Tuesday, 29 December 2015

Mobile & Modular Homes

Mobile and modular homes make up a large and steadily growing part of the housing market in Canada. In fact, these pre-fabricated homes made up more than 15% of the new housing created in 2014. That's too large a segment of the market to ignore!

With that in mind, I wanted to give some insight into the benefits and challenges of considering this type of real estate for your next home or investment property. Dollar for dollar, homes which are manufactured off-site may offer greater value for your investment. They can be custom-built to your specifications if desired, and then moved into place and installed at a site of your choosing. If you opt for a mobile home, you may even have the option of moving that home elsewhere later on if you desire. It is for this very reason that these types of properties can be more of a challenge to finance and there are some special considerations.

Due to the risk associated with these types of homes being anything less than permanent(remember, lenders hate risks!), you may expect some challenges when trying to obtain a mortgage. There are consistently fewer lenders who will accept these properties, and some who may charge a premium rate depending on the details. Pre-approvals can pose a challenge as well due to uncontrollables such as pad rent and/or strata fees varying widely from one property to the next. As you can imagine, a mobile or modular on it's own land will be treated differently from one in a park or strata-type community. It's important to have a Mortgage Broker you know and trust to help you navigate this decision.

Some important questions to as are:
  • Does this purchase include freehold land(define Freehold HERE), or is the land leased?
  • What type of foundation is the home on? Is it a concrete pad? Concrete crawlspace/basement? Wooden piers? Steel pilings? 
  • How is the home secured to this particular foundation?
  • Finally, is it truly a "Mobile" or a "Modular" home?(Read on to answer this question...)

Mobile vs. Modular

A mobile home is NOT the same as a modular home, and vice versa. The two types of homes can be best defined by looking at the differences rather than the similarities. Some of the differences are:

Mobile Homes generally:
  • Have a steel frame
  • Use 2x8 floor joists
  • Are built to CSA Standard Z-240(not building code)
  • Can be moved at a later date, after having been originally installed


Modular Homes:
  • Have a wooden frame
  • Use engineered floor trusses
  • Are built to CSA Standard A-277(Canadian national building code)
  • Are also held to BC Building code standards
  • Can NOT usually be moved after having been placed on-site
As you would imagine, lenders find modular homes to be the more preferred option of the two, but this is at the expense of higher initial cost and the inability to move the building later. Modular homes act, look, smell, and think more like a conventional home and if there's one thing mortgage lenders enjoy, it's convention!

While choosing to opt for a mobile or modular home may limit your choice of lenders, a well-trained Mortgage Broker can help you to find a lender who will suit your needs. It is in situations like these that the power of a good Mortgage Broker's lending network can really shine and help you find the best option for your dream property, no matter the construction type. There may be local Credit Unions and specialty lenders who will offer options to suit, or there could be opportunities to shop the big lenders if the property fits their criteria. When you're ready to discuss the options available, give me a call or visit my website to get a secure online mortgage application started!

And most importantly, as always, Ask Questions! Take the time to interview your chosen professionals when making the decision to purchase or refinance your home, it may very well be the single biggest investment of your lifetime. Are they educated in the niche you're interested in? Are they up-to-date? Are they professional, courteous, and ethical?

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Wednesday, 2 December 2015

RBC Posts Record Profits...

Congratulations(I think...) to one of Canada's largest financial institutions(I won't name names here...) on achieving "Record Profits" in 2015!

Considering this has been a particularly uncertain year economically, they've somehow managed to buck the trend and keep right on growing. It's no surprise given their aggressive marketing tactics and their STEEP incentives(Read: IRD calculation HERE) to retain loyal customers. In their defense, they also have an extremely diverse portfolio of businesses and assets to manage, which allows them to minimize their exposure and risk to the more volatile markets in Canada.

Now I'm not going to dumb this dialogue down to "We are getting ripped off by the banks" as @UncommonSenses so eloquently put it in the CBC News comments section, but is it not worth considering that if your bank is posting record profits then are they really your best deal?

As one of the major players in consumer finances and mortgages, this bank plays a role in setting the standards and should act as healthy competition to the other banks, credit unions, and lenders. This role is particularly crucial given their massive marketing power, and their influence over their existing clients. I keep track of their mortgage offers quite closely and while on the surface they may seem to provide competitive rates, there is always a dark side(Star Wars pun intended, 18 days to go!).

A great discussion of the drawbacks of a mortgage with the larger institutions can be found in This Article. What you need to know is that although the rates might be competitive, the terms and penalties are most likely not. And with a large number of homeowners considering moving or refinancing within their original mortgage term, the reality is that you need to consider the penalties. This could mean the difference of thousands or even tens of thousands of dollars later.

When you're ready to discuss whether or not your bank is a good fit for your mortgage, take Yoda's advice and give me a call. Let's start the discussion. Or visit my website today to fill out a secure online mortgage application to get started right now. There are plenty of alternatives to consider that will save you money!

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Wednesday, 18 November 2015

Different Calculations, Different Payments...

Have you seen the movie Office Space? You know the one, where the guys devise a plan to 'skim' the extra decimal points off all of the bank transactions. If you haven't seen it, go watch it now! It's a personal favourite of mine, and if you must pick only one scene watch the one with the fax machine...enough said.

Anyway, getting back on track here. The point is, the extra decimal points seem unimportant and like they wouldn't add up to much. In reality, if you add enough of those decimals together over time, they can become a huge amount of money!

Did you know some banks might be doing the same thing with your mortgage payments???

Now, it's not like they're taking your money and absconding(word-of-the-day) with it, but it is something fundamental about your mortgage payment that you should understand and be aware of. If your mortgage professional can't explain this to you in great detail, then it might be worth considering their level of education and/or experience.

Depending on your lender, they may choose to either calculate your semi-monthly payment "correctly", or they may choose to simply divide the regular monthly payment in half. The issue with dividing your payment in half is that you are making a larger payment, vs. actually calculating the interest owed with each payment.

Here's an example:

Assume a $300,000 mortgage at 2.79% interest, amortized over 25 years.

Your regular monthly payment would be: $1387.61
By simply dividing that payment in half, your semi-monthly payment would be: $693.81

This calculation actually costs you more, because it assumes you should be charged the interest for an entire month.

The correct calculation takes into account that you actually make your payments twice per month, meaning your interest paid is lower. It looks like this:

Semi-monthly, with interest calculated each payment period: $693.40

Take Back Control!

Now you might say to me "Ryan, why should I care about this 41 cents???", and I would say to you "Mr./Mrs. Client, I care because it's YOUR 41 cents and YOU should decide where it goes and how you use it. Over the average 5-year mortgage term, that adds up to $49.20 in extra payments, and an extra $246.00 over your 25 year amortization. And while your lender should be adding this extra in as a prepayment(thus reducing your amortization by about a month, woohoo!), wouldn't you rather be in control of where and when you choose to put that extra money???

Going back to what I said earlier, I understand that this may not be a game-changer for everyone. Having said that I also want to make sure my clients best interests are always first and foremost, and knowing the ins and outs of your mortgage interest calculations is not only my responsibility, but also something I take great pride in.

So next time someone asks you how you'd like to make your payments, be sure to ask them when and how they calculate those payments and the interest owed. If they can't explain it, give me a call and I will!

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Friday, 30 October 2015

5 Simple Fall Maintenance Tips

Hello again everyone! With winter coming on strong and temperatures dropping more quickly than I'd like to admit, I thought it was time that I share a few Fall Home Maintenance Tips.

Even things as simple as these minor maintenance tasks can save you from expensive repairs and big headaches over the next few months. Don't make the mistake of overlooking the little things, they become bigger over time!

  1. Take care of your hoses and faucets: Disconnect your hoses before the freezing temperatures arrive, because they can cause water to back up in your faucets—and eventually cause the plumbing to crack. Then, if possible, shut off the valves for your exterior faucets.
  2. Winterize your lawn mower: Either run the mower dry, or use a fuel stabilizer to prevent the gas in your mower from degrading and damaging the engine.
  3. Clean out the gutters/eaves: Twigs and leaves will build up in your gutters throughout the fall. Make sure to clean the gutters before there’s heavy snow, because the weight of both the leaves and the melting snow could cause the gutters to break away from the house. Fixing this later is always more expensive than cleaning them today.
  4. Get the furnace ready: Your best bet is to call in a professional to give the furnace a tune up, but at the very least you should change the filters. Your furnace is a very sensitive, finely-tuned appliance and your energy bill will thank you later for maintaining it. 
  5. Inspect the roof: As snow accumulates and melts from your roof, it can cause major water damage if the roof isn’t in good shape. Look for loose shingles, rust, moss—anything that could lead to decay or water damage. It’s best to be proactive with your roof—repairs can be extremely expensive—so don’t hesitate to call a roofing professional if necessary. It’s worth it in the long run! 
Stay tuned for more as I continue my ever-expanding list of most recommended maintenance and repairs before we bunker down for winter!


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Friday, 16 October 2015

Top 5 Reasons Your Pre-Approved Mortgage Could Be Declined

Quite a while ago, I wrote about the differences between a mortgage pre-qualification and pre-approval.(Hint: It's ALL about the documents...) While it covered a few of the things to consider, I thought it was worth explaining some of the reasons why even a pre-approved mortgage can be declined. Although I hold myself to an exceptionally high standard, there will always be some things which could cause an decline and which are beyond my control as your mortgage broker.

I just recently had clients call me to inquire why their previous mortgage broker was unable to follow through on their pre-approval(from approx. 4 months ago). I reviewed their application and was quickly able to spot the changes in their situation which made it much more difficult to approve than they had originally anticipated. If their broker had taken the time to explain this to them, they could have not only made the client happy but even worked through it and obtained final approval. Here are some things worth watching out for:

1) Property/Appraisal Problems

It can be very difficult to predict when problems of this type will come up, but I always suggest letting your mortgage broker know about any properties you are considering. Our training allows us to look for details about a property which could be detrimental to your approval, including:

  • A low appraisal, vs. your purchase price(For more on Appraisals, check this out)
  • Rural properties, or properties outside a lender's service area
  • Non-typical homes (Mobile, modular, straw, anything out of the ordinary)
If we take all the potential factors into consideration for a particular property, it becomes much easier to understand if or when a lender may decline, based on your choice of property.

2) Changes To Your Credit

Credit blemishes happen all the time, and can often be overcome when applying for a mortgage. The problem here happens when surprises show up late in the approval process. Some of the potential roadblocks could include:

  • Missed payments
  • Increased balances
  • Accounts which have recently gone to collections
For the most part, these things can be overcome with some planning so my best advice is to let your mortgage broker or lender know in advance if you are anticipating any major changes or surprises. It's understandable that things sometimes change between pre-approval and writing an offer to purchase, but it's easier to explain when we are given the information ahead of time.

3) Employment/Career Changes

I think this one pretty well explains itself. If you change your job between your pre-approval and the time of your approval, it could cause some problems. Here are some tips to remember:



  • Same industry/Type of job = Probably OK, ask your mortgage broker
  • New industry/Different career = Could be OK, ask your mortgage broker
  • Go from employee to self-employed = Probably NOT OK, check with your broker
Mortgage applications are all about trying to tell your story to the lender. If your story makes sense, i.e. you got a great new job in a similar industry, then it should be straightforward to explain this to your lender. If you become self-employed however, almost all lenders will require you to have 2 years of business under your belt before they will give you an approval. Just something to consider when buying or refinancing your home, and considering some job changes at the same time.

4)Increased/New debts or Liabilities

Your monthly payment obligations all count towards what is called your Total Debt Service Ratio(or TDS, See HERE for more info). As your payments increase, your monthly ability to service your mortgage decreases proportionally. Things like:

  • Buying a new car
  • Going on a shopping spree
  • Increasing your payments on an existing loan
Can all affect your approval amount, so consider calling your mortgage broker before driving that new car off the lot!

5) Guideline Changes

If there's one thing to be learned by those in the real estate industry, it is this: The rules are constantly changing. With changes being made by everyone from FICOM to CMHC to the various lenders, the only constant is the changing rules. Some of the guidelines that could change during the course of your pre-approval might be:

  • Debt servicing requirements (See GDS/TDS article for more info)
  • Minimum down payments (See this article for more)
  • Required documentation (For income, down payment, property, etc.)
If either the regulators, the mortgage insurers, or your chosen lender decide to change their policies, then there is always a possibility that it could affect your application. Always put your trust in your mortgage broker, knowing that is it our job to keep you up-to-date on changes like this as they happen.

Are you thinking about getting pre-approved for your next mortgage? Give me a call anytime and I would be happy to sit down with your for a Free Consultation to discuss your needs. Visit my website at www.ryanwsmith.ca for more info, or to fill out an easy, quick online application!

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Friday, 9 October 2015

The 'Free' Mortgage Switch

When is free not really free?

Every day for the last month or so, I've been walking past a major bank branch who has been advertising a 'Free Mortgage Switch'. When I saw the offer, I couldn't help but remember the old saying: "If it sounds too good to be true, it probably is!".

With that in mind, I spent some time researching the program and thought it was worth clarifying the small print that goes along with offers like this. Several of the lenders I work with offer a similar program, and almost all of them have some limitations that you should be aware of.

Rule #1: The Fee Cap

Even if the offer includes transfer of some fees, there will be a cap(Usually of $1000-$1500) beyond which you will be responsible for paying the difference. This keeps your new lender from accepting the risk of a transfer that comes with exorbitant fees from your current lender. Always ask questions about the cost of leaving your lender, before assuming that those fees will be paid for.

Rule #2: Collateral Charges 

A collateral charge mortgage is registered against your property differently from a standard mortgage, and is often unable to be transferred to a new lender(For more info, click here). While there are some programs to allow a collateral switch, most times you will be required to pay the fees to discharge your old mortgage, and register a new one with your new lender.  This discharge/registration process can be expensive and will require the services of a lawyer or notary to complete.

Rule #3: The Cash-Back 'Free Switch'

There are now some big banks offering up big cash-back incentives when you switch to their institution, and while this could help offset some of the extra fees that might not be covered, it comes at a price. Cash-back mortgage options come with a hefty interest premium, and could wind up costing you a lot more money than you would expect. Carefully compare how badly you might need that cash now, vs. how much the increase in interest will cost you over your mortgage term.

Rule #4: Where Has This Thing Been? 

Your new lender will also have a specific set of guidelines describing who they will accept mortgages from, and under what circumstances. If your mortgage is currently with a lender that isn't on the list, then you guessed it! You're going to have to discharge the old and register the new(i.e. there will be legal costs)

Today's message is simply this: Always read the fine print, it's rare that a deal which sounds too good to be true actually is. There are plenty of lenders who will gladly transfer your mortgage in at no cost, but you are going to have to meet the criteria they set out in advance. This generally means no collateral charges, very low fees/penalties, and only from a lender with whom they are comfortable dealing.

When you're thinking about switching or transferring your mortgage elsewhere, come see me first for a no-cost review of your situation and some good advice about where and when to make the switch. It will not only make the process easier, but could save you a lot of money!

Contact me HERE for more info!

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Friday, 28 August 2015

Best Apps For Homebuyers

 Hey tech-savvy homebuyer, look over here! Next time you're out hunting for your next humble abode, stop sketching notes on the back of your feature sheets and start making a detailed gameplan using your smartphone or tablet.

With these powerful apps at your fingertips, you'll be well-equipped to tackle even the most ambitious home tours all while being able to retain the information about each home you visit. Best of all, each of these makes it easy to take the information home with you later and compare the listings side by side. If you're looking for a way to make your house hunt less stressful, you've come to the right place!

1) Realtor.ca Mobile App

This app is about as useful as it gets when househunting. Get all the details of listings in your area, compare different listings, and even a basic mortgage/transfer tax calculator all in one place. This is the easy-to-use, tablet/phone friendly version of the MLS.ca or Realtor.ca website, which is hands-down the definitive listing for Canadian real estate. Get the App HERE

2) House Hunter

Wouldn't it be nice if you could take all those notes you scribbled while visiting different homes for sale and compile them in one neat, organized place? Well, your dreams just came true! House Hunter allows you to check off the different amenities and options of each home you visit, allowing you to compare the options objectively later on. An invaluable tool for making an informed decision, especially if you're going to visit multiple homes or open houses in a short period of time. Get House Hunter HERE

3) AroundMe App

When you're considering moving to a new neighbourhood, it's important to find out what services and amenities will be available near your new place. With AroundMe, you can easily view everything from banks to restaurants to parks in the vicinity of your new neighbourhood. It is often more comprehensive than Google's listings, so could be a useful tool for exploring your new part of town from the comfort of your smartphone! Get AroundMe HERE

4)MagicPlan

Having a hard time remembering the layout of a house you've visited? Bring MagicPlan with you next time and have the tools handy to make your own detailed map of the home without ever busting out a pen or paper! This innovative app uses the camera in your phone to take a set of pictures and assemble them into an accurate rendering including measurements and the overall layout of any interior you visit. It doesn't require moving any existing furniture or appliances and can be combined with a laser measurement device for even more accurate layouts if needed. Check out MagicPlan HERE 

5) Houzz Interior Design App

Seeking inspiration? Look no further than this app featuring hundreds of gorgeous home designs in one place. It's like Pinterest, but simplified and concentrated into the best and the brightest in home design. It doesn't have any crazy features or tricks, just a simple way to view some beautiful home designs and get yourself excited for your next design project! Visit their website HERE for more.

6) Pinterest

Since I've gotten myself on the topic of design and inspiration, how could I leave out Pinterest??? This app is addictive, YOU'VE BEEN WARNED! But it does showcase some of the best DIY, home improvement, and awe-inspiring ideas from all around the internet. It allows you to collect and organize your favourite ideas in one place for reviewing and inspiring you later. Buyer beware, I have no sympathy if you download this app and it takes over your life like mine....Check out my boards HERE and Follow me to see what I've been up to!

Have any other apps that should have made the cut? Send me a message and let me know if there's something else new and innovative that I should be checking out!

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Wednesday, 26 August 2015

When Do I Need A Building Permit?

As a homeowner there will no doubt come a time when you decide that some work needs being done around the house. You might consider rounding up from friends and creating a new backyard masterpiece, or maybe something as simple as a new front door. But before you go making those calls, make sure you make another one first to your local city building department. The information should be found easily online, but the City of Kamloops building inspection division can be found HERE.

In the meantime, here's a rough guide to some of the projects you may(or may not) need a building permit for.

You will almost always need a building permit to undertake projects such as:

  •  Moving load-bearing or partition walls
  • Demolition of part or the whole of an existing building
  • Retaining walls greater than 4ft. in height
  •  Creating a new structure on your property larger than 100sq. feet
  • Plumbing or electrical alterations(i.e. Moving locations or re-routing of pipes/wires)
  • Any alteration to change the use of a structure(i.e. turn your garage into an office)
  • Construction or alteration of a swimming pool
  • Decks/Patios(depending on height/size)

You will be less likely to need a permit for projects like these:

  • Interior decorating
  • Painting
  • Flooring
  • Addition of extra insulation or drywall to existing installations
  • Kitchen/bathroom cabinets, when plumbing will not be altered
  • Fencing(Not always, so check to be sure!)

While this is a guide to point you in the right direction, you should always make sure to confirm the details with your local municipality. There are many scenarios where what seems like a simple project can turn into much more, and you want to be sure that you have approval from the city before you get out the hammer and start swinging!


Also, to make the most of your return on investment, see this article for ideas on the best renovations to increase your home's resale value.

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Monday, 17 August 2015

The 10 Questions Mortgage Brokers are Asked

Every day those of us in the mortgage industry (whether brokers, agents, or even bank employees) get asked the same set of questions regularly. Rather than make you try and guess the top 10, I'm gonna leave them here in no particular order!


What's the one thing you always ask your mortgage pro when you run into them? Did it make the list? And if not, send me a message, I'm always interested to hear what you want to know!

1) What is the best rate right now?
  • Because rates change constantly, this is a tough question to answer. It also depends on factors such as your term, type of loan(refinance, purchase, etc.) and borrower qualifications. Contact me or visit my website at www.RyanWSmith.ca and I'd be happy to send you an updated rate sheet and we can discuss the options.
2) What's your lowest 5 year fixed rate?
  • With the 5-year fixed being the most popular mortgage choice, this is the one we get asked about the most. My 5-year fixed rates are around 2.64% at this time, but I have even lower rates than that for certain types of clients. These rock-bottom rates generally come with very few features and may cost quite a bit more in the long run. Here's an article all about 'No-Frills' mortgages.
3) When are rates gong to go up?
  • Good question! While the mortgage brokers crystal ball is always hazy, it is reasonable to say that rates won't likely increase until we see a major rebound or upswing in the Canadian or US economies. With economic growth so slow, the Canadian government will likely try and keep rates low to encourage home purchases. Real estate is a big driver of the economy and a large spike in rates could cause the industry to stall, which would have some serious negative impacts on personal and national finances.
4) How do I choose the best term?
  • Read my article on choosing the best mortgage term HERE. It's a difficult decision and all your options should be considered before jumping on the 5-year fixed rate wagon without exploring what else is out there. 
5) Can I still get a 30 or 35 year amortization?
  • Yes and No. If you have less than 20% down for a purchase, then you will only be able to get a maximum of 25 year amortization. More than 20% down opens up more options, including both 30 and 35 year amortizations, depending on your lender. If you're thinking of putting down less than 20%, read this article on Mortgage Insurance HERE.
6) Why wouldn't I just got to my bank?
  • Mainly because your bank is not a highly trained expert in mortgages. Mortgage brokers do one thing and we do it well; Mortgages. By all means, consider the options available from your financial institution, but remember that the best advice and the most lenders/options will always come from a specialist you know and trust.
 7) What if my bank matches your best rate?
  • My advice: Always read the small print. Or have someone you trust read the small print with you. Lower rates almost always come with higher penalties and more restrictions, so make sure you know what your bank is actually offering. Many of my lenders offer the same rates but with better options for prepayment and lower penalties for early mortgage payout. This can come in handy later if and when life changes for any reason.
8) How much do I qualify for?
  • Check out this article on mortgage prequalification and preapproval. To really answer this question, it's best to contact me so we can sit down and discuss all the parameters that go into determining your mortgage amount. And always remember, what you qualify for and what is a comfortable payment for you may be 2 very different amounts!
9) How do you get paid?
10) My bank wants me to renew early, what do I do?
  • An early renewal may be an option for you, but again you should read the fine print carefully. I always offer completely free mortgage evaluations so bring me your renewal notice and let's discuss it in detail. If you find that the renewal offer isn't your best option, then we can discuss other potential lenders and how to proceed. 
 There are always a million other questions to be had throughout a regular day, what's yours? I'm here and always happy to help, and remember my meetings and evaluations are always free! Contact me today!
 

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Saturday, 15 August 2015

Friday, 14 August 2015

Condo Woes...

About two years ago, my fiance and I found an opportunity to downsize our living situation. We were on a lazy Sunday drive when we passed an open house sign and decided to pop in and check it out, mostly out of curiosity.

As it turns out, it was a newly renovated group of townhomes for sale. We were given the tour and saw that they were not only completely renovated and redecorated, but also quite affordable. After a few weeks of careful consideration we decided to list our then-current home for sale and write an offer on one of the units. Things were going exceptionally well and we were able to sell our first home quickly. We moved in shortly thereafter, but with hindsight being much better than forethought there are a couple of things I wish we had noticed earlier.

Condo Redevelopments

This particular development is an example of what I later learned is called a 'Condo Redevelopment'. This is where a developer/investor takes an existing group of apartments/townhouses and applies to have them rezoned as strata/condo properties(meaning each unit has an owner, instead of the property being owned by a landlord). And while this is an excellent way of creating housing supply in a tight market, it also leaves room for some major issues to pop up down the road. (Read here for more on stratas vs. single-family homes)

Most 'Condo Redevelopments' are accompanied by a large-scale remodel/renovation in order to make the units more appealing and to meet building and fire safety codes(separate the units, basic living requirements, etc.). If this is done correctly, then the results can be pretty fantastic, but as with any renovation there can be problems that pop up later on. One important thing to remember with conversions is that there is often NO New Home Warranty to fall back on later, so Buyer BEWARE! You must make sure to do your due diligence and to trust the contractor/developer involved.

Another potential pitfall with redevelopments comes into play when considering the financial situation of the newly formed strata. Despite the main building structure often being old, the strata group who is now caring for it is going to be new. This creates some problems because the group will have had very little time to start saving for repairs/maintenance, and there may also be a lack of planning or incorrect budgeting. With such a new group of owners, it will likely take several years to get finances in order and have a reliable budget and some savings in the bank. The security of strata living is diminished somewhat by this.

When it came right down to it, we were forced to learn some lessons the hard way. While I wouldn't want to see any of my friends or family go through a similar experience, I will say that I appreciate all that I have learned about new developments, strata law, and managing/maintaining a strata.

What can I do?

Ok, let's get to the good stuff. How do you avoid making similar mistakes when considering purchasing in a strata complex? Here's my guide:

1) Read the Paperwork!(Before committing to a purchase!)

Make sure you read all the documents thoroughly. Although the content is boooooring, it can save you a ton of money and headaches down the road. In addition to reviewing all the strata documentation yourself, you should also consider having your lawyer review some of the information as well as your purchase contract(if you have one yet). Of particular interest to prospective owners should be financial statements(how much money in the bank?), budgets(are the amounts reasonable?), and council/group meeting minutes. The meeting minutes should tell a story about how the property is managed, give insight into any potential problems, and alert you to any major costs coming up to be aware of/budget for. 

2) Who's In Charge Here?

Find out whether the strata is self-managed or cared for by a property management company. While a management company = higher monthly fees, it will also alleviate the stress and inconvenience of  DIY management.

Once you've got an idea who is running the property, make time to reach out to them and ask some questions. Ask about fees, any recent issues, or anything else you'd like to know about how thigns work. Each and every property will be unique so it can be invaluable to have the 'inside scoop' from the people in charge or maintaining and operating it every day.

3) Maintenance

 Also be sure to ask plenty of questions about upcoming maintenance, planned projects, etc. Try to get as clear an idea as possible as to what will need to be repaired/updated and when it will need to be done. This can give you time to plan for expenses that may get passed along to owners(if there isn't enough money in the strata savings).

Another great indicator of future costs is the Depreciation Report. Each strata is required by the strata act to obtain a depreciation report as soon as possible, and stratas must vote each year if they should choose to defer the report. A depreciation report is an in-depth analysis of all common areas and equipment on the property, along with an anticipated lifespan and cost to maintain for everything. It can be an easy one-stop guide to understanding the remaining economic life of the complex, it's buildings, and all the equipment to keep everything working correctly.

Many insurers/lenders are now asking for a depreciation report as part of the mortgage process, and it's easy to see why. They want an objective third party opinion of how long the buildings will last and how well they have been maintained up til now.

What Else?

Buying a strata property can be a great way to afford to own your own home without a lot of the hassle of regular maintenance and upkeep of a detached home. Owning a piece of a strata is like owning a piece of your neighbourhood; make sure you are buying into a group you will be proud to be a part of and that is properly managed and maintained.

One of the biggest benefits of purchasing in a strata is that you are given a chance to review the decisions that have been made, and to get to know those making the decisions. Taking the time to review the documents and to really get to know the people in charge can give you the chance to make the best decision possible as to whether this is the property for you.

Would I do it again? Probably. But I'd be armed with a mountain of paperwork and questions to ask first!

Through my first-hand experiences in strata living, I've definitely become a local expert and am happy to share my knowledge with you. Do you have questions about strata living? Give me a call and let's talk about it!

-RS

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Thursday, 13 August 2015

CMHC Quarterly Review Results

Despite the latest rumours of over-valuation and mud-slinging towards foreign investors, CMHC recently released a report indicating only a few select markets are in any kind of danger of a 'crash'. Click HERE for the full report. 


What do you think? Which cities made the list that you were expecting? Which do you think should be added and why?

 

CMHC Releases Quarterly Results of its House Price Analysis and Assessment Framework for Canada and 15 Markets

 

AUGUST 2015 OTTAWA, August 13, 2015 - Canada Mortgage and Housing Corporation (CMHC) released updated results today from its House Price Analysis and Assessment (HPAA) framework, which is designed to detect the presence of problematic conditions in Canadian housing markets.

The overall assessment of risk detected by the framework is high for Toronto, Winnipeg and Regina. In Toronto, the high overall risk reflects a combination of price acceleration and overvaluation and overbuilding, particularly of condominium and apartments.

"Nationally, CMHC continues to detect a modest risk overvaluation. However, out overall assessment of the risk of problematic conditions varies from centre to centre due to regional differences in housing markets. Imbalances in local housing markets could be resolved with further moderation in house prices or improving economic conditions," said Bob Dugan, CMHC's Chief Economist.

"In the case of Toronto, strong price acceleration in 2015 reflects a larger share of sales of pricier homes. The rise in house prices have not been matched by growth in personal disposable income, giving rise to a modest risk of overvaluation."

The risk of problematic market conditions continues to be assessed as moderate for Montreal and Quebec due to the detection of some risk overvaluation.

In Toronto, Ottawa and Montreal, we are monitoring the risk of overbuilding. Condominium units under construction are near historical peaks. Inventory management is therefore necessary to make sure that these condominium units under construction do not remain unsold upon completion.

Low overall housing market risk is observed for Vancouver, as none of the individual risk factors are currently detected.

The results released today include those for the national market as well as 15 Census Metropolitan Areas (CMAs) - Vancouver, Victoria, Calgary, Edmonton, Regina, Saskatoon, Winnipeg, Toronto, Hamilton, Ottawa, Montreal, Quebec, Moncton, St. John's and Halifax (with Victoria, Hamilton and Moncton being added from the previous report in April).

The centres recently added, Victoria, Hamilton and Moncton are assessed as low overall risk. None of the risk factors are detected in Victoria, while overheating is detected in Hamilton, and overbuilding in Moncton.

The HPAA is a comprehensive framework that is designed to assess housing market conditions by taking into consideration the economic, financial and demographic drivers of housing markets. The use of multiple indicators of housing conditions, which incorporate various data sources and price measures, provides a robust picture of overall housing market conditions.

The full text of the latest HPPA update if available in the August supplement of Housing Now - Canada Edition at http://www.cmhc.ca/HPAA.

This is the third release of the HPAA, a quarterly report. The next HPAA report is expected to be released in October.

As Canada's authority on housing, CMHC continually works to increase the amount of available data and analysis on the housing market.

CMHC draws on more than 65 years of experience to help Canadians access a variety of high quality, environmentally sustainable and affordable housing solutions. CMHC also provides reliable, impartial and up-to-date housing market reports, analysis and knowledge to support and assist consumers and the housing industry in making informed decisions.


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Wednesday, 12 August 2015

Appraisals: Do I Need One?

Property Appraisals: 101

 When do I need an appraisal?

There are a few situations during either a property purchase or a refinance during which you may be asked for an appraisal of your home and property. While there is no guarantee as to whether a lender will ask for an appraisal or not, here are the most likely scenarios where they will usually be required:

  • Purchase with 20% or greater down payment.  
  • Refinancing or taking out existing home equity 
  • Reverse mortgages(See this article about CHIP reverse mortgages)
  • Rural or unusual property types 

The reason for requiring an appraisal is to give the lender reassurance of the property's fair market value. A good appraisal is an honest, unbiased representation of what the property is worth.

Why isn't an appraisal required with less than 20% down?

In this case, the lender will be backed by one of the mortgage insurers(More info about mortgage insurance HERE), such as CMHC, Genworth or Canada Guaranty. The mortgage insurers have a sophisticated property valuation tool and in most cases can verify a property's value through their existing information. In the case where they don't already have this information, the insurer will actually request an appraisal, but it will be done at their cost, not yours.

How is an appraisal performed?

An appraisal is performed by a licensed appraiser who is certified by the Appraisal Institute of Canada. The appraiser will start by assessing the location, age, and other basic information about the home to begin filling in the information and the calculations required. Once they have the basic info in place, they will visit the property to inspect the condition, layout, etc., and to take multiple pictures of the home to document their visit.

With all the information in hand and the site visit complete, the appraiser will take some time to complete calculations using one or more of the following methods:

Direct Comparison Approach: This approach compares the subject to similar properties that have sold, are for sale and that have expired and estimates a value based on the market comparables. This is the typical approach for a residential property, in which similar sales are considered and adjustments for differences are made based on market evidence of factors that influence purchase decisions – for example, finished basement versus an unfinished basement.

Cost Approach: This approach estimates the cost to replace or reproduce the property, then applies depreciation for a number of components (physical, functional, external obsolescence, etc.)

Income Approach: This approach estimates the potential income of the subject and applies the appropriate mathematical function (capitalization rate, Gross income Multiplier, etc.)

 Often your appraisal will use 2 of the 3 methods, in order to offer a range of value depending on the purpose of the appraisal(Is it for a mortgage? Home insurance?). This information is then bundled up and sent off to whomever has ordered the appraisal.

***Important consideration: If the lender is requiring an appraisal solely for their benefit(i.e. for mortgage approval), you will probably not receive results, only an approval or not. If you are interested or require the information for yourself, you will be responsible for ordering and arranging your own inspection for your private use. A good example might be if you are wanting to sell your home privately and want an idea of where to set your asking price.

If you want to learn a little bit more about appraisals, I work with several reputable companies and would be happy to suggest one to suit your needs. Get in touch with me anytime, I'm here to help!


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Monday, 10 August 2015

Bridge Financing

 To bridge, or not to bridge?

Bridge financing is an interesting solution to a very specific problem: If you have agreed to purchase a new home and also have an agreement to sell your old one, you might consider bridge financing to cover the transition period between homes. This product would be used in the case that the purchase of your new home takes place before the sale of your current home has completed.

Not THAT kind of bridge..
For a buyer planning to use the equity in their current home as a down payment(or partial down payment) on the next home, most people automatically assume you must wait until your home has sold and the money has changed hands. Not with bridge financing! This short-term solution can allow you access to the equity temporarily, giving you time to complete the sale of your last home while you have already moved into your new one.

Some important points to consider:

  • Not all lenders offer this solution(See your broker!)
  • It is only designed as a short-term solution, usually not more than 120 days
  • Interest rates are usually around Prime + 2 to 3%
  • There will be an administrative fee to set up
  • Usually doesn't require lien registered on home if under $100,000(Saves legal fees $)
  • Can be up to $200,000 in most cases
  • You must have an Unconditional offer(No subjects remaining) to sell your current home to qualify
Once the sale of your last home is completed, your lawyer will use the proceeds from that transaction to pay off the bridge loan that was arranged as well as any outstanding previous mortgages. There are no extra fees or penalties required to pay off the bridge financing. Any funds left over will then be passed along to you as the seller once all adjustments have been made and everyone has been paid accordingly.

Bridge financing is not the solution for everyone, but it fits the needs of a select group of home buyers. With all the different timelines and possible scenarios, it's best to contact your mortgage broker to discuss the details and find out if this product might fit your unique situation.
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Friday, 7 August 2015

Let's Fly Away...

Ever have one of those days when you just feel like flying away somewhere? Somewhere tropical maybe, somewhere mountainous, somewhere cultured and ancient...

I think we all have those days, so in the pursuit of keeping desk-bound daydreamers everywhere happy, here's my list of some of my dream destinations!

1. Fiji

Why not Fiji? It's literally about as far away from my daily life as I can imagine. White sand, beautiful beaches, and endless opportunities for enjoying the blue water! Learning to scuba dive is now definitely on my bucket list.

2. London, England

Even though I spent some time exploring England with family in 2005, I never did get the chance to visit London. Although far from the lazy, beach-friendly all-inclusive vacations I've been longing for lately, London just has so many great places to visit and so much history to enjoy!

3. Riviera Maya, Mexico

Is that a swim-up bar I see? Yeeaaahh, now that's a vacation! Riviera Maya is also well known for it's rich history, culture, and it's all-inclusive beach resorts. There are plenty of great historical places to visit near Tulum, including a well-preserved Mayan city perched on a cliff above the beach. What's not to love?

4. Tokyo, Japan

One of the largest, busiest cities in the world, I can't imagine much that compares to the hustle and bustle of life in Tokyo. I'm not sure I'd be convinced to stay for long, but to experience so many people and so many things happening all at once would be quite the trip. I can't believe I went all the way to Japan and didn't visit Tokyo...

5. The Great Barrier Reef
  

While we're at it, since I'm going to learn to scuba dive before heading to Fiji I may as well stop by the Great Barrier Reef as well ;) . Home to some of the most interesting and unique creatures on the planet, this beautiful place is constantly under the threat of climate change. I would love to explore and enjoy the chance to be there in person before it gets taken away and we lose the opportunity.
 
6. Las Vegas, Nevada(Again!)
 

What kind of travel conversation with me would be complete without Las Vegas being included somewhere??? For those that know me, you know that we really love spending time here. It's a city filled with hopes, dreams, and quite literally anything else you can imagine. From racing cars to skydiving to some of the best food in the world, Vegas has it all! It still seems to me to be a place where no matter how long you stay, there is always something you want to come back to try next time!

What's your dream destination? Or must-see place you've already been to? I'd love to hear your ideas!

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Wednesday, 5 August 2015

Registering Property Ownership/Titles - What's In a Name?

Have you given much thought to how your property title is registered? Carefully choosing the right type of registration for you could save you thousands in fees, headaches, and legal battles later on. Discuss your options now and save yourself time, hassle, and money!

Types Of Title Registration

In BC(and many other places), there are two ways to register your property title. They both have pros and cons which should be discussed at length with your lawyer so you understand the risks and benefits of each before making your final decision.

Carefully consider who you share your moon-property with, and how it's registered!

Joint Tenancy

In joint tenancy, all owners maintain an undivided interest in the land being registered. Between themselves, they share separate rights. As against everyone else, they are treated as a single owner.

A defining feature of joint tenancy is the Right of Survivorship. This dictates that should one owner pass away, the property automatically goes to the remaining living owner(s).

Tenancy in Common

Tenancy in common is a slightly more flexible form of ownership, under which the interests of the owners can be divided and may even be divided in unequal shares. In it's most basic form, it may also allow owners to sell or mortgage their share without the consent of the others. While this is not always the case, it could create some potential problems.

Upon the death of an owner, a tenancy in common will leave a deceased owner's share to his/her estate. This share will then be subject to probate and any applicable taxes before it then passes to the beneficiaries.

For parents who are considering whether to register property as joint or tenancy in common with an adult child, there are some important points to consider:

Joint Tenancy
  • You may be unable to sell or mortgage the property without the consent of all parties on title. 
  • Upon the death of one owner, there may be tax/capital gains implications for the remaining owner.
  • The property may be at risk of exposure to the child's(or potentially the child's spouse's) creditors.
  • For more info read: Joint Tenancy as an Estate Planning Tool
Tenants in Common
  • Can be more difficult to distribute if multiple beneficiaries are not in complete agreement amongst themselves.
  • Will be subject to probate fees and/or taxes
  • Will trigger capital gains if sold by beneficiaries
  • See RBC's Estate Planning Guide for more general information.

Tenancy in Common and Property Title Transfer Tax

In the case of a parent acting as a co-borrower with their child during a first-time home purchase, registering the property as a tenancy in common may allow you to take advantage of the property title transfer tax exemption for first-time buyers. See my article HERE for more info on this exemption.

Tenancy in common allows the property to be registered as 99% ownership by the child and 1% ownership by the parent. By creating this situation, the child retains 99% of the benefit of the transfer tax exemption. This option should always be discussed with your lawyer, but could be a great way to save some money on a first-time home buyer's purchase!

Because there are many possible complications of these scenarios and with laws constantly changing and being updated, always seek independent legal advice before making a decision regarding your property title registration. This guide is only meant as general advice and should not be solely relied upon. If you are interested in learning more, please Contact Me and I would be happy to get you in touch with the legal advice you need.

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Friday, 31 July 2015

Mortgage Fraud in The Media

Lately it seems like the media has been painting all mortgage brokers and lenders with the same negative paintbrush. With that in mind, I want to remind my friends and family
of my strict ethics standards, and the standards to which all members of CAAMP and MBABC should hold themselves to.

My clients and the trust they place in me are the heart and soul of my business. 

As such, I take the idea of mortgage fraud very seriously and choose to hold myself to an extremely high standard. I also take offense to brokers being lumped in with the term "Shadow Lenders", as in the recent media frenzy over poorly monitored and ethically questionable private lending. These lenders are not always looking out for their clients best interests and are also not always licensed mortgage brokers.

With that in mind, I want to share with you a statement from one of my member associations, CAAMP(Canada Association of Accredited Mortgage Professionals):


"The topic of mortgage fraud has come to the forefront in the media as of late, and we want to ensure that you are well aware your association is closely monitoring this situation.
We participated in the Home Capital Group call this morning, and commend the company on its positive portrayal of mortgage brokers across Canada. While 45 mortgage brokers – 18 individuals and two brokerages – were cut off by Home Capital for suspected falsification of employment documents, the lender stressed it is currently dealing with close to 4,000 mortgage brokers.
Home Capital is taking a number of steps to show its continued commitment to the channel and intends to deepen relationships with brokers, including spearheading a new broker loyalty program later this year as well as introducing a new broker portal.

What CAAMP is doing
 
We want to share the message CAAMP is taking to the media. At the same time we would like to provide the following speaking points to our members to equip you with easy access to information when you are asked questions about mortgage fraud from your clients, referral partners and the media:
  • Fraud is unacceptable anywhere, including within the mortgage industry, credit cards, bank accounts, etc.
  • There are approximately 18,000 registered mortgage brokers across Canada – representing approximately 36% share of market or about $70 billion in annual mortgage funding.
  • The latest data, based on 2012 figures, shows mortgage fraud totalled about $600 million. Of the $200 billion total outstanding mortgage volume during that same time period, mortgage fraud represented 0.3% of mortgage volume.
  • Mortgage arrears in Canada remain extremely low at around 0.28%.
  • The Canadian mortgage industry has among the strongest systems in place in the world to ensure fraud does not occur, including comprehensive lender and insurer fraud detection systems. Brokers play a vital role in terms of vetting all supporting documentation and interviewing all clients, as they are the direct line to the borrower.
  • Broker licensing and re-licensing are mandatory for most provinces, and fraud detection makes up a significant part of the curriculum.
  • CAAMP continues to educate the industry through events such as fraud summits and education days, as well as via standards of practice and professional development courses on Mortgage Campus in order to help ensure brokers are up-to-date on the latest scams and prevention measures.
There is no doubt that any amount of fraud is too much. CAAMP is dedicated to sustaining a strong and respected mortgage industry and ensuring that consumers continue to understand the benefits of dealing with mortgage brokers for their financing needs."
 
If you ever have any questions about mortgage fraud, ethical lending practices, or anything else industry-related for that matter, let's talk and I will be happy to discuss the benefits of using a mortgage broker and the relationships most of us strive to build with out clients.


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Monday, 27 July 2015

Rates, Rates, Rates...

It seems to be the question on everyone's lips lately: "How long are rates going to stay low like this?", and while I'd be ecstatic to have a crystal ball showing the way, it just doesn't work like that.

Photo credit: Lending Memo
In lieu of a crystal ball, we do have a few tools to help us try and predict where things are headed and why. There are 2 major indicators of where mortgage rates are headed:

The Bank of Canada overnight rate, and the 5-year benchmark bond yield.

While neither of these allows us to see into the future, they do allow us to track historical trends and take a best guess as to what might happen and when.

The overnight rate is set by the BoC 8 times per year and is determined by the state of the economy and the banks desired outcomes. For example, many analysts speculate that the latest rate drop by the bank was specifically intended to drive the Canadian Dollar down and improve our export economy. Whether or not it achieves it's intended purpose will be seen in the coming months, but a nice side effect for those with variable rate mortgages is that rates tracked downward in response. This .25% drop corresponded with a .15% drop in most consumers variable rate mortgages. While they aren't passing on the full benefit of the lower rate, the savings can still be significant over the long-run.

But what about fixed rate mortgages, you say?

Well, fixed rate mortgages usually correspond directly with bond yields of similar maturity. 5-year fixed rates, for example, almost always directly follow the 5-year benchmark bond yield. What this means is that we are able to track the historical performance, take into account current economic factors, and take a best guess as to where things are headed in the near future. Yields crept up quite a bit throughout May-June, but are now back near the historical lows we experienced in February and March this year. Beyond that, it's impossible to say what might happen in the long term.

What I can tell you right now is that 5-year rates are still at all-time lows, and variables seem to keep breaking through the "rock bottom" we heard about earlier this year. Will rates continue their downward spiral? Hard to say. But if you want an opportunity to make sure they stay put during your home purchase, why not get a Rate Hold?

A rate hold goes hand-in-hand with a pre-approval and can give you a guarantee that your rate will stay the same for up to 120 days from the time of your application. This means that when rates go up, you'll stay put at that great low rate, even if it takes some time to find the right home or close your purchase agreement. Better yet, if rates drop many lenders will lower your rate correspondingly! A rate hold costs nothing and there is no obligation whatsoever so get in touch and book an appointment.

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