Examining Revenue Property Options

With interest rates remaining at all-time lows, now is an ideal time to invest in the purchase of revenue property – and start building your revenue property portfolio or continue adding to your existing list of properties.

The key is to work with a mortgage professional who is an expert in this niche and can provide you with a wealth of knowledge and ongoing information that will help you make informed investment decisions, and feel at ease throughout each purchase.

Mortgage professionals offer an invaluable service to real estate investors because, if the mortgages on your investment properties are not set up properly from the on-set of each venture, you will not be able to get future financing – a necessity for continuing to build your portfolio of revenue properties.

Mortgage professionals who are experts in dealing with real estate investors know that a portfolio approach must be taken to ensure future financing for those looking to purchase revenue properties. An experienced mortgage professional will ask you in detail about your specific property investment goals and develop a game plan for the next five or 10 years based on these goals.

Your mortgage professional can work with you in order to determine where you currently stand in terms of your real estate goals, where you need to be to meet those goals and the steps involved to get you there.

Keep in mind, however, that your plan should be revisited with your mortgage professional at least annually to ensure you’re still on track.

A team of experts

A mortgage professional who specializes in helping clients acquire revenue property is also likely to partner with other investment property experts, including real estate agents, lawyers, accountants, insurance agents and contractors, to name a few, which enables your mortgage professional to provide valuable information to you through this knowledge network they have created.

By forming ties with other trusted experts, your mortgage professional is able to provide you with a one-stop shop for meeting all of your real estate investment needs.

Your mortgage professional can also help direct you to other organizations that will offer you further insight into your real estate investment needs. If you join groups such as the Real Estate Investment Network (REIN) or even a local Rental Owners and Managers Society (ROMS), for instance, you can receive a wealth of added knowledge catered to your revenue property needs.

While REIN can provide market insight and investing tips through years of experience, ROMS helps with credit checks for potential tenants, keeps you abreast of changes to the Residential Tenancy Act and other topics/concerns often faced by landlords.

So before you begin building your revenue property portfolio, ask a Dominion Lending Centres mortgage professional what they can do to cater to all your real estate investment needs.

Remaining proactive in trying times

With the uncertainty of job loss racing through many people’s minds these days, taking a proactive approach to this issue by putting mortgage payments aside while you’re still actively employed can help set your mind at ease.

 Planning for the future and potential job loss is one of the most important undertakings you can make to ensure you can pay your mortgage in an uncertain economy.

 Dominion Lending Centres Mortgage Professionals often suggest you put money aside each pay period so you can place six to 12 months’ worth of mortgage payments into a short-term GIC as security for a possible job loss.

 And, best of all, if your job remains secure, you can take the money out of your GIC and make a pre-payment back on your mortgage on your anniversary date, which can end up saving you thousands of dollars in interest payments.

 Refinancing to access your home’s equity

But if it’s not plausible to save money each pay period, refinancing to access the equity you’ve already built up in your home is another valid option for planning ahead in uncertain times.

 In addition to freeing up money to store future mortgage payments in a GIC, some of the money can also be used to pay off high-interest debt – such as credit cards – and get you and your family off to a fresh financial start.

 You will find that taking equity out of your home to pay off high-interest debt can put more money in your bank account each month.

 And since interest rates are at historic lows, switching to a lower rate may save you a lot of money – possibly thousands of dollars per year.

 There are penalties for paying your mortgage loan out prior to renewal, but these could be offset by the extra money you acquire through a refinance.

 With access to more money, you will be better able to manage your debt. Refinancing your first mortgage and taking some existing equity out could also enable you to make other investments, go on vacation, do some renovations or even invest in your children’s education.

 Keep in mind, however, that by refinancing you may extend the time it will take to pay off your mortgage.

 Options for paying your mortgage down quicker

There are many ways to pay down your mortgage sooner that could save you thousands of dollars in interest payments throughout the term of your mortgage.

 Most mortgage products, for instance, include prepayment privileges that enable you to pay up to 20% of the principal (the true value of your mortgage minus the interest payments) per calendar year. This will also help reduce your amortization period (the length of your mortgage), which, in turn, saves you money.

 Another way to lower the time it takes to pay off your mortgage involves changing the way you make your payments by opting for accelerated bi-weekly mortgage payments. Not to be confused with semi-monthly mortgage payments (24 payments per year), accelerated bi-weekly mortgage payments (26 payments per year) will not only pay your mortgage off quicker, but it’s guaranteed to save you a significant amount of money over the term of your mortgage.

If, for instance, you have a $100,000 mortgage, an interest rate of 5% and an amortization period of 25 years, your monthly mortgage payment would be $581.60 and your total payments for a year would be $6,979.20 ($581.60 x 12).

To understand the savings accelerated bi-weekly mortgage payments can make, take the monthly mortgage payment of $581.60 and divide it by two ($581.60 ÷ 2 = $290.80).  Next, take that payment and multiple it by 26 to arrive at your total payments for the year ($290.80 x 26 = $7,560.80).

As you can see, by using the monthly mortgage payment plan, you’ve made payments totalling $6,979.20 for the year, while using the accelerated bi-weekly mortgage plan you’ve made payments totalling $7,560.80 – a difference of $581.60. 

Basically, with accelerated bi-weekly mortgage payments, you’re making one additional monthly payment per year.

Using this example, you would reduce the amortization on your $100,000 mortgage from 25 years to just over 21 years and your total savings on interest over the life of the mortgage would be just over $12,000.

 By refinancing now and paying off your debt or putting money aside for future mortgage payments, you can put yourself and your family in a better financial position.

Have you considered refinancing to pay off debt?

With the high cost of holiday gift-buying and entertaining now behind you, this may be the perfect time to get the New Year off to a fresh start by refinancing your mortgage and freeing up some money to pay off that high-interest credit card debt.

 By talking to mortgage professional, you may find that taking equity out of your home to pay off high-interest debt associated with credit card balances can put more money in your bank account each month.

 And since interest rates are at a 40-year low, switching to a lower rate may save you a lot of money – possibly thousands of dollars per year.

 There are penalties for paying your mortgage loan out prior to renewal, but these could be offset by the extra money you could acquire through a refinance.

 With access to more money, you will be better able to manage your debt. Refinancing your first mortgage and taking some existing equity out could also enable you to make investments, go on vacation, do some renovations or even invest in your children’s education.

 Keep in mind, however, that by refinancing you may extend the time it will take to pay off your mortgage. That said, there are many ways to pay down your mortgage sooner to save you thousands of dollars. Most mortgage products, for instance, include prepayment privileges that enable you to pay up to 20% of the principal (the true value of your mortgage minus the interest payments) per calendar year. This will also help reduce your amortization period (the length of your mortgage), which, in turn, saves you money.

  If homeowners fail to take the time to thoroughly research their options through a mortgage professional and, instead, simply sign renewal offers received from their bank, credit union or other lender, they could end up paying thousands of dollars more per year in interest. Simply by shopping your mortgage with a qualified mortgage professional, you can access the banks as well as other lenders that you may not have considered, but which can often offer interest rate specials or other attractive terms.

  In the current credit-crunched lending environment, now more than ever it’s important to take the time to contact a Dominion Lending Centres mortgage professional to find out your options.

 By refinancing now and paying off your debt, you can put yourself and your family in a better financial position. It’s very important to not rack up your credit cards after refinancing, however, so set your goals and budgets, and stick to them!

Is Your Mortgage Portable?

Selling your current home and moving into a new one can be stressful enough, let alone worrying about your current mortgage and whether you’re able to carry it over to your new home.

Porting enables you to move to another property without having to lose your existing interest rate, mortgage balance and term. And, better yet, the ability to port also saves you money by avoiding early discharge penalties.

It’s important to note, however, that not all mortgages are portable. When it comes to fixed-rate mortgage products, you usually have a portability option. Lenders often use a “blended” system where your current mortgage rate stays the same on the mortgage amount ported over to the new property and the new balance is calculated using the current interest rate.

With variable-rate mortgages, on the other hand, porting is usually not available. As such, upon breaking your existing mortgage, a three-month interest penalty will be charged. This charge – which can be a surprising $1,500-$4,000 penalty at closing – may or may not be reimbursed with your new mortgage.

Porting Conditions

While porting typically ensures no penalty will be charged when you sell your existing property and buy a new one, some conditions that may apply include:

·     

      Some lenders allow you to port your mortgage, but your sale and purchase have to happen on the same day. Other lenders offer a week to do this, some a month, and others up to three months.

·        Some lenders don’t allow a changed term or force you into a longer term as part of agreeing to port you mortgage.

·        Some lenders will, in fact, reimburse your entire penalty whether you are a fixed or variable borrower if you simply get a new mortgage with the same lender – replacing the one being discharged. Additionally, some lenders will even allow you to move into a brand new term of your choice and start fresh.

·        There are instances where it’s better to pay a penalty at the time of selling and get into a new term at a brand new rate that could save back your penalty over the course of the new term.

While this may sound like a complicated subject, your mortgage professional will be able to explain all of your options and help you select the right mortgage based on your own specific needs.