25 Aug

Understanding the Mortgage Renewal Process – A Step by Step Guide

General

Posted by: Chanele Langevin

When your mortgage is first established it is set up with an amount of years it will take for you to completely pay off your loan. This is called the “Amortization Period”.  Within the Amortization period there is a “Term” which is the amount of years that a Lender will guarantee you the agreed upon interest rate.  During the years within the term, you are obligated to fulfill the commitment initially agreed to.  Once the term is coming to an end, as the mortgagor, you have the right to renegotiate a new interest rate and possibly change mortgage details for the next term without any penalty.  This is called the Renewal Process.

  • The first step is knowing when your mortgage is up for renewal.  You do not want to leave the renewal process too close to the term’s maturity date.  Many recommend beginning the process with a mortgage broker 120 days prior to the end of your term.  Your Lender will send you a renewal statement 21-30 days prior to your renewal date with the hopes that you will continue your mortgage with them and let it renew automatically for the next term.
  • The next step would be working with a Mortgage Broker to see what other options as far as interest rates and terms are available to you moving forward. 
  • It is beneficial to list any changes to finances, debt, and overall lifestyle changes.  You will need to determine if you want to increase your payments or if you need your payments to be less than they currently are.  This will help determine what type of payment would work best for the next term that will be agreed upon.
  • Your Mortgage Broker then uses their expertise to submit applications to Lenders that work with your specific needs and requests.  This takes the renewal process stress away from you and can truly be a simple process that may save you time and money on your overall mortgage loan.

Mortgage renewals are great opportunities to make any adjustments to your mortgage according to what is happening in your current life.  Essentially, the more money you choose to pay towards your mortgage the faster you will pay off your entire mortgage loan.  If planning to move to a new home, renewal time works well because it gives you the ability to secure a mortgage for your new home without having to worry about a payout penalty.

Mortgage Brokers are always a wise choice when you are needing to assess your options.  Rather than you taking on the stress of “shopping around” for a better interest rate a Mortgage Broker is unbiased and capable of answering all of your questions and explaining different scenarios to you with regards to your mortgage.  They work for you by having access to numerous lenders, which gives them the ability to help you achieve the greatest options when it comes to your mortgage loan.

11 Aug

Property Taxes – Mortgagor Paid vs Lender Paid

General

Posted by: Chanele Langevin

When accepting a mortgage agreement, it is important to understand some of the fine print regarding who will be responsible for paying property taxes. Depending on your situation and preferences, this little detail may be one of the deciding factors for which lender you choose when you have multiple options on the table.

Mortgagor Responsible

There are 2 ways for a mortgagor to pay their property taxes:

  1. A lump sum payment may be paid annually to the City/Municipality.  This is a good option if a mortgagor prefers to pay with a credit card to gain loyalty points/miles.  It also may give the opportunity to have a large sum of money in a savings account collecting interest.
  2. The other option is called TIPPS (Tax Instalment Payment Plan).  With this option the mortgagor will set up a monthly payment to be taken directly from their bank account by the City/Municipality.  There are no extra fees or interest payments when using the TIPPS program.  The annual property tax payment is equally divided in 12 monthly instalments per year.  This is a great option for mortgagors who prefer to operate on a monthly budget and know what their payments are month to month.

Lender Responsible

Another option that comes into play for is when certain lenders do not allow the mortgagor to have the responsibility of paying their own property taxes. This happens with some lenders when a home buyer has a down payment of 20% or less. These lenders do not like to take a chance of property taxes not being paid and having a lien put on a property they hold interest in.

There are no extra fees to the mortgagor when the lender pays the property taxes on their behalf. They do, however, add a “cushion” onto the mortgage broker payment on top of the monthly payment. They do this because they are estimating the amount based on the previous tax year and the most recent tax assessment. The property tax money is put into an escrow account and the payment to the City/Municipality is paid on the mortgagor’s behalf.  If there is money left over in the account it is put towards the following year’s taxes. There may also be the issue of the lender underestimating the fees, creating a shortage in the escrow account. This means the mortgagor will have to come up with the extra funds to pay the exact amount owing to the City/Municipality.

Having a lender making the property tax payment can be a relief to some homeowners.  It is one less payment that the Mortgagor has to remember to make on their own and they can have confidence that their property tax bill will always be paid.

Whether a mortgagor pays their own taxes or the lender pays the property taxes on the mortgagor’s behalf, the best option comes down to what the mortgagor is comfortable with and whether they have a lender with specific requirements.