15 Mar

Unlocking Equity Through Refinancing

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:

The type of property
The location of the property
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.

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

22 Feb

5 Expenses Most Canadians Don’t Expect in Retirement

General

Posted by: Ingrid Kutzner

According to a recent CIBC poll, nearly half (48%) of retired Canadians stopped working sooner than they expected. The result is that many retirees have saved less for retirement than they planned, making unexpected expenses all the more stressful once the income tap has run dry.

But you know what they say, preparation is the best protection against the unexpected. And with that in mind, here are some unexpected expenses that many retired Canadians experience that you might want to plan for.

Home maintenance and upgrades

Just like with our own bodies, homes require ongoing care and have unexpected breakdowns. That’s why it’s important to do regular check-ups and budget for the unexpected, as well as the expected.

Whether it’s replacing the roof, furnace, or appliances, or upgrading your home to be more accessible as you age, it’s important to plan ahead for how you will cover the costs of keeping the home you love safe, beautiful, and suited to your needs. Luckily, there are options like the CHIP Reverse Mortgage that can provide the funds to help you take care of your home without making monthly payments or affecting your OAS or CPP.

Personal and family emergencies

It’s sad to say, but most people at some point in their lives will have to deal with a sudden emergency. Whether it is needing to travel to see a family member who has had an accident or become ill, or people you love who may need some financial assistance during a trying time. The costs of dealing with such an emergency can be as draining on your finances as they are on your emotions.

Many financial institutions and advisors recommend setting up an emergency fund with 3-6 months salary. Of course, this means you would need to plan ahead and set up the fund before retiring and adding to it when possible in retirement. You can use the emergency fund calculator from Practical Money Skills Canada if you need to get started.

Frauds and scams

Between January 2014 and December 2017, Canadians lost more than $405 million to fraudsters. What’s more, these criminals largely target elderly citizens, with $94 million of that sum coming from Canadians aged 60 to 79. And with the growth of the digital age since then, there are now more opportunities for fraudsters than ever before.

No one expects to get scammed, but many retirees experience significant financial hardship due to fraudulent crimes. To help you avoid, detect, and report fraud, HomeEquity Bank has recently launched Catch the Scam, a series of online classes led by Frank Abagnale, the former conman whose life inspired the Leonardo DiCaprio film Catch Me If You Can. Frank now works as a consultant with organizations including the FBI to help tackle fraud, forgery, and embezzlement. Watch Frank’s Catch the Scam video series to see how you can avoid Canada’s most common scams.

Living longer than expected

While a long life is truly a blessing and something to celebrate, Canadians are living longer than they ever have. One result of this is that some of the financial advice being given today may not account for the realities of tomorrow. Of course, any retirement plan needs to begin with when you plan to retire, and end with how long you can realistically expect to stay retired.

Many Canadians are realizing that they will live longer and experience higher health costs toward the end of their lives. In order to be fully prepared, it’s important to over-plan to ensure you are fully covered for the (extra) long term.

Investment losses

While everyone understands that investments have a cycle with peaks and valleys, toward retirement most people tend to shift towards safer assets such as government bonds and Guaranteed Income Certificates (GICs) – but there is always a level of risk for any investment. Make sure your investments align with the risk you’re willing to tolerate, and that you have a way to get extra funds if needed. For instance, a reverse mortgage is an ideal option for many 55+ Canadians, since it’s tax-free, unlocks up to 55% of their home equity, and requires no monthly mortgage payments.

Contact your DLC Mortgage Broker to find out more about how the CHIP Reverse Mortgage can help you prepare for the unexpected in retirement.

Written By: Agostino Tuzi
Post Sponsored by HomeEquity Bank

8 Feb

6 Important Questions to Ask Before a Big Home Renovation

General

Posted by: Ingrid Kutzner

So you want to make a major home renovation. Congratulations! Now, you’ve got to find the right contractor for the job. While doing a thorough online search or asking family and friends is an important first step, once you find a potential contractor, it’s time to start treating the process like a job interview. Being prepared with the right questions protects you from future headaches, but also ensures that you’re happy with the end result.

Hiring a contractor for your big home reno? Ask these important questions to make sure you’re picking the right contractor.

What is your experience in home renovation?

This question can help you determine how long the contractor has been in the business, whether they’ve worked with similar challenges as those in your home and how they ensure that projects are completed on time. With this question, you get full insight into their methodology.

You can also find contractors in your area that might have positive Yelp reviews or other social media to see if others are happy with their work.

Do you have a contracting license?

Depending on where you live, there are different requirements for what type of license a contractor has to hold. Check the laws in your region to see what might apply, and ask potential contractors directly whether they hold those licenses.

Do you carry the appropriate insurance?

According to the Canadian Homeowner’s Association, hiring people without the proper insurance could put you at legal and financial risk should something happen in your home. Protect yourself (and the workers improving your home) by checking off this box in the beginning, and ensure they have both liability insurance and worker’s compensation.

Will we get a written contract?

This should be a given if you’re working with a contractor because if the answer is no, don’t even bother moving forward with the interview. The CHBA says contracts should cover the description of the work, the materials used and the price of the job. You should also take this as an opportunity to figure out your payment schedule, as the Better Business Bureau in the U.S. says that you should never pay the full price of the job upfront, and the specific timeline for completing your project.

Contractors should also always offer a warranty in writing that informs you of what is covered and for how long.

Can we get in touch with your past clients?

A contractor should be proud of their past work. Take this as an opportunity to figure out how contractors approach their work, whether they have effectively handled disputes and fact-check what contractors tell you about their working style.

Will you be responsible for building permits?

If there is a chance that your building requires permits, you want to make sure that your contractor is prepared in this area. Square One Insurance says you should try to be present for a contractor’s home inspection to ensure that you fully understand their feedback, and anticipate if any changes in your home need to happen.

Published by FCT

30 Jan

The Top 7 Misconceptions About Reverse Mortgages.

General

Posted by: Ingrid Kutzner

How much do you really know about reverse mortgages? Maybe you know that reverse mortgages can help Canadians 55+ access the equity in their home, tax-free. Maybe you know that tens of thousands of Canadians are using a reverse mortgage as part of their financial plan. But did you know that there are 7 common misconceptions when it comes to understanding reverse mortgages in Canada. As Canada’s leading provider of reverse mortgages, HomeEquity Bank can help set the record straight.

common misconceptions about reverse mortgages

1. If you have a reverse mortgage, you no longer own your home

Nothing could be further from the truth. You always maintain title, ownership and control of your home – HomeEquity Bank simply has a first mortgage on the title.

2. You will owe more than the value of your home in the end

Also, untrue. Every CHIP Reverse Mortgage from HomeEquity Bank comes with a No Negative Equity Guarantee(1) which states that as long as you – the homeowner – have met your obligations, the amount you will have to pay on the due date will not exceed the fair market value of your home. In fact, over 99% of HomeEquity Bank’s customers retain equity in their home when they decide to sell, with over 50% of the home’s value remaining after the loan is paid back (on average).

3. Only people younger than 62 can apply for a reverse mortgage

In Canada, the CHIP Reverse Mortgage is available to Canadian homeowners aged 55 and older. In fact, as you age you are more likely to qualify for a higher amount on your loan. A reverse mortgage is a lifetime product and as long as the property taxes and insurance are in good standing, the property remains in good condition, and the homeowner is living in the home full-time, the loan won’t be called even if the house decreases in value.

4. Failure to make payments can result in eviction

This myth is one of the most common when it comes to reverse mortgages. The CHIP Reverse Mortgage does not require any monthly payments, meaning you can’t miss payments in the first place.

5. Arranging a reverse mortgage is very expensive

This is also untrue. Much like a conventional mortgage, an appraisal of your property and independent legal advice is required, and your responsibility to pay for. The only remaining cost is a one-off closing and administration fee. When you compare this to the costs of “rightsizing” to another home, you will find a much more affordable option in a reverse mortgage.

6. Reverse mortgages have much higher interest rates than conventional mortgages

While it’s generally true that interest rates are a bit higher than a traditional mortgage, the difference is not excessive. Plus, making monthly mortgage payments is simply not a viable option for many retired Canadians, and – even if it were – many would struggle to qualify for a traditional mortgage in the first place. For these reasons, many retired Canadians are choosing reverse mortgages over conventional solutions.

7. You won’t be able to pass on your home to your children

The idea that your children won’t be able to inherit your home is a complete myth. Your heirs will always have the option of keeping the property by paying off your reverse mortgage after you pass away. Plus, HomeEquity Bank’s No Negative Equity Guarantee, (1) states that if the home depreciates in value and the mortgage amount due is more than the gross proceeds from the sale of the property, HomeEquity Bank covers the difference between the sale price and the loan amount. Therefore, you will never owe more than the fair market value of the home.

To find out how much you could qualify for, try our reverse mortgage calculator, or contact your DLC Mortgage Professional.

[1] The guarantee excludes administrative expenses and interest that has accumulated after the due date.

Written By: Agostino Tuzi
Published by HomeEquity Bank

15 Jan

5 Expenses Most Canadians Don’t Expect in Retirement

General

Posted by: Ingrid Kutzner

Home maintenance and upgrades

Just like with our own bodies, homes require ongoing care and have unexpected breakdowns. That’s why it’s important to do regular check-ups and budget for the unexpected, as well as the expected.

Personal and family emergencies

Frauds and scams

Living longer than expected

Investment losses

Contact your DLC Mortgage Broker to find out more about how the CHIP Reverse Mortgage can help you prepare for the unexpected in retirement.

Written By: Agostino Tuzi

13 Jan

Ultimate Checklist for Selling Your Home

General

Posted by: Ingrid Kutzner

Selling your home can be an extremely stressful experience. Between thinking about moving logistics and financials, it’s easy to miss the small details in between the process.

With that in mind, we’ve built this checklist for selling your home to help you keep track of the things that will get a potential buyer interested. Turns out, it’s not as simple as just fluffing pillows or doing a light dusting. “Put your buyer’s hat on and walk through your home like it is the first time,” Marilou Young, an Accredited Staging Professional and an Associate Broker with Virtual Properties Realty in the metropolitan Atlanta area, told Forbes.

Below is the ultimate checklist for selling your home.

GET FAMILIAR WITH THE PAPERWORK

For home sellers interested in the history of the house, make sure you’ve got all the information handy; this can include paperwork on renovations, property tax receipts, deeds and transferable warranties.

GETTING THE PRICE RIGHT

According to HGTV, it can be helpful to do some market research on what homes in your area are selling for- then shave 15 to 20 percent off that. This way, you attract multiple buyers who can end up outbidding each other and bringing up the price. While that can seem like a risky move, it could work in the competitive markets of big Canadian cities.

DEPERSONALIZE AND DECLUTTER

You want potential buyers to see themselves in the space, which is hard to do if you have family photos on the wall or personal items around. This would be a good time to start putting items in storage or try to keep your personal items out of sight. At the same time, you’re also ensuring that you’re keeping your house tidy—a must if you want to make your home sellable. Check around the house for dirt, stains or small cracks you might be able to fix. And if you have pets, make sure their litter boxes and play areas are also clean and odour-free.

FIND A QUALIFIED REALTOR

Realtors can be helpful to take some of the processes off your plate, including marketing your home and arranging open houses. If you do go this route, none of this list will matter if you decide to work with a realtor that doesn’t know the market inside out. You can search their name on the Real Estate Institute of Canada to ensure that they’re qualified, and meet with them to see if you mesh and understand how they price your unit. At Proptalk, we also have this handy guide for more details.

DON’T SKIP THE HOME INSPECTION

While presenting an unconditional offer may win you the home of your dreams, it can also end up costing you more than you expected. If you’re mortgaged to the max, you can’t afford surprises like repairs or replacements that you haven’t already budgeted for. Consider a Home Protection Plan that includes an 18-month warranty and up to $20,000 in warranty coverage for major household features such as foundation, roof, heating and cooling.

Published by FCT

12 Jan

This is your Captain speaking…

General

Posted by: Ingrid Kutzner

Bringing a wealth of knowledge to help you navigate home financing, with 30 years of experience in the banks as a mortgage lender, investment advisor, and professional financial planner, I am also a professional pilot, with a goal to ensuring a safe journey and smooth landing!

My expertise ranges from helping first time home buyers, to more complex equity draws for investing, tax planning and estate planning.

In the bank I was a financial physician for my clients, with limited tools. Working as a mortgage agent for Dominion Lending Centre, I work for you, not the bank. I have access to a great variety of lenders, and this allows me to help you navigate your mortgage journey, and get you to your destination smoothly with customized solutions.

Sit back and relax knowing you’re in good hands, enjoy the flight!

Your Captain

Ingrid Kutzner