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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Sunday, 26 July 2015

10 Best Pool Properties in Kamloops

Anybody else dreaming of being poolside this time of the year??? I know I am...

Here is my personal top 10 properties for sale in Kamloops featuring gorgeous swimming pools. This list is in no particular order and was compiled using Realtor.ca. Each picture includes a link to the listing broker's website/page for more pics and info if you're interested.

Happy daydreaming!

#1 - 3095 Kicking Horse Drive - Juniper
Beautiful custom home in Juniper's 'Benchlands' development.

#2 - 2517 Marsh Rd. - Valleyview
Waterfront pool looks over the Thompson river, niiiiice!

#3 - 534 Trillium Drive - Sun Rivers

#4 - 7075 Barnhartvale Rd. - Barnhartvale
20 acres, gigantic shop, AND A POOL??? Yeah, this could be my new home...

#5 - 705 Townsend Place - Brocklehurst
Beautiful park-like yard in Brocklehurst, close to everything!

#6 - 2089 Sifton Ave. - Aberdeen
Gorgeous views of the city from Aberdeen, and from your private pool.

#7 - 1129 Schubert Drive - North Kamloops
Close to all amenities(and the river!), right on the Rivers Trail. Beautiful yard!

#8 - 133 Whistler Drive - Sahali
Great home, great location, need I say more???

#9 - 638 Durango - Campbell Creek/Deloro
That's a nice looking patio for summertime drinks a bbqs!

#10 - 4103 Davie Road - Rayleigh

Plenty of privacy and a direct view to the North Thompson river, very nice!


This article does not guarantee accuracy of listings or availability of properties. To confirm details, please contact the listing realtor for the property you are interested in by following the appropriate links.

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Friday, 24 July 2015

20 Tips & Tricks to Maximize Your Next Open House or Showing

If there's one thing most people can agree on, it's that properly preparing and staging your home before an open house or showing can make a big difference in the impression it leaves on potential buyers.

You Only Get One Chance at a First Impression

A few small details can make all the difference, and don't forget:

Everyone who visits your home is either a potential buyer or knows someone who might be.

With technology use on the rise when searching for new homes (especially with first-time buyers), it's easy to overlook the importance of a good-old-fashioned, well thought out open house or buyer showing.

Make sure you follow these tips and tricks to maximize the effectiveness and attractiveness of your next showing:
I'd be happy to personalize a seller's list like this for your clients. Contact me today!

  1. Curb appeal
    • Mow the lawn, rake the leaves, and make your home stand out from the crowd on your street. Curb appeal is your home's very first impression and will leave a lasting mark on the rest of the showing.
  2. Clear out & clean walkways and doors leading to/from the home. 
    • Consider giving your front door a mini-makeover. Paint and clean to greet buyers with a sign of things to come inside.
  3. Take out the trash
    • Put away unsightly garbage cans/recycling.
  4. Secure your valuables.
    • Most important to lock up should be jewelery, electronics, and any paperwork with personal or financial information.
  5. Put away keys and other personal items for safekeeping.
  6. Check the thermostat
    • Make sure the home is comfortable, should the heat or air conditioning be turned on?
  7.  Clean up your bathroom
    • Make sure it is spotless and smell-free!
    • Speaking of smells...
  8. Consider baking something tasty before a showing
    • Chocolate chip cookies anyone?
  9. AND/OR put out some fresh cut flowers
  10. Take down any extra family/personal pictures. 
    • Buyers can have a hard time seeing past personal touches. Make them feel like this could be THEIR home, not yours.
  11. Remove magnets, letters, art and clutter from your refrigerator.
  12. While you're at it, Clean Out The Fridge!
    • Yep, buyers are gonna look there too. May as well make it clean and tidy.
  13. Clear off the counter tops
    • Any appliances, cups, etc. should be put away to maximize the available counter space.
  14. Turn on all the lights
    • People love bright, airy spaces
  15. Make sure all the lights work
    • If they don't, be sure to replace the bulbs beforehand to improve the look of your interior.
  16. Open the windows!
    • Open blinds, curtains and shades to let in as much natural light as possible.

Declutter

  1. Put away any extra furniture.
    • Excess furniture can make your home seem crowded or smaller than it actually is.
  2. Remove/store your everyday items.
    • Things like dishes, shoes/coats, mail, etc. should all be put away somewhere.
  3.  Put away all personal toiletries.
    • No matter your choice in toothpaste, shampoo, or shaving accessories potential buyers do not want to see things like this taking up space in your bathroom
    • Don't have a drawer? Consider getting a couple of baskets to store things neatly and place on your existing shelves.
  4. Consider a storage locker.
    • Although they can be expensive, a storage locker will allow you a place to store those things which might be taking up extra space but which you can't bear to part with. 
    • A storage locker is ideal for larger items as well, like the extra furniture we just mentioned!
There are always plenty of other ideas for making a home show as well as possible, whether for an open house, a potential buyer showing, or a realtor tour.

What are your Open House/Showing secret weapons?

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Wednesday, 22 July 2015

Don't Call Me "Bank" - The Truth About Credit Unions


I know what you're thinking, that's quite the logo. It's old school, but it gets the point across!

Who The Heck Are These People?

According to Credit Unions of BC, a credit union is a financial institution whose key difference from a traditional bank is the structure of ownership. Credit unions are owned through shares held by the members. In addition to being owned by the members of the institution, they are also governed by a board of directors which is voted on by those same members. In true democratic fashion, each member is given a vote which they can use to choose who they feel will best represent them on the board of directors.

Many people feel that having a system like this allows more accountability, control, and personal influence in the operations of their financial institution. As a result of being locally owned and operated, most credit unions also feel a need to give back to their respective communities and can often be found supporting local events through sponsorships, etc.

Why Choose Them?

As was just mentioned, credit unions are a local business. This allows them to keep their profits in the communities and to reinvest in the areas within which they operate. Another nice side effect of the local member ownership is that credit unions pay dividends to their members when they are profitable. It therefore becomes beneficial for the members to invest in their local branch and to keep them operating at successfully as possible, in order to maximize their potential dividends paid.

When it comes to mortgage lending, credit unions have some unique advantages. Credit unions are provincially regulated in a slightly different manner than the major banks(which are federally regulated), which allows them some flexibility in their loan and mortgage guidelines. There can be flexibility in terms of income, debt servicing, or property types, and it can vary from one credit union to the next.

Often, credit unions offer some of the best solutions when it comes to mortgages for modular/mobile homes, as well as new home construction. They are able to create programs tailored to these types of properties which come with competitive rates and features. This flexibility to adapt is simply not there with some of the other financial institutions.

That Sounds Great, What's The Catch?

There are a few minor drawbacks to placing your mortgage with a credit union, but the two major issues are:

Portability

Credit unions generally have limitations on the area in which they choose to lend and offer services. This can be a drawback if you are forced to move to another area in which your credit union does not operate. This is an important consideration that should be discussed with your mortgage broker before deciding if this is the right option for you.  

Membership

You will most likely be required to open an account in order to have your mortgage with a local credit union. A small member shares account is usually the bare minimum, with many requiring that you also open a chequing or savings account which regularly maintains a balance. Do your research, and find out if this is a requirement and if they offer an account option that suits your needs.

A Viable Alternative

As a licensed mortgage broker, I am proud to offer products from many different credit unions around BC. I keep these options available so that my clients know they have an opportunity for flexibility and creative lending in those situations where it is required.

If you're thinking about building a new home, purchasing a modular or mobile home, or considering any home purchase or investment, book your free appointment today to find out if a credit union mortgage might be a good option for you.

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Sunday, 19 July 2015

Monolines, Alternatives, Broker Exclusive...What are they???


With so many different names for these types of lenders(Monoline, Alternative, Broker Exclusive), now might be a good time to clear the air and clarify what all these things mean to you.

In the mortgage world, you will often hear the term "Monoline Lender" thrown around as if everyone should know what it means and how they operate. In reality, not many people truly understand the difference these companies and the big banks.

Define: 

Monoline: A financial institution which focuses on dealing in only one specific type of financial service.

 

The Difference

These financial institutions(much like mortgage brokers!), are specialists in their fields. They deal specifically with mortgage lending and as such can be relied upon to have competitive products, rates, and extensive knowledge of their products and the mortgage industry.

A second defining feature of most Monoline lenders is that they do not usually have a network of branches and representatives open to the public. It is for this same reason that people are sometimes unfamiliar with the names and logos of these institutions. However, it should be noted that these institutions are regulated and controlled by many of the same sets of rules as the banks. They are required to be as reliable, as transparent, and to uphold the same or higher standards as their big bank counterparts.

The benefit to you is that you are able to reap the savings of the significantly lower overhead of these lenders:

"By having no storefront, a monoline lender is able to keep their costs down, offer you preferential rates, products and service" Andrew Howard, Merix Financial
  
You get all the benefits of a large financial powerhouse, without paying for the comfy couches and rows upon rows of tellers and ATMs.

Why Doesn't Everyone Choose a Monoline?

When my spouse and I first started shopping for houses, we knew very little about mortgages or the finance industry. We had picked the house and we had a mortgage broker working hard on our behalf, but we didn't truly understand the benefits or potential savings of using a broker exclusive, or monoline lender. For some reason(hint: Big bank advertising $$$$), we were unsure about the security of these institutions and were concerned about the inconvenience of not having a local branch. As a result, we chose to place our mortgage with a large, well-known bank.

The truth is that you have every bit as much security in a monoline as with a bank. As I touched on earlier, they are bound by the same rules and regulations as the banks and you can therefore expect the same type of service and long-term security from both. And while your monoline may not have a branch you can stroll into on every corner, they do have exceptional customer service teams available over the phone, internet, or through your local mortgage broker(I'm always here to help if you have a problem! Contact Me).

In Hindsight

If I had it to do over again, I would take my time to research my mortgage options more carefully before making a final decision. In my case, that big bank we placed our mortgage with also came with some BIG fees and penalties. Not only did we pay thousands in higher interest over the years, but we are also stuck with a HUGE pre-payment penalty when we are ready to move on to a new home.

For some more info, check out this article detailing the dreaded "IRD" penalty, and how you can be aware of the implications of your lender's unique early payout penalties.


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Friday, 17 July 2015

Mortgage Brokers & Fees

Ever wondered what it costs to have a personal financial assistant spend hours carefully research your best options and craft a unique, custom-tailored mortgage solution just for you?

Well, you're in luck because today we're going to discuss exactly that, here are the costs of using a mortgage broker:

The Great News!

For the majority of my clients applications, I do not charge you anything. That's right, no cost to you. Similar to cell phone providers(as an example), I am paid by the mortgage providers who administer and provide you with your mortgage. It's my job to go out, find suitable borrowers like you, and to find the best solution for your needs. I then bring your application to the lender who suits you best, and they pay me a fee for arranging the details.

I get to be the trusted point of contact for my lenders as they know it's in their best interest to have someone locally that clients trust and who will do the best job possible to represent them.

Another important thing to note is that the fees paid to me by the various institutions are all quite similar, meaning that my only reason for suggesting a particular lender or product is to get you a better rate or terms. Your needs always come first and foremost!

As part of the fee paid for my services, I am here to provide plenty of options and to discuss with you the different rates, programs, and penalties/fees associated with all the different options. This allows you to be certain you are getting the best fit for you and I welcome you to be an active part in the process and decision making when it comes to your mortgage.

The Minority

There are and always will be some cases in which mortgage brokers do charge a fee to the borrower. If this is the case, I will always inform you up-front and well in advance so that you know what to expect and why there could be a fee involved.

A fee may be charged in the case of arranging a mortgage with a private lender for example, or in the case of commercial mortgage lending. In these unique circumstances, it is best to discuss the situation with your broker in person as the fees and the reasons for having to charge them can vary greatly from one instance to the next.

The Bottom Line

While mortgage brokers do not charge fees directly in most cases, I place great value in my clients time and the trust you place in me to do the best job possible. I will always be here to provide unbiased advice, regardless of who is paying or how.

Hopefully this helps you make sense of how and why we are able to offer no-obligation, no-fee consultations and annual mortgage reviews. If there is an opportunity to make a beneficial change to your mortgage, we are here to help. And if your current mortgage turns out to be the best fit for you, I will be here to reaffirm that decision and to help negotiate and represent you if there are ever any problems to be resolved with your lender.

To book your free appointment now, please Contact Us Here

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Wednesday, 15 July 2015

Early Payout Penalties: 101

Are you concerned about being locked into your mortgage? You might be, and here's why.

Easily the most misleading and often misunderstood part of mortgages deals with "Early Payout Penalties" and "Pre-Payment Charges". Although the idea of charging a fee for breaking your mortgage term is quite simple on it's own, the difficulty comes when lenders are left to decide for themselves how this penalty is calculated.

Currently in Canada, there are only a limited set of standards and that the lenders must abide by when calculating these penalties. The law holds that penalties must be deemed "reasonable", and the most common calculations are as follows:

  • For Variable Rate Mortgages - Three months interest, calculated at your current rate.
  • For Fixed Rate Mortgages - The greater of: 
    • 3 months interest penalty 
    • OR the Interest Rate Differential penalty
Unfortunately, many lenders take liberties in the formulas used to calculate these penalties, and as a result some are much more costly than others.(see below)

3 Months Interest Penalty

Let's assume you currently have a mortgage balance of $200,000 at 3.5% interest with 2 years remaining and you want to pay your mortgage off in full. This could be because you have sold your home, have the cash and would like to pay it in full, or because you would like to refinance with another lender. Any of these activities constitute paying off your mortgage and therefore invoke a penalty.

The calculation for the 3 Month Interest Penalty is:

Current Mortgage Balance($200,000) * Your Monthly Rate(3.5% / 12) * # of Months(3) = $1500.00

Interest Rate Differential

Using the same scenario as above, the interest rate differential attempts to calculate the amount of interest your lender will lose when your mortgage is no longer with them. Depending on the circumstances(are rates higher/lower than your contract rate?), this penalty could be more or less than 3 Months Interest. Assume in this case that the lenders current rate for a term closest to your remaining term(2 years) is now 2.69%.

The calculation for the Interest Rate Differential Penalty is:

Current Mortgage Balance($200,000) * Number of months remaining in term(24) * Difference in your rate vs. Similar Term Current Rate(3.5% - 2.69% / 12) = $3240.00

As you can see, since interest rates have fallen, the IRD penalty is significantly more than the 3 Months Interest. In this case if you have a fixed mortgage rate, you will pay the IRD because it is the GREATER of the two penalty options.

But Wait, There's More!

In addition to the "Standard" IRD and 3 Months Interest penalties described above, many lenders ave crafted their own versions which make for higher penalties if/when you break your mortgage term. Here are a few of the possibilities:
  1. Greater of three months interest penalty OR  the interest rate differential.
  2. The mortgage can not be paid out unless there is an arm's length sale - then the penalty is 3% of the outstanding mortgage balance.
  3. The mortgage can not be paid out unless there is an arm's length sale - then the penalty is the greater of three months interest OR  3% of the outstanding balance
  4. Same as above, but not more than three months interest in years 4 and 5 of a five year term
  5. For non-arm's length sales - it is the greater of three months interest OR  interest rate differential to the bond rate for the remaining term
  6. For arm's length sales - it is the greater of three months interest OR  IRD to the current posted mortgage rate for remaining term.
  7. And finally, some lenders use the greater of three months interest OR the IRD to current posted rates, including your original rate discount. 

Ouch!

Of all the possible calculations above, by far the most significant is the 3% of your outstanding balance(worse still if there must be a bona fide sale), or the IRD to posted rate with your discount. By using posted rates and discount percentages, the banks are able to enforce larger penalties, while still technically following the current laws. With either one of these clauses in place, you can be sure that it will cost thousands to break your term or pay off your mortgage early.

How To Protect Yourself

With all the different mortgage companies and products available, it's important to have someone knowledgeable and trustworthy go over the terms of your mortgage agreement with you. You should know well in advance exactly which penalties you might be subject to, and how they are calculated. A licensed mortgage broker will have the necessary skills and knowledge to help you understand these risks and make a decision that is most comfortable for you.

In most cases, lenders who are offering deeply discounted rates will apply the most harsh penalties. For some more info on this read: Super Low Rate = Super Low Features

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Tuesday, 14 July 2015

Are 10% Minimum Down Payments In Our Future?

Those of you sitting on the sidelines waiting for mortgage rates to continue their decline may be in for a pleasant surprise. If you hold the same beliefs as many financial analysts and experts then you might be expecting a lower Bank of Canada rate soon. At the moment things are still up in the air, but recent economic indicators and attitudes are starting to indicate that the government may drop rates once again.

While I have mixed feelings about the Bank of Canada lowering their rates, it's hard to dispute that these lower rates almost always mean an increase in housing demand. With the perceived savings of lower interest rates comes renewed demand from home purchasers and people considering a refinance. This could mean big opportunity, but also big risk in red-hot real estate markets like Toronto and Vancouver.

What's The Catch?

If the demand for housing starts to grow at an unstable rate, the Department of Finance will likely start looking for ways to pull back the reigns and control the real estate markets. There are several methods by which they could achieve this, but one of the most effective might be to increase the minimum down payment required.

There have been hints of an increase of the minimum required down payment from the current 5% to as much as 7-10% of your home's purchase price. For many young Canadians, this could be enough to drive them out of the market, especially in pricier areas like BC's lower mainland or the greater Toronto area.

According to a recent report released by CAAMP, 19% of first-time home buyers would probably not have been able to purchase their homes, had the minimum down payment been 10%. This just goes to show the kind of impact that this increase could have on some buyers.

Another article(CLICK HERE) by Robert McLister with Canadian Mortgage Trends highlights some more key data and important points to consider if the Bank of Canada does decide to drop rates soon. Whether they choose to lower rates this week or in September, there could definitely be some rule-tightening coming along shortly afterwards.


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Tuesday Update: Guest Post Goes Live

Hey all,

Tuesday update here today, hoping everybody had a fantastic weekend! I wanted to let you all know that another real estate blog just featured one of my guest posts.

If you're interested in checking it out, please find it here:

http://real-estate-canada.org/does-a-mortgage-pre-approval-mean-anything/

I take a critical look at the "average" bank pre-approval and how this process may not mean as much as you think. When relying on a pre-approval or pre-qualification, it's important to remember that it is only as good as the process that produces it.

If your bank or lender doesn't carefully review your documentation and all the relevant information, then you could find yourself facing a decline later in the mortgage process. In my business I place the utmost importance on ensuring we have the right information to provide you with a timely and accurate pre-approval.

Stay tuned for another article coming soon which explains my pre-approval process in even greater detail. 


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Sunday, 12 July 2015

Reverse Mortgages - A CHIP Off The Old Block?


Forget what you think you know about Reverse Mortgages!


Many people have heard the term "Reverse Mortgage" used in passing, but lately there seems to be a lot of misconceptions and misunderstandings about the term and the concept.

Much of the controversy surrounding reverse mortgages has to do with the bad reputation they earned(and sometimes deserved!) in the United States. Historically, reverse mortgages have had such negative connotations surrounding them as astronomical interest rates, exorbitant fees, and a distinct lack of equity(or even ownership) at the end of one's life or mortgage term. This problem stemmed directly from poor handling by the lenders and even worse regulation by the US government.

Bad golf jokes aside, what's a CHIP?

Enter CHIP

The good news is that in Canada we are extremely fortunate(aren't we always?) to have some great reverse mortgage programs and some even better legislation and regulations that allow us to borrow equity from our homes securely and safely.

CHIP(by Homequity Bank) is a reverse mortgage program designed for homeowners at least 55 years of age who have equity built up in their homes and would like easy access to it. This program is the only one of it's kind in Canada and is administered exclusively by Homequity, so if you hear a local credit union or bank offering you a "reverse mortgage", it's either something different entirely or it is CHIP and they're just not telling you that yet. 

How Does It Work?


This program is similar to a traditional mortgage in that it is essentially a loan secured by your home. The key difference is that with CHIP you are not required to make monthly payments(although you may if you choose). What this means is that you can access the equity in your home without encumbering yourself with more monthly payments when you are likely already on a limited income.

Your credit score and/or your annual income do not make a difference when qualifying for a reverse mortgage like this; all that determines your eligibility is your age, the value of your home, and how much equity you have built into it(i.e. are there any existing mortgages on the home?). If you are at least 55 years old and own a good portion of your home, you likely are already qualified to take advantage of CHIP.

The Benefits

Aside from not having to make regular monthly payments, a CHIP reverse mortgage comes with some other great features you should be aware of:





  •  You choose how much(up to the maximum for your home and age) and how you would like to receive the income. It can be monthly income, one large lump-sum, or multiple lump-sum advances. This all comes down to your preference.
  • The income you receive from your reverse mortgage(whether monthly or lump-sum, you choice), is Tax-Free. It is considered a loan advance and therefore not included in your taxable income. This means that the same amount of equity($) could go further than other types of retirement income. 
  • You always maintain ownership and title to your home as long as you live in it, period.
  • In the event you sell your home or pass away, you are only required to repay the outstanding balance(with accumulated interest). There are no extra fees or penalties for you to repay the reverse mortgage in full.*(If repaid after 36 mos. or at any time in the event of death of the owner)
  • Your CHIP reverse mortgage is GUARANTEED to never exceed the value of your home. CHIP provides a clause in your contract that protects you from this situation; they will cover the difference if there is a shortfall upon your death. 
A reverse mortgage is not the solution for everyone, but for some people it may be an excellent option to retain or improve your quality of life through making use of the equity you already have in your home. For more information or questions, feel free to contact me anytime or,
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Friday, 10 July 2015

Super Low Rate = Super Low Features

"Wow! That's an awesome low rate, I'll take it!" - Everybody, Everywhere.

If it sounds too good to be true, it probably is... This is the mantra one should live by when shopping for the best mortgage available. The lowest rate is not always the best option for everyone as that low rate almost always includes some restrictions and penalties that may not be in your best interest.

Deeply discounted mortgage rates are discounted for a reason. Like any purchase, when something comes at a much lower price than comparable goods, it usually means something is wrong with it. In the case of your mortgage, that something could cost you thousands of dollars in no time.

The Dilemma

Take the lowest rate and deal with the consequences? Or plan ahead and know what you are getting into?

The promotional low rates offered by today's lenders come with a myriad of drawbacks, exclusions, and limitations that can hinder your ability to change your mortgage or even to sell your home or move later as your life changes.

Some of the fine print with these products can include large prepayment or early payout penalties, a lack of prepayment privileges, and some are even 'fully closed', meaning you must sell your home to be able to break your mortgage term. Others may limit your ability to 'port' your mortgage to another property or increase your mortgage amount later, effectively locking you into the property you are purchasing or refinancing today.

Is it worth it?

For a small number of borrowers, these products may be a good fit. With the unique options available, it's important to have a second look by a mortgage advisor who can offer you all the alternatives so that you are making an informed decision today. Basing your mortgage choice solely on rate my save you some money in interest, but you can wind up paying far more than that in fees later. Always understand the 'fine print' when making your final decision, and be sure to ask plenty of questions about what, if any, restrictions apply to the product you are choosing.

Do you have questions about your mortgage? I'm always available for a free consultation to discuss your options and to help you understand the details and terms of your particular mortgage product.

Whether you got your mortgage from your bank or a mortgage broker, there is never a bad time for a review! Contact Ryan Today

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Wednesday, 8 July 2015

Financing Options For Your Home Renovation


For many people, renovating is part of the joy of homeownership. We love being able to update, renovate, and rebuild the places we live and this can go hand in hand with increasing the value of your property. To learn about which upgrades return the most value, check out my article The Best Renovations for Resale Value.

Ok, now that you've decided on what you'd like to do and in which areas of your home, how are you going to pay for it?  When it comes down to it, you have several options and if you choose to borrow, follow my tips to borrow smart and not get stuck paying excessive interest rates!

Cash

Cash is king, and always will be. If the return on investments continues at the historical lows we've been seeing lately, there is not much point in tying up your hard-earned money in an investment with little to no return. Despite the myriad of low-interest financing options available, unless you can guarantee a great return then using your savings might be an excellent option for you.

Refinance Your Mortgage

A major renovation is a great time to have a look at your existing mortgage to see if it might be worth using some of your equity to finance the project. With mortgage rates continuing along at historical rock bottom, there will rarely be a better opportunity to borrow more money against your home. An option for those buying a home could also be the Purchase Plus Improvements mortgage. Here's an article with details on how this product could work for you. It can allow you to borrow extra money as part of your mortgage(at your low mortgage rate) to allow for renovations of your new home.

HELOC

HELOC stands for home equity line of credit, and is essentially a line of credit which is secured by your home. Having the security of your home backing this means lenders will usually offer you very low rates and great terms. You may withdraw only as much money as needed as your renovation goes along, therefore saving you money in interest, and you may repay it at any time without penalties. The disadvantage of a HELOC is that you must have more than 20% equity in your home to qualify. That means if your home is worth $200,000 and your current mortgage is $100,000, your HELOC cannot be more than $60,000 max.

Unsecured Line of Credit

An unsecured line of credit is available to qualified borrowers at most financial institutions and is similar to a HELOC, except it does not have the security of your home used as collateral. This is an option to consider for new buyers using the Purchase Plus Improvements mortgage as it allows you the funds needed to complete your renovation project and to have your final mortgage amount released(See here for more details). This is also a good option if a necessary renovation or repairs come up and you do not have the cash available. An unsecured line of credit comes at a much higher interest rate than a mortgage or HELOC and should be considered if the prior 2 are not an option, in order to minimize your interest costs.

Promotional Offers

If used with caution, a renovation could also be a great time to utilize a bank or credit card
promotional offer. These offers usually take the form of a low interest rate for a short period of time, after which the interest rate increases significantly. If you are able to pay off the debts within the promotional period, this can be a great way to finance your reno in the short-term while getting a fantastic rate. Many people forget to keep track of offers like this however, so make sure if you are considering this that you mark the dates in your calendar and be sure to pay it off asap. Service charges and increased interest can completely offset any savings had if the debt is still owing when the promotion expires.

Other Considerations

One of the keys to successfully financing a renovation is to actively manage your chosen finance method. It is important to take note of any penalties, charges, or interest rate increases that will come along later on. You may be able to prepay a portion of your mortgage each year for example, but only up to your lenders limits before incurring a penalty. If you want the flexibility of repaying the debt completely at any time, then any of the other options should be considered as well.

There are plenty of things to think about when tackling your next renovation, with financing being just a small part of the puzzle. I'd be happy to help you through the process and I have the experience and programs to help your renovation project succeed. Contact me at any time at RSmith@mortgagewest.ca or visit me online at www.ryanwsmith.ca


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Monday, 6 July 2015

The Dirty Secret Your Variable Rate Mortgage Might Be Hiding...

Are you aware that your variable rate mortgage might have a dirty little secret? And that it could cost you a significant amount of money? Taking the time to review and understand all your mortgage details can make the difference between thinking you are getting the best rate and knowing you are getting the best rate.

The Secret

Does anyone remember way back in school when they taught us about compounding and interest? While I for one definitely slept through that class, it would have been a valuable lesson to learn early.

Compounding is essentially the number of times per year that your interest owing is calculated. There are many different methods of calculating interest, but for the sake of this article we will keep things simple. In the world of Canadian mortgages, most are either compounded Semi-Annually(i.e. Twice per year), or Monthy(once each month). While fixed-rate mortgages are required by law to always be calculated on a semi-annual basis, lenders are free to choose their calculation of choice when it comes to variable rates. This means that your variable rate mortgage could use either calculation, depending on your lender's preference.

Is My Mortgage Keeping Secrets From Me?

In all likelihood there could be several things you should know about your mortgage that you may not be aware of. These could be things like the compounding period for interest, prepayment privileges, penalties, fees, and the type of registration(i.e. Collateral Charge). While I discuss these details at length in other articles(click the links to check out some other articles), today we will focus on your compounding period.

When it all boils down to it, what you need to know is this:

If your lender uses monthly compounding, it will cost you more than a comparable rate compounded semi-annually.

What Could This Cost Me?

As an example, let's compare 2 mortgages. Both have a starting balance of $300,000, and an interest rate of 5%. The only difference between these 2 is that one uses monthly compounding and the other uses semi-annual.

 Monthly Compounding


Semi-Annual Compounding


What you will notice is that the monthly compounding option costs a whopping $7314.93 over the life of your mortgage. Even if you break that down, it will cost you an extra $755.27 over a 5-year term. This is because the more frequent compounding forces you to pay more interest during each calculation. The difference between the 2 rates can be best demonstrated by comparing the Effective Annual Rate for each, as if it were calculated only once per year.

5%, compounded monthly = EAR of 5.1162%
5%, compounded semi-annually = EAR of 5.0625%

As you can see, as the compounding frequency increases, so too does your cost of borrowing. And while this information is required to be disclosed to borrowers, most people don't receive it until late in the mortgage process when it will be of little use for comparison. 


What Do I Do About It?

Always trust a mortgage professional to review the details of any mortgage you are considering. Ask lots of questions and don't be afraid to make sure you are aware of all the details up front. Something like compounding could mean thousands of dollars in extra costs and/or an unfair comparison between 2 lenders. A good mortgage broker can show you the differences like this between lenders so that you are making an informed decision that is right for you.

Do you feel like some of the details of your mortgage are unclear? Contact Ryan for a free consultation and we can review the details and make sure that you understand and are satisfied with your current lender and product. If not, then continue to follow us here and at www.ryanwsmith.ca for more info on mortgages, real estate, and personal finance.


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Friday, 3 July 2015

Investment Properties, Just The Basics

Have you ever thought about exploring the exciting world of real estate investing? With opportunities available at every turn, now might be the time to make your move.

Fortunately for many, Kamloops is a growing city with low vacancy rates and fairly attractive real estate purchase prices. The central location of TRU and other amenities make it a great location for students, working families, and even retirees looking to downsize. Depending on your investment objectives, any of these groups could be a demographic from which you could earn a significant amount of rental income.

According to CMHC statistics, the average rent in Kamloops for a 2-Bedroom apartment is currently just under $900/month(with townhomes renting for much more!). Compare that with a mortgage of just $550/month(based on $150,000 mortgage @ 2.69%), and you can see that there is potential for good cash flow if you can keep your monthly operating costs low.

Sounds pretty good, right?

And it can be, if you do your research and understand the risks involved. Investors of all types gravitate towards the flexibility and the opportunity that owning a rental can allow. Like any investment, the best opportunities are had by those who start early and plan ahead. A long time horizon will allow you to ride out some of the fluctuations of the real estate market and to watch the value of your property increase over time. It can also be an excellent way to plan for retirement, having rental income available later in your life to offset any decrease in your employment earnings.

A rental investment portfolio is a great option for people who like the tangible, secure potential of property but who are ready to accept that this can come at a cost.

Ok, so what's the catch?

If you're still reading at this point, you must be wondering what the price of all this security and wealth is? Well, like any investment there are always risks such as:

Vacancy
What if you are unable to find tenants? Will you be able to afford your monthly payments without the rental income? And if so, for how long? It is important to think that there may be a time where you are required to carry the mortgage, insurance, and other monthly obligations in order to keep your property.

Maintenance
As a landlord, it is now your job to ensure things go as planned for your tenants. Depending on your experience and your comfort level with performing tasks, these costs can add up quickly. Remember to budget for things like leaky faucets, plugged toilets, and other repairs that can and will come up over time.
 
Major Repairs/Problems

Problems like plumbing and minor maintenance pale in comparison to the major problems with a home that can occur. Large, unexpected costs such as foundation problems, electrical issues, roofing, or water/mold problems can creep up and cost thousands of dollars at a time. If you are earning an income each month from your rental, it would be wise to save some of that money as an emergency buffer for when things like this come up.

Bad Tenants
There is no amount of value you can place on the headache and hassle of having bad tenants. This can be as bad as police visits to the property and you on the hook for months of missed rent and/or property damage. It is extremely important to understand who you are renting to and to realize the potential damage and cost of bad tenants!

Not scared off yet?

Great! Then you might be exactly the type of person to invest in a rental property. Now that we've worked that out, let's get to the meat and potatoes.

How do I choose an investment property?

The answer here lies in seeking out multiple options and comparing to decide what you are comfortable investing in. There are a myriad of property types to choose from including single family homes, duplexes, condos & apartments, or even a principal residence(where you live) with an income-producing suite.

When considering the options, think about how much maintenance a property will require, how much it will cost to operate and insure each month, and any other costs in terms of both time and money in order to run the property as effectively as possible.

  • Stratas/Condos may cost less in maintenance, but will come with the added expense of monthly fees. There may also be rental restrictions in some strata/condo complexes, be sure to read the rules thoroughly when considering this type of purchase,
  • Single family homes and duplexes on the other hand, may not have monthly fees but can cost significantly more to maintain and operate each month. Costs ranging from insurance to property taxes will all usually increase, but you may be able to charge more rent.
  • Income-producing suites are a popular option to balance costs and income. Many first-time buyers and young families consider this "Mortgage Helper" option to keep their living costs low, but allow for a larger living space later if needed. Simply converting a suite back into part of the home allows your home to grow alongside your family when you are ready.
 Once you've determined the monthly costs, compare that with the amount of rent you expect to receive each month to determine your potential income.

Comparing market rents for the property should begin with a thorough comparison of similar available properties(Kijiji and Craigslist can be good resources), and it may also include a visit from a property appraiser. He or she will take factors such as size, location, and amenities into account to determine an estimate of how much the property will rent for each month in your market. 

And Now for The Nitty-Gritty(Financing, Taxes, and Legal...)

Your best mortgage advice will come from a local mortgage broker who can compare the different options available for your particular situation. There are literally dozens of lenders, insurers, and different programs to consider in order to make sure you get a competitive rate and good terms. A 20% down payment is usually required when financing rentals, but there are also some alternative options available for highly qualified borrowers, again see your mortgage pro for advice. There is also plenty of competition in the private lending market for properties or portfolios that may not fit into the typical lender profile.

Rental properties come with a unique set of challenges and benefits come tax time and it will also be important to have a trusted tax professional on your side. Things like your interest paid, maintenance costs, depreciation, and even strata fees could all contribute to reducing or even eliminating any taxes owing on rental income you receive each year. There are plenty of opportunities here, but you should discuss this at length to determine how this will fit into your personal situation.

Finally, you must always seek legal counsel when considering a large investment such as real estate. This may be one of the largest purchases you ever make and it is important to have a lawyer review everything and consider any and all potential implication before completing your purchase.

The Final Word

Investing in real estate is not for everyone. It can be very rewarding to watch an investment like this grow and turn into valuable income and long-term wealth, but it won't come without hard work and intelligent decisions. Consider whether you can afford to maintain a property like this when it is vacant or needs repairs. If you can build up some savings(hopefully with all that income you're earning!) to prepare for things to go wrong, then you will be in a position to maintain your investment in the long run. This is how smart investors maintain and eventually grow their portfolios.

Need some personal advice on whether an investment property might be in your future? Visit my website for some free calculators to get you started, and then contact me so we can discuss the details and get started planning!
 

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Thursday, 2 July 2015

House or Condo?

Today we are going to compare two very different types of properties to try and weigh the differences, pros, and cons of living in a detached home vs. a strata or condominium property. Each one has it's own unique set of qualities and understanding the difference can help you decide which is right for you.

Detached House(see: Freehold Properties)

Pros:

There are plenty of fantastic reasons to own a detached home on it's own land. You have the benefits of extra space, usually a yard or outdoor area to enjoy, and the freedom to make changes to the decor and even the layout of the home as you see fit. Having extra privacy can also be a major benefit as you will never have to worry about sharing hallways or common spaces with anyone inside the boundaries of your property. Many people also value the sense of independence that comes with being the owner of a freehold property(i.e. no strata). Being able to Improve and Renovate to your home as you see fit is something that appeals to the DIYer in all of us.

Cons:

With all the great reasons to own a home like this, why are people so reluctant to take the plunge?

One word: Responsibility.

Uncle Ben said it best:"With great power comes great responsibility", and this holds true for detached home-owners. You are the one who has to worry when things go wrong; you are property manager, bookkeeper, maintenance guy, and secretary of "Chateau-Your-House". As such, you must also remember that you are responsible for budgeting for the extra costs of operating and maintaining a home, such as yard work, utilities, monthly/yearly maintenance, and the inevitable repairs that all homes will need sooner or later.


Condo/Townhouse/Apartment(See: Strata Properties)

Pros:

For as many great reasons as there are for owning freehold, strata properties can also be a great alternative for several key reasons. Owning in a strata, whether you choose a townhouse, an apartment, or a condo(Call it whatever you like!) comes with strength in numbers. Because there is a larger pool of owners available to distribute the costs(things like yard work, basic maintenance, insurance, etc.) it is easier to keep the overall costs reasonable. The other benefits that often go hand-in-hand with strata living are better locations and amenities than a similarly-priced detached home. These complexes and buildings are often situated in prime locations and may offer bonus amenities like a gym or even a pool that might otherwise be out of your budget in a freehold home. Add to this the turn-key, move-in ready lifestyle that you can often get and you have a pretty appealing package.

Cons:

There are however, some drawbacks that must be considered with strata living. One thing to consider is the diminished privacy of group living. This can be anything from sharing a parking lot to sharing a hallway or a storage building, but it is worth remembering that these places are often referred to as "Common Property" for a reason; they are common/shared amongst all the owners. Your monthly strata fees can go a long way towards lowering your cost of maintenance and repairs to your unit, but these costs must be considered as part of your total monthly budget and may lower your qualifying mortgage amount somewhat. Lastly, there is always the simple fact that you are only able to make minor changes to your unit when you are part of a strata. Each group will have it's own unique rules, but these should be thoroughly understood to ensure you understand what you can and can not do within the walls of your home. Often structural changes will not be allowed, and similarly you will not usually be able to make changes to the exterior look, color, or style of the home.

How Do You Choose?

Deciding whether a House or Condo is right for you is a task that requires comparing the options and determining how each would fit into your own life. While there is no right or wrong choice, I've written this article to help you break down which one may best suit your lifestyle. A house comes with extra privacy, independence, and space, whereas a condo comes with a low-maintenance, turn-key lifestyle and often a better location and amenities.


For the most up-to-date information on rates, mortgage terms, and real estate in Kamloops, BC please visit us at www.ryanwsmith.ca or

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