The world of mortgage financing is an ever evolving world that offers so many variables and options that it’s often difficult to keep them straight. As we all know, there is a great deal more to a mortgage than just rate.
Over the past couple of years we have seen extended amortization being added and then taken away - at least the 40 year option for high-ratio mortgages.
Is a longer amortization fundamentally GOOD? It will add to the interest expense over time. However, borrowers may use any one of the several generous bonus or extra payment privileges available in all mortgages to accelerate their payments in future years and reduce their effective amortization to 25 years or even less. It will help in a period of high prices where incomes are perhaps not quite keeping pace. Borrowers can also take the lower payment and use those funds for other priority objectives: RRSP contributions, other investments or their insurance program.
Mortgage lenders review a file on five basic levels:
1. Income stability from employment or self employment
2. Credit history
3. Down payment on purchases; Equity on refinances
4. % of total family income for housing costs: principal, interest, property taxes, heat and a percentage of condo fees if applicable
5. % of total family income for total debt service: housing costs plus any required payments on loans, leases, lines of credit, credit cards, support or alimony
There are over 40 lenders in the marketplace. Different lenders place different weight on the factors above depending on which segment of the market they wish to appeal to.
To earn the absolute best rates, terms and conditions, offered by the Tier One prime lenders we must present a file confirming: good income stability; strong credit history; a minimum of 5% down payment from non borrowed sources; housing costs not exceeding 34% of gross income; and total debt service not exceeding 42% of gross income. There are exceptions to these guidelines in cases of very strong credit history represented by a Beacon Score 680 or higher.
Underwriting criteria and style varies from lender to lender. Consult with your mortgage professional to ensure that you are getting the best that the market has to offer.
We wish to recognize this article contribution by Brian Gentles AMP of the Home n Work Mortgages national network of mortgage consultants.
Under our ‘shared knowledge’ concept intellectual property is shared within our organization for all and recognition is given for the one making the contribution.’
Rebecca joins the team with over 20 years of business, investment and real estate experience. A true advocate for the consumer, Rebecca brings you unparalleled integrity with unbiased advice. Phone anytime and discover for yourself just how easy and enjoyable the mortgage process can be.
Serving Metro Vancouver Area
& Fraser Valley BC
Direct 604.614.2382
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rebeccaawram@homenwork.com
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