Anyone looking for a mortgage can be forgiven for feeling a little bewildered and confused when confronted with the staggering amount of mortgage deals that are available on the market at any one time. If you feel as though finding the right mortgage is a mountainous task that is difficult to start have you ever thought about using a mortgage comparison site to help you in your search?

A mortgage comparison site is by far the best way to take the headache out of finding a mortgage that suits you perfectly. Why go to a broker that is biased and looking for their commission each and every time they close a mortgage deal when you can do it yourself? Not only do you cut out the middleman by using a mortgage comparison site, you also drastically cut down the amount of time spent searching for a mortgage. After all you are the broker when using a mortgage comparison site and you have your best interests in mind all the time.

Using a mortgage comparison site such as Go Direct couldn’t be easier, you are guided through the whole process by firstly filling in an online form. The type of questions asked on this form are:

• The name and date of birth of each applicant (if the application is a joint mortgage).

• The amount you wish to borrow – most people have a rough idea of this and on a mortgage comparison site you can alter the amount you wish to borrow to get an idea of what your repayments will be. Try it and you could be surprised at the amount you could borrow.

• The term of the mortgage – once again most people have a timescale for their mortgage in mind when applying. Bear in mind that the shorter the length the larger the repayments – however the interest you pay will be less than that paid on a longer term mortgage.

• The type of mortgage you would prefer – do you want a repayment, interest only, buy to let, shared ownership or other type of mortgage?

• The employment details of all applicants – these will be checked if you decide to go ahead with a mortgage application.

• Any credit score details you feel are necessary.

By asking these questions the mortgage comparison tool can then build a list of the lenders who may be able to offer you a mortgage. It is essential that you answer these questions truthfully and do not inflate your income as when you do come to apply for a mortgage these details will be scrutinised. The list will show a brief description of the mortgages on offer along with what you could expect to borrow and the projected repayments every month. If any of the mortgages take your eye you simply have to click through onto the lenders website where you can find further details and go ahead with your application if you wish.

Anyone using a mortgage comparison site will be struck once they begin to use it at how easy it is. Each and every step in the process is explained to you on the site and you will find that you cannot progress to the next stage without filling in certain sections so you cannot miss anything out. So if you are looking for the mortgage that is right for you check out Go Direct’s mortgage comparison tool and see how easy it is to compare mortgages for yourself. Soon you will be signing the paperwork for your new home all thanks to Go Direct and their mortgage comparison tool.

With housing prices stalled, or even having falling in some local markets, Canadian home owners seeking mortgage refinancing and who are looking at a high ratio mortgage – i.e., home owners who are refinancing a mortgage where the mortgage exceeds 80% of a home’s current market value, or those looking at a second mortgage but who lack the requisite 20% down payment – need not be discouraged. Mortgage loan insurance is available, and affordable, commercially through the Canadian Mortgage and Housing Corporation (CMHC), a federal crown corporation, or through private mortgage loan insurers such as Genworth Financial Canada.

Most federally regulated lending institutions in Canada – the banks, credit unions and caisses populaires that compete for the bulk of the Canadian mortgages market – are prohibited by regulations under the Canadian Bank Act from providing mortgages without mortgage loan insurance for amounts that exceed 80% of the value of the home or property purchases with less than a 20% down payment.

Homeowners who initially started out with a high ratio mortgage, or whose home equity is flirting with the 20% equity ratio under the Bank Act can readily access affordable mortgage loan insurance for high ratio mortgages. The CMHC explains that “mortgage loan insurance helps protects lenders against mortgage default, and enables consumers to purchase homes with little or no downpayment – with interest rates comparable to those with a 20% downpayment.” Similarly, mortgage insurance is available for high ratio second mortgages where home owners do not meet the 20% equity threshold and need financing but are unwilling or unable to renegotiate their first mortgage because the interest rate on their first mortgage loan is significantly lower than current interest rates, termination penalties are too high, or they would not re-qualify for the same mortgage amount today.

As with any other form of insurance, there are insurance premiums to be paid, although they need not be prohibitive nor unduly expensive. Insurance premiums for high ratio mortgage loans vary and can range between 0.65% and 2.75% depending upon how much of the home’s value is to be financed.

The structure and costs of a high ratio mortgage will, of course, vary between lenders, as will the price and coverage for mortgage loan insurance. The best step for a homeowner who is looking at his or her refinancing options and is at or past the cusp where mandatory mortgage insurance coverage kicks in, is to comparison shop with the assistance of an experienced mortgage broker. The options that are available when looking at refinancing a high ratio mortgage or financing a high ratio second mortgage can vary significantly between lenders and insurers.

Some options that are available to qualifying home owners who are looking at a high ratio second mortgage include:

- High Ratio, equity based 2nd mortgages up to 85%
- Insured second mortgages that are typically available for up to 95% of the property value;
- High-ratio second mortgages that are usually available for up to 100% of the property value, albeit with limited fees;
- Open 2nd mortgages and Lines of Credit typically available for up to 90% of the property value;
- Mortgage amortizations of up to 35 years, or interest only mortgages; and
- Loan terms ranging from 1 – 5 years.

Those homeowners who are looking at refinancing and are faced with the prospects of refinancing with high ratio mortgages, or who may be seeking second mortgage financing in order to avoid the real and hidden costs of refinancing their first mortgage, should seek the services of an accredited Canadian mortgage broker so that they can investigate the full range of mortgage and insurance options that are available to them.

On July 9th, the Department of Finance moved to tighten Canada’s mortgages markets by announcing changes to the requirements for federally-backed mortgage insurance. The changes set minimum credit scores that home purchasers must meet to qualify for mortgage insurance on so-called ‘high-ratio mortgages” while restricting amortization terms to 35 years and requiring a minimum 5% down payment on mortgages insured through the Canadian Mortgage and Housing Corporation (CMHC) or other government-backed private mortgage insurers.

The tightening of Canada’s mortgage insurance rules, which will take effect on October 15th, is widely seen as a measure to further tighten Canadian mortgages market and forestall the credit problems that have crippled the U.S housing market. In announcing the changes, the Department of Finance characterized them as “a responsible and measured approach by the government to ensure Canada’s housing market remains strong and to reduce the risk of a U. S.-style housing bubble developing in Canada.”

Under the Bank Act, mortgages from federally-regulated lenders, including banks, credit unions, and caisses depots, must be insured where the value of the mortgage exceeds 80% of the value of the property or home being purchased or financed. Such high-ratio mortgages are insured primarily through the Canadian Mortgage and Housing Corporation, a federal Crown Corporation, but also through a handful of private mortgage insurers – Genworth Financial Canada, AIG and PMI Mortgage Insurance. The federal government guarantees the obligations of these mortgage insurers to lenders in the event of their not covering the costs of defaulted mortgages.

Effective October 15th, new federal rules will require that the loan-to-value ratios for federally-backed mortgages not exceed 95%, that amortization periods not exceed 35 years and that prospective borrowers have a minimum credit score of 620 and a debt service ratio (the percentage of income that goes to servicing existing debts and housing costs) of no more than 45%. The new rules will also require evidence of the reasonableness of the mortgaged property’s value and of the borrower’s source and level of income.

The new rule changes come at a time when Canadian real estate markets are already cooling off. Growth in housing prices showed a very moderate 1.1% year-over-year gain in May, according to the latest numbers from the Canadian Real Estate Association, as Canadian markets and consumer expectations have adjusted in response to the constant barrage of bad news about the worst U.S. housing market slump since the Great Depression and sobering forecasts about the state of a Canadian economy that is coming to grips with escalating energy and commodity prices.

The tightening of amortization periods and loan-to-value ratios will likely have a further dampening effect on Canadian housing markets, which already have sharply increased levels of resale and new home listings. However, this dampening effect may not be felt until after October 15th when the new rules come into effect. In the short term, the move to tighten mortgage lending standards could have the opposite effect – providing an impetus for Canadians to take the plunge into highly leveraged, no-money-down mortgages before the October 15th deadline.

(An October 15th implementation date was chosen to give home purchasers with mortgage pre-approvals the opportunity to exercise their options before the pre-approvals expire at the end of their usual 90-day term. Note, also, that the mortgages of existing home owners with high-ratio mortgages, amortization periods in excess of 35 years and substandard credit scores will be grandfathered under the new rules so that they will not be precluded from obtaining mortgage insurance when it comes time to refinance their homes.)

Industry feelings have been mixed about this latest move to ensure the solidity of Canada’s mortgages and housing markets. Most industry analysts applaud the move to ensure that Canadian home purchasers do not get sucked into the same speculative frenzy that fueled the meltdown of U.S housing prices when the sub-prime mortgage market unraveled. Other analysts seem to be expressing the view that this is a case of too-little-too-late or mere window dressing.

Derek Holt, Scotiabank’s vice president of economics, acknowledged that mortgage lending rules had been “modestly tightened” but noted that, “The changes are more about optics.” Meanwhile, a more pessimistic analysis came from BMO Nesbitt Burn’s deputy chief economist, who observed that the rule change is “a bit like closing the barn door after the horse has already run down the road.”

Canada’s mortgages and housing markets have not experienced the wild speculative bubble that erupted and burst south of our border, largely due to much more conservative lending practices here at home. Canadians were not privy to such innovative and speculative mortgage products as the so-called NINJA mortgages (“no income, no job, no assets), where borrowers could qualify for mortgages without adequate proof of income or employment that would enable then to afford the requisite mortgage payments, and only a small percentage of Canadians took out the sub-prime mortgages that scuppered U.S. markets. As a result, the percentage of Canadian mortgages in arrears are at the lowest levels – 0.27 per cent – they have been at since 1990, whereas Americans are facing mortgage foreclosures at a rate not seen since the Great Depression. This tightening of Canada’s mortgage insurance rules seem to be largely a pre-emptive move to reassure Canadian markets and ensure that Canadian home buyers do not go down the same path trodden by snake-bitten home buyers south of the border.

Home buyers are sometimes faced with special needs when purchasing or refinancing their home. A second mortgage can sometimes help in these instances. A second mortgage is a registered lien on your property. This lien is in second place, behind the first mortgage. Because second mortgages are riskier, the interest rates are usually a minimum of 10-12%. A new second mortgage can be used to purchase a home or to refinance an existing home. If refinancing, the new second mortgage can be used for a variety of things:

§ Home renovations § Children’s education § Pay off existing debt § Emergency expenses § Business expenses in challenging times § Investments Home equity is the difference between the current appraised value of your home and the amount you have paid on the first mortgage. For example, if you have paid $85,000 on a residential mortgage of $300,000, you can borrow against the $85,000 already paid. Home equity loans are either second mortgages or refinanced first mortgages with taking cash out. Again, this cash out can be used for a variety of reasons, from consolidating outstanding debt to renovating your home to paying for your children’s education. Depending on your particular financial situation, you may be able to lower monthly payments on your outstanding debts. Instead of paying high interest rates on a personal loan or credit card, you can get a home equity loan at low mortgage rates and pay off these debts for less. Depending on your unique loan scenario, we may be able to offer the following terms for your second mortgage: § Insured Second mortgage up to 95% § High-ratio first residential mortgages up to 100% § Equity-based first and second mortgages up to 100% Through our vast network of lenders, we can increase the probability of approval of your home equity loan/second mortgage. Call us today to see how we can provide a solution to your unique residential mortgage loan scenario. Now, given the current the state of the capital markets its more important than ever to work with seasoned professionals. Lender guidelines and underwriting parameters are changing rapidly as banks try to protect themselves. Options for bad credit residential mortgage refinances, though still broad, are getting harder to determine and close. Just as important it is key to know not only which lenders are offering the lowest rate and fees but which are still actively funding bad credit residential mortgage loans. We know who these lenders are. Good experienced mortgage brokers have a track record for helping our customers manage their financial affairs responsibly, and assisting them in re-establishing their credit and stability.

Although many clients are capable and willing to take on the responsibility of a new residential mortgage, the criteria used by most, if not all, traditional financial lending institutions prevent them from obtaining their loan request, due to past bad credit. Over the past few years, it has become increasingly easier to obtain loans for clients with bad or less than perfect credit, via tried and trusted private lending companies. These are also called sub-prime residential mortgages and loans. These companies can often finance sub-prime or bad credit mortgages which conventional institutions cannot. Although lending criteria has tightened due to the sub prime mortgage melt down in the United States, the main thing these private lending companies wish to see, verifiably, is a clear method of repayment, and equity in the property, in a marketable location.

What’s really important is that, regardless of your past credit history, a good experienced mortgage broker is able, in the vast majority of cases, to place financing for bad, or less than perfect credit mortgages. They are also able to assist consumers with good credit to obtain the most competitive mortgage rates and terms, and offer a wide range of residential mortgage products to meet a variety of needs.

Whether you have a history of bad or less than perfect credit, you have filed for bankruptcy, consumer proposal, credit counseling, you are self-employed or without verifiable income, or you’ve accumulated an unmanageable amount of debt, a good experienced mortgage broker can almost always place your loan request for financing.

Because sub-prime or bad credit residential mortgage loans can often be a complicated process, it’s important you speak with the right people. The idea is to improve your credit score and get you back on track with manageable debt and payment schedules. Even if your initial goal is to consolidate debts, do home renovations, taking a much-needed holiday, or anything else, a sub-prime bad credit mortgage can actually help improve your credit score. Combined with timely payments, a sub-prime mortgage can put you in the right direction towards financial freedom.

100% Mortgage – This is when you borrow the full property value from a mortgage broker. This type of mortgage requires no deposit or down payment, and is therefore popular with first-time buyers. However, because of the credit crunch, 100% mortgages are hard to come by.

Adverse (or bad) Credit Mortgages – These are, as the name suggests, available to people with a low, or nonexistent, credit score. These are increasingly hard to come by, and usually have a very high interest rate attached. It’s better to rent and work on improving your credit score before applying for a mortgage. They are also known as sub-prime mortgages.

Base Rate Tracker – Interest rates on all mortgages fluctuate, but a Tracker mortgage will vary depending on the base rate set by the Bank of England. For example; if the deal you find offers base rate plus 0.75% for life, you will always pay exactly 0.75% over the base rate, whatever it is. The advantage of this is that if the base rate goes down, so do your repayments, and quicker than with a standard variable mortgage (covered below).

Capped Rate Mortgage – Another rare deal, the capped mortgage guarantees that you will not pay more than a pre-determined amount of interest on your repayments over a set period of time, no matter how much they go up. The admin fees on this type of mortgage are usually higher than on more standard deals, but there is the advantage of knowing, at least for a few years, that your payments won’t rise above a certain level.

Current Account Mortgages – Relatively new on the mortgage market, this type of mortgage, often called a combined mortgage, works like a bank account. You get a fully functioning bank account with direct debit facilities, chequebook and statements, and your earnings are paid into this account. The amount of the mortgage is also paid into this account, and it works like a big overdraft – you can borrow money from it to pay for holidays etc, but this theoretically gets repaid as your wages are paid in. the temptation is to borrow a little too much when faced with such a large amount of cash, so this is only really good for those who can manage their money well!

Divorced Mortgages – Some lenders recognise that a couple in the midst of divorce, or a newly divorced homeowner, may need special assistance. Therefore, certain mortgages come with a fixed interest rate for up to 5 years, with an interest free period for the first few months. For the new divorcees buying a home, alimony payments can be calculated into the income when determining a mortgage limit. These mortgages are often 100% deals, and are only offered to divorcees.

Endowment Mortgage – These mortgages are linked to the Stock Market. Often called an ‘interest-only’ mortgage, your monthly repayments only cover the interest due; the idea being that your investments will do well enough to pay off the whole capital at the end of the term. Of course, if your investments fail to make you money, you could be faced with a huge debt at the end of the term.

Fixed Rate Mortgage – Like all mortgages, this has good and bad points. You get a fixed monthly payment amount for a set term – usually between 1 and 5 years – and during this time you are guaranteed to pay that amount no matter what happens to interest rates. It’s good because you know exactly what you’ll be paying for that term but at the end, you might be in for a nasty shock if rates have risen substantially. In addition, if rates drop below the rate you’re paying during your fixed term, you’ll be paying more than you would on a different type of mortgage.

Flexible Mortgage – This type of mortgage deal has massive benefits as it allows you to vary your mortgage payment amounts, under- or over-pay as needed, and even miss payments altogether if you need cash for a holiday or Christmas. Potentially you could save thousands in interest if you pay off this type of mortgage early, as there are no repayment penalties as with other deals. But again, you need to be responsible with this as the interest will keep mounting up during a payment holiday.

Guarantor Mortgages – A guarantor is a person who acts as a kind of financial backup for a borrower. In the case of mortgages, the guarantor would be responsible for repayments should the borrower default. It’s a huge responsibility which involves a lot of trust on both sides, but for a first-time buyer it can be a good solution to a first mortgage. A guarantor needs to prove that they could afford your repayments as well as their own commitments in the event of a default. Most lenders will look favourably on an applicant with a guarantor, so it’s worth securing one even if you don’t foresee any problems.

This concludes part one of the mortgages guide. Part two will cover more mortgages such as offset mortgages and the classic repayment mortgage.

Investment Mortgage – More commonly known as a buy-to-let mortgage, this type of deal involves getting a mortgage on a property which you intend to rent out to someone else. Instead of being calculated according to your income, an investment mortgage is calculated based on the projected income from your investment, for example a house being rented out as student accommodation. A BTL mortgage deposit is typically 10%, and is available is a repayment or interest-only option.

Key Worker or Shared Ownership Mortgages – These are a newer type of deal which allows someone in rented accommodation from a Council or housing association to purchase part of the property they occupy, while still paying rent on the other half. This option is also available for ‘key workers’ such as nurses, teachers or police officers, who are typically on lower incomes. First-time buyers can also benefit from these schemes, as there are some which allow part-purchase of new homes from participating builders.

Offset Mortgage – If you have substantial savings, an offset mortgage can be a great way to keep your repayments to a minimum. It takes the amount you have in a savings account and counts this towards you total mortgage debt and therefore reduces the amount you owe. When you earn interest on your cash savings, you avoid paying interest on the equivalent amount of your mortgage. The principle is similar to a current account, or combined mortgage (see part 1).

Overseas Mortgage – This is self-explanatory; it’s a mortgage you take out on a property abroad. It typically involves more work and potentially higher admin costs, and of course if you’re planning on renting out the property to tourists you need to make sure the demand is there. But if you choose the location carefully you could reap the rewards and recoup your initial costs. Different countries have different property laws so you’re better off consulting with a specialist overseas mortgage broker before making any final decisions.

Pension Mortgage – This is a form of endowment mortgage, with the repayments going towards paying the interest each month. But instead of investing directly in shares, a pension mortgage requires you to pay an additional sum into a pension plan to cover the capital at the end of the term. This is still tied to the Stock Market and therefore cannot guarantee to cover the whole capital at the end. Payments into the pension plan must be kept up regardless of other financial hardships if the final sum is to stand a chance of clearing your capital, but as a pension plan is not legally accessible until after the age of 55, some of the temptation to spend it is removed. One major disadvantage this has over a repayment mortgage is that there is no opt-out; you’re tied to the deal until you reach retirement age. Potentially this could mean a term much longer than the standard 25 years, and therefore more interest would be paid.

Repayment Mortgage – We come to the mainstay of the mortgage industry, and the most common type of deal. A repayment mortgage is the only way you are guaranteed to have full ownership of a property at the end of the term, provided you’ve kept up with repayments. The amount you pay each month on this type of mortgage is used to pay off part of the interest and part of the capital, so there is nothing left to pay at the end of the mortgage period. The early years of a repayment mortgage are mainly spent paying off the interest and only a small amount of the capital, but this is often preferable to other types where you pay off nothing but the interest.

Remortgage – If you’re part-way through paying off your mortgage, and find you need a large amount of cash for repairs, renovations or perhaps even a holiday or wedding, you could remortgage your home and release some of the equity on it. This often involves switching lenders to find a better deal i.e. a lower interest rate, or perhaps taking out a new mortgage for the full property value and using this cash to pay off your current, lower, one. But be careful if you decide to do this, as there may be an early repayment penalty on your existing mortgage.

Self-certification Mortgage – Often assumed to be only for the self-employed, this type of mortgage is useful for anyone who cannot guarantee or prove an exact income amount or do not wish to disclose their total annual salary. People such as seasonal workers or freelancers, or perhaps company directors who do not have a fixed annual salary are all eligible for a self-certification mortgage. Other than the standard credit checks, there are no checks made on your financial status, income or employment record, so it stands to reason that a good credit rating is necessary for this mortgage.

Standard Variable Rate Mortgage – An extremely common type of mortgage, this takes its interest rates from the base rate like a tracker mortgage, but charges a higher additional percentage. So, the interest rate you pay will fluctuate when the base rate does, but you may pay 2% over instead of 0.75% (see part 1 of this guide for more details on base rate tracker mortgages). In addition, any drops in the base rate won’t necessarily pass benefits to you straight away, as the interest on these mortgages tends to be calculated monthly or annual rather than daily. Those with poor credit scores will end up paying a higher additional percentage than those with good credit histories.

It’s important to remember than none of these mortgages are mutually exclusive. For example, you could have overseas mortgages with capped rates, or remortgage from a tracker base rate to a standard variable rate. In all circumstances, it’s best to seek expert advice and shop around for the best rates.

A mortgage calculator is a useful tool to help we budget for our new mortgage. A good mortgage calculator allows us to calculate our monthly payments based on our desired interest rate, taxes, and insurance. Here is how this useful tool can help we avoid common mistakes when refinancing our mortgage.

Mortgage calculators can provide us valuable information about our mortgage. A good mortgage calculator will show us monthly payment information and amortization tables to help us understand how our mortgage works. Amortization with a mortgage calculator describes the process of paying interest and principle graphically; using a mortgage calculator can help us get our head around a complicated financial concept like amortization.

In many parts of the country the average price for a home has gone up significantly over the past few years. This makes it difficult for many people to qualify for the financing they need using a traditional mortgage lender. Many of these individuals have turned to 80/20 mortgages to secure 100 percent of the mortgage financing they need.

Internet mortgage leads are indispensable for mortgage lending companies and brokers. The mortgage leads are lifelines to their business. That’s why they always look for qualified and cost-effective Internet mortgage leads. Borrowers often search for mortgage lending companies on the web. Initially they get in touch with the lead generation companies with their loan requests. They submit their requests to the mortgage lead generation companies by filling out an online application form. The lead generation companies send the applications, after screening them carefully, to the mortgage brokers and lending companies. Here the screening is necessary to ascertain the reliability of the loan application. The mortgage applications then become leads. Mortgage brokers and lending companies in turn contact the borrower via e-mail or telephone.

Lead generation companies use advanced technology to find suitable Internet mortgage leads. Here the quality of Internet mortgage leads depends on how sophisticated the lead generation process is. Mortgage-generating companies always aim to offer suitable and profitable mortgage leads to lending companies.

The major advantage of a fixed rate mortgage is that it presents a predictable housing cost for the life of the loan. A fixed rate mortgage guarantees that our interest rate stays the same, which means that our monthly principle and interest payments through the entire term of the mortgage remain unchanged. With a fixed rate mortgage, our monthly payments would only increase due to increases in property taxes or insurance rates.

In general, fixed rate mortgages are seen as the safer alternative to an adjustable rate mortgage. An ARM is considered riskier than a fixed rate mortgage because our payment may change significantly. If we have an ARM, it may be best to lock in a fixed rate mortgage now, in advance of our current loan adjustment.

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1. Am I eligible for a Reverse Mortgage?
• To qualify for a reverse mortgage, you must:
• Be at least 62 years old. In the case of a couple or co-owners, both must be 62 if they want their names to be on title of the home.
• Be a homeowner with enough equity in the home.
• Seniors may qualify even if they have an outstanding balance on a mortgage.
• Single-family homes and qualified condominiums, townhouses, manufactured homes, and 2 to 4-family owner occupied residences are eligible.
• Reverse mortgages are available only for homes occupied by owners as a principal residence.
• Can own up to 4 dwellings.

2. Are Reverse Mortgages legitimate?
Yes. Reverse Mortgages are federally regulated and insured and are safer than most traditional mortgages.

3. If I get a Reverse Mortgage that means the government holds title to my home?
False. Title does not get transferred into the governments name. Throughout the life of the loan, you own your home.

4. If I decide to sell my home, will the lender make me pay back the loan and will they collect a portion of the appreciation?
False. The lender will only collect the amount that is due to them. If the loan balance is larger than the home value, the lender will only collect the proceeds from the sale. You can never owe more than what your home is worth.

5. What do I have to pay to get a Reverse Mortgage?
In most cases there are no out of pocket costs to get a Reverse Mortgage. All costs deferred and only due when the homeowner moves out permanently, sells the home or passes away.

6. What are my payment options?
You decide how to receive the money generated by a Reverse Mortgage. In general, your payment options are:
• An upfront lump sum payment.
• Line of credit.
• Fixed monthly payments for as long as you remain in your home (or a predetermined, shorter period).
• A combination of lump sum, monthly income and line of credit.

7. Are Reverse Mortgages only for desperate seniors, or for the “House Rich, Cash Poor?”
False. The Reverse Mortgage is an excellent financial planning tool that has been used by homeowners from all walks of life to enhance their retirement years. While some have needed the cash from a reverse mortgage more than others, the growing popularity of this product is evidence of its benefit in a wide array of financial circumstances.

8. Am I required to pay anything during the course of the Reverse Mortgage loan?
No. The flow of payments is reversed during the term of the Reverse Mortgage – the lending institution pays you. However, you are responsible for keeping up payments for your homeowner’s insurance and property taxes, and to maintain the condition of your home.

9. What happens when my house gets passed to my heirs?
Once your home is passed to your heirs, the Reverse Mortgage comes due. Your heirs may either pay the balance due on the reverse mortgage and keep the home, or sell the home and use the proceeds to pay off the reverse mortgage. If they sell the home, they get to keep any excess sale proceeds.

10. Can I do a Reverse Mortgage if there already is a conventional mortgage on the home?
Yes. Existing mortgages must be paid off at closing. The proceeds from the Reverse Mortgage may be used for that purpose. This will eliminate any monthly mortgage payments.

11. Can a Reverse Mortgage be closed in a living trust?
Yes. Generally this is acceptable. The complete trust documents will need to be copied and put in as part of the file.

12. Will a Reverse Mortgage affect my Social Security, Medicare or pension benefits?
No. Proceeds from a Reverse Mortgage do not affect these benefits.

13. Can I get a Reverse Mortgage from anyone?
No. Only federally approved lenders may offer HUD insured reverse mortgages. Rob Jones will close your Reverse Mortgages up to three times faster than the competition. Why not use a pioneer in the reverse mortgage profession, Sun American has over 20 years of Reverse Mortgage experience.

14. How do I get started?
Call Rob Jones at Sun American Mortgage. He will need your birth date, approximate value of your home and the amount of money remaining on your mortgage, if any.

We’re all fully aware of the crisis in the world housing market, especially in the United States, it’s practically impossible to have missed it with all of the coverage on the news.  Unfortunately, this situation has affected Canadians as well.  It’s more difficult than ever for a person with no down payment to get a mortgage in Canada.  With the cancellation of the zero down mortgage programs, many people now believe that if they don’t have 5% down payment to buy a house they won’t be approved for a mortgage. Although it’s a little more stringent, it’s still possible to get zero down mortgages, however it’s in the form of what the banks call cash back mortgages.

Cash back mortgages are a great alternative for someone who wants to take advantage of the low price of housing in Canada right now but doesn’t have 5% down payment to purchase a home.  Alternatively, some people have saved for their down payment but don’t quite have enough.  A cash back mortgage would be a good option for this situation as well.  You’re probably wondering what’s the difference between a cash back mortgage and the zero down mortgage programs?  The banks would like you to believe that there is essentially no difference between these two mortgage products, but that is not the case. Although cash back mortgages are a fantastic alternative to the zero down mortgage products, there are significant differences.

The first and most important difference is the interest rate.  When the banks were offering zero down mortgages the interest rates were the exact same as if you had 5% down, with a cash back mortgage, the interest rates are usually about 1% higher than a traditional mortgage product.  However, this is offset by the fact that the bank is giving you your down payment.  That means if you have a cash back mortgage for $100,000 the bank will give you 5% down, and you only have to pay back $95,000. Banks would like you to believe that they are giving you the 5% out of the goodness of their hearts, but the fact is the interest rate is higher on this product so they can recoup that 5%. The good news is, at the end of your 5-year term with that bank, you are free to shop around again for the best rates.
 
The second difference between cash back mortgages and the zero down mortgage programs is the penalty if you break the mortgage before the 5-year term is up.  On a traditional mortgage at 100% financing, if you break the mortgage the penalty is the same as any other mortgage, the standard 3-month interest penalty would apply.  With a cash back mortgage they also charge a 3-month interest penalty, in addition to that you have to pay back a portion of the cash the bank “gave” you.

I know it seems like I am trying to deter you from a cash back mortgage but that isn’t the case, I just think it is important to enter into cash back mortgages fully aware of the product.  It is important to weigh your options carefully.  If you decide to wait and save up a down payment for your house because you don’t want to pay a higher interest rate, one very important point to consider is. Every year on average houses increase in value by approximately 5%, so,  if you were to purchase a house for $100 000 today that same house would cost you $110 000 in two years. 

If you consider waiting because the interest rate seems a little high you should know that a cash back works out to about a quarter of a percent higher than a traditional mortgage, when you consider that you are not paying back the cash back portion.  On a $100 000 mortgage over five years you will pay approximately $4,800 more in a cash back mortgage than if the zero down mortgage program was still available.  However, if you consider that waiting two years to save would cost you $10 000, the cash back mortgage would cost less than waiting and would be an excellent option to get into the housing market.  Cash back mortgages are excellent options for homebuyers, but you should make certain that you are fully aware of the conditions in your mortgage. 

A sub-prime mortgage is a mortgage that is extended to people who are not qualified to get the normal mortgage. Most of these mortgages are offered by the same companies that offer the mainstream mortgage but in a different lending institution. The rates for sub-prime mortgages are higher than the rates for prime mortgages thus; it is advisable to get a prime mortgage if possible. The main reason that makes one fail the qualification of prime mortgages is the credit rating where one gets a low credit score and they are rejected by the prime mortgage lender based on the assumption that the person is not able to service the prime mortgage.

The terms that are given for sub-prime mortgages include a small down payment and higher payment due to the higher interest rates and a longer payment period. The rates of sub-prime mortgages are raised to cover the risk that come with offering mortgages to people with low credit scores. There are chances that they might pay late or they might fail to pay if they do not have enough money to service the installment. The high mortgage rates are also meant to discourage borrowing of the sub-prime mortgage and this idea works since a majority of people accumulate their savings and get the prime mortgages.

The advantage of these mortgages is that they allow those people who have low credit ratings get the services that are usually accessed only by the people with high credit ratings. An additional advantage is that they have a longer repayment period and thus they are well suited for customers who would like to extend their repayment period. The disadvantage of these types of mortgages is that some of the people who qualify for mortgages are referred for sub-prime mortgages when their credit rating is low. The lending company determines one’s credit rating and whether one should be issued with a prime or sub-prime mortgage. This thus, leads to people who would otherwise have qualified for a prime mortgage being relegated into the sub-prime mortgage area. Additionally, this thus makes a person get one of these mortgages when mortgage lenders solicit them. They do not get a chance to consult prime mortgage lenders. Therefore, once these sub-prime lenders get solicitation commissions, they then carry out a process called ’steering’.

The houses for which sub-prime mortgages are offered are not in good condition as those that qualify for prime mortgages. This arises from the assumption that when one has poor credit rating, they are not well up and thus they do not need a very expensive house. Sub-prime mortgage also face competition from prime mortgage lenders since the mortgage lenders offer lower interest rates. These lenders also offer customized mortgage programs. Most people who fall in the middle class or are associated with this financial status subscribe to sub-prime mortgage since when they apply for these mortgages they qualify. Most citizens cower from the mainstream mortgage, which they assume is for the wealthy. For this reason, people are advised to consult with the relevant people prior to taking up a sub-prime mortgage.