Is your Mortgage Coming Up for Renewal?

Here are some interesting stats for you from CMHC.

• 88% of people who renew their mortgage stay with their current lender
• 70% of people who refinance their mortgage do not change lenders when obtaining their current mortgage
• 46% of first time home-buyers took out their mortgage with the institution they were dealing with at the time
• 58% of repeat buyers did not change lenders when obtaining their most recent mortgage

Is this good news or bad news? It all depends on whether you have taken the time to research your options to see if you are saving the most money and getting the best advice based on your situation. For those of us who are complacent and just sign the mortgage renewal agreement that comes in the mail, you could missing out and end up paying the financial institution more money. How do you know that you are getting a competitive rate? More importantly, how do you know that you are choosing the right term? So before you sign the the mortgage renewal agreement, take 15 minutes our of your day and review the following questions that can end up saving you thousands of dollars. After you review these questions, call your mortgage specialist or myself if you would like a second opinion before you renew or decide that it may be better to transfer your mortgage to a different financial institution.

1. Is renewing early an option to look at given the current interest rate environment?
2. What financial changes do you anticipate in the next 6-12 months that might impact this renewal?
3. How satisfied are you with your current mortgage?
4. Are you moving or selling in the near future?
5. Are you considering doing renovations or improvements to your home?
6. Do you prefer fixed or variable rates?
7. Have you already been considering a specific term? If so, which term and why?
8. Do you have any other debt that you would like to consolidate?

All of these questions may impact your decision and most importantly can end up saving you a lot of money in the long run. These questions are very similar to the ones on my blog on Important Questions to Consider Before Choosing the Right Mortgage.

Before you go on to review your mortgage renewal options, here are some other important factors to consider. These features may not be important to you but you would be surprised at how it may affect your situation in the future.

• Are you able to early renew your mortgage for 120 days in advance without paying a penalty?
• Can your financial institution offer you a blended rate to spread out the penalty costs over the term of the new mortgage?
• How many days in advance from your maturity can you pay out your mortgage?

Just to give you an example, a recent mortgage transfer that I did for a customer was not able to fund until the exact day of maturity. Their financial institution would not allow early payout 30 days in advance. At TD, this is a standard feature of our mortgages. How did this affect my client? 30 days of paying a higher interest rate. To learn more about what TD Canada Trust has to offer, please see our Mortgage Line-up. No matter what type of mortgage financing you are looking for, it makes sense to speak to me first. If you have any questions or would like to leave a comment, please do so below. Thank You!

Sincerely,
Josephine Ng
www.tdmortgage.wordpress.com

How to Confirm Income

One of the most important factors that lenders look at when assessing a credit request such as a mortgage is a customers capacity to repay the loan. Now it may seem as simple as just providing a paystub or a letter from your employer but lenders may not just look at your current ability to pay but other factors such as the stability of your employment and job security. For example, if you work in an industry that is highly seasonal in nature, you may be asked to provide not only a recent paystub but also Notice of Assessments for the last 2 years. Now today I want to go over the different ways to confirm income and what documents your lender may expect from you prior to your credit request. Most importantly, I want to clearly define what these documents are or may look like because a lot of times when I ask for things like Notice of Assessments, I’m getting T4′s or indiviual prepared tax returns. Every lender will have its own policies when it comes to confirming income so use this only as a general guideline.

Salaried or Hourly Income
If you are salaried or receive regular hourly income, typically you will be asked to provide a recent or a few recent paystubs dated within the last 2 months. In addition to the paystubs, you may also be asked to provide a recent letter of employment, also dated within the last 2 months. These documents should indicate your name, your employer’s name, and your base pay. If you are providing paystubs, they should also show your pay period and your pay rate per hour. For a letter of employment, the name and title of the person should be indicated on the letter. If you work for a family business, most lenders will usually consider you to be self employed and will not accept a letter of employment. If your bank account is with the same lender, they may consider looking at your direct deposit history for the last 2 months. Since it discloses your net pay, most banks will use a certain multiplier to estimate your gross pay.

Self Employed or Fluctuating Income
If you are self employed/Professional, employed by a relative, have fluctuating income such as commissions, bonuses, profit sharing, overtime, gratuities, fluctuating hourly, seasonal employment, contract employment or receive other investment income, then you will most like be asked to provide your 2 most recent years Notice of Assessments from Revenue Canada. To clarify what we consider most recent, your 2009 NOA may be used up until June 30th, 2011. After that deadline, you will be asked to provide your 2010 NOA.

So what is a Notice of Assessment? It is the form that the Canada Revenue Agency sends to all taxpayers after processing their returns, that states the amount of taxes to be paid or refunded. A T4 is what you receive from your employer to file your tax return but does not give us any indication of whether you will owe taxes or receive a refund. A T1 General also does not constitute as a Notice of Assessment because this is what you or your accountant prepares to submit to the CRA. If you do not have a copy, you can obtain one by accessing the Canada Revenue Agency Web Site or alternatively, by requesting a copy from CRA by phone.

Line 150 on your Notice of Assessments provides a total of all reported sources of income so lenders will take the average of your last 2 years. If you have any income taxes owing, lenders will ask that it be paid prior to granting you any credit. There are certain programs in place for self employed individuals who may have numerous write-offs and cannot show the require income on paper. Please visit my blog on Self Employed Borrowers to learn more about these programs.

Other Sources of Income
You may receive other sources of income including rental, alimony or child support, maternity or parental leave, or other investment income including Non Canadian Currency. The best thing to do in these instances is to contact your lender to find out what they will accept as proof for these sources of income.

No matter what type of mortgage financing you are looking for, it makes sense to speak to me first. Happy Canada Day!

Sincerely,
Josephine Ng
www.tdmortgage.wordpress.com

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