A lot of people think mortgage brokers offer loans that have high upfront fees and heavy interest. Clearly, this is not true, but it doesn't mean that we still don't have these loans avaialble. Is there ever a time that its a good idea to use them? Private Lenders exist for a reason. Here are some of them:
1. Pending Bankruptices
If your home is in bankruptcy and you are equity rich, using a private lender is a very good idea to stay in your home. Another advantage with private lenders is that you can have your mortgage prepaid, which means no payments are required till the end of the term. Make sure that you have a good equity postion and can afford the payments.
2. Doing a Big Renovation
When your using a progress draw from a bank the process can be lengthy and the interest rate is higher than most "A" rate mortgages. Also construction loans require payments during the process where many people are required to service a rent payment or other living arrangements. A lot of borrowers simply find private loans easier.
3. Fix and Flips
Private Loans are great products for investors. There are no TDS and GDS requirements, and the ability to borrow money over and over again is a very easy solution.
Private loans are just like any other mortgage product. There are not bad loans, just bad for some situations.
Sunday, October 17, 2010
Saturday, September 11, 2010
Want to buy a dumpy house? Check Out the Purchase Plus Improvement Program
There is no question that the today's real estate market causes us to be more creative when it comes to buying a home.
Picture this common scenario. You get pre-qualified for a mortgage, and you go out to start buying homes with your realtor and discover that the house you can qualify for needs some work! You barely have money for a downpayment, let alone the $20,000 extra to fix up a home. Many home buyers hang their head and resort back to renting.
There is another way.
A lot of lenders offer the Purchase Plus Improvement Program. It's very simple. When you buy a home, you are able to get some additional renovations tacked right onto the mortgage. The only stipulations are that it cannot include appliances and the lender usually will only advance the funds when the project is done. A purchase plus improvement program can be used up to 95% Loan to Value
Most houses have only cosmetic issues, and with a little extra money and elbow grease you'll have your own home and likely a very strong equity position.
Picture this common scenario. You get pre-qualified for a mortgage, and you go out to start buying homes with your realtor and discover that the house you can qualify for needs some work! You barely have money for a downpayment, let alone the $20,000 extra to fix up a home. Many home buyers hang their head and resort back to renting.
There is another way.
A lot of lenders offer the Purchase Plus Improvement Program. It's very simple. When you buy a home, you are able to get some additional renovations tacked right onto the mortgage. The only stipulations are that it cannot include appliances and the lender usually will only advance the funds when the project is done. A purchase plus improvement program can be used up to 95% Loan to Value
Most houses have only cosmetic issues, and with a little extra money and elbow grease you'll have your own home and likely a very strong equity position.
Saturday, August 28, 2010
Mortgages for the Self-Employed
When someone is self-employed, it may be difficult to show income, as a lot of the income that they recive in written off.
Here are some options for the self-employed borrowers that are available:
1. Fully Qualified Self-Employed Application
As income fulcates for a self-employed individual, this application involves taking the last two years NOA, and using that number as the qualifying income. Many lenders will either offer a 15% gross up of the income, or allow add-backs for things like car expenses. Recently, National Bank in an effor to get away from Stated Income (Discussed Below) is offering a fully qualified application that allows a 75% TDS. This means that 75% of your income can be used towards debt payments. A fully qualfied self-employed application has the ability to qualify for a downpayment as low as 5%.
2. Stated Income for Self-Employed Applications
Basically for this type of application, the borrower is required to state or give an approxmeite idea of their income situation. The amount must be reasonable. A higher than normal credit score is required, and a mimium of two years as a self-employed employee is required. It is only permissable to put no less than !0% down on a property that is being purchased. It is possible to be able to qualify for a loan sooner, if you become self-employed in an industry that you were already working in.
Without question this is perhaps one of the most common scenriors that you must use a mortgage professional.
Here are some options for the self-employed borrowers that are available:
1. Fully Qualified Self-Employed Application
As income fulcates for a self-employed individual, this application involves taking the last two years NOA, and using that number as the qualifying income. Many lenders will either offer a 15% gross up of the income, or allow add-backs for things like car expenses. Recently, National Bank in an effor to get away from Stated Income (Discussed Below) is offering a fully qualified application that allows a 75% TDS. This means that 75% of your income can be used towards debt payments. A fully qualfied self-employed application has the ability to qualify for a downpayment as low as 5%.
2. Stated Income for Self-Employed Applications
Basically for this type of application, the borrower is required to state or give an approxmeite idea of their income situation. The amount must be reasonable. A higher than normal credit score is required, and a mimium of two years as a self-employed employee is required. It is only permissable to put no less than !0% down on a property that is being purchased. It is possible to be able to qualify for a loan sooner, if you become self-employed in an industry that you were already working in.
Without question this is perhaps one of the most common scenriors that you must use a mortgage professional.
Sunday, August 22, 2010
Things You Didn't Know Your Mortgage Could Do
When we think of a mortgage, there are several things that come to mind. What is the interest rate? How long is the term? How much will my payments be? But, did you know that lenders are adding new perks to mortgages all the time? Here are some great features that lenders are offering:
1. Cash back Mortgages
Most lenders offer some variation of this program. Basically, this program means that a lender will give you cash back at the closing to be used for things like closing costs, furniture, renovation costs, and even the down payment. The amount that a lender will offer with this program varies from 3% to 8%. However, the program isn't all roses as usually lenders will charge a higher interest rate on the mortgage.
2. Warranty Insurance
There are a few lenders that are offering free home warranty on things on your house if something goes wrong in your first year of home ownership.
3. Green Mortgages
With a move towards more eco-friendly products, mortgages are no different. Usually, the approach is that once the house is completed with eco-friendly renovations, there is cash back given to the borrower.
4. Portability
A lot of people worry about what happens if they decide to move and change houses. They may even avoid moving in an effort to not have to pay the enormous mortgage penalty. Portability allows you to move your mortgage over to a new property with the same rate and terms.
Just like any other type of product on the market, there are plenty of mortgage products to choose from and compare. Make sure to contact a mortgage professional to make sure you get the best "perks" possible on your mortgage.
1. Cash back Mortgages
Most lenders offer some variation of this program. Basically, this program means that a lender will give you cash back at the closing to be used for things like closing costs, furniture, renovation costs, and even the down payment. The amount that a lender will offer with this program varies from 3% to 8%. However, the program isn't all roses as usually lenders will charge a higher interest rate on the mortgage.
2. Warranty Insurance
There are a few lenders that are offering free home warranty on things on your house if something goes wrong in your first year of home ownership.
3. Green Mortgages
With a move towards more eco-friendly products, mortgages are no different. Usually, the approach is that once the house is completed with eco-friendly renovations, there is cash back given to the borrower.
4. Portability
A lot of people worry about what happens if they decide to move and change houses. They may even avoid moving in an effort to not have to pay the enormous mortgage penalty. Portability allows you to move your mortgage over to a new property with the same rate and terms.
Just like any other type of product on the market, there are plenty of mortgage products to choose from and compare. Make sure to contact a mortgage professional to make sure you get the best "perks" possible on your mortgage.
Sunday, August 1, 2010
Behind on Your Mortgage Payments?
Let's face it, times are tough. Sometimes you may find yourself unable to meet your financial obligations. If this happens, its' important to be proactive, so you will be able to avoid losing your home and damage to your credit.
Here's are some vital steps you need to take.
1. Evaluate Your Commitment
Before anything else you need to be honest if you can afford your mortgage payment should times change, you will need to closely follow the following steps, but if you decide you have gotten yourself in a situation where you are too overlevarged. You will need to list your home for sale immediately. Even if you are unable to make any payments at all, the foreclosure process will take a long-time to complete, so you have some time to be aggressive and sell the house quickly, while having the least long-term repercussions.
2. Talk to your lender
No matter what your situation is talk to your lender and explain it. The longer that you leave the payments unpaid without talking to the lender the harder it will be for them to make a payment arrangement. Let them know when you expect to be back at work or when you expect for you situation to change. Any missed payments will be required to be made up over a short period of time to bring you back current. Some lenders have a capitalization program that can be used to skip your payments. The payments are added to the end of your term. Make sure that any payment arrangement that you make is realistic and that you follow it exactly how its agreed upon.
If you are falling behind, time is off the essence and your lender will be more inclined to help if you are honest and timely in dealing with it.
Here's are some vital steps you need to take.
1. Evaluate Your Commitment
Before anything else you need to be honest if you can afford your mortgage payment should times change, you will need to closely follow the following steps, but if you decide you have gotten yourself in a situation where you are too overlevarged. You will need to list your home for sale immediately. Even if you are unable to make any payments at all, the foreclosure process will take a long-time to complete, so you have some time to be aggressive and sell the house quickly, while having the least long-term repercussions.
2. Talk to your lender
No matter what your situation is talk to your lender and explain it. The longer that you leave the payments unpaid without talking to the lender the harder it will be for them to make a payment arrangement. Let them know when you expect to be back at work or when you expect for you situation to change. Any missed payments will be required to be made up over a short period of time to bring you back current. Some lenders have a capitalization program that can be used to skip your payments. The payments are added to the end of your term. Make sure that any payment arrangement that you make is realistic and that you follow it exactly how its agreed upon.
If you are falling behind, time is off the essence and your lender will be more inclined to help if you are honest and timely in dealing with it.
Saturday, July 24, 2010
Picking Your Mortgage Term
Time is very valuable asset and when choosing a mortgage selecting an acceptable mortgage term could save you thousands.
Typically, lenders offer terms from anywhere from 6 Months all the way to 25 Years.
Essentially, the mortgage term serves as the time that you are locked into the mortgage agreement. The most important part of the agreement of the term is the mortgage rate. This is why you should choose the best possible term to meet your needs, as you may pay a major penalty for breaking it.
The following things should be considered:
1. Economic Conditions
Lenders set lower rates for smaller terms if they believe that at the end of your term mortgage rates will be higher. Avoid the short-term low rate, and opt for the longer term of five years if this is the situation. Alternatively, if interest rates are believed to decrease, consider a shorter term.
2. Think about how long your mortgage is required for.
Consider how long you will need your current mortgage for, are you planning on selling in two years? Plan on having only a two year term. It is also a good idea to think about when you will need to refinance, as you will avoid a heavy penalty by locking into a term that coincides with this.
Most clients lock in for terms of about five years. There are terms that are longer, but the luxury of having them is not likely to yield more savings than depending on the ebb and flow of the market.
Typically, lenders offer terms from anywhere from 6 Months all the way to 25 Years.
Essentially, the mortgage term serves as the time that you are locked into the mortgage agreement. The most important part of the agreement of the term is the mortgage rate. This is why you should choose the best possible term to meet your needs, as you may pay a major penalty for breaking it.
The following things should be considered:
1. Economic Conditions
Lenders set lower rates for smaller terms if they believe that at the end of your term mortgage rates will be higher. Avoid the short-term low rate, and opt for the longer term of five years if this is the situation. Alternatively, if interest rates are believed to decrease, consider a shorter term.
2. Think about how long your mortgage is required for.
Consider how long you will need your current mortgage for, are you planning on selling in two years? Plan on having only a two year term. It is also a good idea to think about when you will need to refinance, as you will avoid a heavy penalty by locking into a term that coincides with this.
Most clients lock in for terms of about five years. There are terms that are longer, but the luxury of having them is not likely to yield more savings than depending on the ebb and flow of the market.
Monday, July 12, 2010
The Trouble with Open Mortgages
Many clients also ask me about getting an open mortgage when purchasing or refinancing their properties. The concept is sound, an open mortgage enables you to pay off your mortgage at any time with no penalty fees. This is pretty appealing because many people who attempt to refinance before their term is up can be hit with an average penalty of $15,000 to $30,000. So, why would I think open mortgages are bogus? Open mortgages are priced at a high premium, so if you (and most don't) do decide to end your term early, the bank is sure to still make a profit. This doesn't mean that every home buyer should jump into a long five year fixed rate. There are some other creative options, to pay less and still have the flexibility of not being locked into an unbreakable mortgage.
1. Consider a variable rate
Yes, there is still a penalty, but a variable rate has a penalty of only three months interest, which is likely to be way less than the typical fixed rate penalty. A fixed rate mortgage is subject to an interest rate differential penalty, which basically means that you will have to pay the interest that a bank is missing out on.
2. Add a Line of Credit
Although more expensive than a variable rate, a credit line can be payed to zero at any time with no penalty. Having advanceable credit is only an advantage if your expect to need different portions of your equity at different times. An example being a home renovation.
3. Plan Ahead
The best way to avoid penalties and have the cheapest rate. Plan. Are you going to sell your home in two years? Get a Two Year Term Will you need to remodel in three years? Get a three year term, or add a line of credit. The more you can anticipate upfront the less penalties you will pay. Additionally, if you are required to pay a penalty this will be less the closer you are to the end of your term.
Typically, banks will advertise the money saving advantage of an open mortgage, without letting you know that with a little bit of creative planning (and the help of a mortgage broker), you can expect to pay less money.
Remember, I will happily evaluate your mortgage for free call me at 1.250.814.1627 or visit my website at www.joelolson.ca
1. Consider a variable rate
Yes, there is still a penalty, but a variable rate has a penalty of only three months interest, which is likely to be way less than the typical fixed rate penalty. A fixed rate mortgage is subject to an interest rate differential penalty, which basically means that you will have to pay the interest that a bank is missing out on.
2. Add a Line of Credit
Although more expensive than a variable rate, a credit line can be payed to zero at any time with no penalty. Having advanceable credit is only an advantage if your expect to need different portions of your equity at different times. An example being a home renovation.
3. Plan Ahead
The best way to avoid penalties and have the cheapest rate. Plan. Are you going to sell your home in two years? Get a Two Year Term Will you need to remodel in three years? Get a three year term, or add a line of credit. The more you can anticipate upfront the less penalties you will pay. Additionally, if you are required to pay a penalty this will be less the closer you are to the end of your term.
Typically, banks will advertise the money saving advantage of an open mortgage, without letting you know that with a little bit of creative planning (and the help of a mortgage broker), you can expect to pay less money.
Remember, I will happily evaluate your mortgage for free call me at 1.250.814.1627 or visit my website at www.joelolson.ca
Tuesday, July 6, 2010
Realtor or For Sale By Owner
It's a pretty common occurrence, people call me looking to get qualified for a mortgage only for me to discover that the house they're looking at is a FSBO, or for sale by owner. Now, don't get me wrong, I have looked at and even considered buying For Sale By Owner properties for my portfolio, but it seems every time I have a client looking at one it turns into a bogus deal. Wait, I'm getting ahead of myself. What is a For Sale By Owner property? It's a property that the owners sells themselves without the use of a professional realtor. On the surface, it seems like a great idea. Avoid a realtor's commissions and you'll be able to save money on the purchase price and the seller will be able to keep more of their hard-earned equity in their pocket. You can't lose! Wrong!
Here are some things you should know about For Sale By Owner properties that will have you running for a realtor.
1. The seller doesn't make more money and the buyer doesn't save money.
Hey, wait a minute! I thought you said...Yes, its a theory that a homeowner will lower the price, because they don't have to pay a realtor commission and then they will pass those savings onto a buyer. It rarely happens though. Most sellers are emotional attached to their properties and see way more value than an objective realtor would. It's not uncommon to see "FSBO" properties listed for more than market value. Additionally, a lot of sellers don't know their local market. They are not aware of factors that affect value like location, and house condition. But, hey my neighbour's house sold for this price! Yes, but your neighbour has a full basement suite and a new jacuzzi tube in the master bedroom. Add to this that Real Estate is always local and factors that may improve value in one place will decrease it in another make determining your house's realistic selling price a tougher job than just skimming the classifieds.
2. A real estate offer is a legal contract, have you ever written one before?
Sure, you can take your real estate offer down to your lawyer or your notary, but even these professionals are not trained in writing real estate offers every day. Many people who sell their homes on their own, leave out important clauses or assume things that become a problem later. A realtor writes offers every day. Their job is to make sure your interests are protected and to put you in the best situation possible. Their "hefty" commission will seem pretty small when you realize that you could've avoided losing your deposit and getting sued by using them.
3. A owner has one property, but a realtor can show you many properties
One of a realtor's most important job is to monitor the market, and see what properties are listed, for what price, and to what client they will fit. A realtor only makes a commission when you buy a house, but it doesn't matter what house it is. A owner only makes money if you buy their house, there not going to recommend the house down the street that has a bigger playroom for your growing family.
4. You will have to get dirty!
At the end of the day, your making a business transaction and a house is a very big "guilt" purchase. Let' say that you think that the bathroom needs an update, so you need $5000 off the purchase price. If your buying a "FSBO", the bathroom could've been the owner's latest and proudest fix-it project, and it might be a tad bit daunting to mention you think he should apply to be on "Holmes on Homes". If you use a realtor, they will do the talking for you, and make sure that you don't get into a situation where your house will become your most hated purchase.
5. Professional Advice?
Sure, a seller will say he knows the best lawyer, the best home inspector, and the best mortgage broker, but a realtor will actually know the best. Remember, a seller sells one house in his lifetime, and a realtor sells a house a week. Who is going to know more about the process?
6. Banks hate Private Sales
There are some banks and lenders that will finance a private sale, but a lot of lenders will stay away from transactions that have no realtor involved, as it is too likely to have something go wrong due to the inexperience of the parties involved. The banks that do finance them are rarely the most aggressively priced, so be prepared to pay a premium for this "money-saving" opportunity.
So, stop driving around looking for a homemade sign in the laws. Call you local real estate office today, and start moving towards a house buying experience that is smoother, cheaper, and guaranteed to give you peace of mind.
Don't forget, when you have a house you want to buy I would love to help you get a mortgage. Call Joel Olson at 1.250.814.1627 or visit my website at www.joelolson.ca
Here are some things you should know about For Sale By Owner properties that will have you running for a realtor.
1. The seller doesn't make more money and the buyer doesn't save money.
Hey, wait a minute! I thought you said...Yes, its a theory that a homeowner will lower the price, because they don't have to pay a realtor commission and then they will pass those savings onto a buyer. It rarely happens though. Most sellers are emotional attached to their properties and see way more value than an objective realtor would. It's not uncommon to see "FSBO" properties listed for more than market value. Additionally, a lot of sellers don't know their local market. They are not aware of factors that affect value like location, and house condition. But, hey my neighbour's house sold for this price! Yes, but your neighbour has a full basement suite and a new jacuzzi tube in the master bedroom. Add to this that Real Estate is always local and factors that may improve value in one place will decrease it in another make determining your house's realistic selling price a tougher job than just skimming the classifieds.
2. A real estate offer is a legal contract, have you ever written one before?
Sure, you can take your real estate offer down to your lawyer or your notary, but even these professionals are not trained in writing real estate offers every day. Many people who sell their homes on their own, leave out important clauses or assume things that become a problem later. A realtor writes offers every day. Their job is to make sure your interests are protected and to put you in the best situation possible. Their "hefty" commission will seem pretty small when you realize that you could've avoided losing your deposit and getting sued by using them.
3. A owner has one property, but a realtor can show you many properties
One of a realtor's most important job is to monitor the market, and see what properties are listed, for what price, and to what client they will fit. A realtor only makes a commission when you buy a house, but it doesn't matter what house it is. A owner only makes money if you buy their house, there not going to recommend the house down the street that has a bigger playroom for your growing family.
4. You will have to get dirty!
At the end of the day, your making a business transaction and a house is a very big "guilt" purchase. Let' say that you think that the bathroom needs an update, so you need $5000 off the purchase price. If your buying a "FSBO", the bathroom could've been the owner's latest and proudest fix-it project, and it might be a tad bit daunting to mention you think he should apply to be on "Holmes on Homes". If you use a realtor, they will do the talking for you, and make sure that you don't get into a situation where your house will become your most hated purchase.
5. Professional Advice?
Sure, a seller will say he knows the best lawyer, the best home inspector, and the best mortgage broker, but a realtor will actually know the best. Remember, a seller sells one house in his lifetime, and a realtor sells a house a week. Who is going to know more about the process?
6. Banks hate Private Sales
There are some banks and lenders that will finance a private sale, but a lot of lenders will stay away from transactions that have no realtor involved, as it is too likely to have something go wrong due to the inexperience of the parties involved. The banks that do finance them are rarely the most aggressively priced, so be prepared to pay a premium for this "money-saving" opportunity.
So, stop driving around looking for a homemade sign in the laws. Call you local real estate office today, and start moving towards a house buying experience that is smoother, cheaper, and guaranteed to give you peace of mind.
Don't forget, when you have a house you want to buy I would love to help you get a mortgage. Call Joel Olson at 1.250.814.1627 or visit my website at www.joelolson.ca
Wednesday, January 6, 2010
More than Rate
It's easy to be consumed with just finding the best rate for your mortgage, but there are other things to consider that will save you money on a mortgage even if it isn't the best rate on the market.
1. Pre-Payment Privlages
If you want to put an type of agggressive amounts on your mortgage, this is something you'll want to make sure your broker is clarifying for you. Lenders range from 10%-20% for this term. This means you can pay between 10%-20% of your mortgage balance per year without there being a penalty fee. If you're looking to put big chunks of change or pay your mortgage off within the first fee years of obtaining it this is a big consideration.
2. Portability
Although, most mortgages are portable it is very important to check. Portability means your mortgage can move with you to another property when you move and usually it can be done when it's portable with a gap, where you would be able to purchase a home that is more expensive. If your mortgage lacks this feature you can be subject to some very substantial penatlities.
3. Penalties
Every company is different, even if they look the same. The industry norm is that you can pay the GREATER of three months interest or the interest rate differential. Every lender seems to have a little bit different way of calculating it.
4. Term
How long do you need your mortgage for? Do you plan on refinance to renovate or to buy investment properties? If you plan on changing you mortgage within three years, don't get a five year term, even if it is cheaper.
Dob't be lured in by advertising based on just the rate, get the whole story, and if it seems like your broker isn't giving you the best rate ask him to supply the reasons. It will give you piece of mind that you're not paying any more than you need to be.
As always, my advice and services are free and don't hestitate to call me.
Joel Olson
Pacific Mortgage
1.250.814.1627
1. Pre-Payment Privlages
If you want to put an type of agggressive amounts on your mortgage, this is something you'll want to make sure your broker is clarifying for you. Lenders range from 10%-20% for this term. This means you can pay between 10%-20% of your mortgage balance per year without there being a penalty fee. If you're looking to put big chunks of change or pay your mortgage off within the first fee years of obtaining it this is a big consideration.
2. Portability
Although, most mortgages are portable it is very important to check. Portability means your mortgage can move with you to another property when you move and usually it can be done when it's portable with a gap, where you would be able to purchase a home that is more expensive. If your mortgage lacks this feature you can be subject to some very substantial penatlities.
3. Penalties
Every company is different, even if they look the same. The industry norm is that you can pay the GREATER of three months interest or the interest rate differential. Every lender seems to have a little bit different way of calculating it.
4. Term
How long do you need your mortgage for? Do you plan on refinance to renovate or to buy investment properties? If you plan on changing you mortgage within three years, don't get a five year term, even if it is cheaper.
Dob't be lured in by advertising based on just the rate, get the whole story, and if it seems like your broker isn't giving you the best rate ask him to supply the reasons. It will give you piece of mind that you're not paying any more than you need to be.
As always, my advice and services are free and don't hestitate to call me.
Joel Olson
Pacific Mortgage
1.250.814.1627
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