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According to recent data from Black Knight, 80% of mortgages originating in 2018 could benefit from refinancing. Coupled with data from the US Mortgage Bankers Association showing that refinancing applications are up 117% on last year, is it time you looked at refinancing your mortgage?

Refinancing is a way to redraw the terms of a mortgage. For the borrower, this usually results in a lower interest rate. This reduces the monthly cost and the ratio between paying off the principal debt and paying off the interest. The borrowing period of the mortgage is also reset, meaning that the lender can rely on your interest payments for a longer period of time.

One of the most common barriers to refinancing is penalty fees. Lenders often include a fee to refinance to cover expenditures they incur. So in the short term, a borrower may see a small decrease in their monthly payments paired with a large initial cost and decide it’s not a viable thing to do.

But is this correct view to take?

While both the monthly payments and penalty fees can feel more relevant, looking at them in relation to the lifetime of a mortgage can recontextualise them. Small changes in the applicable interest rate (up or down) compound in the long term.

The average Canadian mortgage value currently stands at around $200,000. Let’s compare the difference between a 30-year mortgage with a 4.25% interest rate and one with a 4% interest rate. Over the lifetime of the higher rate mortgage, the total repayment is $354,042. At 4% the borrower repays $343,573. With a 0.25% lower interest rate, the borrower saves more than $10,000 over the lifetime of their mortgage. That represents a 3% reduction of the overall repayment figure.

So even when factoring in fees for refinancing, the benefits are clear, borrowers can save a lot of money over the lifetime of their mortgage.

When to Refinance Your Mortgage

With the example above in mind, is it a surprise that Black Knight found that within the first 18 months, 80% of mortgages could be improved with refinancing?

In order to reap maximum benefits for refinancing, it needs to occur earlier in the schedule rather than later. The more time you spend paying in at a higher rate, the more money you’re spending that you don’t need to spend.

There’s also the interest-to-principal ratio to consider. The deeper you get into your mortgage schedule the more your monthly payment goes towards paying down the principal debt rather than paying off the interest. This ratio will be reset when you refinance and you take on a new schedule. After a certain point in the life of your mortgage refinancing can be a worse option. It’s better to pay two years at 4.25% and thirty at 4%, than fifteen years and then another thirty years.

Refinancing your mortgage can shave whole percentage points off the total repayment value of your mortgage and the sooner you do it, the greater the benefit you derive from it.

But refinancing often sits at a convergence point between a number of things that most people are reticent to deal with. Talking honestly about money, paying penalty fees, complicated math and the need to undertake some administrative work.

The independent mortgage experts at Canadalend.com can help with the concerns you might have. They’ll be able to discuss knowledgeably, and confidentially, the different options available from the hundreds of different lenders they have access to. They’ll be able to guide you through the admin side of refinancing. Though you are applying for a new loan, the work done for your previous loan can form a basis for this one.

Our experts will always make sure you understand every aspect of your refinancing before going ahead.

To find out what options might be available to you for refinancing your mortgage, contact contact Canadalend.com today and start a conversation about saving money.

Refinancing a mortgage can potentially save you tens of thousands of dollars over the life of the mortgage. But many Canadian homeowners don’t refinance their mortgage when the opportunity arises because there are many mortgage refinancing myths floating around.

These mortgage refinancing misconceptions prevent homeowners from getting the best rates and terms, which has a big impact on your financial and lifestyle needs. If you’re thinking of refinancing your mortgage but aren’t sure if you should, the following mortgage refinancing tips should help you decide whether it’s in your best interest or not.

Myth 1: You Will Not Save Much Money when Refinancing

Refinancing a mortgage, even if you break your current contract and need to pay a penalty, can still save you a lot of money. Most homeowners refinance to get a lower interest rate.

Refinancing your interest rate by just 1/8th of a percent could save you tens of thousands of dollars in interest payments. That means less money going to the bank and more money staying in your pocket.

Myth 2: With Rates Rising, It Doesn’t Make Sense to Refinance

The biggest reason for refinancing is to find a lower interest rate. But with interest rates on the rise, many homeowners have decided that it doesn’t make sense to shop around. First, interest rates are inching their way up, but they are still near historical lows.

Second, because rates are going up, now is the perfect time to refinance. Waiting for rates to climb even higher will mean paying more in interest.

Third, you’re the customer and lenders want your business. That’s why it’s always a good idea to shop around and find a lender that will provide you with the best rates, terms, conditions, and personal service.

Myth 3: Banks Always Have the Best Rates

Banks and traditional lenders do not always have the best rates. Homebuyers are initially attracted to big banks because they are the most recognizable face of the mortgage industry and people assume that they must have the best rates and financial products.
That’s wrong.

Instead of shopping around and helping you refinance with the best rates, big banks will only try and sell you their own products, even if it’s not in your best financial interest.

On top of that, they only give their best rates and terms to their best clients. If you’re credit rating is bruised, you’re not going to get the same kind of offer someone with a better credit rating will.

Even if a bank tries to offer you a rate that they claim is great, it might not be. There’s an excellent chance that another lender will get you better financing terms. Here’s why. Private lenders are independent, which means they do not need to adhere to the same strict rules federally regulated banks and trust companies do.

Alternate lenders can provide the same kind of services that traditional lenders do, but because they are independent, they have access to hundreds of different lenders. More lenders mean more options and freedom to choose what’s best for you.

Myth 4: Lower Rates Are the Only Reason People Refinance

Refinancing to get a lower interest rate is certainly important. But a lower interest rate is only one piece of the puzzle. A licensed private mortgage professional will help you look at the big picture and come up with a plan. For example, in addition to lower rates, maybe you want a shorter mortgage term, allowing you to pay off the mortgage sooner, which could save you even more in interest.

Understanding the total cost of borrowing will have a big impact on how you refinance, consolidate debt, or get a second mortgage.

Myth 5: Private Lenders Can’t Help Me with My Situation

Traditional lenders cannot come close to proving the kind of service that private lenders do. Big banks prefer to deal with people with excellent credit rating and a big down payment. There are a lot of people looking to refinance that do not meet the bank’s strict rules.

What if your job situation has changed? Or what if you have bad credit or no credit, are self-employed, have unreliable income, are recently divorced, or new to Canada?

For those refinancing their mortgage, working with a private lender can give you more options than you are aware of. Again, because mortgage brokers are independent, they work with hundreds of different lenders—even the big banks.

A private mortgage specialist will help you find a lender that will refinance a mortgage or find any other financial product that meets your needs.

Myth 6: Private Lenders Are Expensive

One big mortgage refinancing misconception is that private lenders are costly. Not true. It’s the same as using a traditional lender. Fees for using a private lender comes from the funds of the mortgage refinancing they put together for you. If they are unable to help you refinance, there is no cost to you.

Myth 7: There’s Too Much Paperwork to Deal with

Refencing is actually not as complicated as you think. Yes, when you refinance a mortgage you are applying for a new loan and will need to provide the same kind of information you did the first time around. This will include a mortgage statement, property tax assessment, and employment letter.

But here’s the thing: You’ve been through this process before and a mortgage broker will help you with the rest. This can include requesting documentation on your behalf and having you sign and submit the paperwork digitally.

Canadalend.com, Helping You Get the Best Mortgage

Are you thinking of refinancing a mortgage? If so, the licensed, independent mortgage professionals at Canadalend.com will ensure you find the financial product with the rates and terms that best suit your financial and lifestyle needs.

Why choose Canadalend.com? Because our mortgage experts are independent, they have access to hundreds of different lenders. Some of the lenders Canadalend.com works with specialize in helping those who are self-employed, have unreliable income, or have failed the mortgage stress test.

To see what kind of mortgage you qualify for, contact Canadalend.com today or apply online and a Canadalend.com mortgage specialist will set up an appointment at your earliest convenience.

Thanks to stricter lending rules, it’s getting more and more difficult to even qualify for a mortgage. Once you do, you’re not out of the woods yet. When you secure a mortgage it comes with a term and amortization period. The amortization period is the length of time it takes to pay off the mortgage. The most popular amortization period in Canada is 25 years. There’s also the mortgage term. That’s the length of time you that you locked into a mortgage rate, as well as other terms with a specific lender. A typical mortgage term in Canada is five years.

When the mortgage term ends you need to sign up for another term. It’s a common misunderstanding that you need to sign a new mortgage term with the same lender. This is not true. You can either sign on for a new term with your current lender or you can shop around, hoping to get a get a better rate and terms with another lender.

While some homeowners may wish they could just stick with the same mortgage terms for the entire amortization period, renewing a mortgage term every one, three, five, or 10 years, means you can find the best mortgage terms and rates that suit your ever-changing lifestyle and financial needs—and the changing dynamics in Canada’s dynamic housing market!

Below are four things you should consider before renewing your mortgage.

1. Renewal Statement

If you currently have a mortgage with one of the big banks or any other federally regulated financial institution, the lender will send you a renewal statement at least 21 days before the end of the existing mortgage term.

There is a chance your current lender decides it doesn’t want to renew your mortgage. If this is the case, they need to notify you at least 21 days before the end of the mortgage term.

No matter which camp you’re in, that doesn’t give you a lot of time to act. That’s why it’s important to get a head start looking around for a better mortgage term. The better informed you are the greater your chances are of renewing the mortgage with better rates and terms.

The renewal statement will contain the same kind of information that you would find on your current mortgage. This includes the balance remaining or the principle at the renewal date, the interest rate, terms, the payment frequency, and any fees or charges.

Most lenders will also include a mortgage renewal contract with the renewal statement, in the hopes you will just sign on for the same rates and terms.

Don’t do it.

Simply signing on the dotted line and returning the new mortgage term might sound easy, but it can only be costly. Chances are excellent you could get a lower rate and better terms with a new lender. After all, they want your business.

2. Your Mortgage Needs

If your mortgage term is coming to an end in the coming months, it’s the perfect time to review your mortgage needs and make sure your current lender is meeting your needs. Life is not static, there is a good chance your needs have changed.

How can you tell if you need to find a new lender? Ask yourself:

• Has my financial situation changed? Can I increase my payments to help pay off my mortgage sooner?
• Can I change the payment frequency, switching from monthly to bi-weekly, or even weekly? Doing so means paying off the mortgage faster and paying less in interest.
• Are you happy with the kind of service your current lender provides?
• Have you accumulated too much high-interest debt (credit card, car loan) and want to consolidate with a larger mortgage?

3. Shop for Better Interest Rates

The biggest reason why people shop around for a new lender when their mortgage comes up for renewal is to find better interest rates. After all, lower interest rates mean more money in your pocket every month and less going to the banks.

Don’t wait until you get the renewal letter in the mail. Shop around, find a lender that will offer you the kind of rates, terms, and conditions that better suit your lifestyle needs.

Best of all, you don’t need to stick with traditional lenders. Private lenders are independent, meaning they do not need to adhere to the same strict rules federally regulated banks and trust companies do. They provide the same kind of services that traditional lenders do, but they also offer you better options, which provides you with more freedom to choose what’s best for you.

4. Switch to New Mortgage Lender

If your current lender will not give you a better, discounted interest rate, lower than the one quoted in your renewal term letter, think of switching to a new mortgage lender. Just be sure to weigh out your options.

Traditional lenders, like Canada’s big banks, will only try and sell you their own financial products, even if it’s not in your best interest. Private lenders, because they are independent, have access to hundreds of different lenders and are looking out for your best interest.

When negotiating with a new lender, tell them what your current lender offers and about offers you’ve received from other financial institutions or mortgage brokers.

Finding the lowest interest rate is important, but there are other factors to consider too. If your financial position has changed, you may want different terms than what was originally agreed to or your current lender is offering.

The lender works for you. Make sure you get what you need.

Canadalend.com, Helping You Refinance a Mortgage

If your mortgage is coming up for renewal and you want to see if you can find a lender with better rates, terms, and conditions, contact a licensed mortgage professional at Canadalend.com.

Because the mortgage experts at Canadalend.com are independent, they have access to hundreds of different lenders. Many specialize in providing mortgages for those who are self-employed, have unreliable income, are new to Canada, or have no credit.

If you’re thinking of refinancing your mortgage, contact Canadalend.com today or apply online and a Canadalend.com mortgage specialist will set up an appointment at your earliest convenience.

What You Need to Know if You’re Self Employed

Because of increasingly strict lending rules being handed down by the big banks and other traditional lenders, it can be difficult, at the best of times, to get a mortgage in Canada. If you’re self-employed it can be even more difficult to secure a mortgage. That’s because traditional lenders don’t like to give loans and mortgages to those with unpredictable, unreliable income streams; they’re seen as being a higher risk to default.

To ensure self-employed Canadians can pay their loans back, banks look at three factors: income, net worth, and credit score. Unfortunately, these tougher mortgage requirements place an unfair burden on the 20% of Canadians who are self-employed.

Part of the problem is that the big banks know that entrepreneurs, independent contractors, and small business owners have difficulty proving their income. On top of that, they understand that self-employed Canadians write off as much as they can to reduce their income and minimize their taxes. The big banks don’t care though.

Documents Required

If you’re self-employed, traditional lenders can ask for any number of documents to prove your income. Pay stubs are the most obvious proof of income, but again, if cash flow is unreliable, big banks will need to see more, such as a tax return or bank statements.

If they’re looking at tax returns to verify income levels, they’ll ask to see a Notice of Assessment, which you can get from Revenue Canada. Lenders will usually ask to look at your income for the past two or three years, which the Notice of Assessment will reveal. Admittedly, some traditional lenders will approve someone who is self-employed for a mortgage with less than a three-year history of income. But there are strings attached; the mortgage will come with a much higher rate and restrictive terms and conditions.

In addition to the Notice of Assessment, the big banks will want to see other supporting documents when you apply for a mortgage.

They can include:

• Proof that you are the owner of the business
• Financial statements for the business
• Contracts showing expected revenue for this year and next year
• Documents showing your HST and/or PST is paid off
• Both your personal and business credit scores
• Written proof that your down payment is not a gift

Lending Standards for Self-Employed

As already mentioned, the lending standards that traditional mortgage lenders impose on those who are self-employed are onerous. This includes looking at tax returns over the last two or three years. But, as we already know, because of tax deductions, how much you make each year may not actually be reflected in the net (take-home) income.

Debt-to-Income Levels

Lowering your taxes is a great idea if you’re self-employed, but traditional mortgage lenders see this as a disadvantage. Big banks calculate your debt-to-income levels, which measures how much of your income is used up to service your debt. This is done by looking at your net income, which is the after-tax amount you take home.

If, like virtually every self-employed Canadian, because of deductions, you have a lower net income. This means your debt ratio will be higher, and most likely, your mortgage application will be rejected.

Higher Down Payment

Banks may tell you that you can get a mortgage, but the terms and conditions will not be as favourable as if you were not self-employed. If you work for someone else, you need to save up a 20% down payment.

If you’re self-employed though, the banks penalize you by saying you need to have a minimum down payment of 30% or even more. It’s tough to save up a 20% down payment, asking for a 30% down payment means most self-employed Canadians will never qualify for a mortgage.

How to Improve Your Chances of Getting Approved for a Mortgage

Get Your Documents Ready/Be Organized

Being self-employed, you know how important it is to keep your records up to date, especially when it comes to doing your taxes. The same can be said when it comes time to apply for a mortgage. Have all supporting documents that prove your income, net worth, and credit score close at hand.

Don’t Miss Tax Payment

When you work for someone else, all of your tax deductions come off before you get paid. When you’re self-employed, you’re 100% reliable for make all of those deductions and paying your taxes and GST/HST on time.

Your Notice of Assessment from the CRA will show whether or not you owe taxes or are up to date. Keeping up with your tax obligations shows lenders you are responsible.

Keep a Good Credit Score

A good credit score is another way to prove that you are good with paying bills on time. The higher the score (300 to 900), the more reliable you are. The lower your credit score, the higher the odds are that you’ll default on a mortgage or loan.

To get a mortgage with the best rates and terms, traditional mortgage lenders will need you to have a credit score of at least 680. The average credit score in Canada is 650. A credit score of 650 or below makes it more difficult to qualify for a mortgage. If you are approved, you’ll be hit with paying much higher interest rates.

A low credit score will impact more than just a mortgage application. It will make it difficult to rent an apartment, get a car, or secure any kind of loan.

To get and maintain a high credit score, make bill payments on time.

Canadalend.com, Helping Self-Employed Canadians Secure a Mortgage

If you’re self-employed and thinking of getting a mortgage, it can be difficult to determine which lenders will even give you a loan, or which ones will provide you with the best rates and terms. The self-employed mortgage professionals at Canadalend.com can help.

Because the mortgage experts at Canadalend.com are independent, they have access to hundreds of different lenders. Many of whom specialize in providing mortgages to those who are self-employed, have unreliable income, bad credit, or even no credit. Traditional lenders on the other hand, will only offer you their financial products, even if it’s not in your best interest.

To find out what kind of mortgage you qualify for, contact Canadalend.com today or apply online and a Canadalend.com mortgage specialist will set up an appointment at your earliest convenience.