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Refinancing your mortgage is kind of like hitting the reset button: you get to start from scratch by paying off only what’s left of your original mortgage agreement. This can allow you to get a better rate or lower payments on your mortgage. Since home ownership in Canada is on the rise, around three-quarters of Canadians who own a mortgage have a fixed rate mortgage. This leads to equity ownership in homes, which can be helpful when financial stress from other payments and bills starts mounting up.

Refinancing can be an attractive strategy, especially considering today’s low interest environment. Read on to find out if it’s the right move for you.

Why should I refinance my mortgage?

People decide to undertake home mortgage refinancing for a number of different reasons. Some may want to take advantage of lower interest rates for reduced payments, while others look to get access to more money through reduced payments which they can then use for other expenses, such as renovation or education.

The key benefit to refinancing is that you can build up equity faster, while also paying your mortgage off - and you can do these simultaneously. You’ll save money in the long term through better interest rates and lower monthly payments.

What about your existing mortgage plan?

Refinancing can only be the right strategy for you if it makes financial sense against your previous or existing mortgage plan. Deciding on home equity mortgages as a strategy can be stressful, so consider these three steps when evaluating your plan:

1. Reach out to your mortgage lender

Your lender will be equipped to answer a full range of questions from how difficult it would be to get out of your existing mortgage to how much you can borrow. Some lenders will have blended rate options or discounts on the prepayment plan, so make sure you know the options available to you.

2. Find out about your mortgage prepayment charge

The general rule of thumb for the prepayment charge is 3 months of interest payments. For a fixed rate mortgage it’s generally the higher of three months of interest payments and an interest rate differential amount. Of course this varies by financial institution and the existing clauses in your mortgage. Refer to a trusted lender or advisor on the interest rates and prepayment charge to ensure you’re getting the best rate.

3. Do your due diligence

Make sure to go over the clauses in your mortgage plan - and then go over them again. Also remember, although you may find a better deal somewhere else, switching your home equity mortgage and refinancing to another institution may rack up expenses. You often have to pay legal, administrative and registration costs charged by the other lender, so definitely consider if these costs are worth the amount you save with the mortgage.

Current Rate vs. Today’s Rates

If you have a five year fixed rate mortgage with a value of 3% or higher, a refinance is worth considering. The savings on what you’re paying today should generally be higher than the cost of any penalties or refinancing costs such as the legal or administrative fees mentioned above.

Doing an analysis of the rates will help you gauge if it’s the right time for a home equity mortgage refinancing. Due to the Covid-19 pandemic, interest rates are constantly fluctuating. Although fixed and variable rates started going down late 2019, the interest rates are creeping up again.

However, because the economy and housing market is currently down, banks and other financial institutions are implementing policies to incentivize the market to go back up. Although the market is constantly changing, it is forecasted that there will be adjustments to rates. If you’re convinced you want to refinance but have just been looking out for the perfect moment to act, now may be the right time.

Take Account of Your Other Debts

If you’re trying to figure out if refinancing is for you, consider your other debts - both past dues and ones you may incur in the future. Remember to include any interest rate savings realized by including your other debts. Sometimes, these can be rolled in with your new mortgage as well and factoring in these new savings may help you decide if this strategy is for you.

For those with high interest debt this may be a great solution, saving you money over the long term. It can also dramatically improve your cash flow. Again, factor in the payout penalty fees. If you find that your potential saving outweighs the earlier cost, that can help you with your decision.

Refinancing has to save you money and increase your cash flow. If you’re able to put some of this newly saved cash back into your mortgage, that’s another strategy to speed up your payment plan.

At Canadalend.com we understand that considering the possibility of home equity refinancing may be stressful and oftentimes confusing. Always remember that refinancing is a strategy that replaces your current loan with a special one that is tailored to your needs, so the refinancing should make financial sense to your situation. Our team of licensed mortgage refinancing experts can help guide you on the best strategy for your lifestyle and financial needs.

If you’re considering refinancing your mortgage, contact CanadaLend today at 1-866-422-6536 or contact us here.

If you’re reading this, chances are that you’re looking to save up for a big life purchase - your first home. Congratulations! Buying a home is a great investment that will only appreciate over time.

Home ownership is a growing trend in Canada, as young homebuyers are realizing the problems associated with renting homes instead of buying. Policies at the governmental level make renting unfavourable in Canada because rents are too high in big cities for many to live affordably, and renters also lack control over their homes. This has led the country’s home ownership rate to rocket, with over two-thirds of Canadians choosing to buy their own home.

While home ownership can seem daunting upon first consideration, remember that planning, hard work and savings go a long way. Here are 5 tips to get you started on your home ownership journey.

1. Buy within your means

Owning a home is more expensive than renting, with maintenance and mortgage payments quickly stacking up. There will always be unforeseen costs that come up when you own a home, and these are generally more expensive than outsourcing the problem to your landlord or condo manager. Keeping this in mind, our first tip is to start humbly and consider homes within your means. Factor in all the variants such as your income, the purchase price of the home, mortgage payments and the down payment. The main options our advisors suggest is to either buy a less expensive home or keep saving to make a bigger down payment.

From there, double down on a home that is in line with your long-term financial goals. Getting professional advice on mortgage plans is important, and can be the deciding factor in keeping your home ownership process stress-free and financially manageable. Another helpful tip is to use a mortgage affordability calculator to determine the mortgage you can afford.

2. Closing costs add up

Once you’ve figured out the average down payment and mortgage you can afford, start factoring in the closing costs. For example, what you get approved for may be a lot higher than what you’ll want to spend, both long term and each month.

For a good approval rating, most lenders will want to see that you’ve saved up about 1.5% of the purchase price to cover additional costs other than just your home. This might include expenses such as lawyer fees, taxes etc.

These closing costs can add up but depending on where you live, some of these expenses could be eliminated. There are many programs and rebates to incentivize first time homebuyers, so that is a good resource to investigate.

Some lenders will also provide a lower interest rate, provide quick funding or help you lock in a fixed rate. Often first-time home buyers do not have the kind of credit rating and financial background or history that lenders are looking for. So referring to a private lender who can work with your unique situation can be a solution.

3. Check out home buying incentives

If your city has a first-time home buyers program, definitely look into it as it can help make home owning more affordable in many of Canada’s larger cities. If you can get part of the down payment covered with an interest free loan, it can help you save up to $20,000.

The Home Buyers Plan (HBP), on the other hand, allows you to save using your registered retirement savings plan (RRSP). Essentially, you can withdraw up to $35,000 without penalty, which can reduce your tax burden as well as use your tax refunds to bump up your savings.

Both the first-time home buyers program and the HBP come with their own stipulations such as the payback period and penalty clauses.

4. Saving is everything

All financial experts say that home owning is simply about saving up enough - and it's true. People often underestimate the power of a savings account and how far it can help you when you’re looking to make a big purchase. Opt for a high interest savings account, which will pay you a lot more interest than most typical savings accounts, where the interest rate is usually extremely negligible. This will allow your savings to appreciate without you doing anything. An automated savings plan is also beneficial.

If you’ve done your research on the starting rate for down payments, you’ll know that most Canadians spend between 5 -10% of the purchase price on a down payment. If you’ve started saving early, you’ll be able to pay a larger down payment upfront.

This is always more beneficial as the Canada Mortgage and Housing Corporation (CMHC) can charge a hefty mortgage default insurance. This expense can be avoided with a down payment of 20% or more.

5. Consider a home equity mortgage

Your future home accrues interest over time, so looking into a home equity mortgage could be a great solution if you don’t currently qualify for a loan. A home equity loan, as opposed to other loans, will allow you to draw money from the equity built up in your home. The amount you can take out depends on the value of your home.

If you’re interested in home equity loans, our financial advisors suggest a fixed-term loan for first time home buyers. This loan is a one-time lump sum loan that you can pay back on a monthly basis. The monthly payments don’t fluctuate by month, which provides a great alternative for risk averse buyers who are looking for flexibility to budget according to their varying lifestyle needs.

There you have it: 5 tips to save up for your first home. While home ownership can be expensive, with the right advisors and resources it is becoming increasingly easier to own a home in Canada.

Just make sure to budget for a high down payment and start saving early. If you’re looking for more information on home equity mortgages or to get you started on your home ownership journey, you can always reach out to our licensed team of financial experts.

For more information on home equity mortgages, call Canadalend at 1-866-422-6536 or contact us here.

If you’re self-employed, you’re definitely not alone. Over the last couple of decades, self-employment levels in Canada have risen greatly, with over 2.9 million Canadians leaving the traditional workforce in 2018 alone. Through the advent of unconventional jobs with different ways of working, Canadians have the freedom to explore more than just the usual job structures.

Currently, 15% of the nation are self-employed, which is a pretty big chunk of the population. Although there are a lot of benefits to being self-employed, it does come with its own hurdles. Getting approved for self-employed mortgage loans isn’t impossible, but it is relatively difficult compared to other kinds of mortgage loans. Canada’s big banks and companies have implemented several strict lending rules, while the Canadian Mortgage and Housing Corporation (CMHC) discontinued mortgages for the self-employed unless verified by a third party.

This is simply because there is a higher risk associated with lending to those with unpredictable, varying, or unreliable streams of income. That being said, awareness of some strategies to implement can definitely guide you on your way. Here is how to get a mortgage if you’re self employed.

Why is it difficult for self-employed workers to get mortgages?

Despite the increasing number of self-employed workers, getting approved for self-employed mortgage loans is getting more complicated. The Office of the Superintendent of Financial Institutions (OSFI) released guidelines in 2014 that called for federally chartered lenders to inspect self-employed buyers even more closely. Simply put, the 2014 B-12 bill puts a usually simple process under more scrutiny, making it harder for self-employed workers to prove their income.

While salaried employees are easily able to get a mortgage by showing documents such as a T4, letter of employment, and recent pay stubs, these documents are often not available for most people who work for themselves.

What documents do I need to get approved?

Self-employed individuals usually utilize stated income applications to aid them in their mortgage application process. Stated income applications are used by borrowers who cannot portray their income in the usual manner or using traditional avenues. This application requires a signed income declaration and proof of self-employment, and is formulated based on how much individuals claim to earn.

For your stated income application to be accepted, lenders will need you to provide the following supported documentation as well:

1. Income tax returns. These need to date back the last two to three years. Additionally, your tax returns need to be showing profits (even minor profits help) because if they point out a loss in revenue, then most lenders will not look favourably upon your application.

2. Notice of assessment. The Canada Revenue Agency (CRA) will provide you with a notice stating that you do not have any outstanding tax payments. This helps prove to lenders that you’re a reliable borrower.

3. HST and/or GST payment proof.

4. Copy of your business license, or articles of incorporation work as well.

5. Expected revenue predictions. These are documents that demonstrate your expected revenue for the next few years, and will come in handy to prove your income is stable and consistent.

6. Down payment of 10-15%.

7. Business ownership. This is evidence to support how much of the business you own.

8. Bank statements. You will also need to provide bank statements (both business and personal) for the past 6-12 months to prove revenue and earnings.

That’s a lot of documents! Our team at Canadalend.com has helped countless self-employed workers get approved for mortgage loans, and we have a few additional recommended documents. It is beneficial for self-employed workers to have a good credit score in addition to the required documents; you can check your credit score online easily with a credit bureau like Equifax or TransUnion. A debt service ratio measures borrowers’ ability to make monthly debt payments on time, and is also usually reviewed before an approval. So, be sure to check your ratio to make sure you’re on the right track to get easily approved for a self-employed mortgage loan.

How are self-employed individuals classified?

There are many definitions as to what constitutes as self-employed, but such individuals range from being business owners and IT contractors to doctors and freelancers. Owning a farm or rental properties can also classify as being self-employed. The different business structures that self-employed individuals are classified under are what is important in getting mortgage approval and loans.

A lot of lenders will classify self-employed individuals in various groups based on business type. You could get classified under the commission sales, corporations, sole proprietors, or partnerships group, and this directly affects your mortgage approval or rejection. For example, owners of incorporated businesses pay themselves a salary, and are easily approved for self-employed mortgage rules, as their salary structure is more traditional. Thus, unincorporated businesses and sole proprietorships can benefit by incorporating, although it is best to speak to a certified professional in the business.

What Non-Traditional Lenders Can Offer

Stricter lending rules are squashing the home-ownership dream for so many Canadians. The tightening of the CMHC guidelines don’t take into account the struggles of entrepreneurs, and this trickles down into the lending rules of Canada’s big banks. Instead of struggling to get approved with strict lending rules, consider turning to those who work with private mortgage brokers. This makes the process easier for many self-employed workers because it allows potential borrowers the chance to secure a mortgage without the stress of rejections and with more specialized support. Working with non-traditional lenders will grant you access to hundreds of different lenders, many of whom specialize in lending to those who are self-employed and may not qualify for the banks’ stricter terms.

Whether you’re a commission-based employee or a business owner, if you’re struggling to get approved or don’t know where to start, then our team at Canadalend.com is here to help. Our mortgage brokers are knowledgeable and with years of experience with self-employed individuals, we are qualified to help you in your unique situation. From creating a plan of action to making sure you get specialized services and great mortgage rates, our brokers will guide you throughout your home-owning journey. 

To book an appointment or for more mortgage advice, call us at 1-866-422-6536 or contact us here.

If you’re an aspiring first-time home buyer and live in one of Canada’s three most expensive cities, a new government incentive may be the way forward for you. If you live in Toronto, Vancouver, or Victoria, then the First-Time Home Buyer Incentive (FTHBI) helps ease mortgage rates to make home-owning more accessible to all.

The government’s Fall Economic Statement included changes that will come into effect in the Spring of 2021, helping qualified buyers to reduce their monthly mortgage payments, without adding to their financial burdens. The incentive will be helpful to a lot of people in the right situation, but qualifying for it has a few caveats. 

Here is everything you need to know about the FTHBI and how to use it for your benefit in your home-owning journey.

What does the incentive offer?

The FTHBI is essentially a shared equity mortgage with the Government of Canada. In order to reduce mortgage rates, it offers three main benefits:

1. 5% or 10% for a first-time buyer’s ownership of a newly constructed home.

2. 5% for a first-time buyer’s ownership for a resale or existing home.

3. 5% for a first-time buyer’s ownership or a new or resale of a mobile/manufactured home.

As the incentive offers a shared mortgage rate benefit, the Canada Mortgage and Housing Corporation (CMHC) partners in sharing the investment of the home with you, the homeowner. As the property appreciates and depreciates in value according to the fluctuation of the market, the CMHC will share in the upside and downside of the property value with you.

The scheme is most valuable to those with outstanding financial payments, as it will help reduce the regular mortgage payments for the new home. You’ll need to pay back the amount within 25 years, during which home-buyers will be able to save up a significant chunk of money due to the reduced mortgage rates. The incentive also stipulates that in the case the property is sold before the 25 year period, the amount must be paid back. The home-buyer may also pay back the amount in full before the payment deadline without facing a prepayment penalty.

Qualifying for the FTHBI

While the incentive is of great value for many home-buyers, unfortunately it does come with some caveats. The CMHC has placed some restrictions on qualifying based on who can use it and what kind of homes can be purchased with it. Here are the four main requirements to qualify for the FTHBI:

1. First-Time Home Buyers. The name of the incentive says it all: you have to be a first-time home buyer in order to qualify! The incentive defines a first-time home buyer as someone who’s never owned a home (anywhere in the world, not just Canada), nor lived in a house owned by a spouse of a common law partner in the last four years.

2. Household Income. Another stipulation the CMHC has put in place is that the household income of the interested party must be less than $120,000 to qualify. This includes the income of you and anyone else who chooses to co-own the home with you. The annual average Canadian income is reported to be around $52,000, which means that a lot of Canadians will be able to qualify for the FTHBI in the Household Income clause.

3. Minimum Down Payment. The down payment must be paid fully in cash, after which the reduced mortgage rates start applying, meaning that the incentive doesn’t kick in until after the down payment is paid off. For properties worth $500,000 or less, the minimum down payment will be 5% of the total amount. For homes costing between $500,000 and $1 million, the down payment is 5% of the first $500,000 and then 10% of the remaining amount.

4. Maximum Borrowed. The incentive also stipulates that the maximum amount to be borrowed is four times your qualifying income. If you earn exactly $120,000 a year (which is the qualifying maximum), that means the maximum amount you can borrow to be eligible for the incentive is $480,000. This is a pretty restrictive requirement, as it significantly limits the range of properties available for reduced mortgage rates. As the FTHBI is available only in Canada’s three most expensive cities, finding an eligible mortgage within this amount can be tricky for some. This is because the first-time buyer will likely earn close to the national average and then have to buy a moderately priced home compared to their earnings as well.

Is the FTHBI right for you?

This is a tricky question because it depends on so many factors such as where you live, how much you earn, and how much financial burden you wish to undertake. There will be no one-size-fits-all answer, but checking if you’re eligible is a good place to start. Crunching some numbers to check your mortgage affordability is helpful too, so be sure to check mortgage rates with the incentive as well as without. However, it’s always best to speak to a mortgage broker in your area who can help evaluate the right move for you.

For example, if you’re looking to buy a home that’s more expensive than the maximum allowed in the incentive, then it may not be right for you. At the same time, remember that the housing market is constantly fluctuating, and it is impossible to determine future property values.

Also, researching other options for someone in your situation is great to understand the housing market where you live. A joint mortgage may be a solution for some, while a refinancing may be the right move for others.

To book an appointment or for more mortgage advice, call Canadalend at 1-866-422-6536 or contact us here.