20 Jun

Unlock Savings: Top Refinance Options for Homeowners in 2024

Posted by: Michael Greene

Unlock Savings: Top refinance options for homeowners to consider in 2024. Hey there, fellow homeowners! If you’re reading this, you’re probably wondering if refinancing your mortgage is the way to go. Spoiler alert: it just might be! As a friendly mortgage broker who’s seen it all, I’m here to guide you through the maze of refinancing options. According to reports Mortgage delinquency rates in Ontario exceed $1B. Should we be concerned? This is a sign the more Canadian households than ever before, need help to navigate this interest rate environment and making an informed decisions that will save them money. Believe me, you don’t want to be one of those Canadians leaving money on the table by not negotiating their mortgage renewal rates

So, let’s dive in and find the perfect solution for you. And don’t worry, I promise not to bore you with too much mortgage jargon—unless you’re into that sort of thing!

1. Rate-and-Term Refinance

Think of this as the “classic combo” of refinancing. You’re simply swapping out your current mortgage for a new one with a different interest rate or term. It’s like upgrading your old phone without changing your number—same house, just better payments.

Why You’ll Love It:

Potentially lower monthly payments (more money for that Tim Hortons run!).
Or, you could speed up your loan payoff—because who wants a mortgage forever?

Why You Might Not:

There are some closing costs, kind of like paying for a nice meal out. However, some banks do give you a credit of up to $3,000 to go towards your total costs.
You’ll need a decent credit score—time to pay those credit card bills!

Perfect For: Homeowners looking to save on interest or those eager to get rid of their current bank mortgage faster because of a not so favourable renewal rate coming up. Who doesn’t like the sound of that?

2. Equity Refinance Option

Need to consolidate your high interest credit cards or some extra cash for that kitchen reno or maybe a dream vacation? With an equity refi, you borrow more than you owe and pocket the difference. Think of it as turning your house into an ATM—but one that actually improves your financial picture (unlike the usual ATMs that just eat your card).

Why You’ll Love It:

You get a chunk of cash for whatever you need—renovations, debt consolidation, tuition, or maybe that classic car you’ve been eyeing.
It’s often at a lower interest rate than your average credit card or personal loan. Who needs high-interest debt, anyway?

Why You Might Not:

It increases your mortgage balance and monthly payments. Remember, you’ll have to pay it back!
It taps into your home’s equity. So if the housing market takes a dip, you might owe more than your home’s worth. Yikes!

Perfect For: Homeowners with significant equity who need a hefty amount of cash for big expenses. Just remember, this isn’t Monopoly money—spend wisely!

3. Home Equity Line of Credit (HELOC)

Imagine having a financial safety net that you can dip into whenever you need. A HELOC lets you borrow against your home’s equity up to a certain limit, much like a credit card. The best part? You only pay interest on what you borrow, not the whole shebang.

Why You’ll Love It:

Flexibility to borrow only what you need, when you need it. It’s like having a secret stash of cash for emergencies or spur-of-the-moment splurges.
Lower interest rates compared to personal loans or credit cards. Those home projects just got a little cheaper!

Why You Might Not:

Variable interest rates mean your payments can go up and down like a roller coaster. Hold on tight!
Your home is on the line. If you can’t repay, you risk foreclosure. Not exactly a pleasant thought.

Perfect For: Homeowners who want access to funds for ongoing expenses like home improvements or unexpected life events. It’s like having a rainy-day fund, but better.

4. Interest-Only Refinance

Looking for a way to lower your monthly payments temporarily? An interest-only refinance lets you pay just the interest on your mortgage for a set period. It’s a bit like taking a financial breather—giving you some extra cash flow when you need it most.

Why You’ll Love It:

Lower monthly payments during the interest-only period mean more money in your pocket for the fun stuff.
Great for managing finances during tough times or if your income is temporarily lower.

Why You Might Not:

You’re not reducing your loan’s principal, so you’re not making a dent in the overall balance.
Payments will jump once the interest-only period ends. Be prepared for that!

Perfect For: Homeowners who need temporary payment relief and expect their financial situation to improve in the future. Just don’t forget that the mortgage principal isn’t going anywhere!

5. Reverse Mortgage Refinance

For my seasoned homeowners aged 55 and up, this one’s for you. A reverse mortgage lets you convert your home’s equity into tax-free cash without selling or moving. It’s like turning your home into a pension plan!

Why You’ll Love It:

No monthly mortgage payments. You heard that right—you stay in your home and get paid.
Provides a steady income stream during retirement, making those golden years a little shinier.

Why You Might Not:

It reduces the equity in your home, which might affect how much you leave to your heirs. Sorry, kids!
Fees and interest can pile up over time, which can shrink your nest egg.

Perfect For: Senior homeowners looking to supplement their retirement income while staying put. It’s a great way to enjoy the fruits of your lifelong investment—your home.

6. Mortgage Switch Refinance

Feel like your current mortgage is more of a bad romance than a perfect match? Maybe it’s time for a mortgage switch. This option lets you switch to a new lender with better terms or lower interest rates. It’s like breaking up with your old mortgage for a better one. No hard feelings!

Why You’ll Love It:

You might snag a lower interest rate, reducing those monthly payments. More savings, less stress!
Some lenders offer cash incentives or cover the switching costs. Free money? Yes, please!

Why You Might Not:

There could be prepayment penalties for ditching your current lender. Always read the fine print.
You’ll need to qualify for the new mortgage, so make sure your credit and finances are in good shape.

Perfect For: Homeowners who aren’t happy with their current mortgage terms and want to shop around for a better deal. Think of it as trading up to a better mortgage relationship.

Things to Consider Before Refinancing

Before jumping into any refinancing options, homeowners keep these in mind:

Closing Costs: Just like moving, refinancing can come with costs—appraisals, legal fees, and sometimes penalties for breaking your current mortgage. Make sure the benefits outweigh these expenses.
Credit Score: A good credit score is your ticket to better rates. Check your score and clean up any issues before applying. Pay those bills on time, folks!
Financial Goals: Your refinancing choice should align with your long-term goals. Want lower payments now or to pay off your mortgage sooner? Choose wisely based on your life plans.

Conclusion on Refinance Options

With income challenges and home values being the leading factors to getting approved, any good news are welcomed. Especially if values are starting to stack up in your home Bank of Canada officials worry that rate cuts may overheat the housing market this means more equity for you to work with. Also, keep in mind that your income will affect your qualifications, in a previous post in break all that down. Check it out here Mortgage Debt Ratios: Basics of GDS & TDS

Refinancing your mortgage in 2024 can be a game-changer for your finances, and by utilizing some of these refinance options homeowners can get ahead. Whether you’re looking to lower your interest rate, access your home’s equity, or adjust your payment structure, there’s an option that’s right for you. Take the time to explore these refinance options and choose the one that best fits your needs and future goals.

Need help figuring out which refinance options suits you best? Reach out to me today, and we’ll find the perfect refinance solution for your situation. Let’s make 2024 the year of smart financial moves and a mortgage that works for you!

Get in touch with us today to get started.

7 Dec

Top 5 Most Affordable Housing Market in Ontario

First-Time Homebuyers

Posted by: Michael Greene

When it comes to affordable housing there is only one questin that comes to mind. Where in Ontario can you currently get the most bang for your buck?

As the Ontario real estate market bounces back from the coronavirus pandemic, many homebuyers may think they may have missed out on the brief opportunity at the height of the public health crisis. In March and April, many of the province’s housing markets experienced modest price declines, offering discounts on detached, semi-detached, townhomes and condominiums.

Prices and sales quickly increased again through the summer in what proved to be a delayed spring market. However, that does not mean all of Ontario’s housing markets are out of range for first-time buyers, families, and newcomers when immigration to Canada eventually resumes its typical pace. With a little bit of due diligence, you can find a region or a city in the province that can present you with the property of your dreams.

DETERMINING AN AFFORDABLE HOUSING MARKET

First, it is important to understand what determines an affordable market. Contrary to popular belief, it goes beyond the average home price. An affordable market takes into account the level of income necessary to afford the purchase of a house, as well as the current home price. For example, the median income in London,ON is approximately $54,000 and the average home price is a little more than $440,000. This makes London an affordable market.

Here are the top five most affordable Ontario real estate markets to consider in 2021.

North Bay, ON

Home Price: $286,114 (CREA NOBA July 2020, year-to-date average price)

Income Required: $39,893

For a long time, homebuyers have overlooked northern Ontario in favour of its southern urban counterparts. Unlike other rural areas, access to typical amenities is not as easy and development is more limited compared to the rest of the province. That said, real estate sales have been climbing in cities like North Bay, possibly because of greater infrastructure investment, improved land development, and lower taxation. With the combination of incredibly affordable homes and the increased flexibility of telecommuting employees, this trend is likely to continue through the rest of 2020.

Sudbury, ON

Home Price: $297,938 (CREA SUD June 2020, year-to-date average price)

Income Required: $33,749

When Sudbury witnessed an uptick in confirmed COVID-19 cases, officials were forced to implement strict safety measures for people buying and selling their homes. That did not stop real estate activity in the area as home sales have been on the rise – and for good reason. Sudbury is one of the province’s most affordable cities to live in in Ontario. As more people exit the big cities amid the work-from-home trend, cities such as Sudbury have a become a prime location for families looking to move, offering more space and an affordable cost of living.

Windsor, ON

Home Price: $383,521 (CREA WIND July 2020, year-to-date average price)

Income Required: $52,192

Windsor is one of Ontario’s best-kept secrets. You can purchase a large property for the average price of a one-bedroom apartment in Toronto, and many young couples are following the smell of savings! The Windsor housing market continued to sizzle even during the coronavirus pandemic, and now that the city has joined the rest of the province by officially moving into stage three or reopening, this boom is expected to intensify. CBC News writes:

“In addition to the lower housing prices… Windsor makes it an attractive city to buyers and investors because of its close proximity to Detroit, low traffic, relatively warm weather and views, the casino, and the imminent construction of the Windsor-mega-hospital.”

Niagara, ON

Home Price: $493,007 (CREA STCA June 2020, year-to-date average price)

The Niagara Home Builders’ Association (NHBA) said in Statistics Canada’s monthly survey of home builders that retirees and remote workers have amplified demand for new housing in the Niagara region, which elevated prices by one percent last month.

“As working from home becomes more prevalent, we may see an increase in the demand for larger living spaces that single-family homes can offer, causing a shift in demand from condominium apartments towards single houses,” the NHBA noted in the monthly survey.

Peterborough, ON

Home Price: $505,998 (CREA PETE July 2020, year-to-date average price)

Income Required: $69,072

Sales activity has been strong in Peterborough and the Kawartha Lakes in the aftermath of the peak COVID-19 period. In April, residential home sales plummeted 58.1 per cent, but they have rebounded as much as 34.5 per cent since. The contributing factor has been GTA buyers fleeing the region and seeking homes in smaller, quieter cities like Peterborough. The problem? Not enough supply, says Chiarina Payne, president of Peterborough and the Kawarthas Association of Realtors, in an interview with MyKawartha.com.

With interest rates at historic lows and demand expected to remain healthy, residential prices in the region are expected to rise by three per cent by the end of 2020.

CONCLUSION

Ontario’s slogan is “Yours to discover,” but the concept is more than just a garnish on our license plates. There is a lot of the province that most people have yet to see, and this is important if you are searching for a property to purchase. For Ontario real estate hunters, Toronto is an ideal location but the cost of a Toronto home is unaffordable for many. Exploring or expanding your home search to other parts of the province is more doable than ever before: public transit routes are expansive, remote work is more common, and a lot of cities in Ontario offer comparable amenities to what you would find in Toronto or Hamilton. Ready to make the great escape from big city life? Time to start discovering Ontario real estate!

23 Jul

New Qualifying Rate for the Mortgage Stress Test

General

Posted by: Michael Greene

For the first time in three years, the Bank of Canada, on Friday lowered the qualifying rate from 5.34 percent to 5.19 percent.

A typical mortgage application is tested against this five-year benchmark rate or the qualifying rate plus two percent, depending on which one is greater. This slight decrease could make a big difference for many Canadians applying for a mortgage.

So, what does this mean you may ask, well let’s see!

Let’s take an example; Sally makes $60,000 a year and she is putting 20% down payment. Stress tested at 5.34%, Sally would qualify for a mortgage of about $278,651 versus stress tested at 5.19%, she would qualify for a mortgage of about $282,716. As you can see, Sally would now be able to qualify for an extra $4,000 of mortgage approximately.

This certainly won’t have a huge impact on mortgage approvals but it will give some much-needed relief. This could be looked at as an added bonus for first-time home buyers, and combined with the down payment assistance – this is great news.

In February 2018, home sales dipped to their lowest levels since 2012, this was due to the introduction of the stress test that was introduced in 2017.

Although the new five-year benchmark rate is certainly good news from some prospective buyers, it hasn’t really changed the system that much, Samantha Brookes, CEO of broker Mortgages of Canada, told CBC.

“Consumers are in this wait-and-see pattern — it’s still difficult to get into the market because that stress test is there.”

It’s also something that’s sparked much debate among groups like the Ontario Real Estate Association, the Toronto Real Estate Board (TREB), the International Monetary Fund, Canada Mortgage and Housing Corporation (CMHC), and even some economists.

On one side of the aisle are those like TREB who say that the rules need to be relaxed because so many are still locked out of the housing market as a result of the test’s strict qualification metrics. And on the other are those like the CMHC who say that doing so would be a “reckless myopia.”

The qualifying rate is used in the stress tests for both insured and uninsured mortgages, so this lower rate will make it easier for borrowers to qualify for a mortgage. These tests were set up to ensure the potential homebuyer can afford the mortgage payments.