Realtors, How To Finance Your Own Deal

Hello and Good Polar Vortex Morning,

Even though things have been made tougher, there are still a few ways to get financed for your own purchase, be it a rental OR owner-occupied. Let’s go down the list:

1. The easiest but most expensive way:

Lenders such as Home Trust and Equitable Bank will finance up to 80% (even 85% in extreme/rare cases) of your purchase. Caveat here is: higher rates, tighter appraisals, and higher fees.

Example I recently financed a Realtor at 75%LTV for a condo downtown, 3 year fixed 4.25% with a $750 fee.

Pros: You get the deal done with minimal hassle regarding income.
Cons: Higher rate, fees, and appraisal issues.

2. The second (and one of my most favorite) way:

Credit Unions are becoming more aggressive in the mortgage space. Why? Because they are not subject to mortgage rules like Banks and Lenders. Why not? Since they fall under provincial and not federal legislation, they can write their own set of rules (within reason, of course).

As such, a credit union I work with finances up to 80% of a purchase (owner or rental) using 2-year T1 “GROSS” average.

Pros: Decent rate, add .25bps to their regular rate. Use gross not net income, you should qualify. Good appraisal selection. Good branch features, good pre-payments.

Cons: Take forEVER to get approved (think 3-5 days). Very slow underwriting. .25 surcharge to rate. Lend at discretion.

Recently I had a case where my Realtor showed excellent income, had an existing mortgage with them, and they pushed it to 35% down - even though he met every single guideline. Why? At their discretion they will push back.

3. The Bank Way

This is very difficult. If you’re 100% commissioned then you (and I) will find it difficult…


Mistakes Buyers Make

In this post I want to put on my real estate observer hat and tell you about common mistakes buyers make. You see, I have a different perspective on this because I meet buyers sometimes before, but usually after they’ve made the single biggest purchase of their lives. I can also talk freely because I’m not the one showing them the properties, nor their Realtor, therefore I’m able to give you my observations of mistakes I have seen buyers make and how to avoid them in 2014 (and beyond)

Let’s start with the biggest mistake: Setting A Price.

I oftentimes ask buyers how much they want to spend and I get a range, followed by “but not over $x”. It could be $400,000 or $600,000, but definitely not over $600,000. What I find interesting about this is that setting a price ceiling has never worked to your advantage. First, if you’re setting a price ceiling you’re not looking at properties over that price, therefore you’re not opening yourself up to the opportunities of overpriced homes. Second, you must remember the art of negotiation. Just because your limit is $600,000 and you see a home for $639,000, doesn’t mean you can’t hit your mark with skilful negotiation. Third, did you know every $10,000 costs about $45 per month? If $600,000 is your limit because of cash-flow reasons, that’s one thing. If it’s your limit because, well, it’s a number you feel is high enough, that’s another. So determine your range and then look for houses over and under, to see what is the best value for your situation.

A second mistake I see is: Forgetting About Potential.

I had a buyer who had a very very very restrictive area they wanted to buy in because of a family situation. Fair enough.…


Got A Student Loan? Want A Mortgage? Read This.

As mortgage lending becomes tighter in Canada, new rules that came into effect are slowly being applied by lenders that will affect your qualifying ratios if you have student loans. Let’s use three examples of the recent changes to highlight how this will affect your borrowing:

If your loan is $50,000 or less, loan repayments will be based on a 7 year term at 5.34%. Using this metric, the payment per month is $713. Compare this to many student lines of credit where payments are interest-only and at 6% your payment is $250 per month.

If your loan is between $50,000 and $120,000, so let’s say $80,000 (right in the middle), that means you can amortize over a 10 year term or $861 per month vs $400 at interest-only.

If your loan is $120,000 or more, they amortize it over 15 years or $920 per month vs $600 per month at interest-only.

I can see both sides of the argument here as to whether this change makes sense. The market bears will say that someone between $50,000 and $120,000 in student loans should focus on paying these off first, and should not be buying a home with that heavy a debt load. My counter argument to this is, the times I have seen debt loads this high were for professionals such as Doctors, Lawyers, or MBA graduates. Rarely have I seen a client have a student loan in excess of $50,000 who did not earn a very healthy salary. If the student loan is agreed upon by a major lending institution like a big bank for a much longer or flexible repayment, isn’t it funny that the same bank would then apply a much more stringent loan repayment schedule to that loan if applying for a mortgage? And they will!…

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