Who pays your Mortgage Broker? Not you!

General Giovanni Perri 10 May

If you’re looking to get a mortgage and considering a mortgage broker, there’s a good chance you’re wondering about how much the service costs.

Good news! Clients looking to get a standard residential mortgage pay no fees to the broker.

On standard residential mortgages, it’s 100% free for the clients. We’re paid by the bank or by the lending institution that we give the mortgage to.

But it’s not the only advantage a broker can bring you. When you’re shopping for a mortgage at a bank, they’re only able to offer you something from their stable of products. A broker, however, is able to shop at different banks to get you the best product for your needs.

If you don’t fit in the bank’s box of products, then you don’t get the mortgage. When you go to a mortgage broker, the mortgage broker has access to every lender on the market and is able to sell you basically everything to find a solution that makes the most amount of sense for you.

Because they’re able to shop around, in many cases the broker is able to find you a better rate on your mortgage.

In addition, mortgage brokers are licensed professionals covered by provincial governing bodies that looks out for you, the consumer. In many cases, the person you’re dealing with at the bank is just a salesperson, without any requirement they be licensed.

So, if you’re in the market for a new home, try a mortgage broker. It’s the safer, smarter choice for your mortgage. We’d encourage you to shop around, then get in touch with us for a no-obligation chat with a Dominion Lending Centres mortgage professional near you.

-Terry Kilakos, DLC

Original Article Source

Why Canadians really need to change lenders at Mortgage Renewal time, especially now

General Giovanni Perri 19 Dec

You're likelier to get a better mortgage rate if you switch lenders at renewal time.

“Last year marked the beginning of a new era for Canadian households,” economists at CIBC declared in a report issued in September.

For the first time since the early 1990s, they wrote, the interest rates that banks base their fixed-rate mortgages on are higher than they were five years earlier. In Canada — where four out of five mortgages are the five-year fixed-rate variety — most borrowers will now be facing higher mortgage rates at renewal time than they originally got.

Unless you’re at the tail end of a 25-year mortgage, you likely will not remember a time when your mortgage became more expensive as time went on. This could take some getting used to.

And for some, it could mean serious financial pressure. In a new survey carried out for mortgage comparison site Ratehub, 31 per cent of mortgage holders said they could afford no more than a $100 increase to their monthly payments. On a mortgage initially worth $400,000, it would take only a 0.6-percentage-point increase in rates to make that happen.

But the chances are good your own lender will make things even worse at renewal time. That’s because mortgage lenders tend to give higher rates to borrowers who are renewing than to new customers, says Rob McLister, founder of RateSpy.com.

“A great number of people don’t do any comparison shopping whatsoever and the banks take advantage of those people by offering higher rates at renewal,” McLister told HuffPost Canada.

“That’s one of the ways lenders maximize profit. There’s not the reward for loyalty that you would expect.”

But the new federally mandated mortgage “stress test” complicates things. You’ll have to pass the test at renewal time if changing lenders, but if you stick with your current lender, you don’t have to pass the test.

The stress test requires you to qualify at a rate that is two percentage points higher than the one you’re being offered, or the Bank of Canada’s posted rate (currently 5.34 per cent) — whichever is higher.

It applies to any federally regulated lender, like banks and mortgage loan companies. Credit unions are mostly provincially regulated, but provinces often look to federal standards to set their own policies.

Many borrowers “may be compelled to renew their mortgage with their current lender out of fear of having to requalify,” Ratehub said in a recent report.

As many as one in 10 renewals could be rejected because of the stress test, McLister estimates. If that happens, your odds of getting a good mortgage rate are practically nil, as no federally regulated bank or credit union can give you a mortgage. You will have to move to alternative lenders that will almost certainly charge higher mortgage rates than banks.

A great number of people don’t do any comparison shopping whatsoever and the banks take advantage of those people by offering higher rates at renewal.Rob McLister, RateSpy.com

But “most homeowners will likely pass the stress test as their income may have increased since they first got the mortgage, and they might not have originally purchased right at their limit,” said James Laird, co-founder of Ratehub, in a statement.

So what do you do if you can’t afford a much larger mortgage payment? Start by shopping around for better rates. Laird suggests starting your shopping 120 days before renewal. Consider hiring a mortgage broker to help you find better rates in the marketplace.

Here are some strategies to help you cope in a world of rising mortgage rates.

Switching lenders could help

Just crossing the street to a different bank than the one you’re currently with could save you money, because the major lenders typically offer a discount of up to a quarter percentage point off their advertised rates for well-qualified new customers, McLister said.

“First time customers will often get a better rate than someone coming up for renewal,” he said.

Switch from a fixed rate to a variable rate

If you have a fixed-rate mortgage, you can switch to a variable rate and save about a percentage point on interest. While the discount lenders today are offering rates at 3.39 per cent or higher for fixed-rate mortgages, variable rate mortgages are available for as little as 2.59 per cent, according to Ratehub data.

But there is risk involved because your mortgage rate will move in tandem with overall interest rates. And as we are now in a rising interest rate environment, there’s a good chance that will happen.

Depending on how your mortgage is structured, rising rates will mean either a higher monthly payment, or the same payment but with a larger share going to paying interest — meaning it will take longer to pay off the mortgage.

Find a co-signer for your mortgage

If you’re in dire financial straits and don’t think you can pass the stress test, you can try to find someone to co-sign, usually someone in your family.

But that makes those co-signers liable for your mortgage, so make sure you have an agreement as to who pays what, and what happens when the person responsible can’t make a payment.

Also, getting a co-signer means it will be a “refinance” and not a renewal, meaning it will be an uninsured mortgage. You’ll need to have at least 20 per cent equity in the property to get an uninsured refinance.

Original Source Article

Reverse mortgage: Is this the solution if you retire cash-poor?

Mortgage Tips Giovanni Perri 11 Dec

Reverse mortgages have never been this popular in Canada.

Inquiries about them have doubled between 2016 and 2017, according to HomeEquity Bank’s CHIP Reverse Mortgage, which was, for a time, the only financial institution to offer them nationwide.

And as a wave of baby boomers crosses the work-life finish line, competition to serve those who are feeling house-rich and cash-poor is heating up. Equitable Bank became a second option for retirees looking for a reverse mortgage in January when it announced its PATH Home Plan, which is available through mortgage brokers in Alberta, British Columbia and Ontario.

The basic idea of a reverse mortgage is simple. Instead of making payments to build up equity in your home, as you would with a traditional mortgage, you draw down on your home equity and receive payments. You can opt for a lump-sum loan or get a certain amount of cash at regular intervals.

It sounds like the personal finance equivalent of having your cake and eating it, too: You generate some extra income and get to stay in your home. In a country where nearly a third of those approaching retirement has no savings, that seems like a great deal.

One catch, though, is that the bank gets a rather large slice of your cake, as well. Reverse mortgages are expensive. The current interest rate on a five-year fixed-rate loan is 6.49 per cent, almost double what you’d pay with a regular mortgage these days.

The other obvious catch is that there will be less cake left for your kids, grand-kids and anyone else who might survive you.

“A reverse mortgage is never the first choice,” said Robert McLister, founder of rate-comparisons site ratespy.com and mortgage planner at intellimortgage.com.

Juicing your home equity to squeeze out some extra cash isn’t a retirement plan. It’s a last resort for someone who has no other options, said Clay Gillespie, a financial adviser and managing director at RGF Integrated Wealth Management.

Still, he adds, for someone with, say, a $2-million home who has minimal retirement income from government benefits, “a reverse mortgage makes all the sense in the world.”

Here are a few things you should know about reverse mortgages:

Reverse mortgage basics

Reverse mortgages are only available to Canadians 55 and older who own their home.

The overall amount of the loan is capped at 55 per cent of the value of the house for HomeEquity Bank and 40 per cent for Equitable Bank. The good news here is that you can’t borrow more than your home is worth.

However, how close you’ll be able to get to the cap depends on your age, your equity stake, the appraised value of your home, where you live and current interest rates, among other factors.

In general, “you’d have to be in your late 70s, living in an urban centre and likely male,” to be able to borrow the maximum, Yvonne Ziomecki, executive vice-president, at HomeEquity Bank told Global News. That’s because home values in cities tend to be higher and men have a shorter life expectancy.

On that note, keep in mind that your spouse’s age matters as well. You both have to be at least 55 to get a reverse mortgage, and you might not be able to borrow as much if you have a younger spouse.

When you take out a reverse mortgage, the interest on your loan comes out of your home equity. For example, if you have a $400,000 home and take out $100,000 at 6.49 per cent over five years, you’d be paying over $37,000 in interest, according to HomeEquity Bank’s online calculator. That means your equity stake in the house would be $137,000 less by the end of the mortgage term.

The lender will continue to charge you interest until the loan is paid in full. In the example above, assuming you don’t want another loan but are unable to repay what you owe at the end of year five, your rate will be reset for another five-year term, according to Ziomecki. Put simply, your new rate applies to the full $137,000, not just your original principal of $100,000.

If you sell the house, your reverse mortgage will discharge like any other mortgage: The lender gets what it is owed first, you get the rest. The same applies if you die without having moved out. Assuming you have descendants and a will, your survivors will get whatever is left, if anything.

Pros and cons

There are several pros and cons to reverse mortgages:

Equity

  • Con: Compounding – or paying interest on interest – the interest charges can erode your home equity pretty quickly, Gillespie warned.
  • Pro: On the other hand, keep in mind that your home equity will likely go up as well. In our example, even assuming a very moderate rate of appreciation of 2 per cent per year would add over $41,000 to your home value. After five years, you’d end up with $304,000 in equity, slightly more than when you took out the $100,000 loan.

  • Con: “It’s hard or often impossible to borrow against a property that has a reverse mortgage on it, apart from just increasing the reverse mortgage,” Tea Nicola, co-founder and CEO of robo adviser WealthBar told Global News via email.

Market conditions

  • Pro: Boomers are arguably the perfect generation to take advantage of reverse mortgages. Many of them, especially in Vancouver and Toronto, own homes that have doubled or tripled in value since they bought them. That appreciation is essentially money for which they did not save and which they can now easily turn into cash. Reverse mortgages help resolve the issue that “you can’t really sell a tenth of your house,” if you need a tenth of the money, Gillespie noted.
  • Con: But boomers’ timing for taking out a reverse mortgage seems less than perfect. “Economic indicators would lead us to believe that we are headed for rising interest rates and a housing correction, which is not a favourable environment for reverse mortgages. Even if housing prices hold strong, the interest-rate rise would have a negative impact,” Nicola said. According to HomeEquity Bank’s Ziomecki, home appreciation and the amount borrowers owe in principal plus interest tend to move in tandem (if you’re looking at the graph above, the green and red line tend to rise in parallel). But one has to wonder whether this might change as home prices cool off and interest rates rise from historic lows.

Your descendants

  • Con: Your home is likely your biggest asset, so if you start chipping away at the equity in old age, there may be little left for your heirs.
  • Pro: This may be less of a pro than a mitigation of a con, but it’s an important point. Even if home prices plummet and your home value eventually dips below the amount of your reverse mortgage loan, you will never end up with negative equity. “That’s the beauty of a reverse mortgage,” Gillespie said. The worst-case scenario is that you or your survivors walk away with nothing after selling the home. But your children will not be left with debts to pay.
  • Pro: Leaving no inheritance and maintaining financial independence is arguably preferable to having to borrow from family to pay your bills in old age.

Staying in your home

  • Pro: You get to stay at home. This is very important for many people, often for sentimental reasons. According to a recent poll conducted by Ipsos for HomeEquity Bank, nine in 10 Canadian aged 65 and over feel that way.
  • Con: According to Gillespie, many people stop feeling that way around the time they hit 80, when they can no longer climb up and down the stairs and things like gardening and minor house maintenance become impossible chores. One of the dangers of reverse mortgages is that, even if you sell the house, you won’t have enough money to cover end-of-life health-care costs.
  • Con: Staying in your home may not be the smartest financial decision if moving to a smaller home costs considerably less, Gillespie said.

Gillespie said that while he pulls reverse-mortgages quotes for clients every month these days, he has only ever recommended the product five times over his decades-long career. Instead, he generally advises downsizing.

And reverse mortgages are hardly something that people can rely on to boost their retirement income over a 30- to 35-year period, he added. Case in point, according to Ziomecki, the typical HomeEquity Bank client takes out a reverse mortgage around age 70 and stays with the lender for about 10 years.

Still, for the cash-poor and house-rich, a reverse mortgage is something that “can dramatically improve your lifestyle,” Gillespie said.

 

Original Source Article

4 Reasons Why Mortgage Brokers are Better than Banks

General Giovanni Perri 23 Nov

I am often asked if it’s hard to compete with the banks. While they may offer competitive rates at times, right now we have much better rates than the banks. However, we have certain advantages which allow us to blow them out of the water most of the time.

  1. More Choice – banks are limited to around 5 products that they can offer you. They will try to fit you into one of their products even if the financial institution next door has a better one for you. Brokers have access to banks, credit unions, trust and mortgage companies as well as private lenders.
  2. Better Representation – Brokers are your champions bankers are employees. They put their employer first . They won’t offer you the best rates unless you are a good negotiator. Brokers are licenced by provincial organizations and have to follow a code of ethics which requires that we put the consumer first. We also negotiate the best rate, terms and conditions for you. If you need to break the mortgage before the end of the term, we can assist you with that and perhaps help you to avoid paying a penalty.
  3. More Benefits – If you are moving into a home that is more than one year old, you probably do not have a home warranty. Brokers have 3 lenders who offer home warranties, which can cover repairs to the plumbing, heating and electrical systems with a small deductible. Two of the lenders even offer this as a complimentary service for the first year while the third lender offers it for the length of the mortgage. As Dominion Lending Centre brokers, we also have discounted rates for moving services and boxes from a large national moving company .
  4. Better Protection – I saved the best for last. We offer portable mortgage life and disability insurance.

It may not sound like much but we have the same coverage as the banks offer with one important difference – portability. While we take care to place you with a good lender, circumstances change and lenders may not offer favourable terms on renewal. If you try to leave a bank after developing a condition like high blood pressure or having a heart attack, you will have to re-apply for insurance coverage and may be denied. There are hundreds if not thousands of unhappy bank clients who are stuck paying high interest rates because they are forced to stay with a lender. Broker insurance gives you the independence to move from lender to lender depending on who is willing to offer you the best rates and terms. This may not sound like much to you now but it’s a real game changer for anyone who knows someone who have had this happen to them.

Is it difficult to compete with the banks? No – we have them beat hands down.

Original Article by David Cooke (DLC – Clarity Mortgages)

Congratulations On The Mortgage! Now Let’s Get Rid of It

General Giovanni Perri 22 Nov

So now that you’re a home owner, what are your next steps? Well first, you will have to figure out exactly how you are going to get RID of that mortgage. Yes, that’s right. Now that you got it, here are four ways you can pay it off and be done with it!

1. ACCELERATE YOUR PAYMENT FREQUENCY

Making the change from monthly payments to accelerated bi-weekly payments is one of the easiest ways you can make a huge difference to the bottom line of your mortgage. A traditional mortgage splits the amount owing into 12 equal monthly payments however, an accelerated biweekly payment is simply taking a regular monthly payment and dividing it in two. Instead of making 24 payments, you will make 26. The extra two payments really accelerate the repayment of your mortgage!
Here is an example of what I’m talking about.
Bob currently has a $300,000 mortgage at a 4% fixed rate with a 25 year amortization period. He will save $32,000 just by moving to biweekly accelerated payments from biweekly. Go Bob!

2. INCREASE YOUR MORTGAGE PAYMENT AMOUNT
Unless you opted for a “no-frills” mortgage, chances are you have the capability of increasing your regular mortgage payment by 10-25%. This is a great option if you have some extra cash to spend within your budget. This money will go directly towards paying down the principal amount owing on your mortgage. The more money you can pay down when you first get your mortgage, the better. At the end of the day, you will pay less interest over the lifespan of your mortgage. By voluntarily increasing your mortgage payment, it is metaphorically like you are signing up for a long term forced savings plan where equity builds in your house rather than your bank account.

3. MAKE A LUMP SUM PAYMENT

Again, unless you have a “no-frills” mortgage, you should be able to make bulk payments towards your mortgage. Depending on your lender and your mortgage product, you should be able to put down anywhere from 10-25% of the original mortgage balance. Some lenders may be particular about WHEN you can make these payments, however if you haven’t taken advantage of a lump sum payment yet this year, you will be eligible.

4. REVIEW YOUR OPTIONS REGULARLY

As your mortgage payments are withdrawn from your account, it is easy to put your mortgage payments on auto-pilot especially if you have opted for a 5-year fixed term. Despite the term of your mortgage, it is highly encouraged to give your mortgage an annual review. This review gives you a conscious look at the overall stance of your mortgage which could rise to opportunities of refinancing or lowering your interest rate!
If you have any questions about your mortgage, how to get a mortgage, or how to get rid of the mortgage you have, please don’t hesitate to contact a Dominion Lending Centres mortgage professional today!

 

Original Source Article – Chris Cabel (DLC HomeHow)

Pre-approved for your mortgage… what does that really mean?

General Giovanni Perri 15 Nov

There is a myth out there that once you’re pre-approved for a mortgage, you’re good to go out and buy a home… with a no subject offer… DON’T do it!

A pre-approval means that based on being able to PROVE (through documentation) your CURRENT income, expenses, down payment and credit bureau you SHOULD be able to get fully approved once you find the right property (this is the first half of the equation).

Remember that there cannot be any major changes to the your mortgage application details prior to the completion of their purchase as it may affect the your qualifications and change the conditions of the approval.

I always recommend my clients put in a “subject to financing” clause with their realtor when they are putting in an offer to protect themselves.

Here’s why:

The lender can like you and your financial picture, BUT the lender doesn’t know which property you want to purchase (this is the other half of the equation). Here are 3 examples:

  • A bidding war has bid up the price and the best offer (yours) has been accepted. YIPPEE!!! The lender sends in their appraiser to determine the value of the property. The appraisal comes in at a lower price than your accepted offer DRATS!! You now have to come up with the difference between the appraised value and your offer, since lenders will only offer a mortgage based on the appraised value of the home.
  • You are buying a condo/townhouse and the strata minutes indicate that there are: leaks, electrical issues, roofing problems, etc. that the strata needs to act upon. If the Strata doesn’t have a big enough contingency fund, the lender can decline due to potential special assessments down the road.
  • Property zoning – if the zoning is anything other than residential then your options will be limited. Some condos are zoned commercial if there is a large commercial component to the complex. Industrial, Agricultural Land Reserve (ALR) in B.C., or leasehold (government or otherwise) limit a buyer’s options.
    As you can tell “you may be pre-approved” but most certainly the subject property is not!!

There are several properties that most lenders will not touch these days. Here’s a (partial) list of property details that can affect most lender’s decisions on approving your mortgage:

  • A remediated grow-op or drug lab
  • Leased land or co-op
  • Age-restricted property
  • Special assessment (pending or otherwise)
  • Any reference to water or leaks in the minutes
  • A “fixer upper”
  • Contains asbestos, vermiculite insulations or has (even partial) knob-and-tube or aluminum wiring
  • Is on land with a commercial zoning component
  • Livestock is present, etc.
  • Self-managed strata’s (no strata management company)
  • Size of the property- below 500 sq. feet,
  • Doesn’t use municipal sewage or waste
  • Over 1 Acre and/or multiple buildings
  • Ongoing or upcoming assessments or legal proceedings
  • Strata with small contingency fund

The lender reviews the details of each property in detail once you have an accepted offer in place.

It’s important that the real estate agent discloses the information to their buyer ASAP so that it can be brought to the lender’s attention. The agent should be proactive in getting all documentation pertaining to the building/property, so that the buyer can make an educated buying decision. Many of the issues stated above can affect the long-term value and marketability of a property.

If you have a “subject to financing” clause in your purchase agreement, and you can’t find a lender (for whatever reason), then you can back out of the deal with no financial repercussions.

In my opinion you need to always put in a “subject to financing clause” as that’s the best protection you have. With subject free offers you could forfeit your deposit (and facing potential legal action from the seller) should you want to cancel your contract after the agreement has been made, even though you were technically “pre-approved”.

As you can tell there is lots to discuss about buying homes including pre-approvals! If you have any questions, contact a Dominion Lending Centres mortgage broker near you.

-Kelly Hudson (DLC – Canadian Mortgage Experts).

Original Source of Article

All about Land Assemblies in Metro Vancouver

General Giovanni Perri 29 Oct

What is a “land assembly”?

A land assembly is simply the joining of adjacent lands to make a larger parcel. This is normally done so that the larger parcel can accommodate the building of more living units (be they houses, townhouses, low rise or high rise condominiums). Selling your property as part of a land assembly usually means that you will get a much higher price than you would on a one off sale to an individual buyer on the open market.

A realtor knocks on your door and says that he or she is representing a buyer or developer who is interested in purchasing your property as part of a land assembly.

What should you do?

– Find out as much as you can from the realtor about the assembly including who is behind it (i.e. developer, city hall, school board or other government authority or other), how much land is being assembled, what is going to be built on the property (i.e. townhouses, low rise, high rise or other), what is permitted by the current Community Plan for your neighborhood, who else has signed a sale agreement in your area for this assembly, the time frame for the development, whether the realtor wants to represent you or the buyer (dual agency where the realtor represents both the buyer and the seller is now forbidden in BC except in unusual circumstances). Link.

– Ask the realtor to leave copies of all documentation with you for your review including marketing materials, listing agreement and proposed contract.

– Before you sign any listing agreement or contract of purchase, take it you your lawyer for review. Don’t ask the lawyer to “have a peak at the documents” because you don’t want to spend much money. These are complex documents and the lawyer has to take the time to read and understand them in order to properly advise you. I have had clients who have inadvertently signed two year listing agreements for land assemblies, assuming that they could cancel them if the realtor was not performing to their satisfaction. Unfortunately that is NOT the case. In a recent scenario, a school board presented an offer to a client of mine which had an open ended subject removal date (meaning that it would have tied my client’s property up indefinitely). The offer was drafted by a large Vancouver law firm, so one would have to assume that was not a drafting error. Unscrupulous developers, realtors or others often seek to hide unreasonable clauses in the fine print. Don’t assume that you can void a contract because you didn’t read it before signing (you will have an uphill battle in court on that front). Don’t rely on the buyer’s realtor or other third party to explain it to you, in place of your actually reading it or having your lawyer review it and explain it to you.

– THE DEVELOPER’S GOAL: is to tie up your property for as long as possible without paying you anything unless the proposed development goes ahead. The carrot which is dangled in front of you is the potential to get a lot more money for your home than its normal market value. The developer accomplishes this slight-of-hand by the use of “subject conditions,” which are terms which make the contract binding on him only when they are removed.

Typical subject conditions are:

• A certain number of neighborhood owners signing on;

• Satisfactory Phase I environmental site assessment;

• Satisfactory Feasibility Study;

• Other due diligence searches and investigations such as title review, soil sampling, site assessment etc.

– Often it can take a half a year or more to complete these matters. In the meantime, your property is effectively tied up. It can’t be sold to someone else and it’s unlikely that you would want to renovate or upgrade it with the possibility of a sale on the horizon. On occasion, the developer will want an Option registered on your property as well.

– THE SELLER’S GOAL: is to have your property under contract for as short a time as possible and to get some non-refundable compensation from the developer if the property is going to be tied up for more than three or four months. Options cost money and there is no reason to grant one to a developer and not get paid something if the sale never materializes. I have had clients who have had their property tied up for eighteen months only to have the development cancelled at the last minute. In such a case, keeping $20,000 or more for your trouble makes the situation somewhat more palatable. Beware the Listing Agreement also. These are very complex, one sided standard agreements drafted by the real estate board’s lawyers. Once they are signed, unless modified by you or your lawyer first, they can lock a seller into a long term relationship with the listing realtor –again effectively tying up your home without compensation.

Other considerations are:

– Payment of the deposit on the subject removal date. That deposit should be minimally 5-10% of the ultimate purchase price, non-refundable and preferably, released to the seller forthwith upon subject removal. If not, it’s held in the real estate brokerage’s or developer’s lawyer’s trust account. Stipulate that it be held in an interest bearing account and that the interest accrues to you if the completion date is more than three or four months down the road. If the deposit is to be held in trust, add a clause requiring the developer’s brokerage or lawyer to release the deposit to you or your lawyer forthwith, if the developer fails to close on the completion date (otherwise, you may have to go to court to get it, as the Real Estate Services Act requires either mutual consent or a court order to have a deposit released. Link.

– Rent back. Often, the development may not be built for a year or more after the completion date. In such case the house may be livable during that period and the seller should negotiate for free rent for a year or more, while he or she finds somewhere else to live. Make sure that there is a sub-lease clause so that if the seller finds another property to buy or rent that he can sublease the property to someone else and keep the rent as part of his remuneration.

– VIP or Friends & Relatives status on developer’s other projects. If the developer is a large one like BOSA, Polygon, Pinnacle, West Bank, Onni, etc., you may be able to obtain preferred status on their other developments, if you see something in their other offerings which is appealing.

– Capital gains and other tax implications. Even before your lawyer reviews the documents, a call to your accountant is in order to understand what the tax implications are of your possible sale. In the case of a single family dwelling on a normal sized lot which has been used for residential purposes, it is almost certainly a non-taxable transaction. However if the property was an acre or two and/or used for commercial activities there may be capital gains or GST consequences. In real estate, all surprises are bad as a rule, so it’s best to find out in advance.

– What is out there for you to acquire? Ask your own realtor to advise you about what you could buy for the suggested sale price in the area that you want to re-purchase in. Often people are shocked to find out just how little they can buy for a million dollars these days (particularly if they bought a long time ago for a hundred thousand dollars or less!)

– Never make a rushed decision. Developers and realtors are always pushing for a signature NOW. Take your time and assess the situation in consultation with your lawyer, accountant and your own realtor. In most instances, it’s the land assembler that is coming to you, not the other way around, so you are in the driver’s seat as long as you don’t give in to fear or greed.

Conclusion

Land assemblies are here to stay. With 40-50,000 people moving to the Lower Mainland yearly and every politician and his dog in favor of increasing density (although how that is either “green” or “sustainable” is a mystery to me), it’s wise to at least be aware of the basics if you find someone knocking on your door to buy your property for this purpose.

The corollary of a land assembly for condominium owners of older, low rise buildings is the “strata dissolution” scenario which we have dealt with in a previous blog “Help, my strata wants to sell the building out from under me!”

If you have any questions, or want to share your land assembly story we would love to hear from you! Feel free to contact Kenneth Pazder or Melissa Valana at 604-682-1509.

PAZDER LAW CORPORATION © 2018

Original Source Article by Kenneth Allan Pazder

7 things every self-employed individual should know – before applying for a mortgage

Mortgage Tips Giovanni Perri 26 Oct

Self-employed individuals are quickly becoming one of the most common clients that we handle. Daily we have successful business owners come into our offices who enjoy the perks of being an entrepreneur. One of these includes fantastic write-offs that allow them to bring their income down to a low tax bracket.

However, this benefit can also mean that the same business owner may have a hard time qualifying for a mortgage all because their income is significantly reduced on paper… how frustrating ‘eh? But these savvy business owners know that there is advanced planning that is involved in being able to qualify for conventional financing. Back in 2015, Statistics Canada reported that there were about 2.7 million people self-employed in Canada… which is an astounding 14% of the total population of Canada! What does that stat mean? Two things:

1. That being self-employed is a more than viable way of earning income in today’s world.
2. That 14% may not fit into the conventional lending “box”

The Conventional Lending Box
To fit into this box, self-employed individuals must meet certain qualifications. For example, they must be able to provide:
>Two most recent years of personal tax returns
>Two most current years Notice of Assessments
>Two most current years financial statements
>Statement of Bank Account Activity
>Investment Income Statement
>Photo ID

Now, the one area that raises a red flag in the above is the tax returns. As we previously mentioned, their income claimed on the return itself might be significantly different than their actual income. Tax deductions related to business often reflect meals, rental spaces, credit card interest etc. The result is that the income the self-employed business owner shows on their tax return is a significantly lower figure than what their actual take home pay is. However, the conventional lending box requires income to justify the mortgage. So how do we pull this off?

The Unconventional Lending Box
Now please keep in mind that “unconventional” in this box just means that as a self-employed individua,l you are going to work with a Mortgage Broker to find an alternative to allow you to show that you can justify the mortgage. There are several well-known and consistently used pieces of advice that we would like to pass along to you:

1. If you are organized and planning (think 2 years out) you can plan to write off fewer expenses in the two years leading up to the property purchase. Yes, you will pay more personal taxes. However, your income will be higher, and it will be easier to qualify you for the mortgage amount you are seeking.

2. Set up your finances through a certified accountant. Many lenders want to see self-employed income submitted through a professional rather than doing it yourself. The truth is that the time you spend doing your own taxes will not be nearly as efficient both financially and time-wise as a professional. Make sure that you discuss with them what your goals are so that they can set up your taxes properly for you!

3. Choose your timing carefully. If you are leaving for an extended holiday within the two years before purchasing, your two-year average income may fluctuate. Plan your vacations and extended trips away with income in mind.

4. Consider using Stated Income. You have the option to state your income. This is based on you being in the same profession for 2+ years before being self-employed. The lender looks at the industry and researches the mean income of someone in that profession and with your experience. You will be required to provide additional documents such as bank statements, showing consistent deposits and other documentation may be asked of you to show your income.

5. Avoid Bankruptcy at all cost…. or if you do declare bankruptcy have all your discharge papers on hand to present to the lender and ensure you have two years of re-established your credit.

6. Mortgage Brokers can state income with lenders at the best discounted rates. But if you do not qualify with A lenders using stated income, then a broker will work with you to utilize a B Lender who are more lenient but may come with higher interest rates and applicable lending and broker fees.

7. Last but not least, if A or B lenders don’t fit, private financing can be looked at as an alternative option in order to get you into the market and offer a short-term solution to improve credit or top up your reporting income. Then you and your broker can refinance into an A or B lender at that time. Just keep in mind that private lending will have a higher rate associated with it , with lender and broker fees added on as well, if you choose to go with this option.

So, to all of our self-employed, hard-working, determined individuals, take heart! You can qualify for the mortgage you want, it just takes a little more planning to get everything in order. Keep in mind to that every lender has different guidelines as to how they view self-employment. Working with a Dominion Lending Centres broker leading up to your property purchase can help you ensure you get the mortgage you want.

Original Source

By: Geoff Lee – DLC GLM Mortgage Group

“Why We Chose a Mortgage Broker” from DLC Fall 2018 Our House Magazine

General Giovanni Perri 11 Oct

WHY WE CHOSE A MORTGAGE BROKER – OUR HOUSE MAGAZINE

Lindsay Austin and her husband never imagined they could get a home with a lakefront view. Their real estate journey began in 2012, when the couple purchased their first place, a townhome in Kelowna B.C. with the help of a Dominion Lending Centres Mortgage broker. By 2017, they were ready for something bigger and better. So the couple reached out again to their mortgage broker, who was there to lend a hand. After months of searching, the couple found their home. A one-acre property just outside the city overlooking Okanagan Lake. They purchased the home for $618,000 and moved in just before the summer.
“It’s rural, a little out of town. It’s exactly what we need,” Austin said, noting her mortgage broker was patient and right by their side as they spent months searching for the right place.

Q: Why did you choose a mortgage broker?
A: We got connected with our broker in 2011. At the time, being our first home, we were financially lost. We were new to the market and my mom said reach out and try. And it just made the process so simple. She’s a one-stop-shop. She collects all of our information once, and I have this touch point and this person who I can trust. My brother and sister-in-law just went through the process, and they had appointments at all sorts of banks, and they sit down and do this and that, and then they do it again with another stranger. Our broker was able to get our information streamlined and out to all of the available lenders and get us the best rates and just simplify it for us. I think that was so key. She made the first process in 2012 so smooth and so easy for us. It wasn’t even a question that we would go with her again because it was so easy the first time.

Q: How was it working with a mortgage broker?
A: It was fantastic. I can say her customer service was so high, and she was always looking at every option. Even with the changes (to mortgage rules) in the last couple years, I’m sure mortgage brokers have had to learn a bunch of new things. She was such a good communicator, and it’s so easy having just one touch point.

Q: What advice would you give someone in your situation?
A: Ask lots of questions, and your mortgage broker will have all the answers. That’s their job and that’s why they make it so nice and easy. Ask lots of questions and be totally honest. Those, along with communication, and you’ll have a very pleasant experience.

 

Original Article Source

Your Mortgage Broker is here to help!

General Giovanni Perri 31 Aug

Your Mortgage Broker is here to help!
For many people in Canada, they are first-time home buyers. Or if they are new to Canada, it’s their first home purchase in a new country. They may not be aware of the rules and guidelines. It’s the job of your mortgage broker to make you aware of what is expected from you to avoid disappointment.

Mortgage Documentation
90-day bank statements – It’s important to make your clients aware that they need 90 days of bank statements to show they have saved the funds needed for the down payment and closing costs. Closing costs vary by province, so it’s important to let out-of-province buyers know exactly what the costs are in their new home. I like to explain that the 90-day statements is meant to prevent money laundering. A few years before this law was enacted, gangs would find an elderly couple and offer them the down payment funds asking only to be allowed to grow a few plants in the basement.

Some people are very private and don’t want you to know how much they spend on lottery tickets. They will blank out everything on the statement except for the down payment funds entering the account. This will not be accepted by lenders and is a big red flag for them.
Another problem that can arise with statements is if the clients print them online. As a security precaution, many banks allow printouts but they remove the name and/or account number from the statements. The easiest thing to do is to have them go into a branch and ask for a printout and have it stamped by a teller.

Employment Letters- Many small employers will give a hand written employment letter. This is acceptable but a letter written on company letterhead is better. The letter should state the name of the employee, their job title when they started with the firm, if they are full or part time and what their gross annual income is. If there’s an overtime or bonus component to their pay, this should be clearly explained and how much of their gross is straight salary.

After the Mortgage is approved
It is important for home buyers to know that while the mortgage has been approved they need to avoid doing anything to change their financial situation before possession day. That means they should not quit their job, buy lots of new furniture or a car. Lenders will often check the credit bureau a few days before possession day to see if there’s been any changes. If the debt ratios are out, the mortgage could go sideways. Taking a few minutes to explain this is prudent but it also shows you care. Dominion Lending Centres mortgage brokers are not big banks, we are people who live in the community and we want to see our clients in homes and living happy lives. It matters to us.

Original Source – David Cooke

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