Tag Archives: mortgages made simple

Starting today, self-employed Canadians have a better shot of qualifying for a mortgage

Photo: James Bombales

It’s long been an accepted fact that self-employed Canadians have difficulty qualifying for mortgages. But that could be able to change, now that new lending rules are in place.

Starting today, new guidelines from Canada Mortgage and Housing Corp. (CMHC) will make it easier for anyone who has been self-employed for less than two years to qualify for a mortgage. The new rules will ask lenders to consider additional factors in their decision-making process, such as predictable earnings, cash reserves and education.

“Self-employed Canadians represent a significant part of the Canadian workforce,” writes CMHC chief commercial officer Romy Bowers, in a statement. “These policy changes respond to that reality by making it easier for self-employed borrowers to obtain CMHC mortgage loan insurance and benefit from competitive interest rates.”

Roughly 15 per cent of Canadians identify as self-employed, according to CMHC data, and the agency predicts that the number will increase as the “gig economy” continues to grow.

Approved lenders, including the country’s big banks, are under no strict obligation to observe the new guidelines, though it is likely that each will take their own approach to the new rules, according to CMHC spokesperson Audrey-Anne Coulombe.

“Implementation of CMHC guidelines may vary among lenders,” she tells Livabl. “These new guidelines are meant to be principle based and not to be too prescriptive to provide maximum flexibility for lenders.”
She adds that the overall objective of the rules was to provide additional guidance to self-employed Canadians looking to qualify for a mortgage.

“These policy changes will make it easier for self-employed borrowers to obtain CMHC mortgage loan insurance and benefit from competitive interest rates,” she shares.

Source: livabl.com –  

 

 

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5 Things I Learned in My First Year Owning a Rental Property

I was determined to own property, in some form. Sadly, I couldn’t afford anything in my home city of Toronto, so I decided to buy a property in a neighbouring city and rent it out until, or if, I was ready to move.

After looking at several possibilities, I decided to buy in Hamilton because of transit options, affordable housing prices and a low vacancy rate.

I found a cute bungalow divided in two units. After all the paperwork went through, I found great tenants.

It’s now one year later, and I’ve learned a lot. Here are five lessons I learned:

  1. Plan for Extra Costs

I needed way more money than I thought in order to buy and manage a rental property. The closing costs alone were thousands of dollars in cash. In Ontario, closing costs include land transfer tax, legal fees, a home inspection, pre-paid property tax and PST on Canada Mortgage and Housing Corporation insurance — if you put less than 20 per cent down. My closing costs totalled $6,000.

In the first year, I spent $2,700 on maintenance, and that’s for a small, fully-renovated house. Just recently, a windstorm knocked shingles off my roof. Totally unexpected and $500 to fix.

Budget for all anticipated expenses, and then add a few thousand dollars to be safe.

  1. Figure Out the Rent

How do you know if you have enough money to be a landlord? Easy: use a spreadsheet. You need to know exactly how much your house costs to run so that you can charge sufficient rent.

And how embarrassing would it be if you forgot whether a tenant paid you first and last months’ rent? Think of an investment property like a business, and keep your books accordingly.

  1. Don’t Forget Tax Time

I was shocked when I had to pay $1,500 this April to the Canada Revenue Agency (CRA). The CRA taxes rental income at your marginal tax rate. I now have an automated monthly savings set up to set aside tax money and avoid last-minute scrambling.

  1. Check Your Tenant’s Credit Worthiness

What you need as a landlord is a tenant who pays their rent promptly each month. A credit score can tell you if a person has a history of paying their lenders on time. Ask for a credit report and employment letter to confirm that your tenant can pay their rent each month.

  1. To Include Utilities or Not?

I decided to include utilities. I have two units but one meter, and I couldn’t figure out a way for each tenant to split it fairly without hassle. So I called the utility companies, asked them for the monthly average of the previous year, added 30 per cent, and included it in the rent.

You can also let the tenants pay utilities themselves. Because electric and gas are so expensive in Ontario, you don’t want to be on the hook unless you have to be. It’s a lot easier for tenants to leave the lights on when someone else is footing the bill.

A Learning Experience

I learned that owning an investment property is much like having a child. Make sure you can comfortably afford it before you start trying, and if it’s exhausting you, consider hiring a nanny—that is, a property management company.

 

Source: Tangerine.ca – Written by Danielle Kubes Wednesday, July 11th, 2018

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What is a mortgage broker, and should I use one?

But what is a mortgage broker exactly, and what can they do for you?

A mortgage broker is a licensed professional – a person who serves as a bridge between a homeowner and a lender.

As a middleman, a mortgage broker evaluates the financial capacity of a borrower. A broker looks for top quality lending products and handles all transactions for their clients. A broker gathers the necessary documents to apply for a mortgage and then facilitates the underwriting and approval process. They ensure that the transactions are valid and complete.

The Lending Process

When should I see a mortgage broker?

Now that you know what a mortgage broker is, you also need to determine when the right time is to consult with one. If you fall in any one of the categories below, you might need to see a broker:

  • You are a first-time home buyer.
  • You want to purchase a second property
  • You want to free up funds for things like renovations, a child’s education, investments, and more.
  • You have very limited time left to purchase a house.
  • You are not comfortable with the idea of negotiating with lenders.
  • You have a weak credit score.
  • You want access to exclusive rates and deals from banks which are offered only to brokers.
  • You prefer to have an expert who provides you with an educated and confident analysis of the current housing market.
  • You need help in deciding on a financing structure that is advantageous for you in the long run.

Take the case of Maureen:

Maureen is an interior design artist who moved to Toronto with her husband. After doing her research, she signed an agreement to buy a house. A bank approved her mortgage, and she was ready to make the deposit of her first mortgage. However, knowing that the bank was willing to lend her thousands of dollars, she was skeptical if she was getting the best offer.

While considering the offer, a friend suggested that she consult with a mortgage broker. Her friend recommended a broker whom she transacted with before. After talking to the broker, Maureen realized that the rates presented by the broker are better compared to the bank’s offer.

Though Maureen was initially unaware about the important role that a mortgage broker plays in home buying, she made the decision to close the deal for her new home through one whens she realized the undeniable advantages.

Mortgage brokers are very convenient to work with. They have extensive networks of investors, lenders, and real estate companies. Just like in the abovementioned case of Maureen, mortgage brokers are committed in providing you housing options that match your requirements.

The benefits of working with a professional mortgage broker

Licensed mortgage brokers are professionals who are well-trained and knowledgeable at what they do. Most of them have a proven track record when it comes to handling mortgage transactions. Moreover, given their extensive experience in the housing industry, their network is just as vast.

Access to critical industry information

Working with a mortgage broker means gaining access to first-hand information on your market and lending options. Brokers are part of a broad community where members share valuable data. These details include real property values, new home releases, new financing rules, pricing, and among others.

Access to the best lending rates

Because most mortgage brokers have access to an extensive network of lenders, borrowers who tap their expertise widen their options.

Customize your loan plan

Brokers have access to traditional and non-traditional lenders which may be able to offer creative financing solutions for your situation.

Your quarterback

Mortgage brokers are there to work for you. They will handle many of behind-the-scenes paperwork and negotiation that will help ensure you get the achieve the most favorable loan solution.

Factors to consider when choosing a mortgage broker

Not all mortgage brokers are the same. Some may be more equipped to meet your needs than others. Therefore, you need to consider the following:

License and affiliation of a mortgage broker

Be sure to consult only with a licensed broker who is officially registered as a member of Canada’s National Association of Professional Mortgage Brokers. These associations spread advocacy, share knowledge, and disseminate relevant information to mortgage clients.

Canadian resident and knowledge of the locality

Your chosen licensed mortgage broker should be a resident of Canada, and must be familiar with the housing market of the specific location where you intend to purchase a new home.

Mortgage lender portfolio

A comprehensive mortgage lender portfolio is proof of all the hard work the mortgage broker has put in. Moreover, access to as many lenders as possible means a broker has the means to help you find the right funding.

Recommendations

Word-of-mouth is a handy marketing tool because it means people have already transacted with a particular mortgage broker and they are overall pleased with his performance. Seek recommendations from family and friends, and check the broker’s online star ratings and reviews.

Integrity and open communication

All forms of investment involve money, effort, and time. A professional mortgage broker must be reliable and trustworthy to handle your investments. Likewise, these middlemen must maintain constant communication with lenders and borrowers alike.

It’s easy to get intimidated when big numbers come into the picture. But with Canadian Mortgages, Inc., whether it’s customizing a loan or looking for alternative lending options, interest rates, home equity opportunities, or debt consolidation plans, the help that you need is readily available with a professional mortgage broker.

Source: Canadian Mortgages Inc. – 23 July, 2018 / by Glenn Carter

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What is a second mortgage? 5 tips you need to know

In certain circumstances, you may even have to think about getting a second mortgage. This is a mortgage typically taken out by homeowners who need cash for emergency repairs, working capital for business or investments, renovations, funding education, paying for a wedding, or even to consolidate other debts and lines of credit.

Let’s take a closer look at exactly what is a second mortgage, and what it means to you.

An overview of second mortgages

A second mortgage can mean two things: a mortgage you take out on a second home, some refer to literally as a second mortgage, and a mortgage which sits on top of a primary mortgage. The latter is the most accurate use of the term second mortgage, and is what we will be discussing today.

In this sense, a second mortgage is not a mortgage you get on a new home — it’s actually a secondary mortgage that you can take out on your existing property.

Second mortgages extract equity from a home, which allows homeowners to access capital when they need it. The basic form of second mortgage comes in the form of an lump sum loan.

With a standard equity loan, you can borrow up to 85 percent of the value of your home in major cities in B.C., Alberta, and Ontario. For most other cities in Canada, the maximum is typically 80 percent.

Over time, you will pay off the entirety of the loan and the interest, much like you would with a car loan. Regardless of the loan option you pursue, you should make sure you understand all the intricacies of second mortgages before getting started.

How a second mortgage works

What is a second mortgage and how does it work? As we mentioned above, a second mortgage is a secondary loan you can take out on top of your current home mortgage. They are typically held by a different mortgage lender than the one who lent you your primary mortgage. Getting a second mortgage enables you to access equity from your home without making any changes to your primary mortgage.

The distinction between primary and secondary mortgages is an important factor to keep in mind. Rather than simply increasing the principal of your initial mortgage loan, second mortgages have their own terms, rates and rules, which means you pay it off independently of your primary mortgage. When you get a second mortgage, you will continue to pay your primary mortgage, along with additional mortgage payments for your new loan.

Before you can apply for a second mortgage, you will need to find out how much equity you have in your home, your home’s value, and your credit score. All of these details will affect your ability to secure a second mortgage, and they also influence second mortgage rates and terms.

Next, you will need to shop around for the best rates from various banks and lenders. As always, it’s best to partner with a knowledgeable mortgage professional who tailor a loan product to your specific needs.

TALK WITH AN EXPERT 866-243-2207

After choosing a lender, you will fill out an application for a second mortgage. If you are approved, you can review the terms of your loan before signing an agreement.

In many ways, applying for a second mortgage is similar to applying for a primary mortgage. A major difference, however, is that second mortgage rates are typically higher than those associated with primary mortgages. This is because lenders that offer second mortgages typically have to assume more risk of delinquent payments or loan defaults.

The higher interest rate is also a result of the primary loan taking precedence over the secondary one. For example, should there be a forfeiture, the secondary lender will only get money after the primary one is paid in full. This makes secondary lending riskier.

Second mortgages can range greatly, but a borrower with good equity and credit history could get a 6.99% or 7.99% rate. While this may seem high, it’s low compared to most unsecured credit lines and credit cards

Below you will find some tips when it comes to second mortgages:

Tip #1 – Second mortgages are commonly used for…

Individuals and families may face a variety of circumstances that might lead them to consider a second mortgage loan. Generally, those who apply for a second mortgage do so out of necessity because they need capital quickly. In the interest of freeing up financial resources from home equity, they will assume the higher rates that come along with a second mortgage.

The following are some of the most common reasons people apply for second mortgages in Canada:

  • Working Capital: Getting access to your home equity is a primary funding method for those looking for working capital. This can include opening a new business or funding a current one, investing in businesses, retirement, or real estate, and any other forms of investing that requires a lump sum of capital.
  • Debt consolidation: If you have several loans and lines of credit from various lenders, banks or agencies, the payments, loan terms and interest rates may overwhelm you. When you have to concern yourself with numerous loans, you may be more likely to miss payments or pay excessive amounts of interest. A second mortgage loan allows you to pay off debts and consolidate loansinto one manageable mortgage agreement.
  • Renovations and repairs: It is common for home appliances and roofs to fail unexpectedly and necessitate emergency repairs. This kind of work on your home can be costly, and you might not have much time to save money for the repair. In other situations, you may simply want to make an improvement to the appearance or function of your home. Whatever the reasons, a second mortgage could allow you to finance these improvements.
  • Avoiding high penalties: Finally, a common use for a second mortgage is people who may have a first mortgage with a low rate locked in, and their penalty is high to break in order to access funds. It is far cheaper to get a 1-2 year second mortgage than pay a high breakage fee. This can provide access to funds for debt relief or investment capital. When the first mortgage matures, the two loans can then be blended into one.

Tip #2 – Helps those with bad credit

One of the top benefits of second mortgages is that it is possible to get one even if your credit history is mediocre or poor.

If you have paid off a significant amount of your primary mortgage loan, you have a record of making consistent and on-time payments and you have a lot of equity in your home, a lender may overlook your credit score (within reason) and approve you for a second mortgage.

Because a lender evaluates your suitability for a loan based on your equity and track record with your primary mortgage, you may even have an easier time getting a second mortgage than you would a standard loan—assuming you have been making your payments on time and you have plenty of equity.

Second mortgages are also a great way to clean up bad debt, such as high interest consumer debt, debt that is in collections, or even tax arrears.

Tip #3 – Private lenders are often more flexible

All federally regulated banks must operate within certain laws and guidelines. These rules reduce risk for the lender, but they often cause them to overlook reliable borrowers simply due to minor disqualifications.

Because every person is different, it’s important to ensure that your case is examined individually so that you have the best chance of getting the loan you need at a fair rate. To accomplish this, your best course of action can be to work with a private lender.

A private lender is a business—rather than a traditional bank or financial institution—who agrees to finance your loan. In the past, private lending was equated with individuals loaning out money at high interest rates. Although some still do this, private lenders include professional organizations, like CMI, who can offer a variety of loan products at competitive rates.

Tip #4 – Common costs associated

As with any loan, you may be subject to additional fees, including closing, legal, and appraisal fees.

When it’s all said and done, you may be on the hook for several thousands of dollars worth of fees, so make sure you know what to expect from your lender before you sign anything. This is why it’s important to work with an experienced broker who can guide you in the right direction.

TALK WITH AN EXPERT 866-243-2207

Tip #5 – Know how to find a second mortgage (talk to a professional)

Financial choices are not always totally clear, and it’s important that you examine all the options available to you to determine which decision is best for you and your family.

As a general rule, you should not make a big decision about your finances if you feel pressured or rushed. That said, you are considering a second mortgage because you are in a tough financial spot, and likely need some quick cash. This why it’s so important your partner with a knowledgeable and reputable broker to help guide you through the process in a timely manner.

Considering that there are so many different factors at play when it comes to second mortgages, you also shouldn’t attempt this process on your own. Look for guidance from a mortgage professional who you trust and who is looking out for your best interests.

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Even New Yorkers Can’t Afford a Home in Toronto

 

There’s only a handful of cities in the world that make living in New York seem cheap for middle-income people, places like London, Sydney and Hong Kong. And then there’s Toronto, as 26-year-old JunJun Wu will tell you with a sigh.

After almost three years in New York she opted to move to Toronto for what she figured would be less-expensive housing.

“The apartments that I saw were so tiny, which was shocking,” she said. “Compared to my studio in New York, these were half the size.”

Prices have soared almost 60 percent in the last five years in Canada’s biggest city, and are up another 3 percent already this year. They’re not as high as Vancouver — one of the hottest real-estate markets anywhere — but among the world’s major cities, Toronto housing ranks as the fifth most unaffordable relative to income, according to consultant Demographia.

Severely Unaffordable

The world’s seven priciest housing markets relative to salary

Source: Demographia

Rankings are only for major markets with over 5 million residents. Price and pre-tax income are medians.

All that means is that a Canadian millennial, aged 25 to 31 with a median income of C$38,148 ($29,360), can’t buy very much housing in Toronto. Her maximum budget at that salary would be about C$193,661, according to Royal LePage. That calculation includes tougher lending rules, institutedthis year, that has reduced buyers’ purchasing power by almost 20 percent and cooled the market.

That’s probably not even enough money to purchase the garage of a detached home in the Toronto region, where the average price was C$1.05 million in May, according to the Toronto Real Estate Board.

Rents are no better, having soared about 11 percent to an average monthly C$2,206 ($1,697) in the first quarter from a year earlier, according to researcher Urbanation. That’s if you can find a unit: the number of newly completed condos available dropped to 1,945 over that time frame, the lowest in more than eight years.

Angie Mosquera, a 23-year-old software developer, saw up to 30 different units in recent months but kept getting outbid.

“I was so frustrated by the whole process,” Mosquera said. “I was like screw this, I’m going to be 40 and living at home, and I don’t even want to live in Toronto anymore.”

She eventually found a tiny studio downtown for about C$1,620 per month, meeting her budget. Still, the rent eats up a huge chunk of her salary, which is especially frustrating because she moved to Toronto from Montreal for a 40 percent bump up in pay.

Penthouse Condo

Stephanie and Justin Wood

Source: Justin Wood

Even those with more resources find it tough. Three years ago, Justin Wood and his wife Stephanie bought a three-bedroom penthouse condo for about C$430,000. Its price surged by about C$181,000 and this year they decided to upgrade to a house, with a toddler in tow.

“We thought we were going to be rich and it was going to be amazing,” said Wood, 33, who is now chief executive officer of his own Toronto-based tech startup. “But then we were like ‘Oh wait, we have to buy something.’”

As living in Toronto proved to be too expensive, the Woods headed for the suburbs and ended up purchasing a three-bedroom detached house in neighboring Oakville with a pool for about C$800,000. Monthly mortgage payments are about C$3,400. The commute is around two hours.

After spending almost a month in Toronto looking at about 40 listings, JunJun Wu, a college-prep counselor originally from Montreal, finally found a studio to rent in downtown Toronto through an online listing. She’s relieved that she secured a lease but the experience has left her unnerved.

“Maybe I should’ve gone back to Montreal instead,” she said. “I’m thinking I’ll give myself maybe one or two years in this city to see.”

Source: 

 

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Is co-ownership a good idea?

As co-ownership becomes a popular antidote to unaffordability, expect to hear about ensuing acrimony.

“On paper, it seems like a great idea, but in reality…”

Steve Arruda, a Century 21 Regal Realty sales rep, agrees that unaffordability in cities like Toronto and Vancouver is catalyzing creating living arrangements, but he can see myriad problems arising from ones like co-ownership.

“Everybody has the best of plans, and on paper it looks perfect, but when they move in with each other, who’s responsible for what? What if one person wants to sell early because they got a job on the other side of the country or far outside of the city?”

While co-ownership between friends can be tricky, it becomes amplified when more than one family owns and shares a home.

“I’ve had ones where two friends bought a place together and thought it’d be a great idea and good for their families, but they didn’t buy a mansion,” said Arruda. “It was a crammed space for two families and four children. With the respective families or events they host, there will be issues that way. They have the best intentions, but when you’re living in a crammed space, function becomes a different story.

“It could be happy when two friends share but when you start bringing in partners—more personalities under one roof could cause a problem.”

Arruda concedes, however, that the arrangement has better likelihood of succeeding if a duplex is the shared abode. Not to say it won’t have its share of problems.

“I find the best option for that is if the home is divided equally into a duplex, each with its own kitchen and bathroom, and maybe they have a shared living space,” he said. “But if one person wants to sell, the other has to sell or buy that person out.”

Manu Singh, a broker with Right At Home Realty, doesn’t recommend co-ownership but nevertheless suggests both parties draw up an exit strategy.

“They should have an agreement in place, an exit strategy,” he said. “Just a simple contract, not a complicated one, that lays out what the exit strategy is should one party decide to move on. If it’s for investment purposes, maybe the appreciation rate reaches such and such level and only then can the partner decide to sell.”

Singh also recommends a minimum hold period of five years “to recoup a lot of costs of the transaction, like the Land Transfer Tax.”

Source: Canadian Real Estate Wealth – Neil Sharma 25 May 2018

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Your Spring Home Maintenance Checklist

When winter departs, it’s time to check for damage and prepare for hot weather ahead

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With the days lengthening and weather warming, spring is a good time to get outdoors and tackle some larger home projects. With the threat of winter storms past, you can look for damage and make any needed repairs, as well as prep your home and garden for summer. We spoke with an expert to get some tips on what to watch for this season, from proper irrigation to mosquitoes and termites (oh my!).
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