ePaper Nov 5, 2015

BUSINESS 7 DESI EXPRESS www.desiexpressonline.com Thursday, November 5, 2015 By Mahendra Gupta While own- ing a home is a great way to build equity, the equity is of little use if you can’t access it. As more Canadians look for ways to renovate their homes, improve their net worth and take that much- needed vacation, the mort- gage industry has responded by introducing an influx of flexible mortgage prod- ucts and making traditional products more accessible to more homeowners. Second mortgages, refi- nancing and Home Equity Lines of Credit (HELOC) are just a few options avail- able on the market — and they’re enough to make any homeowner’s head spin. The decision is further complicated if you opt to take advantage of one of these products in the mid- dle of your mortgage term. Lenders and banks occa- sionally charge hefty penal- ties and interest rates if you don’t choose your products wisely. So which option is right for you? • HELOCs A HELOC is quite different than a Home Equity Loan, although the two terms are often mistakenly inter- changed. For starters, a home eq- uity loan might be the best fit if you plan to use the money in a lump sum for a one-time occasion, as the interest rate and monthly payments are fixed, so you can budget accordingly. A HELOC might be a better fit if you need money periodically and not all at once. These products usu- ally consist of a revolving line of credit that automati- cally rebalances and can be structured along with the mortgage. Because the line of credit is secured to your home, the interest payment is significantly lower than a regular line of credit. The revolving portion of the loan acts like a typical line of credit — you receive monthly statements and can draw down at any time, as well as make monthly pay- ments on it. As the fixed term mortgage is paid down, the available revolv- ing limit increases. Because many clients don’t feel comfortable having a large loan registered against their home that could rise if vari- able rates increase, many providers offer the option of locking portions of their loan in, either to a fixed term or an adjustable rate mortgage (ARM). • Refinancing Refinancing your existing mortgage in the middle of a mortgage term can result in huge penalties — but there are ways around them. Often you merely have to return to your existing lender and opt to ‘blend the rates.’Refinances are popu- lar with homeowners who have accumulated a large amount of high interest debt — such as credit card debt — and have calculated that it will save them money in interest charges if they tie it all into their mortgage and pay it off at a much lower rate. Although the move does have its advantages, there are risks involved. One risk is that you’re reducing the equity in your home but if you need the funds — for whatever pur- pose — tapping into your home equity may be the cheapest way. While this strategy makes sense for some, there is a catch. You must have built enough equity in your home to warrant a refi- nance. After all, a bank will not offer you a $300,000 mortgage on a home that’s still only worth $250,000. Thisstrategyalsodoesn’t work if your first mortgage is at an exceptionally low rate in comparison to the current rate. In this case, it will likely save you more money if you acquire a sec- ond mortgage that matures at the same time as your first, at which point you can refinance with no extra costs. • Second mortgages Second mortgages are no longer limited to the finan- cially-troubled — they’re also a great tool for individ- uals who would like to ac- cess some extra money, but don’t have the necessary equity built up to refinance their existing mortgage or obtain a HELOC. A second mortgage is an additional loan taken out on a property that is already mortgaged. For the lender, this is more risky than the first mortgage, because they are in second position on your property’s title. If the homeowner defaulted on their payments and the property was taken into possession, the lender in first position would always be paid out first, whereas the lender in second posi- tion runs a higher risk of not being paid out in full. To compensate for this additional risk, mortgage rates for second mortgages are always higher than for principal mortgages. For individuals with an existing mortgage, who have good credit and more than 20 per cent equity in their homes, the most af- fordable second mortgages will be in the form of a home equity line of credit. However, if the homeowner has weaker credit and/or lit- tle equity in their property, a second mortgage through a trust company or private lender would be required. Private lenders have been moving aggressively to fill a growing void in the wake of Canada’s tighter mortgage lending rules, offering loans to desper- ate homeowners that, with fees, can range from 12 to more than 30 per cent in- terest rates, leaving some people at risk of losing their properties. Borrowers should be very careful about using second mortgages. I only recommend them to people who don’t qualify at the banks. There are very few cases where a client should take a second mortgage at 12 to 13 per cent. It’s important for home- owners to do their research when deciding whether a second mortgage — or other mortgage product — is right for them. Your local mortgage broker could be an excellent secret weapon in this arena, as pricing can vary widely depending on your situation and the mort- gage product involved. There are many different products out there and one should carefully read their mortgage agreement in or- der to know what exactly they are getting, especially if it comes to pricing and possible penalties. — Mahendra Gupta is a GTA-based community activist and media commentator. He is also a financial advisor – RefundMyTax providesTax, Accounting, Insurance, Mortgage and Business Evaluation services. Contact mgupta@desiexpressonline.com or 647-292-1190. Accessing your home equity MONEY MATTERS White Cashmere in first ever bridal couture collection By A Staff Reporter The world’s first collection of one-of-a-kind, designer- made wedding couture fashioned in luxuriously soft sheets of Cashmere Bathroom Tissue (BT), floated down the aisle at the 12th Annual White Cash- mere Collection fashion show earlier this fall at The Carlu, in Toronto. Celebrating love and romance, 15 top Canadian bridal designers presented an exquisite show of Cash- mereBathroomTissueCou- ture gowns, lingerie and ac- cessories, all in support of the Canadian Breast Cancer Foundation (CBCF). The spectacular bridal showcase was curated by Jessica Mulroney, Klein- feld Hudson’s Bay. “The White Cashmere Bridal Collection provides a unique and welcome spot- light for Canada’s top brid- al designers, and gives us a chance to support a life- saving cause that touches women and their families,” said Mulroney. “The designers’ hard- work, passion, creativity and diversity are gloriously displayed in their brilliant creations that feature every- thing from fabulous bead- ing, braiding, and flowers to layers of ruffles, sheer and lace bodices, all me- ticulously crafted in Cash- mere Bathroom Tissue.” The 12th Annual White Cashmere Collection in- cluded a spectacular, invi- tation-only runway show, a portfolio of high-fashion Cashmere BT Couture pho- tosbyfamedCanadianwed- ding photographer Babar Khan, and a Vote Couture for the Cure consumer pro- motion for CBCF. An annual fund- and awareness-raiser for the Canadian Breast Cancer Foundation, the White Cashmere Collection is produced by Kruger Prod- ucts LP, maker of Cash- mere Bathroom Tissue and highlights the brand’s on- going commitment to help end breast cancer. Like Cashmere on Fa- cebook.com/Cashmere; or for further information visit cbcf.org. Non-stopToronto-Delhi flight best possible deal: Air Canada By GURMUKH SINGH Effective November 1, Air Canada has started four weekly Toronto-Delhi non- stop flights. The flight leaves Toron- to at 8.55pm on Mondays, Wednesdays, Fridays and Sundays and leaves Delhi at 00.45am on Tuesdays, Wednesdays, Fridays and Sundays. The flight time from Toronto to Delhi is 13 hours and 15 minutes. With this new flight, Air Canada also becomes the first airline to operate the new 787-9 Dreamliner to India from North America. Making the announce- ment amid Bollywood songs and dance recently, Air Canada vice-president Duncan Bureau said the airline stopped its flights to New Delhi via Europe in 2007 because they were not profitable. “But the very efficient new Boing Dreamliner has changed the economics of flying to India. This non- stop flight will be a big suc- cess. There has been a huge response to this flight,’’ he said at the launch event. Vijay Bathija, Air Can- ada vice president (com- mercial), said, “This first non-stop flight between Canada and India will be the best deal for passen- gers. First, they save up to six hours of time and land in Delhi after flying for just 13 hours and 15 minutes. Second, the cost per unit is lower. Our much more comfortable economy class costs between $1,100 and $1,300. The business class comes between $2,000 and $3,000, but with cushy ‘su- per diamond’ seats. The benefits for passengers are unbeatable. It is the best deal.’’ The Indian-origin vice president of Air Canada added, “Since 2007 when Air Canada stopped fly- ing to India, the traffic be- tween India and Canada has grown and matured because there are now vari- ous kinds of traffic — more business and first-class traf- fic. Then there is the fuel efficient Dreamliner which also offers 8 per cent more oxygen to passengers and you won’t be tired when you land in Delhi. We are at the right time with the right aircraft and the right traffic.” With Toronto airport becoming the major inter- national hub, Bajitha said, “Passengers flying from India will have connections to 60 destinations in the US and 50 in Canada.’’ Interestingly, Toronto — the fourth biggest city in North America with the biggest concentration of the Indian diaspora any- where in the world — is not served by Air India. India’s national car- rier stopped its flights from Toronto in 2012, citing fi- nancial losses even when Jet Airways is running its flights via Brussels. — News EastWest At the Air Canada launch event for the Toronto-Delhi flight, (standing from left) IndiaTourism director Anil Oraw, Air Canada vice president (global sales) Duncan Bureau and Air Canada vice president (commercial)Vijay Bathija.

ePaper Nov 5, 2015

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