I have a mortgage with TD. The last mortgage payment day is April 1st 2011.
Q1: Which day is the start day of the new mortgage term? April 1 or May 1
Q2: When do I need to shop around?
Q3: If I still stay with TD, the new mortgage will become a collateral mortgage, is that right?
Q4: If the new mortgage is a collateral one, what benefit I can get? For example the house worth 400k and have 300k mortgage balance left.
Thanks for any input.
Great questions and I hope you'll find my answers helpful. I work with TD so remember you can always give us a call at 1-866-222-3456 or come and talk to us at a branch http://www.tdcanadatrust.com/locator/index.jsp
Q1: Which day is the start day of the new mortgage term? April 1 or May 1
If April 1 2011 is your maturity date, then your new term begins on April 2 2011, and your first monthly payment on the new term will be due on May 1, 2011. TD mortgage payments are collected in arrears and not in advance, hence your payment for May 1 2011, will reflect the new term/rate.
Q2: When do I need to shop around?
You will receive a renewal notice 60 days in advance of your maturity. However, I would advise that you meet with your local TD branch, up to 120 days in advance to discuss all your available options.
Q3: If I still stay with TD, the new mortgage will become a collateral mortgage, is that right?
When you stay with TD, and opt to renew your mortgage on maturity (not refinance for additional funds), your charge will remain as is. If however, you refinance or take out additional equity (provided you are qualified/approved for the increase) your mortgage charge would be updated to the new collateral mortgage charge.
Q4: If the new mortgage is a collateral one, what benefit I can get? For example the house worth 400k and have 300k mortgage balance left.
If you refinance for additional funds, where the old charge is replaced with a new collateral charge and you choose to register your collateral charge for more than the approved principal amount of the mortgage, by up to 125% of the property value, you could then increase your future borrowings without having to re-register the charge under certain circumstances. This would save you money on your future refinance activity against the same property.
So in your example:
Your house is worth $400K today and you hold a mortgage of $300k, but you decide to set up a charge for $500K, and in 2014 your property value has increased to $450K and you would like to refinance some additional equity. Provided you qualify for the added amount and the property value supports the new request, your can refinance your mortgage and re-use the collateral charge if the following criteria still applies:
The mortgage was registered with a collateral charge.
The property value supports the new request.
The amount of the collateral charge will support the customer's new lending application request.
The borrowers on the new application match the property and the existing registration.
There has been no subsequent lending on the property.
This eliminates any Solicitor/In-House Registration fees.
And the other benefit is that you can switch between a mortgage and a Home Equity Line of Credit without having to re-register the charge – offering you more flexibility and choice
Best of luck,
Farhaneh Haque, Regional Sales Manager, TD Canada Trust
The last mortgage payment would be the day that the balance is due in full. Should be on your paperwork.
Q2: When do I need to shop around?
Sooner, the better. Preferably, you don't want to be 'under the gun' and forced to accept something that's not optimal.
Q3: If I still stay with TD, the new mortgage will become a collateral mortgage, is that right?
Maybe. The collateral mortgage change applied to all new mortgages issued by TD, but not renewals of existing ones.
TD might offer you a line of credit for $20k, secured by your house, under a collateral mortgage charge. I would be wary of really having flexibility and choice because if you refinance for 125% property value you will be tied to it because will need to pay that off fully before being able to transfer to another institution.
Showing posts with label Mortgage. Show all posts
Showing posts with label Mortgage. Show all posts
Wednesday, January 12, 2011
TD HELOC: can you still get one that increases as you pay mortgage?
I have read elsewhere on the web that TD used to offer a HELOC whose limit increased concomitantly as you paid down your mortgage. Do they still offer this? My TD lady is not aware of it, but she didn't seem too sure.
What you can do is get a HELOC for 80% of your home's value and within that HELOC create what's called a Fixed Rate Advantage Option (FRAO), which is essentially a mortgage (mortgage rates, mortgage terms/ammortization, closed). As you pay it down, availability on the revolving part of the line of credit increases.
Example:
-Purchase a $300K house, $60K down, $240K on a HELOC.
-Initially the $240K will be revolving at a rate of Prime +1%.
-After the purchase you lock in that $240K to a FRAO with a 25 year ammortization for a 5 year term at a regular mortgage rate
-Each payment you make reduces the balance of that FRAO below $240K, the difference is available on the revolving credit line (just as if you didn't fix it in, if you make a payment on the HELOC, it makes credit available).
What you can do is get a HELOC for 80% of your home's value and within that HELOC create what's called a Fixed Rate Advantage Option (FRAO), which is essentially a mortgage (mortgage rates, mortgage terms/ammortization, closed). As you pay it down, availability on the revolving part of the line of credit increases.
Example:
-Purchase a $300K house, $60K down, $240K on a HELOC.
-Initially the $240K will be revolving at a rate of Prime +1%.
-After the purchase you lock in that $240K to a FRAO with a 25 year ammortization for a 5 year term at a regular mortgage rate
-Each payment you make reduces the balance of that FRAO below $240K, the difference is available on the revolving credit line (just as if you didn't fix it in, if you make a payment on the HELOC, it makes credit available).
Making a return on your mortgage in RRSP? Not sure how it works...thoughts?
Below is the article and link...my questions are as follows (I can't see to get my head around it):
1) How does Mortgage and RRSP mix? (if someone can explain the idea below to me in dummy terms...would be appreciated)
2) How does RRSP contribution room come in to play?
May have follow on questions depending on answer.
http://www.theglobeandmail.com/globe...1815416/page2/
Making a return on your mortgage
Now to the question of whether it makes sense to put your mortgage in your RRSP from an investment point of view. If we take all the startup fees mentioned above, we end up with a cost of roughly $1,000 to $2,000 in the first year, assuming a $100,000 mortgage. Essentially, you could have a first-year fee of up to 2 per cent if you decide to pay your mortgage insurance upfront.
The cost looks more attractive in subsequent years, when the $225 annual admin fee works out to a fee of just 0.23 per cent.
These fees tell us that conservative investors earning 2 to 3 per cent in their retirement savings should not find it hard to get a better return from the mortgage-RRSP strategy.
“If you have fixed income in your RRSP and if it’s generating a very low yield, then this may be something worth looking at,” Mr. Tsai said. “The greater the difference, the more economic sense it might make to do this.”
Mr. Wise, the Calgary investment adviser, said the mortgage-RRSP strategy works best if you use the mortgage to replace the bonds and GICs in your portfolio while leaving your holdings in the stock market.
If putting your mortgage in your RRSP leaves you light on equities, take the mortgage payments flowing into your retirement plan and invest them in stocks, funds and so forth. In fact, investing each successive mortgage payment gives you a nice little dollar-cost averaging program.
Making mortgage payments into your retirement plan does not affect your RRSP contribution room. So you can further diversify your retirement savings using the money you annually add to your RRSP, separate from your mortgage.
One of the challenges in putting your mortgage in your RRSP is to find a trustee for the plan. In addition to TD Waterhouse, the online brokerages CIBC Investor’s Edge, RBC Direct Investing, Scotia iTrade and ScotiaMcLeod Direct Investing all allow this. Bank of Montreal says it no longer offers this program. If you have an investment adviser, he or she should be able to find a trust company to hold your mortgage RRSP.
Don’t forget the usual strategizing if you’re putting your mortgage into your RRSP – amortization period, biweekly versus monthly payments and so on. An interesting question arises here: Do you put the priority here on getting your mortgage paid off as quickly as possible, or on building your RRSP?
“If I can get a fixed income investment in my RRSP that will give me 5 per cent, I think I’d want to keep that as long as possible,” Mr. Wise said.
---------
HOW TO DO IT
Investing your registered retirement savings plan in the mortgage on your home is not for everyone, but it can generate steady returns that beat what bonds and term deposits offer.
Step One
Find a bank, investment dealer, trust company that offers this service; some investment advisers may also be able to help you set this up.
Step Two
Tally up fees – expect to pay a set-up fee, an annual mortgage administration fee, legal fees to set up the RRSP mortgage, mortgage insurance fees and possibly discharge fees if you're breaking your current mortgage.
Step Three
Pick mortgage terms. Expect rules guiding the rate you can use, the mortgage terms available and so forth.
Step Four
Use the money you're paying into your RRSP to diversify your RRSP investments, possibly by making regular purchases of stocks or equity funds and ETFs
WHAT YOU SHOULD KNOW
Four things to keep in mind about investing your retirement savings in your mortgage:
1. You can invest RRIF money in your mortgage, but you must have enough cash on hand to fund the required minimum annual RRIF withdrawal.
2. Some banks will allow you to use RRSP money to buy a residential investment property, while others allow this only for an owner-occupied residence.
3. It may be possible to invest in a mortgage on someone else's property.
4. You'll need mortgage default insurance even though you're lending to yourself and even if you have a lot of equity in your home.
sounds like you're confused with all the numbers.
First thing you should know is that if you plan to buy a house with a 200k mortgage and fund it with your rrsp
u need 200k in your rrsp.
there's the hbp which will allow you to loan 20k to help your purchase but this method says forget that i'm going to hold my entire mortgage in my rrsp and pay myself back.
that's the essential the article goes on to list the pros and cons which you should know.
i would highlight in the article it says that if you have to sell your stocks/bonds/whatever yielding 5% then it's probably not a good idea.
2, it wouldn't affect your contribution room.
The basic idea is that you can loan the money you've put in your RRSP to other people to make a return (interest), i.e., loan it to the bank in a GIC, or via bonds to other companies/governments/etc.
With your mortgage, you borrow money from other people and pay them interest to buy a house.
An RRSP mortgage is a way to lend yourself the money to buy a house from your RRSP. You become both the lender and the borrower, and the interest you pay on the mortgage becomes a return for your RRSP.
If you have enough in your RRSP to lend out to cover your mortgage, then the payments you make on that mortgage are treated as, well, payments on your mortgage. They're not "contributions", so you can still contribute to your RRSP on top of the mortgage repayments. From the mortgage side, it's just like if you were paying the mortgage off to the bank -- you have to make your payments every month. On the RRSP side, it's just like if you loaned the money out to anyone else: you expect to get back a stream of interest and principal repayments.
1) How does Mortgage and RRSP mix? (if someone can explain the idea below to me in dummy terms...would be appreciated)
2) How does RRSP contribution room come in to play?
May have follow on questions depending on answer.
http://www.theglobeandmail.com/globe...1815416/page2/
Making a return on your mortgage
Now to the question of whether it makes sense to put your mortgage in your RRSP from an investment point of view. If we take all the startup fees mentioned above, we end up with a cost of roughly $1,000 to $2,000 in the first year, assuming a $100,000 mortgage. Essentially, you could have a first-year fee of up to 2 per cent if you decide to pay your mortgage insurance upfront.
The cost looks more attractive in subsequent years, when the $225 annual admin fee works out to a fee of just 0.23 per cent.
These fees tell us that conservative investors earning 2 to 3 per cent in their retirement savings should not find it hard to get a better return from the mortgage-RRSP strategy.
“If you have fixed income in your RRSP and if it’s generating a very low yield, then this may be something worth looking at,” Mr. Tsai said. “The greater the difference, the more economic sense it might make to do this.”
Mr. Wise, the Calgary investment adviser, said the mortgage-RRSP strategy works best if you use the mortgage to replace the bonds and GICs in your portfolio while leaving your holdings in the stock market.
If putting your mortgage in your RRSP leaves you light on equities, take the mortgage payments flowing into your retirement plan and invest them in stocks, funds and so forth. In fact, investing each successive mortgage payment gives you a nice little dollar-cost averaging program.
Making mortgage payments into your retirement plan does not affect your RRSP contribution room. So you can further diversify your retirement savings using the money you annually add to your RRSP, separate from your mortgage.
One of the challenges in putting your mortgage in your RRSP is to find a trustee for the plan. In addition to TD Waterhouse, the online brokerages CIBC Investor’s Edge, RBC Direct Investing, Scotia iTrade and ScotiaMcLeod Direct Investing all allow this. Bank of Montreal says it no longer offers this program. If you have an investment adviser, he or she should be able to find a trust company to hold your mortgage RRSP.
Don’t forget the usual strategizing if you’re putting your mortgage into your RRSP – amortization period, biweekly versus monthly payments and so on. An interesting question arises here: Do you put the priority here on getting your mortgage paid off as quickly as possible, or on building your RRSP?
“If I can get a fixed income investment in my RRSP that will give me 5 per cent, I think I’d want to keep that as long as possible,” Mr. Wise said.
---------
HOW TO DO IT
Investing your registered retirement savings plan in the mortgage on your home is not for everyone, but it can generate steady returns that beat what bonds and term deposits offer.
Step One
Find a bank, investment dealer, trust company that offers this service; some investment advisers may also be able to help you set this up.
Step Two
Tally up fees – expect to pay a set-up fee, an annual mortgage administration fee, legal fees to set up the RRSP mortgage, mortgage insurance fees and possibly discharge fees if you're breaking your current mortgage.
Step Three
Pick mortgage terms. Expect rules guiding the rate you can use, the mortgage terms available and so forth.
Step Four
Use the money you're paying into your RRSP to diversify your RRSP investments, possibly by making regular purchases of stocks or equity funds and ETFs
WHAT YOU SHOULD KNOW
Four things to keep in mind about investing your retirement savings in your mortgage:
1. You can invest RRIF money in your mortgage, but you must have enough cash on hand to fund the required minimum annual RRIF withdrawal.
2. Some banks will allow you to use RRSP money to buy a residential investment property, while others allow this only for an owner-occupied residence.
3. It may be possible to invest in a mortgage on someone else's property.
4. You'll need mortgage default insurance even though you're lending to yourself and even if you have a lot of equity in your home.
sounds like you're confused with all the numbers.
First thing you should know is that if you plan to buy a house with a 200k mortgage and fund it with your rrsp
u need 200k in your rrsp.
there's the hbp which will allow you to loan 20k to help your purchase but this method says forget that i'm going to hold my entire mortgage in my rrsp and pay myself back.
that's the essential the article goes on to list the pros and cons which you should know.
i would highlight in the article it says that if you have to sell your stocks/bonds/whatever yielding 5% then it's probably not a good idea.
2, it wouldn't affect your contribution room.
The basic idea is that you can loan the money you've put in your RRSP to other people to make a return (interest), i.e., loan it to the bank in a GIC, or via bonds to other companies/governments/etc.
With your mortgage, you borrow money from other people and pay them interest to buy a house.
An RRSP mortgage is a way to lend yourself the money to buy a house from your RRSP. You become both the lender and the borrower, and the interest you pay on the mortgage becomes a return for your RRSP.
If you have enough in your RRSP to lend out to cover your mortgage, then the payments you make on that mortgage are treated as, well, payments on your mortgage. They're not "contributions", so you can still contribute to your RRSP on top of the mortgage repayments. From the mortgage side, it's just like if you were paying the mortgage off to the bank -- you have to make your payments every month. On the RRSP side, it's just like if you loaned the money out to anyone else: you expect to get back a stream of interest and principal repayments.
Tuesday, January 11, 2011
Can CMHC charge me a fee because of the size of the house?
just wondering if i was to buy a property that is under 1000sq ft and put 20 percent down can CMHC charge me a fee because of the size of the house?
i bought a property almost 1 year ago and basically had to pay approx $1,800 more because the house was under 1,000sq ft.
That was your bank's requirement, not CMHC.
If you are putting 20% down then CMHC would not come in to picture and it would depend on the banks policy on lending on condo/houses for a lower square foot area. Some banks may have restrictions on landing on any condo below 650 sq ft. so if the area is over that you should be fine.
i bought a property almost 1 year ago and basically had to pay approx $1,800 more because the house was under 1,000sq ft.
That was your bank's requirement, not CMHC.
If you are putting 20% down then CMHC would not come in to picture and it would depend on the banks policy on lending on condo/houses for a lower square foot area. Some banks may have restrictions on landing on any condo below 650 sq ft. so if the area is over that you should be fine.
Monday, January 10, 2011
Mortgage Renewal and Legal Fees
Can anyone shed some light for me?
When refinancing a mortgage at the end of a term would the client or mortgage broker typically pay legal fees?
Just finished 5 year term with traditional bank, looking at taking out equity in rental and moving to another 5 year term via lender through mortgage broker.
Thanks in advance.
If you are switching lenders or increasing the mortgage amount so as to get more cash out of your home, then you will have to pay legal fees.
If you are staying with the same bank and not refinancing to a greater amount of money, no legals will be necessary.
You can try to work a deal to get the new lender to pick up the cost of the legal fees. I've switched lenders twice now and never paid any extra legals.
When refinancing a mortgage at the end of a term would the client or mortgage broker typically pay legal fees?
Just finished 5 year term with traditional bank, looking at taking out equity in rental and moving to another 5 year term via lender through mortgage broker.
Thanks in advance.
If you are switching lenders or increasing the mortgage amount so as to get more cash out of your home, then you will have to pay legal fees.
If you are staying with the same bank and not refinancing to a greater amount of money, no legals will be necessary.
You can try to work a deal to get the new lender to pick up the cost of the legal fees. I've switched lenders twice now and never paid any extra legals.
When to walk away from a mortgage?
I bought an investment condo, which really didn't pan out.
I can still afford payments (in fact monthly cashflow from tenants covers entire mortgage (PIT)) but I'm worried about potential water pipes breaking, or interest rate rises.
To throw some numbers out there.
Purchases for 230.
Mortgage principle 175.
Saw one listed today for Current price 160k
I've been doing lots of reading online, about the benefits of walking away, but many pertain to american markets. Some say you have bad credit for 3 years then you're in good standing again.
What are my options?
1) Sell at a loss. Claim loss of capital gains for a few years (avoids having to buy rrsps)?
2) Suck it up, pay bare minimum into mortgage, hoping to have it pick up in 5 years, (sell at a smaller loss in the future)..
3) Suck it up, pay off mortgage asap. (Just feel like I'm throwing good money into bad with this option).
4) Default on payment. Foreclose property, take a big credit hit.
Any other thoughts?
If I do option 4, and a bank short sales, would they come after my other assets to cover the balance?
TIA
I can still afford payments (in fact monthly cashflow from tenants covers entire mortgage (PIT)) but I'm worried about potential water pipes breaking, or interest rate rises.
To throw some numbers out there.
Purchases for 230.
Mortgage principle 175.
Saw one listed today for Current price 160k
I've been doing lots of reading online, about the benefits of walking away, but many pertain to american markets. Some say you have bad credit for 3 years then you're in good standing again.
What are my options?
1) Sell at a loss. Claim loss of capital gains for a few years (avoids having to buy rrsps)?
2) Suck it up, pay bare minimum into mortgage, hoping to have it pick up in 5 years, (sell at a smaller loss in the future)..
3) Suck it up, pay off mortgage asap. (Just feel like I'm throwing good money into bad with this option).
4) Default on payment. Foreclose property, take a big credit hit.
Any other thoughts?
If I do option 4, and a bank short sales, would they come after my other assets to cover the balance?
TIA
1) Sell at a loss. Claim loss of capital gains for a few years (avoids having to buy rrsps)?
You can only claim capital losses against capital gains, except if you die or go bankrupt, in which case, you can offset income with a capital loss.
2) Suck it up, pay bare minimum into mortgage, hoping to have it pick up in 5 years, (sell at a smaller loss in the future)..
For 'just' a $15k deficiency, probably one of your better options, unless your local market is oversaturated with a lot of supply. Are there a lot of vacant houses or not? You say Edmonton, right, there's not a lot of overbuilding there, is there?
3) Suck it up, pay off mortgage asap. (Just feel like I'm throwing good money into bad with this option).
You owe the debt, and you have to pay. Either way, the bank is getting their money. Short of bankruptcy, there is very likely no way out.
4) Default on payment. Foreclose property, take a big credit hit.
And get sued for the deficiency.
If I do option 4, and a bank short sales, would they come after my other assets to cover the balance?
Generally, yes. If you're in Alberta, and you put a >20% downpayment you may be able to walk away without making up the deficiency. Right now, you're in $15k negative equity, which isn't worth trashing your credit and your reputation over, that's for sure. If you truly have a non-recourse mortgage in Alberta, and you are still cash-flow positive, then why not just keep running the property? It really doesn't matter if you end up defaulting on $15k or $100k -- the hit to your credit record, in both circumstances, is equal. And who knows, maybe there will be some upside of government incentive programs or loan forgiveness programs in the future, who knows.... Especially when all of Canada is severely down the same path.
http://www.blakes.com/english/view_disc.asp?ID=1232
A capital loss can be carried over the years but can only be applied against a net capital gain.
2) seems like the best option, your credit score is maintained and you remain cash flow positive.http://www.blakes.com/english/view_disc.asp?ID=1232
A capital loss can be carried over the years but can only be applied against a net capital gain.
interest rates most definitely rise.
Big risks you face are in the renewal of the loans, especially since they may ask you to disclose everything you have, and, when they see the negative equity in the one property, ask you for a higher interest rate. So getting rid of the property right now, and only taking a $15k hit, might be preferable. You really haven't given a lot of information on your overall finances to say, one way or the other. Also, coming up with an optimal plan requires many assumptions.
Prepayment after term ends on mortgage?
I have a question regarding mortgage payments that should have a simple answer, but couldn't find a solid response.
Let's say you are coming up to the end of your 5-year mortgage term on a closed fixed-rate. You plan to refinance with another
lender, also on a closed term.
In that window between terms, would you be able to prepay (without limit directly towards principal) without any penalties from either lender?
Let's say you are coming up to the end of your 5-year mortgage term on a closed fixed-rate. You plan to refinance with another
lender, also on a closed term.
In that window between terms, would you be able to prepay (without limit directly towards principal) without any penalties from either lender?
YES. You can do it easily without any penalties from either lender at least in 2 different ways.
First, tell your existing lender to keep your mortgage open after the maturity of the term till such time you transfer it to another lender and during the intervening period any amount you pay would not entail any penalty;
Secondly, when you transfer a mortgage to another lender, get an approval for a lower amount and the lawyer or the First Canadian Title would take the difference amount from you in a certified cheque and pay it to your existing lender along with the money received form your new lender. For example, when your mortgage comes up for renewal the amount is $200,000 and you want to pay $25,000 and want to refinance/renew only $175,000 then let the new bank know that the balance of mortgage is $200,000 and you would be getting new mortgage for only $175,000 and paying $25,000 from your pocket to reduce the new mortgage before start and the lender would only approve you for $175,000 and the lawyer/FCT will pay your existing lender $200,000 by taking $25,000 from you and your new mortgage would start with $175,000 with the new lender.
so you can actually prepay with no penalties and without refinancing upon renewal?
The mortgage becomes open after the expiry of the term. However, every lender has a different policy. Some will send you a renewal offer with their rates and if you DO NOT sign back on the rates and term offered, some would keep it fully open with higher rates while some would automatically renew the mortgage for either a 6 months or a 1 year term. However, if you are switching the mortgage or doing a refinance, the lawyer or the FCT would ask a pay out statement from the existing lender which is generally valid for 30 days and at that time also the mortgage is treated as fully open with the existing lender and your liability is to pay the mortgage amount balance plus daily interest on the balance till such time the mortgage is switched to another lender. During this intervening period, you can pre pay any amount with out any penalties.
I was curious about something, once the renewal becomes due how long does a person have till it has to be renewed? Say I wanted to renew with the same bank and i received their form but didn't sign it yet as well i tell them not to auto renew and to keep it open. so it's still currently accumulating interest at maybe a higher rate. also are there any fees applicable if i lump sum pay it down once the term expires and then renew?
Typically if a mortgage is not paid in full by making a balloon payment after the expiry of the term, it has to be either switched to another lender or renewed with the same lender. And this renewal of term starts from the very next day of the last day of the existing term. However, as mentioned earlier, if you ask the bank to keep the mortgage open, then in fact it would be considered as if the mortgage is renewed with the OPEN TERM. Or, Alternatively, your lawyer or the FCT asks for the pay out statement which is generally valid for a maximum of 30 days from the date issued and at that time the mortgage is considered open and you have to pay a daily interest on the balance.
So, in your example if you ask the bank to keep the mortgage open, they will do so at a higher rate and can keep it open till such time you want to keep it that way. There are no penalties if you pay it out completely any time when it is in 'open state' but the bank may (will) charge you a 'discharge fee and or any applicable admin fees.
Mortgage amount in the Notary documents
This is my situation:
The bank did an evaluation of the house = 300K
We refinance for 230K plus HELOC 10K total 240K.
I received the paperwork for the Notary and the amount of the mortgage is set to 300K?? Should not be 240K only?
the HELOC it's only 10K and not 70K?
The bank told me that the max amount of credit is 300K (the evaluation) - 20% = 240K. That's why I was expecting to see on the Notary's papers 240K not 300...
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