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Showing posts with label Steven Porter. Show all posts
Showing posts with label Steven Porter. Show all posts
Monday, 16 September 2019
Home and Mortgage eNewsletter - September 2019
Monday, 1 May 2017
SHOULD YOU PAY DOWN THE MORTGAGE OR INVEST?
SHOULD YOU PAY DOWN THE MORTGAGE OR INVEST?
Source: www.baystreet.ca
One of the biggest debates in the personal finance community is whether someone should use their extra cash to pay down the mortgage or put that money to work in investments.
The mortgage paydown strategy is popular with risk-adverse folks. Investing is risky, while shoveling extra cash towards the mortgage offers a guaranteed return that’s usually better than GICs or high-interest savings accounts.
Paying off the mortgage early is also incredibly empowering, at least for some people. They yearn for debt freedom more than anything.
This will enable them to do things they’ve always dreamed of, like travel, take a lower paying job, or retire early.
The investing argument essentially comes down to one factor. Investments in the stock market grow much faster than mortgage interest. If stocks return 8% over time and a homeowner can reasonably expect to pay 3% annually over a 25-year mortgage, the investor would end up with more money.
It works out to taking a 3% loan to make 8%. The only problem is the 8% return won’t be consistent. It will vary from year to year.
Perhaps the best solution is a hybrid approach. Paying down the mortgage early is a worthy goal that can save thousands in interest over the life of the loan. But investing for the future is incredibly important too. A 50/50 split between the two goals is a worthy compromise.
Remember, neither of these choices are terrible. Both will ensure you become richer in the long run, which is the ultimate goal.
Posted by Steven Porter. Steven is a licensed Mortgage Agent with Mortgage Architects, Certified Reverse Mortgage Specialist (CRMS); Seniors Real Estate Specialist (SRES) and Accredited Buyer Representative (ABR) and retired, real estate broker with 30 years experience in residential real estate. Steven can be reached at 1-905-875-2582; steven.porter@mtgarc.ca or online at 1800Mortgages.ca
Monday, 5 December 2016
What you need to know about the Principal Residence Tax Exemption
When it comes time to sell the family home, few homeowners give any thought to the possibility of having to pay taxes on the realized profit resulting from the sale. After all, everyone knows that you are not required to pay capital gains tax on your home, right?
While it is true that you do not pay capital gains tax on your personal dwelling, you need to keep in mind that there are very specific rules around this exemption. Should you fail to follow these rules, you may be required to pay capital gains tax on all, or some portion of, the profit from the sale of your home. In this Home Trust Mortgages Blog article, we’ll take a closer look at these rules to help clear up any confusion.
Principal Residence Defined
It is the existence of the Principal Residence Exemption that allows you to forego paying any form of capital gains tax on the profit you make when selling your home. Having said that, you must ensure that your home meets the strict definition of “principal residence” for the entire time that you own the property. More than one homeowner has learned the hard way that after selling what they consider to be their home and main residence, the tax man does not share the same view and capital gains are now owing.
To avoid this costly situation, let’s first look at what qualifies as your principal residence.
For starters, the Canada Revenue Agency allows for considerable leniency regarding the type of home that can serve as your principal residence. Everything from trailers to condos are permitted, but whatever form your principal residence takes, there are four requirements all homes must meet in order to be recognised as your principal residence.
These are:
The key point to remember is that maintaining ownership alone is not sufficient to preserve the principal residence designation. For any period that you, your spouse, or your children are not living in the property, and even if you retain ownership, the property cannot be considered your principal residence for that time period.
Consider, for example, situations where owners might not live in the property for several years; this may be the result of a temporary relocation to another area for work or schooling. During this time, unless your spouse or your child continues to live in the house, the property is not considered to be your principal residence.
This means that when you sell the property, for any year that your home is not your principal residence, you will be required to pay capital gains tax for that period. The Canada Revenue Agency has a worksheet available to help determine the taxable amount for such situations.
If you have questions on this or anything else having to do with your principal residence designation, see the Canada Revenue website to avoid an unexpected tax bill when you sell your home.
Note: On October 3, 2016, the Government announced an administrative change to Canada Revenue Agency’s reporting requirements for the sale of a principal residence. For more information, go to Reporting the sale of your principal residence for individuals (other than trusts).
By Pino Decina, EVP Residential Mortgage Lending, Home Trust Company
Posted by Steven Porter. Steven is a licensed Mortgage Agent with Mortgage Architects and retired, licensed, real estate broker with 30 years experience in residential real estate. Certified Reverse Mortgage Specialist (CRMS); Seniors Real Estate Specialist (SRES) and Accredited Buyer Representative (ABR). Steven can be reached at 1-905-875-2582; steven.porter@mtgarc.ca or online at 1800Mortgages.ca
While it is true that you do not pay capital gains tax on your personal dwelling, you need to keep in mind that there are very specific rules around this exemption. Should you fail to follow these rules, you may be required to pay capital gains tax on all, or some portion of, the profit from the sale of your home. In this Home Trust Mortgages Blog article, we’ll take a closer look at these rules to help clear up any confusion.
Principal Residence Defined
It is the existence of the Principal Residence Exemption that allows you to forego paying any form of capital gains tax on the profit you make when selling your home. Having said that, you must ensure that your home meets the strict definition of “principal residence” for the entire time that you own the property. More than one homeowner has learned the hard way that after selling what they consider to be their home and main residence, the tax man does not share the same view and capital gains are now owing.
To avoid this costly situation, let’s first look at what qualifies as your principal residence.
For starters, the Canada Revenue Agency allows for considerable leniency regarding the type of home that can serve as your principal residence. Everything from trailers to condos are permitted, but whatever form your principal residence takes, there are four requirements all homes must meet in order to be recognised as your principal residence.
These are:
- The home must be owned by you or jointly with another person.
- You, your current or former spouse or common-law partner, or any of your children, must have lived in the home at some point for each year that you are claiming the home as your principal residence.
- The home must be a housing unit, a leasehold interest in a housing unit, or a share of the capital stock of a co-operative housing corporation acquired only to get the right to inhabit a housing unit owned by that corporation.
- You declare the home as your principal residence by listing it as your address on official documents such as your tax return.
The key point to remember is that maintaining ownership alone is not sufficient to preserve the principal residence designation. For any period that you, your spouse, or your children are not living in the property, and even if you retain ownership, the property cannot be considered your principal residence for that time period.
Consider, for example, situations where owners might not live in the property for several years; this may be the result of a temporary relocation to another area for work or schooling. During this time, unless your spouse or your child continues to live in the house, the property is not considered to be your principal residence.
This means that when you sell the property, for any year that your home is not your principal residence, you will be required to pay capital gains tax for that period. The Canada Revenue Agency has a worksheet available to help determine the taxable amount for such situations.
If you have questions on this or anything else having to do with your principal residence designation, see the Canada Revenue website to avoid an unexpected tax bill when you sell your home.
Note: On October 3, 2016, the Government announced an administrative change to Canada Revenue Agency’s reporting requirements for the sale of a principal residence. For more information, go to Reporting the sale of your principal residence for individuals (other than trusts).
By Pino Decina, EVP Residential Mortgage Lending, Home Trust Company
Posted by Steven Porter. Steven is a licensed Mortgage Agent with Mortgage Architects and retired, licensed, real estate broker with 30 years experience in residential real estate. Certified Reverse Mortgage Specialist (CRMS); Seniors Real Estate Specialist (SRES) and Accredited Buyer Representative (ABR). Steven can be reached at 1-905-875-2582; steven.porter@mtgarc.ca or online at 1800Mortgages.ca
Wednesday, 23 November 2016
3 Easy ways to finance your home renovation
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| Renovating your home is within financial reach; increase the value of your home with an updated bathroom or kitchen, new hardwood floors, or energy efficient solutions.
Talk to Steven Porter with Mortgage Architects today to see how you can finance your next renovation project!
Posted by Steven Porter. Steven is a licensed Mortgage Agent with Mortgage Architects and retired, licensed, real estate broker with 30 years experience in residential real estate. Certified Reverse Mortgage Specialist (CRMS); Seniors Real Estate Specialist (SRES) and Accredited Buyer Representative (ABR). Steven can be reached at 1-905-875-2582; steven.porter@mtgarc.ca or online at 1800Mortgages.ca
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Saturday, 17 September 2016
Simple Steps to Rebuilding Your Credit
When you have bad credit, many doors are closed to you. A poor or bad credit score is one that falls at or below 619 on the Beacon Score. You might not qualify for loans, or have to settle for less-than-desirable terms that cost you thousands of dollars over the loan’s term.
Many lenders are also wary of those with a credit rating also known as a Beacon score of between 620 and 679. You might qualify for a loan, but you won’t get the best terms; instead, you are likely to pay a higher interest rate, costing you hundreds – or thousands – of dollars over the life of the loan. Until you achieve a good score of 680 to 739, you will likely pay the price. And if you want the best terms on some loans (particularly mortgages), you need to achieve an excellent credit score of 740 or more.
Most of us could use a little improvement in our scores. If you have average credit, you might want to bump it into the “good” range. Someone with good credit might want a credit score upgrade to an “excellent” rating. And, if your credit rating is poor, it’s especially important that you work to improve your situation.
Rebuilding your credit, whether you have been through a bankruptcy, consumer proposal or whether you have made mistakes with your finances, doesn’t have to be complicated. As long as you have patience and create a plan, you can rebuild your credit and eventually obtain an excellent credit rating.
Check Your Credit Report
Know where you are at financially. Check your credit report to see exactly where you need to improve. Do you have a lot of missed or late payments? Is your debt utilization too high? These clues can help you figure out what items to tackle first. You can order your credit report directly from each of the two bureaus:
* Equifax
* TransUnion
Check your credit report for errors and fraudulent accounts as well. Errors can bring your credit score down. If something is inaccurate, dispute it, and fix the problem. Each of the reporting agencies offer information on disputing inaccurate information. This can be one of the easiest ways to give your credit score a little bump higher. Don’t forget to bring fraudulent accounts to the attention of the credit bureau and have them removed. If you are concerned about fraudulent accounts and identity theft, can place a freeze on your credit to avoid further identity theft problems. Each bureau has its own procedures, and you can learn more about how to place a credit freeze on your report by visiting the bureaus’ web sites. Understand that a freeze needs to be placed with each bureau individually.
Arrange to Catch Up on Your Payments
Payment history accounts for the largest factor affecting your credit score. If you are behind on your payments, you won’t be able to improve your credit situation. Try to bring all of your accounts up to date. If you can’t afford to bring everything up to date at once, you can contact your creditors and work out a payment plan. Be up-front when you contact your creditors, explaining your situation and letting them know that you want to pay your obligation. Let your creditors know how much you can pay, and how long you expect to pay it. In many cases, it’s possible to work out an arrangement that all parties can live with.
You can also seek the services of a legitimate credit counseling agency to help you create a plan. Credit Counseling Canada - has some good information on managing your debt, contacting creditors and finding accredited credit counselors.
Pay Your Bills on Time Moving Forward
Going forward, pay your bills on time. This includes non-credit bills. Missed utility payments and late rent payments can be reported to the credit bureaus. Because payment history is so important, establishing a reliable pattern of timely payment is vital to rebuilding your credit. At the very least, you want to avoid reports that you are missing payments, or paying habitually late. Consider setting up automatic withdrawals for the minimum amounts in order to avoid missing payments in the future.
Try to Avoid Closing Credit Card Accounts
When possible, avoid closing credit card accounts. The longer your credit history, the better your score. However, if you are very far behind in your payments, you may not have a choice. A payment plan may require you to cancel your credit card. If possible, though, keep your older accounts so that you have a substantial credit history on your side. If you're at risk of having your account closed by the credit grantor or you feel you must close your card, initiate the process yourself by contacting the credit card company and have them close it at your, "the Customers Request" this reflects more favourably to lenders and other credit grantors when reviewing your credit report in the future.
Pay Down Debt
The second most important factor in your credit score is credit utilization. Your credit utilization is a measure of how much debt you have. It is expressed as a portion of the available credit on each credit facility you are using. If you have a total credit availability of $10,000, and you are using $7,500 of it, your credit utilization is 75%.
If you are using a great deal of your available credit, it can count against you. Create a plan to pay down your debt a little faster. Honestly evaluate your expenses and cut back. Use the money you save to reduce your debt. Try to get your credit utilization down to 30% or less. At the very least 60%. If you can reduce your debt, the credit utilization portion of your score will improve and help your credit overall. Another strategy for reducing credit utilization on a single credit card is by taking out a second credit card and transfer a portion of the balance using balance transfer promos by other credit card companies. This will help your utilization score while you're paying down your credit card balances. The additional credit facility will also help build your credit history provided you follow these steps for rebuilding your credit. Failure to do so could actually compound any negative impact on your credit history.
Use a Secured Credit Card
One of the best ways to quickly build a payment history is to use a credit card. A secured credit card can help with this step if your poor credit precludes you from qualifying for a “regular” credit card. A secured card requires that you have equity in your home linked as collateral or a security deposit with the credit card issuer. Because the money is already there, it is easier to get approval for a secured card — especially when you have poor credit. In either case, your payments are reported to the bureaus every month, so it makes a big difference in showing that you pay regularly — and on time.
An unsecured credit card carries more positive weight, but you might not qualify for an unsecured card right now. If this is the case, begin using a secured credit card. Double-check to ensure that the card is truly a credit card. Prepaid debit cards look similar, but they are not the same thing and your payment history isn’t reported to the credit bureaus. Ask the secured card issuer if your payments will be reported, and only use a card that will report to bureaus.
After a few months, ask if your secured card can be “upgraded” to an unsecured card. If you stay within your balance, and make your payments on time, it should be possible to transform your secured card into an unsecured card. This will also give your credit score a bit of a boost.
Remember, though, that any credit card isn’t an excuse to spend more money. Whether you get a secured card or use an unsecured card, getting a card just to “free up” more money that you don’t actually have to spend out of control won’t help you in the long run. You have to keep a tight rein on your spending. If you can’t change your habits so that you are in control of your spending, don’t get a credit card, secured or unsecured.
(Download my HT Secured Visa Application)
Obtain an Installment Loan
Now that you have a secured credit card and are on your way to improving your payment history, you can try to obtain other loans. Part of your credit score is based on the types of account you have. There are two main types of account: rotating and installment. A rotating credit account is like a credit card or a home equity line of credit, where you have an available limit and you free up more funds as you pay down the loan. An installment loan has a set term and a set payment. Auto loans and mortgages are installment loans.
It’s important to be careful with this step, though. If you apply for too many loans, it can damage your score. Instead, you need to plan your credit applications carefully. Start with a small installment loan. You might be able to get a small, low-balance installment loan from your bank. It might also be possible (if you are looking for a car) to get an inexpensive car from a dealer that specializes in customers with poor credit. Your small loan will probably have a relatively high interest rate, so plan to borrow a small amount, and keep the loan term short.
Your installment loan will show diversity in your account types and help your credit score. As you apply, though, keep it targeted. If you shop around, do so over the course of a few days, and your inquiries will be clustered together and considered one inquiry.
Debt Consolidation Mortgage
Sometimes life events can cause you to get into a position where you may have maximized credit balances on several high interest rate credit cards and payments, even keeping up minimum payments can be overwhelming. Rather than being late or defaulting on payments altogether consider a debt consolidation mortgage to ease the burden of high interest payments. If you own your own home and you have built up some equity, you may be able to tap into this equity either through refinancing or a second mortgage to payout the higher interest card cards. Interest payments on a secured mortgage loan are typically a fraction of what they are on a credit card. The reduced payments will help you make payments and at the same time help build your credit history if done correctly. (Apply free, online for a debt consolidation mortgage loan with me)
Maintain a Current Credit History
When many people first attempt to start rebuilding their credit they make the mistake of cancelling all their credit cards and paying off all loans so they have no credit at all. This strategy actually has a negative impact when applying for future credit.
Try maintaining at least two active facilities of credit, i.e.credit cards, consumer loans. in addition to your mortgage, three is better. These are known as Trade Lines on a credit bureau report. Loans and credit cards for a financial institution are always best for bettering your credit score.
When it comes to applying for a new mortgage or refinancing an existing mortgage, lenders not only look at credit scores but the number of active trade lines you have with a 12 month or more credit history. You may have a great credit score but if you haven't any recent credit history you risk the likelihood of being turned down for a mortgage or at the least paying a higher interest rate.
Practice Good Financial Habits
It can take 60 to 90 days or longer for you to start seeing improvement in your credit score. In some cases, depending on how bad the situation is, it can take two or three years to see solid improvement to your credit history. As a result, it’s important to change your financial habits so that you reduce the chances of poor credit in the future.
Develop the good financial habits of living within your means, setting aside money in your emergency fund, and saving for the future. That way, you’ll be less inclined to skip payments, and you’ll have something to fall back on if you run into financial trouble. Keep with the good habits you formed while rebuilding your credit, and it will be easier to maintain your new, better credit history.
Rebuilding Your Credit Is Worth Your Patience
Follow the steps listed above, and you will be well on your way to a credit score of more than 700. Don’t forget to show patience, though. Credit improvement doesn’t happen overnight. Depending on how bad your credit is, it can take years to achieve excellent credit. But, if you keep at it, you will be rewarded with better rates, and thousands of dollars in interest savings.
Banks turning you down? Creditors on your back? Contact me about debt consolidation solutions that work for you.
Steven Porter is a licensed Mortgage Agent with Mortgage Architects
Steven can be reached through his website at www.1800Mortgages.ca or calling 1-905-875-2582
Many lenders are also wary of those with a credit rating also known as a Beacon score of between 620 and 679. You might qualify for a loan, but you won’t get the best terms; instead, you are likely to pay a higher interest rate, costing you hundreds – or thousands – of dollars over the life of the loan. Until you achieve a good score of 680 to 739, you will likely pay the price. And if you want the best terms on some loans (particularly mortgages), you need to achieve an excellent credit score of 740 or more.
Most of us could use a little improvement in our scores. If you have average credit, you might want to bump it into the “good” range. Someone with good credit might want a credit score upgrade to an “excellent” rating. And, if your credit rating is poor, it’s especially important that you work to improve your situation.
Rebuilding your credit, whether you have been through a bankruptcy, consumer proposal or whether you have made mistakes with your finances, doesn’t have to be complicated. As long as you have patience and create a plan, you can rebuild your credit and eventually obtain an excellent credit rating.
Check Your Credit Report
Know where you are at financially. Check your credit report to see exactly where you need to improve. Do you have a lot of missed or late payments? Is your debt utilization too high? These clues can help you figure out what items to tackle first. You can order your credit report directly from each of the two bureaus:
* Equifax
* TransUnion
Check your credit report for errors and fraudulent accounts as well. Errors can bring your credit score down. If something is inaccurate, dispute it, and fix the problem. Each of the reporting agencies offer information on disputing inaccurate information. This can be one of the easiest ways to give your credit score a little bump higher. Don’t forget to bring fraudulent accounts to the attention of the credit bureau and have them removed. If you are concerned about fraudulent accounts and identity theft, can place a freeze on your credit to avoid further identity theft problems. Each bureau has its own procedures, and you can learn more about how to place a credit freeze on your report by visiting the bureaus’ web sites. Understand that a freeze needs to be placed with each bureau individually.
Arrange to Catch Up on Your Payments
Payment history accounts for the largest factor affecting your credit score. If you are behind on your payments, you won’t be able to improve your credit situation. Try to bring all of your accounts up to date. If you can’t afford to bring everything up to date at once, you can contact your creditors and work out a payment plan. Be up-front when you contact your creditors, explaining your situation and letting them know that you want to pay your obligation. Let your creditors know how much you can pay, and how long you expect to pay it. In many cases, it’s possible to work out an arrangement that all parties can live with.
You can also seek the services of a legitimate credit counseling agency to help you create a plan. Credit Counseling Canada - has some good information on managing your debt, contacting creditors and finding accredited credit counselors.
Pay Your Bills on Time Moving Forward
Going forward, pay your bills on time. This includes non-credit bills. Missed utility payments and late rent payments can be reported to the credit bureaus. Because payment history is so important, establishing a reliable pattern of timely payment is vital to rebuilding your credit. At the very least, you want to avoid reports that you are missing payments, or paying habitually late. Consider setting up automatic withdrawals for the minimum amounts in order to avoid missing payments in the future.
Try to Avoid Closing Credit Card Accounts
When possible, avoid closing credit card accounts. The longer your credit history, the better your score. However, if you are very far behind in your payments, you may not have a choice. A payment plan may require you to cancel your credit card. If possible, though, keep your older accounts so that you have a substantial credit history on your side. If you're at risk of having your account closed by the credit grantor or you feel you must close your card, initiate the process yourself by contacting the credit card company and have them close it at your, "the Customers Request" this reflects more favourably to lenders and other credit grantors when reviewing your credit report in the future.
Pay Down Debt
The second most important factor in your credit score is credit utilization. Your credit utilization is a measure of how much debt you have. It is expressed as a portion of the available credit on each credit facility you are using. If you have a total credit availability of $10,000, and you are using $7,500 of it, your credit utilization is 75%.
If you are using a great deal of your available credit, it can count against you. Create a plan to pay down your debt a little faster. Honestly evaluate your expenses and cut back. Use the money you save to reduce your debt. Try to get your credit utilization down to 30% or less. At the very least 60%. If you can reduce your debt, the credit utilization portion of your score will improve and help your credit overall. Another strategy for reducing credit utilization on a single credit card is by taking out a second credit card and transfer a portion of the balance using balance transfer promos by other credit card companies. This will help your utilization score while you're paying down your credit card balances. The additional credit facility will also help build your credit history provided you follow these steps for rebuilding your credit. Failure to do so could actually compound any negative impact on your credit history.
Use a Secured Credit Card
One of the best ways to quickly build a payment history is to use a credit card. A secured credit card can help with this step if your poor credit precludes you from qualifying for a “regular” credit card. A secured card requires that you have equity in your home linked as collateral or a security deposit with the credit card issuer. Because the money is already there, it is easier to get approval for a secured card — especially when you have poor credit. In either case, your payments are reported to the bureaus every month, so it makes a big difference in showing that you pay regularly — and on time.
An unsecured credit card carries more positive weight, but you might not qualify for an unsecured card right now. If this is the case, begin using a secured credit card. Double-check to ensure that the card is truly a credit card. Prepaid debit cards look similar, but they are not the same thing and your payment history isn’t reported to the credit bureaus. Ask the secured card issuer if your payments will be reported, and only use a card that will report to bureaus.
After a few months, ask if your secured card can be “upgraded” to an unsecured card. If you stay within your balance, and make your payments on time, it should be possible to transform your secured card into an unsecured card. This will also give your credit score a bit of a boost.
Remember, though, that any credit card isn’t an excuse to spend more money. Whether you get a secured card or use an unsecured card, getting a card just to “free up” more money that you don’t actually have to spend out of control won’t help you in the long run. You have to keep a tight rein on your spending. If you can’t change your habits so that you are in control of your spending, don’t get a credit card, secured or unsecured.
(Download my HT Secured Visa Application)
Obtain an Installment Loan
Now that you have a secured credit card and are on your way to improving your payment history, you can try to obtain other loans. Part of your credit score is based on the types of account you have. There are two main types of account: rotating and installment. A rotating credit account is like a credit card or a home equity line of credit, where you have an available limit and you free up more funds as you pay down the loan. An installment loan has a set term and a set payment. Auto loans and mortgages are installment loans.
It’s important to be careful with this step, though. If you apply for too many loans, it can damage your score. Instead, you need to plan your credit applications carefully. Start with a small installment loan. You might be able to get a small, low-balance installment loan from your bank. It might also be possible (if you are looking for a car) to get an inexpensive car from a dealer that specializes in customers with poor credit. Your small loan will probably have a relatively high interest rate, so plan to borrow a small amount, and keep the loan term short.
Your installment loan will show diversity in your account types and help your credit score. As you apply, though, keep it targeted. If you shop around, do so over the course of a few days, and your inquiries will be clustered together and considered one inquiry.
Debt Consolidation Mortgage
Sometimes life events can cause you to get into a position where you may have maximized credit balances on several high interest rate credit cards and payments, even keeping up minimum payments can be overwhelming. Rather than being late or defaulting on payments altogether consider a debt consolidation mortgage to ease the burden of high interest payments. If you own your own home and you have built up some equity, you may be able to tap into this equity either through refinancing or a second mortgage to payout the higher interest card cards. Interest payments on a secured mortgage loan are typically a fraction of what they are on a credit card. The reduced payments will help you make payments and at the same time help build your credit history if done correctly. (Apply free, online for a debt consolidation mortgage loan with me)
Maintain a Current Credit History
When many people first attempt to start rebuilding their credit they make the mistake of cancelling all their credit cards and paying off all loans so they have no credit at all. This strategy actually has a negative impact when applying for future credit.
Try maintaining at least two active facilities of credit, i.e.credit cards, consumer loans. in addition to your mortgage, three is better. These are known as Trade Lines on a credit bureau report. Loans and credit cards for a financial institution are always best for bettering your credit score.
When it comes to applying for a new mortgage or refinancing an existing mortgage, lenders not only look at credit scores but the number of active trade lines you have with a 12 month or more credit history. You may have a great credit score but if you haven't any recent credit history you risk the likelihood of being turned down for a mortgage or at the least paying a higher interest rate.
Practice Good Financial Habits
It can take 60 to 90 days or longer for you to start seeing improvement in your credit score. In some cases, depending on how bad the situation is, it can take two or three years to see solid improvement to your credit history. As a result, it’s important to change your financial habits so that you reduce the chances of poor credit in the future.
Develop the good financial habits of living within your means, setting aside money in your emergency fund, and saving for the future. That way, you’ll be less inclined to skip payments, and you’ll have something to fall back on if you run into financial trouble. Keep with the good habits you formed while rebuilding your credit, and it will be easier to maintain your new, better credit history.
Rebuilding Your Credit Is Worth Your Patience
Follow the steps listed above, and you will be well on your way to a credit score of more than 700. Don’t forget to show patience, though. Credit improvement doesn’t happen overnight. Depending on how bad your credit is, it can take years to achieve excellent credit. But, if you keep at it, you will be rewarded with better rates, and thousands of dollars in interest savings.
Banks turning you down? Creditors on your back? Contact me about debt consolidation solutions that work for you.
Steven Porter is a licensed Mortgage Agent with Mortgage Architects
Steven can be reached through his website at www.1800Mortgages.ca or calling 1-905-875-2582
Monday, 25 July 2016
Federal Regulator Tightens Up
On how borrowers may fare:
Mortgage applicants, particularly foreign borrowers and self-employed applicants who don’t earn a traditional T4’d salary, should expect to be asked for more income documentation (e.g., tax documents, pay statements, bank account statements, etc.)
Some homeowners who can’t prove income in the traditional manner will be pushed into the arms of non-federally regulated lenders (credit unions, mortgage investment corporations and private lenders).
In turn, more of those borrowers will be forced to pay interest rate premiums, as federally regulated lenders have traditionally provided the lowest cost of borrowing in this market.
Lenders will make fewer debt-ratio exceptions. As a result, a small percentage of borrowers will see their requested loan sizes cut back.
In certain cases, homeowners with rental income will not be able to use as much of that income to qualify for their mortgage.
Lenders may no longer be able to rely on the 5-year posted qualifying rate (currently 4.74%) when measuring a borrower’s debt ratios. If this qualifying rate is raised, it will further restrict credit (maximum loan amounts) for borrowers with above-average debt loads.
Some lenders may start calculating and relying on more conservative lending values, as opposed to normal appraised values. This could slightly reduce the equity available to homeowners, a key consideration for those who want to refinance up to 80% of their property’s value (the current refi limit for prime mortgages).
Allow yourself choice. Contact a Mortgage Broker. We work for you.
- Posted by Steven Porter, Mortgage Agent - Mortgage Architects
Steven can be reached through his website at www.1800Mortgages.ca
Mortgage applicants, particularly foreign borrowers and self-employed applicants who don’t earn a traditional T4’d salary, should expect to be asked for more income documentation (e.g., tax documents, pay statements, bank account statements, etc.)
Some homeowners who can’t prove income in the traditional manner will be pushed into the arms of non-federally regulated lenders (credit unions, mortgage investment corporations and private lenders).
In turn, more of those borrowers will be forced to pay interest rate premiums, as federally regulated lenders have traditionally provided the lowest cost of borrowing in this market.
Lenders will make fewer debt-ratio exceptions. As a result, a small percentage of borrowers will see their requested loan sizes cut back.
In certain cases, homeowners with rental income will not be able to use as much of that income to qualify for their mortgage.
Lenders may no longer be able to rely on the 5-year posted qualifying rate (currently 4.74%) when measuring a borrower’s debt ratios. If this qualifying rate is raised, it will further restrict credit (maximum loan amounts) for borrowers with above-average debt loads.
Some lenders may start calculating and relying on more conservative lending values, as opposed to normal appraised values. This could slightly reduce the equity available to homeowners, a key consideration for those who want to refinance up to 80% of their property’s value (the current refi limit for prime mortgages).
Allow yourself choice. Contact a Mortgage Broker. We work for you.
- Posted by Steven Porter, Mortgage Agent - Mortgage Architects
Steven can be reached through his website at www.1800Mortgages.ca
Renovation spending expected to rise in 2016 as people just can’t afford to move
Housing gridlock — that’s what realtors call it. Affordability issues leave you stuck in your existing home, but looking for a better living space.
About the only move left for Canadians demanding a better home has been to renovate the one they have, which has led to record levels of spending on home improvement. A new survey from Canadian Imperial Bank of Commerce out Wednesday suggests that Canadians are now turning their attention to landscaping — a renovation that doesn’t do much for the appreciation of home values.
The findings from the bank might be another clear sign that Canadians are settling into their current houses because of the state of the market, which is increasingly being choked by a lack of affordability.
“The shift in focus from indoors to outdoors is surprising,” said Barry Gollom, vice-president, mortgages and lending, with CIBC.
Between May 19 and 25, 2016, Angus Reid surveyed 2,129 people online about their renovation plans. The top project was basic maintenance, cited by 54 per cent of respondents, down slightly from 55 per cent in 2015. The big jump was in landscaping, with 42 per cent of respondents planning some type of project, up from 25 per cent a year ago.
Gollom said “landscaping, patio and deck,” is a growing phenomenon and might indicate that people have spent so much money inside their house, that they are now turning their attention to the outside.
Separately, Altus Group has noted that renovation spending in 2014 was $20 billion more than was spent on new homes that year. In 2015, Canadians spent $70.1 billion on renos and Altus forecasts that figure to climb to $71.4 billion this year.
The CIBC survey backs that up, with the average renovation project coming in at $13,017, up from the $12,293 average in 2015, although the bank says only 37 per cent of Canadian homeowners plan to renovate this year versus 40 per cent in 2015.
Bathroom renovations were cited by 33 per cent of respondents, down from 40 per cent in 2015. Only 26 per cent plan to update a kitchen in 2016 versus 31 per cent who said they would in 2015.
“I think the shift has gone from seeing renovation as an investment — the return you see from a bathroom or a kitchen tends to be much higher than on landscaping,” said Gollom. “I think there is focus on quality of life versus the return.”
Interestingly enough, renovation spending is highest in struggling Alberta, with the average homeowner planning a project worth an average $22,951, up from $13,520 a year earlier. In British Columbia the average project is expected to drop to $15,522 from $16,639, while in Ontario panelists said their spending would drop to $13,878 from $15,487 a year earlier.
Benjamin Tal, the deputy chief economist with CIBC, says renovation spending has “mostly stabilized” at this point but at a “very high level” he doesn’t expect to decline very soon.
“At first you had a lot of pent up demand from the recession in 2000 and that was behind much of the activity in the first half of the last decade, but in the second half after 2008-2009 you had the beginning of a new trajectory,’ said Tal, adding that the current renovation market is driven by housing prices. “Basically, people are unable to buy what they want.”
The lack of available product has been cited by real estate boards in both Toronto and Vancouver, which have been the driving forces of the housing boom in Canada. In May, detached home prices rose 36.9 per cent from a year earlier in Metro Vancouver to $1,513,800 and in the Greater Toronto Area detached home prices rose 18.9 per cent during the same period to $986,691.
Brad Henderson, chief executive of Sotheby’s International Realty Canada, said he can’t say exactly how directly this housing gridlock is leading to renovation, but it’s part of what is driving home repairs.
“Whilst people are fascinated by the price of homes, more and more people are not selling because, by the time I sell, pay commissions, pay land transfer tax, and go through the hassle of moving I may not be any better off than I am. So, what I’ll do is renovate and just stay where I am,” he says. “As more and more people choose not to put homes on the market it just encourages upward pressure on prices.”
- Financial Post
Find out how to easily finance your home renovation project here
- Repost by Steven Porter, Mortgage Agent - Mortgage Architects
Steven can be reached through his website at www.1800Mortgages.ca
About the only move left for Canadians demanding a better home has been to renovate the one they have, which has led to record levels of spending on home improvement. A new survey from Canadian Imperial Bank of Commerce out Wednesday suggests that Canadians are now turning their attention to landscaping — a renovation that doesn’t do much for the appreciation of home values.
The findings from the bank might be another clear sign that Canadians are settling into their current houses because of the state of the market, which is increasingly being choked by a lack of affordability.
“The shift in focus from indoors to outdoors is surprising,” said Barry Gollom, vice-president, mortgages and lending, with CIBC.
Between May 19 and 25, 2016, Angus Reid surveyed 2,129 people online about their renovation plans. The top project was basic maintenance, cited by 54 per cent of respondents, down slightly from 55 per cent in 2015. The big jump was in landscaping, with 42 per cent of respondents planning some type of project, up from 25 per cent a year ago.
Gollom said “landscaping, patio and deck,” is a growing phenomenon and might indicate that people have spent so much money inside their house, that they are now turning their attention to the outside.
Separately, Altus Group has noted that renovation spending in 2014 was $20 billion more than was spent on new homes that year. In 2015, Canadians spent $70.1 billion on renos and Altus forecasts that figure to climb to $71.4 billion this year.
The CIBC survey backs that up, with the average renovation project coming in at $13,017, up from the $12,293 average in 2015, although the bank says only 37 per cent of Canadian homeowners plan to renovate this year versus 40 per cent in 2015.
Bathroom renovations were cited by 33 per cent of respondents, down from 40 per cent in 2015. Only 26 per cent plan to update a kitchen in 2016 versus 31 per cent who said they would in 2015.
“I think the shift has gone from seeing renovation as an investment — the return you see from a bathroom or a kitchen tends to be much higher than on landscaping,” said Gollom. “I think there is focus on quality of life versus the return.”
Interestingly enough, renovation spending is highest in struggling Alberta, with the average homeowner planning a project worth an average $22,951, up from $13,520 a year earlier. In British Columbia the average project is expected to drop to $15,522 from $16,639, while in Ontario panelists said their spending would drop to $13,878 from $15,487 a year earlier.
Benjamin Tal, the deputy chief economist with CIBC, says renovation spending has “mostly stabilized” at this point but at a “very high level” he doesn’t expect to decline very soon.
“At first you had a lot of pent up demand from the recession in 2000 and that was behind much of the activity in the first half of the last decade, but in the second half after 2008-2009 you had the beginning of a new trajectory,’ said Tal, adding that the current renovation market is driven by housing prices. “Basically, people are unable to buy what they want.”
The lack of available product has been cited by real estate boards in both Toronto and Vancouver, which have been the driving forces of the housing boom in Canada. In May, detached home prices rose 36.9 per cent from a year earlier in Metro Vancouver to $1,513,800 and in the Greater Toronto Area detached home prices rose 18.9 per cent during the same period to $986,691.
Brad Henderson, chief executive of Sotheby’s International Realty Canada, said he can’t say exactly how directly this housing gridlock is leading to renovation, but it’s part of what is driving home repairs.
“Whilst people are fascinated by the price of homes, more and more people are not selling because, by the time I sell, pay commissions, pay land transfer tax, and go through the hassle of moving I may not be any better off than I am. So, what I’ll do is renovate and just stay where I am,” he says. “As more and more people choose not to put homes on the market it just encourages upward pressure on prices.”
- Financial Post
Find out how to easily finance your home renovation project here
- Repost by Steven Porter, Mortgage Agent - Mortgage Architects
Steven can be reached through his website at www.1800Mortgages.ca
Friday, 27 May 2016
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:
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.
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.”
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.
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.”
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.”
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.
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.”
“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
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?
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?
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?
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?
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?
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?
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?
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?
“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
Friday, 15 January 2016
How to buy and sell a home at the same time
You own a home now, but it’s time to make a change. If you’re moving up or downsizing, you probably have questions about how it all works. That is, the logistics of buying another home while you still own your existing property.
Here are 10 facts you need to know about navigating through the two transactions at once - to make the move as smooth as possible...
Get the facts on your existing home
What is your home worth?
Find out the value of your home by asking a Realtor to provide you with a detailed market evaluation. Alternatively, get a detailed estimate of the value by paying for an appraisal by a licensed appraiser. This will give you an idea of what residual funds you will net from the sale of your existing home which will determine how to structure a mortgage for the new home. Be conservative when working with the down payment amount so you have some wiggle room when negotiating the sale of your current home.
Three questions to ask
After you have determined what new mortgage amount you will require, you will then need to contact your current lender to ask them the following 3 questions...
1) Is the mortgage portable to a new property?
If it is and you are moving up, can the new mortgage rate be “blended” - and what will that new rate be in order to avoid paying a payout penalty?
2) If you were to pay the existing mortgage out in order to get a better rate, what would the penalty be?
Be advised that you are required to qualify for any new mortgage whether you “port” the existing mortgage to a new property or get a brand new one, as you are effectively only “porting” the terms of the mortgage
3) How are you going to sell your current home?
Options available to sell your home include for sale by owner, by a Realtor, or somewhere in between the two. I recommend using the services of a Realtor as I personally would like to leave any showings and negotiations with any potential buyers in the hands of a professional.
Ask a Mortgage Professional, Steven Porter, Mortgage Agent, Mortgage Architects
Financing your next home
Securing a pre-approval
Based on your initial findings about your current residence, I recommend obtaining a pre-approval for your next purchase as this will give you an idea of what kind of requirements you’ll need to meet in order to be approved for your next mortgage.
Quick, easy on-line mortgage pre-approval
What if your existing home hasn't sold by the time you take possession of the new home?
Your new mortgage may contain a condition to confirm your existing place has sold. This could be for either down payment or qualifying purposes, or both. See if a back-up plan is possible in case your existing home does not sell by the time you take possession of your new home. Your mortgage professional can work through a few potential scenarios with you until you’re comfortable with the options you have for all possible outcomes.
Investigate the "Home Sale Guarantee" offered by some professional Realtors
Keeping both homes, with one as a rental property
Perhaps you are looking into the possibility of keeping your current home and turning it into a rental property. Some lenders will allow this as long as you can qualify to carry both properties. Talk to your mortgage professional about the option of including potential rental income to help you qualify. Be aware that lenders tend to calculate the inclusion of rental income differently, so if you don’t qualify with your current lender, check others. If you are leaning to keeping both properties, ensure you explore all options in accessing funds for the down payment on the new home. For example, is a gift from a family member a possibility? Do you have sufficient funds in savings? Can you look at refinancing your current residence to access the equity?
What down payment requirements and proof do you need to provide?
If the down payment is coming from anywhere other than the sale of your existing home, the requirements are pretty straightforward; your lender will look for the paper trail to support the source of the funds being used. If the down payment funds are coming from the sale of a property, you’ll be asked to confirm what your equity position is via a current mortgage statement, as well as a copy of a fully-executed sale agreement for your current residence, along with all condition removals related to that contract.
The qualification process
Qualifying for your next home will be similar to getting approved the first time. Your lender will be looking at the usual application aspects - like income, credit, down payment, and the property you’re financing. If your income or credit profile has changed drastically, such as you becoming self-employed or your credit not being as good as it used to be, be sure to have a conversation with your mortgage broker about how the qualifying process could differ from the first time around.
Consider what you'll need for supporting documents
While many of our mortgage rules have changed, document requirements likely haven’t changed too much since you last qualified. What you’ll be asked to provide will be dependent on your current financial profile. Your mortgage professional, along with a mortgage pre-approval, will give you an idea of what you’ll be asked to provide in terms of supporting documents.
What to do when you need bridge financing
If the possession date for the sale property is after your purchase possession date, and you need those funds for a down payment, there is a solution known as bridge or interim financing. The lender will not only finance your mortgage, they will also give you a short-term loan to cover the down payment. This way the seller gets their money and you get possession of your new home even though your old home is still technically yours. Once your existing place has sold, your lender will recover the funds they lent to cover your down payment. It is important to note that you must have an unconditional or firm offer for your existing home in order to qualify for bridge financing. Be aware that not all lenders offer bridge or interim financing and the terms and costs for this service can vary, so double check the conditions before you commit.
Moving confidently from one home to the next
It can be stressful to sell and buy simultaneously. There are a lot of things that need to go right in order for everything to go smoothly for you. The best way to ensure a smooth move is to do your research first. Explore your options until you find one that allows you to confidently move forward into your next home while leaving the last one fondly behind.
Reprint - GoldenGirlFinance
For all your mortgage needs contact Steven Porter, Mortgage Agent/Planner, Mortgage Architects - 1-905-875-2582 or steven.porter@mtgarc.ca
Here are 10 facts you need to know about navigating through the two transactions at once - to make the move as smooth as possible...
Get the facts on your existing home
What is your home worth?
Find out the value of your home by asking a Realtor to provide you with a detailed market evaluation. Alternatively, get a detailed estimate of the value by paying for an appraisal by a licensed appraiser. This will give you an idea of what residual funds you will net from the sale of your existing home which will determine how to structure a mortgage for the new home. Be conservative when working with the down payment amount so you have some wiggle room when negotiating the sale of your current home.
Three questions to ask
After you have determined what new mortgage amount you will require, you will then need to contact your current lender to ask them the following 3 questions...
1) Is the mortgage portable to a new property?
If it is and you are moving up, can the new mortgage rate be “blended” - and what will that new rate be in order to avoid paying a payout penalty?
2) If you were to pay the existing mortgage out in order to get a better rate, what would the penalty be?
Be advised that you are required to qualify for any new mortgage whether you “port” the existing mortgage to a new property or get a brand new one, as you are effectively only “porting” the terms of the mortgage
3) How are you going to sell your current home?
Options available to sell your home include for sale by owner, by a Realtor, or somewhere in between the two. I recommend using the services of a Realtor as I personally would like to leave any showings and negotiations with any potential buyers in the hands of a professional.
Ask a Mortgage Professional, Steven Porter, Mortgage Agent, Mortgage Architects
Financing your next home
Securing a pre-approval
Based on your initial findings about your current residence, I recommend obtaining a pre-approval for your next purchase as this will give you an idea of what kind of requirements you’ll need to meet in order to be approved for your next mortgage.
Quick, easy on-line mortgage pre-approval
What if your existing home hasn't sold by the time you take possession of the new home?
Your new mortgage may contain a condition to confirm your existing place has sold. This could be for either down payment or qualifying purposes, or both. See if a back-up plan is possible in case your existing home does not sell by the time you take possession of your new home. Your mortgage professional can work through a few potential scenarios with you until you’re comfortable with the options you have for all possible outcomes.
Investigate the "Home Sale Guarantee" offered by some professional Realtors
Keeping both homes, with one as a rental property
Perhaps you are looking into the possibility of keeping your current home and turning it into a rental property. Some lenders will allow this as long as you can qualify to carry both properties. Talk to your mortgage professional about the option of including potential rental income to help you qualify. Be aware that lenders tend to calculate the inclusion of rental income differently, so if you don’t qualify with your current lender, check others. If you are leaning to keeping both properties, ensure you explore all options in accessing funds for the down payment on the new home. For example, is a gift from a family member a possibility? Do you have sufficient funds in savings? Can you look at refinancing your current residence to access the equity?
What down payment requirements and proof do you need to provide?
If the down payment is coming from anywhere other than the sale of your existing home, the requirements are pretty straightforward; your lender will look for the paper trail to support the source of the funds being used. If the down payment funds are coming from the sale of a property, you’ll be asked to confirm what your equity position is via a current mortgage statement, as well as a copy of a fully-executed sale agreement for your current residence, along with all condition removals related to that contract.
The qualification process
Qualifying for your next home will be similar to getting approved the first time. Your lender will be looking at the usual application aspects - like income, credit, down payment, and the property you’re financing. If your income or credit profile has changed drastically, such as you becoming self-employed or your credit not being as good as it used to be, be sure to have a conversation with your mortgage broker about how the qualifying process could differ from the first time around.
Consider what you'll need for supporting documents
While many of our mortgage rules have changed, document requirements likely haven’t changed too much since you last qualified. What you’ll be asked to provide will be dependent on your current financial profile. Your mortgage professional, along with a mortgage pre-approval, will give you an idea of what you’ll be asked to provide in terms of supporting documents.
What to do when you need bridge financing
If the possession date for the sale property is after your purchase possession date, and you need those funds for a down payment, there is a solution known as bridge or interim financing. The lender will not only finance your mortgage, they will also give you a short-term loan to cover the down payment. This way the seller gets their money and you get possession of your new home even though your old home is still technically yours. Once your existing place has sold, your lender will recover the funds they lent to cover your down payment. It is important to note that you must have an unconditional or firm offer for your existing home in order to qualify for bridge financing. Be aware that not all lenders offer bridge or interim financing and the terms and costs for this service can vary, so double check the conditions before you commit.
Moving confidently from one home to the next
It can be stressful to sell and buy simultaneously. There are a lot of things that need to go right in order for everything to go smoothly for you. The best way to ensure a smooth move is to do your research first. Explore your options until you find one that allows you to confidently move forward into your next home while leaving the last one fondly behind.
Reprint - GoldenGirlFinance
For all your mortgage needs contact Steven Porter, Mortgage Agent/Planner, Mortgage Architects - 1-905-875-2582 or steven.porter@mtgarc.ca
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