Mortgage Insurance: Canada Gives You a Choice

If you are looking to buy a home but cannot afford the money down, the Canadian housing finance system has made it possible. You are able to get a mortgage with a 5% down payment on your home, but will be able to get a 20% interest rate. How is this possible? It is possible to get such a great deal because they require the purchase of mortgage insurance for the amount borrowed. Risk of the loan defaulting is reduced for the lender and the buyer is able to buy a residence without making the entire down payment.

Who Qualifies?

The purchaser must qualify for mortgage insurance, so not everyone will be able to participate. The first requirement is the residence must be in Canada. The buyer must make a down payment of at least 5% on single-family and two-unit homes and 10% on three- or four-unit dwellings. You need to provide the down payment from either your own resources or a gift from an close family member. Also, the total monthly housing expenses that include principle, interest, property taxes, heat, the yearly site lease in case of household tenure, and 50% of applicable condominium fees should not represent more than 32% of your gross household earnings. Moreover, no more than 40% of your gross household earnings can be put towards liabilities. The amount of closing costs and fees can also determine if you qualify for loan insurance.

Will this cost much?

The mortgage company pays for the loan insurance by paying the insurance premiums. Though the responsibility for paying for the mortgage insurance is technically on the broker, the broker will pass the cost on to you. So, how much is loan insurance? There are various answers to that question. There is a direct correlation between the amount borrowed and the price of mortgage insurance. The more you borrow, the more insurance will be. This helps buyers who save more for a down payment. You can even pay the insurance premium in different ways. The insurance premiums can be paid monthly as a part of your loan payments or up front in a large lump sum. If you default on your loan, the mortgage insurance does not keep you safe. Insurance for the borrowed loan reduces risk for the broker. The good news for you is that you were able to buy a residence you probably could not have purchased. Visit www.infoprimes.com and save on mortgage insurance. Summary: Mortgage insurance, introduced by the Canadian housing finance system, has made possible for buyers who qualify to purchase a residence without paying a large portion of the down payment.

Mortgage Insurance: Canada Gives You an Option

For those wanting to buy a residence, the Canadian housing finance system has made it possible to do so without paying all the down payment. You are able to get a loan with a 5% down payment on your residence, but will be able to get a 20% interest rate. How can this be? This is made possible by acquiring mortgage insurance for the amount borrowed on the mortgage. Risk of the loan defaulting is reduced for the lender and the buyer is able to purchase a property without making the entire down payment.

What are the Requirements?

To get mortgage insurance, there are requirements to qualify, so some borrowers will not be able to get it. The property must be in Canada to meet the first requirement. The buyer must make a down payment of at least 5% on single-family and two-unit residences and 10% on three- or four-unit residences. You need to provide the down payment from either your own resources or a donation from an close family member. The loan principle, interest on the loan, property taxes, heat bill, the annual site lease in case of household tenure, and 50% of applicable condominium fees should make up only 32% of your gross household earnings as another qualifier. Moreover, no more than 40% of your gross household income can be put towards debt. The amount of closing expenses and fees can also play a roll in deciding your eligibility for mortgage insurance.

Will this cost much?

To obtain loan insurance, the broker pays an insurance premium. Yes, the mortgage company is the one who pays the premium, but believe me; they will pass the cost on to you. Does loan insurance cost a lot? Well, the answer varies. The cost of the insurance and the amount of the loan are directly connected. The less you are lended, the less your insurance will cost. This rewards those who save to put money down. Buyers can even pay the insurance premium in diverse ways. The insurance premiums can be paid monthly as a part of your loan payments or up front in a large lump sum. Purchasing mortgage insurance does not mean you are safe if you default on a loan. Insurance for the borrowed amount reduces risk for the broker. The good news for you is that you were able to buy a property you probably could not have purchased. Save on loan insurance by going to www.infoprimes.com.

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Life Insurance in Canada and the Options Available

The many life insurance options make buying a policy unclear and not understandable. What is life insurance for anyway? It is protection for our loved ones. Right?

Most think that life insurance is for those with young families with a big debt load that will not be paid off for a long time. They are wisely planning to secure their family for the chance of the the unspeakable.

So do people who have a smaller debt load and an empty nest still need life insurance or is it just for young people? Thinking they are being fiscally sound, many put a stop on their life insurance. While they may have saved a few dollars, they have put security for their family at risk.

Getting life insurance later in life may not be as costly as you think. A decade ago, it was much more expensive than it is now. Actually, there are over ten million Canadians in their forties and fifties who can buy very affordable life insurance.

The older you get, you can take advantage of the different policies to protect your loved ones and your wallet. Term life insurance is going to be smarter, safer, and more affordable in the short term. However, to prepare for long term, you have the option of permanent life insurance where you can choose from traditional whole life, universal, and variable whole life insurance.

To help your future, these options will help you save money and secure your loved ones future.

To get the most guarantees, traditional whole life is the best choice. The annual premium is guaranteed and as well as minimum guaranteed cash values and death benefits. Earnings from the dividends can increase cash value or death benefits with most whole life policies.

The premiums with universal life are very flexible, particularly early on in the policy. There are maximum set premiums and minimum set cash value and death benefits with universal life. If you would prefer to earn interest at a determined rate every year instead of dividends, universal life is the right choice.

There is also variable life, which is for the more knowledgeable and risky investor. Variable life has the least guarantees and because of that, it offers the best potential for cash value increases. Moreover, there are mandatory guaranteed death benefits and yearly premiums.

It can be very beneficial for you familys future to buy life insurance regardless of how complicated it can be. Receive great deals and professional advice at www.infoprimes.com for life insurance that meets your needs.

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The Best Forms of Life Insurance Policy

When buying life insurance its vital you get the right policy for your needs. With a plethora of web sites offering discount life insurance, it\’s often easy to end up with a policy that is not suited to your unique needs and circumstances.

There are a variety of life insurance policies available, so it\’s important to understand the differences.

Term Life Insurance:

Term life policies cover you a predefined term.

Term life insurance only offers protection for the duration of the mortgage, and can be of little value when once your mortgage is paid up.

Term insurance is generally cheap and is expected to fall over time providing you don\’t suffer from a major disease. However, there are a number of different types of term life insurance policy:

* The first type is known as level term insurance, and it is a very popular policy. Here, the premium costs are locked in for the entire term of the policy. This means you pay the same amount every month/year for the term of the policy.

* The next form of term life insurance is escalating term cover. This policy can be more expensive, as you pay an increasing amount each year. However, the lump sum payable at death also increases. These are normally low cost policies, and are best suited to younger people.

* The third type of term cover is known as decreasing term insurance. With this type of policy the monthly/annual payments stay exactly the same. However, the amount of protection reduces each year.

* The forth type of term life policy is known as increasing term insurance. With this type of term life insurance the benefit on death increases. However, in order to make up for this increase you will need to increase your premiums at certain times, for example on the birth of a child, or as your financial circumstances improve.

* The fifth and final type is known as convertible term insurance. It is a type of term life insurance that you can convert at a later stage into an investment vehicle. The value of the investment is normally based on your health when you originally took out the policy.

Whole of Life Insurance:

Whole of life cover covers you right up until your death. Provided, of course, that you keep paying your premiums! It can pay out a substantial benefit to your loved ones when you die, and it can also accumulate a cash value over time.

The amount generally increases in value over the years. Also, the contributions you make to your policy normally earn interest each year. When this happens, your premiums may reduce over time, to the point where you no longer have any more premiums to pay.

However, it\’s important to understand that the final cash-in-value of a whole of life policy may or may not equal the amount of money that has been paid into the policy over it\’s full term.

Summary:

Buying a term life policy, or whole of life insurance is an important decision and one that needs to be made carefully. Before you take the plunge, you need to examine your needs, and exactly what you wish to achieve.

The simplest form is a level term policy with a renewable option. This will allow you to get life insurance for as long as you may need it.

On the other hand, you might like to consider a policy that grows in value over time, giving you a very nice nest egg which you can benefit from, while you are still alive.

Both types have their advantages and disadvantages, and careful consideration and advice from a competent insurance adviser is vitally important.

Michael Pettigrew is an article writer for Best Insurance Quotes, a provider of quality cheap life insurance quotes. Visit Best Insurance Quotes to get a better life insurance quote

Tags: Finance, General, insurance, investments, life insurance, mortgage, Mortgage Loans

Deciding on an Adjustable Rate Mortgage

For many reasons, both on lenders and buyers sides, the typical mortgage loan today is no longer fixed for 25 years or so. Interest rate volatility, frequent sales and purchases of homes and other factors have led to the ARM, or Adjustable Rate Mortgage to be the norm in our days.

Even standard ARMs have become old fashioned as index based ARMs have developed, that allow borrowers to time their entry into the borrowing market more precisely.

If you choose a rate that is tied to an index that reacts quickly to changing rates, you can take advantage every time the rates are falling. A so-called lagging index will permit the borrower to lock in a new rate and all this before the rates increase again and you can take advantage of this lagging index if you understand it. Some index base ARMs include:

The six month CD ARM- Reacts rapidly to changes in interest rate markets and that is because it is priced every six months.

The twelve month spot ARM- This rate will change only 2% every twelve months. This will react more slowly than the CD ARM.

The six month Treasury Average ARM- This indicator adjusts more quickly since it is six months, but treasury bills so not move rapidly, so it is a slowly adjusting rate.

The twelve Month Treasury Average ARM- Reacts slowly to market moves, even more slowly than the six month Treasury Average ARM, since it changes every twelve months.

Read this article before you take a final decision for your ARMs as you may find great counsel for mortgages that will help you to take the best decision.

If you are looking to obtain the annual percentage rate of your ARMs, you should better inform about quotes and the best place to obtain them.

Adjustable rate mortgages are also available with no points, if you want to obtain more information on adjustable rate mortgages there is more than one page about the best consumer handbook on adjustable rate mortgages on the Internet.

You may do all this from home by checking the information on the Internet as sometimes you will end up finding better quotes than with a personal broker by analyzing the options.

So deciding for the option that will match with you will not be an easy task you will need to get as much information as possible about adjustable rate mortgage and fixed rates.

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Choosing Between a 15 or 30 Year Mortgage

It is not rocket science to realize the difference between a 15 and 30 year mortgage: the payments on the 15 are figured so that the mortgage will be paid off in 15 years. This, of course, means that you will have a higher monthly payment rate than with the 15 year than with the 30 year mortgage.

But the 15 year mortgage builds equity in the home a lot more quickly than the 30 year mortgage, with the result that the monthly payments are higher. Each time you pay off the 15 year mortgage, you can get a new home loan since the equity stays in the home.

This is a personal choice, since some borrowers prefer to have lower monthly payments, while some like to build equity quickly. If you can afford the higher payments of a 15 year mortgage, should you automatically choose it? If you chose a 30 year home loan, you always have the option to pay additional payments and reduce the principal more quickly. The benefits are not exactly the same as choosing the 15 year mortgage in the first place, but you will build equity faster than only paying the required payments. This is an option that appeals to a lot of people, since they feel that they can make higher payments when it is right for them, but keep the lower payments when they prefer to.

There are some, however, who feel that they can build their wealth in different ways. Let us say that the monthly mortgage on a $100,000, 30 year mortgage at 7% is $665, but on a 15 year loan at 6.75% (the rate is always higher for the longer term) is $885. The savings of $220 can be used in many ways. With the 30 year mortgage, you would have only repaid $5,868 in principal, as opposed to $22,933 with the 15 year mortgage. What would happen if you invested $220 in the stock market each month, using dollar averaging purchases or putting it into a Section 529 plan for your children’s’ education? Everyone’s needs are different.

For many the 30 year home loan proves to be much more flexible than the 15 year term. If you are disciplined enough to put the funds that are saved into a different investment vehicle that fits better in your portfolio or your time of life, it may be the way to go. However, if you have little discipline, and the savings will just be squandered, you should take the 15 year option and concentrate on building wealth.

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Is There Any Advantage to Paying Points on Your Mortgage?

Before you make such a decision, you have to understand exactly what points are. In simple terms, points are paid by a borrower to a bank to reduce the rate on a mortgage. One point represents a percentage point of the entire loan value. If your mortgage is in the amount of $100,000, one point costs you $1,000.

Points decrease the rate of the loan over the term of the mortgage. Points, tough, are used in different ways by different lenders, so that one point at one bank may reduce your loan by 3/8%, whereas at a different lender it may be worth ?%.

The important thing to consider when you are deciding upon paying points is how long you plan on living in your home, and whether or not you can afford the points upfront. Don?t be tempted by the idea of borrowing extra to have the money to pay for points; this doesn?t make any economic sense. For many first time home purchasers, points are not a good idea, since they may want to move to a different home in the near future.

In general, points are a deposit on your interest rate that you will use over the life of the loan. If you decide to pay 1.5 points to get a reduction from 6% to 5.5%, that?s the investment you make. In essence, you are paying some of the interest in advance, so if you are only going to have the mortgage a short while, you have paid that advance interest for nothing.

You can use any one of the mortgage point calculators on the internet, or by consulting with a mortgage consultant, you can see how much you will save in monthly payments on your mortgage, based on how long you will hold the loan.

Let us go back to our $100,000 loan that could be reduced to 5.5% if $1,500 were paid in points. It is necessary to find the breakeven point on how sensible this $1,500 investment will be. For a $100,000 loan, the monthly payment is $599.55 for a 15 year mortgage. For a 30 year maturity, it would be $567.79.

The lower rate mortgage is $31.76 a month lower, but you had to pay points to get this smaller payment. When you divide that $1,500 by the savings of $31.76, it would take you almost 4 years, 47.23 months, to recover the initial outlay. That makes the decision simple; if you do not plan on being in your home a minimum of 47.23 months, the points do not gain you any advantage.

However, after the 47.23 months have elapsed, each month payment is a savings. That can be a real savings if you keep your home for thirty years and save $31.76 a month; in fact, it will add up to $9,933.58!

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Interest Rates and Your MortgagHome Loan

One of the most critical decisions to make when you want to a home is to time the interest rates exactly right. If you think rates will increase, you want to purchase now before they do, but if you think they are going to go down, you may want to delay your purchase and take advantage of lower rates.

The interest rate on your mortgage will be influenced by many factors and economic indicators, and having a basic concept of these will help you in your choice. The first thing to understand is that interest rates are just the price of money and like all prices, they are determined by supply and demand.

The first factor to examine regarding interest rates is the inflation rate. Inflation is measured by two primary indicators called price indicators. These are the producer price index and the consumer price index.

The Producer Price Index (PPI) measures the changes in the prices producers need to pay to produce items. If PPI is rising, this means that the cost of finished goods is more, which mean inflation.

CPI is the measure of the change in prices at the consumer level, measured as a group of items. This is a very critical signal of inflation since it is what we will all pay for our purchases. The so called ?basket of goods? used is steady so that economists can measure how prices change, but because food and energy are included, they are often eliminated to lower volatility. This allows them to look at the core inflation rate to understand better where overall prices, and therefore inflation, are going.

GDP is the next widely used indicator of how inflation and therefore interest rates will behave. Central banks aim at slow, steady growth in the economy, since zero growth means recession, and too fast growth means inflation. The Fed therefore intervenes and when the economy is growing too quickly, it will raise interest rates to slow the economy down, or conversely, lower interest rates to stimulate the economy for increased growth.

The unemployment rate is another major component of the economy that affects interest rates. Low unemployment is considered inflationary since employers have to chase after too few candidates, and will raise wages to do this. High unemployment will typically lead to reduced interest rates since it means lower wages and consequently lower prices. This is called the wage price spiral; higher wages lead to increased prices, decreased wages to lower prices.

If you are thinking about a loan, it is to your advantage to watch these indicators to find the best timing to enter the loan market. The bigger picture to watch out for is a falling GDP with unemployment which leads to lower rates. Conversely, higher GDP and lower unemployment will mean an increase in interest rates.

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ARMs Are Not That Difficult to Understand

You have a lot of choices to make in buying a house and deciding upon a mortgage, and in today’s confusing mortgage world, you now also have to choose the index that you want for your Adjustable Rate Mortgage (ARM).

When we speak of the “index”, we are speaking of the base financial instrument that the adjusting rates will be based upon. Today, banks use different indices, such as the rate on government debt, or the Fed Fund rate or the London Interbank Offer Rate(LIBOR).

Interest rates on ARMS adjust, upwards or downwards, based on how general rates are moving, which is shown in the movement of the underlying index rate. For example, if you chose the CD rate as your index, when CD rates go up, your mortgage rate will increase. ARMS also contain adjustment caps, so that you can limit the exposure as to how high your loan rate can go, even if your index rate continues to increase, which is good if you just had an adjustment, and the rates go up again. But be aw are, however, that if you just readjusted at a higher rate, and your index rate falls, you are stuck with the increased rate until the next adjustment period.

Your ARM may be tied to the Treasury Bill rate, which is the rate the US Government pays on its 90 day investments. The Fed Fund rate is the rate banks pay to the Federal Reserve Bank for funds. LIBOR, the London Interbank Offered Rate, is a very popular index, and is the rate used by large global companies to borrow.

Which is the right choice depends on your own circumstances and your view of where interest rates are heading. If you would like a rate that is responsive to the interest rate market, you should choose the CD rate as your index. On the other hand, if your ARM is based on T Bills, it will react more slowly. LIBOR is the index that moves the most frequently and the most quickly, so if you want to take frequent advantage of the downward level of decreasing rates, this is the one for you.

As we said, new products are introduced each day, and one of the newest it the option ARM, which allows the borrower to pick how much he wants to pay on his home loan each month. Of course, there is a minimum, usually the amount of interest, so the bank can guarantee its return, and then the balance goes toward the loan. Be warned that minimum payment option can end up in an increasing, rather than decreasing mortgage, a phenomenon known as negative amortization.

With all of these choices, a potential borrower should be sure to talk to a professional mortgage broker who understands the various products and can help you choose the best one for you.

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