Semi-Monthly Accelerated… is it REALLY the same as bi-weekly accelerated?

Posted on by
Reply

One of the most important things that we discuss with our clients prior to closing is how they want their payments to come out of their account for their mortgage payment.  It’s always simple and easy when a client gets paid bi-weekly, however it’s a total different story when someone gets paid monthly or 1st & 15th. I can relate to this, as I too only get paid twice a month and have tried going bi-weekly “accelerated” in the past and with all honesty even though I always keep money in my account it still drove me crazy to not know when a mortgage payment is coming out of my account.

Needless to say everyone knows that paying a mortgage bi-weekly accelerated saves them not only thousands of dollars in interest (depending on the mortgage size) but also can reduce approx 5 years off of their mortgage. Most clients when shown the savings would like to save the money and years of interest but in reality more and more employers are paying twice a month.. Well we’ve got the answer for you…

Accelerated semi-monthly…. Let’s use a $200,000.00 mortgage at today’s 3.49% 5 year rate and a amortization of 35 years as an example, monthly this payment is $822.52, a bi-weekly payment would equal exactly HALF the monthly payment but paid every 2nd Friday (equals 26 payments per year) $411.26 bi-weekly, now it doesn’t take a rocket scientist to figure this out, but if you make this payment 26 times you’re effectively making an extra $822.52 towards your principal.

Now if you wanted to pay semi-monthly but wanted to accelerated the payments you would simply divide the $822.52 (paid extra) by 24 (semi-monthly payments) and add that to your already $411.26 payments making your payments a slightly higher $445.53 and you are effectively doing the EXACT same thing as bi-weekly accelerated, or pretty damn close.. look at the numbers..

  • 200K @ 3.49% over 35 years and payments of $411.26 bi-weekly accelerated = $179,443.97 at the end of 5 years.
  • 200K @ 3.49% over 35 years and payments of $445.53 semi –monthly = $179,447.37 at the end of 5 years.

o    Total difference equals $3.40 over 5 years.. .68 cents a year..

The best thing about this is that you are accomplishing the same things as the bi-weekly payer, however fitting it into your pay periods…

Any questions about this I welcome them and look forward to your comments.

Shaun Z

Look how far we’ve come!

Posted on by
Reply

As discussed in today’s Province Newspaper More homebuyers turn to mortgage brokers in arranging their new mortgages. The percentage is up significantly, according the Deloitte report, especially with first-time home buyer and younger Canadian’s.

I too find this, however even with repeat buyers I’m finding the need and want for “expert advice” is making home buyers search for a Mortgage Professional, rather than just walking themselves into their existing bank or mortgage lenders. Some recent clients that just bought their second home last week, took the advice of their Realtor and called me to discuss their new mortgage.. Within a few minutes of talking with them ( and on a weekend :) ) they quickly said “this time around we are looking at not only the rate but we want a MORE flexible mortgage” Their previous mortgage was with a major Bank and when they first shopped around for a mortgage they thought everything was about the best rate…. They quickly found out that although they got a very competitive mortgage rate the pre-payment options and flexibility restraints weren’t what they were looking for.

“This time around” they left it in my hands to not only find them the best mortgage rate, but also a mortgage that will allow them to make multiple lump sum payments and aggressively pay down their mortgage by increased mortgage payments. They too got a GREAT rate in their mortgage but why settle on just a rate when you can get a “full meal deal mortgage”.

As I like to say “the best mortgage is one that is PAID off” and the only way to do this is by knowing what your options are, budgeting for them and working on paying it down as you can afford.

When looking for your next mortgage I urge you to do what SO many more Canadians are doing and look to the advice of a Professional Mortgage Broker.

I look forward to your comments!

Shaun Z
Providing Mortgage Services for 20 years.

Are all mortgages created equally?

Posted on by
Reply

This is likely a great time to debate this subject as more and more lenders and brokers are competing for the borrowers business. Everyone is offering some amazing rates on fixed 5 year mortgages, however some lenders are trying to offer slightly better deals, but are they really better? for example Is it more important to take a mortgage with full, or better pre-payment options and pay a slightly higher rate or just take the lower rate and be more restricted in your pre-payments?

This question in best answered with the borrowers own thoughts of whats important to them in a mortgage. for example in my opinion the “BEST” mortgage is one that is paid off!

Considering this, pre-payment options are very important in helping doing this.  Let’s say that you can get a .10% lower rate (3.69%) with one lender but you are then limited to only paying down 10% of your original mortgage balance ONCE per year. Another lender is offering a slightly higher rate (3.79%) but you have the option of paying down 20% of the original mortgage balance, as many times as you wish, as long as the payments are a minimum of $100.00 and are on a payment date. That extra 10%, if the clients have it and the ability to pay down the mortgage in multiple payment would easily make up for the .10% difference in the rate.

Let’s consider another option, let’s say the lower rate lender only allows a 10% increase in payment and the higher rate lender offers a 25% increase in payments. If the clients took a longer amortization to allow them a little more flexibility and comfort level but later down the road realized that they wanted to increase their payments to reflect a shorter amortization, more towards the 25 year mark…. The lower interest lender while only allowing a 10% increase in payments would only reflect a 6 year reduction in amortization, thus allowing an original amortization of 35 years to decrease to 29 years.

The higher rate lender, offering 25% increase in payment options allows the original amortization to be reduced from 35 years to just over 23 years. This is close to 12 years of interest savings, 6 more years than the lower rate lender. How quickly do you think you could make up for the .10% difference in the rate over 5 years?????

Simple interest calculations show that on a 200K mortgage with a .10% difference is equal to $200 a year, and $1000.00 over 5 years. However, I believe that having the ability to pay down your mortgage faster, and the ability to save years and years of interest by increasing your payment is more important..

Remember when taking out your next mortgage to think about more than just the rate.

Your thoughts are appreciated and I look forward to hearing from you.

Shaun Zipursky.

What to expect when trying to mortgage AFTER you’ve gone into debt counseling.

Posted on by
2

Recently I had the opportunity to work with some first time home buyer’s that in the past have opted to go through the process of a debt counseling to re-structure and pay off their previous debt . Now some of you may ask “what is debt counseling. Well I talked about this exact subject on our weekly radio spot on Radio Real Estate

I spoke about some important things to consider before entering into Debt Counseling, as well as things to do after you have paid back your creditors and have finished the program.

Please click on the listen now link below to hear the spot. Radio Real Estate airs every Saturday at 10am on AM 650 .

Wow… Some big changes coming for mortgage consumers!

Posted on by
Reply

This morning Canada’s Finance Minister Jim flaherty tightened the rules and guidelines for Canadians when qualifying for a mortgage.

Under the new rules, starting April 19th, 2010 buyers will have to meet qualification standards for a 5 year term regardless of whether they take a shorter term or variable rate with a lower interest rate.

Home owners will now only be able to access their equity to a maximum of 90% of the value of their home for equity take out mortgages, rather than the 95% previously allowed. These sort of mortgage clients normally used funds for investments, debt consolidation and renovation uses.

Now, if you’re a future property investor you need to take note of this change. You are NOW required to put a minimum of 20% down for non owner-occupied purchases. This change, in my opinion has the ability to have the biggest impact in our market. When you consider where interest rates are (historical low) more and more clients are trying to get into the housing / revenue market.. the higher down payment will likely take a bite out of that market.

for the full press release please click on this link – full press realease

Thanks for reading, I’m looking forward to any and all comments.

What happens when your presale condo or home doesn’t appraise for the original purchase price?

Posted on by
2

Hello Everyone,

Today I’m discussing a recent client completion where the purchase property purchased over 2 years ago appraised for LESS than what they paid for the property when first purchased.. What happens? Well watch my video blog and find out!

I’m looking forward to your comments!

Get the Flash Player to see this content.

Rates are down.. but for how long?

Posted on by
Reply

If you’re reading this post it’s extremely important to not only listen to my link, but read the attached article from Canadian Business on-line below!

A few weeks ago I had the opportunity to speak about current mortgage rates and what a consumer can expect when taking out a mortgage today on our weekly radio spot on Radio Real Estate. I touched on how aggressively priced variable rate products are becoming, and that there is NOW a few BELOW prime options available, something we haven’t seen in quite some time. At the same time it was important to point out that not only are variable products attracting attention in today’s market. With rates being below 4% for all fixed terms up to 5 years a consumer choosing a mortgage in today’s market are guaranteed a GREAT deal.

Prepare for higher rates posted on Canadian Business on-line is a MUST read if taking out a mortgage currently, It clearly states that experts are expecting higher interest rates in the near future..

“Interest rates will rise – it’s just a question of time, it’s not a question of if. And if that’s the case, we have to make sure that when we borrow this money we can afford the same mortgage 200 or 300 basis points higher. That’s the key responsibility now of borrowers and lenders, to make sure that what we do, we do it in a prudent way.”
”But mortgage lenders agree that rates are nearing the bottom and will begin to rise again in 2010.”

I hope you enjoy this post and I welcome your comments!

Caution! Falling Rates…

Posted on by
2

Falling ratesRBC has led the way again… announcing yesterday that they have lowered their fixed interest rates by the following.

  • 5 year posted fell .15% to 5.59%
  • 1,2 & 3 year terms fell .20%

Shortly after this announcement, BMO matched the drop and TD decided ONLY match the 5 year drop. The other majors (CIBC & Scotia) haven’t announced anything yet, but they are likely to follow in some capacity.

There has been NO further changes on the variable rate side with one lender still offering prime minus .25% but NO majors have followed.

Finally.. A below prime option!

Posted on by
Reply

Merix Financial has just announced a below prime variable, the lowest nationally-advertised variable rate product in over a year.

Merix is now offering a 3 year variable rate at Prime – .25%. Now of course there are some conditions.

The Conditions:

  • Must close within 30 days.
  • Purchase and refinance only.
  • NO pre-approvals.
  • Owner occupied single family dwelling only.
  • Minimum credit score of 680
  • Minimum amortization of 10 years
  • Minimum mortgage amount of $100K

Will this force further lenders to lower their pricing on variable rates to match Merix, time will only tell, but we hope so.

Now Merix Financial is only available through approved mortgage originators, and yes Mortgage Centre City Wide are approved originators, so call us today for approval.

Extended Amortization

Posted on by
3

It seems that no matter who the client, what the clients financial situation, or how much money the client has to put down. Extended Amortization and it’s pros and cons are heavily discussed throughout the process in setting up a new mortgage in today’s market.

Back in Aug I had the opportunity to speak about this on our weekly radio spot on Radio Real Estate. I touched on why, in my opinion extended amortizations where first brought into Canada by CMHC and Genworth and why so many of today’s clients are taking them. Please click on the listen now link below to hear the spot. Radio Real Estate airs every Saturday at 11am on Talk 1410 .

I’m looking forward to your comments.