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Mortgage Facts

Prepayment penalties A prepayment penalty is a fee that your lender may charge if: you make more than the allowed additional payments toward your mortgage you break your mortgage contract Your lenders may call the prepayment penalty a prepayment charge or breakage cost Prepayment penalties can cost thousands of dollars. It's important to know when they apply and how your lender calculates them. You can base your estimate of your prepayment penalty on factors such as: how much you want to prepay (or pay off early) how many months are left until the end of your term interest rates the method your lender uses to calculate the charge   When prepayment penalties apply If you have a closed mortgage, you'll need to pay a prepayment penalty if you: pay more than the amount your prepayment privileges allow borrow more money using home equity break your mortgage contract transfer your mortgage to another lender before the end of your term If you have an open mortgage, you can make a prepayment or lump-sum payment…

Breaking your mortgage contract Why break your mortgage contract You may find that your current mortgage terms and conditions no longer meet your needs. If you want to change the terms and conditions of your mortgage contract before the end of your term, you’ll need to renegotiate your mortgage contract. When you renegotiate your mortgage contract, you break your old mortgage contract and replace it with a new one. You may want to break your mortgage contract, if: interest rates have gone down your financial situation has changed you want to buy a new home and are planning on moving There may be some significant costs to breaking your mortgage contract. Read your mortgage contract or ask your lender if breaking your mortgage contact is an option. It is important to consider carefully all the costs and benefits involved. To qualify for a new mortgage at a bank, you will need to pass a mortgage “stress test”. You will need to prove you can make payments at a qualifying interest rate which will typically be higher…

Reverse Mortgages A reverse mortgage is a loan that allows you to get money from your home equity without having to sell your home. You may be able to borrow up to 55% of the current value of your home tax-free   Eligibility for a reverse mortgage To be eligible for a reverse mortgage, you must be: a homeowner at least 55 years old If you have a spouse, both of you must be at least 55 years old to be eligible.   Qualifying for a reverse mortgage To get a reverse mortgage, your lender will consider: your home equity where you live your age your home’s appraised value current interest rates In general, the older you are and the more home equity you have when you apply for a reverse mortgage, the bigger your loan will be Accessing money with a reverse mortgage You may choose to get the money from your loan through: ·         lump-sum payment ·         planned advances, giving you a regular income ·         a combination of both of these options You must first pay off any outstanding…

Paying Off Your Mortgage Faster Put extra money toward your mortgage To pay off your mortgage faster, consider putting extra money toward your mortgage. Your mortgage contract may allow you to: increase the amount of your regular payments make a lump-sum payment Your lender calls this a prepayment or prepayment privilege.   Increase your payments Increasing the amount of your regular payments, even by a small amount, may help you pay off your mortgage faster. You may only be able to increase your payments by a certain amount each year. The amount will be written in your mortgage contract. If you increase your payments by more than your prepayment privileges allow, you may have to pay a prepayment penalty. Normally, once you decide to increase your payments, you won’t be allowed to lower them until the end of the term. The term is the period of time that your mortgage agreement is in effect, including your interest rate and terms and conditions. Check your mortgage contract or contact your mortgage lender to find out…

Qualifying interest rates for mortgages To qualify for a mortgage loan at a bank, you will need to pass a “stress test”. You will need to prove you can afford payments at a qualifying interest rate which is typically higher than the actual rate in your mortgage contract.   Credit unions and other lenders that are not federally regulated do not need to use this mortgage stress test.   The qualifying interest rate your bank will use for the stress test depends on whether or not you need to get mortgage loan insurance.   If you need mortgage loan insurance, the bank must use the higher interest rate of either the Bank of Canada’s conventional five-year mortgage rate the interest rate you negotiate with your lender   If you don’t need mortgage loan insurance, the bank must use the higher interest rate of either: the Bank of Canada’s conventional five-year mortgage rate the interest rate you negotiate with your lender plus 2% For example, say you apply for a mortgage at a bank and that you have a down payment of 5%…

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