First-Time Home Buyer Incentive Program

General Lynda Thai-Baird 2 Aug

The First-Time Home Buyer Incentive launches on September 2, 2019 and was designed to help qualified first-time home buyers reduce their monthly mortgage carrying costs without adding to their financial burdens.

There are a few qualifiers to apply for this incentive:

  • you need to have the minimum down payment to be eligible
  • your maximum qualifying income is no more than $120,000
  • your total borrowing is limited to 4 times the qualifying income 

If you meet these criteria, you can then apply for a 5% or 10% shared equity mortgage with the Government of Canada.  A shared equity mortgage is where the government shares in the upside and downside of the property value.

At least one homeowner must be a first-time homebuyer, which is considered as the following:

  • Have never purchased a home before
  • Have gone through a breakdown of marriage or common-law partnership (even if the other first-time home buyer requirements are not met)
  • In the last 4 years did not occupy a home that was occupied by the homebuyer or their spouse

IMPORTANT:  It’s possible that you or your spouse or common-law partner qualifies for the First-Time Home Buyer Incentive (if you are in a married or common-law relationship) with the 4-year clause even if you’ve owned a home.

How does it work? 

The Incentive enables first-time home buyers to reduce their monthly mortgage payment without increasing their down payment. The Incentive is not interest bearing and does not require ongoing repayments.   

Through the First-Time Home Buyer Incentive, the Government of Canada will offer: 

  • 5% for a first-time buyer’s purchase of a re-sale home 
  • 5% or 10% for a first-time buyer’s purchase of a new construction 

How do I know how much I have to pay back?   

You can repay the Incentive at any time in full without a pre-payment penalty. You have to repay the Incentive after 25 years or if the property is sold, whichever happens first. The repayment of the Incentive is based on the property’s fair market value. 

  • You receive a 5% incentive of the home’s purchase price of $200,000, or $10,000. 
    If your home value increases to $300,000 your payback would be 5% of the current value or $15,000. 
  • You receive a 10% incentive of the home’s purchase price of $200,000, or $20,000 and your home value decreases to $150,000, your repayment value will be 10% of the current value or $15,000. 

More details about the First-Time Home Buyer Incentive will be released later this month. The program will be ready to receive Incentive applications on September 2, 2019; with the first closing taking effect on November 1, 2019. If you have any questions, or would like to know if this program is right for you, please contact me today.

Foreclosure, Bankruptcy, Consumer Proposal & Credit Counselling

General Lynda Thai-Baird 17 Jul

The Canadian Bankers Association’s latest report on mortgage delinquency shows that Alberta has the third highest per capita of all the provinces at .49%. The national average shows that .25% of home owners are having difficulty paying their mortgage. At first glance these numbers seem relatively small until you note the fine print that “delinquency” in this report only represents those homeowners that are more than 3 months behind.

Here are the highlights of the potential ramifications of foreclosure, bankruptcy, consumer proposal and credit counselling:

Foreclosure

Foreclosure occurs when the mortgage has gone unpaid for an extended period of time that the bank is forced to take back the security for the mortgage which is the home. The foreclosure process is different in every province; and each process can take months to work through for the bank to take possession of the home to be able to sell it to recover their losses. It is important to note that the long-term effect on a client that goes through foreclosure is permanent. A record of the foreclosure is placed on each clients’ credit report. Unlike a bankruptcy or consumer proposal that are eventually removed, the foreclosure stays on the credit report for life. What that will mean is that when you want to eventually purchase a home again, you will more than likely be required to put a minimum 20% down payment and be limited to only certain lenders.

Bankruptcy & Consumer Proposal

Both bankruptcy and consumer proposals are administered through a licensed insolvency trustee. Typically, every creditor that you have debt with will participate in the process. This also includes student loans and arrears with the Canada Revenue Agency. If you have gone through either of these insolvency actions, the mortgage industry views them as them as the same thing. What is most important is to re-establish positive credit history as soon as possible. Consumers that swear off debt of any kind after insolvency are better known as lifelong renters. Never owning a credit card or loan again is certainly fine until you apply for a mortgage to buy a home. Banks and mortgage lenders want to see how a consumer handles small amounts of credit before offering hundreds of thousands in a mortgage. Once discharged from a bankruptcy or consumer proposal, obtaining a secured credit card should be your very first step. The next thing to do is advise both Canadian credit reporting agencies that you were discharged. You may be required to send historical documents related to the insolvency. It is good practice to retain all the paper work from this process in a safe place for at least 10 years as you may be required to submit them to a lender for verification.

Credit Counseling

Credit counselling could be a viable option for those that are keeping up with their debt payments but need assistance in designing a household budget to allow them to get out of debt faster. For those that have fallen behind on their debt payments and have gone into collection status, credit counselling may not an available solution. There are 2 distinct differences between working with a credit counselor and a licensed insolvency trustee:

  • Student loans and debts to Canada Revenue Agency cannot be addressed within credit counseling.
  • If your credit counselling results in the requirement of debt negotiations and/or payment arrangements, some of your creditors may decline to participate. This leaves debts outside of the credit counseling arrangement that you must address on your own. It’s a little like having two flat tires on your car and only one spare. The spare may work well to fix one flat tire, but your car still isn’t roadworthy.

Should you find yourself or someone you know in a difficult financial situation, you can rest assured that there are always options to explore. Seek a credit counselling service provider or debt relief specialist near you, and they will help guide you to a strategy that will be tailored to your specific needs.

Buying a Home with a Rental Suite

General Lynda Thai-Baird 3 Jul

As the prices of homes have elevated in many locations over recent years, often aspiring homeowners will consider buying a property with intent to rent out part of the space, such as a basement or spare bedroom, to tenants or roommates. The benefit of this plan is to use the rental income to offset the mortgage payment, increasing the potential mortgage value a borrower could qualify for.

When the space is a self-contained suite, fully compliant with municipal zoning (i.e. the suite is legal/permitted), the borrower can use the (projected) rental income added to their own to help qualify for the mortgage. For example, a client could buy a legal 4-plex, occupy one unit and use the rent from the other three added to his own to make the mortgage qualifying debt-to-income ratio work.  

However, when the space is a room in your house, or income from a non-permitted (illegal) suite (basement, garage, etc.) that income is generally not allowed to be factored into qualifying as the municipality could force you to shut down your suite. Now this doesn’t mean you can’t rent out a space in your property; it just means you can’t use the projected income to help you qualify for the mortgage because the income is unreliable from a mortgage lender’s point of view.

To prove the amount of rental income a legal space could generate, lenders often require an independent assessment from a licensed property appraiser. Your mortgage professional would help you coordinate this. If leases are already in place, then those can be used to prove income instead.

When you, as the owner, occupy the property; the minimum down payment is as low as 5% provided the property is a 4-plex or less. When you do not intend to live in one of the units, then the down payment requirement is much higher, currently 20% down for a non-owner-occupied rental.

Certain lenders are better to work with than others for qualifying mortgages where the potential rental income is required to make the numbers work. Contact me today for more information.

The Professionals To Hire When Buying A Home

General Lynda Thai-Baird 31 Jan

Assembling a knowledgeable and cohesive home-buying team will help ensure you have a smooth and stress-free experience. Here are the individuals that are integral to the process:

Mortgage Professional

A mortgage professional will help arrange the financing for your home. He or she will help you understand your home-buying budget, research the market, and help you navigate the different mortgage options available to you, ensuring you have the features and rate that meets your needs.

Realtor

Between navigating the real estate market, negotiating on behalf of your best interests, and ensuring you find the right house; hiring the right Realtor is an important step in your home ownership process.

Home Inspector

A home inspector will ensure you know what defects, if any, there may be in a home you’ve written an offer on. This is part of your due diligence process and hugely integral in ensuring you are fully informed about what you’re potentially investing in.

Lawyer

Finally, the last step! Your lawyer will convey your purchase documents, transfer title and ensure you are protected in the transaction.

Contact me today if you have any questions or if you would like more information.

Some Important Things to Consider Before Your Mortgage Renewal

General Lynda Thai-Baird 15 Jan

Your upcoming mortgage renewal provides you a great opportunity to recalibrate and plan for the future. Here’s a list of a few important things you should consider before that day approaches:

Can you handle fluctuating rates?

Some homeowners are nervous about any increase to interest rates, while others are comfortable to go with the flow. Rates are hard to predict. It’s best to base your decision on your personal situation, not what you read in the news, and tailor your mortgage renewal around your needs. I can help you decide whether to opt for fixed or variable rates on your renewal.

Are you getting the best rates and terms?

In a competitive mortgage environment, your good credit history can make refinancing work to your advantage. We analyze mortgage markets daily to ensure you don’t miss any money-saving opportunities.

Are you planning to sell soon?

If you are likely to sell your current home soon, you might consider a shorter-term mortgage or one that has more flexible terms so you can avoid being penalized if you sell your house before the new mortgage comes due.

Have you explored all your mortgage renewal options?

Once you receive your mortgage renewal statement, there’s nothing easier than simply signing on the dotted line for another term. While this may make sense in many cases, your family or financial situation may have changed since you first got your mortgage. Renewal time is the perfect time to look for opportunities that could better meet your current needs.

Are you comfortable with your payments?

If you’ve been feeling financially strapped each month making your mortgage payments, this could be the time to reduce them to a more easily managed level. On the other hand, if you’re earning more, why not pay down your mortgage faster and save thousands of dollars in interest over time? Renewal time is the perfect time to review your mortgage amortization.

Do you need cash flow for other things?

Your priorities may have shifted since you first bought your home, and your cash flow needs can shift too. Things like paying for a child’s university education, planning a career change, or a major purchase such as a vacation property may call for spending money on things other than your home. You may be able to refinance your mortgage to take this into account.

Are you thinking about a major renovation?

Home improvement projects such as a new kitchen or an addition can make your home more valuable, but the cost of having the work done can tie up a lot of money. Before you renew, look at all your financing options, which may include getting an additional line of credit or keeping your monthly mortgage payments low so you have money on hand to finance the renovation.

When do you want to be “mortgage-free”?

If you’re planning extended time away from work or perhaps an early retirement, it may make sense to pay down your mortgage sooner rather than later. While increasing your payments will raise your monthly costs now, you’ll ultimately save on interest in the long-term and can prepare for being mortgage-free sooner.

Could you use your home equity to fulfill other goals?

Refinancing a mortgage can be one way to free up the cash you need for other things, which could even include buying another property. Mortgage renewal time is an ideal occasion to review all your options.

Questions about renewing your mortgage?

Contact me for more information. I’d be happy to discuss with you your options and provide you with a free, no-obligation consultation.

Source: http://www.scottdawson.ca/9-things-to-consider-before-your-mortgage-renewal/

The 3 Crucial Things you Need to Get a Mortgage

General Lynda Thai-Baird 2 Jan

There are a few components required for you to successfully qualify for a mortgage. Here are the three crucial things you need to get yourself approved to buy that home:

  1. Income

There are many different ways people earn income nowadays (salary, commissions, bonus, tips, etc.). Lenders would like to see that you receive a consistent source of income. This will have a large impact on what you can qualify for, as the more income you make (and can prove), the more of a mortgage you can generally qualify for.

If you are self-employed, click here to see how your income can be assessed differently.

  1. Credit

Your credit report informs lenders how you have managed credit in the past, and your credit report will generate a score based on that history. Lenders are looking for a score ranging between 600-900. 600 is considered low, 680 is excellent, and anything above 700 is exceptional. Your credit score is important as it will determine what interest rates you have access to. Generally speaking, if you have established credit (at least two different types for the past two years), pay your bills on time, and don’t max out your credit limits, your score should be great!

To learn strategies on how you can increase your credit score click here. To find out how you can get a free copy of your own credit report, click here.

  1. Down Payment

Having the appropriate amount of money for a down payment shows your lender that you can afford to pay for a house and that you are financially responsible. You are required to put a minimum of 5% down of the purchase price of your home. If you have at least 20% available for a down payment, you are rewarded by not being required to purchase mortgage default insurance. Lenders will accept a down payment from the following sources: your own savings, RRSP’s, gifts from family, or from borrowed funds.

To get a better understanding on the documentation required depending on the type of down payment you plan on using, click here.

If you believe you are ready to purchase a home now, getting ready to purchase one in the near future, or just want to find out where you currently stand, click here to fill out an application. I will be happy to put together a customized plan on how you can get a mortgage that best suits your individual needs.

Property Assessment vs a Home Appraisal

General Lynda Thai-Baird 20 Dec

The real estate market is the single biggest influence on home values. Market forces vary from year to year and from property to property. The market value on an assessment notice may differ from that shown on a bank mortgage appraisal or a real estate appraisal because an assessment’s appraisal reflects the value at a specific time of the year, while a private appraisal can be done at any time.

Use your assessment as a starting point for the value of the property you are planning your home purchase on. Do not rely on a municipal assessment for the exact value of the property you’re considering purchasing. Markets can change quickly, both increasing and decreasing in value depending on the area.

What is a Home Appraisal?

An appraisal is a document that gives an estimate of a property’s current fair market value.Often there is no correlation between a municipal assessment and an appraised value. This is why lenders request an appraisal – an independent evaluation of the property’s value at this particular moment in time.

Primarily, home appraisals are completed at the request of a lender. Lenders need to know the value of a property in the current market before they are willing to lend against the home.The appraisal is performed by an appraiser who is an educated, licensed, and heavily regulated third-party offering an unbiased evaluation of the property in question, trained to render expert opinions concerning property values.

When an appraisal is completed, consideration is given to the property, the home, its location, amenities, as well as its physical condition.Appraisals may also be required when an owner has less than a 20% down payment and requires mortgage default insurance.

Who Pays for the Home Appraisal?

Typically, the borrower pays the cost of the appraisal, and upon completion, the appraisal goes directly to the lender (does not go into the home buyer’s hands). I know it sounds odd, but brokerages, lenders and appraisers cannot just show the buyer the appraisal on a property, even though the borrower paid for it.

Think of an appraisal as an administrative fee for finding today’s current value of the property. You need a home appraisal since the lender doesn’t want to lend on a poor investment and the appraisal helps the buyer decide if the property is worth what they offered (especially in hot markets like Vancouver & Toronto).

Why don’t you get a copy of the appraisal? The appraiser considers their client to be the lender (the reason the appraisal was ordered). The lender has guidelines for the appraisal, and the appraiser prepares his report according to those parameters. The lender is free to share the appraisal with the borrower, but the appraiser cannot share it. This is because the lender is the client… NOT the borrower. It doesn’t matter who pays for the appraisal.

Sometimes an appraisal can come in lower than the purchase price, causing angry calls to the Appraisal Institute of Canada (AIC), and the answer they give is: The Brokerage or Lender is the client of the appraiser, and as such has ownership of the report.

One of the main reasons the buyer pays for the appraisal, is that if the mortgage doesn’t go through, the lender does not want to be on the hook for paying for the appraisal and not getting the business. Lenders are also aware that home buyers could take the appraisal and shop it around with other Lenders to try and get a better deal.

It is rare for Lenders to share the report. With most appraisal companies, the appraisal is only provided after the closing of the mortgage transaction and must have the lender’s approval. After the funding of your mortgage, some mortgage brokers will refund the appraisal fee or sometimes the lender may agree to reimburse the cost of the appraisal.

While a lender does not have to release the entire appraisal, there are some pieces of information that remain the personal property of the buyer, and PIPEDA legislation guarantees them access to that. However, any information on the report that does not relate to the property itself (such as the neighboring properties or other data about the community) would come off the report before the lender provided it.

Some Other Reasons for Getting an Appraisal:

  • to establish a reasonable price when selling real estate
  • to establish the replacement cost (insurance purposes).
  • to contest high property taxes.
  • to settle a divorce.
  • to settle an estate.
  • to use as a negotiation tool (in real estate transactions).
  • because a government agency requires it.
  • lawsuit

Getting Your Home Ready for an Appraisal:

The appraiser report involves a report including pictures of the home and property with the appraiser’s value of the property, along with a short summary of how that information was derived. It’s good practice to have your home tidy, show that you have maintained things inside and outside your home, and ensure all areas to the home are accessible.

Most lenders have an approved appraiser list which requires appraisers to have the appropriate designation. Lenders tend to reject appraisals that are ordered directly by property owners. Lenders want the appraisal to be ordered by the broker or the lender, primarily to avoid potential interference from the property owner.

Home Appraisal Costs

Appraisal costs do vary. Most home appraisals start around $350 (plus tax) but they can go much higher depending on how expensive the home is, complexity of the appraisal and how easily the appraiser can access comparable data.

Are you thinking of buying a home? As you can tell there are a few things to discus – call a me today and let’s have a chat!

How To Get A Free Copy of Your Credit Report

General Lynda Thai-Baird 8 Nov

Think of your credit score as a report card on how you’ve handled your finances in the past. A credit score is a number that lenders use to determine the risk of lending money to a given borrower.

There is always someone willing to lend you money however, higher risk = higher rates!

Step 1 for good credit – you need to know your credit history
• In Canada there are 2 credit bureaus – Equifax and TransUnion.
• You can receive a FREE copy of your credit report from both Equifax Canada and TransUnion Canada once a year
• You can request from Equifax or TransUnion a digital copy, which is much faster, BUT you will have to pay for it.

If you currently are not sure what your credit score is, I recommend you order a copy of your credit report from both Equifax Canada and TransUnion Canada, since each credit bureau may have different information about how you have used credit in the past.

Ordering your own credit report has no effect on your credit score.
• Equifax Canada refers to your credit report as “credit file disclosure”.
• TransUnion Canada refers to your credit report as “consumer disclosure”.

Once you have obtained your free credit report, check it for errors:
• Are there any late payments that have been erroneously reported to your credit history?
• Are the amounts owing in your credit report accurate?
• Is there anything missing on your credit bureau
• Sometimes the credit bureau has more than one file with your name, which can be merged, but it takes time.

If you do happen to find any errors on your credit report, you will need to dispute them with your credit bureau.

How can I get a copy of my credit report and credit score?
• For Equifax, the instructions to get a free credit report by mail are available here.
• For TransUnion, the instructions to get a free credit report by mail are available here.
• Credit scores range from 300 to 900. The higher the number, the greater the likelihood a request for credit will be approved.

The bottom line: when it comes to financing your life, through credit cards, mortgages, car loans or any other kind of debt – your credit score has a BIG impact on what kind of terms you can negotiate.

Keeping an eye on your credit score is important — if there’s a problem or an error, you want to know and have time to fix it before you apply for a loan. If you have any questions, or would like to learn strategies on how you can improve your score, contact me today. 

Home Buying Tips for Newlyweds

General Lynda Thai-Baird 28 Sep

 

Buying a house is one of the biggest purchases you and your partner will make together. The more you talk about it before you begin your search, the more successful your search is likely to be, and the happier you’ll both be when you turn the key.

Agree on Needs and Wants

Before contacting a realtor, agree on what you need and want in a house, while understanding that these can be different. You may need a master bedroom and an office, and two bathrooms to get ready for work in the morning. Those are the minimums you’re willing to accept. You’d love to also have a game room for a pool table, and a mud room to bring the dog in and wipe his paws. These are extras you’ll look for in your house hunting, but their absence won’t necessarily be deal breakers. Agree, too, on whether the house itself or the neighborhood is more important, and how much work you’re willing to do in exchange for a good price.

Discuss Motives and Goals

Like most couples, you probably agree on many ideas but not all of them. So, it’s important to discuss why you want to buy a house and what you hope to gain in the purchase. One person wants a cozy living space reminiscent of the home he/she grew up in; the other wants an investment that will appreciate in value rapidly. Older newlyweds may be looking for a vacation home or a single spot to retire. Agreeing on your goals going in will make house-hunting easier. 

Determine Your Budget

It’s vital that you have a price range and a maximum price before you even step out your door, while understanding that you will pay more for a house that is in “move-in” condition and less for one that needs repairs. Every real estate agent (realtor) will ask what your budget is, because it’s pointless to look at houses beyond what you can afford and are comfortable paying. Unless you are paying cash for the house, you’ll also need to know how much you will offer as a down payment. The rest will need to be mortgaged.

Secure a Mortgage Pre-Approval

In years past, home buyers narrowed their search, submitted an offer on their chosen house and, if it was accepted, then went to the bank for financing. Today, sellers and their agents want to know up front that you will be approved for the loan. So, it’s important for you to understand the maximum mortgage amount a bank will finance for you. To determine this amount, lenders will check your credit history, verify your household income and ask you to explain any issues they find before they determine whether or not they will finance your loan and for what amount.

Choose a Realtor

Choose a realtor who is the best match for your situation. Ideally, he/she will have proven experience working with couples who are combining finances and living arrangements for the first time, is familiar with the neighborhoods that interest you, and typically works with clients in your price range. Choose the person you and your spouse feel will best represent your interests.

Buying a home as a newly married couple can be daunting, but it’s also one of the best things that you’ll get to do together. Learn as much as you can and don’t make hasty decisions. It may take some time before you land the perfect one, but it’ll be worth it once you find the one where you know you can happily spend the rest of your lives.

Mortgage Options on Divorce or Relationship Breakdowns

General Lynda Thai-Baird 14 Sep

 

First of all, it is important to understand that Separation is the process whereby partners reach written agreement on custody arrangement for any children, child support, spousal support and the division of the relationship’s assets and debts, often including the home and related mortgage. A Separation Agreement deals with how the financial obligations of both parties will be split, while divorce (if the parties have been legally married) simply means the marriage is legally ended, and both parties are free to remarry.

It is also important to note that other relationships (besides marriage) can breakdown. For example, that of a common-law couple or siblings who bought a home together, or an adult child becomes estranged from Mom & Dad who had previously co-signed the mortgage. These are all examples of a dissolution of a relationship, for which the options below will apply equally.

The General Issue

A mortgage is a financial obligation. From a mortgage lender’s point of view, before anyone heads out to buy another property, they want the parties to the existing mortgage to properly deal with that one first.

Keep in mind, as long as your name is on the mortgage, you are financially liable for the debt even if you no longer occupy or have anything to do with the property. Being financially liable will impact your ability to borrow in the future. So even if you or your partner is going to keep the home and agrees to pay the mortgage, as long as the other’s name remains on the mortgage, they too are responsible for the payments if the other party defaults (illness, job loss, revenge, etc.).

The less obvious issue as it relates to future mortgage qualifying is that of spousal and/or child support obligations. These financial obligations are to be spelled out in the Separation Agreement. If there is no agreement, then you will need one before talking to mortgage lenders. Here’s why:

Any payment obligations are viewed as monthly liabilities, as such will limit how much you can safely borrow on your next mortgage. Even if the payments are going to be zero, lenders need to see that in writing (via a Statutory Declaration) before they will approve you to borrow again.

Conversely, any support payments received can be viewed as income, which – if combined with other employment income – can help increase your access to mortgage funds. (Note: support income generally cannot exceed 1/3rd of your total income mix for mortgage qualifying purposes.)

Options for Getting Out of a Joint Mortgage

  • Sell – you both agree to end the mortgage contract and simply sell the house and pay off the lender, plus any transaction costs such as a mortgage payout penalty and/or Realtor fees. Any leftover cash (the ‘net equity’) can be split as agreed. 
  • One stays, one goes, no cash required – the party who is to leave the home requests a “release of covenant” from the mortgage lender. The one to stay is said to “assume the mortgage” and must requalify to carry the mortgage solely on their own financial credentials, while the other is released. There is no cash available from this process, so the parties must have enough cash elsewhere to settle their affairs. There is a small legal expense, perhaps $1000, and no appraisal is required by the lender.
  • One stays, one goes, cash is required – in the event that there is equity in the home and some of the equity is required for settlement with the other party, the party to stay may be able to refinance the mortgage in their own name (buyout the other) to as much as 95% of the appraised value or the home. This releases the other party from mortgage and hopefully releases enough cash for settling affairs. Note, the party to stay cannot get cash out for their own personal use/personal debts. (Tip – there is no requirement to split the equity 50-50).
  • No equity, can’t sell or refinance – sad to say, but this happens. This is called negative equity and the only ways to get out of this deal (if you can’t write a cheque to the bank for the shortfall) is to keep it until there is enough equity to sell.  If the parties can agree, my favourite suggestion here would be to lease the property at fair market rent to a tenant. An independent property manager can be used, and the rent payments cover the mortgage, property taxes, and insurance. A joint venture agreement covers off the details between the two parties. As the parties now have rental income to offset the property expenses, the negative effect on future mortgage borrowing is greatly reduced.

Please don’t hesitate to contact me to consult on your options today. Often, upon request and when emotions are running high, I will agree to talk with both parties separately to help each of you understand how to navigate this difficult time.

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