All the best of the season!

All the best of the season to you and your families.  May the coming year bring you much joy and prosperity, and may we always remember to be thankful for the many blessings we have in our lives.

Talk to you in 2012!

Photo credit: [c] Axente Ovidiu for stock.xchng

Five Ways to Pay Your Mortgage Off Faster

Looking for tips on paying off your mortgage in the shortest amount of time?  For most of us, paying off our mortgages as quickly as possible is a priority. 

Here are some simple ways to pay down extra principal early on.  This will shorten the life of your mortgage and reduce the amount of interest you'll pay over the years.    

1. Round your payments up – this little extra adds up over time. 

2. Pay a lump sum whenever possible.  Use your tax refund, your annual bonus, or if you're lucky enough to get one, an unexpected cash gift, and put the money against your mortgage.  Most lenders allow you to pay up to 15% - 20% of your mortgage amount each calendar year. 

3. Increase payments when you get a raise.  Most lenders will allow you to increase your payments, and again, you are typically entitled to increase them by 15 - 20% per year.  Take advantage of their flexibility!

4. Make bi-weekly payments – you'll end up paying more toward the principal each year.  If you start doing this from the beginning, you can pay your mortgage off years sooner.  Not only that, but if you are paid bi-weekly, it makes your life simpler too!

5. Keep payments the same when mortgage rates have fallen.  This is applicable both in a variable rate scenario and when your mortgage is up for renewal and the interest rate has dropped.  Keeping your mortgage payments the same as before can save you thousands of dollars in interest. 

For inspiration, check out this article on Moneyville.ca - in which the author describes how he and his wife paid off their mortgage in three years.  Aggressive?  Definitely.  But, it does show that if you're disciplined and motivated, you can pay off your mortgage earlier than you think.

If you would like help with your specific mortgage question, don't hesitate to call or email me!

~ Powered by Mortgage Intelligence

Photo credit: [c] Jolka Igolka for stock.xchng
 

Home and Mortgage Essentials - December 2011 Issue

Did you know that Canadians are responsible for almost 25% of foreign purchases of U.S. property? It's not the first time I've talked about the fact that more and more of us are taking an interested look at the bargains available in those warm locales to the south. If you're thinking this might be for you, make sure you talk to specialists in cross-border taxation, local real estate experts in the location you're considering, and of course, a mortgage specialist like me if you are looking for advice on financing your purchase. 

The December issue of our monthly newsletter touches on this and more. Click on the image at left to check it out!

Debt denial can do you damage

A great article posted by the CBC today, entitled “Debt’s Dirty Dozen Danger Signs” highlights an issue we mortgage consultants come across all too often. That is: people waiting too long to ask for help.

As you may be aware, if you have equity in your home, and are feeling overwhelmed by your monthly payments on high interest debts such as credit cards or car loans, it is often possible to give you financial breathing room by doing a debt consolidation (paying off debt by rolling it into a lower interest mortgage). This can lower your monthly payments, and reduce your interest costs by a tremendous amount.

However, there’s a catch. If we get the call from our clients too late – after several mortgage payments have been missed, or credit cards are way over the limit, or debts have gone to a collection agency – it makes it very difficult, and sometimes impossible, to help. For example, most mortgage lenders are not excited about the idea of advancing several hundred thousand dollars, to clients who have already shown that they are consistently not paying their existing mortgage payment, and have not tried to re-negotiate terms with the existing mortgage lender. Because of this, the options we can offer you become very limited.

Your best bet is to call your mortgage professional as soon as you feel you might be running into trouble. We can help you review your options and figure out a plan of action.

Check out the article – it’s worth reading. And if you think you might need us to review your financial options, call now, not later.

Home and Mortgage Essentials - November 2011 Issue!

Curious about where home trends are heading?  Click the image at left for a sneak peek at what homes are projected to look like in 2015.  It has some great stats on mortgage paydowns too!

Using your RRSP for a Down Payment? Read this!

If you're like many of us, wading through all the rules on RRSPs, the federal Home Buyer Plan, and the like is sure to put you to sleep.  Here's a great article that gives you the scoop on the rules around RRSP withdrawals for your down payment.  And it's in plain English! 

How to buy the perfect home (For you. For right now.)

So, you’ve decided to buy a home? Congratulations!

When my husband and I were house-hunting, it was such an exciting time. We looked for almost 2 years before we found a place we fell in love with (our real estate agents had the patience of saints!). The reason it took so long was: a) we kept thinking prices HAD to go lower – which they didn't, and b) there was a slight disconnect in what my hubby and I were prepared to live with – I would have been okay with a fixer-upper, but my hubby was totally NOT okay with a fixer-upper. As it turns out, we ended up somewhere in the middle.

Being fairly analytical types, we had a list of ten “must-haves” for our house:

1. Within certain price range
2. Maximum commute time from work
3. Four bedrooms
4. Two-car garage
5. Lots of space between us and neighbours
6. Neighbourhood with character
7. Backyard for kids to play in
8. Lots of windows
9. Basement that my 6’2” husband didn't have to crouch in
10. Within walking distance of good school

In the end, we got almost everything we wanted from our list, although we did go over on # 1. You’ll notice that one thing was not on our list – a big modern kitchen. That is why we are now considering a pain-in-the-neck kitchen reno. Anyway, I digress.

Here are my recommendations for finding the perfect home:

1. Decide on your top ten “must-haves” and rank them in order of priority. Doing some research on helpful sites such as CMHC.ca and Genworth.ca will get you thinking about points you might not have considered. Check out CMHC’s “Homebuying Step by Step” guide as well as their great home features checklist.

2. Get pre-approved for a mortgage. A good mortgage specialist will help you develop a mortgage plan. This gives you several key pieces of information. Not only should you understand exactly how much you can qualify for, but you should also get advice on whether you need to fix anything credit-wise to get the best mortgage rates, and whether you need to increase your savings for down payment and/or closing costs.

3. Connect with a great real estate agent. If you don’t already have one, ask around for recommendations. A skilled real estate agent will sit down with you and provide guidance on where in the city you can get a home that fits with your budget and your requirements. Be sure to keep the lines of communication open, so that after every viewing, you can provide feedback on what you liked and didn't like about the place. This can save you a lot of time and effort.

4. Make your offer. Your real estate agent will guide you here as well, based on their experience and understanding of the market. Make sure to include clauses in your offer to give you time to finalize your financing and to get a home inspection.

A little planning can go a long way to relieving any stress associated with this big step in your life. Take your time in doing the research, talk to friends and real estate professionals, and then, trust your instincts. And make sure that you take a good hard look at that kitchen!


Photo credit: [c] Miroslav Vajdic for openphoto.net

Home and Mortgage Essentials - October 2011

Click the newsletter image at left to see our October 2011 issue of Home & Mortgage Essentials. This month, it contains tips and mortgage solutions for freelancers, as well as the latest Canadian housing market overview.

After clicking, click again if you would like to enlarge the image further.

If you would prefer a pdf version, email me and I'll get one to you.

Happy reading!

Renewing your mortgage? Read this first!

Think of your mortgage renewal as a valuable opportunity. It's a chance not only to take advantage of today's great rates, but also get a mortgage product that better fits your current needs.

When you receive a renewal notice from your current lender, don't simply sign it without knowing all your options. If you do so, you could be paying a higher rate than you need to, and end up with a mortgage that might not be best suited to your requirements.

Often, by the time your mortgage comes up for renewal, you are most likely in a different financial position than when you first obtained it. As our financial and life circumstances change, so does the mortgage product that is best for our needs and goals. For example, you may wish to access your home's equity to consolidate other debts (especially high interest credit card debt), or perhaps help pay for a renovation or investment property.

So make sure to review your options thoroughly. Feel free to call me to discuss your situation. We can discuss your interest rate options, and help you with a customized mortgage strategy.

At renewal time, take the time to ensure you get the most from your financing. We can speak to any concerns you may have about interest rate trends and advise you on what to do as your mortgage renewal approaches.





- powered by Mortgage Intelligence


Photo credit: Thanh for openphoto.net

Planning for retirement? Make the most of your biggest asset...

Did you know that Canada's first batch of Baby Boomers is hitting retirement age this year? And, according to Ipsos-Reid, almost a quarter of them worry whether they have enough for retirement. They're not alone. Almost 40% of Canadian adults haven't saved a penny for retirement.


If this is your situation, you may not realize that you might actually be living in your nest egg. If you expect to be mortgage-free by retirement, this opens up several options for your retirement plan. If at all possible, you should explore these options, with the help of a good financial advisor, well before you stop working.


Here are three options to consider:


1. Plan on selling your home and downsizing at retirement.


Selling your home and moving into a smaller home or condo should serve to minimize your living expenses. In addition, you can use the surplus cash from the sale of your home to invest in a nice diversified portfolio of investments that ensures safety and income, as well as some growth. Make sure you talk to a good financial planner and/or investment advisor to get the best mix of investments for your long term needs.


2. Leverage the value of your home by setting up a home equity line of credit.


If your home is, or soon will be, mortgage free, and if you still have a source of income to qualify, setting up a "HELOC" will enable you to access the funds tied up in your home. Although there are some initial setup costs, there is no ongoing cost for having an unused HELOC available to you. And once you have it set up, you can use it when needed, either by writing cheques, doing a transfer to your bank account, or sometimes even using an ATM. If you do carry a balance, the interest rate charged is much less than on an unsecured line of credit, and you only need to pay the interest monthly. So, if you're eventually on a limited income, the payments should not be burdensome. And if you’re able to periodically make extra payments, there is no penalty to pay off part or all of the outstanding balance whenever you choose. Talk to an experienced mortgage advisor to find out if you qualify and for what amount.


3. Arrange a reverse mortgage.


If you don't qualify for a HELOC, and you feel strongly about staying in your home, this is another option to investigate. The way a reverse mortgage works is that you determine a maximum amount that you will borrow - no more than 50% of the value of your home - based on your age. You can then receive the funds in one bulk payment, several payments, or installments, based on your requirements. No monthly payments are required; rather, your interest on the reverse mortgage accumulates over time. The mortgage is paid off when your home is sold or when you and your partner (if applicable) permanently move out of your home. While there are costs associated with the setup of the reverse mortgage, it is quick to arrange and the money received is not taxable (and therefore, does not impact OAS and GIS). As long as you continue paying your property taxes and property insurance, and keep up with any maintenance, you have the security of knowing that you can keep your home as long as you wish. If this is an option you wish to contemplate further, you'll need to get advice not only from a mortgage advisor, but also a good financial planner and legal advisor.


Whether you decide to downsize, set up a home equity line of credit, or arrange a reverse mortgage, make sure you get advice from the experts in considering your options. I can't emphasize enough that the earlier you explore which option is best for your unique situation, the less stress you will experience when it is time to implement your plan.
 
 
 

Buying a Condo? 5 Tips For Getting the Best Value...

If you're a first-time homebuyer, a current homeowner looking to downsize or a parent considering buying a secondary property for kids moving for school, chances are you've considered condo ownership.

When looking for a condo, finding the best value is all in the combination of the place, the price and the monthly fees.  When calculating how much they will loan to you, mortgage lenders count half of your monthly fees, along with other factors such as property taxes and heat expenses.

Here are five tips from Mortgage Intelligence, to help you get the best value for your condo purchase:

1. Know what your fees cover.  Along with maintenance of the building and common areas, some condominiums will include part or all of your utilities or property taxes in your fees, while others keep them completely separate.

2. Check the reserve fund.  The corporation responsible for the condo development should have a reserve fund that's large enough to cover the cost of repairs to the building's common elements.  A status certificate (or Estoppel certificate in some provinces) will show any planned developments that could increase your monthly fees or require a special one time assessment.  You can find similar details in the condo corporation's annual meeting minutes.  

3. Think twice about upscale amenities.  Keep in mind that building features like pools, saunas, deluxe fitness areas or large common rooms typically require higher condo fees to cover the upkeep. Consider whether you'll really use these features enough to make the extra cost worthwhile.

4. Check the regulations.  Make sure you're aware of any bylaws governing your condo development that could affect your lifestyle. For example, bylaws may restrict household pets, gas barbecues, working from home or renting the unit to a tenant.

5. Consider your neighbours.  Is the building mainly occupied by owners, or renters? Residents who own and have a vested interest in the building may be more careful about upkeep.


- powered by Mortgage Intelligence

Photo credit: [c] Sharon Diwakar for openphoto.net

Are We in a Housing Bubble?

In a recent issue of CIBC World Markets' Economic Insights, one of my favourite economists, Benjamin Tal, addresses what we've all been wondering...  Are we in a housing market bubble?  Is a crash imminent?

Tal states that any such suggestion is "probably wrong".

His reasons for this conclusion:

First, while average house prices have indeed been increasing, the main markets that are pulling up the average are Vancouver (a "highly skewed" market) and, to a lesser extent, Toronto.  Pulling out the data from these markets reveals a much more moderate 3.7% year-over-year price increase.

Second, while he does believe that "prices in the Canadian market and its sub-segments are higher than can be explained by factors such as income growth, rent and household formation", the "pace of any correction is likely to be gradual".   He demonstrates that we only have a small segment of the population that is vulnerable to interest rate hikes (families with less than 20% equity and/or whose debt payments total more than 40% of their gross income).  Further, he maintains that such interest rate increases are expected to be moderate. 

Tal concludes that there may indeed be a period of time where housing "underperforms" compared to other assets, but that eventually we will see a return to equilibrium.

If you're house-hunting and wondering whether to get into a bidding war on one of those "hot" houses, this is something to keep in mind.  More and more, the answer is you probably shouldn't.

 


Photo credit: [c] Jasenka Petanjek for openphoto.net

Rate watch - rates on the rise

A couple of the chartered banks announced rate increases yesterday and today, and with bond yields going up recently, it is likely that the other lenders will do the same. 

If you're in the market for a home and don't have a pre-approval yet, or you've been considering refinancing soon, don't delay calling your mortgage consultant.  Lock in these low rates while you have the chance!

Buy your cottage and keep it, too

We just got back from our cottage on the Ottawa River.  It's wonderful there...  Wild windswept forest, water gently lapping onto the sandy beach (and mosquitoes the size of hummingbirds, but hopefully some long overdue hot dry weather will beat them into submission). 

I always know that summer's coming because the smaller members of our household start negotiating, "Can we go to the cottage tomorrow?  Why not?  Well, when can we go?"  And I find myself wondering, just how much school do those kids really need, anyway?

The reality of our situation however is that taxes, insurance, maintenance, and small renovations really tap into our cash flow.  In addition, with our busy jobs it's hard to get away as much as we would like.  So, like many people, we rent the cottage part of the summer.  It accomplishes two things: one, the rental income helps with our expenses, and two, we have wonderful renters who take care of the cottage as if it were their own, so that we don't have to worry that an empty cottage is just sitting there, vulnerable to thieves.

If you've been bitten by the cottage bug, or a vacation home is crowding in on your daydreams, you have probably realized another reality.  Nowadays, property prices have greatly increased in many of Canada's popular vacation destinations, making it a challenge to purchase the beach house of your dreams.

Some people choose to share these costs by renting, as we have, while others manage the cost through joint ownership with family or friends, or even some combination of the two.  However, before taking the plunge into co-ownership or renting, you need to be sure that you really understand what you're getting into.

Here are a few things to think about:

Does owning a vacation property fit your lifestyle?

In addition to the fun and leisure aspects of a vacation home it is important to factor in the time and cost involved in year-round upkeep. How will the property be used? If your dream is to own a ready-to-live-in relaxing hideaway while your co-owners dream of a northern DIY project, you may not see eye-to-eye when it comes to how you will be spending your weekends.

It’s important to think carefully about how much time you and your co-owners plan to spend at the vacation property. Will you be vacationing as a group, or do you want to trade off on weekends? Will one use the property more than the other? Will it be a 50/50 split?  

How will disagreements be resolved?  Can your relationship withstand potential friction regarding decisions involving money?

Have you thought about what’s involved before you put it up for rent?

While most Canadians buy a second home for recreational use, growing numbers are also buying for investment purposes. Determine in advance how you will split, and claim, the rental income. In the case of a vacation property that you intend to rent out most of the time, the lender may deduct the rental income from your total monthly debt payments when qualifying you for a mortgage. It is important to be aware that not all lenders will take rental income into account – a mortgage broker can advise you on this.   As well, if you do rent the property for the majority of the year, you may have additional expenses - insurance would be more expensive, and you may wish to consider using a property management company.  How do these fit into your spreadsheet?

Can you afford the financing?

While it certainly helps to go in with a co-purchaser, you want to be sure that your waterfront property isn't putting you underwater.  Seek independent advice on what size of mortgage you can reasonably handle - again, a mortgage broker can help you with this.  And as with any purchase, if you think you will need financing, make sure you get a pre-approval to ensure smooth sailing when you put in your offer to purchase.

Regardless of whether you are buying a cottage that you yourself will enjoy, or as an investment, some pre-planning will help make sure it is a relaxing and rewarding venture.  And don't forget your bug spray!

Image credit: [c] Daniel Steger for openphoto.net

Thinking of helping your kids to buy a home? Three ways to do it

Abigail Van Buren once said, “If you want children to keep their feet on the ground, put some responsibility on their shoulders.”

This holds true even once they’re grown. What better way to give responsibility to your adult children than by helping them to become homeowners?  Further, once your kids are old enough to go to university or first start working, they likely won’t have the funds to buy their own home, yet many of us feel that it is better to own the home we live in, rather than paying off someone else’s mortgage. So, how can this be accomplished? 

Here are three alternatives. Which is most appropriate for you depends on your financial situation and your lifestyle and retirement goals.

Option 1. Provide cash to your child as a gift, for a down payment on a home.

PROS: Your child can buy a home sooner, and start building up equity, rather than paying rent to someone else. If the amount of the gift is more than 20% of the value of the home they wish to buy, you enable them to obtain a conventional mortgage, avoiding mortgage default insurance fees.

CONS: You will have to provide a letter confirming that the funds are a gift, with no repayment required. The child is free to use the money as they choose.

Option 2. Co-sign on your child’s mortgage.

PROS: The mortgage will be obtained based on your financial circumstances. Your child may not have an established credit rating, high enough salary, or a proven track record of employment, to qualify for a mortgage. If your financial situation allows, you can co-sign or guarantee their mortgage. This may result in a better interest rate, larger mortgage amount, and a more ideal home for your child.

CONS: You will be responsible for paying the mortgage, if your child becomes unable to do so. As well, if you later need to borrow money yourself, the debt may impact your own ability to qualify for funds.

Option 3. Use your own cash, or equity you have available in your own home, to buy a home and have your child pay you rent.

PROS: If you feel your child is not yet ready to own their own home, for example, while going to university, becoming the landlord may make the most sense. Using money you have in the bank, or equity in your own paid-off home, you could invest in a rental property. If you do finance the purchase, your interest on the loan is tax-deductible since this is not your primary residence (and if you choose a home equity line of credit, all you have to pay is the interest).   Best of all, your child and their roommates will pay the rent to you, keeping the money in the family.

CONS: If you finance the purchase, the equity in your own home will be tied up and not available to you for your personal needs. The same holds true of you use your own funds. Also, if your child moves away, you might be stuck holding property in an area that was chosen only because your child was attending school there.

The key benefit in these scenarios: the help you have provided will keep money in the family, instead of paying someone else’s mortgage via rent payments.  Talk to your accountant or financial planner to review your options and ensure they are appropriate for your situation, and then enjoy helping to make your child a homeowner!

Photo credit: [c] Microsoft Clip Art

Five Steps to Making Your Dream Renovation a Reality

The lure of a stunning gourmet kitchen or sparkling spa-style bathroom may have you chomping at the bit to begin a home renovation. But if you heed the advice of experienced renovators, pre-planning and advanced preparation are the secrets to renovation success.

Here’s a helpful checklist to get your renovation started on the right track:

1. DECIDE WHAT YOU WANT TO DO

For most people, this is the fun part – flipping through magazines and watching home decorating shows to get inspired. But it is also one of the most critical phases in any home renovation.

2. PREPARE A REALISTIC BUDGET

Determine how much you are prepared to spend on your renovation. Remember to boost your budget by at least 10% for unexpected costs.

3. ARRANGE FOR FINANCING

Get financing in place early so that you can plan your renovation with confidence. Leveraging the equity in your home is often a good option. With a secured loan, you can usually obtain an attractive interest rate with flexible repayments. Other alternatives include refinancing your existing mortgage or arranging for a second mortgage on your home.

An independent mortgage broker can help by negotiatiating competitive financing with a number of competing lending institutions.

4. SELECT THE RIGHT TEAM

You’ll want to entrust your project to people known for their quality of work. Ask for recommendations from friends and family, interview prospective candidates, and I strongly recommend that you check references.

5. STICK WITH YOUR PLAN

Your contractor, who does the construction or subcontracts it to other trades people, will work with you or your designer to implement your plan. With a sound plan, reasonable budget, financing in place and a team that you trust, your renovation can get off on the right track.

What renovations are on your wish list?

Home sales down, prices up in April 2011

According to the Canadian Real Estate Association, home sales activity was down 4.4% in April 2011.  This softening was expected due to the tightening of mortgage regulations in March.

Home prices were up 8% compared to April 2010, buoyed by continuing increases of multi-million dollar home sales in Vancouver.  

To see the full article, click here.


Photo credit [c] Liz Orfao for openphoto.net

Rates drop - but only slightly

The bank posted 5 year rate has dropped from 5.69% to 5.59%. That .10% is not significant but it is allowing fixed rates to continue to edge down. Overall, rates are lower than they were a few weeks ago, and a lot of our lenders are beating the posted rate by 1.5% or more. 

It would be nice to see rates stay at these levels throughout the summer!

Mortgage and homebuying tools - free for the taking!

If you do a quick google search you will find that there is an overwhelming amount of information available for new homebuyers.  Save yourself some time and check out one of the best sites out there:  the CMHC website.  It contains literally thousands of articles on everything from homebuying to mortgages to renting and dealing with home ownership issues.  And it's not just in English; translations are available in French and eight other languages.

Check out this first time homebuyer video, then spend some time looking at the homebuyer guides, easy-to-use calculators, and of course, information about CMHC mortgage insurance.

I'm a big believer in getting educated.  Since a home purchase is the biggest financial investment most of us will ever undertake, it is worth knowing about a resource that gives you so much unbiased, high quality information about home buying.

Let me know what you think!

Top Homebuying Mistakes and How to Avoid Them

In the market for a new home in the next year or two?  Make sure you avoid these common homebuyer mistakes: 

Not getting a pre-approval.     The very first thing you should do before doing much more than glancing through the real estate section of the newspaper or online is to go to your mortgage broker or favourite lender and get preapproved for a mortgage.  For one thing, this tells you how much you can afford, so you don’t risk finding a house you fall in love with but can’t actually buy.  For another, it allows your mortgage professional to review your credit score and credit report.  If there are any problems with your credit, errors on the credit report (which happens more often than you might think), or your credit score is too low, you can then work together to develop a credit improvement plan.  This can take as long as two years, so the earlier you start, the better.  Your reward will be qualifying for the best possible interest rate on your mortgage and, therefore, saving money.

Not knowing where your down payment is coming from.     You will need anywhere from 5% to 20% of your home’s purchase price as a down payment.  Money in an RRSP (up to $25,000, for first time home buyers), money in bank accounts or brokerage accounts, or a gift from a family member are possible sources.  If you are putting down less than 20%, it’s called a “High Ratio” mortgage.  All this means is that the mortgage must be insured either through CMHC or Genworth, to protect your lender.  There are a few lenders that offer what they call a cash back mortgage, where you can get money on your closing date to help with closing costs, your down payment, or another purpose.  The bottom line, however, is that you will have to prove that you have a down payment.

Not budgeting for closing costs.     Don’t get caught forgetting about closing costs.  You will need  to demonstrate that you have at least 1.5% - 3% of the purchase price to cover costs including lawyer fees,  land transfer tax (including Toronto’s MLTT), home inspection, title insurance, interest adjustments, and other charges.   See my blog post about closing costs for more details.

Maxxing out on your home purchase.     We’ve all been there.  You’re out looking at homes, and you go see “the one” – the house with that perfect kitchen or the perfect yard for entertaining.  The catch is that it’s just a tad above your top price.  But if you tighten your belts, you could just about manage it, right?  Well, before you rush in, make sure you spend some time looking at something less exciting: the numbers.  If you have a pre-approval, you should know by now how much you qualify for.  Work through how each month’s budget would look like it you do max out.  Do you have any money left over for things like home maintenance?  Unexpected expenses such as a new roof or new car?  Fun things like travel?  And what happens if interest rates go up, or you or your partner don't get that expected bonus – will you still be able to afford the payments?

Hiding information about your financial situation from your advisors.     Often people will not disclose negative financial information because they are concerned that they will “look bad”, don’t feel it’s relevant, or don’t think it will come to light.  Unfortunately, surprises during the home financing process are usually not happy surprises!  It is better to be forthright about your situation.  There are very few circumstances we haven’t seen before, so we usually have a solution!

Changing something about your financial picture before closing on your home purchase.      Remember that you have been approved for your mortgage based on a certain set of financial circumstances – income amount, employer / self-employment information, current debt load.  Do not run out and sign for a new car lease, or quit your job to start a business, or anything else that impacts the set of numbers you provided when you applied for your mortgage!

Feel free to call me to discuss your options.   In the meantime, I wish you smooth and surprise-free home buying.

Photo credit: [c] ComputerHotline for openphoto.net

Thanks for visiting us at the Mississauga Home Show!

Thanks to everyone who visited us at the Mississauga Home Show this past weekend!  We were happy to see so many people braving the rainy weather Saturday and the snow (!) and cold on Sunday.  It was great to be out and chatting with everyone.   Now for all the follow-up calls!

10 Tips for Obtaining a Mortgage After Bankruptcy

Sometimes bad financial situations happen to good people and bankruptcy is the only way out.  But there's hope – there are a number of strategies for putting your credit back on track and getting approved for a mortgage, even after bankruptcy. 

Here are some points to consider:

1.  Locate the right lender: Some lenders will not approve a mortgage if a bankruptcy shows up on a credit report.  However so-called "non-conforming" lenders may consider doing so, provided the borrower can demonstrate that he or she has the income to support the payments and is now a good credit risk. 

2.  Length of time since bankruptcy discharge: Different lenders have different criteria regarding the length of time since a bankruptcy after which they will grant a mortgage – often  two years along with proof of re-established credit.  Some lenders may consider applicants with a more recent bankruptcy – a mortgage broker can advise on the requirements of various lenders.  

3.  Reasons for bankruptcy: If a bankruptcy was due to factors beyond your control, this is more acceptable to the lender than if the bankruptcy was the result of poor money management and excessive debt, which can affect the terms of an applicant’s mortgage approval.   

4.  Size of down payment: With a past bankruptcy, most lenders like to see a minimum 10% down payment consisting of one’s own funds, and it can't be borrowed, or a gift.  A down payment of 5% or less may be permitted, in some circumstances.   

5.  The type of property: Some lenders will only lend on houses or row townhouses.  Very few will consider apartments or stacked townhouses, which may involve stringent criteria to qualify.

6.  Credit report: A credit report provides a picture of your financial health based on past behaviour.   Lenders are looking to see improvements over time.

7.  Credit score: A borrower’s credit score may determine the rate of the mortgage — the higher your credit score, the better the rate.  Some lenders have minimum credit score requirements for those with a bankruptcy.

8.  Rate considerations: Most lenders charge a higher interest rate and even some extra fees to those with a bankruptcy.  A lender may grant a better rate if certain lending criteria have been met, such as: two years since bankruptcy discharge, good re-established credit, minimum beacon scores, saved down payment, good debt servicing ratios, and a long-term history of job stability.

9.  Re-established credit: Re-established credit shows the lender that a prospective borrower has new credit and has managed it well since bankruptcy.  Typically, re-established credit should involve a recent record of on-time payments on major bank or credit cards.  If you are re-building your credit, you need to be aware that a missed payment at this stage could be mentioned on your credit report for the next six years, and could be grounds for some lenders to decline a mortgage application. 

10.  Don’t do it alone:  Consider asking a mortgage broker for help.  For those with bad credit and/or bankruptcy, a mortgage broker can coach you on how to improve your credit score over time.  While you work on bettering your score, a mortgage broker can advise you on how to get a mortgage despite bruised credit, and provide valuable expertise, both before, during, and after the mortgage financing process. 

Come visit us at the home show!

Don't forget that the Mississauga Lifestyle Home Show and Cottagefest is happening this weekend.  We saw some great booths getting set up today, including some great-looking speedboats and other cool "toys".  I can't wait to talk to the people who've brought the antique boat motors.

If you are planning to go, make sure you come by booth # 330 to say hello!

Click here for the hours and location.   And whatever you end up doing, have a great weekend!

Take the surprise out of closing costs

You've figured out your down payment, started working with a great real estate agent, and have been pre-approved for a mortgage.  You're off to the races, right?

Well, not quite.  You are indeed off to a great start.  However, you also need to understand and be prepared for the costs that you will need to pay when you "close", or finalize, your home purchase.  If you don't have the money to pay these closing costs, your deal will not go through.  Not a good thing!

So how much should you set aside for closing costs?

The exact amount is based on a number of factors related to your specific situation, but we usually recommend that you budget about 1.5% - 3% of your purchase price.   This will cover costs such as the following:

• Reimbursements - repaying the home seller for amounts that they've paid in advance, which are now owed by you.  These are things like property taxes, utilities, and so on.
• Ontario Land Transfer Tax, and Toronto Municipal Land Transfer Tax (if you're purchasing in the city of Toronto).  Click on each of these for the calculation.
• Home inspection fee - this is the amount for the inspector you hired to check out the physical structure of your home prior to buying it.
• Appraisal fee, if applicable - typically about $250 in the GTA; it depends on the uniqueness and complexity of your property.
• HST on your CMHC premium, if applicable.
• Legal fees - speak to your lawyer about their fee schedule.  Typically this is in the range of $1,000 - $1,500.
• Title insurance or property survey - many lenders will accept title insurance instead of needing a full property survey.  Title insurance covers a number of situations that could threaten your ownership of your home.
• Property insurance - this insurance, especially fire, must take effect the moment you are the owner of the home.
• Status certificate fee of $100 - this applies to condos only. 
• Interest adjustment amount - based on the timing of your closing date and your first mortgage payment, there may be interest owing. 

What can you do if you don't have the money?

There are a couple of options for you in this scenario:

1) Wait a little longer to purchase your home, until you have the money saved for closing costs.
2)  Consult with your mortgage broker.  Some lenders offer "cash back" programs where you can get up to 5% of the mortgage amount paid to you on your closing date.  You can then use the funds for closing costs or another purpose.

If you have any questions, please get in touch with me.  I would be happy to help.

Enjoy your house hunting!


Photo credit: Microsoft clip art

Rates on the rise again

TD has announced that they are raising fixed rates for 1 to 5 year terms by as much as 35 basis points.  The other financial institutions are expected to follow suit in the next few days, as rising bond yields are increasing their cost of funds, and putting upward pressure on mortgage rates. 

What does this mean to you? 

If you're planning to purchase in the next 4 months or so, you should lock in your pre-approval rate now, just to be safe.  And if you have a mortgage coming up for renewal in the near future, contact your financial institution or mortgage broker to see if you can lock in your rate early. 

Want to be mortgage-free sooner? Pre-pay now!

Signing up for a mortgage may seem like a life-time commitment.  For most of us, it is the biggest debt we'll ever take on.  What many people may not realize is just how big a dent they can put in their mortgage by making pre-payments. 

Making extra payments or larger payments early on can add up to significant interest savings and shorten the life of your mortgage, leaving more money available for RRSPs and other investments, as well as improving your cash flow for changing lifestyle needs. 

Here are some strategies for making prepayments:

Add a bit to your monthly payment

Most of us can find an extra $50 per month by cutting out a restaurant meal.  Add that money to your mortgage and you’re saving a lot in interest down the road.   Most lenders allow you to increase your payment amount by a certain percentage every year.

Make a yearly pre-payment 

Paying an extra one or two thousand on your mortgage once per year on the anniversary date of the mortgage could yield significant savings over the life of the loan.  For many borrowers, the money for such a prepayment comes from a tax return. 

Make a larger prepayment early in the mortgage

Note that lump-sum mortgage prepayments have a much greater impact on the total amount of interest you’ll pay, the earlier they are made.  Check your mortgage contract to see how much you can pay down your principal, and how often you can do so.

If you're paid bi-weekly, sign up for "bi-weekly accelerated" payments 

If you split your monthly payment in half, and pay that amount every two weeks, it's an easy way to sneak in an extra payment every year.  This can save your thousands in interest and allow you to pay off your mortgage years earlier.

Please call me if you have any questions or would like to further discuss your options!

Photo credit: Microsoft Clip Art

$25,000 Giveaway Contest!

This year at Mortgage Intelligence we are celebrating our 500,000th mortgage client with our biggest giveaway ever!

We invite you to enter for a chance to win $25,000.  You can use it for a down payment, home improvements, or just about anything. 

Click here to fill out a ballot on my website.   Good luck!

Debt Restructuring – It Pays to Have a Plan

Many of us are carrying consumer debt from several sources – credit cards, car loans, personal loans, student loans – and are paying much more in interest costs than we should be. 

An option available to homeowners is paying off higher interest debts with a refinanced mortgage that has a lower interest rate. 

This is worth considering if you are paying a lot of interest for your other debts.  Debt restructuring can help lower your overall monthly payments, giving you financial breathing room rather than living paycheck to paycheck.  

Just as importantly, a well thought-out debt restructuring plan can set you up for success, because at the end of the amortization period, your total debt is zero.  With revolving credit – such as credit cards – you may be paying a lot in interest without ever attacking the principal. 

Let me know if you would like my help in reviewing your financial needs.  I can advise you on how to use the equity in your home to reduce the interest paid on your other debts.  We may be able to arrive at a solution that gives you more control over your interest costs, and leaves you with more money at the end of the month. 

Photo credit: [c] Adrian Van Leen for openphoto.net