Bob Hanscom Mortgage Agency

A: Mortgage Associates have access to many different lenders, including the major banks (TD Canada Trust, Scotiabank, ING Direct, ATB Financial, etc). Access to so many lenders and hundreds of mortgage options means a better fit for you. 1st & 2nd Mortgages, Refinances, Relocations (Military, Oilfield, Police), Mobile & Modular Homes, Construction Mortgages, Raw Land Loans, Investor Portfolios, Options for Bruised Credit…we can tackle it all. And typically, with just 1 application and credit check with your permission.

A: You may have heard of 25, 30 and 35 year mortgage Amortizations. In Canada, amortization refers to the amount of time it takes to pay the mortgage off in full. So for example, if you make monthly mortgage payments of $1000 on your 25 year amortization mortgage, it will take you 25 years to pay off your mortgage. Term refers to how long of a mortgage contract you sign with a lender or bank. Terms can last from 6 months to 10 years, the most common being the 5 year term. Once the term is up, this is known as your renewal date. You have to renegotiate another term with a lender (same or different – whoever gives the best deal – we can help) and keep on doing this until your mortgage is finally paid off. Each time your mortgage is up for renewal, you can choose a different lender or bank, the term you want and your amortization (shorter; the same; or longer).

A: You may have heard of a "Home Equity Line of Credit" or HELOC before. The key word is "equity", which refers to the difference between your existing mortgage and your home's appraised value. So for example, if my home value was $300,000 and my mortgage was $250,000, I would have a home equity of $50,000 or 83% Loan to Value ($250,000/$300,000). Most home equity line of credits hover at Prime or Prime + a certain percentage. Payments are interest only. In order to qualify for a line of credit on your home, most banks want anywhere from a Loan to Value of 75-80% or less. In this case, I would not qualify for a home equity line of credit because my Loan to Value is more than 75-80% (it's 83%). This is why many first time homebuyers don't qualify for a line of credit on their homes right off the start, since the majority of new homeowners start with 5% equity in their home provided by the 5% down payment they gave when they bought the home. With regular mortgage payments and with time, a home can increase in value providing the opportunity to get a home equity line of credit later on.

A: "Bruised credit" can be a result of collections, past bankruptcy(s), late payments, maxed out credit and/or too many credit inquiries. The fantastic news is that anyone with bruised credit can obtain good credit with time. This is important because good credit equals access to the best mortgage rates and products.

Consider the following tips from Equifax and TransUnion, Canada's credit reporting agencies, to improve your credit: 1) Always pay your bills on time. Late payments hurt your score, 2) Try to keep your credit card limit under 50% of its maximum limit. It's best to spread the debt out between several cards than to max one card out, 3) Don't give your Social Insurance Number out more than 8x per year. More than 8 credit inquiries per year may hurt your score. Bob Hanscom Mortgage Agency advisors can shop multiple lenders/banks on your behalf to get the best interest rate, but typically with only 1 credit check.

A: Each bank has a different bankruptcy policy. Most major banks require you to be fully clear of the bankruptcy for 3 years – fully discharged from the bankruptcy for 2 years plus another year's worth showing re-established credit that has been well-maintained (payments made on time, limits within reason, etc). Others will require a longer period of time before they are willing to provide a loan.

If you can't afford to wait that long, we have alternative lenders that may provide you with mortgage financing before your 3 years are up. The best way to determine whether or not you would qualify at this time is to discuss your situation with a mortgage advisor from the Bob Hanscom Mortgage Agency.

A: If you are locked into a mortgage at a higher interest rate, it pays to do some research. The first step is to call your mortgage company and have them determine how much the penalty would be if you paid off your mortgage early. Then, contact a mortgage advisor from the Bob Hanscom Mortgage Agency, to determine whether the interest you'd save vs the cost for breaking your current mortgage would be worth it. Depending on the equity in your home, you may be able to get a little extra money out to cover the penalty cost, or in some cases, a little extra to consolidate debt.

A: To start, decide if you want the stability of a fixed rate mortgage, or if you're comfortable with the potential risk of a variable rate mortgage. When clients contact our Agency, we look at their personal situation and goals. For the variable rate, we review important details to ensure the variable is a good fit such as:

• Portability options
• How interest is compounded (monthly or semi-annually). This impacts how much interest you pay
• Will your monthly payments fluctuate with Prime or will they remain constant?
• Can you lock into a fixed rate mortgage from a variable rate (also known as Convertibility)? What are the details? Will the bank offer you a discounted fixed rate to lock into (or their regular, retail rate)?

Each bank has a different policy on variable rate mortgages and fixed rate mortgages, so speaking to one of our mortgage advisors can help simplify things.

A: Think of an Open Mortgage as a mortgage that you are open or free to pay as much onto the mortgage as you want at any time, or even pay off the mortgage in full at any time without penalty (some admin fees may be charged by the lender for changes made, so make sure you always check). A Closed Mortgage on the other hand is a Closed contract. If you break the contract during the term you agreed to sign up for, there will be a penalty charged. The majority of mortgages in Canada are Closed mortgages. We can help you decide which is best for your personal plans and your financial goals.

A: Pricing for variable-rate and fixed-rate mortgages are determined by two different means. The variable rate or "floating" interest rate mortgage is tied directly to the Prime rate, which is set by the Bank of Canada, usually through regularly scheduled announcements. Pricing for fixed rate mortgages is in relation to the bond markets, as bonds are the main competing investment to mortgages. Mortgages are priced higher than bonds to account for higher risk of default. In a broader, more general scale, interest rates on mortgages are typically lower when the economy is struggling to encourage spending and higher when the economy is experiencing inflation.

A: I think now more than ever, it is important not to live beyond ones means. I believe this statement to be true, whether we are facing a recession or whether we are in an economic boom.

When it comes to mortgages, whenever possible, the question for Canadians should be, "what can I afford?" versus "what is the maximum I qualify for?"

The Government of Canada typically allows 42% of total gross income to go towards all debt, including credit cards, auto loans, mortgage, property taxes, heating, etc. However, does this mean that 42% of your income should actually go towards debt?

We've witnessed such a good economy, that sometimes it's easy to forget that unforeseen factors such as unemployment or health issues can change the ability to afford debt quite drastically.

A: It sounds like you have a Closed Mortgage. Closed mortgages contain a prepayment clause that requires the borrower to pay a penalty (or cancellation fee) when the mortgage is paid before the term is up. The penalty is calculated based on the remaining term of the mortgage. Open Mortgages do not have a prepayment clause.

All banks will charge a three months' interest penalty or the Interest Rate Differential (IRD) penalty, whichever is greater. The IRD is the difference between the interest rate on your mortgage vs the rate at which the money can be re-lent. Each bank will calculate the IRD penalty differently. To determine your penalty, you would have to call your mortgage company directly for a quote.

When refinancing to get a better rate, make sure you connect with a mortgage advisor from our Agency. We can let you know whether the refinance would be of financial benefit to you.

A: 2 key tips - avoid higher interest rates and make sure your mortgage fits your needs. The majority of homeowners sign their renewal notice with their existing mortgage company without a second thought. They should instead, be checking around to make sure they are being offered the best rate and the best product. After all, your requirements are probably much different than they were when you first got your mortgage. The easiest way to do this is to contact a mortgage advisor from the Bob Hanscom Mortgage Agency. We check your credit only once with your permission, but can shop around to over 30 different lenders on your behalf. We can tell you who is offering the best rates. We can assess what your needs are and will either advise you to stay put or to perhaps give a different company a try.

Just like anything, it pays to be informed. You should start this process no later than 1 month before your mortgage due date or renewal is up. You can actually start 4 months in advance so that you have the most opportunity to capture the best interest rate.

A: If you pay extra towards your mortgage, you will end up paying less interest. Here's why: The payment schedule for a mortgage is designed so that if you make a constant payment every month for a given amount of time, the loan will be paid off at the end of the period. This is known as the amortization of the mortgage – how long it takes to pay off your mortgage in full.
To pay more towards the principal and less towards interest, pay down the principal faster. You can do this by accelerating your payments; making extra payments; by making lump-sum payments or by choosing the shortest amortization you are comfortable with. The smaller the mortgage balance (principal) is, the less time it will take to pay the mortgage off and the less interest you will pay.
Here are some examples of the impact of paying your mortgage off faster, using 2 of the strategies listed above:

THE EFFECT OF A SHORTER AMORTIZATION PERIOD – based on a $300,000 mortgage at 5% interest (fixed, 5 year term, interest compounded semi-annually)

AMORTIZATION CHOSEN	25 year	30 year	35 year
MONTHLY PAYMENT (principle & interest)	$1744.82	$1601.08	$1504.27
TOTAL interest PAID BY THE END OF THE AMORTIZATION PERIOD	$223443.02	$276382.23	$331784.05

*we recommend you choose the amortization that gives you payments you can afford on a monthly basis. You can always put a "lump sum" payment towards your mortgage each year when you have extra money (how much, depends on the type of mortgage and the lender) or some lenders will allow you extra payments in addition to the lump sum. Another option is payment frequency:

THE IMPACT OF ACCELERATED BI-WEEKLY VS. MONTHLY PAYMENTS – based on a $300,000 mortgage at 5% interest (fixed rate, 25 year amortization, 5 year term, interest compounded semi-annually)

YOUR PAYMENT FREQUENCY	PAYMENT AMOUNT	INTEREST PAID OVER THE TERM OF 5 YEARS	REMAINING AMORTIZATION AFTER A 5 YEAR TERM
Monthly Payments	$1744.82	$70211.38	25.0 years
Accelerated Biweekly Payments (paid every 2 weeks)	$872.41	$68649.54	21.4 years
AMOUNT YOU SAVED	--	1561.84	3.6 years less payments

*Check with your financial institution to see what privileges you have to pay off your mortgage faster. These privileges are known as "prepayment privileges" and they are different at each bank*

A: The key is to ask for "accelerated" biweekly payments. The accelerated part of the statement ensures you are paying every 2 weeks (whereas if it's not accelerated, you will just be paying 2x per month). When you are making accelerated biweekly payments towards your mortgage, you actually make 26 payments per year. For example, if a monthly payment is $1000 and there are 12 months in the year, you would put $12,000 towards your mortgage in payments.

An accelerated biweekly payment is your monthly payment divided by 2. So, every 2 weeks you would pay $500 towards your mortgage * 26 payments per year = $13,000 towards your mortgage each year.

This $1000 extra per year can save you thousands of dollars in interest over your term and over the full life of your mortgage (amortization).

A: It depends if you are the person receiving these support payments or if you are the person paying these support payments.
If you receive support and/or alimony - generally the amount you receive can be added to your total income, provided proof of regular receipt is available (e.g., court ordered payments, banking history showing deposits of the payments, or a separation agreement that specifies the support arrangements).
If you pay child support and/or alimony, generally the amount you pay must be deducted from your total income before determining the size of mortgage you will qualify for.

A: The majority of banks require a separation agreement before an offer on a new property can be made – they want to see how the assets are divided and whether child support or alimony will be paid.

However, it's a good idea to talk to a Bob Hanscom Mortgage Agency advisor about your needs and your particular situation. While you sort out the details of the separation, you can get a mortgage pre-approval in place to guarantee your interest rate. A pre-approval will tell you how much you qualify to purchase on your own and can be arranged 4 months in advance.

Connect with a mortgage advisor from the Bob Hanscom Mortgage Agency to insure you receive the appropriate advice on the following:

• maintaining your credit rating (be on time with payments on your own debt and any shared debt. Good credit is important)
• how child support and alimony will factor into the equation
• paying out an existing mortgage or buying out your spouse's equity
• consolidating debts and obtaining funds for separation/divorce expenses
• purchasing a new home

A: An Appraisal assesses Market Value of the home. When purchasing a home, an appraisal allows the lending institution to determine if the land and building in question are suitable as security for a mortgage. The lender basically wants to know if the home you plan to purchase is "worth" what you are willing to pay.

A Home Inspection assesses the Condition of the home. Home inspections are always optional to the buyer, but it is highly recommended that they are added on as a condition in the Purchase Contract.

A well-trained home inspector will perform a comprehensive visual inspection to determine the condition of the building and all of its major systems (for example the roof, structural, heating, plumbing and electrical systems).

While an appraisal is intended to provide the lender with sufficient information to decide on mortgage financing, a home inspection will hopefully reveal to a potential homebuyer that the building and its systems are in sound working order.

A: You have to repay all withdrawals to your RRSPs within a period of no more than 15 years. If you do not repay the amount due for a year, it will have to be included in your income for that year.

When planning to use your RRSPs for a home purchase, it's always important to make sure you qualify under the Home Buyers' Program (HBP) first and that your RRSPs are eligible to be withdrawn (all RRSPs have to be in an RRSP account for 90 days before they can be withdrawn).

The HBP specifies you can use your RRSPs for any purpose (down payment, moving costs, furniture, etc).

For information on the Home Buyers' Plan, check out the Home Buyers' Plan Guide at http://www.cra-arc.gc.ca/E/pub/tg/rc4135/rc4135-09e.pdf