Mortgage Refinance

You can lower your business or personal debt through debt consolidation using the extra funds you draw out of the equity of your home through your refinance loan. If you have built up enough available equity in your home, then you should be able to pay out high interest personal or business debts, such as credit on various cards, using the money you get from your home refinance loan. These debts can include a car loan, student education loan, a line of credit, high interest travel rewards and points credit card bills, and other types of debts, bills, an overdue tax payment, and different types of loans.

The Clover Mortgage Home Equity Loan Calculator, is one of several mortgage calculators and tools that can help you better understand how you might benefit from a debt consolidation home refinance loan. These calculators are great because they make complicated formulas simple and it only takes a few seconds to get the answers you are looking for using calculators that are available online.

You can start to improve and rebuild your credit by paying off higher interest revolving debt such as a rewards credit card and other cards (which tend to carry higher debts and yearly fees than regular cards), past due property or personal tax bills, or other outstanding credit cards. By reducing the balance remaining on your revolving debts on cards and using the extra funds to ensure that you pay all of your bills and bring any past due debt arrears and cards into good standing, you can find your credit score grow and build before your eyes. Improved credit will lead you to significant savings in interest when applying for a mortgage in the future.

Evan small debts that are overdue can negatively affect your credit report. This is provided that other aspects of your financial situation are in good standing as it relates to your credit history. Paying down your credit cards can result in additional benefits too. You should also make sure that you pay your obligations in due time every month. Although you don’t have to be debt free to have good credit, getting close to being debt free can certainly help.

You will find that an improved credit score will come with many rewards such as reduced interest rates when applying for future financing loans, quicker and simpler approvals, and much more. Since your credit score is partly based on your loan to credit limit ratios, reducing that ratio it can help improve your credit profile and score.

Depending on the prepayment penalty fee that may be involved with breaking your mortgage, based on your agreement, you may have a great advantage by refinancing your mortgage to get a great new low rate that can lead to significant savings. The qualified mortgage brokers at Clover Mortgage can help you crunch the numbers to make sure they present you with only the best possible options for you and that all the links fit together. If the numbers work, then you may have a few options available to you that can end up saving you tens of thousands of dollars over time.

If you have a variable rate mortgage, you will be paying a prepayment penalty of only three months interest to break your mortgage at any time during your term period. If your mortgage is a fixed rate mortgage, then you are likely going to be required to pay the greater of either three months of interest or the interest differential penalty, also known as the IRD. Contact us at Clover Mortgage to speak with a professional broker who can help you calculate the exact amount of penalty for the prepayment of your mortgage, based on your specific mortgage agreement.

If you get mortgage insurance for your mortgage through an insurance company like Genworth Insurance or CMHC Insurance, you might be able to qualify for even lower rates.

Through a conventional bank, you can access up to 80% of your home’s value in total mortgages. If you step outside of the conventional banking system in Canada, then you can access up to 80% of your home or commercial property’s value by drawing that equity as a first, second, or third mortgage. Once you and your lender close on the deal, your excess funds will be deposited directly into your chequing account or savings accounts. You can use those funds for whatever you’d like, including debt consolidation, investments, or even luxury purchases and travel. You can take that vacation you’ve been dreaming about for years.

Depending on a variety of factors, including whether your mortgage broker helps you refinance through a bank, a B lender, or a private lender, you will incur different costs when refinancing your mortgage. Legal costs, potential lender and broker fees should all be factored in when you account for what the cost will be. Great mortgage brokers will list out every single cost dollar by dollar to you before you commit to refinancing your mortgage loan, so that you can see exactly what you will be paying for and how much money you will need on the day of closing.

When refinancing through a conventional banking company, you may save a portion of the brokerage fees since some of the AAA banks in Canada pay the brokers directly for their services, though the application process tends to be much more daunting and difficult to go through.

A mortgage refinance allows you to entirely swap the terms of your current mortgage contract for a different arrangement. You don’t have to wait for your mortgage term to end or approach the renewal date, you can be apply for a full mortgage refinancing at anytime. However, in most cases a refinance done before the end of the term will require the borrower to pay a prepayment fee. An experienced Clover Mortgage agent can help you better understand if a mortgage refinance is right for you and what fees, if any, might be associated with it. Please refer to our mortgage per-approval checklist to see what documentation you should prepare for completing a proper mortgage refinance application.

Since the stress test and change in other regulations were introduced by the government, the banking system is subjected to much stricter rules. Getting approved for borrowing money for a mortgage or refinance at a bank has become much more difficult, and even impossible for many people in Canada. This change in banking regulations is the main reason why many Canadians are turning to non-traditional lenders outside of the bank world for all of their property borrowing needs.

Poor credit and low income accounts for the majority of bank declines. At Clover Mortgage, we have access and links to over 40 top lenders, many of which do not place much importance on poor credit or low income.

Although refinancing rates tend to be the same as rates on a new purchase mortgage, the rate that you will be given will depend on a number of qualifying factors. Speak with one of the mortgage brokers at Clover Mortgage who will help you qualify for the best possible mortgage rate, term, and amortization. Good brokers will search until they find the right solutions for you.

Yes. If you insure your mortgage refinance through a third party mortgage insurance company like CMHC Insurance, then banks and other lenders will likely approve you for even lower rates depending on the promotions and programs they are running. These low rates come as a result of the decreased risk that lenders have when lending you money on your home. There are many mortgage programs that offer the lowest possible rates on insured mortgage loans. Speak our team of brokers at Clover Mortgage to find out what programs might suit you best.

Here is a brief guide and glossary of mortgage related terms:

• Adjustable Rate Mortgage (ARM): An adjustable rate mortgage is a mortgage in which the interest rate changes periodically. These changes are based on the prime rates dictated by the banks. An Adjustable Rate Mortgage is also known as a Variable Rate Mortgage (VRM).
• Amortization: The amortization period of a mortgage is essentially the number of years that it will take a borrower to pay off the entire balance of their mortgage based on a specific interest rate and monthly payment amount. Amortization is the amount of time that it will take to repay a loan in full, including interest that is accrued and the principal loan amount, by a pre-determined schedule of ongoing equal payment.
• Appraisal: An appraisal is a formally conducted assessment and analyses of the property with the purpose and reason of determining an accurate property value. A proper appraisal is conducted by a qualified, license and unbiased third party appraiser or appraisal company. The value of the property can be determined by a variety of ways including a cost approach, direct comparison approach, income approach, or a combination of those. Arranging for an appraisal on your home or commercial property is one of the services that your mortgage broker will provide you with.
• Assumption Mortgage: An assumption is a legally binding agreement between the seller of a property and the buyer of that same property. In an assumption, the buyer will be taking over an existing mortgage form the vendor to themselves and assuming the remainder of the payments of that mortgage. This helps save the seller on penalty fees for breaking a mortgage early, and it saves the buyer on closing costs involved when getting a new mortgage.
• Mortgage Broker: A mortgage broker is a licenced and qualified professional who helps arrange financing for clients who are looking for a new mortgage, a mortgage refinance, or a mortgage renewal. Professional mortgage brokers in Toronto and other parts of Ontario and Canada provide unbiased advice in order to guide you, and have a fiduciary duty to their clients, unlike the banks. Brokers are typically compensated for their services either by the lenders themselves or through brokerage fees charged to the borrower. The fees will depend on the type of financing arranged, the services rendered, and the lenders involved.
• Closing: The closing is the last step in the process of getting a mortgage. The mortgage closing process involves a few things including a meeting between the buyer, seller, and the lender. At closing of a new property, the title ownership of the property, the property itself, and the money all get legally transferred.
• Closing Costs: The closing costs are all of the costs that are involved when getting a mortgage or refinancing or renewing a mortgage. These costs include, but are not limited to, legal fee’s, appraisal costs, land transfer taxes, lender fees, mortgage transfer or porting fees, and more. The closing costs can range from 1.5% to as much as 10% depending on the situation. Your mortgage broker can help you calculate and understand all of the closing costs that are associated with your specific mortgage situation. You should note that mortgage renewal costs tend to be less due to the fact that there is usually less work involved since they might not always involve the transfer of a mortgage to a different lender.
• CMHC: CMHC stands for the Canadian Mortgage Housing Corporation which provides High Ratio Mortgage Insurance to borrowers who might need it to qualify or to get a lower rate. This insurance protects the money that lenders provide to borrowers by guaranteeing them the payments on those funds that they lend towards mortgages in Canada. This insurance also enables homebuyers to buy a home with less than 20% down.
• Commitment: A commitment letter is a legal document that is signed by both the lender and borrower confirming their agreement to proceed with the mortgage loan. It contains a set of conditions that must be fulfilled and met by the borrower before the lender funds the loan.
• Construction Loan: A construction loan is a loan that helps the borrower complete the construction of a residential or commercial property. The financing is provide by the lender in stages know as draws, and these draw amounts and timings are based on hitting certain completion milestones. In order to receive the next draw, the next step of the construction process must be complete. Arranging construction loans is one of the services that Clover Mortgage specializes in.
• Conventional Loan: A conventional loan is a standard mortgage that is not insured by a high ratio mortgage insurer such as Genworth Financial, CMHC, AIG, and more.
• Credit Report: The credit bureau report is what mortgage brokers, banks, and other financial institutions and lenders use to determine if a borrower will qualify for a loan based on their past credit history, payment history, outstanding revolving debts on cards, and current debt ratios. All of this information is available on an individual’s credit report.
• Default: Mortgage default occurs when a borrower fails to comply to the their legal obligations that are specified in their mortgage agreement. Most commonly default happens when a borrower stops making their monthly mortgage payments and falls behind.
• Delinquency: The term delinquency talks about a borrower who is late on their mortgage payments. In many situations where a borrower is constantly late on payment, the lender will execute a power of sale on the property.
• Down payment: A borrower looking to purchase a property must come up with the money to cover the difference between the amount of mortgage loan they will be taking out and the purchase price. This difference is the down payment amount they need to put down. The typical down payment amount on a new purchase is usually between 5% to 25% of the total purchase price, although a buyer has not limit of how large of a down payment they can give.
• Equity: Equity is the calculated by taking the value of the property and subtracting any financing, like mortgages and balances outstanding on home line of credits. The remaining unencumbered amount is the owner’s equity.
• First Mortgage: A first mortgage is a mortgage that is in a first lien position registered against your property and takes priority over any other liens that may be placed again your property. The only way that the first mortgage can ever be put into second position behind another lien is the in the event of a tax lien. With tax liens, the government can place a lien against your property for unpaid back taxes that take priority over a first mortgage or any mortgage. This is why that whenever applying for a mortgage, the lender will always check your tax records to ensure that you are not owing any taxes to the government. Typically this is done by providing your notice of assessment for the most recent 1 or 2 years.
• Fixed-Rate Mortgage: A fixed rate mortgage is one that the interested rate is guaranteed to remain the same for a specified period of time known as the mortgage term. With a fixed-rate mortgage, both your interest rate and payments are fixed and do not change for the duration of your term.
• Gross Monthly Income: Your gross monthly income is the total amount of income that you earn each month. The amount is calculated before any deductions, expenses, or debt payments are taken into account.
• Investor: The term investor, in the mortgage world, refers to the source of funds that are used for the purposes of lending towards mortgages. In exchange for the investment, the investor earns a return in the form of interest that the borrower pays on the funds that they borrow for their mortgage. For an investor, it’s not always all about the return rate, as the security and risk of the investment is of the utmost importance.
• Lien: A lien is a legal term and is used as security against a home or property in exchange for a mortgage loan, home line of credit, outstanding debts or payments, and so on.
• Loan-To-Value Ratio: The Loan-To-Value Ratio, also known as the LTV, is a percentage that represents the ratio between a registered mortgage in comparison to the value or purchase price or a property. As an example, if you are buying a home or commercial property for $1,000,000 and need a mortgage of $500,000, then your loan to value ratio will be 50%. Lower LTV’s can lead to lower interest rates and savings in monthly payments.
• Market Value: The market value of a property is equivalent to the amount that a property will be able to realistically sell for. This value is usually calculated using sales date over the past 90 days of similar comparable property sales. Market value is important when calculating the loan to value of a property.
• Mortgagee: The mortgagee is the lender that is providing the money for the mortgage loan.
• Mortgagor: The mortgagor is the borrower or property owner seeking to borrow again their property.
• Net Effective Income: The net effective income is the gross income of a borrower less all taxes and deductions. Debts like department store cards and other forms of credit debt are not considered in this calculation.
• Origination Fee: An origination fee is sometimes charged by a lender or mortgage broker. This fee covers the time it takes to prepare, package, submit, and organize the mortgage loan. This fee is usually stated as either a lender fee or broker fee on the disclosure to borrower documents and is calculated as and usually deducted from the gross proceeds of the mortgage.
• P.I.T.H: The abbreviation P.I.T.H. is used to calculate the monthly expenses that are associated with housing and a mortgage. The abbreviation stands for Principal, Interest, Taxes, and Heat. This calculation is important and is used by a bank or other conventional lender when determining how much of a mortgage a borrower might qualify for.
• Power of Attorney: A Power of Attorney document is a legal document that gives the authorization to an individual to act and make decisions on behalf of another person in certain legal, medical, and financial situations.
• Prepayment: A prepayment is a condition of a mortgage where the borrower is allowed by the lender to contribute additional payments to their mortgage that fall outside of the regularly agreed upon payments in the mortgage payment schedule.
• Prepayment Penalty: The prepayment penalty is charged when a borrower chooses to pay out their mortgage before the expiration of their mortgage term. It is important to understand how your prepayment penalty will be calculated on your mortgage. On the majority of fixed-rate mortgages this penalty is usually calculated as the greater of either 3 months of interest payments or the interest differential for the remainder of the term. On a variable-rate mortgage this penalty is usually only equal to 3 months of interest payments.
• Principal: The Principal represent the amount that is still outstanding on the mortgage, also referred to as the mortgage balance remaining. The principal is exclusive of interest.
• Realtor: Realtor is a common term used when referring to or talking about a licensed real estate sales person.
• Second Mortgage: A second mortgage is a mortgage lien that is in second position after the first mortgage. Any additional liens on the property will go in priority after the second mortgage.
• Title: The title is a legal document that is used to confirm and verify the legal ownership of a specific real estate property.
• Title Insurance: Title insurance is insurance that most property owners purchase to guarantee that the property buyer is protected again any fraud and errors on the title of the property.
• Title Search: A title search is usually conducted by the lawyer representing the buyer of a property. It pulls municipal records and helps confirm who the legal owner of the property is, and to verify if any incumbrances exist on the property. The title search is conducted before registering a mortgage, and is usually a condition of all mortgage contracts.
• Underwriting: The underwriting process is the process of assessing a potential borrowers ability to qualify and pay for a mortgage. An underwriter of a mortgage will typically assess a borrower’s credit history, employment history, net worth, and debt ratios to determine what kind of mortgage rate, mortgage terms, and mortgage amount would be best suited for them.
• Variable Rate Mortgage (VRM): See Adjustable Rate Mortgage