A common term and form of advertising to hear in the mortgage industry is that "in most cases, my services are free". While it may come across that Mortgage Brokers are doing the work for nothing, in reality, it really comes down to who pays us, and more often, it is the lender, not the borrower. 

For a typical, well qualified mortgage file that is done on the Prime, or A lending side, a Mortgage Broker is paid by the lender as a form of commission, or finder's fee. I will discuss broker fees shortly; however, it is important to note that most Prime lenders do not allow Mortgage Brokers to charge any fees, such as a broker fee, to the client. If you are having a mortgage done by a Broker where a broker fee is being charged, and it is with a Prime lender, it is recommended to discuss this with the broker and lender to ensure everything is being done properly. 

A finder's fee is paid to the Mortgage Broker by the lender after the mortgage has funded, also known as the closing day, and is generally a percentage of the mortgage amount. A typical percentage is one percentage of the funded amount; however, it varies amongst lenders and is higher or lower depending on the length of the term.

On top of the finder's fee, a Mortgage Broker may also receive other incentives, such as Volume Bonuses from lenders that a Mortgage Broker uses commonly or Efficiency Bonuses from lenders to award Mortgage Brokers that send quality files or promotions that are offered by lenders from time to time.

Another form of commission that a Mortgage Broker may make from a lender are trailer fees. A trailer fee is a form of commission that is paid over time rather than all up front. A finder's fee is still paid shortly after closing the mortgage; however, it is smaller than normal since a portion of it is paid out annually. This method of getting paid is preferred by some brokers as it stretches out their income stream and may allow better control of funds.

When a Mortgage Broker works on a file that is suitable for an alternative, also known as a B lender, or a private lender, they may charge a broker fee, which is a fee for their services that is paid for by the client and is normally processed on closing day and collected by the client's lawyer and then sent to the Mortgage Broker.

The reason that a broker fee may be charged on these types of files is that some of these lenders do not pay a finder's fee to the Mortgage Broker directly; or they offer a lower finder's fee than normal.

It is important to note that a broker fee may not be charged on alternative files since the lender may offer a suitable finder's fee to compensate the Mortgage Broker. If a broker fee is being charged, it could be that the lender does not pay a finder's fee or there was a substantial amount of work put into the file, or a combination of both. Most private mortgages will feature a broker fee as the majority of private lenders do not pay the Mortgage Broker any compensation.

Whether a mortgage is being done with a prime, alternative, or private lender, a Mortgage Broker should always be transparent about their method of compensation and be open to explaining who is paying them for their services, the lender, the client, or both? A Mortgage Broker is also required to disclose how they get paid directly to the client on the Disclosure To Borrower document that is given to the client during the mortgage process. If your Mortgage Broker is not transparent or has not disclosed this information to you, it is recommended to ask why and get more information to ensure you are protected.

There is nothing wrong with asking your Mortgage Broker if there is a different product available to you that would pay the Mortgage Broker less money in order to save you more money over the course of your mortgage. In fact, Mortgage Brokers are regulated to ensure that the mortgage product offered to the client is in the best interest of the client, and recommendations were made without weighing the broker's compensation above the client's interests.

It is also important to note that a Mortgage Broker is not paid directly by the client, and all compensation must go through the mortgage brokerage that the Broker represents, no matter what type of compensation it is. If your Mortgage Broker or Agent is requesting payment directly, you should discuss this with the Principal Broker of the brokerage or the regulator, the Financial Services Regulatory Authority of Ontario.

Today I want to discuss the subject of porting an existing mortgage and explain what a port is and go over the pros and cons of doing so.

When shopping for a new mortgage, a common source of confusion is the difference between the mortgage term, which is normally 1 to 5 years, and the amortization period, which is normally 25 or 30 years.

The basic explanation for the difference between the two timelines is that the mortgage term is the length of the current mortgage contract, and the amortization period is the total life of the mortgage. A typical insured mortgage in Canada features a 5-year term and a 25-year amortization period. There are mortgage terms as long as 10-years in Canada; however, the majority of mortgages feature a 5-year term or less.

Throughout the life of a mortgage, it is expected that there will be multiple terms as the mortgage is renewed with the same lender or even when switched over to a new lender. A great example of the difference between the term and amortization period is to think of a pizza. Basically, the whole pizza would represent the amortization period, and each slice would represent each term. Using the typical insured mortgage of a 5-yerm term and 25-year amortization, 5 slices, or terms, would make up the whole pizza, or amortization period. Considering that not all terms would be equal, and clients can elect to have a shorter or longer term at renewal time, the slices may not all be the same size.

The mortgage term is the time that the mortgage contract is in effect and represents the period that both you and the lenders are committed to for the mortgage, its rate, and the terms and conditions of the mortgage. Mortgage terms typically range from 1 to 5 years; however, can be as short as 6 months and as long as 10 years. Typically, a shorter term will feature a higher rate of interest versus a longer term up to 5 years, which commonly features the lowest interest rates. Longer terms, such as 7 and 10 years, may also feature a higher interest rate as well.

At the end of the mortgage term, you will have the opportunity to renew your mortgage with the current lender or have your mortgage broker look for other options to potentially switch your mortgage to a new lender or look at potential refinancing options if required. The renewal date is when it is recommended to make any changes in order to limit your exposure to potential fees and penalties.

The mortgage amortization period is the time that it would take to payoff the mortgage in full. The amortization period is an estimate and is based on the current interest rate; which may change upon future renewals. Amortization periods on new mortgages are typically 25 or 30 years, with 25 years being the maximum amortization period for an insured mortgage with less than 20% down payment. Although 25 to 30 years is the most common amortization period for mortgages; some alternative lenders do offer amortization periods of 35 years or more.

When it comes to how amortization affects your interest cost, keep in mind that the shorter the amortization, the higher the payment and the lower the interest. The benefit to a longer amortization is that your payment will be lower than compared to a shorter amortization; however, the offset is that your interest expense may be higher if you don't take advantage of prepayment privileges throughout the life of the mortgage. When considering a longer amortization period, you should discuss this with your mortgage broker and ensure that the increased cash flow resulting from the lower payments is worth the possible extra expense in interest. A longer amortization period can add tens of thousands of dollars to the cost of your mortgage and options should be understood ahead of time.

So, let's talk about two types of mortgages: the standard charge mortgage and the collateral charge mortgage. Now, you might be wondering what the difference is between these two, and that's what I'm here to explain. First, let's start with the standard charge mortgage. This type of mortgage is what most people are familiar with. In a standard charge mortgage, the amount you borrow is registered with the land registry office for the exact amount of your mortgage. The mortgage, along with any associated fees, is all bundled together and registered as a single charge against the property. Now, let's move on to the collateral charge mortgage. Unlike the standard charge mortgage, a collateral charge mortgage does not register the specific amount of your mortgage. Instead, it may be registered against your property for a higher amount. This higher amount is usually greater than the actual mortgage amount you borrowed. The idea behind a collateral charge mortgage is to give you the flexibility to borrow additional funds without having to go through the refinancing process. If you currently have a mortgage with a Home Equity Line of Credit portion (or HELOC); you likely have a collateral charge mortgage registered on your property. With a collateral charge mortgage, you may be able to borrow up to the registered amount without having to pay costly legal fees or go through the process of refinancing. This can be beneficial if you plan on accessing your home equity for things like renovations or investments in the future. However, it's important to remember that this flexibility comes at a cost. Since the collateral charge is registered for a higher amount, it may limit your ability to switch lenders easily. Future lending flexibility is the key difference between the two types of mortgages. In a standard charge mortgage, if you need to borrow additional funds after you've already obtained your mortgage, you'll have to go through the process of refinancing. This can involve additional legal fees, appraisals, and other costs. The collateral charge mortgage can save you time, money, and hassle, but once again, it's important to consider the limitations of borrowing against the full registered amount. Now, let's explore the implications of these two types of mortgages when it comes to switching lenders. With a standard charge mortgage, if you decide to switch lenders when your mortgage term is up for renewal, the process is fairly straightforward. You can shop around for better rates, negotiate with different lenders, and choose the one that best suits your needs. However, with a collateral charge mortgage, switching lenders can be more complicated. Not all lenders may be willing to take on the full registered amount, so you might be limited to staying with your original lender or refinancing the mortgage with a new lender, with all the associated costs. Many lenders also offer the ability to transfer a collateral charge mortgage; however, there may be additional fees to do so. To summarize, a standard charge mortgage registers the exact amount of your mortgage with the land registry office, while a collateral charge mortgage registers a higher amount against your property to allow for future borrowing flexibility. With a standard charge mortgage, you'll need to refinance if you want to access additional funds, whereas with a collateral charge mortgage, you may be able to access those funds without refinancing. However, the flexibility of a collateral charge mortgage comes with limitations, as switching lenders can be more challenging. Ultimately, it's important to work with a Mortgage Broker and consider your future borrowing needs and weigh the benefits and limitations of each type of mortgage before making a decision.

So, let's talk about the new CRA T3 filing requirements for people who have co-signed on a mortgage. You might be wondering why this is even a thing, and what it means for you. Well, don't worry, because I'm here to break it down for you. First things first, let's quickly go over what a co-signer is. When you co-sign a mortgage, it means that you are essentially taking on the responsibility of the loan along with the primary borrower. This can happen when someone, like a family member or a close friend, doesn't meet the lender's criteria on their own. So, as a co-signer, you're on the hook for the mortgage if the primary borrower defaults on the loan. Second, a Bare Trust is a situation where you legally or are named as a legal owner of an asset or property, but the asset is held for the benefit of someone else. Having co-signed for someone else’s mortgage so they can qualify and get into the housing market is an example of a Bare Trust. Usually when co-signing for a mortgage, you will be added to title for as little as 1 percent of ownership; therefore, you are a named legal owner of the property. Now, let's get into the nitty-gritty of the new CRA T3 filing requirements. The Canada Revenue Agency (CRA) has recently implemented changes to ensure that all income from joint investments, including co-signed mortgages, are properly reported. In the past, co-signers did not have any reporting obligations when it came to these investments. However, with the new requirements, co-signers are now required to report any income earned from the co-signed mortgage on their T3 tax form. So, what does this mean for you as a co-signer? Well, it means that you need to pay close attention to the income earned from the co-signed mortgage. This includes any interest, dividends, or other types of income that may be generated. You will need to gather all the necessary information related to this income and report it on your T3 tax form. It should also be noted that even if there is no income generated by the property, you will still need to file a Schedule 15 (Beneficial Ownership Information of a Trust) which forms part of a T3 tax form; therefore, a co-signer of any property will now need to have a T3 filed. Now, you might be thinking, "How do I even know what income is earned from the co-signed mortgage?" The first step is to communicate with the primary borrower and the financial institution where the mortgage is held. They should be able to provide you with the necessary information, such as annual statements and tax documents. Once you have all the required information, you will need to complete the T3 tax form. This form is specifically designed for reporting income earned from joint investments, including co-signed mortgages. It will ask for details such as the type of income, the amount earned, and any taxes withheld. Make sure to fill out the form accurately and double-check all the information before submitting it to the CRA. The T3 tax form can be a bit complicated for someone that has never completed one and even though the CRA provides detailed instructions and guides on their website, it is highly recommended to seek the advice of a tax professional who can guide you through the requirements and ensure that everything is filed correctly. The deadline for the filing of the T3 is April 2nd; which is well ahead of the April 30th tax return filing deadline. There may be significant penalties levied for late or unfiled T3 tax forms. The CRA may waive penalties for the 2023 tax year; however, if it is shown that the T3 was not filed knowingly or due to gross negligence an even more severe penalty will apply. It's important to note that these new filing requirements are not limited to just the current tax year. Co-signers are required to report income from co-signed mortgages for each tax year moving forward. So, it's crucial to stay on top of your reporting obligations every year. To avoid these complications, it's essential to understand and fulfill your obligations as a co-signer. Take the time to educate yourself on the new filing requirements, gather all the necessary information, and ensure that you accurately report the income earned from the co-signed mortgage on your T3 tax form. In summary, the new CRA T3 filing requirements now require co-signers on mortgages to file a T3 tax form and report any income earned or generated by the property; even if there was no income earned whatsoever. This means that as a co-signer, you must gather all the relevant information, accurately complete the T3 tax form, and submit it to the CRA. Failure to comply with these requirements can lead to penalties and potential audits. So, make sure to stay informed and fulfill your reporting obligations to avoid any unwanted complications.

A Home Equity Line of Credit, or HELOC, as it is commonly referred to is a method of tapping into your home's equity, much like a mortgage refinance or 2nd mortgage; except there are some key differences between them.

A HELOC is a type of mortgage that is still secured by the property; however works more like a credit card than a normal mortgage. A HELOC allows a client to draw funds as required, instead of a normal mortgage that is commonly one lump sum at the start. A HELOC is a type of re-advanceable loan, or revolving loan.

The flexibility of a HELOC is one of the main benefits of the product since you are accessing funds as they are required, and therefore you will only incur interest costs on funds you actually use, not the full limit available. This can be particularly useful for home renovations, unexpected expenses or other significant financial needs that may arise. Sometimes it is better to have access to funds as needed; rather than just have a large sum of money in an account.

Another benefit of a HELOC is that they can be paid back at anytime without penalties. This is different from most regular mortgages, where you are only able to pay back the full balance at the end of the term; otherwise you may incur a prepayment penalty, which can be substantial. With a HELOC you can make as small or as large of a payment as you want, as long as you are covering the minimum amount required by the lender. The minimum payment is normally the monthly interest plus an amount required to payoff some of the principal. Every lender is different in how they structure their minimum payments.

A further benefit of a HELOC can also be viewed as a drawback at the same time. Unlike many other types of revolving loans, such as credit cards and standard Lines of Credit that feature high interest rates on balances, a HELOC features fairly low interest rates; however, these rates are normally higher than the interest rate on a regular mortgage and a HELOC's interest rates are variable, not fixed. Since they are variable, fluctuations in the lender's prime rate will affect the amount of interest that is charged and the ability to cover even just the interest costs may be affected in a rising rate environment. 

As an example, if we look at a HELOC when prime rates were historically low in 2020 and 2021, versus when prime rates peaked in 2023; we can see a drastic difference in the interest cost incurred on a HELOC. The common rate of interest on a HELOC is prime plus a half percent or a full percent; for the purpose of our example we will use prime plus a half percent and a HELOC balance of $250,000. When prime was at it's lowest, the interest rate on the HELOC would have been 2.95% and the monthly interest costs would have been roughly $614. That same HELOC would have featured a rate of 7.7% in 2023 and the monthly interest cost would have been $1,604; or almost a thousand dollars more per month.

Many people drew large amounts from their HELOCs when rates were low for things like investments, renovations or a down payment on a second home or investment property and may have been unprepared and affected negatively when the prime rate started rising. Since a HELOC is secured by the home just like a regular mortgage; failure to repay could result in a foreclosure or power of sale of the property.

It is important to discuss your financial needs and plans with a Mortgage Broker in order to ensure you have the proper product in place for your future needs. If your HELOC may be drawn to it's limit for an extended period; it may be better to look at a regular mortgage instead. Everybody's situation is different and there is no one size fits all HELOC or mortgage.

It is important to note that just like a standard Line of Credit, which is not secured by property, a HELOC is a Demand Loan, which means that the lender can demand repayment at anytime or even adjust the interest rate or limit whenever they would like. If the lender sees that a client is potentially at risk of not being able to cover their expenses; they may look to limit their exposure to loss just in case. This is different from a regular mortgage, where the lender cannot make changes during the term of the mortgage.

Today we are going to discuss the Mortgage Protection Plan (or MPP) and all the great stuff it can do for homeowners like you. Trust me, it's something you definitely want to know about. This plan features optional life and disability insurance to help protect yourself and your loved ones against the unexpected. It is a convenient, affordable choice whether you have no insurance or need to top-up your existing protection.

So, have you ever heard of a purchase plus improvements mortgage? It's a pretty interesting concept that can actually help home buyers finance both the purchase of a property and any necessary renovations or improvements. Sounds like a win-win, doesn't it? Well, let's dig into the details and explain how this type of mortgage works. First off, a purchase plus improvements mortgage is a type of mortgage that allows home buyers to borrow additional funds for renovations or upgrades to a property they are purchasing. This can be incredibly beneficial, especially for buyers who may not have enough cash on hand to cover the costs of both the home purchase and the desired improvements. Now, you might be wondering how this all works. Well, let's say you find a property that you absolutely love, but it needs some work. Maybe the kitchen is outdated or the bathroom needs a facelift. Instead of having to finance the purchase of the property and then find a separate loan or source of financing for the renovations, a purchase plus improvements mortgage combines it all into one convenient package. When you apply for a purchase plus improvements mortgage, you'll need to provide the lender with quotes or estimates for the cost of the renovations you plan to undertake. These quotes will be used to determine the total amount you can borrow. On the closing date, the funds for both the purchase price of the property and the estimated cost of the renovations will be forwarded to your lawyer with the funds for the renovations being held in trust until the work is complete and the lender authorizes the release. Now, it's important to note that the actual release of funds for the renovations may be done in stages or progress payments. This means that as the renovations progress and certain milestones are met, funds will be released to pay for the completed work. This ensures that the renovations are being done as planned and that the funds are being used appropriately. One great advantage of a purchase plus improvements mortgage is that the cost of the renovations is often factored into the mortgage itself. This means that you won't have to come up with additional cash or take out a separate loan to cover the cost of the renovations. Instead, the cost of the renovations is spread out over the life of the mortgage, making it more manageable for many buyers. A great comparison to this would be when you buy a car and will need snow tires; you could spend a couple thousand dollars all at once; or, you could include the price of the tires in the price of the car and finance the full amount. This is essentially what is happening with a purchase plus improvements mortgage.. In addition to the convenience of financing both the purchase and improvements together, there may also be some financial benefits to a purchase plus improvements mortgage. For example, the improvements you make to the property could potentially increase its value, allowing you to build equity in your home right from the start. This can be a smart investment, especially if you plan to sell the property down the line. It's important to keep in mind that not all lenders offer purchase plus improvements mortgages, so you'll need to do some research to find the ones that do. Additionally, there may be specific restrictions or requirements that you'll need to meet in order to qualify for this type of mortgage. For instance, some lenders may have a minimum loan amount or maximum renovations amount or require a certain percentage of the renovations to be completed by licensed professionals. Some lenders may only offer the product on an insured mortgage; where they use the insurers purchase plus improvement program. Now, let's talk about the potential downsides of a purchase plus improvements mortgage. One thing to consider is that the renovations you undertake may be subject to an appraisal. This means that the value of the completed renovations will need to justify the additional funds that were borrowed. So, it's important to choose your renovations wisely and ensure that they will truly add value to the property. Another thing to consider is that a purchase plus improvements mortgage may have a higher interest rate than a traditional mortgage. This is because the lender is taking on additional risk by providing funds for both the purchase and the renovations. So, it's important to carefully consider the cost of borrowing and ensure that it makes financial sense for your situation. Finally, it's crucial to budget and plan your renovations accordingly. It can be easy to get carried away with the excitement of buying a new home and wanting to make all kinds of improvements. However, it's important to stay within your means and have a clear plan for how the renovations will be completed. Remember, you'll be responsible for repaying the total cost of the mortgage, including the funds borrowed for the improvements. In conclusion, a purchase plus improvements mortgage can be a great option for home buyers who have their eyes on a property that needs a little TLC. It allows you to finance both the purchase and renovations together, making it convenient and potentially cost-effective. However, it's important to carefully consider the financial implications and ensure that the renovations will truly add value to the property. With proper planning and research, a purchase plus improvements mortgage can be a fantastic tool to help you turn a fixer-upper into your dream home!