I would consider myself a Mortgage Broker who appreciates the reasons behind the Government’s decision to apply the most recent regulatory changes by way of the “stress test”, that took effect this past January.  I see the benefit in stimulating a Borrower’s financial situation in the event the rate environment is higher, compared to when the mortgage was originally taken, and the need to stabilize the real estate prices in some of Canada’s hottest markets.  That being said, I would also agree with many of the arguments against the magnitude to which the Government applied this agenda.  Canadian Lenders are seeing the lowest level of mortgage default in more than 10 years, not to mention the impact a slower real estate market will have on the Canadian workforce.

I thought I would start this piece with my opinion of the regulatory environment to help address any perceived bias. Coming from the Banking world, I am more sensitive to the notion that Mortgage Brokers will present mortgage options to their Clients, based on the relationship the Broker would have with the Financial Institution.  That couldn’t be further from the truth! Speaking for myself, a majority of the mortgages I’ve arranged for my Clients  have been completed with my client’s preferred Bank.  It’s ironic that as a Mortgage Broker, some of my strongest lending partnerships are held with two of Canada’s Big Five Banks. I don’t know a Mortgage Broker who doesn’t objectively present the top three Mortgage Lenders based off their client’s suitability and preference.

What has motivated me to author this blog is to highlight my position that although I can understand both sides of the debate with the government’s regulatory changes, it is also my belief that not every home buyer has the luxury of waiting for the best time to purchase.  Adding to that, for those who must evaluate their purchase decision with leasing for another year – there can actually be a cost-benefit in purchasing with a mortgage from an Alternaitve Lender.  The new mortgage guidelines have also impacted the traditional Alternative Lending institutions and that has given rise to Alternative “Private” Lenders.  Banks and institutional lenders still account for a majority of my mortgages funded; but having access to these lenders, gives a mortgage broker the ability to support a Borrower that might not have the option of waiting until they can qualify under the current B20 Guidelines.  With my clients who request this support, I structure it as a “short-term” strategy; as the length of term is normally 12 to 24 months, depending on the borrower’s situation and how soon the reasons that required alternative lending would be addressed.

Before I started as a mortgage broker, I had assumed that any lending from a non-traditional source (ex. private lending), would only be necessary for individuals who have mismanaged their credit.  After supporting mortgage clients as a broker for the past 10 years, I understand that these types of lending solutions can be a great assistance with self-employed borrowers who don’t qualify based on the income they have declared, for borrowers who may not have active credit (which can negatively impact an individual’s credit score) and for those who don’t have the options with traditional mortgage lending.

In closing, it’s my opinion that having a Mortgage Professional who can navigate these various lending options and educate Home Buyers, will make the decision “to buy” or “to wait” an informed one.

In light of the historically low inventory in the Toronto housing market, many homeowners are now deciding to refinance their homes to pay for major renovations. This is a great way to upgrade your living situation when moving to a new property isn’t feasible. Today I’m sharing everything you need to know about refinancing your home for home improvements, so that you’ll know if this is the right move for you.

Choosing Your Project

In order to ensure that this is a smart financial decision, you need to carefully select your home improvement project. Historically, certain renovations do a better job of increasing your home’s value than others.

• A renovated kitchen almost always increases home value, since most people consider the kitchen to be the ‘heart’ of their house.
• Improved lighting can also add value to your house – whether it’s be adding pot lights, a sky light or removing interior walls to let more light through the house.
• Energy efficient upgrades are another way to add value. Homebuyers recognize that these upgrades can save them money in the long run (and they’re good for the environment), so they’re willing to pay a bit more for it.
• Swimming pools require a lot of maintenance, and can be a hassle to own. Adding a swimming pool to your backyard will not necessarily add value to your house.
• Likewise, extensive landscaping is also not guaranteed to add value. Some homebuyers will see this as a disadvantage because it requires lots of upkeep and attention.
• Renovations that can’t be seen – such as a new furnace or plumbing system – also don’t guarantee an increase in home value. Homebuyers expect to have these things working to begin with, and won’t be willing to pay extra for the house because of it.

The Benefits Of Refinancing Your Home

One of the biggest benefits is the fact that you will have immediate access to money so you can start your home improvement project right away. Another benefit is that your new loan may have a lower interest rate. Above all, the fact that you are refinancing to add value to your home makes this a smart move.

Refinancing Your Home For Home Improvements Is Right For You If….

• … you plan on increasing the size of your mortgage by $20,000 or more. Because of the legal and appraisal fees, increasing your mortgage by anything less than $20,000 might not make sense financially.
• … you plan on putting the money towards a home improvement project that has a high likelihood of increasing your home value.

Since it can be difficult to understand mortgage terms, I’ve created a list of the most common terms and their definitions. Hopefully, by using this as a reference, you can finally see mortgage terms made easy!

Here are common mortgage terms made easy:

Amortization

An amortized loan is a loan with scheduled periodic payments that consist of both principal and interest. An amortized loan payment pays the relevant interest expense for the period before any principal is paid and reduced.

Appraisal

An appraised value is an evaluation of a property’s value based on a given point in time that is performed by a professional appraiser during the mortgage origination process. The appraiser is usually chosen by the lender, but the appraisal is paid for by the borrower.

Closed Mortgage

Closed mortgages have a prepayment limit, which means you are only permitted to pay 15% of the original principal balance of the mortgage per calendar year.

Closing Costs

Common closing costs include loan application fees, points, prepaid homeowners’ insurance, an appraisal fee, inspection fees, transfer taxes, escrow fees, attorney fees, recording fees, prepaid interest , prepaid private mortgage insurance, title insurance, and title search costs.

Conditional Offer

In general, an agreement between a buyer and a seller that an offer will be made if a certain condition is met. In real estate transactions, conditions can include a home inspection or a mortgage application.

Conventional Mortgage

A conventional mortgage is a loan that is not guaranteed or insured by any government agency. It is typically fixed in its terms and rate.

Credit Report

A credit report is a detailed report of an individual’s credit history. Credit bureaus collect information and create credit reports based on that information, and lenders use the reports along with other details to determine loan applicants’ credit worthiness.

Credit Score

A number assigned to a person that indicates to lenders their capacity to repay a loan.

Debt Consolidation

Debt consolidation means taking out a new loan to pay off a number of liabilities and consumer debts, generally unsecured ones. In effect, multiple debts are combined into a single, larger piece of debt, usually with more favorable pay-off terms: a lower interest rate, lower monthly payment or both.

Down Payment

In mortgage agreements, down payment is the difference between the purchase price of a property and the mortgage loan amount.

Fixed Rate Mortgage

A fixed-rate mortgage is a fully amortizing mortgage loan where the interest rate on the note remains the same through the term of the loan, as opposed to loans where the interest rate may adjust or “float”.

Home Equity

Home equity is the value of ownership built up in a home or property that represents the current market value of the house less any remaining mortgage payments. This value is built up over time as the property owner pays off the mortgage and the market value of the property appreciates.

Interest Adjustment Date

Interest adjustment date is the date from which your lender first starts.

Maturity Date

In finance, maturity or maturity date refers to the final payment date of a loan or other financial instrument, at which point the principal (and all remaining interest) is due to be paid.

Mortgage

A legal agreement by which a bank or other creditor lends money at interest in exchange for taking title of the debtor’s property, with the condition that the conveyance of title becomes void upon the payment of the debt.

Mortgage Broker

A mortgage broker is an intermediary working with a borrower and a lender while qualifying the borrower for a mortgage. The broker gathers income, asset and employment documentation, a credit report and other information for assessing the borrower’s ability to secure financing.

Open Mortgage

Open mortgages allow you to prepay any amount of your mortgage at any time without a compensation charge.

Prepayment Penalty

A prepayment penalty is a clause in a mortgage contract stating that a penalty will be assessed if the mortgage is prepaid within a certain time period.

Refinancing

Getting a new mortgage to replace the original is called refinancing. Refinancing is done to allow a borrower to obtain a better interest term and rate.

Renewal

A mortgage renewal is a new agreement to extend or renew mortgage terms with your mortgage holder.

Subprime Lending

The term subprime refers to the credit quality of particular borrowers, who have weakened credit histories and a greater risk of loan default than prime borrowers.

Variable Mortgage Rate

A type of home loan in which the interest rate is not fixed.

Buying your first home can be overwhelming and stressful if you don’t have any guidance, which is why I’m outlining my top 5 tips for first time home buyers in this article! Together, I can help you navigate the home buying process in a stress free process that allows you to feel confident and comfortable with your home purchase.

Here are my top five tips for first time home buyers:

1. Start by getting pre-approved.

Getting pre-approved for a mortgage has many benefits – but one major benefit is that it shows that you are a serious buyer, which can be very helpful in a competitive market. This can allow you to negotiate the price of your home with more confidence, and it can help make for a smoother transaction. When asked about pre-approvals, Redfin’s chief economist Nela Richradson says “That is almost as good as cash”.

2. Have a clear understanding of what you can afford.

Before purchasing a house, it’s important that you sit down and thoroughly review your finances to get a clear understanding of how much you spend on living expenses each month. It’s important that you’re honest with yourself about your spending, and realistic about the budget you can set for yourself. This is a crucial step in home buying, because getting approved for a $500,000 mortgage does not necessarily mean that you can afford the monthly payments that come with that.

3. Be realistic about what you really need.

Sure, a walk-in closet and ensuite bathroom would be nice – but it may not be possible for your first home purchase. Your first home is not your “forever home” so it most likely won’t have everything you dreamed of – but it’s a stepping-stone for getting there. When purchasing your first home it’s important that you are realistic about your “wants” and your “needs” so that you can make a wise decision.

4. Try to establish a 20% down payment.

In order to keep yourself in a safe, comfortable financial position it’s recommended that you aim for a 20% down payments on your first home purchase. Of course, with untraditional mortgages you can certainly do less but this is a great goal to set for yourself.

5. Be sure to factor in closing costs.

On average, closing costs can range from 2% – 3.5% of the total cost of your home purchase. Have you budgeted for this expense? Depending on your situation (and the home you choose to buy) you can expect to pay legal fees, home inspection fees, property transfer tax, land transfer tax, title insurance – and more!

Confused about reverse mortgages? You’re not alone! Today I’m explaining what you need to know about reverse mortgages so that you can better understand the advantages and disadvantages of applying for one. As a CHIP Certified Reverse Mortgage Specialist I’m uniquely qualified to educate homeowners on reverse mortgages, and I welcome any questions you may have.

A reverse mortgage is a loan secured against the value of your home. Unlike a loan or a regular mortgage, with CHIP you are not required to make payments. You only repay the loan when you move or sell your home.

Here is exactly what you need to know about reverse mortgages:

1. Age matters

You must be the age of 50 or older to be a qualified applicant.

2. This offer is exclusive to Home Equity Bank

Home Equity Bank is the only financial institution in Canada that offers this product

3. Seek legal advice first

Independent legal Advice is required as part of the application conditions

4. Use age as your advantage

The older the applicant, the larger the loan-to-value permitted

5. Unique opportunity

A reverse mortgage is an ideal lending product for an Applicant who may not meet the debt-servicing qualifications of a traditional mortgage application.

There are many advantages to reverse mortgages, but the biggest selling point is the fact that there are no monthly payments. As mentioned before, you only repay the loan when you decide to move or sell your home. Another benefit is the fact that property value increases in most Canadian provinces are higher than the annual percentage rate of this product. Many people also seek out a reverse mortgage as a way to deal with debt-consolidation – which is a great way to utilize this option.

Of course, there are some disadvantages to reverse mortgages – and also some factors that make attaining a reverse mortgage difficult for some. To start with, all individuals on the titles of the subject property must meet the required age. For example, both husband and wife would have to be over the age of 50 to quality for a reverse mortgage. In addition to this age restriction, in most cases the home equity must also be greater than 50% to borrow.