How would you like 10% of your CMHC fees back?

Taxes keep going up, the cost of gasoline is going up. How are you going to get ahead these days? You need to find rebates, deals and money back offers. Here's one from CMHC. If you can make your home more energy efficient or if you buy a home that is already Ener Guide rated at 82 or above you qualify for a rebate of up to 10% of your CMHC fees. Take a look at your mortgage documents and you may have paid $11-12,000 in fees when you bought your home. You could get $1100 to $1200 back just for proving your home meets the energy efficiency ratings. 
   Now here's the item your realtor or bank do not tell you. If you make your home for energy efficient 4 years after your purchase, you can still apply for the rebate. How sweet is that?
 This rebate is also available through the private mortgage insurers, Genworth and Canada Guaranty  .  You do have to prove that you have improved the energy efficiency and you need to do this with an energy audit. A full explanation is available from CMHC and I have added the link to the bottom of this article. If you need more information contact me, David Cooke, your Calgary mortgage broker.



CMHC fee rebate explained  

Purchase Plus Improvements explained

   

So you found the perfect house in your price range, close to schools, and shopping but the kitchen is from 1956. Your down payment will clean out your bank account and you won't be able to afford to renovate for at least a few years. How about a program where you could have the renovations done soon after possession date? Would that interest you? Here's a great video that explains the process. Contact me if you have any questions.

Beware the pitfalls of collateral mortgages

Back in 2011, TD came out with collateral charge mortgages. The other banks soon followed suit. They found out that 80% of clients would stay with them regardless of the rate when they found out that it would be expensive to move their mortgage. Here's an article written at the time about the pitfalls of collateral mortgages. It still rings true today.

Many banks are now asking borrowers to sign collateral mortgages, but you could end up tied to this bank for life.

By: Mark Weisleder Published on Sat Jul 30 2011

When you apply for a mortgage, you usually just ask about the term, amount, interest rate and monthly payment. Not many people understand the difference between a conventional mortgage and a collateral mortgage. Yet many banks are now asking borrowers to sign collateral mortgages — and it could result in them being tied to this bank, for life.

With a normal conventional mortgage you bargain for a set amount, rate and amortization. Say the property is worth $250,000 — you bargain for a $200,000 loan, at 3.5 per cent, a five-year term/25-year amortization, payments of $998.54 per month.

A conventional mortgage is registered against the property for $200,000. If all the payments are made on time, the mortgage is renewed on the same terms every five years and no prepayments are made, the balance is zero after 25 years.

Should another lender decide to lend you money as a second mortgage, there is nothing stopping them from doing so, subject to their own guidelines. Under normal circumstances the principal balance on a conventional mortgage goes only one way, down. In addition, banks will accept “transfers” of conventional mortgages from other banks, at little or no cost to the consumer.

A collateral mortgage has as its primary security a promissory note or loan agreement and as “backup,” a collateral security, being a mortgage against your property. The difference is that, in most cases, the mortgage will be for 125 per cent of the value of the property. In our example, the mortgage registered will be for $312,500. But you will only receive $200,000. The loan agreement will indicate the actual amount of the loan, interest rate and monthly payments.

The collateral mortgage may indicate an interest rate of prime plus 5-10 per cent. This will permit you to go back to this same bank and borrow more money from time to time, without having to register new security. The lender will offer you a closing service, to register the mortgage against your property, at fees that will be cheaper than what a lawyer would charge you. Sounds good so far, doesn’t it?

However, this collateral loan agreement has different consequences, which are usually not explained to the borrower.

 • Most banks will not accept “transfers” of collateral mortgages from other banks, so the consumer is forced to pay discharge fees to get out of one mortgage and additional fees to register a new mortgage if they move to a new lender. Thus the bank is able to tie you to them for all your lending needs indefinitely because it will cost you too much to move.

 • Lenders may be able to use the collateral mortgage to offset any other unpaid debts you have. Offset is a right under Canadian law that says a lender may be able to seize equity you have in your home, over and above the mortgage balance, to pay, for example, a credit-card balance, a car loan, or any loan you may have co-signed that is in default with the same lender. In essence any loans you may have with that lender may be secured by the collateral mortgage. Nobody goes into a mortgage thinking about default, but “stuff” happens in people’s lives and 25 years is a long time.

 • Let’s say your house value is $200,000. A collateral first mortgage registered on the property is $250,000. The amount owing on the mortgage is $150,000. If you were to need an additional $20,000, but the lender declines to lend it for any reason, then practically speaking you won’t be able to approach any other lender. They will not go behind a $250,000 mortgage. Your only way out would be to pay any prepayment penalty to get out of the first mortgage and pay any additional costs to get a new mortgage.

 • Let’s say your mortgage is in good standing but you default under a credit line with the same bank. The bank could in most cases still start default proceedings under your mortgage, meaning you could lose the house.

 • Some lenders are offering collateral mortgages in a “negative option billing” manner. Unless you are informed enough to say you want a conventional mortgage, you will be asked to sign documents for a collateral mortgage.

One bank is only offering collateral mortgages.

I spoke with David O’Gorman, the president and principal mortgage broker with MortgageLand Inc. He tells me it is his duty under the law to ensure the “suitability” of any mortgage he arranges for a consumer.

He would be hard pressed to justify the recommendation of this type of collateral first mortgage to any consumer, without disclosing both verbally and in writing the points listed above, and he believes the consumer should have their own lawyer review everything before they sign.

Mark Weisleder is a lawyer, author and speaker to the real estate industry. Email mark at mark@markweisleder.com

When the banks say "gotcha"

Recently we have all seen the 5 year fixed rate of 2.99% being advertised by BMO. The promotion ends today. They are offering a rate that former finance minister Flaherty would not allow when he was in office. It sounds like a great deal but is it? Did you know that the only way out of this mortgage is by selling your house? The only other way is to pay all the interest due until the mortgage expires. Did you know that the pre-payment privileges that we take for granted are cut in half? What may look like a great deal can be one of the times when you know someone at the bank is saying "gotcha". This is one reason why it is so important to consult a mortgage professional rather than trying to go it alone.
You want some of these record low rates on the market but you’re locked into a mortgage. Just break it, right?
Not so fast, there’s a key question you need to ask before you commit to break a mortgage: how much will it cost you? Actually, it’s a question you should be asking before you sign up in the first place.
Don Hurman, a 64-year-old from Okotoks, Alta., learned the hard way when he incurred a $10,000 penalty after selling his house halfway through a five-year mortgage term. Some mortgages let you port the loan to a new home but Mr. Hurman was forced to break his and pay what is called the interest rate differential.
Here's an article that delves more into this problem. 
http://business.financialpost.com/2014/04/12/be-careful-before-you-break-that-mortgage/

Affordable Housing in Calgary

As anyone in Calgary knows, rental housing is becoming more and more difficult to find. The vacancy rate is in the 1% range and dropping. Housing prices are rising in response. How can anyone pay rent and save a down payment for a home while paying their bills? It can be tough. Affordable Housing Calgary has come up with a solution. They will provide 2/3's of the down payment for a condo unit. You only need $2000 for your portion of the down payment. If you are interested in this program , contact Calgary Affordable Homes

If you want to purchase a home and need help, feel free to contact me at 403- 836-1201 or via my website at http://davidcooke.ca .

New to Canada issues

I recently came across a problem with a couple which I had not encountered before. My clients wanted to buy a home after renting for the year and a half since they arrived in Canada. They saved diligently and were able to put down a 10% down payment. When I asked them if the money was in the bank they replied "yes".
I told them that I would need an employment letter and recent pay stub and 3 months of bank statements. They quickly responded with the required items.
When I reviewed the bank statements I found that they had just put the bulk of the downpayment money into their account a week before. The reason CMHC and the lenders ask for the 3 months of bank statements is to show that the people have saved the money over time.
This is a requirement of the Anti- Money Laundering laws passed a few years ago.
I asked them where the money came from and they said they had saved it. When I asked where, they told me that in their country people do not trust banks so they put the money under their mattress. In this case, they rented a safe deposit box and saved it there.
When I spoke to the lender they said this was not acceptable. The funds could easily be the results of crime..
In the end, the bank they had their account in was the only lender who could help them.
Personnel at the bank had seen them withdraw hundreds of dollars and then go to their safe deposit box. Whey they never said anything to this couple I'll never know.
Be sure to put your funds for downpayment all in one account. Make sure your funds are there for at least 90 days. If you are using RRSP's you must have held them for at least 90 days.
If you follow this simple rule, you can avoid disappointment and get into the house of your dreams faster.If you have any questions about down payments and the New to Canada program , contact me via my website.

Understanding yoru Credit Report

Understanding Your Credit Report

As credit has become more and more abundant in our society, your credit report, and thus your credit rating, has become more important in your daily life. Your credit rating affects all aspects of your financial activities when it comes to borrowing money. Your credit rating also has the ability to affect the job you get, the apartment you rent, and even the ability to open a bank account.
Your credit report itself is simply a listing of all of your mortgage and consumer debt. Here in Canada, the two main credit reporting agencies are Trans Union and Equifax. Both agencies have a credit history file on anyone who has ever borrowed money. Every time you borrow money, or make a payment on a loan or credit card, the lender then reports the information about the transaction to these two agencies. In addition to credit information, you will also find liens and judgments on your credit report as well as your address and possibly your work history. The accumulation of all of this information is called your credit report.
The information on your credit report varies based on your creditors and what they have reported about you. Potential lenders and others, such as employers, view your credit history as a reflection of your character. Whether we like it or not, our financial habits have a lot to say about the way in which we choose to live our lives.
The credit score, or beacon score, is a number which gives mortgage lenders an idea of your lending risk.
Credit scores range from 300 to 900, the higher your credit score the better. The mortgage products and interest rate that you will qualify for are often determined by your credit score.
One thing that many people do not know is that you have the legal right to obtain a copy of your credit report. A mortgage professional can help you obtain a copy of this report and go through it with you to verify that all of the information is true and correct.
The good news is that your credit report is a working document. This means that you have the ability over time, to repair any damaged credit and increase your credit score.

Did you know that a mortgage broker can help you improve your credit rating and get you the financing you need for a home?  

Contact me for more information.