Sam's Team with 18 years experience will help you in mortgage process.

 

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Centum Liberty Mortgages is part of Centum Financial, one of the largest and fastest growing Mortgage Broker frenchises in Canada. Sam Ansari as a Principal Mortgage Broker of Centum Liberty Mortgages has access to more than 30 plus lenders. Sam Ansari can save you money with giving you the best advice with more than 15 years knowldege in this feild. Sam Ansari has been served thousands of clients in past years.

Sam Ansari as a mortgage broker is working professional and hard to get you best mortgage based on your situation.

Before purchasing a property is better to talk to Sam Ansari and find out about your financial situation. Sam Ansari office is located in verty convinance loaction 505 - 7191 Yonge street, Thornhill, Ontario  L3T 0C4. You can contact him directly @ 416.356.6310

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Sam Ansari has a Realtor referral program, Please contact me for more details.

 

INTEREST RATES ON THE RISE?

 

There has been speculation that Canadian interest rates are not done rising yet – and some say they will keep rising until 2020.  This means borrowers will qualify for less when they’re looking to purchase, and current home owners can expect mortgage payments to climb at the time of their mortgage renewal, or if they are in a variable rate mortgage.
 
Why are rates increasing?
The strengthening Canadian economy strengthening, especially with the recent finalization of the North American Free Trade Agreement (NAFTA), is one of the reasons for higher interest rates for consumers.  Some economists hypothesize that the interest rate will rise not only during the October Bank of Canada (BoC) rate announcement, but it will also increase steadily over the course of 2019.
 
When are BoC announcements?
There are 8 BoC rate announcements a year where the Canadian Prime Rate can be increased or decreased based of the outlook for the Canadian economy.  The prime rate is the interest rate that commercial banks charge their most creditworthy clients, and it is determined by the federal funds overnight rate (ie. the interest rate that large banks use to borrow and lend against each other).  The next scheduled BoC rate announcement is on October 24, 2018 with strong expectations of an increase.
 
When was the last time the prime rate was higher than 5%?
Our current Prime Rate in Canada is 3.7%, with expectations from some economists that the Prime rate could be upwards of 6% by 2020.  This is a large increase for most Canadians – especially as we have not seen the Prime Rate above 5% since 2008!
 
What will this mean for home owners?
To put it simply, anyone with a fixed rate mortgage will not be immediately affected as their payment will stay the same until the end of their mortgage term, when they come up for renewal.  Variable rate clients will feel the brunt of the increases, as when the BoC Prime Rate increases so do their mortgage payments.  With this in mind, it brings the question: is a fixed or variable rate the better choice for the next couple of years?

 

LEGALIZATION AND LANDLORDS

 

With cannabis legalization in Canada coming into effect on October 17, 2018, many landlords are wondering about their rights as landlords and how the legalization will affect their rental property investments.  New rules allow cannabis to be used recreationally as well as for Canadians to grow up to 4 plants in their homes.  Rightfully so, some landlords are panicked that this is a slippery slope that can make their investments riskier.

Although there is the Cannabis Act nationally, each province also has a say in possession limits, minimum age, requirements on personal cultivation and where cannabis may be used in public spaces. 

Currently, there some provinces are banning cannabis use in all public spaces, noting that it’s is only to be allowed in private residences or a unit’s balcony or patio, if applicable.  Of course, with these rules, landlords would be worried about tenants smoking within the homes.  In BC, the Residential Tenancy Act mentions if the tenant has already agreed to no smoking of any combustible material (this would be applicable in multiple provincial tenancy agreements), this would then still apply in the case of cannabis.  In Ontario, landlords cannot change the terms of the lease to include such a clause on no smoking until the lease has run out.

With the introduction of these new regulations surrounding cannabis, stratified properties can put bylaws in place for units and common areas to restrict activities such as smoking in common areas or within the building itself.  Unfortunately, if you have a detached home you will be at the mercy of the tenancy agreement.

Why is growing cannabis so bad for buildings?

The process of growing cannabis, as for most plants, requires water and proper lighting.  Grow ops typically have excess moisture, improper electrical setup for lighting and inadequate ventilation – a combination that can lead to serious home issues such as mold from excess moisture, pesticide and fertilizer contamination, or even electrical fires. 

With any grow op comes the retraction of any home insurance on the property, due to the health and deteriorating property conditions it can create.  Not only is home insurance an issue with a grow op, even after you remediate a property there are very few mortgage providers who will lend on this type of property due to the health implications if a remediation is not completed properly.  After a grow op, the home would need to be remediated by professionals experienced in grow op remediation.  Remediations could include any of the following: renovation to remove walls and ceilings and determine all possible mold build up, sanding of home framing to remove any possible mold build up, duct cleaning, alteration to electrical wiring to correct (typically grow op homes will have altered wiring to bypass the electrical grid), and extensive environmental and air quality tests to ensure the home is free from biological and chemical hazards.

Why is smoking cannabis inside bad for buildings?

When you smoke indoors you are exhaling smoke, which can cake itself onto walls, furniture, carpets and even inside vents in the home.  This is considered third-hand smoke, and it can linger and cause health effects over time if left exposed.  Not only can it cause health problems, but again repairing such damage could require duct cleaning, carpet and furniture replacement and an overall deep clean of the home.

 

HOW LONG DOES IT TAKE TO SAVE A DOWN PAYMENT, WHEN EARNING MINIMUM WAGE?

 

Getting into home ownership has never been tougher than it is today.  With the qualifying rate over 2% higher and with the additional stress tests, it’s no surprise anyone earning near minimum wage would feel that the idea of home ownership is impossible.  But what seems impossible, might be realistic over time and saving – depending where you live in Canada.

After all, in 2015 25% of Canadians made less than $15 per hour.  The Canada 2016 Census tells us that Canada has a population of over 35 million.  This means that nearly 9 million Canadians made less than $15 per hour.  Taking that into account, the Canada 2016 Census also tells us the homeownership rate was 67.8%.

Currently, as of June 1, 2018 in Canada, the national average minimum wage is $12.09, with a high of $14.00 in Ontario and a low of $10.96 in Saskatchewan. 

If we assume you are working full time hours of 37.5 hours per week, the weekly income at the national average would be $453.37. On an annual basis, this would equate to an income of $23,575.50.  Let’s look at a few capital cities across Canada to analyze the amount of time it would take you to save for a down payment, assuming you are currently renting a one-bedroom apartment and have monthly living and utilities expenses of $575. 
 

*Average rent is from Padmapper as of June 2018          *Average house cost from CREA as of June 2017
*Tax deductions are not taken into account in calculations         *Down payment doesn’t include closing costs required
*These calculations do not take into account any qualifications for the mortgage, only how long to save down payment

 

REVERSE MORTGAGES

 

With mortgage guidelines getting stricter over the past year, it has opened a wave of interest for different types of mortgages – including what’s known as a reverse mortgage.  There have been negative connotations about reverse mortgages over the years, so let’s challenge the misconceptions and see if and how a reverse mortgage could benefit you.

What is a reverse mortgage?
Reverse mortgages work exactly as they sound.  When you have a reverse mortgage, you are utilizing equity within your property to supplement your income.  This can be done in a lump sum payment or through ongoing draws.

Benefits of a reverse mortgage?
For the majority of people, their net worth is tied up in equity. Freeing up some of this capital could allow you to live more freely.  With a reverse mortgage, no payments are ever required throughout the life of the mortgage.  This allows you to access up to 55% of your home equity and also stay in your home as long as possible.  The reverse mortgage will only come due when you sell or no longer reside in the home, at which time the remaining equity would go to your estate.

How does a reverse mortgage not have any payments?
With a reverse mortgage, all accrued interest charges would be tacked onto your mortgage.  This would only increase the mortgage to 55% of your home’s value in order to keep value in the home itself for when you sell, as well as to keep value in your home incase prices decrease.  If home prices increase, this in turn can unlock more equity from your home.

What do you need to qualify?
To qualify for a reverse mortgage, you and your spouse (if applicable) will have to be over the age of 55 and on the home’s title.  Otherwise the only other requirements are having equity in your home to utilize and that the property is your primary residence.  If you have a current mortgage or secured Line of Credit (LOC), these would be rolled into the reverse mortgage.

If your pension doesn’t cover all the bills each month, and you have equity within your home, a reverse mortgage may be the right product for you.

 

FIXED VS VARIABLE

 

When obtaining a mortgage, there is always the question of a fixed or variable interest rate.  There are pros to cons to both types, which we will explore below.

Fixed Rate Mortgage

To start, the fixed rate mortgage offers greater peace of mind for most home owners.  With a fixed rate mortgage, you are guaranteed the same payment throughout the entire term of your mortgage.  This means if you have a 5-year mortgage term, your payments stay consistent throughout.  This takes away the guessing and makes financial planning easier.

Variable Rate Mortgage

With a variable rate mortgage, you are signing up for uncertainty throughout the term of your mortgage.  Variable rate mortgages fluctuate every time the Bank of Canada (BoC) overnight rate is increased or decreased.  With this, you either have the benefit of paying less or paying more, all depending on the overnight rate.  If you can ride the wave of a variable rate, you could save compared to a fixed rate mortgage.  Over the last ten years, the variable rate has been a better option in terms of saving money on your mortgage.  And at any time throughout the mortgage term, you have the ability to convert your variable rate into a fixed rate.

What about penalties with fixed and variable mortgages?

Not all penalties are created equal, and this is definitely the case when it comes to fixed and variable rate mortgages.  When you break a variable rate mortgage term, you generally pay 3 months interest as a penalty, unless your mortgage commitment states otherwise.

If you are breaking a fixed rate mortgage term, your penalty is calculated by using a standard Interest Rate Differential (IRD).  There can also be a posted IRD, depending on which lender holds your mortgage.

Let’s review a standard Interest Rate Differential (IRD) Calculation:

For demonstration purposes, we’ll use the following information for our calculation:

Client has a current mortgage of 3.45% with a mortgage balance of $300,000 and has 3 years left in their 5-year term. 

The lender would use the difference between your current rate and their current rate for a term that’s similar to your current term is (so, if there are 2 years left on the mortgage, a 2-year term interest rate would be used).
Formula:

(Current rate – Rate matching your term) x Mortgage Amount x (months remaining/12) = IRD
(3.45 – 2.99) x $300,000 x (36/12) = $4,140

When your obtaining a mortgage, there are pros and cons to both variable rate and fixed rate mortgages. And your choice will lie with how much risk you can handle.

 

WHAT THE CHATTEL!?

 

When you are selling or buying a home, you inadvertently come across chattels in the purchase and sale agreement.  Chattels can complicate a purchase or sale depending on the agreement and how it is set out by the REALTOR®.

What is a chattel?

A chattel is defined as any item in the home that is not affixed to the property itself.  This can be anything from artwork to appliances or even window coverings.

What is a fixture?

Fixtures differentiate from chattels because fixtures are attached to the property and cannot be moved or taken. 

Examples:

A piece of art is hanging on the wall in the hallway of the home – this can be easily removed and is not affixed to the property, this would classify as a chattel.

A light fixture is mounted on the wall in the hallway of the home – this would be classified as a fixture as it is not easily removed from the home and is permanent improvement of the property.

Why does it matter?

When you have the written purchase agreement a common mistake is when a price is given to the chattel.  In terms of a mortgage, any item listed in the purchase agreement should be included in the purchase price.  Mortgage lenders only lend funds on the property, not any personal items.

Example:

If the purchase agreement listed the buyer would pay $3,500 for art already in the home.  Mortgage lenders would not lend on this amount and would expect the home owner to pay for this.

Where this can differ, is if the purchase agreement was written in a way that the art is included in the home. One common case is having appliances wrapped up in the price of the property.  It’s important to know that the purchase price of the property cannot be inflated to accommodate these additions.  Lenders will still only lend on what is considered fair market value of the property, typically done by means of an appraisal.

When in doubt it is always recommended to discuss any item that you would want included in the home purchase or sale such as appliances, window covers, or any other item not affixed with your REALTOR®. 

 

 

SHOULD YOU BUY THE FIXER UPPER?

When it comes time to purchasing a home, do you choose the more expensive but brand-new home– or do you go for that fixer upper with the potential to become your dream home?  In order to make this important decision, you will need to consider if renovations are a fit for you on a variety of levels, from budget to the unexpected.

Budgeting for a fixer upper

If you haven’t crunched the numbers yet, do so before you start! A contractor can provide an estimate on the approximate cost for the work.  Always remember the costliest renovations are typically in the kitchen and bathrooms, but renos in other parts of the home can add up quickly depending on the condition of the home.  How does the cost of the construction, supplies and also your time compare to the cost of the brand-new home (without all the effort)?

Expect the unexpected

As with most old homes, you never really know what type of material was used, how well the work was done, or if the walls are hiding a costly update.  When planning a renovation, it’s always recommended to budget a 15% buffer above what you are quoted.  This will prepare you financially in the event you discover old wiring that needs to be replaced, or a leak you didn’t know about until you opened up the walls. 

Can you roll up your sleeves and get dirty?

The most cost-effective way of renovating is of course good old-fashioned elbow grease.  By this, we mean if there are projects in the home you can do yourself instead of hiring a contractor, you will save big money.  If painting the walls or removing the old flooring is something within your DIY capabilities, then do it!  We are not recommending you start replacing piping or electrical wires, or that you remove that wall for the open concept floor plan you always wanted.  Do what’s in your comfort zone and skillset, and hire a professional where needed.

Living in a construction zone

Renovations are not a one-day adventure!  Depending on how extensive your renovation is, you could have work being done for weeks or months or more.  If you can handle living without a kitchen for a week, or without proper flooring until it’s completed – all the power to you!  It can be stressful coming home daily to a home under-construction and not able to have a “normal” and relaxing living space for an undetermined amount of time. But on the other hand, it can also be exciting, as you see the process as your dream home renos progress. 

Whether you are going to buy the brand-new home or the fixer upper or something in between, always remember to expect the unexpected.  A fixed upper is definitely not for everyone, but if you can handle the stress, the cost, and living through a temporary construction zone, it may be the right option for you!

 

HOW TO USE PREPAYMENTS TO BE MORTGAGE FREE

 

Using mortgage prepayment options can drastically reduce the total amount of money you spend on your mortgage – and shorten the time it takes to pay it down!  If you follow these three steps, you can be mortgage free sooner than ever!
 
1. Know your prepayment privileges
Most mortgages include allowances for you to use prepayments to pay down your mortgage faster.  The standard prepayment amount allowed per payment can vary depending on your mortgage provider.  Your mortgage provider may also be able to increase and decrease your prepayment privilege at any time throughout the life of your mortgage. 

This means that if any life event occurs and you need to reduce your payment to the minimum, you can do so easily.  Most mortgage providers allow this free of charge, but with some providers you can only change your payments a set number of times each calendar year.


2. Increase your payments
When you increase your payments, the excess you pay per payment goes directly onto the principal portion of your mortgage.  This is an easy way to drastically reduce the interest you will pay over the long term.Common lender prepayments allow you to add an additional 10% to 20% to each payment.  Some lenders also allow the use of “double-up payments”, which let you double each payment – the extra of course going against your principal. 

Prepayments being used on a typical mortgage:

All calculations are based off of a $400,000 mortgage with a 5 year term and 25 year amortization at a rate of 3.39% with monthly payments.

No Prepayments:
Monthly payments: $1,973.93
Principal paid over 5 year term: $55,578.21
Interest paid over 5 year term: $62,857.59
Mortgage amount remaining: $344,421.79
Years remaining on mortgage after 5 years: 20 Years

Adding a 20% Prepayment:
Monthly payments: $2,368.72
Principal paid over 5 year term: $81,336.55
Interest paid over 5 year term: $60,786.65
Mortgage amount remaining: $318,663.45           
Years remaining on mortgage after 5 years: 14 years & 2 months
As you can see in the example, the mortgage was reduced by $25,758.34, saving $2,070.94 in interest!The mortgage term was reduced an extra 5 years and 10 months – just within the 5-year term!
 
3. Make a lump sum prepayment
Making a large prepayment can be a great option for paying down your mortgage faster, but may not be ideal for everyone. Lump sum payments help you reduce the amount of interest you will be required to pay on your mortgage. Lump sums can also be used to reduce your mortgage amount before selling your home and will reduce the penalty you may be required to pay. 

Lump sum payments can be made annually, and are usually 10% to 25% of the total mortgage amount, based on the amount funded. Typically, you can make a lump sum payment once a year, but every mortgage provider has specific guidelines for how you can make a lump sum payment.  For example, your provider may require you put down a minimum amount for a lump sum prepayment, or you may only be eligible for one on the anniversary date of your mortgage.  
There are a variety of ways to make prepayments, but in all there is one clear benefit: achieving mortgage freedom sooner! 

 

ALTERNATIVE LENDING

 

With mortgage regulations ever-changing and becoming more stringent on borrower qualification, more and more Canadians are finding it harder to qualify for a traditional mortgage.  Consumers who do not qualify for a traditional mortgage are increasingly turning to alternative lenders for their borrowing needs.

What are the newest mortgage regulations?

As of January 1, 2018, the newest regulations – called the B-20 rules – are in effect.  The main change of the B-20 rules is the addition of the mortgage “stress test”, which requires all conventional mortgages (borrowers with a 20% down payment or equity in the home) to qualify at the greater of the Bank of Canada (BoC) Benchmark rate of 5.14%, or the contract rate plus 2%.  The contract rate would be the rate which you are receiving during financing.

What does this mean for my upcoming renewal?

If you are a current mortgage holder, these changes do not directly impact you until the time comes to change your mortgage.  If you do not need to refinance for a better rate or consolidate any debt, you can re-sign with your current mortgage lender on a new term.

What if I need to refinance, or the bank isn’t offering the best rate?

If you are looking to consolidate your high interest credit card debts, withdraw funds for a renovation, or just want to get the best rate, a refinance could be what you are looking for.  When it comes to qualifying, you will have to do so under the new regulations, which is to say qualifying at over 5%!  This is significant, as even the slightest bit of debt can push homeowners over the line of qualifying for a traditional mortgage.

What are alternative mortgage lenders?

Alternative mortgage lenders have the ability to look beyond traditional lending guidelines to qualify borrowers.  This means if a traditional lender cannot approve you due to lack of income, poor credit history, or debt load, an alternative lender could be an option.
Alternative lenders give you the opportunity to reduce your overall debts and rebuild your credit.  This of course comes as a risk to the lender, and they in turn pass this risk onto the client in the form of a higher interest rate.  Interest rates can vary with alternative lenders from 5-15% based on individual financial situations.
Every time there are new mortgage regulations, new trends emerge that affect both consumers and the industry.  With the B-20 mortgage rules introducing a higher qualifying interest rate, an estimated 20% of Canadians may no longer qualify traditionally and therefore turn to the alternative lending market – a market that didn’t exist in such a capacity prior to these newest mortgage regulation changes.

 

ALL ABOUT APPRAISALS

 

What is an appraisal?
Simply put: an appraisal is a professional’s opinion on the true market value of your home.  Banks use appraisals, and so do home owners during the process of buying, selling or refinancing a home.

How do appraisers calculate my home’s worth?

Cost Approach: Based on the current price of materials, the cost approach estimates the cost to reproduce a new building identical to your property. The appraiser then subtracts any accumulated depreciation due to wear and tear, while also adding land value.

Income Approach: The income approach determines the value of an income-producing property based on the income it generates. Typically, this is calculated by dividing the net operating income of the rent (gross revenue minus all operating expenses) by the capitalization rate.

CAPITALIZATION RATE = ANNUAL NET OPERATION INCOME / COST (OR VALUE)

Direct Approach: The appraiser takes comparable properties that have recently sold, and/or reviews active real estate listings, and then considers adjustments for differences. The variations among comparable properties will have a value determined by the appraiser based on market evidence. Example: If the property being appraised has 4 bedrooms, and a comparable property has only 3 bedrooms, an adjustment is made for the value of that extra bedroom, and the value is added to the property being appraised.

Are appraisers certified or licensed?
When it comes to being licensed, only three provinces require that appraisers hold a license: Alberta, New Brunswick and Nova Scotia.  This doesn’t mean the field is unregulated in other provinces, as there are associations such as The Appraisal Institute of Canada (AIC), which works with closely with provincial associations.  AIC has created a comprehensive curriculum its members need to complete to earn a designation of Accredited Appraiser Canadian Institute (AACI) or Canadian Residential Appraiser (CRA).

How to increase your appraisal value?
Having the highest appraised value of your home is essential for home owners. To increase this value of your property, here are a few pieces of information to consider presenting for your next appraisal:

Document renovations – Have a list of upgrades you have performed on the property to show the appraiser.  Before and after photos can also assist in showing upgrades, and how extensive (or not) renovations were.
 

Know your neighbourhood – It can come in quite handy to have some specific details about your local area.  If you know the values of a few homes in your neighbourhood, or recent sales, you can put these forward as comparables to the appraiser to assist in determining the value of your home.

Whether you are selling, buying or renovating your home, an appraisal can be required for the mortgage transaction.  Reach out to your mortgage broker today regarding your mortgage transaction.

 

BRIDGE FINANCING

 

Bridge financing is a less common financing option, but it can be ideal for some buyers.  Bridge financing is used when you have a firm sale agreement on your home and a firm purchase on a new home – but your new home closing date is sooner than the home they’re selling. 

Bridge financing is a way to fill the gap between these closing dates.

What are the costs?
With bridge financing, the interest rate is similar to that of an open mortgage or a line of credit.  Typically, lenders offering bridge financing also add an administration fee for arranging the bridge.

How long is a bridge?
When you obtain bridge financing, it only ever covers the period of time between the closing dates of the two homes.  Most lenders only approve a bridge if the time in between is less than 90 days.

What’s required?
With a bridge, lenders will want to have a firm, subject-free sale agreement on your current home along with a firm subject-free purchase agreement on your future home.

How does it actually work?
The way the bridge works once you have the firm purchase agreements is:

Scenario
You are purchasing a home worth $400,000 with 5% down payment ($400,000. X .05% = $20,000 down payment).

You are receiving $215,000 from the existing equity of your current home, which you will put into the new purchase.

$215,000 (Existing equity you are putting down on the new home) - $20,000 Down payment placed in trust = $195,000 Bridge financing amount.

When it comes to obtaining financing for a purchase, bridge financing might not be the least costly but it can be a good choice if you find your dream home before completing the sale of your current property.  Remember, not all lenders allow bridge financing, so it is best to speak with a mortgage professional to determine your best options.

 

BANKRUPTCY AND GETTING A MORTGAGE

 

With the increasing stricter mortgage regulations in Canada has prompted the question, if you have to file bankruptcy is a mortgage still attainable?  Most Canadians think of this as not possible, but let’s review what bankruptcy is and how you can rebuild your credit score from such.

What happens when you file bankruptcy
When you are filing bankruptcy, you will be working with a trustee to generate a list of creditors and assets as well as they will prepare the paperwork for your bankruptcy.  Once reviewed and you ensure all your outstanding debts are accounted for, you will sign and bankruptcy starts.  At this point your trustee will ensure all creditors are aware of your bankruptcy proceedings and will no longer contact you for payment etc.  You will have obligations to do monthly reporting, credit counselling and any other obligations as listed by your trustee, until a point you are discharged from your bankruptcy (Usually about 9 months to be discharged).

How do you rebuild your credit?
You can start rebuilding your credit as soon as you are discharged from your bankruptcy.  Most lenders require for 2 years to pass from the time you get discharged to the time you apply for a mortgage.  A great way to get started is by getting a form of prepaid credit card – this simply means you pay the upfront balance of the card ($500 upfront for a $500 card), this simply is a risk-free credit card for the company and allows you to start rebuilding your credit.  Along with this you will want to have 2 trade lines (credit cards, car payments, loan payments, etc.).  Based on how long after you’ve been discharged along with how much credit rebuilding you have done will determine if you will be able to use a mainstream lender or if you will need to use a B lender.

What is the difference between and mainstream lender and a B lender?
A mainstream lender will allow a mortgage for individuals with a good credit standing at current market rates with a lower down payment required.

If you haven’t rebuilt your credit to acceptable levels for mainstream lenders you can alternatively look at financing from a B lender.  A “B Lender” would traditionally have higher interest rates and a higher down payment requirement due to a lower credit score or history.  B lenders typically utilize shorter terms such as 1-2 year terms, this way as a client you can have an opportunity at the renewal to reapply for a better interest rate if you have kept rebuilding your credit and ensuring all your payments are on time.

Whether you are just applying for bankruptcy or if you have just been discharged, there is never a better time to start working with a mortgage professional to assist in credit rebuilding and getting you into the home you deserve to own.

 

WHAT FEATURES OF A MORTGAGE ARE IMPORTANT TO YOU?

 

When you think of what you look for in a mortgage, was rate the first thing that came to your mind? It is the most common feature of a mortgage in which we all focus on. But is it truly the most important?

Let’s explore the features of a mortgage and why they are all important to consider when you are looking to purchase or refinance.

Prepayments

Every Canadian no doubt dreams about paying their home off in full, but few of us know how to do so when you have a 25-year amortization on your mortgage. Mortgage lenders typically allow prepayments on their fixed and variable rate mortgages. With prepayments, you can prepay an extra 15%-20% per payment! This can drastically reduce the amount you owe on your mortgage over the course of a few years. These same mortgage lenders also allow lump sum prepayments which can be 15%-20% of your original mortgage balance.

Let’s look at what happens if we simply increase our monthly payments.

*Calculations are based off a $400,000 mortgage at a fixed rate of 3.29% with a 5-year term and 25 year amortization, compounded semi-annually. *

 Regular20% per payment increase


Payment$1,953.00
$2,343.60


Interest paid over 5 years
$60,962.28
$58,976.63

Principal paid over 5 years
$56,217.72$81,639.37


Mortgage balance after 5 years
$343,782.28
$318,360.63

Remaining years on the mortgage

20 Years
14 Years 2 Months

As you can see by increasing your monthly payments during this 5-year term, you are in turn paying off your principal at an accelerated pace. By increasing the monthly payments by 20%, the home owner would be mortgage-free 5 years and 10 months sooner.

Penalties

When purchasing a home, it’s hard to estimate what the future holds – whether that be a job transfer, marriage, divorce, and so on. One of the costliest mistakes with purchasing is not knowing the true cost to exit that mortgage.

For a variable rate mortgage, which fluctuates with the market, the penalty is calculated as a 3-month interest payment, no matter how many years into the term you are. With a fixed rate mortgage, the penalty is calculated as the greater of 3 months interest, or the interest rate differential (IRD). IRD is defined as the difference between your current rate and the current market rate (Ex. If you are 2 years into your 5 year term, your IRD would be the difference between your current rate and a 3 year term rate (aligning with the remaining three years of the mortgage term). Once the mortgage lender has the

IRD, they crunch some numbers: they take the percentage difference, multiple it by your mortgage amount, then by how many months remain, and finally divide by 12.

This may not sound like much, but if you take this and apply it to the big banks you can be looking at a penalty multiple times that of other mortgage lenders. The big banks typically calculate penalties using posted rates, while most consumers have “discounted rates”. There are also products where the lender will offer their lowest rates but pair that with the highest penalty.

Let us compare two mortgages for their penalties after being 2 years into a 5-year term mortgage.

*Calculations are based off a $200,000 mortgage at a fixed rate of 2.99% with a 5-year term and 25 year amortization, compounded semi-annually. *


Variable rate mortgage penalty 
Fixed rate mortgage penalty
Fixed rate mortgage penalty with posted rate


3 Months Interest
IRD – New current rate of 3.29
IRD – Posted Rate (Utilized mortgage calculator of one of big 4 banks)


$1,399.62
$1,699.93
$6,675

As you can see the penalty can be costly if you break your mortgage term on a fixed rate with a large institution.

Rates

At the end of the day, most home owners focus on ensuring they secure the lowest rate possible. Let’s compare a few different rates and see how much a difference it makes to your payments.

*Calculations are based off a $200,000 mortgage with a 5-year term and 25 year amortization, compounded semi-annually. *

Rate
% 3.39%
2.99%
3.19%
3.39%


Monthly Payment
 $925.07
$945.47$966.10
$986.96

As we can see from our calculations, the difference in payment from 2.79% to 3.39% (Difference of .6 %) turns out to be a difference of $61.89 per month or $2.06/day (that’s a Tim Hortons large coffee). Of course, this number may seem significant up-front, but if you consider if you pay this over the course of the 5 years you are looking at an overall amount of $3,713.40 – yet this is still lower than what you could pay on some mortgage penalties!

So, although rate may be an important component in your mortgage selection process, don’t forget the fine print details such as your penalty cost and your ability to utilize prepayments and pay off your mortgage faster.

 

CLOSING COSTS

 

Buying a home can be a stressful process and you may not know the full scope of the costs to close and finalize your purchase.  Let’s break down what some of these costs can look like in getting a mortgage.  Most lenders have a standing guideline of verifying a home buyer has 1.5% of the purchase price in closing costs.  For example: 1.5% of a $500,000 would be $7,500.  Closings costs can be more than the predicted 1.5%, but to understand that guideline better let’s review the sources of these costs.

Appraisal

An appraisal isn’t always required by a lender, but if it is the cost can vary depending on where the property is located.  If you are in a main urban center the cost can range from $200 to $350.  This can increase for a rural property, which might be a fair distance from the nearest appraisal company. These appraisals can cost $450 or more, depending on travel time and comparable properties within the area.

Home Inspection

These are not required by mortgage lenders, but are recommended for any home buyer.  Buying a home is one of the greatest financial obligations you may have, and you will want to ensure the home doesn’t have hidden and potentially costly faults or defects.   Home inspection companies create their own fee schedule, and pricing can be based on square footage, property price, or extra services added to an inspection report.  The cost of these inspections can run from $400 to more than $1000, depending on your needs.

Lawyer fees

When it comes to signing papers to finalize your purchase, of course the lawyers also need to be paid.  A typical real estate lawyer or a notary costs $1000 to $1500.  The lawyer would be responsible for registering your new mortgage, conducting a title search and getting title insurance, and creating the statement of adjustments. 

Land Transfer Tax

This tax is applied when finalizing your purchase and would be calculated by your real estate lawyer and shown on the statement of adjustments.  Land transfer tax is calculated by the purchase price of the property. In essence, the higher purchase price you pay, the more you can expect to pay in land transfer tax.  Some provinces do not apply a land transfer tax, and instead they have a set-amount transfer fee.

Title Insurance

Title insurance would be obtained by your lawyer during the closing.  Title insurance protects you and the lender from possible title fraud, or defects which may occur with the title.  With the increase in real estate fraud, title insurance protects your interests in your home.  Title insurance is around $250 and well worth it. 

Property Taxes

Property taxes will be calculated by the lawyer and this adjustment will appear on the Statement of Adjustments.  In the case the current owner has already paid for the current years property taxes, you will be reimbursing them for the amount of time in which the property will be in your name.  The property taxes vary on your housing price as well as the municipality where your home resides.

Home Insurance

Insurance for your home is required to protect against fires, floods, earthquakes, lightening, vandalism or even theft, if your insurance includes contents.  This gives you coverage should you need to have your property fixed or contents replaced.  The average cost for home insurance is $450 per year, depending on how much coverage you place on your home.

Form B (if applicable)

Form B is only applicable for any home buyers purchasing a stratified property, such as townhomes, apartments, or condominiums.  This Form B, or estoppel certificate, is a copy of the strata document for the property.  The reason for this will be to ensure there are no arrears in condo fees or any other arrears on the property.

Utilities

Utilities are arranged by the lawyer on the statement of adjustments.  If the previous owner had paid any utilities past the date in which you take possession, you pay the difference for the days in which ownership is transferred to you. 

 

ALL ABOUT GETTING A HELOC: HOME EQUITY LINE OF CREDIT

 

When refinancing your home, a newer trend is the option to put a portion of those funds into a HELOC (Home Equity Line of Credit).  A HELOC provides greater flexibility in accessing funds – but it is important to determine if it’s the right choice for your financial situation.

When refinancing you can utilize up to 80% of the value of your home (known as loan to value, or LTV), but with a HELOC you are limited to only 65% of the home’s value. 


Let’s break down the math!

Home value: $750,000
80% of value – maximum LTV for a refinance = $600,000
65% of value – maximum LTV for a HELOC = $487,500
 

But there are ways to combine products and maximize a loan. Access up to 80% loan to value by managing different components, for example:

HELOC component of $487,500
Mortgage component of $112,500
Both components = $600,000
 

Another example would be if you have an existing mortgage for $300,000 on your home valued at $750,000. If you keep this existing debt in a mortgage product, you can still unlock up to 80% LTV with the HELOC, as the HELOC funds are not more than the initial 65% LTV, for example:

Home value: $750,000
80% of value – maximum LTV for a refinance = $600,000

HELOC component of $300,000
Mortgage component of $300,000
Both components = $600,000

 

Typically, with a HELOC, you pay a higher interest rate for the advantage of having an “open” term.  The open term means you can draw the funds or pay off the funds at any time without encountering a penalty. 

Because a HELOC has a higher interest rate, it would be cost effective to place your current mortgage debt into another fixed mortgage product (fixed or variable, depending on your own preference), while utilizing your equity through a HELOC. 

The benefits to having a HELOC are endless, whether you want the ability to invest the funds for a high return, use the funds for a down payment on a second residence, have funds available to use for your child’s college or university education, or assist with a child’s down payment on their first home. 

HELOCs are becoming more popular with the new influx of tighter mortgage restrictions.  Traditionally, most lenders allowed an equity withdrawal of up to $200,000 on any refinance. But with new rules and regulations, lenders have tightened the gap and are now releasing fewer funds, if any extra at all.  If they are going to release funds they also will want to know what exactly the funds are for.  This means the advantage of a HELOC is that you can do as you please with your money – though it comes at that slightly higher interest rate

 

HOW TO REBUILD YOUR CREDIT AND PAY OFF DEBT

 

Whether you own property or not, there are times when life just happens: an unexpected bill or an emergency arises that puts you in place where your credit is the one to take a hit.  Credit can be impacted negatively from cards with balances over 75%, missed payments on trade lines and collections.

With so many ways credit can be impacted, there are also key ways in which you can rebuild your credit, and pay off your debt load.

Know your own credit score:
Pull your own credit bureau report through Equifax or TransUnion.  This will provide you with a good starting point as you will be able to clearly see any missed payments, collections or even mistakes on your record.  Any errors can be corrected.  It may be a slow process, but the benefit to your credit report can be substantial.  The general rule is that a credit score over 680 is considered good, but the higher your score the better.

Negotiate interest rates:
One key way to stop your debt from growing is by negotiating interest rates on your trade lines.  If you have travel cards for points, but the interest rate is 19.99% or more, these cards can be changed into a lower interest card.  This will decrease your monthly minimum payment and interest charges.

75% of balance:
With any trade line, once you go over 75% of the card’s allowable balance your credit score slowly decreases due to the debt load.  If you have room, balancing out your cards can be a simple step to improving your credit.  You can also ask for a limit increase on the card: used not to withdraw more funds, but to give more overhead so you can get below the 75% threshold.

Budget by cash diet:
When focusing on paying down your debt, it can be a challenge to decide what to pay first and how to free up funds to do so.  Making a budget is a great start to paying off your debts, but how do you implement it to be effective?  It’s simple: a cash diet.  Looking at your new budget, withdraw the cash you have budgeted to live off until you receive your next paycheque.  Unlike using a debit or credit card, with cash: once you run out, you’re out.  This is a great learning tool to stay within your budget.

Reduce credit pulls:
There is a misconception that a credit pull automatically reduces your credit score.  When it comes to credit pulls, the more pulls over a short period of time is what has a negative impact.  For example, if you go car shopping and the dealership sends your financing application to four different lenders before getting to the one which approved you – each counts as a credit pull.

Use mortgage equity:
This by no means is an ongoing solution, or do we ever recommend using your home like a bank account, but if you have a large amount of debt plus equity in your home, it may be the best solution for you.  Most mortgage lenders will allow you to take out up to 80% of the home’s current value.  The great solution with utilizing your home equity is you increase your cash flow by paying all your debts.  The amount of equity you pull out will increase your monthly mortgage payments, but because line of credits and credit cards have higher interest rates, you will still be in a better financial situation.  This will also drastically improve your credit score because your debts will be paid off in full.  Don’t forget to ask your CENTUM Mortgage Broker how you can utilize your equity.

Whether you are a home owner or not, there is always opportunity to improve your credit score.  With these tips, you can start to work on building up or improving your credit score. 

 

BEST FALL RENOVATIONS

 

Winter in Canada can be intense, snowy and freezing.  Pretty much everywhere.  Some provinces experience temperatures below -30 degrees Celsius during their coldest part of the year, so it makes sense to think of better ways to save energy and conserve heat in the winter.  Some of these ways require renovations, and fall is the best time to start your home renos, with kids back to school and the summer heat behind you. Then you’ll enjoy the warmth of energy savings during the cold clutches of winter.

Here are some fall renovations ideas to help make your winter cozier and utility bills a little lower.

Heated Floors
Radiant floors have become a very popular home trend, especially for new construction.  Under-floor heating provides an even heat across the floor without stirring up dust like traditional furnaces.  The installation can take some time as you have to remove current flooring to install the radiant heat pad.  When first launched, heated floors were designed for tiles only, but now companies have been able to produce a heated floor product able to go underneath hardwood, laminate and even carpet!

Rain Chains
Rain chains are a wonderful idea that has been around for centuries, originating in Japan and called “Kusari-Doi”, which means chain gutter.  These were used in Japan for two reasons: rainwater collection for household use as well as in temples to provide water music, or tranquility.  These chains attach to a standard gutter, where your downspout would commonly be.  In the winter, these chains have an advantage over a typical downspout.  Downspouts can freeze solid in the winter and possibly cause damage. Chain gutters accumulate water, but it can easily melt on a sunny day.

Smart Thermostats
With advancing technology, smart thermostats are allowing you to control your home temperatures by smart phone, tablets and even voice command.  Your classic thermostat must be set, programmed or adjusted constantly to keep in the right temperature range. But why waste your time?  Smart thermostats learn your habits, such as when you leave for and arrive back home from work, and use that data to plan a heating and cooling schedule.  These thermostats are so advanced that some of them are now rated ENERGY STAR.

Fireplaces
If you have a wood burning fireplace, you will want to switch it out. And fast!  Not only do wood burning fireplaces create more pollutants, they also lose more heat than today’s common gas or electric fireplaces.  There has been a debate on gas versus electric fireplaces in homes and what is more energy efficient, and the winner is electric! 

The electric fireplace is not only more energy efficient, it also doesn’t require as much maintenance over time.  A wood burning fireplace needs annual chimney cleaning and maintenance to prevent build up and reduce fire risk. Gas fireplaces also need a good annual maintenance to ensure all wearable parts are in good condition and there are no gas leaks.  Electric fireplaces need a lightbulb changed every 2-3 years but otherwise are maintenance free! (Don’t forget some electric fireplaces come with a remote, and you may also need to replace the battery.)

Furnace
Furnace heating is an area where most home owners know to clean air filters annually and vacuum out ducts. But is your furnace the most energy efficient?  Most homes still have a mid-efficiency furnace, which is defined as an annual efficiency of 78-82%. Newer high-efficiency condensing furnaces offer an annual efficiency of 90-98%!  This makes a huge difference when adding up how much you spend to heat your home in those cold, cold months of winter.

Insulation
Insulation is one of the costliest items to upgrade in your home as installation could require removing and replacing your home’s drywall.  Fiberglass batts were the most commonly used insulation for many years, but the most energy efficient way to insulate your home nowadays is spray foam insulation or expanding polystyrene. 

Insulation is measured in R-Value (thermal resistance) with a higher number being better.  Fiberglass ranges at 3.5-3.7 whereas expanding polystyrene has almost double the R-value of 6.5!  Fiberglass batts are not as energy efficient and they can be hazardous to you.  If you are handling fiberglass batts you can expect itchiness, rashes and irritation – or worse if ingested or inhaled.

Whether it’s a complete re-install of insulation, flooring or furnace, or a less extensive (and less expensive) project like upgrading your thermostat or downspouts, fall is the time to start home renovations. Upgrades will leave you cozier and saving money this winter when the snow falls and temperatures drop.

 

THE POWER OF PRE-APPROVAL

 

With home buying season upon us, most people will dive right in with a loose budget. A loose budget however, can be dangerous if your heart gets set on a home that is out of reach financially. The first thing that any potential buyer should do is get pre-approved for a mortgage. Once approved, buyers can shop within a clear budget and focus the search on properties within a specific price range. This not only saves time and money, but also a little heartache.

Real estate agents love hearing the words “pre-approved.” They are the experts when it comes to finding the perfect home for their clients. When consulting with a potential buyer they will want to know the budget, number of bedrooms, property type, desired neighbourhood to help narrow the search. The budget should be number one guiding principle of house hunting, and pre-approval will reveal the price range that buyers should be searching within.

With the housing market so hot, and the mortgage application process exhaustive, it’s important to be ready to jump on the perfect home when it’s finally found. Having the necessary documents ready, coupled with pre-approval will speed up the journey to purchase. Don’t get delayed with finding financing or having to submit an offer subject to financing.

When working with a CENTUM mortgage professional to get pre-approved, ask as many questions as possible! There can be a lot of additional costs that come up when purchasing a home, including appraisals, closing fees, down payments and monthly payments. Having a full picture is always key to avoid any unexpected surprises.

The process of purchasing a home is smoother for buyers who get pre-approved. Financing is much quicker if a lender has pre-approved the client, which is especially important if there’s a tight deadline. A little pre-planning will help alleviate some stress, and in the end, allows you to better understand what what’s financially realistic.

If you have any questions about mortgage pre-approval, or the home buying experience in general, don’t hesitate to give our CENTUM mortgage professionals a call. Our job is to help you get into a house that suits your needs, your financial picture, and of course one you’ll be proud to call home.

 

NOT ALL MORTGAGE PENALTIES ARE EQUAL

 

This is a story about Joe and Sue. Two different people with similar mortgages, but very different prepayment penalties. 

Joe and Sue each buy a house at the exact same time for the exact same price and get a mortgage for the exact same amount. The only difference is Joe uses a Big Bank, and Sue uses a monoline lender for their mortgages. Let’s assume they both received a rate of 2.99% for a 5 year fixed term. 

Three years into their mortgages, Joe and Sue are both going to be paying off their respective mortgages which are both at $250,000 at the time of the payoff. Now to keep the comparison fair, we will pretend that interest rates have not changed at all for any of the terms, whether it is the posted rates or the discounted rates. The rates are made up for example purpose only. 

Now because they have ended their 5 year contract early, they will have to pay a penalty. Both agreed at the time they took out their mortgage they would pay the greater of 3 months interest or the Interest Rate Differential (IRD). The IRD is in place so that the lender will be reimbursed for any income they would lose because you broke the contract early. In theory, it should only apply when rates have gone down from the rate you agreed to pay. In this example, they each agreed to pay 2.99% for 5 years, so if rates had dropped to 1.99%, the lenders would be entitled to the 1% difference for the remaining two years. Which is fair. If you invested $1000 and were told at maturity your investment would be worth $1200, you would not want to get $50 and be told, “sorry, someone else changed their mind.” You, like everyone else, would want the full $200 you were promised. Same idea. Only the Banks are using the IRD to punish you for leaving or to force you to stay with them. Which is not fair, nor the idea behind an IRD. 

In our example, Joe and Sue each have to pay a penalty. But how much they have to pay is a shocking difference! 

Sue’s Monoline Penalty: $1,868 

Joe’s Big Bank Penalty: $8,750 

That’s a difference of $6,882 !!! 

So why such a huge difference? In the simplest explanation, it’s the “discount” given by the big banks.

Let me explain. With a Monoline lender, like Sue used, that mortgage brokers usually use, they offer their best rates upfront. They generally only have one rate for each term length. Whereas the banks have two rates for each term. The posted rate, and the discounted, or special offer rate. Almost everyone actually pays the discounted rate, but the banks use the posted rates when calculating the Interest Rate Differential. That is how they come up with huge IRD penalties. 

The math behind it can be a bit confusing when you read it, so pretend you’re back in high school math class but pay attention this time.   

The banks take the rate you are paying (2.99% in our example) subtract the difference between what is the current posted rate for a similar term for the time remaining (2 years at 3.04%) less the discount given. The posted rate in our example is 4.79% minus the real rate of 2.99% which is a discount of 1.80% That is what is going to cause the variance between the two scenarios. They take the similar posted term rate then minus the discount (3.04% – 1.80%). Then they multiple that number by the balance owing and the time remaining. 

Big Bank IRD calculation

2.99% – (3.04% – 1.80%) x $250,000 x 2 years = $8,750 

Compared to a true IRD calculation

(2.99% rate – 2.79% comparable rate for term remaining) x $250,000 x 2 years = $1,000 which is less than the 3 months interest, $1,868, which is what Sue would be paying. The Interest Rate Differential should not have come into play. 

The numbers being used are for example purpose only, 

Posted Rate for 5 year term    4.79%
Rate Clients are paying for 5 year term    2.99%
Posted Rate for 2 year term    3.04%
Discounted Rate for a 2 year term    2.79%

To make up for such a monstrous penalty from his bank, Joe would have needed a rate of 1/2 of a percent (0.5% or 0.005) which is 2.49% lower than the best rate at the time from the banks. There is more to consider with a mortgage than just rates. Know your other risks. 

At the time of writing penalties according to the Big 5 Banks online calculators and their listed posted rates: BMO $8750, Scotia $8250, RBC $9057.85, CIBC $10,677.65, TD Canada Trust online calculator not working but it would be $8750. The Banks penalties differ somewhat mainly because of differences in the banks posted rates.

 

8 THINGS TO AVOID AFTER A MORTGAGE PREAPPROVAL.

 

You have word from your agent letting you know you are pre-approved for a mortgage. This is an exciting time as you are well on your way to purchasing a new home. A preapproval is usually good for 60 to 120 days depending on the lender. If you do not purchase a home within this time frame, the lender may require you to get preapproved again. Therefore, it is important to continue the great behavior that got you the preapproval, in the first place. Below are eight tips to help keep your financial situation preapproval ready.

 

1. Don't for new credit

Some lenders require the mortgage broker to do another credit check before they give final approval. If the credit check reveals new credit inquiries, they may want you to verify that you have not taken on any new debt which will delay the approval. Taking on any new debt can impact your credit score, so it is best not to take the risk.

 

2. Don't make any major purchases

If your credit report does get pulled again and it shows you are carrying a balance from making some large purchases, this may affect your approval status. Buying furniture, appliances or renovation material is fine if you have extra cash but putting it on your credit card will increase your debt-servicing ratio which is one of the guidelines used for qualifying a mortgage. This can reduce the loan amount and put your home you made an offer on, out of your price range.

 

3. Don’t pay off your debt

Paying off debt is usually a good idea, but it can limit your cash flow. Talk with your mortgage agent first to find out if it is best to pay down a loan or keep that cash flow available for a down payment on your mortgage. If you pay off too much debt and no longer have the cash flow to provide a down payment, then it can delay the process of purchasing a home.

 

4. Don’t co-sign any loans

A lot of people don’t realize that co-signing a loan does affect your credit even if you have nothing to do with that loan from the time you sign. Any loan that shows up on your credit report must be brought into consideration even if you have never had to make a payment. It is a financial obligation and if the primary person on the loan defaults, you must be able to make the payments.

 

5. Don’t change jobs

Although it may be a great opportunity, try not to switch jobs during the process of obtaining home financing. With every new job, there is a probationary period where you could be let go at any time within that time frame. Even if you believe the job is very secure, unfortunately, lenders do not think so. Of course, there are exceptions but if you can, hold off switching jobs until you purchase a new home.

 

6. Don’t ignore lender requests

Take mortgage broker’s recommendations seriously. Mortgage agents specialize in mortgages, so they know the ins and outs of the industry. Mortgage agents are not recommending things for the fun of it but instead making you as attractive as possible to not only buyers but lenders. For example, a mortgage agent will suggest you do not buy a car, as this is a large expenditure and a common reason why someone would not get approved. When a mortgage agent requests documents, they don’t do it to make work but are required by lenders to verify information that is provided within the application. Lenders need to fact check and will not provide the credit for your home without these parameters being met.

 

7. Stay current on your existing accounts

Paying bills on time is crucial to ensure that your credit remains healthy and stable. This includes your overdraft, credit cards and lines of credit.  Pulling your credit gives lenders your current financial snapshot so if they are to pull your credit again, you want to display consistency within your finances.

 

8. Keep a paper trail of your deposits

Depositing money is a very good idea but keep a paper trail especially when it comes to large deposits that are out of your everyday transactions (paychecks, royalties, etc.). Mortgage fraud and money laundering are still present, so lenders want to do a thorough check to find out where the money is coming from and making sure it is not an illegitimate source.

These tips will help keep your financial picture strong but talk to your CENTUM professional today to find out more. We want to make sure you are set up so whether you are ready to buy or looking to create a financial plan to get there. We are Looking out for your best interest®.

 

YOUR HOME BUYING TEAM

 

Purchasing a home is likely to be the largest investment you will ever make, and that means that it is very important you have a team of professionals working with you throughout the entire process.

More and more clients are discovering the benefits of utilizing the services of a professional mortgage broker to help them secure financing for their homes. Why is this? It is simple really.

The banks are filled with a lot of great people who are knowledgeable, friendly and do good jobs. The challenge is that they are employees of the bank. That means that their first responsibility is to look out for the best interest of their employer. It also means that they can only offer you a single line up of products.

 

As CENTUM Liberty Mortgages, Sam Ansari has access to many different lenders, some that are simply not available to the consumer except through the services of a mortgage broker. That means that you, as our customer, have greater choice and can truly customize your home financing. It also means that generally, we have access to lower rates. More choice and better rates = win for you!

Do you have to pay us for our service? Mortgage brokers always get paid by the lender, so our service to you is offered without charge. In some rare cases, however, there may be a broker fee, but if that ever happens your broker will always explain that to you upfront so that you can make an informed decision.  This is usually only in the cases of second, third or private mortgages.

 

Your Professional Team

 

Real Estate Agent

 

A Realtor® is an integral part of your home ownership experience. Their job is to find you a home, write the contracts, negotiate on your behalf, and to provide you with important information about the home and the community. They can provide you with details that would take you hours of research, or you may not have access too and can help you make an informed decision about your purchase.

If you would like to know more about a real estate agent’s ethical obligations, visit the Canadian Real Estate Association’s website at www.crea.ca or call your local real estate association.

 

The Lawyer/Notary

You need a lawyer to protect your legal interests, such as ensuring the property you are thinking of buying does not have any building, statutory liens, charges or work and clean-up orders associated with it. He or she will review all contracts before you sign them, especially the Offer to Purchase. Having a lawyer involved in the process will give you peace of mind and ensure that things go as smoothly as possible. Law associations can refer you to lawyers who specialize in real estate law.

Lawyer fees depend on the complexity of the transaction and their experience. For instance, if you are buying a condominium, you will want a lawyer experienced in condominium transactions.

Remember that a lawyer:

Should be a licensed full-time lawyer. 

Should be local and understand real estate laws, regulations and restrictions. 

Should have realistic and acceptable fees. 

Should be able and willing to explain things in plain language. 

Should be experienced with condominiums (if you are purchasing a condominium). 

The Insurance Broker

An insurance broker can help you with your insurance needs, including property insurance and mortgage life insurance. Lenders insist on property insurance because your property is their security for your loan. Property insurance covers the replacement cost of your home so that premiums may vary depending on its value. We also recommend that you consider obtaining mortgage life insurance. This provides coverage for your family if you die before your mortgage is paid off. As your mortgage broker, we can offer you the benefit of Mortgage Protection Plan (MPP) offered through Manulife Financial. We also have disability insurance available in the event that you are injured and as a result, cannot meet your mortgage payment obligations. If you are interested in finding out more information on MPP, please do not hesitate to ask. Be careful not to confuse property or life insurance with mortgage loan insurance, which may be required for high-ratio mortgages. 

 

The Home Inspector

You should consider having any home you are thinking of buying—whether it is a resale home or a brand new home—inspected by a knowledgeable and professional inspector. An inspection by a home inspector is a visual inspection.

The home inspector’s role is to inform you about the property’s condition. The home inspector will tell you if something is not functioning properly, needs to be changed or is unsafe. You will also be informed of repairs that need to be made and maybe even where there may have been problems in the past.

Every inspection should include a visual assessment of at least the following:

Foundation

Doors and windows

Roof and exterior walls

Attics

Plumbing and electrical systems (visible)

Heating and air conditioning systems

Ceilings, walls, and floors

Insulation (where visible)

Ventilation

Septic tanks, wells or sewer lines (if qualified)

Any other buildings such as a detached garage

The lot, including drainage, slopes, and vegetation

Overall opinion of structural integrity of the buildings

Common areas (condominium/strata or co-operative)

Home inspector fees are generally in the $300-500 range and depend on the size and condition of the home.  If you don’t know where to start when it comes to building your team don’t worry, we can point
you in the right direction!

 

FOLLOW THESE SIX TIPS TO SAVE MONEY AND TIME DURING THE BACK TO SCHOOL SEASON!

 

Follow these six tips to save money and time during the back to school season:

 

1. What do you already have?

To avoid unnecessary shopping trips and expenses, take some time to go through your home to see if any of the stationary supplies that you already have, such as binders, calculators or art supplies, can be reused.  

 

 2. See what fits

Heading back to school season is a great reason to go through your children’s clothing to make sure it all still fits.  If things don’t, make space for stuff that does by donating outgrown items to charity or a clothing drive. If you have multiple children who are separated in age, saving your eldest’s clothes for the younger one will help extend the lifecycle of your closets, and save you money. 

 

3. Make a list and set a budget

Once you have assessed which clothes and supplies you need for the new school year, create a list and come up with a firm budget to work within.  This is a good opportunity to involve your children to teach them about budgeting.

 

4. Follow your favorite stores

Most companies share sales and promotions via email or social media. To help you stay within your budget, stay in-the-know when it comes to special deals by following your favourite stores on Facebook and Twitter, or subscribe to their emails. 

 

5. Plan the shop

Once you have gathered coupons or noted which stores have sales, it’s a good idea to plan out your shopping trip to make the most of your time and energy. Organize your list into sections based on what you need at each store. To help stay within your budget, don’t forget about your local dollar store for school supplies!

 

6. Don’t shop by brands

Children always want the latest and trendiest items, whether it’s a Hugo Boss t-shirt or a Star Wars backpack, but brand name designer items will empty your wallet and break the budget fast. It’s always a good idea to research comparable items that you can purchase for a fraction of the cost.

 

HOME INSPECTIONS

What are their purpose and why are they important?

The purpose of a home inspection is to reveal any defects or flaws that a property has, so that potential buyers can make an informed decision and avoid costly surprises down the road. During an inspection, the inspector will investigate every room in the home to identify and assess possible underlying health and safety issues; they will look for structural issues, water damage, working appliances, insect or pest problems and even forecast potential future expenses. 

What do they mean for homebuyers?

An inspection report can help a homebuyer decide if a property is a good fit for them or if it has too many problems to deal with, and they should consider re-evaluating. It can also be useful during pricing negotiations because it discloses issues that would likely cost the buyer additional money above the purchase price to repair; buyers can use the report to request the seller to make the necessary repairs or reduce the asking price.

Who should attend the inspection?

It’s a good idea for the buyer and their REALTOR® to be present during the home inspection so that they can ask questions and fully understand any issues if they are discovered.

Are home inspectors licensed?

In Canada, only two provinces have licensing requirements for home inspectors: British Columbia and Alberta. The Canadian Association of Home and Property Inspectors (CAHPI) has established standards of practice and codes of ethics and will award a professional designation to inspectors who meet all of the regulations.  When hiring a home inspector in Alberta or BC, it is important to ensure they are licensed or a member of CAHPI. 

What are the top issues to consider when purchasing a property?

Any property can host a variety of defects, but some of the pricier issues that you need to be on the lookout for include:

Structural problems

Pests and termites

Water damage or plumbing defects

Mold and asbestos

Wiring and electrical issues

Heating and air conditioning malfunctions

Well water complications

Roof leakage 

 

STANDARD CHARGE VS COLLATERAL CHARGE MORTGAGES

 

When you need a loan to purchase a property, your bank or lender will require security for repayment in the form of a charge that is registered at your provincial land registry office. This process secures the residential mortgage loan to your property, and gives your lender certain rights as it relates to the terms of your agreement. There are two forms of charges: standard and collateral.

What is a standard charge?

A standard charge includes the details of your mortgage such as the term, rate, payments and amortization. A standard charge only registers and secures the amount of the mortgage itself.

For example:  If you purchase a home for $250,000 and make a $50,000 down payment, only $200,000 would be registered as a standard charge.

What is a collateral charge?

A collateral charge is a readvanceable mortgage that allows you to pull equity out of your home throughout the term of the mortgage.  With this type of charge, you are able to re-apply for additional funds from your lender without having to pay a penalty or refinance.  Collateral charge mortgages register between 100% and 125% of your properties overall value, whereas standard charge mortgages register the loan value.

For example:  If you purchase a home for $250,000 and have $50,000 down payment.  Your home can be registered as a collateral charge for up to $312,500.

Downside of a standard charge?

With a standard charge mortgage you will not be able to withdraw extra funds out of your home without refinancing, legal fees or possible penalty. 

Upside of a standard charge?

With a standard charge you can switch or transfer your mortgage to a new lender at the time of renewal without incurring legal fees. 

Downside of a collateral charge?

With a collateral charge, moving your mortgage at the time of renewal will incur legal costs, and because the lender knows this, they may be less inclined to offer their best rates.

Upside of a collateral charge?

With a collateral charge you can take additional funds (up to 80% of the value) out of your home throughout your mortgage term

 

THINKING OF RENTING THAT BASEMENT SUITE? TIPS FOR FIRST-TIME LANDLORDS

 

Having a rental space in your home is a great mortgage helper as well as it also increases the value of your home.  Many people are unaware of the challenges that are generated by having a rental suite in their home.  Here are some tips and tricks to ensure you are equipped to handle your first tenant experience. 

1. Consider your privacy. 
Can you live with seeing a stranger around your house or using your property outside? Is the extra money worth it?

2. Try to avoid renting to family. 
It is best not to rent to family, as it completely changes the relationship and is difficult to use “eviction” or “collection” rules against a non-paying family member without destroying the relationship and having the repercussions ripple out into the rest of the family.

3. Sign a proper written lease. 
Always – even with family members – have a properly written lease between you and the tenant that clearly outlines the rules, late rent penalties, expectations, and length of term. It must be signed by every adult who is to reside in the suite.

4. Don’t set your rent too low. 
Never be the lowest rent in the market – you will attract the type of renter whose focus is solely on dollars. It will also lead to more rapid turnover as they leave to the next “lowest rent” spot. To set the proper rent for your suite, go online and search for available units in your area. Make sure to look at a number of different sites and be location-specific in your comparisons. Look at the amenities and picture them through the eyes of a potential renter. Then place your price in the middle or higher end of the average comparable.

5. Do your research. 
Each province and territory has its own landlord-tenant legislation so make sure to read up on the rules that apply where you live. In addition, make sure to research your local municipal bylaws, which include things like guidelines and standards for fire and building safety. Municipal bylaws also cover issues like zoning and permits. For example, some cities are now looking to shut down secondary suites in specific neighbourhoods. Not conforming to these rules means you could be shut down at a moment’s notice, so check with the city to make sure that your suite is legal. The Canada Housing Mortgage and Housing Corp. has a useful website with many good links.

6. Tell your home insurance company. 
When you rent out a unit in your home, you are obliged to inform your home insurance company – something that the vast majority of people fail to do. If anything were to happen, for instance if a fire starts in the rental suite, the insurance company could say they were not informed of the tenant and that the policy is voided.

7. Research the tax repercussions. 
Once you have a rental suite in your home, you have to claim that rental income on your tax return. In addition, once you start using the property for revenue, a portion of the capital gain when selling the property could be deemed taxable.

8. Learn from other landlords. 
Knowing the tricks of the trade is important and who better to learn from than other landlords? A great free way is to visit the Real Estate Investment Network and use the search function to read discussions between Canadian property owners and their experiences and strategies when dealing with tenants.

 

 

 

 

 

 

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