mortgage 

This post covers standard mortgage types and associated terms. Each bank, credit union and private lender may also offer their own specialized mortgages and terms.

 Brought to you by: Kristen White
 

Term

The period of time your mortgage agreement will be in effect, including your interest rate and terms and conditions. At the end of the term, you either pay off the mortgage in full, renew it or possibly renegotiate your mortgage agreement (for example, decrease your amortization period). Terms are generally for six months to 10 years.

Prepayment Charge / Penalty

Your lender may require you to pay a charge if you want to make a prepayment greater than the amount allowed in your mortgage agreement, or pay off or break a closed mortgage before the end of the term. Sometimes also called a penalty. Prepayment Privilege Terms of your mortgage contract that allow you to pay an amount toward a closed mortgage on top of your regular payments, without triggering a prepayment charge. For example, you may be allowed to make lump-sum payments up to a certain amount or increase the amount of your regular mortgage payments.

Prepayment Penalty

A fee charged to you by the lender for making a prepayment greater than the amount allowed in your mortgage agreement, or for paying off a closed mortgage before the end of the term.

Open Mortgage

A mortgage that can be prepaid at any time during the term, without paying a prepayment charge. The interest rate on an open mortgage may be higher than on a closed mortgage with a similar term.

Closed Mortgage

A mortgage agreement that cannot be changed before the end of the term. Your lender may let you make certain prepayments without paying a charge, but you will usually have to pay a charge to break or change your mortgage agreement.

We buy homes in British Columbia

 Should You Break Your Current Mortgage Contract to Take  Advantage of a Lower Interest Rate?

 By: RBC Advisory Services
With rates these days at historical lows, you may be wondering if it is  the right time to break your current mortgage and lock into a new term to take advantage of these low interest rates. Remember that if you have a closed mortgage, you will incur what is called a pre-payment charge.

Why do banks charge a penalty to do this?

Lenders incur significant sales, underwriting and funding costs to issue and renew mortgages.  Mortgage rates are designed to recoup these costs over the contractual mortgage term. Most of today's mortgages are 'closed' which, for similar terms, tend to have lower rates than open mortgages.  The lower rates are in large part due to the fact that there are prepayment charges which are designed to compensate the lender for the economic costs it incurs when a prepayment amount exceeds the prepayment privileges permitted under the mortgage.  These costs include prepayment transaction costs, plus the fact the lender will not receive the full term amount of interest that was designed, in part, to recover the lender’s costs to acquire the mortgage. In contrast, you can pay off an open mortgage at any time without penalty. However, rates tend to be higher than for closed mortgages with similar terms.
By: Gabor Palos - D&H Group LLP, Chartered Accountants

Owners of residential rental properties often spend significant money on the maintenance and improvement of their investments. And they often wonder whether they can deduct these expenditures on their income tax returns.

The answer is: it depends! The tax rule says that the cost of maintenance is deductible, but capital expenditures are not. How to tell the difference? Well, the difference is not always obvious and for that reason this area is the subject of frequent controversy between taxpayers and the Canada Revenue Agency (CRA). hammerMinor repairs and routine maintenance are considered “current expenses” and are deductible when incurred. A current expense simply restores the property to its original state, and has little or no long- term effect. These expenses usually recur after a relatively short period of time. On the other hand, renovations that extend the useful life of the property and improve it beyond its original condition are considered “capital expenditures” and are not deductible when they are incurred. Instead, these expenditures may be deducted in small portions over time by claiming “capital cost allowance” (tax depreciation).

bubble

Great Canadian Real Estate Crash; The Housing Bubble Has Burst, and Few Will Emerge Unscathed

By: Chris Sorensen
Keith Roy began warning his clients about a faltering Vancouver housing market in early 2012. The realtor says he was tipped off not by industry statistics, but by chatter across backyard fences. “When you hear about a homeowner who thinks his neighbour got too much money when he sold his house, you know there’s something going on,” says Roy. “That was the first clue.” The next shoe to drop was a handful of homes in desirable west side neighbourhoods that took a few extra days to sell. Sensing a shift in the market, Roy put his own house up for sale in June and penned a blog posting the following month that advised people to “cash out.” Though he was criticized by fellow agents for breaking rank, Roy says he now feels vindicated after watching Vancouver home sales crumble to their lowest point in more than decade, with prices falling 3.5 per cent since hitting a high last May. The lesson? Recognizing a looming real estate downturn is more art than science; once it shows up in the numbers, it’s too late to do much about it. “One day the phone just stops ringing,” Roy says. “Then you’re in it.”
foreclosure2If You Are Facing Pre-Foreclosure or Foreclosure, You May Be Able To Stop It
Written by: Kristen White
Foreclosure is an extremely stressful situation and the process is unknown to many people. It is important for you to know the process you are facing. Information in this article is a general overview of the Foreclosure process and mainly applies if your first mortgage is in Foreclosure and your first mortgage is with a larger banking institution or credit union. If you have a second, third or fourth mortgage that is in Foreclosure with a smaller  credit union or private lender, some information in this article applies but the Foreclosure process can be drastically different. We specialize in Pre-Foreclosure, please call us today if you have questions regarding your 1st, 2nd, 3rd or 4th mortgage with a larger banking institution or credit union or a smaller credit union or private lender. 1. If you have fallen behind on mortgage payments, your Bank/Lender will send you a letter and also call you to make you aware of the missed payment(s). If you don’t respond or attempt to bring your payment(s) up to date, the Foreclosure may start immediately without any further notice to you. There is no general rule on the number of missed payments it takes for your Bank/Lender to start the Foreclosure and is solely at the discrepancy of the Bank/Lender.

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