25 Apr

Why You Need A Home Inspection!

Mortgage Tips

Posted by: Tyler Cowle

Why you need a home inspection.

A home inspection isn’t a legal requirement when you buy a home in Canada. Yet, it’s certainly a wise decision for the largest purchase you will likely ever make.

Here are five reasons why you should opt for a home inspection when buying a home, even if it is a brand-new build.

  1. Things unseen

The home you want to buy may have a gorgeous skylight, cathedral ceilings and a huge master bedroom.  But the home’s aesthetics can hide big problems.

When you tour a house, you aren’t climbing into the crawl space or looking at the furnace. A home inspector isn’t wowed by beautiful staging. He or she will look at what’s in your walls, not what’s on them.

  1. Realistic budget for home maintenance

Many home inspections include the items that will need to be replaced within the next five years.

Paying for a home inspection can help you come up with a realistic home maintenance budget. If you know that the windows and roof are nearing the end of their lifespan, you can plan for that.

  1. A solid negotiation tool

Getting a home inspection gives you a huge amount of leverage. You can ask the sellers to fix some or all of the issues found during the inspection. Or you can renegotiate the sale price or ask the seller to contribute more towards closing costs.

With a home inspection, you have the upper hand in the deal. This gives you a lot of power to get a better deal on the purchase. Of course, you can also choose to back out of the sale if there are big, expensive issues that you’d rather not deal with.

  1. Can be an eye-opener

A home inspection will reveal the big picture when you might be focused on the location and the open kitchen plan. You don’t want to be blind to the potentially big issues like foundation cracks or electrical problems that can lurk unseen.

  1. Peace of mind

Lastly, and most importantly, a home inspection gives you peace of mind. You’ll be able to finalize the sale of a home knowing exactly what you’re getting yourself into. That way, you don’t uncover any major surprises shortly after moving in—even new builds are subject to issues.

Published by FCT

19 Apr

Process In The Paperwork.

Mortgage Tips

Posted by: Tyler Cowle

Documents Required to Qualify for a Mortgage

Mortgages can sometimes feel like endless stacks of paperwork, but being prepared in advance can save you time and stress! Getting your mortgage pre-approved is part of this prep-process, and will make things easy in the long run.

In order to get pre-approved, the lender must have taken you on as a client and reviewed all your documents before you begin house-hunting. It is important to ensure you have your pre-approval certificate before moving ahead and your pre-approval agreement in writing. This should include the pre-approved mortgage amount, the mortgage term, interest rate, payment information and the expiry for the pre-approval. Typically, they are valid for up to 120 days.

To prepare for the mortgage pre-approval process, there are a few must have documents that you will need to organize and have available prior to submission.

  1. Letter of Employment: One of the key aspects for financing approval is employment stability. Lenders want to see a letter from your employer (on a company letterhead) that details when you started working at this company, how much you make per hour or your annual salary, your guaranteed hours per week, and any probation if you are new. This can be done by your direct manager or the company HR department – they will be used to this type of request.
    1. Previous Two Pay Stubs: In addition to the employment letter, you must also have your previous two pay stubs. These must indicate the company name, your name and all tax deductions.
  2. Supporting Documents for Additional Income: If you have any other income, such as child support, long-term disability, EI, part-time income, etc., the lender will want to see any and all supporting documentation.
    1. NOTE: If you are divorced or separated and paying child support, it is important to also bring your finalized separation or divorce agreement. In some cases, they may request a statutory declaration from your lawyer.
  3. Notice of Assessment from Canada Revenue Agency: Lenders will also want to see your tax assessment for the previous year. If you do not have a copy, you can request one from the CRA by mail (4-6 weeks) or you can login to your online CRA account to access it.
    1. Your Previous Years T4: Along with your tax filing and assessment notice, lenders will also want to see your previous years T4 slip to confirm income.
  4. 3-Month (90 day) Bank Account History: Lastly, it is important for lenders to see 90 days history of bank statements for any funds that you are using towards the down payment. As saving up for a down payment takes time, there should be no issues providing these documents. If you received the money from the sale of a house or car, or as a gift from your family, you will need proof of that in the form of sales documents or a letter.

The above documents are required for any potential buyer who is a typical, full-time employee. But what if you only work part-time? Or maybe you are self-employed? Here is what you will need:

Part-time employee

You will still require all of the above documents (letter of employment, previous pay stubs, supporting documents for any additional income and 90 days of bank history).

However, the difference between a full-time employee and a part-time employee, is that if you only work part-time, you will need to supply THREE years worth of Notice of Assessments, versus just one. You will also need to have been working for at least two years in the same job to use part-time income.

If you have both a full-time and a part-time job, you can use that income too, assuming it has been at least two years.

Self-employed

If you are self-employed, the requirements for documents to lenders is slightly different. You will need to provide them:

  1. T1 Generals: Also known as the Income Tax and Benefit Return
  2. Statement of Business Activities: This is used to illustrate the business income versus expenses and should include financial statements for your business.
  3. Notice of Assessment from Canada Revenue Agency: Similarly to part-time income, if you are self-employed you will also need to provide the previous three years of assessments.
  4. If Incorporated: You will need to supply your incorporation license and articles of incorporation.

When it comes to mortgages, preparation is key. By having a pre-approval in hand, it can prevent any delays or issues with subject-to-financing clauses in the mortgage agreement. While you can walk into a bank, fill in an application and get a rate for a potential mortgage, this is just a ‘rate hold’ meaning it is a quote on the rate so you can qualify for the same rate later. This is not a pre-approval and does not guarantee financing.

To save yourself the headache down the line, contact me today to start the pre-approval process! Plus, my services are free to you. Why wait? Get fully pre-approved today to make closing the deal that much faster when you do find that perfect home.

Published by the DLC Marketing Team!

14 Apr

Industry Jargon Explained

Mortgage Tips

Posted by: Tyler Cowle

Baffled by some of the phrases realtors and bankers throw at you? Here are some commonly used—but not always understood—words to describe mortgages:

Amortization Period

This is the number of years it will take to repay the entire mortgage in full and is determined when you are approved. A longer amortization period will result in lower payments but more interest overall as it will take longer to pay off. The typical amortization range is 15 to 30 years.

Closed Mortgage

This is any mortgage where you have agreed to pay the lender for a specified period of time. This means that you cannot pay it off, refinance or renegotiate before the mortgage term ends without incurring a penalty. Depending on the lender, there may be options for accelerated payments but it depends on your particular mortgage contract. While these mortgages tend to be a lot stricter, they can often provide lower interest rates.

Conventional Mortgage

In the case of a conventional mortgage, the loan covers no more than 80% of the purchase price on the property. This means, the buyer has put 20% (or more) down on the property. These mortgages do not require default insurance due to the amount down.

Default

Failure to pay your mortgage on time will result in defaulting on the loan.

Derogs

Short for ‘derogatory’, derogs refers to an overdue account or late payments on your credit report.

Down

Short for down payment. In Canada, the minimum down payment is 5% on any home purchase.

Fixed

A fixed-rate mortgage means you are locked in at the interest rate agreed for a longer length of time.

Flex Down

This refers to a borrowed down payment program, which allows homeowners to “borrow” money for the down payment from a credit card, line of credit or other loan. In this case, the repayment of the loan is included in the debt calculations.

Foreclosure

This refers to the possession of a mortgaged property by the bank or lender if a borrower fails to keep up their mortgage payments.

High-Ratio Mortgage

A high-ratio mortgage is where the buyer has provided a down payment of less than 20% of the purchase price and needs to pay Canada Mortgage and Housing Corp. (CMHC) to insure the mortgage against default.

MIC

Short for a Mortgage Investment Corporation, this is a group of investors who will lend you the money for a mortgage if a traditional lender will not due to unusual circumstances.

Open Mortgage

An open mortgage means you can pay out the balance at any time, without incurring a penalty.

PIT

Principal, interest and taxes— a calculation representing the amount you can afford to pay monthly on your home. Heating costs are often included in this calculation (PITH).

Pull

Also known as a ‘credit check’ or ‘credit inquiry’ a ‘credit pull’ refers to the act of checking a credit report to determine if the borrower is a viable investment prior to approval of the mortgage.

Term

Term is the length of time that a mortgage agreement exists between you and the lender. Rates and payments vary with the length of the term. The most common term is a 5-year, but they can be anywhere from 1 to 10 years. Generally a longer term will come at a higher rate due to the added security.

Trade Lines

This refers to any credit cards, loans, wireless phone accounts, or mortgages that appear on your credit report.

Underwriting

This refers to the process of determining any risks relating to a particular loan and establishing suitable terms and conditions for that loan.

Variable

A variable-rate refers to an interest rate that is adjusted periodically to reflect market conditions.

20/20

A condition that refers to repaying 20% of the mortgage balance OR increasing your payment by 20%, without incurring a penalty.

If you are looking into getting a mortgage don’t be afraid to ask questions! At the end of the day, the mortgage contract has your signature on it and it is important to understand any contract you are signing. Contact me today and I would be happy to discuss your situation and answer any questions surrounding mortgage conditions or jargon to ensure the best result for YOU!

Published by the DLC Marketing Team!

8 Apr

Federal Budget 2022 – Economic Insights with Dr. Sherry Cooper

Mortgage Tips

Posted by: Tyler Cowle

 

Affordable Housing Is A Key Theme In Federal Budget 2022

Today’s budget announced a $10 billion package of proposals intended to reduce the cost of housing in Canada (see box below). The fundamental problem is insufficient supply to meet the demands of a rapidly growing population base. Thanks to the federal government’s policy to rapidly increase immigration since 2015, new household formation has risen far faster than housing completions, both for rent and purchase. This excess demand has markedly pushed home prices to levels beyond average-income Canadians’ means.

The measures announced in today’s budget to increase housing construction, though welcome, are underwhelming. The Feds can control the construction of lower-cost housing through CMHC. Still, most home building is under the auspices of the municipal governments, where the red tape, zoning restrictions and delays abound. The federal government increased funds to help local governments address these issues, but NIMBY thinking still prevents increased housing density in many neighbourhoods.

The headline policy announcement for a two-year ban on foreign residential property purchases may sound reasonable. Still, according to Phil Soper, chief executive of Royal LePage, “It will have a negligible impact on home prices. We know from the pandemic period, when home prices escalated with virtually no foreign money, that our problem is made-in-Canada.”

According to the Financial Post, Soper added that measures like the tax-free savings account for young Canadians would be encouraged to help them achieve their dreams of homeownership in a typical real estate market. However, in a low-supply environment with pandemic-fuelled price gains, these measures would only add more demand without addressing the supply issue. Only a few first-time buyers would be able to take advantage of it.

The Home Buyers’ Bill of Rights that would end blind bidding and assures the right to a home inspection and transparent historical sales prices on title searches is also long overdue.

The First-Time Home Buyer Incentive has been extended to March 2025. This program has been a bust. Buyers do not want to share the equity in their homes with CMHC. The Feds are taking another kick at the can, “exploring options to make the program more flexible and responsive to the needs of first-time homebuyers, including single-led households.” To date, the limits on the program have made them useless in high-priced markets such as the GTA and the GVA.

Budget 2022 Measures To Improve Housing Affordability

Tax-Free Home Savings Account

Introduce the Tax-Free First Home Savings Account that would give prospective first-time home buyers the ability to save up to $40,000. Like an RRSP, contributions would be tax-deductible, and withdrawals to purchase a first home—including investment income—would be non-taxable, like a TFSA.

New Housing Accelerator Fund

With the target of creating 100,000 net new housing units over five years, proposes to provide $4 billion over five years, starting in 2022-23, to launch a new Housing Accelerator Fund that is flexible to the needs and realities of cities and communities, while providing them support such as an annual per-door incentive or up-front funding for investments in municipal housing planning and delivery processes that will speed up housing development.

New Affordable Housing

To ensure that more affordable housing can be built quickly, Budget 2022 proposes to provide $1.5 billion over two years, starting in 2022-23, to extend the Rapid Housing Initiative. This new funding is expected to create at least 6,000 new affordable housing units, with at least 25% of funding going towards women-focused housing projects.

An Extended and More Flexible First-Time Home Buyer Incentive

Extension of the First-Time Home Buyer Incentive–which allows eligible first-time homebuyers to lower their borrowing costs by sharing the cost of buying a home with the government–to March 31, 2025. Explore options to make the program more flexible and responsive to the needs of first-time homebuyers, including single-led households.

A Ban on Foreign Investment in Canadian Housing

Proposes restrictions that would prohibit foreign commercial enterprises and people who are not Canadian citizens or permanent residents from acquiring non-recreational, residential property in Canada for a two-year period.

 Property Flippers Pay Their Fair Share

Introduce new rules so that any person who sells a property they have held for less than 12 months would be subject to full taxation on their profits as business income, applying to residential properties sold on or after January 1, 2023. Exemptions would apply to Canadians who sell their home due to certain life circumstances, such as a death, disability, the birth of a child, a new job, or a divorce.

Rent-to-Own Projects

Provide $200 million in dedicated support under the existing Affordable Housing Innovation Fund. This will include $100 million to support non-profits, co-ops, developers, and rent-to-own companies building new rent-to-own units.

Home Buyers’ Bill of Rights

Bring forward a national plan to end blind bidding. Among other things, the Home Buyers’ Bill of Rights could also include ensuring a legal right to a home inspection and ensuring transparency on the history of sales prices on title searches.

Multigenerational Home Renovation Tax Credit

Provide up to $7,500 in support for constructing a secondary suite for a senior or an adult with a disability, starting in 2023.

Doubling the First-Time Home Buyers’ Tax Credit

Double the First-Time Home Buyers’ Tax Credit amount to $10,000, providing up to $1,500 in direct support to home buyers, applying to homes purchased on or after January 1, 2022.

Co-Operative Housing Development

Reallocate funding of $500 million to a new Co-Operative Housing Development Program to expand co-op housing in Canada. Provide an additional $1 billion in loans to be reallocated from the Rental Construction Financing Initiative to support co-op housing projects.

There is also a laundry list of other programs to create additional affordable housing for Indigenous Peoples, Northern Communities, and vulnerable Canadians. Enhanced tax credits for renovations to allow seniors or disabled family members to move in; and for seniors to improve accessibility in their homes. As well, money is provided for long-term efforts to end homelessness.

To combat money laundering, the government said it would extend anti-money laundering and anti-terrorist financing requirements to all mortgage-lending businesses within the next year.

For greener housing initiatives, the government is planning to provide $150 million over five years starting this year to drive building code reform to focus on building low-carbon construction projects and $200 million over the same timeline for building retrofits large development projects.

Bottom Line

Nothing the federal government has done in today’s budget will make much of a difference in the housing market. What does make a difference is the spike in interest rates that is already in train. Fixed mortgage rates are up to around 4%, and variable mortgage rates have begun their ascent. There is still a record gap between the two, but the Bank of Canada will likely hike the policy rate by 50 bps next week. The Bank will probably hike interest rates at every meeting for the remainder of the year and continue into the first half of next year.

It is also noteworthy what Budget 2022 did not do. It did not address REITs or investment activity by domestic non-flipping purchasers. Some were expecting a rise in minimum downpayment on investor purchases or restrictions on using HELOCs for their funding.

Budget 2022 did not raise the cap of $1 million on insurable mortgages. It did not reinstate 30-year amortization, a favourite of the NDP. And, it did not follow the BC provincial government in allowing a “cooling-off” period after a bid has been accepted, technically giving would-be buyers more time to secure financing.

Published by Dr. Sherry Cooper – Chief Economist, Dominion Lending Centres

 

4 Apr

How to protect yourself from real estate fraud and schemes.

Mortgage Tips

Posted by: Tyler Cowle

As online-based transactions become more prevalent, cybercriminals are finding new and creative ways to steal your money.

So, what can you do to make sure you don’t fall prey to these malicious attacks? Here are the most common types of real estate fraud schemes and some ways that you can safeguard yourself.

WIRE FRAUD

One of the most common types of real estate fraud is wire fraud. Fraudsters send you an email or text that outlines instructions on where to wire your deposit funds to be held in trust.

These cybercriminals may even set up a fake website that looks similar to your lending company’s site. The phone number, URL and email addresses will typically look familiar. They might just be one letter or number off. It’s an easy thing to miss if you aren’t looking closely.

If you send the money this way, the scammers can withdraw your money from some offshore account and you are left a victim of fraud.

LOAN FRAUD

You get an email telling you that you are pre-approved for a special mortgage loan with a super-low interest rate. Often, these “mortgage agencies” are fraudulent loan companies that offer a steep discount on loans if you pay an upfront fee.

Be wary of any service that asks for your banking information or other sensitive information. Do your research on the company before moving forward. Ask for a list of referrals you can contact.

Remember, if it sounds too good to be true, it probably is.

TITLE FRAUD

One of the most devastating real estate fraud schemes for property owners is title fraud.

Title fraud usually starts with identity theft. Scammers get a hold of your online passwords and sensitive information. Then, they use fake documents to pose as the property owner and transfer the property to his or her name. They typically take out a mortgage or line of credit against the property. The criminal then takes the cash and runs, leaving you stuck with the payments.

How to protect yourself from real estate fraud schemes

As alarming as these types of fraud are, there are many things you can do to protect yourself from becoming a victim to these schemes.

PROTECT YOUR PERSONAL DATA

Use a unique password for each login account. It’s wise to keep your antivirus and security software installed and up to date. And avoid sensitive transactions such as online banking or shopping when you’re using public Wi-Fi.

When conducting online transactions that involve money or personal data, use password-protected emails.

CONFIRM VALIDITY

Before you send money or give out sensitive information to a third party, verify that you are dealing with the legitimate company or person.

Make sure you check the original documents from your lender and call the listed phone number to verify the payment instructions.

GET TITLE INSURANCE

If you’re buying property, make sure that you get title insurance. Title insurance is your best protection against title fraud. It also protects you from existing liens on the title, encroachment issues and errors in surveys and public records.

Published by FCT