There are two types of variable mortgages. Open and closed. Both with TD are 5 year terms but the 2 main differences are the rates and prepayment privileges. With the variable closed, the rate is usually priced below bank prime and with the open it’s usually priced above bank prime. In terms of pre-payment priviledges, the closed term does not allow the mortgage to be pre-paid in full without paying 3 months interest compensation. The open term allows pre-payment in full however administration fees apply if the mortgage is paid in full in the first or second year, $500 and $250 respectively. Two important things to note about variable mortgages with TD is that they are NOT assumable nor portable. To learn more about portability, please visit my article on Porting or Replacing your Mortgage.

The interest rate on a variable mortgage is calculated monthly, not in advance and changes when TD Mortgage Prime changes. This is different than a fixed rate mortgage in which the interest is calculated semi-anually and not in advance. The rate is set on the 1st day of each month based on the variable mortgage rate. So if the bank prime changes mid month, your variable rate will not be changed until the first of the following month. Keep in mind your lender’s rate adjustment policy if you choose to go with a variable mortgage. Your payments on our variable mortgage are fixed for the entire 5 year term. I always recommend to those who choose a variable mortgage to set their payments based on a higher rate to pay off the principal faster and to safeguard against interest rate increases. Since interest rate fluctuations can push the outstanding balance beyond the contractual amortization, it is always a good idea to increase the payment frequency and amount. For more information on how to pay off your mortgage faster, please visit my blog on Mortgage Payment Plans and Say Goodbye to your Mortgage Faster. When your interest rate reaches the point where your payments no longer cover the interest charged under the mortgage, this is referred to as the Trigger Rate. If this occurs, you may be asked to pay your mortgage down to the appropriate trigger point, re-evaluate your property, convert your mortgage to a fixed rate, or increase your regular payments.

If you currently have or choose to go with our closed variable mortgage, you have the option to early renew into a fixed rate mortgage with a minimum term equal to the lesser of 3 years or remaining period of the original term. If you have or choose to go with our open variable mortgage, you have the option of renewing into any fixed term mortgage. So as you can see, there is more to variable mortgages than just the rate. Knowing what your options are during your contract period can have an impact on your decision or situation down the road. Going forward, the variable may no longer win according to the Financial Post, but there never seems to be a clear answer on whether to lock in or stay variable. 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

According to Christine Rae, Ontario President of the U.S.-based Real Estate Staging Association, 63% of buyers will pay more money for a house that is move-in ready than one that needs renovations. Staging a home encourages buyers to see themselves living in the space and allows them to form an emotional connection to the property. Staging is not about hiding problems but showcasing a property’s integrity.

A stager will reveal things about your home that you may not want to hear because they must look at it through a buyer’s eyes and ultimately remove any reason for a buyer not to complete a purchase. This can be things like bad odours, outdated floors, drapery, wall colours etc. Remember that that renovations made to sell are not about personal taste but to meet the needs of potential buyers.

The cost to stage your home may vary but can hold potential payback in your price. Consult with your Real Estate Professional to see if they offer home staging as part of their services or can refer you to a home staging professional. 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

Original Article: Comforts of Home

With your TD Canada Trust mortgage, you can choose a payment frequency of weekly, bi-weekly, semi-monthly, or monthly. With the first 3 types of payment frequencies, you can also between regular or rapid repayment. Rapid plans basically accelerate the repayment of the mortgage by permitting the equivalent of 13 “monthly” payments per year instead of 12 on a regular plan. Of course, this will lower your amortization in the long run. Just to give you an example, for a $50,000 loan with an interest rate of 11%  amortized over a 25 year period, making a rapid weekly repayment reduces the period from 25 to 18 years. Since you can increase your minimum payments by up to 100% on all our fixed and variable term mortgages anyway, you can even pay more than the rapid option.

From time to time I get customers that don’t know the difference between semi-monthly and bi-weekly so just to clarify:

• Weekly payments are due on the same day each week
• Bi-weekly payments are due on the same day every other week
• Semi-monthly payments are due twice each month, usually on the 1st and 15th
• Monthly payments can be set up on any day of the month for a monthly payment frequency

Now here comes the important part. I get a lot of customers who aren’t familiar with conversion dates and interest adjustments so if you happen to request a change in payment frequency, please take note of this. If you are on a monthly payment plan, you are always paying for the month behind. Same goes for a semi-monthly plan, you are always paying for the 15 days before. In other words, on a monthly plan, your June 1st  payment is paying for the month of May. So if you decide to convert to semi-monthly and you want your semi-monthly payment to start on July 1st, you will have an interest only payment due on June 15th which is the conversion date. This covers the period between June 1st and June 15th. Your first semi-monthly payment would then begin on July 1st. Having to make that interest adjustment payment can throw people off so hopefully this clarifies things.

The easiest thing to do is to have your mortgage payments come out on the same day as pay day. Most of us are paid on a bi-weekly or semi-monthly basis so use this opportunity to increase the frequency of your payments. If its within your financial means, choose the rapid repayment feature to lower your amortization which will save you more money. For other strategies on how you can own your home faster, please visit my blog on Say Goodbye To Your Mortgage Faster. 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

Savings
If your down payment is coming from a bank account, simply providing your latest balance from your bank online or from a bank machine won’t be good enough. We will want to see at least a 30 day history of savings or more and you may be asked to further verify any large deposits that were made in that period. If you take out a cashback mortgage, the cashback you receive cannot be used to confirm down payment as this is not considered your savings.

Gift
If your mortgage is insured by CMHC or genworth, a gifted down payment must come from a relative or immediate family member. You must provide a gift letter that states the funds requires no re-payment, the relationship of giftor to giftee, and also verify the existence of the gift. The existence of the gift also means verifying at least a 30 day history of savings or more. In addition to the gift letter we also need to verify that the funds are on deposit in your account prior to closing or sent directly to your solicitor. So as you can see, a simple gift letter will not suffice. The best thing to do is to contact your lender and find out exactly what documentation they require for confirming down payment if it’s in the form of a gift.

Other Liquid Assets
If you have other investments like bonds, stocks or RRSP’s, these can also be used to confirm down payment. You might have to pay witholding tax on your RRSP withdrawal unless youre utilizing the first time homebuyers plan. TD will require a recent statement showing the description of your assets and the current value. Remember that locked in RRSPs cannot be used for down payment as they represent pension assets. Borrowing against liquid assets or a home equity line of credit against another property is fine but payments will be included in your debt service ratio.

Proceeds from the sale of a property
If your down payment is coming from the sale of a property, we will ask you to provide a a firm unconditional offer to purchase and sale together with a recent mortgage statement. We will take into account real estate commissions, lawyer fees and other costs associated with the sale when calculating the net proceeds.

I hope this clarifies the different sources of down payment and more importantly how lenders may ask you to confirm it. 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

Purchase Price: $300,000
Down Payment: $15000
Required loan: $285000
Mortgage Insurance (Standard Premum): $7837.50
Mortgage Amount: $292837.50

The premium payable is based on the size of your down payment. The lower your down payment, the higher percentage you will pay in insurance premiums. There are also extended amortization surcharges if you choose an amortization of greater than 25 years. To learn more about the insurance premiums, you can visit the CMHC website. With both mortgage insurers, you can pay the premium in full upfront or you can add the premium to the principal amount of the mortgage like the example above. TD Canada Trust no longer offers insured Home Equity Lines of Credits  therefore they are only available on a conventional basis. Remember if you choose a mortage term of less than 5 years or a variable rate option, we will qualify you by using the 5 year posted interest rate. For more information on qualifying rates, please visit my blog on New Mortgage Rules.

Keep in mind that Mortgage loan insurance enables you to purchase a home with only 5% downpayment but once you own your home, the maximum loan to value that lenders will grant is 90% if you refinance. In other words, you will need to have at least 10% equity in your home. Mortgage loan insurance is also not to be confused with mortgage life insurance which guarantees that your remaining mortgage at the time of your death will not be a burden to your estate. To learn more about TD Mortgage Life and Critical illness insurance and other home insurance, please visit our website. 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

• 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

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

“I wanted to thank you for your blog on ports and replacements. As a TD Canada Trust customer with a mortgage held by TD, my wife and I engaged in the purchase of a new house utlizing the Port, Blend and Increase. However, the sale of the old house created a gap of about 53 days after the close of the purchase. We were told that we needed a bridge loan, but we were able to pay the 5% deposit required, closing cost on the purchase and was also given 1% cashback incentive by TD. This eliminated the need for the Bridge financing to the surprise of the local branch manager and the lawyer.

What I was concerned with was the accounting and probably the pessimism that TD would forward me the money for the purchase without funds from the sale. Even more suprising was that the 1% cashback that basically carried the two mortgages for the 53 day gap. Your blog gave me the real understanding that essentially the Port was an opportunity to pay off the mortgage associated with the sale and that we were actually quite well planned with the actions that we took and with the 1% cashback “lucked out”. And that we really are going to carry 2 mortgages.

Without your blog, I would have continued to have sleepless nights. Thank you. Your blog has been helpful and in fact outlined the opportunities in plain language that TD customers have. Again, Thank you. Vince”

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

Co-signors and Co-applicants are two terms that are used interchangeably. They are usually required in cases where someone cannot qualify on their own. These reasons might include no current or past borrowing record, poor current or past credit history, insufficient income, limited financial worth, or no tangible security. Most co-signors and co-applicants are restricted to family members of the person applying but TD will consider non-relative requests on an exception basis. Always check with your Financial Institution on what their rules are. Now, a co-signor or co-applicant is equally responsible for the debt until its fully repaid so even though you may be just a co-signor and someone else is paying the debt, it is still your liability in the bank’s eyes. This means that if you apply for credit down the road, they will include this liability on your application, potentially impacting your ability to qualify. As a co-signor or co-applicant on a mortgage, you will also be on title of the home.

Joint applicants usually apply to spousal situations where common assets and liabilities are shared, so like husband and wife or common law relationship. Each are also equally responsible for the debt obligation. Both spouses may or may not have income that can be available to satisfy debt-servicing requirements but if the real estate is owned jointly, both spouses must be included in the application and sign as mortgagors.

So that leaves us to our last term and that is a guarantor. A guarantor basically guarantees a mortgage but they are NOT on title of the property. So why wound anyone want to provide a guarantee? Well for one thing it can help strengthen an application for those wanting to help out a family member or close relative but it also gives them the ability to utilize the first time homebuyers plan if they haven’t done so already. There may be other personal reasons why people don’t want to be on title but at the end of the day, this is the main difference between guarantors and cosignors. What a lot of us don’t know is that most lenders will not even include the income of the guarantor because income from other parties to the mortgage is only used when they have an interest in the property. The percentage of secondary income used depends on the quality and durability of the guarantor’s employment. So when I say that a guarantor may help strengthen the application, it’s not actually helping the main applicant qualify, but rather adds an extra cushion in the event of default.

So I hope this clarifies the definitions of co-signors, co-applicants, joint applicants and guarantors. If you are ever in doubt, always seek independant legal advice before entering into any contract. 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