Building a Custom Home with less than 20% downpayment

How our new Liberal government will affect realtors and housing in Canada

One month ago today Canadians gave Justin Trudeau and the Liberal Party of Canada a majority. Some people were unsure as to how this would affect Canada's economy and the housing market. I am optimistic that this will be a good thing for realtors, mortgage brokers and the general home buying public.

It was a very clear verdict that Canadians were seeking real change,” said Pramod Udiaver, CEO of online advisor service, Invisor. “The Liberals campaigned and won with a focus on the middle-class,” says Udiaver, “with many of their promises attempting to make a meaningful difference for middle-income families.”

While most Canadians still struggle with paying too much in taxes, trying to maximize savings while making sound financial decisions, the new Liberal majority government will have real impact on the nation’s real estate market.

 

First-time buyers might get incentives

One way the Liberals propose to deal with housing affordability is to analyze all factors that help or hinder housing affordability in Toronto and Vancouver and in other parts of Canada.

The Liberals have also made vague promises about helping the first-time homebuyer, explained Robert McLister, independent mortgage broker and founder of Ratespy.com. “This might mean looser policies, such as longer amortization limits for first-time buyers, but so far few details have been released.” First time home buyers might qualify for a 30 year mortgage term, which would lower their monthly payments

Changes to the Home Buyers’ Plan

Homeowners may, yet, come out ahead with the Liberals, explained McLister. “They’ve promised to open up access to the Home Buyers’Plan (HBP), which will give more people access to money for a down payment on a house.”  The HBP has a limit of $25,000 and the Liberals don’t plan to increase that but they will loosen the existing qualification rules for the HBP to allow more Canadians affected by sudden and significant life changes—such as divorce, death of a spouse or an employment move—to access their RRSP savings for a down payment.

   This will be a great help to many Canadians. I don't know how many times I have had couples who are splitting up  call me saying that they want to refinance their house to allow one  spouse to  buy out the other one. Unfortunately, many times there isn't enough equity in the home for this to happen and dad ended up moving to the basement. Think of the stress on the children and the family as a whole. 

   Now , if there's a shortfall, we can access RRSP money to make up for any shortages. Now Dad can get his condo and Mom and the kids avoid the conflicts that arise by being stuck under one roof. 

      This plan can also be used in the case of the death of a spouse. Let's say, Dad dies. Mom is alone in her home and trying to sell it. You want her to move in with your family but due to her age and infirmities she needs to live in a house with lift to access the bath tub and you need to to widen the doorways and build a wheelchair ramp. Accessing RRSP money to pay for these renovations will now be possible. 

  Finally, if you lose your job and find one in Ontario. The only problem is that by the time you pay realtor and legal fees to sell your home you have nothing left to pay for the move. Now  you can pay for your moving expenses to move to the new job using the Home Buyers Plan.  

   In conclusion, the changes we can expect will help to keep home sales up during this  very challenging time in Western Canada. We look forward to seeing these changes enacted as soon as possible. 

David Cooke is a Calgary mortgage broker. Find out more at his website at http://davidcooke.ca 

Renovation Financing

 My colleaguem Pam Pikkart published this great blog on renovating. Here it is in its entirety. 

Renovation Financing

So you have found a great house.  The neighborhood is wonderful.  Mature trees, lower property taxes, schools within walking distance and easy access to a variety of amenities.  But the house is, how do I put it, retro at best.  You wonder how you will tolerate the bright pink carpets and the vast array of energy inefficient items has you wondering if you will be able to pay the astronomical heating bills.
What now?  Should you look for something newer? No way my friend, there is a mortgage product made just for this situation and today we are going to take a look.
Purchase Plus Improvements is the name of this product and this is how it works. You head out with your Realtor to choose the best house for your needs.  You write up an offer and bargain your way to the best price.   In the meantime, you contact a qualified contractor or other service providers, to get quotes for the work you would like to do.  These quotes are provided to the lender as a part of the financing process.  The lender reviews and provides the thumbs up.
But you before to rush out to do just this, you really need to know a few things.

1. The day of possession, the funds are transferred for the purchase of the home so you are able to move in and start the renovations. The balance of the funds are held in trust with the lawyer and will not be released until the work is 100% complete. An appraiser will be sent to your home to verify the work is done. You may want to arrange access to a line of credit so you will be able pay for any deposits or other costs in the interim as you will only get the funds upon completion.
2. There is a maximum amount you are allowed. Most lenders will allow you $40,000 or 10% of the home’s value as your renovation budget.
3. You will have to have at least 5% of the improved value to put down. For example, if your new home costs $300,000 and you are going to do $30,000 of improvements, you will need to have $16,500 down ($300,000+ $30,000 = $330,000 x 5% = $16,500) instead of $15,000.
4. Not all improvements you propose will be acceptable to the lender. The Travertine tile imported from Italy may be gorgeous but it does not necessarily add a dollar-for-dollar value.   Lenders like new kitchens, flooring, bathrooms, siding, windows, furnaces, garages, roofing or other substantial upgrades. They will sometimes allow appliances or landscaping but this is a case by case decision.
5. You must do the upgrades you said you would do to get the funds. It has happened that once a homeowner took possession of their home they opted to make different improvements, however the lender is not likely to release the funds for work they did not agree to in the first place.
6. There is a time restriction. Most lenders allow only 90 days for the work to be completed.  If some of the work is seasonal you should make sure your lender will allow a relaxation on the restriction.

This product can also be great for people purchasing a brand new home.  This is an easy way to get the funds you need to finish the basement or the fencing.
There is also a similar program for homeowners looking to upgrade their existing home.  In this case, the value of the home is determined via an appraisal “as is” and a complete system.   The current mortgage is paid out and the balance of the funds are held in trust with the lawyer until the work is complete.  The same restrictions as the Purchase plus Improvements apply.
The really nice part of this program is that you are able to borrow the funds to complete your renovations at today’s very low rates and your mortgage payment will be only slightly higher.
So there you have it.  A simple way to get the funds you need to turn your house into your dream home. Your mortgage professional at Dominion Lending Centres can answer any questions you may have about this program.

Let Someone Else Pay your (Second) Mortgage

The concept of building your wealth through rental properties is simple because they pay for themselves. You purchase and manage the property but your tenants actually pay for the properties and  whatever extra is profit for you. It's hard to resist because it's such an easy concept. Aside from any profit gained in charging your tenants more than the property costs you, there is another advantage for you. While your tenants occupy the property, its value continues to grow and you reap the benefits of the increased property value. That's where the big payoff lies. Your expenses are in any property repairs or upkeep that may arise from time to time. Most small items can be and will be taken care of by your tenants. The biggest component of running rental properties, to give you maximum profit from the least amount of hassle, is finding the right tenants. Dealing with tenants who do not pay or cause property damage can be issues that you'll have to deal with occasionally. The less you have to spend time and money on bad tenants, the more money you'll make. Long term tenants are the best choice. They have a commitment to the property and will consider it their home, not just a house they're renting. Another factor to consider is the type of home you purchase to rent. Cheap properties are tempting to acquire immediately because they require fewer dollars from you. However, middle and upper-class properties will require less maintenance and their values will appreciate better than cheaper homes, giving you a bigger payoff when you decide to sell. For more information on how you can invest in real estate contact David Cooke - 403-836-1201 or visit http://davidcooke.ca

 

Steps to buying a home by CMHC

Shopping for a Mortgage Renewal

Shopping for a Renewal

While most Canadians spend a lot of time, and expend a lot of effort, in shopping for an initial mortgage, the same is generally not the case when looking at mortgage term renewals. By omitting proper consideration at the time of renewal, this practice costs Canadian citizens thousands of extra dollars every year. Nearly 60% of borrowers simply sign and send back their renewal that is first offered to them by their lender without ever shopping around for a more favourable interest rate.
Homeowners should never accept the first rate offer from their existing lender. Without any negotiation, simply signing up for the market rate on a renewal is unnecessarily costing the homeowner a lot of money on their mortgage.
Generally it is a good idea to start shopping for a new term between four and six months before your current mortgage term expires. Many lenders send out your renewal letter very close to the time that your term expires and this does not give you ample time to arrange for a mortgage term through a different lender. This means that you need to be tracking your own mortgage term timeframe and know when it is time to start shopping for a good mortgage renewal rate.
Before you ever hear from your lender about renewing your mortgage term, have a licensed mortgage professional shop around for you, you will be amazed at what they can accomplish on your behalf!
Your mortgage is one of your biggest expenses. For this reason it is imperative to find the best interest rates and mortgage terms you possibly can. By shopping around at renewal time you can save substantial amounts of money over the life of your mortgage loan. Don't be one of the 60% who just simply sign their renewal letter and send it back. Use the services of a licensed Dominion Lending Centres mortgage professional to ensure the lenders compete for your business.
For more information on how I can save you money contact me at http://davidcooke.ca or 403-836-1201

What People Think and How they Act can be Very Different

A new survey for the Chartered Professional Accountants of Canada suggests Canadians may harbour false notions about their financial savvy and security. 

The CPA assessed attitudes from before and after the recent drop in oil prices and interest rates. The accountants say, that while Canadians rank themselves highly for financial discipline, few households are planning for potential changes to the economy.

According to the survey 79% of respondents say they are staying on top of their payments, while 59% say they are living comfortably and are doing alright financially. This may sound great but further questioning reveals another story. 

The CPA survey indicates: 

 - 53% of households do not save on a regular basis.

- 51% say they do not have an emergency reserve fund apart from their "regular savings".

- 60% (which the CPA characterizes as "only") of households say they pay off a portion of their debt on a regular basis.

- 41% of households with a HELOC (Home Equity Line of Credit) in other words a line of credit secured on their home's equity,  did not make regular interest and principal payments to repay their outstanding balance. 

 “It may be a matter of perception,” explains Kevin Dancey, FCPA, FCA, president and CEO, CPA Canada. “Factors such as lower interest rates, cheaper gas and a strengthening U.S. economy may have some people thinking things are just fine. However, no matter what happens with the economy over the coming months many households remain vulnerable because of high debt levels.”

 Key economic indicators reinforce the financial vulnerability of many Canadian households:

• total household debt reached a record high of $1.82 trillion as of Q4 2014
• the debt-to-income ratio reached an all-time high of 163 per cent in Q4 2014, meaning that for every dollar of income, Canadians carried $1.63 in debt

“Canadians should be taking steps now to build their nest eggs and improve their ability to service debt obligations in the event of future economic shocks,” says Joy Thomas, FCPA, FCMA, executive vice president, CPA Canada. “Economic uncertainty lingers and borrowing rates will rise at some point. Canadians should be planning ahead and be prepared for what tomorrow brings.”

   If you work in the oil patch or a related industry; or if you are feeling financially vulnerable the best thing to do now is to speak with a mortgage broker about lowering your mortgage payments or moving your high interest debt into a lower interest product to make paying it off easier if your situation changes.

Source: https://www.cpacanada.ca/en/connecting-and-news/news/professional-news/2015/March/Household-finances-Canadians-at-risk