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Tuesday, May 8, 2018

It’s not all about the rate: Amortization & Renewals




It’s not all about the rate: Amortization & Renewals
Have you spoken to a mortgage broker lately? When it’s time to renew your mortgage you have the freedom to do a number of things that are not possible at any other time without a financial penalty.  Renewal time is an opportunity.
Have you looked at your mortgage amortization lately?  Let’s say that you started your present mortgage 10 years ago and you had a 30 year amortization. You now have 20 years left on your mortgage but your situation has changed. Your children have grown up and one is ready to leave for college and another one will follow in a couple of years. An easy way to help the kids out would be to refinance your home.  However, the rules have changed and if the value of your home has not risen a lot and you have not paid down the balance you may not have the 20+% you need to withdraw the equity.
 Another possible solution would be to use the amortization on your mortgage to help you achiever your financial goals. 
You can extend the amortization and lower your monthly payments thus freeing up cash flow. 

Here’s an example. With a balance of $400,000 on your mortgage 

Amortization
Interest Rate
Monthly Payment
Savings
20 years
3.19%
$2252.

25 years
3.19%
$1932
$320
30 years
3.19%
$1723
$529


By adding 5 years to your mortgage you can lower your payments by $320 a month. If that’s not enough and you have more than 20% equity , in other words, your mortgage is less than 80% of the value of the home, you can extend your mortgage to 30 years with most lenders. This will free up $520 a month. When your children graduate you or your mortgage broker can contact the lender and have your amortization lowered again.  Note that changing the amortization can result in costs. Check with your Dominion Lending Centres mortgage broker before you make any changes to your mortgage.  For more information visit www.davidcooke.ca



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Monday, May 7, 2018

5 Ways you can Kill your Mortgage Approval

So, you found your dream home, negotiated a fair price which was accepted. You supplied all the needed documentation to your mortgage broker and you are waiting for the day that you go to the lawyer’s to sign the final paperwork and pick up the keys.

 All of a sudden your  broker or the lawyer calls to say that there’s a problem. How could this be? Everything has been signed and conditions have been removed. What many home buyers do not realize is that your financing approval is based on the information the lender was provided with at the time of the application. If there have been any changes to your financial situation, the lender is within their rights to cancel your mortgage approval. There are 5 things that can make home financing go sideways.
1 Employment – You were working for ABC company as a clerk for 5 years making $50,000 a year and just before home possession you change jobs. The lender will now ask for proof that probation for this new job is waived and new job letters and pay stubs at the very least. If you change industries they will want to see more proof that you are capable of keeping this job.
  If your new job involves overtime or bonuses of any kind that vary over time, they will ask for a 2 year average which you will not be able to provide.
 Another item that could ruin your chances of getting the mortgage is if you decide to change from an employee to a self-employed contractor just before possession day. Even though you are in the same industry, your employment status has changed . This is a big deal killer. .
2. Debt – A week or two before your possession date, the lender will obtain a copy of your credit report and look for any changes to your debt load. Your approval was based on how much you owed on that particular date. Buying a new car or items for the new home need to be postponed until after possession of your new home.
Don’t be fooled by “Do not pay for 12 months”  sales campaigns. You now owe this money regardless of when the payments start. Don’t buy a new car and don’t buy furniture for the new home. This will increase your debt ratio and can nullify your financing.
3. Down payment source – And yet again I reiterate that the approval is based on the initial information you have provided. You will be asked at the lawyer’s office to verify the source of the down payment and if it is different than what the lender has approved, then you may be in trouble. For example, you said that you were going to save the funds and then at the last minute Mom and Dad offer you the funds as a gift. There’s no problem accepting the gift if the lender knows about it in advance and has included this in their risk assessment but it can end a deal. .
4. Credit – Don’t forget to make your regular credit card payments. If your credit score falls due to late payments, this can kill your financing. If you have a high ratio mortgage in place which required CMHC insurance, a lower credit score could mean a withdrawal of their insurance once again , killing the deal.
5-Identity Documents  - This can be a deal killer at the lawyer’s office. The lawyer is required to verify your identity documents and see that they match the mortgage documents. Many Canadians use their middle names if they have the same name as their parent.   Lots of new Canadians adopt a more Canadian sounding name for their day to day lives but their passports and other documents show another name.
 Be sure to use your  legal name when you apply for a mortgage to avoid this catastrophe . Finally, keep in touch with your Dominion Lending Centres mortgage professional right up to possession day. Make this a happy experience rather than a heartbreaking one.  

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Wednesday, March 28, 2018

What are Credit Unions ?


What are Credit Unions?

We’ve all seen credit unions or advertisements for them, but do you know what a credit union is? What’s the difference between banks and credit unions?  How did we end up with credit unions in Canada?
 What is a Credit Union? -  it is a  non for profit money cooperative. Members pool their money to lend to other members for car loans, consumer loans and mortgages. The profits are not paid out to stock holders but they are returned as dividends to the members.
 How did this cooperative system enter the Canadian financial system?
 In 1900 Alphonse Desjardins read about a man in Toronto who borrowed $150 and ended up having to pay $5000 in interest to pay is loan off.  At the time, banks were for well off people and your average working class individual had to borrow from loan sharks .  Desjardins studied the cooperative banks in Europe and opened his first branch in the Quebec City suburb of Levis that year. At the time of his death in 1920 there were 163 branches in Quebec and 18 in Ontario.
    The first credit union branch opened Alberta in Edmonton in 1938. Credit unions can now be found in all provinces and territories.
    Why do mortgage brokers use credit unions?  They do not fall under the rules of the Canada Bank Act and sometimes we can get better terms for a client that is not available from a bank or other lending institution.  Credit unions often  tend to follow the guidelines set out for banks but sometimes they can be more understanding as the lending decisions are made locally and not in an office in Toronto.
 Next time you need a mortgage or a line of credit speak to your favourite mortgage broker. A credit union might have the right product for your particular needs.
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Sunday, February 25, 2018

Be creative when saving to buy a home


Homeownership is a goal for most of us and millennials appear to be the most optimistic group. According to an RBC poll, two in five millennials said they intend to buy a home in the next two years. But the cost of homeownership and things such as regulatory changes can make saving for a downpayment more difficult and for many put the dream of homeownership out of reach.
However, first-time buyers may not be looking at all their options. A little flexibility and compromise can help make ownership more accessible when considering the following:
Begin with a starter home: Think about your lifestyle for the next five to 10 years and make a decision based on that. Your dream home in your dream neighbourhood may still be yours, just a bit later in your life.
Get a renter: Could you afford the home you want if you rented out part of it? Many people create a basement suite or rent out a second bedroom as a way to offset their mortgage payments.
Consider co-ownership: Buying a property with family or friends is a great way to get your foot in the door. Discuss options with your mortgage specialist and be sure to establish a solid contractual agreement that will help avoid or mediate any future disagreements when selling the property, renegotiating terms or buying each other out.
Be patient: Style your home slowly. Get creative with chic but less expensive, gently used furniture or pieces that may not last a lifetime but will save you money today. Calgary Sun Feb 24, 2018
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Tuesday, February 20, 2018

6 Reasons To Get A Home Inspection Before You Buy







In an active housing market sometimes buyers are urged by their realtors to make an offer with no conditions. As a mortgage broker this always makes my heart skip a beat.  I know from experience that financing can go sideways and you need to be sure it’s in place before removing conditions.
  Another item that should not be forgotten is a house inspection. You may have a good eye for d├ęcor but house inspections are not for amateurs. We have all heard, “Never judge a book by its cover” so why would you make the most important purchase in your life without checking it out? This may be the best $300-$500 you ever spent. Here’s why.
#1 – It provides an out for the home buyer.
    Sometimes hidden structural issues like a cracked foundation or saggy beams can mean expensive repairs. If the price can’t be re-negotiated then you have a way to walk away from an expensive mistake.
   A few years ago I had a client who I preapproved for a mortgage. He found the perfect house in south east Calgary and made an offer which was accepted. He then ordered a house inspection while I arranged the mortgage. The inspector came back and told my client that there were 10 things he could see in the house that indicated that it had been used as a grow op. My client used this to break the contract and went on to buy another home without any problems.
#2 – Revealing illegal additions or improper renovations
    If the DIY seller wired the house improperly or used sub-standard materials your home insurance could be null and void if you had something happen in the future.  The home inspector for my first home noticed that the indoor outdoor carpet in the master bedroom had been glued to the hardwood, something that resulted in a multi-day project we were not counting on.
#3 Safety and Structural issues
Inspectors go up into the attic , and down into the farthest reaches of the basement and can spot things like mold, holes in the chimney, improper wiring or improperly vented fans.
#4 – Aiding in the planning for future maintenance expenses
   Unless the home is brand new you will need to replace a number of things; water heaters last 6-10 years, roofs about 20 years ,  furnaces about 25 years. . The report will include an estimate on the remaining life for each of these expensive items which will give you time to save for their eventual replacement.
#5 Bargaining power
  If you find something that will cost a considerable amount to replace or repair you can go back to the seller’s agent and ask for a reduction in the price. A leaky roof may cost $3000 to replace. Perhaps the seller would split the cost with you?  It’s worth asking.
#6 Peace of Mind
 Finally, for your own peace of mind. When you have spent all your hard earned cash on a home and will be paying it off for 20+ years, it’s easier to sleep at night knowing that the house won’t come tumbling down on you or that you paid too much .
While an inspection cuts into your budget at a time when you need all the cash you can get,  you will find it is money well spent. NOTE: If you live in an area where housing prices are rising quickly your appraisal may come in low as the property is appraised based on sales in the previous 90 days. Ask your mortgage broker and your realtor if this is the case for your area.
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