1 Oct

Breaking Up Is Hard to Do!

General

Posted by: Trent Glover

So the reality of the world is that a large number of marriages end up in divorce.  This is a hard enough time in anyone’s life so the lenders and the mortgage insurers have come up with a product that can help.  It is the ability to refinance your matrimonial home up to 95% of its value to payout your ex their portion of the equity and perhaps even some of the debts you incurred together.  This is a specialty product and there are certain things you must do.  Let’s take a look shall we??

Step 1.  You must complete a legal separation agreement through a lawyer.  Even if it is the most amicable split in the history of mankind, this has to be done.  The reason for this is you want your rights protected fully.  If you are the one staying in the house, you want to make sure that your ex has legally and irrevocably given up their rights to the home.  If you are the one leaving, you want to make sure that your name is removed from the title so there is no question of you have any further obligation where it is concerned.   There will be a cost associated with the legal separation agreement. How much?  I would not dare to say but I would budget a bare minimum of $2500.  It is also important to keep in mind that legal matters often take more time than anticipated so don’t imagine you will be able to get this completed in a hurry.  Make sure that you address any debts taken on during the marriage.  These can be paid out from the proceeds of the new mortgage but only if they are listed.

 

Step 2.  Order an appraisal.  This has 2 reasons.  The first is that you and your ex will be able to determine the true value of the home through an impartial third party.  The second is that most lenders require it in this situation.

Step 3. Write up an offer to purchase.  This one always catches people off guard.  Why should you have to write up an offer to purchase on a property you already own?  The answer is just this.  The lenders require it.  This legally binding document shows the agreed upon price and the final closing date to which both parties have agreed. This can be completed through your lawyer, with the help of a willing Real estate professional or on your own with a form available online.

Step 4.  Get a mortgage.  You have likely been in contact with your mortgage professional before now but if not, then now is the time.  You are going to have to provide:

  • Separation Agreement
  • Appraisal
  • Offer to Purchase
  • Letter of employment and Paystub
  • Last 2 years Notice of Assessments or T4’s
  • Any other required documentation

It is very important to note that you will incur new mortgage insurance premiums if you go right to 95% of the home’s value even if you had already done so on the same property.  This is a brand new application with you as the sole borrower so a full new premium applies.   This is how it could look:

 

 

Home Value              $300,000

5% Equity                    $15,000

New Mortgage for   $285,000

Insurance Premium $8977.50

Total Loan            $293,977.50

 

So that my mortgage minions is a product which can help you through a very challenging time.  As always we are more than happy to answer any of your questions.  Until next time!

2 Sep

Did your bank give you a rate hold or an actual pre-approval?

General

Posted by: Trent Glover

Securing a rate hold is like having   insurance on your mortgage rate – you no longer have to worry about mortgage   rates increasing while you find your new home over the next 90-120 days. And   if rates drop within that same period, so too will your pre-approved rate.

For instance, if you obtain a 3.75%   rate hold and then global risks subside and the economy strongly recovers   over the next three to four months, that 3.75% could easily jump to 4.50% or   higher. In this case, your rate hold for 3.75% would have saved you   three-quarters of a percentage point, which would translate to a savings of a   significant amount of money over the term of your mortgage.

But a rate hold means nothing if you   don’t meet the lender’s qualifications. By working with me to obtain a pre-approval   and a rate hold, you can be confident you have access to mortgage financing   and you will know how much you can spend before you head out shopping for a   property.

It’s important to note, however, that   there is a significant difference between being pre-

 

approved and pre-qualified.   In order to obtain a pre-approval, the lender fully underwrites the deal,   whereas with a pre-qualification only the most basic details are considered.   Remember that many   banks will only issue a pre-qualification.

There are several reasons why you may   want to secure a rate hold, including when you:

  •   Are thinking of buying a home in the   next four months
  •   Are considering locking in your   variable rate to a five-year fixed if rates rise, but your lender won’t hold   a good rate for you
  •   Are casually thinking of refinancing   but prefer to wait for fixed rates to rise so that your interest rate   differential (IRD) penalty falls
  •   You want to hold a rate on a   different term than you were pre-approved for by a different lender

As always, if you have any questions   about rate holds, pre-approvals or your mortgage in general, I’m here to   help!

 

31 Aug

Transitioning from Renter to Homeowner

General

Posted by: Trent Glover

 

 

 

 

Transitioning from Renter to Homeowner

 

 

 

 

 

Transitioning from renter to homeowner is one of the biggest decisions you’ll make throughout your lifetime. That’s why it’s essential to surround yourself with a team of experts – including both a mortgage and real estate professional – to walk you through the steps to home ownership, answer all of your questions and concerns, help you decide what kind of home you can afford and get you pre-approved for a mortgage.

 

 

 

With interest rates still hovering around “emergency” levels – low rates never before seen by your parents and even your grandparents – now is an ideal time for first-time homebuyers to embark upon homeownership.

 

 

 

 

 

Down payment

 

The main reason many renters feel they can’t afford to purchase a home has to do with saving for a down payment. But there are many solutions available today that can help first-time buyers with their down payments.

 

 

 

Many lenders will allow for a gifted or borrowed down payment. And of those lenders that will not provide this alternative, many offer cash-back options that can be used as a down payment.

 

 

 

Better yet, there are programs available from some financial institutions where they will offer a “free down payment” or a “flex down”. Of course, you will end up paying about 1% more in your interest rate, but the program will help you get in the homeownership door and start accumulating equity earlier. You must, however, stay with the original lender for the full initial five-year term or else you’ll have to pay the down payment back.

 

 

 

Last year, a $5,000 increase was made to the RRSP Home Buyers’ Plan, meaning first-time homebuyers can now withdraw up to $25,000 from their RRSPs for a down payment – tax- and interest-free.

 

 

 

And if you’re part of a couple making a home purchase together, you can each withdraw up to $25,000 from your RRSPs.

 

 

 

 

 

Educating and coaching

 

There’s an endless amount of information available to prospective homeowners – through the Internet, friends, family members and anyone willing to voice their opinion on a given subject. What you really need, therefore, is education and coaching as opposed to being bombarded with more information.

 

 

 

Speaking to a mortgage professional in order to obtain a pre-approval prior to setting out home shopping can help set your mind at ease, because many first-time buyers are overwhelmed by the financing and buying processes, and often don’t know what it truly costs to purchase a home. Real examples can go a long way in showing you what it costs to buy a home in your area versus what you’re currently paying in rent. For instance, if a renter is currently paying $800 per month, with that same payment (including taxes) they could afford to buy a $120,000 home. And assuming real estate values increase 2% per year over the next five years, the new homeowner would have accumulated $27,000 in equity in their home. If they continue renting, however, this $27,000 has generated equity in someone else’s home.

 

31 Aug

Transitioning from Renter to Homeowner

General

Posted by: Trent Glover

 

 

 

 

Transitioning from Renter to Homeowner

 

 

 

 

 

Transitioning from renter to homeowner is one of the biggest decisions you’ll make throughout your lifetime. That’s why it’s essential to surround yourself with a team of experts – including both a mortgage and real estate professional – to walk you through the steps to home ownership, answer all of your questions and concerns, help you decide what kind of home you can afford and get you pre-approved for a mortgage.

 

 

 

With interest rates still hovering around “emergency” levels – low rates never before seen by your parents and even your grandparents – now is an ideal time for first-time homebuyers to embark upon homeownership.

 

 

 

 

 

Down payment

 

The main reason many renters feel they can’t afford to purchase a home has to do with saving for a down payment. But there are many solutions available today that can help first-time buyers with their down payments.

 

 

 

Many lenders will allow for a gifted or borrowed down payment. And of those lenders that will not provide this alternative, many offer cash-back options that can be used as a down payment.

 

 

 

Better yet, there are programs available from some financial institutions where they will offer a “free down payment” or a “flex down”. Of course, you will end up paying about 1% more in your interest rate, but the program will help you get in the homeownership door and start accumulating equity earlier. You must, however, stay with the original lender for the full initial five-year term or else you’ll have to pay the down payment back.

 

 

 

Last year, a $5,000 increase was made to the RRSP Home Buyers’ Plan, meaning first-time homebuyers can now withdraw up to $25,000 from their RRSPs for a down payment – tax- and interest-free.

 

 

 

And if you’re part of a couple making a home purchase together, you can each withdraw up to $25,000 from your RRSPs.

 

 

 

 

 

Educating and coaching

 

There’s an endless amount of information available to prospective homeowners – through the Internet, friends, family members and anyone willing to voice their opinion on a given subject. What you really need, therefore, is education and coaching as opposed to being bombarded with more information.

 

 

 

Speaking to a mortgage professional in order to obtain a pre-approval prior to setting out home shopping can help set your mind at ease, because many first-time buyers are overwhelmed by the financing and buying processes, and often don’t know what it truly costs to purchase a home. Real examples can go a long way in showing you what it costs to buy a home in your area versus what you’re currently paying in rent. For instance, if a renter is currently paying $800 per month, with that same payment (including taxes) they could afford to buy a $120,000 home. And assuming real estate values increase 2% per year over the next five years, the new homeowner would have accumulated $27,000 in equity in their home. If they continue renting, however, this $27,000 has generated equity in someone else’s home.

 

7 Dec

It can pay to break your mortgage!

General

Posted by: Trent Glover

With mortgage rates still hovering near historic lows, chances are you’ve considered breaking your current mortgage and renewing now before rates rise any further.

Perhaps you want to free up cash for such things as renovations, travel or putting towards your children’s education? Or maybe you want to pay down debt or pay your mortgage off faster?

If you’ve thought about breaking your mortgage and taking advantage of these historically low rates, feel free to give me a call to discuss your options.

In some cases, the penalty can be quite substantial if you aren’t very far into your mortgage term, but we can determine if breaking your mortgage now will benefit you long term.

People often assume the penalty for breaking a mortgage amounts to three months’ interest payments so, when they crunch the numbers, it doesn’t seem so bad. In most cases, however, the penalty is the greater of three months’ interest or the interest rate differential (IRD).

 

The IRD is the difference between the interest rate on your mortgage contract and today’s rate, which is the rate at which the lender can relend the money. And with rates so low these days, the IRD tends to be greater than three months’ interest. Because this is a way for banks to recuperate any losses, for some people, breaking and renegotiating at a lower rate without careful planning can mean they come out no further ahead.

Keep in mind, however, that penalties vary from lender to lender and there are different penalties for different types of mortgages. In addition, the size of your down payment and whether you opted for a “cash back” mortgage can influence penalties.

While breaking a mortgage and paying penalties based on the IRD can result in a break-even proposition in the short term, if you look at the big picture, you’ll see that the true savings are long term – as we know that rates will be higher in the years to come. Your current goal is to secure a long-term rate commitment before it is too late, and here lies the significant future savings.

As always, if you have questions about breaking your mortgage to secure a lower rate, or general mortgage questions, I’m here to help!