Federal Budget Proposal for First Time Buyers

I’m sure you’ve heard the news regarding the new Federal Budget proposal regarding First Time Homebuyer Program. I thought I’d shed light on what’s been developing.

As of March 19/19′, RRSP withdrawal limits have increased from $25,000 to $35,000 per person, or $70,000 per household. If you have been separated or divorced, you can now again access your RRSP tax free.

The bigger splash made by the Federal government, the CMHC incentive plan, will likely be in effect in the Fall. The proposal? CMHC will contribute 5-10% of your purchase price, lowering your monthly payments; Lending 5% of the purchase price on resale homes, and 10% on new build homes.

Scenario: On a $400,000 home, the buyer will have to come up with 5% or $20,000. Equalling a mortgage of $380,000, CMHC would kick in 10% or $40,000 bringing the loan down to $340,000. On a 3.5% mortgage rate, that equals savings of more than $2,700 / year.

There are a few proposed qualifications / stipulations for this program:
– Must be paid back to CMHC once either the home is sold or put up for rent. This is where I have a problem. The government has an equity stake of your home. If you were lent 10% of the home at time of purchase, you must pay back 10% of the current market value at the time of sale or rent. So if your home increases in value you are actually paying back more, however if it decreases, you will pay back less.
– Not eligible to buyers putting 20% down or more
– Maximum of $120k household income

Have questions? Send me an email or give me a call today!

What NOT to do

So you’ve submitted your list of paperwork to your mortgage specialist, found the home of your dreams, and gotten an approval on the mortgage. You’ve even signed the mortgage commitment and given your downpayment! You are probably thinking, “phew! We are in the clear!”

This is a mistake that too many clients make, and its one that needs to be properly communicated by the mortgage expert.
The fact is, until your mortgage has funded and you have taken possession, the home is NOT yours.

Below are 14 things NOT to do before getting your keys!

 

10 Things To Consider

Things to consider


I want to say these are 10 things that your mortgage expert should explain to you, however the reality is that sometimes the message is not clearly explained. So, below are 10 things to consider when looking for a mortgage or refinance, provided by Axiom Mortgage Solutions.

10 Things to Consider

10 Questions to Ask Your Banker

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If for a reason you choose to work with your bank, rather than your broker, these questions are very important to ask before signing a mortgage commitment. Remember that you are working with a professional who is representing an entity, rather than yourself.

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My Story

My Story


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Not many people believe this, but when I was a little kid, I didn’t dream of joining a Mortgage brokerage.

Exploring stage

I call this the exploring stage in my life because man did I move in crazy directions. I took Business Administration at NAIT and was instantly fascinated by the finance world. From then on I knew I wanted to pursue a career in that field, but was not sure to what capacity. Right after graduating I applied at a Financial Institution and started my career as a Personal Banker. My dream was to become an investment banker, as I had gotten my mutual fund designation. Unfortunately, after a long year and a lack of mentorship / support, I quit. I felt defeated and thought this is not what I imagined my education was for. So I made a rash, emotional decision… I picked up a skilled trade so that I could make six figures like my fellow 20 year old oil worker friends.

Little did I know, I would only last 30 days. If there’s something I learned from that experience, it was that I was not cut out to work with my hands. Looking back it was quite admirable that my co-workers didn’t literally kill me; let’s just say I wasn’t exactly an asset. However, I did  gain a LOT of respect for those trade workers.

Growing Stage

This is where I started to grow into the mature professional I am today (okay, only occasionally mature). I quit the trade job when I was referred by a friend to join a home builder in the Lake Summerside community. There I made life long friends, received the coaching I needed, and truly grew as a professional. I worked my way to becoming a Sales Representative, where I was primarily selling duplexes and townhouses.

I loved being able to help people make the biggest purchase of their life, and get to experience the process with them. While I enjoyed real estate, I always had that empty void inside me wanting to pursue the financial field. Clients would come in and I would try to prequalify them in the show home!

Wanderlust Stage

After realizing this wasn’t the long-term goal, and summing together a decent sized savings, the timing was perfect. I left the homebuilder, and flew to Italy for a bit of a break. My diet consisted of pizza, gelato, wine and Peroni’s; I was living the dream.
I came back and set my eyes on re-joining a Financial Institution, but this time with the goal of getting into a Mortgage Specialist role in the long-term.

Fresh start, with intention

I joined an Institution that best fit with my values and ethics, and worked there for a year. During my tenure, I learnt a lot about the industry and re-gained confidence in the financial field. I discovered in the process that the best way I could sincerely help clients and fulfill my own values, would be to become a Licensed Mortgage Professional rather than work as a Mortgage Specialist in the bank. This decision wasn’t easy, but being able to shop the entire mortgage market for a client versus only being able to provide products from the institution that I work for was the deciding factor.

The Exciting Stage

In November I started my licensing course and committed a lot of time to it, practically obsessing over it, and passed the final exam at the end of January 18’. I am now a Licensed Mortgage Professional, and created Black Tie Mortgages, which is operated under Axiom Mortgage Solutions. I chose to operate under Axiom because they are the largest independent brokerage in Canada, giving me (in turn my clients) access to over 30 lenders and hundreds of products. They also have one of the best technological software systems in the industry, letting me give the best service to my clients.

 

That’s my story

That’s it thats all folks, my story in a nutshell. You might’ve noticed that I am not afraid to change something if I don’t feel fulfilled. Change is scary, but do you know what is scarier? How fragile and short life can be. As long as you’re growing and following your heart, everything will work out. This career is the best of both worlds for me, and as I am already obsessing with every task I have, I know this was worth the journey.

Purchase Plus Program

Purchase Plus Program

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Purchasing a home and giving it a face lift can be a very desirable option. What type of buyers might find value in this program?

  1. Someone looking to turn a previously lived in house, to a personally designed home.
  2. A buyer wanting to turn an unfinished basement, into a legal suite to earn rental income.
  3. A buyer who’s most important criteria is location, and is willing to purchase a property that needs work. After all, you can always change the look of your home, but you can never pick it up and move it.
  4. …and many more! The list is endless!

Due to many questions about this highly desirable program, I have made a brief summary on how it all works!

*Insurance premium is subject to change

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Closing Costs

Closing Costs

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You’re on the homestretch of receiving funding for your mortgage! After getting an approval, meeting all conditions of your offer to purchase, you’ll have gotten to the last step of moving into your home. Closing with the lawyers. There are costs associated with finalizing the purchase, and my objective from this post is to prepare you so that there aren’t any surprises.

Down payment

At this point, your lawyer will ask for a cheque with the down payment that you agreed to, minus any deposits you’ve already made.

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Depending on when you move into your home, you will have to pay the difference of taxes for the year. The adjustment insures you’re not over or under paying depending on when you move in. The calculation can be confusing, but to put it simply; When the property is sold, if the taxes have been paid in full, than the buyer will owe the seller money for their share of the taxes. If the taxes have not yet been paid then the buyer will receive a credit for the seller’s share of property taxes. The lawyer will prorate and calculate to the day you take possession.

Interest Adjustment

Depending when you move in, and what day you start making payments, you are responsible to pay the few days difference. (Ex. Take possession on the 25th of March but want to start making payments the 1st of April)

Legal fees

This varies from lawyer to lawyer. When shopping around for costs, make sure to clarify if the quote is only legal fees or does it include an estimated disbursements charge (Interest adjustment, tax adjustments etc.)

Conclusion

There could be more fees depending on the lender you are with, but the above are the most common closing costs. Of course one must also keep in mind any furniture purchases, blinds, any renovations that needs to be done etc.
Make sure to discuss with your lawyer, mortgage broker, realtor and anyone else involved, with any closing costs that you will incur. It’s best to protect yourself from any unpleasant surprises.

 

Conventional vs High-Ratio

Conventional vs
High-Ratio

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Introduction

This blog is a quick, to-the-point comparison that can help someone who is looking to buy a home, understand what type of implications there could be from the downpayment one might make. The difference between making a sizeable downpayment and the bare minimum can completely change your cashflow and what your finances look like.

Conventional

A conventional mortgage means putting 20% of your total purchase price as down payment. Meaning if the purchase price of home is $300,000 you would put down $60,000 to secure it. For first time homebuyers, that’s quite a chunk of change, and is more common with existing home owners who have existing equity to put down. The reason a conventional mortgage is most ideal and will save you money in the long run, is because you can avoid having to pay mortgage default insurance (Provided by CMHC, Canada Guaranty, or Genworth Financial Canada). However, due to recent rule changes, if you were to put 20% down, your interest rates are actually higher than someone who’s put 5% down. Not by a large amount (about 0.10%). Add insurance premiums, and your monthly payments, and payments as a high-ratio buyer are much higher.

High-ratio

High ratio is a term that relates to your overall loan to value ratio, being above 80%. If your home is $300,000 and you can secure it with $15,000, you pose a greater risk to the lender as your loan amount compared to the value of the home is higher. Depending on your down payment amount, determines how much of an insurance premium you will pay over the term. Greater the loan to value ratio (risk to lender), greater the insurance premium. For First time buyers, there is a Government incentive, allowing buyers to break their RRSP without incurring any fees or taxes. It must however, be paid back in 15 years.

My experience

I purchased my first home with exactly 5% down, as I needed all new furniture and money for closing costs. I was charged a 4% insurance premium to add to my monthly mortgage payments. What I did was I looked at a chart on CMHC’s website, which was who my lender chose to use, to see how much exactly I would be charged. For example, it would show that if your loan to value ratio is 90% (a 10% down payment), then the insurance premium will be X% of the mortgage amount. Once I figured this out, I thought I would rather put less down and use more of that money on furniture and closing costs, since the difference in payments were not substantial. In your case the extra $5000 could be the difference between an extra few hundred bucks per month or not! See the following link https://www.cmhc-schl.gc.ca/en/hoficlincl/moloin/hopr/hopr_007.cfm

Conclusion

Ideally, putting a bigger dent before starting to accumulate interest on your mortgage, and avoiding insurance default premiums, is the most ideal. However, speaking with an expert, and determining what insurance payments might look like (reviewing the chart linked above etc.), will make the idea of home ownership that much less overwhelming.

6 Step Home Buyer Guide

6 Step Home Buyer Guide

 

Guide

 

Below is a simple step-by-step guide that summarizes what buying a home entails. Whether it’s your first purchase or your fifth, the following guide can act as a great educational piece, or a quick and easy refresher.
Questions? Send me an email or give me a call! I am also providing a PDF link to the guide below, to download for quick use: Home Buyer Guide

 

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Fixed vs. Variable

Fixed vs. Variable

 

When searching for a mortgage, there can be a lot of information to process. Some products are more publicized or advertised as the better option, when in reality mortgages are FAR from one size fits all. To help make all the information coming your way easier to understand, below are the main differences between the Fixed and Variable rate options.

Fixed

This type of mortgage will charge you a certain interest rate that will not change throughout the term of your mortgage. This is an excellent option for the risk averse, who would sleep much better at night knowing exactly what tomorrow will look like. Especially with what has been going on recently with the Bank of Canada’s policy changes and rate hikes, it’s not crazy to want to fix your payments. Something that 99% of lenders gloss over however, is that a prepayment penalty is approximately 4.5% of the balance, vs about 0.5% of the balance on variable. However, that is only a concern if you make the choice to cancel your fixed mortgage to switch to a variable mortgage, renew your mortgage earlier than planned, or want to move lenders part way through your term. Staying committed to your fixed agreement will avoid those penalties.

Math for prepayment penalties:
Fixed – Approx. 4.5% on a $300,000 balance = $14,000 penalty
Variable – Approx. 0.5% on a $300,000 balance = $1,500 penalty

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Variable

Variable rate means just that, it is subject to change with the Bank of Canada’s rates. Variable rates are much lower than fixed rates (on average 0.75% lower) and for good reason, the lender is not protected like they are on a fixed. The Government of Canada has raised interest rates recently, almost always in 0.25% increments at a time (approx. $13/mo. per $100,000 of mortgage). When comparing options between fixed and variable, keep in mind that with a 0.75% difference the Bank of Canada would have to raise its rates more than 3 times for your rate to be higher than the current fixed rate. Another thing, variable terms are almost always convertible to fixed should you want to throughout the duration of your term. There are eight prescheduled Bank of Canada meetings per year on variables like the interest rate adjustments, so it definitely won’t blind side you overnight. This is a good option for those who are comfortable with changing rates, and are looking for a lower interest rate. 

Conclusion

Simply put, would you like to have the comfort of knowing you are protected if rates go up but paying a little more now, or take a calculated risk and follow the Bank of Canada’s rates. Your guess is as good as mine as to where the Bank of Canada’s rates will be in 3-5 years, and there is something to be said about that. It’s all about having the conversation, and knowing what you are comfortable with. There are a lot of options out there; making sure you’ve discovered them all is key to making the right decision.

Leave your questions and comment below – thanks for reading!

*New blog posts are released every third Tuesday! Stay tuned for the next one!*