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

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.

The solution to high interest credit payments

What Is a Debt Consolidation Mortgage? A debt consolidation mortgage is when you refinance your mortgage to incorporate all your high interest debts into one payment – your mortgage. Find an affordable home in need of TLC and transform it into that perfect home you always dreamed of; with new bathrooms, kitchen, and hardwood floors. Add the estimated costs of the renovation to your mortgage at the time of purchase to finance the entire renovation transformation without having to wait! Debt Consolidation Benefits • A much lower monthly interest rate that all your debts will now fall under • Lower monthly payments • The comfort and convenience of making only one monthly payment. • Improved credit score from making all your payments on time. Here’s an example showing the effect on your monthly payments:

Now all that’s left is to figure out precisely which solution is best for you, and wipe out all those high interest payments. You already have the mortgage, so if you also have some high interest debt you’d love to unload... Call me today!

Mortgage Architects	Steven Porter CRMS ABR SRES Agent Lic. No. M15001919 Mortgage Agent P 905-878-7213 C 905.875.2582 F 416-900-8227 Steven.Porter@mtgarc.ca Brokerage #10287 14 Martin Street, Milton, ON, L9T 2P9
	6505A Mississauga Road, Mississauga, ON, L5N 1A6 Privacy Policy

Mortgage lenders are getting creative to keep rates low, but here’s why homebuyers should beware

Online comparison shopping is changing everything from how we buy a new television set to how we select a mortgage, and it’s causing some mortgage lenders to get creative in order to compete.

Lenders are stripping away features of mortgages to get their rates lower,” says Steve Pipkey, co-founder of Spin Mortgage.

Consumers have always been keen on scoring a low mortgage rate, but the ease with which they can comparison shop via their computers, smartphones and tablets has created an even greater fixation on the headline number, above all else.

“The majority of our phone calls are about rates these days, whereas before it might have been more about, ’How can I get my money out fast?’ or ’What’s the quickest way to refinance my home?”’ says Bob Aggarwal, president of Canadalend.com.

Brokers say the push for low rates is not a bad thing, but it has led to some confusion. While mortgage contracts used to be fairly standardized, many of them now contain various conditions and clauses, and in some cases it’s hard for consumers to decipher the difference between various products.

“If you’re online trying to figure out what the rates are and why, good luck to you,” says Pipkey. “Some banks and brokers are better at disclosing the fine print than others.”

In some instances, in exchange for a lower rate, lenders are adding steeper penalties for paying off a mortgage early. By chasing those five extra basis points, buyers put themselves at risk of having to pay thousands more in penalties later on down the road, says Pipkey.

Prepayment privileges also allow borrowers to pay more than their regular mortgage payments without penalty in order to get out of debt faster. But some lenders may reduce how much money borrowers can repay in exchange for a rate reduction.

Pipkey says it’s not surprising that lenders are lowering their rates given how competitive the mortgage market has become.

“Mortgage originations are down and lenders are fighting for market share in the face of compressing margins,” he said.

Bill Whyte, senior vice-president and chief of member services at Meridian Credit Union, says it’s hard to attract clients unless you offer a competitive rate that will grab the attention of borrowers.
The credit union recently offered, for a limited time, an 18-month mortgage for an eye-grabbing 1.49 per cent.

“To our knowledge, when we offered it, 1.49 was the lowest in Canadian history,” said Whyte.
“It drove a ton of traffic to our contact centre, our website and our branches.”

However, many borrowers who phoned to discuss the offer ended up going for a five-year mortgage at a slightly higher rate instead, he said.

“In a lot of cases the five-year rate fit them better, and some of that initial interest in 18-month was diverted to five-year,” he said, adding that many Canadian borrowers are looking to lock in at today’s rock-bottom interest rates before they climb higher.
Alexandra Posadzki, The Canadian Press

How much you need to earn to buy a house in every major Canadian city

Many say property is the best investment you can make. Bursting housing bubbles and mortgage scandals aside, they’re usually right.

The price of making that investment varies widely in Canada, depending on where you live. We looked at how much you need to earn to buy a house in every major Canadian city.

To get these numbers, we consulted Adrian Williams. He explained that to calculate the income required you need to know the purchase price, down payment, rate, utilities – mortgage qualifying must include a minimum of $100 a month for heating costs – and taxes.

We got the average purchase price per city from the Canadian Real Estate Association, and Williams provided the property tax rates. At his suggestion we used a 2.99% interest rate, which is the average qualifying rate for a 5-year fixed term. We used a down payment of 10% of the purchase price and calculated $100 a month for utilities.

According to Williams, “Other factors that will be included with mortgage qualification are the total monthly payment obligations from credit card, LOC’s, personal and car loans, car lease and other types of credit that require a monthly payment.”

Here is what you need to earn to buy a house in every major Canadian market. (Numbers are rounded to the nearest dollar.)

Toronto

Average price: $587,505

Monthly mortgage payment: $2,560

Property tax: $354

Income required: $113,009

Vancouver

Average price: $819,336

Monthly mortgage payment: $3,570

Property tax: $251

Income required: $147,023

Calgary

Average price: $465,047

Mortgage mortgage payment: $2,026

Property taxes: $236

Income required: $88,578

Edmonton

Average price: $365,520

Mortgage payment: $1,592

Property tax: $244

Salary required: $72,617

Regina

Average price: $331,161

Monthly mortgage payment: $1,443

Property tax: $378

Income required: $72,028

Saskatoon

Average price: $349,322

Monthly mortgage payment: $1,522

Property tax: $366

Income required: $74,546

Winnipeg

Average price: $270,605

Monthly mortgage payment: $1,179

Property tax: $274

Income required: $58,235

Ottawa

Average price: $357,887

Monthly mortgage payment: $1,559

Property tax: $336

Income required: $74,820.28

Montreal

Average price: $344,273

Monthly mortgage payment: $1,500

Property tax: $237

Income required: $68,884

Halifax

Average price: $264,447

Monthly mortgage payment: $1,152

Property tax: $266

Income required: $56,929

by  Elizabeth Bromstein

How can I protect myself from mortgage fraud?

To avoid unknowingly taking part in a mortgage fraud, be suspicious if you are:

• asked to say that you make more money than you really do
• asked to lie about whether you will live in a property or rent it out
• asked to sign documents that have blanks, or asked not to fill out certain sections of a form or document
• offered a fee for the use of your name and credit information
• discouraged from visiting the property, or having it appraised or inspected 

If a registered real estate professional commits mortgage fraud, The Real Estate Council of Ontario (RECO) can take away their registration or prosecute them.

See RECO’s website for more information on mortgage fraud.

Six Questions to Ask Before Refinancing

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

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

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

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

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

1. Do I Have Equity in My Home?

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

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

2. Do I Have Good Enough Credit?

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

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

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

3. What Are My Financial Goals?

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

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

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

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


How Long Do I Plan to Stay in This Home?

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

What Are the Terms of My Current Loan?

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

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

Do I Have a Second Mortgage or Line of Credit?

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

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

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

Retiring with a Mortgage?

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

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

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

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

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

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

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

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

Public Alert – Unlicensed Syndicated Mortgage Brokering Activity

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

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

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

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

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

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

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

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

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

Get a great mortgage rate.

And $5,000 in your pocket.

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

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*Excluded existing lender charges

Will you need to pay any additional costs?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

2 Reasons to Switch Mortgage Providers at Renewal Time

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

1. Switch for a Better Mortgage Rate

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

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

2. Switch for Better Prepayment Options

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

Example: 10% vs. 20% Prepayment Options

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

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

$1,107.00 x 10% = $110.70

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

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

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

$1,107.00 x 20% = $221.40 

$1,107.00 + $221.40 = $1,328.40 

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

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

How to Make the Switch

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

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

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

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

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

Property sales in Canada reach highest level since March 2010

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

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

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

Steven Porter

Self-employed? Navigating through the recent mortgage rule changes

  For years, the self-employed could count on getting a mortgage on the strength of their credit score, and on their word that they were earning enough from their business to repay the loan.

These days, because of rules brought in almost two years ago by the regulator of Canada’s chartered banks, borrowing money to buy a home has become harder for many of the country’s 2.75 million self-employed workers.

In the summer of 2012, the Office of the Superintendent of Financial Institutions introduced Guideline B-20, which required federally regulated banks to tighten their processes for approving mortgages and home equity lines of credit. As part of B-20, banks must now look more closely at incomes before approving a mortgage application.

This presents a problem for self-employed workers, who typically lower their taxable income by maximizing business expenses and personal deductions. Because of the discrepancy between what’s on their tax return and how much money they actually earn, self-employed workers have typically obtained their mortgage through “stated income” applications, which required a signed income declaration and proof of self-employment such as a business registration number or articles of incorporation.

Today, self-employed workers can still apply for a stated income mortgage at some banks, but under B-20 they can borrow only 65 per cent of the purchase value – 10 per cent less than what was allowed before B-20 – without requiring default insurance from Canada Mortgage Housing Corp., Genworth Canada or Canada Guaranty.

If you have less than 35-per-cent down payment, your mortgage now has to be insured, and insurers have specific guidelines that you need to meet. CMHC will allow a stated income application as long as you have been self-employed for less than three years. More than three years and you have to qualify according to your net taxable income.

So what can the self-employed do to improve their chances of qualifying for the mortgage they need, on terms that work for them?

• Providing complete and current financial and tax documents is critical. Which includes the latest notice of assessment from Canada Revenue Agency and financial statements from the past two years.
• Bank statements to show regular income going into your bank account may also be required.
• Make sure you are up-to-date with income and sales tax returns, and that you don’t owe taxes.
• The more information you can provide the a bank about your business the better it can help self-employed borrowers qualify for the mortgage they want.
• Certain lenders allow add backs of things like car expenses, capital cost allowance or housing expenses. these add backs may enable an applicant to qualify.
• Some lenders take a different approach to increase the mortgage eligibility of self-employed workers for example adding 15 per cent to reported income if the self-employed borrower provides financial statements showing deducted business expenses totalled 15 per cent or more.
• Note that credit unions are not affected by B-20 and many still extend a mortgage of up to 80 per cent of purchase value to stated-income applicants without the need for default insurance.
• For sole proprietors or owners of an unincorporated business, making the leap to incorporation may also help. Most banks prefer salary, and if you have a corporation you can pay yourself a salary. That may make it easier for a self-employed individual to qualify for a mortgage.

Incorporating could also reduce tax rates and allow the business owner to collect a higher salary or dividend payout.

Posted by Steven Porter, Broker  -  RE/MAX Aboutowne Realty Corp., Brokerage
based on a story in Globe & Mail titled More self-employed mortgage wall because of recent rule changes

Nest Egg: The lowdown on low down payments

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Hot markets and cold feet might keep some people out of the housing market, but a lack of upfront cash doesn’t have to be an obstacle. While it’s long been the convention in the industry to start with a 20% down payment, the availability of mortgage default insurance means ownership is still possible with as little as 5% down, as long as the buyer meets industry standards of income and creditworthiness.

“What mortgage insurance allows people to do is to get into the market with today’s prices, with today’s low interest rates, once they have determined that home ownership is right for them,” says Mary Stergiadis, principal for Ontario business development at Canada Mortgage and Housing Corp. The insurance repays lenders if a homeowner defaults on payment.

People with insured mortgages can take advantage of the same interest rates as those taking out conventional mortgages, she says. And the insurance doesn’t cost as much as some people think.

Here’s how it works: With 5% down, the insurance premium is 2.75% of the mortgage. On a $400,000 property with $20,000 down, the mortgage insurance premium would be $10,450. That would bring the total being borrowed to $390,450. Assuming a five-year closed at 3.75% amortized over 25 years, the monthly payment would be about $2,000, including less than $55 a month for the insurance. The same property with 20% down would have a monthly payment of $1,640.

“What consumers have to ask themselves is what $60,000 means to them in terms of savings,” Ms. Stergiadis says, referring to the amount needed to reach a 20% down payment for this property. “How long would it take to save that additional down payment? Where will home prices be within that time? Where will interest rates be?”
(But note that the tax on the premium — 8% in Ontario — cannot be amortized and is due on closing.)

The insurance rate goes down as the down payment goes up. For buyers with 10% down, for instance, the premium is 2%; with 15% down, it’s 1.75%.

A popular misconception is that this insurance applies only to the primary residence of the borrower. But it is also available for a second property, such as a home or condo in the city to cut a commute or to house an aging parent or a student. CMHC does not, however, insure recreational properties.

Private mortgage insurers, such as Genworth Canada and Canada Guaranty, also insure high-ratio mortgages. The rates offered match those of CMHC; consumers usually aren’t aware of differences, as lenders apply directly to the insurers once an offer has been made and accepted on a property.

Genworth estimates about 30% of Canadian mortgages are insured, down from historical levels of as high as 40%. That percentage tends to be lower in the GTA, says Jason Neziol, Genworth’s regional vice-president of sales for Ontario and the GTA. That’s because higher prices mean more people make larger down payments in order to quality for mortgage loans.

‘What mortgage insurance allows people to do is to get into the market with today’s prices, with today’s low interest rates, once they have determined that home ownership is right for them’

Mr. Neziol says private insurers play an important role in the market by providing more choice for lenders and helping to educate the public about options. “It gives options to consumers,” he says. “It’s good for lenders to have a choice in terms of what insurance providers would do.”

You don’t have to be a first-time buyer in order to qualify. Plus, even conventional mortgages, those with 20% or more down, can be insured. This can happen if a loan is slightly outside of a lender’s usual parameters.
And there can be a rental component. A buyer can purchase a duplex with 5% down, for instance, but must live in one unit. A 10% down payment is the norm for three- and four-unit properties, where one unit is owner-occupied and the others are rented out.

The point, Mr. Neziol says, is to be aware of the many options available.


Susan Smith, Special to National Post | 23/11/13 

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