5 Reasons why you need a home inspection before buying in Calgary

Several  years ago I had a client who wanted to buy a home before he moved to my city. He was in a hurry as he had to get back home. He put very few conditions in his offer to purchase but he did have a financing condition and an home inspection.  A few days later he called me to say the inspector found 10 things that showed him that this house was a former grow op. If he had not had the inspection and found out after he had removed conditions he could have been unable to get financing, home insurance and been stuck with a hefty remediation bill.

     One thing I always encourage my clients to do is get a home inspection. It’s $500 well spent.

You may not be buying a former grow op but there can be costly repairs that you  may have missed while inspecting the home yourself. If you have watched even one home renovation program you know that once the work starts they usually find a surprise or two.

 Here’s a list of the most common faults in homes

Foundation Cracks - the biggest and a very costly item is a cracked foundation. While some cracks in the basement floor are acceptable cracks in the foundation walls need to be excavated and filled which is expensive.

Roof Problems – did you go up on the roof and check the shingles , the pointing around the chimney, etc? Probably not.  Did you check the tresses in the attic? This can be another big repair cost that could be difficult to pay after purchasing a home.

Loading Bearing Walls Removed -  1950’s homes converted to open plan are popular but do you know if a support wall was removed and the roof could end up in your new open concept living area?

Encroachments – are any building, retaining wall ,fence or driveway that extends into a neighbour ‘s property or the City Right of Way. . It was 2 weeks after I moved into my first home that I found out that my retaining wall behind my home was falling into my backyard neighbours’ yard.  Another unexpected repair that I had to handle. 

Electrical or Plumbing Issues – while heritage  homes close to the city centre have character, they also have old wiring that uses fibre insulation. All you need is for a mouse to chew on it and you could have a fire.  Find out how much it will cost to re-wire your home and save yourself headaches down the road.

The same goes for plumbing . It’s old. There’s a chance it could have a slow leak.

     As I said before, it’s always wise to get a house inspection and include this in your offer to purchase. The anguish that you can avoid by doing this is well worth the time and expense. 

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Brokers make a Difference

While many people will go to their bank to obtain a mortgage or line of credit they often feel betrayed by their favourite bank if their application is rejected. One big advantage that we have over banks is that we can send underwriter notes along with the application. Our questions and speaking at length with the borrower give us insight that the underwriter will never get from the facts and figures on the application.

 A while ago, I had an application at a lender for a young man who wanted to buy his first home.

He worked in the construction trades and his income history was up and down over the past 3 years. He needed overtime to support his application and the two year average wasn’t there.

I went back with 3 years of Notices of Assessments, his recent pay stubs and pleaded the case for my client. The underwriter finally asked for an exception based on my confidence in the client. She trusted my judgement and the mortgage was approved.

     This leads me to the idea that underwriter notes are very important and can mean the difference between an approval and a decline. If you have a chance, ask your underwriter how they like their notes; in point form or in paragraphs . Do they prefer emails or phone calls?

   When a successful mortgage broker writes notes they start by stating what product they are asking for and giving their contact information. I put my contact info at the top of the notes and at the bottom so they don’t have to go searching for it if they have a question or need clarification.  I then state what my client is trying to do; purchase their first home, refinance, a renewal or if it’s’ a switch, that they want to benefit from lower interest rates.

I then list the areas I want to highlight: Income, Credit, Property , Down payment and start with it their weakest link first and explain their situation. I had a client who had her down payment in a joint account with her father in Japan. I started with that knowing that a paper trail would be important. If the credit score is low, is it due to a past illness, divorce or job loss? I tell the underwriter right away. As  a result, underwriters trust me and have given my clients a second look or asked for an exception.  Finally, I finish up by summarizing the strong points in the file and thanking them for their consideration of my file. 

     I never yell or give my underwriters a blast if they decline a file. I will , however, ask why the file was declined so that I can better prepare my client for the disappointment and plan on how we can remedy the situation.  Just as a FYI,  a manager at a major bank told me that at one bank he worked for after hitting the send key he received a simple message back – either APPROVED or DECLINED with no explanation.  Now who do you think mortgage clients should deal with? A bank or a broker?
for more information visit my website at http://davidcooke.ca 

Legalized Marijuana and the Canadian Housing Market

     October 17^th will be an  important day in Canada’s social history. It’s the day when we are going to have legalized marijauana across the country. We will be the second major country in the world to do this. How does this affect mortgage brokers like myself?  When someone comes to me to obtain financing for a home purchase and the sellers have disclosed that they smoked pot in the house or grew a few plants , how will this affect their home purchase? 

     A few years ago, someone disclosed that their home had been a grow op 6 years previously and their home insurance company cancelled their policy siting safety issues. I could see this happening with both lenders and mortgage default insurers like CMHC, Genworth and Canada Guaranty. A recent article by a member of the Canadian Real Estate Association suggested that both lenders and insurers might ask for a complete home inspection. It was suggested that sellers who have grown a few plants might want to get a head of a problem and have an inspection before they list the property. If there are any issues of mold or electrical systems that are not up to code, they can remedy this and have a quick sale.

     I contacted both CMHC and Genworth Canada to find out if any policy changes are in the works. CMHC told me that there’s nothing planned beyond what is already on the books. If there’s been a grow operation it needs to be inspected and remediation done before they will insure. Genworth says that nothing has been announced as of yet . Any changes will result in an official announcement to all brokers.

       Mortgage brokers may want to call their realtor referral partners and discuss this with them to see if local real estate authorities have any changes planned. If nothing else it will be good to touch base with your realtors to find out how the market is in your area.  

     If you are thinking about smoking  pot in your home or want to grow a few plants , contact your local Dominion Lending Centre mortgage professional first to find out if this could affect your house value or sale in the future. for further information visit my Facebook page

When Double Dipping is Okay

When double dipping is okay

Perhaps you remember the Seinfeld episode where George Costanza catches someone double dipping in the salsa. While this is considered unsanitary and bad manners some forms of double dipping are okay.

  Sometimes 2 levels of government want you to do something so they offer you an incentive. The idea is that over time people’s behavior over time changes and it becomes the norm to do this.

Several years ago when I was having my furnace cleaned and serviced the service man told me that the firebox had rusted and fumes could flow through my home. He turned the furnace off and told me that I needed a new one.

    At the time, the local natural gas company was offering discounts of furnaces for people who switched over to their company. The local electricity provider offered lower rates to people who bought a heat pump and the federal government had a program to encourage people to become more energy efficient. As  a result I was able to triple dip – I got a discounted more energy efficient furnace with air conditioning and a new lower rate for electricity.

    That program is gone now but there are others that you can benefit from. At this time Alberta residents are being bombarded with ads and flyers from window companies. They say that if you replace your windows now you can qualify for a $1500 rebate through the provincial government. What they are not telling you is that you can double dip. If you get an energy audit before the windows are replaced and you apply to your mortgage default insurance company , whether it’s CMHC, Genworth , or Canada Guaranty you may qualify for a 15% rebate on your premium !  On a $400,000 mortgage with 5% down you pay $16,000 in fees. How nice would it be to get $2400 back?

     The programs vary from province to province and cover windows, hot water tanks, appliances. You can check out what’s available here or ask your local mortgage broker for more information. .  Go ahead and double dip.Here's a link to help you find out what's available in your province.

 http://oee.nrcan.gc.ca/energy/products/energystar/why-buy/programs.cfm?attr=0

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

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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