Transcript of Video Blog:

Hey everybody, it’s Rowan Smith of the Mortgage Center. I’m here today to talk about appraisals. There seems to be a lot of confusion as to when appraisals are ordered, when they’re not ordered.

This blog today is going to detail in what circumstances it’s going to be needed. It’s a little counter intuitive. You see there’s typically an appraisal or some assessment of value 100 percent of the time. Does that mean that they go through the property and take pictures every single time? No.

So, I’m going to divide this into three categories, less than 20 percent down, 50 to 20 percent down and greater than 50 percent down. Those are the three main categories. You can argue with me a little bit on this, but that’s the three general guidelines.

Now, less than 20 percent down, the bank’s going to want to make sure they know the value of the property, but do they require an appraisal? The typical answer is not usual. The reason being is less than 20 percent down are insured by either CMHC, Genworth and Canada guarantee. It’s mortgage insurance. That’s that big insurance premium you hear about.

Now, in those circumstances those lenders typically, though not always, have a internal modeling software that looks at sales in the area and the last prices, listings, et cetera. And as long as you’re within a range of normalcy, not wildly above or below, they’re going to accept that value.

Now, there’s times when even when you’ve got the mortgage insurance, they still ask for appraisals. And that’s sometimes when there’s a rental component to the property or it’s particularly unique or a high-end home or for whatever reason that they don’t support the lending value of the home. So, that’s if there is less than 20 percent down, they typically don’t need appraisals. But, again, an assessment of value is always being done.

Now, from 50 to 20 percent down, you will almost need an appraisal 100 percent of the time. Now, some banks, a social bank, has an internal property assessment tool that they use, and they will do similar to those systems through the mortgage insurers.

They’ll do like an electronic appraisal, but they have some guidelines there. The property can’t be more than a certain value and all those eligible for homes beyond a certain age, size or whatnot. Usually, those electronic systems are only allowed in a major urban setting, whatnot.

So, most times 50 to 20 percent down payment, you’re going to require an appraisal. It costs about $250 to $300, depending on where the property is located. This is assuming it’s a general, normal transaction.

The appraiser will go to the property, takes some photos and walk through it and then prepare a report of anywhere from 40 to 70 pages, depending on the complexity and depending on the lending requirements. It outlines everything about the property and makes an assessment of value, based on other comparable sales.

Now, you may think to yourself. OK, well, if I’m putting 20 percent down or more, why do they want an appraisal. When I put less than 20 percent down, they don’t want an appraisal. And the answer is that when you’re putting 20 percent or more that bank is absorbing the full risk of that mortgage.

If you default on it or the property values fall and you walk away, they eat the loss versus the mortgage insurers are the ones that take the loss in the event that you’re putting less than 20 percent down. So, the bank leaves it up to them because they ultimately will be the one at risk to make an assessment of value.

So, less than 20 percent down, probably not an appraisal but you may have to, depending on the property. 50 to 20 percent down in that range, you’re going to need an appraisal of some kind, whether it’s an electronic one or whether it’s a walk-through.

Typically, it’s a walk-through. 50 percent or more down, we can often use tax assessed values because it is such a low amount of financing. It’s a very low risk to the lending institutions.

Some banks unequivocally demand appraisals 100 percent of the time. Other ones will use a property assessment tool if you have that much down the desktop or drive-by appraisals which are less costly and quicker to get. But it will still provide with some comfort.

Those are the situations where an appraisal will be required. If you’re being asked for one and you don’t understand why, just give me a call. I’ll give you an explanation for it.

I’m Rowan Smith from the Mortgage Center.

Transcript of Video Blog:

Hey, everyone. Rowan Smith with The Mortgage Centre, here today to talk about maternity leave and mortgages, because this is a big thing that comes up. People oftentimes end up going on maternity leave and then realizing the house is too small. They go to qualify for their mortgage and the bank tells them, “Sorry, you can’t qualify. You can’t afford it.” And they go, “But I’ve got a job I’m going back to, where I’m going to make $100,000 a year.” And they say, “Well, you might go back.”

Statistically, a very large percentage of women that take maternity leave don’t go back. So the bank has to hedge its bets. It has to look at, “Can you afford this now, with your reduced income? Can you afford it if you don’t have that income?” Most times, people come to me with maternity-leave questions, and there’s six months or three months left, and they’ve realized, “I’ve got to get into a bigger place. I’ve had my second or third child,” or whatever the case is. And, “I need more space.” The husband’s income maybe doesn’t qualify a loan, so the wife comes and starts the application process. Very common problem. They’re told no at most institutions.

Now, I have lenders that will treat maternity leave a little more favorably. If you’re going back to a decent job, and you’ve got a letter from your employer confirming that the position awaits you and the salary awaits you, we can generally use it. We can typically get around it if you’re otherwise strong clients with clean credit and if the income otherwise makes sense. If you’ve just gone on mat leave, and you’ve got a full year ahead of you, it’s a little harder, because that’s an extended period of time where you’re going to be forced to make payments that you would qualify with on your normal income on the EI or the government-subsidized maternity-leave portion.

Now, some companies are very good. Some companies actually offer women a top-up. So if you’re only going to get 60 percent of your income throughout the year when you’re on maternity leave… The companies, these are good employers, will pay a top-up to bring you back up to 100 percent of what you’d be earning. In those circumstances, we can definitely use it. But again, certain banks have just hard-and-fast policies where, “If you’re on mat leave, we can’t help you, ” and it doesn’t go much further than that in the discussion.

Well, I can help you. If you’re on maternity leave and you’re looking to find out if you can get a mortgage, yes, please give me a call. It’s Rowan Smith from The Mortgage Centre.

Transcript of the video:

Hi everybody, it’s Rowan Smith with The Mortgage Centre. It’s been a little while since I did a post, and I’m busy cleaning up a lot of problems. I figured that this would be a great to do a blog specifically targeted toward realtors for things to do during the offer process regarding contracts that will make life infinitely easier for me if I’m trying to do financing for you, or for any of the banks that are trying to do financing with you.

So, the first thing has to do with contracts and signatures. There’s a number of financial institutions that insist that the contract signatures be witnessed. Now, I know that the real estate board doesn’t require that every single contract signature be witnessed. They’ll allow it to be unwitnessed, but the banks want it witnessed in many, many cases. The CIBC is particularly strict on this matter, so you must have all witnessed lines filled out and signed.

The next thing is the property condition disclosure statement. Oftentimes, if the person has never seen the property, the seller has never seen the property, maybe because it’s been an investment property. Or they bought a rental five years ago, and they haven’t been inside of it, and they can’t answer a lot of the questions. We still need something to show that there has, in fact, been… A property condition disclosure statement has, in fact, been issued.

If I go to them and say, “Oh, no. There isn’t one,” but there has to be, oftentimes the contract will specifically make mention of the fact that a PCDS makes up a component of this contract, so you have to provide it. If there is no way they can answer those questions, have them just throw a line through it. Put, “Never lived in,” and sign it. That’s better than me not having anything, because I go to the bank, and the bank says, “What are we hiding? Is it a grow-op?” And they just don’t want to put that down, a past grow-op, a meth lab, or anything of that nature.”

So, property condition disclosure statements, even if they’re going to be blank, you still need them.

Subject to removal deadlines. Try to line them up, not on a Saturday or Sunday. I get this constantly, where we get a contract. The subject to removal date is set to a Saturday, which is no better than the Friday. So, getting the extra day on the weekend doesn’t really help us for financing anyway. It doesn’t really help us, because the banks aren’t going to be open to work with us.

If you’re going to go for Saturday, you might as well go for Monday, and on that note, be cognizant of when holidays are. We’ve been having a lot of contracts come in lately, especially during the May long weekend with the subject to removal date on the actually holiday, which, again, I can’t have a bank look at anything, so it might as well have been the Friday before, which doesn’t help anybody.

Be particularly cognizant during the negotiation time, and during the excitement, and the back and forth on the prices. You have the subject to removal deadline, and we set it for, say, June 14th. And as the dates progress, and the negotiation takes a few days, no one ever bumps that out. And then once we’ve finally got it accepted, we have one day or two business days to get an approval done, which might be possible, but it might not, depending on which bank the client has to go with.

So, just make sure that as the negotiation proceeds, and as it get further and further along in the contract negotiation process, that the subject to removal dates are being bumped up correspondingly, so we still have a number of good days in there.

Lastly, when it comes to strata documents, if you have a listing and you’ve… Typically, the protocol in this market, being such as it is, realtors usually don’t order the strata form B, and all the strata documentation when they take the listing. In a perfect world, that would be the case, but I understand there’s some cost to do that, so it’s not always in your best interest, especially if you feel that the owner has listed it too high, and would not list lower, and you don’t think it’s actually going to go through.

That said, if it’s a competitively priced property, either A: Order the form B and all of the strata documentation up front, or you have to be willing to pay for it on a rush basis. I had three deals in that last month were my buyers were buying a property. The listing agent did not order up the strata documents, and then, of course, it was part of our contract. Once that buyer requested them, it then took seven days, because the realtor didn’t want to pay the extra $100 or $50, or whatever it is for a rush.

Now had they ordered them initially, there wouldn’t have been that fee. Of course, that’s a separate issue. But had they ordered them on a rush basis, we would have had them in 24 to 28 hours, and there would have been no problem.

Instead, we had to extend, extend, extend and it really annoyed the sellers and the buyers involved, and it could have easily been taken care of by just getting those documents on a rush basis.

So, those are the thing that I consistently see, I think, that realtors can do a lot better of. The realtors that I work with on a regular basis all are very good at this. But as I meet new people who are agents coming into the field, this is something that will come back and make your life a lot easier, if you can follow these tenets.

For The Mortgage Centre, I’m Rowan Smith.

In this video, I look at what fixed and variable mortgages are as a refresher for past viewers or of my first time buyers.

Transcription of Video Blog:

Hi, everybody. It’s Rowan Smith from the Mortgage Centre.

I want to talk today about fixed or variable. Specifically, I want to define what they are so that when someone is telling you they got a fixed rate at a certain percentage or variable rate at another that you understand what exactly they’re saying so that you can compare apples to apples.

A fixed-rate mortgage is just that. The rate is fixed for the life and the length of your term. If you got a three-year term, and it’s at 3.25, you pay 3.25 throughout the entire term. If it’s a five-year term, and it’s 4.25, you pay 4.25 for the entire term. It does not matter if interest rates go up or go down; your rate is fixed, and your payment is fixed.

A variable-rate mortgage, conversely, is one where the payment fluctuates according to some other interest rate, usually prime rate. Prime rate is dictated by the Bank of Canada and the banks that match or try to follow very closely their prime rate.

Now if you have a prime-rate mortgage, the best available in the market that I have today, it’s prime minus 0.55. Prime rate is 2.25; that means a net rate of 1.7. So 1.7% on a variable versus, say, 4.25 on a five-year fixed. So variable has a substantial savings. However, your payment can and will rise if prime rate goes up.

There are different types of variable. There’s variable capped, where there’s a limit to how high it can go. Before that, you won’t be get getting 1.7. You’ll probably be getting closer to 3% in today’s markets.

You’re going to give up something in terms if you want more security. Whether it be a fixed rate or a fixed payment, you’re going to pay a higher rate.

I’ve seen several ads, and I saw one institution run an ad where what they had was on their whiteboard out front of their institution. It said, “Five years, 1.75.” Of course, clients are calling me saying, “My bank’s advertising 1.75.”

What they don’t put on that sign is it’s a variable. Now you can guarantee that it’s going to be below the fixed rate that I’m quoting if you’re getting a variable rate, because variable rates are generally lower. But they do have that upside risk that your payment could rise.

So there it is: fixed and variable. For the Mortgage Centre, I’m Rowan Smith.

I’m getting lots of questions about why bank penalties have fallen in the last three weeks. This blog explains the calculation methodology behind it:

Transcript of Video Blog:

Hi, everybody. It’s Rowan Smith from the Mortgage Centre. I wanted to address penalties, and interest rate differentials, and three month interest penalties and how it all works today in this blog.
I’m getting a lot of inquiries about it. There’s some confusion as to why rates have gone up and penalties have gone down. Well, let’s look at the standard mortgage terms.

For variable rates mortgages, most institutions, the way that it’s going to work is if you break the term at some point during any time; now most variables are five year terms, but some of them are three years.

That means that during that period of time, your discount or your premium on your rate will not change. For example, if your rate was prime rate plus a quarter, for five years you would always be prime plus a quarter regardless of where prime went. Up or down, you would follow it with a quarter percent.

You’re guaranteed that, so should banks go with prime plus a half or prime plus one, you’re still guaranteed to retain the prime plus a quarter throughout that five year term.

In exchange for that security, if you break that term, that five-year term, to sell your house, or you need to refinance, take equity out and end up doing it with a different lender, you’re going to pay a three month interest penalty.

That said, it’s a non negotiable. It’s going to happen at every single institution. However, the three-month interest penalty is the only one that will apply to a variable rate mortgage. In the event that you’ve got a fixed rate mortgage, it will be the greater of three months’ interest or the interest-rate differential.

Interest rate differential is a complicated formula that essentially looks at how much time is left in your term, what rate you’re paying now, what rate the bank could get on money now, and they charge you that difference. That’s a simplification, or perhaps an oversimplification of it.

But if you visualize being at six percent, and let’s say rates went down to the 3.69 they were at and you wanted to get that rate, that bank would be giving up on six percent for the remainder of your five year term and letting you out into the lower term.

So they’re going to look at their loss/profit and are basically going to charge you that amount or three months’ interest, whichever is greater.

You can guarantee that in cases where rates have gone down, your penalty is going to be dramatically larger under the interest-rate differential. Now how far down? It depends. It’s a complicated formula.

How much time is left in your term? If you’re within the last year, it’s generally only ever three months’ interest. There are a lot of different variations in how these penalties can be calculated from bank to bank to bank.

So if you’re looking at your penalty, not quite sure if the penalty is worth paying it to get the new lower rates, give me a call and I can walk through the math with you on it and make sure that you’re making a correct decision.

Also, if you’re looking at that penalty and wondering why did the penalty go down from last month when I had a quote, it’s because rates came up. That means that the bank could get a greater rate from money loaned at the same point at time.

So if you were three years into a five year term, there are two years left. The bank will compare their profit and loss of what they would get on a two-year mortgage.

Imagine, for example, that rates have gone in two years from, let me grab a number here, 2.25 to 2.9. If you were previously paying five percent, that spread, the difference between what they could be getting and what they are getting, got smaller, thus your interest-rate differential penalty will be smaller.

As you can see, there’s quite a bit to penalty calculation. If you have any questions, give me a call. For the Mortgage Centre, I’m Rowan Smith.

Anyone have any suggestions for blog posts you’d like to see me do? Just ask in the comments section, or email me at smith.rowan@mortgagecentre.com and I’ll get something put up for you.

Transcription of Video Blog:

Hi everybody, it’s Rowan Smith from the Mortgage Centre. I wanted to do a blog today to ask for your input on what type of articles and issues you’d like me to address.

So if you have any ideas or suggestions, or any topics you’d like me to cover, anything ranging from how the banks treat income to the differences between commercial properties and residential properties, former marijuana grow ops, anything to do with construction financing, or anything alone those lines, please drop me an email or respond to this video in my Youtube channels and let me know and I’ll get something put up right away for you.

A frequent question that made put out this blog:

Transcription of Video Blog:

Hi, everybody. It’s Rowan Smith at The Mortgage Center. I wanted to address a topic that’s come up a number of times, which is guarantors and co signers and really what a guarantor co signer is. For the most part, for a mortgage, if you’re asked by your broker or your lender to get a co signer, it’s because your income doesn’t really qualify you for the mortgage that you’re trying to get. It could also be that your down payment isn’t enough, but typically the reason has to do with income and whether or not you’re able to document it in a way that’s sufficient with the bank.

People say “Well, the co signer or guarantor, they’re just signing their name on it, right?” Well, not really. The whole point of a guarantor is to add strength to a deal. So, first off, what does a guarantor or a co signer need? I’m going to use those words interchangeably, because they realistically mean the same thing.

A guarantor or co signer needs to have either A; a whole lot of assets, like a clear title home in their name, so a parent or grandparent, or they’ve got to have a lot of income. When I say income, I don’t just mean they earn a lot. They have to earn a lot, but not also have a subsequent large amount of debt.

In my experience, people will say, “Oh, I’ve got my uncle. He makes a couple hundred thousand dollars a year.” Well, people that make a couple of hundred thousand dollars a year tend to have pretty large mortgage payments. If they don’t have large mortgage payments, then they tend to have a lot of other debts and line of credit facilities, car lease payments for tax purposes and all that.

So, just because they make a lot of money, it’s not enough. They also have to have what we call unencumbered income. That’s income that doesn’t require a lot of other payments and the like. So, when they signed on there, what are their responsibilities? Well, it’s what you call a contingent responsibility.

In the event that you, the primary applicant fail to make payment, they have the rights to go after your co signer. Now, how far does that right extend? Well, if they take a loss on the property, you and the co signer are both jointly and separately responsible for that debt or for that loss in the event there is a foreclosure and they subsequently take it.

They will go after that foreclosure as rigorously as they would go after you. So, if you skip town, or you leave, or you throw up your hands and say, “I just can’t afford the payments,” they will turn to your co signer and attempt to force a sale of some of their assets if it comes to that. It often doesn’t, and the co signer will often have to eat the brunt of the problems.

This is why we see a lot of people who have one damaged item on their credit and nine good ones. That’s because they’ve agreed to be a co signer for someone who really didn’t deserve it. So, if
someone’s asking you to be a co signer, don’t jump the gun and say, “Yes” just because they’re your friend.

You’ve got to do the smart thing, and you’ve got to look out for yourself. Make sure that you understand all of the risks and responsibilities. Go with that responsibility, being a co signer, and see what you’re getting out of the deal as well. Don’t hurt your own financial position just trying to better somebody else’s.

For The Mortgage Center, I’m Rowan Smith.

I frequently take calls from clients confused why the bank is asking for so much paperwork. You have to realize, they are lending you like hundreds of thousands of dollars, and have to do their due diligence to make sure you qualify, and that nothing is amiss. There is a LOT of fraud out there, so expect a lot of questions. That said, it’s pretty standard from bank to bank, and this video explains what you’ll need.

Transcript of Video Blog:

Hi, everybody — Rowan Smith at The Mortgage Center. Not a day goes by that somebody doesn’t say to me, when I give them my list of paperwork requirements, “Why is it so much?”

Well, you’re borrowing a lot of money. You can expect the bank is going to ask pretty much the same questions at every institution. Here is a list of paperwork you’re going to need for your first home purchase, or any home purchase. You may want to jot these down.

First, you’re going to need something to confirm your income. Now, this can take varying degrees and varying forms. It’s a little tricky, but basically, if you earn an hourly rate and you work full-time hours, we’re going to need a job letter that specifies that and tells what your job title is.

If you earn varying amounts of money — because maybe there’s overtime, bonuses, incentives, profit sharing, something like that — if you need that money to qualify, then we’re going to need to document it somehow. We have to show a track record of that extra money.

Generally, two years is what they’re going to be looking for. If you’ve only been on the job for six months and even though it looks like you’re going to make a lot more, they’re just going to use your base. They’re not going to use that higher figure.

For income, you’re going to want to get the last two years’ T4s, or notices of assessment, and a recent pay stub. It’s generally a good idea to get your two most recent pay stubs, because sometimes we can make that fly with certain lenders.

If you’re self-employed, we need proof that you’re self-employed, for at least two years. If you haven’t been self-employed for two years, that’s fine; but we have to show you’ve been in the industry for two years.

You have to have at least been doing something for the two years. It gives them something to fall back on, to let you know you’ve been in this business — whether you’ve been an employee or self-employed — for at least a two-year period of time. That’s the breakpoint for self-employed people.

You can expect us asking for things like articles of incorporation, or the last two years of T1 generals that show you filing as a self-employed person, assuming an accountant has prepared those documents. Or a business license, a GST return — something to just show us that fact.

That’s for income. If you’re buying a home, you’re going to need the contract, and if it’s in DC, the property condition disclosure statement. That answers all of the questions, such as, “Was it a former grow-up? Was it a meth lab? Is it connected to sanitary and sewer?” and all that other stuff.

You’re going to need the multiple listing servicing, the MLS deal sheet. That outlines all the specifics of the property — the square footage, heating, taxes, etc., maintenance fees, if applicable.

For down payment, you can be expected to be asked for about 90 days of bank statements showing that money. Now, if it just shows up in your account a month ago or a week ago, you have to show us where it came from.

If it came from the sales of another home, that’s fine. We just need to show that sale document and that contract. That shows that you actually did sell a home, and that’s how you got the funds.

So you’re looking at down payment, income, and property.

The property is also appraisal. The appraisal is required 100 percent of the time; however, sometimes we do it behind the scenes, electronically. You don’t ever see it. That’s a little bit complicated and it’s more of a topic for one of my prior blogs, where I covered off when appraisals are required.

There you are: Income, down payment, and property. If you can satisfy those things, or at least get those documents in motion before writing your offer, it will make the subject removal period — that period where you get to firm up your financing — much easier.

For the Mortgage Center, I’m Rowan Smith.

Deals fall apart from time to time due to down payment not being “sourced and seasoned.” This means the borrower couldn’t prove where the money came from, and provide a reliable track record of the funds. Down payment is important to the banks! It is a vital part of the deal, and cannot be borrowed from friends and credit cards unless you qualify. How do you know if you qualify? You need to retain the services of an Accredited Mortgage Professional, and I can help you.

This video blog explains what forms down payment can take, and how it will be treated by the banks.

Transcript of Video Blog:

Hi, everybody. Rowan Smith with The Mortgage Centre. I’m going to talk today about down payment.

I was in the gym, and I was running on the treadmill, beside a couple of people who were talking about buying a home, recently. The one was lamenting to the other that the whole deal had fallen apart, simply because of their down payment. I immediately, of course, had to listen in on this conversation and eavesdrop.

The gist of it was that they were borrowing some of money from a friend, and a little bit of money from their parents. They were going to pay it all back and they had the money to pay it all back, but it wasn’t clearly documentable to them. So whoever was handling the financing just got squeamish about it and decided that they didn’t want to do it.

Now, this brings me to the point of “How important is down payment?” Well, it’s vital. It’s the capital you’re putting into the deal, the security. It’s your skin in the deal, if you will. It’s what’s going to hurt, or not going to hurt, if you walk away or get foreclosed on. Naturally, the source of that down payment is very important.

If you’re trying to borrow that money from somewhere, you can do so — so long as you can service the debt that you’re taking on as the mortgage, and the debt that you’re taking on to bring the down payment in.

A lot of people will use five percent down. They’ll borrow it from a line of credit or a credit card. They’ll say to me, “Well, here you go. Here’s the down payment.” I say, “Where did you get it from?” They go, “Well, I took it from my line of credit.” I go, “Well, uh-oh. OK, well, you didn’t. You barely qualified for the purchase, but now you don’t qualify because you’ve got another payment you have to build into it.”

The client is going, “Well, I can afford it.” Now, you might be able to afford it, but you’re not qualified for it. The bank has very specific guidelines on this fact. You’re allowed to borrow the down payment, but you have to be able to qualify for it.

You do pay a slightly higher CMHC premium as well, if you’re borrowing the down payment — whether it’s from parents or wherever else. A better move is to have your family gift you those dollars.

If your family’s trying to help you to buy a home, have them write up a gift letter. We can provide it to you. It just simply says that this is not a repayable loan. As long as that’s the truth, there’s nothing wrong with getting money gifted to you.

But gifts have to really come from people that you reasonably get a gift from. I don’t get a gift from one of my buddies. I get a gift from mom, or dad, or sister, or grandparents. We direct really a blood relation, with one step away from you — your mother, father, sister, or your grandparents, in that case. So a gift of down payment is fine.

Alternatively, you could be looking at your own savings. Now, we often have to prove where those savings have been. If you’ve been transferring money all over different accounts, it can get very confusing, so don’t do that.

What you want to do is, if you’ve got your statements, leave them in the account that they’re going to sit in. The banks are typically going to want anywhere from 30 to 90 days — usually 90 — of history of those down payment funds. Where were they? You may say to them, “Well, why does it matter where they were?” Why does the bank even care?

Well, the bank has an obligation to make sure that the funds are not coming from some illegal source, or proceeds of crime, that you didn’t get the money from a drug sale or human trafficking. I know it sounds extreme, but this is what they actually have to look for.

They have to make sure that these dollars are legitimate funds that are in a bank account that have cleared all of the fin track regulations, which involve the money laundering, and proceeds of crime, and all of that.

When we ride you about, “Hey, we need bank statements,” and, “Hey, we need proof of where you’re down payment is coming from,” first, you should expect it, and B; We, as brokers, don’t care where your down payment is coming from. We just want to get you the best mortgage we can, at the best rates, and we want to get you in there as easily as possible. We’re not here to make your life difficult.

The banks, unfortunately, have an obligation. We just have to pass that obligation on to you. If you have any questions about down payment — what’s acceptable, what’s not — give me a call.

My phone number is 604-657-6775, and I’m Rowan Smith for The Mortgage Centre.

I get confused requests a lot of the time with people wanting bi-weekly payments, but they aren’t sure why. They’ve just been told by friends and family that it speeds up your mortgage. This video blog explains exactly why. Enjoy!

Transcript of Video Blog:

Hey, everybody, it’s Rowan Smith with the Mortgage Centre. A lot of people are under the misconception that paying bi-weekly unto itself makes your mortgage go away faster. That’s not true. I just want to explain very briefly why bi-weekly payments, why in fact bi-weekly accelerated payments, make your mortgage go away faster.

If your payment is $1,000 a month – we’ll keep the numbers nice and round here. Most people think, OK, bi-weekly is therefore $500 every two weeks. And they’re correct. However, how many bi-weekly periods are there in a year? The answer is 26. So you’re actually making one full extra monthly payment spread out over the course of your year.

If you’ve ever had that experience of being a bi-weekly paid employee, and twice a year you get a paycheck that doesn’t have rent or a mortgage payment waiting for you, that’s why it works. Because you are in fact paying more.

Now if somebody says to you, “I want to pay semi-monthly. I want to pay $500 on the first and $500 on the 15th, ” or whatever their pay stubs say, you can do that but that doesn’t accelerate the payments at all because that’s still only 24 payments of $500.

In order to get that benefit, speeding up your mortgage, you have to make what we call bi-weekly accelerated. That’s taking the number of your payments – so, $1,000 divided by two, that finds what the halfway point is, that’s $500. Figuring that out times 26, and you’ll find out what your annual actual payments are going to be.

You’ll find out that’s exactly one payment more than if you had just been paying monthly. But that one payment can shave many years off your mortgage. That’s the way I pay mortgages and that’s the way I recommend everybody pay them.

For the Mortgage Centre, I’m Rowan Smith.