Do You Need a Cohabitation Agreement?

People in a common-law relationship don't have the same built-in protections as married couples when it comes to asset-division if the relationship ends.
 
For example, it is not true that the property they live in will be split equally if the relationship ends--the rule of 50/50 asset division applies only to married couples. If you are in a common law relationship with all of the assets, including the home, in the other spouse's name, the only way you might succeed in claiming an interest in these assets is through a very expensive court case.
 
So, if you are planning to move in with a partner-or are already living together-be sure to have a cohabitation agreement in place laying out the terms for division of your assets and spousal support in case your common-law relationship comes to an end.
By G. Gord Mohan | Barrister & Solicitor

- Posted by Steven Porter, Mortgage Agent - Mortgage Architects
Steven can be reached through his website at www.1800Mortgages.ca

Purchase Plus Improvements Program

I'd like to share a program that has become very popular with many first time home buyers who want the features that come with a new home at the price and benefits of a resale home. The program is called Purchase Plus Improvements.  Here's just a couple of great examples for use of this program:

1) By including $30,000 for upgrades in your mortgage on a $400,000 home purchase gain a kitchen and bathroom that could have only been purchased if you spent $500,000 on a home.

2) By including $40,000 in your mortgage by adding a rental suite, turn a home into an additional source of income.

Overall, if you are looking for a product that offers a greater financing choice for you and your family by building a new home or undertaking a small or large scale improvement to an existing home and increasing the value of the property, this is the product for you!

Some of the features of the Purchase Plus Improvements Program include:

• Availability for new home construction, purchases or refinance with improvements.
• Loan-to-Value (LTV) ratios for purchase transactions: up to 95% for 1–2 unit and 90% for 3-4 unit owner-occupied properties based on as-improved value.
• LTV ratio for refinance transactions: up to 80% for 1-4 unit owner- occupied properties.
• Mortgage loan insurance premium refunds for homeowners who make energy–savings renovations to an existing home.
• For more detailed information get in touch with Steven Porter, Mortgage Agent with Mortgage Architects to explain the technical aspects of this program and fit it to your needs.

Take the first step to creating your own dream home and talk with your mortgage broker. 

Visit http://www.stevenporter.ca/solutions/ShoppingAids and download my easy Mortgage Checklist to begin your home search. Or email me, I'm always available to answer your questions. 

Steven Porter, CRMS ABR SRES CNE is a licensed Mortgage Agent with the Mortgage Architects. Steven is also a licensed, non-selling real estate broker, Accredited Buyer Representative and Seniors Real Estate Specialist with 30 years residential, commercial and investment  real estate experience. Steven works with together with Realtors across the west GTA in a noncompeting capacity, assisting customers and clients achieve financial independence through home ownership. Steven can be reached at 1-905-875-2582 or EMail at steven.porter@mtgarc.ca

How to Calculate Your Credit Score for Free

In the last few years, your credit rating has become increasingly important. While it seems obvious that your credit report and credit score are used in making decisions about loans, there are other less obvious uses for your credit history. Others might use your credit information to make decisions about other financial services and products. Poor credit could lead to you paying hundreds, or even thousands, of dollars more over your lifetime.

Understanding your credit, and knowing your credit score, can help you learn more about what’s at stake, and help you improve your financial situation. However, it’s not always straightforward to get an idea of where you stand with your credit.

When it comes to checking your credit reports, it might be worth paying for your credit report to get your credit score. This is because, while you are entitled to a free credit report, you aren’t entitled to a free credit score. While your free credit report can give you an idea of what you look like financially, on paper, it’s not the same as seeing the credit score that lenders will use to determine whether or not they will approve your loan. Your credit score is a quick look for others; they make snap judgments about your level of financial responsibility using your credit score. It might not be fair, but it is the reality of our financial system right now.

However, it you aren’t planning to apply for credit anytime in the immediate future, you might not need your exact credit score to keep tabs on your general financial progress. If you’re not too worried about an exact number and would like to have a general idea of your credit score, there is a way to calculate this for free.

How to Calculate Your Free Credit Score

It’s actually fairly easy to see where you stand when it comes to your credit score. All you need to do is visit this credit score estimator and fill in the fields. Once you have done that, the calculator will tell you what range your score falls into. This can provide you with a starting point for improving your finances. If you are considered to have “Fair” credit, you can make it a goal to move up into the “Good” category. If you are in the “Good” category, knowing your estimated score can provide you with a starting point to take you into the “Excellent” category.

The score estimator works by asking you for information that indicates where you fall in terms of the factors that the official credit scoring algorithm works. Factors such as payment history, amount of debt you have, the types of accounts you have, how many credit inquiries are on your report, and the length of your credit history are weighted differently and used to come up with your credit score.

The calculator can’t be perfect, since the exact scoring algorithm is proprietary. But using the information that has been made public about the way some of the factors are weighted, it’s possible to come pretty close. In fact, I found this calculator to be quite accurate when I compared the results with my own credit information.

I have three different reports that I’ve paid for to get my credit score over the last five years. Two were from Equifax and one was from TransUnion. I answered the questions using the information in these reports and not only did the calculator get the range right, all three times the score on the reports came within 10 points of the middle of the calculated range for that report. That’s not bad at all!

While you may have all the needed information handy and could check your score at any time, I recommend ordering your free credit reports and using that information with the calculator. You can order your free credit report, use the exact information provided by the report to ensure maximum accuracy, and then write the score the estimator gives you on the report for your records.

If you plan to apply for credit, it’s best to pay for your “official” credit score. However, if you are just keeping tabs on your financial progress, Bankrate’s free credit score estimator is a great resource that you can use for your own information.

Written by: Tom Drake, Canadian Finance Blog

Posted by: Steven Porter, Mortgage Agent - Mortgage Architects

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

Home inspection . . . A team approach

It may be difficult for a home inspector to detect issues behind any walls or under floors and only certain specialists may be qualified detect certain flaws in furnaces and fireplaces. In rural properties, it is common to have separate inspections for a home, well and septic systems, as these elements require certain expertise to properly inspect and advise potential buyers.

Expertise in these areas include a fireplace inspection by a qualified wood energy technology transfer (WETT) professional once a year. This is a real safety issue as an improperly working fireplace can cause a fire in your home. Furnaces and HVAC systems should be checked once each year for similar reasons. This not only ensures that your equipment is operating safely, but informs you so you may be able to make changes to your equipment that will make your system operate more efficiently, saving you money in the long term.

Sellers should consider such a pre-inspection prior to putting their home up for sale, to demonstrate to potential buyers that the systems are operating safely.

Mold is becoming an even larger issue especially after flooding and sewage backups. The good news is that there are now companies that can inspect for moisture within wall cavities, with sophisticated infra-red equipment.

When you are about to make one of the largest purchase decisions of your life, it is important to have as much information that you need in advance. A home inspection team may supply the answer.