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Mortgage-Matters

With higher interest rates, a hybrid mortgage may be right for you

Hybrid mortgages

A fixed rate mortgage or a variable rate mortgage? Why not both?

If you are looking at renewing your mortgage this year, you will definitely be facing some payment shock with higher interest rates. If you are looking to purchase a new home, locking in at today’s higher interest rates may not feel prudent at this time.

With interest rates on both fixed rate and variable, or adjustable, rate mortgages higher at this time, and the talk of some rate reductions in the future, a hybrid mortgage could offer some flexibility and reduce the impact of rising rates.

You can diversify your mortgage risk similar to how you can diversify your investments. A Home Equity Line of Credit could also be included, as some lenders allow the mortgage to be broken into multiple components. You can mix and match terms and types of mortgages in a multitude of combinations.

A hybrid mortgage allows you to manage the risk of interest rate fluctuations effectively in times of economic uncertainty with a fixed rate component and, at the same time, possibly take advantage of the lower rates on the variable rate portion of the mortgage, particularly if rates start to decline during the term of the mortgage.

It can also diversify your mortgage’s conditions—terms, amortization, payment frequency, etc. and spread out your payments so they are not all due at the same time.

The best option is to match the terms – a five-year fixed rate with a five-year variable rate so, if you don’t like the lender’s renewal offer, you are free to easily move to another lender with a better offer instead of possibly paying a penalty on a portion of the mortgage that has a different renewal date.

Hybrid mortgages are collateral mortgages. If your mortgage is divided into different terms that mature on different dates, then you could be faced with a penalty should you decide to break the mortgage early. This type of mortgage is also more difficult to transfer to a new lender, so fees could be charged to make a switch.

If you can’t decide between a fixed rate or variable rate mortgage, a hybrid mortgage could be a good option to limit your interest rate risk. It could be a great option if one party wants to go fixed and the other leans towards variable.

A hybrid mortgage is a more complicated product to consider but depending on your specific needs, it may be the right choice for you. Benefits include the potential for interest savings, flexibility in payments and amortization schedules, and the savings of a variable mortgage mixed with the reduced risk of fixed rates.

As always my best recommendation is to speak with a mortgage professional to review your possible options. Please email me at [email protected] or if you would like to discuss you can always book a time here on my calendar calendly.com/april-dunn

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.



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Clearing up misconceptions about reverse mortgages

Reverse mortgage myths

A reverse mortgage is a financial tool that empowers homeowners aged 55 or older to unlock up to 55% of their home's value as tax-free cash.

Unlike traditional home equity lines of credit or conventional mortgages, it offers the unique advantage of not requiring monthly mortgage payments as long as you reside in your home. With its growing popularity, it's crucial to separate fact from fiction and address common misconceptions surrounding reverse mortgages.

Myth: The bank owns your home.

Fact: You retain control and title ownership of your home. You have the freedom to decide if and when you want to move or sell, granting you complete autonomy over your property.

Myth: You'll owe more than your home is worth.

Fact: Clients can qualify for up to 55% of the appraised value of their home, with an average of 33%. Lenders adhere to conservative lending practices, ensuring that equity remains in the home when the loan is eventually repaid. Over 99% of reverse mortgage clients still have equity remaining in their homes after the loan is paid out.

Myth: Reverse mortgages are a last-resort solution.

Fact: Many financial professionals now recommend reverse mortgages as a vital component of a comprehensive retirement plan. It offers unparalleled financial flexibility, enabling tax-free funds to extend the lifespan of retirement savings.

Myth: Existing mortgages hinder eligibility for reverse mortgages.

Fact: Reverse mortgages can be used to pay off existing mortgages and other debts, freeing up valuable cash flow. Imagine the relief of eliminating regular mortgage payments and having more financial freedom.

In addition, it's important to understand two key points:

1. Homeownership: You maintain full ownership of your home as long as you fulfill your obligations of paying property taxes, home insurance and keep the property well maintained. You will never be forced to move or sell your home.

2. Government benefits: A reverse mortgage will not impact any government benefits you may receive, such as Old Age Security (OAS), Canada Pension Plan (CPP), or Guaranteed Income Supplement (GIS).

To determine if a reverse mortgage is a suitable option for you, take advantage of a no-obligation assessment. As a certified reverse mortgage expert and impartial mortgage broker, I can confidentially review all available mortgage options tailored to your unique circumstances. The assessment takes only 90 seconds, so please don't hesitate to email [email protected] or you can book a time for a chat here on my calendar. www.calendly.com/april-dunn

By dispelling myths and gaining accurate information, you can make an informed decision about whether a reverse mortgage is the right choice for your retirement goals. Secure your financial future and enjoy the benefits of this valuable financial tool.

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.



Divorce does not necessarily mean selling your home

Spousal buyout mortgage

You might be going through, or considering, a separation or divorce. But the end of a relationship does not necessarily mean you will have to sell your home.

Your home may be able to give both partners a new start. For many, their home is their largest asset and where most of their net worth has accumulated. There are mortgage products available that can allow you to buy out the other party, while enabling you to stay in your home. A divorce or separation doesn’t always mean you will have to sell your property.

You will require a finalized separation or divorce agreement, as that is required by the lenders and the agreement needs to clearly detail the asset allocation and any joint debts that need to be cleared.

The mortgage funds can only be used to buy out the other party’s equity in the home unless it is clearly laid out in the separation agreement that some joint debts need to be paid off to a maximum of 95% of the value of the property. The property must be your primary residence.

Sometimes friends or siblings have bought a home and live together in the property. That program may be used in that circumstance also, but this will require an exception for an approval by the mortgage insurer.

There are insured mortgage programs available that could help you stay in your home in the event of a separation, divorce or dissolution of a relationship by purchasing the home from your ex-spouse or partner for up to 95% of the home’s value.

To qualify for this program you must be able to afford the mortgage payment on your own along with your other liabilities. Not only must the lender approve your application but also a mortgage insurer. Both parties must also be on title on the home prior to the separation.

There are some differences between two of the programs.

With the first mortgage insurer the funds can only be used for a spousal buy-out or the dissolution of a relationship. This could be friends, relatives, etc. There cannot be any matrimonial debts or pre-payment penalties or fees included in the new financing.

With the other mortgage insurer the funds can only be used for a spousal buy-out and no other relationship breakdown but the new financing can include matrimonial debts if they are listed on the separation or divorce agreement. They will also allow pre-payment penalties and fees to be included.

To qualify for both of these programs you must have good credit and earn sufficient income to support the mortgage payments.

It’s so important to seek the advice of a mortgage broker very early in the process as we can guide you along the way to a successful separation so you can both have the best possible outcome going forward. If you already have a separation agreement in place we can show you how the value in your home can make it work out for you both.

If you have any questions on this program please give me a call at 1-888-561-2679 or email [email protected]. You can also book a time here on my calendar for a chat.

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.



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Latest changes to mortgage regulations explained

Mortgage rules eased

A few changes to mortgage regulations were announced this week by federal Finance Minister Chrystia Freeland. Here’s a recap of some of the recent changes.

The Home Buyers’ Plan

Starting April 16, the government will increase in the maximum amount first-time home buyers’ can withdraw from their Registered Retirement Savings Plans (RRSPs) to assist with their down payment. Previously set at $35,000, this limit will be raised to $60,000.

There is also a change that extends the grace period for repaying RRSPs after a withdrawal. From now until the end of 2025, first-time home buyers who use their RRSP funds towards purchasing a home will have five years to start their repayments, rather than the previous two-year requirement. This extension gives new homeowners additional breathing room to stabilize financially after acquiring their property.

Extended amortizations

Freeland, who is also the deputy prime minister, also unveiled modifications to the amortization schedule for mortgage repayments, which are set to take effect on Aug. 1. First-time home buyers opting for insured mortgages on newly-built homes will now have up to 30 years to repay their mortgages. This adjustment aims to make monthly payments more manageable, thereby making homeownership more accessible to younger Canadians, a demographic that often struggles with housing affordability.

Mortgage renewals

In an effort to further support homeowners, the federal government has introduced a mandate under the Canadian Mortgage Charter requiring banks to proactively communicate with homeowners about their mortgage renewal options. Previously, banks were required to contact homeowners four to six months in advance of their mortgage renewal date. Now, lenders must reach out up to 24 months in advance to discuss available options, giving homeowners ample time to make informed decisions regarding their mortgage arrangements.

Mortgage charter updates

Additionally, the mortgage charter has been updated to permanently include provisions for those facing financial difficulties. These measures include:

• Waiving fees and additional costs that would typically be charged for mortgage relief measures.

• Exempting insured mortgage holders from re-qualifying under the stress test when switching lenders at mortgage renewal time.

• Allowing borrowers to make lump sum payments towards their mortgage to avoid negative amortization or to sell their principal residence without facing prepayment penalties.

• Waiving interest on interest for deferred mortgage payments that do not cover the interest charges on the loan.

These enhancements to mortgage and financial regulations represent a proactive approach by the Canadian government to address the needs of first-time home buyers and financially vulnerable borrowers.

The extended amortization periods, increased RRSP withdrawal limits and improved communication and support measures are all designed to ease the burden on new homeowners and provide a clearer path to financial stability and homeownership.

As always, if you have questions about how these changes might affect your home buying journey or need guidance through the mortgage process, feel free to reach out to me at [email protected] or you can book a time for a chat here on my calendar www.calendly.com/april-dunn

It’s a great time for first-time buyers to consider their options, and as your trusted mortgage broker, I’m here to help you every step of the way.

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.



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About the Author

April Dunn is the owner and a Mortgage Broker with The Red Door Mortgage Group – Mortgage Architects. For over two decades, she has been helping clients to arrange their financing to purchase a home, refinance, or renew their mortgages. Drawing from her extensive experience as a Credit Union manager, a Residential Mortgage Manager with a large financial institution, and as a Mortgage Broker, April has the necessary expertise to design a tailored mortgage plan with features and options that cater to each client's individual needs. April offers a complete range of residential and commercial mortgage financing services to clients throughout British Columbia and the rest of Canada through her affiliation with the Mortgage Architects network.

Contact e-mail address: [email protected] or by phone at: 1-888-561-2679.

Website: www.reddoormortgage.com



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The views expressed are strictly those of the author and not necessarily those of Castanet. Castanet does not warrant the contents.

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