Mississauga Mortgage

Let’s use numbers that are easy to work with so that we can understand the concepts rather than having to struggle with the math:

Joe & Mary purchased a $100,000 home in Mississauga, in 2006 with a 5% down payment. They worked with a mortgage broker to get them an excellent 5 year mortgage rate of 5.09%. The math would be as follows:
Purchase Price: $100,000
Minus Down Payment: $5,000
Balance: $95,000
Plus Mortgage Insurance: $2,612.50
Final Mortgage Amount: $97,612.50

Let’s assume the following about the housing market over the five years of their mortgage term:
2006 & 2007 - Market appreciated by 5%
2008 & 2009 - Market depreciates by 10% per year
2010 - Market appreciates by 1%
Thus, after 5 years and at the time of their mortgage renewal, their Mississauga home would have an approximate value of $90,195. Equally, Joe & Mary would have an approximate mortgage balance of $86,498 (assuming they paid monthly and nothing extra). This means that their new mortgage would have a Loan to Value (LTV) of 95.9%

FYI: LTV = Mortgage Amount/Property Value ($86,498/$90,195 = 95.9%)

This presents at least two potential problems for Joe & Mary:
1) In Canada we don’t have insured mortgages with less than 5% equity (They only have 4.1% equity).
2) They would have to requalify for both the lender and the mortgage insurer’s requirements.
In the next blog we will look at their qualification criteria and how this could cause them to loose their home and what they can do to prevent this.

Stay tuned….and let me have your questions and comments.

Well we have all seen the reports that property prices are declining.   Although we know the press likes a good story, and decling property prices do make a good story these days, there is truth to property values decreasing, by how much in Mississauga, that is not clear.  Even if only half the stats are true about declines, as home owners in Mississauga it is still prudent to reflect on how this might affect us.  I hope this helps you to review your mortgage status so that you dont stand a chance of loosing your home when it comes to refinancing time.  This is particularly applicable to those of us whose mortgages are up for renewal in 2009 or 2010.

If you have more than 30% equity in your home and your credit is good you should not have a problem getting a mortgage.  However, if you have less than 20% equity in your home I will write a series of articles to help you protect your home, which is probably your greatest asset.  Stay tuned for more shortly or give me a call to discuss!