What next?Buying a house will now require a larger home down payment, due to the rising national indebtedness, as our Finance Minister Jim Flaherty has said. Due to lower interest rates, more and more people are buying houses and taking on mortgages they’re not able to handle.

Historically speaking,owning your own house was never easy in Ontario Canada but recent credit crunch had made it worse for Canadians to own their own houses. If you want to own your own house you have to plan and prepare in advance. You need to understand some basics of Canadian mortgage system. You should know how to evaluate your finances and should know how big of a house can you afford in Ontario Canada.  Bank is your only best friend In this journey to make you own your own house in Ontario Canada. Banks are ready to lend you money but are you ready to ask for that money?

Continue reading this article to educate yourself about how to own house. Find out the reasons why bank may decline your mortgage application and much more...

In the age of consumerism where the more we consume, the better since our economy relies predominantly on demand and supply. Mortgaging, to own a house is a means to secure the future of your family by creating long term appreciating assets. Just hoping to get mortgage to own your home is not enough in todays market. Despite of lending to be a major part of banks business they have tightened the lending criterias. Banks have changed the rules of ungagement.

In todays market, to own a house in Ontario Canada, every applicant has to be well informed about banks expectations. Every borrower has to be well positioned in front of any lender.

This article talks about business of mortgage,mortgage products in Canada. This article also reinforces the importance of attention to details prior ro submitting your application to banks. You will also learn a unique solution to own a house when banks cookie cutter approach rejects your application.

Let's start with basics " Mortgage"

What is Mortgage?

The word mortgage originates from the French word "dead pledge" which meant that the pledge ends or dies when the obligation is fulfilled. "Mort" means "death" and gage means "pledge or agreement".

How can I get mortgage for buying house in Ontario Canada? If you are planning to get mortgage or own house in Ontario, Canada, you have to evaluate your financial abilities. You can get mortgage easily if you have good credit scores, and have low debts. You have to get mortgage because we live in an age where credit is a part of our daily lives and a good credit can create an asset for a secure future. Don't think 'Can I get mortgage?' without planning because it would only mean a pile of debts for you. Remember to own house in Ontario or get mortgage, a lot of financial planning is required. Get mortgage by evaluating your expenses, and your income. To get mortgage you may compare rates of interest from different financial institutions.
The most important take home point is not to get stuck on interest rate alone, there is a lot more than just interest rate. To get mortgage you should speak to a mortgage agent who is capable to customize your mortgage to your present and future needs.

Mortgage is a form of security or any charge created on an asset for securing the payment of a debt which is usually a loan of money. The mortgage is given by the lender, who is any person or organization willing to lend money as a loan towards securing an asset or house in Ontario Canada.

History of Mortgage System

Mortgage started as conveyance of land for a fee. The history of mortgages goes back to the end of World War II. Canadian government panicked over demobilization of hundreds, and thousands of soldiers in Europe, along with their re-entrance in to Canada. To own a house would be a dream at that time. Entrance of so many people created a boom for real estate in Canada. However, it would mean more trouble getting access to mortgages. There were large number of problems on the rise, and everyone had the same question, "Can I get mortgage?" There was lack of housing, which meant remote chances to own a house in Ontario.. This burning desire of owning a house transformed in to bigger problem as there were not enough houses to accommodate the demand.

A semi government agency called CMHC (Canada Mortgage and Housing Corporation) was created in 1946. The question "Can I get mortgage?" was now a realistic dream for Canadians. With mortgage insurance and budding real estate in Canada, the government made all attempts to provide homes across the nation, including houses in Ontario.

CMHC responded to the demands of World War II veterans to own house. Societal changes followed, and viable answer to the big question 'Can I get a mortgage?' was crafted. The crafted solution was transformed later into nationwide policy. Since its inception CMHC insured the lenders loan on houses with less than 25% equity. This policy helped Canadians own their houses with less than 25% down payment. Few years ago the 25% limit was lowered to 20%.

Reflections of this policy of real estate in Canada can be seen in

• The general policies of development to get mortgage
• A national building code
• Mortgage insurance and 90%/10% option of down payment standard in suburbanization of many Canadian cities
• Experimental houses in Ontario and other regions
• Eliminating socio-economic differences via approval of low-cost housing projects

With time and unconcealed exploitation of the mortgage system, the law began to uphold more of the buyer's rights. This meant that they stood a higher chance, when it came to owning their land and getting mortgage insurance. Ultimately, they were permitted to ask for the deed to be free and clear ahead the payoff of the property.
The interest levied on mortgage insurance is one of the most important aspects to check upon while mortgaging your house.

Fixed mortgage rates for a house in Ontario indicate monthly payments by the borrower for interest and principal remaining constant. The interest rates over the term remain the same. Lock-in interest rates duration usually include 1, 3 and 5 years. The major benefit of fixed mortgage is that the monthly payment remains the same for entire term. This implies easier budgeting, and planning.

Current Mortgage Interest rate trends

The current trend in the real estate market is an upward trend since mortgage rates have been hovering at or near historic lows for about the past five years. The average interest rates over the past 25 years or so has been about 5-7%. Current rates are about 2-4% which makes buying houses more affordable. Most analysts and experts predict that rates will remain more or less the same for many years to come. Over the past 5 to 6 years the market rates have been quite consistent and steady. Those who want to get mortgage, or own houses can easily pick from rates varying 3-6%.

In order for you to leverage mortgage insurance to your benefit, your answer to the question 'Can I get mortgage?' has to be YES. The interest rates in Canada have been consistently low for shorter tenures and higher for the longer ones i.e. ten years or more. Any individual who wishes to purchase a home in Canada with less than 100% of the purchase price needs a mortgage. CMHC requires the lender to look into an individual's Debt to Income ratio, Loan to Value, Employment history, and Mortgage/Rental history for qualifying the individual for a loan.

Do your home work before purchasing Real estate in Ontario Canada?

Learn 4 pieces of the puzzle to get your mortgage approved

Remember all 4 factors have to be aligned in order for you to get mortgage in Ontario Canada.

01

Your Maximum Buying Power

This is your maximum mortgage amount you may qualify for. It depends on your annual verifiable before taxes Income, less the total amount of debt you owe. The best time to know this is before you start looking for your dream home. This will save lot of time and last minute headaches for you and your realtor. Don't be intimidated when Mortgage agents use the terms like GDS, TDS. They are nothing more than the ratio between your monthly obligations and income on monthly basis.As long as your GDS stays below 32% and TDS stays below 40% you are in good shape!-Good Luck.

02

Monthly Carrying Cost

This depends on your purchase price, mortgage, down payment, property taxes, condo fees and insurance and the repair cost on ongoing basis.

03

Interest Rates

This is the great time for mortgage interest rates, as they are record low. Knowing more about interest rates will help you plan for future cash flow. A good mortgage agent should be able to assist you in planning with any big ticketed items in near future including new car or perhaps a rental property. Don't forget to ask your mortgage agent to educate you on interest rates trends, best approach to rates. Our advice to you is not to get stuck with lowest interest rate mortgage. Mortgage interest rate plays a role in buying a home but there are equally important other factors to consider before you sign on your mortgage commitment documents. Feel free to contact us to get mortgage insight and available choices in your particular case.

04

Amortization Period

This is referred to as the number of years required to pay back the mortgage. As of now the maximum period is 35 years. This may change as per our Finance Minister Jim Flaherty as the national debt per person is increasing.

Whether you buy Real estate for your investment or as primary residence, this is the only investment where you can leverage borrowed funds. Mortgaging is beneficial in real estate market since out of pocket investment is less. Owning a home is much more beneficial since the returns are much higher and the banks are always willing to lend you money as long as you fulfill the requirement of down payment. The other great benefit of owning real estate over mutual funds is, unlike financial investments like stocks and mutual funds the real estate prices lags by 6-9 months from the onset of any major financial. This buffer of time makes real estate more stable investment vehicle.

Investment in financial market is completely an individual's 100% investment where as in real estate the banks are always willing to lend money. The returns on the former is completely under the mercy of the fund manager and companies constituting the fund, where as real estate is much more stable and as years go by the assets appreciate.

Different Kinds of Mortgages

There are different types of mortgages available for home buyers. So, when you ask 'Can I get mortgage?' you should also consider the different options here. Variation of mortgages was introduced to ensure that even those investing in low cost homes could get mortgage easily. For instance, when you consider the scenario of real estate in Ontario Canada, you have to evaluate what kind of house in Ontario do you seek?

Conventional Mortgages

Most of the banks allow up to 80% of the value as mortgage. This is very safe for banks since 99% of the Canadians pay their mortgages on time and do not default on the payments. In this case, the banks has lot of equity to get their money out and do not lose money. Income verification of self employed or glitches on credit history is mandatory. All national banks, credit unions, Mortgage Insurance (CMHC, AIG, GENWORTH) are players in this category for houses in Ontario Canada.

High Ratio Mortgages

High ratio mortgage is another way of qualifying for the mortgages in Canada. In this type of mortgage an individual can buy with less than 20 % down payment. Mortgage insurance is required by the lenders when buyers make a down payment of less than 20% of the purchase price. Mortgage insurance helps protect lenders against mortgage default and also enables buyers to purchase houses in Ontario Canada with as little as 5% down payments with interest rates comparable to those with 20% down payment. The borrower pays an insurance premium to the lender. The premium payable is based on the down payment and purchase price of the house. The premium can be paid as lump sum or can be added to the mortgage and included in the buyer's monthly payments.

For a very long time, in Mortgage Insurance, CMHC was the only big players who secured less than 20% mortgage for banks. Prior to recent credit crunch and after 2007 some changes took place and more foreign based companies like AIG and PMI came to Canada. After the recent credit crunch, AIG took off and so did PMI. Consequently, lots of self employed individuals who were able to qualify for mortgage became disqualified and were left with renting as the only option for them.

Private Mortgages

Private mortgages are the third option to buy a real estate or house in Ontario Canada. This is very much used by investors but if chosen carefully can be beneficial even for primary residence. No insurance required here, Bad credit does not matter. Private mortgages are provided by group of people or companies who invest in real estate. These investors want higher returns on their money and are willing to take more risks than the previous two players. Private lenders also do not give 100% mortgage. They may lend up to 85% and rest 15% comes from the buyer in the form of down payment.

Private mortgages are funded by individuals, group of individuals or corporation looking for better return than 2% on their investment in a GIC at their bank. They are comfortable with investments that are secured by real estate and may bypass credit issues. Private lenders invest in people and property rather than in reports and numbers. Private mortgage investors look at things like bank statements, recent appraisals, employment letters, whatever the buyer can provide to show them why the buyer and his/her property is a good investment for owning house in Ontario.

To own a house in Ontario Canada, know what banks are looking for!

The lender considers three primary components of each application to own a house. The task of underwriting is to determine the buyer's ability to repay the funds under the agreed upon terms, their willingness to repay, and the adequacy of the real property as security for the mortgage loan.

The following details are checked by the lender before approving any mortgage to own house in Ontario Canada:

1. The current financial position of the buyer in terms of his net worth, Gross income (salary, commission bonus, self employment income and any other income like rents etc, funds to close)
2. Affordability of the buyer to cater to expenses like mortgage payment, property taxes, condominium maintenance fees, heating costs etc).
3. Gross Debt Service Ratio (GDS) which is the ratio between gross income and shelter costs is calculated.
4. Total Debt Service ratio (TDS) which is the sum of both the shelter and non shelter financial obligations combined with gross income is calculated for mortgages in Real estate in Ontario Canada.Non-Shelter Financial Obligations include:

• Car Payments
• Credit & Charge Card Payments
• Personal Loans
• Lines of Credit
• Finance Company Loans
• Long Term Leases (more than 1 year)
• Tax loans
• Long term RRSP catch up loans (more than 1 year)

5. Credit Worthiness is analyzed which includes credit analysis of past and existing mortgage debt, Installment and revolving credit, Collections, repossession, foreclosures and bankruptcies, etc. before an applicant gets mortgage.
6. Property assessment: The documents required for approval of mortgage are listed below: 
   • Employment Verification: A current Letter of Employment and pay stub will be required. The buyer may also be asked to provide last years T4's or Notice of Assessments for further history. If the buyer has a Business for self, he will be asked to provide the last 3 years of Revenue Canada Notice of Assessments and possibly financial statements for your company.
   • Purchase Agreement (if applicable)
   • MLS listing or Feature Sheet (if applicable)
   • Sale Agreement for the current home and mortgage statement (if applicable)
   • Condo Financial statements (if applicable)
   • Down Payment: If down payment is coming from a savings account, the buyer will be required to produce the last 3 months of bank statements to verify an accumulated savings. If down payment will be by way of gift, the donor must be an immediate relative and sign a gift letter verifying that the down payment will not have to be repaid. As well, the buyer will be asked to provide proof of deposit of the gift funds into his/her account to own a house. If down payment will come from an investment, the buyer will be required to produce the last statement verifying value of funds.
   • Appraisal: The buyer will be required to produce an appraisal of the property, like a house in Ontario, they are purchasing/refinancing and if he/she has more than 25% down payment/equity as these are conventional mortgages and are not insured by CMHC.

Will you get mortgage to own a house?

If you answer "YES" to above question, proceed with mortgage application, get approved and own a house in Ontario Canada. In case you do not qualify for the mortgage then there is another option which the buyer can exercise and own a house in Ontario Canada.

Rent to Own a house in Ontario Canada!

A property can be acquired even if an individual has a bruised credit history, a history of bankruptcy or insufficient funds for down payment for mortgage. A property can be occupied with initial deposit and occupancy fees which would give the individual exclusive rights to buy the property after a certain time period on a predetermined price. By paying a certain amount each month to live in, and own house, you are actually leveraging your time and rent money to own house. A portion of the rent goes towards a down payment to actually buy the home.

The rent to own process is much more lucrative and hassle free which eventually makes you a house owner. The advantages of rent to own house are customized lease terms, fixed monthly payments, forced-savings plan, credit issues resolved, down payment saved and free property inspection.

The rent to own process in Ontario also gives you the freedom to choose the house an individual really wants with in a specified area along with the liberty to choose his/her own lender at the end of the term. They can customized or renovate the living space to the individual's taste which will eventually increase the house value in the long term.

Are you always asking yourself 'can I get mortgage' or worrying about the real estate in Ontario, Canada, then fill in the pre-qualifying form to find out if you can secure a mortgage with major banks.

Contact Us today to help you with the right options towards owning your own house for free.