30 Jun

PAYING OFF YOUR MORTGAGE FASTER

General

Posted by: Mike Hattim

Most of us that have a mortgage would like nothing more than to have our mortgage paid off. Being mortgage free is an achievable goal. But it is important to think through the process so that you utilize your money the best way possible. You may be surprised what conclusions you draw if you thoroughly think through your options.

Think about this!

1. Right now interest rates are the lowest they’ve ever been. Paying off your mortgage may not give you the same return as you’d get by investing in a higher interest investment return. Make sure you’ve talked with your financial advisor on money investment opportunities. It may be more beneficial to invest in other opportunities.

2. On the same note, there may be an opportunity to match retirement contributions through your employment. There are some fantastic opportunities with RRSPs which may give you a higher return for your money rather than paying off your mortgage.

3. Taking advantage of prepayment privileges with bonus money such as bonuses, inheritance, may not be as fruitful in returns as paying into higher interest return investments. Make sure you ask your lender how much it will cost to pay off your mortgage early. And make sure your ask your lender how much per year can be paid off. Some lenders say 15% and some lenders say 20%. Some lenders say 0%! Make sure you find out their guidelines.

Having said all that, there are great ways to pay your mortgage off faster. But before the suggestions, lets define some of the terms you need to know in order to understand your mortgage fully.

Definitions

Amortization – paying off mortgage debt with a fixed repayment schedule in regular installment over a period of time. Most amortization periods are 25 or 30 years long.

Term – contracted period of time for a mortgage. Terms are usually 5 years long but can be any amount of time that you contract with your lender. 6 month terms, 1 year terms, 2 year terms, 3 year terms, 4 year terms, etc are all available through your lender. However, interest rates will vary with different term lengths.

Principle – the actual amount of the mortgage loan.

Interest – the interest incurred on the loan

Principle plus Interest (PI) – This is typically the payment that is taken monthly from your account. The actual principle amount and interest amount varies from payment to payment. However, the payment that is coming from your account will remain consistent from month to month.

If paying off the mortgage is your goal, consider the following:

1. Increase your scheduled payments to bi-weekly or even weekly payments. You will not pay as much interest by increasing your payment schedule. Note that your payment amount will NOT increase. Your payments are merely applied sooner which does not allow interest to compound as quickly, thereby lessening the amount of interest you are paying and, therefore, decreasing the time to pay off your mortgage. Take a look at http://itools-ioutils.fcac-acfc.gc.ca/MC-CH/MortgageCalculator.aspx?lang=eng and consider the tax savings.

2. Amortize your loan over a lesser amount of time. When your term renewal time comes up, you can negotiate with your lender a shorter amortization period. There is less flexibility with this option as your monthly payments will be higher. With this option, it is important to keep your eyes on the goal so you don’t get discouraged with the bigger payments. Your mortgage will absolutely be paid off faster.

3. Increase your scheduled payment by $25 or $50 per payment. Surprisingly, you might not even feel it as much as you might think. We are creatures of habit and once changes are implemented and become the norm, the higher payments are just expected and our mortgage pays down faster and faster.

4. Take advantage of prepayment privilege. Whether your lender allows 10%, 15%, or 20%, make it a goal to put something extra toward your mortgage every year. Make sure you ask your lender how to make a higher payment as they will have guidelines to follow.

5. If you receive a tax return, use it toward your mortgage. Making an extra payment every years will literally take years off the amortized time of your mortgage.

6. Any bonuses this year? Apply it toward your mortgage. Even a few hundred dollars down on your principal can make a significant difference in the amount of time to pay off your mortgage.

7. If you are a double income family, consider dedicating one of your incomes toward mortgage payments.

8. Purchase BELOW your means. That way, the extra the would be in a higher mortgage amount can be put into good use by increasing your mortgage payment amount by the difference.

The sense in paying off your mortgage faster…

1. Making a plan – a well structured plan will stop you from overspending. Putting together a plan forces you to think through your goals. Budgets cause us to narrow down our goals and stick with them. If a new adventure or unnecessary expenditure comes up, you can align it with your goals and consider if it fits. If it doesn’t, throw it. If it does, then it is likely time to sit down and revamp or consider your goals. Having a plan chases away thoughtless impulses and keeps you on the right track.

2. Peace of mind in owning your own home. When you sign your mortgage papers, the lender discloses to you that you will pay more than twice the purchase price of your home. Your amortization schedule will clearly show the amount of interest and the amount of principle that you pay with every payment. You can google amortization schedule and several calculators will come up. Just punch in your numbers and you will see how much interest versus principle that you actually pay.

3. Paying off your mortgage provides a reliable return on your investment. Typically, and most likely, your property purchase will result in an increase in value as the years go on. It has been argued that using the “extra” money that comes in toward investments will result in a higher return. However, most of us don’t have a plan in place and so that extra money gets quickly spent. A sure investment is increasing your monthly payments (even by a few dollars) resulting in a mortgage that is more quickly paid off.

4. Saving up for the 20% is much more economical than going into a property purchase too early (using 5%) down. You will literally save tens of thousands by NOT having to purchase the mortgage insurance that is not for your benefit but for the banks! On a $400,000 purchase price with 5% down, you will pay a 3.6% premium which amounts to just over $12,000.00 dollars (added to your mortgage).

5. When it comes time to refinance, make sure you know your options. Don’t assume that your lender has your best in mind and will give you the lowest rate available. Make sure you have a Dominion Lending Centres Mortgage Specialist look at your situation to see if there is a better option out there for you. This service is free so take advantage of it!

28 Jun

UNIQUE DETAILS ON PROPERTIES WHICH WILL MAKE YOUR PRE APPROVAL VOID

General

Posted by: Mike Hattim

Shopping for a new home can be fun and exciting, but there are many details that contribute to a property’s marketability.

Mortgages that have the lowest total cost are reserved for the most marketable properties that are in prime locations as per the lender’s criteria.

Please remember that a mortgage professional can never advise a buyer to make any subject-free offers or even to remove the subjects on an offer.  The decision to remove subjects is one that the buyer has to make once all of the conditions for their mortgage approval have been satisfied with the lender(s).    Also remember that there cannot be any major changes to the borrower’s application details prior to the completion of their purchase as it may affect the borrower’s qualifications and change the conditions of the approval.

A Dominion Lending Centres mortgage professional will provide a buyer with the lowest cost and best mortgage for their scenario and for the property that they select to purchase.   This comes without limitations as we are without bias to any particular lenders and we protect a buyer’s credit score, which is another contributing factor to the best mortgage.

Here are some of the property details that can affect a lender’s decision on whether or not they approve a mortgage:

Property Zoning- if the zoning is anything other than plain residential then your options will be limited.  This sounds simple.  However, some condos are zoned commercial if there is a large commercial component to the complex. Industrial, Agricultural Land Reserve (ALR), or leasehold (government or otherwise) will limit a buyer’s options.

Here is a list of some other potential deal breakers:

  • cable cord construction
  • oil tank(s) on the property
  • self-managed stratas (no strata management company)
  • size of the property- below 500 sq. feet,
  • doesn’t use municipal sewage or waste
  • former marijuana grow op or used for illegal activity
  • outdated electrical
  • over 1 Acre and/or multiple buildings
  • age restriction(s)
  • rental usage
  • any animal use
  • any structural issues/damages work done without permits
  • ongoing or upcoming assessments or legal proceedings
  • prior fixes in the building not done to the lender’s preference
  • strata contingency fund with less than $1,500 per unit in the entire strata

The lender always reviews the details of each property only when an accepted offer is in place.  The request for information can be a simple document or it can require an explanation/written documentation from various parties.   This information may go back several years in order to get to the source of the issue.   This, of course, takes more time.

With complexities such as these, it’s important that a real estate agent discloses the information to their buyer right away so that it can be brought to the lender’s attention.    The agent should also be proactive in getting any and all documentation pertaining to the building/property so that the buyer can evaluate if a property has long term value to them.    Many of the issues stated above can affect the long term value and marketability of a property.

As a mortgage professional, we share any and all information that the lender provides to us if they decide not to approve a property that is being purchased.   We care about protecting borrowers from a bad real estate investment and are without bias in the advice that we provide.

We are always here to help,

24 Jun

SHOULD YOU BE CONCERNED ABOUT CANADIAN HOUSEHOLD DEBT LEVELS?

General

Posted by: Mike Hattim

Despite what you may see on TV, hear on the radio, or read online, there is strong evidence that although Canadian household debt is at an all-time record high, Canadians are doing just fine financially.

How can that be? Canadians are a whopping 1.8 TRILLION DOLLARS in debt – and that is exactly what the media focuses on. What they fail to disclose is that according to a recent report published by the Fraser Institute, Canadians also have $10 TRILLION DOLLARS in assets.

SO FOR EVERY $10.00 THAT CANADIANS HAVE… THEY OWE JUST $1.80. NOW THAT DOESN’T SOUND ALL THAT BAD… IT’S REALLY A MATTER OF PERSPECTIVE AND HAVING ALL THE FACTS.

So the next time you hear some doomsday report indicating that our economy is ready to implode in the next 38 minutes, remember that media outlets are more concerned about getting your attention than anything else. It’s not about the facts, it’s about the spin on the story. And seeing as though debt levels have hit new record highs every year since 1961, how can this still be news? Of course there is more debt… there are more people. Those people are buying houses!

Actually, right now, borrowing money in Canada has never been cheaper. We are experiencing all-time lows on some fixed rate mortgage terms and variable rate mortgages. So to answer the question, “Should you be concerned about Canadian household debt levels”… no, you should be concerned about your own personal debt level. Because that is what matters.

What is your financial situation like? Just as the economy changes, and life changes… your financial situation changes as well. It is good to periodically review your mortgage or financial situation to make sure that you are paying as little interest as possible.  That’s where Dominion Lending Centres comes in. If you currently have a mortgage and want to know if it is the best fit for you, or if you are working towards buying your first home, we would love to assist you.

Please contact us anytime!

As far as the report from the Fraser Institute goes, it is filled with great points and interesting stats! It is very well done and is certainly worth a look if you are interested in stuff like this!

I have included the report in its entirety for you below!

23 Jun

YOUR FIRST MORTGAGE RENEWAL

General

Posted by: Mike Hattim

A lot can change in a year when it comes to mortgages. These changes can provide great opportunities for mortgagees to refinance their mortgage at the time of renewal in order to save money.

Unfortunately, most people are under the impression that once they sign on the dotted line they are locked into their mortgage agreement for the specified term. One study found that a staggering 70% of people simply renew their mortgage every year without even looking into other options! Refinancing can give you the leverage to make your mortgage more affordable.

Here are 5 tips to help you prepare for your first mortgage renewal and save thousands of dollars!

1. Plan in Advance

Mortgage renewals are mailed out months before the renewal date. This gives you plenty of time to shop around for the best rate. Many mortgage professionals recommend a 4-6 month window to negotiate because that’s how long a lender may guarantee a discounted rate. By planning ahead you could find yourself a rate significantly lower with another lender or have a nicely discounted rate to fall back on.

2. Do Your Research

Mortgage research isn’t a one-time process you perform when buying you first home, it’s a topic you should revisit each year. The reason for ongoing research relates to the changes that occur in the marketplace. It is important to keep up-to-date with mortgage trends so you don’t get swindled into a higher rate than you deserve. The key thing to avoid when shopping for a new rate is signing with a bank’s posted rate. These rates are usually the highest the bank charges and all that extra interest will accumulate quickly, adding thousands to your mortgage total. Take the time and know what trends are doing so you can recognize a good rate when it comes along.

3. Don’t Avoid the Switch

Some mortgagees are scared to switch lenders because of hidden fees and the paperwork that may be involved with the process. If you do your research and start early enough there is no reason to avoid switching your mortgage lender. When you make a switch at renewal time there is usually no monetary penalty. Switching allows you to take advantage of lower rates and save you money, so take the plunge if you find a better deal with a different lender!

4. Negotiate on Everything

Most people only negotiate the interest rate when they’re applying for or renewing a mortgage, but all variables are open to discussion! Make sure you know the importance of the amortization period, fixed versus variable rates, and payment schedule flexibility so your negotiation power is up to its full potential. All these variables can help reduce your payments, interest rate, and overall payment period.

5. Work with a Professional

Some mortgagees find all this information rather overwhelming and some simply don’t have the time to do the necessary research. If you find yourself fitting into one of these two categories then work with a Dominion Lending Centres mortgage professional. These brokers work for you and will handle all the shopping and negotiations required to make your mortgage more manageable.

Whether you decide to work with a professional or not make sure to do some research for yourself. It’s always a good idea to have the basic knowledge fully understood before jumping into one of the biggest purchases of your life.

If you are ever unsure of any specifics, call Dominion Lending Centres to clarify. We are always happy to help guide you through the process!

22 Jun

DOWN PAYMENT CONSIDERATIONS

General

Posted by: Mike Hattim

More often than not, as a Dominion Lending Centres mortgage broker, I come across clients who may not yet know, understand or simply forget about all of the costs incurred in purchasing a home. Closing cost are something you should be made aware of by your Mortgage Broker as well as your carrying costs once you move in! These numbers should always be discussed prior to even making an offer so that you are aware of the funds you require to actually complete the transaction.

Your Mortgage Lender may want to see proof that you have both the Down Payment required as well as approximately 1.5% of your purchase price on hand for other various Closing Costs. It is important to understand that closing costs may exceed or end up slightly less than this 1.5%, but it at least demonstrates your ability to have near realistic funding and your overall preparedness.

So let’s list out all of the Closing Costs you should consider with your purchase in our Vancouver market for residential clients; commercial files see even more complexity.

1. Minimum 5%+ Down Payment

In my last writing, I talked about minimum down payment rule changes that took effect in February 2016. Minimum Down Payments required range from 5% on homes under $500,000 to 7.5% on homes up to $999,999, and 20% required on homes over $1,000,000. Calculator here for you: https://dominionlending.ca/tools/mortgage-calculators/


2. Allowable Sources for Down Payment

Your own savings, TFSA’s, RRSP’s, Gifted Funds and/or Existing Equity in property you are selling.

RRSP’s can be used by first time home buyers via the Home Buyers’ Plan up to a maximum of $25,000 per individual. You must have never owned property anywhere in the world, RRSP funds have to be there for minimum 90days and accessible prior to your closing date. Another major consideration is that some Employer RRSP Plans may NOT be eligible for withdraw so verify this first!

Gifted Down Payments can come from immediate family such as Mother, Father, Brother, Sister or Grandparents.

Many lenders require 90 days history of your down payment funds and require explanation or proof of any large deposits, so early preparation is more necessary than ever.

Existing Equity is the Net Equity you walk away with after selling your home, paying out any mortgage, legal fees and realty fees in the process.


3. GST – Goods and Services Tax

You can expect to pay 5% GST on any home that has not been lived in, including new builds, new subdivided land parcels, property primarily used in business etc.

There are various GST rebates available on homes under $450,000. GST may be included in the overall purchase price OR excluded meaning you may need to come up with the funds, finance the GST into the mortgage.

If qualifying for a GST rebate, there are occasions where you pay full GST and apply for the rebate yourself OR the Builder accepts assignment of your rebate, in which case you require less upfront!


4. PPT – Property Transfer Tax

Property Transfer Tax (PPT) applies to purchases in BC. PTT is charged at a rate of 1% on the first $200,000 of the purchase price and 2% on the remainder, up to $2,000,000 and 3% on any amount above $2,000,000. First-time home buyers may be exempt from paying the PTT on homes up to $475,000 with a partial exemption between $475,000 and $500,000.

New Builds now have a PPT exemption up to $750,000 which is fantastic for new buyers and those upgrading to a new property.


5. Realty Fees – if selling current home

Realty Fees payable to a Brokerage are a multiple percentage split typically a % on first $100,000 another % on the remainder. Both Buyers and Sellers Agents usually also receive different amounts from one another but usually close to 50/50.


6. Legal Fees and Title Insurance

Legal Fees include many service charges such as Land Title Registration, confirming signatures on Mortgage Contract, Title Insurance (required by most lenders today), ensuring Property Insurance, Property Tax Adjustments, payout of debts such as credit or mortgage on other property etc.

Typically we see charges in the $850 – $1000 range for a complete real estate transaction.

7. Home Inspection

Would you normally gamble $500,000? Having a qualified and licensed Home Inspector look at your prospective new home is a worthwhile exercise. Typically we are seeing prices between $400 – $500 for this valuable service. Uncover any current or potential issues with this property in advance and perhaps use this information to assist in negotiation! This is your own assurance that you are placing a good bet!


8. Appraisals – With bidding wars and increasing valuations, expect this more today!

It may come as no surprise to you that current increases and bidding wars are seeing offers higher than the expected or listing price. Lenders and Insurers alike can request an appraisal as a condition of financing to support the purchase price.

Important note to those with minimum down payments – If the appraisal or an Insurer has difficulty supporting the valuation of the home, you could be asked to come up with a higher down payment! This occurs when an insurer is only comfortable at a max amount that is below the actual purchase price. This is not only a possibility; Appraisals ARE being requested more often in this market. Sometimes as a Broker with good Lender relationships I can get this waived but only if the request and the numbers are reasonable or supported.

An appraisal can range from $300 – $500 for residential and higher for remote rural areas OR larger acreage.


9. Property Tax Adjustment – Municipal Property Taxes

Each year Property tax bills are due July 1st. Property taxes in BC are adjusted annually from January 1st – December 31st, so even though property taxes are paid in July, they are based on the calendar year.

So how do we adjust?

Your Lawyer will calculate the property tax reimbursement for either the Buyer or the Seller pro-rated to the Adjustment Date on contract. Each party is responsible only for the portion of the year, to the day, that they will own the property.

If you purchase your home on or before July 1st and before taxes have been paid, you should be receiving credit for the Sellers portion of the annual property taxes as you will be responsible for paying the full amount of the annual property taxes.

However, if you purchase your home after July 1st or the Seller has paid for the full tax year, you will owe your portion of the Property Taxes to the Seller.

As always, if you need more information, contact any of the mortgage professionals at Dominion Lending Centres!

20 Jun

Don’t renew! Renegotiate!

General

Posted by: Mike Hattim

Everybody wants to save money on their mortgage!

A new home buyer is especially diligent when shopping for the best mortgage.

They make the effort to:

find out the options

compare rates and costs

compare flexibility

This home buyer then moves into their new home and their mortgage can easily become something they don’t think about often. They might have a growing family and an ambitious career. In the meantime, the mortgage payments are happening on automatic pilot.

Eventually their lender sends them a letter to let them know that their mortgage is coming up for term renewal. That borrower is faced with some decisions to sort out.

1. Should they do things the “easy” way and sign the offer from their current lender?

2. Should they ask their lender for a better rate?

3. Should they move their mortgage to another lender?

The answer? You guessed it! Don’t Renew! Renegotiate!

1. Call your lender and ask them for their best offer and ask them to send it to you in writing.

2. Work with a broker who has access to many different lenders so you can better assess your options. Even if that broker has not worked with you before, they can still help you sort out your renewal.

3. Have the broker compare options for you including the option from your current lender. This analysis will include any possible costs for moving the mortgage and list possible advantages to moving to another lender.

4. Then decide. It will cost you nothing to ask and it could save you thousands of dollars.

Remember the effort when you first bought your home? Well you only need a small fraction of that effort to ensure you get the best mortgage when renewing your mortgage term.

It is not unheard of to have a mortgage renewal offer of a whopping 1% higher than competitive rates. On a mortgage of $400 000 that would cost approximately $4000 extra per year! I have also seen decent renewal offers where it was clear that the client was fine to stay where they were.

No matter what your final decision, it pays to consult with a Dominion Lending Centres mortgage broker before you sign the “easy “offer from your current lender. Go ahead and make that call.

17 Jun

DIVORCE AND WHAT CAN HAPPEN WITH THE MORTGAGE

General

Posted by: Mike Hattim

When tough times put stress on families sometimes the end result is divorce. While no one ever wants to see this happen sometimes it is inevitable. Recently, CMHC changed the rules about how much a house can be refinanced for, they have set the limit at 80% of the property value so that refinances would no longer fall under the insured mortgages. What they also did was set some guidelines for couples who are divorcing.

When a partnership in a home is being dissolved, that partnership can be a marriage, common law relationship or simply two owners of a property, it is now considered a sale. This means that the existing mortgage will most likely be paid out or in some cases one of the spouses can assume that mortgage and possibly increase the amount. Most likely it will mean that one spouse will purchase the home from the other. Here’s the difference when we are in this situation, the home can be purchased with just 5% down payment again as it doesn’t fall under the refinance rule.

One other thing to consider under the divorce rules is child support. As many parents have learned lately, child support and section 7 spousal support are liabilities for many lenders. So if you do have a $2,000 a month support payment, then that is the same as having a $2,000 dollar car payment. Not all lenders are looking at that the same, some have allowed us to reduce the yearly incomes buy the amount of child support. The biggest difference here is of course that the reduction allows you to qualify for more mortgage, it’s just a matter of knowing which lenders work the system which way and a skilled mortgage broker will know the difference.

Ideally, of course, the divorce never happens but one way around child support being paid is joint custody where it is shared 50/50 and no liability is forced upon either spouse allowing them to maximize their purchasing power as the start their new lives.

What also needs to be considered is that this needs to be done in writing, separation agreements are legal binding documents that tell the lenders what your responsibility is to the other partner in the divorce. We have also had situations where a statutory declaration saying that you have no responsibility to the other partner has been sufficient especially in cases of common law separations.

So many in’s and out’s to be considered when embarking on dividing your households and of course we here at Dominion Lending Centres would always advise legal counsel first and then talk to your mortgage brokers about what is required for the mortgage process.

16 Jun

MAKE SOMEONE FEEL SOMETHING AND YOU WILL NEVER BE FORGOTTEN

General

Posted by: Mike Hattim

Recently, I had the pleasure of meeting a 61 year old female client. She was a widow of 4 years and she was living on her husband’s pension. Her home was free and clear and she had lived there since she was married at age 18. Her husband (11 years her senior) was diagnosed with terminal cancer and he had joked to his neighbours that he had a metal roof put on the house for his wife, implying that he was putting a roof over her head for as long as she needed.

Shortly after her husband passed away, she had an unexpected flood in the house to which she had to call contractors to fix. Through the process, she felt she was taken advantage of since the water damage was not extensive but the contractor insisted that her whole kitchen had to be redone and the floors throughout her home had to be replaced. In order to pay for this extensive renovation, she had to take out a secured line of credit. However, the renovation ended up costing more than the line of credit available to her, so she had to pay for the remainder using her cash savings.

I met this lady when her car insurance was about to be cancelled and she was getting inundated with calls about delinquent utility bills. As a result, her house was very cold. When I visited her home in March, she asked if I wanted her to turn on her heat. Among the many things in her home, I noticed a very nice table display with candles and a bottle of wine in a rod iron holder. I asked her what kind of wine it was and she said “it’s my favourite, but it’s filled with water. I haven’t purchased a bottle of wine in 2 years because I can’t afford it.”

Once her reverse mortgage was funded with HomEquity Bank, she was able to pay out her line of credit, pay a year’s worth of car insurance to reinstate her insurance and she even had tens of thousands of dollars left over as a savings buffer.

I felt connected with this client and her situation. Shortly after she funded with us, I visited her at her home and gifted her with her favourite bottle of wine. She was in tears and said she felt like she had a new lease on life. It was very moving to see the difference in her and her lifestyle. She was beaming with joy and she couldn’t stop saying how thankful she was.

I am happy to be able to say that I made a difference in someone’s life. If a reverse mortgage can help you lift your client out from under such circumstances, your job and your efforts are well worth it. These and many other stories inspire me to do what I do every day!

If you want to learn more about reverse mortgages, contact your Dominion Lending Centres mortgage professional.

 
15 Jun

CREATING A PENSION PLAN PART 2

General

Posted by: Mike Hattim

Every good plan starts with building a foundation, the plan will rely on the foundation for years to come. Now that you have decided to pursue the acquisition of real estate (property #1 purchased and successfully rented…check!) as your vehicle to build wealth it’s time to stay the course and add the next layer. We will continue on from Part 1 and build upon it. The information here can be duplicated for property #3, 4…and so on.

For this scenario we are considering the acquisition of property #2 at the end of year 3. Based on the estimated market value, the subject property will cost $245,863 to purchase and (in the perfect world) we are buying another one in the same building. Sticking with a simplistic scenario the current market value of property #1 is $245,863. The plan that had been laid out in the beginning comprised the combination of leveraging equity from other rental properties and savings to acquire the ‘next’ property.

End of Year 3

Estimated market value $245,863
Outstanding mortgage balance $167,227
Access to equity $49,172 (*80% of the market value of the subject property must remain unleveraged, determined by an appraisal)

New mortgage amount on P#1 $196,690
Funds leveraged from P#1 $29,463
Balance from own resources $19,710
20% down payment for P#2 $49,173

Early prepayment penalty P#1 $1,104 (3 months interest)

The balance of funds required were available because instead of making extra payments against your principal residence (up to a maximum of 20%) you were directing that amount into a ‘rental property purchase’ savings account. Over the past 3 years the account has ballooned to over $20,000.

Through the necessary qualifying process we have now established the new (re-financed) term on property #1 for $196,690 to assist with acquiring property #2. We will also utilize an economic rent letter to help service the debt unless there is an existing renter (and rental/lease agreement ) currently in place.

Purchase Price: $245,863
Down Payment: $49,172 (20% minimum, lender may request more)
Mortgage Amount: $196,690

Variable at 2.40% (P-0.30%) 5 year term CLOSED 30 year amortization
Monthly Mtg Payment: $765.77
Est. Monthly Strata: $250 (costs to operate have increased)
Est. Monthly Property Tax: $117 ($1,400/year)

TOTAL Monthly Payment: $1,132.77

Property Transfer Tax:
$2,917.26 (paid at completion, cannot be rolled into the mortgaged. It is calculated based on 1% of the 1st $200,000 and 2% on the remaining balance.) To calculate Property Transfer Tax use this calculator.

Appraisal:
$300 (required to validate the purchase price because there is no mortgage insurer involved; CMHC, Genworth or Canada Guaranty).

Home Inspection:
$400 (highly recommended)

Title Insurance:
$200 (In short, title insurance is an assurance as to the state of title of a given property. In practical terms, it protects lenders and purchasers against loss or damage suffered due to survey problems, defects in title and other matters relating to title as specified in the policy.

Approx lawyer fees:
$1,500

The cost to acquire the property was $5,317.26

The act of buying rental properties should be treated as a business transaction. The thought of falling in LOVE with a potential property should be purged from your mind completely. When you are search for a desirable property do your homework; look into the Official Community Plan with the city, if you have a higher budget you might want to consider a 2 bedroom unit vs 1 bedroom, know what the rental restrictions are within the strata prior to buying and most importantly contact your Mortgage Broker prior to meeting with Realtor so that he/she can assist with the structuring as all lenders employ different ways of underwriting rental mortgage applications. The numbers have to make sense to give yourself a chance to build your real estate empire.

*Based on today’s re-financing guidelines. Please check with your Dominion Lending Centres Mortgage Professional before executing your plan.

14 Jun

Home owner grant – Don’t forget to apply

General

Posted by: Mike Hattim

It’s that time of year again when property taxes are coming due.  Did you know that the average homeowner saves about $600.00 with the home owners grant?

On the bottom of your property taxes you will notice a section called “Home Owner Grant Application”.  Make sure you take the time to fill that out!

Below is a list of frequently asked questions regarding property taxes.

When are my property taxes due?

    • Property taxes are due in full by the due date indicated on your tax notice.  This is typically July 1st.

Are my property taxes included in my mortgage payment?

    • Property taxes are never included in the mortgage loan.  However the monthly payment can be collected by the lender who then pays the property tax on your behalf but that is set up with the notary at the time of signing with them.
    • If you can’t remember if you have your lender set up to take monthly payments on your behalf you will need to contact them.
    • If you lender is taking monthly payments on your behalf don’t forget to claim the home owners grant.  Your lender will not do that for you.

What if my property is assessed at more than $1,200,000.00?

    • If you meet all requirements but your property’s assessed value is over $1,200,000.00, you may qualify for the grant at a reduced amount.
    • The grant is reduced by $5 for each $1,000 of assessed value over $1,200,000.00.  This means the grant is not available for properties accessed over $1,314,000.

Where can I pay my taxes?

    • In person at City Hall
    • Through your bank or financial institution
    • Through your mortgage agreement
    • By mail or courier
    • Some cities have the option to pay online

If you have any questions regarding your property taxes contact your city for further information.