7 ways your home can make money for you.

Who knew you could be living in a money-maker?

The roof over your head is likely the biggest asset you'll ever own. Trouble is you don't see any money from your house until you sell it – unless you follow the lead of some ingenious homeowners who have figured out a way to cash in on their homes while still living in it. You could be sitting on a pile of dough without even realizing them. Here's how you can make your home make money.

1. Become a landlord
The plan: Rent an apartment in your home. It could be a basement bachelor, a renovated attic, an entire floor or a detached, renovated garage. Renting an apartment can allow you to buy a house you might otherwise not be able to afford. "It also allows many seniors to hang on to their homes," says Susan Wankiewicz, executive director of the Landlord's Self-Help Centre, a nonprofit service that helps small-scale landlords in Ontario.

KA-ching!: Rents range from a few hundred dollars to more than $1,000 a month. When Rosalind Stefanac and her husband bought their first home in Toronto in 2002 for $300,000, they specifically looked for a property with an apartment that would help ease the mortgage payments. They rented out their basement apartment for $700 a month, which covered half the mortgage.

Reality check: It takes more than paint and wallpaper to make an apartment suitable to rent. Each municipality in Canada has individual standards regarding renting, and you'll need to ensure the space meets zoning codes. Stefanac spent about $10,000 on drywall, insulation, carpets, wiring and a new fridge – and it took 14 months of rent money to recoup the cost.

Being a landlord can also be stressful, especially when your tenant gets behind on the rent. After Stefanac's first tenant lost his job, he couldn't always make the rent and sometimes paid her partially with five- and 10-dollar bills. Carefully screen potential tenants by getting references, especially from previous landlords.

2. Put up a parking lot
The plan: Rent out your driveway or garage to people who need parking space (usually in major urban centres) or storage facilities for items that need to be kept indoors over winter, such as boats and motorcycles. Free classified ad websites such as www.craigslist.org and www.kijiji.ca have categories specifically devoted to parking and storage spaces for rent.

KA-ching!: Norm Gill, a retired school district employee whose Vancouver home is close to B.C. Children's Hospital (where parking spots go for $10 a day), rents out two spaces in his four-car garage for a total of $300 a month. "We built a new home and didn't realize how much it would cost, so this brings in a little extra money," he says. Rebecca Gruihn, a film student at York University in Toronto, rents out the parking space that comes with her apartment for $75 a month. "It's not a lot of money, but when you're a student, every bit helps," she says.


Make your property a star
The plan: Rent out your home as a set for a commercial, TV movie or feature film. Every province in Canada has a government-run film development corporation (British Columbia Film, for example) that lists properties available to location scouts and producers. All you need to do to get listed is send in photos of your home.

KA-ching!: Rental rates can vary from $500 to $5,000 a day, depending on the type of project (a feature film typically pays more than a TV production). When the Honourable Myra Freeman, lieutenant-governor of Nova Scotia, listed her Halifax home for sale in 2000, a location scout who went to the open house decided the 1970s details – yellow appliances, shag carpet and wallpapered rooms – were just right for the feature film Scotland, Pa., directed by Billy Morrissette and starring Christopher Walken. Freeman was pleased by the respect the film company showed for the property during the three-week-long shoot and says seeing a movie made in her home was an "exciting adventure." Over the past two years, Susan Harding-Cruz of Hamilton has earned $5,000 for renting out her home for three TV productions that each took three days to shoot.

Reality check: A movie shoot can upend your life, since you'll have to move out of your home during filming. You may have a crew of 50 people tramping through your house, so things can get broken. "This isn't for someone who is uptight about her home," says Harding-Cruz. "If you've got lots of precious things around, it might make you nervous." Check that the production company has adequate insurance to cover replacement costs. When one of Freeman's antique tables was badly scratched, the film company paid for a replacement.

4. Host a student
The plan: Host an international student in your home by providing a separate bedroom and three meals a day. Homestays, as they are called, can last anywhere from a few days to a year, and students can range in age from 10 to 60. The host family is expected to spend quality time with the student, helping him adjust to a new culture and often a new language.

KA-ching!: You can earn about $500 to $800 a month per student and can host more than one student, says Robin Wilson, managing director of Canada Homestay International, which has a network of 4,000 homeowners across the country. Laura Williams, a Vancouver-area energy manager and single mom to three teens, hosted a 16-year-old Brazilian boy and received $800 a month. "It was a positive experience for my kids," says Williams. "They loved getting to know Felipe and treated him just like a brother. And they are hatching plans to go visit him in Brazil now that he is back home."

Reality check: You, the homeowner, lose some privacy, and students may test their newfound freedom since they are away from their families, often for the first time. Felipe had trouble sticking to a curfew because he hadn't had one back home.

5. Run a bed-and-breakfast
The plan: Offer one or more rooms in your home to travellers who are visiting your area.

KA-ching!: Rates vary widely, from about $50 to $200 a night, depending on how luxurious the accomodations are and where you are located. Debbie Gaspich purchased her 150-year-old home, the Martin House Bed and Breakfast, in Jordan Village, Ont., (close to Niagara-on-the-Lake and the popular Shaw Festival) with the intention of continuing to rent out the rooms to pay for the renovation and upkeep of her large property. She began by renting just a couple of rooms and earned $7,000 in her first year. Today she rents five bedrooms, as well as a small cottage on the property, from May to October and earns $25,000 annually. She manages the B&B on top of a full-time job.

Reality check: Changing sheets. Preparing brunch. Keeping your home tidy. Engaging in small talk early in the morning even if you don't feel up to it. Running a B and B can require a lot of work and energy.

6. Go back to the land
The plan: If you own a large parcel of land in a rural area, you can rent it to farmers to raise crops or livestock.

KA-ching!: Depending on where you live and what the land is used for, rates can vary from $20 to $200 an acre, says Kevin Hursh, an agriculture consultant in Saskatoon. "There are different values for different crops – you can earn more if you rent your land to harvest soybeans instead of wheat or barley, for example." Six years ago, Tami and Daniel Blais sold their house in town and moved to a $130,000 country home that came with 160 acres outside Battleford, Sask. Instead of farming the land themselves, they rent 80 acres to a local farmer. The farmer keeps two-thirds of the profits and pays the other third (about $3,000 a year) to the Blaises as rent. "We use the money to pay our property taxes and insurance," says Tami.

Reality check: The odour of manure in the fields and the noise of combines swathing the crops may be a bit of a nuisance, but for most people in rural areas this is just part of country living. More concerning is the potential for pesticide drift when crops are sprayed. Also cattle or horses may get out and require rounding up.

7. Tap into your equity
The plan: Apply for a home equity loan. One-quarter of Canadian homeowners have borrowed against the equity in their home, according to a recent Ipsos-Reid survey. These loans are easy to qualify for and have lower interest rates than other types of loans (usually around prime). Plus, banks typically require that you pay only the interest expense of the loan.

KA-ching!: This is an easy way to get access to a lot of money without having to wait too long. "Many banks will lend you up to 80 per cent of the value of your home, 85% with some private lenders, minus any outstanding mortgage".

Reality check: Because they are so easy to acquire, you can land in more debt than you can handle. If the market turns downward and your $300,000 house is suddenly worth only $250,000, you've lost a lot of the equity in your home and still have the loan to repay.
by Anne Bokma

Posted by Steven Porter. Steven is a licensed Mortgage Agent with Mortgage Architects and a retired licensed, real estate broker with 30 years experience in residential real estate. He can be reached at 1-905-875-2582; steven.porter@mtgarc.ca or online at 1800Mortgages.ca

10 Things to Know About Second Mortgages

When I talk about second mortgages, I don’t mean it in the sense of getting a mortgage on a second property. In this case I’m talking about a second mortgage, following an existing first mortgage secured by the same property. Second mortgages aren’t for everyone, so I’m going to highlight what I think are the top ten things you should know about them to determine if one is right for you.

1. Get the cash you need quick

A second mortgage is a great way to access any available equity quickly without having to break the terms you presently have in place for your first mortgage.  This way you will avoid any potential payout penalties associated with that first mortgage.

2. Types of second mortgages

Basically, you can get a home equity line of credit (HELOC) secured by a 2nd mortgage behind your first mortgage, or a 2nd mortgage that is a separate loan on the property. The HELOC is limiting, because it is only available for up to 65 percent of your home value and has strict qualifying requirements - whereas the 2nd mortgage loan can go as high as 95 percent of your property value depending on the lender, private lenders being the most flexible.

3. Private lenders have looser qualifying guidelines

If you are having problems qualifying for a 2nd mortgage with the lender who presently holds your 1st mortgage or any other lender for that matter, you may want to have a look at what private lenders have to offer by going through an independent mortgage professional. As you are not dealing with a large and potentially rigid institution, private lenders tend to be more flexible when it comes to qualifying and will work with you to find a solution that works for both you and them. Keep in mind - they lend on a smaller scale so, while their qualifying guidelines and document requirements are a bit looser, they tend to be more selective about the property they use to secure the mortgage. Talk to your favorite mortgage professional about how second mortgage lenders products are different than going through a typical first mortgage lender.

4. Higher rates and fees

While the HELOC usually comes with favorable terms like interest-only payments, an open term and a low variable interest rate, they are restrictive in their loan-to-value and qualifying guidelines. Private second mortgage lenders, on the other hand, are more adaptable in that they know they will not be paid out first in the event of a sale or a default. Because they are essentially taking on a greater risk being paid out second, they will likely charge higher interest rates and an upfront fee. But don't worry - there are still deals to be had. Some mortgage professionals have established relationships with a private lender that afford them competitive terms. Or, some first mortgage lenders have arranged special discounted rates through an exclusive relationship with a second mortgage lender, allowing them to offer a blended product for the customer that enables them to borrow more.

5. Watch out for renewal fees and increased payout penalties

Private lenders usually consist of an individual or group of individuals lending out their capital in the form of real estate secured financing (also known as mortgages). As private lenders are not a bank, they are not governed by the usual bank rules and can lend to higher loan-to-values, ask for less qualifying documentation and charge higher renewal and payout penalties at their discretion. This information will be disclosed in your mortgage commitment or in the documents you sign with your lawyer. So, whichever type of 2nd mortgage lender you choose to go with, ensure you fully understand all the terms and fees involved in borrowing those funds.

6. Short term is best

I recommend only using a second mortgage as a short-term financing solution. Higher interest rates, coupled with larger penalties and fees should propel you to find a less expensive financing solution if possible. If you have no other options available to you, know exactly what you are getting into and find out what is necessary to avoid private lending again. You may need to fix your credit or aggressively reduce your mortgage amount in order to build enough equity to eventually combine the two mortgages you have into only one, at a competitive rate with a lower payment amount.

7. When would taking a second mortgage make sense?

Most importantly, there has to be sufficient equity in your home to support a second mortgage as the “A” lenders will only allow you to refinance up to 80 percent of the home's present value. If you are in the first year or two of a closed fixed rate mortgage term, or your mortgage rate is higher than rates offered today, there could be a large penalty involved in accessing equity via breaking your term to refinance. In this case, a second mortgage could be a potential solution for you to access funds from your home. Alternatively, if current interest rates are higher than the rate on your existing first mortgage, instead of a second mortgage, you could consider refinancing your first mortgage to access home equity. I would ask your favourite mortgage professional for some savings calculations that should help you with your decision on how to obtain that equity, and if it's worth it to do so.

8.  One, two, me

If you have a second mortgage on your home, you are third in line to benefit from any equity available once the property sells and all costs associated with the sale (including any real estate fees) have been paid. Your first mortgage holder gets their mortgage balance owing, then the second mortgage is paid out, then the fees associated with selling. Finally, you will receive the remainder as proceeds of the sale. Second mortgage financing reduces the equity you have in your home and you should keep that in mind if you’re selling soon and want to maximize your profits earned.

9. Who you know makes a big difference

If you’re looking for a Home Equity Line of Credit, visit your personal banker as well as a independent mortgage professional to explore the options available to you as not all HELOCs are the same. I mentioned this as some lenders have what is called a “bundled product” which allows you to access home equity a number of different ways under one umbrella. This could include lines of credit, or various credit card accounts, fixed and variable rate mortgages, and more. When it comes to private financing, who you know matters more than what you know. Access to multiple private lenders, instead of just one or two, optimizes the best solution for your financing needs. In addition to access to more financing options, working with a mortgage professional who has experience with both private and second mortgage financing can also benefit you, especially if you're still unsure that it's the best solution available to you at this time.

10. Have an exit strategy

It is usually the intention of a majority of homeowners to pay down their mortgage balances as quickly as possible and a second mortgage can only cause delays in reaching that goal. Before you commit to second mortgage financing, ensure you have an exit strategy planned in order to protect your assets. Work with your mortgage professional on a plan that either has you paying off the 2nd mortgage financing quickly, or an eventual refinance solution in place to avoid the renewal of your second mortgage multiple times.
By Jackie Woodward 

Posted by Steven Porter. Steven is a licensed Mortgage Agent with Mortgage Architects and a retired licensed, real estate broker with 30 years experience in residential real estate. He can be reached at 1-905-875-2582; steven.porter@mtgarc.ca or online at 1800Mortgages.ca

All the Ways Bad Credit Can Make Your Life Difficult

Anyone who has had bad credit knows that it can be a huge pain in the butt. Oh sure, it doesn’t seem to affect your day-to-day too much. But when it comes time to get a car, or fill out a rental application, that crappy credit score comes back to haunt you. Here are a few disadvantages of having poor credit, and what you can do about it.
Your Cable, Phone and Internet Bills Can be Higher

If your credit isn’t great, don’t be surprised if your cable, Internet, or cell phone bill comes with an extra fee. We’ve told you before: service providers are allowed to charge you more for having poor credit. It’s called “risk-based pricing”. 

You’ll want to check your monthly bill, or even call your service provider, to see if you’re paying extra. Then, review your credit report (which you should do anyway) and see why your score is so low in the first place. If there are any errors, write the credit bureau a letter disputing them. If that doesn’t work, there’s not much you can do to get rid of this fee aside from improving your credit.
 
It’ll be Tough to Apply for a Mortgage

If your credit is really bad, you might have a hard time buying a house. It’s difficult, but not impossible. Some mortgage lenders are becoming more lenient about low scores, especially if applicants have proven a year of on-time payments. You can get a mortgage loan with a credit score as low as 580, assuming you have the cash for at least 10% of a down payment. In some cases, you might even be able to get a loan with a 500 credit score, but expect to put down even more up front.

However, even if you can get a mortgage loan, your interest rate will be a lot higher than someone with great credit. 

Even half a percentage point can cost you more in the long run, so you might consider improving your credit before taking out a mortgage loan. Of course, mortgage rates are really low right now, so you also have to consider the market, but your credit score plays a big role, too.
 
You’ll Have Higher Interest on Other Loans

High interest rates aren’t just limited to your mortgage. If you take out an auto loan or a personal loan, you can expect higher than average rates, too.

If your credit is really bad, you’ll probably have to take out a subprime auto loan (if you have to take out a loan at all). A subprime loan is a special loan for borrowers with weakened credit histories—and according to Edmunds, your interest rate on a subprime loan could be as high as 18%.

You may want to try to getting a loan with a local credit union, which might be a little more lenient. Also shop loan terms, not just monthly payment. You want to consider what you’re paying in total over time:
 
Look for the cheapest money — the lowest APR over the shortest period. Don’t be distracted by promises of a lower monthly payment over a longer period of time. If the only way you can make the payments is to take out a long-term loan, you probably can’t afford the car.

Credit card interest rates have a pretty wide range. According to Investopedia, they can be anywhere from 7 to 36 percent. If your credit score is poor, you can probably expect a rate of 22 percent or more, Investopedia says.

Work on improving your score, and when you notice it’s a little higher, call your credit card company and follow this script for a better rate.
 
You May Have Trouble Renting an Apartment

Renting an apartment can be a huge hassle if your credit isn’t great. Again, you’re seen as a risk, and the landlord or rental company wants to make sure you can pay on time each month. Luckily, there are a few things you can do to improve your chances of getting the apartment you want. We’ve detailed these methods here, but a few options include:

    Provide a brief explanation: Add a statement to your credit report explaining any negative items.
    Ask for a recommendation: If you’ve been current on your payments, ask previous landlords to offer a letter of recommendation stating that.
    Offer an incentive: Offer to move in immediately, put down a bigger security deposit, sign a shorter-term lease, or a direct deposit from your bank.

Of course, cosigning is also an option, but not one that should be taken lightly. You may also want to consider looking for smaller, independent owners who might be willing to work with you.

When it comes time to turn on your water or electricity, the utility company might ask you to pay a security deposit if you have bad credit. If so, make sure you’re clear on what happens to this money when you move. In most cases, you’ll simply get it back when you move, but you want to make sure this is the case.
 
Really, that’s what the solution to all of this comes down to: improving your credit. Get a free copy of your report, review it thoroughly, then implement a few strategies to boost your score. Either way, it helps to simply be aware of each of these drawbacks so you’re prepared when the issue comes up. While there are some workarounds to each of these hassles, fixing your score is the best long-term solution.

Original article by Kristin Wong, edited for Canada by Steven Porter


Posted by Steven Porter. Steven is a licensed Mortgage Agent with Mortgage Architects and a retired licensed, real estate broker with 30 years experience in residential real estate. He can be reached at 1-905-875-2582; steven.porter@mtgarc.ca or online at 1800Mortgages.ca

For Millennials, buying a home is a distant dream unless parents help with down payment . . .

 For parents, a reverse mortgage can provide funds            

Young Canadians living in hot housing markets such as Vancouver and Toronto are increasingly looking to their parents for help with down payments when it comes to purchasing their first home.  And, for parents who have seen the value of their homes rise dramatically in the last 10 years, a reverse mortgage is often an attractive way to assist adult children.

That's according to HomEquity Bank experts, who are helping more Canadian seniors set up reverse mortgages so funds may go to adult children needing a down payment on their first home.  

And, financial experts are seeing the same trend of parents helping adult children purchase a first home.

"Ten years ago, this topic rarely came up as most seniors were more concerned with remaining self-sufficient. And, first time homebuyers were purchasing houses on their own. That's changed. Up to 30% of my clients aged 60+ now want to discuss to what degree they can help their adult children financially," explains Rona Birenbaum, financial planner and founder, Caring for Clients.

In fact, it's become such a large part of its service offering that Caring for Clients created a comprehensive, 20-hour assessment program to help clients best determine:

• What is a safe amount to provide to adult children?
• How to be fair and equitable with all children.
• With the amount of money provided, what options are available to adult children? For example, what size mortgage is viable if using funds to purchase a first home?
• How can they protect their money gifted to adult children?

"Most parents want to know that they can protect their money and still lend funds to adult children wanting to purchase a home. By setting up the financial assistance as a zero-interest mortgage, registered on the property, the funds are protected. So, in the event of divorce and the sale of the home, the money goes back to the parents," adds Ms. Birenbaum.

However, if over the long term the marriage does not break down, the parents simply de-register the mortgage and the money is considered a gift, she notes.

"Without help from parents, it's getting to be next to impossible to get into the housing market – especially in Toronto and Vancouver," explains Ms. Birenbaum.

Adds Yvonne Ziomecki, SVP, HomEquity Bank: "The seniors we work with to provide reverse mortgage solutions tell us without financial help, their adult children would be locked out of the housing market.  So, tapping into the equity of their home and providing a down payment becomes an important way to give their children a way to enter the real estate market."

For many first home buyers, condos are a way into the real estate market. The average cost of a condo in Toronto, according to information released in April, 2016 by the Toronto Real Estate Board (TREB) is $393,589. In Vancouver, according to information released in January, 2016 by the Real Estate Board of Greater Vancouver, condos now sell for, on average, $466,600.

HomEquity Bank, the only Canadian bank working exclusively with seniors, provides funds through its CHIP reverse mortgage solution www.chip.ca. Seniors can supplement their income, or tap into the equity of their home, via reverse mortgage monthly or lump sum payments.

About HomEquity Bank

HomEquity Bank is a Schedule 1 Canadian Bank offering the CHIP reverse mortgage solution www.chip.ca.  It was founded 30 years ago as an annuity based solution addressing the financial needs of Canadians who want to access the equity of their top asset – their home. 

To rent or to buy? 8 questions Canadians should ask before taking the plunge

Conventional wisdom suggests it’s a no-brainer – buying real estate as a worthwhile investment with a high return.

Despite record low interest rates, sky high prices and carrying costs are causing many to rethink the allure of home ownership. When you factor in the costs of repair, maintenance and other expenses associated with owning a home, Toronto-based financial planner Shannon Simmons argues that renting and putting saved money into another investment may earn more in the long run.

If you've ever filled in a questionnaire asking where you see yourself in 10 years, many would answer “buying/owning a house. 

Do you really care if you buy a house, but think you should? Lets look at both sides of the argument and give a balanced view of the Rent-vs-Own debate.

Based on advice from financial planners—both independent and those employed by banks—Global News has compiled a list of questions (and some context) to help you decide whether buying or renting is the right move for you:

• Do you have 10-20 per cent of the home’s purchase price saved for the down payment?   

Do you have a down payment? While it’s possible to purchase a home with as little as five per cent down in Canada, big banks prefer first-time home buyers to have an average of 10 per cent.“If this is the property of your dreams and it’s a really good buy, and you don’t have the full 20 per cent down,” says Royal Bank of Canada’s Rachel Wihby, it may make sense to pay the mortgage loan insurance charged to anyone who doesn’t put 20 per cent or more down on the home. 

But “the less you put down, the higher the amount that you’re actually being charged,” Simmons said. That could mean you end up paying an additional $10,000 or more. 

• Do you have another 1.5-5 per cent saved for closing costs?

First-time home buyers don’t have to pay realtor fees, but there’s a number of other closing costs that need to be taken into account.

What are my closing costs? Depending where you live, land transfer taxes can carry a “significant” price tag, said Farhaneh Haque, director of mortgage advice for TD Canada Trust. BC's current transfer tax is 1% on the first $200,000 and 2% on the balance, if you are a first time home buyer that is waived on your first purchase on a home up to a maximum of $450,000

“Lawyer fees, seller/buyer property tax adjustment, appraisal fees, home inspection fees, even just your moving costs,” Haque said.

David Stafford, Scotiabank’s managing director of real estate secured lending, added fire and loss insurance to the list, suggesting $50-$100 per month as a ballpark figure.
Stafford also stressed the value of a building inspection, particularly for first-time home buyers, who may be easily impressed by granite countertops and hardwood floors but miss such other details as an old furnace, a leaky roof, or electrical wiring that’s in need of repair.

“Given you’re contemplating a multi-hundred thousand dollar purchase, a building inspection for a couple hundred dollars isn’t a bad idea.”

• Can you keep debt servicing below 40 per cent of your income?

Your total debt service ratio measures the percentage of your gross annual income needed to cover housing payments (principal, interest, property taxes and heat, known as “PITH”) plus registered debts like car loans, personal loans and credit cards if applicable. Simmons says this 40 per cent rule is “specifically to please the bank” and is the general eligibility criteria when applying for your mortgage at most financial institutions.

So if you add it all up, housing payments and other debts should be between 35 and 40 per cent of your gross annual income.

• Are your monthly fixed costs at 50-60 per cent of your after-tax income?

Debt servicing ratio in Canada. These “fixed costs” include housing and transportation, groceries, toiletries, and “everything you have to pay every month whether you like it or not,” Simmons said. “When the money hits your bank account, if more than 60 per cent is tied up in things that you can’t get out of every single month, then you have no room after that for spending money which is not a fixed cost – things like going out for dinner, going out with friends, weddings, anything else that’s not just a bill.”

Keeping this ratio under control ensures you have enough money left over to keep saving, and avoid becoming “house poor.”

“Once you buy a house, it’s not like retirement’s done; you still have to save for other things,” Simmons added. “You also want to make sure that you have enough cash flow every single month that you don’t have to go into credit card debt – and that’s what I see: house broke, all the time.”

• Can you save 1-2 per cent of your income in a “housing maintenance fee” each year?

The top mistake Canadian homebuyers make? Underestimating “significant renovations needed to the property,” according to a recent RBC poll.

Saving for a rainy day? Stafford suggests asking your realtor, and getting a home inspection. “Even if it’s in pretty good shape, most homes of any age, there’s something you’ve got to do every year… and you need to factor that into your cash flows,” he said.
Simmons advises setting aside 1-2 per cent of your after-tax income each year to what she calls a “house maintenance fund” to avoid going into debt. “When there’s not that extra cash sitting in an emergency fund, if there’s a $10,000 renovation or if you get cockroaches … It has to go on debt, because you’re not going to live in a place with cockroaches,” she said. “That can take a long time to pay off if you don’t have flexibility with your cash flow.”

• Do you plan to stay in your home for at least three years?

Haque said TD advises clients to think about their life in three to five-year chunks when considering purchasing a home. A young couple buying a condo, for example, should consider how soon they’ll need a bigger space if they want children in the near future.
Wihby suggests regarding a home as a long-term investment – it might not be worth it if you buy a home and sell it a year later.

• Is your job stable?

Are you planning to stay in your field? What would happen if your income decreased?
These are some of the questions mortgage planners ask clients to determine how monthly payments and lifestyle would change as a result of job fluctuations.
“So you need to think of things like, will you be on a single income household instead of two?” Wihby said. “Maybe that means you won’t be taking those trips you thought you’d be taking or maybe you won’t be going to the gym as often.”

• Are you emotionally ready to own a home?

Rent or buy in Kamloops? It may sound hokey. But this is a big lifestyle leap to take.
“A lot of people heard that it was almost a no-brainer to go into property, especially when we saw property prices rising like we did in the past,” Wihby said. “But I think a lot of people got into purchasing a home before they were ready emotionally.” The impact of what Stafford calls the “single biggest financial commitment for most people” includes the mental shock of going from a tenant to a homeowner. “When you’re a tenant, the month that cheque goes out, it clears your account, and then you don’t think about it for the next 30 days,” Haque explained. “But when you’re a homeowner, you have those multiple payments like home insurance, maintenance fee, utilities, property taxes, that you have to account for on an ongoing basis. And sometimes it’s very much a shock to your system.” “I know a lot of professionals who just don’t want to be bothered cutting the grass on Saturday, and doing the gardening. … They would much prefer to rent and save a bunch of money, so they can travel every weekend,” she said. “If you’re not actually going to enjoy the house, what’s the point in buying it?”

RENTAL INSECURITY
But, as anyone who has struggled to find a place to rent knows, renting isn’t a walk in the park either. Vacancy rates in the region hover at less than one per cent and have been on a downward trajectory since 2012, affected in part by the skyrocketing popularity of short-term rental platform Airbnb. Renting remains cheap relative to property values, but that doesn’t mean rentals are affordable. Rents are only expected to rise over time and there is already scarcity among certain types of rentals, such as three-bedroom units for families.

Final Word and other facts.
With Toronto's overheated real-estate market showing no signs of abating, many people are foregoing home ownership — at least for now — because the numbers simply don’t add up.

RENT-VS.-OWN CALCULATOR
A valuable number in real estate investing is the price to rent ratio, which is simply the purchase price divided by the rent received. For example, a condo purchased for $126,000 and rent for $1,300 / month would have a Price-Rent Ratio of 96.9 (monthly) or 8.08 (annualized).

One measure to determine whether it’s better to rent or to buy is a metric called the price-to-rent ratio, which takes the price of the property and divides it by its annual rent. Ratios in the 10-13 range indicate it’s better to buy than to rent, while a ratio in the 18-20 range is a sign in favour of renting over buying. Anything in between is a judgment call based on personal situation and local market conditions, according to Toronto-based BMO senior economist Robert Kavcic. This calculation doesn’t take into account other costs of home ownership, such as property taxes or maintenance and repairs.

Throughout most of the 20th century, renters have run the gamut of people in all socio-economic classes, said Andy Yan, an urban planner and acting director of Simon Fraser University’s City Program. Renting didn’t used to be just for those who couldn’t afford to buy. But since the Great Depression and the World Wars, governments in North America have promoted policies to support home ownership, said Yan. The American or Canadian dream of owning a home was used to stabilize the economy and ensure people have assets in their later years through the “forced” savings plan of a mortgage. “There’s a notion in Canada and the U.S. that rental is a temporary state only. But for an increasing population in places such as Vancouver and Toronto, it’s a housing reality,” Yan said, calling on government to recognize renting as a much-needed form of housing.

At the risk of over-simplifying, the rent-or-buy debate comes down to your values, what you prioritize in life, and what you can afford.


Financial decisions related to Renting verses Buying a home require the advice of seasoned professionals. Steven Porter is a former Realtor with 30 years experience in residential real estate and is now a Mortgage Planner/Agent with one of Canadas's top Mortgage Brokerages. Call him at 905-875-2582 or email him at steven.porter@mtgarc.ca for a confidential dioscussionon whether renting or buying fits your personal and financial lifestyle.
  - Re-posted from the Global News by Steven Porter, Mortgage Agent - Mortgage Architects
Steven can be reached through his website at www.1800Mortgages.ca

Title Insurance and Surveys

Title insurance, while it has its advantages, does not eliminate the need for a survey.

A title insurance policy is simply a form of insurance that insures against title defects that may be revealed by a survey. It is a "quick fix" which allows a real estate transaction to close in a timely fashion without any hassles; however, without a survey all you have done is delayed the discovery of any potential problems to a later date. The moral of the story: get title insurance and a survey, and avoid surprises.
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

What to do after your credit has gone bad.

 WHAT TO DO AFTER YOUR CREDIT HAS GONE BAD

It is matter of fact that life can be much unexpected. Perhaps you have been hit hard by this economic downturn or maybe an illness or even just plain old mismanagement has left you with a series of late payments on your credit. No use crying over spilt milk so to speak. So, let’s look at what to do to repair your credit after such an event.

There are three main scenarios we most often see in conjunction with damaged credit:

1. Regular late payments. All types of credit providers report to the credit agencies about you and your repayment history. Cell phones, credit cards, student loans, vehicle or personal loans, lines of credit, and of course your mortgage. You are assigned a credit rating based on if your payments are made on time, if you are at or near limit on your credit cards and a variety of other things. Often the descent into bruised credit starts by missing a payment here and there. Of course the more late payments you have, the more leery a new lender will be to extend you additional credit. If you had a rough patch like this, then the best thing to do is catch up ASAP and do not let it happen again. Lenders will want to see that you have recovered financially and you now mange yourself well. The magic number is 2. They want to see 2 years of perfect repayment on at least 2 credit facilities. After the damage was done, it is imperative that you not have another late payment on anything including your cell phone. It is also a good idea to save some money so they can see you have a fallback position if you lose your job. Finally, keep your credit cards at no higher than 75% of the available credit. It can be a sign of financial distress if you are maxed out.

2. Orderly payment of debts (OPD) – This program is entered into voluntarily by people who need further help. These agencies will meet with you to assess your situation and determine a repayment plan with your creditors. They make calls on your behalf and negotiate for you which will stop the collection calls you may have been receiving. Interest rates are negotiated down and you are set up on a repayment plan to pay your creditors every cent you owe based on your income. Your credit bureau will reflect that you have opted for the OPD which means you have to do some work to be considered for lending later on. Again, the magic number is 2. You need to have 2 credit facilities reporting pristine for 2 years once the OPD reports as complete. At that point many lenders will consider you for mainstream lending. You may have to start with a secured credit card or 2 or a vehicle with a higher interest rate to get back on track.

3. Bankruptcy – In this scenario, you have gone through the formal bankruptcy process which involves a trustee and the court system. Your debt obligations were negotiated down to a fraction of what they were and you have paid out that amount as per your agreement. Two years after you show as formally discharged with 2 years of established credit on 2 credit facilities you will once again be eligible for mainstream lending. Without those criteria you may find yourself paying a higher rate for a mortgage or other loan.

A few extras I would like to point out: If you have ANY late payments after the OPD or bankruptcy, you will likely be turned down for a mortgage at best rates. The lenders will allow that life threw you sideways, but it is up to you to show them it will not happen again. If there was a foreclosure in your past, you are not likely to get any financing for a mortgage unless you are willing to pay some very high interest. Finally, there are companies out there who advertise that they can fix your credit for a fee. Be very cautious in your dealings with them. They can be very expensive and the credit reporting agencies are on record reporting there is NO quick fix for credit issues. Do your due diligence before entering into an agreement with anyone telling you they can fix your credit

Top 10 mortgage mistakes and how to avoid them

Here's a list of the top 10 mortgage mistakes home owners/buyers should avoid when planning to finance a home purchase or refinance an existing mortgage.

Anything on this list should be avoided at all costs to ensure your credit score is as high as possible and that you don’t run into any qualification problems when it comes time to get that sparkling new mortgage. Otherwise you could end up with a higher-than-necessary mortgage rate, or simply get declined!

1. While an obvious no-brainer, avoid bankruptcy or foreclosure. Either could keep you out of the mortgage game for several years.  Also avoid late mortgage payments. Even if your credit score is up to snuff, a late mortgage payment that shows up on your credit report can disqualify you with many banks and lenders. 
2. Not "locking in" a mortgage rate. If you fail or forget to lock an interest rate for your mortgage in the months before you purchase or refinance, rates could increase.  Yes, you have the option to lock and float down a rate, but make sure you understand both options and keep an eye on interest rates before and during the home loan process. 
3. Listing your property on the MLS and then attempting to refinance that same property within six months (or longer). Lenders don’t love the idea of giving you a loan on something you don’t actually want, or tried to get rid of just months before.
4. Applying for a mortgage with charge offs and collections on your credit report (consumers may have these in error. They can be removed via a credit bureau dispute. They crush your FICO score!). Regularly review your credit report to ensure there are no surprises long before you begin the mortgage process.
   
   Put simply, a low credit score will lead to a much higher mortgage rate, and even disqualification if it drives your monthly mortgage payment high enough. Also steer clear of credit counseling. (Many banks and A lenders won’t lend to borrowers who have used these services in the recent past.)
5. Not figuring out how much you can afford well before beginning your property search. You should get pre-qualified or pre-approved before you even start looking at homes. Once you know how much home you can afford based on your salary and assets, you can properly assess the situation. Otherwise you could just be wasting your time and setting yourself up for disappointment.
6. Opening new credit cards or making excessive charges on existing credit lines before and during the loan application process. This can hurt your credit score and increase your debt load, which could lead to disqualification.  See debt-to-income ratio for more on that. You can buy your new leather couch and big-screen TV once the loan is funded and closed.
    
7. Attempting to get a mortgage with less than two years consecutive employment in the same occupation or field (unless you’re a recent grad with proof of future income). You must prove to lenders that you will actually continue to make the money you’re currently making to obtain a mortgage.
8. Trying to get a mortgage without documented 12-month housing history or your own verifiable assets that cover at least two months of your proposed mortgage payment, including taxes and insurance. Yes, lenders want to know that you paid your rent on time previously and have enough in your bank account to cover future payments.
   Oh, and the money needs to be in your account, not under your mattress.  
9. Not establishing your credit history. You generally need at least three credit tradelines (that show up on your credit report) with a minimum two-year history on each. Yes, credit is the root of all evil, but also a necessary one in the mortgage world, that is, unless you plan to pay for your expensive house with cash.
10. Not shopping around. If you don’t take the time to comparison shop, as you would any other product you buy, like a big-screen TV or a car, you’re doing yourself a major disservice. Put in the hours to ensure to find the right bank to work with and snag the best deal or better still, engage the services of a Mortgage Broker. They will do the shopping for you.
    
    Bonus tip: Don’t forget to compare different loan products, such as fixed-rate mortgages vs. variable rate, and conventional loans vs. insured loans. All have their pros and cons, and should be carefully considered before applying for a mortgage. There is no one-size-fits-all approach folks.

*Many mistakes on this list pertain especially to first-time homebuyers. Homebuyers usually always have to verify assets, employment, and credit history. Sure, you might find a lender willing to give you a mortgage without those requirements, but your mortgage rate will be less than desirable!

Do I qualify for a mortgage? I can help. Call me or complete my secure, online mortgage application.