Rent to Own Mortgage

A Rent to Own contract could be the answer for someone who is renting but is also having a hard time getting their down payment together. Rent to Own contracts usually are between 1 and 5 years long and can give the client the time they need to implement strategies on increasing their down payment or even improving their credit.  As one of the Top 3 Rated Mortgage Brokers in Vancouver, we would be more than happy to assist you with understanding Rent to Own Mortgages.

In the Lower Mainland, Rent to Own is becoming more popular as housing prices are increasing, and renting seems inevitable. In fact, there are properties that are being built with Rent to Own financing in mind.

Initially, the contract is signed just between the renter (the buyer) and the Landlord (the seller) that states an agreed price, length of time of Rent to Own, and market rent (typical rent of a similar property) with the excess going toward down payment (usually $200 – $400/month). The lender is not involved yet.

For example, market rent for your property goes for around $1000.00. You agree to pay the Landlord $1400.00/month. The extra $400/month goes into an account that the Landlord has in place for you for the down payment. This is a great example of  a Rent to Own situation.

Regardless of the lender, the Landlord must keep pristine records of the extra money coming in and can show the history of any excess deposit. When the Rent to Own is registered on title, there will be a clear indication as to how much of the monthly payments are directed toward the deposit.

The client will want to work with a team of property purchase professionals that will strategize Action Steps to make a seamless Rent to Own experience. The client`s team would be:

1. MORTGAGE PROFESSIONAL

• Get pre-approved! In the pre-approval process, the Mortgage Professional will be able to advise on improving credit or the need to increase employment income if need be.
• As well, the Mortgage Professional understands lender policies and guidelines for Rent to Own contracts and will be able to advise on how to properly set up the Rent to Own.

2. SOLICITOR/LAWYER

• Make sure that your lawyer is familiar with Rent to Own contracts and that they work closely with the Mortgage Professional who knows what the lender is going to expect. This relationship is very important and one that should not be overlooked.

The down payment continues to grow over the life of the Rent to Own contract. At any time, you can add lump payments to the down payment, simply by giving the Landlord a bigger rent check. Keep in mind, the Rent to Own contract could stipulate that the down payment is non-refundable. Make sure you read the fine print and work closely with your mortgage professional and lawyer so that you clearly understand the terms of your Rent to Own contract.

The bank does not get involved until the time the renter (the buyer) makes an offer to purchase to the Landlord (the seller). The person paying for the rent to own does not have to qualify for a mortgage at this point because the Landlord continues to carry the mortgage on the property.

Rent to Own Properties can also be facilitated through a company such as a condominium developer. For example, the developer could offer a Rent to Own contract when entering a rental lease with an owner-occupied property that the client wants to rent.

The client may be charged a contract fee upfront (for example $10,000) to enter the Rent to Own contract. At times all or a portion of this contract fee can be used toward the down payment pending on what has been negotiated within the Rent to Own contract.

Over the course of the Rent to Own some of the obstacles to financing you will consider are:

• How to improve your credit rating
• Consider applying for an RRSP loan to further establish credit and take advantage of tax benefits
• Consider refinancing any outstanding credit
• Consider job changes to increase employment income
• Consider other sources to increase down payment

Rent To Own contracts are more than just paying rent to the Landlord and applying the rent toward the purchase of the property. There are details that you need to know when entering into a Rent To Own Contract. If you need help setting up a Rent to Own contract or for more information regarding this topic please reach out.

GLM Mortgage | Dominion Lending Centres is here to walk your mortgage planning path with you. Give us a call at 604-259-1486 and find out what your mortgage options are!

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Mortgaging a Property via Assignment

Mortgaging a property via assignment is a contract provision included in some real estate transactions that allow the buyer to resell or transfer a property to another buyer before the deal’s closing date. As one of the Top 3 Rated Mortgage Brokers in Vancouver, we would be more than happy to assist you with understanding Mortgaging a Property Via Assignment.

This product was originally intended to give buyers a legal way of backing out of a purchase if for some reason their circumstances changed after they had put an offer on a property, instead of having to surrender their deposit. The clause was also meant to protect sellers, ensuring a sale would still go forward if another buyer could be found.

To qualify for a product like an Assigned Mortgage, there are some things you will want to first consider:

• Not all lenders offer to finance for Assignment Purchases
• Assignment Purchase products will contain the same features and conditions that you would expect of a traditional standard mortgage qualification
  • This means income and credit score requirements remain the same
• There will likely be additional documentation that will be required
  • Pertaining to the Purchase Contract and Contract of Assignment
• Some lenders will only finance on the original purchase price

The assignment clause allows real estate agents to sell a contract for a single property multiple times at increasingly higher prices as they make a commission on each transfer. Buyers in the middle also benefit by pocketing the difference between what they paid and the resale value. They also don’t pay any land-transfer taxes because the entire transaction happens before the deal officially closes, so the property is never technically in their possession.

The original seller receives less than what the property ends up being worth and the last buyer may be paying an inflated price, with the difference in value going to the real estate agent and the buyers in the middle.

The option of an Assigned Mortgage can be appealing to borrowers for a few different reasons:

1. Depending on how far along the process is, you could possibly be involved in choosing finishes of the property
2. Depending on your local market, you could score a good deal on an assignable property

The risk to individuals and developers, regardless of incorporation or not, is that the CRA is aggressive on assignments and will often investigate GST compliance long after the transaction has occurred. This leaves the taxpayer at high risk with a large tax liability if the sale of an assignment fee was not properly documented for GST purposes. As always, remember to consult a qualified tax professional with regards to your potential exposure and ensure that GST is reported correctly along the sequence of transactions.

Let’s look at this case study on Mortgaging a Property via Assignment together…

A real estate agent’s client reaches a deal to sell a property to an initial buyer for $1 million. The agent then takes that contract and resells it to a second buyer for $1.5 million. The agent in turn goes to a third and final buyer and sells the contract for $1.8 million.

For each transaction, the agent receives a commission. The initial seller receives $1 million minus the agent’s commission. The first buyer who bought the contract for the property for $1 million and sold it for $1.5 million pockets $500,000. The second buyer who bought the contract for $1.5 million and sold it for $1.8 million gets $300,000. The third buyer pays the land-transfer tax on the $1.8 million purchase price.

For any issues with Mortgaging a Property via Assignment please reach out and one of our Senior Broker Partners would be more than happy to assess your unique situation and give you the best advice.

At GLM Mortgage Group, we are with our clients for the entire journey. From the beginning, we can identify client needs, any possible roadblocks, and give a variety of tailored solutions.

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Bridge Financing

Bridge Financing, also commonly referred to as a “Bridge Loan”, is a way to help literally bridge the gap between closing on your current house and your new place. This product allows you to carry the mortgage on two properties for a specified amount of time and for typically a maximum of 90 days. As one of the Top 3 Rated Mortgage Brokers in Vancouver, we would be more than happy to assist you with understanding Bridge Financing.

How does Bridge financing work? These short-term loan products use your current home’s equity to cover some of the costs of your new home (for example, could be used for a down payment.) That way, you don’t have to miss out on your dream home while waiting on the cash from the sale of your current house.

What is the cost of Bridge Financing? You will be charged an interest rate on the amount of funds you are borrowing. This will be based on the lender’s prime rate and will vary. You can expect to pay prime plus 2-5%. You can also plan to pay an administrative fee. This will vary pending on the lender and can range from $200-$695.

Similar to most other financial decisions, there will always be advantages and disadvantages for Bridge financing. Here are a few things you should be aware of:

One of the most popular advantages of acquiring Bridge financing is financial flexibility. With this product, you will be able to use the equity you’ve built in your current home to secure the new purchase of your dream home. Since you will be able to access those funds via equity, you won’t have to stress about the sale closing of your current home before you close on your new home.

Although most terms for Bridge financing products are short, the interest rate will be similar to open rate mortgages, which are often higher than the interest rate you may have locked in with your current mortgage. If for some reason your sale agreement falls through on your current house, you may have to make up for the payments until a new sale is finalized.

To qualify for Bridge financing you will need:

• Have a current mortgage in good standing with equity
• A copy of the Sale Agreement for the home you’re selling
• A copy of the Purchase Agreement for the home you’re buying
• Valid pre-approval (with document review) with the lender of your choice

Like your home buying situation, your home financing needs are unique. Bridge financing may be the right solution for you if you would like the following…

• You’ve found your dream property and do not want to wait on submitting your offer
• You can’t afford a down payment without the money from your current home’s equity
• You want time between closing dates

If you’re a homeowner aged 55 and over, rather than taking out a regular Bridge loan, you could take out a CHIP Open Mortgage with HomeEquity Bank. The CHIP Open Mortgage can assist you in purchasing a new home when your existing property has not yet been sold.

Let’s have a look at this case study together…

• Meet the Ellis family, a couple in their early 70s who live in the Greater Vancouver Area in a home worth $1.3 million. Looking to downsize, they’re keeping an eagle eye on available properties on Vancouver Island, and finally find their dream home at a price tag of $550,000. Afraid to lose it, they act quickly to purchase the new place before selling their existing home — but don’t qualify for a large enough traditional loan, putting the dream they have for their future in jeopardy.
• This product is a CHIP Open Mortgage (A Reverse Mortgage with no pre-payment penalties) The couple was able to access $600,000, allowing them to purchase their new place outright and cover the costs of their move. With no repayments, the couple were able to properly prepare their home for sale and repaid the CHIP Open in full once the house sold.

Please reach out and one of our Senior Broker Partners would be more than happy to assess your unique situation and give you the best advice. At GLM Mortgage Group, we are with our clients for the entire journey. From the beginning, we can identify client needs, any possible roadblocks, and give a variety of tailored solutions.

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Our Discovery Call

A Discovery Call is our first touchpoint with your client. We make a quick 5–10-minute phone call to simply connect with the client and gather some basic information regarding a mortgage pre-approval. After we ask the client all necessary intake questions, we will either send them a link to our online application form OR create and give them a custom game plan for the future.

Once your client completes the online application, we will have a more thorough knowledge of the client, giving us access to the client’s Credit Bureau, etc… We will use these details to create a custom plan for your client.

A few questions that we will always ask during a Discovery Call are:

• Employment
  • Are they an employee or self-employed?
  • What is their annual income?
  • Do they receive any additional income?
• Property
  • What price range suits their needs?
  • Are they currently working with a realtor?
  • What type of property appeals to them?
• Credit
  • What is their credit like?
  • Have they ever had issues (past or present) with collections/bankruptcies?
  • Do you have any car/student loans?
• Down Payment
  • Do they have any funds saved for the down payment? How much?
  • Where did this down payment come from? How long have they had it?
  • Are they a First Time Home Buyer?

Our online application can be completed from your mobile phone, laptop, or tablet. Your client’s application stays “live” for 36 hours. To put it simply, this means that the application can be re-opened and closed at the client’s convenience to ensure all information is filled out in the given period. It’s not uncommon for us to send a reminder to your client to finish the app before the 36-hour deadline ends or reach out to us for any help.

Through every step of our Discovery Call process, we update both the realtors and clients. We provide the realtor a quick summary email giving our professional opinions on what we think their client can afford after we connect on the phone. We also update the realtor when the pre-approval is completed. As for the clients, they are receiving multiple calls/emails from us along the way keeping them up to speed. Our clients can feel at ease knowing that WE are on top of things taking care of them!

During our Discovery Call, when we are asking our intake questions, we can usually gather a rough idea of their projected purchase price with their liabilities accounted for.

For example:

• Every $20,000 of income earns approximately $100,000 borrowing power
• Every $13,000 of credit card/ line of credit debt subtracts approximately $100,000
• Every $400 monthly car payment subtracts approximately $100,000 borrowing power

Let’s review this case study…

Joe Smith earns $80,000 per year. His wife Sarah earns $60,000 per year. The total household income is $140,000 annually. This income is equal to $700,000 borrowing power. The couple has one car payment at $400 a month. They have about $6,000 in credit card debt collectively.

These liabilities decrease the couple’s borrowing power by $150,000, leaving them able to borrow $550,000. Joe and Sarah do have $75,000 in savings. We add their savings to their purchase power, and they are now able to look for properties in the price range of $625,000. Discovery call.

If having us reach out to YOUR clients for a discovery call is something you may be interested in, please reach out and one of our Senior Broker Partners would be more than happy to assess your unique situation and give you the best advice. At GLM Mortgage Group, we are with our clients for the entire journey. Fr

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First Time Home Buyer’s Program

The First Time Home Buyer’s Program otherwise referred to as the FTHBI is a Canadian Government program, which contributes up to 10% to the down payment for First Time Home Buyers. This is an effort to support borrowers in their first home purchase to reduce their monthly mortgage payments, without contributing to their financial burdens. This program is a “shared equity” mortgage with the government of Canada, where you put 5% down on an existing home and they match your down payment and put another 5% down for you without any out-of-pocket or upfront costs.  If you are looking at purchasing a newly constructed home, there are options for down payments from 5-10%.

As one of the Top 3 Rated Mortgage Brokers in Vancouver, we would be more than happy to assist you with understanding the First Time Home Buyer’s Program.

To be eligible for this government incentive program you must:

• Be a first-time homebuyer
  • Exception if you have been renting and NOT owned a property for the last 4 years
• Total household income must be under $120,000
• You must have the minimum 5% down payment from your own resources
  • This means that the 5% down payment cannot be from a line of credit, loan, or gift.

Some limitations to the program that are non-negotiable are:

• Must be owner-occupied (no rentals)
• Property must be in Canada
• Must be owner-occupied year-round
• Must be an insured mortgage (less than 20% down payment)
• Mortgage can be maximum four times your annual income (or the maximum amount of $480,000 plus down payment)
• Must pay back the “shared-equity” at the time of property sale or within 25 years (whichever comes first)

This program is a popular option in BC with property values coming in at an all-time high and mortgage rates at an all-time low. Although this can be helpful in reducing your monthly mortgage payments, it does come with a few catches. Since the government of Canada will be matching your 5% down payment, they now own 5% equity in YOUR home.

In summary, this means that when you sell your house (or after 25 years) you will be paying 5% of that equity back to the government. This can feel unfair to some people as the value in their home increases, so does the 5% “shared home equity”. If your property is worth more at 25 years (or sells for more than the time of purchase) the “shared home equity” also increases, meaning they could potentially require you to pay back MORE than the original amount they lent to you at the time of purchase.

Let’s have a look at this case study:

• Joe Smith is looking to make his first-time home purchase with his annual income of $85,000. The property he is looking at has a purchase price of $325,000, with his 5% down payment he can put $16,250 down. That brings his requested mortgage amount to $308,750 leaving him with monthly payments of $1,405.
• If Joe Smith decided to use the FTHBI with his annual income of $85,000 to put down $16,250, the government of Canada would chip in the same 5% of $16,250 and now Joe has a down payment of $32,500. Joe’s requested mortgage amount would then be $292,500 leaving him with monthly payments of $1,331.
• If Joe Smith utilized this FTHBI program, he would be saving $22,200 over the life of his mortgage.

FTHBI is a federal government initiative to help first-time homebuyers into the housing market. It is important that you understand the ins and outs of this product and work with a professional Mortgage Broker. Your Mortgage Broker will be able to look at your individual situation and walk you through your options and advise if this product would be of benefit to you.

If you are interested in an First Time Home Buyer’s Program, please click this link, and feel free to use the free tools to help answer any questions you may have.

https://www.placetocallhome.ca/fthbi/first-time-homebuyer-incentive

Please reach out and one of our Senior Broker Partners would be more than happy to assess your unique situation for First Time Home Buyer’s Program and give you the best advice.

At GLM Mortgage Group, we are with our clients for the entire journey. From the beginning, we can identify client needs, any possible roadblocks, and give a variety of tailored solutions. If any, please reach out and one of our Senior Broker Partners would be more than happy to assess your unique situation and give you the best advice.. 

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How Mortgage Rates Work

The topic of how Mortgage Rates work is a long, complicated series of moving puzzle pieces that work together perfectly. Today we are going to break it down as best we can. During the process of taking out your first mortgage, you will learn that the interest rate is the “payable fee” your lender has calculated for you in exchange for borrowing their money.

As one of the Top 3 Rated Mortgage Brokers in Vancouver, we would be more than happy to assist you with understanding How Mortgage Rates Work.

When applying for a mortgage, the lender you decide to choose may offer various interest rate options. Mortgage rates are constantly changing due to the Canadian economy (Fixed rates) and Global economy (Variable rates). Each time you renew your mortgage term, you re-negotiate your mortgage interest rate… Simply, this means at the time of term renewal, your new mortgage interest rate may cause your monthly payments to increase or decrease.

The lender of your choice will set the interest rate for your mortgage.

Here are a few of the factors that they use to help determine your cost:

• The length of your mortgage term (higher length in the term usually have higher rates)
• Their current Prime and Posted Interest Rate
• If you qualify for a discounted rate
• Type of interest you choose (fixed, variable, or combination)
• Your credit history
• If you’re Self Employed/ Employee

For example, with credit, lenders will assess your bureau report to decide if they will lend you money. They will also use this document to determine how much interest they will charge on the money you will agree to borrow. The better your credit is, the easier it will be for you to get a mortgage. Even if you have poor or little to no credit history, there will always be options like B lenders and private lenders depending on your specific file details.

On the topic of Mortgage Rates, you will very commonly hear three words: Prime, Posted, and Discounted Rates. These are all different. To put it simply, a Prime Rate is the rate the lenders use to determine their posted interest rate. A Posted Rate is the interest rate that the lenders advertise for their products (these can change regularly).

A Discounted Rate is lower than the lender’s Posted Rates. Along with those keywords, there are two more words you will need to know about. These important terms are called Fixed and Variable Interest Rates. A Fixed interest rate will stay the same for the length of your term.

Fixed Mortgage Rates will work the best for you if you need the following:

• Your payments stay the same over the term of your mortgage
• You want to know in advance how much principal you’ll pay by the end of the term
• Keep your interest rate the same because you think market interest rates will go up

A Variable Mortgage Rate can increase and decrease during the length of your term. This means that when you choose a Variable Rate Mortgage, your interest rate may be lower than if you selected a Fixed rate.

This type of Mortgage Rates may be best for you if you can accommodate the following:

• Your interest rate changing
• Your monthly mortgage payments potentially increasing or decreasing

In a Variable Rate Mortgage (commonly referred to as AVRM) the interest rate can go up, meaning more of your monthly payment goes towards the interest and less to the principal. If rates go down, more of your payment goes to the principal, which means you can pay the mortgage off faster.

The best advice on Mortgage Rates is the advice that comes from your Mortgage Broker because they can analyze your needs and start underwriting your information. With their expert advice, together you can create a perfectly “tailored-to-you” plan.

If any of the topics mentioned on Mortgage Rates sound like something you may be interested in, please reach out and one of our Senior Broker Partners would be more than happy to assess your unique situation and give you the best advice. At GLM Mortgage Group, we are with our clients for the entire journey. From the beginning, we can identify client needs, any possible roadblocks, and give a variety of tailored solutions.

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Pre-Approval VS Rate Hold

Pre-Approval VS Rate Hold… what are the differences? What are the benefits? Not even one Mortgage or Pre-Approval Process is the exact same as someone else’s. The Mortgage and Pre-Approval process are complex mazes of tiny puzzle pieces that must fit together seamlessly. Note that the puzzle pieces are constantly changing in this industry. Many lenders will pre-qualify and give Rate Holds to their customers, but that only gives you as a borrower, a general idea of the amount of the mortgage you could afford. However, when you are pre-approved, you’ll have a clear picture of the home you can afford and what you might pay each month.

As one of the Top 3 Rated Mortgage Brokers in Vancouver, we would be more than happy to assist you with understanding Pre-Approvals VS Rate Holds.

The “Pre-Approval Approach” is simply a more detailed process. You as a client will be sending in all requested documents for review (besides subject property.) The lender of your choice will have to approve your application based on information such as employment, current debts, down payment, and your previous/current credit history.

Something to keep in mind is that even if all four “pillars” are approved, it is NOT a guarantee that the whole application will be approved. The lender you chose will still need to meet all insurance guidelines if there is less than a 20% down payment.

Since the Pre-Approval process (compared to the Rate Hold process) is quite thorough, there are many benefits to this product. The biggest one is that you will have a general idea of what you can afford even before you shop for a home. Another commonly appreciated “pro” of a Pre-Approval process is that you can ask your Mortgage Broker any questions about current mortgage products on the market and get the best plan for you, before looking at any properties.

A few things to also consider while thinking of starting your Pre-Approval Process are:

• Pulling your credit in the Pre-Approval Process will cause a temporary decline in your credit score
• There is no 100% Guarantee on being approved after a Pre-Approval if circumstances for the borrower or subject property change

A Rate Hold is simply “locking in” a specific mortgage rate for a certain number of days. Most commonly, a general Rate Hold is for 120 days, but 30, 45, 60, and 90-day rate holds are also widely offered by various lenders. A “Rate Hold” only applies to fixed rates since variable rates are constantly fluctuating with the global economy. While the lender you are working with will guarantee a fixed rate for the duration of your “Rate Hold” period, this should NOT be seen as a guarantee that you’ll be pre-approved for the mortgage.

Locking in a fixed rate will come most in handy when mortgage rates are rising, you won’t have to worry since you have your “locked-in” rate. However, if rates decline, you will also have access to the lower mortgage rates that are currently on the market.

Now that we’ve discussed the “pros” here are a few things to consider:

• Not all lenders offer pre-approvals and rate holds
• Rate holds are often shorter for renewals and refinances
• Some promotional rates involve a “no float-down” policy, meaning the lender has locked-in rates that cannot drop, regardless of whether rates are falling in general

Most Rate Hold products are generally automated, which means nobody is even looking at your application. That means any documents you have sent in, won’t be reviewed at this point.

The system will analyze a few key pieces of data from the application like:

• Credit Score
• Loan to Value Ratio
• Name
• Birthdate

The best time for a “Rate Hold” would be for a borrower that is looking to make a Purchase or start a Refinance in the very near future, since the max Rate Hold is usually 120 days. The best Pre-Approvals and Rate Holds are the ones that come from your Mortgage Broker because they can analyze your needs and start underwriting right away. With their expert advice, together you can create a perfectly “tailored-to-you” plan.

If any of the products mentioned sound like something you may be interested in, please reach out and one of our Senior Broker Partners would be more than happy to assess your unique situation and give you the best advice.

From the beginning, we can identify client needs, any possible roadblocks, and give a variety of tailored solutions. If any of the products mentioned sound like something you may be interested in, please reach out and one of our Senior Broker Partners would be more than happy to assess your unique situation and give you the best advice. At GLM Mortgage Group, we are with our clients for the entire journey. From the beginning, we can identify client needs, any possible roadblocks, and give a variety of tailored solutions.

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Increasing Your Purchase Power

Most individuals that we connect with to discuss a Mortgage Pre-Approval also want to know how we can go about Increasing Your Purchase Power. More often than not, those individuals could afford to make mortgage payments. Usually, they already pay monthly rent in the same amount as a mortgage, or perhaps even more! As one of the Top 3 Rated Mortgage Brokers in Vancouver, we would be more than happy to assist you with your Purchasing journey.

Part of our process as Mortgage Brokers at GLM Mortgage Group is to connect with new clients with a Discovery Call, which involves key questions on important factors of a Mortgage Approval. We spend 10 minutes gathering information on income, credit, and down payment and with that, can provide a possible purchase price, and a piece of mind to shop within one’s budget.

Sometimes at the end of the conversation, we find that an individual may not be able to purchase within the price range they had planned to and brings us back to the drawing board to discuss options and a gameplan for the Increasing Your Purchase Power in the future.

Now, the reason that someone may not qualify for a mortgage that they could afford payments on, is due to the Stress Test, which newest rules were released in June 2021 and decreased borrowing power by 25%. To pass the mortgage Stress Test, you need to qualify at the contract mortgage rate plus 2% or the benchmark rate of 5.25%, whichever is higher. The purpose of the Stress Test is to ensure that should interest rates rise – a borrower will still be able to afford their mortgage payment.

This is a tactic by the Bank of Canada to ensure that consumers can withstand rising interest rates, as well as tackle household debt issues in Canada by preventing consumers from getting into further debt – but it greatly affects your purchase power, as you will qualify for less.

There are a few options to consider, that can help Increasing Your Purchase Power, potentially bypass the Stress Test and qualify for the purchase you are hoping to make.

First, down payment – if you have 20% down payment, this can provide various options that will allow you bypass the Stress Test, which will increase purchase power. Local credit unions are provincially regulated and therefore can allow you to bypass the Stress Test, although this comes with a slight rate premium. Secondly, having a 20% down payment can also make Alternative Lending an option – but be sure you understand this, as it may be easier to qualify, but these interest rates will be higher and could cost you more in the long run.

Nonetheless, with a 20% down payment – there are two viable options to Increasing Your Purchase Power in the Pre-Approval stage.

Further advice that we share with new clients, when we find they may not qualify for what they hoped is bringing a Co-signor to the mortgage. This could be a friend or family member that will be on the mortgage with you, and on the title of the property as little as 1%. We would be able to factor their income, assets, and debts into the equation to increase the purchase power. The primary borrower is still responsible for making mortgage payments, but the co-signor is there as a back up, and is required to make payments should the primary borrower default.

Another solution to Increasing Your Purchase Power is to increase the down payment.

This could mean putting your plans to purchase on hold for another 12 months while you continue to save, perhaps withdrawing RRSP or other Investments or even a gift from a family member may be possible. Given the current market conditions, we are seeing family members offer financial aid to their kids and grandkids to make home ownership possible for them.

Lastly, to help with Increasing Your Purchase Power, you can INcrease household income and DEcrease household debt. Although these options have a positive effect on purchase power, it takes time to see these effects take place. Perhaps obtaining a second part time job is possible, to increase income – but keep in mind, lenders will want to see this sustained for 2 years to consider the income. Also, decreasing debt will increase purchase power significantly.

For every $14,000 of debt that we carry, or $400/month payment, our borrowing power is decreased by $100,000. If you have a significant down payment, it’s always more advantageous for qualifying, to use a portion to pay down debts. It’s important to understand tips like this as they will contribute to Increasing Your Purchase Power.

At GLM Mortgage Group, we are with our clients for the entire journey. From the Discovery Call, we can identify client needs, any possible roadblocks, and a variety of solutions. Our brokers know how to Increasing Your Purchase Power and know how to assess your unique situation, giving the right advice so you can best move forward in your plans to purchase a home.

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Personalities of Your Mortgage

Asking the right questions and understanding the Personalities of Your Mortgage is an important part of the mortgage process as it will allow you to understand which mortgage product is right for you! An important aspect of a mortgage is its flexibility and terms, such as how the penalty is calculated if you break your mortgage. As one of the Top 3 Rated Mortgage Brokers in Vancouver, we would be more than happy to assist you with understanding every personality of your mortgage.

Keep in mind that statistically, 70% (7 out of 10 people) of mortgages are broken within the first 3 years. This could be due to a variety of reasons, including life events: matrimonial breakdown, job transfer, downsizing, consolidation of consumer debts, or refinancing to take advantage of lower interest rates. If a mortgage is broken before the contract term (usually 5 years) there will be a penalty that you will need to pay. This is yet another reason as to why you should get to know the Personalities of Your Mortgage.

A variable-rate mortgage (one that fluctuates with the bank of Canada) depending on the lender, usually incurs a 3-month interest penalty. A fixed-rate mortgage (a set rate that is usually higher than a variable rate mortgage) incurs a penalty of the interest accumulated for the remainder of the term. For example, if you decide to sell your house in year 2 of the 5-year term, you will have to pay 3 years of interest to get out of the mortgage – which may be very costly! Depending on the Lender, you may not be able to break your mortgage at all! The terms surrounding the penalty are crucial to know before you commit to a specific mortgage.

Personalities of Your Mortgage- Prepayment privileges:

This means how much extra you can put toward your mortgage principal, both monthly and annually. Make sure to consider the minimum and maximum payment allowed. Depending on the lender, the payment amount might have specific parameters. In other words, the payment amount might be specified such as a minimum payment of $1000.00 monthly, or a maximum payment of 20% annually. If there is no flexibility in the mortgage product you may not be able to make any extra payments.

Personalities of Your Mortgage- Portable Mortgage:

As a family’s needs grow one may need to sell their existing property to buy another and it may be a good idea to port the existing mortgage to the new property. If portability is an option, you need to make sure you understand the restrictions tied to the portability of the mortgage product you are looking at. Depending on the lender there could be a time restriction such as having to sell your present home AND buy your new home within 30 days. Never be afraid to reach out and ask questions regarding the Personalities of Your Mortgage.

Personalities of Your Mortgage- Blend & Extend:

Another important question is that if you can port your mortgage, can you add further money to purchase your next property? This is known as BLEND AND EXTEND. This takes your present mortgage and its rate and adds new funds to the existing mortgage with the current rates to purchase the new home. It is a little more complicated but certainly can be done. The challenge with BLEND AND EXTEND is that your mortgage renewal dates can land on significantly different timelines and when it comes to selling and ending your mortgage there could be significant penalties to break if it is not set up wisely.

There are many Personalities of Your Mortgage, an important one is if it can be assumed which can make a property more desirable to a buyer. If interest rates have increased since you’ve bought the property it can be very advantageous for the buyer to purchase your property with an assumable mortgage. An assumable mortgage is transferred with no change in its terms. The buyer assumes all responsibility for repayment.

But be careful! The original lender needs to agree to this transfer and the buyer may be charged an assumption fee.

Now, to simplify a mortgage term you hear often, let’s talk about Amortization. This means the length of the mortgage if you were to pay it off with the present terms of the current mortgage contract. For instance, if you have a mortgage that is a 5-year term at a specific interest rate, the amortization is the amount of time it would take to pay off the mortgage using the specific payment outlined within the current contract.

If you have less than 20% down payment (or equity) your amortization period is legislated to 25 years. There is no amortization flexibility if you have less than 20% down payment (or equity). If you have more than 20% down payment (or equity) your amortization period can be extended to 30 years. The longer you amortize your mortgage, the smaller your payments are.

You will take that much longer to pay off your mortgage if you amortize for a longer period.

It is VERY important to get clear answers on what the terms of your mortgage are. It makes all the difference in future planning and can impact you in very significant ways. Of course, the rate is important. You don’t want to be paying more than you should be. But if the rate is too low, beware! If it is too good to be true, it probably is! There are likely some hidden costs that you don’t know about. Whether it is a penalty to break, restrictions on porting or assumptions, or even an administrative cost. Always ask questions and be sure to find out the “in’s and out’s“ and the Personalities of Your Mortgage.

At GLM Mortgage Group, we know what questions to ask. We have relationships with the lenders that you know about and the lenders you don’t. We would be pleased to educate you on the financial options available to you regarding the Personalities of Your Mortgage.  Call us anytime for a FREE consultation on the mortgage products available to you.

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1. Closing Costs.

Congratulations! Your offer was just accepted on your new home, you’re one step closer to adding a major asset to your portfolio!  We don’t want to shock or dampen the excitement of this moment. However, it’s important that you factor in closing costs right at the beginning of your purchase.

The best time to do this is before even applying for your pre-approval or making any offers on a home. Closing costsmayinclude:

>insurance

>taxes (Land Transfer, Property, and others depending on what province you are in)

>legal/notary fees

>inspection/appraisal fees.

A general rule of thumb is to set aside 1.5% of the purchase price to account for the closing costs above. To plan ahead, consider speaking to a mortgage broker and your realtor. They can help you determine just how much you should set aside to accommodate thoseadditional closing costs.

2. Utility Bills.

If you’ve gotten used to living in a small space, such as a condo or an apartment, you may be surprised how much more water, heat, and energy you consume in a larger space such as a detached home or a townhouse.

It’s important to prepare for these as you do not want to have a “surprise” when your bill arrives in the mail and it’s nearly double what you are used to spending!

Factoring in these bills is also crucial if you are going from renting to owning! Often times the landlord will cover a portion of your utility bills or your cable/internet depending on the contract you had with your landlord. Of course, once you are a homeowner, you are covering the entire cost! Ask family members, friends, even your mortgage broker or realtor what is a realistic cost for things such as cable and internet, water, heat, etc.  You’d be surprised how fast they can add up!

3. Renovations and Updates.

Unless you bought a newly built, brand new home, there is undoubtedly going to be future renovations and updates that you will need to do on your home. They may not need to happen right when you move in, but sometimes the unexpected does happen and having money set aside can make a world of difference! When you have your home inspection completed, make a prioritized list of what will need to be fixed/updated first and set aside money each month for it.

In addition to the “must do” updates/renovations, new property owners may also want to make aesthetic improvements, whether they mean to reside there or not. Naturally, a homeowner wants to make the place feel more like their own, and investors want to add value their investment or make adjustments to make the asset more aesthetically pleasing.

4. Ongoing Maintenance

Home’s require maintenance—all the time! Ask any homeowner and they will tell you that there is always home maintenance in one form or another happening. A few common home maintenance costs may include:

• Gutter cleaning
• Roof repair/maintenance
• Drywall repair
• Furnace cleaning
• HVAC and Duct cleaning
• General plumbing and electrical fixes

Every home is different in regards to how much you should budget annually for regular maintenance. It will depend on the age of your home, square footage, climate in your region, and overall condition of your home.

In closing, property ownership shouldn’t be dampened by financial rules caused by lack of preparation. All of these costs, as well as additional other costs, are easy to plan ahead for and to ensure that you have budget set aside each and every single month to make sure that you stay on track. As a rule of thumb, the CMHC states that your housing costs including mortgage payment should not exceed 39% of your monthly income. Treat this number as a point of reference when you’re doing your budget and consider leaving room for the unexpected. It’ll give you peace of mind on the long run and allow you to actually enjoy your new home!

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