We get this question often as there is lots of fully bizarre data out there.
Here is what we are seeing. Remember, as the #1 mortgage brokerage/ franchise in ALL of Canada for 2013 at the countries largest SuperBroker – Mortgage Alliance we see lots of deal flow so this is based off of many hundreds of conversations with the insurers and lenders:
- IF the flood damage has been repaired AND you are in the flood zone then an insurer (CMHC/ Genworth/ Canada Guarantee) WILL / can insurer your purchase with as little as 5% down as long as all the other normal criteria are met.
- IF there is damage that is not repaired then the odds of an approval with an insurer are very, very LOW. Often, even if you put 20% or more down, and do the purchase without CMHC involved, the lenders are not taking the risk and doing them.
the KEY is to fix the damage first, then sell.
Call if you have any questions on this as there are many specific examples that are not mentioned above.
The beginning of a great article below goes more into the details on what the BANKS do to you when you get their low rates deals like the BMO 2.99% – which everyone now says is not a great deal as you must sell your home to get out of it – among other things. Ensure you always use a broker for your mortgage.
Low mortgage rates tempt, but penalties for breaking can be high!!
You want some of these record low rates on the market but you’re locked into a mortgage. Just break it, right?
Not so fast, there’s a key question you need to ask before you commit to break a mortgage: how much will it cost you? Actually, it’s a question you should be asking before you sign up in the first place.
Don Hurman, a 64-year-old from Okotoks, Alta., learned the hard way when he incurred a $10,000 penalty after selling his house halfway through a five-year mortgage term. Some mortgages let you port the loan to a new home but Mr. Hurman was forced to break his and pay what is called the interest rate differential.
Here is a great way to use your tax refund to repay / pay down your mortgage. It does make a difference.
But you still have to live. I recommend using 1/2 of it for this and the other 1/2 for something you NEED, not want.
Lump Sum Payment Strategy
Tax Season is fast approaching and the average Canadian tax refund is approximately $1600. An excellent use of these funds would be a lump sum mortgage payment. If a client was to do so they could save thousands of dollars in interest over the life of their mortgage. For example:
Mortgage Amount $300,000
Mortgage Interest Rate 3.25%
Approx. Interest Savings Over 25 years $1,600 x 3 = $4,800
The above savings might seem trivial if looked at as a one-time event, however if you continue this strategy on a yearly basis they could save over $17,000 in interest over the life of their mortgage. Additionally, this would help you become mortgage free almost 5 years faster.
***note the above calculations are based off a 25 year amortization, a higher interest rates would increase the savings***
My colleague in Toronto wrote this and he puts it very well:
Don’t let the Banks Play you for a Fool.
With all the press surrounding the 2.99% % year fixed rate mortgage from BMO we thought we should clarify some if its characteristics. There is no point in saving 0.05% on a mortgage if it means having to pay outrageous break fees, or be limited to dealing with one Lender for the entire term of your mortgage. Believe it or not, many Lenders offer the same 2.99% without the draconian terms the Bank insist upon you.
Even though the Government of Canada is trying to put the brakes on the red hot housing market there are lots of great mortgages to be had in the market. It seems every major Lender in Canada will be offering a really low 4 Year or 5 Year Fixed Rate Mortgage by the time spring really has sprung. But you should be careful.
One such incredible rate that many people are asking about is BMO’s 2.99% 5 Year Fixed Rate Mortgage. We did a few interviews last week with different news outlets and made some comments on this offering and few others.
We have been doing our best to explain the perils of some of these new low rate products, as most are extremely restrictive. For example the BMO mortgage doesn’t let you break the mortgage unless you are selling your house. Consumers quickly find that additional value added features are typically removed from these products. These include your ability to pre-pay, to port your mortgage, to have someone assume your mortgage, or add or remove someone from the title.
Since most Canadians augment their mortgage in some way at about the 3rd year of their mortgage, we should be really careful about what type of product we choose. For instance, right now when it makes sense for many people to be breaking their mortgage to save money with the lower rate fixed and variable rate offerings many clients are locked in with no ability to change their rate or Mortgage Lender.
In short, be careful when picking a mortgage! Weigh all your available options before making a decision. Make sure that you are not sacrificing tens of thousands of dollars in penalties in the future for a small rate benefit today. Ask an expert, typically Bank Branch Representatives are not Licensed Mortgage Agents, and can only offer you one set of products.
Ask about our special “Mortgage Breaker Program” going on right now. If your mortgage is locked in for the next 2 or 3 years at 3.5% or more you could be saving thousands of dollars by breaking.
With all the people you have to worry about playing tricks on you today at least your mortgage will be safe.