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Mortgage GuidePre-Approved Mortgages Overseas Buyer Closed Mortgage Open Mortgage
What is Bridge Financing? If your new home closes before the one you are selling, you'll probably need bridge financing. Here's how it works. Bridge financing is used as temporary funds to cover the cost of your new home if the sale of your current home isn't complete by the time your new home's purchase is complete.
Lenders can utilize the equity in the current home without having to refinance it to get the equity for the mortgage on the new home.
How this can help?
If a seller has a firm offer but the closing date isn’t for example for 3 months, and they have purchased a new home which that seller wants to close in one month. This is a perfect situation to use bridge financing.
What the lenders can do is set up a new mortgage, using the equity from their existing home as a guarantee and close on the new property up to 90 days earlier than when they sell their property.
Best Residential Rates for Aug 24, 2010 Mortgage Rates (Apr) Term Rate Prime 2.75% Variable 2.05% 1 Year 2.54% 3 Year 2.90% 4 Year 3.79% 5 Year 3.69% 10 Year 5.35% Qualifying Rate Aug24 5.49% Current Inflation August 1.5% 5 Year Bond Yield Aug 24 2.06%
* 120 Day Rate Hold * Interest rates effective on the date this email was sent
Update Mortgage News: The great rate debate The homebuyer's dilemma: short-term or long? Helen Morris, National Post When finances are tight, it's good to plan ahead and have a clear idea of what your future expenditures will be. One of the standard ways to plan a budget is to base your monthly expenditures on your mortgage payment and fit other expenses around that. A fixed-rate mortgage gives you set monthly payments for anything from one to 10 years, allowing for a stable financial plan. There are currently five-year deals available at about 4%. On the other hand, if you are strictly looking for the lowest payment possible and feel you are able to tolerate the risk of a future rate rise, then you may choose a variable rate. "The lowest variable is prime [2.25%] plus 0.3% and it goes up to prime plus 0.6%. It's so low that it's only going to eventually go up," says Paula Roberts, a mortgage broker for Mortgage Intelligence in Unionville. "What's most important is if clients want to take advantage of the prime plus, say, 0.5%, they need to be prepared that if prime goes up to 4%, their rate goes up to 4.5%." The Bank of Canada has signaled it is likely to keep rates unchanged until June 2010. This means an existing variable deal linked to prime is stable for the time being, but rates on new fixed-term deals (which are based on bond yields rather than prime) are rising. "It does make the decision a little bit difficult ... where one is apparently locked for at least another 11 months and the other one is slowly creeping up," says Michael Gregory, senior economist at BMO Capital Markets. "The differential has become quite wide ... so you are paying what would appear to be a pretty hefty insurance premium[if you choose a fixed rate] to guard against higher variable-rate mortgages." Both Ms. Roberts and Jim Murphy, president and CEO of the Canadian Association of Accredited Mortgage Professionals ( caamp.org),recommend checking the fine print on a new variable mortgage to ensure it permits you to lock in at a fixed rate when variable rates start to rise. For refinancing an existing mortgage, Mr. Murphy cautions that the penalty for an early payout will likely outweigh any gains in reduced interest. "If you're only in the first year or even the second year of a mortgage ... generally speaking, the penalty is going to be much higher," says Mr. Murphy. "You've really got to sharpen your pencil and do the math and make sure that you're getting an advantage." Penalties are generally three months' worth of interest payments or the interest rate differential on the balance, but check the fine print. And the decision to switch also depends on where in your current mortgage term you are. Ms. Roberts says clients who have less than $100,000 to pay off may be more tolerant of rate rises than a client who is at, say, the start of paying off a $400,000 loan and may want to lock into a predictable fixed rate. Ms. Roberts recommends that, if you do sign on to a new variable rate mortgage, you set your payments as if they were at a fixed rate of, say, 5%. "More money is going to principal, and when you lock in at 4.5%, it's no shock to your payment," says Ms. Roberts. "The last thing anybody wants is to have to sell their house because they can't afford it." As for deciding the best moment to lock in? There are no easy answers. "There's been a lot of stimulus. Maybe we will have inflation problems, in which case central banks will have to raise rates quickly and aggressively to try to cool that," says Mr. Gregory. "That is one risk you'll face with certain variable rates. It's definitely a hard choice for consumers." See the history of mortgage rates from 1950-2007
Bank of Canada raises interest rates furtherNotes slowing global economic growth The Bank of Canada increased the target for its trend-setting overnight lending rate on July 20, 2010, raising it by a quarter of a percentage point to 0.75 per cent. The increase follows on the heels of an equal interest rate increase in June 2010, when it was raised for the first time since 2007. The Bank rate now stands at one per cent. In its most recent interest rate announcement, the Bank marked down its outlook for economic growth globally, emphasizing the uneven economic recovery in the U.S., and weakening prospects for European economic growth. In the Bank’s view, Canada’s domestic economy is evolving largely as expected in recent months, but trimmed its forecast for economic growth this year and next by 0.2 per cent to 3.5 per cent in 2010 and 2.9 per cent in 2011. While the Bank raised its forecast for Canadian economic to 2.2 per cent in 2012, it nonetheless left the easing trend for growth intact. The Bank indicated, “[this] revision reflects a slightly weaker profile for global economic growth and more modest consumption growth in Canada." Where the domestic recovery had previously been led by housing and consumer spending it is now guided more by government stimulus. The Bank also reaffirmed its view that housing activity and household expenditures was pulled forward into the first half of 2010, causing to soften in the second half. It also recognized that business investment has been weaker than it previously expected, “held back by global uncertainties.” The Bank anticipates “that business investment and net exports will make a relatively larger contribution to growth” over its forecast horizon. As of July 20th, the advertised five-year conventional mortgage rate of 5.79 per cent was down 0.06 per cent from one year earlier, and 0.2 per cent below where it stood when Bank made its previous interest rate announcement on June 1, 2010. However, it is 0.3 percentage points higher than it was at the beginning of the year. The Bank has signaled to financial markets that it is leaving its options wide open as to whether it will raise interest rates further when it makes its next rate announcement on September 8th. “As it did with its previous announcement in June, the Bank messaged financial markets that further interest rate increases are not pre-ordained,” said CREA Chief Economist Gregory Klump. “The strength of recent economic indicators have prompted the Bank to raise interest rates, but the Bank has signaled that it may keep rates on hold should the economic recovery begin to show signs of losing steam.” The Bank’s July MPR will be published on July 22. The Bank will make its next scheduled rate announcement on September 8th. (CREA 07/20/2010) http://creastats.crea.ca/natl/interest_rate_trends.htm
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