Paying Off Your Mortgage Faster

General Darick Battaglia 30 Jun

Most of us that have a mortgage would like nothing more than to have our mortgage paid off. Being mortgage free is an achievable goal. But it is important to think through the process so that you utilize your money the best way possible. You may be surprised what conclusions you draw if you thoroughly think through your options.

Think about this!

1. Right now interest rates are the lowest they’ve ever been. Paying off your mortgage may not give you the same return as you’d get by investing in a higher interest investment return. Make sure you’ve talked with your financial advisor on money investment opportunities. It may be more beneficial to invest in other opportunities.

2. On the same note, there may be an opportunity to match retirement contributions through your employment. There are some fantastic opportunities with RRSPs which may give you a higher return for your money rather than paying off your mortgage.

3. Taking advantage of prepayment privileges with bonus money such as bonuses, inheritance, may not be as fruitful in returns as paying into higher interest return investments. Make sure you ask your lender how much it will cost to pay off your mortgage early. And make sure your ask your lender how much per year can be paid off. Some lenders say 15% and some lenders say 20%. Some lenders say 0%! Make sure you find out their guidelines.

Having said all that, there are great ways to pay your mortgage off faster. But before the suggestions, lets define some of the terms you need to know in order to understand your mortgage fully.

Definitions

Amortization – paying off mortgage debt with a fixed repayment schedule in regular installment over a period of time. Most amortization periods are 25 or 30 years long.

Term – contracted period of time for a mortgage. Terms are usually 5 years long but can be any amount of time that you contract with your lender. 6 month terms, 1 year terms, 2 year terms, 3 year terms, 4 year terms, etc are all available through your lender. However, interest rates will vary with different term lengths.

Principle – the actual amount of the mortgage loan.

Interest – the interest incurred on the loan

Principle plus Interest (PI) – This is typically the payment that is taken monthly from your account. The actual principle amount and interest amount varies from payment to payment. However, the payment that is coming from your account will remain consistent from month to month.

If paying off the mortgage is your goal, consider the following:

1. Increase your scheduled payments to bi-weekly or even weekly payments. You will not pay as much interest by increasing your payment schedule. Note that your payment amount will NOT increase. Your payments are merely applied sooner which does not allow interest to compound as quickly, thereby lessening the amount of interest you are paying and, therefore, decreasing the time to pay off your mortgage. Take a look at http://itools-ioutils.fcac-acfc.gc.ca/MC-CH/MortgageCalculator.aspx?lang=eng and consider the tax savings.

2. Amortize your loan over a lesser amount of time. When your term renewal time comes up, you can negotiate with your lender a shorter amortization period. There is less flexibility with this option as your monthly payments will be higher. With this option, it is important to keep your eyes on the goal so you don’t get discouraged with the bigger payments. Your mortgage will absolutely be paid off faster.

3. Increase your scheduled payment by $25 or $50 per payment. Surprisingly, you might not even feel it as much as you might think. We are creatures of habit and once changes are implemented and become the norm, the higher payments are just expected and our mortgage pays down faster and faster.

4. Take advantage of prepayment privilege. Whether your lender allows 10%, 15%, or 20%, make it a goal to put something extra toward your mortgage every year. Make sure you ask your lender how to make a higher payment as they will have guidelines to follow.

5. If you receive a tax return, use it toward your mortgage. Making an extra payment every years will literally take years off the amortized time of your mortgage.

6. Any bonuses this year? Apply it toward your mortgage. Even a few hundred dollars down on your principal can make a significant difference in the amount of time to pay off your mortgage.

7. If you are a double income family, consider dedicating one of your incomes toward mortgage payments.

8. Purchase BELOW your means. That way, the extra the would be in a higher mortgage amount can be put into good use by increasing your mortgage payment amount by the difference.

The sense in paying off your mortgage faster…

1. Making a plan – a well structured plan will stop you from overspending. Putting together a plan forces you to think through your goals. Budgets cause us to narrow down our goals and stick with them. If a new adventure or unnecessary expenditure comes up, you can align it with your goals and consider if it fits. If it doesn’t, throw it. If it does, then it is likely time to sit down and revamp or consider your goals. Having a plan chases away thoughtless impulses and keeps you on the right track.

2. Peace of mind in owning your own home. When you sign your mortgage papers, the lender discloses to you that you will pay more than twice the purchase price of your home. Your amortization schedule will clearly show the amount of interest and the amount of principle that you pay with every payment. You can google amortization schedule and several calculators will come up. Just punch in your numbers and you will see how much interest versus principle that you actually pay.

3. Paying off your mortgage provides a reliable return on your investment. Typically, and most likely, your property purchase will result in an increase in value as the years go on. It has been argued that using the “extra” money that comes in toward investments will result in a higher return. However, most of us don’t have a plan in place and so that extra money gets quickly spent. A sure investment is increasing your monthly payments (even by a few dollars) resulting in a mortgage that is more quickly paid off.

4. Saving up for the 20% is much more economical than going into a property purchase too early (using 5%) down. You will literally save tens of thousands by NOT having to purchase the mortgage insurance that is not for your benefit but for the banks! On a $400,000 purchase price with 5% down, you will pay a 3.6% premium which amounts to just over $12,000.00 dollars (added to your mortgage).

5. When it comes time to refinance, make sure you know your options. Don’t assume that your lender has your best in mind and will give you the lowest rate available. Make sure you have a Dominion Lending Centres Mortgage Specialist look at your situation to see if there is a better option out there for you. This service is free so take advantage of it!

Courtesy of Geoff Lee, AMP – GLM Mortgage Group 

More For Less – Lessons From Omi’s Kitchen

General Darick Battaglia 29 Jun

As the price of real estate in many areas of the Canadian market continues to rise, first-time buyers can find it increasingly challenging to find a house that fits their family. Growing families already in their own houses are also feeling the pinch – outgrowing their present home and anxious to find living space that “works”.

There always seems to be this persistent longing for more and bigger – magnificent looking estate homes boasting more square footage than anything we have right now. Have you ever eagerly visited one of these larger homes, ignoring the smaller lot size than that of your former home, opening the front door and finally being underwhelmed by…space? Walking away from such a visit myself one time, I could not help but feel that the STEEP surcharge on the attractive façade and extra interior square footage would bring an acute sense of buyer’s remorse.

In contrast, I remember several years ago, when I used to pick up my sons from their babysitter’s house. Dorothy was a grandmother who used to babysit her 4 other grandchildren during the day in her 3-bedroom ranch bungalow. That house never ever seemed confining or too small, no matter how many guests she had at Christmastime. I remember walking into the kitchen and seeing 6-7 children in Omi’s kitchen sitting at the oversized dinette booth playing crokinole or Monopoly. How that space worked! It’s no wonder that this feature (dinette booths) has found its way back in many homes. It made me think: What could we get by on if we used every square foot of our house and fully inhabited the space we lived in?

Years ago, my wife and I spoke to my sister-in-law, who was also our realtor at the time, who suggested a book by Sara Susanka. I remembered a feature article on Ms. Susanka in Fine Homebuilding magazine, so I was familiar with her work. In her signature book, The Not-So Small House, and in her articles, Sara talks about inhabiting your space FULLY, without anything getting cluttered. She talks about emphasizing design over materials, and mentions things like foregoing granite as a major cost-saver. We have all experienced moments where we’ve entered a room that felt inviting and made us want to sit in it, not because of any luxurious appointments, but because of how the space was used, and how and what furniture is placed in it.

It’s hard to convey the impact of such renovations so I would just encourage readers to do some research on the internet and view some before and after pictures. Some of these transformations are truly amazing.

Rustic and functional seems to be a trend on the rise (how many websites on furniture from wooden pallets are there??) with costlier materials not as alluring as they once were. One does not have to go to this extreme, but this is just an example of how better design and economy can trump inferior design and costlier materials.

One classic dilemma growing families sometimes face is needing an extra bedroom. So in this case would a basement reno solve the problem, creating a bedroom on the lower level? Or even a set of bunk beds (and if you want to see some fantastic bunk bed ideas, go online to sites like Houzz to view some examples).

A number one favourite reno is, of course, a new kitchen. Again, Susanka urges, consider design over materials. Susanka talks about opening up space in walls, transforming them into places that feel more spacious and also more connected. I know, this is an old idea, but readers are encouraged to search before and after pictures to see how homes have been transformed by this idea.

Consider storage solutions for the garage and/or the basement, which helps to de-clutter and free up much-needed space, not to mention helping you find things again! Or fully renovate the basement to create more living space.

These renovation costs, when compared with the cost of selling and buying your new home, combined with the hassles of moving, can sometimes be the less arduous (and less expensive) path. Also, the new place will, more often than not, still require some work to customize.

If future home buyers might believe that an alteration, renovation, or addition of their existing home might work for their family’s needs, the refinance plus improvements program may be the perfect program. In it, the costs of the renovation can be added into the mortgage. It is a VERY powerful program used by the mortgage insurers and, in my opinion, it has been under-utilized. It can be an ideal solution to make your existing house look and feel perfect!

And if that doesn’t work, the flip side of that same program, Purchase Plus Improvements, can make the search for that new home that much easier. It can eliminate a lot of time searching for the elusive perfect home – now, you can add that one (or several) feature(s) to make it your dream home! Again, renovation costs can be rolled into the new mortgage.

Be sure to call so a Dominion Lending Centres mortgage professional can walk you through the process.

Courtesy of Daniel Lewczuk, AMP – DLC Parato Mortgage Group 

Unique Details On Properties Which Will Make Your Pre Approval Void

General Darick Battaglia 28 Jun

Shopping for a new home can be fun and exciting, but there are many details that contribute to a property’s marketability.

Mortgages that have the lowest total cost are reserved for the most marketable properties that are in prime locations as per the lender’s criteria.

Please remember that a mortgage professional can never advise a buyer to make any subject-free offers or even to remove the subjects on an offer.  The decision to remove subjects is one that the buyer has to make once all of the conditions for their mortgage approval have been satisfied with the lender(s).    Also remember that there cannot be any major changes to the borrower’s application details prior to the completion of their purchase as it may affect the borrower’s qualifications and change the conditions of the approval.

A Dominion Lending Centres mortgage professional will provide a buyer with the lowest cost and best mortgage for their scenario and for the property that they select to purchase.   This comes without limitations as we are without bias to any particular lenders and we protect a buyer’s credit score, which is another contributing factor to the best mortgage.

Here are some of the property details that can affect a lender’s decision on whether or not they approve a mortgage:

Property Zoning- if the zoning is anything other than plain residential then your options will be limited.  This sounds simple.  However, some condos are zoned commercial if there is a large commercial component to the complex. Industrial, Agricultural Land Reserve (ALR), or leasehold (government or otherwise) will limit a buyer’s options.

Here is a list of some other potential deal breakers:

  • cable cord construction
  • oil tank(s) on the property
  • self-managed stratas (no strata management company)
  • size of the property- below 500 sq. feet,
  • doesn’t use municipal sewage or waste
  • former marijuana grow op or used for illegal activity
  • outdated electrical
  • over 1 Acre and/or multiple buildings
  • age restriction(s)
  • rental usage
  • any animal use
  • any structural issues/damages work done without permits
  • ongoing or upcoming assessments or legal proceedings
  • prior fixes in the building not done to the lender’s preference
  • strata contingency fund with less than $1,500 per unit in the entire strata

The lender always reviews the details of each property only when an accepted offer is in place.  The request for information can be a simple document or it can require an explanation/written documentation from various parties.   This information may go back several years in order to get to the source of the issue.   This, of course, takes more time.

With complexities such as these, it’s important that a real estate agent discloses the information to their buyer right away so that it can be brought to the lender’s attention.    The agent should also be proactive in getting any and all documentation pertaining to the building/property so that the buyer can evaluate if a property has long term value to them.    Many of the issues stated above can affect the long term value and marketability of a property.

As a mortgage professional, we share any and all information that the lender provides to us if they decide not to approve a property that is being purchased.   We care about protecting borrowers from a bad real estate investment and are without bias in the advice that we provide.

Courtesy of Angela Calla, AMP – DLC Angela Calla Mortgage Team

 

The Worst Time to Be a Realtor?

General Darick Battaglia 27 Jun

It is a frenzy out there.

Home sales keep smashing previous records – Greater Vancouver MLS sales for May were up 32 percent year over year, and Fraser Valley sales were up 48 percent. Properties sell in hours, with multiple offers, often ‘Subject-Free‘.

One might think that it must be amazing to be a Realtor right now. Surely everybody in the industry is having record years?

Nothing could be further from the truth. In fact, for Realtors this is probably the most painful market to be working in.

Here is just one example. Four weeks ago, a client of mine wrote what was one of 28 subject-free offers to be submitted a 35-year-old condo downtown. That condo sold for $165,000.00 over the asking price. My client was unsuccessful in her attempt, as were 26 others.

28 sets of clients, with 28 Realtors.

All of whom read through stacks of minutes, reviewed Form B’s, depreciation reports and budgets, performed inspections, contacted their mortgage Brokers for finance review discussions. Hours and hours of work invested by dozens and dozens of people who are not paid by the hour.

For 27 of these crews of people involved per client putting in dozens of hours of effort each, it was all to no avail.

Realtors earn a living only one way – with a successful transaction. There is no base rate of pay for making an effort to win. It is all about the win.

Realtors are having to have difficult conversations with clients about the need to write subject free. The need to offer above asking prices, asking prices which sellers want set artificially low to drive multiple offers.

Realtors have to complete their due diligence on each property and write up all the related contracts, all on a maybe.

In the instance above 27 Realtors did several hours work and none walked away with any compensation from the event.

The majority of the clients of those 27 Realtors are looking at more properties and making additional offers. The cycle repeating over and over. And with this ferocious competition, the buyers are getting skunked again and again.

My personal record was one set of clients for whom I had to underwrite 13 properties before they were successful on a bid. Twelve unsuccessful offers, all researched, prepared and presented by their Realtor. Thirteen times more work than in a typical (balanced) market.

The stress levels in this market frenzy are reaching astronomical heights with not just Realtors, but also bankers, Brokers, underwriters, appraisers, home inspectors, conveyance staff, notaries, lawyers, and any other party to any number of utterly ridiculous timelines being presented.

Often ‘winning’ the property requires agreeing to a timeline which would be a miracle to achieve in more relaxed market conditions. However in an already overloaded system where every single thing is labelled either as RUSH or EMERGENCY it is tougher than ever to make the miracles happen.

And all the while to the public the face of the entire experience is most often the Realtor.

Realtors have been run off of their feet for the better part of two years straight, all the while facing almost continual failure. One Realtor I spoke with recently has been in 16 bidding wars over the past 6 weeks and has lost every single one of them. That is a lot of work for zero reward.

Sure, when Realtors have a listing and are representing sellers their job is perhaps simpler than in years gone by. But with nineteen Realtors per week knocking on your own door asking to list your property this fierce competition creates incredibly high levels of rejection on the listing front as well. So while it might be ‘easy’ if you have listing, the getting of those listings has never been more difficult.

For most Realtors there is no time to invest on obtaining listings, as all of their waking hours are spent repeatedly tracking down properties before they are snapped up and preparing offer after offer. The work required on either side of the transaction has expanded exponentially.

Is the life of a Realtor wonderful? For many it is, but in a market like this the optics are certainly skewed.

More sales than ever, but radically steeper competition that even.

And yes, the buyers have it even worse. Falling in love with a home used to be a more relaxed process, it has turned into a process akin to a speed-dating round with a Justice of the Peace at the door wanting to know who you are marrying – right now. But for the buyer the process ends with a purchase, for a Realtor there is no end. No end to the line up of buyers wanting to win that multiple offer contest. The fatigue and strain of this prolonged market frenzy is starting to show up in various areas of the system.

It is the best of times and it is the worst of times.

Next time you see a Realtor, give them a hug.

Courtesy of Dustan Woodhouse, AMP – DLC Canadian Mortgae Experts 

The Worst Time to Be a Realtor?

General Darick Battaglia 27 Jun

It is a frenzy out there.

Home sales keep smashing previous records – Greater Vancouver MLS sales for May were up 32 percent year over year, and Fraser Valley sales were up 48 percent. Properties sell in hours, with multiple offers, often ‘Subject-Free‘.

One might think that it must be amazing to be a Realtor right now. Surely everybody in the industry is having record years?

Nothing could be further from the truth. In fact, for Realtors this is probably the most painful market to be working in.

Here is just one example. Four weeks ago, a client of mine wrote what was one of 28 subject-free offers to be submitted a 35-year-old condo downtown. That condo sold for $165,000.00 over the asking price. My client was unsuccessful in her attempt, as were 26 others.

28 sets of clients, with 28 Realtors.

All of whom read through stacks of minutes, reviewed Form B’s, depreciation reports and budgets, performed inspections, contacted their mortgage Brokers for finance review discussions. Hours and hours of work invested by dozens and dozens of people who are not paid by the hour.

For 27 of these crews of people involved per client putting in dozens of hours of effort each, it was all to no avail.

Realtors earn a living only one way – with a successful transaction. There is no base rate of pay for making an effort to win. It is all about the win.

Realtors are having to have difficult conversations with clients about the need to write subject free. The need to offer above asking prices, asking prices which sellers want set artificially low to drive multiple offers.

Realtors have to complete their due diligence on each property and write up all the related contracts, all on a maybe.

In the instance above 27 Realtors did several hours work and none walked away with any compensation from the event.

The majority of the clients of those 27 Realtors are looking at more properties and making additional offers. The cycle repeating over and over. And with this ferocious competition, the buyers are getting skunked again and again.

My personal record was one set of clients for whom I had to underwrite 13 properties before they were successful on a bid. Twelve unsuccessful offers, all researched, prepared and presented by their Realtor. Thirteen times more work than in a typical (balanced) market.

The stress levels in this market frenzy are reaching astronomical heights with not just Realtors, but also bankers, Brokers, underwriters, appraisers, home inspectors, conveyance staff, notaries, lawyers, and any other party to any number of utterly ridiculous timelines being presented.

Often ‘winning’ the property requires agreeing to a timeline which would be a miracle to achieve in more relaxed market conditions. However in an already overloaded system where every single thing is labelled either as RUSH or EMERGENCY it is tougher than ever to make the miracles happen.

And all the while to the public the face of the entire experience is most often the Realtor.

Realtors have been run off of their feet for the better part of two years straight, all the while facing almost continual failure. One Realtor I spoke with recently has been in 16 bidding wars over the past 6 weeks and has lost every single one of them. That is a lot of work for zero reward.

Sure, when Realtors have a listing and are representing sellers their job is perhaps simpler than in years gone by. But with nineteen Realtors per week knocking on your own door asking to list your property this fierce competition creates incredibly high levels of rejection on the listing front as well. So while it might be ‘easy’ if you have listing, the getting of those listings has never been more difficult.

For most Realtors there is no time to invest on obtaining listings, as all of their waking hours are spent repeatedly tracking down properties before they are snapped up and preparing offer after offer. The work required on either side of the transaction has expanded exponentially.

Is the life of a Realtor wonderful? For many it is, but in a market like this the optics are certainly skewed.

More sales than ever, but radically steeper competition that even.

And yes, the buyers have it even worse. Falling in love with a home used to be a more relaxed process, it has turned into a process akin to a speed-dating round with a Justice of the Peace at the door wanting to know who you are marrying – right now. But for the buyer the process ends with a purchase, for a Realtor there is no end. No end to the line up of buyers wanting to win that multiple offer contest. The fatigue and strain of this prolonged market frenzy is starting to show up in various areas of the system.

It is the best of times and it is the worst of times.

Next time you see a Realtor, give them a hug.

Courtesy of Dustan Woodhouse, AMP – DLC Canadian Mortgae Experts 

Should You Be Concerned About Canadian Household Debt Levels?

General Darick Battaglia 24 Jun

Despite what you may see on TV, hear on the radio, or read online, there is strong evidence that although Canadian household debt is at an all-time record high, Canadians are doing just fine financially.

How can that be? Canadians are a whopping 1.8 TRILLION DOLLARS in debt – and that is exactly what the media focuses on. What they fail to disclose is that according to a recent report published by the Fraser Institute, Canadians also have $10 TRILLION DOLLARS in assets.

So for every $10.00 that Canadians have… they owe just $1.80. Now that doesn’t sound all that bad… It’s really a matter of perspective AND having all the facts.

So the next time you hear some doomsday report indicating that our economy is ready to implode in the next 38 minutes, remember that media outlets are more concerned about getting your attention than anything else. It’s not about the facts, it’s about the spin on the story. And seeing as though debt levels have hit new record highs every year since 1961, how can this still be news? Of course there is more debt… there are more people. Those people are buying houses!

Actually, right now, borrowing money in Canada has never been cheaper. We are experiencing all-time lows on some fixed rate mortgage terms and variable rate mortgages. So to answer the question, “Should you be concerned about Canadian household debt levels”… no, you should be concerned about your own personal debt level. Because that is what matters.

What is your financial situation like? Just as the economy changes, and life changes… your financial situation changes as well. It is good to periodically review your mortgage or financial situation to make sure that you are paying as little interest as possible.  That’s where Dominion Lending Centres comes in. If you currently have a mortgage and want to know if it is the best fit for you, or if you are working towards buying your first home, we would love to assist you.

Please contact us anytime!

As far as the report from the Fraser Institute goes, it is filled with great points and interesting stats! It is very well done and is certainly worth a look if you are interested in stuff like this!

Courtesy of Joe Tompkins, AMP – DLC Canadian Mortgage Experts 

Your First Mortgage Renewal

General Darick Battaglia 23 Jun

A lot can change in a year when it comes to mortgages. These changes can provide great opportunities for mortgagees to refinance their mortgage at the time of renewal in order to save money.

Unfortunately, most people are under the impression that once they sign on the dotted line they are locked into their mortgage agreement for the specified term. One study found that a staggering 70% of people simply renew their mortgage every year without even looking into other options! Refinancing can give you the leverage to make your mortgage more affordable.

Here are 5 tips to help you prepare for your first mortgage renewal and save thousands of dollars!

1. Plan in Advance

Mortgage renewals are mailed out months before the renewal date. This gives you plenty of time to shop around for the best rate. Many mortgage professionals recommend a 4-6 month window to negotiate because that’s how long a lender may guarantee a discounted rate. By planning ahead you could find yourself a rate significantly lower with another lender or have a nicely discounted rate to fall back on.

2. Do Your Research

Mortgage research isn’t a one-time process you perform when buying you first home, it’s a topic you should revisit each year. The reason for ongoing research relates to the changes that occur in the marketplace. It is important to keep up-to-date with mortgage trends so you don’t get swindled into a higher rate than you deserve. The key thing to avoid when shopping for a new rate is signing with a bank’s posted rate. These rates are usually the highest the bank charges and all that extra interest will accumulate quickly, adding thousands to your mortgage total. Take the time and know what trends are doing so you can recognize a good rate when it comes along.

3. Don’t Avoid the Switch

Some mortgagees are scared to switch lenders because of hidden fees and the paperwork that may be involved with the process. If you do your research and start early enough there is no reason to avoid switching your mortgage lender. When you make a switch at renewal time there is usually no monetary penalty. Switching allows you to take advantage of lower rates and save you money, so take the plunge if you find a better deal with a different lender!

4. Negotiate on Everything

Most people only negotiate the interest rate when they’re applying for or renewing a mortgage, but all variables are open to discussion! Make sure you know the importance of the amortization period, fixed versus variable rates, and payment schedule flexibility so your negotiation power is up to its full potential. All these variables can help reduce your payments, interest rate, and overall payment period.

5. Work with a Professional

Some mortgagees find all this information rather overwhelming and some simply don’t have the time to do the necessary research. If you find yourself fitting into one of these two categories then work with a Dominion Lending Centres mortgage professional. These brokers work for you and will handle all the shopping and negotiations required to make your mortgage more manageable.

Whether you decide to work with a professional or not make sure to do some research for yourself. It’s always a good idea to have the basic knowledge fully understood before jumping into one of the biggest purchases of your life.

If you are ever unsure of any specifics, call Dominion Lending Centres to clarify. We are always happy to help guide you through the process!

Courtesy of Pam Pikkert, AMP – DLC Regional Mortgage Group 

Down Payment Considerations

General Darick Battaglia 22 Jun

More often than not, as a Dominion Lending Centres mortgage broker, I come across clients who may not yet know, understand or simply forget about all of the costs incurred in purchasing a home. Closing costs are something you should be made aware of by your Mortgage Broker as well as your carrying costs once you move in! These numbers should always be discussed prior to even making an offer so that you are aware of the funds you require to actually complete the transaction.

Your Mortgage Lender may want to see proof that you have both the Down Payment required as well as approximately 1.5% of your purchase price on hand for other various Closing Costs. It is important to understand that closing costs may exceed or end up slightly less than this 1.5%, but it at least demonstrates your ability to have near realistic funding and your overall preparedness.

So let’s list out all of the closing costs you should consider with your purchase in our Vancouver market for residential clients; commercial files see even more complexity.

1. Minimum 5%+ Down Payment

In my last writing, I talked about minimum down payment rule changes that took effect in February 2016. Minimum Down Payments required range from 5% on homes under $500,000 to 7.5% on homes up to $999,999, and 20% required on homes over $1,000,000. Calculator here for you: https://dominionlending.ca/tools/mortgage-calculators/


2. Allowable Sources for Down Payment

Your own savings, TFSA’s, RRSP’s, Gifted Funds and/or Existing Equity in property you are selling.

RRSP’s can be used by first time home buyers via the Home Buyers’ Plan up to a maximum of $25,000 per individual. You must have never owned property anywhere in the world, RRSP funds have to be there for minimum 90days and accessible prior to your closing date. Another major consideration is that some Employer RRSP Plans may NOT be eligible for withdraw so verify this first!

Gifted Down Payments can come from immediate family such as Mother, Father, Brother, Sister or Grandparents.

Many lenders require 90 days history of your down payment funds and require explanation or proof of any large deposits, so early preparation is more necessary than ever.

Existing Equity is the Net Equity you walk away with after selling your home, paying out any mortgage, legal fees and realty fees in the process.


3. GST – Goods and Services Tax

You can expect to pay 5% GST on any home that has not been lived in, including new builds, new subdivided land parcels, property primarily used in business etc.

There are various GST rebates available on homes under $450,000. GST may be included in the overall purchase price OR excluded meaning you may need to come up with the funds, finance the GST into the mortgage.

If qualifying for a GST rebate, there are occasions where you pay full GST and apply for the rebate yourself OR the Builder accepts assignment of your rebate, in which case you require less upfront!


4. PPT – Property Transfer Tax

Property Transfer Tax (PPT) applies to purchases in BC. PTT is charged at a rate of 1% on the first $200,000 of the purchase price and 2% on the remainder, up to $2,000,000 and 3% on any amount above $2,000,000. First-time home buyers may be exempt from paying the PTT on homes up to $475,000 with a partial exemption between $475,000 and $500,000.

New Builds now have a PPT exemption up to $750,000 which is fantastic for new buyers and those upgrading to a new property.


5. Realty Fees – if selling current home

Realty Fees payable to a Brokerage are a multiple percentage split typically a % on first $100,000 another % on the remainder. Both Buyers and Sellers Agents usually also receive different amounts from one another but usually close to 50/50.


6. Legal Fees and Title Insurance

Legal Fees include many service charges such as Land Title Registration, confirming signatures on Mortgage Contract, Title Insurance (required by most lenders today), ensuring Property Insurance, Property Tax Adjustments, payout of debts such as credit or mortgage on other property etc.

Typically we see charges in the $850 – $1000 range for a complete real estate transaction.

7. Home Inspection

Would you normally gamble $500,000? Having a qualified and licensed Home Inspector look at your prospective new home is a worthwhile exercise. Typically we are seeing prices between $400 – $500 for this valuable service. Uncover any current or potential issues with this property in advance and perhaps use this information to assist in negotiation! This is your own assurance that you are placing a good bet!


8. Appraisals – With bidding wars and increasing valuations, expect this more today!

It may come as no surprise to you that current increases and bidding wars are seeing offers higher than the expected or listing price. Lenders and Insurers alike can request an appraisal as a condition of financing to support the purchase price.

Important note to those with minimum down payments – If the appraisal or an Insurer has difficulty supporting the valuation of the home, you could be asked to come up with a higher down payment! This occurs when an insurer is only comfortable at a max amount that is below the actual purchase price. This is not only a possibility; Appraisals ARE being requested more often in this market. Sometimes as a Broker with good Lender relationships I can get this waived but only if the request and the numbers are reasonable or supported.

An appraisal can range from $300 – $500 for residential and higher for remote rural areas OR larger acreage.


9. Property Tax Adjustment – Municipal Property Taxes

Each year Property tax bills are due July 1st. Property taxes in BC are adjusted annually from January 1st – December 31st, so even though property taxes are paid in July, they are based on the calendar year.

So how do we adjust?

Your Lawyer will calculate the property tax reimbursement for either the Buyer or the Seller pro-rated to the Adjustment Date on contract. Each party is responsible only for the portion of the year, to the day, that they will own the property.

If you purchase your home on or before July 1st and before taxes have been paid, you should be receiving credit for the Sellers portion of the annual property taxes as you will be responsible for paying the full amount of the annual property taxes.

However, if you purchase your home after July 1st or the Seller has paid for the full tax year, you will owe your portion of the Property Taxes to the Seller.

As always, if you need more information, contact any of the mortgage professionals at Dominion Lending Centres!

Courtesy of Kris Grasty, AMP – DLC Canadian Mortgage Experts 

Writing a Subject Free Offer?

General Darick Battaglia 21 Jun

Following are just a few rules and considerations.

It looks like a long list of things that could be potentially serious problems, but I assure you the full list is far longer. This is just the tip of the iceberg… an iceberg that more than a few people are heading towards or have hit.

Following are just a few rules and considerations.

It looks like a long list of things that could be potentially serious problems, but I assure you the full list is far longer. This is just the tip of the iceberg… an iceberg that more than a few people are heading towards or have hit.

The Rules

Rule #1 – There is no such thing as a ‘pre-approval’.

Not in the sense that you can write a subject-free offer with 100% confidence. Anyone who tells you different does not know their job. So then, what is a pre-approval? It is little more than a glorified rate hold in most cases, perhaps a cursory review of your own personal good standing in very few cases. The missing ingredient from a pre-approval is the property. Without the property details, documents, and appraisal there is nothing to approve or pre-approve.

Rule #2 – Call your Dominion Lending Centres Broker and go over the MLS notes, pertinent property details (zoning, construction style, etc) and most importantly, the Property Disclosure Statement (PDS) in advance of writing your offer.

Rule #3 – Be certain that your Broker and your Realtor are having direct conversations with each other. You should not be in the middle; those two should be speaking directly. They are the licensed professionals in the equation. However, neither fully understands the nuances of the other’s job. Realtors are not current on various lending guidelines, and Brokers are not all current on contract updates (i.e., the recent changes around assignment clauses). For this reason it is vital that they are communicating with each other and not making assumptions about what is possible for the other.

For instance, the Broker may need to add a guarantor to your contract for your financing, but your real estate contract might prohibit that under the new assignment rules. Uh-oh.

Or the Realtor may negotiate a 7-day completion (happened to us last week) but your only ability to qualify may be through a lender with a 10-day policy. (No completions within 10 days is very common with Credit Unions.)

Rule #4 – Understand that no matter what your Broker, banker, Realtor, appraiser, lawyer, or accountant says… at NO time are you guaranteed financing simply because you are super-duper awesome. And I am certain that you are indeed super-duper awesome. The fact is that until the lender reviews and approves 100% of the related documents, you are at risk of not being approved.

Following in a partial list of reasons a lender will say no to the property, even though they love you.

CONSIDERATIONS

  • Self-managed stratas
  • Commercial-zoned properties – C1 thru C8 zonings are ineligible with nearly all lenders (CD-1 is not commercial; many high-density areas in greater Vancouver will have this zoning)
  • Age-restricted properties greater than 19+ – 19+ is a case by case exception.
  • Condos with ongoing assessments or incomplete repairs
  • Live/work or heritage zoning
  • Log or floating homes
  • Post-tension cable or condo conversions
  • Rental pools
  • Resort areas – Sun Peaks, Big White, Apex, Hemlock, Kicking Horse, etc.
  • Rent-to-own deals
  • Past grow-ops… even though the property has been remediated
  • Purchases closing outside of 120 days
  • PDS references to vermiculite insulation, asbestos, water leaks, septic system failures, non-potable water, large special assessments within the past five years etc.

The list of showstoppers and red flags goes on.

CONCLUSION

The subject-removal period is where we figure out the solutions to files with various wrinkles. It is the period where Realtors and Brokers too often converse and discover something new about each other’s limitations.

Without that subject-removal period there is no safety net, there is no filter. You are stuck with whatever you have unknowingly purchased.

Can you think of a better market in which an owner can list and sell a property with various defects, defects that become the subject-free buyer’s problem.

Call your Dominion Lending Centres mortgage professional BEFORE you write a subject free offer.

Courtesy of Dustan Woodhouse, AMP – DLC Canadian Mortgage Experts 

Don’t Renew! Renegotiate!

General Darick Battaglia 20 Jun

Everybody wants to save money on their mortgage!

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

They make the effort to:

find out the options

compare rates and costs

compare flexibility

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

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

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

2. Should they ask their lender for a better rate?

3. Should they move their mortgage to another lender?

The answer? You guessed it! Don’t Renew! Renegotiate!

1. Call your lender and ask them for their best offer and ask them to send it to you in writing.

2. Work with a broker who has access to many different lenders so you can better assess your options. Even if that broker has not worked with you before, they can still help you sort out your renewal.

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

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

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

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

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

Courtesy of Christina Horvath, AMP – DLC Primex Mortgages 

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