28 Jun

Building a New Home ? Completion vs. Draw Mortgages

General

Posted by: Valerie J Cavers

Building a New Home? Completion vs. Draw Mortgages

Building a New Home? Completion vs. Draw Mortgages     Just today, chatting with a long time client I get the exciting news they are looking to build a new house for themselves.  I thought perhaps this might be a good time to make this post.

If you are considering building a new home, then you need to be educated on the difference between draw and completion mortgages. When you meet with a builder, there is tons of terminology and information you should be aware of so you are properly covered.   Here is just the tip of the iceberge.

Completion mortgage means that the builder does not expect any funds until you take possession of your new home. Before the building process begins, you will have to go to your mortgage professional to get your application verified for the build to start. The benefits of this option are that you don’t have to put down any payments before you take possession, you can add upgrades to the mortgage, and the lender doesn’t require all final information from you until 30 days before you take possession. During this build process you will want to take extra care of your finances to ensure nothing changes, which could put your initial approval in jeopardy. Any changes that could possibly change your financial position and your credit should be discussed with your mortgage professional. This can include things like switching jobs, buying a car, and taking out any new loan.

A draw mortgage is preferred by home builders because it allows them to receive portions of funds during predetermined stages of the build process. To obtain a draw mortgage, the beginning process is the same and you will have to go to your lender to be verified for the build to begin. The benefits of this option are that the builder is able to manage their cash flow, inspectors are sent to verify stages of development are met, and funds sent to the builder are handled through a lawyer. There are some extra costs associated with this option though. Inspections will incur a cost upon each stage met and interest payments may be incurred as well. You also do not have the option to add upgrades throughout the build process with a draw mortgage as the first advance sets the loan in stone.

As always, if you would like to discuss draw and completion mortgages in preparation for your new build contact me, Valerie Cavers at Dominion Lending Centres, The Mortgage source! We are happy to help you figure out your financial future and your NEW DREAM HOME!

23 Jun

How to Maximize Your Cash Flow!

General

Posted by: Valerie J Cavers

How To Maximize Your Cash Flow While Increasing Your Net Worth By Having a Mortgage Plan, by: K Bay, DLC

How To Maximize Your Cash Flow While Increasing Your Net Worth By Having a Mortgage PlanInterest rates are only one of many features that should be looked at when you are applying for a mortgage. But all things being equal, the interest rate may be more important than you think.

I was reviewing mortgage options with a client and the only thing they were interested in was the mortgage rate. There was no concern about all the other conditions that could end up being quite costly and since I could only offer him what he considered a small reduction, the client said “the bank’s rate was only a little higher and I feel more comfortable leaving everything I have with my bank for such a small difference.” What was the difference? I will get to that in a minute.

The mortgage renewal form you get in the mail is another cautionary note. I have had clients send me a copy of their renewal form. So far, in every case the renewal rate was higher than what I was currently able to get them. The last one I saw was .25% higher than what I could offer.

According to a recent Maritz/CAAMP survey, clients who used the services of a Mortgage Broker benefited with an interest rate .045% lower than those that dealt directly with their lenders.

So what does this fraction of a percentage mean for you? Let’s look at a $500,000 mortgage at 2.64% compared to 2.84%. That is only .2% or, to look at it a different way, it is about $50 a month or $600 a year savings by taking the 2.64% mortgage.  NO DON’T PANIC, not current rates, was a post form January, but so worth the REPEAT. Today Banks are offering 2.79 or 2.69 when we are offering 2.49 or 2.44, some as low as 2.39.  The point is the SAVINGS CAN WORK FOR YOU!

Here are a few options to increase net worth.

  1. You take the 2.64% rate and you invest the $600 a year into a growth mutual fund that averages 10%. Even though over the years, as your mortgage goes down, the savings may not be as great, you make up the difference and keep investing that $600 a year for the next 30 years. That is a small difference, but in 30 years it has added up to over $100,000 in your tax free savings account.
  2. You take out the 2.84% and say I like my bank and I am comfortable with the bank making the extra money and increasing their bottom line off my mortgage.
  3. With interest rates being so low, you could look at increasing your cash flow by stretching out your amortization and lowering your payment. Then you take the extra cash flow and invest it with your financial adviser in your tax free savings account.
  4. If you have extra equity in your home and have not contributed to your Tax Free Savings Account, consider refinancing and topping up your TFSA. As of 2016, the accumulative amount you can contribute is $51,000 per person 19 years or old in BC. So that would be $102,000 per couple. Invest that $102,000 and get an 8% return, you end up with $698,544 tax free money after 25 years and you paid back the mortgage and interest payments. If rates stayed the same throughout the 25 years at 2.69%, the whole $139,906 would be paid back. So you make a tax free profit of $558,638 by freeing up some capital to invest. Your total cost is $37,906 in interest.

There are many details to a mortgage and the rate is just one of them. Any of us here at Dominion Lending Centres would be happy to review your future mortgage needs to make sure you are maximizing your mortgage to your benefit.

Give me a shout, let’s find you some money that we can get yo investing and improving your NET WORTH!

Valerie J Cavers DLC THE MORTGAGE SOURCE

20 Jun

Don’t SIMPLY RENEW! See what your Mortgage Agent can do!

General

Posted by: Valerie J Cavers

Don’t Renew!  See what’s available!

Don't Renew! Renegotiate!Everybody wants to save money on their mortgage!

A new home buyer is especially diligent when shopping for the best mortgage.

They make the effort to:

find out the options

compare rates and costs

compare flexibility

This home buyer then moves into their new home and their mortgage can easily become something they don’t think about often. They might have a growing family and an ambitious career. In the meantime, the mortgage payments are happening on automatic pilot.

Eventually their lender sends them a letter to let them know that their mortgage is coming up for term renewal. That borrower is faced with some decisions to sort out.

1. Should they do things the “easy” way and sign the offer from their current lender?

2. Have they fully considered their current situation?  Have their needs changed?

3. Do they need to pay out debts, top up RRSP’s, are they needed updates to the home?

4. Should they move their mortgage to another lender?

The answer? You guessed it! Don’t Renew, Don’t Sign the offer, ask your Mortgage Agent!!

1. Sadly your lender might not be offering you the BEST RATE in your renewal offer. 

2. Work with me I’ve access to many different lenders so you can better assess your options. Even if I’ve not worked with you berfore, I can still help you sort out your renewal.

3. Have me compare options for you including the option from your current lender. This analysis will include any possible costs for moving the mortgage and list possible advantages to moving to another lender.

4. Then decide. It will cost you nothing to ask and it could save you thousands of dollars.

Remember the effort when you first bought your home? Well you only need a small fraction of that effort to ensure you get the best mortgage when renewing your mortgage term.

It is not unheard of to have a mortgage renewal offer of a whopping 1% higher than competitive rates. On a mortgage of $400 000 that would cost approximately $4000 extra per year! I have also seen decent renewal offers where it was clear that the client was fine to stay where they were.

No matter what your final decision, it pays to consult with a Dominion Lending Centres Mortgage Agent, before you sign the “easy “offer from your current lender. Go ahead and make that call.

Please reach out, if I can find you savings we will, if we can find more money at the end of the month, let’s do that for you, and if we need to simply sign that renewal as circumstances are such we can’t get better, or we can’t qualify, or credit is poor, we can make that decision together, and I give you the HONEST ANSWER!  Just last week, I advised a client, SIGN IT,just sign the renewal they were not in a position to qualify for thier current mortgage.

I’d like to help out, just ask!

Valerie J Cavers, DLC, The Mortgage Source, Cumblerland ON

 

by C Horvath, DLC

17 Jun

Divorce and What Can Happen with the Mortgage

General

Posted by: Valerie J Cavers

Divorce and What Can Happen With the Mortgage

Divorce and What can happen with the Mortgage.When tough times put stress on families sometimes the end result is divorce. While no one ever wants to see this happen sometimes it is inevitable. Recently, CMHC changed the rules about how much a house can be refinanced for, they have set the limit at 80% of the property value so that refinances would no longer fall under the insured mortgages. What they also did was set some guidelines for couples who are divorcing.

When a partnership in a home is being dissolved, that partnership can be a marriage, common law relationship or simply two owners of a property, it is now considered a sale. This means that the existing mortgage will most likely be paid out or in some cases one of the spouses can assume that mortgage and possibly increase the amount. Most likely it will mean that one spouse will purchase the home from the other. Here’s the difference when we are in this situation, the home can be purchased with just 5% down payment again as it doesn’t fall under the refinance rule.

One other thing to consider under the divorce rules is child support. As many parents have learned lately, child support and section 7 spousal support are liabilities for many lenders. So if you do have a $2,000 a month support payment, then that is the same as having a $2,000 dollar car payment. Not all lenders are looking at that the same, some have allowed us to reduce the yearly incomes by the amount of child support. The biggest difference here is of course that the reduction allows you to qualify for more mortgage, it’s just a matter of knowing which lenders work the system which way and a skilled mortgage broker will know the difference.

Ideally, of course, the divorce never happens but one way around child support being paid is joint custody where it is shared 50/50 and no liability is forced upon either spouse allowing them to maximize their purchasing power as the start their new lives.

What also needs to be considered is that this needs to be done in writing, separation agreements are legal binding documents that tell the lenders what your responsibility is to the other partner in the divorce. We have also had situations where a statutory declaration saying that you have no responsibility to the other partner has been sufficient especially in cases of common law separations.

So many in’s and out’s to be considered when embarking on dividing your households and of course we here at Dominion Lending Centres would always advise legal counsel first and then talk to your mortgage brokers about what is required for the mortgage process.

by: L Lane DLC

Life’s circumstance, it happens to the best of us, and I have often worked with both SIDES in this instance. I mean who wants to share their life’s on goings with more people than you have to.   What is said ot me by one party, is not disclosed to the other spouse.  I look forward to helping you through this, it’s a tough road but there is certainly light at the end of the tunnel, one step in front of the other!

Valerie J Cavers

 

16 Jun

Life Happens, Let Your Home Help

General

Posted by: Valerie J Cavers

Life Happens, Let Your Home Help

Life Happens, Let Your Home HelpSometimes “life happens”, and when it does, your home can be your savior if you have accrued some equity in it. Maybe you’ve been out of work, run up your credit cards and driven your credit rating into the ground. Perhaps, you’ve decided to leave the job you hate and venture out into the world of owning your own business. Whatever it may be, the equity in your home can help.

I recently helped a client who had maxed out her high interest credit cards due to not being able to work for a couple of years, and the credit card debt had lowered her credit score substantially. She was now back to work as a self employed consultant earning a good income, but the $1,000 monthly interest payments she was paying was seriously eating at her cash flow and not reducing the principal she owed. Dead money!!

Luckily for her, she had great equity in her condo, so I was able to provide her with an Equity Take Out Mortgage. The mortgage lender I chose was able to loan her money based on the strength of her property and the low loan to value of the mortgage based on her equity, NOT her income or credit score.

Here are the numbers:

Mortgage Amount $75,000

Rate: 4.75% (due to low credit score and equity take out)

Monthly Payments: $425.59

Savings per month: $574.41

In this case, my client was able to pay off her credit card debt and had a fair amount of money left over to invest in her business and her future.

In the end, she was very happy to be able to get her finances and business back on track, and start her life anew!

by: J Thomson DLC

Call me, I get “life happenstance”, and as licence Mortgage Agent with a great range of lenders availaable to me, we can help you out, provide some well needed relief, and cash flow!

Valerie J Cavers

 

14 Jun

Renovating Your Home

General

Posted by: Valerie J Cavers

 Renovating Your HomeDid you know you can get a mortgage for renovating your home? Many home buyers and existing home owners are deciding to get more bang for their buck by purchasing a home that needs some improvements. Whether you are renovating at the time you buy or waiting for a few years, there are financing options available.

For home buyers, you may want to consider a “purchase plus improvements” mortgage when renovating your home. Many lenders offer these even if you only have a 5% down payment. The lender will require proof of the work to be completed in renovating your home. They will add this quoted amount to the purchase price, deduct the down payment and determine your mortgage amount. If you are buying with less than a 20% down payment, insurance fees by CMHC or Genworth will be added to the mortgage. The lender and insurer will typically allow a maximum of 10% of the value of the home to a maximum of $40,000-$50,000. If it is going to cost much more for renovating your home a construction draw mortgage would be required.

At the time of completion on your purchase, the lender will fund the mortgage proceeds to the lawyer and condition a hold back for the renovation funds. You will have to use your own funds (or borrowed from family or your line of credit) for renovating your home. The remaining funds will be released by the lawyer upon proof (appraisal) confirming the work quoted has been completed. There is typically a 90 day period for work to be complete but this can be extended if required. Of course, during this time you are making mortgage payments on the full mortgage amount.

Buy a home $500,000

Renovate $ 50,000

Down pay $110,000

Mortgage $440,000

For existing home owners the same financing option for renovating your home is available. The one exception is your maximum mortgage amount for the existing mortgage and new funds for renovating your home can’t exceed 80% of the value of the home.

by P.Tonkin DLC

For some referenced on renovation your home:

https://www.ontario.ca/page/your-rights-when-starting-home-renovations-or-repairs

http://www.consumerinformation.ca/eic/site/032.nsf/eng/00049.html

http://www.prohomeinspect.com/buyer-seller-home-inspections/residential-construction-remodeling-repairing-cost-guide.aspx

13 Jun

8 Considerations for the First time Home Buyer

General

Posted by: Valerie J Cavers

 

8 Considerations For The First Time Home Buyer

Top 8 Benefits of Using a Mortgage Broker1. Create yourself a Budget and stick to it, so you can keep your finances on track. Planning a budget will help you identify uneconomical expenditures and help you achieve your financial goals. Having a budget can also decrease your stress levels, prepare you for unexpected costs and help you plan for your future of home ownership.

Some of the things you should consider in a budget are all your sources of income, mortgage payment, all loans, condo fees, utilities, cable, internet, phone bills, credit card debts, entertainment expenses, clothing, food, transportation expenses, Insurance (auto, house, life), personal grooming, pet care, donations, child care and an emergency fund which can assist in those unexpected costs like an exterior leak, plumbing issues or just those unforeseen repairs and maintenance issues that could arise.

2. Before you start looking at homes, meet with your Mortgage Broker so they can assist you in figuring out how much home you can afford, get you pre-approved for a mortgage loan and give you the information you need for planning and preparing to save for your down payment. It can be very disappointing to find your dream home only to find out you don’t qualify.

During your qualification period and before you purchase a home, avoid making any big purchases like a new car or buying furniture as these expenses will have to be factored into your debt servicing ratios and could seriously jeopardize your loan approval.

3. Part of your budget plan is to know and consider the additional costs before the purchase of your home. Legal fees, mortgage insurance premiums, life and disability Insurance, Fire Insurance, house insurance, strata fees, appraisal, home inspection, property survey, moving costs, appliances, home maintenance equipment, purchase deposit, down payment, GST if it’s a new construction, property tax, and possibly property transfer taxes. The amount of this property transfer tax will depend on your province and the amount of your home purchase price.

4. Your realtor should be someone you can trust, who understands your needs and will take the time to educate you through the home buying process and the current real estate market conditions in your chosen area.

Your realtor will provide a variety of services to make the complexity of purchasing a home seamless. For example, they will arrange appointments of potential homes, assist in the Contract Of Purchase And Sale agreements, obtain and review the strata minutes, negotiate the home offer on your behalf, inform you of facilities and public services that are available in your neighborhood and current future zoning regulations. Simply, they will streamline the biggest investment purchase that you will ever make.

5. Have your home or strata property inspected. This is one of the most important steps to consider when buying a home, to make sure your home is a sound investment and a safe place to live. If significant defects are revealed by a home inspection, you can back out of your offer, free of penalty, within a certain time frame. Condominium buyers will tend to focus on the Form B certificate that will identify any major issues and costs by the condominium corporation.

6. If there is anything unclear to you while you are preparing the Contract Of Purchase And Sale have the Purchase And Sale Agreement reviewed by your real estate attorney before signing this legal document.

7. Subject Clauses on your Offer To Purchase is highly recommended, especially for first time home buyers. For example a

  • subject to a satisfactory home inspection
  • subject to arranging your mortgage financing

It is of great significance to know that “subject clauses” do not “elude” you to avoid your legal responsibilities in the contract and you must make every attempt to fulfill the conditions that you have set. During this time, it is the seller’s discretion to continue to accept other offers even after the seller has accepted your offer with subjects.

8. On Closing Day, all parties will sign the papers at the lawyer’s office, officially sealing the deal. This is the day that ownership of the property will be transferred to you. On this day it is your job to provide your mortgage broker with your lawyer’s information, as they will be the ones to forward a copy of the Purchase And Sale Agreement to your lawyer as well as inform your lender of your lawyer’s information.

Proof of insurance will need to be obtained, so arrange your Home Insurance before closing and bring the policy with you to your appointment, have your certified cheque or bank draft with closing balance payable to the lawyer’s firm’s trust account, a VOID cheque or a pre-authorized payment form and bring two pieces of valid identification with you like a valid driver’s license or passport. The second piece of identification can be your social insurance card, birth certificate or credit card from a major bank.

Closing funds will be arranged by your lawyer to the seller’s lawyer, the transfer and mortgage will be registered and you will be given the keys to your new home! Finally you take possession.

There are many aspects to consider with your mortgage and home purchase so it would be wise to contact your trusted Dominion Lending Centres Mortgage Professional who can navigate you through the home buying process and give you the resources you need for a successful first home! Give us a call today so we can help you through these steps of home ownership!

 

J.Picco, DLC

9 Jun

Accelerated Bi Weekly vs Bi weekly Payments

General

Posted by: Valerie J Cavers

  Accelerated Bi-Weekly vs. Bi-Weekly Payments

Accelerated Bi-Weekly vs. Bi-Weekly PaymentsWhen signing your mortgage commitment letter you will have to choose your payment frequency. If your goal is to re-pay your mortgage as quickly as possible, then you need to understand how different payment options will affect your repayment schedule.

So what are your options?

In general, most lenders will offer the borrower the option to decide which repayment schedule fits best with their lifestyle. The options include monthly, semi-monthly, bi-weekly, accelerated bi-weekly, weekly and accelerated weekly payments. Let’s use some simple math to determine which payment frequency will assist you in paying back your mortgage in the shortest time possible.

For the purposes of this exercise and to keep things simple, let’s use $100,000 as our mortgage amount. We’ll use a 5 year fixed rate at 2.54% with a 25 year amortization period and interest being compounded semi-annually.

Increasing your payment frequency doesn’t mean shortening your amortization.

As you can see from the table above, choosing to pay your mortgage more frequently doesn’t result in reducing your amortization schedule. The key to reducing your amortization is to make sure you choose an accelerated re-payment schedule.

We are going to focus on Accelerated bi-weekly vs. bi-weekly payments but the same principle can be applied to accelerated weekly payments as well.

By accelerating your repayment schedule, you reduce your amortization by 2.5 years.

Okay, we’ve just determined that accelerating your mortgage payments will reduce your amortization and the interest you pay. How does accelerated bi-weekly vs bi-weekly result in more principle being repaid?

It’s important to think of your payments as a stream of income for the mortgage lender. Mortgage payments are comprised of principal and interest payments. The interest is calculated based on your outstanding principal balance, meaning once the interest has been paid, the remainder of your payment is used towards paying down your principal balance.

By choosing an accelerated repayment schedule, the monthly payment is divided by 2 (bi-weekly) or by 4 (weekly). There are 52 weeks in a calendar year so if you make 26 bi-weekly payments, you are in effect paying your Lender the equivalent of 13 months of payments per year compared to 12 months payments with all non-accelerated repayment schedules.

This accelerated repayment of principal is what shortens your amortization.

13 monthly payments ÷ 26 = accelerated bi-weekly payment

Example: ($449.96 per month x 13 months) ÷ 26 = $224.98 accelerated bi-weekly payment

With a non-accelerated or regular payment plan, the Lender takes 12 months worth of payments and divides this by either 26 or 52 to come up with the bi-weekly (or weekly) payment. With this adjusted payment, the Lender still receives a stream of income of 12 monthly payments per year, so there is no additional principal available to accelerate the amortization.

12 monthly payments ÷ 26 = regular bi-weekly payment

Example: ($449.96 per month x 12 months) ÷ 26 = $207.67 regular bi-weekly payment

So now you know why choosing accelerated bi-weekly vs. bi-weekly payments results in 1 extra month of payments per year, which in turn shortens your amortization.

I always recommend this to anyone who can afford the increase in payment but I understand this option isn’t right for everyone. Another option to help shorten your amortization is to increase your payments, meaning more principal paid.

When you’re choosing your next mortgage, make sure you discuss payment options with your Dominion Lending Centres mortgage professional that align with your overall goals for repaying your mortgage.

Brent Shepheard, DLC

 

8 Jun

6 Tips on How to Repair, Increase and Maintain Your Credit

General

Posted by: Valerie J Cavers

6 Tips on How to Repair, Increase and Maintain Your Credit

Credit scores are like report cards for grown‐ups. The score you get ranges from 300 to 900. Your score indicates your creditworthiness to potential lenders, banks, landlords, insurance companies, and even to some employers. The higher your score the better.

1. Get a Copy of Your Credit Report

Make an inquiry once a year, twice is much better. If you are planning on purchasing anything that requires a credit check, keep track of your credit. This is something that is 100% in your control. As a consumer you have ability to make a soft/consumer inquiry to Equifax as many times as you want without it affecting your score. Here is a link to Equifax. If something doesn’t look right, contact the creditor immediately. Don’t wait to report an incorrect or fraudulent transaction. Is there an outstanding collection? If so, deal with it immediately, and by that I mean pay it. Then argue to get your money back. Do not leave this on your credit report hoping that it will disappear. No matter what, the collection will not be removed until it’s paid unless taken to litigation. Once dealt with, it will still take months to recover the points lost and 6 years to fall off your credit report.

2. NEVER Miss a Minimum Payment

Because this attributes to 35% of your overall score, delinquencies have the biggest negative effect on your credit score. If you have overdue bills, make the necessary arrangements with your creditors. They would much rather work with you than file collections against you. If you can’t pay it all back, it’s better to pay some.

3. Don’t Close Unused Credit Card Accounts

Got a credit card that you have had ten years and hardly use? Keep it. It takes 12 years of history with the same specific card in good standing to crack 800 and enter that top 2% tier of quality credit. Cancelling a card can actually lower your score. Keep the old cards and only use them occasionally so the issuer doesn’t stop reporting your information to the credit bureaus. Having a long credit history helps increase your score. Don’t jump around to credit providers. Most ‘large’ providers have several different products. There is likely one that will fit your needs.

4. Never Max Out Your Credit Cards

A good rule of thumb when considering building your credit is to keep the balance at or below 30% of the limit. Furthermore, a balance of 50% of the limit will maintain existing levels and over 75% will start to decrease it. NEVER exceed the limit, by even a $1.

5. Don’t Look For More Credit

Don’t shop around for credit or open several credit accounts in a short period of time. It raises alarms at credit bureaus and financial institutions, especially when you don’t have a long‐established credit history. Work with your existing creditors, as there is more relevant history. They are more likely to work with you, especially if you are looking to resolve some credit hardship(s). Always ensure you give your permission before allowing a credit check.

6. Rule of 2

Ideally, you want to have 2 sources of credit solely in your own name for a minimum of 2 years with at least a $2,500 credit limit. This would be either 2 credit cards or one credit card and a line of credit. Ensure this is in addition to any joint accounts. Joint credit is only reported to the primary credit holders credit bureau and will not have any positive effect on the co-account holder.

If you ever have questions about your financial situation or want to discuss your credit score, please contact Dominion Lending Centres.

 

-Michael Hallett