What is Refinance Mortgage?

What is a Refinance Mortgage mean for you? Refinancing is a strategy where homeowners replace their existing mortgage with a new one. This change typically comes with different terms. The goal is to secure better interest rates, adjust mortgage lengths, or access home equity as cash. What does it mean to refinance your mortgage & benefits? Refinancing offers significant advantages under the right circumstances. Homeowners can benefit in several ways: Lower Interest Rates: This is a key benefit. A lower interest rate than your current mortgage can lead to reduced monthly payments. This makes the mortgage more affordable, saving money over the loan's life. Reduced Loan Term: Refinancing can shorten your mortgage term. While this might increase monthly payments, it significantly reduces total interest paid. This leads to substantial long-term savings. Accessing Home Equity: Cash-out refinancing lets homeowners tap into their property's built-up equity. They can use this lump sum for home renovations, education, or paying off debts. Debt Consolidation: Refinancing can combine multiple debts into one loan. This is beneficial if the new mortgage has a lower interest rate than existing debts, reducing overall interest. Improved Cash Flow: Lower monthly payments through refinancing free up cash. This can be used for other expenses or investments, enhancing overall cash flow. What is refinance mortgage cons? Refinancing also has potential drawbacks: Closing Costs and Fees: Refinancing often involves fees like application and appraisal fees, legal fees, and prepayment penalties. These costs can be significant and should be weighed against potential savings. Longer Loan Term: Some refinancing options extend the loan term, potentially increasing total interest paid over the loan's life. Equity Reduction: Refinancing to access equity reduces the equity in your home. This could be a disadvantage if home values drop or if you plan to sell soon. Risks in Debt Consolidation: Refinancing for debt consolidation converts unsecured debt into secured debt. This increases the risk of losing your home if you default on the loan. Credit Score Impact: Refinancing involves a hard credit inquiry, temporarily lowering your credit score . Extending the loan term or increasing the loan amount could also impact your credit score. Calculating the Break-Even Point: It's vital to calculate when refinancing savings exceed its costs. If you plan to move or sell before this point, refinancing might not be beneficial. To make an informed decision, review our comprehensive Mortgage Refinancing Guide . Or, contact one of our Mortgage Brokers for a personalized plan to maximize savings potential.

What is a Non Arm's Length Transaction?

Understanding Non Arm's Length Transactions A non arm's length transaction in real estate refers to a situation where the buyer and seller have a pre-existing relationship. This can include familial ties, business partnerships, or close friendships. Such transactions are scrutinized due to the potential for unfair pricing or manipulation, differing significantly from arm's length transactions where parties act independently. Parties Involved In Canada, a non-arm's length person can be a family member related by blood, marriage, or adoption. This includes children, parents, siblings, spouses, and in-laws. In corporate terms, it involves entities under your control or within a related group controlling the corporation, ensuring a broad definition that captures various relationship dynamics. Non Arm's Length Transaction Implications Mortgage Considerations in Non Arm's Length Transactions Mortgage arrangements in non-arm's length transactions, particularly involving family members, may have unique considerations. The mortgage rates , down payment requirements, and approval processes could differ from standard arm's length transactions. It’s essential to consult with a mortgage professional to understand the nuances of financing such deals. Exceptions and Special Cases Gift transactions are an exception in non-arm's length dealings. Here, both the gifter and recipient consider the property's fair market value for tax purposes, which helps avoid double taxation. This streamlined approach simplifies gift transactions within family or business networks. Example of Gifted Equity A mother wishes to gift equity from her primary residence to a child. They sell their property in full to their child for a valued at $700,000. There is an existing mortgage on the property the child wishes to assume, or seek a new lender for a better rate . The balance is $400,000. Furthermore, they need an additional $300,000 to complete the full payment of $700,000. Upon approval of the new mortgage to cover the $700,000 balance, the bank requests an appraisal to determine fair market value . To the child's surprise, the appraiser determines the fair market value of the property to be $800,000. With the fair market value being $800k. The mother is gifting $100k in equity upon the sale. Which can be considered cash down for the childs mortgage approval. This shows a simple scenario where immediate family members can provide gifts, potentially tax free. The mother occupied her primary residence before selling, which was then transferred to their child and declared their primary residence. Beyond this simple example, one should not expect a non arm's length transaction to be tax free. Most scenarios require consulting a tax professional to determine tax implications Tax Implications Tax implications in a non-arm's length transaction are complex. Selling a property below its fair market value to a related individual is considered a sale at the fair market value for tax purposes. Buying above the fair market value also assumes acquisition at the fair market value. These rules are crucial for avoiding one-sided financial outcomes and double taxation issues. Spouse and Common-Law Partner Considerations Transferring property between spouses or common-law partners triggers an automatic "rollover." This means the transfer is tax-free, with the recipient assuming the property's original cost. This exception is particularly relevant in family law settlements, providing a tax-efficient method of property transfer. Importance of Professional Consultation The tax implications of non arm's length transactions are complicated and do not have a one-size-fits-all solution. Thus, it's important to consult with a lawyer or accountant to determine if a transaction is deemed non-arm's length and understand the associated financial and legal ramifications.

Master the Interest Rate Differential (IRD): How to Calculate IRD Penalty 3 different ways

[fusion_builder_container type="flex" hundred_percent="no" equal_height_columns="no" hide_on_mobile="small-visibility,medium-visibility,large-visibility" background_position="center center" background_repeat="no-repeat" fade="no" background_parallax="none" parallax_speed="0.3" video_aspect_ratio="16:9" video_loop="yes" video_mute="yes" border_style="solid"][fusion_builder_row][fusion_builder_column type="1_1" layout="1_1" background_position="left top" border_style="solid" border_position="all" spacing="yes" background_repeat="no-repeat" margin_top="0px" margin_bottom="0px" animation_speed="0.3" animation_direction="left" hide_on_mobile="small-visibility,medium-visibility,large-visibility" center_content="no" last="true" hover_type="none" first="true" background_blend_mode="overlay" min_height="" link=""][fusion_text hide_on_mobile="small-visibility,medium-visibility,large-visibility" sticky_display="normal,sticky" animation_direction="left" animation_speed="0.3" animation_delay="0"] The Mortgage IRD Interest Rate Differential Definition What is an Interest Rate Differential (IRD)? Interest Rate Differential, often abbreviated as IRD, is a crucial financial concept in banking and mortgage sectors. It represents the difference between the interest rate of an existing mortgage and the rate for a new term, playing a significant role when considering mortgage prepayment or refinancing . IRD Usage in Banking and Loans In banking, IRD is a key factor in determining penalties for early loan repayment, especially for mortgages. It helps banks estimate the interest revenue lost when a loan is paid off before its scheduled end date. IRD Penalty in Mortgage Agreements An IRD penalty is a charge levied by lenders when a borrower settles their mortgage earlier than the agreed term. This fee compensates for the potential interest income the lender loses. Understanding this penalty is crucial for making informed mortgage-related financial decisions. Practical Considerations and Strategies IRD's Impact on Refinancing Considering the potential IRD penalty is essential when thinking about refinancing . High IRD penalties can sometimes negate the financial advantages of refinancing at a lower interest rate. Always weigh the costs against the savings when exploring refinancing options. Strategies to Reduce or Avoid IRD Penalties To minimize or avoid IRD penalties, consider mortgages with flexible prepayment terms, plan the timing of your payments strategically, and discuss possible waivers or reductions with your lender. These methods require a good understanding of your mortgage agreement and prevailing market conditions. Considerations Before Breaking a Mortgage Early Before deciding to break your mortgage early, it's important to evaluate the IRD penalty against potential benefits from refinancing . Additionally, consider any changes in your financial situation and how they align with your long-term financial goals. In some cases, maintaining your current mortgage may be more beneficial than opting for a lower interest rate elsewhere. Simply put, if interest rates go up since you began your mortgage, your penalty will be smaller. Whereas If interest rates go down, your penalty will be larger. How to Calculate IRD Penalty Short Answer The IRD (Interest Rate Differential) penalty is generally calculated by the difference between your existing mortgage interest rate and the current rate for a new mortgage with a similar term. This amount is then multiplied by your remaining mortgage balance and term. For example, if your rate is 3.5%, the current rate is 2.5%, and you have $100,000 remaining with 3 years left, your IRD penalty would be approximately $3,000. IRD Penalty = (Your Mortgage Rate − Current Mortgage Rate) × Remaining Mortgage Balance × Remaining Term (in years or months). Pragmatic Answer How to Calculate IRD Penalty in Canada is much more complicated than that. Insights into the Process Calculating IRD penalties in Canadian mortgages can be complex due to the varied methods used by different banks. It’s crucial to understand these calculations to avoid unexpected costs when breaking your mortgage. The simple example above does not factor in the different methodologies lenders may use, which can significantly affect the penalty amount. Some common methods include using the Posted Rate, Discounted Rate, or True Contract Rate. Professional advice is paramount in navigating these complexities. Video Explanation on How to Calculate IRD Penalty [/fusion_text][fusion_youtube autoplay="false" mute="false" hide_on_mobile="small-visibility,medium-visibility,large-visibility" structured_data="off" id="K5ANOOH7RNs" alignment="center" video_facade="on" /][fusion_title title_type="text" marquee_direction="left" marquee_speed="15000" rotation_effect="bounceIn" display_time="1200" highlight_effect="circle" loop_animation="off" highlight_width="9" highlight_top_margin="0" rotation_text="" title_link="off" link_target="_self" content_align="center" size="2" text_shadow="no" text_shadow_blur="0" text_stroke="no" text_stroke_size="1" text_overflow="none" dimensions_medium="" dimensions_small="" gradient_font="no" gradient_start_color="" gradient_end_color="" gradient_start_position="0" gradient_end_position="100" gradient_type="linear" radial_direction="center center" linear_angle="180" style_type="default" animation_direction="left" animation_color="" animation_speed="0.3" animation_delay="0" hide_on_mobile="small-visibility,medium-visibility,large-visibility" sticky_display="normal,sticky" margin_top="20px"] Interest Rate Differential FAQ's [/fusion_title][fusion_accordion type="" inactive_icon="" active_icon="" margin_top="" margin_bottom="" hide_on_mobile="small-visibility,medium-visibility,large-visibility" class="" id="" boxed_mode="" border_size="1" border_color="" hue="" saturation="" lightness="" alpha="" hover_color="" background_color="" divider_line="" divider_hover_color="" divider_color="" padding_top="" padding_right="" padding_bottom="" padding_left="" title_tag="h3" fusion_font_family_title_font="" fusion_font_variant_title_font="" title_font_size="" title_line_height="" title_letter_spacing="" title_text_transform="" title_color="#1a80b6" icon_size="" icon_color="" icon_boxed_mode="" icon_box_color="" icon_alignment="" fusion_font_family_content_font="" fusion_font_variant_content_font="" content_font_size="" content_line_height="" content_letter_spacing="" content_text_transform="" content_color="var(--awb-color8)" toggle_hover_accent_color="" toggle_active_accent_color="" parent_dynamic_content=""][fusion_toggle title="Do lenders calculate the IRD penalty differently?" open="no"] Surprisingly, yes! Banks and lenders in Canada will use one of the following methods. How to Calculate IRD Penalty: Posted Rate Method This calculation based on the difference between the posted rate at the start of your mortgage and the current posted rate advertised on their website. How Does the Posted Rate Method Affect IRD Calculation? Under the posted rate method, the calculation can result in a higher penalty as it uses the bank's standard rates, which are often higher than the rates actually paid by borrowers. However, sometimes the posted rate can actually be a competitive rate at the time of breaking the mortgage. It depends on the lender, and how they advertise those posted rates. How to Calculate IRD Penalty: Discounted Rate Method IRD This is typically the most expensive interest rate differential calculation method. It considers the discounted rate you received initially when you accepted the mortgage, compared to the current Non-discounted rate. This creates a massive differential penalty difference. Essentially, some bank justifies this calculation by making it appear that you "should have" paid more interest, but they offered a discount at time of funding. Which banks use the Discounted Rate Method? Most big banks in Canada use the Discount Rate method to charge you an IRD penalty. Why? Because they can, even though confidence in the big 5 banks is dwindling . How to Calculate IRD Penalty: True Contract Rate Method This method is by all means the best way to calculate IRD penalties. It is based on the actual rate specified in your mortgage contract compared to the current rate for a similar term . How Accurate is the True Contract Rate Method? The true contract rate method is often seen as more precise and fair, as it reflects the actual rate you agreed upon. It compares this rate with the current rate for a similar mortgage term. There are several Mortgage Finance Companies and Lenders who use this fair method. Professional guidance in calculating IRD penalties. Due to the complexity and variability in lenders' calculation methods, a professional mortgage broker can provide accurate calculations and insights into the specific terms of your contract, ensuring you get a precise estimate of the IRD penalty. How to Calculate IRD Penalty using a Mortgage Broker Mortgage brokers are knowledgeable about the various calculation methods used by different banks and can interpret these in the context of your specific mortgage contract, providing clarity and accurate estimates. [/fusion_toggle][fusion_toggle title="Is an Interest Rate Differential calculator accurate?" open="no" class="" id="" fusion_font_family_title_font="" fusion_font_variant_title_font="" title_font_size="" title_line_height="" title_letter_spacing="" title_text_transform="" title_color="#1a80b6" hue="" saturation="" lightness="" alpha="" fusion_font_family_content_font="" fusion_font_variant_content_font="" content_font_size="" content_line_height="" content_letter_spacing="" content_text_transform="" content_color="var(--awb-color8)"] There are many online resources for interest rate differential calculators, including your current lender who may have this tool on their website to help you determine your penalty. However, you must use these tools with caution. It is essentially impossible to determine an exact interest rate differential calculation unless you are breaking the mortgage ird as of today. The Uncertainty of Future Interest Rates An Interest Rate Differential IRD Calculator can give you an estimate of your penalty for breaking your mortgage. However, it's important to note that predicting future Canadian Mortgage Rates and the differential of them is uncertain because it depends on when you actually break your mortgage and the interest rates at that time. We recommend using your specific banks tool to determine mortgage penalty calculator to get it as accurate as possible. Working with a lender who uses a true contract rate IRD calculation rather than relying on riskier formulas like posted rate or discount rate IRD can potentially save you thousands of dollars. Contact Pragmatic Mortgag e today and we can make sure you are working with the right lender or help you navigate how to calculate IRD penalty. [/fusion_toggle][/fusion_accordion][/fusion_builder_column][/fusion_builder_row][/fusion_builder_container]

Renting Vs Buying. What is right for me?

[fusion_builder_container hundred_percent="no" hundred_percent_height="no" hundred_percent_height_scroll="no" hundred_percent_height_center_content="yes" equal_height_columns="no" hide_on_mobile="small-visibility,medium-visibility,large-visibility" background_position="center center" background_repeat="no-repeat" fade="no" background_parallax="none" enable_mobile="no" parallax_speed="0.3" video_aspect_ratio="16:9" video_loop="yes" video_mute="yes" border_style="solid" type="flex"][fusion_builder_row][fusion_builder_column type="1_1" layout="1_1" align_self="auto" content_layout="column" align_content="flex-start" content_wrap="wrap" center_content="no" target="_self" hide_on_mobile="small-visibility,medium-visibility,large-visibility" sticky_display="normal,sticky" order_medium="0" order_small="0" hover_type="none" border_style="solid" box_shadow="no" box_shadow_blur="0" box_shadow_spread="0" background_type="single" gradient_start_position="0" gradient_end_position="100" gradient_type="linear" radial_direction="center center" linear_angle="180" background_position="left top" background_repeat="no-repeat" background_blend_mode="none" animation_direction="left" animation_speed="0.3" filter_type="regular" filter_hue="0" filter_saturation="100" filter_brightness="100" filter_contrast="100" filter_invert="0" filter_sepia="0" filter_opacity="100" filter_blur="0" filter_hue_hover="0" filter_saturation_hover="100" filter_brightness_hover="100" filter_contrast_hover="100" filter_invert_hover="0" filter_sepia_hover="0" filter_opacity_hover="100" filter_blur_hover="0" first="true" last="true" border_position="all" min_height="" link=""][fusion_separator style_type="none" flex_grow="0" alignment="center" hide_on_mobile="small-visibility,medium-visibility,large-visibility" sticky_display="normal,sticky" top_margin="10px" bottom_margin="10px" /][/fusion_builder_column][fusion_builder_column type="1_1" layout="1_2" center_content="no" target="_self" hide_on_mobile="small-visibility,medium-visibility,large-visibility" background_position="left top" background_repeat="no-repeat" hover_type="none" border_style="solid" border_position="all" animation_direction="left" animation_speed="0.3" last="true" border_sizes_top="0" border_sizes_bottom="0" border_sizes_left="0" border_sizes_right="0" first="true" background_blend_mode="overlay" min_height="" link=""][fusion_text rule_style="default" hide_on_mobile="small-visibility,medium-visibility,large-visibility" sticky_display="normal,sticky" animation_direction="left" animation_speed="0.3"] Renting vs Buying. Can we equate apples and oranges? I love the viewpoints on this topic. And have always found it so interesting that people think comparing apples to oranges is ever going to work. It shows there is no silver bullet in this world to make smart financial decisions. Yet, what should we factor into renting vs buying the place we call home? This article is not an exhaustive list of pros and cons. But rather there key elements that we must define ourselves in making the decision. Marketability (Location) Peoples definition of “investing”. Lifestyle I stumbled across an interesting social post this week with someone claiming the math to own a house actually cost them over $161k in the long run, rather than generating equity, or profit; to be more clear. Thus, rather than argue with the numbers presented in the image below. I am going to work with the numbers to attempt an unbiased viewpoint on the cost, and investment of home ownership. (Don't forget I am a Mortgage Broker , take that with a grain of salt.) [caption id="attachment_4246" align="alignleft" width="600"] Renting VS Buying Skewed numbers to favour the renter. | Kelowna Mortgage Broker[/caption] Location and Marketability factor in Renting Vs Buying. First of all, I am curious where these figures came from (Town? City? Country? ). Is this a house comparable in Beaverdell British Columbia where no one wants to live, or is it on the corner of Grandview and Nainamo downtown Vancouver? Marketability and location is crucial in determining if you can A) Afford to own. and B) It makes sense to own. A market could be so overpriced, it is difficult to even qualify for a mortgage . Or, the market could be so small, it would tough to sell the asset. Thus, owning the home you live in within a region of growth is key to is being a better choice. Renting VS Buying Kelowna BC Example. A close person I know purchased a house in Rutland area in the late 90’s for $165,900. ( People thought they were insane!) In 2008 before the recession, they sold it for $480,000. The value of that property dropped to $375,000 overnight in 2009. It didn’t rebound until 2014. Even then, let’s pretend he kept that property for the entire 25 year mortgage he original planned to pay off (selling it today in 2021.. 21 years later). BC Assessment shows that property currently assessed at $545,000: Click here to see the property. True sellable value in todays market is likely 590-620k. Maybe even more, the neighbouring property directly across the street I just assisted the homeowner in refinancing to do renovations and the appraisal came out at $650,000. Thus, my estimates are beyond conservative. But let’s pretend it’s only worth 545k (let's give these renters a competitive edge here so they feel like they are winning). A few factors I could argue in some of numbers show in the social post above: Assuming they lived in it for the entire 25 years. Using this math on this post. In the Kelowna area the 158$ a month property taxes are a low estimate, but let’s go with it given the 25 year spread on inflation, and add $25,000 of taxes for Kelowna area just to make home ownership look even worse. Total Spent = $439,695 + $25,000 + $65,900 (original price difference compared to example above) = $530,595 - 545,000 = $14,405 “profit” according to this post comparison of expenses to own a home. Sounds pathetic, but what have we forgotten in this Renting vs Buying comparison? Their mortgage payment at 95% value of the property in 1990 was $156k ($8295 cash down). Interest rates in the 90’s were 7%. Renewing their mortgage every 5 years, rates only went down since, currently at 1.4% today. Lets assume an average here of 4.2% on each 5 year renewal: Click here to see the calculations. The calculator above shows an initial investment of $8,295. And the long term investment of $96,224.90 in principle paid. With an interest cost of $156,000. Interestingly very close to your $222,361 “total mortgage payments” in the comparable social post. But what are we forgetting here? Their initial investment was $8295. Using “other peoples A.K.A. the bank's” money to grow that investment. Arguably the investment didn’t grow much if he only came out with $14,505 profit when selling at the end. They didn’t lose his $96,224.90 in principle he paid down over 25 years. He got that back when he sold. Something renters will never see. Rental history cost. I can not speak for the Kootenays, Beaverdell. Alberta now the entire planet for that matter. But I can speak for the Okanagan when I say: People want to live where they want to live. And when the marketability is strong…. Rental costs are high. I have also yet to meet more than a handful of people in my life who have lived in one property for longer than 5 years. (Including home owners, but I’ll come back to that shortly). Many home owners in Kelowna buy and sell frequently because of spikes in investment value. Sadly forcing tenants to find a new place to live, paying todays new current market rents instead of the 1.4% increase mandated by the province. Can a renter truly equate their 25 year cost of living the same way a home owner could? Thus, you have a homeowner here who: A) Lived in a house they owned for the entire 25 years (we all know that doesn’t happen). With a monthly mortgage payment on average of $840.75 a month. OR B) He moved out of the property after 5 years, but HELD the property for 25 years as a rental property. To rent this property out in todays market is $1400 for the basement suite, and $2000 for the upstairs 3 bedroom unit. Minimum. I hear renters all the time talk about how it’s cheaper to rent in other parts of the world. Perhaps it is. Yet I find these social posts similar to above also do not accurately factoring in true costs a renter has. They assume extremely low rental cost, with zero risk of rate hikes. The true cost of renting when getting kicked out every few years never seems to be a factor. It's easy to know what something costs now, and turn a blind eye to what costs will be later when you are thinking monthly. The money renters put into decorating their rental. Or God forbid, renovating it with their own money! (I see this all the time, why would you do that?) It would be interesting to see what the maintenance expense of $315 monthly in the above example truly equated too when you factor in items renters will also pay for based on lifestyle and creature comforts. The cost of contents insurance, ($60 a month). Maybe these are not an issue in the Kootenay's, or other parts of Canada (Maybe being a strong word). But if people are still paying $840 a month in rent for a 5 bedroom house in Rutland area in Kelowna in 2021. I waive the white flag. Renting VS Buying | Should owning a home be considered "investing". Note also, my sale value was almost $80,000 less than true market value on this property today. One could argue we are in an overpriced bubble again similar to 2008. But this begs the question. Why does that matter? In 10 years from now, the correction will continue. Taking that initial investment of $8300 (cash down), plus 96,224.90 principle paid over 21 years, plus $14,405 profit when selling, minus shelter costs (which were clearly flawed not including the real costs of renting beyond just the rental payment) plus the $80,000 difference in todays true value = $198929.9 in total equity growth using $8300 21 year ago. According this calculator, that is a 5% annual return on cash down and principle spread payments over that 21 years: Click here to view the return data. Nothing to sniff at, but what ones who will continue to forget to add in this equation is the true cost of Renting, the inflation of those rental payments, and the cost associated with having to move frequently and pay exorbitantly higher rental costs when relocating frequently. Lifestyle plays a role in your decision. My 2 cents: I find it interesting that ones who are so dead set against owning a home, try to spell out mythical magical equations to not own their home and invest all that money into the stock market or some other investment vehicle. But my question is simple for these folks: Why would you not do both? If you can lock in the cost of living early in life through home ownership, combined with the fact the data proves having a mortgage payment is less than renting once the initial investment occurs and you view this purchase as long term. I will say it again; why would you not do both? People need to stop looking at their HOME as an investment opportunity. We need to look at home ownership as a SAVINGS VEHICLE. With the potential for long term growth, and FUTURE rental investment potential. Owning a home will never hurt you. People will continue to argue what is “cheaper”; renting vs buying. But it’s not even a debate that should exist. What people need to ask themselves is: Does my specific lifestyle and my long term goals make sense to own a property that I call home, which would potentially be a smart investment for the long term? I would love for home owners to knock on my door 25 years from now and tell me I was wrong. Saying "we should have just rented", but the majority will not do this because 1). They bought a house which locked in their cost of living 25 years earlier and 2). There will be 1..2.. maybe even 3 recessions between now and then. Yet, they sat patiently, waiting for the correction to occur. And made the decision based on what made sense at that time. This reasoning also doesn’t change with the stock market, or any sort of investment for that matter. If it is not your full time job or business working that market, it is foolish to play the game of short term day trading/or quick turn around investing. This is simply a coincidental profit, which real estate transactions will also fall prey too. History shows us that investments should never be viewed as a short term profit, unless you really know what you are doing, or the timing was simply great. Another argument I hear frequently is "But owning a house ties me down! I don’t want to live in it for 25 years, I want to be mobile and free!?" However, if someone can help me understand the difference between locking in their money in open markets (not accessible unless they liquidate IE. "cash out"), versus renting out a property when they don’t want to live in it. If long term home ownership is actually LESS than renting, again I will say it. Why couldn’t you do both? Renting VS Buying. What makes sense for you? Marketability. Where you live right now, is it cheaper renting vs buying? Or in the foreseeable future, Where you live right now if you decided to buy, would it save you money long term by locking in those lower costs today? Answer this question based on your understand of where you live. It is the only question you need to ask yourself. Don’t let anyone else convince you otherwise. You know what's is going on locally better than the world of social networks would. What is investing? People think investing is putting money away and watching compound interest magically grow it. That’s part of it, but investing in yourself and reducing your cost to live is also investing! Meaning; what decisions can I make today that will lock in saving me money for the future? And now? Lifestyle, do you care if you get kicked out of your rental property every 3 years? No? Great! Rent. Do you have a family and you feel a consistent routine with a comfort of locking in affordable payments while your little family grows in the area you call home? Or the thought of moving every 3 years makes you scream? Buy a house. And close your eyes and stop watching what the world is doing. Because in 25 years from now. It wont matter, and you wont regret it. The best part is we are all right, and we all wrong. It just depends when you decided to buy it, and then sell it, and what makes sense for you. Cool topic though, but what do I know, I just put people into debt for a living. [/fusion_text][/fusion_builder_column][/fusion_builder_row][/fusion_builder_container]

What are Mortgage Pre-Payment Privileges?

[fusion_builder_container hundred_percent="no" hundred_percent_height="no" hundred_percent_height_scroll="no" hundred_percent_height_center_content="yes" equal_height_columns="no" hide_on_mobile="small-visibility,medium-visibility,large-visibility" status="published" border_style="solid" gradient_start_position="0" gradient_end_position="100" gradient_type="linear" radial_direction="center center" linear_angle="180" background_position="center center" background_repeat="no-repeat" fade="no" background_parallax="none" enable_mobile="no" parallax_speed="0.3" background_blend_mode="none" video_aspect_ratio="16:9" video_loop="yes" video_mute="yes" filter_hue="0" filter_saturation="100" filter_brightness="100" filter_contrast="100" filter_invert="0" filter_sepia="0" filter_opacity="100" filter_blur="0" filter_hue_hover="0" filter_saturation_hover="100" filter_brightness_hover="100" filter_contrast_hover="100" filter_invert_hover="0" filter_sepia_hover="0" filter_opacity_hover="100" filter_blur_hover="0" type="flex"][fusion_builder_row][fusion_builder_column type="2_3" type="2_3" layout="2_3" center_content="no" target="_self" hide_on_mobile="small-visibility,medium-visibility,large-visibility" hover_type="none" border_style="solid" border_position="all" box_shadow="no" box_shadow_blur="0" box_shadow_spread="0" background_type="single" gradient_start_position="0" gradient_end_position="100" gradient_type="linear" radial_direction="center center" linear_angle="180" background_position="left top" background_repeat="no-repeat" background_blend_mode="none" animation_direction="left" animation_speed="0.3" filter_type="regular" filter_hue="0" filter_saturation="100" filter_brightness="100" filter_contrast="100" filter_invert="0" filter_sepia="0" filter_opacity="100" filter_blur="0" filter_hue_hover="0" filter_saturation_hover="100" filter_brightness_hover="100" filter_contrast_hover="100" filter_invert_hover="0" filter_sepia_hover="0" filter_opacity_hover="100" filter_blur_hover="0" last="false" border_sizes_top="0" border_sizes_bottom="0" border_sizes_left="0" border_sizes_right="0" first="true" min_height="" link=""][fusion_text rule_style="default" hide_on_mobile="small-visibility,medium-visibility,large-visibility" animation_direction="left" animation_speed="0.3"] Mortgage Pre-Payment Privileges allow you to pay down the principle of your mortgage penalty free! Every lender is different. Some lenders have "cheaper" rate options, but only allow 5-10% privilege annually. Standard pre-payment privileges range from 15-30% annually. This may not sound like an important feature if your goal is to simply pay the minimum monthly payments. But higher pre-payment privileges give you more flexibility if you ever need to break your mortgage term early (Selling, Refinancing , Renewing at lower rates etc.). [/fusion_text][/fusion_builder_column][fusion_builder_column type="1_3" type="1_3" layout="1_3" center_content="no" target="_self" hide_on_mobile="small-visibility,medium-visibility,large-visibility" hover_type="none" border_style="solid" border_position="all" box_shadow="no" box_shadow_blur="0" box_shadow_spread="0" background_type="single" gradient_start_position="0" gradient_end_position="100" gradient_type="linear" radial_direction="center center" linear_angle="180" background_position="left top" background_repeat="no-repeat" background_blend_mode="none" animation_direction="left" animation_speed="0.3" filter_type="regular" filter_hue="0" filter_saturation="100" filter_brightness="100" filter_contrast="100" filter_invert="0" filter_sepia="0" filter_opacity="100" filter_blur="0" filter_hue_hover="0" filter_saturation_hover="100" filter_brightness_hover="100" filter_contrast_hover="100" filter_invert_hover="0" filter_sepia_hover="0" filter_opacity_hover="100" filter_blur_hover="0" last="true" border_sizes_top="0" border_sizes_bottom="0" border_sizes_left="0" border_sizes_right="0" first="false" element_content="" min_height="" link=""][/fusion_builder_column][/fusion_builder_row][/fusion_builder_container]

What Makes Up Your Credit Score?

[fusion_builder_container admin_label="" hundred_percent="no" equal_height_columns="yes" menu_anchor="" hide_on_mobile="small-visibility,medium-visibility,large-visibility" class="" id="" background_color="" background_image="" background_position="center center" background_repeat="no-repeat" fade="no" background_parallax="none" enable_mobile="no" parallax_speed="0.3" video_mp4="" video_webm="" video_ogv="" video_url="" video_aspect_ratio="16:9" video_loop="yes" video_mute="yes" video_preview_image="" border_color="" border_style="solid" margin_top="" margin_bottom="" padding_top="" padding_right="" padding_bottom="" padding_left="" type="legacy" flex_align_items="stretch"][fusion_builder_row][fusion_builder_column type="1_1" layout="1_1" spacing="" center_content="yes" hover_type="none" link="" min_height="" hide_on_mobile="small-visibility,medium-visibility,large-visibility" class="" id="" background_color="" background_image="" background_position="left top" undefined="" background_repeat="no-repeat" border_color="" border_style="solid" border_position="all" padding_top="" padding_right="" padding_bottom="" padding_left="" margin_top="" margin_bottom="" animation_type="" animation_direction="left" animation_speed="0.3" animation_offset="" last="true" align_content="center" border_sizes_top="0" border_sizes_bottom="0" border_sizes_left="0" border_sizes_right="0" first="true"][fusion_separator style_type="none" hide_on_mobile="small-visibility,medium-visibility,large-visibility" class="" id="" sep_color="" top_margin="20px" bottom_margin="20px" border_size="" icon="" icon_circle="" icon_circle_color="" width="" alignment="center" /][fusion_text] What Makes Up Your Credit Score? The algorithm for calculating your Equifax / Transunion Credit Score can be rather mind boggling. However, it's actually quite simple what impacts your beacon, and why. Below are the 5 key components of what makes up your credit score: [/fusion_text][/fusion_builder_column][/fusion_builder_row][/fusion_builder_container][fusion_builder_container admin_label="" hundred_percent="no" equal_height_columns="no" menu_anchor="" hide_on_mobile="small-visibility,medium-visibility,large-visibility" class="" id="" background_color="" background_image="" background_position="center center" background_repeat="no-repeat" fade="no" background_parallax="none" enable_mobile="no" parallax_speed="0.3" video_mp4="" video_webm="" video_ogv="" video_url="" video_aspect_ratio="16:9" video_loop="yes" video_mute="yes" video_preview_image="" border_color="" border_style="solid" margin_top="" margin_bottom="" padding_top="" padding_right="" padding_bottom="" padding_left="" type="legacy"][fusion_builder_row][fusion_builder_column type="1_3" layout="1_3" spacing="" center_content="no" hover_type="none" link="" min_height="" hide_on_mobile="small-visibility,medium-visibility,large-visibility" class="" id="" background_color="" background_image="" background_position="left top" undefined="" background_repeat="no-repeat" border_color="" border_style="solid" border_position="all" padding_top="" padding_right="" padding_bottom="" padding_left="" margin_top="" margin_bottom="" animation_type="" animation_direction="left" animation_speed="0.3" animation_offset="" last="false" border_sizes_top="0" border_sizes_bottom="0" border_sizes_left="0" border_sizes_right="0" first="true" spacing_right=""][fusion_counters_circle animation_offset="" hide_on_mobile="small-visibility,medium-visibility,large-visibility" class="" id=""][fusion_counter_circle value="35" filledcolor="" unfilledcolor="" size="150" scales="no" countdown="no" speed="1500"]35%[/fusion_counter_circle][/fusion_counters_circle][/fusion_builder_column][fusion_builder_column type="2_3" layout="2_3" spacing="" center_content="no" hover_type="none" link="" min_height="" hide_on_mobile="small-visibility,medium-visibility,large-visibility" class="" id="" background_color="" background_image="" background_position="left top" undefined="" background_repeat="no-repeat" border_color="" border_style="solid" border_position="all" padding_top="" padding_right="" padding_bottom="" padding_left="" margin_top="" margin_bottom="" animation_type="" animation_direction="left" animation_speed="0.3" animation_offset="" last="true" border_sizes_top="0" border_sizes_bottom="0" border_sizes_left="0" border_sizes_right="0" first="false"][fusion_title margin_top="" margin_bottom="" hide_on_mobile="small-visibility,medium-visibility,large-visibility" class="" id="" size="1" content_align="left" style_type="default" sep_color=""] Payment History This makes up about 35% of your score, it's crucial to pay your bills on time. Even if you miss $5 dollar payment on a credit card, it can produce the same negative effect as missing a $500 payment! Don't skip minimum payment requirements. Always be aware of whom you owe money to—even if it's just a parking ticket; left too long and this could go to collections which will damage your score immensely! [/fusion_title][/fusion_builder_column][fusion_builder_column type="1_3" layout="1_3" spacing="" center_content="no" hover_type="none" link="" min_height="" hide_on_mobile="small-visibility,medium-visibility,large-visibility" class="" id="" background_color="" background_image="" background_position="left top" undefined="" background_repeat="no-repeat" border_color="" border_style="solid" border_position="all" padding_top="" padding_right="" padding_bottom="" padding_left="" margin_top="" margin_bottom="" animation_type="" animation_direction="left" animation_speed="0.3" animation_offset="" last="false" border_sizes_top="0" border_sizes_bottom="0" border_sizes_left="0" border_sizes_right="0" first="true" spacing_right=""][fusion_counters_circle animation_offset="" hide_on_mobile="small-visibility,medium-visibility,large-visibility" class="" id=""][fusion_counter_circle value="30" filledcolor="" unfilledcolor="" size="150" scales="no" countdown="no" speed="1500"]30%[/fusion_counter_circle][/fusion_counters_circle][/fusion_builder_column][fusion_builder_column type="2_3" layout="2_3" spacing="" center_content="no" hover_type="none" link="" min_height="" hide_on_mobile="small-visibility,medium-visibility,large-visibility" class="" id="" background_color="" background_image="" background_position="left top" undefined="" background_repeat="no-repeat" border_color="" border_style="solid" border_position="all" padding_top="" padding_right="" padding_bottom="" padding_left="" margin_top="" margin_bottom="" animation_type="" animation_direction="left" animation_speed="0.3" animation_offset="" last="true" border_sizes_top="0" border_sizes_bottom="0" border_sizes_left="0" border_sizes_right="0" first="false"][fusion_title margin_top="" margin_bottom="" hide_on_mobile="small-visibility,medium-visibility,large-visibility" class="" id="" size="1" content_align="left" style_type="default" sep_color=""] Utilization Ratio This is your level of indebtedness. This is how much of your total available credit you're using. Try to keep your balance below 35% of your credit limit, and don’t ever go over 70%, even if you pay it off every month. For example, if you have a $10,000 Credit Card, don't allow the limit to exceed $7,000. It is better to obtain a seperate credit card or increase your limit, then to go beyond the 70% utilization ratio. [/fusion_title][/fusion_builder_column][fusion_builder_column type="1_3" layout="1_3" spacing="" center_content="no" hover_type="none" link="" min_height="" hide_on_mobile="small-visibility,medium-visibility,large-visibility" class="" id="" background_color="" background_image="" background_position="left top" undefined="" background_repeat="no-repeat" border_color="" border_style="solid" border_position="all" padding_top="" padding_right="" padding_bottom="" padding_left="" margin_top="" margin_bottom="" animation_type="" animation_direction="left" animation_speed="0.3" animation_offset="" last="false" border_sizes_top="0" border_sizes_bottom="0" border_sizes_left="0" border_sizes_right="0" first="true" spacing_right=""][fusion_counters_circle animation_offset="" hide_on_mobile="small-visibility,medium-visibility,large-visibility" class="" id=""][fusion_counter_circle value="15" filledcolor="" unfilledcolor="" size="150" scales="no" countdown="no" speed="1500"]15%[/fusion_counter_circle][/fusion_counters_circle][/fusion_builder_column][fusion_builder_column type="2_3" layout="2_3" spacing="" center_content="no" hover_type="none" link="" min_height="" hide_on_mobile="small-visibility,medium-visibility,large-visibility" class="" id="" background_color="" background_image="" background_position="left top" undefined="" background_repeat="no-repeat" border_color="" border_style="solid" border_position="all" padding_top="" padding_right="" padding_bottom="" padding_left="" margin_top="" margin_bottom="" animation_type="" animation_direction="left" animation_speed="0.3" animation_offset="" last="true" border_sizes_top="0" border_sizes_bottom="0" border_sizes_left="0" border_sizes_right="0" first="false"][fusion_title margin_top="" margin_bottom="" hide_on_mobile="small-visibility,medium-visibility,large-visibility" class="" id="" size="1" content_align="left" style_type="default" sep_color=""] Length of Credit The longer you have an account open, the better. Think of it as a good track record. It shows you’re capable of managing credit. [/fusion_title][/fusion_builder_column][fusion_builder_column type="1_3" layout="1_3" spacing="" center_content="no" hover_type="none" link="" min_height="" hide_on_mobile="small-visibility,medium-visibility,large-visibility" class="" id="" background_color="" background_image="" background_position="left top" undefined="" background_repeat="no-repeat" border_color="" border_style="solid" border_position="all" padding_top="" padding_right="" padding_bottom="" padding_left="" margin_top="" margin_bottom="" animation_type="" animation_direction="left" animation_speed="0.3" animation_offset="" last="false" border_sizes_top="0" border_sizes_bottom="0" border_sizes_left="0" border_sizes_right="0" first="true" spacing_right=""][fusion_counters_circle animation_offset="" hide_on_mobile="small-visibility,medium-visibility,large-visibility" class="" id=""][fusion_counter_circle value="10" filledcolor="" unfilledcolor="" size="150" scales="no" countdown="no" speed="1500"]10%[/fusion_counter_circle][/fusion_counters_circle][/fusion_builder_column][fusion_builder_column type="2_3" layout="2_3" spacing="" center_content="no" hover_type="none" link="" min_height="" hide_on_mobile="small-visibility,medium-visibility,large-visibility" class="" id="" background_color="" background_image="" background_position="left top" undefined="" background_repeat="no-repeat" border_color="" border_style="solid" border_position="all" padding_top="" padding_right="" padding_bottom="" padding_left="" margin_top="" margin_bottom="" animation_type="" animation_direction="left" animation_speed="0.3" animation_offset="" last="true" border_sizes_top="0" border_sizes_bottom="0" border_sizes_left="0" border_sizes_right="0" first="false"][fusion_title margin_top="" margin_bottom="" hide_on_mobile="small-visibility,medium-visibility,large-visibility" class="" id="" size="1" content_align="left" style_type="default" sep_color=""] Types of Credit It's good to have a mix of different types of credit to show that you can manage your financials well. But use caution as to what types of credit you have. For example: A mortgage reporting on your credit history will produce a strong beacon score vs. a payday loan which can show you are a higher risk borrower. General rule of thumb: Have at least 2 credit cards, a line of credit, and a mortgage reporting for at least 2 years plus and you will be a beacon stud! Did you know?: 95% of banks require you to have at least 2 credit cards for a minimum of 2 years if you wish to qualify for "A" Credit rates! [/fusion_title][/fusion_builder_column][fusion_builder_column type="1_3" layout="1_3" spacing="" center_content="no" hover_type="none" link="" min_height="" hide_on_mobile="small-visibility,medium-visibility,large-visibility" class="" id="" background_color="" background_image="" background_position="left top" undefined="" background_repeat="no-repeat" border_color="" border_style="solid" border_position="all" padding_top="" padding_right="" padding_bottom="" padding_left="" margin_top="" margin_bottom="" animation_type="" animation_direction="left" animation_speed="0.3" animation_offset="" last="false" border_sizes_top="0" border_sizes_bottom="0" border_sizes_left="0" border_sizes_right="0" first="true" spacing_right=""][fusion_counters_circle animation_offset="" hide_on_mobile="small-visibility,medium-visibility,large-visibility" class="" id=""][fusion_counter_circle value="10" filledcolor="" unfilledcolor="" size="150" scales="no" countdown="no" speed="1500"]10%[/fusion_counter_circle][/fusion_counters_circle][/fusion_builder_column][fusion_builder_column type="2_3" layout="2_3" spacing="" center_content="no" hover_type="none" link="" min_height="" hide_on_mobile="small-visibility,medium-visibility,large-visibility" class="" id="" background_color="" background_image="" background_position="left top" undefined="" background_repeat="no-repeat" border_color="" border_style="solid" border_position="all" padding_top="" padding_right="" padding_bottom="" padding_left="" margin_top="" margin_bottom="" animation_type="" animation_direction="left" animation_speed="0.3" animation_offset="" last="true" border_sizes_top="0" border_sizes_bottom="0" border_sizes_left="0" border_sizes_right="0" first="false"][fusion_title margin_top="" margin_bottom="" hide_on_mobile="small-visibility,medium-visibility,large-visibility" class="" id="" size="1" content_align="left" style_type="default" sep_color=""] Inquiries These happen every time you agree to look to obtain credit. But there is a big difference between a Hard Inquiry and a Soft Inquiry. A hard inquiry happen's when you open a bank account, a credit card, an auto loan etc. A soft inquiry is when you search your credit history personally, or I help you obtain an report without "inquiring for credit". Note: Equifax and Transunion view credit inquiries for different types of credit within the similar time frame as a major red flag that will impact your score. If you are shopping for a mortgage, don't shop for a Hot Tub or Auto Loan during this period, it could affect your approval! [/fusion_title][/fusion_builder_column][fusion_builder_column type="1_1" layout="1_1" spacing="" center_content="yes" hover_type="none" link="" min_height="" hide_on_mobile="small-visibility,medium-visibility,large-visibility" class="" id="" background_color="" background_image="" background_position="left top" undefined="" background_repeat="no-repeat" border_color="" border_style="solid" border_position="all" padding_top="" padding_right="" padding_bottom="" padding_left="" margin_top="" margin_bottom="" animation_type="" animation_direction="left" animation_speed="0.3" animation_offset="" last="true" align_content="center" border_sizes_top="0" border_sizes_bottom="0" border_sizes_left="0" border_sizes_right="0" first="true"][fusion_imageframe image_id="1382|full" aspect_ratio="" custom_aspect_ratio="100" aspect_ratio_position="" skip_lazy_load="" lightbox="no" gallery_id="" lightbox_image="" lightbox_image_id="" alt="credit score" link="" linktarget="_self" hide_on_mobile="small-visibility,medium-visibility,large-visibility" sticky_display="normal,sticky" class="" id="" max_width="" sticky_max_width="" align_medium="none" align_small="none" align="none" mask="" custom_mask="" mask_size="" mask_custom_size="" mask_position="" mask_custom_position="" mask_repeat="" style_type="none" blur="" stylecolor="" hue="" saturation="" lightness="" alpha="" hover_type="none" margin_top_medium="" margin_right_medium="" margin_bottom_medium="" margin_left_medium="" margin_top_small="" margin_right_small="" margin_bottom_small="" margin_left_small="" margin_top="" margin_right="" margin_bottom="" margin_left="" bordersize="" bordercolor="" borderradius="" z_index="" caption_style="off" caption_align_medium="none" caption_align_small="none" caption_align="none" caption_title="" caption_text="" caption_title_tag="2" fusion_font_family_caption_title_font="" fusion_font_variant_caption_title_font="" caption_title_size="" caption_title_line_height="" caption_title_letter_spacing="" caption_title_transform="" caption_title_color="" caption_background_color="" fusion_font_family_caption_text_font="" fusion_font_variant_caption_text_font="" caption_text_size="" caption_text_line_height="" caption_text_letter_spacing="" caption_text_transform="" caption_text_color="" caption_border_color="" caption_overlay_color="" caption_margin_top="" caption_margin_right="" caption_margin_bottom="" caption_margin_left="" animation_type="" animation_direction="left" animation_speed="0.3" animation_offset="" filter_hue="0" filter_saturation="100" filter_brightness="100" filter_contrast="100" filter_invert="0" filter_sepia="0" filter_opacity="100" filter_blur="0" filter_hue_hover="0" filter_saturation_hover="100" filter_brightness_hover="100" filter_contrast_hover="100" filter_invert_hover="0" filter_sepia_hover="0" filter_opacity_hover="100" filter_blur_hover="0"]https://pragmatic.mortgage/wp-content/uploads/2022/11/pie-chart.jpg[/fusion_imageframe][/fusion_builder_column][/fusion_builder_row][/fusion_builder_container]

Bona Fide Sale Clause Mortgage & Reasons to avoid it.

[fusion_builder_container type="flex" hundred_percent="no" equal_height_columns="no" hide_on_mobile="small-visibility,medium-visibility,large-visibility" background_position="center center" background_repeat="no-repeat" fade="no" background_parallax="none" parallax_speed="0.3" video_aspect_ratio="16:9" video_loop="yes" video_mute="yes" border_style="solid"][fusion_builder_row][fusion_builder_column type="1_1" layout="1_1" background_position="left top" border_style="solid" border_position="all" spacing="yes" background_repeat="no-repeat" margin_top="0px" margin_bottom="0px" animation_speed="0.3" animation_direction="left" hide_on_mobile="small-visibility,medium-visibility,large-visibility" center_content="no" last="true" hover_type="none" background_blend_mode="overlay" first="true" min_height="" link=""][fusion_text columns="" column_min_width="" column_spacing="" rule_style="" rule_size="" rule_color="" hue="" saturation="" lightness="" alpha="" content_alignment_medium="" content_alignment_small="" content_alignment="" hide_on_mobile="small-visibility,medium-visibility,large-visibility" sticky_display="normal,sticky" class="" id="" margin_top="" margin_right="" margin_bottom="" margin_left="" fusion_font_family_text_font="" fusion_font_variant_text_font="" font_size="" line_height="" letter_spacing="" text_transform="" text_color="" animation_type="" animation_direction="left" animation_color="" animation_speed="0.3" animation_delay="0" animation_offset="" logics=""] What is a Bona Fide Sale Clause? A Bona Fide Sale Clause is a contractual restriction in mortgage agreements that essentially binds the borrower to the lender for the entire duration of the term, unless the property is sold in a non-arm's length transaction . This clause is typically found in low-frills , flex or limited mortgage products that offer attractively low interest rates. Pragmatic Answer: A Bona Fide Sale Clause in a mortgage binds the borrower to the lender for the term, only allowing exit of the mortgage if genuinely sold. Accepting this clause can be risky, and expensive. Bona Fide Sale Clause in Mortgages Decoded When exploring mortgage options, borrowers often encounter various clauses and terms, one of which is the Bona Fide Sale Clause. This clause, while offering lower interest rates, comes with restrictions that may have long-term financial implications. In this Frequently Asked Question , we delve into what it is, the reasons to be cautious about it, its potential dangers, and why lenders might include it in certain mortgage product offerings. Why Consider Avoiding Bona Fide Sale Clause Mortgages? Despite the lure of lower rates, there are compelling reasons to be wary of mortgages with a Bona Fide Sale Clause: Restrictive Early Discharge Terms: Exiting these mortgages before term-end, even through a property sale, can incur significantly higher IRD penalties than standard mortgage products. Legal Risks: Attempting to refinance , switch lenders, or secure lower rates can lead to legal complications, including breach of contract lawsuits. Financial Implications: The long-term costs and lack of flexibility could outweigh the initial savings from the lower interest rate. Potential Dangers of the Bona Fide Sales Clause The Bona Fide Sale Clause can pose several dangers to borrowers, especially those who might need financial flexibility. Reduced Flexibility Limits options for refinancing or renegotiating the mortgage. Life events can happen and when we least expect it. For example, what if you need access to equity in your current home for an emergency? A Bona Fide Sale Clause could force you to sell your home to obtain what you need. Financial Burden High penalties for early mortgage termination can be financially burdensome. Legal Complications: Risk of legal action by the lender for contract breach if attempting to refinance or switch lenders. Why would some Lenders include a Bona Fide Sale Clause? Lenders could include a Bona Fide Sales Clause in order to offset the lower rates provided within that specific product. Ensure Customer Retention: To keep customers for the full term, which is financially beneficial for the lender. Offset Low Rates: To compensate for the lower profit margins associated with offering lower interest rates. Minimize Early Discharge Costs: To reduce financial losses from early mortgage terminations. Frequently Asked Questions Can I negotiate the removal of a Bona Fide Sale Clause? Certain low-frills or low-featured mortgage products enforce the Bona Fide Sale Clause, which cannot be removed. However, most lenders offer higher quality mortgage products that do not enforce this Clause. Consulting a Mortgage Broker will ensure you are informed of all your options before making a final decision. What if I need to move before the mortgage term ends? If you need to move before the term ends and wish to keep your home, you might face high penalties or legal challenges, depending on the terms of your specific Bona Fide Sale Clause. Is a mortgage with a Bona Fide Sale Clause ever a good option? For some borrowers, particularly those who are certain they won't need to break the mortgage early, the lower interest rates might justify accepting this clause. It's essential to be realistic about future events that could impact your financial stability and future plans before making this big decision. What should I do if I'm considering a mortgage with this clause? Consult with a licensed mortgage broker to understand the full implications of the clause. They can help you weigh the pros and cons based on your personal and financial circumstances. Are mortgages available that do not force this clause? Yes, there are many mortgage products without this clause. Comparing different options with the help of a mortgage broker can help you find a mortgage that balances interest rates and flexibility. For more information and personalized advice on mortgage terms and products, consider consulting a professional mortgage broker . [/fusion_text][/fusion_builder_column][/fusion_builder_row][/fusion_builder_container]

Why don't I just borrow money for my renovation from a separate source?

[fusion_builder_container type="flex" hundred_percent="no" hundred_percent_height="no" min_height_medium="" min_height_small="" min_height="" hundred_percent_height_scroll="no" align_content="stretch" flex_align_items="flex-start" flex_justify_content="flex-start" flex_column_spacing="" hundred_percent_height_center_content="yes" equal_height_columns="no" container_tag="div" menu_anchor="" hide_on_mobile="small-visibility,medium-visibility,large-visibility" status="published" publish_date="" class="" id="" spacing_medium="" margin_top_medium="" margin_bottom_medium="" spacing_small="" margin_top_small="" margin_bottom_small="" margin_top="" margin_bottom="" padding_dimensions_medium="" padding_top_medium="" padding_right_medium="" padding_bottom_medium="" padding_left_medium="" padding_dimensions_small="" padding_top_small="" padding_right_small="" padding_bottom_small="" padding_left_small="" padding_top="" padding_right="" padding_bottom="" padding_left="" link_color="" 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type_medium="" type_small="" order_medium="0" order_small="0" dimension_spacing_medium="" dimension_spacing_small="" dimension_spacing="" dimension_margin_medium="" dimension_margin_small="" margin_top="" margin_bottom="" padding_medium="" padding_small="" padding_top="" padding_right="" padding_bottom="" padding_left="" hover_type="none" border_sizes="" border_color="" border_style="solid" border_radius="" box_shadow="no" dimension_box_shadow="" box_shadow_blur="0" box_shadow_spread="0" box_shadow_color="" box_shadow_style="" overflow="" background_type="single" gradient_start_color="" gradient_end_color="" gradient_start_position="0" gradient_end_position="100" gradient_type="linear" radial_direction="center center" linear_angle="180" background_color="" background_image="" background_image_id="" background_position="left top" background_repeat="no-repeat" background_blend_mode="none" render_logics="" filter_type="regular" filter_hue="0" filter_saturation="100" 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animation_type="" animation_direction="left" animation_speed="0.3" animation_offset=""] You can and more then welcome too. However the benefit of the Purchase Plus Improvements mortgage is you get an incredibly low mortgage rate PLUS a low renovation loan "All in One". You will not find any Home equity, line of credit, personal loan, or credit card that comes close to saving you this much interest. [/fusion_text][/fusion_builder_column][/fusion_builder_row][/fusion_builder_container]

Why is the purchase plus improvements mortgage rate lower then typical?

[fusion_builder_container type="flex" hundred_percent="no" hundred_percent_height="no" min_height_medium="" min_height_small="" min_height="" hundred_percent_height_scroll="no" align_content="stretch" flex_align_items="flex-start" flex_justify_content="flex-start" flex_column_spacing="" hundred_percent_height_center_content="yes" equal_height_columns="no" container_tag="div" menu_anchor="" hide_on_mobile="small-visibility,medium-visibility,large-visibility" status="published" publish_date="" class="" id="" spacing_medium="" margin_top_medium="" margin_bottom_medium="" spacing_small="" margin_top_small="" margin_bottom_small="" margin_top="" margin_bottom="" padding_dimensions_medium="" padding_top_medium="" padding_right_medium="" padding_bottom_medium="" padding_left_medium="" padding_dimensions_small="" padding_top_small="" padding_right_small="" padding_bottom_small="" padding_left_small="" padding_top="" padding_right="" padding_bottom="" padding_left="" link_color="" 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filter_brightness="100" filter_contrast="100" filter_invert="0" filter_sepia="0" filter_opacity="100" filter_blur="0" filter_hue_hover="0" filter_saturation_hover="100" filter_brightness_hover="100" filter_contrast_hover="100" filter_invert_hover="0" filter_sepia_hover="0" filter_opacity_hover="100" filter_blur_hover="0" animation_type="" animation_direction="left" animation_speed="0.3" animation_offset="" last="no" border_position="all"][fusion_text columns="" column_min_width="" column_spacing="" rule_style="default" rule_size="" rule_color="" hue="" saturation="" lightness="" alpha="" content_alignment_medium="" content_alignment_small="" content_alignment="" hide_on_mobile="small-visibility,medium-visibility,large-visibility" sticky_display="normal,sticky" class="" id="" margin_top="" margin_right="" margin_bottom="" margin_left="" fusion_font_family_text_font="" fusion_font_variant_text_font="" font_size="" line_height="" letter_spacing="" text_transform="none" text_color="" animation_type="" animation_direction="left" animation_speed="0.3" animation_offset=""] Good Question. Because of our buying power as a licensed Mortgage Broker through the super broker network Verico Finex Lending. We are offered very low interest rates. But on top of that, in order to earn your business for your next home improvement project; we take a large chunk of our commissions earned by the bank and "buy down" the interest rate! [/fusion_text][/fusion_builder_column][/fusion_builder_row][/fusion_builder_container]

Insured Vs Uninsured Mortgage Rates. Whats the Difference?

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sticky_devices="small-visibility,medium-visibility,large-visibility" sticky_background_color="" sticky_height="" sticky_offset="" sticky_transition_offset="0" scroll_offset="0" animation_type="" animation_direction="left" animation_speed="0.3" animation_offset="" filter_hue="0" filter_saturation="100" filter_brightness="100" filter_contrast="100" filter_invert="0" filter_sepia="0" filter_opacity="100" filter_blur="0" filter_hue_hover="0" filter_saturation_hover="100" filter_brightness_hover="100" filter_contrast_hover="100" filter_invert_hover="0" filter_sepia_hover="0" filter_opacity_hover="100" filter_blur_hover="0"][fusion_builder_row][fusion_builder_column type="1_1" layout="1_1" align_self="auto" content_layout="column" align_content="flex-start" valign_content="flex-start" content_wrap="wrap" spacing="" center_content="no" link="" target="_self" min_height="" hide_on_mobile="small-visibility,medium-visibility,large-visibility" sticky_display="normal,sticky" class="" id="" type_medium="" type_small="" order_medium="0" order_small="0" dimension_spacing_medium="" dimension_spacing_small="" dimension_spacing="" dimension_margin_medium="" dimension_margin_small="" margin_top="" margin_bottom="" padding_medium="" padding_small="" padding_top="" padding_right="" padding_bottom="" padding_left="" hover_type="none" border_sizes="" border_color="" border_style="solid" border_radius="" box_shadow="no" dimension_box_shadow="" box_shadow_blur="0" box_shadow_spread="0" box_shadow_color="" box_shadow_style="" background_type="single" gradient_start_color="" gradient_end_color="" gradient_start_position="0" gradient_end_position="100" gradient_type="linear" radial_direction="center center" linear_angle="180" background_color="" background_image="" background_image_id="" background_position="left top" background_repeat="no-repeat" background_blend_mode="none" render_logics="" filter_type="regular" filter_hue="0" filter_saturation="100" filter_brightness="100" filter_contrast="100" filter_invert="0" filter_sepia="0" filter_opacity="100" filter_blur="0" filter_hue_hover="0" filter_saturation_hover="100" filter_brightness_hover="100" filter_contrast_hover="100" filter_invert_hover="0" filter_sepia_hover="0" filter_opacity_hover="100" filter_blur_hover="0" animation_type="" animation_direction="left" animation_speed="0.3" animation_offset="" last="true" border_position="all" first="true"][fusion_separator style_type="none" hide_on_mobile="small-visibility,medium-visibility,large-visibility" sticky_display="normal,sticky" class="" id="" flex_grow="0" top_margin="20px" bottom_margin="20px" width="" alignment="center" border_size="" sep_color="" icon="" icon_size="" icon_color="" icon_circle="" icon_circle_color="" /][fusion_text columns="" column_min_width="" column_spacing="" rule_style="default" rule_size="" rule_color="" content_alignment_medium="" content_alignment_small="" content_alignment="" hide_on_mobile="small-visibility,medium-visibility,large-visibility" sticky_display="normal,sticky" class="" id="" margin_top="" margin_right="" margin_bottom="" margin_left="" font_size="" fusion_font_family_text_font="" fusion_font_variant_text_font="" line_height="" letter_spacing="" text_color="" animation_type="" animation_direction="left" animation_speed="0.3" animation_offset=""] Insured Vs Uninsured Mortgage Rates. Whats the Difference? The internet is a fantastic shopping tool. Allowing us to source the most competitive and affordable products needed. Yet, searching for a mortgage rate has never been so complicated with all the changes since 2017. Insured vs uninsured mortgage rates really make things confusing. We are here to help! Insured Mortgage Rates Insur ed mortgage rates (ending in a past tense "ed") means that the borrower is obligated to pay CMHC mortgage insurance. This typically occurs when cash down to purchase a property is less than 20% down. Interestingly, lenders love Insur ed Mortgages! The main reason being the borrower is paying the insurance to the government to insure the loan. This takes the risk off the lender completely, allowing them to sell the mortgage as a Mortgage Back Security, or on the bond market. Thus taking it "off the books". With less risk, and allowing the bank to free up "liquidity". Lenders will typically offer the lowest rates on insured mortgages given their funnel through sell off benefits. Insurable Mortgage Rates Insur able mortgage rates (ending in future potential "able") means that the borrow is not obligated to pay CMHC mortgage insurance, having more than 20% cash down. But the lender has the opportunity to "back-end insure" the mortgage with CMHC Canada. This means the lender can still gain all of the benefits of an insur ed mortgage, with one caveat: The lender is required to pay the insurance premium. Most lenders are willing to cover the cost of insuring the mortgage in the "back-end" so they can keep the mortgage off their balance sheet to allow re lending of more funds. However, because they have to cover the cost to achieve this, you will not usually see interest rates as competitive as insur ed mortgages so they can recoup the cost. Uninsured Mortgage Rates Non insurable mortgages mean exactly what the term implies: They do not qualify for being insur ed or insur able. This can happen for several reasons: The property value is over the insurable limit of 1 million. The property is a rental The property, or the borrower do not fit insurability requirements (to low of FICO score, property is a co-op.... etc.) If a mortgage does not fit insurability guidelines. The lender must then keep it on the balance sheet. This then leads more difficulty "reselling" the mortgage if they ever wanted to, along with higher risk on the lender in the event the borrower defaults (misses payments). Thus, Non-Insurable rates tend to be the highest in the market. Thankfully, Pragmatic Lending has made it extremely simple for you to figure out which rate you will get! Head over to our Canadian mortgage rates page and use our Rate Finder tool to source the best rate possible along with being the best product! Remember, the lowest interest rate you find online does not necessarily mean the best rate . We can't wait to guide you through the process of saving you thousands! Schedule a digital visit with us today . [/fusion_text][/fusion_builder_column][/fusion_builder_row][/fusion_builder_container]