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Archive for the ‘Mortgages’ Category

Jumbo Mortgages

 A jumbo mortgage is a home loan that exceeds the limits set by Fannie Mae and Freddie Mac.

How are jumbo loans different?

A jumbo mortgage is determined by the loan amount. Currently, loan amounts that are higher than $417,000 are usually deemed jumbo mortgages. This determination is made by comparing industry standards for average housing loans as governed by the two largest  secondary mortgage lenders, Fannie Mae and Freddie Mac.

Fannie Mae and Freddie Mac set industry standards for “conforming loans”. Home loans beyond those maximums are regarded as jumbo mortgages. These two agencies cap the dollar figure for loans that they will buy. That is where the $417,000 figure comes from. Larger loan amounts are funded by investors, such as banks, and insurance companies. The dollar figure set to qualify as a jumbo mortgage differs by locale. The limit is higher in Hawaii, Alaska and certain other states. Generally a jumbo mortgage is $417,000.

Jumbo mortgages are available for different terms. They have fifteen year fixed, thirty year fixed or a thirty year variable.

Jumbo Mortgage

The terms for jumbo mortgages vary not unlike conventional home loans. Borrowers can choose between variable rates like 3/1 or 5/1 ARM’s, 15-30 year jumbo’s or a 15 or 30 year fixed jumbo mortgage rate. The type of loan that you choose will be determined by your specific circumstances.

A thirty year fixed jumbo mortgage should be used if the borrower plans to own the home for an extended period of time. The rate is fixed and will not go up or down over the life of the loan. One advantage of this loan is that the payment is the same throughout the entire life of the loan. One drawback is that the fixed rate is generally higher than other loan options.

The lowest jumbo mortgage is usually an adjustable thirty year rate. Lenders understand their potential to benefit from increases in rates over time, so they are willing to lend at a lower rate in the beginning. Although the lower rate won’t last, a variable thirty year jumbo mortgage rate will be fixed for three to five years. The interest rate will usually adjust annually according to a pre-specified index.

An adjustable thirty year jumbo mortgage rate works well when a buyer plans to move within a three to five year period. This option affords the borrower with lower initial monthly payments. Most buyers will consider this option better than the 30 year fixed jumbo mortgage. There is no need to pay the higher rate if you only plan on being the property for a short period of time.

If you are planning on purchasing a home, then consulting with a qualified and trustworthy mortgage lender may be a buyer’s best resource for determining which loan type is right for them.

Mortgage

“A penny saved is a penny earned.”… or so the old proverb goes. Of course, the value of a penny has changed somewhat from the time when your mother offered her wisdom on the value of keeping what you earn. Today, you could save thousands of dollars by simply making the right mortgage decision. If you are like most Canadian homeowners, your mortgage is a goldmine of potential savings.

In the past few articles we have talked about the importance of your mortgage as one of your most significant financial decisions. We have explored the value of seeking the advice of a mortgage professional. This is sage advice whether you are buying a home or just renewing an existing mortgage.

Today, let’s take a look at the bottom line: the savings you can enjoy by making the right mortgage decisions.

It is the primary role of a mortgage broker to find you the right product for your personal situation. A mortgage broker is a financial professional, like your investment advisor, and he or she will want to understand your personal situation and payment preferences. Your mortgage broker has access to a broad spectrum of lending institutions. This provides you with the ability to do comparison shopping for the right combination of features, rates and mortgage options.

All these choices offer you substantial opportunities to save money over the life of your mortgage.

If you are like most homeowners, you are focused, for good reason, on finding the best possible rate for your mortgage. Your mortgage broker can offer you the best range of rate options and terms. Saving one per cent off the posted rate could translate into more than $13,000 in interest per $100,000 borrowed over a 25-year amortization schedule. If, however, you believe that most mortgage rates are basically the same, from one institution to the next, then consider the fact that even an eighth of a point difference in the rate can offer significant savings over the duration of your mortgage.

But it is also important to look beyond the rate. There are other ways to find savings in your mortgage. Your mortgage broker is up to date on market trends and new opportunities, as well as some of the tried and true ways to save money on a mortgage.

Do you get an annual bonus in your job? You may want to use that bonus to pay down the principal of your mortgage. If you pursue this strategy consistently over the life of your mortgage you could save thousands of dollars in interest by paying your mortgage off sooner.

Are you paid bi-weekly or bi-monthly? Consider a change from the usual monthly mortgage payment. Set up your mortgage payment schedule to coincide with your pay period. Again, you can shave years off your mortgage, and enjoy thousands of dollars in savings.

In the coming weeks we will look at some of these savings opportunities in more detail. In the meantime, consider the old penny proverb again. How much is your time worth? Time savings is one of the key, unexpected benefits that clients say they have enjoyed when they choose to work with a mortgage broker. Above all, a mortgage broker is an expert in customer service and that means that your broker looks after every detail of your mortgage research and negotiations on your behalf.