Save thousands in mortgage interest with this strategy

Simply changing your monthly mortgage payments from to a weekly or bi-weekly payment schedule can actually save you thousands of dollars in interest payments and take years of your mortgage amortization period. Consider timing payments on your pay weeks.

This is how it works. Accelerated weekly and accelerated bi-weekly payment options are calculated by taking a monthly payment schedule and assuming only four weeks in a month. An accelerated weekly payment, for example, is calculated by taking your normal monthly payment and dividing it by four. Since you pay 52 weekly payments, by the end of a year you have paid the equivalent of one extra monthly payment. 

The accelerated bi-weekly payment is calculated by dividing your monthly payment by two. You then make 26 bi-weekly payments. Just like the accelerated weekly payments you are in effect paying an additional monthly payment per year.

This additional amount accelerates your loan payoff by going directly against your loan's principal. The effect can save you thousands in interest and take years off of your Mortgage.

Steven Porter - Mortgage Advisor, CIBC, steven@stevenporter.ca

How can mortgage prepayment charges be avoided?

 

You have a number of options available to prepay your mortgage and avoid prepayment charges:

Portability

If you’re selling and buying a new home, your mortgage may have a portability option that allows you to Port your existing mortgage term, outstanding principal balance and maturity date to a new property.

Assumption

If you’re selling your home, the purchaser may have the option of applying to assume your mortgage with the existing terms and conditions on closing.

Open mortgage

Enjoy the flexibility to pay off as much of your mortgage any time without paying a prepayment charge.

Subject to approval and eligibility based the terms of the mortgage.

Contact me to learn more about assuming someone else's CIBC mortgage, or having a potential purchaser assume your CIBC mortgage.

There are also ways to save thousands of dollars in interest payments breaking your mortgage early, paying the discharge penalty, and not being "out of pocket" for the expense.

Steven Porter, Mortgage Advisor - CIBC, 1-888-885-8962, steven@stevenporter.ca

When does a mortgage prepayment charge apply?

 

• Renewing your mortgage before the maturity date
• Prepaying more than the amount of your annual prepayment privilege
• Refinancing your mortgage and selecting a new term
• Transferring your mortgage to another lender
• Paying off your mortgage before the maturity date

In all of the above scenarios, the mortgage balance is being prepaid before the maturity date, which may result in a prepayment charge.

How are prepayment charges calculated for a fixed rate closed mortgage?

If you have a fixed rate closed mortgage, your prepayment charge will be the greater of the following:

• three months' interest on the amount you are prepaying. Interest will be calculated at your annual mortgage interest rate, plus any discount you received
• the Interest Rate Differential on the amount you are prepaying

What is interest rate differential (IRD)?

If you prepay your mortgage, you may be charged a prepayment charge. There are different methods for calculating prepayment charges. In some cases, the amount charged is the Interest Rate Differential amount. At CIBC, the Interest Rate Differential amount is the difference between the following two amounts:

• interest over the remaining term of your mortgage, calculated at your current mortgage interest rate, plus any interest rate discount you received.
• interest over the remaining term of your mortgage, calculated at CIBC's current posted interest rate for the comparison mortgage identified in your mortgage documents.

For a full prepayment, the prepayment charge is calculated on the full amount of the prepayment. For a partial prepayment, the prepayment charge is calculated on the amount of the prepayment that is more than your annual prepayment privilege amount.

How are prepayment charges calculated for variable rate closed mortgages?

If you have a variable rate closed mortgage, your prepayment charge will be three months interest on the amount you are prepaying. Interest will be calculated at CIBC Prime Rate.

Examples of prepayment charge calculations

The following illustrates how prepayment charges are calculated. To estimate your prepayment charge, use the CIBC Mortgage Prepayment Charge Calculator.
Example of estimating the prepayment charge for a variable-rate closed mortgage
Martin has a variable rate mortgage. If Martin wanted to pay off the entire principal amount, the prepayment charge would be equal to three months' interest on the entire amount he is prepaying, calculated at the CIBC Prime Rate in effect on the date the mortgage payout statement is prepared.
Martin still owes $60,000.00 on his mortgage. If the mortgage payout statement were prepared today, and if the current CIBC Prime Rate is 5.000%, here is how Martin estimates the prepayment charge to pay off the entire mortgage.

Step 1:

The total amount of the prepayment.

$60,000.00

Step 2:

The CIBC Prime Rate in effect on the date of the mortgage payout statement is prepared (written as a decimal). Thus, 5.000% becomes .050.

0.050

Step 3:

He multiples the total amount of the prepayment by the interest rate. This is equal to an estimate of one year's interest.

$3,000.00

Step 4:

He divides the annual interest cost by twelve to get an estimate of one month's interest.

$250.00

Step 5:

He multiplies one month's interest by three to get an estimate of three months' interest. This is an estimate of the prepayment charge.

$750.00

When Martin pays off his mortgage, he will need to pay an estimated additional amount of $750.00 to pay for the prepayment charge. This is only an estimate. Martin should call CIBC Mortgages or his current lender to find out the exact amount of her prepayment charge.

Example of estimating the prepayment charge for a fixed-rate closed mortgage
Maria has a 5-year fixed-rate closed mortgage. When she arranged the mortgage, she received an interest rate discount of .500%. Her existing annual interest rate on her mortgage is 6.500%.
The principal amount she still owes is $100,000. She has two years (or 24 months) left in the term of this mortgage. However, Maria has just inherited some money and wants to pay off the mortgage.
In Maria's case, the prepayment charge will be the higher of the following two amounts:

• three months' interest at her interest rate of 6.500% plus the discount she received of .500%, which is equal to 7.000%; or
• the interest rate differential amount

The following shows an estimated prepayment charge for prepaying the full amount of Maria's mortgage:

Estimate of 3 Months' Interest

Step 1:

The amount Maria wishes to pay off is $100,000.00.

$100,000.00

Step 2:

Maria’s current interest rate plus the discount she received equals 7.000%. Written as a decimal, this becomes 0.070.

0.070

Step 3:

The amount Maria wishes to prepay multiplied by her interest rate plus the discount ($100,000.00 x 0.070) equals the estimated annual interest costs.

$7,000.00

Step 4:

The estimated annual interest costs divided by 12 equals an estimate of one month's interest.

$583.33

Step 5:

1 month’s interest costs multiplied by 3 equals an estimate of 3 months’ interest.

$1,749.99

So, an estimate of 3 months’ interest would be $1,749.99.

Estimate of the Interest Rate Differential Amount

Step 1:

The interest costs over the term of a mortgage with Maria’s current principal balance of $100,000.00, with her monthly payment amount of $693.47, a term of 2 years (which is the remaining term of Maria’s mortgage) and her interest rate plus the discount that she received, which is 7.000%, would be $13,603.92.

$13,603.92

Step 2:

In Maria’s case, we determine that the comparison mortgage is the CIBC 2-year fixed-rate closed mortgage. On the date we prepare the mortgage payout statement, the posted rate for this product is 5.000%.

0.050

Step 3:

The interest costs over the term of a CIBC 2-year fixed-rate closed mortgage, with the same principal amount as Maria's remaining balance of $100,000.00, the same monthly payment amount of $693.47 and our current posted rate of 5.000%, would be $9,567.59.

$9,567.59

Step 4:

The interest costs calculated in Step 3 is subtracted from the interest costs set out in Step 1. This is the interest rate differential amount.

$4,036.33

So, an estimate of the interest differential amount would be $4,036.33.

The Estimated Prepayment Charge

Maria's prepayment charge is the higher of the estimated three months' interest costs of $1,749.99 and the estimated interest rate differential amount of $4,036.33.
So, if Maria's mortgage payout statement was prepared today, an estimate of her prepayment charge would be $4,036.33.
Maria should call CIBC Mortgages or her current lender to find out the exact amount of her prepayment charge. The amount above is only an estimate.
 The timing of your prepayment, changes in the interest rate and changes in your payment amount can have an impact on the IRD calculation. You can use the CIBC Prepayment Charge Calculator to see how these changes affect your prepayment costs.

What additional charges may apply when prepaying a mortgage?

There are sometimes additional charges that may apply when prepaying a mortgage in full before the maturity date:

Cash Back Repayment:
• If you received a cash back amount, when you entered or renewed your mortgage, you may be required to repay the cash back. Below are examples of situations where cash back repayment may be required. When you:
• Prepay the mortgage in full
• Ask us to transfer the mortgage to another lender (a "switch")
• Renew the mortgage with an effective date that is before your current mortgage matures
• Refinance the mortgage
• Transfer title to the property and arrange for the mortgage to be assumed by the new owner
• Port the mortgage

Mortgage Discharge Fee/Assignment Fee
• A discharge fee and/or assignment fee for document preparation and registration when the mortgage is prepaid in full.
• If you ask us to transfer your mortgage to another lender, an assignment fee will apply.

How can prepayment charges be avoided? Call me to find out, Steven Porter -1-888-885-8962

Steven Porter, Mortgage Advisor  CIBC, 1-888-885-8962, steven@stevenporter.ca
www.FreeMortgageInfo.ca

Different Mortgage Options - What to Choose?

 

What is an open mortgage?

An open mortgage can be prepaid, in part or in full, during the term of the mortgage without paying a prepayment charge. The interest rate on an open mortgage is often higher than the interest rate on a closed mortgage. An open mortgage can provide flexibility until you are ready to lock into a closed term.

What is a closed mortgage?

A closed mortgage is one that cannot be prepaid, renegotiated or refinanced before the end of the term without paying a prepayment charge. However, most closed mortgages contain certain prepayment privileges, such as the right to make a prepayment of 10-20% of the original principal amount each year, without paying a prepayment charge.
A closed mortgage often has a lower interest rate than an open mortgage.

What is a fixed interest rate mortgage?

• With a fixed interest rate mortgage, in most cases your interest rate does not fluctuate during the mortgage term. Your regular mortgage payment amount does not change.
• You know exactly what your regular payments will be and how much of the principal balance will be paid off during the term.

What is a variable interest rate mortgage?

• With a variable rate mortgage, the interest rate changes with changes to the CIBC Prime Rate. In addition, your regular mortgage payment amount is fixed and does not change.
• When the CIBC Prime Rate decreases, the amount of interest you pay will also decrease. A smaller portion of your regular mortgage payment will be applied to pay interest, and a larger portion will be applied to pay down the principal amount of your mortgage.
• When the CIBC Prime Rate increases, the amount of interest you pay will also rise. A larger portion of your regular mortgage payment will be applied to pay interest, and a smaller portion will be applied to pay down the principal amount of your mortgage.

Why choose a short term mortgage?

A short term mortgage generally offers a lower interest rate than a longer term mortgage. When current rates are high and you think rates may drop, choosing a short term mortgage allows you to lock in for a shorter period. A short term mortgage may also be a good option if you plan to sell your home or pay off the mortgage early.

Why choose a long term mortgage?

A long term mortgage generally offers a higher interest rate than that of a shorter term mortgage. When current rates are reasonably low, choosing a longer term mortgage secures the interest rate for a longer period of time and makes budgeting easier.

Free On-Line Mortgage Pre-Approval

Steven Porter - Mortgage Advisor, CIBC - 1-888-885-8962, steven@stevenporter.ca
www.FreeMortgageInfo.ca

Today's Most Desirable Home Features

Housing trends and styles are changing constantly. Today, more than ever, buyers have a strong sense of what they want in a home. 

Today’s desirable home features depend greatly on the type of buyer.  Buyers can be divided into two main groups. The first group are first-time buyers which is pretty self-explanatory. The second group are the move up buyers, which are looking to move into a home that addresses the shortcomings of their existing home. They aren't necessarily second-time buyers but they are often people that have out grown their current home. Buyer age is also a main factor in deciding the desired home features.

This article focuses on what is hot in the housing market today. Whether you are planning on renovating, selling, or you are looking for a new home, this information will help you make choices that will contribute to both your real estate enjoyment and investment.

Home Exterior

Today, stone and stucco are very popular choices. Brick is the standard material used with mass builders, but the more customized and trendy homebuilders are using stone and stucco on a more frequent basis.

Floor Layout   

Bungalows are hot nowadays. Excessive floor level changes are no longer popular as people desire to live on one or two levels.

Room Sizes

Room sizes have been gradually increasing for a number of years. Buyers tend to place the most importance on three key rooms: the kitchen, family room and master bedroom. You can expect to see these three rooms continue to increase in size over the next 10 years while rooms such as the living and dining room are likely to get smaller or disappear altogether. Many new homes scrap the living room and instead incorporate that space into the family room or the 'Great' room.

Buyers still, ideally, desire four bedrooms in their home and would like, if possible, two living areas. One of the living areas can be the recreation room in the lower level (basement).
A master bedroom on the main floor is ranked very important for buyers 65 and older. A two-car garage with ample storage area and a main floor laundry area is desirable for move-up buyers.

Kitchen and Bathrooms 

The kitchen is becoming the hub of the house. The most desired features for the kitchen include: an abundance of counter space, a butler’s pantry, deep drawers and two sinks. Stainless steel appliances are also very popular today, and in the upper end market, appliances concealed as cabinetry are very chic.

Large kitchens with an island and counter tops made of granite or marble are very desirable for move up buyers. However, this must be matched with stylish kitchen cabinets.

Luxurious bathrooms with a separate tub and multiple shower heads; pedestal sinks and large mirrors; an overall spa like feeling; attached dressing rooms and a place to sit are all desirable features. Master suite soaker tubs and whirlpools are still desirable for many home buyers, but not as important as other features.

Energy Efficiency 

With the green movement becoming more popular, energy efficient appliances, high-efficiency insulation, eco-friendly treatments, and environmentally smart building plans are among the "green" features touted in homes.

Tech-readiness 

Satellite and internet wired along with multiple phone jacks are what people want in today’s technology world. With today’s busy lifestyles relaying heavily on technology, even a day or two without high speed internet could be a major inconvenience.

Home Office 

Today, many people would much rather have home office space than a formal dining room. Many employers are seeing the business advantages of allowing employees to work from home. As well, many people are using work from home opportunities to help supplement income because of work shortage or as an opportunity to make money online.

Outdoor Living Space 

The popularity of outdoor spaces continues to grow. Patios, deck, exterior lights, fenced yard and fire pit extend the outdoor living space at home and make a great extra feature.

Other Notables

Some other notable features that home buyers consider very important when buying a home include central air conditioning, recessed lighting, hardwood flooring, energy efficiency and the potential to turn a profit should they decide to sell their home in the near future.

Today’s buyers are looking for a little luxury and features and treatments that are the highest quality their price range will permit.

Copyright 2014 Canada Realty News
Posted by, Steven Porter, Mortgage Advisor - steven@stevenporter.ca

Six Questions to Ask Before Refinancing

Breaking your existing home mortgage and refinancing to take advantage of low interest rates or special promotions from lenders may sound like a good idea in theory, but it may not always be possible or desirable.

For starters, lenders have tightened up the approval process, making it more difficult to get a loan.

Homeowners today need to be triathletes to qualify for a loan, with great income, great credit and great value in their home.

In addition, refinancing may not make sense financially, particularly for borrowers who plan to sell their homes in the foreseeable future.

Before taking the leap and opting to refinance, homeowners should ask themselves these six questions.

1. Do I Have Equity in My Home?

Homeowners need to have a minimum of  20% equity in their home to qualify for a new loan without having to pay creditor mortgage insurance. Adding the additional cost of mortgage insurance to a new loan could negate the benefit of a refinance.

Homeowners can still apply for a refinance even if they have low equity, because there are some lender programs they may be eligible. The best way to find out if you fit into a program is to go to ask you lender.

2. Do I Have Good Enough Credit?

Borrower credit scores play a big role in securing a good mortgage rate. In fact, you'll need a good credit score to qualify for any type of mortgage at all.

Mortgage rates operate on a sliding scale, with the lowest rates going to applicants with the highest credit scores.

Borrowers with scores below 620 may have trouble qualifying for a mortgage at any rate.

3. What Are My Financial Goals?

Many homeowners refinance to lower their monthly payments. A good mortgage calculator gives borrowers a sense of what their new payment would be after refinancing.

Others choose a shorter-term loan with higher monthly payments so they can reduce overall interest payments and own their homes faster.

Some people are restructuring their loan payments to pay their mortgages off quicker, which may work well for people with plenty of disposable income. But some folks may be too focused on paying off their mortgage and not integrating this decision with their overall financial plan.

Borrowers should also consider contributing to retirement savings and college savings, paying off high-interest debt, and saving 6 to 12 months of expenses before opting more expensive mortgage payments.


How Long Do I Plan to Stay in This Home?

Mortgage professionals generally tell borrowers to expect a home refinance to cost 1.5% to 3% of the loan amount. A simple calculation shows how long it will take to reach the break-even point when the savings outweigh the costs.

What Are the Terms of My Current Loan?

Borrowers with adjustable-rate mortgages or interest-only loans should consider the potential benefit of switching to a fixed-rate loan.

Breaking your mortgage early usually incurs a pepayment penalty and other expenses which could reduce the financial gain of a refinance.

Do I Have a Second Mortgage or Line of Credit?

Borrowers with a second mortgage or secured line of credit will face additional complexity when refinancing.

Borrowers can either pay off the second loan / line of credit or combine the two loans into a larger first mortgage. Otherwise, the lender holding that second loan /line of credit must agree to stay in second position behind the lender of the first mortgage, which the lender may or may not be willing to do.

Steven Porter, Mortgage Advisor with CIBC, steven.porter@cibc.com

Retiring with a Mortgage?

Throughout our working careers the goal most often is to own our home, mortgage free at least by the time we retire.

Here are a few considerations for you if you have reached your retirement, still have a mortgage and want a little extra money to enjoy your retirement years.

Downsize
By selling you your larger or higher priced home with a mortgage you may be able to purchase a smaller or lower priced home in another area and eliminate or reduce the size of your current mortgage.

Refinance
If monthly cash flow is a concern, refinancing your mortgage to a lesser rate and.or extending your mortgages amortization period could reduce you monthly payment obligations.

Alternative Cash Flow
Your home may lend itself to creating an income suite to generate monthly rental income. The money required to complete such a project my be accessed through the equity in your home.

Reverse Mortgage
Switching your current mortgage to a reverse mortgage with no monthly payments may also be a beneficial consideration.

Changes like the ones listed above should not be taken lightly. Be sure to discuss these options with you financial professionals and your mortgage lender.

Steven Porter, Mortgage Advisor with CIBC. steven.porter@cibc.com

Public Alert – Unlicensed Syndicated Mortgage Brokering Activity

​The Financial Services Commission of Ontario (FSCO) is warning consumers that it has received complaints about some websites promoting syndicated mortgage investments. The businesses operating these specific websites are not licensed or registered to conduct this activity in Ontario.

These websites may refer to the investments as "pooled mortgage investments" or "principal secured investments". These websites, along with their online ads, may guarantee high rates of return, secured by real estate, and claim to be RRSP and LIRA eligible.

Consumers should exercise caution if they are contacted by any entity matching this description. Consumers should also be aware that all mortgage brokerages, brokers and agents in Ontario are required to disclose the material risks of any mortgage investment to investors in writing and in plain language. Investors should ensure they receive this disclosure and should carefully review it, ideally alongside independent legal advice, before making an investment or lending decision.

If consumers arrange a mortgage from a mortgage brokerage, broker or agent that is not licensed in the province, they are not protected under the Mortgage Brokerages, Lenders and Administrators Act, 2006 [New Window], which holds Ontario’s mortgage brokerages, administrators, brokers and agents to specific standards.

FSCO's website contains a list of all mortgage brokerages, administrators, brokers and agents licensed to do business in Ontario as well as tips on shopping around for a mortgage.

A licensed Ontario mortgage brokerage, administrator, broker or agent can provide information and advice on the risks involved in borrowing, lending or investing for different mortgage products.

CONTACT
Media inquiries
Aisha Silim
Phone: 416-226-7795
Email: Aisha.Silim@fsco.gov.on.ca
Public inquiries
1-800-668-0128
contactcentre@fsco.gov.on.ca

https://www.fsco.gov.on.ca/en/about/warning-notices/Pages/warning-unlicensed-syndicated-06-16-2014.aspx

Get a great mortgage rate. And $5,000 in your pocket.

Get a great mortgage rate.

And $5,000 in your pocket.

Take advantage of the CIBC Cash Back Mortgage
and get up to 3% cash back^*

^{Contact Steven Porter
Mortgage CIBC Advisor}

^{For details}

^{1-888-885-8962}

Hurry, this offer ends October 31, 2014

*Excluded existing lender charges

Protect yourself against condo insurance deductible

 There is a lot of confusion out there by buyers and real estate salespeople as to what insurance is required when buying a condominium. The mistake is thinking that the insurance policy for the building will always cover your situation. In most cases, the buyer will still have to pay for part of the damages, even if they have done nothing wrong.

Here's why:

Condominium buildings do have an insurance policy that insures the building and the units. However, it will not cover any improvements to the unit made by the owners or the owners' contents, should damage occur, whether by water leakage, fire or smoke damage. In addition, if someone you invite into your unit gets hurt, they can sue the owner personally for liability. As a result, most condominium buyers purchase a policy that provides coverage for their contents, any upgrades that they do to their unit and liability insurance to protect them if someone gets hurt visiting their unit.

What is confusing to most buyers is that just about every condominium insurance policy has deductibles, which become the owner's responsibility should any damage occur, even if it is not the owner's fault. The deductibles are usually $5,000 but I have seen many policies that have $10,000 deductibles. What this means is that let's say you leave the bathtub overflowing and water damages the unit below you. You are responsible to pay the deductible, and the condominium will pay for any damage above the deductible. This will also be the case if you are responsible for the HVAC equipment in your unit and any malfunction causes damages to the building or to other units.

Let's say the pipes in the wall burst, your unit was damaged and you did nothing wrong. Although the pipes may be the responsibility of the condominium corporation, you will still have to pay the deductible before the condominium pays anything extra to repair the damages. The only way to fight this is if you could prove that the condominium corporation was negligent in conducting repairs and should have known that the damage could occur. In my experience, you will pay more in legal fees to fight this than the deductible, so it is just preferable to have the proper insurance instead.

In every condominium status certificate, there is a summary given of the insurance policy for the building, including any deductibles. One way to protect yourself is to send this certificate to your own insurance company and tell them that you wish to buy extra coverage for the deductibles noted on the policy.

A better idea, in my opinion, is to use the same insurance company that your building is using for your own insurance package. This company likely understands the deductibles better than anyone and will make sure that your package covers any gap that may exist in the building insurance policy.

If you are buying a condominium as an investment, you still need to make sure that you have this type of insurance protection. Most tenants purchase insurance for their belongings and to cover liability. If you want the tenant to also pay for insurance for the deductibles, you need to say so in your lease agreement and make sure that the tenant provides proof that they have obtained all required insurance coverage before you give them the keys to the unit.

When you understand the insurance you need before you move into a condominium unit, you will be prepared should anything occur later.

By Mark Weisleder, Toronto real estate lawyer. mark@markweisleder.com

Renewing your mortgage? Here’s why you should pick up the phone

I am one of those debt loving people who believe I can do more with my money by carrying a big debt at 3%, than by paying off my house and using up all that cheap capital – but that financial idea is a story for another column.

So, even though my mortgage comes due in October, I decided to lock in a rate four months earlier at a different institution at 2.79% for 5 years fixed. I was thrilled to have another five years of cheap money.

Even though I had already locked in elsewhere, I was interested in what my current mortgage lender would provide. I waited and I waited. Just four weeks before it was due for renewal they sent me a mortgage renewal notice. They could have sent it to me two or three months before my mortgage came due, but they may prefer to leave consumers less time to shop around and more inclined to just renew.

Here is where it gets interesting. “Please indicate which option you are accepting by signing your initials in the appropriate area indicated and return your signed agreement,” the letter stated.

I could just initial the 5-year fixed rate — for the princely rate of 4.79%.

Further on in the letter under a section called “Get the best rate,” it offered to extend to you our special interest rate hold guarantee provided if I signed by my renewal date. But all this says is that if the rate went down between now and about three weeks from now, I would get the lower rate.

This is a full 2% higher than what I am actually going to get somewhere else. If I had a $500,000 mortgage, this would cost me $47,600 more over 5 years by ‘just signing here’ vs. going to a mortgage broker three months in advance.

Just to be sure that I wasn’t missing something I called to make sure that I had the correct instructions and rate on my renewal. An interesting thing happened when I called. In about 30 seconds they said “I can actually get you a rate of 2.99% for 5 years.” I asked why my rate was 4.79%, and they said that this is the standard rate, but I can get this better special rate.

Doing the math, that phone call, using the same $500,000 example, would have saved me $42,800 over 5 years. That was a pretty valuable phone call.

I asked the kind sir on the phone how often people just sign the renewal form, and he said ‘quite a few.’

If a bank gets 5,000 people in the same $500,000 example to sign the renewal, that adds $42.8-million in profit to their bottom line each year.

Please do not automatically sign the friendly mortgage renewal form. At a minimum call to negotiate or call a mortgage lender to get the best deal for you. If you feel some sort of loyalty to your current mortgage provider, then be sure to see someone in person and ask for the very best rate that they give their very best customer. Your future net worth will be glad that you did.

By Ted Rechtshaffen, president and wealth advisor at TriDelta Financial

How Cash Back Mortgages Work

 When buying a home, some homeowners might want to buy all new furniture, complete a home renovation or two, or simply have a safety net of cash for the first few months of homeownership. For many, though, the thought of having extra cash when purchasing a home is nothing more than a dream. Fortunately for those people, some lenders offer something called a “cash back mortgage” which can help make that dream a reality.

With a cash back mortgage, you receive a lump sum cash rebate when your mortgage closes, commonly around the 5% mark – though it can be anywhere from 1.00% to 7.00%, depending on which lender you choose. The rebate is tax-free and can be used for almost any purpose, such as to pay for closing costs, complete renovations, buy furniture or pay down other high-interest debts. Some lenders even let you use the cash back as part, or all of, your down payment.

To see how a cash back mortgage works, here’s a simple example. You purchase a home for $350,000 and put down 20% ($70,000) to avoid CMHC insurance, which means you need to borrow $280,000 via a mortgage loan from the bank. If the lender you chose offers a 1.00% cash back mortgage product, you could get a $2,800 ($280,000 x 1.00%) cash back rebate when your mortgage closes and use that money for whatever you want.

The one downside of cash back mortgage products it that they always come with a fixed mortgage rate, and the interest rate is slightly higher than what’s available for standard (non-cash back) mortgage products; this means you’ll pay more interest, over the life of your mortgage, to compensate the lender for letting you borrow extra money from them.

If we continue with the same example above, because you chose the cash back mortgage product with a rate of 3.79% vs. your lender’s standard 5-year fixed mortgage product at 3.25%, you would pay your lender an additional $4,378 over 5 years – and that’s after you deduct the $2,800 cash back rebate you received from them.

Additionally, if you need to refinance your mortgage or break your mortgage term early, you may be on the hook for a portion of your cash back rebate (a pro-rated amount based on how many months you have left in your term). Some lenders even require you to pay back the amount in full.

If we continue with the example above, let’s say you had to break your mortgage 3 years into your 5-year term. Your lender originally gave you a 1.00% cash back rebate amounting to $2,800, which they now want a pro-rated amount of returned, in addition to any prepayment penalty.

With 2 years (24 months) left in your 5-year (60 month) term, you would need to pay back 40% (24 / 60) of the cash back amount you received; that’s $1,120.

While a cash back mortgage might not be an ideal choice for everyone, it can be a great option for a buyer who needs a little extra money while making such a large financial transaction. If you don’t mind the higher interest rate that comes with it, a cash back mortgage can help you pay for any number of things or simply boost your cash flow during the first few months of homeownership.

Alyssa Richard

Founder; RateHub

Lessons from a condo bankruptcy

 The bankruptcy of a proposed condo development and the arrest of a prominent real estate lawyer last month left many buyers potentially out of deposits totaling millions of dollars. It shouldn't have happened.

Here's why:

When you buy a new home or residential condominium from a developer in Ontario, part of your deposit is protected by the Tarion New Home Warranty Program.

This covers up to $20,000 for a new residential condominium deposit and $40,000 in deposits for a new house. However, deposits over and above these amounts are not protected. Similarly, no deposits for a proposed commercial or hotel condominium development are protected by Tarion. In most cases, all deposits are paid to the developer's lawyer, to be held in trust.

Under the regulations governing the Condominium Act, a lawyer is not supposed to release the moneys from trust unless and until they have been given proof by way of a security bond from the developer that the money is protected. In virtually all cases, the money is released when the developer is ready to begin construction on the project and would like to access the deposits for this purpose. As long as the security bond is provided, the law firm will release the funds from trust.

In the Centrum condominium bankruptcy in North York, the Bratty's law firm was holding millions of dollars in trust for the proposed residential condominium that was never built. The money was never released to the developer Yo Sup (Joseph) Lee and the buyers who purchased these residential units will get their deposits back, in full, even though the development is bankrupt and it appears that Lee has disappeared.

However, Lee retained another lawyer, Meerei Cho, to handle the commercial/hotel condominium project and although over 14 million dollars in total was placed into her trust account from buyers, it has since disappeared, even though construction never started and it does not appear that any security bond was posted. In another twist, 1.9 million of the 14 million dollars in deposits was originally placed into Bratty's trust account but developer Lee then instructed Bratty's to pay this money to Cho, which they did, and this money is part of what is now missing.

If Cho made an error in releasing the money, then part of this loss may be covered under her errors and omissions insurance policy, but this may only provide 1 million dollars in coverage for the victims. The law society has a discretionary fraud victim fund of $150,000 but this will also not be nearly enough to compensate all of the victims.

I imagine that some buyers may sue the Bratty's law firm for giving the money to Cho but in my opinion, as long as Bratty's obtained proof from Cho that the money was going to be held by her in trust according to the rules, they should succeed in any claim against them.

The good news is that over the past 20 years, in thousands of new condominium buildings, this has not occurred before, showing that in virtually all cases, lawyers follow the rules and buyers are protected.

The main lesson when buying a new condominium is still the same; check out the reputation of the builder. Reputable builders follow the rules, finish buildings on time and deliver what they promise. Still, whenever you are paying more than the Tarion protected deposits, you should now insist that the developer provide proof that they have sufficient security to protect any deposit over $20,000 if it is a new residential condominium and over $40,000 for a new residential home. It would also be a good idea for the government to just change the rules and make it a law that all lawyers holding trust moneys be bonded themselves, so it can't happen again.

Mark Weisleder is a Toronto real estate lawyer. Contact him at mark@markweisleder.com

Will you need to pay any additional costs?

 While your down payment and mortgage will cover the purchase price of your home, it's wise to consider the other expenses involved in buying a home.

You'll pay some costs at the beginning of the home-buying process and others, known as closing costs or disbursements, when your home purchase is finalized.

Additional costs that could add up when you buy your first home:
Property valuation fee Approximate Cost: $150 - $200
This is the fee for determining the property lending value for mortgage purposes. This value may or may not be the same as the purchase price of the home.

Home inspection fees (may not apply if you are purchasing a new home) Approximate Cost: $500
The home inspector evaluates the structures and systems that make up your home and provides you with a written report. While not mandatory, many people make a professional home inspection a condition of their Offer to Purchase.

Property survey Approximate Cost: $750 - $1,000
A survey indicates the boundaries and measurements of the land and positions of major structures, and any registered or visible easements (such as a driveway) or encroachments (such as a neighbour's fence) on the property.

Land transfer tax (if applicable) Varies based on Province
This is charged whenever a property changes hands and is based on the purchase price. Most provinces in Canada charge a provincial land transfer tax and some cities also charge an additional municipal land transfer tax. In some cases, first time homebuyers may be exempt from a portion of this cost. You can obtain further details about land transfer tax on provincial or municipal websites to help you estimate the cost.

As an example, if you are thinking about purchasing a home in Toronto, Ontario for $300,000, the provincial land transfer tax is $2,975 and the municipal land transfer tax is $2,725 for a total cost of $5,700.

Legal fees and related expenses Approximate Cost: $1,300 - $2,500
These fees vary by province and are subject to GST or HST where applicable. Ensure your lawyer's quote includes all related expenses and disbursements, not just legal fees. Make sure your interests are protected by discussing your Offer to Purchase with your lawyer or notary prior to signing.

GST/HST where applicable (sometimes included in sale price)Varies based on Province
Some properties are GST and/or PST sales tax exempt and some are not. Generally, GST or HST where applicable is charged on new homes, but not on resale properties. Always ask before signing an Offer.

Title insurance Approximate Cost: $250
Title insurance is optional and covers problems that may arise due to encroachment issues (for example, a structure on your property is actually part of your neighbour's property and needs to be removed), existing liens against the property's title, title fraud, undischarged mortgages and other issues relating to the property's previous owners.

Insurance costs for high-ratio mortgages Variable
Usually, mortgage default insurance premiums range between 0.5% and 2.75% of the principal plus applicable fees (may be subject to provincial sales tax which cannot be added to mortgage amount)

If your down payment is less than 20% of the purchase price of your home, you must pay a one-time insurance premium on your mortgage amount. You can make arrangements to pay the premium to CIBC before closing, or it can be added to the principal amount of your mortgage. If it is added to the principal amount of your mortgage, you will pay interest on it at the same interest rate you pay on the principal amount of your mortgage.

Interest adjustments Approximate Cost: $100 - $1,000
You will need to pay interest on any gap between the closing date of the purchase and the first payment date of the mortgage. You can avoid an interest adjustment by arranging to make your first mortgage payment exactly one payment period after your closing date.

Prepaid property tax and utility adjustments Approximate Cost: $400 - $500
You will be required to reimburse the vendor for any prepaid property taxes or utility bills.

Home insurance $450/year
Protection for your home and contents.

Mortgage life insurance Variable
Costs vary but can be conveniently included in your regular mortgage payment.

Mortgage life insurance is optional and provides peace of mind. It protects your family’s financial security by paying off all or a portion of your mortgage (up to a maximum of $500,000) in the event of the premature death of you or your spouse.

Don’t forget to consider general expenses such as moving, upgrades, and home decorating costs as well.

Steven Porter, Mortgage Advisor, CIBC. 905-875-2582; steven@stevenporter.ca

More mortgage and real estate information available at http://www.FreeMortgageInfo.ca

6 Things to Consider Before Applying for Debt Consolidation

For a great many people who happen to be in financial difficulty, debt consolidation might seem to make perfect sense.

If you happen to be one of these people, you will probably be familiar with the claims that debt consolidation is a fast and easy way to get out of debt.

However, it could be the case that you end up in deeper trouble than ever, possibly even losing your home in the process. It is not without good reason that debt consolidation has developed a pretty bad reputation in recent years.

Alleviating Your Financial Problems

In this article we will be exploring how debt consolidation could work for you. Naturally, we will also be exploring some of the pitfalls. Listed below are 8 points that, if carefully heeded, might just be of help in finding a good debt consolidation loan and thereby alleviating your financial problems:

1. Credit Report

If your credit rating has actually improved since taking out the loans, you might well be able to consolidate your loans at a much lower rate. It is for this very reason that you should start by getting your credit report. Study your credit report carefully and keep an eye out for any inaccuracies that might damage your score and prevent you from getting a decent rate.

2. Get Credit Counselling

A reputable credit counselling agency would be able to provide helpful advice, often free or at minimal cost. A good agency would assist you with preparing a budget as a means of getting your finances under control. However, it is extremely important that you exercise caution in this endeavour, as some less than scrupulous credit counselling agencies might attempt to take advantage of your situation.

3. Pay Off Your Debt Quickly

When consolidating your debts, try to pay off the loan as quickly as possible. Reduced monthly payments could merely be the result of your debt being spread over a lengthy period of time, meaning that it could end up costing you far more in the long run. If at all possible, try to get your monthly repayments as high as you are reasonably able to afford in order to clear the debt quickly.

4. Getting the Right Loan

When applying for a debt consolidation loan, be sure that it is the right one for you. You could opt for a home equity loan as a way of keeping the interest rate down, although you should seek advice from your mortgage broker before going down this particular path. Any default on repayment could potentially lead to the loss of your home. A less risky option would be to take out an unsecured loan, although you would be required to pay a significantly higher interest rate.

5. Get Quotes

Before committing yourself to a particular credit consolidation loan do a bit of shopping around first in order to compare interest rates. What you will probably discover is that your own bank or credit union would be prepared to offer the best deals.

6. Read the Loan Contract

This might sound obvious but it is vital that you fully understand every single line of your loan contract before signing on the dotted line. The slightest missed detail could possibly end up costing you a fortune or even your home.

Summary

If you happen to be in serious difficulty, consolidating your credit card debts and high interest loans might seem to make sense. Unfortunately, a great many people end up worse off. By exercising caution and taking stock of your situation, it might be possible to make debt consolidation work for you.

Author: Economic Voice Staff

Bidding war homebuyer beware: Appraisers not so eager Appraisals come in lower than buyers' offers

 Competitive homebuyers in hot housing markets are often facing a critical disagreement as they try to buy a house – the property appraiser doesn't share their opinion about how much the house is worth.

And that can leave homebuyers without the financing they need to close the deal.

The tension, between eager buyers and sellers and often conservative appraisers and bankers, is arising more in the hot housing market and the winners may be blinded by their victory.

There’s a good chance that buyers are so excited about getting the house they want that they’re willing to pay more than market value.

An appraisal is typically the value the mortgage lender will allow buyer to borrow against on the house. So when the appraisal comes in under what the buyers have agreed to pay, they may have to scrounge up the deference between their own funds and what the lender is willing to lend.

It's important buyers make sure they've completed their full application for a mortgage before making an offer, not just submit the initial pre-approval paperwork.
And something that the public should know about when they’re considering purchasing a home.

In competitive situations, many times buyers will increase their competitiveness by making their offer “firm.” But if they’ve gone into the offer without making it conditional on their loan coming through, they could be in trouble – facing a “lawsuit or loss of their deposit or both.

Steven Porter, CIBC Mortgage Advisor, steven@stevenporter.ca

2 Reasons to Switch Mortgage Providers at Renewal Time

 If you’ve ever renewed a mortgage before, chances are you’ve at least entertained the idea of switching mortgage providers. Switching providers is often the best choice, for two reasons: new lenders can usually offer you the best mortgage rates, as well as better prepayment options. The differences in these numbers from one lender to the next may seem insignificant, at first, but waiting until you find the best options can save you thousands of dollars in interest charges over the course of a mortgage term. Here’s why you should make the move:

1. Switch for a Better Mortgage Rate

Let’s say you purchased a home for $400,000, made an $80,000 down payment (20%) and took out a $320,000 mortgage amortized over 25 years. After 5 years, you need to renew, but your existing mortgage provider says the best they can offer you is another 5-year fixed rate of 3.89%. At that rate, your monthly mortgage payment would be $1,664 and you’d pay $48,975 in interest over 5 years.

If, instead, you had shopped around for a better rate/product for you, you could’ve found a 5-year fixed rate of 3.19% with a new mortgage provider. At that rate, your monthly mortgage payment would be just $1,343 and you’d pay $41,060 in interest over 5 years. By switching to a new provider, you could’ve saved $7,915 in interest during your 5-year mortgage term.

2. Switch for Better Prepayment Options

The second reason to consider switching mortgage providers at renewal time is if another lender can offer you better terms and conditions, with prepayment options being among the most important of them. Most lenders will let you increase your monthly mortgage payment amount once each year, but the amount you can increase it by often varies from lender-to-lender. The bigger the allowable increase, the more you can potentially save.

Example: 10% vs. 20% Prepayment Options

Let’s say you bought a $300,000 home, put $85,000 down and took out a $215,000 mortgage amortized over 25 years. If your current mortgage provider offered you a 5-year fixed rate of 3.79%, your monthly mortgage payment would be $1,107 and, over 5 years, you’d pay $37,880 in interest.

If, however, you decided to take advantage of your current provider’s prepayment options, you could increase your monthly payment amount by 10%:

$1,107.00 x 10% = $110.70

$1,107.00 + $110.70 = $1,217.70

If you did that just once* at the beginning of your new 5-year term, you’d pay just $37,229.22 in interest; that’s $650.78 less than if you had stuck with the original payment amount.

Now, if we assume you found a new mortgage provider who offered the same mortgage rate (3.79%) but a 20% prepayment option, your monthly mortgage payments could go up to:

$1,107.00 x 20% = $221.40 

$1,107.00 + $221.40 = $1,328.40 

If you increased it just once* at the beginning of your new 5-year term, you’d only pay $36,576.01 in interest; that’s $653.21 less than if you had stayed with your current provider and taken advantage of their 10% prepayment option, and $1,303.99 less than if you had done nothing.

*Remember that you could potentially increase your payment amount once each year and save even more, but we kept it simple for this example.

How to Make the Switch

If you find a new mortgage provider with an offer you’d like to accept and switch over to, you’ll need to submit a formal application, not unlike the one you originally submitted for your previous mortgage term. Keep in mind that the qualifying criteria may differ from lender-to-lender, so a new provider will likely require certain types of documentation with your application, such as proof of homeownership, employment and home insurance.

When your application is approved, the new provider will ask your existing provider for something called a Payout Statement. The statement outlines information regarding your current mortgage, including the outstanding balance as of the renewal date—this is the amount the new provider will use for your mortgage application.

Just before the switch is made, you’ll have to meet with the new provider again, to pay any outstanding fees for this new mortgage. These fees can include, but aren’t limited to, an appraisal fee, legal fees for signing the new agreement, a mortgage transfer fee and a discharge fee.

The entire process can seem a little daunting, but this is a great example of why it’s smart to work with mortgage brokers. Not only can a mortgage broker shop around for the best mortgage rate/product for you, they’re experienced in the process of switching providers and are happy to guide you through the process.

So, while the renewal slip your existing provider pops in the mail may seem tempting, it’s worth making an appointment with a broker and seeing what kind of offer they can find you. Just remember to give yourself lots of time: if you wait too long and your current mortgage term passes its maturity date, your existing provider will automatically renew you for another term.

Lenders forcing investors to move into commercial

 More landlords are selling up their single-family homes to get over the increasing obstacles imposed by lenders, according to investors.

Frustrated by the increasing demands for additional paperwork and lengthy waiting periods, more investors are selling their assets to make the move into commercial.

“Investors realised more the advantages of commercial investing over residential after the market tumbled and with more lending restrictions in place, we are seeing a lot more make that move,” says Chris Davies, a real estate investor and Realtor in Edmonton.
Requiring a larger down payment, Davies says more investors are willing to sell up their assets quickly and make the move, both into multi-family buildings as well as retail and office space.

Speaking to CREW for a special feature on commercial investing in the new September issue, Simmone Park, an Ottawa-based investor, says landlords can be more financially “creative” to make the move.

“You can get creative and use a small business loan in your corporation’s name rather than use a conventional mortgage,” she says.

The positive performance of commercial real estate across the country is also whetting investor appetite to make the move from residential. According to the latest REALpac/IPD Canada Quarterly Property Index, Calgary recorded the best return of 11.1 per cent for the year ending June 30 compared to the Canadian average of 9.5 per cent.

Edmonton enjoyed returns of 10.8 per cent during the same period, while Toronto hit the spot at 10.1 per cent.

Written by  Grainne Burns

Blogged by Steven Porter, Mortgage Advisor, 

More landlords refuse to rent to social assistance recipients

 An increasing number of landlords are reportedly not accepting people on social assistance until they receive the proper support system from provincial government.

Provincial governments will pay a heavy price for not having a fair system in place to support private landlords that house those on social assistance.

That is the view of many landlords who are now refusing to accept those on social assistance. “In Cambridge, we have 3,100 families waiting for non-profit housing and yet there are only a few hundred units being built,” says Kayla Andrade from Ontario Landlords Watch. “Investors are shying away until there are better systems in place.”

She says that landlords want a “three strikes and out system” in place. “They should have to pay their rent with social assistance money or their payment gets cut off,” she says. ‘Every landlord I know wants the three strikes and you are out system.”

While recognizing the frustrations of landlords dealing with non-paying tenants, the Federation of Rental-Housing Providers of Ontario (FRPO)  advises landlord not to refuse a rental to someone just because they are on social assistance support.

"To do so would be a serious violation of section 2.(1) in Ontario’s Human Rights Code (likely also in other provinces) and would certainly result in heavy fines and penalties against the landlord (up to $25,000). Landlords should conduct credit checks, income checks and reference checks, but should never consider social assistance support as a ground for refusal. Landlords can also better protect themselves by requiring guarantors and conducting criminal background checks on rental applicants."

Many landlords have cited the growing number of “professional” tenants taking advantage of loopholes in the system and more sophisticated methods to deceive the landlord.

“We are seeing more tenants bring their own credit checks, which are often fake, to landlords that do not cop on that they are false,” she says. “Work papers are also being forged. There are many places now to get these false papers and so it’s easier for them.”
Written by  Grainne Burns

Steven Porter, Broker - REMAX Aboutowne Realty Corp., Brokerage

Property sales in Canada reach highest level since March 2010

 Residential property sales in Canada increased by 0.8% in June compared to the previous month, the five monthly rise in a row, taking transactions to their highest level since March 2010.

The data from the Canadian Real Estate Association (CREA) also shows that national average price for homes sold in June was $413,215, up 6.9% from the same month last year.

The national sales to new listings ratio was 53.6% in June, up slightly from 53.2% in May but still well entrenched within the range between 40 and 60% that marks balanced market territory. Just over half of all local markets posted a sales to new listings ratio in this range in June, with a fairly even split among the remainder between those in buyer’s market and seller’s market territory.

Steven Porter

High-end of market continues to show strength: Sotheby’s

Luxury home owners worried about offloading their million-dollar properties can take heart from the figures in the new Sotheby’s report.

The controversial removal of Canada’s immigrant investor class program may have frightened a lot of homeowners, but a new report is showing that appetite and interest in the high-end of the market has remained relatively strong.
The Realtor says that sales of homes worth more than $1 million boomed in the first half of 2014 across all of the country’s major markets – Vancouver (up 34%), Toronto (up 34%), Calgary (up 17%) and Montreal (up 11%).
“Several factors are driving Canada's high-end real estate market in 2014: net migration into major urban markets, immigration of high net-worth individuals into cities like Toronto and Vancouver, significant transfer of wealth between generations and historically low interest rates,” said Ross McCredie, CEO of Sotheby's International Realty Canada.
“Heading into the second half of the year we expect Canada's high-end housing market to remain strong, especially in the single-family home category where inventory remains tight. We're also expecting to see renewed confidence in Montreal's real estate market given the recent change in the political climate,” he added.
Homeowners in Vancouver were particularly concerned about the impact of the cancellation of the program. However, according to the Sotheby’s report, the greatest sales gains were in the single-family home sector, posting a 38 per cent increase with a 37 per cent increase in condo sales.
written by:  Grainne Burns - Canadian Real Estate Wealth

Steven Porter, Broker, Buyer Rep. - REMAX Aboutowne Realty Corp.

How to win a bidding war on a home

In many hot housing markets, bidding wars have been breaking out on a regular basis -- and some house hunters are getting beaten out time and again.

But it's not always about who has the most money. Sellers will accept lower offers if it means less hassle.

What sellers really don't want to do is waste time. That means getting pre-approved for a mortgage and having all your paperwork -- your pre-approval, proof of income, work history and bank statements -- in hand. It also helps to have your lender at the ready so you can act fast.

Related: Fast online mortgage preapproval

But first you have to beat out all of those other bidders.

Here's how you can win over a seller and get the house you want:

Pay with cash. The best way to get a seller's attention is with cold hard cash. That is, if you can afford it. In fact, all-cash sales have become extremely common, representing more than 40% of recent sales. Ever since the US housing meltdown, getting a mortgage has become a longer and more arduous process.

With all-cash offers, sellers are sure the buyer is qualified. And they won't have to wait through the loan approval process.

Depending on the market and the seller's situation, they may even accept a lower offer just because it's in all cash.

Get your mortgage ready in advance. Don't have a ton of cash to put on the table? Try pre-underwriting a mortgage instead.

With pre-underwriting, lenders take the pre-approval process a step further by reviewing all of the income and asset documentation that they would typically need to approve a mortgage.

Related: A foolproof plan to secure the best financing rates

Sellers look favorably on pre-underwritten offers because they don't have to worry that the buyer's mortgage application will be rejected. All that needs to be done after the contract is signed is to complete an appraisal.

Be flexible (but not foolish) with contingencies. Contingencies are clauses that allow buyers to back out of deals if specified conditions are not met. A bidder will sign a contract to buy a home contingent on the appraisal coming in at or over the selling price, for example.

Another common contingency clause is the right to back out if you can't find a buyer for your home. In hot markets, buyers often waive this right because they figure it should be easy to sell their old home quickly. In less heated markets, you could get stuck paying two mortgages.

Related: Housing Market Newbies BEWARE

One contingency you should think twice about before waiving is the home inspection. Should the inspector discover a major problem, such as widespread insect damage or a badly cracked foundation, it could cost far too much to fix. You want to know that before making a commitment you can't back out of.

Related: 11 Home Inspection Pitfalls

Be first. See the home as soon as it comes on the market. That way, you can get your bid in early and preempt later offers.

Real estate agent Steven Porter, has a new service that can help. Its a VIP House Hunter service that enables buyers to receive notification of new listings the moment signal that they're put up for sale allowing buyers to beat out the competition. Homebuyers can find these potential properties by neighbourhood, price, type or city.

Agree to outbid everyone. Do you really want the place? You can outmatch every other bidder by creating a contract with a so-called "escalation clause?"

The clause basically states that you will pay $1,000 or $10,000 more than whatever the highest bidder offers.

So if the seller gets an offer for $200,000, your bid will automatically jump to $201,000 if you have an escalation clause.

Related: How to negotiate a better price

The danger with escalation clauses is twofold. You never really know if the other offer is real. Sellers can ask someone to submit an offer just to get the buyer to raise their bid.

The second problem is that the final home price may be a lot higher than the appraised value of the home. That could jeopardize the mortgage or force you to come up with a lot of cash to make up for the shortfall.

One way to prevent that from happening is to place a cap on the bid, offering to pay no more than 10% or 20% above the original asking price.

Using a cap means, however, that you may not end up with the home in the end. 

Find homes for sale.

Based on a editorial by Les Christie, CNN Money

Steven Porter, Broker, Buyer Rep. - REMAX Aboutowne Realty Corp. Brokerage

Now is the time for home closing protection insurance

Due to the growing possibility of buyers being declined their financing at the last minute, sellers need some protection in the event their closing is delayed or cancelled and they are forced to carry 2 homes for an extended period of time.

One company that I have dealt with that provides this coverage is Canadian Home Shield. Their President, James Vlachos, who is an insurance broker, advises me that for as little as $99, sellers can purchase a $25,000 insurance policy that will cover all mortgage payments, real estate taxes, utilities and insurance premiums up to a total of $25,000 in the event that the deal does not close through no fault of the seller. I personally have had 2 seller clients recover over $9,000 in costs after a buyer failed to close their purchase agreement.

Buyers can also purchase breakdown insurance protection for their home systems and appliances. Since most real estate contracts provide that sellers only warrant their systems and appliances to the date of closing, this provides buyers with the opportunity to purchase additional insurance protection for a year after closing.

For further information, please see the attached website: http://www.canadianhomeshield.com/ 

by Mark Weisleder, Real Estate Lawyer, http://www.markweisleder.com

Financial advice: Say goodbye to family cottage before it's too late

 TORONTO -- After the unforgettable family gatherings, sunbathing on the dock and picture-perfect moments with the kids, it's hard to say goodbye to the cottage you've grown to love.
But financial advisers say that learning when to let go is a fundamental part of ensuring that your lakefront property doesn't become a bad investment.
"There's the romance of it, and there's the reality," said Jason Pereira, a senior financial consultant at Investment Planning Counsel in Toronto.
"The cottage is a place where you escape, but there's also its own series of responsibilities."
For cottage dwellers, that day is inevitable. Eventually you will face the dilemma of either selling the property or passing it down to your children, if you have them.
Neither option is easy and, in many cases, comes down to choosing the best time for the transition which, for tax purposes, will likely be after retirement when your annual income drops.
Financial advisers say one of the biggest mistakes cottage owners make is assuming that somebody else in the family actually loves the place as much as they do.
"A lot of people are quite preoccupied with keeping the property in the family, for some reason," said Christine Van Cauwenberghe, assistant vice president of tax and estate planning at Investors Group.
"People need to look at selling the cottage as a very viable solution."
Several advisers said they've seen instances where transitioning the ownership of the property created powerful rifts within the family. They suggest that cottage owners take a step back and ask themselves whether a few days at the beach should come at the expense of potentially destroying family relationships or shifting a financial burden onto their children's shoulders.
"Often you'll have two kids, and one will be financially successful and one will be not as financially successful," said Greg Rasmussen, an investment adviser at Manulife Financial in Muskoka, Ont., a popular cottage region.
"As soon as you transfer it into their name you're going to have that tax bill."
If one child can't afford the cottage, but the family insists on keeping it, then make special arrangements that are in writing. A promissory note can clearly outline the long-term financial expectations.
"Make sure that child is paying fair market value," Cauwenberghe said.
"Maybe it's not in cash, but in receiving that much less of the estate."
Even in a smooth transition of ownership, there's still years of potential fights ahead as siblings get saddled with the expenses of regular upkeep, taxes, and figuring out a way to share the property without bickering over whose family gets the place each weekend.
That's why advisers suggest that, unlike jewelry or silverware, a cottage shouldn't be treated like a family heirloom because it's not the kind of asset you can store in a drawer and forget about.
"A lot of people can't afford -- even on a divided basis -- to run them," said Tony Layton, chief executive of financial services company PWL Capital.
He said he's seen instances where children will gain possession of a cottage, but don't have time to maintain the property and let it fall into "semi-ruin."
Eventually those children can be forced to sell the cottage and -- depending on how much the value has appreciated over the years -- can be hit with a massive tax bill they can't afford.
In other instances, one child might want to sell the property while other others do not, which can lead to further problems if those situations aren't laid out in writing.
"If anything, you should have agreements in place that say: 'You can buy me out or I can force the sale,"' said Pereira.
"There almost has to be a prenup in place for the cottage to avoid those hazards down the road."
Cash proceeds are easier to divide amongst a group because its a relatively clear-cut process that involves more numbers and less emotion.

by David Friend, The Canadian Press