As we move into the 2017 spring mortgage market, there are several lenders offering great rates. While it is important to look at your rate, it is also vital that you understand the fine print. Not all rates are created equal. The key is to understand your mortgage and its features. Is your mortgage portable? Assumable? Is there a higher penalty when you have to pay it out early? How much can you pay down on your mortgage each year with no penalty? I believe that you need to have flexibility with your mortgage. This can mean many things to different people so be sure to ask about the fine print.Read More
The Government of Canada is proposing new mortgage rules that will come into effect on Oct 17th 2016. Here is the link to the office announcement: http://www.fin.gc.ca/n16/data/16-117_1-eng.asp
At this point, we can only interpret the final outcome as we are still waiting for lender’s feedback and more details. However, the biggest takeaway is that as of Oct 17th all insured mortgages that use a 5 year fixed rate will no longer qualify using the 5 year discounted rate. To be clear, this proposed rule change is for purchasers with less than 20% down. Purchasers with 20% down will not be effected.
Now this same rule came into place some time ago for Variable rate mortgage and for mortgages with terms of less than 5 years. However, we could still qualify clients mortgage amount with a discounted rate if they chose a 5 year fixed rate.
Let’s use the numbers in an real life example:
Let’s assume your family’s income is $80,000 and you have no debt.
Currently, we calculate your Housing affordability or GDS ratio based on 35% of your gross income. (We can use higher ratios with excellent credit but that is a separate discussion!)
So this allows you to spend $2333 per month for housing. Subtract off $100 for heat and $250 for property taxes and that leaves $1983 for your mortgage payment.
Today, you can qualify for a mortgage of $ 445,500 based on the contracted rate of 2.44%.
As of Oct 17th you will qualify for a mortgage of $354,000 with the posted rate at 4.64%
The difference is $91500.
This may be a good move by the Government of Canada or a bad move. It really all depends on your perspective on housing in Canada.
Please call me with any questions at 403-688-0166.Read More
I have worked with hundreds of self-employed buyers and I find that many do not have their financial paperwork handy when they first come to my office. This can create a lot of stress as you go through the process of buying or refinancing a home. If your paperwork has been thrown away or lost, it takes time to replace. To wait for this information in the mail while you a financing conditions deadline is a stress you don’t need! I advise my clients to start a binder and keep 3 years information so that it is ready to grab and go.
Here is what you want to keep in your binder: 3 years Tax returns (including statement of business activities if you are a sole proprietor), 3 years Notice of assessments, and an up to date statement of account to confirm your personal taxes are paid. You will need to confirm that you are self-employed. This can be done with GST returns, business licenses, or articles of incorporation. I would also add 3 years financial statements to the binder if you are incorporated.
Tip: Set up an account with CRA. http://www.cra-arc.gc.ca/myaccount/
This allows you to have up to date access to your Notice of Assessments, tax returns and Statement of account. Your password has to be mailed to you so make sure you set this up today, when you don’t need the information immediately. It is a free service offered by CRA and a great tool and resource.
A Home Equity Line of Credit (or HELOC) has become a popular alternative to borrowing money. The interest rates are based on prime rate, generally substantially lower than the rates you experience with credit cards or unsecured lines of credit. With interest rates sitting at an all time low, many people are considering HELOCs. Here are a few tips:
<li><strong>Make a plan</strong> – Easy money can promote spending beyond your needs. Make sure that you establish exactly what your HELOC will be used for. In most cases they are used to consolidate higher interest debts such as credit cards. It is important to stay financially disciplined. If there are some big ticket expenses coming your way such as college, or an unexpected and costly medical expense —a HELOC may be a great idea. Since the loan is backed by collateral, the rates are lower than they’d otherwise be. (A HELOC shouldn’t be used for day-to-day expenses.)</li>
<li><strong>Be Realistic</strong> – It is advised that you only take out an amount that you will be able to pay off in two to five years, especially if you are thinking about moving anytime in the near future.</li>
<li><strong>Improve your future.</strong> – Typically, using equity to improve the value of your home is always a good move – especially if you decide to sell it soon afterward, and can use the increased selling price to pay off your loan. Note: Rates, terms, and fees that make up the deal you’re offered will vary by lender, so let’s do the shopping around together to make sure you get the best deal possible. I’m always happy to answer any questions you might have & if any of your friends or family members have general inquiries about qualifying for a mortgage, feel free to send them my way!</li>