These are the different kinds of Insurance you can get to protect you in the case of  Loss of Life, Disability, Serious Illness and Unemployment. Your home may be the biggest purchase you make, and the equity you have in your home can be your major investment in your future. Consider getting some or all of the following types of insurance so that your mortgage payments are covered when necessary.

Mortgage Life Insurance

You want to protect your family should you die. One way to ensure they are able to stay in their home is to purchase a mortgage life insurance polity. With mortgage life insurance, if you die, the life insurance proceeds will be used to pay off the mortgage. Any remaining funds will then go with the rest of the estate to those named as your beneficiaries.

Mortgage Protection For Serious Illness and/or Disability

You can safeguard your family’s future and help ensure you don’t lose your home if you are seriously injured are disabled. Many policies offer full coverage after a brief waiting period. Typically, this type of insurance pays your mortgage for up to two years, giving you and your family the opportunity to plan long-term for your future.

One never knows when a devastating illness cancer, heart attack or other potentially life-threatening condition may strike. When you take out mortgage protection insurance against serious illness, a lump sum can often be provided up to 100% of the face value of the policy. These funds allow your family time to make plans long-term for their future.

Mortgage Protection for Unemployment

It may seem improbable to purchase a mortgage protection polity for unemployment. We don’t like to think about the possibility of losing a job, especially if we’re the primary provider for our family.

In today’s tenuous economic situation, unemployment can happen even in industries and with companies that have a long history of stability and job security. Purchase a policy for unemployment further protects your family from the possibility of losing your home when a job loss occurs.

Talk to a reputable insurance agent who has experience with the various kinds of mortgage insurance programs.

These are some of  the common terms you will see used when you are purchasing a home and getting a mortgage.  Learning what they mean will help you avoid misunderstandings and make better decisions.

Appraisal – A real estate appraisal is conducted by a certified professional who offers a written report that provides lenders justification for the price of a home to be purchased. The appraisal used the condition and situation of the home to be purchased and compares it to other recent home sales in the area. A formula is used to add or subtract value for particular amenities such as a new roof, garage, and age of home to ensure a fair comparison.

Closing costs – Closing costs vary depending upon the type and location of the home to be purchased. They are typically divided into two categories: non-recurring closing costs and prepaid or recurring closing costs. The non-recurring closing costs are paid only once, either separately or as part of the mortgage loan. Recurring or prepaid closing costs are paid repeatedly over time and include items such as property tax and homeowners insurance included as part of the mortgage payment.

Other closing costs – Other closing costs are anything that is not actually part of the mortgage instrument, such as appraiser fees, filing fees and other miscellaneous charges paid in order to finance your mortgage.

Amortization – Amortization refers to the term of your loan. In other words, it is the number of years it will take to pay back your mortgage loan.

Closed Mortgage – A closed mortgage is a mortgage loan that has a locked-in payment schedule. Also, the loan may not be prepaid or refinanced before the end of the original term of the loan.

Open Mortgage – An open mortgage allows for prepayment or renegotiation at any time without penalty. Typically, a home purchaser will pay a higher Interest rate for an open mortgage, but this mortgage offers more flexibility.

As always before purchasing a home, consult with a reputable and lisenced mortgage broker before making your buying decisions.  Call us at Averbach Mortgages for unbiased advice.

These are some of  the common terms you will see used when you are purchasing a home and getting a mortgage.  Learning what they mean will help you avoid misunderstandings and make better decisions.

Condo Maintenance Fee (Strata Fees)– Condo fees are generally charged monthly and usually include charges for maintenance of common areas, exterior maintenance and the cost of any amenities offered by the community. In British Columbia condominiums are referred to as “strata.” When calculating the maximum mortgage you can qualify for, it’s a good idea to add 50% of your condominium fee to your Gross Debt Service.

Goods and Services Tax (GST) – This is a tax charged on many new home purchases. Generally there is a 5% GST on new homes. In some provinces, a Harmonized (HST) and/or a Provincial Sales Tax (PST) are also applied either in place of or in addition to the GST on new home purchases. In some cases, low- to moderate- income home owners may be eligible for a rebate to partially offset these fees. We’re experts in understanding how any or all of these taxes apply to your situation. Call us for information on these taxes and all your mortgage needs.

Gross Debt Service Ratio (GDSR) – The Gross Debt Service Ratio is a comparison of the total cost of your monthly mortgage payment (including taxes and heating) to your gross (pre-tax) monthly income. Lenders recommend that these monthly payments not exceed 32%-35% of your gross monthly income.

Total Debt Service Ratio (TDSR) – The Total Debt Service Ratio considers all monthly debts, including mortgage payments, car loans, credit card debt, etc., and compares the total to your gross monthly income. Total monthly debt payments should not exceed 40%-44% of your monthly income.

As always before purchasing a home, consult with a reputable and lisenced mortgage broker before making your buying decisions.  Call us at Averbach Mortgages for unbiased advice.

Here’s a market update from our friends at Macdonald Realty; Simon Clayton, Kristie Marsden, Jason Low, Sandra Ens, Jason Feinstadt and Jenny Stephanson.

Welcome to the Macdonald Realty Market Update

Each month, we provide you with valuable information to help you in your decisions related to real estate. It is my intention that armed with this knowledge, you will be able to make a more informed choice of whether to buy, sell, or hold.

As many of you may know, the US housing market has been in a severe recession for the past several years. And while the Canadian housing market has recently seen a strong correction over the past 6 months, we will likely not see the same year-over-year pain as our neighbours to the south.

There are 3 main reasons for this:

(1) Government Tax Policies
(2) Loan Qualification Policies
(3) Bank Lending Policies

Government Tax Policies

The US Government has long had a policy of encouraging home-ownership. Government-sponsored entities Fanny Mae and Freddy Mac have been getting most of the headlines recently for agreeing to purchase mortgage loans that encouraged unsound lending. However, the US Government’s tax policy of allowing homeowners to deduct mortgage interest payments may be more significant, as it has encouraged Americans to maximize their debt-loads in order to minimize their tax burdens.

Canada, of course, has no mortgage tax break for homeowners, with interest payment deductions only applying to investment properties.

Loan Qualification Policies

The secondary mortgage market in the US allowed the originators of mortgages to pass on the mortgage notes to investors throughout the world. Because of this, lenders became incentivized to originate as many mortgages as possible, with little-to-no regard for risk. These perverse incentives led to ‘liar loans’ – where individuals would simply lie to their mortgage broker about their income or employment knowing that there would be no incentive to conduct a background check – and ‘NINJA loans’ – where mortgage brokers offered mortgages to individuals with No Income, No Job or Assets.

In Canada, the originators of loans (typically the Big Banks) tend to hold on to them. Because of this, the correct incentives are in place to ensure that only individuals who can afford the mortgage receive them.

Bank Lending Policies

Another unintended consequence of the secondary mortgage market in the US has been the creation of extensive Adjustable-Rate Mortgage products with attractive ‘teaser’ rates. These products allowed mortgage-holders to pay an unrealistically low rate for a period of time before ‘resetting’ to a much higher, unaffordable, rate.

In addition to this, loans in the US tend to be ‘non-recourse’ meaning that the only collateral that a lender would have on a mortgage is the house itself. In Canada, mortgages tend to be ‘full-recourse’, with many banks demanding personal guarantees. This difference has resulted in people walking away from their homes in the US at a much higher rate than in Canada.

In the end, the result of all of these policy differences means that Canada is fairly well-insulated from the carnage that is occurring south of the border. Interestingly, our conservative, low-competition banking environment may have saved our housing market from an even more painful downturn.

If you would like to learn more, please feel free to contact us by

calling us or clicking on one of the links below:

Simon Clayton 604-764-0711

Kristie Marsden 778-836-4389

Jason Low 604-790-5276

Sandra Ens 604-263-1911

Jenny Stephanson  604-675-6214

Jason Feinstadt  604-263-1911

MacDonald Realty 604-263-1911

These are some of  the common terms you will see used when you are purchasing a home and getting a mortgage.  Learning what they mean will help you avoid misunderstandings and make better decisions.

Purchase price – The purchase price is the actual price of the home not including the closing costs on the loan.

Total monthly payment – The total monthly payment is the total of principal, interest, taxes and heat that you will required to pay monthly. When the calculations are made to determine the loan amount you qualify for, the total monthly payment is the figure that will be used to be sure you can actually afford a particular home.

Monthly heat – Total monthly payment for your home’s heating bill. CMHC and Genworth currently only require heat costs to be incorporated into the monthly costs, however, there are other monthly costs associated with properly running a house such as hydro, water, telephone, cable, etc. You may wish to add these costs into the “Heat” category in order to properly calculate your monthly payment.

Cash on hand – Cash on hand refers to the total amount of money you will need to have available to cover the down payment and all closing costs (including fees) that are not financed as part of the loan.

Interest rate – The interest rate is the current interest rate you will pay on your mortgage loan.

Mortgage Loan Insurance Premium (non-refundable) Mortgage Loan Insurance allows homeowners to purchase a home with less than a 20% down payment. The Canadian Bank Act prohibits most federally-regulated lenders to offer a mortgage that is more than 80% of the home value without this insurance.

As always before purchasing a home, consult with a reputable and lisenced mortgage broker before making your buying decisions.  Call us at Averbach Mortgages for unbiased advice.

Open Mortgage vs. Closed Mortgage

Both open and closed mortgages offer benefits and advantages for home purchasers. Some of the factors to consider before deciding on one or the other include job stability, personal finances and family situation.

One of the main differences between open mortgage and closed mortgages are prepayment penalties. With a closed mortgage, if you want to pay off your balance early, you will incur prepayment penalties.

Open Mortgage

An open mortgage allows you to pay back the borrowed funds without notice or penalty. In other words, when you have extra cash, you may make extra principal payments. If you decide to sell, because of job relocation or change in family situation, you can pay off the loan without a prepayment penalty.

If you are self-employed, work on commission or otherwise don’t have a regular income, this option is worth serious consideration.

This is an ideal option if you desire flexibility either until you’re ready to lock in to a closed mortgage or don’t plan to remain in your home more than a few years.

Closed Mortgage

Closed mortgage have terms that are set for the original life of the loan. Often closed mortgage cannot be prepaid, even with a penalty unless the lender agrees. Most closed mortgages, though can be paid out but with a substantial prepayment penalty charge.

Borrowers can usually obtain a lower interest rate on a closed loan versus an open mortgage loan, there is less flexibility with this type of loan. That being said, if a closed mortgage is what you want, your broker will make sure that it has the most pre-payment options available. Some banks like RBC and CIBC only offer a 10% pre-payment privilege on their closed mortgages. However a broker can get you a closed, fixed rate mortgage with as much as 25% pre-payment privilege.

If your life and family situation are stable, a closed mortgage affords you the security of knowing how much your monthly payment will and for how long. If you don’t plan to move for the period of the loan, this may be a great option for you.

At Averbach Mortgages, we know about most of the best mortgages available in Canada. We’re experts and we can walk you through which type of mortgage is best for you.  Give us a call!