Category: Mortgages

If you’re confused by the mortgage stress test, you’re not alone. We break down the factors that influence your stress test results and review your options if you’re unable to qualify for a traditional mortgage.

What is the Canadian Mortgage Stress Test?

The Canadian mortgage stress test is an evaluation that banks are required to use to determine whether you’ll be able to pay your mortgage if interests rates rise.

Introduced by the federal government in 2018, it ensures that homebuyers purchase a home they can afford and considers a variety of financial factors.

Who Must Complete a Mortgage Stress Test?

Anyone applying for a traditional mortgage in Canada must complete the mortgage stress test. You’ll also need to complete it if you’re refinancing, changing mortgage lenders, taking out a second mortgage, or applying for a home equity loan.

How Does the Mortgage Stress Test Work?

The mortgage stress test works by considering the full picture of your financial situation. Lenders will look at your mortgage amount and current interest rates, along with your mortgage amortization period. They’ll consider these factors alongside your household income, housing costs, and your current debt load.

You fail the mortgage stress test if the percentage of your pre-tax income you’ll use to pay for housing costs exceeds 35%, or if your outstanding personal debt is greater than 42% of your pre-tax income.

What to Do If You Fail the Mortgage Stress Test

If you fail the mortgage stress test, you won’t be eligible for a mortgage through a bank. There are several ways to improve your financial situation so that you stand a greater chance of passing the stress test.

Increase the Amount of Your Down Payment

The higher your down payment, the lower your monthly mortgage payments will be. Lower mortgage payments will lower your ratio of housing costs vs. income, making it more likely that you’ll be approved.

Improve Your Credit

A credit score below 700 is a major problem when trying to pass the mortgage stress test. Improve your credit by making payments on time and by paying down debt quickly. Less debt makes you more likely to pass the mortgage stress test.

Try a Rent to Own Program

Our Rent to Home Solution allows you to live in and rent your home for a set term before having the option to purchase it from us. Our program is designed so that even those who fail the mortgage stress test can eventually qualify for a mortgage.

We prepare you for homeownership by helping you save money for your down payment and providing access to realtors and financial planners to help you find the home that’s right for you and budget accordingly. As you pay rent, you’ll also automatically improve your credit rating.

Why Choose JAAG Properties

If you’ve failed the mortgage stress test, don’t give up! You can still qualify for a mortgage with the help of our Rent to Own Program. Apply online today or contact us for more information.

It is important to know the financial requirements before making a house purchase. JAAG Properties, a leader in helping people buy homes, stresses the importance of having a good understanding about minimum down payment. This information is essential when you are planning for your ideal house.

How Does the Minimum Down Payment Work?

A minimum down payment is a crucial component of the house-buying process. It is the lowest sum you can pay upfront to get a mortgage. The minimum down payment requirements change according to the loan type and lender. It typically falls between 5 per cent and 20 per cent of the price of the house depending on the purchase price of the house. This down payment affects the remainder of your mortgage agreement by showing the lender you are committed to lowering their risk.

How a Down Payment Influences the Mortgage Rate?

Your mortgage rate is greatly impacted by the minimum down payment for mortgage. Increasing your down payment on a mortgage can be a wise financial decision. Lower interest rates may be awarded to you in addition to lowering the lender’s risk. Conversely, making a smaller down payment results in higher interest rates and the additional expense of private mortgage insurance (PMI). If you default on the loan, this insurance safeguards the lender. As a result, your down payment amount may greatly impact your long-term financial situation.

Saving for your Down Payment When in a Rent-to-Own Agreement

The down payment for a house is different from conventional mortgage agreements with rent-to-own contracts. A percentage of your rent is applied toward the down payment on the property in rent-to-own situations. This can be a fantastic alternative for people who cannot afford to make a sizable down payment upfront.

Why Choose JAAG Properties for Homeownership?

Being able to answer the question, “How much do you need for a down payment?” is a big step toward becoming a homeowner. Potential homeowners are encouraged by JAAG Properties to explore their options, including rent-to-own solutions.

The goal of owning a home can be attainable thanks to these solutions which help you save towards a down payment. If you are considering homeownership, contact JAAG Properties for help navigating the process.

In a market that’s constantly evolving, you’ve probably heard plenty of recent discussion about interest rates and how they affect mortgage holders. If you’re confused by an overload of information, you aren’t the only one! We’ve cut through the financial jargon and translated how interest rates affect monthly mortgage payments into plain English that’s easy to understand.

How Are Mortgage Rates Set?

Your mortgage rate is determined by several factors, including your credit rating, the type of mortgage you apply for, the length of your mortgage term, and the overnight rate set by the Bank of Canada.

Variable mortgages, as the name suggests, have a variable interest rate, meaning that the amount of interest you pay on your mortgage changes depending on the market. Meanwhile, fixed mortgages have their rates locked in for the length of the term.

Your credit rating has a significant impact on the interest rate banks will offer you when you apply for a mortgage. If your rating is lower than 700, you may have difficulty getting approved. As a result, one of the best ways to score a lower interest rate on your mortgage is to improve your credit rating before applying.

What is the Impact of Interest Rates on Monthly Mortgage Payments?

The rate set by the Bank of Canada has the strongest influence on variable mortgage rates. When interest rates increase, so does the cost of a variable mortgage. In contrast, when they decrease, a variable mortgage becomes more affordable.

A fixed-rate mortgage typically has a higher interest rate at the outset, but the advantage is that you are immune to interest rate fluctuations for the duration of the mortgage term (5 years, 10 years, etc.). Your monthly payments remain predictable, making financial planning easier.

How Do Interest Rate Hikes Impact Your Monthly Mortgage Payments?

Interest rates affect you differently depending on whether you own your home yet. As a prospective homebuyer applying for a mortgage, higher interest rates will mean that you can’t afford as large a mortgage, because your monthly payments will be higher.

For current homeowners, those with variable mortgages will see that more of their mortgage payments go towards paying off interest rather than the principal loan. However, the actual payment remains the same. The disadvantage to a variable mortgage is that you’re somewhat at the mercy of the market, and if rates remain high, it will take you longer to pay off your mortgage.

Secure Your Dream Home with JAAG Properties

If you’ve struggled to qualify for a traditional mortgage in an ever-changing housing market, you aren’t alone. We help countless Canadians create a path to homeownership through our Rent to Home Solution, which allows you to live in your dream home while saving the funds to buy it. Apply online today or contact us to get started on your journey towards owning the home you’ve always wanted!

In today’s increasingly tough real estate market, it’s no surprise that many Canadians and newcomers to Canada are struggling to qualify for a traditional mortgage from a bank. While this may be discouraging, the good news is that there are more options than ever for prospective homebuyers to own the home they’ve always wanted.

Reasons Why You May Be Denied a Mortgage from the Bank

Banks are risk-averse, and as a result, there are many reasons your mortgage application may be denied. Your credit rating is an important consideration for any bank, and if you have poor credit or no credit, that’s a top reason for denials.

Additionally, if you have insufficient assets or income to pass the mortgage stress test, or if you’re currently carrying too much debt, your application is unlikely to be successful with major banks.

Mortgage Alternatives in Canada

Thankfully, there is hope, even if you’ve already been denied. We’ve rounded up several alternatives you should consider in the event of a denial.

Private Lenders

Private lenders aren’t affiliated with banks and may be either private lending companies or individuals. Private lenders are more likely to consider higher-risk loans and may overlook poor credit or no credit. However, these loans usually come with a higher interest rate to compensate for the increased risk.

Credit Unions

Credit unions typically adhere to provincial regulations, not federal ones, so they aren’t bound by the national mortgage stress test. They have more flexibility, and they may be more likely to accommodate unique financial situations, such as freelance work.

Mortgage Brokers

Mortgage brokers are financial intermediaries, which means they have access to a wide range of lenders, including some that work exclusively with brokers. They may be able to help you track down a lender that’s more likely to approve your loan.

Rent to Own

Rent to Own agreements are not newer, innovative solution to housing affordability. In these arrangements, you agree to rent your prospective home from a seller for a preset term. During this term, you act as a tenant and save money for your down payment. At the end of the term, you purchase the home from the seller and become a homeowner.

Our Rent to Home Solution is unique because we guide you through every step of the homebuying process. We offer you access to real estate agents and financial planners if you don’t already have one to help you build positive credit, pay down debts, and plan for the future. After a typical term of three years, you’ll own your home! Our Rent to Home Solution allows you to live in your home today without waiting for a lender to approve your loan.

Get Approved for Your Dream Home Today with JAAG Properties

Don’t allow lenders to dictate your future! We can get you into your dream home sooner than you think. The JAAG Rent to Home Solution equips you with the necessary tools and guidance to accumulate savings for your down payment and guides your mortgage approval. Apply online today or contact us for more details!

After a year of rising interest rates, many Canadians are concerned about affording homes during this upward trend. High interest rates may mean paying more for your mortgage, but if you’re a prospective homebuyer, don’t lose hope! There are several ways to a buy a new home with a higher mortgage rate.  

How Interest Rates Affect Your Mortgage 

To understand how interest rates affect your mortgage, you have to understand what you’re really paying when you make a mortgage payment. A certain percentage of your mortgage payment contributes to the principal loan—that is, the amount you borrowed to purchase your home. The remaining amount pays the interest you’re accruing on that loan over time. 

Interest rates are set by the Bank of Canada and vary over time. When interest rates rise, your potential mortgage payment also increases, since you’ll be paying more interest on the principal loan.  

Higher interest rates may mean you can’t afford to take out as large a mortgage, and in some cases, it may price out prospective buyers altogether. But don’t give up! Thankfully, there are ways to own a home with higher interest rates. 

How to Own a Home with Higher Interest Rates 

Increase Your Down Payment

The most straightforward way to combat higher interest rates is to increase your down payment on your prospective home. You may also consider other ways to increase your cash upfront, such as paying for renovations or upgrades before move-in. If your mortgage option offers it, you may also pay discount points, which are upfront fees that you can pay to lower your rate and payment. 

Consult your mortgage broker for advice on whether increasing your cash upfront makes sense for your situation. 

Enter a Rent-to-Own Agreement 

If you’re struggling to qualify for a mortgage due to higher interest rates, a rent-to-own agreement may be the way to ensure that you can own the home that fits your needs. A rent-to-own arrangement works by allowing you to live in your new home as a tenant while you save for a down payment to purchase the home at the end of your term. 

Our Rent to Home Solution was designed to help prospective homebuyers navigate the complicated process of owning a home. If higher interest rates are preventing you from owning a home, consider applying for our program, where our experts will help you every step of the way towards achieving your dreams of homeownership. 

Increase Your Budget 

Increasing your monthly budget seems like the obvious solution to higher interest rates, but the obvious solution isn’t always the easiest or the wisest. Before deciding to increase your budget, take into account your spending and savings goals and consider whether they align with a larger monthly mortgage payment.  

While you consider raising your budget, you may also discuss whether it makes sense to use a higher budget to purchase a newer home. New homes often come with manufacturer warranties, energy-efficient builds, and other features that may ultimately lower your monthly costs by saving you money on expensive repairs and upgrades.  

Pave the Way to Homeownership with JAAG Properties 

Your journey to homeownership doesn’t have to be forestalled by higher interest rates. Our Rent to Home Solution can help you own your home faster by allowing you to live in your home while you save up to eventually own it. Apply online today or contact us for more information on how we can help you own your home sooner! 

With recent interest rate hikes from the Bank of Canada, many potential homebuyers are wondering how new, higher rates may affect them. Let us help you navigate the ways that rising interest rates may affect your mortgage, both in the short and long term, by answering some of the most common questions we receive.

How Do Interest Rates Affect Mortgage Rates?

How interest rates affect your mortgage depends on what rate you’re approved for and what kind of mortgage you have.

When you apply for a mortgage, your lender sets your rate based on the Bank of Canada overnight rate, your credit rating, your choice of fixed or variable rate mortgage, and the length of your mortgage term.

From there, changing interest rates affect your mortgage if you have a variable rate mortgage, or if your mortgage is up for renewal and interest rates have changed during your term.

What Are the Differences Between Fixed and Variable Mortgage Rates?

Having a fixed rate mortgage means that the interest rate you’re approved for is applied to your mortgage for your entire term. Your mortgage payments remain the same in terms of how much is paying down your principal loan vs interest.

With variable mortgages, your interest rate varies depending on the current rate set by the Bank of Canada. As interest rates change, the portion of interest you’re paying each month also changes.

How May a Rate Hike Affect Me?

For a variable rate mortgage, a rate hike means that more of your payment is paying down interest. The higher the rate, the more interest you’ll be paying with each mortgage payment. If rates climb high enough, you may reach the “trigger rate”, which is when your mortgage payments are no longer paying down the principal loan.

For a fixed rate mortgage, a rate hike won’t affect you during your term. However, if interest rates have risen when you renew, your mortgage payments may increase.

Pros and Cons of Variable vs Fixed Rates

Depending on the economic outlook and your circumstances, either mortgage type may be right for you.

Pros of a Fixed Rate Mortgage

• Your monthly payments are predictable. 
• You won’t be vulnerable to rising rates.

Cons of a Fixed Rate Mortgage

• You may pay more if interest rates fall.
• If interest rates fall, you can’t take advantage of lower rates.

Pros of a Variable Rate Mortgage

• You can benefit from falling interest rates.
• You may pay less interest over time.

Cons of a Variable Rate Mortgage

• You’re vulnerable to rate fluctuations and may pay more.
• It may take longer to pay off your mortgage.

Set Yourself Up for Homebuying Success with JAAG Properties

If you’re struggling to qualify for a mortgage, you aren’t alone. Our Rent to Home Solution allows you to live in your dream home while saving for a down payment and building positive credit. Contact us today to learn more about how we can help you on your path to homeownership!