay a lower interest rate if you believe inflation is benign, and if you only plan to hold the property for a shorter number of years.  ARMs generally come in 1, 3, 5, 7, and 10 year durations.

PITA FACTOR (Pain In The A** Factor)

It would be nice if one could just snap one’s fingers and change the terms of the loan.  Unfortunately, it’s not that simple and you need to spend at least 5 hours of your time speaking to your mortgage representative and preparing and signing the paperwork.  A good agent should be able to tell you all the necessary documents you need to get things going.

The process generally takes about a month given the bank needs to pay off the loan, send an appraiser to figure out the loan-to-value ratio, check your income and assets, go through the title company to get the proper documents, pull insurance records from the homeowner’s association, and get you to sign everything.

The less you make, and the less busy you are, the more you should look into refinancing!  If on the other hand, you’re happy with your loan, don’t have a lot of time, and make a ton of money, your time is worth more than the headache you will go through to save $16,000 bucks in the example above.

PUTTING IT ALL TOGETHER

If your mortgage rate is currently above 5%, consider calling your local bank’s mortgage department and asking what their latest rates are at various durations.  The phone call is free, and you will potentially save thousands over the years.

To recap: 1) ask for rates 1% lower than your existing mortgage rate, 2) match your fixed rate duration with the length you plan to pay off the loan and/or own the property, 3) Calculate the break even duration by adding up the cost of refinancing divided by the monthly savings, 4)  Consider refinances the loan if the break even duration is below 20 months (lower the better) and you plan to hold the loan for longer than 5 years.

If anything is unclear, please feel free to ask!  I’ve been involved in a dozen loans with various types of properties, and perhaps I’ll be involved with one more very soon.

Recommendation: Some of the lowest mortgage rates I’ve seen are by Quicken Loan. I’ve know at least 20 people in 2012-2013 who have refinanced through Quicken Loan and with some incredible rates of below 4% for a 30-year fixed and below 2.875% for a 5/1 ARM. I’ve applied before and got matched 2.625% for my 5/1 jumbo ARM. It’s worth applying today to see if they can at least beat your existing mortgage rate since Quicken Loans is entirely online, and therefore doesn’t have the added marketing and overhead costs as the brick and mortar banks.  Less overhead costs means more savings to you. There is no obligation and it’s free.

source: financialsamurai.com