Mortgage Specialist Toronto Advice: Biweekly Mortgage Payments

What is a biweekly Mortgage?

Most of the top performing mortgage specialist Toronto today would encourage their clients to take on instead a biweekly mortgage payment in order for them to complete their payment obligations to it fast. And this seems to be the fad today. But does it really work and most importantly is it beneficial to a homebuyer who is planning to acquire a house soon?

A biweekly mortgage payment is a commitment from the part of the homebuyer to make one-half payment for his mortgage every two weeks as opposed to making a “full payment” in a month. And instead of the usual 12 payments per annum, the homeowner would have made 13 payments overall. This payment scheme recommended by most top performing mortgage brokers in Toronto is beneficial to a homeowner in such a way that they are able to accelerate their payoff schedule by as much as 7 years.

Doing 12 Payments In a Year

In a typical mortgage program, a homeowner is necessitated to commit to making monthly regular payments. This will render him to complete 12 payments in a year, provided he is faithfully committed to making his monthly payment obligation. He would need to make a total of 360 payments to complete full payment on the loan, that is if he opted for a 30 year fixed rate mortgage term.

All payments you make will be divided into two parts, one part is for the interest portion and another part of the principal portion. The amount of money allocated for the principal portion will go to the loan that you have with, say a bank. It will significantly reduce the amount of your loan balance.

The remaining principal and interest balance on your mortgage payment will shift as your loan gradually moves closer and closer towards its maturity. There was a time before when a huge percentage of the mortgage payment is allotted mainly for the interest while the remaining portion would be used to settle the balance.

Unknown to many of us, this explains the reason why even after 5 or 6 years or so of making payment for your mortgage, it remains barely paid up. Technically speaking, this schedule format is responsible for that. The major repayment is referred to as the amortization.

Biweekly Schedule: Doing 13 Counts of Payment in a Year

The primary intention why a biweekly mortgage program came into being is to cut short a homeowner’s amortization schedule. As opposed to the usual 12 payments in a year for a mortgage, the biweekly mortgage program requires a homeowner to make 13 payments instead. And it is done by observing and keeping a fortnightly payment schedule, hence the name.

A certain amount of interest will have to be paid on a yearly basis when using a biweekly mortgage plan. Usually, it is covered in the first 12 months of payment made. And as for the 13th month, it will have to go somewhere. Even though it will be applied to your remaining principal, which is the amount of money that you still owe to the banking institution.

With the prevailing mortgage rates that we have today, loan borrowers can easily shorten their loan amounts by as much as 4 years if they will opt to have a biweekly mortgage payment plan.

Is Biweekly Mortgage Program Suitable for You, too?

If you do the basic math, the computation about it, you will easily understand that biweekly mortgage will work and definitely does not hold empty promises to borrowers. But there are several few reasons why homeowners may hold themselves back from availing themselves a biweekly mortgage plan.

One of the most common reasons why homebuyers opt not to enroll themselves in a biweekly mortgage plan offered by, say, a banking institution, and to have a self-managed biweekly mortgage payment instead is because they know that they will get far better results as opposed to a bank-managed biweekly mortgage payment schedule.

To give you an idea how you can go about in doing a self-manage of your biweekly mortgage payment, you can start by just going about your regular monthly mortgage payment first, but try adding an extra 1/12 of the amount of your regular monthly mortgage payment. Say for instance that you are making at least $1200 monthly mortgage payment. So what you will do on your next cycle is to add $100 more to your payment, thus, making it $1300, At the end of each year, or at the lapse of the 12th month after,you would have made a month of an over payment which is considered your 13th payment month.Banks will not apply your 13th-month pay until such time that the year is complete already. This will go in contrast to your own self-managed biweekly mortgage payment which applies 12 times annually.

You are still bound to get the very same results, though, when you opt for a self-managed biweekly mortgage payment but with the complete absence of a financial obligation to, say, a bank. For better understanding, let us say for instance that the Christmas holidays are coming soon and you want to deliberately skip making an extra payment for your mortgage for the months of November and December, then you can do so simply because you are not bound by a contract. Then, maybe a few months after, when your finances are back on track again you may double-up the payments you are making so as to cover the extra payments that you’ve skipped.

If you are still in doubt that a bank managed biweekly mortgage plan is bringing along a lot of risks to you as the loan borrower, you may want to verify from your lender if they have any charges for you when you are opting to apply for a biweekly mortgage plan with them. There are a number of banking institutions that does this, and that definitely is going to be a waste of your money since it has no return benefits to you in the end.

Should your bank or private lender proactively offered you a biweekly mortgage plan, you can just simply decline that offer for good. You are doing yourself a favor that way. I highly recommend that you initiate a biweekly payment of your mortgage on your own.

Why I Would Discourage You from Biweekly Mortgage

The main purpose of a biweekly mortgage program is to help redeem you from your loaned amount and to get you closer to your loan’s paid off date. In short, it is designed to help you bypass the drudgery of paying your loan in a long term by increasing your frequency of payment schedule. Hence, it provides significant help in building up your equity.

Although biweekly mortgage, by its design, structure, and purpose, is good and intended to benefit the homeowner or the loan borrower but it seems to serve this purpose only when it is not managed or under the shadow of your bank or private lender. Changes on it are bound to happen in the absence of a contract.

Now exactly, what do I mean by this?

If you have an existing property loan and expressed your desire to have it set up for a biweekly mortgage instead, your bank or private lender may have you pay the set fee for that particular conversion. Furthermore, your bank may also even charge you for the automatic transfer of funds twice a month from your savings or checking account with them. All I mean is why would you settle for this kind of biweekly mortgage set up from your bank when you can do it on your own, without any fees.

Another disadvantage when signing up for a biweekly mortgage with a bank or private lender is that you are obligated to pay up every other week. You are not allowed to skip since you are under a contract. If you do, you run the risk of getting penalized by them or you will be charged an extra fee for skipping a payment whereas if you are just doing your biweekly payments on your own initiative, you may skip once or twice if you need to use the funds somewhere else and would not have to worry about anything. Then, after some time, you can pay for the skipped months so you will still have completed 13 months at the lapse of 1 year for your mortgage. Should you require more information about biweekly mortgage, you may consult your trusted mortgage specialist Toronto for this.

Commercial Mortgage Broker Advice: Be on a Biweekly Mortgage Payment

If your commercial mortgage broker tells you that with a biweekly mortgage payment, you can settle your mortgage obligations fast, would you consider it?

Yes, common sense will tell you that you will benefit from this payment schedule. It is a given, by doing simple math, that a bi-weekly or fortnightly mortgage payment will indeed help you finish paying your mortgage faster. However, you also need to be aware that there are some stumbling blocks along the way that might keep you from doing so. The secret to getting past these perceived barriers lies in knowing everything there is to know about completing your mortgage payments fast.

Many people today are not even aware that banks can sometimes become very scheming too in the sense that they can actually hinder you from completing your mortgage payments early and if they are getting a hunch that you are trying to get ahead of your mortgage payments, they can inconspicuous ways to keep you out of focus. This can happen to anyone of us, and the sad part is we are not even aware of it. One common mistake that people have is that they never try to avoid the ‘trap’ that their banks have put up against them. Your best defense against this, though, is nothing less than knowing exactly the proper way of doing your bi-weekly payments.

You should start by making regular payments of your mortgage on the same day, every 2nd week of every month. If you will just remain faithful to this routine and keep up with it, you would be surprised that by year end, you would have paid more than half of what you are supposed to pay with whatever monthly payment schedule you are trying to observe.

And since not all the months have 31 days, what you can do instead is to map out your bi-weekly schedule so you’d know in advance when you are supposed to make payments again. It’s as simple as that. If you are still not convinced, you may want to make some calculations on your own. It will help if you can see that by end of the year, if you make use of a bi-weekly payment method, it will show you have paid more than you are supposed to. You should now see that even if there are possible risks of a spike in interest rates at any given time of a year, it can still work.

To give you an idea on how you can go about this method seamlessly, you need a closer look into your entire mortgage and determine the total amount that you will owe for that year alone. Next, you have to cut in half the amount of money that you owe for each month. Then multiply it by 26, and once done you would see that you would have paid $2000 more as opposed to your original annual payment schedule.

In a given situation when you are encountering financial difficulty, missing out once or twice in your payment schedule would not hurt you significantly. If that happens you can just make up for the lost opportunity by just settling your next schedule and doubling it up when your finances have become more stable. Finding the right commercial mortgage broker, though, is crucial here because such a professional has all the needed expertise in this field. He can help you understand the implication of every action you may have in mind.

Effective Ways to Getting a Mortgage Fast

Getting a mortgage is undoubtedly a big financial commitment to make. And naturally, every one of us, who are in the right property-buying age, would want to have nothing less but the best deal there is.  Fortunately, there are a number of things you can do if you want to improve your chances of securing a mortgage in a snap. The following pointers that I have here can be used as a guide. 

Improve Your Credit Rating First

Before you embark on making an investment in the property market, make sure that you have an excellent credit score. Your credit score will have a direct impact on how much interest rate you are going to be given when you apply for a mortgage. The higher your credit score is, the better because you will be given a lower interest rate for your mortgage.

If in case that you have a not so stellar credit score, don’t lose heart because you can still improve it. One technique that I suggest you make is to discard unused credit cards and settle any pending credits that you have. It might take at least 6 months before this will reflect on your record. Additionally, while trying to improve your rating, don’t attempt to apply for any loan as it will influence your mortgage application interest rate. As much as possible you should be debt-free when applying for a mortgage. 

Manage Your Finances Well

It is very crucial that you handle your finances really well. Prior to the approval of your mortgage application, anticipate if you can realistically afford the monthly repayments for it without running the risk of compromising your other monthly financial obligations such as utility bills. 


Avoid Switching Jobs

One common mistake that most people commit is that they hop from one job to another. When private lenders and financial institutions conduct a background investigation, part of their protocol is to verify your work history. They will favor mortgage applicants who were able to stick to their jobs for a longer period of time, as opposed to those who has the habit of switching from one employment to another. Job hopping gives them a not so good impression of you, and may adversely influence your chances of getting lower interest rate for your mortgage. 


Prepare  to Present Your Proof of Income

Most of the private lenders and even the financial institutions, as part of their requirements, will necessitate you to furnish for them a proof your annual income. This will give them a good idea if you are in a good financial standing and if you can definitely afford repayment for your monthly mortgage. What comes with the annual income are your tax deductions, too. 


Seek Professional Assistance from a Mortgage Broker

The main function of a mortgage broker is to help people who are in your situation. Their industry expertise makes them more than just qualified to give you give you good guidance on how to go about your mortgage application process, seamlessly and hassle-free. People who go on to seek help from a reputable mortgage broker often find very satisfying results with respect to the mortgage rates that they were given. 

With respect to how much money you’d be able to borrow, your mortgage broker will address that for you. He will calculate the amount of money that you can possibly borrow based upon the requirements that you were able to furnish such as credit rating, annual salary, etc. 

The pointers given above are based upon the collective experience that I and my friends have. We are presenting them here in an effort to help out someone who has no background at all in home-buying and property acquisition process. 

Unfortunately, there are no shortcuts in getting a mortgage fast, but you can save yourself from frustration and unmet expectations by heeding the pointers I’ve given here.

The Advantages of Using a Mortgage Calculator Ontario

The truth is not a lot of people today in Canada can afford to buy themselves a house and settle it in one payment, yet they are unaware that a mortgage calculator Ontario is a good solution and will be most useful to them. Of course, you can always opt to apply for a loan or borrow money from a financial institution but naturally, comes with that is your capability to make monthly repayments. Is this a concern that you have right now? If so then it is indeed high time that you familiarize yourself and start using a mortgage calculator. “What is a mortgage calculator?”, you may ask. It is an indispensable tool that is widely used across the globe that helps people determine their monthly mortgage costs.

For me, I don’t find it unusual to see an average person having a certain level of difficulty when it comes to calculating their monthly mortgages. Hence, a calculating system designed specifically for this purpose would be most helpful to them. Imagine, this calculator will take into account what is seemingly a technical jargon to an average person such as hazard insurance, taxes, and extra payments. It will definitely spare them from a lot of unnecessary confusion and hassle.

When using a mortgage calculator, it is crucial that you have a good level of understanding of as many technical terms as you can since you may likely encounter one or two of them when  calculating your monthly mortgage. Another thing, there are usually two types of insurance included when calculating a mortgage, and they are important in the sense that they also take into account both the lender and the borrower of the funds. I’d say that they are critically important for the simple reason that they shield and protect both the lender and the borrower from unforeseen circumstances. While the PMI insurance covers and protects the money lender, the borrower receives protection instead by way of the homeowner insurance. It shields him from any major or minor damage that the object in question may have.

As for the PMI insurance, you will only be necessitated to pay for it when your loan balance reaches 78% and below. After which, making further payments is no longer necessary. Another  exceptional feature that you will like about a mortgage calculator is that it is also able to calculate your HOA fees (short for homeowner’s fee). Homeowners are necessitated to pay for such fees for various purposes. Like for instance, for the maintenance of whatever shared facility they may have on offer such as elevators, swimming pools, fitness center, etc These fees, their amount, will greatly vary from building to building and more so if it is from neighborhood to neighborhood. Therefore, the amount is not going to be comparable to any other else.

Did you know that In a mortgage, the effective interest rate is one of its crucial expenses, besides extra fees and insurances? This is the total amount of money that is due to the lender, which can be a financial institution like your bank, for their act of giving your requested funds. When it comes to the interest, you have the full liberty as to how frequent you will want to make payments for it. And that will also determine how fast you’d be able to settle your loaned amount. You can choose from weekly, bi-weekly or monthly settlements. Well, I suggest that you make payments as often as possible so as to minimize your incurred interest fees, too. Your goal here should be to pay off your interest rate faster, and for that, I highly recommend that you take advantage of a mortgage calculator Toronto, for this  purpose.

How to Get the Best Second Mortgage Rates

In many cases of home loans, the second mortgage rates are almost always higher than interest rates for first mortgages. This is because second mortgage loans carry more risk for the lender as they are placed second in priority on the property’s title in case of non-payment. This means that if there is failure to pay any payment arrangement that the borrower makes is first applied on the first mortgage before any amount can be paid out to the second loan.

A second mortgage is an additional loan made against the same property used for the first mortgage. The amount of the second mortgage loan is usually computed based on the equity of the home.  A home’s equity is equivalent to the appraised value of the home minus how much mortgage is still left to be paid off.

Getting a second mortgage is one of the best way for homeowners to obtain additional funds without needing to refinance their first mortgage. It can be very useful to help finance other major projects such as:

•          To consolidate high interest debt and pay it off into one low interest rate every month

•          To finance a home renovation or home improvement

•          To use as capital to start a small business

•          To help pay for college education

Second mortgage loans are very popular in the private mortgage market, but not everyone can easily qualify. Private lenders are careful of the risks they are taking in these types of loans so they take extra steps to evaluate a borrower’s personal and financial situation.

Lenders will look at four areas to determine if a borrower is eligible:

1.         How much equity do you have? The standard rule is that you must have over 20% of equity in your home to qualify for a second loan mortgage. However, the higher the amount of equity your property has, the better your chances of getting approved for a second loan.

2.         How much income do you earn? Lenders will look at how much income you earn and how much debt you are paying off to determine if you are able to make monthly payments on your second mortgage without exceeding your Total Debt Service Ratio (TDS). They’ll also look at your employment status and the length of time you’ve been with your employer, to make certain you have a dependable source of income and can make steady payments on your loan.

3.         How much is your credit score? Your credit score is needed to determine the interest rate for the second mortgage. Generally, a high credit score is given a lower interest rate. If you have a low credit score, you can still be eligible for a second mortgage but will likely be charged a higher interest rate.

4.         Is your property secure? This makes a second mortgage a secure loan because lenders will take your property as security in case you default on payments. Make sure there are no issues tied to your property as the smallest detail could cost you the loan altogether.

Most homeowners find the best second mortgage rates with the help of a mortgage broker. Working with a mortgage broker can help make the whole process of getting a second mortgage stress free for you. He can help you shop around with different lenders and get you the best possible rates that meet your needs.

What Other Costs are included in the Best Mortgage Rates in Toronto?

In Toronto, the best mortgage rates often do not include other expenses that are involved in buying a home or property. There are additional costs to consider that can amount to thousands of dollars and will significantly affect the final price of the transaction.

Here are some of the extra costs to keep in mind in addition to the mortgage amount: 

Property valuation fee

Lenders charge this fee to find out what your property is worth. They need to do this so they can be sure that if you fail to repay your loan, they can repossess the property and get back the amount of the loan when it is sold. The cost of property valuation is determined by the lender and the purchase price of the home.

Home inspection fees

A home inspection is an evaluation of the home’s overall structure and systems. It is considered a safety measure to reduce a purchaser’s risk when buying a home, so many people stipulate it as a requirement in their Offer to Purchase.

Property survey

This survey will determine property boundaries, land measurements, any easements and encroachments on the property that may affect legal title. This is a lender’s requirement for them to obtain a clear lender's title insurance policy covering the face value of the mortgage.
Legal fees and related expenses

These fees are professional services involved in drafting the title deed, preparing the mortgage, and conducting the various searches, mostly for obtaining and clearing the title to the land or property. Make sure your lawyer enumerates all specifics that are related to this expense and not just merely indicate them as legal fees. Also scrutinize your Offer to Purchase with your lawyer or notary before signing on the dotted line.

GST/HST where applicable

GST/HST are taxes on purchases of property. Some properties are sales tax exempt, but generally these sales taxes are charged on new homes and not on resale purchases. The amount charged will vary depending on provinces and can be paid either through your mortgage or with cash on closing day.

Title insurance

Some lenders will require this as safety measure in the event there is some discrepancy on the property’s title, such as encroachment issues, title fraud, or undischarged mortgages that would potentially create a legal problem. In some cases, lenders will ask for this as an alternative to a property survey.

Insurance costs

If you pay down payment that is less than 20% of the purchase price of the home, your mortgage will be considered a high ratio mortgage and is required by law to be covered by mortgage default insurance. You can pay this upfront before closing or choose to add this to the principal amount of your mortgage, which in this case will incur additional interest that is at the same rate charged on the principal amount of your mortgage loan.

Some lenders will also request for your mortgage to be covered by life/disability insurance to guarantee that you are able to meet payments in the event that you or your co-borrower become disabled or die during the term of the mortgage.

Home insurance

Lenders usually make this a mortgage requirement. It protects your home and all it contains in the event of a fire, theft, storm, liability claim, or other unforeseen event. In case there is damage to your home or property, your insurer, not you, will pick up the tab.

Many Canadians when they are searching for the best mortgage rates in Toronto often make the mistake of failing to take into account all of these extra costs and fees that’s included in the housing loan. It really pays to enlist the help of a mortgage specialist to help you identify the different costs that you might incur at each stage of the home buying process. With good research and good advice, you won’t likely encounter major hurdles in buying the home of your dreams.

Steps to Getting a Mortgage

When getting a mortgage, it’s recommend that you get pre-approved before you even start looking for your dream home.  The pre-approval process will help determine a specific amount that you can borrow at a certain interest rate based on your qualifications and personal credit rating.

Pre-qualification vs. Pre-approval

A mortgage pre-qualification is an informal discussion with your mortgage specialist where general questions will be asked about your income and personal finances and an estimate will be given of how much you can more or less afford as mortgage. No amount is final, no guarantees are made.

A pre-approval is more to your advantage because it provides a specific loan amount at a certain interest rate that is guaranteed for a particular time period such as 30 days or 90 days, depending on the lender.  Getting pre-approved means that the lender has actually checked your credit information and verified your documentation and deemed you “qualified” to be granted a mortgage loan.

Benefits of Getting Pre-approved

Getting pre-approval for a mortgage has several benefits to you:

1.       A guarantee on a certain interest rate for up to 120 days. In case interest rates go up within the specified time, the agreed rate on your pre-approved mortgage will not be affected. If the rates drop, then you will get the lower rate upon final approval.

2.       You know what your buying power is when searching for a home. This will help you set realistic expectations and consider houses that are only within your maximum budget. Also, being aware of a specific price range will put you in a better position to negotiate prices.

3.       You have a higher chance of closing the deal on the home you want to buy. Sellers are likely to deal with buyers who are pre-approved because it assures them that you can secure a mortgage and bid on the property.

4.       You will be able to calculate how much your mortgage payments and other costs will be. This will allow you to evaluate your budget and see if you can really afford to buy a house now or need additional time to save up some more.

Qualifying for a Mortgage

Your mortgage lender will take into consideration both your income and your debts during the process of pre-approval. They will use these formulas to determine the loan amount they can lend to you.

·         Gross Debt Service (GDS) ratio. The percentage of all required monthly housing costs (mortgage payments, property taxes, heat and 50% of condo fees, if applicable) divided by your gross income (income before deductions). Your GDS should be 32% or less to qualify for a mortgage.

·         Total Debt Service (TDS) ratio. The percentage of your gross income needed to pay all housing costs (GDS) plus all other debts, such as car payments, credit cards, alimony, and any loans. Industry standards for TDS shouldn’t be higher than 40%.

Documents and Requirements for Getting a Mortgage

Here is a list of documents and information that lenders will use to get you pre-approved for a mortgage:

·         Proof of Identification

·         Proof of income - If employed, salary and length of employment. If self-employed, minimum 2 year history of self-employed earnings is required. Proof of any additional income such as alimony or bonuses.

·         Good credit - Lenders will request a credit report from any one of the two credit reporting agencies in Canada, Equifax or Trans Union to check your credit score. A credit score above 680 usually guarantees better interest rates and terms.

·         Proof of assets to prove that you have funds for the down payment and closing costs, as well as cash reserves. This can be:

o   Bank statements

o   Investment account statements

o   Vehicles owned

o   Other property owned

·         Information on your liabilities: credit card balances, lines of credit, car loans, student loans

·         Name, address, telephone number of your solicitor/notary

It’s always a good idea to work with a broker when getting a mortgage. Mortgage Specialist Toronto have access to many different lenders and can negotiate the best rates on your behalf. They also have the industry knowledge to direct you to the right mortgage products on the market, and then support you through the application and settlement process.