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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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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Often times we see clients who refinance in order to:

• Renovate their home
• Purchase a secondary property for investment purposes
• Debt consolidation
• Business Development
• Assisting their children’s post secondary education
• Financing thru a “life event” such as illness

In this particular article, we are going to highlight the value of utilizing your home’s equity to reinvest in other investments such as:

• rental properties
• stocks
• bonds
• mutual funds
• RRSP’s
• RESP’s

The first question that people ask is how much can I borrow? Generally speaking, you can borrow up to 80% of the appraised value of your house.  For example, if your home value of 650k, assuming one qualifies, they can access up to 80% of 650k which would be 520k, if their current mortgage is 450k they may be able to get a home equity line of credit for 70k (totaling 520k)

Working with your mortgage broker, you can go through the refinance and approval process if this is something you are interested in accessing. It is always a good idea to consult with your broker and understand the personality of your mortgage—there may be limitations of how much equity you can access and the conditions relating to the refinancing. There are also potential costs associated with this type of refinance including:

• Penalties to break your mortgage
• appraisal fees
• title search
• title insurance
• legal costs

Keep in mind that these potential costs can be rolled within your new loan amount and will not be “out of pocket” – roll this sentence in somewhere that fits within the body of this blog

Now, if you have been approved and are utilizing your home equity for one of the above investments (after speaking to your financial planner/advisor first) and can expect to see a higher rate of return than the interest you are paying to borrow the money, then it is worth considering. We emphasize that you should always proceed with caution and get advice from sound professionals before choosing to invest your hard-earned money.

We have found that this type of investing works extremely well for many and is a safer and less risky way to access funds for further investment purposes. We recognize that this option may not be suitable or comfortable for some, but it is a viable way to capitalize on the equity sitting in your home and make it work for you! If you have questions or are interested in learning more, please do not hesitate to reach out to us.  We also have a full ebook filled with information on refinancing equity. You can download it for FREE by clicking HERE.

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1. Build your Team

• By Team we are referring to the people who will be involved in the process of starting your real estate portfolio. This will typically consist of a Realtor, Accountant, Lawyer/Notary, Financial Advisor, Property Manager, Mortgage Broker. Pick your professional network carefully and you will reap the benefits!

2. Have a Mentor

• Take time to find someone who has been in the business for 10+ years. This person can be a sounding board for you. They can give you advice on investment property financing, rate and insurance premiums, planning your long-term investment goals, etc.

3. Get Educated

• You are investing in real estate, but you also need to invest in your education. In addition to finding a mentor find a dedicated network that can help you grow and learn. For instance, the Investors Network of Greater Vancouver is one of the best organizations around to help you succeed.

4. Pull the Trigger

• After all of this, don’t be afraid to pull the trigger! So often people will get to the final steps and step back due to fear. If you have followed the above three steps, then trust us-you are ready! Dive in head first and we can assure you that there will be no regrets.

In conclusion, when is the right time to invest in real estate? Every time the numbers add up in your favour! It can be an exciting, stressful, crazy time when you choose to invest. By carefully building a strong team around you and recognizing that at the end of the day the numbers must add up, then you will be successful in building your real estate portfolio. If you do require additional assistance, GLM is here to help you crunch the numbers. We can also help you with the process of purchasing your investment property and talk about the financing implications. Are you interested? Download the e-book below and give us a call. We are here to help and be a part of your Real Estate investment team!
 
 

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It is all about Debt Servicing

DEFINITION of ‘Debt Service’
The cash that is required for a particular time period to cover the repayment of interest and principal on a debt. Debt service is often calculated on a yearly basis. Debt service for an individual often includes such financial obligations as a mortgage and student loans. Companies may have outstanding loans or outstanding interest on bonds or the principal of maturing bonds that count towards the company’s debt service. An individual or company that is not able to make payments to service the debt can be said to be “unable to service (his/her/its) debt.”

 
Here is a Debt Service Calculator for you, brought to you by CHMC.ca [click on the picture].

The will to succeed is important but what’s more important is the will to prepare…
Bobby Knight
 
Get the FULL picture of Investment Property Financing by reading, even downloading, my SlideShare presentation below:

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Straight.com reports:

Don Campbell likes to say that he doesn’t sell real estate. “I’m just a researcher,” insists the author of several books on property investing.
Campbell also likes to say that because he’s not selling property, he can be counted on to offer an unbiased perspective. He’s the founding partner of the Real Estate Investment Network, a Langley-based company that provides market analysis to clients.
Reached by the Georgia Straight on his cellphone for an interview about the fall municipal elections, he was forthcoming about which cities he’s watching.
Surrey is number one on his shortlist of three. According to Campbell, B.C.’s second-largest municipality has been “excellent” on a number of fronts. One is the development of its town centres. Another is the protection of farmland. Third is its ability to provide more affordable housing than Vancouver.
“And now that Dianne Watts is no longer going to be the mayor and heading up that focus, it’s going to be very interesting to see (a) who gets in next, and (b) what their policies are,” Campbell said. “They need to keep very similar policies that they’ve got now. They’re growing at such a rapid rate that if they start changing policy now, they’ll get caught in a lot of problems.”
Earlier this year, REIN released its latest report on the top B.C. towns in which to invest in real estate, and Surrey topped the list.
Former Surrey mayor Doug McCallum and councillor Linda Hepner have announced that they’re running for the city’s top post. Councillor Barinder Rasode is widely expected to join the fray.
Campbell said that he’s also looking at what happens in Abbotsford. In REIN’s latest report on the top towns in B.C. for real-estate investment, Abbotsford placed third after Maple Ridge and Pitt Meadows, which came second.
Underscoring that he’s not siding with anyone in particular, Campbell said that he’d like to see that the next Abbotsford council “understands that the Surrey model is a sustainable model”. Another concern he has regarding Abbotsford is the need for the municipality to attract jobs.

For more on this article, please click through here.

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