| Four Questions To Ask Your Mortgage Broker Buying a new house should be exciting, but it can get pretty harrowing at times. You may worry you won’t qualify. You may feel unsure about house prices and worry about interest rates. If you’re considering renovating instead of purchasing, you may worry you won’t qualify for a refinance. |
As we head in to the Spring season, this is the ideal time for us to discuss your goals, including a review of your financial goals, your credit profile, and find the best solution for your personal situation. I will help you answer the following questions:
1. How much can I afford?
Usually people pick their homes before they organize their financing, but it should be the other way around. Determine what monthly payment you would be comfortable with and what money you have available for a down payment before delving into your house hunting. We can review your current sources of income and credit profile to help you determine the maximum purchase price you can afford and are comfortable with.
2. What type of mortgage should I consider?
Fixed or variable? A fixed interest rate is set when you sign for the mortgage; it won’t change for the entire term. A variable rate, however, may change according to market interest rates. While market fluctuations are hard to predict, I can give you historical data and economic information to help you make this decision.
3. How much do I need for a down payment?
Many homebuyers assume they need to make a large down payment in order to get the best mortgage rate, but that’s not always the case. Mortgage insurance products allow buyers to put as little as 5% down and still get the same competitive mortgage rates.
4. What should I take into account for the future?
Everyone is excited about buying a beautiful home, but not everyone is thinking about what that means in the long term. For example, do you plan to have children, go back to school or take a trip of a lifetime? We would factor in the costs of your future potential plans as well.
In 2017 and 2018 the government imposed the Benchmark Rate and Stress Test rate on all mortgages funded by federally-regulated institutions. We will review these factors and see what impact, if any, it has on your ability to qualify for a mortgage.
I have access to many primary lenders who offer the lowest interest rates, best terms and conditions. They also have the most stringent qualifying criteria.
I also have access to numerous “alternative” lenders. These lenders consider files with less stringent criteria than the primary lenders for qualification.
In addition, I have access to several pools of private mortgage options and to individuals who invest directly in mortgages.
I realize that every individual has their unique situation. I will sit with you and go through all your possible options and outcomes so you can make an informed decision.
The Mortgage/Housing Year in Review
We have seen a number of challenges in the housing market over the past few years. Housing prices have been up and down; housing sales were down but have rallied in many areas of the country in the last half of 2019. The government also introduced the First Time Home Buyer Incentive and enhancements to the RRSP Home Buyer’s Plan. Yet, affordability continues to be a hot topic across Canada.
Interest rates inched up slightly for variable rates and lines of credit. We’ve also seen a slight increase to fixed-rates in recent weeks due to the upward pressure on bond yields and increases to the cost of funds. Still, rates are relatively low – perhaps this is the new normal.
The Canadian dollar is trading at approximately 75 cents to the US dollar (at the time of this writing) and there is continued concern about high consumer debt, but we continue to look on the bright side, supported by some new information.
According to a recent report from RE/MAX, an increase in consumer confidence could be a key factor affecting the housing market in 2020.
The report found that Canadians have adjusted to the mortgage stress test, which was introduced three years ago on mortgages with less than 20% down payment and expanded to include all bank mortgages a short time after.
The report also found that older millennials are now moving into their peak earning years and will drive the market in 2020. RE/MAX found that more than half (51%) of Canadians are considering buying a property in the next five years, especially those under the age of 45. This is up from 36% at the same time last year.
A Reuters’ poll found that a strong domestic economy, rising immigration and lower mortgage rates have helped the housing market make a comeback in the second half of this year. “It is not just low interest rates that are helping the housing market – the fundamental support is demographic and that is largely from a rapidly growing population driven by international migration,” Sal Guatieri, senior economist at BMO said in an interview with Reuters.
The Canadian Real Estate Association’s (CREA) prediction for 2020 are that housing sales will continue to improve through 2020, albeit slowly. National home sales are forecast to rise by 7.5% to 518,100 units next year. Ontario and Quebec are predicted to see sales rise by about 7% in 2020, while activity in Alberta will recover by about 5% compared to 2019. The number of homes trading hands in other provinces is predicted to edge up or down only marginally.
With all the positives going into 2020, if you’re thinking of buying a new home, renewing a mortgage or refinancing an existing mortgage, or just want an update about your local market, let’s talk.
Wishing you health, happiness, and prosperity in 2020
It seems as if the
debt-to-income ratio is always in the headlines. Just recently it was reported
that the ratio edged down to 177.1% in the second quarter of this year, from
177.5% between January and March. The number means Canadians owe $1.77 in debt –
including mortgages and consumer debt like credit cards – for every dollar of
disposable income. In 2016, the ratio was sitting at 167.3% and increased each
year until October 2018, when it started to come down, thanks to both a
slowdown in borrowing and healthy income growth.
While increases worry some policy-makers, studies have shown that consumers are able to pay their debts reliably. Low interest rates on mortgages, for example, have allowed consumers to pay down more of their mortgage principal, with payments split almost evenly between interest and principal.
But for some, the debt load can be unmanageable and then the search is on for a solution. Many are familiar with advertising from Debt Settlement services that offer to settle a consumer’s outstanding debt, for a fee. If you’re considering these options, make sure to do your research and find a reputable company to work with.
There are also not-for profit credit counselling services that offer Debt Management and Consolidation Programs who can help you negotiate a repayment plan of 100% of your outstanding debts through something called a debt management plan. They cannot offer a debt settlement because they do not settle your debts for less than you owe. If you only have a few debts, a debt management program may be a good option.
For a larger debt loads where there is equity availably in your property, debt consolidation may be an option. Mortgage professionals may be able to consolidate debt with a refinance.
When arranging a consolidation mortgage loan the amount of the mortgage principal may be increased to pay out the total amount of debt. This becomes part of the mortgage commitment and a condition of the mortgage loan. On closing, your lawyer will disburse the funds to your creditors and register the new mortgage.
What you need to know
A refinance alters the terms and conditions of your mortgage. For this purpose, you are increasing the amount of your mortgage to pay off debt. Your mortgage payment may or may not increase, depending on a number of factors, and you may incur a penalty to break your existing mortgage if you are refinancing midterm. Depending on your current mortgage, you could be paying off the refinanced debt at a much lower interest rate, which could save you thousands of dollars in interest in the long run.
It’s always a good idea to review your mortgage with a mortgage professional, not only when you’re considering consolidating debt. A mortgage professional can shop the rates for you and get you the best deal, tailored to your particular situation. Then, if you decide to switch lenders, there are no penalties at renewal time.
One of these options may be the perfect solution if you know someone who may be struggling with debt please have them call me.
|Vacations give us time to spend with family and friends, a time to kick back and relax, away from the noise and hustle of home. Some might consider owning their own piece of paradise. Having a second home for getaways sounds great, and often, it’s even a really good long-term investment.
Here’s the good news — buying a vacation property is easier than you think, but don’t jump in blind. You absolutely need to work with professionals with specialized knowledge to help you purchase and finance that property.
Working with a local Realtor is essential simply because they know the area and will likely know the property as well.
Working with me is also essential to help you arrange a mortgage. As a mortgage broker, I have access to lenders with more flexibility than many banks, and often at preferred rates.
Here are some other considerations:
Spend Time There First
Make sure to visit the area a few times. It sounds simple, but it’s important to make sure you’re going to love it before committing to buying. You’ll be spending a lot of time there, unlike hotels and timeshares, where you have the option of changing destinations.
Also, if you’re financing the purchase, many lenders will not consider a vacation property that’s too off-the-beaten path.
Know All Your Costs
Just like your primary residence, you have to understand the total price of ownership including property taxes, insurance, and any other carrying costs. When you’re not there, you’re still being charged for water, gas, electrical, trash removal, landscaping, and other maintenance services. Remember, you’re purchasing a property that likely needs year-round upkeep.
You’ll Want A Rental Income Option
You may want to consider purchasing a home with rental potential. Some of your costs may be offset by allowing renters while you’re away. From a long-term investment standpoint, rental income may allow you to build equity and eventually pay off the property. Do some research, talk to local agents and vacation rental property management companies. Before you even consider this option, find out if rentals are permitted in the area.
Vacation Property Checklist
Finally, consider what you value most about your lifestyle before taking on an additional commitment.
Call me today for more information.
Missed a Mortgage Payment?
There are times in our lives when the unexpected happens and we find it difficult to cope financially. It could be a job loss, an unexpected illness, the death of a loved one or separation and divorce. There may be enough money to get by for a few months, but soon families may find themselves overwhelmed as the bills start to mount and household finances begin to dwindle. If you’ve missed a mortgage payment, there are probably cash flow issues going on and you are likely juggling and deciding which debts to repay. While missing a mortgage payment is serious, you do have options.
When will the lender be concerned?
Whenever a borrower fails to meet his or her mortgage commitments as per the original mortgage lending contract, the lender will consider the borrower to be in default. It’s important to be proactive and speak to the lender to try to work with them. Lenders will first want to work with borrowers (and potentially the mortgage insurer, if there is one, to help bring the client current)
Consider the following steps:
Step 1: Contact your mortgage professional or lender immediately.
Homeowners may be reluctant to do this but the goal is to help you find a reasonable and affordable solution. There is a difference between a missed payment and a late payment. A missed payment is one that is completely missed and never made up. A late payment is one that’s not paid on time, but made up.
If there are a few missed mortgage payments, it might be difficult to get a bank loan to pay the arrears since it looks as if there might be an issue repaying the loan.
I can work with the lender to look at a number of different options including:
- A longer amortization period to lower monthly payments
- Switching from a variable rate to a fixed mortgage to provide a consistent payment plan you can budget for without fear of any future interest rate increase
- Refinancing or second mortgage
- There may be an option for a payment holiday or adding missed payments to the back of your current mortgage
Step 2: Be proactive about the next missed payment
If you’ve agreed to a temporary solution and you think you might miss another payment, make a call before you miss the payment. Pro-actively addressing this will give you more options than trying to deal with it when you have already missed payments.
Since every situation is unique, it’s important for us to talk as soon as problems start – it can be the difference between keeping a home and losing it.
The New Budget and You
If you’re a first-time homebuyer, the recent federal budget announcement may help you get into your first home.
The Federal government introduced two measures in their recent budget to address first time home buyers and affordability — A withdrawal increase to the RRSP Home Buyer’s Plan and a new Shared Equity mortgage program.
These measures are aimed at helping first-time homebuyers like millennials and new Canadians break into a housing market. The Shared Equity program, with its interest-free loan program may help earners most affected by the stress test.
Here are the two announcements:
Home Buyer’s Plan Withdrawal Increase. First time home buyers can now withdraw up to $35,000 from their RRSP, tax free, up from $25,000, for a down payment. If you have a co-borrower, that total could be up to $70,000.
First Time Home Buyer Incentive. Billed as a “shared equity mortgage”, the government will lend first-time home buyers’ money to buy a home. According to the budget document, this new incentive “enables homebuyers to reduce the amount of money required from an insured mortgage without increasing the amount they must save for a down payment.”
The loans can be worth up to 10% of the purchase price of newly built homes, or 5% of the price of resale homes. The program is available for buyers with household incomes under $120,000 annually, and the loan portion has a cap of four times annual income.
Shared-equity mortgages do not require interest payments or continuing principal repayments, with the loan repaid when the home is sold.
While that might not seem doable for many households, especially in higher-priced markets, the program is aimed at first-time homebuyers who have been shut out of housing by new mortgage stress-test rules.
Mortgage Professionals Canada, the association for mortgage brokers has estimated that the original stress test would compel about 200,000 potential home buyers to change their plans in the first two years of operation. This program may help a number of those people.
Of course, the devil is in the details, which are still being worked out and I will keep you up-to-date on any new information.
If you would like to know more or have any questions, please call me today. (780) 720-5185
Kahane Law Office offers a variety of legal services, including a number of real estate law services. We understand that buying, selling and refinancing property can be stressful, which is why we pride ourselves on our ability to simplify and explain the process to ensure that our clients’ transactions are as smooth as possible. Our team of experienced Calgary-based lawyers and legal assistants assist clients by facilitating residential and commercial transactions from start to finish. Examples of our real estate legal services include:
- Residential Real Estate Law (including purchases, sales, refinances, construction mortgages, bridge financing, private lending, title transfers, dower releases, filing and defending against builders’ liens, reviewing real property reports, and drafting and reviewing purchase contracts, rent-to-own agreements and condominium bylaws);
- Mobile & Manufactured Homes (including purchases, sales, refinancing, and drafting and reviewing purchase contracts and lease agreements);
- Commercial Real Estate Law (including purchases, sales, refinances, private lending, drafting and reviewing purchase contracts, joint venture agreements, lease agreements);
- Real Estate Litigation; and
- Notary Services for Out of Town Real Estate Transactions.
Through high standards and excellence in customer service, Kahane Law Office has seen tremendous growth in a relatively short time frame. Providing legal assistance on as many as almost 300 real estate transactions in a single month, Kahane Law Office has been responsible for well over a billion dollars worth of transactions.
While Kahane Law Office started primarily as a residential real estate firm, our office has grown into a full service law firm offering a variety of legal services. In addition to Real Estate Law, our experienced lawyers provide legal assistance in the areas of Civil and Commercial Litigation, Employment/Labour Law, Wills and Estates, Powers of Attorney, Corporate Services, Criminal Law, Family Law and Uncontested Divorces and Immigration Law.
Kahane Law Office’s awards include:
- Top Choice Award: Real Estate Law Firm 2015-19
- Top Choice Award: Top Family Law Firm 2013-14
- Calgary Choice Awards Winner 2011
- Calgary Inc. magazine ‘Best Places to Work’ 2006
The owner and founder of Kahane Law Office is Jeffrey Kahane. Jeff graduated from law school in 2000 and thereafter worked in the legal department of Canadian Pacific Limited (former parent corporation of CP Rail, CP Hotels, Fording and CP Ships) and at Ernst & Young’s affiliate law firm, Donahue, Ernst & Young. In 2004, Jeff’s entrepreneurial spirit won out and he opened Kahane Law Office.
Jeff enjoys bringing his warm, caring, and personable approach into the practice of law. He also regularly volunteers his time, leadership and teaching skills to many educational institutions, community enhancement organizations and family and child service organizations. Jeff’s great personal commitment to his community was recognized by the province of Alberta when he was awarded the Alberta Centennial Medal.
In addition to his community involvement, Jeff has also been recognized for his business leadership by a number of organizations. He was nominated for the Ernst & Young Entrepreneur of the Year Award, and most recently was featured in Business in Calgary magazine’s Leaders of Tomorrow. Calgary Inc. magazine also identified Kahane Law Office as one of the best places to work in Calgary.
Jeff works with a team of incredible real estate lawyers and staff. To find out more about our other real estate lawyers as well as information on finding the best real estate lawyer for you, please visit our website by clicking here.
We are a law firm that cares. To contact us regarding your real estate or other legal matter, please call us at 403-225-8810.
Down Payment Options and Tax Credits for First Time Home Buyers
Purchasing a home is a big financial commitment. In addition to moving costs and closing costs, most home purchases require a down payment of at least 5% of the purchase price. This is the amount of money you are personally committing. Coming up with a down payment can be challenging; however, there are options, depending on the lender, the location of the purchased property, the loan to value and your credit score.
Ideally, you’ve saved the down payment in a savings account or have an RRSP, from which you can withdraw up to $25,000 with no penalty under the Home Buyer’s Plan (HBP). If you choose to take advantage of the HBP, here is what you need to know.
RRSP Withdrawal Conditions
- Must be a resident of Canada at the time of the withdrawal.
- Must receive or be considered to have received, all withdrawals in the same calendar year.
- Only the person who is entitled to receive payments from the RRSP can withdraw funds from an RRSP. You can withdraw funds from more than one RRSP as long as you are the owner of each RRSP. Your RRSP issuer will not withhold tax on withdrawal amounts of $25,000 or less.
- Your RRSP contributions must stay in the RRSP for at least 90 days before you can withdraw them under the HBP.
- You have to buy or build a qualifying home for yourself, for a related person with a disability, or to help a related person with a disability buy or build a qualifying home.
- Also, there are a number of rules for repayment that we can review together.
If an RRSP withdrawal is not an option, here are some other avenues to consider:
- Non-repayable gifted funds from an immediate relative
- In some cases, you can borrow the down payment, just be aware that the loan payment will be factored into your affordability calculation
- You can sell some personal property. Make sure you have proof of ownership and a paper trail. If a lender sees a large amount of money deposited into your account, they want to know where it came from.
- You can sell any assets, such as stocks or bonds
- Use the cash value built up in your life insurance policy
- You can use your TFSA. Remember you can withdraw as much as you want tax-free. As with an RRSP withdrawal, there are few rules to repayment that we can review.
Because different lenders have different down payment requirements, I would be happy to discuss all your options.
I’d also like to mention the First Time Home Buyer’s Tax Credit (HBTC). You will qualify if:
- You or your spouse or common-law partner acquired a qualifying home; and
- You did not live in another home owned by you or your spouse or common-law partner in the year of acquisition or in any of the four preceding years.
A qualifying home includes existing homes and those being constructed as well as single-family homes, semi-detached homes, townhouses, mobile homes, condominium units, and apartments in duplexes, triplexes, fourplexes, or apartment buildings.
The tax credit is not connected to Home Buyer’s Plan so your eligibility for the tax does not change whether or not you also participate in the Plan.
Call me today.