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Luxury home sales expected to climb: study – Ask Bruce Coleman. Vancouver Mortgage Broker

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Sales of luxury homes will likely gain momentum in the fall, fuelled by demand from international investors, according a new report from real estate sales and marketing company Sotheby’s International Realty Canada.

When a Second Mortgage Makes Sense – Consult with Bruce Coleman, Vancouver Mortgage Broker

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When a Second Mortgage Makes Sense

If you’re not in the ultra-rich capacity, chances are you’re like most people who are living on a tight budget. There are occasions when you will need a big chunk of cash on hand for a variety of reasons. If you own a home and need that cash right now then it could be right at your fingertips.

Many people who need extra money on hand may consider going the rout of maxing out their credit cards or taking out a personal loan. Depending on the reason why you need some extra serious money you could consider taking out a second mortgage instead.

Why not use the equity you’ve built up in your home and take advantage of the low second mortgage rates that are still available? Consider the interest rates that you would pay on your credit cards or what a lender might charge for a personal loan.

If you check out the going rates for a second mortgage versus the amount of interest you’d be paying for your credit cards or a personal loan, you might be in for a bit of a shock.

Now, since you are using your home as collateral for a second mortgage you might want to consider your reasons for getting a second mortgage carefully. Budgeting and planning need to be both practical and realistic so you don’t end up in a financial bind down the road. Make sure you will be comfortable with the additional debt involved before you apply.

Most Common Reason to Get a Second Mortgage

The most common reasons people consider getting a second mortgage include the following;

Home Renovation, Repairs and Improvements

Home renovation projects are one of the most common reasons to get a second mortgage or a HELOC (Home Equity Line of credit). This is especially true if you are living in or buying an older Vancouver home. Using a second mortgage to renovate, repair or add improvements to an older home can often have a terrific R.O.I. (Return On Investment).

The best renovation projects that can have the best R.O.I., especially if you’re thinking of putting your home on the market, includes kitchen and bathroom renovations, or replacing an aging roof.  Other repairs such as those needed for the foundation or to replace old electrical or plumbing can be quite expensive.

Buying a Second Home or Cottage

Real estate in Vancouver and throughout the province is both vibrant and largely a sound investment. You might be thinking that now might be the right time to buy a second property which you could use to pay for itself as a rental property while reaping the awards of property appreciation down the road. However, coming up with the money for the down payment might be a bit problematic. A second mortgage might be just the perfect solution.

Or, you might be thinking of buying a weekend retreat or cottage. Maybe you’re dreaming of some place out on a lake or nestled away in a quiet valley where you can escape your busy and hectic lifestyle for a few days or weeks each year.

College Tuition

Your children might be at that age where they’re ready to graduate from high school and go to college or university. Let’s face it – college and university tuition is getting pretty pricey. University tuition alone can average around $10,000 per year and that might not even include accommodations and living expenses. Paying off such a hefty student loan can be a horrendous burden for a young person who has just graduated.

Many folks want to give their kids a helping hand and a second mortgage might be the best way to give your children that extra boost in starting out their professional lives with a clean financial slate.

Whatever your reasons for getting a second mortgage, just make sure that you’re in good financial shape before you take the plunge.

Are you meeting these money management milestones? – Consult with Bruce Coleman, Vancouver Mortgage Broker

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LINDA STERN – WASHINGTON — Reuters

Life spans are long, and not everyone lives on a “house and kids by 30, first million by 50” kind of schedule. Nevertheless, there are financial milestones that it helps to hit at every stage.

Here is my list, by decade. If you are late on a few, that’s no big deal. If you’re early, that’s great.

0-10: Learn to add and subtract. Sell something (lemonade, car-washing services) for money. Hope your parents are savvy enough to pay you an allowance – it’s an important first money-management step. Save up some of it for something you really want. Use some to buy a gift for somebody else.

10-20: Work at a job for money. Put some of your paycheck in a checking account. Start a savings account. Buy your own clothes. Learn about average salaries for different careers, and about how much different things cost. Make important decisions about which college to attend and what to study – not strictly on the basis of cost, but with realistic finances in mind. Get a credit card with a low borrowing limit and use it regularly, but pay it off monthly.

20-30: Learn to invest. Learn to budget. Continue to feed your savings, and start a retirement fund. Organize a repayment plan for your student loans. Prioritize among all the things you want or may need at this age – from couches to cribs to career suits. Keep your credit report clean by not defaulting on debt or paying bills late. Learn to make credit cards work for you by choosing a good cash-rebate card, using it for everything and paying it off monthly. Set up a rainy day savings fund so that you build it automatically via payroll deductions. As soon as you have children, buy life insurance. Do your own taxes at least once. Learn to track all of your money in a program like Quicken or Mint or on your own spreadsheet if you’re so inclined.

30-40: Continue plowing as much as possible into retirement vehicles. Buy a house. If you have children, set up a college-savings plan for them. If you haven’t already, switch your various insurance policies to high-deductible plans – you’ll save money every month on premiums and should have accumulated enough savings by now to cover the deductibles. Build your investing expertise by learning about exchange-traded funds, individual stocks and bonds. Diversify your investments to make sure you have some money in some of these categories: real estate, commodities, foreign stocks. Boost your skills – either by pursuing an advanced degree, or taking courses, or spending money on the tools that will make you more employable. Follow the performance of your investments in a portfolio-tracking program.

40-50: Create an investment account that is separate from your rainy day savings, your retirement fund and your kids’ college-savings vehicles. Put it on autopilot so money is deposited routinely from your checking account. Max out your retirement savings to the extent possible. Use some money for something you’ve always wanted to do – take the big family trip or get the swimming pool installed. Talk to some financial advisers – you may find one that you want to work with, or you may decide you can manage your investments by yourself. Talk to your own aging parents to make sure you understand their finances, what you would have to do if they needed care, and what you will have to do when they die.

50-60: Do the pre-retirement math so you have a rough idea of how much money you’ll have when you retire and how much you have to save between now and then. Pay off all your debts, except for a low-interest fixed-rate mortgage. Consider buying a vacation or retirement home. Educate yourself about programs like Old Age Security and any pension benefits you might have coming to you. Invest some money in your future self – building a hobby shop or taking classes to prepare for your next act.

60-70: Develop a part-time consulting gig or side business. Learn to cash in on senior discounts. Earmark a portion of your savings ($250,000 or more if you can afford it) to save in case you need long-term care. (Investigate long-term care insurance but be cautious; many companies are dropping out of the business or drastically raising their rates.) Rejig your investments so they will provide the income you need. Decide if you want to monitor them yourself, or hire a professional money manager. Get more strategic about your charitable giving – make fewer, larger gifts, and consider setting up a donor-advised fund – a type of private charitable fund that acts like a foundation and that other family members could also contribute to. Splurge on the retirement trip or big toy. Prepare yourself psychologically for the withdraw-and-spend phase of life, after a lifetime of working and saving. Start serious estate planning.

70-80: If your finances are tight, cut back on spending. If you’ve got plenty of money, begin acting on your estate plan by being more generous with relatives and charities. Talk to your kids about your finances, and make sure you’ve got clean records they can access about where everything is and what you want done with it.

80-90: Downsize or get rid of stuff – hand off family heirlooms one at a time in a way that is meaningful – and donate household items you don’t use anymore to charity, or to help your grandchildren set up their first places. Use more of your money to live comfortably; don’t stint on the hearing aids, household help or handrails that keep you active and safe.

90-100 and beyond: Hire help, even if you don’t need it – it’s nice to have some chores taken care of and your kids will worry about you less. Spend your money on whatever makes you happy.

As rates rise, brace for mortgage renewal time – Consult with Bruce Coleman, Vancouver Mortgage Broker

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ROB CARRICK– The Globe and Mail

In some cases, homeowners can actually save money by breaking a mortgage with a year left on the contract.
(Gloria Nieto/The Globe and Mail)

The era of pleasant surprises for people renewing their mortgages is over.

After five years of trending lower, mortgage rates have reversed course and started to rise. Aspiring first-time home buyers are being priced out of the market by these increases, but at least they’ve avoided a costly mortgage entanglement. Existing homeowners may simply have to pay more.

Current fixed rates are still lower than they were five years ago, but it’s a different story with the once-popular variable rate mortgage. Veteran mortgage broker Vince Gaetano ofMonsterMortgage.ca says he has clients coming in with maturing variable-rate mortgages at 2.1 or 2.2 per cent, an all-time great deal. “They know their cash flow is going to get crunched,” he said.

A variable-rate mortgage goes for 2.6 per cent with a good discount these days, while a fully discounted five-year fixed rate mortgage rate has risen to 3.49 per cent from 2.89 per cent a few months back. Over the decades you own a house, you’ll win some at mortgage renewal time and you’ll lose some. We’ve had quite the winning streak in recent years for people renewing at lower rates, but now it’s coming to an end.

In the years ahead, the biggest financial mistake you make just might be failing to think well in advance about a mortgage coming up for renewal. You have options: Your lender may let you renew early (within 90 days) into a new five-year term, or you may be able to do a “blend and extend.” That’s where you convert the remains of your existing fixed-rate mortgage into a new loan with a blended interest rate. We’ll look at a more aggressive strategy suggested by Mr. Gaetano in a minute.

But first, there’s the question of how people will afford higher mortgage payments. We’ve been assured by people in the mortgage industry that homeowners can absorb higher mortgage payments. A 2011 report from the Canadian Association of Accredited Mortgage Professionals said there is “very substantial room” for households to pay higher mortgage rates. Will Dunning, CAAMP’s chief economist, said Monday that he stands by that view.

But the issue is not whether you can afford higher mortgage payments. Rather, it’s what you’ll have to sacrifice to make them. Mr. Dunning’s take: “Discretionary spending disappears. A lot of that is in the service sector – people going to coffee shops and restaurants.”

With the need for future sacrifices in mind, let’s look at a strategy suggested by Mr. Gaetano for lessening the impact of renewing a big mortgage at a higher rate. The plan: Break your existing mortgage a few months before the renewal date and refinance at current rates so you avoid higher costs in the future.

Let’s say your mortgage is coming up for renewal in six months, which leaves plenty of time for more rate increases. Start by getting a commitment from your lender to hold today’s best discounted five-year fixed mortgage rate for 120 days. Then, wait until two to three months before renewal to break the mortgage.

Yes, there will be penalties. But by waiting until just a few months before the renewal date, you’ll minimize them. It’s also important to understand that rising rates may actually reduce your penalty.

Penalties on fixed-rate mortgages are usually equivalent to the higher of three months’ worth of interest (Mr. Gaetano said two months’ interest would be charged if you had only two months to go) or a calculation called the interest rate differential, or IRD. Among the factors that go into the IRD are the rate on your existing mortgage and the rate the lender can get today. If rates are rising, then your IRD should decline.

Mr. Gaetano said an additional $1,000 or so in legal fees would apply if you broke your mortgage and took it to another lender. Even so, he thinks borrowers will end up saving money if the balance on their mortgage is more than $200,000 to $250,000 and the difference between the rate on hold for them and market rates is roughly 0.4 of a percentage point or more.

In some cases, it can pay to break a mortgage with even a year to go. Mr. Gaetano said he has clients who owed $980,000 on a mortgage maturing next June 1, with an interest rate of 3.79 per cent. Earlier this summer, he secured a 120-day hold on a 2.89 per cent mortgage. With five-year fixed rates now at 3.49 per cent, the strategy plays out as: Total costs of $8,428 or so in penalties and legal fees versus interest cost savings of $27,766. Net benefit to the clients: Savings of more than $19,300.

For more personal finance coverage, follow Rob Carrick on Twitter (@rcarrick) and Facebook (robcarrickfinance).

Vancouver Home Mortgage Closing Costs – Consult with Bruce Coleman, Vancouver Mortgage Broker

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Vancouver Home Mortgage Closing Costs

Many first time home buyers in Vancouver might not be fully aware about what is involved in closing costs. Although you might have factored in your down payment and what you will be paying for the mortgage, there are also some relatively expensive closing costs that you need to have included in you budget.

The closing costs that you need to consider are not included in just a single payment but include a host of different entities that are involved in the purchase of a new home.

How Expensive Are Closing Costs?

This is some variance in how expensive closing costs can range but most mortgage experts suggest that you budget anywhere from 1 % to as high as 2.5 % of the purchase value of the home you are buying.

This means that if you are buying a home worth $500,000 you might have to budget yourself for an additional $5,000 to as much as $12,500 to have on hand to cover all your closing costs.

These closing costs will not occur all at once, and will be spread out through the mortgage application, approval and closing process.

What do Vancouver Closing Costs Include?

Here are the most common items that comprise closing costs and extra expenses that you will incur.

·         Appraisal Fee

This is the fee the bank charges to have the new home appraised. The bank will initially absorb the cost but ultimately they will bill you for it in their closing cost statement.

·         Your Credit Report

When you apply for a mortgage, the lender will always perform a credit check on you and you will be charged for obtaining this report.

·         Fees for Mortgage Application and Processing

You will be charged a fee by the lender for processing the mortgage application.

·         Cost of a Property Survey

Any home being purchased will require a property survey to be performed so that it includes any improvements which have been added since the last survey and which will affect the amount of property taxes levied by the municipality.

·         Home Mortgage Insurance and PST/GST

 If your down payment is less than 20% of the purchase value of the home then you will be required by the lender to incur the additional expense of mortgage insurance. This will be an expense above and beyond the amount you will be paying for your mortgage and will be added onto your mortgage balance.

·         Property Title Insurance

Most lenders will also require that you obtain property title insurance should you incur any legal claims against your title of property ownership.

·         Disbursements and Legal Expenses

When a property is purchased you will require using the services of either a notary public or a real estate lawyer to represent your interests when buying a property.

·         Land Registry Tax

When the title if a property is transferred you will also have to pay the tax which is levied by the province for this transference.

·         Home Inspection

You will most likely use the services of a licensed home inspector before you take possession of the home to ensure there are not any major structural or other problems. This expense may cost from between $300.00 to as much as $450.00.

·         Adjustment on your Interest

Should you obtain your mortgage before month’s end, you may also be responsible to incur the interest cost for the remaining portion of that particular month.

·         Life and Home Insurance

Most lenders require that you have sufficient life insurance on your mortgage so that it will be covered if you die unexpectedly. Also, you will be required to get a home insurance property to cover the home should it be damaged or destroyed as a result of a loss. You will also want to include your personal possessions in an insurance package.

Additional Closing Costs

Most of the closing costs listed above are fairly standard for any home purchase but there may be additional cost which you will be responsible for the following:

·         Expenses for Levies

If you are moving into a new subdivision an additional levy may also be charged by the municipality.

·         Warranty for New Homes

Most new homes which are constructed require that you also buy a warranty to ensure that the builder has built the home in accordance to provincial regulations.

Home shoppers, don’t rush to buy just to lock in a cheap mortgage – Consult with Bruce Coleman, Vancouver Mortgage Broker

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ROBERT MCLISTER– Special to The Globe and Mail

House for sale in a Toronto neighbourhood, August 27, 2013.
(Gloria Nieto/The Globe and Mail)

The idea that low mortgage rates are gone forever sent Canadian home shoppers into a panic this summer. Thousands rushed to use their rock-bottom pre-approved mortgage rates and buy a home, contributing to a20 to 50 per cent spike in sales last month in Canada’s biggest housing markets.

But how logical is rushing to buy a house simply because mortgage rates have risen?

Rates today

For the past few months, consumers have been bombarded with comments like this:

“I think this is the real thing. This is the end of extremely low interest rates.” – Benjamin Tal, deputy chief economist at CIBC World Markets

Not surprisingly, many folks who read such comments head immediately to their bank or broker and lock in a rate for 90 or 120 days. Those 90-120 days fly by, which adds to their perceived urgency to buy.

But the reality is that by all historical measures, mortgage rates are still extraordinary and could remain so for a while. Take for example the most popular term, the five-year fixed, for example. Data from RateHub.ca shows that since 2006, the average discounted five-year mortgage has been 4.11 per cent. (See this attached chart for more details.) Since 1991 (the modern era of monetary policy), the average has been north of 6 per cent, reaching a high of more than 10 per cent in 1991.

Yet, even after this summer’s big bump in rates, it’s still possible to snare a five-year rate at 3.39 per cent or less. That’s just a short stroll from the historically low 2.99 per cent rates that garnered headlines for months.

And while the uptrend in rates may continue, there’s nothing to say they won’t reverse lower. We’ve seen three major fake outs in rates over the past five years and we remain in a low-inflation modest-growth environment. Until it’s clear that the Bank of Canada will start lifting its key lending rate, fixed mortgage rates will gyrate to the ups and downsof the bond markets and North American economy.

Pay less interest. Pay more for a home?

“Buying the same house will be more expensive this fall than this spring,” National Bank Financial’s Peter Routledge told the Globe and Mail last month. But analysts point to a range of factors that could moderate home prices in the next six months, including higher interest rates, growing supply, modest income growth and stricter mortgage regulations. Canada’s banking regulator is weighing new mortgage rulesas we speak.

Rates are the biggest wild card and the No. 1 factor that could put the brakes on home prices. Higher mortgage rates immediately make it harder for budget-strapped buyers to qualify for a mortgage. That’s why – other things being equal – as rates increase, prices usually decrease.

So if home prices potentially face headwinds, does it really make sense to run out, compete with a stampede of other buyers and purchase a home?

Economists like Toronto-Dominion Bank’s Craig Alexander projectanother half-point rate jump in five-year fixed rates next year. Based on CREA’s average Canadian home price and a 5 per cent down payment, that half-point would cost home buyers $8,900 more interest over five years versus today’s rates, assuming an equally priced home.

What are the chances that rushing to buy now will cost you at least $8,900 more and/or cause you to settle for a less than ideal property?

The right strategy

Knee-jerk decisions tend to be costly when it comes to personal finance, be it with investing, buying insurance, or getting a mortgage. If you’re in the market for a new home, get one or more 120-day pre-approvals to protect yourself from rate increases and reset them every few months as necessary.

Then take your time, block out the rate chatter, and wait for a property that’s the perfect long-term fit… and good value. Canadians live in their homes an average of five to 10 years. That’s a long time to live with a rushed decision.

On Thursday at noon (ET), Robert McLister will take your questions in a live online chat. To join the discussion, click here.

Robert McLister is the editor of CanadianMortgageTrends.com and a mortgage planner at VERICO intelliMortgage, a mortgage brokerage. You can also follow him on twitter at @CdnMortgageNews.

Strategies to Negotiate your First Mortgage – Ask Bruce Coleman, Vancouver Mortgage Broker

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Strategies to Negotiate your First Mortgage 

It doesn’t matter if you are just about to buy your first home or your third home, you still have to deal with a lender. Many people simply accept the terms and conditions of the mortgage and the rates being offered without a second thought.

However, you may not be aware that some aspects of the mortgage can be negotiated where you might just end up with a much better deal that can save you money.

You may not necessarily have a lot of wiggle room, but every advantage you can wring from these tight fisted lenders still means more money in you pocket. The bottom line is that everyone wants to get the best bang for their hard earned buck.

So, what areas can you negotiate and what are some of the negotiating strategies can you use to get a better mortgage deal on your Vancouver home?

One of main areas where you might have some latitude to negotiate is on the interest rates you pay for your Vancouver home mortgage.

Negotiating Strategies for Interest Rates

Most of the large mortgage lenders advertise their rates. However, did you know that most of these large lenders are inclined to advertise the maximum interest rates that they would prefer to charge? Also, they are not the only players in town because there are dozens of smaller lenders who don’t advertise their rates which tend to be generally lower then the big players.

If you have a good credit rating and have obtained a pre-approved mortgage with one of the big lenders, you could be in an ideal position to negotiate. If you’re in good financial standing, all lenders both big and small are in competition to get your business.

If you’ve been offered a better rate by another lender, you might be also be interested in knowing that most of the larger lenders have up to a 1.5 % leeway on the interest rate they are advertising.

If you already have your accounts, RRSP, credit cards or have had personal loans with the bank that has already pre-approved your mortgage, don’t you think you ought to qualify for their lowest possible rate?  Why not negotiate for the best possible rate you can get?

The lender who gave you the pre-approved mortgage obviously wants your business so why not ask for a better deal if you’ve also been offered a better deal on your mortgage rates elsewhere. And, if they won’t budge, then go with the better offer because it’s their loss not yours.

Another way to sweeten the mortgage negotiation is if you have some of your business with one more other institutions. You could negotiate a better interest rate simply by offering to swing this other business their way if they give you a better deal on your mortgage.

Down Payment Negotiating Strategy

Another strategy you can use to get a better mortgage rate entails your down payment. Now here, you have to be able to have more than 20 % of a down payment on hand before this strategy can be put into play.

Suppose you’ve saved as much as 25% for a down payment for your prospective home. You could start the process by telling the lender you have 20% for the down payment. After you’ve received a pre-approved mortgage and you’ve located the house you want to buy, you could go back to the lender and advise them you would be prepared to up your down payment to 25% if they could give you a better rate.

If they aren’t prepared to give you a better rate then just remind them there are plenty of lenders out there who would be happy to give you a better deal on your interest rate.

Lenders are in fierce competition for your business so why not take advantage of this competition and negotiate a better interest rate and save money.

Life Insurance and your Mortgage – Consult with a Vancouver Mortgage Broker

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Life Insurance and your Mortgage

A life insurance policy to cover your mortgage is often required by a lender when you apply for a mortgage. This policy is often offered by a lender so you don’t have to take that extra step in obtaining a policy.

 But, even though the lender is offering this convenient service, it has a number of different disadvantages, so you might want to consider an alternative.

The alternative presented can be more advantageous and will most likely save you some money.

Mortgage Life Insurance Explained

Any mortgage insurance policy which is offered by the mortgage lender is generally not one of their products but is a policy which is proffered by an insurance company. Many people simply go along with this service because of its convenience.

These policies are generally easy to obtain and usually does not require a medical exam. These policies are often referred to as no-exam insurance policies. You have no doubt seen commercials or advertisements which offer this convenient to obtain life insurance policy.

Reasons Why Lender Mortgage Life Insurance is Not the Best Purchase

Although these policies are simple to get there are several reasons why they are not the best purchase you can make when it comes to mortgage life insurance. These reasons include:

• Type of Policy has Drawbacks

The mortgage life insurance is generally of a type known as a “decreasing term life insurance”.  What happens with this policy is that as you pay your premiums the amount of death benefits decreases. There is really little benefit to your or your family other than the mortgage coverage.

• You are Not the Beneficiary

On most life insurance policies you can name your beneficiary. On this type of lender sponsored mortgage life insurance policy, the lender is the sole beneficiary. You are paying for a policy out of your pocket where only the lender benefits.

A No-Medical Exam Mortgage Life Insurance is More Expensive

Any life insurance policy, whether privately bought or through a lender which does not require a medical exam is always more expensive than a policy which does require a medical exam. This is because the insurance company assumes more risk because they know less about your state of health.

These types of policies can cost as much as one third more than a standard term policy which requires an exam.

A $500,000 30 year term life insurance policy with a medical exam may cost a 25 year old male about $360.00 per year. The same policy without a medical exam may run around cost as much as $475.00 per year. Over 30 years, you could up paying as much as $3,750 more out of your pocket simply because you bought a more convenient policy.

Consider an Alternative

Instead, if you bought a level term policy worth $500,000 through an insurance broker and took the medical exam, you would have a policy that would benefit you and your family for your entire life and still satisfy the lender’s requirements.

Additionally, you will be empowered to name your own beneficiary. The death benefits proceeds would go directly to your beneficiary in a lump sum tax-deferred payment. If, 20 years down the road and you died unexpectedly, and have paid your mortgage down to say $175,000, your family could not only pay off the mortgage but would have an additional $375,000 in extra benefits as a financial cushion.

You would also save a fair chunk change on the amount you pay out in premiums over the years. You will need life insurance anyway, and you might as well buy it when you are young because it gets more expensive to buy as you age.

Bottom Line

You have to have mortgage life insurance, so take the time to shop around and use an independent agent to compare rates and get some advice before you jump on the lender’s band wagon. Mortgage life insurance sold by a lender may not be such a good deal.

Using a Co-Signer for your Vancouver Home Mortgage

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Using a Co-Signer for your Vancouver Home Mortgage

Sometimes, getting an approval on your first Vancouver home mortgage has an extra hurdle that you might not have expected. The lender might be prepared to approve your mortgage providing that you have a co-signer. If that happens, you might be wondering what that entails and how it works.

Why a Lender Might Require a Co-Signer

There are several reasons a lender could insist on having a co-signer on your mortgage. The first thing to know is that you should not be discouraged by this request. It simply means that the mortgage lender is not entirely comfortable with your financial or employment situation.

You might only recently have been employed on your job or your employment history might be somewhat scant. Another reason is that you might be somewhat borderline when it comes to how the lender calculates your budget according to your debt ratio and your ability to comfortably handle mortgage payments. It could be you might not have much of a credit history or possibly due to some other reason such as your being self-employed for example.

The lender simply wants to be assured that the mortgage will be more fully secured. The fact that they are still considering you for a mortgage should be taken as a positive sign. You simply have to take that one extra step in order to secure your mortgage.

Responsibility of a Co-Signer

What are the responsibilities and what is the role of a co-signer on a mortgage? The co-signer is the person you’ve approached agreed to take on this very important role to secure the approval of your mortgage.

Most people who use need a co-signer generally use a family member such as a parent or sibling. You must be fully aware that if you renege on your mortgage payments, the co-signer assumes full and complete responsibility for making these payments.

A co-signer should not assume this responsibility lightly as the consequences could have a significant impact on their own financial situation and even on their credit rating should they not be able to fulfill this role.

You must be very clear on your own financial circumstances and only proceed with this route if you have complete confidence about your ability to pay the mortgage loan.

What a Lender Wants for a Co-Signer

A lender will not let just anyone be a co-signer. Essentially, a co-signer must also qualify for the mortgage in the same manner that you were initially approved. The lender will also carefully scrutinize the credit history, employment and income and debt capacity of the co-signer before they will approve the mortgage. So, you must choose your co-signer carefully if you wish to succeed in getting approved.

Removing a Co-Signer from a Mortgage

Should your financial situation improve you also have the option of removing a co-singer from your mortgage. This will be subject to the requirements of your particular lender. They may simply go ahead and do so or you may possibly have to apply for a new mortgage if the term has not fully expired.

You should also be aware that a co-signer also has the right to ask the lender to remove them from a mortgage which may require that you have to re-apply for a new mortgage or seek a mortgage elsewhere.

A Co-Signer can Also be a Co-Borrower

If you have problems in finding someone who meets the qualifications of a co-singer, there is also an alternative you might consider – using a potential candidate as a co-borrower instead.

A co-borrower would be considered as a co-owner of the property because you would be using your combined incomes as a means to pay the mortgage. This also requires that the name of the co-borrower is included on the property title, and jointly owns the property with you even though they don’t reside in the home.

If your financial situation improves, you can reapply for a mortgage and remove the co-borrower from the title and from the mortgage. A co-borrower doesn’t actually have to pay anything towards a mortgage but you must remember they are still a co-owner of the property so you must be fully aware of any potential legal ramifications before you opt for this type of mortgage arrangement.