26 Mar

Top 5 Reasons to Stay in the Home that you Love as you age!

General

Posted by: Ingrid Kutzner

According to a report by Mustel Group and Sotheby’s International Realty Canada, 86% of Canadian baby boomers and older homeowners want to live in their home for as long as possible. However, given the challenges associated with aging – such as reduced mobility and memory loss – many question whether they may be better off in an assisted living or nursing facility.  There are, however, a number of unique advantages to staying in the home you love as you age, which we’ll explore below

1. Maintaining your independence

As you get older, it’s natural to become slightly less independent – you may need help doing the grocery shopping or with certain household tasks. But if you stay in your home as you age, you’ll likely be able to maintain more independence than if you move into a residential facility. At home, you’re in control of your routine, your meals, and your surroundings, while in an assisted living facility, you usually have less control over these things.

2. Staying close to your community

When you’ve lived somewhere for a long time, you’ll likely have friends and neighbours within walking distance. Having regular social interactions is especially important as we get older, it’s good for your mental health and will help stop you from feeling lonely. More importantly, having a flourishing social life as we age has been connected to a 70% reduction in cognitive decline compared to more isolated individuals. This is a huge benefit to aging in place. At home, you’ll be able to easily visit neighbours as well as having friends and family over whenever you want.

3. Keeping your home comforts

For most of us, our house is a place of familiarity, security, and peace. It’s the place we’ve spent years building into a home and where we’ve made many cherished memories. The emotional benefit of aging in place is therefore huge. On the other hand, moving to a facility can take an emotional toll on a person’s wellbeing, putting them more at risk of stress and depression. Furthermore, there’s evidence that familiar smells and surroundings can help trigger memories of those in the early stages of Alzheimer’s.

4. Staying healthier and safer

Many people chose to move into a nursing home or assisted living facility believing it to be the safer and healthier option. And while this may be true for those with severe needs, there are other factors that need to be considered. Feeling homesick can lead to stress and depression, which in turn can lead to greater cognitive and physical decline. Residential facilities also carry a greater risk of infection, which can spread much more easily when living at close quarters with others.

5. Saving money

There’s no denying that aging in place has its expenses. You may need to pay someone to help you with household chores, grocery shopping, or personal care. You may also need to adapt your home for mobility. Despite this, aging in place is typically less expensive than an assisted living facility or nursing home.

Deciding whether to age in place or move into an assisted living or nursing facility is a personal choice that should be made after careful consideration. If you decide that staying in your home is the right option for you, the CHIP Reverse Mortgage can help you with the associated costs.

The CHIP Reverse Mortgage allows you to access up to 55% of your home’s value in tax-free cash. What’s more, the loan isn’t repaid until you leave your home, meaning there are no required monthly repayments. What you do with the money is up to you. You could use it to adapt your home, purchase mobility aids, or pay for an in-home caregiver – helping you stay as independent as possible in your own home.

Written By: Agostino Tuzi
Post Sponsored by HomeEquity Bank

15 Mar

Unlocking Equity Through Refinancing

General

Posted by: Ingrid Kutzner

RENEWING VS. REFINANCING A MORTGAGE

What’s the difference between refinancing and renewing your mortgage? The terms are often used interchangeably, but they are different processes:

  • Renewing a mortgage applies to the current mortgage loan. You will be looking for a new term and interest rate based on the amount remaining in your mortgage at the end of your term. This is a great time to look at ways to reduce the principal amount by making a lump sum payment or changing payment amount and frequency.
  • Refinancing a mortgage is a renegotiation of an existing mortgage loan and is usually used to access the equity in the home or take advantage of better mortgage terms. It’s a more involved process than renewing, especially if the loan amount is changing because it is essentially a new mortgage.

REASONS TO REFINANCE A MORTGAGE

There are many reasons you may wish to refinance your mortgage. For example:

  • You may be in the middle of a higher interest term and want to take advantage of a lower rate. Although there may be prepayment penalties to get out of the current mortgage, it might be worth it for the long-term savings of a lower rate. Your mortgage broker can help you weigh the options.
  • If you have a lot of high-interest debt, you may wish to refinance and consolidate your debt into a single payment at a lower rate.
  • You may wish to access the equity in your home to fund a renovation, purchase a second property, or invest.

PROS AND CONS OF REFINANCING A MORTGAGE

There are advantages and disadvantages to refinancing a mortgage. What you consider a benefit depends on your situation. Here are some things to consider:

Additional costs of refinancing

When you refinance your mortgage, there may be some additional fees to keep in mind. Depending on how close you are to the end of your mortgage term, there might be penalties for paying out your term early. Your lender may also require you to get an appraisal on your home because the amount they will refinance is based on the current appraised value.

Peace of mind from refinancing

Finances can be a major stressor and removing financial pressure is priceless. Consolidating debt into a single monthly payment has its benefits. You’ll likely spend less of your monthly budget on debt payments, and you won’t be juggling your money trying to pay down multiple debts (which may pay more toward interest than principal). That said, if you can’t manage your debt payments now and you’ll be paying roughly the same with the new mortgage, you’re putting your home at risk.

New interest rate on a refinanced mortgage

When you refinance, you’ll be doing so at current interest rates. Are they higher or lower than what you have now? Sometimes it’s worth breaking your current mortgage term because the interest savings will more than cover the pre-payment penalties. Even a slightly higher rate might be okay if you’re consolidating a lot of high-interest debt. Either way, do the math with an experienced mortgage broker who can help you weigh your options.

Longer amortization

Refinancing may mean you’re stretching out your amortization to keep the payments affordable. Before you commit, look at your entire financial picture. For example, will it affect your retirement?

Requalifying for a refinanced mortgage

Refinancing your mortgage to incorporate debt means you’ll need to qualify for the new mortgage amount. If your circumstances have changed and you don’t think you’d qualify with a traditional lender, talk to your mortgage broker about alternative lenders.

Alternative lenders are refinance experts and will work directly with your broker to understand the story behind the refinance and find a solution. They are more willing to consider self-employment and non-traditional sources of income, and they are also a little more flexible with debt ratios.

HOW MUCH CAN YOU BORROW AGAINST THE EQUITY IN YOUR HOME?

Generally, the amount you can borrow is 80% of the appraised value of your home. This is the current market value, not the amount you paid when you purchased it.

The formula is:

(Value of home x 0.80) – Remaining mortgage amount – Loans secured against home = Home equity

  • Multiply the value of your home by 80% (0.80).
  • Subtract the amount remaining on your mortgage.
  • Subtract any other loans you have secured against your home, such as a line of credit.

The amount remaining is the equity you have in your home.

For example, if your home is valued at $400,000 today, multiply that amount by 0.80 to get $320,000. Now if you have $150,000 left to pay on your mortgage, subtract that to get $170,000. Now let’s say you have an RV or car loan for $20,000 secured against your home. That gives you $150,000 of equity in your home.

($400,000 x 0.80) – $150,000 – $20,000 = $150,000

REFINANCING A MORTGAGE IS NOT A HELOC

You might be wondering, “Why not just get a home equity line of credit (HELOC) instead of refinancing?” You could, but there are some advantages to refinancing.

  • Both options will give you access to the same amount of equity in your home.
  • Both options will likely require an appraisal and take about the same amount of paperwork.
  • Refinancing will probably give you access to the money at a lower interest rate.
  • Refinancing gives you access to the funds one time. A HELOC allows you to borrow, pay back, and borrow again. If you’re borrowing to consolidate debt, you might be better served by refinancing so that your only option is to repay it (and not re-spend it).

WORK WITH YOUR MORTGAGE BROKER TO FIND YOUR BEST OPTIONS

Refinancing your mortgage is not as simple as visiting your bank. You should view it as though you are shopping around for a mortgage.

This is when you are well served by the expertise of a mortgage broker. First, they’ll do the legwork to find you the best rate you qualify for. They have relationships with both traditional banks and alternative lenders, which opens more options for terms and rates. A mortgage broker will also consider your immediate needs and your long-term goals when helping you select a mortgage. They are in your corner.

Article Published by Bridgewater Bank

1 Mar

It’s All About The Property

General

Posted by: Ingrid Kutzner

When your mortgage application goes through the approval process, they are not only looking at you, but also the property in question. In fact, sometimes when an application is denied it has nothing to do with you, and everything to do with the property.

To improve your chances of success when it comes to financing, there are three main things to consider:

  1. The type of property
  2. The location of the property
  3. The usage of the property

Let’s take a look at some of the specifics for each of these considerations.

type of property

There are various types of properties when it comes to home ownership – detached houses, semi-detached, condos, townhouse, duplex, carriage or heritage home. Depending on the type of property you have chosen, there may be specific considerations.

CONDOMINIUMS

When it comes to condo properties, the lender (and potentially the insurer) will consider the age of the building. In addition, they will look at maintenance history (or lack thereof), as well as the location for marketability. Some lenders may have stipulations that limit themselves to buildings with a certain number of units, or past a certain age.

If the condo you wish to buy is lacking a depreciation report, has a low contingency fund or large special levies pending, these will be red flags for the lender. Any of these situations will require a more thorough review. These items should also serve as strong considerations for you as it indicates the management (or lack of) for that condo building.

ADDITIONAL UNITS

If you are looking at a property with additional units, it is important to consider that buildings with over four units, are considered a ‘commercial’ property and would be evaluated on that basis.

HERITAGE HOMES

Whether registered or designated, heritage homes require a more detailed review and often come with special considerations for financing.

LEASEHOLD OR CO-OP PROPERTIES

These properties also have specific requirements, particularly when it comes to the maximum loan-to-value which means they will require a larger down payment. These types of properties also typically call for additional documentation, and may have varying interest rates.

If you shift from a standard condo to a lease-hold property, your down payment amount will likely change. If you want to move to a small rural town or a small island, there will be fewer options. In addition, you may have to pay a higher rate as well as provide more documentation on the property.

All About The Property

location considerations

You’ve heard it before – location, location, location! Location matters just as much to the potential homeowner as it does the lender. Some things to keep in mind when it comes to location include:

POTENTIAL RESALE VALUE

If the location limits the potential resale value for the building, lenders may not provide financial approval on that property. This is due to the increased risk if the borrower defaults. In that case, the lender may not be able to foreclose the property and get enough funds back due to the low resale. That said, some lenders may allow these properties but they might reduce the loan amount if the building is located outside of a major market area, or they may add a premium to the interest rate.

RURAL CONSIDERATIONS

For properties with water access only, or with no access to municipal utilities (heat, water, electricity, sewage), there will be additional requirements to assess lender risk. These requirements might include: Insurance coverage, water testing, septic tank inspection, seasonal access and condition of the property.

TRANSFER TO ANOTHER PROVINCE

It is also important to note that if you purchase a home in one Province and are transferred or move to a different province, some lenders won’t be able to port the mortgage due to being provincially based.

usage considerations

The use of the property can include things such as personal, investment, recreational, agricultural and also consider previous activities. A few things to keep in mind are:

CONDOMINIUMS

If you are looking at purchasing a condo on a property that has either a commercial component in the building (such as shops on the first floor), or allowable space in the unit for businesses (live/work designation), you may have limited lender options. In some cases, lenders will avoid these types of properties at all costs, while others may require approval from the insurer (i.e. CMHC).

RENOVATION REQUIRED

If the property requires renovations, the extent of the upgrades, as well as the property value will be taken into consideration.

PREVIOUS GROW-OPS

Homes that previously existed as grow-ops, have special lending options. These typically come with higher interest rates and costs due to decreased value.

RENTAL SUITES

For owner-occupied homes that contain rental suites, it is important to consider potential rental income. If the house is purchased for investment, rental income is automatically considered. This can result in a different interest rate than simply an owner-occupied dwelling. In these cases, the rental income can also increase the resale value of the property. However, an appraisal of the property must be conducted and reviewed to ensure the condition. This will also uncover whether any renovations were completed to add value.

SECOND PROPERTIES

Purchasing a second home for recreational use will require a review to determine if it is seasonal or year-round access.

Before you begin your home search, it is best to discuss your future plans with a Dominion Lending Centres Mortgage Professional. This will ensure you receive accurate information to understand the specific requirements your potential property might require. Seeking expert advice early on will also give you ample time to find the right fit! This will also ensure you can submit a full financing review before subject removal on a purchase.

Published by DLC Marketing Team