With round 4 of the mortgage rules taking effect on November 1, 2012, mortgage qualification for business owners got tougher. Don't despair, since there is still hope for a business owner to get their last mortgage....ever.As you are aware, the new mortgage rules reduce the maximum mortgage to 65% of home value for business owners who use a stated income (income that is not verified by Canada Revenue Agency documents). However, as previously explained in a blog post regarding business owners mortgage options, a mortgage up to 90% for a purchase or 80% for a refinance can be obtained.

Business Owners Mortgage....The Last One

Many homeowners choose a 5 year mortgage term over other terms, however in today's economy the difference between 5 year and 10 year fixed mortgage has never been this small (2.99% vs 3.79% at the time of writing this blog post). The 10 year fixed mortgage provides the following to a business owner:

Stability and security of fixed cost of borrowing over a 10 year period
Not worrying about qualifying for a mortgage in 5 years time frame and providing pages and pages of financial statements
Protection from rising interest at renewal time
Freedom to focus on growing the business, being profitable and tax reduction strategies

The chart below compares 2 options for a $350,000 mortgage: 2 5 year fixed mortgage terms and a 10 year fixed mortgage term

To summarize, the above chart shows if one believes mortgage interest rates in early 2018 will be higher than 4.75%, the 10 year fixed mortgage is a viable option. As difficult as it is to predict where mortgage rates will be in the future, why would anyone want to renew at higher than 3.79%-3.89% interest rate in 5 years time?

This mortgage option powered by the inflation hedge mortgage strategy (explained in this video) provide a solid plan to achieve mortgage freedom.

To discuss your mortgage options whether you are buying a home, an investment property or renewing your mortgage, please contact me.

June 29th is a special day for the following reasons:

5 years ago, Apple's iPhone was launched. It was the birth of Blackberry's nemesis
Today is the first day after RIM announced major losses, delays in launching Blackberry 10 operating system and 5000 additional layoffs
It is also the busiest day for lenders in Canada as the highest number of mortgages close today

You might be wondering what's the connection between the above 3 points. Last year, I was meeting with a few investment banker friends who, at that time, said RIM's stock was a buy since it's price of $16 was undervalued and the company had lots of cash. Fast forward 9 months, RIM's stock is at $7.4 (June 29, 2012 stock price). It has lost half of its value. It is important when buying a stock, mutual fund or investment property to buy based on economics: how much revenue is generated (sales of company, rental income a property demands), profits (net profit, cash flow after all expenses are taken into account) and potential appreciation (R&D and innovation for a company, solid area that will experience growth due to jobs, infrastructure or immigration). Buying (stock or investment property) because someone said it is good to buy is speculation and could result in disaster. Do your own due diligence.

As for the Apple connection, emulating their drive to innovate and improve by continuously reviewing the mortgage, adjusting it and understanding the opportunities leads to financial freedom. Being complacent by getting a mortgage, setting a payment and forgetting about it would be following RIM's path. There is more to mortgage than rates.

Having a vision (building a portfolio of positive cash flow properties or being mortgage free) and executing a plan would result in financial freedom and not arranging a mortgage on the busiest day for lenders.

To discuss how to achieve mortgage freedom or build your real estate investment portfolio, please contact me.