50/50 Mortgage

June 16, 2009

What is a 50/50 mortgage?

·         50% of the mortgage is at our current standard 5 year fixed rate pricing (currently 4.44%)

·         50% of the mortgage is at our current ARM pricing (currently prime + 0.45%)

·         Effective rate is approximately 3.57% based on current rates!!!! 

·         One collateral charge is registered

·         ARM is convertible at any time during the term of the mortgage to our best fixed rates.  ARM must be locked in to remaining term so both portions mature at the same time

·         Mortgage is portable either into a new 50/50 Balanced Mortgage or the borrower can lock in the ARM portion prior to porting and port the whole mortgage as a blended fixed rate.

The 50/50 Balanced Mortgage Borrowers that choose the 50/50 balanced mortgage will benefit from historically low fixed rates and low ARM rates now and have the opportunity to lock in their ARM rate to a fixed rate at any time during the term of their mortgage.  Your borrowers will be protected by being locked into a low fixed rate now and by having the ability to lock in their ARM portion at our best fixed rates at any point during the term of the mortgage.   The perfect balance.

The Merix 50/50 “Wise” Mortgage

Merix Hybrid mortgages offer interest rate diversification that may be suitable for some home owners. When it is difficult for a borrower to choose a fixed or variable rate mortgage, choosing a hybrid mortgage may be the answer to some borrowers:

Some experts think hybrids are a great idea.  Dr. Moshe Milevsky, a prominent mortgage researcher, in the past said that “People should strongly consider mortgages that are part fixed and part floating.”Merix Financial has launched a brand new hybrid called the 50/50 “Wise” Mortgage.  It lets borrowers lock in 1/2 of their mortgage at a 5-year fixed rate and 1/2 at a 5-year variable rate.  The effective combined rate is 3.38% as of today.

The product is suited to borrowers who are:

  • afraid to take a variable term mortgage, due to fear of rates going up.
  • those not comfortable to lock into a fixed rate mortgage.
  • un-decide whether to get a fixed or variable mortgage.

Each portion of Merix’s 50/50 mortgage operates independently, like two separate mortgages.  Yet, the product is registered as only one charge.

Merix’s 50/50 mortgage offers:

  • up to 20% lump-sum pre-payment annually
  • 20% increase in monthly payment
  • mortgage portability to another home
  • option to lock in the variable-rate portion at any time
  • a 120-day rate hold on purchases, 60 days on refinances
  • 20 to 35-year amortization

No switches/transfers are permitted (people at other lenders must refinance if they want it) and there are no pre-approvals.

Variable Mortgage

April 13, 2008

Fixed or Variable Mortgage?

The reason why some home owners favor variable mortgage is because of the lower interest rates available on variable or floating rate mortgage. As of April 12, 2008 a qualified home owner can get a floating mortgage at Prime less 0.50% to 0.75%. The discounted variable rate mortgage is between 4.50% to 4. 75%. This compared to the 5-year fixed rate mortgage at around 5.50% to 5.70% is about 1% lower.

Saving on interest payment

For a $300,000 mortgage amortized over 25 years, the monthly interest payment for a fixed rate mortgage works out to around $1,866 as compared to around $1,650 to $1,701. The saving on a variable term mortgage is quite obvious and translates into $165 to $216 a month or over $2,000 a year in interest payment saving.

The big Canadian Banks love their customers and home owners choosing variable term mortgage. They are more than willing to compete with the smaller “mortgage bankers” like FirstLine Mortgage, FirstNational, MCAP and others head-on and match their rates. Some banks even offer “open variable mortgage” at similar deep discounts below prime.

Beware of 2 mortgage traps!

What was seldom mentioned by the big Canadian Banks is the discount a home owner will get if and when they switch over to a fixed rate mortgage. There are 2 problems faced by all home owners who signed on a variable closed term mortgage with their banks.

Problem No. 1When a home owner’s variable mortgage is a closed term mortgage, he or she can only get out of the contract by paying 3 months interest penalty or the interest rate differential whichever is more. When a home owner converts his or her variable term mortgage to a fixed term mortgage, the discount available is set at posted less 1% or at the discretion of the bank.

If a home owner is getting a 1% discount below the posted rate, he or she is effectively paying around 0.5% to 0.6% more when converting to a fixed rate mortgage. Assuming when interest rates spike up after 1 year, and a home owner lock-in on a fixed term with 1% discount, he or she is paying $125 more in interest a month for a total of $6,000 extra in interest cost.

Problem No. 2 – Home owners are required under the bank’s variable mortgage plan to switch to a fixed rate mortgage not less than 5 years from the time when their mortgages were booked with their banks. Most smaller mortgage bankers have a lock-in period of 3 years. As shorter term fixed rate mortgages are normally priced lower than longer 5-year mortgage, a home owner ends up with a higher mortgage rate when locking in on a fixed rate mortgage.

You have a choice

Some home owners may not be aware on how to avoid some of the problems as mentioned above.  There are homeowners who are knowledgeable and actively paying down their mortgages will save thousands of dollars in interest payment.  If you do want to know more, please follow this link:  pay of their mortgages in one-third the time .

If you like to have more information on getting a mortgage, or any related issues on home financing,  kindly contact me (Elsie Tse) at 604-716-3369 or Email Me 

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Leveraging LOC

March 20, 2008

Save $$$ – Using LOC

Line of credit (LOC) can be used to help home owners pay off their home mortgage sooner and save them thousands dollars on mortgage interest payment. A $200,000 mortgage loan amortized over 25 years can be shortened to just over 13 years 2 months, and the interest savings can be as much as $60,000!

Who can benefit?

Not all home owners can make use of the above program to pay off their home mortgage sooner. For home owners who have substantial equity built up or those who can make use of their LOC may consider using the program. A home owner who wishes to take advantage of the savings should have a good understanding on the risks involved as interest rates do fluctuate over the duration of the program.

The program can best be illustrated using the following assumptions:

1) That a home owner’s mortgage is around $200,000 and he or she is eligible to be approved an additional $100,000 “Line of Credit”

2) That the interest rate on the $200,000 mortgage is at 5.5% and the $100,000 LOC is at Prime Rate assumed to be at 5.5% paying interest only each month.

3) The $100,000 is invested in a 12% a year interest paying investment (Mortgage Investment Corporation or private 2nd mortgages) with monthly interest income of $1,000. This money generated from the investment less monthly interest cost of $541.67 is used to pay down the principal.

4) The $200,000 mortgage is paid off in 13 years and 2 months. The total interest paid on the $200,000 mortgage works out to around $76,542 for a total interest savings of $60,050.

If you like to have more information whether the above program is for you, you can contact kindly contact me (Elsie Tse) at 604-716-3369 or Email Me 

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Accelerated Payment

March 17, 2008

There are a few simple tips on mortgage savings that can shave off thousands of dollars in mortgage interest payment from your mortgage.

Your bank loves you and would like you to drag out your mortgage payment over a longer period. The longer you take to pay off your mortgage loan, the more interest you’ll end up paying.

The following illustration is based on $300,000 mortgage, amortized over 25 years at 3.59% per annum interest rate compounded semi-annually.

By the time you finish paying your mortgage in 25 years at the minimum of $1,5120.10 monthly payment, you would have paid $453,629.00 for your original a loan of $300,000. The interest amount is a staggering $153,639.00!

Here are some tips on saving money on your home mortgage:

Shop for the best mortgage rate
At 3.59% you pay $1,5120.1 monthly instead of $1,528.05 at 3.69%. Your interest paid on the higher rate is $161,012. You save $4,777.
Tip #2
make use of accelerated bi-weekly payment.
You pay $756.05 every 2 weeks. Mortgage paid off in 22 years 1 month. Your interest paid is $133,098 for a saving of $20,541!
Tip #3
Make yearly $2000 lump sum payment.
Maintain bi-weekly accelerated payment. Mortgage paid off in 17 years 1 month. Your interest paid is $112,758 for a saving of $40.881!
Tip #4
Increase bi-weekly payment by $100 to $660.39.
Together with $2,000 yearly lump-sum payment, your mortgage is paid off in 10 years and 8 months. Your interest paid is $69,416 for a saving of $96,820!

You can see from the above illustration, a slightly better interest rate will only save you a few thousand dollars. You can save more on mortgage interest payment if you follow some of the tips above. With a smart mortgage repayment plan, you may pay off your mortgage in 1/2 the time on the time of your 30 or 35 years mortgage.

Kindly contact me (Elsie Tse) at 604-716-3369 or Email Me 

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