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.
