Is Insurance Really that Important?

 

When it comes to the long list of important things you have to think about when buying a new home, insurance for your mortgage is likely nowhere near the top. But an unexpected accident, illness or death can quickly change all that.

What if this happened to you?

There’s a common misconception that only middle-aged or older people need to think about insurance. Unfortunately, our claims files tell some eye-opening stories about:
–          A young couple, both killed in a freak accident when a bridge collapsed;
–          A younger mother killed by a brain aneurysm, just months after giving birth to twins;
–          Another mother killed, trying to protect her disabled son from being hit by a car.
Sure, once you are older it is generally true that there are more risks associated with your health. But young people also tend to have fewer assets than older ones. That means there are no extra resources to draw on if, all of a sudden, a regular source of income is gone.
Don’t save now, only to pay a lot more later
Anyone who has purchased a home has probably been there. You start out by setting a budget, but then you find the perfect house that is just a little bit beyond. You can’t say “no” to your dream for only $10,000 or $20,000.
Then, you find out that property taxes are higher than you expected, and that’s only the beginning. By the time you get to the point of finalizing your mortgage, you’re more than a little nervous about the new financial commitment you’re about to take on.
It’s only natural to want to avoid unnecessary costs at a time like this. But insurance is not “unnecessary” – especially in a situation where you feel like you’ll be financially stretched. If you’re going to have to work hard to make ends meet now, what would happen if one of the family breadwinners were to die or become disabled? How would you continue to meet the mortgage payments with only one income, or with none?
Your family’s dream home could be that again – just a dream.
Questions on your mind
“If I’m going to buy insurance, shouldn’t I talk to an agent or financial planner first?” 

You’re in the middle of buying a new home, planning a move… where are you going to find the extra time to sit down and discuss insurance? Even after you get settled in your home, most families are so busy. Exactly when will you be able to make insurance your # 1 priority?
Are you comfortable with the idea that your home may be at risk in the meantime?
So, by all means, make a plan to visit an insurance agent. But don’t wait to protect your mortgage. If you later find that Mortgage Protection Plan is not the best fit for you and your family, you can cancel it. We’ll even refund all your premiums if you cancel within the first 60 days. That means you have two months to shop around, and if you find a protection option that you like better than Mortgage Protection Plan, we protect you for free.
“So, maybe it is important to get something going now.” 

That’s right, and buying Mortgage Protection Plan is virtually the only way to guarantee that you are protected right away.
You start by completing an application and providing us with your premium collection instructions ( a bank or credit card account from which we can collect your premiums). Once you’ve done that, YOU ARE COVERED – no matter what your health situation is, no matter how large of a mortgage you have (as long as it is less than $1 million).
That doesn’t mean that we don’t take your health into account at all. Insurance plans that work that way are usually very expensive.
We collect some medical information on your application and in most cases, that tells us everything we need to know. If not, we’ll contact you by phone to collect more details and possibly to arrange a paramedical exam. Based on that information, you may ultimately pay a higher premium, or your coverage may have some extra exclusions. The bottom line: we never decline a life insurance application.
But isn’t term life insurance the least expensive choice? Everybody says so. 

Maybe, maybe not. The questions of cost is not a simple one when you are talking about a long term commitment like your mortgage. Just be sure you look beyond an inexpensive premium quotation and get more details. Here are some questions you might want to explore when considering a term life policy.
What’s involved in getting coverage and how long is it going to take?” 

Applying for term life insurance can be time-consuming. An associated company of ours tells us that it’s not unusual for it to take an entire month before a decision is reached. One MPP customer told us that in order to get a small increase in an existing life insurance policy, she would be required to appear for a saliva test – even though she had always been healthy and was only in her 30s. Not exactly convenient.
“What will my insurance cost in five years? In ten years?” 

There are many types of term insurance, with premium rates that are fixed for different periods of time. Don’t be fooled by a premium that is very attractive today, but will increase dramatically over time. Your premium could end up being double or even triple the amount you started out with.
Our studies show that Mortgage Protection Plan can be quite a cost-effective choice.

“Maybe I should consider the bank’s insurance. Then my insurance and my mortgage are together in one place.” 

Your mortgage lender probably does offer the convenience of “bundled” payments – in other words, your mortgage payment and insurance premium are all rolled into one amount, and collected at the same time. And they likely do allow you to carry your insurance with you, whenever you renew or refinance your mortgage with them. This is a good feature that can save you a lot of money.
But what happens if you want to switch your mortgage to a different lender? What happens if, at that time, you are no longer in good health? The fact is that switching to a different lender could mean you have to pay a lot more for insurance, or you might not be able to get it at any price. This is where the lenders’ insurance programs have a serious limitation.
Mortgage Protection Plan stays with you, no matter what. It doesn’t matter if you sell your home, adjust your mortgage, or switch to a different lender.
Your original coverage is also locked in at your original premium. So, if you first buy Mortgage Protection Plan when you are 25 years old, you’ll have protection at an extremely low cost for your entire amortization period, and you never need to apply or submit health evidence again. You only have to do that if you increase your mortgage balance, and need additional coverage. Even then, your original amount of coverage cannot be changed or taken away.

How The Mortgage Process Works

Understanding the process involved in obtaining financing for your home is important. As Mortgage Professionals, we handle everything from your pre-approval to securing the best mortgage rate that works for you.
Our mission is to make this process as simple as possible. Let’s take a closer look at the steps involved and educate you with the information behind them.

Step 1 – How Much Can You Afford?

Before you begin to look for a home, you should have a clear picture of what you can afford in terms of price, down payment, fees, and other expenses.

Consider the cost of living in the home. How much will it cost to heat monthly? What about the monthly cost of insurance, electricity, water, maintenance – painting, repairs etc.? If you are considering buying a condominium, how much are the monthly management fees? How will they affect your ability to carry on a mortgage?

Predicting the cost of living in a home compared to living in an apartment can be difficult. There is a rule of thumb to help you estimate the difference between the two. Take the value of the home you are considering and multiply it by 3 per cent. Then divide that figure by 12. In our example of the $290,000 home, the monthly cost using this formula would be roughly $725 in addition to mortgage and taxes.

Before you find the home of your dreams, make sure you can afford it first!

Step 2 – The Mortgage Application

A typical mortgage application is not very complicated. We are looking for some information about you and whoever is going to be on the mortgage with you. You will need to provide your SIN (Social Insurance Number), employment information – how much you make and how long you’ve been there, where you live and how long you’ve lived there, how much debt you have, what your credit is like (past and present), and your financial net worth. All of your information that is relayed is strictly confidential and is 100% secured.
Once you have filled out our mortgage application, you will be asked to sign two consent forms that allow us to update and review your credit bureau.

You can apply online today using our Online Application Form

Step 3 – Let’s Get You Pre-Approved!

Your pre-approval is generated from a lender. A lender provides the financing for your mortgage, often bank or financial institution. At Mortgage Link, we have access to over 20 Lenders to find you the best mortgage rate that fits your needs.

Check out our Lenderspage to see some of the companies we are associated with.

Your Mortgage Application will then be submitted to a lender for pre-approval and may require more information on your financial situation.

Arranging a pre-approved mortgage is one of the most important steps in the home buying process. It not only protects you in the event of an interest rate increase for up to 120 days, it also provides you and your Realtor with a price range for looking at homes. With a mortgage pre-approval, you can shop with confidence.

Step 4 – The Approval

Many confuse the terms “Pre-approval” and “approval”.  If you are pre-approved for a mortgage, yes you may go shopping for a home – but it doesn’t mean that you are guaranteed a mortgage!

The approval is supplied by the lender when all of the information we relayed to the lender is verified!  For example, we will have to supply the lender a letter of employment and a paystub to “verify” that you make what we’re telling them.

Certain different conditions of verification will be called upon for the different information that we supply the lender. We will communicate with you with what documentation the lender requires to approve your mortgage application.

Be prepared to submit the following documents:

  • Job Letter – A letter from your employer (on company letterhead) stating your wage amount, guaranteed hours, state date and position, name and title of person signing the letter.
  •  Two Most Recent Paystubs
  •  Last 2 year’s T4’s
  •  Last 2 year’s NOA’s (Notice of Assessments)
  •  Child Tax Benefits (if applicable)
  •  Down Payment Information
    •  3 Months Bank Statements showing proof of down payment in your account(s)
    •  Signed Gift Letter and Deposit of Gift into account
  •  Photo Identification
  •  If Divorced:
    • Signed Separation Agreement
    •  Divorce Decree
  •  Current Mortgage Information (if applicable)
  •  Debts Paid
  •  Lawyer Information
  •  MLS Listing of Property
  •  Signed Counter Offer
  •  Accepted Offer to Purchase
  •  Signed PCDS (Property Condition Disclosure Statement)

*There may be more information the lender will require and it is in our hands to update you on any outstanding conditions required. We prepare your documents for the lender and it is critical this information is taken care of as your mortgage will not be funded if the lender does not receive any outstanding information prior to possession date.

As long as you are prepared to submit your information, the easier the process will be. Once your mortgage is approved, you will sign a Mortgage Commitment outlining your mortgage product and rate. You must review these documents prior to signing and make sure that the interest rate and loan terms are what you were promised. Also, verify that the name and address on the loan documents are accurate.

Step 5 – The Closing

Once all the conditions are verified, the lender will package your mortgage and send all information to your lawyer.

The lawyer will work on your behalf to review the following:

  • The Offer to Purchase
  • The Mortgage Commitment
  • Any potential encumbrances, liens, easements, restrictions, encroachments, or other claims registered on the title.
  • Contact the lender to arrange transfer of funds

You will meet with the lawyer shortly before closing date to review and sign closing documents. On closing day, your lawyer and the seller’s lawyer will exchange documents, funds, keys and register all documents on title. There are also several fees associated with obtaining a mortgage and transferring property ownership which you will be expected to pay at closing.

After reading this, we hope you now understand your key role as the borrower. You’ll submit your information and any necessary documents, look for your new home, and we’ll take care of the rest!

Contact us today if you have any questions, or visit our website for more information.

The Importance of Financing Conditions

 

So you’ve found the condo or house of your dreams and you want to make an offerThe Agreement of Purchase and Sale is the official document that includes the terms and conditions of your offer. Do you need a financing condition?
condition is defined as “a requirement that is fundamental to the very existence of the offer.” A breach of a condition allows the Buyer to get out of the contract and obtain the full amount of the deposit back. There are limitless types of conditions that might be included in an AP&S; one of the most important one to understand is the Financing Condition.
The financing condition protects a Buyer. While the legal wording of the clause may vary, it essentially tells a Seller that your offer to buy their property is conditional on you obtaining financing. A well-worded financing clause will state that the financing you obtain must be “satisfactory to the Buyer in their sole and absolute discretion;” meaning that the terms and conditions of the financing obtained (interest rate, payments, etc.) must be satisfactory to you – not just that you were able to obtain financing from someone at some imaginary rate.
If you buy a property without a financing condition and then realize that you can’t find a lender to lend you the money, you’ve got trouble. Or maybe you find out your credit isn’t as good as you thought it was and the bank is penalizing you by charging you a higher interest rate and you can no longer afford the mortgage payments. A financing condition can protect you from losing your deposit and being sued, by giving you an ‘out’ if you need it. Of course if your offer is conditional on financing, you have a duty to seek financing in good faith (meaning you can’t just change your mind about the house the next day and back out of the deal saying you couldn’t get financing).
Mortgage Pre-qualification vs. Pre-approval
People often mistake being pre-qualified for a mortgage for being pre-approved for a mortgage. Being pre-qualified means that a lender has determined how much mortgage you can afford by looking at how much money you make and what your debts are and applying their fancy ratios. They have not likely confirmed what you’ve told them (with credit checks and employment confirmation letters), nor have they guaranteed you an interest rate or mortgage terms.
Mortgage pre-approvals are in writing – so if you don’t have something in writing (probably valid for 120 days), then you aren’t actually pre-approved. Having a financing condition in your offer gives you the opportunity to confirm everything with your lender and is one of the most important ways of protecting yourself.
These days, banks are often looking to approve people for a mortgage for a particular house – they want to know that the home they are purchasing with you is worth what you paid.  They may order an independent appraisal of the house and will lend you money based on that appraisal. Again, a financing condition can protect you.
Financing conditions generally last for 3-5 days, giving you time to sort out your finances. At the end of that time period, you’ll be asked to sign a ‘waiver’ or ‘fulfilment of condition’ and your offer will no longer be dependent on your financial situation.
If you find yourself in a bidding war or some other high-pressure negotiation where financing conditions aren’t likely to be accepted by the Seller, there are ways of being fully approved by your lender BEFORE you make an offer, thus enabling you to make an offer without a financing condition. A good Realtor and lender can guide you through this process.

High Ratio Mortgages

When you need a mortgage that is more than 80% of the purchase price of your home, mortgage loan insurance is required. In Canada, mortgage insurance is provided by either CMHC, a crown corporation, Genworth Financial or Canada Guaranty, Mortgage insurance protects the lender and, by law, most Canadian lending institutions require it.
Having mortgage loan insurance means that if you, the borrower; default on your mortgage, the lender is paid back by the insurer. With the risk of losing their money removed, lenders have confidence to make mortgage loans up to 95% of the purchase price of the home. That means your down payment can be as little as 5% of the purchase price of the home.

How Much Does it Cost?

A premium will be applied. It depends on the amount of your mortgage in relation to your purchase price. The larger the down payment the less the premium. Although you are permitted to pay the premium up front, most borrowers pay it back over the life of their mortgage by including it with their monthly payments.
Down PaymentPremium
5%2.75%
10%2.00%
15%1.75%
20%1.00%

Money Saving Tips

• The decision to grant credit and the interest rate you can successfully negotiate will be strongly influenced by your past credit history. The best thing you can do is avoid debt as much as possible, always pay your bills on time, do not charge your credit limit up past 75% of what’s allowed, and the less you inquire for credit the better.
• Ask your lender for details in the trade off between slightly higher payments and a shorter amortization. For some buyers with good budgeting skills, ask what the payments would be over a twenty year amortization instead of twenty-five. In return for slightly higher payments, you could shave five years off your amortization, build equity in your home faster, and be well on your way to being mortgage-free sooner.
• Take advantage of any prepayment privileges your lender will allow. Treat your regular payment as a worst case scenario in which it will take twenty-five years to pay off your mortgage. Any extra payments you make go directly in your pocket, because every dollar you pay over and above your regular payment goes directly to principal. That means, whenever possible, a few hundred dollars here and there can quickly add up to a few thousand saved later on.

Help the Planet, Help Your Wallet

CMHC Green Home

Energy-Efficient Housing Made More Affordable with Mortgage Loan Insurance

Did you know, more than 17 percent of the energy consumed in Canada is used to run our homes? Buying an energy-efficient home or making energy-saving renovations can offer big savings. A 10% CMHC mortgage loan insurance premium refund, and a premium refund for a longer amortization period (if applicable) may be available when you use CMHC insured financing to purchase an energy-efficient home or make energy-saving renovations.

CMHC has added environmentally friendly features to the Mortgage Loan Insurance it offers. If you use CMHC insured financing to buy an energy-efficient home, purchase a house and make energy-saving renovations or renovate your existing home to make it more energy-efficient, a 10% refund on the Mortgage Loan Insurance premium, and a premium refund for a longer amortization period (if applicable) may be available.

The Government of Canada actively promotes energy conservation and initiatives to reduce greenhouse gas emissions that contribute to climate change.

CMHC Green Home flexibilities were originally introduced in 2004 to encourage consumers to consider energy-efficiency in their housing choices and make the purchase of energy-efficient homes or energy-saving renovations more affordable. Since this began, more than six million dollars in premiums have been refunded to Canadians.

For most people, the hardest part of buying a home — especially a first home — is saving the necessary down payment. To help, CMHC offers lenders Mortgage Loan Insurance, which allows you to buy a house with a minimum down payment of 5%. Offered through most financial institutions, this simple solution has enabled millions of Canadians to realize the dream of home ownership.

CMHC made dreams of home ownership easier to obtain by allowing qualified home buyers to use additional sources of funds for down payments such as a loan or lenders’ cash back incentives.

Thinking of Buying or Building Green? Maybe you already have a home and want to renovation to make your home Energy-Efficient. For all the details on how this can apply to you, visit CMHC’s website: http://www.cmhc-schl.gc.ca/en/co/moloin/moloin_008.cfm

For the BEST Rates in town to finance your mortgage, visit our website www.www.yourmortgagenow.ca or Call us today! (306) 244-7755 – We can help you get into a new home, conserve energy and make a difference for our planet, and along the way WE HELP SAVE YOU MONEY!

Pay Your Mortgage like it’s 2007. You’ll Save a Pile of Money

Just 60 short months ago, mortgage rates were double what they are now. That means payments on a 25-year mortgage of equal size were 36 per cent higher than today. 

Since then, the amortization gods have slashed mortgage rates and payments. Compared to interest costs in 2007, today’s rates would save you $101,700 if projected out over 25 years on a $200,000 mortgage. 

If you look at the payments on a mortgage that size, they’ve tumbled from $1,284 in 2007 to $945 today. (To put that in perspective, the payment at zero per cent interest would be $667.) 

It’s clear that the savings potential of today’s rates is phenomenal. The question is: are Canadians taking advantage of these record-low rates? 

The answer? Not enough. About 60 per cent of mortgage holders make only their minimum mortgage payment, finds the Canadian Association of Accredited Mortgage Professionals. 

But what would happen if people made their payments at the 2007 level? 

If applied today, that higher $1,284 payment would knock an extra $21,900 off your principal in five years. You would also save $1,600 in interest and retire your mortgage in two-thirds the time. 

Switching to bi-weekly 2007-style payments – $642 every two weeks in this example – means you would pay off that 25-year mortgage in 14.8 years. The five-year interest savings would jump to $2,100. 

To replicate interest savings like that, you’d have to chop a quarter per cent off your interest rate. And negotiating another quarter-point reduction on a deep-discount rate can be tougher than sucking sap through a straw. 

“Canadians have a legacy of focusing on rates as the primary means to save on the cost of borrowing,” says David Stafford, managing director of real estate secured lending at Scotiabank. “That’s where all of the time and effort is being invested.” 

“But the actual cost of a mortgage is based on how much you borrow, at what rate, and for how long,” adds Mr. Stafford, who inspired the calculations above. “And with rates well below recent historical averages, the best way to save money on a mortgage is to use today’s low rates to shorten the amortization.” 

Of course, paying extra isn’t easy or everyone would be doing it. Some folks are running too close to the financial edge to bump up payments. Others have more pressing needs for their extra cash. And the rest could pay more if they wanted to, but choose not to. 

Looking forward, the leaves in my teacup suggest we won’t see 2007-style rates again for a while, but I can’t definitively predict that. Nor can anyone else. 

What we do know is that rates are cyclical. They move like a roller coaster. Right now we’re at the bottom of a valley with an incline off in the distance. 

When rates ride the escalator back up, the ascent could theoretically take us back to 2007 levels. So prospective mortgage holders need to ask themselves: Would I buy the same price house if I had to make payments that were 36 per cent higher? Would I get the same size mortgage if rates were double today’s rates? 

If the answer is no, they probably shouldn’t be in that mortgage today. 

If you’re a mortgage holder with other high-interest debt or higher returning investments, or you have no emergency fund, you may want to divert your cash to those objectives. Otherwise, if you want a respectable low-risk return, increasing your mortgage payments fits the bill. 

“An extra dollar paid at the beginning of a mortgage is a dollar you’re not going to pay interest on for the next 20-30 years,” Mr. Stafford says. “And making a payment that’s more reflective of historical rates also has another added benefit – you future-proof yourself from payment shock if rates are back at six per cent five years from now.” 

 

Robert McLister
Special to The Globe and Mail

 

What do I need to apply for a Mortgage in Saskatoon?

 

If you are planning to get a mortgage in the near future, it is best to be prepared.  Being prepared and having the right documents and information ready to present to your Mortgage Associate when you first meet can save tons of time, speed up the process and make things go smoothly.
The following is a summary of what lenders require depending on what type of job you have, keep in mind, we may need more information depending on your circumstance:
Salaried Employees
• Job Letter – Confirmation of your employment needs to be on company letterhead, signed by the appropriate individual confirming the position being held and your wage. If you are a recent hire, the job letter should confirm that probation period has been passed. Bonuses, car allowances and other forms of remuneration should be mentioned if applicable.
• Paystubs – Most recent paystub that shows your year-to-date earnings.
Hourly Employees
• Job Letter – Verification is made on company letterhead, signed by the appropriate individual confirming the position being held and wage. If you are a recent hire, the job letter should confirm that probation period has been passed. Bonuses, car allowances and other forms of remuneration should be mentioned if applicable.
• Paystubs – Most recent paystub that shows your year-to-date earnings.
• T4’s
Commission Income 

• T4’s and/or Personal Tax Returns (T1 Generals) from the current year and the previous year.
• Job Letter – Verification is made on company letterhead, signed by the appropriate individual confirming the position being held and wage. If you are a recent hire, the job letter should confirm that probation period has been passed. Bonuses, car allowances and other forms of remuneration should be mentioned if applicable.
Self Employed 

• Financial Statements
• Notice of Assessments (NOA) – to confirm no taxes owing.
• Personal Tax Returns (T1 Generals) from the current year and the previous year.
There are 4 main factors to qualify for a mortgage; stable income, a good credit history, making a sound choice on the property you are purchasing and how much (if any) of a down payment you have.
 
• Stable Income:  most lenders will require a Letter of Employment confirmation as well as 2 recent paystubs. They may also need the last 2 years of NOA’s (Notice of Assessments).
• Credit History: is a piece of information that is always reviewed by the lenders. We always pull a credit history when you apply for a mortgage or seek a preapproval so that we can determine which programs will best suit your situation.
• Property: choices also impact the mortgage qualifying process, as the real estate is the lender’s security – if for some reason – you are unable to repay the mortgage.
• Down Payment: are not always required as there are mortgage programs that provide cash back incentives for qualified purchasers. If you have no down payment, you generally will still need to have some cash to put down for your real estate purchase deposit and for closing costs
If you have any questions, please give our office a call! (306) 244-7755!