6 Aug

5 House Hunting Mistakes to Avoid

General

Posted by: Mike Hattim

Buying a home is one of the largest investments you will ever make! In order to make your home hunting experience the best it can be, there are a few key mistakes to avoid and be aware of before you start your journey:

Not Getting Pre-Approved: One of the most important aspects of buying a home is the mortgage application and approval process. No matter what time of home you are looking for, you will need a mortgage. One of the biggest mistakes when it comes to the home-buying process is NOT getting pre-approved prior to starting your search. Getting pre-approved determines the actual home price you can afford as it requires submission and verification of your financial history to ensure the most accurate budget to fit your needs.

Not Setting or Following a Pre-Determined Budget: Another mistake that people make when home-hunting is not setting, or following, a pre-determined budget. It can be tempting to start looking at the top of your budget, or even slightly over, but when you consider closing costs and the long-term financial responsibility of home ownership, it is best to avoid maxing yourself out. Getting pre-approved will help determine what you can afford, as well as making an appointment with your mortgage broker to determine your financial situation and the best options for you now, and in the future.

Not Hiring a Real Estate Agent: Your mortgage broker and your real estate agent are two of the most important members of your homebuying A-Team! In today’s competitive real estate market, it can be very difficult to acquire property without the help of a realtor. One reason is that realtors can provide access to properties that never even make it to the MLS website! They can also gain access to information about homes that may come onto the market, before a listing is even signed. Most importantly though, a realtor understands the ins-and-outs of the home buying process and can tell you how to be successful in your endeavors to purchase a home by guiding you through the process from the first viewing to having your bid accepted.

Focusing Too Much on Aesthetics: While we understand that bad interior design can really affect the perception of the home, you don’t want to be blindsided by it. At the end of the day, aesthetics can always be updated! Giving up the perfect price or location or size for a few aesthetic details (such as paint color, flooring, or even outdated appliances or light fixtures) is one of the biggest mistakes people make! Most homes have incredible bones that only need some minor tweaks to become your perfect space.

Not Thinking Ahead: What you want and need in a house today, could be very different from what you want and need in a house in the future. It is important to be able to look ahead – are you planning on having children? Are your parents getting older and in need of a retirement space? These are things that are good to take into consideration when buying a new home. Buying a home isn’t a permanent decision as you can always sell your home later on if it doesn’t work for you in the future, but it is almost always easier to plan ahead so you can grow with—and not out of—your home whenever possible.
If you are looking to purchase a new home, whether your first space or a step-up from your current living situation, I would be happy to help! Please don’t hesitate to reach out to set up a virtual appointment and discuss your mortgage options, pre-approvals and everything you need to know BEFORE you get started.

6 Aug

What to Know Before You Sell Your Home

General

Posted by: Mike Hattim

So, you are ready to sell your home! Whether you are up or down-sizing, selling your home can feel like a large undertaking – but don’t worry! I have put together some things to know before you sell to make the process as smooth as possible.

Improve Your Curb Appeal: When it comes to selling your home, first impressions matter. If a potential buyer pulls up to see overgrown weeds, clogged gutters or cracked concrete, they may have a negative first impression of the home, making it harder to impress them once they are inside. Attending to landscaping and any outdoor maintenance or repairs will go a long way in making your home more appealing. A pressure wash and new coat of exterior paint can also do wonders to give your home a facelift!

Get Rid of Clutter: In addition to updating your homes curb appeal prior to sale, you also want to ensure that you are de-cluttering your space. Removing personalized photos, collectables, memorabilia and other knick-knacks will help open things up and allow potential buyers to envision their own belongings in those spaces. While major renovations are not necessary, a fresh coat of paint and managing any minor repairs will also help to ensure the best first impression!

Set a Reasonable Asking Price: One of the most important aspects for the successful sale of your home is to price accordingly. Even though it can be difficult, when selling your home it is vital to avoid emotional decisions or anchoring your listing price to your home’s previous value. In order to achieve the best asking price for your home, it is best to study the market and enlist the help of a real estate agent who can ensure you get the most value from the sale.

Choose the RIGHT Real Estate Professional: As mentioned, a real estate agent can help you maximize the sale of your home by working to get you the best asking price and help you walk through the sales process. To ensure you have the best realtor on your team, there are two things you can do. The first is to ask your mortgage broker if they have any realtors they recommend as we work with realtors regularly. I would be happy to set up a call with you and discuss your options! Once you have a realtor in mind, it is best to conduct an interview to ensure they are the right fit for the job and that their interests align with yours.

Understand the Costs: Before you get to the point of reviewing a purchase offer, you should have a reasonable understanding of potential gains (or losses) within your acceptable price range. To do this, you need to understand the costs of selling your home, which include:

– Real estate sales commissions
– Closing fees
– Title charges
– Transfer and recording charges
– Additional settlement charges, if applicable
– Debt obligations related to existing mortgages

6 Aug

Investment and Vacation Property 101

General

Posted by: Mike Hattim

So, you are looking to purchase a second property! Congratulations! This is a great opportunity for you to expand your financial portfolio and ensure stability for the future. However, before you launch into this purchase there are a few things you should know, depending on which type of second property you are looking to purchase.

Second Property with Intention to Rent

Buying a property for the purpose of renting it out to someone else comes with different qualifying criteria and mortgage product options than traditional home purchases.

Before you look at purchasing a rental property, there are a few things to consider:

– The minimum down payment required is 20% of the purchase price, and the funds must come from your own savings; you cannot use a gift from someone else.

– Only a portion of the rental income can be used for the qualifying and determining how much of a mortgage you can afford to borrow. Some lenders will only allow you to use 50% of the income added to yours, while other lenders may allow up to 80% of the rental income while subtracting your expenses. This can have a much higher impact on how much you can afford.

– Interest rates usually have a premium on them when the mortgage is for a rental property versus a mortgage for a home someone intends on living in. The premium can be anywhere from 0.10% to 0.20% on a regular 5-year fixed rate.

Vacation Property

While vacation properties are not always the best investment, they are popular options for people who want to get away from it all! If you’re inclined to head down that road, buying a vacation property is essentially like purchasing a second home. The minimum down payment is the same at 5% and you have to go through the same processes as your first mortgage. You would also need to have the same insurance premiums as with a regular home.

If you are considering buying a unit within a hotel as a vacation spot (known as “fractional ownership”), it can be difficult to get financing.

It is important to note that if there is any mention of using your vacation home to provide rental income, you would need to put 20-25% down and it will be treated like an investment property.

Secondary Property

Most people are trained to stay out of debt and don’t tend to consider using the equity in their home to buy an investment property, but they haven’t realized the art of leveraging. If you’re using equity from your primary residence to buy an investment property, keep in mind that the interest you’re using is tax deductible. Consider that you’re buying an appreciating asset, and if you put a real estate portfolio and a stock portfolio side-by-side, they don’t compare.

Who is a good candidate?

You might be surprised to learn that you don’t need to make six figures to get in the game. Essentially, you just have to be someone who wants to be a little smarter with their down payment. Before taking on a secondary property, it is important to remember that the minimum down payment is the same as with a property for rental and will be 20 or 25% of the purchase price. Rental income from the property can be used to debt service the mortgage application, but do bear in mind that some lenders will have a minimum liquid net worth requirement outside of the property. Also, if you do eventually want to sell this property, do note that it will be subject to capital gains tax. Your accountant will be able to help you with that aspect if you do decide to sell in the future.

When it comes to purchasing a secondary property, whether for investment or rental or vacation, it can be a great opportunity! However, do note that most lenders will limit the number of mortgages in a portfolio. If this is only property number two or three, you won’t have any concerns, but as you expand your portfolio you may run into limits at five properties (at which point you would be considered a commercial file).

A mortgage broker can work with you and may even be able to find options to increase the number of investment properties should it become necessary.

7 Jul

Growing Your Own Organic Garden

General

Posted by: Mike Hattim

With many of us spending more time at home this year, now is a great time to start that organic garden you’ve always wanted! As someone with friends who grow their own herbs and vegetables, it can seem pretty daunting at first – but if they can do it, so can you.

Location, Location, Location: Ideally, an organic vegetable garden needs at least 6 to 8 hours of sunlight each day but don’t mind a little shade so they don’t overheat. A handy tip is to choose a spot near your house that you can see from inside – this will remind you to tend to it. Raised beds are another great option if you have limited space, or want a “cleaner” look to your yard.

Start Small: It can be easy to want to plant a full yard right away, but starting small can help you to ensure future success by getting into the habit of gardening and learning about it, without becoming overwhelmed.

Choose The Right Plants: Next you need to decide what plants you want to grow, and find the best strains to suit your environment. A few of the easiest vegetables to grow, regardless of skill level or experience, are: carrots, green beans, lettuce, cucumbers, spinach and tomatoes. If you are looking for more of a herb garden, beginners will want to stick to: chives, mint, parsley, basil and cilantro.

Garden Maintenance: To keep your garden healthy, you will want to water it daily – especially on hot days. The best time is in the morning as there is less evaporation and it keeps your plants hydrated all day. Make sure to focus on the roots, and not the leafy stems! Your garden will also require some maintenance in terms of weeding. Mulch can help reduce the number of weeds present, but you will still want to check regularly and remove any unwanted plant matter. Keeping your plants healthy and hydrated will also prevent pests and allow your plants to flourish.

Harvest Time! Did you know that, generally the more you harvest, the more your plants will produce? Remember to always use scissors to cut produce off, versus pulling and ripping your plant. If you use them fresh, pick them right before you need them!

7 Jul

What Your Banker Won’t Tell You!

General

Posted by: Mike Hattim

Did you know the biggest difference between getting your mortgage from a bank vs. a mortgage broker is that the bank only has access to their products, while I, your mortgage broker, have access to hundreds of different lending institutions and mortgage products to fit your unique needs?

Here are a few things to keep in mind while doing business with your bank – from opening chequing and savings accounts to personal loans and mortgages, I’ve got you covered!

Bank Fees Add Up
One of the biggest money makers for a bank is the fees; this is especially true with overdraft charges. It is important that you are always checking your accounts and loans to ensure that you are aware of all extra fees (and any interest rate changes), as well as staying on top of your bank account balance. Overdraft and banking fees can add up quickly! Fortunately, these fees can often be negotiated and reduced, especially when addressed early.

Penalties Hurt
Banks are a business and the mortgages and loans you sign with them are contracts. If your mortgage is with a traditional bank, they can often come with steep penalties when broken. When signing for a mortgage or loan, be sure to always read the contract thoroughly and make note of any penalties. Generally speaking, big banks typically have higher penalties to break a mortgage than alternative lenders. Most bank loans have terms of five years or more – but a lot can happen in that time! Even if you don’t think so, you just have to take a look at the current situation in the world to realize just how quickly things can change. While your bank may compete on rates, the high break penalty is built in. As your mortgage broker, I would be happy to help you locate the best mortgage contract with minimal penalties.

Your Credit Health
Most of you have received a letter from your bank, at least once, offering you a line of credit; or a letter from your credit card company urging you to increase your credit card limit, or maybe even sign up for their new card. What these letters typically leave out is how this will affect the health of your credit and where you currently stand. You might be paying extremely high-interest rates on all your financial products, not realizing that your credit score (and other credit-related factors) could be earning you a more reasonable rate for your mortgage, credit card or lines of credit! This is where I can help you to review your financial situation and ensure that you get the best mortgage – at the best rate – based on your current credit health.

You Should Shop Around
A bank only has access to their own mortgage rates. While most people will stay with the same bank for years, there can be a cost for that convenience. More often than not, it’s true that individuals who are renewing will be offered a higher rate than a new customer. Shopping around, especially at renewal time, is a great way to ensure that you are getting the best rate available to you. When you are a few months away from renewal, contact me and I would be happy to help you determine if you are getting the best mortgage before you renew.

When dealing with a bank for your mortgage, it can help to get third-party expert advice. As a mortgage broker, I have access to additional mortgage products beyond your current bank and access to even more options to best suit your needs. Contact me today to book your virtual appointment or download the My Mortgage Toolbox App!

7 Jul

Mortgage Insurance and Your Borrowing Power

General

Posted by: Mike Hattim

As a Canadian homebuyer or homeowner, your borrowing power is impacted by a few factors. Recent changes to the lending policies announced by CMHC, The Bank of Canada’s qualifying rate and your banks’ Prime Rate and mortgage stipulations are all things to consider when thinking about purchasing a home.

If you have less than 20% down, mortgage default insurance is required (known as a high ratio mortgage). This insurance policy protects lenders in the event you, the borrower, ever stop making payments and default on the mortgage loan. What you might not know is that mortgages in Canada are insured by one of three companies: CMHC, Genworth Canada or Canada Guaranty. In addition, both the lender and the insurer need to approve your application once you have qualified. In order to qualify, all insured mortgages use the Bank of Canada’s Conventional 5 year fixed posted rate (also referred to as the Benchmark Rate), which has recently dropped to 4.94%! Once you’ve qualified, we can then start to shop the market for you to get the best financing options.

While homeowners are not able to specify the mortgage insurer they prefer, it is important to know what is going on with these companies as every mortgage is covered by one of these three – depending on your bank – and their policies directly affect you as a homeowner. Recently, falling home prices and a stalled economy due to COVID-19 have resulted in some policy changes to insured mortgages, specifically from The Canada Mortgage and Housing Corporation (CMHC).

The recent changes announced by CMHC on June 4, 2020 relate specifically to new applications for homeowner insurance, such as new purchases, as well as renewals; refinancing is not included. So, what are these changes and how do they affect you or a potential homeowner you know?

– Credit Score Increase: Previously, the minimum credit score was 600 but has now been increased to a 680 mandatory credit score for at least one applicant. This is important as 80 points is a considerable jump when the score can only range from 300-900!

– Down Payment Sources: The source of down payment options have changed. Now, you can no longer utilize borrowed funds towards the down-payment. This includes funds from credit card, line of credit or a loan with repayment terms of any kind. Your down payment must come from your own savings.

– GDS/TDS Ratio: This is a ratio of “Gross Debt Service” / “Total Debt Service” and represents how much debt one can have in relation to income. The requirements for this have been decreased from prior potential of 39/44 to a more conservative 35/42. The result is reduced borrowing power in relation to existing debt and size of mortgage request to the allowed income.
Overall, these changes represent an approximate 9% – 13% reduction in what you may qualify for, which primarily impacts first time homebuyers. This is a large reduction in borrowing power and may seem quite restricting in terms of new qualifying policies.

Thankfully, there is some good news! These changes have only been adopted by the CMHC. Canada’s other mortgage insurers, Genworth Canada and Canada Guaranty, have both announced they have no plans to make changes to their debt service ratio limits, minimum credit score and down payment requirements.

While there is still more information to come, and more changes may yet be made, it is a good idea for any potential homeowner to remain educated on the marketplace, especially those with upcoming renewals or plans to purchase.

If you are looking to renew your mortgage, or are a first-time home buyer wanting to make the most of your borrowing power, please contact me today. I would be happy to discuss these changes further and help you to find a mortgage provider that best suits your individual needs.

2 Jun

5 Tips to Stay Cool & Save This Summer

General

Posted by: Mike Hattim

Summer is just around the corner and doesn’t stick around for long, so make sure you enjoy it! We have some great tips for staying cool AND saving money while you do.

Use Portable And Ceiling Fans
Instead of cranking the A/C (and your electricity bill) consider cooling down with portable and ceiling fans. not only are these great options if your A/C unit is on the brink, but they can help ease the stress on your unit when used together or help eliminate the need for it all together. Portable fans work by creating a breeze, helping to circulate the air and causing a wind-chill effect that hits your skin and helps keep you cool. For an extra blast of coolness, place a bowl of ice in front of the fan to create a refreshing mist of air!

Avoid Cooking On The Stove
While cooking indoors can be a great way to warm up the house in the winter, it will create unnecessary heat in the summertime. Instead, consider cold meals such as salads or breaking out the BBQ for grilled chicken or steaks.

Keep The Curtains Drawn
As nice as it is to let the sun in, this can increase the heat in your house and cause extra stress on your A/C unit and fans. Instead, keep the curtains drawn (at least on very hot days) to help your home stay cool.

Maintain the Air Filters
As always, the change of the season is a good time to check the air filters in your home. Dirty filters slow airflow and make the system work harder, which can lead to expensive repairs down the road. Replacing your air filters every three months is ideal to keep dirt and dust out of your system.

Swap to Energy Efficient Lighting
You have probably heard some of the reasons why LED lights have become so popular, but did you know that they also produce 75 percent less heat than incandescent bulbs, and can help keep room temperature down? This can help reduce monthly bills and keep your home more comfortable during the summer season!

2 Jun

Advantages of a Pre-Approval

General

Posted by: Mike Hattim

Getting pre-approved can be a vital step to the home-buying process! But don’t confuse this with pre-qualification; you can get a pre-qualification through the My Mortgage Toolbox app to determine what you might qualify for. Pre-approval, on the other hand, means that a lender has stated (in writing) that you do qualify for a mortgage and what amount, based on your current income and credit history. A pre-approval usually specifies a term, interest rate and mortgage amount and is typically valid for a brief period of time, assuming various conditions are met.

In order to get pre-approved, you must submit and verify your financial history. I can walk you through this process and assist in finding you the best mortgage to suit your needs. Not only will getting pre-approved help speed up the process when you do find that perfect home, but it also helps determine the most accurate budget to fit your needs and the actual home price you can afford.

In fact, pre-approval can help you to determine three very important things:

1. The maximum amount you can afford to spend

2. The monthly mortgage payment associated with your purchase price range

3. The mortgage rate for your first term

Not only does getting pre-approved make the search easier for you, but helps your real estate agent find the best home in your price range. Temptation will always be to start looking at the very top of your budget, but it is important to remember that there will be fees, such as mandatory closing costs, which can range from 1 to 4% of the purchase price. Factoring these into your maximum budget can help you narrow down a home that is entirely affordable and ensure future financial stability and security.

While getting pre-approved doesn’t commit you to a single lender, it does guarantee the rate offered to you will be locked in from 90 to 120 days which helps if interest rates rise while you are still shopping. If interest rates actually decrease, you would still be offered the lower rate.

Another benefit to pre-approval is that, when it comes time to purchase, pre-approval lets the seller know that securing financing should not be an issue. This is extremely important for competitive markets where lots of offers may be coming in.

Protecting Your Pre-Approval
Once you have gone to the trouble of getting pre-approved and determining the boundaries of your budget and mortgage payments, you will want to make sure that you take actions to protect the rate you have been offered.

To protect your pre-approval, there are a few things to keep in mind:

1. Refrain from having additional credit reports pulled once you have been pre-approved

2. Refrain from applying for new credit, closing off credit accounts or making large purchases until after the sale is complete

3. Be prepared to show a paper-trail – any unusual deposits in your bank account may require explanation. Also, if your down payment comes from savings, the bank will want 90 days of statements to ensure the funds are accounted for.

2 Jun

What to Know BEFORE You Start House-Hunting

General

Posted by: Mike Hattim

As exciting as it is to start your journey towards home ownership (or even up- and down-sizing), there are a few things you should consider first.

Most importantly, you need to determine your purchase range. Having the proper budget for your future home is the best way to ensure future financial success! To create a proper budget, you need to look at your monthly income and expenses to determine how much you can afford in monthly mortgage payments. Download my Mortgage Toolbx app directly above this article and create a profile today to access all of the amazing features, including mortgage estimates and budgeting tools. From there, you can determine your purchase price! Ideally, it is best to try and find a home that fits your needs that is below your maximum budget, which will give you a lower mortgage payment and a little more financial freedom and security for the future.

Beyond determining what you can afford, you need to identify your housing needs. It is important to know that, unless you build it yourself, no home will have everything you are looking for. However, you can find a home with most of the things you want and all of what you need if you are able to be a little bit flexible and realistic about your deal breakers. You should have a list of your must-have items that you cannot do without, such as needing a second bathroom or a third bedroom for a growing family. Your list of must-have items, or needs, should be things you cannot change; flooring and paint color should never be on this list.

Once you have your list of needs and your budget, you can connect with me and begin the pre-approval process (more information on that below). I can also help to connect you with a real estate agent to begin your search.

Remember, whether it is your first or fourth house, home-hunting can be a process. Be prepared to revisit your list and homes several times to find the right fit. It is out there! As long as you stay within your budget, you will not only build equity in your new home but you will have a solid financial foundation to continue growing from.

11 May

What to Know if You’re New to Canada

General

Posted by: Mike Hattim

Canada has seen a surge of international migration over the last few years. With all these new faces in town wanting to plant roots in this great country, we wanted to touch base on some of the details surrounding mortgages and how new immigrants can qualify to be homeowners.

If you are already a Permanent Resident or have received confirmation of Permanent Resident Status, you are eligible for a typical mortgage with a 5% down payment – assuming you have good credit.

For Permanent Residents with limited credit, or individuals who have not yet qualified for Permanent Residency, there are still options! In fact, there are several ‘New to Canada’ mortgage programs through CMHC, Genworth Financial and Canada Guaranty Mortgage Insurance, which cater to this group of homebuyers.

To qualify for these New to Canada programs, you must have immigrated or relocated to Canada within the last 60 months and have had three months minimum full-time employment in Canada. Individuals seeking credit of 90.01-95% need to produce an international credit report (Equifax or Transunion) demonstrating a strong credit profile OR two alternative sources of credit demonstrating timely payments (no arrears) for the past 12 months. The alternative sources must include rental payment history and another altnernative, such as hydro/utilities, telephone, cable, cell phone or auto insurance. For individuals looking for 90% credit, a letter of reference from a recognized financial institution OR six (6) months of bank statements from a primary account will be required.

Utilizing a mortgage broker will help to ensure you understand your options and they can help determine the best program and mortgage choice for you. Before you talk with a mortgage broker, there are a few things you need to know when it comes to submitting an application – and getting approved – for your first mortgage in Canada:

1. Supporting Documents: If you’re new to the country but have a weak credit, supporting documents will come in handy. These may include proof of income, 12 months worth of rental payments or letter from landlord, documented savings, bank statements and/or letter of reference from recognized financial institution. These documents all paint the picture of whether you are a safe investment for a lender.

2. Build your Credit Rating: This is one of the most important aspects to getting a mortgage as credit rating determines your reliability as a borrower and will determine your down payment rate. One of the best ways to build your credit is by getting a credit card that you use and pay off each month. Paying other bills such as utilities, cell phones and rent can also contribute to your credit score and reliability.

3. Start Saving: One of the most expensive aspects of home ownership is the down payment; an upfront cost vital to securing your future. The down payment can either be 5% or 10% depending on your status. It is important to note that if you’re paying $500,000 or more for your home, the minimum down payment will be 5% for the first $500,000 and 10% of any amount over $500,000 – regardless of your residency status.

4. Choose a Mortgage Provider: Once you are ready to get your mortgage, you need to decide where you want to borrow from. There are three key lenders: Bank, Credit Unions and Monolines, as well as the option to purchase direct or go through a mortgage broker which may be able to offer you some extra savings.

Buying a house is an exciting step for anyone, but it is especially so for individuals who are new to the country. As daunting as it may seem, purchasing a home is completely possible with a little knowledge and preparation!