29 Sep

How to Purchase a 2nd Home with a 5% Down-Payment

General

Posted by: Adam Sale

How to Purchase a 2nd Home with a 5% Down-Payment

Did you know you can purchase a 2nd home or a vacation property with as little as a 5% down-payment?
That’s right, these mortgage products are available to home-owners, renters and first-time home buyers!

Why don’t more people take advantage of this program?

Lack of knowledge on insured mortgage programs. Of the 3 mortgage insurance companies, Sagen is the only company actively promoting their 2nd home mortgage program.
Most people are unaware this program exists, or are misinformed and were told mortgage insurance products are reserved only for first-time home buyers.

Is there a catch with this program?

There is no catch, but adhering to mortgage insurance policies can be stricter than banking policies.

For example, these are Sagen’s policy requirements:
  • Maximum amortization is 25-years
  • Maximum purchase price is $1 Million
  • Minimum down-payment: 5% on first $500k, 10% on $500k – $1 million
  • Income must be able to debt-service both homes (Mortgages, property taxes & heat)
  • Rental income is not allowed in the mortgage calculation

Affordability Strategies

To unlock additional mortgage qualifying room for this program it may be necessary to re-arrange outstanding debt obligations. Two well used strategies are:

  • Refinancing your current mortgage to take advantage of lower rates and/or extend the amortization
  • Consolidating car loans, credit cards or outstanding lines of credit into a single low-interest debt payment.

Want to learn more about this program?

Contact Adam Sale Mortgages @ 778-215-4121 or adamjsale@gmail.com

16 Sep

Niche Mortgage Solution Designed for the Equity Rich

General

Posted by: Adam Sale

There’s a new niche mortgage solution in British Columbia designed for the Equity Rich

Think of this mortgage solution as a reverse mortgage with no minimum age limit, no monthly payments & no income requirements!

Making this mortgage solution worth exploring for those who are interested in using their equity to purchase a 2nd home or investment property.

This mortgage solution is offered by Fraction Mortgage: https://www.fraction.com

How does it work?

Homeowners can unlock up to 40% of their home’s equity. 

The interest rate on the mortgage is determined by the change in the home value over a 5-year term.

For example, if the home’s value has appreciated by 20% over 5-years, then the interest rate charged to the loan will be 20%/5 years = 4%/yr

The lender restricts the minimum annual interest charged to 3.5%, and the maximum rate will never exceed 7.99%.

Who benefits from this mortgage solution?

– Purchasing an investment property/2nd home and don’t want monthly mortgage payments.

– Loss of income, but don’t qualify for a reverse mortgage due to age

– Retired parents gifting a down-payment to their children

This mortgage solution is designed for equity rich borrowers with no income wanting to unlock their property’s equity without paying Private Lender rates of 8.99%-12%.

For a visual calculator on how this mortgage solution operates please click the link: https://app.fraction.com/estimate

I welcome any questions regarding this mortgage product.

– Adam Sale Mortgages

8 Sep

Interest Rate Update: September 8, 2021

Latest News

Posted by: Adam Sale

Interest Rate Update

Bank of Canada announced today they will maintain the overnight interest rate at 0.25%.

This interest rate directly effects the Prime interest rate charged by lenders on Variable interest rate mortgages.

In addition to maintaining the overnight lending rate, the Bank of Canada will continue their Quantitative Easing program of purchasing $2bn worth of Government of Canada bonds per week.

This bond purchasing program is keeping the interest rates on the bonds suppressed which is producing ultra-low fixed mortgage interest rates.

 Bond Rates at end of day September 8:

Interpreting the chart:

Canada 2-yr: The low 2-yr bond rate means the discount received on Variable Interest mortgages will continue to stay around Prime – 1% on Conventional Mortgages & will be around prime – 1.15% on Insured Mortgages

Canada 3-Yr to Canada 5-Yr: Banks will continue to heavily market their 5-year fixed mortgage rates, but consumers will find cheaper mortgage rates in the 2, 3, & 4-year fixed mortgage durations. Borrowers should determine what their 5-year plan is before taking a 5-year fixed mortgage.

Canada 7-Yr & 10-Yr: Although the difference between the 5-yr and the 7-yr bonds are negligible, the difference in the mortgage rate is roughly a full percentage point at 2.94% & 3.30%. Borrowers should be aware of the high penalties involved with breaking a mortgage of this duration.

The next interest rate update is October 27, 2021.

 

1 Sep

Converting an Outstanding HELOC balance to a Mortgage to Help Purchase a 2nd Home

General

Posted by: Adam Sale

The Benefits of Converting an Outstanding HELOC balance to a Mortgage to Help Purchase a 2nd Home

Firstly, lets look at why someone may keep a large outstanding balance on their Home Equity Line of Credit:

  1. Low monthly debt burden, only interest payments are required, not interest & principal
  2. Flexibility to pay off the entire HELOC without incurring any pre-payment penalties.
  3. Ability to borrow and repay as needed

Carrying a balance on a HELOC will lower the monthly debt burden by requiring only interest payments to be made, but it will actually hinder ones mortgage qualifying amount, and here’s why:

  1. Banks calculate monthly payments for credit cards and unsecured lines of credit @ 3% of the outstanding balance. A $15,000 credit card balance will create a monthly payment of $450!
  2. Home Equity Lines of Credit with balances over $50,000 are calculated at the stress-test rate (5.25%) and amortized over 25-years. An outstanding HELOC balance of $150,000 creates a monthly mortgage payment of $893.88 on the mortgage application.

However, when the balance of a HELOC is converted into a mortgage, the actual mortgage payment is used in the qualifying calculation.

For example, a $150,000 HELOC balance converted into a variable mortgage @ 1.50% creates a monthly mortgage payment of $599.58, a difference of $294!

In this scenario, the borrower is paying off their debts AND qualifies for $50,000 more!