Buy New or Existing?

With construction of new homes in Calgary soaring, one major choice that homebuyers often have to consider is whether to buy or build a brand new home or move into a previously owned house. As an existing homeowner, this is a question that will be up for debate before our next move. Buying a brand new home obviously has its advantages but there are also some downsides to it. I came upon an article in the Globe and Mail that goes over the benefits and drawbacks of being a home’s first owner. Here are some things to think about before you decide.

Customization
If you buy brand new, you have the option to customize. This can include the planning and design of every element in your home if you start from scratch or having an input on minor elements such as colors and materials if you buy a pre-planned house. If you buy an existing home, it comes as is and customizing it may involve more work and more money.

Warranty
Builders usually provide a warranty on their brand new homes to cover any defects in the home’s construction. This can offer you peace of mind because you know you won’t have to spend any money on major repairs for the first few years. Having said that, new homes do need time to settle so whether the construction is sound and foundation likely to shift are unknown. Homeowners can also run into issues with builder warranties if the builder goes out of business or if the defect is not covered under the warranty.

Safety and Building Codes
Brand new homes must comply with up to date building codes that apply to the area such as electrical, plumbing, fire safety and natural disaster protection whereas older homes may need to be brought up to date. The one thing that I would have to agree with though is that new homes tend to use less expensive materials that don’t match the quality or lifespan as the materials more likely found in older homes.

Contemporary Style
Newer homes have better layouts because they get with the times but newer homes tend to be farther from the core of the city. If you don’t mind living in the suburbs then this won’t be an issue for you but if want a shorter commute, then you may have to settle for an older home.

Low Maintenance
With a brand new home you can just move right in and not worry about having to get your hands dirty, so if you like something low maintenance, then buying new may appeal to you.

If you decide to buy new, TD can hold your interest rate for up to 12 months from the application date subject to approval of the builder. On single homes, this can be extended to 18 months in the Greater Toronto and Vancouver areas or 24 months on townhomes and condominiums. In a rising interest rate environment, this is a good option to have, especially since it takes a while for new homes to be built. Talk to your lender to see if they have any special programs in place if you decide to buy new or give me a call and I can show you your options. 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

Original Article: The Globe and Mail

Buy New or Existing?

With construction of new homes in Calgary soaring, one major choice that homebuyers often have to consider is whether to buy or build a brand new home or move into a previously owned house. As an existing homeowner, this is a question that will be up for debate before our next move. Buying a brand new home obviously has its advantages but there are also some downsides to it. I came upon an article in the Globe and Mail that goes over the benefits and drawbacks of being a home’s first owner. Here are some things to think about before you decide.

Customization
If you buy brand new, you have the option to customize. This can include the planning and design of every element in your home if you start from scratch or having an input on minor elements such as colors and materials if you buy a pre-planned house. If you buy an existing home, it comes as is and customizing it may involve more work and more money.

Warranty
Builders usually provide a warranty on their brand new homes to cover any defects in the home’s construction. This can offer you peace of mind because you know you won’t have to spend any money on major repairs for the first few years. Having said that, new homes do need time to settle so whether the construction is sound and foundation likely to shift are unknown. Homeowners can also run into issues with builder warranties if the builder goes out of business or if the defect is not covered under the warranty.

Safety and Building Codes
Brand new homes must comply with up to date building codes that apply to the area such as electrical, plumbing, fire safety and natural disaster protection whereas older homes may need to be brought up to date. The one thing that I would have to agree with though is that new homes tend to use less expensive materials that don’t match the quality or lifespan as the materials more likely found in older homes.

Contemporary Style
Newer homes have better layouts because they get with the times but newer homes tend to be farther from the core of the city. If you don’t mind living in the suburbs then this won’t be an issue for you but if want a shorter commute, then you may have to settle for an older home.

Low Maintenance
With a brand new home you can just move right in and not worry about having to get your hands dirty, so if you like something low maintenance, then buying new may appeal to you.

If you decide to buy new, TD can hold your interest rate for up to 12 months from the application date subject to approval of the builder. On single homes, this can be extended to 18 months in the Greater Toronto and Vancouver areas or 24 months on townhomes and condominiums. In a rising interest rate environment, this is a good option to have, especially since it takes a while for new homes to be built. Talk to your lender to see if they have any special programs in place if you decide to buy new or give me a call and I can show you your options. 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

Original Article: The Globe and Mail

All about VIRM’S (Variable Interest Rate Mortgages)

It seems like the VIRM is the more common mortgage option now adays, especially given the fact that the spread between the discounted 5 year variable closed and 5 year fixed is currently over 2%. Just to put it into perspective, the difference in monthly payments between the two on $100,000 is approximately $113 based on a 35 year amortization. But whether the variable mortgage may be the right option for you shouldn’t be solely dependant on rate. As you know, the interest rate on a variable mortgage fluctuates and more importantly is currently on its way up but not knowing how the product works may leave you with more challenges down the road. Aside from using IDEAS outlined in my blog Fixed or Variable to help you evaluate your situation, I thought I would go over everything you need to know about Variable Interest Rate Mortgages. Keep in mind that the products in my blog are specific to TD so always check with your lender on their mortgage products work.

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

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

Is it Time for a Mortgage Check-up?

Hi! It’s Josephine Ng, your Mobile Mortgage Specialist with TD Canada Trust. While many of us visit our Doctors and Dentists to ensure our health is in check, how many of us are checking our financial health by reviewing our mortgage? With many changes that we all go through including career, kids, retirement and who knows, even new found money, having the right mortgage can make a huge difference on our financial health. So today I want you to take a moment and think about the following things.

Mortgage Term – Is your mortgage coming up for renewal? If so, how are you choosing your mortgage term? Instead of just signing the renewal letter without considering your current needs, you may end up savings thousands of dollars by spending less than 15 minutes speaking with a mortgage advisor. You should put just as much thought into a renewal as you did when you signed the initial deal.

Interest Rates – This is obviously one of the most important factors to consider. If you’re making a commitment to be mortgage free in 25 years, you should have a longer term view of what interest rates will look like over that period. If they’re going up, make sure you can afford the higher monthly payment that may come at renewal time, or lock into a fixed rate if you’re on a variable. If rates are dropping below your existing rate, you might want to refinance or renew early. Choosing between a fixed or variable option can be a tough decision but the more adverse you become to risk, the less likely a variable mortgage will be right for you. To get more insight on this topic, please visit my blog on Fixed or Variable. I have also attached our Historical Rates for your information.

Consolidate – Consolidating higher interest unsecured debt into your mortgage can save you significant interest costs and may possibly help you get out of debt sooner. It may also help you free up some cash flow by combining all your debts into one monthly payment. The best thing to do is to always continue making the same level of payments which will reduce your principal and lower your interest costs. The Example attached demonstrates how one family with mortgage, line of credit, and credit card payments exceeding $1800 per month was able to reduce their annual interest expenses by $4200, while also saving over $900 per month in debt repayments. By consolidating all of their financial debts and exploring the benefits of a home equity line of credit, the family has the ability to better manage their monthly payments.

Amortization – Knowing how amortization works will help you to understand how to properly manage your debts and also pay it off quicker. Amortization is how long you are scheduled to repay a mortgage or loan. Most banks will allow you to make a certain percentage of lump sum payments against the principal of your mortgage and increase your monthly payments. For tips on paying down your mortgage faster, please visit by blog on Saying Goodbye to Your Mortgage Faster.

At the end of the day, understanding your whole financial situation and not just your mortgage can help. Even something simple like undertaking renovations can affect your mortgage options. A mortgage also has its tax advantages if you’re thinking of investing in a business, buying a rental property or purchasing other investments. The interest paid on money borrowed on a principal property can be written off against revenue from those investments. No matter what type of mortgage financing you are looking for, it makes sense to speak to me first. It may be a lot easier to review your situation now and do something before your situation changes. 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