Categories
Blog

A small change in the stress test rate

On Tuesday, February 25, 2020, Minister of Finance, Bill Morneau announced a change in the stress test rate for insured mortgages (with a down payment of less than 20%).

The Federal Government has changed the Bank of Canada Qualifying rate as an effort to make it easier for a home purchase. Here is a brief explanation.

The benchmark for these minimum qualification rates is currently being published by the Bank of Canada based on the announced five-year regular mortgage rates.

Before the changes: no matter what percentage is currently on the market, we (brokers) should qualify the ratio of customer income and expenses by the percentage prescribed by the state, the so-called “five years posted rate” – now 5.19% (mortgage interest rate). Under the new law: the percentage to qualify for a mortgage is the percentage that the client receives on a mortgage + 2%. For example, if the market interest is 2.7%, the loan interest will be 4.7% (2% + 2.7%).

All of the above means that today, we are qualifying you based on a rate which is 2.40%-2.45% higher than the actual rate being offered. Due to this law, people will be able to obtain permits for a higher mortgage housing cost (about 5% more), especially if interest is going down.

This potentially means more fluctuation in the qualifying rate but as of now, it means that our clients will qualify to purchase at a higher value. Such a small change can be a great help and an opportunity to buy your own home.

On this subject (check of the “stress test” conducted by the OSFI The Office of the Superintendent of Financial Institutions in January) I wrote an article predicting this change (you can read here: https://www.facebook.com/groups/VSFinancialGroup/permalink/1067105690302932/).

At the moment, the change applies only to the insured mortgage and will become active on April 6, 2020. On the same day, OSFI announced that it is considering a change in the definition of the base rate for uninsured mortgages.

The effort is designed to hopefully stimulate the housing economy positively. In our opinion, anything that is benefitting the consumer is certainly welcomed.

If you would like to get started on qualifying for a mortgage, please call us @ (204)326-4479 or send us an email save@vssolutions.ca.
Stay with us, your financial education and economic well-being is our task!

Categories
Blog

All in one new mortgage alternative

What sets the “All in One” product apart from the rest of the traditional mortgages is the way the account is structured to work. With a traditional mortgage, your mortgage payment is taken periodically from your bank account. Every bank says you can pre-pay your mortgage faster, but believe me, those that do are a very small percentage. Statistically, only 5% of all clients maximize their pre-payment potential.

The “All-in-One” account combines your mortgage with your chequing and savings accounts. This means that every time you deposit your payroll, your spouse’s payroll, or any other income (like Canadian child benefits)  your mortgage balance is immediately reduced by the amount that you deposited. You are instantly saving money on interest. Your money is working for you every minute not just once in two weeks or once a month.

Let’s say that you have $5,000.00 sitting in your savings account for a rainy day emergency fund. The banks are paying you less than 2% interest on your account. That means you are earning less than $8.50 per month in interest meanwhile the banks are charging you roughly 3% on your mortgage balance. With “All-in-One”, you can move this “rainy day” money into your account and immediately start saving. When you need to take money out, you can do it at any time. The “All-in-One” gives you a debit card, cheques, credit cards, and they have over 3500 ATM’s across Canada.  It is like a normal bank, but one that finally works for you. With traditional banking, your chequing account only benefits the bank and if you need funds, they give you the general public’s money back in the form of loans and charge you interest. On average, our 5 big banks have over 450 billion dollars in their client’s chequing accounts which they use for these loans. They pay on average 0.001 % interest on these operating accounts, which makes it like free money for them. 

Here is the best part…this program offers interest rates similar to the lowest rates we see in the industry. If you think that this product sounds interesting please call us. We have a strategy that we call “VS All-in-One” that we have developed internally. As Manulife’s #1 Volume Mortgage Broker we have learned how to properly structure the account to maximize your results and help you be debt-free years sooner.

*To qualify for this product, you must have a minimum of 20% down payment/equity in your existing home. Some restrictions may apply. For a full list of exclusions please call us at 204-326-4479 or email to save@vssolutions.ca

Categories
Blog

Hot of the press new (FTHBI)

The Federal Government has a new initiative intended to help clients purchase their first house. If you can arrange 5% down payment from your own resources or gifted from an immediate family member, the government will give you an interest free loan for an additional 5% down payment. Thinking of buying a new house? The government will give you an additional 5% making your total down payment 15%.

How Does This Help Me?

When a person buys a house with 5% down payment they are subject to a Default High Ratio Insurance Premium in the amount of 4% of the total mortgage loan. Now with the additional 5% down payment, your Default High Ratio Insurance is reduced to a lower bracket. To understand more please see the attached slide from Genworth Financial.

 

Standard Premium Rate Chart

LTV Ratio Premium Rate Top-Up Premium
Up to 65% 0.60% 0.60%
65.01%-75% 1.70% 5.90%
75.01%-80% 2.40% 6.05%
80.01%-85% 2.80% 6.20%
85.01%-90% 3.10% 6.25%
90.01%-95% 4.00% 6.30%

(Default Mortgage Insurance is most commonly referred to CMHC, although there are two private companies called Genworth Canada and Canada Guaranty that provide the same insurance at the same cost)

In addition to the savings in the Insurance Premiums that are added to the mortgage, the purchaser will also qualify for a higher purchase price. Not only can you qualify for more purchasing power, you will also pay a lower monthly payment to help you afford your new house in your month to month budget.

If you have more than 5% from your own resources, you can still apply for the loan as well. As an example if you are buying an house and you have 10% down payment, the government can still approve an additional 5%.

Let’s take a closer look at the savings using an example

In all three scenarios, we will use the same criteria:

House Price:                         $300,000.00

Interest Rate:                      $2.74%

Mortgage Term:                 5 Years Fixed

Amortization:                      25 Years

Example 1 will be a purchase using current practices without the new loan

Example 2 will be an existing house, including the new 5% loan

Example 3 will be a new house, including the 10% loan

 

  1 2 3
Purchase Price $300,000.00 $300,000.00 $300,000.00
Down Payment Total $15,000.00 $30,000.00 $45,000.00
Total Mortgage Proceeds $285,000.00 $270,000.00 $255,000.00
Insurance Premium $11,400.00 (4.00%) $8,370.00 (3.10%) $7,140.00 (2.80%)
Initial Mortgage Loan $296,400.00 $278,370.00 $262,140.00
Monthly Mortgage Payment $1,363.46 $1,280.52 $1,205.86

 

Do I Qualify for this loan?

This loan is for first time home buyers only. If you currently own a home and you are upgrading to a newer larger property, you are not eligible to apply. If you sell your current house and plan to purchase another, you cannot qualify. To be a first time home buyer it means that for the past 5 Years you have not owned a house.

The exception to the rule is in the case of divorce. If you and your partner are in a home together and are selling due to a divorce, it appears as though you can apply.

In addition, this programs has a maximum income of $120,000.00 Family Income per year. If you are earning more than $120,000.00 this program is not intended for you. It is to assist lower income families to become home owners in an increasingly costly real estate environment

What are the payments? When can the loan be repaid?

During your home ownership you will not have to repay anything. You will be forced to repay the loan if you sell the house OR after the 25 years Amortization. You can repay this debt at anytime if you choose to do so.

Here is the interesting part that you need to know. The federal government is a partner in your home ownership. They will share in your profit and you will share the loss. If they gave you 5%, when you pay them out with the sale you will pay 5% of the sale price. If you pay it out sooner, the government will have you order an appraisal and you will pay them 5% of the appraised value.

Considering the loan is interest free we still believe this is a good deal.

Anything else I should know?

This program is effective September 2 2019 for all houses with possession after November 1st 2019.

The government has allocated only 1.25 billion dollars to this program or three years, whichever happens first. If they run out of money, the program will be cancelled so act accordingly

Keep in mind that the Federal Government will register a 2nd mortgage behind the bank that financed the house.

 

If you have any questions or concerns, please do not hesitate to call us anytime. Mortgage Financing doesn’t need to be difficult when you choose the right partner.

Categories
Blog

Don’t sign that mortgage renewal!

Is your mortgage coming up for renewal? Don’t be too quick to sign that mortgage renewal letter.

More than 70 per cent of Canadian mortgage holders do just that, and what is the usual result? A higher rate and a mortgage product that might not be best suited to their interests.

Experience has shown that lenders don’t necessarily send their mortgage renewals out at best rates, counting on the fact that most homeowners are too busy to ask questions or to inquire about getting a better rate. Don’t let this happen to you!

Rather, let multiple lenders compete for your business to be sure you get the best and lowest cost mortgage possible.

The following are some things to consider before your mortgage renews:

1. Start taking action on your renewal at least 90 days in advance.

2. See renewal as a time to start over.

3. Attractive new mortgage products and features may be available that you’re not aware of.

4. The rate market may have changed dramatically.

5. You are not obliged to renew into the same kind of mortgage, nor are you obligated to stay with the same lender.

6. You can negotiate and compare offers from multiple lenders.

7. Renewal is the best time to refinance.

8. Rate isn’t everything, but it’s tremendously important.

9. Don’t be scared off by fees to switch lenders.

10. Make sure switching lenders is worth it.

For a free, no obligation consultation to discuss your best mortgage renewal options, please contact us by phone @ 204-326-4479 or email us at save@vssolutions.ca

Categories
Blog

Tips for repeat homebuyers

As your life changes, so does your home owning needs. The home that was “right” for you when you were a first-time buyer may no longer be “right” for you now. This means, it is time to re-evaluate your priorities and needs as you prepare to become a repeat buyer. The home buying process will be different for you this time around as both your circumstances and the financing climate have changed. Here are frequently asked questions and answers by repeat homebuyers

Question: Do I have to pay you a separate fee for your service?

Answer: The brokers at VS Solutions* provide their professional services for free. They are paid a commission by the lender once the deal is closed and the mortgage has funded. Should a fee be required, this would be fully disclosed to you by way of a signature, prior to signing the mortgage commitment.

Question: What kind of a down payment do I need?

Answer: The minimum down payment is five percent. Repeat homebuyers often think that they have to put down twenty percent on their second home. They don’t know that they can get away with the five percent down payment again.

Question: What is bridge financing and why do I need it?

Answer: Bridge financing allows you to bridge the gap for your down payment on your new home between the possession of your new home and the closing date of the sold home. The loan will allow access to a portion of the equity you have in your current home until the funds are received by the lawyer. There must be a firm sale on your current home in order to obtain the bridge loan.

Question: Do I have to sell my house first?

Answer: For most people, unless you can qualify and pay for two mortgages, you should always sell your existing home before purchasing a new one. Talking to a mortgage broker before you start the process can help you decide if you need to sell your home first. We can work through the numbers with you.

Question: I didn’t have to provide all of this paperwork/information last time I got my mortgage. Why do I have to now?

Answer: There have been many regulatory changes since 2008 and many even in the last couple of years. These changes have been made to ensure a strong stable housing market. Things like income confirmation have become a key component of the due diligence that is now required.

As you prepare to meet with your VS Solutions* mortgage broker to discuss financing on your next home, keep these FAQ’s and answers handy. They will provide you with a solid foundation as you begin the next step in your journey to continued homeownership!

Interested in finding out more about your home financing options? Give us a call today at (204) 326-4479!

*All mortgages provided under Verico One Link Financial

Categories
Blog

Great news for our newly Self-Employed clients

Canadian Mortgage and Housing Corporation (CMHC) has launched a new program for self employed borrowers who are less than 2 Years Self Employed but have experience in their field. This is great news for any client that has recently decided to branch out on their own. In the past, the age old saying in banking was “If you become self employed, you are on your own for two years.” Finally we have some good news in the mortgage industry and something is happening to HELP purchasers buy their first home or possibly upgrade to that dream home they have always wanted. CMHC now says if we can prove you did the exact same job, they will allow us to use the income that you made in the same line of work over the last two years.

If this situation applies to you, consider to buy now. It is very important that you buy your house before you file your first income tax return as self employed. As your mortgage broker my job is to help you buy. That said, it is your accountants job to declare as little net income as possible on your income tax returns to minimalize your income taxes. The bank looks at the previous 2 years income tax returns so if you declare a small income in the most recent year, you will qualify for a lower amount.

The best part of this program, CMHC is not charging you any additional premiums to take advantage of the program and the banks are giving you their best rates. When I think about this offer, I am excited because I know so many clients that could have fit to this exact scenario. The main career that I think about is Long Distance Truck Drivers.

Happy house shopping to everyone and as always , please share this with your family and friends!!

Categories
Blog

Ten Rules for the Ideal Credit History!

On a daily basis I face credit related issues. People tend to make the same mistakes over and over. I already touched upon this topic during my workshops, wrote about this on my blog and published real life cases. It is crucial to be aware of all factors influencing a credit history as information changes often and the factor that were important yesterday might become irrelevant today.

Credit history plays a key role for banks. It is an insight into the clients capacity to repay along with past history and future projections. A credit history used to be of less importance in the past, however now we cannot even choose the bank or discuss interest rates without reviewing the credit score. It is also becoming increasingly typical in areas that have no direct relationship with banks. For instance, some employers request a credit check of a potential employee. Insurance companies look into the credit history prior to entering an insurance agreement or offering an insurance discount. There is a connection made that a responsible borrower will upkeep their property more responsibly. Landlords of apartment complexes have always checked the credit bureau however it is becoming increasingly popular in the single family rental sector .

A client with a poor/bad credit history will be declined for mortgages that have low rates and favourable conditions.

I would like to highlight the major points for a “good” credit history

1) One of the most essential factors is on-time payments of bills. 35% of your credit history depends on punctual payments on credit cards, loans, etc.

2) Something relatively new is that your cell phone and internet bills affect your credit history. With some banks, even your mortgage reports on your credit history. On a weekly basis we see cell phone delinquencies damaging credit ratings. Mortgage delinquencies are almost an immediate stop & decline if you are trying to buy the next house with less than 20% down payment.

3) Utilization of credit is a critical factor as well. If your credit card limit is $2,000 balance is always exceeding $1,300.00 you are above the recommended 65%. In the same scenario if you need to use $1,800.00 monthly consider increasing your credit limit to $3,000.00.

4) If you have several credit cards, then try to use them equally. Let’s say you have three cards that each have a $2,000.00 limit… At the end of the month, don’t allow one of your cards to have a balance of $1,800.00 and the other two remain unused. Try to use balances equally. By repaying multiple cards on time and managing three accounts properly you are building credit worthiness.

5) It is important not to exceed your limit. People often spend every penny available of their approved limit and think its okay because they are within their right. If you are purchasing a large item using credit to “collect points” this is okay but make a payment immediately. What happens otherwise is the interest on the credit card is added to the balance and being over limit destroys your credit rating immediately. In an isolated incident your credit will rebound, but if this becomes a trend that you are over limit, it will take months to begin rebuilding.

6) Applying for different loan products within a short period of time also negatively affects a credit history. For example, you order a credit card, apply for a loan product and apply for a line of credit. In this case, a credit bureau acts on the assumption that you are in financial trouble and trying to solve it with multiple loans.

7) “Collections” are extremely harmful for your credit history. If you fail to pay a loan or credit card in full, the company will assign your file to a third party collection agency and they will pressure you to pay. This is extremely harmful for your credit history, as this will be kept recorded on your history for 7 years. With the “Prime” or “A” Lenders, they will force the collection to be paid before granting any credit and the reasoning regarding why you failed to pay will also be questioned and scrutinized. Consider this carefully when fighting with a small cell phone bill because you are not happy with their service. Collection Agencies will offer you a “settlement” offer where you have to pay only a portion of what is owing. “Settled” tells the person reviewing the credit report that someone lost money on your account. Paid in full will rebuild credit faster than settled.

8) Declaring bankruptcy or a “consumer proposal” are fatal for your credit history. If the worst happens and you have health problems, lose your job, separate from a relationship etc. and you cannot pay your debts, it is possible that you may have to consider bankruptcy or consumer proposal. What you need to know is the next seven years getting loans/mortgages/credit cards will become increasingly difficult at your interest rates will be higher. Nevertheless, we can help get out of this challenging situation within 2-3 years. Contact us and we will explain what you should do to make sure your future looks bright again.

9) The credit reporting on your credit history is also important. For example, you’ve been using a certain credit card for 4 years and decided to change it with another one because the “rewards” are better. You close the previous card and start using the new one. In this case, you started a new credit history from scratch and your good 4-year payment discipline will no longer have effect in the future. It would be more beneficial for you to have kept the existing card open with minimal to no use. If you have a credit card where you miss a payment or have conflict I would not recommend closing “problem” card. The credit bureau could track positive improvements in your future credit history and see the successful solution of the problem/conflict.

10) Credit Scores are not always as they seem. I often hear from clients: “I have a great credit, my score is 800+”. You may have a high score of 800+, but the financial institutions will not offer you their best products. Another client may have a score of 690 and will get all options. Let’s me explain why this is the case. The first client only has one credit card with a limit of $500 and has been using it for 6 months. This is called a “false beacon” meaning that the credit rating is above 800 however there isn’t sufficient data to examine repayment tendencies. The client has a high score but the financial institution are can see that it is easy to repay such a small amount over a limited period of time. Another client has a credit rating of 690 points, but he/she has been using 3 credit cards with $3,000.00 limit each for more than 2.5 years. This client also repaid a personal loan where the payments were just over $500.00 per month. The credit score is slightly lower because the client needs to buy plane tickets on one credit card last month. This is the ideal client because they have shown they repay their debt on a timely fashion and manage their finances in a proper manner long enough to establish a trend. It is client who would be offered all options available in the market. He/she can claim the best interest rate with the best terms and conditions. I wish you all the best and patience in developing a good credit history, while we will take care of your advantageous options.

I wish you all the best in building a strong credit history. Let us take care of your financial needs and guide you in the process. I hope this information was helpful and hopefully, you will share it with your friends and acquaintances.

My job is to protect your finances!

Categories
Blog Uncategorized

Rule of Thumb

The most typical question a mortgage broker is asked is “How much am I qualified for?”. This question is becoming increasingly difficult to answer without an in depth look at your financial picture.
The government stress test and increasing interest rates often means your limits today are different tomorrow.

Since this question is asked so often, I have decided to give a very general rule of thumb… It should be taken as a generalization and not a hardfast rule.

If you are debt free and have a well established credit history, for every $25,000.00 in family income we can qualify you for $100,000.00 mortgage. As an example, if you want to buy a house for $300,000.00 then you will need $75,000.00.

Some factors that can affect this generalization:

• Debts: If you have lots of car loans, high line of credit/credit card utilization
• High Property Taxes
• Weak/Poor Credit: If your beacon score is less than 680, you will qualify for reduced lending ratios

Keep in mind that we are different then chartered banks. As a mortgage broker we have access to various banks, credit unions, virtual lenders, and alternative options. Each lender has different rules for qualification. Some lenders accept child tax as a portion of the income. 20% down payment or more helps too because certain banks offer extended amortizations (30 Years). In addition, because we don’t require high ratio default insurance with 20%, the banks can make their own decisions regarding affordability ratios.

Self employed clients, keep in mind we are talking about NET income after all deductions. If your gross income is $200,000.00 per year but you write off lots of expenses and end up with an income of $20,000.00, this income (20K) is the number that we are using to qualify. Fear not, we have programs and options for you too.

The most general rule of thumb that I can offer… Don’t guess. Give us a call because it’s free. With all the rules, policies, and programs that exist today let our team of professionals guide you through the process.

Categories
Blog

Why do I need a mortgage broker?

[vc_row][vc_column][vc_column_text]

For something as seemingly straightforward as buying a home, the mortgage process can feel overwhelmingly complex. One element of the purchasing process that causes confusion among home buyers is whether or not to use a mortgage broker. A mortgage broker is an intermediary between borrowers and lenders. Their job is to find the right loan and lender for borrowers, ensuring a smooth mortgage process for all parties involved.

According to the Canada Mortgage Housing Corporation’s 2015 Mortgage Consumer Survey, mortgage broker market share is trending upwards for most market segments. This is particularly evident among repeat buyers where market share has increased from 32% in 2012 to 42% in 2015. Over this time period broker share has also increased among first-time buyers (48% to 55%) and refinancers (27% to 33%). Among renewers, broker share has remained stable at around 21%.

So should you be one of the growing individuals who turn to a mortgage broker when purchasing a home? The following are some of the benefits brokers can offer:

Rates
If you want to make sure you’re getting the best rate possible, working with a mortgage broker can take a lot of the guesswork out of the equation. Brokers have access to a large network of different lenders, helping them to find the best interest rates for your type of loan.

Payment
You can work with a mortgage broker without having to worry about hidden fees. Mortgage brokers’ livelihoods depend on the quality of their services, not on charging borrowers. They get paid a commission from lenders. Brokers also have more incentive to find the best mortgages for borrowers, since they don’t get paid until your mortgage funds.

Options
Your first instinct might be to approach your current financial institution when the time comes to take out a home loan. However, being a customer doesn’t always guarantee approval, or lowest interest rates. Mortgage brokers deal with multiple lenders, allowing them to canvass a much larger area when searching for your loan. While your bank may deny you a loan or charge higher interest rates, brokers have the capability to find a lender that won’t.

[/vc_column_text][/vc_column][/vc_row]

Categories
Blog

How can you protect your house from being taken by fraud?

The purchase of a property is a huge occasion for every home buyer and is, unfortunately, very stressful. It is important that the transaction closes smoothly, however equally important is to ensure that you do not fall victim to fraud.

Recently real-estate fraud has been increasing rapidly, especially in regards to illegal activities in the property title of home owners.  It can turn out that someone registers a mortgage against your title and disappears with the money, leaving you with a mortgage in your name. Another possibility could be that a scammer sells your house, under your name, and takes off after receiving the proceeds.

During the process of purchasing a property, the lawyer needs to ensure that the house will be transferred over with a clean property title. This means that any problems that were connected to the property title of the previous house owner or any other problems should be solved and you should receive a clean title. The lawyer is not responsible, nor able, to protect you from any illegal activities occurring against your house.

Usually people do not know about any illegal process occurring and only learn of it once the fraud is complete. Here are a couple examples of recent fraud occurrences:

1)  A client sent his property tax payment to the city and he receives and answer saying that he doesn’t need to pay as the house no longer belongs to him. This is the first time that he learned that his house was sold without his permission.

2)  A son wanted to sell his house to his parents, but was told that the house was already sold.

3)  A woman got a phone call from a collection agency claiming that she has not paid her mortgage for the past 3 months. This house has never belonged to her and during the process of sorting out the issue it turned out that she “bought” two additional houses with a combined mortgage of $400,000.

These types of fraud scenarios are common in cities such as Toronto, Vancouver, Montreal, and Calgary. However they can also occur in small cities and across the provinces, especially when the purchase doesn’t include a mortgage (but can also occur when a mortgage is involved).  The scammer immediately moves the money to a third-party and the so called new owner disappears.

It can be a negative effect on your health care. You must have one or several mortgage / s. You are not carrying out these illegal activities. Regardless of the outcome, it has been resolved.

We’ve taken credit card disputes for example. The dispute is ongoing. Unfortunately, you’ll not be able to get in touch with the fraudulent activities. Here you can find out how to solve the issue.

So what can you do? You can purchase title insurance (this is not a sales pitch; I am not offering this product). It can be acquired during the purchase of the property. Owning this type of insurance. You are the owner of the house.

The list of important issues. For example:

  • The seller made changes to the house. It is a condition of your own expense. If you have this insurance.
  • It becomes the insurance company.
  • After the purchase of a house, it’s not a problem. Again, the insurance company will take care of the problem.

For the last point, I would like to ask for the lenders. This is a document that confirms the property lines. If there is no such document available. This certificate is worth more than $ 500. I see no reason to order one. Title insurance would cover these problems.

It will be a little bit longer. In many cases, banks agree to protect themselves. If you want to protect yourself. But you are still interested in the banknote.

I hope you never become a victim of fraud. However, if something happens to you, then you have this insurance. If you already mentioned, you can register it while you are registering your mortgage with your lawyer. If you decide to get the insurance company?

I hope this information was useful to you. If you liked the article, please share it with your friends.

My work is to protect your finances.