6 Dec

Why You Should Buy Now

General

Posted by: Maria Solverson

Why you should consider buying now and getting ahead of the market correction:

Rates are going up. Fast. Why?

5 year fixed rates are up about 1.25% since last year this time.

The Federal Government. They have taken steps in an attempt to regulate our housing market in the last few years. Toronto and Vancouver housing markets have grown beyond economic norms due to a variety of factors. The government began its steps to manage this by implementing new mortgage guidelines and rules nation-wide. Many of these are direct to the consumer, such as the benchmark qualifying rules, restrictions on rental and investment mortgages, and foreign investor restrictions/taxes. In addition, there have been new rules that are indirect to the consumer, and unfortunately not as publicized. Intense OSFI regulations have affected all lenders, including the major banks, monoline lenders, trust companies, credit unions and private lenders. Perhaps most notable, is the drastically increased capital reserve requirements for mortgage lenders. The government mandated a 3-year time window for mortgage lenders to fund these capital reserve requirements. Much of this is being funded by increased mortgage rates for the consumer. In addition, there have been regulations implemented regarding back-end insurance for conventional borrowers. The cost for this is also funded by the consumer in the form of higher interest rates.

Canadian Bond Yields. Bond yields determine the discounted 5-year fixed rate. They have been trending upwards, especially in the last 18 months.

US Economics. (Aside from social-political views of course) the Trump administration has grown the US economy, and they are incurring the longest expansion in US history. Basic economics will tell us that a recession is due soon. When that occurs, it will likely drive our interest rates downward. The timing for this is difficult to predict, and I am by no means an economist.

Most Canadian Economists predict that 5 year fixed rates will rise another 0.5% by this spring, and another 0.50% through 2019. Mortgage holders and prospective buyers should expect rates to be around 5% in the next 2 years, at which point we predict a further stagnation in the market and then rates dropping again.

Why Should I buy now, with all of this market correction business going on? I’m waiting for prices to drop.

Now is an opportunity to get ahead of the housing market with a 5 year fixed rate.
For example:

If the monthly payment is your concern:

• Buy a home at $400,000 today with 5% down @ 3.69% and your payment will be $2012.96
• If you wait for a year, and rates are 4.69% and you want to have that same payment, you’ll have to buy a house for $361,000. You would be looking at a monthly payment of $2229.26 on a $400,000 purchase
• This is a huge range in the Calgary market. Depending on the area you’re looking at, this can be the difference between condo or freehold, or attached or detached. Housing prices are not going to drop that quickly, these things take time. Also, if you work with us on a pre-approval, we can hold your rate for 120 days while you shop.

If longer-term interest savings is your concern:

• Buy a home today at $400,00 with 5% down. 3.69% and monthly payment at $2012.96
• After 5 years your principal paydown will be $53,045.00
• Buy a home next year at $400,000 with 5% down. 4.69% and monthly payment at $2229.26
• After 5 years your principal paydown less payment differential will be: $34,168.00
• That’s $18,877.00

If qualifying is your concern:

• If your annual household income is $92,000 today, you would qualify for the above loan scenario ($400,000 with 5% down) assuming you have good credit and do not have excessive loans/debts.
• If rates are 1% higher next year, with 5% down, you would only qualify to buy at $366,000.

Whatever your scenario may be, you can feel free to call me for mortgage advice.

6 Dec

Mortgage Qualifying Solutions

General

Posted by: Maria Solverson

Many people are having trouble getting the mortgage they want these days. Working with a Licensed Mortgage Advisor offers you not only access to a variety of products but also a variety of experience-based solutions.

Here are a couple strategies we have used to get home buyers qualified, who have had difficulty elsewhere:

CREATE THEIR DOWN PAYMENT

Take out an RRSP loan with a lender who has the right guidelines. You utilize a payment on the RRSP loan that fits into their long-term debt service ratios to qualify for a house. After 90 days you use the Home Buyers plan to withdraw the down payment. The advantage of our scenario is that our lender does not require the loan to be paid off to use the RRSP money for the down payment. Most RRSP lenders will demand that the withdrawn funds are used to pay the balance of the RRSP loan off in full. If they qualify, (in RRSP room and GDS / TDS ratios,) up to $25,000 in down payment could be available.

 

RE-WRITE A CAR LOAN TO REDUCE THE MONTHLY PAYMENT

We have a bank lender who rewrites car loans with a longer term creating a lower monthly payment.  Lower car payments can lead to a higher mortgage. Recently, we had clients with a newer vehicle with a large payment. With the new lower payment that we organized, they then were able to obtain a $70,000 higher mortgage. They were very happy that they were now able to purchase the house they really wanted NOT the house that the bank said they should be purchasing.

 

If you think you can benefit from these strategies or would like to know about other solutions, please contact me. Let me use my experience and skill as a licensed mortgage advisor get to know your situation and get you on the path to owning the home of your dreams.

18 Oct

Four Legal Pot Plants, what are lenders Doing?

General

Posted by: Maria Solverson

As we all know, recreational marijuana is now legal in Canada. The law is set, but implementation and how policies and guidelines will impact our industry are yet to be determined. Generally, 30 grams for personal possession and up to 4 plants at home.

For realtors, mortgage brokers and their clients we are facing many months of the lenders sorting out their guidelines. If a borrower or seller voluntarily discloses they have been growing four legal marijuana plants, which should produce more than 30 grams, as a point of interest, how will the lenders, mortgage insurers and home insurers react?

Lenders:

As of today, many lenders do not have a policy. Some say yes four plants will be OK, some say case by case, and some say four plants will be a hard no. For the common existing house stigmatized as a “grow-op”, there are still very few lender options. We do have a couple of lenders for fully remediated grow-ops, and CMHC does consider those applications.

Mortgage Insurers:

CMHC says they will carry on the same as they have been. Genworth and Canada Guaranty are saying either, case by case or the policy will be determined shortly.

Home Insurers:

As or right now we have not been able to get any consistent information on this subject. However, home buyers and homeowners are encouraged to check with their provider for their policy information.

For those folks growing up to four plants and looking for financing, expect your clients to get mixed results from banks and many lenders. Some lenders are considering air quality tests, home inspections, statutory declarations and other means to determine if the home has been impacted or damaged by four plants. For now, we have identified willing lenders. CMHC will consider the applications.

Please contact me if your clients have any questions on how the new legalization laws affect their options or to avoid complications with four plant files.

 

20 Sep

How we get Self-Employed Clients Approved.

General

Posted by: Maria Solverson

Being self-employed in Canada is a dream come true for many Canadians. It gives you freedom and flexibility to forge your path in your personal and professional life. You are in control of when you work, where you work, and whom you work with or for. With that freedom comes a lot of specific responsibilities. Because you’re are both employer and employee, you are now accountable for the finances of your businesses (savings/liabilities and taxes) as well as your own. Buying a home for self-employed Canadians can be an intimidating process for some because it does require answering a few more questions and producing a bit more paperwork. That’s why we are here to help!

Approximately 15-20% of Canadians are considered self-employed. Though this number is not the majority it is still a significant portion of the buyers market, and it is something we pay particular attention to in our office. So where do you start as a self-employed home buyer?

The Groundwork:

Get your paperwork in order. Lenders want to make sure you are organized and can manage both your business finances and your personal finances.

Speak to your accountant, or find a copy of:

  • Financial Statements of your business (last two years)
  • Proof that your HST and/or GST is paid in full
  • A copy of your GST license or Articles of Incorporation
  • T1 Generals (Sole proprietor)

You also want to make sure you have the personal financial documents for you and your co-applicant in order as well. A Notice of Assessment for the last two year showing you have your income taxes paid in full will be necessary. Every ‘A’ lender needs to know you don’t owe the Canadian Government any money before they can approve home financing, though we do have other options we can explore.

Getting Started:

The next step is where working with a Licensed Mortgage Advisor is important. Every Self-employed home financing file is unique, and working with a professional team with expertise and lending options will always give you the best outcome.

First, we get to know your goal and your needs, then we get to know your financial status and run the numbers. All lenders have their particular list of criteria, programs, and conditions for how they view a self-employed application. It’s important that the person you are working with understands your Financial Statements clearly and can identify the lending and insurable options available. As a short example; some business owners don’t declare much income for themselves, giving them the opportunity to write much more off through the company. Though this is a substantial annual tax savings, this could make it difficult to qualify a borrower based on their income alone. Professional Mortgage Advisors can use the complete business financial picture and present a much more favourable and accurate account of your income to the lender. We can do this in a number of ways such as showing year after year growth, providing proof of contracts showing revenue, and in some cases using a Stated Income solution.

I won’t go to into depth on the Stated Income as there are some revisions to the program that promises to make it more accessible to future applicants. However, in a nutshell, the program is designed for Self-employed borrowers who are unable to provide traditional income verification but have a proven history of managing their credit and finances responsibly. If you have more questions or would like to learn more about this, please reach out to us at Jencor or Click Here to see the program’s guidelines.

Getting to the Finish Line:

After we get your paired with the best lender to finance your mortgage, the completion process becomes basically the same as any standard sign off process. You sign your documents with us, then you work with your Lawyer and Realtor to complete the property closing.

The key to this process is, remove doubt and let us know what you can do. True some lenders do not have an appetite for all Self-employed borrowers, but not at Jencor. We know our lender’s programs, and we know not to make them work for our clients. Licensed Mortgage Advisors are trained and educated to make this process as smooth and seamless as possible for borrowers in all situations. Our Advice is free, and we are available when you are.

 

Written By:

Morgan Dempsey – Mortgage Advisor, Jencor Mortgage Corporation

6 Sep

New To Canada

General

Posted by: Maria Solverson

Welcome to Canada!

Canada is made up of hundreds of thousands of people and some did not start in Canada but have made it their home. Buying a home, especially when you are new to Canada can be mind-boggling, BUT, we have a mortgage for you!

The New to Canada Program is designed to help new Canadians purchase their first home sooner and become established faster.

What are the qualifications for this program?

Firstly, you must have immigrated or relocated to Canada within the last 3 to 5 years to qualify for the New to Canada Program.  You must have proof that you have been working full time in Canada for at least 3 months and that you are not on probation with your employer. The lender will require a letter of employment from your employer with your salary and employment status. Copies of your valid work permit or landed immigrant status card (front and back) will also be a requirement.

Down payment is a minimum of 5% and at least 5% of the funds must come from your own savings and be verifiable with 3 months worth of bank statements from a Canadian Bank.  Some lenders will allow the 5% to be a gift from an immediate family member and gift letter from the lender will be required.  Please speak to your broker in advance when a gift is being used. That way we can provide you with information for monies coming from other countries and ensuring you are following all the banking rules and regulations.  With a minimum of 5% down payment, you will need default insurance and that can be provided by Canada Guaranty, Genworth or CMHC (Canada Mortgage and Housing).  Each of these insurers offer programs that will work with the lender.

The lender will need to see your credit bureau and as you are new to Canada you may be just starting that, so we will require an international credit report from your country of origin.  Just starting up your credit, we can assist you with that by providing valuable information to get you ready for the road to homeownership. You can obtain an International or US Bureau by contacting Equifax and they will point you in the right direction.  Your international credit report is taken into consideration by the lender as it will show that you are a responsible borrower and have kept your accounts in good standing.  We would advise that a letter of recommendation from your current bank be done as that is also very helpful in the process. If you cannot provide an international credit bureau the lender will ask you for to confirm your good standing by providing 12 months history of bills that must be paid on time (rent, utilities, cable or insurance premiums).

Working with your Jencor Mortgage Advisor will provide you with options and answers to your questions. Our advice is always free, we are here to help you make home ownership a reality.

Remember, when looking for your home, use a professional to assist with not just financing but the search as well.  Realtors are great negotiators and can also help you determine your requirements in a home, “needs vs wants”.  Do you need to be close to schools, public transportation, etc.

This process can take some time but again, that is why you have a Jencor Mortgage Advisor at your fingertips!

By the way, Welcome to Canada!!

 

By

Karen Penner & Heather Hellings
Jencor Mortgage Corporation

17 Aug

Bruised Credit and Need a Mortgage?

General

Posted by: Maria Solverson

 

Many people think that their credit score will hold them back from obtaining a mortgage.  For some, they may have work to do on their debt beforehand, but sometimes people believe their credit is poor, only to find that it isn’t as bad as they thought.  It pays to seek help from a Jencor Mortgage Advisor to find out where you stand.  

What is bruised credit and how does it impact your ability to obtain a mortgage?   

Mortgage lenders use your credit reports to evaluate risk by looking at your repayment history to see how responsible you are with credit. Although a 790-beacon score and zero late payments in the last three years is ideal for all lenders, bruised credit means something slightly different to some lenders. So, what is bruised credit?  It can be a result of many circumstances including, late payments on loans, collections & judgements, bankruptcy, consumer proposal or credit counselling, late payments on your mortgage, foreclosure & even identity theft. Traditional mortgage lenders and insurers will not commonly approve applications with credit histories that show challenges with borrowing in the recent past. The good news is that there are still options with alternative mortgage lenders with a minimum down payment of 20% to 30%.  With these mortgages, you will be paying higher interest rates, usually for two years, while you rebuild your credit.  We can then transition you into a regular mortgage. 

Rebuilding credit takes time.   

There are some things you can do which will bring your score up substantially in one swoop, but normally it takes time to rebuild.  Here are some of the basics to improve your credit: 

  1. Have at least two credit accounts reporting to your credit report besides cell phone bills, school loans or mortgages.  Use your credit cards every month, even just one purchase monthly and pay it in full before the due date.  The credit limits should be at least approximately $2000 each. 
  1. Always pay all your debts on time – making even the minimum payment on time, is better than making a larger payment late. If need be, reach out to the account holder and make payment arrangements. Never ignore a payment and hope for the best.  

No Late mortgage payments – these are extremely detrimental to you obtaining a mortgage. 

  1. Do not max out your credit.  Use less than 50% of your limits and never go over the limit.  Going over limit impacts your score immediately and severely, and even when you bring it back in line, it still has a lingering effect on your score. 
  1. Do not apply for too much credit and do not cancel existing credit – both these actions will negatively impact your score – yes, you would think that cancelling existing credit would help, but by doing so, you are reducing the overall credit available to you and therefore immediately increasing credit usage.  Also, by cancelling credit, you might be cancelling a credit card that you have held the longest and longevity of credit has an impact on your rating.  
  1. New loans, such as car loans will have an immediate negative impact on your score – so do not obtain a new car loan if you are thinking about obtaining a mortgage.  Because of the size of the loan, your credit usage increases substantially. 
  1. Do not let anything go to collections – even though some utilities, rental payments, gym memberships and the like, do not report to your credit bureau, when they go to collections, they will be reported.  
  1. Ensure that everything on your report is correct.  If not, you must take steps with the creditor or the reporting agency (Equifax or TransUnion) to correct them.  
  1. In some cases, if you already own your home, there may be an opportunity to consolidate debt into your mortgage and improve your credit. 

Don’t be defeated; get advice, get back on track! 

Ultimately, how each item impacts your score, depends on how it interacts with everything else on your report.  One late payment, for some with long-held credit and very little past delinquencies, will have less of an impact than for someone with bruised credit or someone with new credit.  

If you have bruised credit, don’t write off your dream of home ownership.  Contact your Jencor Mortgage Advisor who can advise you on the necessary steps to obtain the mortgage you need. 

 

Ayashah Kothawala – Jencor Mortgage Corporation, Mortgage Advisor

 

26 Jul

How We Look After Your Client, For Better or For Worse!

General

Posted by: Maria Solverson

Divorce is always a very difficult time, and the changes to the mortgage rules over the last few years have made it even more difficult. For the most part, one spouse will want to remain in the home and will need to buy the other out of the remaining equity.

Currently, the most one can refinance is 80% of the value of the home. This leaves 20% of the equity unavailable for the buyout and is forcing the sale of the home. Because of this, both insurers (CMHC and Genworth) will consider a Marital Home Buyout up to 95% of the value of the home. The deal is packaged as a ‘purchase’ and the spouse remaining in the home becomes the buyer on the purchase.

Marital Home Buyout:

Option 1:

  • Refinance the home conventionally (up to 80% of the value of the home).
  • One party can refinance the property conventionally. This person will need to qualify for the mortgage and any other liabilities on their income alone.

Option 2:

  • Refinance through CMHC or Genworth’s Marital Home Buyout program.
  • Qualified clients can refinance the home up to 95% of the value of the property.
  • CMHC’s spousal buyout program will allow the equity to be used only to payout the spouse and not any other debts or penalties.
  • Genworth will allow the funds from the refinance to be used to pay off other matrimonial debts and mortgage penalties a long as they are specified in the separation agreement
  • For refinances over 80% loan to value, clients will be subject to insurance premiums. If the mortgage was originally CMHC or Genworth insured, clients might just face a smaller top up premium. If not, a full premium will apply.

Requirements:

At the time of mortgage approval, in addition to income verification and other standard conditions, lenders will require the following:

  • Divorce/Separation Agreement. Lenders will not finalise a mortgage approval until there is a legal agreement in place outlining the split of assets. This protects both the lender and the client as a soon to be ex-spouse could make a claim against any assets in your name.
  • Proof of support payments. If there are child or spousal support payments and these are needed as income for the buyer to qualify, further documentation will be required. The payment amounts should be specified in the Separation/Divorce Agreement and lenders will require a minimum of 3 months’ worth of bank statements showing the support payments are being made/received consistently on the same day each month and for the same amount.
  • An Offer to Purchase between the two spouses for the subject property (in the case of spousal buyout)
  • An Appraisal will always be required in the case of a spousal buyout. As this transaction is not an Arm’s Length Transaction the lender or insurer will order an appraisal to be completed on the property to confirm market value. In the event of a refinance, the appraisal requirement can sometimes be waived, depending on the loan-to-value ratio.

If you are facing a marital breakdown, make sure that you reach out to your trusted Jencor Mortgage Advisor to make sure you have all of the information you need to make the right decisions regarding your mortgage and your home.

 

Sarah Boudreau – Jencor Mortgage

5 Jul

A Licensed Mortgage Expert is Always the Right choice.

General

Posted by: Maria Solverson

With the recent waves of government mortgage rule changes, home buyers/homeowners are feeling disappointed that they have been declined or not approved by their lending institution for the financing they fell like they can reasonably afford. What was once the ‘norm’ for mortgage financing is no longer and dealing with a mortgage expert is more important than ever.

  • A Mortgage expert has the ability to shop the mark of lenders for the best and most appropriate deals.
  • You are more than a “Rate”. You get the borrowing solution that works best for you, not the only Mortgage a bank has to offer.
  • Licensed Mortgage Advisors have access to A, B, C, and Private Mortgage solutions.
  • Bruised Credit? I can Help! We offer you more options and better Advice!
  • Being self-employed is also no problem for us. We are specialists in using all tools available to present your income the way lenders see it.
  • We deal in Mortgage Solutions, not Mortgage Products.

I have been with Jencor for over 10 years and am an award-winning Mortgage Advisor. My clients speak of my passion for helping others and how impressed they are with the extras measure I take to do the best for my clients. I make a point exhibit an honest enthusiasm for helping clients with one of the biggest financial decisions they make. As one of my clients, you will quickly find yourself enjoying an easy rapport and trusting connection. My genuine interest, great advice and attention to detail leads to very satisfied customers that are happy to refer others to me.

If you are ready to engage a committed mortgage expert who always goes the extra mile, I may be a great choice for you! Please have a look at the Testimonial section of my webpage to see what clients have said.

28 Jun

Calculating Mortgage Payout Penalties

General

Posted by: Maria Solverson

It is very common for people to believe that the rate is the most important consideration when selecting a mortgage product. In many cases, this is a reasonable assumption, many times customer are deciding between mortgage products that are very similar in rate. In this case, as in most, understanding the terms of the mortgage are more important than the interest rate. It is unfortunate that too many Canadians find themselves learning about one of the most important terms which have a very negative effect on their financial situation when it’s too late, Payout Penalties.

When calculating a mortgage payout penalty, banks and broker lenders use the greater of:

  • A 3-month interest penalty or
  • The interest rate differential (I.R.D)

This is where the similarities end. Banks calculate their I.R.D. based on the discount off the posted rate for the nearest term at the time of payout, while the broker lender uses a re-investment rate. The bank discount is the discount you received at the time of approval.

The example that I am using is a mortgage with a balance of $400,000.00 at 2.79% with 26 months left on the original 5-year term. The 2.79% rate from your bank was a 2% discount off the original 5-year posted rate of 4.79%. The broker lender does not deal in posted rates as such.
Interestingly enough, the bank posted rate for the nearest term of 2 years was 3.24%, and the reinvestment rate for the broker lender was also 3.24%.
For the broker lender, the reinvestment rate was higher than the rate on the mortgage paid out, so the 3-month interest penalty is charged. The penalty worked out to $2,790.00.
The bank penalty was calculated using the original 2% discount subtracted from the 3.24% posted rate for a 2-year term. This resulted in the penalty being charged as the difference of 2.79% minus the 1.24% or 1.55% differential for the remaining 26 months of the term. The result was a penalty in the amount of $13,433.33 or a difference of $10,643.33. The banks not only get to charge the higher penalty but also get to reinvest the money at the higher rate. Win, win for the banks but lose, lose for the borrowers.
In the past three years, many Albertans had to sell their homes due to unforeseen circumstances. Do you not think that the $10,000.00 plus in penalty differences would have been better in the hands of these Albertans or your hands versus going to the Ivory Towers on Toronto’s Bay Street?
For all your mortgage financing requirements, please contact Jencor Mortgage Corporation.

22 Jun

5 Things to Consider When Buying an Acreage or Country Property

General

Posted by: Maria Solverson

HOW MANY ACRES ARE YOU PURCHASING? 

For conventional mortgages, lenders will finance a certain number of acres, a house & a garage. The number of acres that they will consider can vary based on the property location and the norm for that area. The minimum down payment can also vary based on the size and location of the land.  For example, a property that is close to a major urban area and under 10 acres would most likely be approved with 20% down payment. If it is a larger acreage 30+ acres and not within an hour of a major urban area, the minimum down payment will likely increase. 

For high-ratio / CMHC insured mortgages with a minimum of 5% down, they will approve and ensure the value of the house, garage and the `residential component` of the land. If the norm / average acreage size for the area is 20 acres, this is what they will approve in land value. If it is 160k – then this is what they will approve. However, if you purchase a 160-acre acreage and all of the acreages surrounding it are only 20 acres – CMHC will likely only give value to the first 20 acres of land, and the buyers will have to pay out of pocket for the value of the remaining land as determined by an appraisal.

It is typically easier to secure financing on CMHC insured Mortgages, and it is not uncommon for lenders to require the mortgage is insured even if the buyers have a 20% down payment based on the purchase price. If it is a large acreage, has outbuildings of major value or is a mobile or modular home – these are all things that could result in either a larger down payment requirement and/or mortgage default insurance. 

If there is no home on the property a mortgage is not available, and one would require a land loan. Land loans typically start at a minimum of 25% down payment and go up from there based on the location, size and value of the property, they also often come at slightly higher interest rates.

WHAT ABOUT POTABILITY? No mortgage unless there is good water! Potability reports are needed for all well water and will be requested either upfront with the lender approval or at the lawyers before closing.

WHAT ABOUT ZONING? Country residential is the easiest to finance. However, if the land is zoned Agricultural, but used as residential (no farming or commercial component), the lenders and insurers will consider this as well. Agricultural & Farmland that derives income is more difficult to finance. Lenders are wary as it is difficult to foreclose on agricultural land and if the Agricultural land has a farming component or income lender options become much more limited, and down payment requirements increase.

WHAT IF THE PROPERTY HAS OUT BUILDINGS? Mortgages are for a house, garage and land – and that’s all.  If the property has an outbuilding of value, the lender or insurer will often reduce the effective value of the property, and this will affect the down payment requirements.

For example, if a client is purchasing a small acreage for 800k , and there are a brand new large heated shop, horse corrals and an arena on the property that the appraiser values in total at $160k, this would be deducted from the purchase price in the lenders eyes bringing the effective value down to 640k (800k-160k). The buyer would then need to have a minimum 5% down payment based on the 640k  effective value ($32k) PLUS 160k to make up the difference (value of outbuildings) for a total of $ 192,000.  Even though the buyer is technically putting more than 20% down based on the contract purchase price, the lender and insurer would consider this to be financed at 95% of the value of the home, garage and land and a CMHC premium would apply. 

OTHER FINANCING FACTORS TO CONSIDER: You may need to allow extra time for conditions to be removed on acreage purchases as  CMHC appraisals and well water testing can cause delays. 

As always with mortgage financing, the buyer plays an important role. For strong clients, the lender may make an exception to their policies. 

Originally Published by Cory Lewis, Mortgage Advisor, Jencor Mortgage Corporation