Calling all house hunters! We have a question for you—have you calculated what your mortgage will be? It is all too common for buyers to start house hunting before they truly know what their mortgage payment will work out to each month. This leads to homeowners being in over their heads. We believe in being proactive, not reactive, so today we are walking you through the steps necessary to calculate your mortgage.

There are a number of factors contributing to your mortgage calculation. These include:

1. Which Type of mortgage you choose (fixed or variable)

2. When you are purchasing your new home

3. The current interest rates

The key one out of those three are the interest rates. Interest rates vary on a daily basis and it is always recommended to pay attention to the current rates and future trends so that you can get the best deal. One very useful tool is an interest rate calculator.

An effective interest rate calculator can be an invaluable tool for those considering the possibility of buying a home. It gives you a chance to input your specific financial information as well as the current interest rate and other mortgage specifics in order to produce the amount of the payments you will make. Because different types of mortgages offer different options and specifics, the amount of interest that is charged will vary from loan to loan.

It is always a good idea to examine the different options available before making your choice. By inputting your specific information, you are better able to compare and contrast the different types of loans as well as interest rates to help determine which the best option for you is. Being able to look at the financial possibilities and outcomes of each of the different loans available to you is the best way to figure out what type of loan will work.

The annual interest rate calculator can be used to break down the amount of interest paid on your mortgage on a yearly basis. This will help you determine the anticipated yearly costs.

Annual interest rate calculators can also help you see how much could be saved by paying off a mortgage at an earlier date.

Speaking to a Dominion Lending Centres mortgage professional is always a great way to learn more about what options you have and how to make the best choices. They will work with you from the very start of this process right till the very end. Our goal is to make it as easy on you as possible; while still getting you the sharpest rate out there! Contact us today to get started!

Geoff Lee

Dominion Lending Centres – Accredited Mortgage Professional
Geoff is part of DLC GLM Mortgage Group based in Vancouver, BC.

We are all familiar with the banks and local credit unions, but what are monoline lenders and why are they in the market?

Mono, meaning alone, single or one, these lenders simply provide a single yet refined service: to fulfill mortgage financing as requested. Banks and credit unions, on the other hand, offer an array of other products and services as well as mortgages.

The monoline lenders do not cross-sell you on chequing/savings account, RRSPs, RESPs, GICs or anything else. They don’t even have these products and services available.

Monolines are very reputable, and many have been around for decades. In fact, Canada’s second-largest mortgage lender through the broker channel is a monoline lender. Many of the monoline lenders source their funds from the big banks in Canada, as these banks are looking to diversify their portfolios and they ultimately seek to make money for their shareholders through alternative channels.

Monolines are sometimes referred to as security-backed investment lenders. All monolines secure their mortgages with back-end mortgage insurance provided by one of the three insurers in Canada.

Monoline lenders can only be accessed by mortgage brokers at the time of origination, refinance or renewal. Upon servicing the mortgage, you cannot by find them next to the gas station or at the local strip mall near your favorite coffee shop. Again, the mortgage can only be secured through a licensed mortgage broker, but once the loan completes you simply picking up your smartphone to call or send them an email with any servicing questions. There are no locations to walk into. This saves on overhead which in turn saves you money.

The major difference between a bank and monoline is the exit penalty structure for fixed mortgages. With a monoline lender the exit penalty is far lower. That is because the banks and monoline lenders calculate the Interest Rate Differential (IRD) penalty differently. The banks utilize a calculation called the posted-rate IRD and the monolines use an IRD calculation called unpublished rate.

In Canada, 60% (or 6 out of every 10) households break their existing 5-year fixed term at the 38 months. This leaves an average 22 months’ penalty against the outstanding balance. With the average mortgage in BC being $300,000, the penalty would amount to approximately $14,000 from a bank. The very same mortgage with a monoline lender would be $2,600. So, in this case the monoline exit penalty is $11,400 less.

Once clients hear about this difference, many are happy to get a mortgage from a company they have never heard of. But some clients want to stick with their existing bank or credit union to exercise their established relationship or to start fostering a new one. Some borrowers just elect to go with a different lender for diversification purposes. (This brings up a whole other topic of collateral charge mortgages, one that I will venture into with another blog post.)

There is a time and a place for banks, credit unions and monoline lenders. I am a prime example. I have recently switched from a large national monoline to a bank, simply for access to a different mortgage product for long-term planning purposes.

An independent mortgage broker can educate you about the many options offered by banks and credit unions vs monolines.

Michael Hallett

Dominion Lending Centres – Accredited Mortgage Professional
Michael is part of DLC Producers West Financial based in Coquitlam, BC.