Here are the new HST rules in BC that will be coming out later this year. It’s not as confusing as you may think. First off, if you’ve purchased a home, then you know that you don’t currently pay GST when you buy a home that’s been previously lived in. This means one house that’s had one previous owner, is now an old house and no longer requires GST to be paid. The HST rules will only apply to brand new homes, homes that have never had anyone else reside in it.

For those of you that don’t know, the HST rule comes with a rebate clause on the PST portion only. The rebate is only for 71.43% of the PST, with GST being paid in full. The maximum rebate for a $525,000 purchase will receive a total of $26,250. If your home is $1 more, there will be no rebate.

Basically if you were to purchase a new home prior to the HST rule being implemented on July 1^st, 2010 a $500,000 home with just GST will cost approximately $10,000 less than a home that is charged HST.

DREAM TODAY. OWN TOMORROW.

It’s easy to get caught up in the idea that comparing mortgage rates will guarantee you get the best bang for your mortgage buck. While this may be true for particular situations, there are many scenarios where this strategy is not effective. Following are three reasons why it doesn’t always pay to make a decision based solely on rates.

Reason #1

Your long-term plan and risk tolerance should determine which mortgage product is right for you. This product may or may not have the lowest rate.

For instance, there are cases where lenders will offer lower rates for insured mortgages. With insured mortgages, however, you’re charged an insurance premium, which is usually added to the mortgage amount. But if you’re not planning on keeping the property for a long enough time to offset that cost, it may be better to take an uninsured mortgage with a slightly higher rate. The cost difference you will pay with the higher interest rate may still be less than what you may pay in insurance premiums.

As another example, if you prefer to budget for a consistent payment and can’t handle rate fluctuations, it may be better to go with a higher fixed-rate mortgage. If you think current rates are low enough and you will be living in your property for at least five years, it may be wise to also opt for a mortgage with a longer term.

Reason #2

One of the biggest mistakes people make when merely comparing mortgage rates is failing to consider important factors such as prepayment options to help pay off the mortgage faster, whether secondary financing options are allowed, early payout penalties, or what fees are involved.

It’s not enough to simply compare mortgage rates because you have to know what “clauses” are contained within the mortgage deal. There may be cases where you will find a lender with the lowest rate and willing to pay for your closing costs, or even provide you with cash-backs after closing.

Reason #3

Lenders can change their rates at any time. As such, if you’re shopping for rates with one lender and then approach another that gives you a lower rate, it’s quite possible that the first lender has also dropped its rates. This is why it’s important to get pre-approved with a lender once you a mortgage that fits your needs. In some cases, you can secure your rate and conditions for up to 120 days.

DREAM TODAY. OWN TOMORROW.

As a licensed mortgage broker with Dominion Lending Centres I have access to multiple mortgage products and services to meet your unique needs and long term goals when it comes time to purchase a new home, renew your existing mortgage, refinance to consolidate debt, take equity out of your home for renovation purposes, or even access your equity to send your kids to a post secondary school.

With access to more than 90 lending institutions, including big banks, credit unions and trust companies, I’m familiar with a vast array of available mortgage products – ranging from financing for the self-employed to financing for those with credit challenges.

And, best of all, I work for you and only you! – not the lenders. This ensures you always receive the best mortgage product and rate to serve your specific needs. Based on the high volume of business I fund, lenders offer me better discounts on mortgages that I can further pass on to my clientele.

With interest rates still below the 10 year mean, refinancing your existing mortgage and switching to a lower rate may save you a lot of money – possibly thousands of dollars per year. Imagine what you could do with the savings – anything from renovating or investing to going on a much-needed vacation or putting money towards your children’s education. By refinancing now and paying off high-interest debt, such as credit cards, you can put yourself and your family in a better financial position.

If your current mortgage is up for renewal, you’re thinking of refinancing your mortgage or you’d like to discuss your options, please give me a call 604 616 2266. I work the standard Monday – Friday hours, evening, weekends and social media 24/7. Instead of taking time out of your busy work week to shop your money around, please let me do the shopping for you. We can meet in the comfort of your own home or at my office. Don’t just accept what the banks tell you!

DREAM TODAY. OWN TOMORROW.

The purchase of a home is likely the largest financial expenditure you’ll ever make. And getting your home inspected is an essential step in the home-buying process. No one wants to buy a money pit – and once you have signed on the dotted line, there is no turning back.

The best way to ensure you use a professional home inspector is to seek referrals from your me, your real estate agent or friends that have purchased homes in the past. Gather 3 referrals names and call them all. Make sure all the prices are competitive and it’s not always the wisest decision to go with the cheapest. Since you want to be able to trust your home inspector’s judgement, you have to ensure they’re not part-time home inspectors just trying to make some extra cash on the side, or they aren’t only home inspecting so they can also offer to complete any work for you that you need done on the home. To ensure the job’s done right, after all, the home inspection must not be biased.

The purpose of a home inspection is for the inspector to be able to tell you everything you need to know about the home you’re going to purchase so that you can make an informed decision.

Following are 10 key questions you can ask your home inspector before they’re hired to ensure the inspection will be completed professionally and thoroughly:

1. Can I see your licence/professional credentials and proof of insurance?

2. How many years’ experience do you have as a home inspector? (Make sure they’re talking specifically about home inspection and not just how much experience they have in a single trade.)

3. How many inspections have you personally completed?

4. What qualifications and training do you have? Are you a member of a professional organization? What’s your background – construction, engineering, plumbing, etc?

5. Can I see some references? (Make sure you also check the references.)

6. What kind of report do you provide? Do you take pictures of the house and add them to your report?

7. What kind of tools do you use during your inspection?

8. Can you give me an idea of what kind of repairs the house may need? (Be wary if they offer to fix the issues themselves or can recommend someone else to complete the job cheap.)

9. When do you do the inspection? (Let’s hope they don’t have a day job, and can only do them at night when it’s too dark to see the roof. It’s best to stay away from part-time inspectors.)

10. How long do your inspections usually take?

Remember to ask all these questions…

DREAM TODAY. OWN TOMORROW.

1. Roommates – helps to pay your mortgage faster.

2. Home Business – will allow you to receive tax deductions; just make sure it is zoned correctly.

3. Storage – rent out unused space. Check with local companies storage companies to make sure you are renting for market value.

4. Parking – if your apartment comes with a parking stall and you don’t use it, that is potential for monthly income.

5. Vacation Rental – if you travel for long duration, rent your property.

6. Collateral – use your current equity as leverage to secure better rates or a HELOC.

7. Long-term investing – it’s not liquid, but if you have the correct plan, this can provide financial freedom.

8. Tax shelter – real estate is a great tax shelter; lowers your tax liability, mortgage interest, closing costs and property taxes can be deducted from your income.

DREAM TODAY. OWN TOMORROW.

In the new era of financial lending the Canadian government is trying harder than ever to control Canada’s debt load in order not to repeat what happened in the USA last year. As credit has become more and more abundant in our society, your credit report, and thus your credit rating, has become more important in your daily life. Your credit rating affects all aspects of your financial activities when it comes to borrowing money. Your credit rating also has the ability to affect the job you get, the apartment you rent, and even the ability to open a bank account. Your credit report itself is simply a listing of all of your mortgage and consumer debt.

There are two major credit reporting agencies in Canada, Equifax and TransUnion. An account with usually both these credit reporting agencies is created when a consumer applies for credit. Every time you borrow money, or make a payment on a loan or credit card, the lender then reports the information about the transaction to these two agencies. There are very few situations in which the extension of credit to a consumer does not result in a report going to the credit reporting agencies.

The credit reporting agencies then track all the credit information reported to them and thus create the consumer’s credit profile. The credit information collected reflects the amount of credit an individual has accumulated, minimum amount of payments, the regularity of payments, any missed payments, credit judgements against them, etc. The information on your credit report varies based on your creditors and what they have reported about you. Potential lenders and others, such as employers, view your credit history as a reflection of your character. Whether we like it or not, our financial habits have a lot to say about the way in which we choose to live our lives. The credit report also lists their employer, or if self-employed, occupation, address, date of birth and social insurance number, who has extended the credit, to whom the consumer has requested credit from, and often any former names  or aliases.

Since Equifax is used most commonly by brokers, I will refer primarily to the BEACON SCORE. TransUnion refers to their calculation as IMPERICA; beacon score makes more literal sense – in my mind! The assessment of the consumer’s credit worthiness by the credit reporting agency is based on statistics and various calculations that are translated into a credit score. A credit score is a risk assessment. It is a prediction of the consumer’s probability or likeliness to default on a debt over a 2 year period. The lower the credit score, the higher the risk of default. GOOD NEWS, your credit report is a working document and you repair any damaged credit over time to increase your beacon score. A beacon score can range from 300 to 850. Creditors usually interpret the score as follows:

680 – 850: good to superior credit

600 – 679: average to good credit

570 – 600: below average credit

Below 570: poor credit

There are 5 main factors that influence the beacon score:

The mortgage products and interest rate that you qualify for are often determined by your credit score. It is important to note that a high beacon score and relatively new credit profile may not necessarily lead to a credit approval. The creditor may not view the short period of credit history as sufficient evidence of the consumer’s ability to handle debt repayment. Don’t have too many credit cards or credit inquiries as this will work against your credit profile. A mortgage consultant, such as myself, can help you obtain a copy of this report and go through it with you to verify that all of the information and help you fix any bad debt.

For any questions related to your personal credit report or mortgage inquiries, I can be reached at 604 616 2266 or mhallett@dominionlending.ca – evenings and weekends, not just bank hours and my services are FREE!

DREAM TODAY. OWN TOMORROW.

If you’re self-employed, you may have a more difficult time obtaining financing for your real estate purchases than you encountered just 18 months ago thanks to the recent recession. And as of April 19^th, 2010, Canada Mortgage and Housing Corporation (CMHC) raised the required down payment amount, as well as decreased the percentage at which you can refinance an existing mortgage if you’re self-employed. To add to the confusion, there are also new rules for those who have been self-employed for more than three years.

Still, if you can prove your income, show you’re up-to-date on your taxes and you have solid credit, and have a good credit history your chances of being approved for a mortgage are greatly improved.

There are essentially two types of self-employed or business-for-self (BFS) borrowers – those who can prove their income and those who cannot, and must instead use a stated-income mortgage product. But, if you have been self-employed for more than three years, you can no longer use a stated-income product.

By providing the required documentation, you’re much more likely to be approved for a mortgage if you qualify based on your income. The trouble is that if you cannot prove your income, you pose a higher risk in the eyes of lenders.

CMHC currently offers default mortgage insurance for people who have been self-employed less than three years through a stated-income mortgage product up to 90% loan to value (LTV) – meaning the down payment can be as low as 10% of the purchase price. But prior to April 19^th, 2010, the maximum LTV for self-employed individuals was 95% for purchases – meaning the down payment would have only been 5% instead of the current 10%.

And if a BFS individual wishes to refinance an existing mortgage, the maximum loan amount was reduced to 85% from the previous 90% of the home’s value.

Regardless of the maximum LTV, however, the income amount you are stating has to make sense based on your occupation. This is important, because the chances of finding lenders to fund this type of deal are significantly boosted if the mortgage is insured.

Lenders and insurers are well aware of the tax write-offs that BFS borrowers can leverage, but these deals are accepted or declined based on average incomes for specific fields, as well as your credit rating. It pretty much goes without saying that those with credit blemishes will have a tough time obtaining mortgage financing if they’re self-employed.

Getting Pre-approved

While BFS mortgage financing is viewed on a case-by-case basis, if you work with a licensed mortgage professional to obtain a pre-approval, you can be confident you have access to mortgage financing and you will know how much you can spend before you head out shopping for a property. It’s important to note, however, that there is a significant difference between being pre-approved and pre-qualified. In order to obtain a pre-approval, the lender fully underwrites the deal whereas, with a pre-qualification, only the most basic details are considered. Remember that many banks will only issue a pre-qualification.

Should a pre-approval and/or mortgage default insurance be unobtainable, the maximum mortgage amount you are likely to qualify for is between 50% and 75% – meaning you will need a much larger down payment.

Alternative financing

If you do not qualify for traditional financing all is not lost, since you may be eligible for alternative or private funding.

Mortgage professionals such as myself have access to private investors who are willing to lend money to BFS individuals looking to obtain mortgages. Although you will pay a higher interest rate – on average about 12% – this route may enable you to acquire funds to purchase a home. It’s also important to note that there are added fees involved with private funding because the deals involve a higher degree of risk. The combined lender/brokerage fee will depend on the specific deal and the risk it poses, but the figure will be disclosed upfront so you know exactly what you’ll be expected to pay for these services.

Another key point to consider is that private financing is equity based, meaning that the lender’s decision will be based on a specific piece of real estate. Private lenders want to know that the property is marketable and that they will be able to easily sell it should the mortgage go into foreclosure.

Just remember, no matter what your financial circumstance is, I can help you find the lender.

DREAM TODAY. OWN TOMORROW.

We live in a society of instant gratification. Unlike our parents or grandparents – who saved up for larger purchases – we are often tempted to splurge on bigger-ticket items simply because we have a debit card in hand when we head out “window shopping”. And aside from overspending thanks to the advent of debit cards, consumers are also more likely to dip into overdraft, which ends up costing more thanks to fees and interest that banks charge whenever you spend more than you have in your account.

Basically, a debit card works like a cheque. The only difference is that every time you use it, you’re immediately taking money out of your account. That’s why when you overdraw it’s like bouncing a cheque – only worse because, unlike cheques, you probably don’t keep a record of every debit card purchase you make. You may even make a bunch of small purchases before you realize you’ve spent more than you have. So before you pay for that coffee or lunch purchase with your debit card, make sure you have enough money in your account to cover it.

Revert to using cash for daily expenses, cash controls spending…plain and simple! Using cash to pay for everyday purchases such as coffee, transit, lunch and magazines alerts you to the idea that you’re actually spending real money. You just don’t get the same cautionary sense when you haul out plastic, be it a debit or credit card. There’s a distinct cognitive event that happens when you handle money – it’s called awareness. Over the counter goes the five dollar bill and back comes a loonie, a dime, two nickels and four pennies.

Did you just add up the change above to determine how much money you have left? Did you think about what that purchase could have been? You see, you are much more conscious of this imaginary purchase than if you had paid with plastic.

Now, add in the awareness of the bills left in your wallet and you become attuned to your temporary wealth, or lack thereof. At the end of the day, what encourages or cautions many consumers about spending is knowing where you stand from a financial perspective. That’s why cash can help control spending. Using cash to pay for everyday purchases alerts you to the idea that you’re actually spending real money.

By allotting yourself a weekly cash allowance for entertainment and everyday expenses – such as that daily morning coffee or weekly movie – you are building a budget around what you can spend on these purchases. And once the money in your wallet has been spent, you have to ensure you fight the urge to withdraw more cash or resort back to using your debit card. Be realistic about what you typically spend on these items in a week. If you routinely eat out for lunch or stop at Tim Hortons for coffee, count that as well. If you think you’re spending too much on these items, you can then decide to find a less expensive alternative, such as brown-bagging your lunch or making your own coffee.

Let’s say, for instance, that you start the week off with $50 in your wallet and you began to spend it on your purchases. You will see $50 turn into $40, $40 turn into $25, $25 turn into $15 and so on. Every time you look into your wallet, you will see what’s left over from your original $50 and be aware of how quickly your money is being spent. This alone can make you think twice before making a purchase.

Budgeting will help you save for your down payment for your new home.

Selecting the length of your mortgage amortization period – the number of years it will take you to become mortgage free – is an important decision that will affect how much interest you pay over the life of your mortgage.

While the lending industry’s benchmark amortization period is 25 years, and this is the standard that is used by lenders when discussing mortgage offers, and usually the basis for mortgage calculators and payment tables, shorter or longer timeframes are available – to a maximum of 35 years.

The main reason to opt for a shorter amortization period is that you will become mortgage-free sooner. And since you’re agreeing to pay off your mortgage in a shorter period of time, the interest you pay over the life of the mortgage is, therefore, greatly reduced. A shorter amortization also affords you the luxury of building up equity in your home sooner. Equity is the difference between any outstanding mortgage on your home and its market value.

While it pays to opt for a shorter amortization period, other considerations must be made before selecting your amortization. Because you’re reducing the actual number of mortgage payments you make to pay off your mortgage, your regular payments will be higher. So if your income is irregular because you’re paid commission or if you’re buying a home for the first time and will be carrying a large mortgage, a shorter amortization period that increases your regular payment amount and ties up your cash flow may not be the best option for you.

I will be able to help you choose the amortization that best suits your unique requirements and ensures you have adequate cash flow. If you can comfortably afford the higher payments, are looking to save money on your mortgage or maybe you just don’t like the idea of carrying debt over a long period of time, we can discuss opting for a shorter amortization period.

Advantages of longer amortization

Choosing a longer amortization period also has its advantages. For instance, it can get you into your dream home sooner than if you choose a shorter period. When you apply for a mortgage, lenders calculate the maximum regular payment you can afford. They then use this figure to determine the maximum mortgage amount they are willing to lend to you.

While a shorter amortization period results in higher regular payments, a longer amortization period reduces the amount of your regular principal and interest payment by spreading your payments out over a longer timeframe. As a result, you could qualify for a higher mortgage amount than you originally anticipated. Or you could qualify for your mortgage sooner than you had planned. Either way, you end up in your dream home sooner than you thought possible.

Again, this option is not for everyone. While a longer amortization period will appeal to many people because the regular mortgage payments can be comparable or even lower than paying rent, it does mean that you will pay more interest over the life of your mortgage. Still, regardless of which amortization period you select when you originally apply for your mortgage, you do not have to stick with that period throughout the life of your mortgage. You can always choose to shorten your amortization and save on interest costs by making extra payments when you can or an annual lump-sum principal pre-payment. If making pre-payments (in the form of extra, larger or lump-sum payments) is an option you’d like to have.

It also makes good financial sense for you to re-evaluate your amortization strategy every time your mortgage comes up for renewal, at the end of each term of your mortgage. That way, as you advance in your career and earn a larger salary and/or commission or bonus, you can choose an accelerated payment option (making larger or more frequent payments) or simply increase the frequency of your regular payments (ie, paying your mortgage every week or two weeks as opposed to once per month). Both of these features will take years off your amortization period and save you a considerable amount of money on interest throughout the life of your mortgage.

The days of the mortgage broker who charges an arm and a leg just to get you financing are gone. No longer is the mortgage broker a last resort source of financing.

So why would you see a mortgage broker instead of your family banker?

1. Lower rates – even if you know your bank’s loan officer, a mortgage broker can usually get you a better rate.

2. Multiple lenders. I have access to more than 20 prime lenders with various products to suite your family needs and long term financial goals.

3. Mortgage brokers can be more flexible and can try innovative financing for special occasions.

4. Receive a mortgage from the comforts of your own home, less running around. Your mortgage broker may even come to your home. Saves you from taking time off work. Ever see a banker do that?

5. Better customer service. Although banks are open longer hours nowadays. They will not answer their phone in the evening or meet you on the weekend – I will!

6. The mortgage broker wants you to get a mortgage. In almost all cases the mortgage broker only get paid if you get a mortgage through them, the banker is on salary and won’t fight as hard for you. Do be wary of mortgage brokers that want to charge you a fee (either upfront or in the mortgage). We get paid by the lending institution. It pays to ask first!