The Top 20 Things NOT To Do Before Your Mortgage Funds

There are some things to remember and keep in mind when you are purchasing a home or waiting for your mortgage to fund.  It is very important that you consider all of the following to ensure that there aren’t any preventable issues that arise.

You will find that everyone is an expert at telling you what-to-do when you purchase a home or shop for a mortgage.  I also think it is just as important to let you know what you shouldn’t do.  As your professional mortgage agent, I will do everything I can to ensure a smooth closing for you and your family.  Here’s a list of things that you might not realize could impact your mortgage approval

Income and Employment Changes

  1. Avoid losing your job – do not resign
  2. If you are on probation with your employer, let me know
  3. Do not reduce your income level
  4. Do not change the status of your employment from full-time to part-time
  5. If you are currently on maternity or paternity leave, or think you will be shortly, let me know
  6. Don’t forget to disclose if you are currently on short-term or long-term disability
  7. If you receive other income such as Canadian Child Tax Credit, and it’s going to stop soon

Down Payment and Closing Costs, remember..

  1. Do not spend your down payment on other things!
  2. Avoid surprises, by making sure you have enough money for ALL closing costs
  3. Try not to let your investments slip to a lower value
  4. If you are using your RRSP, it can take a while to complete the withdrawal process

A lender reserves the right to review your credit rating just before the closing date of your mortgage – if there have been any material changes in your rating, they could withdraw their mortgage approval, avoid this happening by…

  1. Not increasing your debt load unless we have talked about it
  2. Not buying big ticket items like a new vehicle without talking to me first!
  3. Not volunteering to guarantee or co-sign on a loan or mortgage for anyone else
  4. Not applying for new credit cards or loans
  5. Not opening a “don’t-pay-for-a-year” account
  6. Not closing any accounts unless I advise you to

And finally…

  1. Don’t wait until the last minute to arrange for property (fire) insurance.
  2. Don’t just accept the life insurance package offered by the financial institution
  3. Don’t ignore telephone calls from your lawyer, realtor, or me!

Let me help you make your home financing process as smooth as possible by emailing me at melissa@melissabendo.com or call 519-760-4391.

Collateral Mortgage

A collateral mortgage is basically a different method of registering a “lien” to secure a mortgage or loan against your property.  A collateral mortgage used to only be used for lines of credit but is now becoming popular with major financial institutions when providing a regular mortgage.  It differs from a regular mortgage in some very important ways and below is an outline of those differences and how they affect you.  It is very important that you are fully aware of all the advantages and disadvantages of this type of collateral charge mortgage:

The lender may register a higher amount on title than is actually borrowed at the time the mortgage is originally set up.  This is often as much as 125% of the value of the property at time of registration – you will notice that this is either outlined in your Mortgage Commitment and/or at the lawyers’ office in their legal documents.  This results in the lender “protecting” ALL of the current and future equity in your property and not allowing you to add secondary financing at a later date with a different lender.  You would still be able to borrow using the equity in your home at a later date, but would be limited to ONLY the options provided by the existing lender.  If they don’t approve you, or have a product or terms including a rate that is competitive, you would have no choice but to pay out the existing mortgage and incur both legal fees as well as a potential penalty.  collateral mortgage

Unlike a standard mortgage, a collateral charge is re-advanceable:  This means the lender can lend you more money after this mortgage has funded without the need to pay a lawyer.  Remember, this may be subject to you qualifying.

A collateral charge is non-transferable — it cannot be transferred or switched to a new lender like a regular mortgage without incurring legal fees.  This impacts you when it comes to the end of your mortgage term and you want to renew.  At this time you want to ensure that the existing lender is offering you a competitive option – if they are not, and you want to move to another lender that is, then it would be treated as a refinance.  So even though you may not be increasing the amount you owe, you will still incur legal fees to move to another lender.

Regular mortgages put all of the key terms in a document that’s registered with the provincial land title/registry office.  A collateral mortgage, however, puts key terms in a loan agreement which is not registered in the same way. This collateral loan agreement may therefore contain terms such as:

  • The lender has the ability to change the interest rate at any time.  Although this usually only occurs if you are in default, it can occur on certain products such as lines of credit, overdraft facilities etc.|
  • You can increase your loan amount without re-registration on title which means no legal fees
  • Unsecured debt such as credit cards, overdrafts, loans, etc., can become interconnected.  The lender can use your mortgage payment to pay down other debts you have with that lender (if you default on those debts).   So for example, you have a Visa card and you are late in making the minimum payment; if the visa card is with the same lender as the mortgage, they can transfer your mortgage payment to the credit card instead, without your permission, which immediately means your mortgage is now in default.  They can now contact you and ask for you to pay back the entire mortgage immediately or foreclosure proceedings will commence.
  • If you are late or default on paying home insurance, property taxes or condo fees, just like 3) above, your collateral charge mortgage could be used to pay them off and then “called” and foreclosure procedures commence.
  • On Demand: You will be signing a document at the lawyers that confirms that this mortgage is “on demand”.  The lender can ask to be repaid at any time with no recourse to the lender.  This usually only happens in default but as outlined in 3) and 4) above, this could mean default on other debts and NOT just your mortgage

Collateral mortgages may be very beneficial to some people in the right situations and not a great fit for others. Let me help you pick the best mortgage option for your scenario. Call me at 519-760-4391 or email me at melissa@melissabendo.com

Multiple Offers – What Do I Do?

Disclaimer & Explanation of Content:   The information of having multiple offers contained herein is for guideline purposes only and  not to be deemed to be legal advice.  It is written in general terms relating to the purchasing real estate.

Definition: A multiple offer scenario occurs when more than one buyer is presenting an Offer to Purchase to a seller at the same time.  All the offers are being reviewed at the same time by the seller for consideration.  When markets are considered a “seller’s market” this can often occur when buyers are vying and competing to have their Offer accepted over others.  There are many cases where this is a valid and sometimes normal strategy.  However, on occasion it has been known that these buying frenzies and multiple offer scenarios, can be artificially created by others.

As a mortgage broker my role is to ensure that I can secure financing that not only meets your needs, but also provides you with the dollar amount you require.  When there are multiple offer scenarios many buyers are tempted to either:

  1. Go in “firm” with an Offer with no conditions at all in the hope that you win, and/or
  2. Go in at a much higher purchase price than may be necessary – often over list price.  This is what I like to call an emotional price premium on the property.  You may be tempted to pay whatever it takes to get the home and that increased price is the emotional price tag that you agree to pay, but someone else might not

As my priority is to ensure your financing is secure, there are a number of things to consider when going in with a multiple offer scenario and you are tempted or pressured to do the above:

You as the borrower can be pre–approved BUT this is always subject to the property being approved by the lender.  So if you go in firm with no financing clause in your offer then you need to be aware that there are risks with this.  The lender might not like the property you are purchasing because it may:

  • Be unique
  • Have structural issues
  • Requires major repairs
  • or Doesn’t meet the lenders specific guidelines

The lender that previously pre-approved you, may now decline you based on the property.  There are always other lenders that may consider offering you a mortgage but you may have to consider:

  • Increasing your down payment
  • A higher rate,
  • Not being able to select specific features you wanted
  • Even higher fees involve

Remember that the lender will provide you financing based on the purchase price or appraised value, whichever is the lesser.   So let’s assume your purchase price cannot be supported by the lender, appraiser or default insurer – if this occurs, then you have to come up with the shortfall in value.  For example, you are purchasing with a 5% down payment mortgage that you are already pre-approved for.  Your offer was accepted in a bidding war for $350,000 BUT the default insurer and their appraiser believe the value is $330,000 – it is possible that you have paid that emotional price premium that the lender doesn’t want to loan against.  So the lender will therefore provide you with a mortgage based on 95% of the appraised value of $330,000 as  it is the lessor so $313,500.  You still have to pay $350,000 for the property and so your down payment is now $36,500 instead of $17,500.  The difference will come out your own pocket.

So how do you avoid this potentially happening?   When you are in a market where there are “supposedly” multiple offers and bidding wars, I recommend inserting the following clause into your Offer to Purchase Agreement.

“This offer is being submitted on the basis that it is part of multiple offers. If the seller receives no other offer by 10 pm, the seller or the seller’s salesperson, will notify the buyer or the buyer’s salesperson and the buyer will have one hour to revise or revoke their offer.  If the seller accepts the buyer offer, the seller shall provide, within 24 hours, the name, address and phone number of the salesperson and brokerage company that submitted the competing offer.” 

Note: This clause was written by esteemed real estate lawyer and author, Mark Weisleder.  Feel free to consult with your real estate lawyer for further advice on this clause.

Of course I am NOT a licensed realtor and this is just simply a recommendation to ensure you are being presented based on fact and not “fictional multiple offers or bidding war scenarios”.

Please be prepared that you may get some backlash from the realtors involved but if there are genuinely competing offers being presented, then I see no reason why they wouldn’t be okay with this clause – do you?

Wishing you all the best in your house hunting – there is the perfect property out there for you – sometimes it is just a matter of patience!

Please connect with me to discuss your option and get yourself pre-approved at 519-760-4391 or email me at melissa@melissabendo.com

Credit Score Ontario App

Did you know there is now an easy way to find out your credit score ontario app.  When you download this free MOPOLO app from the app store, you will get your updated credit score every month for FREE with the Property Tracker™ and Credit Tracker™ in your MOPOLO app.

When you register for the free CreditTracker™, you will receive your credit score instantly and it will be updated every month! The best part – it won’t affect your credit rating.

On the PropertyTracker™ you can get a free property evaluation every month. You can even see how upgrades you’ve done since you purchased your home or plan to do affect your property value! credit score ontario, credit score canada, credit report

The app also offers an exclusice inventory tracker and gives you can access to current rates, mortgage calculators, and the ability to apply for a mortgage, personal loan or credit card with just a few clicks.

 

 

How to download my app:

  1. Click here from your phone or tablet. Select your operating system (Apple, Android, or Blackberry) to download the app. (or you can find “MOPOLO” on the app store)
  2. Once opened click on “Find A Broker”.
  3. Enter broker code 209928 and select “Pick Broker”

If you have any questions or need assistance downloading my app, I can be reached at 519-760-4391 or by email at melissa@melissabendo.com,

Enjoy!

CMHC Premium Changes

CMHC is increasing their default insurance premiums effective March 17, 2017.  No doubt the other default insurers will follow their lead as they have done in the past.  Considering the recent mortgage legislation changes that have impacted the purchasing power of many home buyers, this might well feel like another hit to our industry, however, did you know that there are many strategies, even with as little as 10% down payment, where we potentially avoid the client paying the default insurance premiums completely?   Don’t get me wrong, we have to make sure the numbers make sense as the overall interest rate might be higher, but the bigger the mortgage amount, the bigger the savings in the long run.  Whether it is saving unnecessary premiums and their associated interest costs or for clients that don’t even qualify for default insurance, this is alternative financing that can work really well – call me to find out how! 
 
Rates have gone up slightly over the last few weeks but did you know that a variable rate is still a great option and as low as 2.20% or a 5 year fixed term at 2.49% and Posted for a 5 year fixed term is at 2.69%.
Lets get you ready for the spring market! Give me a call at 519-760-4391 or email me at melissa@melissabendo.com to get started!
 CMHC insurance premiums

 

Credit Score Canada

Understanding Your Credit Score Canada; How It Affects Getting A Mortgage
Provided by Genworth Financial Canada

Incurring debt is part of life for most people. Understanding how best to handle credit will help you maintain control of your overall financial situation. Strong credit leads to quick credit approval at the best possible terms. Your credit history must clearly show your willingness and ability to pay your debts.

Credit Score Canada

  • During the application process, lenders look at your Canadian credit record and credit score to check how you’ve managed your debts.
  • It’s a smart idea to review your own credit report and score before applying for a loan.
  • For a small fee, a credit bureau will provide an instantaneous, complete online credit report and credit score that details your current debts and payment history. They also detail what your score level means, how you compare to others, and provide tips to improve your score.
  • You also may receive your credit report (without the credit score) by mail for free by contacting the credit bureau.
  • When you receive your credit report, ensure that all the information and amounts are correct. Look carefully for any past-due or written-off amounts. Uncertainty and ambiguity on your credit report can be dangerous to your financial health.

Correcting Credit Problems

  • If you have never had a loan or credit card, you can still show a good record of timely payments of your utility bills, property taxes or rent.
  • You can establish minor credit relationships, such as short term installment loans or a credit card, and maintain a record of prompt payments.
  • If you have a credit problem because of an unusual situation, write a letter of explanation. Your lender may overlook a credit problem if you can give a good reason for not having made your payment.
  • If you’re constantly struggling to pay your bills, seek professional help. Remember: creditors don’t want to lose money. Let them know if you are having trouble with your payments. Most creditors will work out alternative payment arrangements to help you maintain a good credit rating.

Improving Your Credit Score

  • Plan major purchases carefully and do not accumulate excessive amounts of debt.
  • Pay down existing debts and ensure bills are paid on time, especially minimum payments on credit cards. If necessary, postpone major purchases until you can save the money required.
  • Avoid large purchases before buying a house, since the added debt will affect your mortgage qualifications.
  • Use credit responsibly. Establishing a track record of on-time payments will improve your credit rating.
  • Avoid skipping bills to make other payments since missed payments appear on your credit report and create longer-term problems.
  • Avoid defaulting on payments. Delinquent payments, collection items, and court judgments stay on your credit file for six years, even if you subsequently pay them.
  • Save money regularly for financial emergencies. You also can arrange for credit lines to cover short term cash flow payments, but resist utilizing them on a long term basis to improve your credit score. 

For additional information or to access a link to a credit bureau, visit the Genworth Financial Canada (formerly GE Mortgage Insurance Canada) website at http://www.genworth.ca

If you have bruised credit and are looking to become a homeowner sooner, I can always be reached at 519-760-4391 or melissa@melissabendo.com. 

Refinance Mortgage

Now is a great time to refinance mortgage with interest rates at their lowest. Many Canadians are taking advantage of record low interest rates and applying for mortgage refinancing. For some it is a matter of being able to keep on track with their financial goals and of course save thousands of dollars in unnecessary interest payments. For others it’s a way of financing a luxury item such as a new boat, cottage or even a world cruise. Maybe you just feel like your finances are just a constant revolving door – money in your wallet one minute and gone the next! If you feel like you are just never getting ahead and are losing sleep, then a refinance could be the relief you need.

Why Refinance?
By using the equity in your home, refinancing your existing mortgage can be very advantageous and turns your home into a affordable source of extra financing. Here are some examples:

  • To reduce your monthly payments. Consolidate high interest credit cards and other loans into ONE lower rate, monthly mortgage payment. Mortgage refinancing will help you save money, increase your monthly cash flow and eliminate the stress of making multiple loan payments 
  • To purchase an investment property using existing equity in your current home 
  • To top-up your RRSP investments and at the same time receive an income tax credit! 
  • To lower your existing mortgage interest rate. By reviewing your current credit rating and debts, there might be an opportunity for you to take advantage of your credit score improvements to refinance an existing high interest mortgage. 
  • To buy a big ticket item at a lower interest rate that more traditional financing e.g. auto financing, or personal loans etc. 
  • To help pay for your child’s college or university tuition 
  • To help finance the care of an elderly family member or cover medical expenses 
  • To build your home equity faster. If a recent change in your financial situation has made it possible for you increase your monthly payments, you might want to refinance your mortgage with a shorter term. The higher payments will enable you to pay off your home more quickly and to save substantially on long-term interest charges. 
Home Equity Loan Canada

Taking a look at refinancing could lead to financial independence sooner that you think. Together we can review your current financial situation and provide you with some options including a monthly budget. You may be able to quallify for a home equity loan and borrow as much as 80% of the value of your home and reduce your monthly payments by half with just one low payment. If you want to get ahead, then a refinance or debt consolidation could be the answer. 

The following is an example of how you are able to save each month by refinancing and using your equity in your home to lower your monthly payment and increase your cash flow in Ontario, Canada. The Existing Mortgage Interest Rate is higher then todays interest rates but still illustrates  the advantages of refinancing: 

As an expert in this type of Refinance of Your Ontario Mortgage, I can answer all your questions and provide you with recommendations for great contractors. You can contact me at 519-760-4391 or melissa@melissabendo.com 

Do You Want To Make More Interest on Your Saved Money?

Many people save money by placing it in the traditional savings account, RRSP, TFSA or their LIRA. These are all great ways to save for the long term, however the return on your Real Estate Investment may not be a very high interest rate. There are other avenues to increase your rate of return and become a Real Estate Investor and still be in control of your money while this is being done. When you loan out your own funds by way of Real Estate Mortgages, you have now become the Banker! This is another way of getting into the real este market but not having the other headaches that come along with being the landloard:

Passively Investing In Real Estate Without Being The Landlord

What Funds Can Be Used?
The following funds to invest in real estate as a banker – you will be the lender registering a mortgage charge on the title of the property

  • Cash
  • Registered Retirement Savings Plans (RRSP’s) including Locked In Retirement Accounts (LIRA’Money Houses) and Registered Retirement Income Funds (RRIF’s) – known as Self Directed RRSP’s 
  • Tax Free Savings Accounts (TFSA’s)
  • Unregistered Investments such as stocks, bonds etc.
  • Unsecured Lines of Credit
  • Secured Lines of Credit on existing real estate owned

Disadvantages Of Being The Banker:

  • Can be complicated and difficult to decide what is a good borrower and property to mitigate the risks 
  • Dealing with collecting the mortgage payments although typically these are done via direct deposit or post-dated cheques
  • You want your funds back but it is tied up in the real estate and you cannot just “ask for it back” unless default occurs

… many of these disadvantages can be overcome by hiring the right real estate lawyer and mortgage broker like myself on your Power Team

Advantages of Being The Banker:

  • Security… you have the real estate as security in a default situation as you are registering a Monopolymortgage charge on title when you provide the funds via a real estate lawyer.  The property can’t be sold without you being paid!
  • Diversify your investment portfolio – not having all your “eggs in one basket”
  • Gets you into the real estate investment market relatively safely without being a landlord
  • You decide the terms – 1 year, 2 years etc., depending on when you want your money back!
  • Fixed interest rate resulting in a clear return on your money that is often higher than your existing returns on mutual funds, stocks etc. 
  • You can use your RRSP and shelter the profits from tax until withdrawal Self Directed RRSP)
  • Often all legal fees for the lender (you) are paid for by the borrower… so no extra cost to you
  • Even if the borrowers default, you have the opportunity to take over the property and any other existing mortgage payments to avoid a loss.  You may even end up owning a property that adds positively to your portfolio
  • If you use a Self Directed RSP there are very small administration fees – often a lot less than a traditional “money manager” RRSP account

… the advantages have got to simply out-way the disadvantages for you

This may be a new concept for some but I am here to walk you through this whole process and teach you along the way with how your money can work for you and you can gain a higher rate of return on your money. Lets have that conversation! I can be reached at 519-760-4391 or melissa@melissabendo.com

Being A Landlord While Your Kids Are In University

So your children are getting to the age that they are looking to head to university for the first time. They are leaving the nest and going to live and experience life on their own.

Did you know….??
To create some cash flow for yourself and create equity for the next 4 years while they are in school, purchasing a home for your child heading to university may be an option for you:

  • 5% down paymentMoney
  • Cash flow and not pay down someone else’s mortgage
  • Help offset the cost of University
  • Safe environment for your child 

When You Become The Landlord:

  • Regular monthly income with positive cash flow from the property… could be paying your mortgage
  • With each mortgage payment, the equity grows in the property adding to the bottom-line of your Net Worth Statement
  • They aren’t making any more land and property values may likely be more stable than the stock market which can go up and down like a yoyo daily!
  • When the market value of the property increases, you can benefit from the equity growth adding to the bottom-line of your Net Worth StatementLandlord
  • Forced savings plan – having your savings or assets “tied up” in real estate means that you can’t easily access them avoiding any sudden decisions to liquidate or spend!
  • You can deduct certain expenses from your income potentially reducing the tax you pay such as your initial closing costs, mortgage interest, property taxes, insurance, maintenance, upgrades, property management, utilities etc.
  • If you do have losses from your rental property due to some large expenditures one year, it can create some instant tax relief and reduce your tax bill
  • Long term sustainable wealth growth using a fixed asset – real estate

There are many resources available to assist you as a landlord and as a specialist in this area, I can answer all your questions and provide you with recommendations that will best suit you! I can be reached at 519-760-4391 or melissa@melissbendo.com

Debt Consolidation Ontario

Many people struggle with debt and look for solutions for debt consolidation when refinancing their mortgage. The most common reason is because they are carrying a lot of personal debt that is slowly bringing them down each month. They are looking for a solution at this point to take the strain of feeling like all there hard earned money is going towards bills every month. For some though, the cost of servicing those debts is in itself an obstacle to correcting the problem. Each month can be a chase to make the interest payments to keep the debt afloat.  Sometimes, it may help to consolidate  debt into your mortgage.

Unsecured Debt = Bad Debt

The difference between credit card debt (unsecured debt), vs a mortgage, can mean thousands of dollars. As you may know, the interest you pay on a credit card or unsecured credit line is typically much higher than on your mortgage. Because of this, using your home equity to pay off your high-interest credit card debt can save you money in the long run.

That said, deciding whether it makes sense to refinance your mortgage will depend on your individual situation. Either way, with the right plan in place, you can be well on your way to a strong new financial life. If a consolidation is the way you decide to go, every month you could be seeing the difference: a boost to your monthly cash flow, one easy payment, faster debt pay down, and potentially thousands of dollars in interest savings.

Replace High-Interest Debt With Mortgage Debt

I can show you how to use your home equity to consolidate your high-interest debt into a new or existing mortgage.  It often makes sense to roll large amounts of high-interest debt into a mortgage. 

Why? 

Because we are benefiting from mortgage rates that continue to be among the lowest in decades, while credit card rates can be 10 times as high.  Just compare mortgage rates with what you’re paying on your credit cards and other debts!

How does the process work?

Debt ConsolidatingWe start by doing an assessment of your situation.  We list your current debts – both the total amounts owed and the monthly payments you have to make.  We then create a scenario that takes into account your potential new mortgage, with the applicable monthly payment.   We also look at your home’s current market value, to
make sure that a new mortgage can be registered against it.  With a mainstream lender, your new mortgage amount needs to be less than 80% of the home’s market value; with an alternative lender, we can usually go to about 85% of the market value.


Here’s an example – let’s say your mortgage, car loan and credit cards total $225,000. If you roll all that debt into a new mortgage, even if you include the estimated fee to break the existing mortgage, you can see the payoff in monthly cash flow:


Current Situation*

$ 873.73 – Mortgage monthly payments on $175,000
$495 – Car Loan monthly payments on $25,000
$655 – Credit Card Balances monthly payments on $25,000
$2,023.73 – Current total monthly payments

New Situation*

$1,089.56 – Mortgage monthly payments on $233,000 mortgage (debts + early payout penalty on mortgage)
$0 – Car Loan monthly payments paid off
$0 – Credit Card monthly payments paid off
$1,089.56 – New total monthly payments

That’s $934.17 less each month!  

Now decide how to use that $934.17 

If you would like to explore your refinancing options, please don’t hesitate to contact me.  I’d be happy to put together some scenarios for you to think about, so you can figure out if a consolidation is the right solution for you. You can reach me at: 519-760-4391 or melissa@melissabendo.com