Mortgage Broker Calgary

A mortgage broker Calgary does not lend money or find homes for you. He sets you up with a suitable lender and negotiates the best mortgage for your personal situation.

A mortgage broker can help you if borrowing through a traditional bank or credit union is not an option, but he can also help you find the best mortgage that suits your needs when you do qualify with traditional institutions.

In many cases, a mortgage broker can arrange for better interest rates. Your bank is bound by its rules and regulations and is only able to offer you its own products.

A mortgage broker has access to many lenders, including private investors. This increases competition. The more lenders you have competing for your business, the more negotiating power you will have.

The best part is that you do not have to handle the negotiations yourself. Your broker works on your behalf. This takes a lot of pressure off of your shoulders. And since the broker works for you, he will work hard to do what is best for you.

The right mortgage is more than just getting the best rate, you need a mortgage structured to meet your needs.

Mortgage broker Calgary

The loan officer at your bank may have your best interest at heart, but he works for the bank. There is always a little voice in your head wondering if he is really doing what is best for you, or what is best for the bank. With a mortgage broker, there is no doubt. You can rest assured he wants what is best for you.

As with all loans, there is a lot of fine print involved with negotiating a mortgage. Make sure you understand all of the details before you sign anything.

Mortgage Broker Calgary: Types of Mortgages

When you approach a mortgage broker Calgary, you will be provided with several mortgage options. Since he is not limited by the products only one bank has to offer, you will have a better chance of getting a mortgage that meets your needs.

Mortgage Broker Calgary: First Mortgages

When you are buying a house, a first mortgage is what you are looking for. It is the first lien registered against the house you want to buy. In the event of a default, the lender holding the first mortgage has first dibs to the property.

Mortgage Broker Calgary: Second Mortgages

This is the second debt registered against the property. In most cases, you will not try to obtain a second mortgage right off the bat. Later, if you need money for home improvements or to consolidate debts, you may want to consider getting a second mortgage or borrowing against built up equity.

In some cases the seller may hold a second mortgage for you if you can not secure a large enough first mortgage to cover the cost of the property.

Mortgage Broker Calgary: Fixed Rate Mortgage

With a fixed mortgage, you are ensured the interest rates will remain the same over the term of your mortgage. A fixed mortgage can have a term from 6 months to 10 years. This means that if you plan to flip your house, you will want to choose a shorter term than a long one.

Mortgage broker Calgary

Most people choose this type of mortgage. Typically people choose a 5 year term. At the end of the term, the mortgage is available to be renewed for another term, or it can be paid off or transferred to another bank.

Mortgage Broker Calgary: Adjustable Rate Mortgage

An adjustable mortgage offers a lot of flexibility and is becoming more popular. This type is especially attractive when interest rates are on their way down. The Interest rate is based on the prime rate and can have either a discount off prime or a premium added to prime. This discount or premium has fluctuated significantly based on economic conditions but will be set at the beginning of the contracted term.

For example, if we set up an adjustable rate mortgage for a 5 year term with a discount of 0.15% off prime and the prime rate today is 3.0%, then our rate would be 2.85%. If the prime rate changed to 4% next month, then our rate would change to 3.85%. If the prime rate changes the next month to 3.5%, then our rate would change again to 3.35%. Our discount off prime would be the same for the whole 5 year term.

Some lenders will offer an initial larger discount on the rate. This extra discount (or incentive) could be for 3 months to 12 months at which time the rate will go back to the original contracted discount.

With an Adjustable Rate Mortgage, the payments will increase or decrease as the rate changes. With the example above, the mortgage payment would be different every month as our rate changed from 2.85% to 3.85% to 3.35%.

For an adjustable rate mortgage, the payment is based on the mortgage balance, the interest rate and the amortization. The payment changes to ensure that we pay off the mortgage within the pre-determined amortization.

Mortgage Broker Calgary: Variable Rate Mortgage

The variable rate mortgage is also becoming more popular today than the fixed rate mortgages. Life the adjustable rate mortgage, the interest rate will be set based on a discount or premium to the prime lending rate.

The main difference between the adjustable rate mortgage and the variable rate mortgage is the payment. When a variable rate mortgage is set up, the payment is determined at the beginning of the term.

The mortgage payments will then stay the same every month until the end of the term. This means that if the interest rates go up, then less of the payment is going toward the principle of the mortgage. When the interest rate goes down, then more of the payment is going toward the principle of the mortgage.

A Variable rate mortgage is great when the interest rates are falling. As the rates drop, the payments stay the same but more and more of the payment is applied directly to the principle. This reduces the length of time it takes to pay off the mortgage and reduces the over interest paid by the borrower!

If, on the other hand, interest rates are rising, the payments still stay the same. Less and less of the payment is being applied to the principle, the amortization is actually increasing and there could come a point that the payments aren’t even covering the minimum interest payments each month!

Most lenders that offer variable rate mortgages also set up a “Trigger Point”. A trigger point must be set up with this type of mortgage because there may come a point where the payment isn’t paying down any principle anymore. The bank likes you to pay some principle!

Each lender has their own trigger point at which time they will call the borrower and ask him to either make a lump sum payment or increase the mortgage payments so that enough principle is being paid again.

This can be an uncomfortable conversation! This type of mortgage is often fully convertible to a fized rate mortgage without penalty.

Mortgage Broker Calgary: Open Mortgages

An open mortgage is ideal if you have a large sum of money coming your way in the near future or you are planning to sell the house within a year. You have the flexibility to repay the entire mortgage at any time, without additional penalties.

Open mortgages are usually only available in short terms, such as 6 months or 1 year, and the interest rate is usually higher than that of a closed mortgage. Open mortgage are also available in variable or adjustable mortgages and the rates are also higher than closed variable or adjustable mortgages.

Closed Mortgages

With a closed mortgage you get the security of fixed payments for terms from 6 months up to 10 years. Interest rates are considerably lower than with an open mortgage, but there are penalties for early payoff. There are 2 types of penalties:

  1. 3 months interest
  2. Interest Rate Differential

Mortgage Broker Calgary: Interest Only Mortgage

In Canada, we generally only see Home Equity Lines of Credit available with interest only payments. Most other mortgages are amortized over a set time period (up to 30 years for a high ratio mortgage, and up to 40 years for a conventional mortgage)

A home equity line of credit offers flexibility to the borrower. He can set up a limit of the line of credit of 80% of the value of his home. The borrower can then use as much or as little of these available funds as he needs. Once the HELOC is set up, he doesn’t have to go back to the bank or lender to get approved to use the funds.

A HELOC is ideal under these situations:

  1. The borrower is self-employed and earns large lump sums of income irregularly throughout the year. A HELOC can help to even out cash flow.
  2. The borrower is an investor and buys and sells stuff and needs access to large amounts of cash for short periods of time
  3. The borrower is looking to increase his cash flow and wants to have the minimum payment, but the ability to pay off the funds under his own schedule.

This is not a good type of mortgage for most people, but if you know for sure you will be able to make higher payments in the future, you may qualify. This type of debt doesn't build any equity, since you are not paying off any of the principle.

There are so many things to think about when you apply for a mortgage. A mortgage broker Calgary can help you make sense of all your options and all of the different types of mortgages.

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