MONEY BORROWING AND FINANCIAL SOLUTIONS
The world of financing is continuously changing. If you need money, we can help. Whether it is to buy a new property, utilize the equity in your home to finance something else - we can help.
Whether it is residential, commercial or industrial, whether it is institutional or private money - we got it all covered. Short or long term, small private mortgage, or a large commercial loan - we can accommodate you.
Purchasing Your First Home
The best way to start planning the purchase of your first home is to talk to a mortgage professional. By getting the right advice right at the beginning, you are less likely to make costly mistakes such as looking for a property outside of your budget or comfort zone, not taking advantage of programs such as Home Buyer's Plan, not protecting your principal residence in case of potential matrimonial splits in the future, and similar. That's why professional advice is recommended when making one of the most important financial decisions that most Canadians will make in their lifetime.
Work with a mortgage broker to build your home buying budget that includes considerations of your lifestyle, closing costs, and home ownership costs beyond the monthly mortgage payment. Having a realistic budget to start will bring you confidence, knowing that you are not overextending yourself.
As for the all-important down payment, there are a few options to consider for first-time homebuyers who may have smaller amounts to start:
There's so much to consider. Professional advice can get you into the market to start your wealth building with smart debt and can save you thousands over the course of your mortgage.
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Renewing Your Mortgage
When your mortgage comes up for maturity, you are free to renew your mortgage with your existing bank, or take it to a lender who offers you a better rate - at no penalty. Do not sleepwalk through your mortgage renewal! Auto-renewing your mortgage and not getting fully discounted rates could cost you hundreds of dollars each month. Allow your mortgage broker to investigate what are the best options available to you.
Mortgage renewal is an important time to determine whether your personal circumstances have changed, and whether based on these circumstances, your strategy of paying your mortgage should be adjusted. Whether you should consider fixed or variable rate, whether to increase or decrease your payments, or whether to take advantage of prepayment privileges to pay off your mortgage faster - it is important to invest a few minutes of your time and address these important issues that could save you thousands of your hard earned, after-tax money.
Mortgage renewal is also an important time to consider whether to roll your high-interest credit cards and other debt into your mortgage to get one lower payment, boost your monthly cash flow, and save on interest costs. It is also a good time to consider if it makes sense to take equity out of your home for renovations or major expense in the near future.
If you get a proper advice at this crucial renewal time, you could save much more than by simply concentrating on your single task on hand - signing the renewal papers.
Here are some facts regarding mortgage renewals:
~ The process of switching/transferring your mortgage from one bank to another usually doesn't involve any fees. The cost of the switch, appraisal fee and transfer-out fee is either fully, or almost fully covered by the new lender. The process itself involves minimum time on your end. You will not even have to leave the comfort of your home.
~ Most institutions allow mortgage brokers to hold the interest rate for as long as 120 days. In other words, you can start shopping for the best rate as early as 4 months prior to your maturity date. Most lenders send their renewals only about a month prior to your renewal date, potentially missing out on some 3 months when you could have secured a lower rate.
~ Statistics say that some 70% of homeowners sign a renewal form without asking any questions, or barely influencing the change in the rate offered. Don't allow yourself to be reactive, instead, have a control over your renewal process - let the mortgage broker negotiate rates on your behalf. You have nothing to lose.
~ The worst thing that can happen is for your bank to offer you a better rate so you don't leave them.
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Purchasing an Investment Property
Investment properties have been a popular choice of investment for many Canadians, especially in the past 10 years or so. And not for no-reason.
Investment properties typically tend to be a good return on investment, frequently providing returns that are better than other investment alternatives, with minimal risk, and with the appreciation that typically beats inflation.
Depending on the initial investment, consumer demand, and the specifics of the property itself, investment properties can very often be self-sustaining, meaning that the rental income tends to be high enough to cover costs of mortgage, property taxes and maintenance fees, where applicable.
Investment properties are also a great source of retirement funds. If purchased early enough in one's lifecycle, chances are the property will be paid off prior to one's retirement, providing a clear cash flow to the investor.
Barriers to entry into the investment world are not high - indeed, they are very affordable to average Canadians.
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Mortgages for Borrowers Who are Self Employed
We've seen several changes to mortgage lending regulations in the last few years, so we understand if you're having trouble keeping up. There could be further tightening of the rules around proof of income for Canadians who are self-employed. This has always been a tricky area; sometimes smart tax planning means that you don't claim a high income. But that can cost you when it comes time to get a mortgage.
Solutions, however, exist.
If you have as little as 5% down payment from own sources, you are allowed to get additional 5% as gift from immediate family and apply for a mortgage for the remaining 90%. Your credit record has to be immaculate and your "stated income" has to make sense for type of business that you are in. Your insurance premium will be higher than that for income-qualified applications, but it could still make sense in your unique circumstances.
If you have somewhat higher down payment, there are options to obtain a combination of first and second mortgages. In certain cases, it might be more beneficial for you to take this avenue, rather than insuring your mortgage - even though you will pay a higher rate on a second mortgage, the overall cost of borrowing may be less, given the relatively high insurance premiums associated with insured mortgages.
Finally, if your down payment is 35% or more, you can get your mortgage approved on a conventional basis, without having to pay higher insurance premiums or higher second mortgage rates. As long as the application makes financial sense.
Going forward, we expect the new rules to continue affecting all three mortgage insurers in Canada - which is going to limit the maneuverability of lenders like the credit unions and other specialty lenders who have typically had a more flexible lending model. This could spell a big change for mortgage eligibility for self-employed Canadians.
How to handle this? If you're self-employed, your best strategy is to talk to us about your best possible mortgage... before the new rules come into play. That means we should talk now.
A mortgage broker is independent and doesn't work for the banks - or for any one lender. In fact, we have access to over 50 lenders, including regional and private lenders, so we can help find the lender and the mortgage that's right for you.
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Getting a Secured Line of Credit Against Your Home
"Secured Line of Credit", "Home Equity Line of Credit", "HELOC", "Hybrid Mortgages" and "All-In-One" are just some of the common terms used to describe a line of credit that is secured by your home. Let's call it HELOC for the sake of simplicity.
According to the latest regulations, HELOC on its own cannot exceed 65% of your home's value. However, if aligned with a mortgage inside of it, it could technically be extended to 80% of its value.
For example, if your property is worth $100,000, and you would like to set up a HELOC against your home, you could set it up for $65,000 and use it as you like, or you could set it up with $80,000 limit, however, at least $15,000 inside of it should be locked into a mortgage. As you pay the mortgage down, your line of credit limit can never exceed $65,000.
HELOC's are if not the most popular products available in the market. They slightly vary between the institutions that offer them (as not all lenders have HELOC's in their fleet of mortgages), however the principal is quite similar. You will have a limit set up at the time of the application, and then you can split your debt inside of it as you think makes most sense. For example, if your limit is $80,000, and your total debt against it is $60,000, you can have $15,000 locked in a 5-year fixed mortgage, $30,000 in a variable closed mortgage, and the rest floating in a line of credit.
The beauty of the HELOC is that you can diversify your borrowings by splitting your overall debt into a short or long term fixed rates, by taking advantage of lower variable rates, by having a portion in a line of credit and as such fully open for payout, and by having funds available and not paying interest on them unless used. For those that use the HELOC for various investments, it allows them to keep an easier track of their accounting, as they can easily write off the interest on debt used for investments, keeping them away from the personal debt.
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Mortgages for Individuals with Less than Perfect Credit
If you are an individual with past or current credit issues, there are several options that will enable you to get approved for a mortgage.
If the past or present issue is minor and caused by your lack of better knowledge, it is often possible to build a strong business case with the lender and grant an exception to your application. This will ensure you get your mortgage approved by a major lender, with the minimum down payment, at most competitive rates.
Where the credit issue is still beyond the appetite of major lenders and/or mortgage insurance companies, we always have the option of taking your case to a smaller lender, such as credit union, and structure your application as a combination of first and second mortgages. This way, you will still be able to get relatively competitive interest rates with relatively small down payment.
We also have access to non-traditional lenders who offer financing solutions to individuals with larger credit issues. Although these lenders have higher rates, very often it makes complete financial sense to accept their mortgage terms in order to move into your home earlier versus later. Remember, this is only a temporary solution that will bridge you while working on repairing your credit. The idea is to make you a homeowner sooner, but most importantly to move your business to a major lender as soon as possible.
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Refinancing Your Property to Buy Another Property
You may be interested in purchasing a property such as a 3-season cottage or a vacation property in Florida, yet you find out that major banks are not interested in financing these types of properties. Or, you may be interested in simply taking equity out of your home and use it as a down payment towards the purchase of another property. Refinancing your property would be the proper approach to access that equity.
The newest regulations state that you can refinance your property to the maximum of 80% of its appraised value. The new mortgage would be used to pay off your old mortgage, if any, and the difference would be given to you to dispose as you like.
When refinancing, you are not restricted to taking a mortgage as your new product, and/or advancing all of equity up-front. If qualified, we could set you up with a Secured Line of Credit with a limit of 80% of the property's value (subject to having at least 15% locked-in a mortgage within), and then you can advance only what you need to borrow at the time of closing. This way you pay interest only on the amount that you initially borrow. The difference will be available to you when you like it, as you like it. If you don't use it, you don't pay interest on it. Yet, you have the funds available should an interesting property pop up in the near or far future.
Talk to your mortgage broker about the refinancing procedures, costs, benefits and potential downfalls. If the cost of refinancing exceeds the benefits, you may need to look at alternatives. Finally, if you need to borrow more than 80%, talk to your mortgage broker about private mortgages or cash-back options.
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Financing a Cottage or a Vacation Property
Whether you are looking for a vacation property with a waterfront, a retreat home away from the city, a 3-season property, or a year-round house, allow me to guide you through available financing options.
Cottages and vacation properties are becoming ever more popular and demanding, with aging baby boomer population being flush with capital. And with technical advances such as internet and satellite telephone services, these properties are more increasingly used as office away from office for those in remote working environments, or retirement homes in other cases. And not to mention that these properties in most cases represent a solid financial investment.
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Spousal Separation Mortgage
If you are going through a separation or divorce and assume that your house must be sold, you may be in for a positive surprise. If you can afford to carry a new mortgage on your own, you are allowed to refinance your property up to 95% of its value, and provide a spousal buyout, perhaps even pay off any other joint debt.
Divorce or separation does not necessarily mean that you have to leave your family home.
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Purchase Plus Improvements
If you're buying a home but want to add a second storey, finish a basement or redo a kitchen, it can make a lot of sense to add those costs to your mortgage. That way
you can spread your payments over the life of the mortgage and have a cost-effective way to get your dream home. The process is quite simple:
Refinance Plus Improvements Mortgage
Are you looking for financing to improve the value of your home? We see what you see.
New mortgage rules mean that Canadian homeowners can only refinance up to 80 per cent of the value of their home. And when it comes to renovations, it can be a real catch-22: you want to increase the value of your home with a great renovation... but you can only borrow funds on the current, pre-reno value of your home. If you're close to the 80 per cent loan to value (LTV), you can be out of luck.
Fortunately, our lenders see what you see. A Refinance Plus Improvements Mortgage allows you to refinance up to 80 per cent of the new, post-reno value of your home. You can add 10 per cent of your home's value (to a maximum of $40,000) to your mortgage.
Here's how it might work:
Home improvements can increase the value of your home, and improve the quality of your life. And your mortgage is your most cost-effective financing option. Better still, talk to us about using your pre-payment privileges to pay off your renovation faster.
So that vision you have for your home? We see what you see.
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Although the standard zero-down mortgage has been discontinued as of some time ago, an option to purchase a property without any down payment still exists. It is found in a cash-back product offered by some lenders. The lender would charge you a higher interest rate, and in return would give you back 5% cash back that you can use as down payment on the property.
Don't think of a higher interest rate as a negative thing - you would be simply paying the 5% loan back to the lender through a higher interest rate - it is a fair trade for those that prefer not to wait and save the minimum down payment before they move into their own home.
Although a zero-down mortgage is not for everyone, for qualified homebuyers it can be a tremendous financial boost: getting Canadians into their homes faster, saving potentially thousands in rent, and giving homebuyers a jump start on building wealth.
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New to Canada Program
Are you new to Canada? Now qualified homebuyers who have immigrated or relocated to Canada can qualify for home purchases with as little as 5% down payment. To qualify, you need to have job, some type of established credit history, and you need to prove that you are new to Canada, whether as new permanent resident, or with a valid work permit.
Since "New to Canada" programs vary across insurance companies for insured mortgages and across lenders for conventional mortgages, it is important that you talk to a mortgage broker and establish where your unique situation fits. Mortgage brokers can streamline the mortgage process for new immigrants, from counseling on credit in Canada, to obtaining credit references from foreign banks, to confirming foreign income. A broker can work with new immigrant clients to present their financial history to the satisfaction of the lender.
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If you are planning to build a house from scratch, whether by using a builder or by managing the construction process yourself, several institutions offer progress-draw financing options that could meet your needs. Although the construction financing is a relatively complicated process and varies between financial institutions, certain steps in the process are standard to all lenders.
The bank would typically assess the value of the land on which the property will be built, the cost of building according to the construction contract or estimated costs, and would come up with the value of the property upon completion. Based on the expected value of the property, the bank would approve you for a mortgage that will become active once the property is built.
During the construction phase, the bank would usually advance the funds to you in segments (also known as "draws"), which will enable you to finance the construction. The cost associated with a construction mortgage is usually in the neighbourhood of Prime (Prime + 1% - Prime + 4%) where you are required to make the interest payments only. Once the property is completed, your construction mortgage would roll into a regular mortgage at the ongoing or pre-arranged mortgage rate.
Although the majority of financial institutions will require you to have your own funds to start construction, certain lenders will allow the first draw to be advanced against the value of the land. For example, if you own a piece of land that is worth $600,000, you might be allowed to draw up to 50% of the land's value, i.e. $300,000, to start the construction.
As an alternative to getting your construction financed through one of the major banks, you can use private funds to build a property. Although private funds tend to be more expensive than those of main banks, the process is much more simple, flexible and customer-friendly. Furthermore, once the construction is complete, you are free to pay off the loan and either sell the property or arrange final mortgage through the lender of your choice.
It is important to discuss all construction mortgage options with your mortgage broker, to see which option makes more financial sense in your particular case.
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Purchasing a Property Outside of Canada
The fact of the matter is that Canadian banks do not finance properties located outside of Canada.
If you are looking to purchase a property outside of this country, you have two options.
First option is to contact the lender located in the country where the subject property is located. These lenders usually offer products for non-residents who are looking to purchase properties in their country. Their standard requirements would typically include a down payment in the neighbourhood of 35%, as well as some type of income confirmation, to ensure you can carry your mortgage obligations. Certain Canadian banks have affiliations in other countries, which you may be interested in exploring.
Your second option is to use the equity in your Canadian home. If you have substantial equity to purchase a property in another country, that is excellent. If not, hopefully you have at least the 35% that is needed for the down payment, and then you can approach the lender in the subject country to finance the difference.
Before purchasing a property outside of Canada, however, we advise you to consult your accountant about important tax implications that this purchase may create.
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Getting a second mortgage against your home does not necessarily mean getting a large amount of money borrowed - you could borrow as little as $15,000 or $20,000, as long as the set-up costs make financial sense to you.
If you need a quick loan that will be repaid within a short period of time, but you cannot get approved at a major financial institution, these short-term loans may be a temporary solution that make financial sense.
Talk to your mortgage broker about set-up fees and whether this is an option that makes sense for you.
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