Renewal Time!

Ok, so it’s been a few years and you’ve been busy hammering away at your mortgage principal and now it’s time to renew your mortgage. This post will share some myths, insights, and ideas I have when discussing renewals with clients.

First of all, renewal time is your best chance at getting the best deal without any cost. Whether you went fixed or variable, short- or long-term amortization, the lender you’re with now knows full well you may not shop your deal around therefore they will offer you an average and mediocre rate. If you fail to sign up and do anything about it, they’ll offer you an even worse rate: the dreaded convertible option. This means they will fix your mortgage, apply high penalties to leave, but give you the option of picking another term with them at anytime, without cost. Let’s face it: lenders salivate at offering high-rate renewals because they know the great majority of people are too lazy to change their lender. Don’t be that person! Shopping a mortgage renewal is extremely easy and simple and best of all, free*.

Second, if you want to refinance, doing so at renewal will save you on any mortgage penalties and oftentimes there are no legal fees involved either - depending on the new lender you pick. Some lenders offer “free refinance” options where they pick up the legal tab. Heck, I even do it for some clients (especially returning ones) as a way of showing my appreciation for their loyalty. So if the post-holiday Visa bills have you down, consider refinancing during your mortgage renewal to wipe away high-interest debt and start fresh.

Third, here’s a common myth I hear, if you renew with your existing lender you do not need to “requalify” or, prove income. A renewal…


New World Order On Down Payment

The new Finance Minister announced changes to the down payment rules we all knew were coming from last week’s blog post. Simply put, they are the lowest-hanging fruit for the Government to use in order to cool things. Let’s face it - things are out of control in Toronto specifically. If you’re a buyer or buying Realtor you know how insane things are. If you’re a listing agent, you know how insane things are. If you’re a lender or mortgage broker, you know how insane things are. So why not change things up a little bit to cool things off?

This is the sixth version of mortgage rule changes we have seen in the past 10 years and like the previous five, this one will do little to cool things. It will certainly help a little bit, especially on the higher-end, but it is the most gradual and relaxed rule change that could have been implemented. Imagine having to have 20% down on any priced home in the GTA? That would’ve really put a big bucket of ice on our market, kind of like the ALS ice-bucket challenge, except it would have meant not just getting wet but seeing your value of your property decrease. This minor rule change is meant at the higher-end, and it’s done in a very gradual stage that will really not impact things to a great deal.

For any property priced under the $500,000 mark you’ll still be able to buy with 5% down.

For any property over $500,000 you will need 10% down payment on the dollar amount that exceeds the $500K limit.

Example, $450K house is $22,500 down.

$650,000 house is:

5% of the first $500K, or $25,000, then 10% of the remaining $650K-$500K=$150K=$15K

Therefore you’d need $25K plus $15K or…


BIG. NEWS. (maybe). 10% down new minimums?

There has been a lot of speculation about a potential increase to down payment rules from 5% to 10%, especially with the Vancouver and Toronto housing markets continuing their incredible run.

Both Bloomberg and Canadian Mortgage Trends reported today these potential moves brought on by the Liberal Government. “As many as 115,000 buyers across Canada may not afford a 10% down payment”. There is also talk of a sliding scale policy where the 5% down payment would still work for homes under $500,000, 7% being required for $500,001 and $700,000, and 10% on anything over $700,000.

The worst part? If this is to happen expect it to happen fast, without warning, and potentially without much heads up.

The second worst part? This would cause huge damage to a very weak market outside of Toronto and Vancouver as is evident by the charts below. Our prices are way up, the rest of the country has faltered. Same with our sales, and conversely our inventory is very low, while listings are at a record across the board everywhere else.

If you are a 5% down buyer you’ll want to step up you game or risk being completely priced out. NOT because prices will necessarily rise but because the down payment will.

If you are a sellers of a home in these price ranges you should sit down with your Realtor and speak about the potential impacts these changes may bring to demand of your homes.

If you have questions please let me know and I will, of course, pass on the information as I get it.

As with the six previous mortgage rule changes AND the Toronto Land Transfer Tax, and considering my experience of approximately 200 closings per year, I do not think this will…


Don’t Let FOMO Affect Your Decision Making

Lately a lot of my clients of had a difficult time deciding between fixed and variable when choosing their mortgage option. I certainly can sympathize with the decision that is not easy one to make. It seems that it all comes down to fear of missing out a relatively new phenomenon that we are experiencing in the world at large. FOMO has become a term popularized by the fear of missing out on interesting events, especially aroused by usage of social media. In my example here, social media does not have anything to do with the choice of fixed vs variable. Rather, FOMO here revolves around getting the best deal and making the best decision.

For example, if someone takes a variable rate today, there are always worries that the rates might go up by too much, too fast. If someone takes a fixed rate, have they really captured the bottom-end of this market?. My opinion this is the totally wrong way of looking at things. You’re not missing out at all, you’re getting the best rates we’ve ever seen in our lives and we may never see them again. Whether you go fixed or variable, neither of these are wrong. The Bank of Canada has made it much more difficult to qualify for variable rate, because it is inherent that the rate that may rise. It wants to make sure that you are able to afford when rates go up and inevitably rates will go up it is only a matter of how fast and when.  I say, don’t let FOMO rule your decision making.  Speak to a financial planner like Shannon Lee Simmons and figure out your budget before you make that choice to buy something.  She can set you straight with what…


So You Wanna Make An Offer…

I got a call today from a client who wants to take out their RRSPs to make an offer on a house, but, we aren’t sure if their offer will go through.  Now what? Will Revenue Canada tax him on the funds he withdrew? Can he put them back if this offer doesn’t go through? What if he finds another house he wants to buy, how does he get his money back again? If he decides not to buy anything can he fund his RRSPs again and not face any penalty? All good questions to which I have the answers!

Revenue Canada is surprisingly accepting of what’s happening in our surreal estate market these days. They know and understand offers come and go, deals fall through, and do not wish to tax someone for a house they did not end up buying for one reason or another within limits of course.

The following are the steps to ensure that if you remove funds from your RRSP via the Home Buyer’s Plan (HBP from now on), and your offer does not go through:

1. Remove from the HBP using theHome Buyer’s Plan Forms.

2. Fund your account and make the deposit on offer.

3. If your deposit does not go through, keep the funds in your account (preferably a savings account so you don’t use them).

4. Should you not end up making any purchases you can then fund your RRSP account again, but (and this is important), keep the receipt that you funded the same amount you took out.

6. Along with the receipt plus relevant paperwork about your lost offers (dates, emails, offers etc), send a letter to Revenue Canada explaining what happened and why you’re funding your RRSP back.

7. This letter must…


Why I Do What I Do

It has been quite some time that I have put some writing on this blog. Simply put, the summer has been exceptionally busy and I have been dedicating my time to serving my clients as well as spending some quality time with my son who his growing up at lightning speed (matter of fact, today was his first day of school!). Since he’s starting that, I thought I would start today’s blog entry with a straight-from-the-heart post:

Why I Do What I Do

I do what I do because I love what I do. Wouldn’t you rather buy a car from someone who loves cars? Someone who loves cars so much they learn all about the cars they sell and also the cars they don’t sell? Someone who you can see their passion for what they sell shine when you meet them? I hope it’s the same feeling with me. Mortgages may seem like a really boring topic let alone a really unsexy word in itself (it really could use a rebranding) but the concept isn’t boring. Imagine bricks and mortar being responsible for your wealth creation? The results are certainly worth waiting for (and investing in).

I do what I do because I want to uncomplicate things for people who find things like this complicated. Finances can be a scary thing to some, and an exciting thing to others.  The ones who are scared of finances are the best clients for me – because I feel like after a 30 minute chat I can empower their lives with amazing options and make their decision-process that much easier. I do what I do because I love seeing equity grow like a tree. There are hundreds of people I have met in low-rent apartments and now I meet them in their…


Big Banks Touting Their Amazing Features In Face Of Increased Competition. #BRINGITON

I nearly fell off my Ikea chair this morning while eating breakfast and reading the newspaper. It appears the big banks are tired of fighting for just rate, and are now touting their amazing features as reason why you should go with them.. Please, if your sarcasm meter is broken, now is the time to turn it ON.

One paragraph I found most interesting was:

Rather than advertise a rate special, Bank of Nova Scotia is launching its spring mortgage campaign with a consumer poll showing that while 84 per cent of mortgage shoppers care about the rate they’re getting, a majority also care about other mortgage features, such as the ability to break their mortgage early or make extra payments.

Great! Then does this mean that we will finally have the banks feature their amazing penalty calculations which end up costing clients tens of thousands of dollars? Case in point: A client called me to say that his big bank mortgage, at 3.09 with 2 years left on it and $630,000 balance, will cost him approximately $36,000 in penalty. He has to break it because his builder is extending his closing longer than the porting allowance between closing dates. So he’s leaving enough money to pay for an entry-level BMW. In cash.

Conversely, a client of mine who went with a monoline lender just broke a $910,000 mortgage and paid only $7500 in penalty. Same terms, rate etc., as the big bank mortgage. Isn’t that amusing?

Now let’s chat about pre-payment options - something you often see advertised.

“My big bank mortgage allows me to DOUBLE UP my payments anytime”. That’s…


First of 2015! RENEWALS!

After taking some time off from blogging I wanted to kick off 2015 by discussing mortgage renewals. Why? Lately I have been receiving a lot of inquires with many renewals coming up and in order to demystify the process I wanted to share my insight.

First, never ever ever take the offer you are given from your lender right off the bat. Most likely they have priced the renewal offer much higher simply because they are aware that many clients do not want to take the time to shop around. YET, shopping around can literally save you thousands in unnecessary interest costs, so it is worth your while to do so. Your lender knows that inherently people are either too busy or nervous at renewal time and therefore are offering rates (today) that are .10 to .30 basis points higher (or more). Although signing a renewal is a very easy process (usually it’s just one single page), shopping around for one is also very easy and here’s why:

First - some lenders offer a no-income switch program. This is only reserved for the types of deals that have had no income change since the last approval, for good credit applicants, and for people who have a high-ratio mortgage (CMHC insured originally). This is the easiest type of renewal to complete as all that is required is just the renewal form, void cheque and photo ID. Simple & easy.

Second - some lenders offer switches for clients who are stuck in a collateral mortgage. Remember, a collateralized mortgage is one that essentially locks you into an agreement with the lender and even at renewal does not allow you to leave without paying a legal refinance cost (as you must de-register the collateral charge). Yikes. That said, some lenders offer a switch…


Why Bridge Loans Are A Pain In The Rear

You finally found it. After months of searching, and an ever-growing family, you found “the one” that will suit all your needs. Bigger, better, newer, and any other attribute you could name, this one has it. What a relief. You set a closing date 3 months out and post your house up for sale. It’s ideal for first-time buyers so you should have no problem selling it, either. You list your house for sale, and naturally three offers come to the table. After speaking with your Realtor, you decide the best course of action is to sell one week after your purchase date, and take a bridge loan to cover the difference. Relief sets in.

The above scenario is played out hundreds or thousands of times per year in our real estate market. It makes sense. Why not sell your house after you move into the new one, thus giving you time to do any upgrades, cleaning, and to do your move over a period of time rather than in one day. Makes total sense, right?

Here’s why this doesn’t always work out as planned: Some lenders are no longer covering closing costs as part of the bridge loan. What does this mean? If you’re buying in Toronto you know what this means: Double Land Transfer Tax. This will add a huge bill to your already growing list of expenses that you must cover. Let’s look at a real-world example of what I mean:

You bought a house for $700,000 with 20% down.
You put down a $50,000 deposit on offer.
Your total down payment is $140,000 less the $50,000 you have put down, so $90,000 left.
PLUS: Land transfer tax in the range of $22,000 plus legals and closing costs. Make it $25,000 give or take.


The Financing Behind A Big Reno

I’m an avid reader of the Globe & Mail’s Real Estate section, especially Dave Leblanc and Alex Bozikovic. Quite often we see dreamy renovations accomplished in their articles but rarely do we actually know how much they cost. When inquiring about this, the writers both mention the fact that the subjects did not want to reveal personal finances - quite fair in my opinion. It was interesting to see an article in today’s paper, then, that did discuss actual costs and showed us the final product. The Principals behind Solares Architects gutted and greened an old Roncesvalles home for $325,000 and have done an absolutely fantastic job. Two goals were accomplished: 1. a complete makeover of the property and 2. a complete energy update to the property. The results are astounding on both fronts, and the budget was quite manageable in my opinion for an end product of this high quality.

When reading their article and very detailed blog I got to thinking: “I bet a lot of readers want to know how they can do the same?”. So here I present to you: The Financing Behind A Big Reno so you can understand the process and how you can get there!

First let’s start off with the purchase. Using Tom & Christine’s example, they did the absolute right thing in seeking a home with good proportions, but one that didn’t check most of the boxes for other buyers looking for a turn-key property. In a white-hot area of a white-hot market, they managed to secure their property for less than asking. Awesome. Purchase price paid: $680,000 on an original ask of $750,000. Check 1. To avoid CMHC costs, one should put down 20% on $680,000 and arrange…

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