Canada Mortgage Information and Products

Thoughts on Mortgage Changes

2011-01-18T13:46:00.000-08:00

Yesterday, Ottawa issued a statement saying that feel it is necessary to tinker with mortgage rules again. Here's the skinny, and how it will effect you and the greater market.

1. They will no longer insure Secured Lines of Credit

This shouldn't effect much of the mortgage market at all. I'm not totally against lines of credit. They work in some situations. I do believe that the current state of the market makes more sense for a variable rate mortgage and some careful planning to avoid paying a penalty. Further to this, very few lines of credit have government insurance on it, so it shouldn't put any kind of ripple into the market.

2. Reducing the amount to be refinanced from 90% to 85%

This is a further measure to last year's decision to go from 95% to 90%. Basically, this means that you have to have at least 15% of equity left if you want to refinance your home. In my experience, few people want to pay an additional premium, so most people refinance to 80% Loan to Value anyway. This is probably a wise move, because if income or job situation changes, selling a house with 15% equity should prove easy. This does mean that some borrowers who use their home equity like an ATM Machine will have to change some spending habits.

3. Reducing the Amortization from 35 Years to 3o Years.

This is also a further measure to two years ago, when the length of the mortgage was reduced from forty years to thirty-five years. This probably will have the most significant impact on the industry, as this will change the average mortgage by about $100 per month. I'm not really sure if this really does a lot to reduce the risk, except it does decrease the total debt load on the average household. Of course, you can also expect to be paying your mortgage off a little sooner.

Even with the change in amortization, these are relatively small changes and do more to reduce the risk for companies like CMHC, Genworth or Canada Guaranty, should borrower default happen.

Why you should think about using Private Money?

2010-10-17T20:50:00.000-07:00

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.

Want to buy a dumpy house? Check Out the Purchase Plus Improvement Program

2010-09-11T22:29:00.001-07:00

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.

Mortgages for the Self-Employed

2010-08-28T23:40:00.000-07:00

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.

Things You Didn't Know Your Mortgage Could Do

2010-08-22T00:05:00.000-07:00

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.

Behind on Your Mortgage Payments?

2010-08-01T00:09:00.000-07:00

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.

Picking Your Mortgage Term

2010-07-24T23:36:00.000-07:00

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.

The Trouble with Open Mortgages

2010-07-12T21:17:00.000-07:00

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

Realtor or For Sale By Owner

2010-07-06T18:13:00.000-07:00

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

More than Rate

2010-01-06T12:24:00.000-08:00

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

Before you refinance...

2009-12-04T23:38:00.000-08:00

So your house has appreciated in value, and you want to pull that equity out. What should you think of before you sign all the paperwork?

1. Why do you want to refinance?

Although, it can be a great idea to consolidate your debt into one monthly payment, make sure you have control over your spending. If you consolidate your debt and run your credit card up again, you won't have the equity to give you breathing room. Be cautious when taking funds out of real estate. A good ideas is to use it to improve the value of your house or to buy more real estate.

2. Know your penalities.

If you break your term with your lender early, they will want some money back. Make sure you are very clear about what your penalty will be from your lender so if you know if a refinance is worth your while.

3. Plan your term and mortgage ahead of time.

Try to plan ahead as much as possible. Do you plan on only living in the home for three years? Then get a three year term. Do you want to pull equity out in a year's time? Make your term a year. Are you planning on upgrading to a new house? Make sure your mortgage is portable. Do you plan on paying it off over the next five years? Get a good pre-payment plan.

As always, a good broker will save you time and money as they will be able to decipher the penalties required, and be able to find you the best program the suits your current and future needs.

As always, I remain available to serve your needs.

Joel Olson
Pacific Mortgage
1.250.814.1627

Anyone can buy an investment Property!

2009-11-26T15:32:00.000-08:00

Anyone can buy an investment property. It really can be a very easy process and provide you with some great returns. Here's some things you should know.

1. You only need 5% down

It seems all the time I'm getting asked how much money is needed for a down payment on an investment property. 5 % will get you into any rental property that is either a single-family dwelling or a duplex. 10% will allow you to purchase either a triplex or a fourplex and 15% allows you to buy investment properties that are five units and above. Of course, it is true that these are insured mortgages and you will pay the insurance premium, but if you cashflow is sufficient with this, it makes a lot of sense to put the smaller down payment down. Of course, you can avoid this premium by putting 20% down on 4 units and below and 35% down on 5 units and above. The down payment can come from a variety of sources, maybe its money saved up, from a refinance of another property, a gift from a family member, or from a credit line. If you can get your properties to cash flow well, you may be able to take enough equity out of your personal residence to finance several rental units.

2. Cashflow is King

Many investors make the mistake of buying negative cashflow properties. Make sure that after all expenses like mortgages, taxes, and insurance you will still have a profit. This will allow you to continue to buy properties over and over again. A good rule of thumb is a 1.1 ratio, meaning make sure that your rent covers the expenses by 10%. This will ensure you can continue to buy investment properties over and over again. Not to mention, negative cash flow can put you in a bad financial position should something happen.

3. Watch Your Personal Financials

When investing 4 units and below your personal financial picture still plays a major component in getting approval, but once you go five units and above it plays less of a factor. That being said, there's some things you should keep in mind. Keep a good tab on your credit. Too many inquires, Overlimit balances, and of course late payments can really slow you down. Also, watch the amount of personal debt you carry, only borrow to buy more real estate or to renovate your rentals.

4. Establish Good Team Members.

Establish a relationship with a realtor that we find you something that fits your criteria. If you use the same realtor over and over again, they will be more likely to send you listings before they send them to anyone else. Consider using a property manager, they are usually 10% of the gross income. A poorly managed property will affect the cashflow very quickly, so consider a good property manager a cheap price too pay. Finally, find a good lawyer and accountant, there are many more risks associated with rental real estate in Canada, and it's important to have the right people looking out for your legal and tax positions.

The advantage of leverage is that you can buy a lot more real estate for less money than you can with any other investment. In addition to this, a few properties that are being rented at modest cash flow will see you obtain a sizable nest egg for retirement without ever having to save through RRSPs or Mutual Funds.

As always, I'm available to serve you in any way to help you reach any of your real estate investment goals.

Joel Olson
Pacific Mortgage
joel@c3revelstoke.ca
1.250.814.1627

Why Brokers are Better Than Banks?

2009-11-20T15:58:00.001-08:00

Perhaps, one of the most frequent comments that I'm asked is why should I use you over the bank I've been using my whole life? Even before I became a mortgage broker I learned the definte advantage over using brokers over banks.

1. Rate are ALWAYS better

This is a guarantee, not just a hopeful statement. Why? First of all, we don't compete with Banks, we use banks. That's right brokers are clients of everything from Royal Bank, TD Bank and Scotiabank to your local credit union. We know and use all their products. So, whatever the bank is offering we can get you too!!! It's not that one bank has better products than us, we already have all their products. Additonally, these banks give us huge volume discount. That's right, because we give them millions in volumes each year they agree to heavily discount their rate for our clients. You could've gone to the same bank for years, and by using a broker you will still some substatial rate discounts.

2. More Products

There are no bad mortgage products, just bad products for bad people. A bank carries only a limited amount of products and many banks will not carry enough products that will be sufficent for all your mortgage needs through your life time. You can save a lot of time and money, by being able to use a product that has all the terms that will benefit your situation.

3. Bankers only need to know about a few mortgage products.

Bankers are not pushing mortgages. They're pushing credit cards, loans, lines of credit, bank accounts, life insurance, mutual funds, and stocks. As a result, a banker needs to have working knowledge of all these products. A mortgage broker only needs to know mortgages, and a good one will know what all banks and lenders have to offer.

4. Long-Term Relationship

This is probably a banker's most important agrument against a broker. However, a long-term relationship with a mortgage broker will enable you to access the best products at the best time. Remember, just because one lender fits you today, doesn't mean five years down the road that same lender will have the product that suits you.

5. Flexibility

Most bankers need actual appointments. Mortgage brokers rarely need any appointments, and if they do it will be on a time that works for you and not during regular business hours. Your banker won't be available after hours to answer questions that you may have, but a mortgage broker will.

So, fire your banker and switch to a mortgage broker. I would be happy to run the numbers on your mortgage and my services have no obligation and they're free.

Joel Olson
Pacific Mortgage
1.250.814.1627
joel@c3revelstoke.ca

Why you need to buy a house now!!!

2009-11-19T15:57:00.000-08:00

Opportunities last for a short amount of time...right now is the best opportunity to buy a house that we've seen in years or will see for many years to come.
Here's Why:

1. Prices are cheap...

We may not be seeing deep discounts like the US, but there is no question that houses are cheaper than they were a year ago, and at worst prices are stable. Don't be fooled by the listing prices either, some people have had their houses on the market for months. They could be very interested in a deep discount, you never know unless you ask.

2. Rates are low....

Interest rates are lower than they've ever been. With rates staying in the low 4% for fixed rates and 2.15% for variables, that house that was too expensive for you last year, is going to be amazingly affordable this year. Take this with a grain of salt though, eventually rates will go up, and you will pay more when you renew, but there's no sense not taking advantage of these rates in the meantime. Besides, it's a good idea to buy that house that might have potential for a secondary suite or extra room rental, so you can get it ready now and offset the bigger mortgage later.

3. Sellers are flexible...
Some people are sick of having their house on the market, so they will take creative offers that will work towards your situation. If you need a longer closing date or help with the downpayment, now is the time to ask. You'll be surprised what they say yes too.

4. Motivated Realtors, Mortgage Brokers, Lawyers, etc.

Finally, people are slower so it means much more timely service than every before from professionals.

So, don't delay, call me today and find out where you'll pre-qualify.

Joel Olson
Pacific Mortgage
1.250.814.1627
joel@c3revelstoke.ca