Simple mortgage advice, honestly given!

10 Helpful Words to Know when Buying a Home

Wed, 26 Nov 2025 14:18:00 GMT

Buying a home is one of the most important financial decisions you will make and tends to be stressful with all the new terminology.

To help you understand the process and have confidence in your choices, check out the following common terms you will encounter during the home buying process.

1. Amortization – Length of time over which the mortgage debt will be repaid

2. Mortgage Term – Length of time that the contract with your mortgage including interest rate is fixed (typically 5 years)

3. Closing Costs – Costs you need to have available in addition to the purchase price of your home. Closing costs can include: legal fees, taxes, transfer fees, disbursements and are payable on closing day. They can range from 1.5% to 4% of a home’s selling price.

4. Down Payment – The portion of the home price that is NOT financed by the mortgage loan. The buying typically pays the down payment from their own resources (or other eligible sources) to secure a mortgage.

5. Equity – The difference between the price a home could be sold for and the total debts registered against it (i.e. mortgage). Equity usually increases as the mortgage is reduced by regular payments. Rising home prices and home improvements may also increase the equity in the property.

6. Fixed / Variable Mortgage Interest Rate – a fixed mortgage interest rate is locked-in and will not increase for the term of the mortgage. A variable mortgage interest rate is based on the Bank of Canada rate and can fluctuate based on market conditions, the Canadian economy. Fixed vs. Variable Rate Mortgages – Pros & Cons

7. Gross Debt Service Ratio (GDS) and Total Debt Service Ratio (TDS)

GDS – Typically mortgage lenders only want you spending a maximum 32% of your gross income on your mortgage (principle & interest), property taxes, heat and 50% of your strata fees.
TDS – typically, lenders want you spending a maximum 42% of your gross income on your GDS – PLUS any other debt obligations you have (credit card debt, car payments, lines of credit & loans). 3 “Rules of Lending” what Banks look at when you apply for a Mortgage in Canada

8. High-ratio mortgage / Conventional Mortgage – a high ratio mortgage is a mortgage loan higher than 80% of the lending value of the home. A conventional mortgage is when you have more than 20% down payment. In Canada, if you put less than 20% down payment, you must have Mortgage Default Insurance (see below) and your mortgage affordability (GDS & TDS) is “stress tested” with the Bank of Canada’s qualifying rate (currently 4.64%).

9. Mortgage Default Insurance – Is required for mortgage loans with less than a 20% down payment and is available from Canadian Mortgage & Housing Corp. (CMHC) or 2 other private companies. This insurance protects the lender in case you are unable to fulfil your financial obligations regarding the mortgage.

10. Open / Closed Mortgage

An open mortgage is a flexible mortgage that allows you to pay off your mortgage in part or in full before the end of its term, because of the flexibility the interest rates are higher.
Closed mortgages, typically cannot be paid off in whole or in part before the end of its term. Some lenders allow for a partial prepayment of a closed mortgage by increasing the mortgage payment or a lump sum prepayment. If you try and “break your mortgage” or if any prepayments are made above the stipulated allowance the lender allows, a penalty will be charged. Mortgage Penalties – Ouch… How Much??

Mortgages are complicated, but they don’t have to be… Engage an expert!

Give me a call and let’s discuss a mortgage that works for you (not the bank)!

Kelly Hudson

Mortgage Expert

Mobile: 604-312-5009

Kelly@KellyHudsonMortgages.com

www.KellyHudsonMortgages.com

Mortgage Insurance 101 Revised Nov 2025

Fri, 14 Nov 2025 22:12:00 GMT

Buying a home is one of the biggest financial moves you’ll ever make — and along with it comes a whole lot of new terms, rules, and (you guessed it) insurance .

You might think “Mortgage insurance… how complicated can that be?” But once you start hearing about default insurance , mortgage life insurance , and home insurance , it’s easy to get lost in the fine print.

Don’t worry — this guide breaks it all d own so you can feel confident about what each type does, what it costs, and why it matters.

1. Mortgage Default Insurance – Protects the Lender , Not You

Let’s start with the one most first-time buyers hear about first: Mortgage Default Insurance .

In Canada, this insurance is mandatory if you put less than 20% down payment on your home. This insurance protects your lender , not you.

If you ever stop making your mortgage payments (called defaulting ), this insurance kicks in to make sure the lender doesn’t lose money.

HOWEVER the insurance company will come after you to get their money.

There are three companies in Canada that provide this type of insurance:

CMHC (Canada Mortgage & Housing Corporation)
Sagen (formerly Genworth)
Canada Guaranty

You don’t need to do anything on your side since your lender decides which insurer they want to work with.

How much does it cost?

The cost (called the premium ) is based on your down payment amount and is added to your mortgage. Here’s a quick example:

If you buy a $600,000 home with 10% down, your default insurance premium might be about 3.1% of your mortgage amount — roughly $16,740 , which added to your mortgage loan (you don’t need to come up with the cash).

It sounds like a lot, but the good news is that this insurance allows homebuyers with smaller down payments to get into the market sooner , instead of waiting years to save 20%.

�� Fun fact: As of December 15, 2024, first-time buyers purchasing newly built homes can now qualify for 30-year amortizations with insured mortgages — a big win for affordability!

For a deep dive, check out my other BLOG: Everything You Wanted to Know about Mortgage Default Insurance

2. Mortgage Insurance vs. Life Insurance – What’s the Difference?

Once you have your mortgage, you need to decide: “Would you like to add mortgage insurance to protect your loan?”

That’s when things can get confusing — because mortgage insurance in this case isn’t the same as mortgage default insurance .

This version is about protecting you and your family , not the lender.

Let’s compare mortgage insurance to life insurance so you can see how they differ:

So which one’s better?

That depends on your needs.

Mortgage insurance can be convenient, especially if you want quick, no-hassle coverage when buying your first home. But a personal life insurance policy can offer more flexibility and control , especially if you want your family to choose how to use the funds.

Remember: You don’t need mortgage or life insurance to qualify for a mortgage. But having the right kind of protection gives you peace of mind — and that’s priceless.

Here are the Top 4 Benefits of getting life or mortgage insurance when you buy a home:

Peace of Mind – You’ll sleep better knowing you (and your family) are financially protected.
The Mortgage Can Be Paid Off – Your loved ones won’t have to worry about losing their home.
Your Family Can Stay in Their Home – During a difficult time, keeping stability matters more than ever.
It’s Cheaper When You’re Young – The younger and healthier you are, the lower your premiums.

3. Other Important Types of Insurance

While we’re on the topic, here are a few other kinds of insurance every homeowner should know about:

�� Fire / Home Insurance

Before your mortgage can be funded, your lender will ask for proof of home insurance (often called fire insurance ).

This protects both you and the lender if your home is damaged or destroyed. You’ll want to make sure it covers replacement cost , not just market value.

Some policies even cover temporary living costs if your home becomes unlivable after a fire or flood.

�� Disability Insurance

This one protects your income . If an accident or illness stops you from working, disability insurance can help cover your mortgage payments and other bills while you recover.

��️ Contents Insurance

Also called personal property insurance , this covers all your stuff — furniture, clothes, electronics, etc. — if it’s damaged or stolen.

4. Quick Recap

Here’s a simple way to remember it all:

The Bottom Line

Mortgages can feel complicated — but they don’t have to be!

Understanding the different kinds of insurance helps you protect your home , your family , and your financial future .

When you’re working with a mortgage expert, you don’t have to figure it all out alone. I’ll walk you through which coverage makes sense for your budget and lifestyle — and connect you with trusted, reputable insurance professionals when you need them.

Because at the end of the day, your home isn’t just an investment — it’s where life happens. ��

Have questions about your mortgage or insurance options? Let’s chat!

 Kelly Hudson

Mortgage Broker – Mortgage Architects – A Better Way
Mobile: 604-312-5009
Kelly@KellyHudsonMortgages.com
www.KellyHudsonMortgages.com

Collateral Charge vs. Standard Charge Mortgages in Canada

Wed, 15 Oct 2025 23:29:41 GMT

When you’re buying a home in Canada, you’ll hear a lot of new terms. One of those is how your mortgage is registered: as a standard charge or a collateral charge .

This choice matters because it affects your flexibility, your costs if you ever switch lenders, and how easy it is to borrow more money later. Let’s break it down in simple terms.

What’s the Big Difference?

Both types of mortgages let you borrow money to buy your home. The difference comes in how the lender registers the loan against your property .

Standard Charge Mortgage
This is the traditional way most lenders register mortgages. The charge is for the exact amount you borrow. For example, if your mortgage is $400,000, the charge is for $400,000.
Collateral Charge Mortgage
This type registers your home for more than the amount you actually borrow —sometimes up to 100% or even 125% of your home’s value. So, if you borrow $400,000 on a $500,000 home, the lender might register it as $625,000.

Why? Because it makes it easier to borrow more later—without hiring a lawyer again or paying extra legal fees.

Advantages of Collateral Charge Mortgages

Easy Access to Equity
If your home goes up in value or you want to use equity for renovations, debt consolidation, or investments, you can often access those funds directly with your lender.
You need the income to qualify for the larger mortgage
No New Legal Fees
Since the mortgage is already registered for a larger amount, you don’t have to pay a lawyer if you want to increase your mortgage with the same lender.
Good for HELOCs
Home Equity Lines of Credit (HELOCs) are always registered as collateral charges. They’re designed for people who want ongoing access to their home equity.

Downsides of Collateral Charge Mortgages

Harder to Switch Lenders
If you want to change lenders at renewal to get a better rate or different features, you can’t just “transfer” your mortgage for free. With a collateral charge, most lenders require you to start fresh, which means paying new legal fees—anywhere from $1,000 or more.
Negotiating Power is Limited
Since switching to a new lender will cost more, you may lose some leverage when asking your current lender for a better deal.
Second Mortgages Can Be Tricky
Because the collateral charge takes up more of your home’s value, it may block other lenders from giving you a second mortgage—unless your home value has increased a lot.

Advantages of Standard Charge Mortgages

Easy to Switch Lenders
At renewal, you can shop around and transfer to another lender with little or no cost. This helps keep your options open and gives you stronger negotiating power.
Simple and Clear
Your mortgage is registered for exactly what you borrow. If you need more money later, you can add a second mortgage or line of credit.
Fewer Surprises
Because the registered amount matches what you owe, you know exactly where you stand.

Downsides of Standard Charge Mortgages

Extra Legal Fees if You Refinance
If you want to borrow more money later (say for renovations), you’ll usually need to hire a lawyer and pay legal fees.
Less Built-In Flexibility
Unlike collateral charges, standard charges don’t give you instant access to more equity without extra steps.

What’s Changed in the last 10 years?

Back in 2014, TD and ING (now Tangerine) had already switched to collateral charges for all new mortgages. Today, most major banks in Canada still use collateral charges for HELOCs and some mortgage products. Some lenders continue to offer standard charge mortgages, especially credit unions and non-bank lenders.

The key difference now is that more borrowers are aware of the trade-offs . With rising home prices and tighter mortgage rules (like the stress test), being strategic about how your mortgage is registered matters more than ever.

Which One Is Right for You?

Choose a Collateral Charge Mortgage if:
You think you’ll want to refinance for renovations, investments, or debt consolidation.
You value flexibility plan on staying with the same lender long-term.
Choose a Standard Charge Mortgage if:
You want the ability to shop around at renewal without extra costs.
You don’t expect to refinance.
You want to simply pay off your mortgage with no surprises.

Final Word: Talk to a Mortgage Broker

Every homeowner’s situation is different. Choosing between a standard or collateral charge mortgage adds one more decision to an already big process.

That’s where a mortgage broker can help. Brokers work with many different lenders, explain the pros and cons, and guide you to the option that fits your goals. Whether you value flexibility, lower fees, or freedom to shop around, getting expert advice makes the choice much easier.

Bottom Line: A collateral charge mortgage gives you flexibility to borrow more later but limits your ability to switch lenders cheaply. A standard charge mortgage makes it easier to shop around but may cost more if you need to refinance. The right choice depends on your long-term plans—and that’s why expert advice from your mortgage broker is key.

Are you considering buying a home? As you can tell there is lots to discuss, let’s have a chat and find a mortgage that works for you and not the bank.

Kelly Hudson
Mortgage Expert
Mortgage Architects – A Better Way
Mobile: 604-312-5009
Kelly@KellyHudsonMortgages.com
www.KellyHudsonMortgages.com

Rental Property Management in BC

Fri, 19 Sep 2025 22:13:24 GMT

Greater Vancouver Property Management Fees – What You Need to Know

Owning a rental property in Greater Vancouver can be a smart way to build wealth. But if you have ever tried to manage a rental on your own, you already know it takes more than just collecting rent. From finding the right tenant to fixing leaky faucets, the work can add up fast.

That’s why many owners hire a property manager . A good property manager takes care of the day-to-day tasks and helps you avoid costly mistakes. But before you sign a contract, you’ll want to understand how property management fees work and what you get for your money .

Let’s break it down in simple terms.

What Is a Property Manager?

A property manager is a licensed professional who looks after your rental property for you. In British Columbia, property managers must complete special training and get a licence from the BC Financial Services Authority (BCFSA) . This means they follow strict rules and stay up to date on important laws such as the BC Residential Tenancy Act .

A good property manager knows Greater Vancouver’s rental market and keeps up with changes to taxes and local rules. For example, the City of Vancouver’s Empty Homes Tax is now 5% of the property’s assessed value for 2025 —something an experienced manager will help you handle.

What Does a Property Manager Do?

A property manager wears many hats. Here are some of the main jobs they handle:

Set the right rent. They study market rents, so your rent is high enough to earn a good return, but not so high that it scares away renters.
Advertise your place. From taking great photos to posting on popular rental sites they make sure people see your property.
Screen tenants. They check credit, references, and employment so you get reliable tenants who pay on time.
Handle the paperwork. They prepare and sign the lease (called a tenancy agreement) and organize move-in and move-out inspections.
Collect rent. They make sure the rent shows up in your bank account every month.
Take care of repairs. Whether it’s a broken dishwasher or regular maintenance, they arrange for trusted tradespeople to get the job done.
Keep records. Each month you get a statement showing rent collected and expenses paid. At year-end you get a summary that makes tax time easier.
Special services. For owners who live outside Canada, they can also look after the required non-resident tax filings .

How Much Do Property Management Fees Cost?

Fees can vary depending on the type of property and the company you hire. But here are the typical 2025 rates in Greater Vancouver :

Why Hiring a Property Manager Can Be Worth It

It might seem cheaper to do everything yourself. But a property manager can actually save you both time and money .

1. Less Stress, More Free Time
No late-night phone calls about a broken furnace. No chasing tenants for late rent. Your manager handles it.

2. Better Tenants, Fewer Vacancies
Managers often have a list of pre-screened tenants and work with relocation companies. This can mean your place is rented faster and stays occupied.

3. Local Knowledge
Vancouver’s rental rules and taxes change often. A licensed manager keeps you on the right side of the law.

4. Bulk Savings on Repairs
Because they work with many properties, managers often get better prices from contractors and can pass those savings on to you.

5. Peace of Mind—Even From Far Away
If you live in another city or province, a property manager can be your eyes and ears on the ground.

Tips for Choosing the Right Property Manager

Check their licence. Make sure they are licensed with the BCFSA .
Compare more than one company. Get quotes and see what services are included.
Read the contract. Know exactly what you’re paying for and any extra fees.
Ask for references. Talk to other owners to hear about their experience.

The Bottom Line

Property management fees in Vancouver—usually 7%–10% of the rent plus a tenant-placement fee —aren’t just another expense. They’re an investment in protecting your property and your time .

A good property manager keeps your rental running smoothly, makes sure you follow the rules, and helps you get the best return on your investment. For most landlords, that peace of mind is worth every penny.

Need help navigating mortgage financing options for rental properties? I’d be happy to help!

Kelly Hudson
Mortgage Broker
604-312-5009
Kelly@KellyHudsonMortgages.com
ww w .KellyHudsonMortgages.com

Mortgages 101 – What you need to Know about Mortgages (Updated for 2025)

Tue, 19 Aug 2025 02:12:00 GMT

Buying your first home is exciting—and rather nerve-wracking! With so many mortgage options, the process can feel like a maze. My job is to make mortgages simple.

Below is your step-by-step guide to how mortgages work , along with the key 2025 updates every homebuyer should know .

What is a Mortgage?

A mortgage is a loan secured by your home. If payments stop, the lender can take possession and sell the property to recover what’s owed.

Your payments cover two things:

Principal – the amount you borrowed.
Interest – the cost of borrowing.

The Building Blocks of a Mortgage

Down Payment – The cash you put in upfront.
In Canada, you can buy with less than 20% down if you purchase Mortgage Default Insurance .
Minimum: 5% of the first $500,000 and 10% of the portion above $500,000 up to $1,499,999.
Amortization – How long you take to pay the loan off (25 or 30 years are most common).
Term – How long your rate/contract lasts before you renew (usually 1–5 years).
Rate Type :
Fixed : your rate/payment stays the same.
Variable/Adjustable : tied to your lender’s prime rate, so your costs may change.

�� New to mortgages? Check out my 20 Terms Home Buyers Need to Know .

Getting Approved

Lenders look at: your income, debts, credit history, down payment, and the property itself.

You also need to pass the mortgage stress test —qualifying at either your contract rate + 2% or 5.25% (whichever is higher).

Want to strengthen your credit before buying?

What’s New (Big Changes that Matter)

30-Year Insured Amortizations – Now available in select cases (first-time buyers & new builds).
Insured Mortgage Cap Raised to $1.5M – Up from the old $1M.
RRSP Home Buyers’ Plan (HBP) Limit Increased – You can now withdraw up to $60,000 per person.
First Home Savings Account (FHSA) – Tax-deductible in, tax-free out.
Read my guide here First Home Savings Account (FHSA) - 5 Things You Need to Know
BC Property Transfer Tax (PTT) Relief Expanded – First-time buyers can now qualify on homes up to $835,000 (partial up to $860,000). There’s also a separate new build home exemption with higher thresholds.

Mortgage Default Insurance

If you have less than 20% down, default insurance allows you to buy. Premiums are added to your mortgage and vary by down payment amount.

�� Learn more in my updated post: Everything You Need to Know about Mortgage Default Insurance (2025)

Fixed or Variable – How to Choose?

Fixed: Payment certainty and peace of mind.
Variable/Adjustable: Potential savings when rates drop, but higher risk.

�� Deep dive here: Mortgages Made Simple – Fixed vs. Variable Rates .

Why Strategy Beats “Lowest Rate”

The lowest rate isn’t always the best mortgage. A cheap rate can come with big penalties, poor prepayment terms, or restrictions that don’t fit your future plans.

I help clients evaluate based on 4 key priorities :

Lowest total cost
Lowest payment
Maximum flexibility
Lowest risk

Next Steps

Try my Mortgage Planner Tool – run your own home buying scenarios.
Book a 15-minute Zoom chat with me—I’ll help you find the mortgage that works for YOU (not your bank).

Bottom Line: Mortgages are complicated, but they don’t have to be. With the right expert in your corner, you’ll save money, avoid costly mistakes, and buy your first home with confidence.

Need help navigating your home buying & mortgage financing options? I’d be happy to guide you through what’s possible.

Kelly Hudson
Mortgage Broker
604-312-5009
Kelly@KellyHudsonMortgages.com
www . KellyHudsonMortgages.com

20 Changes to BC Real Estate Rules Since 2010 – and Why You Need a Mortgage Broker

Thu, 17 Jul 2025 20:40:51 GMT

British Columbia’s real estate landscape has changed dramatically over the past 15 years. Since 2010, we've seen waves of new legislation, tax policies, zoning reforms, and consumer protections that affect how homes are bought, sold, financed—and lived in.

Whether you're a first-time homebuyer or a seasoned investor, keeping up with all these changes can feel overwhelming. That’s why working with a knowledgeable mortgage broker has become more important than ever.

Here are 20 key real estate changes in BC since 2010 —and how they affect you.

�� 1. Stricter Mortgage Down Payment Rules

2010: A 20% minimum down payment was introduced for rental properties.
2011: The maximum amortization for insured mortgages dropped from 35 to 30 years.
2012: For homes over $1 million, a 20% down payment became mandatory.

�� 2. Tiered Down Payment System Introduced

2016: Buyers must put down 10% on the portion of a home’s price between $500,000 and $1 million. Insured borrowers must qualify at the higher benchmark rate.

��️ 3. Strata Rental and Age Restrictions Reformed

2022: BC banned most rental restriction bylaws for strata buildings. Age restrictions are now limited to 55+ only.

�� 4. Depreciation Reports Mandated

July 1, 2024: All strata corporations with 5+ units must update depreciation reports every five years.

�� 5. Foreign Buyer and Speculation Taxes

2016: Aug. 2 A 15% Foreign Buyer Tax was introduced, later raised to 20% Feb. 20, 2018
2018: Speculation and Vacancy Tax implemented in designated regions (Metro Vancouver, Victoria, Kelowna, Nanaimo, Central Okanagan).

��️ 6. Expanded Tax Zones

2018 & 2023 & 2024 Foreign Buyer and Speculation Tax zones expanded to include more areas in BC

�� 7. Homebuyer Cooling-Off Period

2023: Buyers now have a mandatory 3-day “rescind” period after contract acceptance, offering time to reconsider (get financing, home inspection, appraisal etc.).

�� 8. Home Flipping Tax Introduced

January 2025: Properties sold within one year of purchase may face a 20% provincial tax on profits, tapering to zero by year two.

�� 9. Realtor Commissions Under Review

2024–2025: Ongoing lawsuits and policy scrutiny are prompting potential reforms to how commissions are structured.

��️ 10. End of Industry Self-Regulation

2016: Real estate regulation shifted from industry-led to government-supervised under the Real Estate Services Act (RESA).

�� 11. Updated Real Estate Services Rules

2021–2022: Licensing, brokerage relationships, and realtor conduct rules were revised to improve consumer protection.

��️ 12. BC Energy Step Code Introduced

2017: New energy-efficiency standards aim for all new homes to be net-zero ready by 2032.

�� 13. Elimination of Single-Family Zoning

2023–2024: Municipalities can no longer enforce single-family-only zoning. Multiplex and infill housing is now permitted in urban areas.

�� 14. Density & Parking Near Transit

2023–2024: Provincial rules increased allowable density near transit hubs and removed minimum parking requirements.

�� 15. Stricter Short-Term Rental Rules

2023–2024: Airbnb-style rentals are restricted or banned in many urban areas unless the unit is a principal residence.

�� 16. Single-Stair Apartments Now Allowed

2023–2024: Low-rise apartment buildings can now use single-staircase construction, lowering development costs.

�� 17. No Public Hearings for Code-Compliant Projects

2023–2024: Projects that already meet zoning and building code can bypass public hearings to accelerate approvals.

��️ 18. Municipal Rental-Only Zoning Powers

2018 & 2023: Cities can enforce rental-only zoning and monitor housing supply more closely.

�� 19. Farmland "Monster Home" Limits

2018–2021: Principal dwellings on ALR land are limited to 500 m², with rules around secondary dwellings tightened.

��️ 20. Strata Disputes Handled by Civil Resolution Tribunal (CRT)

2016: The CRT gained authority to resolve strata and small claims disputes online—streamlining resolution for owners and tenants alike.

Why You Need to Work with a Mortgage Broker

The last 15 years of real estate reform in BC haven’t just affected home prices—they’ve reshaped how homes are bought, sold, and financed. That’s why working with a professional mortgage broker isn’t just helpful—it’s essential.

✅ Expert Guidance

We stay up to date on every regulatory change—from the new flipping tax to strata law reforms—so you don’t have to. We’ll explain what matters and how it affects your financing.

�� Tailored Mortgage Solutions

Every buyer has a different financial picture. We analyze your income, down payment, credit, and goals to match you with lenders that align with your unique situation—even when guidelines are shifting.

�� Maximize Affordability

We help you navigate high down payment thresholds, mortgage stress tests, and short amortization periods to find strategies that keep your monthly payments affordable.

�� We Advocate for You

Whether you're a first-time buyer, upsizing, or purchasing an investment property, your broker negotiates on your behalf and protects your interests.

Conclusion

With everything from zoning rules to tax policies evolving rapidly in BC, having a mortgage broker on your team means you’re not navigating it alone. You gain clarity, confidence, and access to the best possible mortgage solutions—so your real estate decisions are informed and strategic.

Need help navigating mortgage financing for BC’s ever-changing real estate market?

Let’s talk about how I can guide you through today’s rules—and help you plan for tomorrow.

Everything You Need to Know about Mortgage Default Insurance. (updated June 2025)

Thu, 19 Jun 2025 17:28:00 GMT

Home buyers say the #1 obstacle to homeownership is saving enough money for a down payment.

Mortgage default insurance (also called mortgage insurance) allows you to purchase a home with as little as 5% down . It protects your lender if you stop making payments.

Typically, a 20% or higher down payment is your best option. However, for many Canadians, reaching this amount can be challenging, especially in expensive markets like Greater Vancouver & Toronto.

If you don't have enough cash for a 20% down payment, Mortgage Default Insurance can help.

How Much Down Payment Do You Need?

Mortgage Default Insurance Providers

In Canada there are three Mortgage Default Insurance providers:

Canadian Mortgage & Housing Corp. (CMHC), – a Canadian Federal Crown corporation
Sagen (formerly Genworth Canada) – a private insurer
Canada Guaranty – a private insurer

They all have the same rates & sliding scale - the larger your down payment the less insurance you pay, since you are considered less “risky”.

Your lender selects the mortgage insurer, not you. Each insurer assesses borrowers and properties differently. Sometimes, your lender may approve your mortgage, but the insurer might decline it. If all three insurers decline, you won’t get approved for a mortgage with less than 20% down payment.

How Mortgage Default Insurance Premiums Work

The smaller your down payment, the higher the Mortgage Default insurance premium.

Good news – Insurance Premiums can be rolled into your mortgage amount
Bad news - this means you’ll pay interest on the insurance premium for the life of your mortgage (usually 25 or 30 years).
Alternatively, you can pay the premium upfront as part of your closing costs.

Current Mortgage Default Insurance premium rates based on down payment size:

5% - 9.99% down payment: 4.00%
10% - 14.99% down payment: 3.10%
15% - 19.99% down payment: 2.80%

Mortgage Default Insurance in Action

If you stop making mortgage payments, the insurer covers the lender's financial losses. However, this doesn't absolve you of responsibility. If the property sells for less than the outstanding mortgage, you're still personally responsible for any shortfall.

Mortgage Default Insurance Exceptions to Keep in Mind

Investment properties are not eligible for mortgage insurance; consequently, you will need a minimum 20% down payment to buy.
The max imum amortization for an insured mortgage is 25 years.
Dec. 15, 2024 – 30-year amortization available for First Time Home Buyers OR buying a Prebuild
Using Federal RRSP rules
Dec. 15, 2024 maximum home price increased to $1.5 million (was $1M)
Homes over $1.5 million do not qualify for Mortgage Default Insurance.
Lenders might still require mortgage insurance even if your down payment exceeds 20% based on property type or location.

Why Mortgage Default Insurance Matters

Mortgage insurance benefits home buyers by allowing lenders to offer lower interest rates, despite smaller down payments. Without this insurance, lenders would charge much, much higher interest rates due to increased risk.

You pay the mortgage default insurance and if something goes horribly wrong in your life regarding your mortgage, the lender can go to the insurance company to recoup their loses.

Ideally, providing a 20% down payment is the best option, but if that's not feasible, Mortgage Default Insurance can make homeownership achievable.

If you default on a mortgage that’s protected by mortgage default insurance, here's what happens:

Lender Claims Insurance :
Your lender will sell the property to recover the outstanding mortgage balance. If the sale doesn't cover what's owed, the lender files a claim with the mortgage insurer (e.g., CMHC, Sagen, Canada Guaranty).
Insurer Pays the Lender :
The mortgage insurer compensates the lender for the shortfall.
You Remain Liable :
Mortgage Default Insurance does NOT protect you… it protects your mortgage lender. You are still personally responsible for repaying any remaining outstanding balance. The mortgage insurer (or lender) can legally pursue you for this outstanding debt, potentially affecting your credit and financial future.

Mortgage default insurance protects the lender—not you—so it’s critical to understand your ongoing obligations in default scenarios.

Final Thoughts

Whenever possible, aim for at least a 20% down payment . It helps you avoid mortgage default insurance premiums and gives you more financial flexibility.

Check out my BLOG: 5 GREAT Reasons To Provide a 20% Down Payment when Buying a Home

But if 20% isn’t realistic for you right now, Mortgage Default Insurance can help you move forward confidently—and get into your home sooner.

Need help navigating your home buying & mortgage financing options? I’d be happy to guide you through what’s possible.

Kelly Hudson

Mortgage Expert

Mortgage Architects

Mobile 604-312-5009

BLOG Would a Co-Signer Enable You to Qualify for a Mortgage?

Buying Bare Land in Canada: What You Need to Know

Fri, 16 May 2025 16:48:06 GMT

Have you ever dreamed of buying a piece of land and building your very own home from scratch? You're not alone! Buying bare land, especially in beautiful British Columbia, Canada, can be an exciting adventure or a money pit. Before you start dreaming of where to put your future house, there are a few important things you should know.

What is Bare Land?

Bare land, sometimes called vacant land, is just that—land without any buildings or structures on it. It's an empty canvas waiting for your ideas. But buying bare land isn’t quite the same as buying a house or apartment. It comes with its own set of rules and challenges, especially when it comes to financing.

Why is Financing Bare Land Different?

When you buy a home, Lenders feel safer lending you money because if something goes wrong, they can sell the house to get their money back. With bare land, it’s different because there’s nothing built yet.

It’s harder to sell bare land – than a home.
Which makes it riskier for Lenders, therefore they usually have stricter lending rules and higher interest rates to offset the risk.

Important Things to Consider About Financing Bare Land:

1. Down Payments Can Be High

Raw Land : This is completely untouched land without any utilities like water, sewer, electricity, or roads. Lenders often require a large down payment, sometimes around 50% of the land’s price.
Due to the higher perceived risk, many lenders do not lend on raw, undeveloped land.
Vacant or Serviced Land : This land already has important utilities (like electricity, water, sewer, gas, telecommunications, and road access) nearby or already installed. Because it's easier to build on, Lenders may require a slightly lower down payment, usually around 35%.

2. Higher Interest Rates and Shorter Loan Terms

Interest rates on land loans are generally higher than on regular home loans because of the increased risk. Also, Lenders might offer shorter loan terms.
Some lenders may offer loans where you only pay interest for a few years, which can help lower your monthly payments in the short term.

3. Finding the Right Lender

There are three main places to get a land loan:

Traditional Banks : Major banks sometimes provide land loans but usually with strict rules, high down payments, and higher interest rates.
Credit Unions : Local credit unions can often have more flexible rules and may offer better terms, especially if the land is within their local lending area.
Private Lenders : Companies specifically dealing with land financing. They offer customized loans but typically charge fees for borrowing the money and higher interest rates.

Steps to Successfully Get a Land Loan:

Step 1: Prepare Your Documentation

Banks and lenders will want to see:

Your financial records – i.e. income & down payment
Credit reports
Information about the land itself (like zoning, future plans, and what services are included).

Being organized and prepared helps make the process smoother.

Step 2: Think About Your Future Plans

Do you want to build your dream home right away or just hold onto the land for a while? If you’re planning to build right away, a construction mortgage may be the solution. This type of loan can cover the cost of buying the land and building your new home.

Is Buying Bare Land Right for You?

Buying land can be an amazing experience, but it's important to be realistic. It can be challenging, especially financially, if you're not prepared. High down payments and higher interest rates can be tricky for many people without extra savings.

Given the complexities and varying terms associated with land financing – for most people without deep pockets – it’s challenging.

Kelly Hudson
Mortgage Broker
604-312-5009
Kelly@KellyHudsonMortgages.com
www.KellyHudsonMortgages.com

Buying vs. Renting in Canada: Which Makes Financial Sense for You?

Thu, 03 Apr 2025 18:04:06 GMT

Are you debating whether it's smarter to rent or buy a home in Canada? It's a common question, and the answer depends on your personal situation. Both renting and buying have their pros and cons, but for most people, homeownership tends to offer substantial long-term benefits. Let’s explore both options clearly, so you can confidently decide what’s best for you.

Advantages of Buying a Home

1. Personal Freedom and Customization Owning your home means having the freedom to personalize your living space. Dreaming of a bold paint colour or unique flooring? Go ahead—your home, your rules!

2. Building Equity and Wealth Each mortgage payment you make is an investment in yourself. Over time, your home typically appreciates in value, increasing your equity. This can become a significant asset that helps secure your financial future.

3. Stability and Security Owning offers peace of mind. You don’t need to worry about sudden rent hikes or eviction notices. Your home remains yours until you decide otherwise.

4. Long-Term Financial Benefits Homeownership acts as forced savings. Unlike renting, every mortgage payment moves you closer to outright ownership, building a financial foundation that can support you and your family for years to come.

Challenges of Buying a Home

1. Upfront Costs Buying comes with significant initial costs, including a down payment, legal fees, home inspection, appraisal, moving expenses, etc.

2. Responsibility for Maintenance Owning a home means you're responsible for maintenance and repairs. This can sometimes be costly and inconvenient.

3. Reduced Flexibility Selling a home typically takes time, which can limit your flexibility if you need or want to relocate quickly.

Advantages of Renting

1. Easy Mobility Renting offers flexibility to relocate easily, beneficial for frequent job changes or lifestyle adjustments.

2. Fewer Responsibilities Repairs and maintenance are generally your landlord’s responsibility, reducing stress and unexpected expenses.

3. Lower Initial Costs Renting typically requires just a security deposit and the first month's rent, making it easier financially at the start.

Downsides of Renting

1. No Equity Building Rent payments do not contribute to your equity. Instead, you’re effectively paying your landlord’s mortgage, offering no long-term financial return.

2. Restrictions and Rules Landlords often impose limitations, such as no pets or restrictions on decorating, making it challenging to feel fully at home.

3. Instability and Uncertainty Renters may face sudden rent increases or eviction if the landlord decides to sell or repurpose the property, disrupting your life significantly.

How to Decide if Buying Makes Sense for You

Consider these key questions:

Financial Stability: Can you afford a down payment, closing costs, and an emergency fund?
Long-Term Plans: Do you intend to stay in one location for a few years?
Personal Preferences: Do you value customization and control over your living environment?
Market Conditions: Is homeownership financially advantageous compared to renting in your area?

Answering 'yes' to these questions means buying could be an excellent decision for you.

A Helpful Exercise: "Trying On" a Mortgage

If you’re renting and uncertain whether you can handle the financial commitment of homeownership, consider this practical strategy: calculate the difference between your current rent and the total monthly cost of owning a home, including mortgage, property taxes, strata fees (if applicable) etc. Deposit this difference monthly into a savings account for six months.

This approach lets you experience the financial reality of owning a home without immediate risk. Additionally, you’ll boost your savings, bringing you closer to your homeownership goal.

Why Buying Typically Offers Greater Long-Term Value

In the long term, buying a home generally makes more financial sense. It helps you build equity, achieve stability, and enjoy greater personal freedom. Renting can feel simpler in the short term but offers little long-term financial benefit or security.

By carefully considering your finances, goals, and the housing market, you'll make the right decision for your unique situation.

Ready to explore further? Let's connect and discuss whether homeownership aligns with your financial goals and personal dreams.

Kelly Hudson
Mortgage Expert
Mortgage Architects – A Better Way
Mobile: 604-312-5009
Kelly@KellyHudsonMortgages.com
www.KellyHudsonMortgages.com

Mortgages Made Simple: Understanding Fixed vs. Variable Interest Rates in Canada

Mon, 17 Mar 2025 19:03:33 GMT

Since March 2022, mortgage rates in Canada have risen significantly, raising concerns for homeowners and potential buyers. But what drives these changes, and how do they impact your choice between fixed and variable mortgage rates? Let's simplify this important financial topic.

Why Do Mortgage Rates Change?

Mortgage rates fluctuate based on several key economic factors:

Inflation: High inflation rates typically lead the Bank of Canada to increase interest rates to control rising costs and stabilize the economy.
Employment Rates: During periods of high unemployment, the Bank of Canada may reduce rates to encourage borrowing and economic growth.
Global Events: Wars, geopolitical tensions, or international economic crises can significantly influence interest rates.
Central Bank Decisions: The Bank of Canada's policy decisions, especially regarding the overnight lending rate, directly influence mortgage rates.

Understanding Variable Mortgage Rates

Variable-rate mortgages, often called adjustable-rate mortgages, are directly tied to the Bank of Canada's overnight rate. Here's how it works:

The Bank of Canada sets the overnight lending rate.
Banks use this overnight rate to establish their prime rate, which is the benchmark rate offered to their most creditworthy customers.
Your variable mortgage interest rate is typically calculated as the prime rate minus a specific discount offered by your lender.

Example (as of March 12, 2025):

Bank of Canada's overnight rate: 2.75%
Bank's prime rate: 4.95% (overnight rate of 2.75% plus a 2.20% bank margin)
If your variable mortgage rate includes a discount of 0.30%, your rate becomes 4.65%.

When the Bank of Canada increases its overnight rate, your mortgage payments also increase. Conversely, if the overnight rate decreases, your payments drop. Variable rates are advantageous during periods of falling interest rates but can become stressful if rates rise unexpectedly.

Variable-rate mortgages offer flexibility, as borrowers typically have the option to switch to a fixed-rate mortgage if they become concerned about rising interest rates. However, during economic uncertainty or instability, lenders might become cautious, limiting this flexibility.

Understanding Fixed Mortgage Rates

Fixed mortgage rates operate differently from variable rates. They are primarily linked to Canadian government bond yields, specifically the 5-year bond rates:

Economic Growth: In strong economic conditions, investors prefer stocks for higher returns, reducing demand for bonds. Bond prices fall, yields rise, and subsequently, fixed mortgage rates increase.
Economic Downturns: During economic uncertainty, investors prefer the safety and stability of bonds. Increased demand raises bond prices and lowers their yields, resulting in lower fixed mortgage rates.

However, even during downturns, banks may increase fixed mortgage rates if they perceive higher lending risks. This scenario can keep fixed rates elevated despite low bond yields.

Fixed vs. Variable: Which is Better?

Choosing between fixed and variable rates depends on personal financial circumstances, comfort with risk, and future plans:

Variable Rates: Typically start lower than fixed rates, providing immediate savings. However, they may rise significantly, creating financial stress if rates increase rapidly.
Fixed Rates: Offer predictable and stable mortgage payments, protecting borrowers from unexpected interest rate hikes or economic shocks.

Historically, during the COVID-19 pandemic, homeowners who locked in low fixed rates enjoyed stability as interest rates climbed afterward. Conversely, those with variable-rate mortgages faced increased financial stress from rising payments.

What's Happening Now?

After COVID interest rates in Canada peaked around 5% in June 2024 but have since decreased significantly. As of March 12, 2025, the Bank of Canada's overnight rate has dropped to 2.75%. This reduction has provided relief for homeowners with variable mortgages and has improved affordability for potential homebuyers and those looking to refinance their mortgages.

The recent decrease in rates signals greater opportunities for Canadians to secure favorable mortgage terms and more manageable monthly payments.

Deciding between fixed and variable rates involves several crucial considerations:

Financial Stability: Evaluate your current income, savings, and monthly budget to determine how comfortably you can handle potential fluctuations in mortgage payments.
Risk Tolerance: Reflect on your personal comfort level with financial uncertainty and the possibility of rising interest rates affecting your monthly budget.
Economic Forecasts: Consider current and projected economic conditions, including interest rate forecasts and market predictions.
Long-Term Goals: Align your mortgage choice with your future financial plans, such as homeownership duration, potential relocations, or significant life events.

Expert guidance can make this decision easier by clarifying how different mortgage types align with your personal financial situation and long-term goals.

Still Have Questions?

That's totally normal! Mortgages can feel complicated, but you don't have to navigate this alone. As your friendly Mortgage Broker, I'm here to answer all your questions, explain your options clearly, and help you find the best mortgage for your unique situation.

BLOG Mortgages 101 - What You Need to Know about Mortgages

Reach out today—let's chat and get you on the path to your new home!

Kelly Hudson
Mortgage Expert
Mortgage Architects – A Better Way
Mobile: 604-312-5009
Kelly@KellyHudsonMortgages.com
www.KellyHudsonMortgages.com

Getting a Mortgage After Separation or Divorce in Canada: What You Need to Know

Fri, 14 Feb 2025 19:14:46 GMT

Separation and divorce are major life events that significantly impact finances—including homeownership. In Canada, approximately 40% of marriages end in divorce , making it a common challenge for homeowners.

As a mortgage broker, I work with many clients who are navigating the challenges of keeping or selling their home, refinancing, or qualifying for a new mortgage post-separation.

Lenders assess these applications differently than standard ones, particularly when it comes to income, debts, and liabilities . Whether you want to stay in your current home or move on to a new one, understanding your mortgage options is essential.

How Separation & Divorce Impact Your Mortgage

When separating from a spouse, one of the biggest financial decisions is what to do with the family home. Here are some common scenarios:

1. Keeping the Home

If one spouse wants to stay in the home, they must refinance the mortgage to remove the other person’s name from title and buy out their ex’s share of the equity.

2. Selling the Home

In some cases, selling the home and splitting the proceeds is the best financial option. This provides a clean break but requires both parties to qualify for new mortgages if they wish to buy separate homes.

3. Co-Owning After Separation

Some ex-partners choose to co-own the home for a period, often for the sake of stability for children. While this may work temporarily, it will complicate future borrowing power .

4. Existing Mortgage Responsibilities

Even if a separation agreement states that one party is responsible for the mortgage, lenders will still consider both parties liable unless the mortgage is refinanced and the ex’s name is removed from the title & the mortgage.

Important : If both names remain on the mortgage and your ex stops making payments, your credit score and future borrowing ability will be affected .

Mortgage Options After Separation or Divorce

1. Refinancing your Mortgage to Keep the Home

To stay in the home, you will need to refinance the mortgage in your name alone (OR adding a co-signer). This involves:

Qualifying based on your income and credit score

Paying out your ex-spouse’s share of the equity

Removing your ex-spouse from the mortgage and title

If the home has increased in value, a refinance may allow you to access additional equity to cover legal fees or consolidate debts.

2. Spousal Buyout Program

For those who need to buy out their spouse’s share but don’t have a large down payment, some lenders offer a Spousal Buyout Program that allows refinancing up to 95% of the home’s value instead of the usual 80%.

Requirements for a Spousal Buyout Mortgage:
✅ The home must be the primary residence.
✅ A legal separation agreement must be in place.
✅ The funds can only be used to pay the spouse’s equity and joint debts.

✅ You must have enough income to qualify for the new mortgage .

This option can help one partner keep the home without a massive cash outlay upfront.

BLOG If Your Marriage is Ending and You Want to Keep the Family Home, Consider a Spousal Buyout

3. Purchasing a New Home After Separation

If you decide to sell and buy a new home, you’ll need to qualify for a mortgage based on your individual income, debts, and credit score .

�� Key considerations for getting a new mortgage:

You’ll need at least a 5% down payment .

Lenders will assess your debt-to-income ratio, including any spousal or child support obligations .

If you’re receiving support, some lenders will count it as income—provided it’s documented in a legal agreement, and you can prove there is a history of receiving payments.

4. Alternative Lenders for Challenging Situations

If you don’t meet traditional mortgage requirements due to:
❌ A low credit score
❌ High debt from the divorce
❌ Hard to prove/ unstable/low income

…you might consider alternative lenders . These lenders have more flexible criteria and may accept lower credit scores or higher debt ratios. However, interest rates will be higher due to the increased risk for the lender.

Steps to Take Before Applying for a Mortgage

If you’re considering a mortgage after separation or divorce, here’s how to prepare:

1. Get a Legal Separation Agreement

Lenders require a formal signed separation agreement outlining property division, spousal/child support payments, and financial responsibilities. Without this document, getting a mortgage approval will be extremely difficult, especially if there are children.

2. Check Your Credit Report

Separation can impact your credit, especially if joint debts aren’t handled properly. Contact Equifax or TransUnion to get a copy of your credit report to check for any missed payments or joint accounts that need to be closed.

BLOG 8 Credit Rules You Need to Know, Before You Buy a Home

3. Close or Refinance Joint Debts

Even if your separation agreement assigns a debt to your ex-spouse, lenders still see it as your responsibility UNTIL your name is removed from the account. Work on:

Paying off or refinancing joint debts into separate accounts.

Closing shared credit cards or lines of credit.

4. Start Working With a Mortgage Broker Early

The earlier you consult a mortgage broker, the better your chances of securing financing that fits your new financial reality. A broker can:
✅ Assess your borrowing power based on your new financial situation.
✅ Find lenders who consider any spousal/child support payments as income .
✅ Help improve your credit and debt positioning before applying.

5. Save for a Down Payment

If you plan to purchase a new home, start saving for a down payment as soon as possible. If you are receiving equity from the sale of a home or a spousal buyout, set aside a portion for this purpose.

Final Thoughts: Moving Forward with Confidence

Divorce and separation can bring financial uncertainty, but they don’t have to derail your homeownership goals. Whether you’re keeping your current home, buying a new one, or refinancing, understanding your mortgage options is key to making informed financial decisions.

As a mortgage broker, I can help you:
�� Navigate mortgages options tailored to your new financial situation.

�� Secure the best rates and terms for your new mortgage
�� Ensure a smooth transition into your next chapter of homeownership.

If you or someone you know is going through a separation or divorce and needs mortgage advice, let’s get connected. A well-planned mortgage strategy can help you move forward with financial confidence.

As you can tell there is a lot to discuss, let’s have a chat and find a mortgage that works for you.

Kelly Hudson
Mortgage Expert
Mortgage Architects – A Better Way
Mobile: 604-312-5009
Kelly@KellyHudsonMortgages.com
www.KellyHudsonMortgages.com

BC Property Assessment vs Home Appraisal (revised Jan16-2025)

Tue, 21 Jan 2025 02:46:15 GMT

What is BC Assessment?

It’s January and in BC homeowners are receiving their property assessments.

BC Assessment is a provincial Crown corporation that values all real estate property in British Columbia. Every year, BC Assessment sends property owners a Property Assessment Notice telling them the fair market value of their property as of July 1 the prior year .

To see the most recent assessment for a property, click on BC Assessment and type in the property address.

The real estate market is the single biggest influence on market values. Market forces vary from year to year and from property to property. The market value on an assessment notice may differ from that shown on a bank mortgage appraisal or a real estate appraisal because BC Assessment’s appraisal reflects the value as of July 1 of 2024 , while a private appraisal can be done at any time.

The assessed values are based on limited information and are a result of algorithms and mass appraisal techniques which have their limitations.

BC in general

A new report forecasts the average price of B.C. home in 2025 at just over $1 million — the highest in Canada, some $280,000 above the national average. These figures appear in the latest forecast from the Canadian Real Estate Association released Jan. 15, 2025.

Factors

The increase in home prices was driven by a decrease in fixed mortgage rates and expectations for future Bank of Canada rate cuts.

Use your BC Assessment as a starting point for the value of the property you’re planning to purchase… Do not rely on BC assessment for the exact value of the property you’re considering purchasing. Markets in BC change quickly both increasing and decreasing in value depending on the area and the economy.

What is a Home Appraisal?

An appraisal is a document that gives an estimate of a property’s current fair market value.

Often there is no connection between BC Assessment and appraised value. Therefore, lenders require an appraisal – an independent evaluation of the properties value NOW.

Primarily home appraisals are completed at the request of a lender. Lenders want to know the value of a property in the current market before they are willing to lend against the home.

The appraisal is performed by an “appraiser” who is typically an educated, licensed, and heavily regulated third party offering an unbiased valuation of the property in question, trained to render expert opinions concerning property values.

When an appraisal is done, consideration is given to the property, the home, its location, amenities, as well as its physical condition.

Who pays for the Home Appraisal?

Typically, the borrower pays the cost of the appraisal, and upon completion, the appraisal goes directly to the lender (does not go into the home buyer’s hands).

I know it sounds odd, but brokerages, lenders and appraisers cannot just show the buyer the appraisal on a property, even though the borrower paid for it.

Think of an appraisal as an administrative fee for finding today’s current value of the property

You need a Home Appraisal since the lender doesn’t want to lend on a poor investment. The appraisal helps the buyer decide if the property is worth what they offered (especially in hot markets like Greater Vancouver & Toronto).

What if you offered $600,000 and the home appraisal came in at $550,000?

Why don’t you get a copy of the appraisal? The appraiser considers their client to be to the lender (the reason the appraisal was ordered). The lender has guidelines for the appraisal, and the appraiser prepares his report according to those parameters.

Sometimes an appraisal can come in lower than the purchase price, causing angry calls to the Appraisal Institute of Canada (AIC) , and the answer they give is: the Brokerage or Lender is the client of the appraiser, and as such has ownership of the report.

BLOG What Happens When Your Home Appraisal Comes in Low?

The main reasons the buyer pays for the appraisal, is that if the mortgage doesn’t go through, the lender does not want to be on the hook for paying for the appraisal and not getting the business.

Other reasons for getting an Appraisal:

to establish a reasonable price when selling real estate.
to establish the replacement cost (insurance purposes).
to contest high property taxes.
to settle a divorce.
to settle an estate.
to use as a negotiation tool (in real estate transactions).
because a government agency requires it.
lawsuit.

Getting your home ready for an Appraisal:

The appraiser report involves a report including pictures of the home and property with the appraiser’s value of the property, along with a short summary of how that information was derived.

BLOG Need an Appraisal – 7½ Tips for Success

Most lenders have an approved appraiser list which requires appraisers to have the appropriate designation. Lenders tend to reject appraisals that are ordered directly by property owners. Lenders want the appraisal to be ordered by the broker or the lender, primarily to avoid potential interference from the property owner.

Home Appraisal Costs

Appraisal costs do vary. Most home appraisals start around $450 (plus tax) but they can go much higher depending on:

location
how expensive the home is
complexity of the appraisal
how easily the appraiser can access comparable data
how quickly the appraisal needs to be done – RUSH charges

BC Assessment vs Appraised value. Lenders want an appraisal – a professional, independent evaluation of a homes value now!

Are you thinking of buying a home? As you can tell there is lots to discuss, let’s have a chat!

Kelly Hudson
Mortgage Broker
604-312-5009
Kelly@KellyHudsonMortgages.com
www.KellyHudsonMortgages.com

Understanding Canadian Reverse Mortgages - Unlocking Home Equity for Homeowners 55+

Wed, 04 Dec 2024 22:20:05 GMT

48% of Canadian homeowners are 55+ and many find that their homes represent a significant portion of their net worth.

For retirees looking to access their home equity without selling or moving, a Canadian reverse mortgage offers an ideal solution. However, this financial product isn’t without its complexities.

In this article, we’ll explore what a reverse mortgage is, its advantages, and why consulting with a mortgage broker is essential for making an informed decision.

What is a Canadian Reverse Mortgage?

A reverse mortgage is a financial product available to Canadian homeowners aged 55 or older. It allows them to borrow against the equity in their homes while continuing to live there.

Unlike a traditional mortgage, no monthly payments are required; instead, the loan balance grows over time as interest accumulates. Repayment is only required when the homeowner sells the property, moves out, or passes away.

With more than 50% of Canadians worried about outliving their retirement savings, reverse mortgages can offer financial relief, especially as inflation and interest rates strain fixed incomes.

The Benefits of Canadian Reverse Mortgages

Reverse mortgages can be a valuable tool for Canadian retirees, offering several key advantages:

Stay in Your Home

93% of Canadians 55+ want to stay in their homes and age in place.

Emotional Value : Reverse mortgages allow retirees to remain in familiar surroundings, preserving their sense of independence and community ties.

2. No Monthly Mortgage Payments

20% or retirees still have a mortgage – 66% are still carrying credit card debt!

Unlike traditional loans, reverse mortgages don’t require monthly repayments.

Advantage : This alleviates the burden of regular payments for retirees with limited cash flow. The loan is repaid only when the home is sold or ownership changes.

3. No Impact on Government Benefits

A reverse mortgage does not affect eligibility for government benefits like Old Age Security (OAS) or the Canada Pension Plan (CPP).

Why It Matters : Retirees can access home equity without jeopardizing their existing income streams.

4. Supplement Retirement Income

A reverse mortgage can provide much-needed funds to supplement retirement income, helping retirees cover daily living expenses or healthcare costs without the need to sell their homes.

Example : For retirees on a fixed income, accessing home equity can ease financial stress while allowing them to maintain their lifestyle or help with in home care.

5. Fund Home Improvements

Aging in place often requires home modifications, such as installing ramps, stairlifts, or accessible bathrooms.

How it Helps : A reverse mortgage can finance these renovations, enabling seniors to remain in their homes longer and more comfortably.

6. No Risk of Negative Equity

Reverse mortgages are structured to ensure homeowners never owe more than the home’s value.

Peace of Mind : This guarantees that even if the housing market declines, neither the homeowner nor their heirs will face additional financial obligations.

7. Flexible Payment Options

Reverse mortgages offer a variety of ways to receive funds:

Lump sum payment
Regular monthly disbursements
Line of credit for future needs

This flexibility allows homeowners to tailor their financing to meet their unique needs.

Considerations and Risks

While reverse mortgages offer significant benefits, they also come with considerations that must be carefully weighed. This is why you need to work with your mortgage broker.

Higher Interest Rates : Reverse mortgages typically carry slightly higher interest rates than traditional loans.

Accumulating Debt : The loan balance grows over time, potentially reducing the estate value left to heirs.

Fees and Costs : Reverse mortgages can involve setup costs, including appraisal, legal, and administrative fees.

Is a Reverse Mortgage Right for You?

The decision to pursue a reverse mortgage depends on individual circumstances. Speaking with a qualified mortgage broker is essential to evaluate whether this product aligns with your financial goals.

Key Questions to Discuss :
How will a reverse mortgage impact my long-term financial plan?
Are there alternative ways to access funds, such as a home equity line of credit (HELOC)?
What are the costs, and how do they compare to other options?

Conclusion

A Canadian reverse mortgage can be a powerful financial tool for retirees, offering a lifeline to supplement income, finance home improvements, and stay in their cherished homes.

If you’re considering a reverse mortgage, take the time to discuss your unique situation with me, your trusted mortgage broker. Together, we can determine whether this product aligns with your goals and needs.

Let’s start the conversation today to explore your options and secure your financial future!

Kelly Hudson
Mortgage Broker
604-312-5009
Kelly@KellyHudsonMortgages.com

Click here for the Government Release

Dec. 15, 2024 New Rules for Insured Mortgages

Sun, 17 Nov 2024 03:08:48 GMT

On September 24, 2024, the federal government announced expanded parameters for lenders and mortgage default insurers to begin offering insured mortgages as of December 15, 2024.

The expanded parameters include:

expanding the eligibility for 30-year amortizations and
increasing the $1 million purchase cap to $1.5 million.

Eligibility for 30-year amortizations for insured mortgages

To qualify for the 30-year amortization:

the loan to value must be 80% or higher; and
the borrower must be a first-time homebuyer OR purchaser of a new build.
There is a premium of 0.20% on the 30-year amortization

The change will give qualifying borrowers the option to take out a 30-year amortization period, rather than cap it at the existing maximum of 25.

Currently, anyone who pays less than 20% down on their home purchase (also referred to as a high-ratio, insured borrower) is limited to a 25-year amortization, a rule that’s been in place as of 2012.

To be considered a first-time homebuyer , a borrower must meet one of the following criteria:

The borrower has never purchased a home before.
In the last four years, the borrower has not occupied a home as a principal place of residence that either they themselves or their current spouse or common-law partner owned.
The borrower recently experienced the breakdown of a marriage or common-law partnership.
On this point, the regulations will follow the approach that the Canada Revenue Agency has taken with respect to the Home Buyers Plan (HBP) .

To be considered a newly constructed home , the new home must not have been previously occupied for residential purposes.

This requirement is not intended to exclude newly constructed condominiums where there has been an interim occupancy period.

Price cap for insured mortgage increased to $1.5 million (from $1 million)

To qualify for the increased $1.5 million cap price :

the loan to value must be 80% or higher;
the value of the eligible residential property against which the loan is secured must be less than $1.5 million; and
the downpayment must be:
5% on the portion of a purchase price up to $500,000, and
PLUS 10% on the portion of a purchase price between $500,000 and $1.5 million.

Additional Qualifications

To qualify for either measure:

the mortgage insurance application must be submitted to mortgage insurers on or after December 15, 2024
the subject property must be occupied by the borrower or a close relative; and existing eligibility criteria for government-guaranteed mortgage insurance must be satisfied.
All other eligibility criteria for government-guaranteed mortgage insurance will continue to apply.

Are you considering at buying a home?

As you can tell there is lots to discuss, let’s have a chat and find a mortgage that works for you and not the bank.

Kelly Hudson
Mortgage Expert
Mortgage Architects – A Better Way
Mobile: 604-312-5009
Kelly@KellyHudsonMortgages.com
www.KellyHudsonMortgages.com

Would a Co-Signer Enable You to Qualify for a Mortgage?

Tue, 01 Oct 2024 00:40:14 GMT

There seems to be some confusion about what it means to co-sign on a mortgage… and any time there is confusion about mortgages, it’s time to chat with Kelly Hudson, your trusted mortgage expert!!

Thanks to tighter mortgage qualification rules and higher-priced real estate - particularly in the greater Vancouver and Toronto areas - it is not easy to qualify for a mortgage on your own merits.

Let’s look at why you would want to have someone co-sign your mortgage and what you need to know before, during, and after the co-signing process.

The ‘stress test’ has been especially “stressful” for borrowers. As of Jan. 1, 2018, all homebuyers need to qualify at the rate negotiated for their mortgage contract PLUS 2% OR the government posted rate which varies (as of Oct. 2024 5.25%), which ever is higher .

If you have less than 20% down payment, you must purchase Mortgage Default Insurance and qualify at 5.25%.

If you must qualify at a rate higher than what you are paying… then your money doesn’t go as far… and you qualify for a smaller mortgage.

In the wise words of Mom’s & Dad’s of Canada… “if you can’t afford to buy a home now, then WAIT until you can!!”

BUT wait… in some housing markets (especially Vancouver & Toronto), waiting it out could easily mean missing out, depending on how quickly property values are appreciating in the area you want to purchase.

If you can’t income qualify for a mortgage with your current provable income along with GREAT credit, your lender’s going to ask for a co-signer.

In order to give borrowers, the best mortgage rates, Lenders want the best borrowers!! They want someone who will pay their mortgage on time as promised with no hassles.

Co-sign vs Guarantor

Short version: The main difference between a guarantor and a co-signer is that the co-signer is a title holder and a guarantor is not. However, both individuals are responsible for mortgage payments being made to the lender.

Someone can co-sign your mortgage and become a co-borrower , the same as a spouse or anyone else who you are buying the home with. It’s basically adding the support of another person’s income and credit history to those initially on the application. The co-signer will be put on the title of the home and lenders will consider them equally responsible for the debt should the mortgage go into default.
Another option is a guarantor . If a co-signer decides to become a guarantor, then they’re backing the loan and essentially vouching for the person getting the loan that they’re going to be good for it. The guarantor is going to be responsible for the loan should the borrower go into default.

Most lenders prefer a co-signer going on title.

More than one person can co-sign a mortgage although it’s typically the parent(s) or a close relative of a borrower who steps up and is willing to put their neck, income, and credit bureau on the line.

Ultimately, if the lender is satisfied that all parties meet the qualification requirements and can lessen the risk of their investment, they’re likely to approve your mortgage.

Before signing on the dotted line

Short Version: A co-signer, in essence, co-owns the home with the individual living in it and paying the mortgage. A co-signer must sign all the mortgage documents and their name will appear on the title of the property. When you co-sign on a mortgage, you become just as responsible for the mortgage loan as the primary borrower — and you can suffer serious consequences if they make late payments or default.

Anyone that is willing to co-sign a mortgage must be fully vetted, just like the primary applicant(s). They will have to provide all the same documentation as the primary applicant(s). Being a co-signer makes you legally responsible for the mortgage, exactly the same as the primary applicant(s).

Please note as a Co-signer your future borrowing plans will be affected

Since the mortgage will also appear on your credit report, this additional debt could make it tougher for you to qualify for additional credit down the road.
For example: if you dreamed of one day owning a vacation home, just know that a lender will have to consider 100% of your co-signed mortgage as part of your overall debt-to-income ratio .

You are allowing your name and all your information to be used in the process of a mortgage, which is going to affect your ability to borrow anything in the future.

If the Co-signer already owns a home, then they could be charged capital gains on the property they co-signed for IF the property sells for more than the purchase price (contact your accountant for tax advice).

In Canada, capital gains tax is charged on the profit made from selling real estate, including homes, for more than their purchase price.

However, there is an exemption for primary residences. If the home was your primary residence for the entire period of ownership, you are generally exempt from paying capital gains tax on the sale.

A primary residence is where you or your family lived most of the time, and only one property per family can be designated as such per year.

This gets complicated for co-signers – since they rarely live in the home they are co-signing for.

For non-primary residences, (rental, investment properties, co-signed properties) capital gains tax applies to the profit made from the sale. In Canada, the CRA taxes 50% of gains up to $250,000, and 66.7% of gains over $250,000.

For example, selling a rental property that you purchased for $300K and sold for $400K would result in a $100K capital gain.

Typically, we’ll put the co-signer(s) on title for the home/mortgage at 1% of home ownership... then IF there were a capital gain, they would pay 1% of their share of the capital gain (contact your accountant for tax advice).

If someone is a guarantor , then things can become even trickier as the guarantor isn’t on title to the home. That means that even though they are on the mortgage, they have no legal right to the home itself. If anything happens to the original borrower, where they die, or something happens, they’re not on the title of that property but they’ve signed up for the mortgage.

The Guarantor doesn’t have a lot of control which can be a scary thing.

In my opinion, it’s much better for a co-signer to be a co-borrower on the property, where you can be on title to the property and enjoy all the legal rights afforded to you.

The Responsibilities of Being a Co-signer

Co-signing can really help someone out, but it’s also a big responsibility. When you co-sign for someone, you’re putting your name and credit on the line as security for the loan/mortgage.

If the person you co-sign for misses a payment, the lender or other creditor can come after you to get their money. Any late mortgage payments would also show up on your credit report, which could impact your own loan/mortgage qualification in the future.

Because co-signing a loan has the potential to affect both your credit and finances, it’s extremely important to make sure you’re comfortable with the person you’re co-signing for.

You both need to know what you’re getting into.

I recommend Independent Legal Advice between all co-borrowers.

Co-signing is NOT a life sentence.

Just because you need a co-signer to get a mortgage does not mean that you will always need a co-signer.

In fact, as soon as you can credit & income qualify for the mortgage on your own (without your co-signer) – you can ask your lender to remove the co-signer from title.

It is a legal procedure so there will be a cost associated with the process, but doing so will remove the co-signer from your mortgage loan and release them from the responsibility of your mortgage.

Removing a co-signer technically counts as changing the mortgage, so you need to ensure that the lender you chose doesn’t consider removing a co-signer (changing the covenant) as breaking your mortgage. There could be large penalties associated with doing so.

For more information, check out my BLOG Mortgage Penalties – Ouch… How Much??

Co-signing is an option that could help a lot of people buy a home, especially first-time home buyers who are typically starting their career and building their credit bureau.

A final mortgage tip: a few alternatives to co-signing that could help someone buy a home:

Providing funds for a gifted down payment
NOT a loan – a gift. The person providing the gift would need to sign a Gift Letter stating that the money is a gift and there is no repayment required.
Helping to pay off some OR better yet all their debt (i.e., credit cards, loans, lines of credit, student loans etc.)
Giving them additional funds to help pay the mortgage/home owning expenses.

Are you considering at buying a home?

As you can tell there is lots to discuss, let’s have a chat and find a mortgage that works for you and not the bank.

Kelly Hudson
Mortgage Expert
Mortgage Architects – A Better Way
Mobile: 604-312-5009
Kelly@KellyHudsonMortgages.com
www.KellyHudsonMortgages.com

Why Do Lenders Want So Much Mortgage Documentation?

Mon, 16 Sep 2024 15:33:04 GMT

Imagine you're about to apply for a mortgage to buy a house, and suddenly, you realize the mortgage lender is asking for a lot of paperwork. If you've never applied for a mortgage before, it can feel overwhelming. But the good news is, this isn't because lenders or mortgage brokers want to make your life difficult! It's because buying a home is one of the biggest purchases most people will ever make, and the Canadian mortgage system is carefully regulated by the government to make sure everything goes smoothly and fairly.

In Canada, the mortgage industry is overseen by a federal regulator known as OSFI Office of the Superintendent of Financial Institutions . Their main job is to protect the stability of the financial system and to ensure that lenders, like banks, only lend money to people who can repay it. To do this, they require lenders to collect certain documents that prove you’re financially stable enough to handle a mortgage.

This can feel like a lot, but if you think about it, you’re asking for hundreds of thousands of dollars. So, it makes sense that they need to verify your ability to pay it back.
I’ve got a GREAT process for collecting documentation & keeping you organized!

Why So Many Documents?

It’s important to understand that neither the mortgage broker nor the mortgage lender is trying to make this process harder than it needs to be. The real reason for the documentation is the government regulations that require lenders to verify that borrowers are trustworthy and capable of repaying the loan. It's not about trust—it's about following the rules to keep the system safe for everyone.

Here’s a simple way to look at it: If you were lending someone several hundred thousand dollars, wouldn’t you want to know that they could pay you back?

Getting Organized

When you're planning to buy a home, it's smart to start organizing your documents early. I will provide you with a checklist to help you prepare, this saves a lot of time and make the process faster. By gathering everything upfront, the approval process can go much more smoothly.

Being prepared upfront is much easier than dealing with "death by a thousand paper cuts." This is when the broker must keep coming back to you again and again for more documents, which can be stressful—especially if you're on a tight timeline.

Even if you think you have everything ready, don’t be surprised if the lender asks for more documentation. Sometimes they need additional information to finalize your application.

Your Mortgage Document Checklist

So, what documents are needed to support a mortgage application? Here's a detailed explanation of the most common ones.

Personal Information Documents

The lender needs to confirm your identity, largely to protect against identity theft. You’ll need to provide:

Government-issued photo ID – Two pieces of valid ID, one of which must have your photo.

Employment/Income Documents

Lenders need to confirm your employment status and income to make sure you can make your mortgage payments.

Letter of Employment – This document proves where you work, your job title, employment status (full-time or part-time), how long you've been employed, and your salary.
Pay Stub – Shows your recent earnings and verifies the information on your Letter of Employment.
T4/T4A Forms from the Past Two Years – These are tax forms that show your income. T4 forms are for employees, while T4A forms cover other types of income like pensions or commissions.
Notice of Assessment from Past 2 Years – These documents from the Canada Revenue Agency (CRA) shows your income for the past two years and shows if you owe any taxes.

Personal Financial Documents

These documents help lenders understand your overall financial health, including any debts or financial obligations.

Credit Report – Lenders will pull your credit report, which shows your credit score and any outstanding debts.
BLOG 8 Credit Rules You Need to Know, Before You Buy a Home
BLOG 5 C’s of Credit to get a Mortgage
Bank Account Information – Lenders will want your bank details to set up mortgage payments.
Statement of Assets or Investments – These are extra financial resources that can serve as backup in case you experience an interruption in income.

Extra Documents for Self-Employed Buyers

If you're self-employed, you’ll need to provide more documentation to prove your income, such as:

Two Years of Tax Returns (T1 Generals) – These tax documents help show that you’ve been earning a steady income.
Business Articles of Incorporation (if incorporated) – Lenders may check your business’s financial health to ensure you can make your mortgage payments.

Down Payment Documents

When buying a home, you need to make a down payment, and you’ll need to prove where the money for your down payment is coming from.

90 Days of Bank Statements – Lenders need to see the source of your down payment due to Canada’s anti-money laundering laws.
BLOG How to Verify Your Down Payment When Buying a Home
BLOG 5 GREAT Reasons To Provide a 20% Down Payment when Buying a Home

Canada also offers two programs to help first-time homebuyers save for a down payment:

Tax-Free First Home Savings Account (FHSA) – You can contribute up to $40,000, and withdrawals are tax-free when buying a home.
BLOG First Home Savings Account (FHSA)
Home Buyers’ Plan (HBP) – This allows you to withdraw up to $60,000 from your Registered Retirement Savings Plan (RRSP) to use for your down payment.

Documents for Selling Your Existing Home

If you’re selling a home to help pay for your new one, you’ll need to provide documents like the Contract of Purchase & Sale and any mortgage details related to the property.

Gift Letter (If Applicable)

If part of your down payment comes as a gift from family or friends, you’ll need a Gift Letter . This letter confirms that the money is a gift and not a loan.

Documents for the Property You’re Buying

When you find a home, you’ll also need documents specific to the property:

Contract of Purchase and Sale – Details the terms of your home purchase.
MLS Listing – Includes details about the property like taxes and home/property size.
Legal Description of the Property – Information about the property’s location and legal identity.
Proof of Property/Fire Insurance – Most lenders require insurance to protect the home from damage.
Title insurance – in BC most mortgage lenders require title insurance.
BLOG Title Insurance: What Every BC Home Buyer Should Know!
Condo/Townhouse strata property docs (if applicable) – Typically lender require: Form B, strata budget, strata rules, previous 2 years strata minutes, minutes form the last 2 Annual General Meetings (AGM), current strata insurance, depreciation report (if available), engineers report (if available).

Tips for Speeding Up the Mortgage Process

Now that you know all the documents needed, here are some tips to speed up the process:

Complete Kelly’s Online Mortgage Application

Make sure your mortgage application is complete and accurate – If there is information missing on your mortgage application, or the information you provide is inaccurate, this may cause a delay.

2. Gather all necessary documents in advance – locate all the documents you need.

Once you’ve completed my online mortgage application (which becomes your mortgage portal) I will send you a link to your mortgage portal with a customized list of all the documents required.
Documents uploaded to your mortgage portal are fully secure and are end-to-end encrypted.
I will see your documents instantly and if you're using your phone, you can take pictures of the required documents if you don’t have digital copies.

3. Stay organized – Keep everything together, either in a digital folder or in a physical file, so it's easy to find when needed.

Applying for a mortgage can seem complicated but being organized and understanding why lenders need so much documentation can make the process much smoother. Working with me, working with your mortgage portal to upload docs and preparing ahead of time can save you stress and help you get into your new home faster.

If you have any questions or need help, let’s chat. I’m here to support you in your journey to homeownership!

Kelly Hudson
Mortgage Expert
Cell: 604-312-5009
Kelly@KellyHudsonMortgages.com
www.KellyHudsonMortgages.com

Unlocking Homeownership: You Don’t Need Perfect Credit

Tue, 13 Aug 2024 17:46:38 GMT

Do you dream of buying your first home but worry that your credit history might stop you? Well, here’s some good news: you don’t need a perfect credit score to own a home! Let’s explore how you can still achieve your dream of homeownership, even if your credit isn’t perfect.

What Is Credit, and Why Does It Matter?

Before diving in, let's talk a bit about credit. Your credit score is a number that tells lenders (like banks) how trustworthy you are with money. It’s based on things like how often you pay your bills on time and how much money you owe on credit cards or loans. A high credit score means you're seen as a good bet for paying back loans, while a lower score might make lenders a bit more cautious.

1.You Have Options: Access to Multiple Lenders

Many people think that if they don’t have a perfect credit score, they won’t be able to get a mortgage. But that’s not true! As a Mortgage Broker, I work with a lot of different lenders. Some of these lenders specialize in helping people who have less-than-perfect credit scores. So, even if your credit isn’t great, there’s a good chance we can find a lender who’s willing to work with you.

2. How to Improve Your Credit

Getting a mortgage is one thing, but did you know that working with a Mortgage Broker can also help you improve your credit? Here’s how:

Credit Report Review: I can help you look at your credit report, which is a record of your credit history. If there are any mistakes on it, we can work together to fix them.
Advice on Credit: I’ll give you tips on how to make your credit score better over time. This might involve paying down some of your debt, making sure you’re paying bills on time, or not applying for too much new credit all at once.

Improving your credit can open up even more options for you. Over time, as your credit score gets better, you might be able to qualify for better mortgage rates or terms, which means you could pay less money over the life of your mortgage.

3. Taking Advantage of Lower Home Prices

The real estate market is constantly changing. Right now, home prices are lower than they have been in the past, which makes this a great time to buy. You might think that you need to wait until your credit is perfect to take advantage of these lower prices, but that’s not the case!

I can help you find a short-term mortgage that works for you now, even if your credit isn’t perfect. While you’re making payments on this mortgage, I’ll help you work on improving your credit. Once your credit score is better, we can look at moving your mortgage to a new lender with better terms.

This way, you can buy a home sooner, while working on improving your credit for the future.

Credit Tip: The Rule of 2

When lenders decide whether or not to grant you a mortgage, they’re looking for signs that you’re responsible with credit. One way they do this is by following what’s called the “Rule of 2.” Here’s what it means:

2 Lines of Credit: Lenders like to see that you have at least two different lines of credit (credit cards, loans or Lines of Credit).
$2,000 Minimum Credit Limit: They also want to see that you’ve been given at least $2,000 in credit to use.
2 years clean payments (24 months)

If you meet these criteria, you’re more likely to be seen as a good candidate for a mortgage. But don’t worry if you’re not quite there yet! I work with lenders who are willing to consider your unique situation, even if your credit isn’t perfect.

Even with Credit Challenges, There’s Hope…

What if you’ve faced bigger challenges, like a bankruptcy or a consumer proposal? It might feel like homeownership is out of reach, but that’s not true. I have connections with lenders who are willing to look beyond these issues and consider your situation.

You’re Not Alone on This Journey

You don’t need a perfect credit score to achieve homeownership. With the right guidance and support, your dream of owning a home can become a reality. As a Mortgage Broker, I’m here to help you every step of the way.

Want to Learn More?

If you’re interested in learning more about credit and how it affects your ability to get a mortgage, check out my other blog posts:

If you have any questions or need help, let’s chat. I’m here to support you in your journey to homeownership!

Kelly Hudson
Mortgage Expert
Cell: 604-312-5009
Kelly@KellyHudsonMortgages.com
www.Kelly H udsonMortgages.com

What is Mortgage Fraud and How to Protect Yourself

Wed, 10 Jul 2024 18:01:23 GMT

Understanding Mortgage Fraud

Mortgage fraud is when people lie or cheat to get a mortgage loan or better loan terms than they should. This means giving false information on purpose. Different people can commit mortgage fraud, from individuals looking for loopholes to people within the mortgage industry itself. They might do this to own a home, take advantage of rising interest rates, or make a lot of money quickly.

In 2023, the Canadian Anti-Fraud Centre processed more than 63,000 reports of fraud, resulting in staggering losses totalling $569 million.

These figures likely underestimate the true extent of fraud, as the Anti-Fraud Centre estimates that only 5-10% of incidents are reported.
While fraud can impact anyone, older Canadians are particularly vulnerable.

Types of Mortgage Fraud

Here are the different types of mortgage fraud, as explained by the Canada Mortgage and Housing Corporation (CHMC):

Fraud for Profit: This happens when someone sells a property at a price much higher than it’s worth, tricking mortgage lenders or buyers about its true value.
Fraud for Commission: Using false information to get more mortgages, increasing their commissions.
Fraud for Shelter: People use fake documents or lie about their income or credit history to get bigger loans.
Straw Buyer Schemes: Someone pretends to be a legitimate buyer to get a mortgage on a home they don’t plan to pay for.
Real Estate Title Fraud: Thieves steal a homeowner’s identity to refinance or sell their home without them knowing, using fake IDs or forged documents.

Protecting Yourself from Mortgage Fraud

Here’s how to help avoid mortgage fraud:

Encourage honesty in loan applications.
Don’t add your name to someone else’s mortgage without a clear plan for payments.
Seek independent legal advice.
Conduct thorough property assessments/appraisal
Check the credentials of your real estate professionals.

What Mortgage Fraud Looks Like

Both homebuyers and the professionals they work with can commit mortgage fraud. Common cheats include:

Faking or altering paperwork.
Not communicating or disclosing important information.
Making verbal agreements or accepting cash fees.
Lying about job status, making fake pay stubs, or lying about a property’s purpose.

Consequences of Mortgage Fraud

Mortgage fraud can have serious consequences:

Criminal charges and legal trouble.
Canceled mortgages, lost deposits, or getting sued.
Difficulty getting future loans.
Possible foreclosure if fraud is discovered after closing.

For real estate professionals, the consequences can include losing certification, hefty fines, career damage, and criminal liability.

How Mortgage Fraud is Detected

Lenders use anti-fraud experts to watch for suspicious behavior in documents and accounts. They use both manual checks and advanced technology. The Canada Mortgage and Housing Corporation also has a fraud team to protect against mortgage fraud.

Protecting Your Home from Mortgage and Real Estate Title Fraud

Title and mortgage fraud are increasing, especially targeting seniors. These crimes involve skilled perpetrators using modern technology and understanding of real estate processes. First Canadian Title estimates that mortgage fraud in Canada has surpassed $100 million, with title fraud happening about twice a week, mostly affecting the elderly.

Simple Precautions to Prevent Mortgage Fraud

Work with certified mortgage professionals.
Make sure an unbiased real estate or mortgage lawyer reviews all mortgage documents.
Proofread all documents carefully before submitting them.
Seek independent legal advice if you suspect fraud.

By taking these steps, you can protect yourself and your home from mortgage and real estate title fraud, ensuring your financial well-being and peace of mind.

Mortgages are complicated… you need to engage an expert!!! Give me a call and let’s discuss a mortgage that works for you (not the bank)!

Kelly Hudson
Mortgage Expert
Cell: 604-312-5009
Kelly@KellyHudsonMortgages.com
www.KellyHudsonMortgages.com

Want to Buy Rural Property? 7 Things to know before you buy!

Tue, 11 Jun 2024 14:51:11 GMT

Living in the country has a lot of appeal for many people. Imagine waking up to the sound of birds instead of traffic, having a big yard to play in, and enjoying the peace and quiet that city life often lacks. A country home offers ample space, a place to raise your family, and the beauty of nature right at your doorstep.

However, buying a rural home can be quite different from purchasing a home in the city, especially when it comes to getting a mortgage. Let’s explore some important things to consider before making the move to the countryside.

Understanding Mortgage Risks

When lenders look at your mortgage application, they are primarily concerned about managing risk. Higher risk means higher interest rates. The main risk for lenders is whether you'll repay the loan as agreed. If you don’t, they might have to take your home and sell it to get their money back.

Foreclosure Hassles : Lenders do not want to own your property.
Foreclosing on a home is a long and complicated process that involves evicting the current owners, listing the property for sale, and waiting for it to sell.
This process can take months & months, especially in rural areas.
Rural Property Challenges : Selling a rural home can be more difficult compared to an urban one.
The demand for homes in the country is usually lower, meaning it could take longer to find a buyer.

To reduce their risk, lenders have special rules for rural properties.

What Counts as a Rural Property?

In Canada, a rural property is typically defined as land located outside urban areas, characterized by low population density, primarily used for agriculture, forestry, or natural resource activities, and often lacking extensive infrastructure.

7 Key Considerations Before Buying a Country Home:

1. Zoning Matters

Many lenders are hesitant to mortgage properties zoned as agricultural. Why? It’s all about risk again.

Foreclosure on Farms : Foreclosing on a farm means taking away a farmer's livelihood, which involves complex legal hurdles designed to protect farmers.
Non-Farming Uses : If you’re not planning to farm, financing a rural home can be similar to financing an urban home.

2. Water and Septic Systems

In the country, you need to manage your own water and sewer systems.

Water Tests : If your water comes from a well, lenders might require a potability and flow test to ensure the water is drinkable.
Septic Systems : Check the septic system with a qualified inspector. Make sure the seller guarantees that the system is in good working order until closing. Repairs can be costly, so include these checks in your buying conditions.

3. Land and Appraisal

Lenders when looking at the value of your property typically consider the house, one garage (outbuilding), and up to 10 acres of land.

Appraisal Costs : Rural property appraisals can be more expensive because the appraiser has to travel further. The appraised value might also be lower than expected since rural properties don’t sell as quickly as city homes.
Covering the Difference : If you love the property, be prepared to pay the difference between the selling price and the appraised value.

4. Wood Energy Technology Transfer (WETT)

If the house has a wood stove or fireplace, consider making your offer conditional on a satisfactory WETT inspection. This ensures the wood-burning unit is safe and properly installed.

5. Title Insurance

Rural lands, especially larger or remote ones, may have been used for dumping toxic chemicals.

Check the Title : Investigate the property’s title for any history of hazardous waste. Title insurance can protect you from potential issues.
Insurance Requirements : Your insurance company might require title insurance before issuing a policy.

6. House Insurance and Fire Safety

Lenders require insurance to protect their investment.
Getting home insurance in the country can be tricky and expensive due to the distance from fire hydrants and stations.
If you can't get insurance, it might delay or prevent your mortgage from closing.

7. Work with a Realtor Who Knows about Rural Properties

Hire a real estate agent knowledgeable about rural properties and local zoning laws.
Zones and the related details are determined by each local government so there may be variation between communities throughout each province.

The Bottom Line

Buying a rural home involves unique challenges, especially when it comes to securing a mortgage. Before you make an offer, have a detailed discussion with your real estate agent, mortgage broker, and lawyer to understand all aspects involved. Mortgages can be complex, but with the right guidance, you can find a solution that works for you.

Need Help?

If you're considering a move to the country and need expert advice on mortgages, don’t hesitate to reach out.

Let’s discuss a mortgage that works for you, not the bank!

Kelly Hudson
Mortgage Expert
Cell: 604-312-5009
Kelly@KellyHudsonMortgages.com
www.K e llyHudsonMortgages.com

Self-Employed Mortgages – Made Easy!

Mon, 20 May 2024 23:52:44 GMT

Approximately 20% of Canadians are self-employed - choosing to pave their own path, rather than working for someone else. If you’re self-employed, getting approved for a mortgage can be challenging, however with my guidance, it doesn't have to be that way.

Why, why, why it is so challenging for entrepreneurs to obtain a mortgage in Canada?

In 2021 there were 2.7 million Canadians who are self-employed. Regrettably, self-employed income is not as easy to document as someone who’s traditionally employed.

Most people that are self-employed are motivated to decrease their earnings to avoid paying tax through legitimate expenses and personal deductions. As a result, much of one’s self-employed income may not show up on paper.

Work with Professionals.

To navigate the complexities of getting a mortgage as a self-employed individual, you need to hire a qualified bookkeeper and a Chartered Professional Accountant (CPA). Their job is to know the ins and outs of taxes so that you can focus on growing your business. Here’s what you need to do:

Keep your financial affairs up to date.
Ensure your CPA prepares your financials.
Pay your taxes.
Government always gets first dibs on any money and Lenders won’t be interested in you if you haven’t paid your taxes.
Document income for 2-3 years.
Being able to document income for the past 2-3 years gives you more lending options.

Self-employed home buyers, who can document proof of income, can generally access the same mortgage products and rates as traditional borrowers.

Tips for Self-Employed Applying for a Mortgage.

To ensure the mortgage application process goes smoothly, follow these tips:

Get Your Finances In Order and Pay Down Your Debt!!

Every $500/month in loan payments lowers your mortgage eligibility by about $100,000. Similarly, every $12,000 in credit card debt lowers your mortgage eligibility by about $100,000
Do you see a theme here?? Pay down your debt! Resist buying or leasing a new vehicle OR taking on any additional debt prior to buying your home.

2. Have Two to Three Years’ Worth of Your Documentation.

Gather all your self-employed supporting documentation for your mortgage broker. This typically includes tax returns, business financial statements, and bank statements.

3. Show Stability & Consistency

Lenders prefer self-employed borrowers who work in a business that’s established and have expertise in that field. Demonstrating stability and consistency in your business can significantly boost your chances of getting approved.

Specialized Mortgage Programs for Self-Employed Individuals

As a mortgage professional with access to many lenders, I specialize in helping self-employed individuals acquire the mortgage they need. Everyone’s situation is as unique as their business. We will look at the whole picture to determine which lender best suits your needs and which program will give you the best options to increase your mortgage capacity. Here are some available options:

Addbacks or Gross Up

The easiest route is to use your last two years' NET income to get you qualified. We can either gross up your net income by 10-20% (lender specific) or 'Add Back' eligible business expenses to increase your net income.
If we can make this work, it gives you access to all the lenders.

2. Stated Income Program

This allows us to “state” your income. Lenders will look at your gross and net income, and we can state a reasonable income somewhere between the two.

3. Net-worth Program

If the first two options don’t work and you have a high “liquid” net worth, we can use lenders who will use your verifiable “liquid” assets to boost your income for qualification.

4. Net Income After Tax Program

Have a moderate personal income and some income in your operating company? This program allows us to use your NIAT (Net Income After Taxes) to help you qualify.

5 . Bank Statements Program

This program allows you to qualify by annualizing your deposits for the last six months and backing out minor expenses. We then can use that income to qualify you.

What happens if the banks still don’t want you for a conventional mortgage??

Many high-net-worth business owners with low stated incomes work with Mortgage Brokers to find alternative lenders for financing if they can’t qualify for a mortgage with a traditional lender.

Being self-employed need not be a deterrent to buying a property. Let’s have a chat so I can connect you to the lender most suited to your situation.

Planning Ahead

If you're planning to apply for a mortgage within the next two years, here are 3 important tips:

Talk to a Mortgage Professional

Have a quick chat with me to determine the income you need to prove, in order to qualify for your desired mortgage amount.

2. Discuss with Your Accountant.

Discuss these details with your accountant, as they can suggest ways to safeguard or improve your mortgage capacity. One potential way is to defer write-offs. Keep in mind that your income from the last two years will be used to qualify you for a mortgage.

3. Plan Ahead

Self-employed individuals need to plan ahead when seeking a mortgage, ideally looking two years into the future.

As you can see, there are many ways to qualify for a mortgage if you are self-employed. It’s just a matter of determining which program will work best for you. If you'd like to discuss any of these potential programs that can help you qualify, I’m here to help.

Kelly Hudson
Mortgage Expert
Cell: 604-312-5009
Kelly@KellyHudsonMortgages.com
www.KellyHudsonMortgages.com

First Home Savings Account (FHSA) - 5 Things You Need to Know

Tue, 09 Apr 2024 19:15:04 GMT

Canadian homebuyers face a significant challenge when it comes to accumulating the hefty down payments required to purchase homes in our increasingly expensive housing markets. According to the National Bank of Canada's housing affordability index from February 2024, the down payments needed for the median homes in cities like Toronto and Vancouver surpass $200,000.

In response to this growing concern, the federal government introduced the First Home Savings Account (FHSA) on April 1, 2023, aiming to help improve the financial down payment burden on prospective homebuyers.

However, while the FHSA offers promising opportunities, it's crucial for would-be buyers to understand its workings and potential risks. Here are five essential things prospective homebuyers should know before opening their own FHSA:

1. How does the FHSA work?

The FHSA allows account owners to put as much as $8,000 in savings away annually, and up to $40,000 over five years. Contribution room starts growing the first year the FHSA is opened.

If you don’t have the whole $8000 now – consider starting your FHSA account this year with $100. Then if/when the rest of the cash comes available you can top up the account to a maximum of $8000/year (maximum contribution $40K)

That money is tax-free on the way in and on the way out, meaning any contributions can count as deductions on income tax and are not taxed when withdrawn for a down payment on a qualifying home.

The FHSA is “the best of both worlds,” with funds behaving like a registered retirement savings plan (RRSP) on the way in and a tax-free savings account (TFSA) on the way out.

Moreover, funds in the FHSA can grow tax-free for up to 15 years, after which they must be withdrawn or transferred to an RRSP.

It's important to note that withdrawing funds for purposes other than a home purchase results in the amount being added to your taxable income for that year.

2. You don’t have to be a first-time buyer

Contrary to popular belief, the FHSA is not exclusively reserved for first-time homebuyers. Eligibility extends to Canadian residents aged 18 (or 19 in some provinces) to under 71.

You also must not have lived in a home owned by you OR your spouse in the year that you open the account or any of the preceding four years. This means Canadians who owned their home but sold more than five years ago, or currently own the property but don’t live there as their principal residence, are qualified to open an FHSA.

That opens the account up to anyone who owns and rents out a property but also rents themselves.

3. What do you do with the money once it’s in the FHSA?

Funds within the FHSA can be held in various investment vehicles, including high-interest savings accounts or securities. The choice of investments depends on individual risk tolerance and time horizon. While long-term savers might opt for stock market investments to capitalize on potential gains, those nearing their purchasing goals might prefer more conservative options like guaranteed investment certificates (GICs) or fixed-rate savings accounts.

4. Multiple accounts can work together

Individuals can open multiple FHSAs across different financial institutions without exceeding annual or lifetime contribution limits. Although joint accounts aren't permitted, funds from multiple FHSAs can be pooled towards the purchase of a single home. Additionally, the FHSA can be used alongside other savings vehicles such as TFSAs and the Home Buyers' Plan (HBP), further enhancing purchasing power.

Home Buyers Plan (HBP): Qualifying home buyers can withdraw up to $35,000/each from their RRSPs to assist with the purchase of an owner-occupied home . The funds are not required to be used only for the down payment, but for other purposes to assist in the purchase of a home.

These funds are withdrawn, with the condition that the funds are paid back into the account over the course of 15 years (or you are taxed on the portion not being repaid into your RRSP).
Please note that RRSP funds MUST be in account for 90 days BEFORE removing for down payment.

A down payment is not the only thing buyers need to prepare to be financially ready for a home.

Canadians should consider their “credit-worthiness,” as well, and make sure they’re paying down debt so that when they’re ready to buy and cash out their FHSA, that they will qualify for the mortgage amount they need.

5. Don’t forget about the tax implications

Opening an FHSA entails tax obligations, including reporting contributions and transactions in the annual tax return. A T4FHSA slip provided by the lender details these transactions, with individuals required to fill out Schedule 15 for deductible contributions. Notably, contributions to the FHSA are tax-deductible, but transfers to an RRSP are not. Individuals have the flexibility to carry forward deductions to future tax years if desired.

In conclusion, the FHSA presents a valuable opportunity for prospective homebuyers to save for down payments while enjoying tax benefits. However, understanding its mechanisms, eligibility criteria, investment options, and tax implications is crucial for maximizing its potential. Since buying a home involves various financial considerations beyond the down payment, it's essential to assess one's overall financial readiness, including creditworthiness and debt management. By exploring available options and seeking professional guidance of your mortgage broker, financial planner & accountant, individuals can navigate the path to homeownership more effectively.

As you can tell there is lots to discuss when buying a home, including saving your down payment.

Let’s have a chat and find a mortgage that works for your sit uation.

Kelly Hudson
Mortgage Expert
Mortgage Architects – A Better Way
Mobile: 604-312-5009
Kelly@KellyHudsonMortgages.com
www.KellyHudsonMortgages.com

Understanding Debt and Its Impact on Mortgage Approval

Wed, 13 Mar 2024 19:06:28 GMT

Securing a mortgage significantly depends on your credit score and debt load. Understanding how different types of debt affect mortgage affordability is crucial.

Debt falls into two categories: secured and unsecured.

Secured debt, backed by collateral like a house or car, provides lenders security in case of default.
Unsecured debt, such as credit cards, lines of credit, and student loans, poses higher risk for lenders and typically carries higher interest rates.

Here's how different types of debt influence your credit score and mortgage approval:

Credit Cards are unsecured debt, offering revolving credit lines with interest rates based on creditworthiness. Responsible credit card usage can positively affect credit scores, but defaults or late payments can lead to higher interest rates and decreased creditworthiness.
Line of Credit : Like credit cards, lines of credit are unsecured and provide borrowers access to a predetermined credit limit. Responsible use can improve credit scores, while defaults can have negative credit repercussions.
Student Loans: Despite being unsecured, they can enhance credit scores if paid on time. They contribute to the debt-to-income ratio.
Auto Loans: Auto loans are secured debt, with the vehicle serving as collateral. They can diversify debt portfolios and improve credit scores.
Existing Mortgage Loans: Secured by the property, timely payments enhance credit scores. Missed mortgage payments raise red flags for new lenders.

Maintaining a balanced mix of debt types strengthens credit scores and mortgage eligibility. However, over-borrowing can be harmful.

Mortgage lenders aim for a debt-to-income ratio below 43%, considering all your debts. Ensuring income covers all payments is crucial for approval.

Understanding debt intricacies is vital for navigating the mortgage application process. Ideally, less debt means a bigger mortgage, since more of your income can go to cover your mortgage payments.

For instance, a $500/month auto loan decreases your mortgage affordability by about $100K.

Practicing responsible borrowing and effective debt management increases chances of securing the needed mortgage for homeownership goals.

Whether it's a new home, investment property, or refinancing, I have the knowledge and experience to guide you towards the right mortgage solution.

Are you thinking of buying a home? As you can tell there is lots to discuss, let’s have a chat!

Kelly Hudson

Mortgage Expert
Mortgage Architects
Phone 604-312-5009
Kelly@KellyHudsonMortgages.com
www.KellyHudsonMortgages.com

Frequency of Mortgage Payments: Understanding How it Impacts Your Finances

Wed, 07 Feb 2024 18:56:08 GMT

When it comes to managing your mortgage, every payment matters. The frequency of your mortgage payments can significantly impact your financial strategy and overall budgeting. While monthly payments are the norm, alternatives like bi-weekly, semi-monthly, and accelerated options offer unique advantages and considerations. Let's explore how each frequency impacts your bottom line and helps you make informed decisions about your mortgage.

Understanding Mortgage Payment Frequencies

Mortgage payments are the backbone of homeownership, representing a blend of interest and principal. Interest accrues on the outstanding balance (principal), and once it's paid, the remainder of your payment goes towards reducing the principal balance (amount you borrowed).

Here's a breakdown of the most common payment frequencies:

1. Monthly Payments (12/year): The most prevalent option, monthly payments simplify budgeting with 12 payments per year. They align well with most income schedules, offering convenience and consistency.

2. Semi-Monthly Payments (24/year): Occurring twice a month (typically 1st & 15th), semi-monthly payments result in 24 payments annually, equivalent to 12 full payments. While they offer structured budgeting, they lack the accelerated payoff benefits of other options.

3. Accelerated Bi-Weekly Payments (26/year): Accelerated bi-weekly payments involve paying every two weeks, totalling 26 payments annually (equivalent to 13 months' worth in a 12-month period). This extra payment each year accelerates mortgage payoff, reducing the principal balance faster and saving on interest over time.

Considerations for Choosing Payment Frequencies

Selecting the right payment frequency depends on various factors, including your financial goals, cash flow, and budgeting preferences.

1. Interest Savings : Accelerated bi-weekly payments save significant interest costs over the loan term by reducing the principal balance faster. Use mortgage calculators to compare total interest paid under different frequencies.

2. Budgeting Flexibility : Monthly payments offer simplicity and consistency, while accelerated bi-weekly payments may require stricter budgeting. Consider your ability to accommodate higher payment amounts.

3. Income Frequency : Align payment frequency with your income schedule. Bi-weekly or semi-monthly payments may sync well with your paychecks, offering smoother cash flow management.

4. Financial Discipline : Accelerated bi-weekly payments demand consistency to maintain the accelerated payoff schedule. Assess your financial habits and commitment to determine suitability.

5. Lender Policies : Some lenders offer flexibility to change payment frequencies throughout the mortgage term. Check your lender's guidelines for options available to you.

In conclusion, the frequency of mortgage payments plays a crucial role in managing your mortgage effectively and achieving your financial goals. Whether you prefer the simplicity of monthly payments or the benefits of accelerated bi-weekly payments, it's essential to weigh the advantages and considerations of each option before deciding.

By understanding the differences in payment frequencies and evaluating your financial situation, you can choose the payment schedule that best aligns with your needs and objectives.

Reducing mortgage payoff time is possible with the right strategy. Explore various mortgage options tailored to your preferences and financial objectives. Whether purchasing, investing, or refinancing, a mortgage tailored to your needs can accelerate your journey to financial freedom.

Let's discuss a mortgage plan that works for you, empowering your financial future and helping you achieve your homeownership dreams.

Whether it's a new home, investment property, or refinancing, I have the knowledge and experience to guide you towards the right mortgage solution. Let's embark on this journey together!

Let’s discuss a mortgage that works for you (not the bank)!

Kelly Hudson

Mortgage Expert
Mortgage Architects
Phone 604-312-5009
Kelly@KellyHudsonMortgages.com
www.KellyHudsonMortgages.com

BC Property Assessment vs Home Appraisal

Thu, 04 Jan 2024 16:40:46 GMT

This post is revised from Jan. 7, 2023

What is BC Assessment?

It’s January 2024 and BC homeowners are receiving their property assessments.

Residential asset prices in British Columbia stabilized over the past year, according to the province’s latest housing assessment figures. Metro Vancouver exhibited few price fluctuations.

BC Assessment said that its latest evaluation, which reflected market conditions as of July 1, 2023, found that single-family homes in Vancouver saw a 4% increase in assessed values, exceeding $2.2 million. Conversely, strata properties exhibited stability, posting minimal change to remain at $807,000.

To see the most recent assessment for a property, click on BC Assessment and type in the property address.

The real estate market is the single biggest influence on market values. Market forces vary from year to year and from property to property. The market value on an assessment notice may differ from that shown on a bank mortgage appraisal or a real estate appraisal because BC Assessment’s appraisal reflects the value as of July 1 of 2023 , while a private appraisal can be done at any time.

The assessed values are based on limited information and are a result of algorithms and mass appraisal techniques which have their limitations.

Use your BC Assessment as a starting point for the value your home purchase… Do not rely on BC assessment for the exact value of the property you’re considering purchasing. Markets in BC change quickly both increasing and decreasing in value depending on the area and the economy.

What is a Home Appraisal?

An appraisal is a document that gives an estimate of a property’s current fair market value.

Often there is no connection between BC Assessment and appraised value. Therefore, lenders require an appraisal – an independent evaluation of the properties value now .

Primarily home appraisals are completed at the request of a lender. Lenders want to know the value of a property in the current market before they are willing to lend against the home.

When an appraisal is done, consideration is given to the property, the home, its location, amenities, as well as its physical condition.

Who pays for the Home Appraisal?

Typically, the borrower pays the cost of the appraisal, and upon completion, the appraisal goes directly to the lender (does not go into the home buyer’s hands).

Brokerages, lenders and appraisers cannot just show the buyer the appraisal on a property, even though the borrower paid for it.

Think of an appraisal as an administrative fee for finding today’s current value of the property

What if you offered $475,000 and the home appraisal came in at $450,000?

Why don’t you get a copy of the appraisal? The appraiser considers their client to be to the lender (the reason the appraisal was ordered). The lender has guidelines for the appraisal, and the appraiser prepares his report according to those parameters.

BLOG What Happens When Your Home Appraisal Comes in Low?

The main reasons the buyer pays for the appraisal, is that if the mortgage doesn’t go through, the lender does not want to be on the hook for paying for the appraisal and not getting the business.

Other reasons for getting an Appraisal:

to establish a reasonable price when selling real estate.
to establish the value of a home when changing an owner-occupied home into a rental (capital gains).
to establish the replacement cost (insurance purposes).
to contest high property taxes.
to settle a divorce.
to settle an estate.
to use as a negotiation tool (in real estate transactions).
because a government agency requires it.
lawsuit.

Getting your home ready for an Appraisal:

The appraiser report involves a report including pictures of the home and property with the appraiser’s value of the property, along with a short summary of how that information was derived.

BLOG Need an Appraisal – 7½ Tips for Success

Home Appraisal Costs

Appraisal costs do vary. Most home appraisals start around $400 (plus tax) but they can go much higher depending on:

location
how expensive the home is
complexity of the appraisal
how easily the appraiser can access comparable data.

BC Assessment vs Appraised value. Lenders want an appraisal – a professional, independent evaluation of a homes value now!

Are you thinking of buying a home? As you can tell there is lots to discuss, let’s have a chat!

Kelly Hudson
Mortgage Broker
604-312-5009
Kelly@KellyHudsonMortgages.com
www.Kelly H udsonMortgages.com

How to Pick the Best Mortgage for YOUR Situation!

Tue, 05 Dec 2023 17:56:21 GMT

Most Canadians are conditioned to think that the lowest interest rate means the best mortgage product. Although sometimes that is true, a mortgage is much more than just an interest rate. You can save yourself a lot of money if you pay attention to the fine print for the total cost of your mortgage.

To pick the best mortgage, you need to understand how mortgages work and what your options are. This comes with Mortgage Intelligence (my specialty)!

Once you’ve selected the type of mortgage, then you’ll need to work with your Mortgage Broker (me!) to find the best fit for you and your situation.

Are you planning to move in the next 5 years (Upsize? Downsize?)
Will your family be growing/shrinking?
Will your employment change and if it does will you need to relocate?
Would $1000’s in penalties impact you if you need to break your mortgage?
What types of debts do you have? Credit cards? Car loan? Student loan? Line of Credit?

Why do all this work? Because it will have a direct impact on your bottom line. A mortgage is made up of two parts—the principal and interest—you need to pay attention to how and when these parts get paid down.

Ideally, you want to minimize your interest payments and maximize the principal payments.

To pick the best formula for your situation, you’ll first need to understand some of the factors that impact how much interest you’ll pay for your mortgage loan.

Here are 6 mortgage terms to help you make the best decision for your situation.

Amortization

Amortization is a fancy word that means the “life of your mortgage” OR how long it takes to pay off your mortgage if you paid your mortgage for “X” years. The amount of your mortgage loan repayment is calculated based on the length of time you agree to paying off that debt. In Canada, the standard amortization period is 25 years.

If you have a 20% down payment (or higher) you could amortize over 30-years
BLOG 5 GREAT Reasons To Provide a 20% Down Payment when Buying a Home

Picking the best mortgage is not just about qualifying for the mortgage. The amortization period is integral in the best mortgage decision because it will decide how much or how little interest you will pay during the life of the mortgage loan.

The longer the amortization period (25 years vs 30 years) the more interest you will pay.
Therefore, a shorter amortization period will lower your overall cost of borrowing BUT you must be able to afford/qualify for the higher payments.

Once you’ve decided on your amortization, you will need to decide how frequently you would like to make your mortgage payments. Every mortgage payment (consisting of both interest and principal) will help reduce your principal (the amount of money you borrowed) and eventually reduces the overall interest you pay on this loan.

Monthly, bi-monthly, accelerated bi-weekly or weekly mortgage payments.
BLOG Mortgage Payment Frequency - Accelerated Bi-Weekly vs Bi-Weekly Payments

Term

In the 1980’s mortgage interest rates were as high as 22%. Interest rates can change over time therefore, lenders don’t want to negotiate a 25-year loan at 5% interest if the interest rates go up to 10% in 5 years. To avoid the risk, lenders break your mortgage amortization into smaller terms.

The term is shorter than the amortization period and locks you into your pre-negotiated rates during that time.
The length of term you choose (most Canadians choose 5 years) will depend partly on if you think interest rates will rise or fall. Typical terms are: 1, 2, 3, 4, 5, 7 & 10.

About 3-6 months before your current term matures, your current lender usually sends you a renewal notice with options on rates for the various terms they offer.

Once your mortgage matures - you can stay with your current lender or move to a new lender.

Once you get your renewal notice, you need to contact your mortgage broker (me!) to ensure you’re choosing the best option for your situation.

BLOG Mortgage Renewal – 5 Things You Need to Know

Closed Mortgage

A closed mortgage usually offers the lowest interest rates.

Closed mortgages cannot be paid off before the end of its term without triggering a penalty. Some lenders allow for a partial prepayment of a closed mortgage by increasing the mortgage payment or a lump sum prepayment.

If you try and “break your mortgage” or if any prepayments are made above the stipulated allowance the lender allows, a penalty will be charged.
BLOG Mortgage Penalties – Ouch… How Much??

Open Mortgage

An open mortgage is a more flexible mortgage that allows you to pay off your mortgage in part or in full before the end of its term without penalty. Because of the flexibility the interest rates are higher.

The interest rates for an open mortgage are typically 3-4% higher than a closed rate mortgage.
i.e., a home buyer may pay 7.99% for a 5-year open mortgage vs. 4.99% for a five-year closed mortgage.

If you plan to sell your home soon or expect a large sum of money, an open mortgage can be a great option. Most lenders will allow you to convert from an open to a closed mortgage at any time (and switch you to lower rates).

Fixed mortgage – you have the same payment for the term of the mortgage

Variable mortgage (Floating rate) – the mortgage rate (and your mortgage payment) varies depending on the Bank of Canada rate (Prime)

Fixed vs. Variable Pros & Cons (in a nutshell) for more information check out my BLOG Fixed vs. Variable Rate Mortgages – Pros & Cons

Fixed rate:

Pro – you would have the same mortgage payment for the entire term of the mortgage
Your mortgage payments are not affected by Bank of Canada Rate
Think of fixed rate as an insurance policy – you may pay a premium to guarantee “fixed” rates for the balance of the term
Pro – can port a fixed mortgage (*MUST requalify)
Con – Typically fixed rates are higher than variable interest rates
Con – MUCH higher penalties if you need to break your mortgage (can be 4-5% of outstanding balance with Banks/Credit Unions)
60% of home owners, break their mortgage before it matures! There are penalties to break your mortgage, click on this GREAT 3 minute video from the Globe & Mail explaining how Banks calculate mortgage penalties for both Variable & Fixed mortgages and how banks squeeze even more money out of their clients by giving discounts off their inflated posted rates Drawing Conclusions: How much does it cost to break a mortgage?
BLOG 9 Reasons Why People Break Their Mortgages

Variable rate:

Pro – typically variable rates are lower than the fixed rates
Pro – Penalty for breaking is 3 months interest.
Pro – you can lock into a fixed rate mortgage (assuming your mortgage is in good standing) at any time, based on the amount of time remaining on your mortgage and the current posted rates.
i.e. If you have a 5-year variable mortgage and you want to move to Fixed after 2 years, you would lock into the current 3 year fixed posted rate
Con – May or may not be able to port a variable mortgage – will depend on the lender (*MUST requalify)
Con – Mortgage payments will increase/decrease based on the Bank of Canada rate – Dec. 2023 at 5.00% and the lenders prime rate = Prime 7.20%
Bank of Canada meets 8 times a year
Every 0.25% increase with the lender Prime rate will cost you an extra $13/$100,000 borrowed. i.e., $300K mortgage an increase of 0.25% will cost you about $39/month more.

BLOG 10 Helpful Words to Know when Buying a Home

The best way to decide on the best mortgage is to contact your friendly neighbourhood mortgage broker. Mortgages are complicated, but they don't have to be... Engage an expert!

Give me a call and let’s discuss a mortgage that works for you (not the bank)!

Kelly Hudson
Mortgage Expert
Mortgage Architects – A Better Way
Mobile 604-312-5009
Kelly@KellyHudsonMortgages.com
www.KellyHudsonMortgages.com

8.5 Critical Things NOT to Do Before Closing on Your Mortgage!

Fri, 17 Nov 2023 23:22:50 GMT

Securing a mortgage is a significant step in the home-buying process, and as you approach the finish line, it's crucial to exercise caution. Certain actions can potentially jeopardize your mortgage approval or affect the terms of your loan.

We have worked together to secure financing for your mortgage. You are getting a great rate, favourable terms that meet your mortgage needs, the lender is satisfied with all the supporting documents. We are broker complete, and the only thing left to do is wait for the day the lawyers advance the funds for your mortgage.

In my blog post, we'll explore the 8.5 things you should avoid doing before your mortgage closes to ensure a smooth and successful home purchase.

1. Don't Switch Jobs or Careers: Stability is key during the mortgage approval process. Changing jobs or careers can raise red flags, as lenders prefer a consistent employment history. Try to maintain your current employment situation until after closing.

2. Avoid Major Financial Changes: Making significant financial changes, such as large purchases (i.e., new vehicle, furniture, hot tub, investments etc.) and taking on additional debt, can impact your debt-to-income ratio and raise concerns for lenders. Hold off on ALL major transactions until after your mortgage has closed.

3. Steer Clear of New Credit Accounts: Opening new credit accounts can result in hard inquiries on your credit report, potentially affecting your credit score and, subsequently, your mortgage approval. Postpone any new credit applications until after closing.

4. Large Cash Transactions Are Risky: Large cash deposits or withdrawals can complicate the documentation process. Lenders Anti-Money Laundering rules require clear and traceable records of your financial transactions, so avoid any major cash- related activities.

5. Please Don’t Close Existing Credit Accounts: Closing credit accounts can impact your credit utilization ratio and, consequently, your credit score. Keep your existing credit accounts open until after the mortgage has closed.

6. Respond Promptly to Lender Requests: During the closing process, your lender may request additional documentation or information. It's essential to respond promptly to these requests to avoid delays in the closing. Clear communication and cooperation with your lender are key to a smooth mortgage closing process.

7. Don’t Co-sign for a Loan or a Mortgage for Someone Else: You may have the best intentions in the world, but if you co-sign for any type of debt for someone else, you are 100% responsible for the full payments incurred on that loan. This extra debt is added to your expenses and may throw your ratios out of line. Lenders base their decisions on your current financial status, and changes can complicate the approval process.

8. Maintain Timely Payments: Late payments on existing debts can negatively impact your credit score and potentially lead to issues with your mortgage approval. Ensure that all your payments are made on time.

8.5 Don’t Accept Unsolicited Mortgage Advice from Unqualified Individuals Although this point is least likely to impact the approval of your mortgage status, it is frustrating when people who don't understand you and your unique mortgage financing situation, give you unsolicited advice about what you should do with your mortgage, making you second guess yourself.

Conclusion: As you approach the closing of your mortgage, being mindful of these key actions to avoid can help ensure a successful and timely conclusion to the home-buying process. By maintaining financial stability and cooperation with your lender, you'll increase the likelihood of a smooth transition into homeownership.

Any questions? Give me a call and let’s discuss a mortgage that works for you (not the bank)!

Kelly Hudson

Mortgage Expert

Mortgage Architects – A Better Way

Mobile 604-312-5009

Kelly@KellyHudsonMortgages.com

www.KellyHudsonMortgages.com

Can You Port Your Mortgage??? Maybe… Maybe Not!

Sat, 07 Oct 2023 15:02:41 GMT

What is Porting a Mortgage?

Porting your mortgage means taking your current existing mortgage (along with its current rates & terms) from your current property & transferring it to another property.

People want to port their mortgage when they buy a new home and want to preserve their current interest rate OR avoid paying a penalty for breaking their current mortgage early.

BLOG : Mortgage Penalties – Ouch… How Much??

What many people don’t realize is that if you decide to port your mortgage, it is like starting from square 1 on your mortgage. It requires a complete re-qualification for everyone on the mortgage, meaning a whole new application, all new employment documentation, a fresh credit check PLUS the new property needs to qualify (appraisal).

Don’t worry if the mortgage you’ll need for the new property will be larger than your current mortgage – that’s very common when porting a mortgage.

Most lenders will offer you what’s called a blend and extend. This is essentially a weighted average of the existing mortgage and interest rate, and the new money required at a current mortgage rate.

Your mortgage is portable, right?

Most lenders claim their mortgages are portable, however porting is so complex these days that it has become one of the more over-rated mortgage features.

Let me explain:

You don’t have enough income to qualify for the mortgage.
If you don’t have enough provable income (i.e., your income has fallen since you last got approved), you could have a problem.
If you become self-employed after your mortgage funds, but don’t have the required two years of tax returns showing sufficient earnings.
BLOG : Self Employed?? Here’s What You Need to Know About Mortgages

Your debt ratios are too high ( you’re spending too much of your income on mortgage & debts).
If your monthly debt load and housing obligations have grown too large (more of your gross monthly income is needed to finance your home & debts), you’ll be declined.

In January 2018 the federal government implemented a Stress Test. Whichever is the highest is how you must qualify for a mortgage.
Qualify at the Chartered Bank Benchmark Rate (Government Rate) which fluctuates (currently 5.25%).
OR the contract rate your lender gives you PLUS 2% i.e. 5.00% + 2% = 7.00%
Since 7.00% is the highest – that would be the stress tested rate.
If you must qualify for a mortgage at a rate 2% higher than the lender is giving you, your buying power decreases by about 20%.
The new home purchase date doesn’t match up with the selling of your current home.
If the purchase of your new home closes after the lender’s porting deadline.
Typically, Lenders allow 30-120 days to port your mortgage from Property A to Property B (a few lenders allow up to 365 days).
It can be difficult to get the closing dates of your current and new home to fall within porting deadline.
Your new property doesn’t qualify.
Lender may LOVE you, but they need to LOVE the new property as well.
Many lenders have changed criteria on investment, leased land, age-restricted, remediated grow-op properties, well water, building flaws, co-ops, etc.
Your credit score has fallen.
The lender will look at your current credit score. If you no longer meet the lender’s minimum credit score (typically 680+), porting your mortgage may not be an option.
OR if the lender allows you to port, you will pay a higher interest rate.
BLOG: 8 Credit Rules You Need to Know, Before You Buy a Home
You need more money.
If you are upgrading your home, you will probably need a bigger mortgage.
Some lenders will only port the exact same dollar amount.
That means you may have to come up with the difference if you buy a more expensive home OR break your current mortgage.
Please note that for lenders that allow a bigger mortgage, applying for more money while porting (a.k.a., a “port and increase”) could reduce your negotiating power because the existing lender knows you don’t want to pay a penalty to leave.
Your current lender does not have to be competitive since you are “stuck with them” since you don’t want to pay the penalty for breaking your mortgage.
You’ve got a variable-rate mortgage.
Your lender may not port its variable-rate mortgages (many don’t), you may have to break it and pay a penalty.
Some lenders will require you to convert your variable mortgage to a fixed rate before porting… typically you wouldn’t get the best rate.
If your mortgage has a home equity line of credit (HELOC) component, note that some lenders refuse to port HELOCs
You can’t get bridge financing.
If your take possession of your new property before the sale completes on your old property, you need to “bridge” the down payment until you get the cash from your sale.
The problem is, not all lenders offer bridge financing. If yours doesn’t, and you need it, and you can’t get it elsewhere, you may have to break the mortgage.
BLOG: Bridge Financing – How Does It Work??
The property is outside the lending area.
Some lenders have very restrictive lending areas.
i.e., If you’re with a credit union, you generally can’t port out of the province.
Many other smaller lenders have restrictions on rural properties, especially if the mortgage is not mortgage default insured .
You want to keep your current maturity date.
Some lenders require you to get a brand new 5-year term when you “port” your mortgage to a new property.
A 5-year term “could” lock you in longer than you’d prefer at a worse rate than you like.

Forewarned is forearmed. Understanding the pros & cons of mortgage portability can save you a lot of stress.

The bottom line: Mortgages are portable (in theory). However in practice, over 60% of people can NOT port their mortgage.

Any questions? Give me a call and let’s discuss a mortgage that works for you (not the bank)!

Kelly Hudson
Mortgage Expert
Mortgage Architects – A Better Way
Mobile 604-312-5009
Kelly@KellyHudsonMortgages.com
www.KellyHudsonMortgages.com

10 Reasons Why YOU May Not Qualify for a Mortgage

Thu, 07 Sep 2023 18:50:20 GMT

Buying a home is an exciting and significant step in one's life, but for most people, unless they are independently wealthy, it often involves securing a mortgage to turn their home buying dream into a reality.

Not everyone who applies for a mortgage gets approved. In my BLOG, we'll explore ten common factors that can affect mortgage eligibility.

Low or No Credit Score: One of the most critical factors in mortgage approval is your credit score. Lenders use this score to assess your creditworthiness. A low credit score may result from missed payments, high credit card balances, or other negative credit history, making it challenging to secure a mortgage. Think of it from the lenders point of view… they are going to lend you Hundred’s of Thousands of dollars and the only indication that you will pay them back as promised, is by thoroughly reviewing your credit bureau.
BLOG 8 Credit Rules You Need to Know, Before You Buy a Home
BLOG 5 C’s of Credit to get a Mortgage

Insufficient Income: Lenders need to ensure that you have a provable income to make mortgage payments. If your income is insufficient to cover the monthly payments or your debt-to-income ratio is too high, it can lead to rejection.
Employed or Self Employed: Lenders prefer borrowers with a provable, stable employment history. Frequent job changes, unemployment periods or recently starting your own business, will raise concerns from the lender about your ability to repay the mortgage.
BLOG Self Employed?? Here’s What You Need to Know About Mortgages
High Debt Levels: Excessive debt, including credit card debt, student loans, or car loans, can have a negative impact on your mortgage approval. Lenders evaluate your debt-to-income ratio, and a high ratio may lead to your mortgage being denied.
Insufficient Down Payment: Lenders require a down payment, typically ranging from 5% to 20% (or more) of the home's purchase price. If you can't afford the required down payment, it can be a significant barrier to mortgage approval.
BLOG 5 GREAT Reasons To Provide a 20% Down Payment when Buying a Home
BLOG Why You Need to Prove your Down Payment when Buying a Home
BLOG How to Verify Your Down Payment When Buying a Home
Inadequate Documentation: Failure to provide accurate or complete documentation can lead to delays and jeopardize your mortgage approval.
Poor Mortgage Payment History: If you've previously defaulted on a mortgage or faced foreclosure, declared bankruptcy or consumer proposal, it will impact your chances of getting approved for a new mortgage. Lenders are wary of borrowers with a history of non-payment.
Too Much New Credit: Opening multiple new credit accounts shortly before applying for a mortgage can raise red flags for lenders, as it may indicate financial instability or a higher risk of default.
Property Appraisal Issues: Even if you meet the financial criteria, the property itself must pass the lender's approval including an appraisal. If the appraisal value is lower than the purchase price, it can create challenges in securing a mortgage.
BLOG What Happens When Your Home Appraisal Comes in Low?
BLOG BC Property Assessment vs Home Appraisal 2023
Co-Signer Issues: Having a co-signer on your mortgage can be helpful if you have credit or income challenges. However, if the co-signer has their own financial obligations or credit challenges, it can affect your mortgage approval.
BLOG Would a Co-Signer Enable You to Qualify for a Mortgage?

In conclusion, obtaining a mortgage is a significant milestone in the journey to homeownership. Hopefully, this list helps answer the common question borrowers ask when they are unable to qualify for a mortgage: 'Why?’

To increase your chances of mortgage approval, focus on maintaining a healthy credit score, managing your debt wisely, and working with your trusted mortgage broker will help you navigate the process and address potential obstacles.

As brokers, we have the tools and expertise to assist borrowers with more complicated mortgage files. For home buyers with minimum 20% down payment, if the borrower can’t qualify since their situation doesn’t “fit in the box” we work can with alternative lenders that may be able to help.

As you can tell there is lots to discuss, let’s have a chat and find a mortgage that works for you and not the bank.

Kelly Hudson
Mortgage Expert
Mortgage Architects – A Better Way
Mobile: 604-312-5009
Kelly@KellyHudsonMortgages.com
www.KellyHudsonMortgages.com

Canada’s Awesome - First Home Savings Account (FHSA)

Mon, 03 Jul 2023 14:57:47 GMT

The Basics

The Tax-Free First Home Savings Account (FHSA) offers first-time home buyers the ability to save $40,000 tax-free.

Like registered retirement savings plans (RRSP), contributions to an FHSA would be tax deductible. Like tax-free savings accounts (TFSA), income and gains inside the FHSA, as well as the withdrawals would be tax-free when used for purchase of an owner-occupied home.

Who can open an FHSA?

A resident of Canada
Be as least 18 years old (and not more than 71 years of age on Dec. 31 of the year)
First-time home buyer

o This means you, or your spouse or common-law partner did NOT own a qualifying home that you lived in as a principal place of residence at any time in the year the account is opened OR the preceding 4 calendar years.

NO minimum number of days the funds must stay in FHSA before being withdrawn

How much can you contribute?

You can contribute up to $8,000 each year (in the year that you open your first FHSA), with a

cumulative total of up to $40,000 over your lifetime.

You can carry forward your unused FHSA participation room at the end of the year, up to a

maximum of $8,000 to use the following year.

o This amount is referred to as your FHSA Carry forward. Any FHSA carry forward will be include in the calculation of your FHSA participation room for the year.

The Details

Why did the Canadian government create the Tax-Free First Home Savings Account (FHSA)?

Housing affordability in Canada has been a hot topic for many years. Canada’s real estate has risen

steeply for properties, especially in hot spots like Toronto & Vancouver.

Saving a down payment is typically the biggest challenge for most Canadians buying their first home. In the Canadian Budget in 2022, the government proposed the introduction of the Tax-Free First Home Savings Account (FHSA) . This new registered plan gives first-time home buyers the ability to save $40,000 on a tax-free basis.
$8,000 each year (including 2023),

o The annual contribution limit applies to contributions made within the calendar year.

Like a Registered Retirement Savings Plan (RRSP), contributions would be tax-deductible , and

withdrawals to purchase a first home (including the investment income) would be non-taxable , like a Tax-Free Savings Account (TFSA).

o You are getting the best of both account types with the new FHSA. The FHSA is designed to help Canadian residents who are first-time home buyers (aged 18+).

The Tax-Free First Home Savings Account (including investment earning s& growth accumulated inside

the account) can be kept open until the 15 th anniversary of the FHSA account opening OR if an individual turns 72 years old.

Canadians can claim an income tax deduction for the FHSA contribution.

Contributions that are made in the first 60 days of the year can’t be considered part of the previous tax year (unlike for RRSPs).

Unused contribution portions can be carried forward into future years. Amounts to be carried forward only

start accumulating after an FHSA is opened for the first time.

The new FHSA can be opened just like you would open an RRSP or TFSA at the broker of your choice.

Canadians can have more than one FHSA account, even across multiple financial institutions or brokerages. You are responsible for making sure that you do not contribute more than the annual limit to your FHSA account in total across all accounts .

Only the FHSA owner can contribute to the account.

Just like over contributions to a TFSA, over contributions to an FHSA are taxed at 1% per month.

Any assets in an FHSA that are not used to buy a home that qualifies, can be transferred tax-free into a Registered Retirement Savings Plan.

Once a qualifying withdrawal has been made from a FHSA, the remaining balance of the account can be transferred to a RRSP or RRIF by Dec. 31 st of the year after the qualifying withdrawal.

By allowing you to contribute pre-tax income to an FHSA, the account can quickly grow to meet the minimum down payment value of some properties in Canada. It can give eligible first-time home buyers a tax advantage over those that are using an FHSA.

FHSA Transfers

If funds contributed to an FHSA are not used within 15 years from account opening (or Dec. 31 st of the year the account owner turns 71) the account holders will have the option to transfer the accumulated funds into their RRSP/RRIF, even if they don’t have contribution room.

Funds can be transferred between an FHSA account and the following accounts tax-free:

Another FHSA
RRSP
RRIF

When you are transferring money between these accounts, you must follow the rules for each account

type.

The FHSA and How it Compares to the Home Buyer’s Plan (HBP)

First Time homeowners will be able to access both the Home Buyer’s Plan (HBP) and the Tax-Free First Home Savings Account (FHSA) when purchasing a home.

Home Buyers’ Plan (HBP)

The Home Buyers’ Plan (HBP) : is an older program that allows Canadians to withdraw from their RRSP

accounts to build or buy a qualifying home.

Qualifying home buyers can withdraw up to $35,000/each from their RRSPs to assist with the purchase of

an owner-occupied home. The funds are not required to be used only for down payment, but for other

purposes to assist in the purchase of a home.

Amounts that are withdrawn from the Home Buyers’ Plan must be repaid back to your RRSP within 15 years.

o Your repayment period to the RRSP account starts the second year after the HBP withdrawal.

RRSP funds MUST be in the account for 90 days BEFORE removing for down payment.

A homebuyer could maximize both programs and be able to access up to $75,000 in capital for their down

payment (plus any growth in the FHSA).

FHSA rules allow funds to be transferred to an RRSP, or from an RRSP to an FHSA up to the yearly and

annual deduction limits, on a tax-free basis.

The FHSA has advantages over the HBP because you get to make a deductible contribution and funds can come out tax-free. Now that homeowners can use both FHSA OR HBP, the issue of which program to use isn’t as crucial.

----------

There is an abundance of additional information on the Tax-Free First Home Savings Account on

the Government of Canada website Tax-Free First Home Savings Account (FHSA).

If you or someone close to you is thinking of buying their first home, we can help! As you can tell there is

lots to discuss about buying your first home, let’s have a chat!

Kelly Hudson

Mortgage Broker

604-312-5009

Kelly@KellyHudsonMortgages.com

www.KellyHudsonMortgages.com

9 Reasons Why People Break Their Mortgages

Wed, 14 Jun 2023 23:39:25 GMT

Did you know that 60% of people break their mortgage before their mortgage term matures? Most homeowners are blissfully unaware that when you break your mortgage with your lender, you will incur penalties and those penalties can be painfully expensive.

Many homeowners are so focused on the rate that they are ignorant about the terms of their mortgage.

o We call it being Blinded by the Rate.

Is it sensible to save $15/month on a lower interest rate only to find out that, 2 years down the road you need to break your mortgage and that “safe” 5-year fixed rate could cost you over $20,000 in penalties?

Check out my BLOG Mortgage Penalties – Ouch… How Much??

There are a variety of different mortgage options available. Check out my 9 reasons for a breaking your mortgage –which may help you avoid those troublesome penalties!

9 reasons why people break their mortgages:

1. Sale and purchase of a home

If you are considering moving within the next 5 years you need to consider a portable mortgage.
Not all of mortgages are portable. Some lenders avoid portable mortgages by giving a slightly lower interest rate.
Please note: when you port a mortgage, you & the new home need to requalify to ensure you can afford the “new mortgage” based on your current income and any the current mortgage rules.

2. To take equity out

In the last 5 years many homeowners (especially in Vancouver & Toronto) have seen a huge increase in their home values. Some homeowners want to take out some of the available equity from their homes for buying a rental property, renovations, travel etc.

3. To pay off debt

Life happens, and you may have accumulated some debt. By rolling your debts into your mortgage, you can pay off the debts over a long period of time at a much lower interest rate than credit cards.

o Once you are no longer paying the high interest rates on credit cards, it gives you the opportunity to get your finances in order.

4. Cohabitation; marriage; children

You and your partner decide it’s time to live together… you both have a home and can’t afford to keep both homes??? The reality is that you have one home too many and may need to sell one or both of the homes – to buy something bigger.
You’re bursting at the seams in your 1-bedroom condo with baby #2 on the way.

5. Relationship/marriage break up

43% of Canadian marriages are now expected to end in divorce. When a couple separates, typically the equity in the home will be split between both parties.

o If one partner wants to buy out the other partner, they will need to refinance the home.

6. Health challenges; life circumstances

Major life events such as illness, unemployment, death of a partner (or someone on title), etc. may require the home to be refinanced or even sold.

7. Remove a person from Title/mortgage

20% of parents help their children purchase a home. Once the kids are financially secure and can qualify for a mortgage on their own, many parents want to be removed from Title.

o Some lenders allow parents to be removed from Title with a Change of Covenant – you simply need to pay administration & legal fees.

o Other lenders say that changing the people on Title equates to breaking your mortgage – yes… there will be penalties.

8. To save money, with a lower interest rate

Mortgage interest rates may be lower now than when you originally got your mortgage.
Work with your mortgage broker to crunch the numbers to see if it’s worthwhile to break your mortgage for the lower interest rate.

9. Pay the mortgage off before the maturity date

YIPEE – you’ve won the lottery, got an inheritance, scored the world’s best job or some other windfall of cash!! Some people will have the funds to pay off their mortgage early.

Some of these 9 reasons are avoidable, others are not…

Mortgages are complicated… Therefore, you need a mortgage expert!

Give me a call and let’s discuss the best mortgage for you, not your bank!

Kelly Hudson

Mortgage Expert

Mortgage Architects

Mobile: 604-312-5009

Kelly@KellyHudsonMortgages.com

www.KellyHudsonMortgages.com

Pros & Cons of buying a Presale

Fri, 19 May 2023 13:29:04 GMT

Buying a presale is a popular strategy in the real estate market that allows buyers to purchase a home before it is completed or even before construction has begun. This approach comes with both advantages and disadvantages, which are important to consider before making any investment decisions.

Pros of buying a presale:

1. Lower cost: One of the most significant advantages of buying a presale is that it can be less

expensive (no guarantees!) than purchasing a finished property. Builders and developers often

offer early bird incentives to attract buyers, such as discounts on the purchase price or upgrades.

2. Increased value: If the market trends upwards between the time the presale is purchased and

the completion of the property, buyers could see a significant increase in the value of their

investment. This could mean that buyers are able to sell the property for a higher price than they

paid for it, providing a healthy return on investment.

3. Extended closing timeline: Buying a presale also allows for a longer closing timeline, which can

be advantageous for buyers who may not be able to move in right away. This can also provide

more time to secure financing, saving buyers from the stress of having to arrange a mortgage in a

hurry.

4. Customization: Another advantage of purchasing a presale is that buyers may be able to have

some say in the design and customization of their property. Buyers can often choose from a variety

of finishes, fixtures, and layouts to create a personalized living space that meets their needs and

preferences.

Cons of buying a presale:

1. Uncertainty: One of the biggest risks of buying a presale is that the property may not turn out as

expected. Since the property is not yet built, buyers must rely on floor plans and artist's renderings

to imagine what the finished product will look like. There is always the possibility that the finished

product will not live up to expectations, leaving buyers disappointed with their investment.

2. Delays: Another risk of buying a presale is that construction may be delayed. This could be due to

a variety of factors, including labour disputes, material shortages, poor weather conditions &

Pandemics. These delays could leave buyers without a place to live or stuck in their current living

situation for longer than expected.

3. Mortgage Financing: Another challenge of buying a presale is securing mortgage financing. Since

buyers are purchasing a property that has not yet been built, they must jump through more hoops

to secure a mortgage. Lenders may require more documentation or offer less favourable terms to

buyers of presales, which could impact their ability to afford the property.

4. Limited flexibility: Buying a presale also requires a certain level of commitment from buyers.

Once the contract is signed, it is VERY difficult to back out or make changes to the purchase

agreement. This can be challenging for buyers who have a change in circumstances or who decide

they no longer want to purchase the property.

5. Higher cost: One challenge with buying a presale is that, once it has been completed (1, 3 or

even 5 years down the road), it could be worth less than you paid if there is a downturn in the

market. We all assume home prices are going to increase, and eventually that may be true…

however there are always ups and downs in the housing market.

So, what can buyers do to overcome these challenges? One strategy is to work with a reputable developer who has a track record of completing projects on time and to a high standard. It's also important to carefully review all marketing materials and floor plans to get a sense of what the final product will look like. Buyers should also consider the neighbourhood carefully, researching the area to get a sense of what it will be like once the home is completed.

In conclusion, buying a presale can be a smart investment for some buyers, particularly those who are looking for a more affordable way to enter the real estate market or who are interested in customization options. However, presales also come with risks, including uncertainty around the finished product and the potential for delays or challenges with mortgage financing. As with any investment decision, it is important for buyers to carefully consider their options and carefully weigh the pros and cons before making a purchase.

Reverse Mortgages For Home Owners 55+

Mon, 17 Apr 2023 21:17:15 GMT

As Canadian homeowners age, many are finding that their home represents a significant portion of their net worth.

A Canadian reverse mortgage is a financial product that can allow homeowners who are 55 years or older to access the equity in their homes without having to sell or move out. Reverse mortgages can be somewhat controversial – there are both supporters and opponents of this mortgage product. You need to discuss with your Mortgage Broker about the risks and benefits. More than 50% of Canadians worry about outliving their retirement savings. These loans are designed for Canadian retirees, which allow homeowners to tap into their home equity as a source of income, especially as interest rates and inflation have soared over the past year.

In my article, we’ll explore the benefits of reverse mortgages in more detail.

1. Supplement Retirement Income

A Canadian reverse mortgage can be a valuable tool for seniors who want to supplement their retirement income. Rather than selling their home and downsizing, seniors can stay in their homes and access the equity they’ve built up over time.

This can provide them with the funds they need to cover living expenses or pay for healthcare costs.

2. Pay for Home Improvements

Another benefit of a reverse mortgage is that it can be used to make home improvements. As homeowners age, they may need to make modifications to their homes to make them more accessible or to accommodate changing needs.

A reverse mortgage can provide the funds needed to make these changes, allowing seniors to stay in their homes for longer.

3. No Monthly Mortgage Payments

With a reverse mortgage, homeowners are not required to make monthly mortgage payments. Instead, the interest on the loan accrues and is added to the balance of the loan.

This can be helpful for seniors who may have limited income and want to avoid the burden of monthly payments.

4. Flexible Payment Options

Reverse mortgages offer flexible payment options, allowing homeowners to choose how they want to receive the funds.

Homeowners can receive a lump sum payment, regular monthly payments, or set up a line of credit.
This can allow seniors to customize their reverse mortgage to meet their specific needs.

5. No Impact on Government Benefits

A reverse mortgage does not impact government benefits such as Old Age Security & Canadian Pension Plan.

This means that seniors can still receive these benefits while accessing the equity in their homes.

6. No Risk of Negative Equity

Reverse mortgages are designed so that homeowners can never owe more than the value of their home.

This means that there is no risk of negative equity, which can provide peace of mind for seniors and their families.

7. Stay in Your Home

One of the most significant benefits of a reverse mortgage is that it allows homeowners to stay in their homes.

This can be especially important for seniors who have lived in their homes for many years and have a strong emotional attachment to their homes.

In conclusion, a Canadian reverse mortgage can be a valuable tool for seniors who have limited income and want to access the equity in their homes without having to sell or move out.

By providing a flexible source of funds, a reverse mortgage can help seniors supplement their retirement income, pay for home improvements, and stay in their homes for longer.

Before deciding on a reverse mortgage, it is important to carefully consider the costs and benefits. Let’s have a chat about your situation!

Title Insurance: What Every BC Home Buyer Should Know!

Thu, 16 Mar 2023 17:12:52 GMT

You found your new home—congratulations! It’s your biggest asset and one of the most important investments you’ll ever make. How will you keep it safe?

When you get a mortgage in BC, one part of your closing costs will be title insurance. The premium is a one-time charge, and the policy protects the lender.

You also can purchase owner’s title insurance to protect yourself, but it’s optional.

Title insurance is NOT home insurance.

BLOG - Mortgage Insurance 101

Here’s what you need to know about what title insurance.

Title insurance is a policy that covers third-party claims on a property that don’t show up in the initial title

search and arise after a real estate closing.

A third party is someone other than the property’s owner, such as a construction company that

didn’t get paid for its work on the home under a previous owner.

The term “title” refers to someone’s legal ownership of the property.

A title claim could arise at any time, even after you’ve owned the property with no problems for many years. How could this happen? Someone else might have ownership rights that you don’t know about when you make an offer to buy a property. Even the current owner might not be aware that someone else has a claim on the property. In the case of an overlooked heir, even the person who has those rights might not know they have them.

Before your home mortgage closes, your mortgage lender will order a title search from a title company. The title company searches for public records related to your home to try to find any title defects that could affect the lender’s or buyer’s property rights such as:

Liens can get placed on the property by a contractor, tax authority or lender who hasn’t been paid. You don’t want to get stuck paying a previous owner’s unpaid bills.
Easements are someone else’s right to use your property even though you are the owner. For example, if there are utility lines in your backyard, the utility company will have an easement that allows them to access your property if they need to work on the lines. The easement could limit your ability to use your property however you want.
Encumbrances include liens (also called “financial encumbrances”) as well as easements, but also include zoning laws & restrictive covenants.
A title company searches public records including deeds, mortgages, divorce decrees, court judgments, tax records and child support orders.

What Does Title Insurance Cover?

A title insurance policy covers underlying issues with a property’s title that might have been missed before you bought the home. Basically, it comes in handy if the public record search conducted by the titled company failed to catch any liens or ownership disputes.

Residential title insurance can protect you against issues that could affect your ability to sell, lease or mortgage your property. It can provide coverage for the following:

An unforeseen defect in your title ownership.
Negligence or errors made by your lawyer relating to title risks.
Unpaid utilities, mortgages, taxes or condo/strata maintenance fees – these are known as liens.
Fraud, survey or records errors.
A pre-existing outbuilding that must be removed because it encroaches on a neighbouring property.
The gap period between when a property purchase is finalized or closed and when the title is officially registered with the government.

The BC Land Title Registration Office does not require title insurance because they guarantee the

title to your property.

However, your lender may require it as a condition of your mortgage.

Q. There are 2 types of Title insurance. What is the difference between a Lender Policy and an

Owner Policy?

A lender’s title insurance policy protects the organization (lender) from which you obtained your mortgage

loan.

For example, if you default on your mortgage repayments as a direct result of the title defect, the lender will be protected from that loss.

An owner’s title insurance policy protects you from potential loss.

For example, if it becomes clear that someone else is the true titleholder of the property, the policy will cover your loss.

Who Pays for Title Insurance?

The buyer pays for the lender’s title insurance policy as part of their closing costs. Although title insurance costs range between $200 - $400, prices vary based on various factors.

The value of your home, insurance provider and province you live in will all affect the cost of your one-time fee.

Key Takeaway

Title insurance is a type of insurance that protects the lender (and if purchased, the property owner) against loss or damage caused by problems with the title to the land.

In BC, typically all Lenders require Title Insurance as a condition of you receiving their mortgage.

Mortgage Renewal - 5 Things You Need to Know

Sat, 14 Jan 2023 00:23:22 GMT

If you have a mortgage, chances are unless you win a lottery (cha-ching $$$) you’ll need to do a mortgage renewal when your current term has finished.

Most Canadians spend a lot of time, and expend a lot of effort, in shopping for their initial mortgage, typically this is NOT the case when looking at mortgage renewals.

So, what is a mortgage renewal?

Mortgages are amortized* over a set term* which can vary from 1-10 years.

Most Canadians choose a 5 year term.

About 6 months before the end of your term, your current lender will suddenly become your “Best Friend” showering you with attention and trying to entice you with early renewal offers… Please, please, please Mortgage borrower, sign here on the dotted line to renew… it’s sooo easy!!

Most Canadians simply sign their mortgage renewal papers instead of checking if there are better mortgage options available to them.

The banks would love nothing more than for you to just sign the mortgage renewal document and send it back to them. There is minimal cost for the bank and they don’t have to follow up with you (other than sending you a new copy of the agreement).

Mortgage renewal documents are printed automatically and yes they may include a “preferred rate” or sign before XX and you don’t have to pay a renewal charge, which makes them even more tempting to sign.

Most banks boast a 80%-90% renewal rate on their mortgages. Banks love the profit of a simple mortgage renewal, since it costs them a lot more money to acquire a new client vs. keeping an existing one.

You would assumer your bank would offer you the best up front rate on your renewals since it will save them money in the long run?

Well… not necessarily.

With renewal rates being as high as they are, there is not much incentive for banks to give their clients the best rates up front. They know that a HUGE percentage of people will stay with their current bank, since it’s easier to just sign a form, as opposed to going through the paperwork to apply for a mortgage with another lender.

If you are renewing your mortgage, there are five things to keep in mind before you sign your banks mortgage renewal document.

The bank’s posted rate is rarely the best rate: Think of the posted rate as the opening offer in a negotiation. Banks use the posted rate to provide a value proposition to their clients. They often start with the posted rate and then offer discounts to their clients (making you feel like you’re special). Even if you get the super-secret discounted rate, you may still be paying a premium compared to other lenders. The BIG banks play dumb, offering the posted rate and leave it up to the borrower to negotiate a better rate… it’s all about playing the game.
Bank or mortgage broker? The general belief is that brokers can offer a better rate than banks due to their access to multiple lenders. The Bank of Canada survey found that using an independent mortgage broker can result in getting a lower rate.
Shop around before you negotiate This is where your mortgage broker shines – acting on your behalf to find the best mortgage option based on your situation. If your current lender is offering the best solution – I’ll tell you!
Being loyal to your current bank makes no difference to your rate. Are you a loyal customer? Have you been with your bank for years and do everything with them? SURPRI SE Loyalty doesn’t count when it’s time to renew your mortgage. Historically, loyal customers may not get as good a deal with their bank as they would if they went to a different lender as a new customer. If you’re looking for a better deal, consider working with your Mortgage Broker who has access to different lending institutions.
Carefully review the mortgage terms before you sign. The cheapest rate may NOT be the best mortgage. Working with me will give you a better sense of what mortgage options are available based on the 4 strategic priorities that every mortgage needs to balance:

lowest cost
lowest payment
maximum flexibility
lowest risk

Here are some important questions to consider:

Where do you expect to be in the next 1-5 years?
Are you planning on selling your home anytime over the next 5 years?
Do you need access to any equity from your home for renovations, buying an investment property, starting a new business, children’s education, etc.?
What are your long-term goals with your property?

It’s important to treat your mortgage renewal as if you’re obtaining a new mortgage and spend some time researching your options.

Let’s have a chat to discuss your best options for your mortgage renewal.

*BLOG 20 Terms that Home Buyers Need to Know

Kelly Hudson
Mortgage Broker
Mobile 604-312-5009
Kelly@KellyHudsonMortgages.com

Open vs Closed Mortgages, Which is your Best Choice… Well it Depends!

Mon, 19 Dec 2022 21:22:40 GMT

Every Canadian is different, so we all have different needs when it comes to buying a home. As a result, mortgages come in lots of different shapes and sizes: closed, open, variable-rate, fixed-rate, 3-year, 5-year, 10-year… etc. etc. you get the picture.

One of the most important decisions you’ll need to make when applying for a mortgage is whether you want an open vs. closed mortgage. They are designed with different borrowers in mind and can result in significant savings (or costs) if you choose the wrong one.

In a Nutshell

Open mortgages provide you with more flexibility to prepay your mortgage, however that flexibility comes at a price… higher interest rates. A closed mortgage has lower interest rates, yet limits your prepayments and will penalize you should you need to break your mortgage.

Outside the Nutshell

What is an open mortgage?

The definition of an open mortgage is simple: the entire mortgage balance can be paid off in part or in full at any time, and the contract can be refinanced or renegotiated without penalty.

That’s what makes an open mortgage so appealing — you can pay it off early or convert to another term without a prepayment charge.

Open mortgage terms are also typically shorter than closed mortgages, ranging from six months to five years.

In Canada, open mortgages are less common. They are, however, a viable option if you are looking to pay off your mortgage early or if you want to deviate from the standard, longer-term repayment schedule.

The trade-off for the flexibility is that interest rates for open mortgages are higher compared to closed mortgage rates. With an open mortgage, you’ll likely end up paying the PRIME rate plus a substantial premium.

The reason for this is, that lenders don’t want your mortgage for a few months or even a year… too much work and not enough profit – therefore they charge higher rates to push “rate chasers” into a closed mortgage.

What is a closed mortgage?

A closed mortgage is pretty much the opposite of an open mortgage. Closed mortgages have more restrictions and limited flexibility for borrowers: you can’t pay off the loan early, refinance, or renegotiate the terms without incurring a penalty.

On the plus side, compared to open mortgages, closed mortgages have lower interest rates.

Typically closed mortgages offer prepayment privileges, letting you boost your monthly payments by a fixed percentage. Closed mortgages also allow borrowers to pay an annual lump sum prepayment, up to a certain percentage of the mortgage balance.

Prepayment terms are set by each lender typically ranging from 10-20% of the original mortgage balance.

Since most people are not able to pay off their mortgage quickly, closed mortgages are the most popular choice in Canada. Terms for closed mortgages can vary from anywhere between 6 months and up to 10 years.

Pros & Cons of Open and Closed Mortgages

Pros

Cons

Open Mortgages

More Flexibility
Increase your regular payments with little or no penalty
Make a lump-sum payment on your mortgage at any time, with little or no penalty
Refinancing your mortgage is more flexible and cheaper

Higher mortgage interest rates than closed mortgages (typically 1-3% higher)

Open Mortgages

Pros

More Flexibility
Increase your regular payments with little or no penalty
Make a lump-sum payment on your mortgage at any time, with little or no penalty
Refinancing your mortgage is more flexible and cheaper

Cons

Higher mortgage interest rates than closed mortgages (typically 1-3% higher)

Closed Mortgages

Lower mortgage interest rates than open mortgages (typically 1-3% lower)

Less flexibility
Penalties if you break your mortgage early.
Refinancing your mortgage can be costly

Closed Mortgages

Pros

Lower mortgage interest rates than open mortgages (typically 1-3% lower)

Cons

Less flexibility
Penalties if you break your mortgage early.
Refinancing your mortgage can be costly

When it comes to paying off your mortgage, you need to decide between two payment structures: an open-end and a closed-end mortgage.

The one you choose will determine your interest rate, flexibility, and prepayment penalties.

A closed mortgage penalizes you for paying off part (or all) of your mortgage early.

Closed mortgages benefit from a lower interest rate, compared to open mortgages. Pre-payment penalties can be quite significant.

An open mortgage, on the other hand, is much more flexible in terms of increasing your mortgage repayments, which you can do either by increasing your regular payments or through a larger lump sum.

For a closed mortgage, the prepayment penalties (the cost to break your contract with your lender early) will depend on whether your interest rate is fixed or variable.

BLOG 9 Reasons Why People Break Their Mortgages

For a variable-rate mortgage, the penalty is usually three months of interest (NOT the whole mortgage payment – just the interest component).

For a fixed-rate mortgage, the fee to break your mortgages is either: three months of interest or the Interest Rate Differential (IRD), whichever is greater.

Most borrowers with a fixed rate mortgage will be paying the IRD.

This can be a nasty surprise to Canadians who failed to read the fine print of their mortgage contract.
It’s very important to go over your mortgage contract to find out exactly how your mortgage lender calculates IRD, each lender seems to have their own way to calculate.

The standard IRD calculation uses the difference between two interest rates: the annual interest rate in your mortgage contract, and the lender’s posted rate closest in duration to the remainder of your term.

Most Big Banks & credit unions use the discounted IRD calculation, which uses the difference between the annual interest rate in your mortgage contract and the lender’s posted rate closest in duration to the remainder of your term, less any discount you received on your initial rate.
As you can tell, these calculations can be confusing since each lender has their own way of calculating IRD using different interest rates. It’s best to talk to a mortgage broker about your options and clarify exactly how the IRD for your mortgage contract is calculated.

How to choose the right mortgage for you

While Canadians typically opt for a closed mortgage because of lower interest rates, an open mortgage could be a better choice for the following reasons:

1. You are about to sell your home. You might consider an open mortgage if you want to pay off your mortgage with the proceeds of selling your house.

If you pay off a whole closed mortgage, you will likely incur significant prepayment penalties.

2. You are about to receive an inheritance/large sum of money. If you are expecting an inheritance or large sum of money, you can pay off your mortgage (all or part) with little or no penalty.

All that said, it's not just about getting the lowest interest rate — there are several variables at play when you get a mortgage.

As a Mortgage Broker, I specialize in Mortgage Intelligence , educating people about mortgages, how they work and what lenders are looking for. Everyone's home purchasing situation is different, so working with me will give you a better sense of what mortgage options are available based on the 4 strategic priorities that every mortgage needs to balance:

lowest cost
lowest payment
maximum flexibility
lowest risk

The fine print in the mortgage contract can far outweigh the rate being offered. Most people are blinded by the rate, in their quest for a mortgage.

Let’s set up a time to chat abut your home buying situation!

Kelly Hudson
Mortgage Expert
Mortgage Architects

604-312-5009

Kelly@ KellyHudsonMortgages.com
www.KellyHudsonMortgages.com

Pre-Qualified for Your Mortgage… What Does that Really Mean???

Mon, 24 Oct 2022 18:09:54 GMT

There is a myth out there that once you’re pre-qualified for a mortgage, you’re good to go out and buy a home… with a no subject offer… DON’T do it!!

A pre-qualification means that based on being able to PROVE (through documentation) your CURRENT income, expenses, down payment and credit bureau you SHOULD be able to get approved once you find the right property (this is the first half of the equation).

Remember that there cannot be any major changes to your application details prior to the completion of your purchase as it may affect your qualification and change the conditions of the approval.

I always recommend my clients put in a “subject to financing” clause with their realtor when they are putting in an offer to protect themselves.

Here’s why:

The lender can like you and your financial picture, BUT the lender doesn’t know which property you want to purchase ( this is the other half of the equation ). Here are 3 examples

A bidding war has bid up the price and the best offer (yours) has been accepted. YIPPEE!!!
The lender sends in their appraiser to determine the value of the property. The appraisal comes in at a lower price than your accepted offer DRATS.
Depending on your down payment, you now must come up with the difference between the appraised value and your offer, since lenders will only offer a mortgage based on the appraised value of the home.
You are buying a condo/townhouse and the strata minutes indicate that there are: leaks, electrical issues, roofing problems, etc. that the strata should be working on.
If the Strata doesn’t have a big enough contingency fund, the lender can decline due to potential special assessments down the road.
Property zoning - if the zoning is anything other than residential then your options will be limited. Some condos are zoned commercial if there is a large commercial component to the complex. Industrial, Agricultural Land Reserve (ALR), or leasehold (government or otherwise) limit a buyer’s options.

As you can tell… you may be ‘pre-qualified’ but most certainly the subject property is not!!

Here’s a (partial) list of property details that can affect most lender’s decisions on approving your mortgage:

Leased land (depends on who holds the lease and how much time is remaining on the lease)
Age-restricted property
For condo’s & townhouses
Any reference to water or leaks in the minutes
Strata with small contingency fund
Special assessments (pending or otherwise)
Self-managed strata’s (no strata management company)
A “fixer upper”
Contains asbestos, vermiculite insulations or has (even partial) knob-and-tube or aluminum wiring
Co-ops
Size of the property
Typically, condo’s below 500 sq. feet or houses under 750 sq. feet
Is on land with a commercial zoning component
Doesn’t use municipal sewage or waste
Over 1 Acre and/or multiple buildings
In the Agricultural Land Reserve
Farming or Livestock is present
Upcoming legal proceedings
A remediated grow-op or drug lab

The lender reviews the details of each property in detail once you have an accepted offer in place.

It’s important that the real estate agent discloses the information to their home buyers ASAP so that it can be reviewed by the lender. The realtor should be proactive in getting all documentation pertaining to the building/property, so that the buyer can make an educated buying decision. Many of the issues stated above can affect the long-term value and marketability of a property.

If you have a “subject to financing” clause in your purchase agreement, and you can’t find a lender, then you can back out of the deal with no financial repercussions.

In my opinion you need to always put in a “subject to financing clause” as that’s the best protection you have. With subject free offers you could forfeit your deposit (and facing potential legal action from the seller) should you want to cancel your contract after the agreement has been made, even though you were technically “pre-qualified”.

Mortgages are complicated, but they don’t have to be… Engage an expert before you start looking!

Kelly Hudson
Mortgage Expert
Mortgage Architects

604-312-5009

Kelly@ KellyHudsonMortgages.com
www.Kelly H udsonMortgages.com

Buying a Pre-Sale Condo or Home?

Thu, 29 Sep 2022 19:48:33 GMT

What you need to know about Buying a Presale/Prebuild/Pre-construction in BC.

What is a Presale?

A pre-sale or a pre-construction sale is where a developer sells homes in a development before construction has begun or while the development is under construction.

Important facts about presale condos

The presale condominium market is governed by the Real Estate Development Marketing Act in BC which protects the Buyer.
There is a 7-day rescission period from the day of an accepted contract to purchase. During this time the buyer can do their due diligence on their purchase.
The developer must provide the buyer with all the Disclosure Statements. The Disclosures will contain all the important information on the development. It is very important to carefully read this information.
BC provincial law - if the buyer wants to cancel the contract to purchase during the 7-day rescission period they can do so without any costs.
Disclosure Statement information link .
With Presales, there is a deposit structure.
The most common deposit structure is 5% of the purchase price at the time of acceptance of the contract to purchase. This is followed by two or three more payments of 5% over a predetermined period of time while the home is being built.
The total deposit typically will be 15% or 20% of the purchase price. The deposit is placed in a lawyer’s trust account and cannot be accessed by the developer.
If the developer does not complete construction or the developer files for bankruptcy, the deposit will be returned to the buyer.
Presale condos and houses under $750,000 are exempt from Property Purchase Tax (PPT).
To qualify the buyer must be a Canadian Citizen or a permanent resident and living in the house for one year ( link ).
First time buyers are exempt from PPT when purchasing a home under $500,000 with a slight rebate up to $525,000.
PPT is 1% on the first $200,000 and 2% on the balance up to $2,000,000. The PPT is 3% on amounts greater than $2,000,000 ( more PPT details ).

Pros of buying a presale home

In a hot real estate market, buying a pre-sale home can be easier than competing against multiple offers. This is because there are many units for sale in the building at one time, and you are negotiating with one sales representative.

Purchasing a new home that no one has lived in will be in excellent shape, you don’t have to deal with other people’s dirt. Nothing to upgrade or renovate, minimal repairs needed.
None (or very few) strata restrictions at time of ownership (i.e. rentals or pets).
New condos built by reputable developers tend to have lower maintenance costs due to less upkeep required since the building is brand new… i.e. it could take 20-30 years before you need a new roof.
There is a warranty protection on presales– British Columbia 2 -5-10 year Warranty Insurance BC Housing – Home Warranty Insurance on New Homes .
The warranty starts once the developer gets the occupancy permit.
You may have months or even years to get your mortgage financing in order.
There are no mortgage payments from the time of purchasing the presale to the development’s completion (certificate of occupancy). This period can be anywhere from 1 to 5 years.
Many buyers continue to save money while renting or living at home
Buyers may see an increase with their wages while waiting for the presale to complete
If the economy is strong, you build your equity when the property prices increase.
For rentals, a newly constructed home will typically achieve higher rental price.

Cons of buying a presale home?

GST (currently 5%) is paid on the purchase price, and due when the development is finished (certificate of occupancy has been provided to the developer).
GST can be rolled into your mortgage.

New is more expensive than used. A new building will not require significant maintenance for 10 to 20 years. You will pay more for a new home than you would for a 5, 25 or 50 year-old home.

Market Value What will be the market value of the unit by the time it is ready to be occupied?
No one can predict what the price of a property will be 1 to 5 years from now.
A pre-sale agreement is essentially a ‘futures contract’ (i.e. a commitment to buy something in the future) with an uncertain delivery date.
While the price paid to the developer is guaranteed, the buyer does not receive a guarantee that the market value of the home they purchased will be equal to or higher than the pre-agreed purchase price.
As a result, the buyer carries the risk of any market fluctuations and absorbs the losses if the market value goes down (however they capture gains if the housing market rises).

Interest Rates Nobody knows what variable or fixed mortgage rates will be 1 to 5 years from now. They could be lower or higher. From 2021 to 2022 interest rates went up around 3%.
While your homeownership budget may work when you calculate it at today’s mortgage rates, does it still work if rates rise by 1, 2, 3, 4 or 5% by the time the home completes?

Financing While a home buyer may qualify for a mortgage today there are a few ways they may not be qualified when the purchase closing date arrives:
The interest rates have gone up OR mortgage qualification rules have changed, and you no longer qualify for a mortgage according to bank’s lending guidelines.
The property market value has dropped below the pre-agreed purchase price, and the bank only lends you money based on the current market value.
The home buyer may need to make up the difference with a larger down payment.
You may have had a change of employment, be laid-off or had your hours reduced since you were initially pre-approved for a mortgage, so you no longer qualify.
If completion date comes and you can’t qualify for a mortgage – will the developer allow you to Assign your purchase (sell before you take possession)
If YES how much will the developer charge for an assignment?

Completion Date is a moving target with any pre-sale contract. Most contracts provide an estimated completion date which is generally 1-5 years away. However, the contract will stipulate that the date is subject to change by the developer by a significant amount of time.
Therefore, the developer may extend the closing date many times up to a specified “outside completion date” which may be several years past the original estimated closing date. The developer may be within its rights to extend the closing years beyond the date the purchaser may have planned for.
In the meantime, the purchaser is on the hook to buy the unit for what may feel like an indefinite period of time (and their cash tied up with the deposit on the unit).
In contrast, when the developer is finally ready to complete, the contract provides for a short closing period (usually 7-10 days) within which the purchaser must be ready to close or face being in breach of contract.

Imbalance in Legal Consequences. When it’s time to close on a purchase, the buyer is obliged to follow through on the agreement. If a buyer fails to close without a valid legal reason, they will forfeit their deposit, and the developer has the right to pursue further damages.
On the other hand, if the developer fails to close, they return the deposit funds to the buyer. There are no other legal consequences for the developer.

Purchasing a condo from a floor plan requires vision and experience.
In the Disclosure Statement, the developer is allowed to make small variances to the floor plan during construction if required.

Recommendations:

Always have your own realtor represent you when you buy any home (let me know if you need an introduction to realtors I know, like & trust).
The developer will pay the realtor a pre-arranged commission for bringing in a buyer (so your realtor gets paid, and the buyer gets independent representation).
After you sign a pre-sale agreement, bring the contract to your lawyer for review immediately. You are allowed 7 days to rescission your offer. If you change your mind after reviewing all the documents in detail with your lawyer, you can cancel the contract within this period.
The bottom line is you need to weigh the risk and potential reward of buying a home before it is built and are well advised to investigate that developer’s business practices and track record as thoroughly as possible.

The best way to determine if purchasing a home presale is the best option for you is to weigh the pros and cons with your mortgage specialist (me!!) and real estate professional who specializes in presale development.

Let’s have a chat to help you determine if buying a Pre-Sale home is right choice for your situation.

Mortgages are complicated, but they don’t have to be… Engage an expert!

Kelly Hudson
Mortgage Broker

Mortgage Architects
Mobile: 604-312-5009
Kelly@KellyHudsonMortgages.com
w ww.KellyHudsonMortgages.com

Rate Increase Announcement September 2022

Thu, 08 Sep 2022 16:01:46 GMT

The Bank of Canada's latest announcement - September 2022

Watch this video to learn more about the interest rate increase and how it may affect you.

Don't hesitate to contact me at anytime, I'm here to help.

Kelly Hudson

Mortgage Broker

604-312-5009

http://www.KellyHudsonMortgages.com/

5 Signs You’re Ready for Home Ownership

Tue, 19 Jul 2022 20:41:52 GMT

As a mortgage broker, it is my job to ensure that each one of my clients is getting the best service I can provide.

Part of this means educating as much as possible when it comes to buying a home, which is why I’ve put together a list of 5 signs that may tell you that you are ready to become a homeowner.

You Can Afford the Down Payment

You’ve finally saved up enough to make a down payment. Depending on your situation you will need to deposit anywhere from 5-20% of the home’s price tag. You also need to make sure that you have saved money for any applicable taxes and closing costs.

BLOG Don’t Forget the Closing Costs When You Purchase a Home

However, if you don’t quite have enough saved up on your own, but you have a family member who is willing to give you a gifted down payment to assist you, that works too.

BLOG Would a Co-Signer Enable You to Qualify for a Mortgage?

Paying for a home goes well beyond just making your mortgage payment every month. As a homeowner you’re responsible for fixing anything and everything that may break. If you don’t have an emergency savings fund, you may end up putting yourself in debt paying for repairs or issues around the house that need to be dealt with immediately.

As a rule, it’s advised to have 3 months’ worth of your living expenses saved in case any emergency costs come up.

2. You’ve Got Good Credit

This might seem obvious, if you don’t have a good credit score, chances increase that you could be declined altogether or stuck with higher interest rates = higher mortgage payments.

Lenders are more likely to give those with good credit a mortgage plus better interest rates. Good credit tells the lender you are unlikely to miss mortgage payments, so a less risky investment.

If you already have good credit, you are one step closer to buying your first home. If not, start working to improve that credit score one day at a time.

BLOG 5 C’s of Credit to get a Mortgage

If you’ve had some credit issues in the past, it doesn’t mean you aren’t ready to be a homeowner, however, it might mean a little more planning is required!

Most Canadians carry some debt (loans, credit cards, vehicles, student loans, etc.) you don’t have to be debt free to buy a home, but it helps. The less debts you have, the more of your income that can go towards paying the mortgage, giving you higher home buying affordability.

BLOG 8 Credit Rules You Need to Know, Before You Buy a Home

A co-signor can be considered here as well

BLOG Would a Co-Signer Enable You to Qualify for a Mortgage?

3. You’re Sick of Spending Money on Rent

As the old saying goes… you can pay your mortgage OR you can pay your landlord’s mortgage.

One of the biggest disadvantages with renting is that you’re essentially throwing away money every month – or at least, throwing it into your landlord’s wallet.

If you’re tired of spending your hard-earned money on monthly rental payments, then buying a home may be the right decision for you.

Unlike rental payments, a portion of every mortgage payment goes towards building equity in your home.

Building equity is one of the most important benefits of owning a home. The more money you put towards your home, the closer you’ll be to owning the home outright.

When you own your own home, you won’t have to worry about rent increases or being kicked out of your home if the landlord sells.

4. You’ve Got Enough Income to Cover the Mortgage Payments and All the Additional Costs of Home Ownership

While no job is ever 100% secure, the longer you’re established at a certain job, the longer you’ve been practicing within a specific career, or the more years of self employment you have under your belt, the more likely your job will be seen by the lenders as “steady enough” to support home ownership.

It’s all about providing confidence to the bank/lender that you’re capable of holding down a steady job and will, in turn, be able to make your mortgage payment on time every month.

If you’re going to borrow money to buy a house, the lender wants to make sure that you can pay it back. The ideal situation is to have a permanent full-time position where you have past probation.

If you rely on any inconsistent forms of income (self employed, casual, hourly etc.), having a two-year history is required.

A good rule of thumb is to keep the costs of homeownership to under a third of your gross income, leaving you with two-thirds of your income to pay for the rest your life (i.e. taxes, food, medical, household expenses, entertainment, etc.).

5. You’ve Discussed Mortgage Financing with Me, your Mortgage Broker.

Buying your first home can be quite a process. With all the information available online, it’s hard to know where to start. While you might feel ready, there are lots of steps to take; way more than can be outlined in a simple article like this one.

I specialize in FIRST TIME HOME BUYERS! I will walk you through the mortgage process to help you buy you first home! It can be very complicated & overwhelming!

We work together to set a realistic home buying budget
I set up your mortgage PreQualification to ensure you stay on budget with what you can afford.
I educate you about mortgages, so you can decide which mortgage is the best fit for your situation
I work with a team of realtors who specialize in First Time Home Buyers

Buying a home is both exciting and nerve wracking. My goal is to simplify and educate you about mortgage financing, so you make good decisions based on your situation.

I specialize in Mortgage Intelligence, educating people about mortgages, how they work and what lenders are looking for. Everyone's home purchasing situation is different, so working with me will give you a better sense of what mortgage options are available based on the 4 strategic priorities that every mortgage needs to balance:

lowest cost
lowest payment
maximum flexibility
lowest risk

The fine print in the mortgage contract can far outweigh the rate being offered. Most people are blinded by the rate, in their quest for a mortgage.

If you want to understand how mortgages work BEFORE making the biggest purchase of your life, let’s set up a time to chat.

Kelly Hudson

Mortgage Broker

604-312-5009

Kelly@KellyHudsonMortgages. com

What Happens When Your Home Appraisal Comes in Low?

Thu, 19 May 2022 23:41:28 GMT

What Happens When Your Home Appraisal Comes in Low?

With record low interest rates starting in 2020, the price of homes has been steadily increasing across Canada. Currently, there is a downward shift in the market which can impact the value of your home.

Raging inflation, war in the Ukraine and rapidly rising interest rates have helped cool off the housing market. Now it is more common that homes may appraise for less than their agreed purchase price.

As a home buyer, you are going to be unhappy to find out that an appraiser thinks the home you want to buy is not worth what you offered.

Unless you are a cash buyer, a low appraisal could make it difficult for you to get mortgage financing to purchase your dream home.

Lenders will only offer mortgage financing to buy a home at fair market value.

If your appraisal comes in low, that is going to complicate matters.
BLOG BC Property Assessment vs Home Appraisal

Does a low appraisal value kill a deal?

No, not necessarily. If the only thing in the appraisal report is the lower value, the buyer must come up with additional funds to make up the shortfall and they’re good to go.

However, there’s also the possibility the appraisal raises other concerns that the lender may take into account i.e. short economic life of the property, the house is in poor condition, undesirable location, etc.

These and other such issues can kill your mortgage lender’s interest in financing your purchase, regardless of the valuation of the property.

What happens if your offer is firm, with no condition of financing?

You are obligated to complete your purchase at the agreed price. If the appraisal comes in low, but the property is otherwise acceptable, your lender may offer you a smaller mortgage.

Suppose you agree to buy firm for $1,100,000. You have a 20% down payment, or $220,000.

Regrettably, the property appraises at $1,000,000.

Your lender is willing to offer you a mortgage of $800,000, which is 80% of the appraised value (20% down payment).

Oh no - there is a gap of $100,000

Which means, you need to come up with $300,000 to fulfill the purchase price of $1.1 million.

That’s an extra $80,000 you hopefully have on hand (plus your original $220,000 = $300,000)

What happens if you are purchasing with less than 20% down payment (and require Mortgage Default Insurance)

The Mortgage Default Insurer will decide if you require an appraisal.

If your purchase price falls within their acceptable range – no appraisal required
If the insurer is unsure about the value – the Mortgage Default insurer will order and pay for the appraisal.

There are 3 mortgage default insurers in Canada (Canada Guaranty, Sagen or CMHC).

3 strikes and you’re out!

BLOG Everything You Need to Know about Mortgage Default Insurance

Can you have a condition of appraisal clause?

Having a condition like “subject to appraisal” is a great idea in this market. It tells the seller you are not worried about financing (getting a mortgage), which, coupled with your deposit and agreeable closing date, makes a respectable offer.

It also gives you an out if you need to withdraw/re-negotiate an offer following an appraisal.

What happens after an appraisal comes in low?

When the home appraisal comes back lower than the purchase price, the buyer has a few options to keep the deal alive.

Make up the difference in cash

The buyer can increase their down payment to make up the difference. For example, if the buyer needed the appraisal to come in at $300,000 but it comes in at $290,000, the buyer can pay the $10,000 difference in cash.

2. Shift some down payment to make up the difference

Let’s say the buyer was planning on putting $60,000 down on a $300,000 home (a 20% down payment). If the appraisal comes in $10,000 low, the buyer could shift $10,000 of the money they’ve set aside for their down payment to make up the difference.
This would trigger Mortgage Default Insurance with less than 20% down payment

3. Appeal the appraisal

Appraisers are licensed, trained professionals. They know what they are doing.
That said, if spoken to with respect and understanding and perhaps additional information (like upgrades to the home or higher comparable sales in the area) I have occasionally seen some movement in their opinion of value. Please don’t count on this!

4. Revoke your offer/cancel the contract to purchase

Ideally, you’ve included the appraisal in your subjects.

BLOG Need an Appraisal – 7½ Tips for Success

Final Word

Nobody involved in a real estate transaction wants to get that dreaded call saying that the appraisal has come in low.

When this happens the stress level of everyone involved skyrockets. In situations like these cooler heads prevail. Make a plan with your realtor and Mortgage Broker to create a plan, before hand, to deal with the situation.

My services for a typical mortgage are FREE and I help people save money. I LOVE my job!

Kelly Hudson
Mortgage Broker
Mortgage Architects
Mobile 604-312-5009
Kelly@KellyHudsonMortgages.com

What Happens to My Mortgage Payment if Interest Rates Double??

Tue, 05 Apr 2022 21:04:45 GMT

Are you freaked out with all the negative press lately about rising interest rates?

One thing you can do to alleviate that fear is to educate yourself.

Let’s ask few questions – what is your current mortgage rate? How much are your monthly payments?

What would happen if your Fixed mortgage rates doubled, when it comes time to renew (typically 5 years)? Will you be able to afford your home? Will you have to adjust your lifestyle?

Does a doubling of the interest-rate double your mortgage payment? The short answer is NO it does not.

Let’s discuss the math and the logic.

I have used 25-year amortization, the maximum allowed for purchases with less than 20% down payment. This is usually the first-time home buyers – which tend to be the highest risk group.

Blog 5 GREAT Reasons To Provide a 20% Down Payment when Buying a Home

I’ve used a $100,000 mortgage as an example, which makes it easy to do the math for higher mortgages.

The net monthly payment increase, at the 5-year renewal would be $134.94 per $100K of the original mortgage balance.

The net monthly payment increase, at the 5-year renewal refinanced over 25 years would be $73.02 per $100K of the original mortgage balance.

Now for the Logic:

Think of how much money you made 5 years ago… do you make more money now? Do you think your household income will increase over the next 5 years? Do you think your additional income would be enough to offset what you would pay if your mortgage interest rate doubled?

Over 5 years, an average family would experience an increase in household income.

How do rising mortgage rates affect you personally?

After looking at the math and the logic, clearly a doubling of mortgage interest rates would be unlikely to cause any kind of significant crisis for most average homeowners, and there are options available:

refinancing your mortgage to lock into current rates
increase your current principal payment and accelerate your mortgage repayment – this way your principal amount is lower when you’re refinancing.

Rising mortgage rates are discussed frequently and will continue to be discussed, as long as people have mortgages.

The best way to you prepare for the adversity of higher interest rates, is to shrink your mortgage balance as much and as quickly possible, especially with the current low mortgage rates, so more of your money pays off the principal.

If you have any further questions about mortgages, let’s chat.

My services for a typical mortgage are FREE and I help people save money. I LOVE my job!

Kelly Hudson
Mortgage Broker
Mortgage Architects
Mobile 604-312-5009
Kelly@ KellyHudsonMortgages.com

KellyHudsonMortgages.com

Closing Costs to Consider When Buying a Home

Thu, 17 Mar 2022 22:11:06 GMT

To assist you in preparing for Closing Costs, when you purchase a home, I have created this document so that there won’t be any surprises come closing time!

Closing costs can vary greatly depending on what you are purchasing & where.

BLOG Don’t Forget the Closing Costs When You Purchase a Home

Please feel free to contact me with any questions you have regarding any of the below items.

$______________

Property Transfer Tax (PTT) All home buyers in BC pay Property Transfer Tax (except First Time Home Buyers under $500,000 or new purchases under $750,000). This is a cash expense, in addition to your down payment. PPT can not be rolled into your mortgage.

For more details & link to a PTT calculator
First-time buyers purchasing between $500K-525K? Click this link for the transition calculations

$______________

GST (currently 5%) on all new home purchases (if applicable)

$______________

Legal Costs & Disbursements

Legal costs – what your notary or lawyer charges for their services
Disbursements are costs that are paid out-of-pocket by your notary public or lawyer on your behalf in connection with your real estate transaction. Disbursements usually include the cost of land title and tax searches, land title registration fees, digital execution fees, agent’s fees, courier, postage, copies and other miscellaneous office expenses.

$______________

Interest Adjustment

This is the interest you will pay for receiving your mortgage money before the official start of your mortgage.
i.e., if your "completion" were on the 23rd of a 30-day month, and your first mortgage payment is on the 1st of the month, your interest adjustment would be 7 days interest.

$______________

Property Tax Adjustments Most municipal taxes are paid July 1st, for the calendar year BLOG BC Property Tax - What You Need to Know When Buying a Home

If you purchase a property before July 1st , the seller will be paying you for the days they owned the home after January 1st, and you will pay the city.
If you purchase a property after July 1st , the seller will have already paid the city and you will pay the seller for the days you own the property up to December 31st.

$______________

Adjustments - you pay for your share of costs, already paid by seller. i.e. if you take possession on July 15 – you will pay your share of electricity, heat, strata, property taxes (above) etc. Typical adjustments include:

BC Hydro
Fortis BC
Strata fee adjustments (if applicable)

$______________

Property value Appraisa l (included if you require mortgage default insurance i.e. CMHC) BLOG BC Property Assessment vs Home Appraisal

$______________

Home Inspection / Property Condition Inspection (optional)

$______________

Property survey certificate OR Title Insurance in lieu of survey

Title Insurance BLOG What is Title Insurance? Why Do You Need It?

$______________

Fire Insurance (if required by the lender)

$______________

Mortgage Penalty Payout (if a refinance)

$______________

Well Water/Septic Certificate (if applicable)

$______________

Moving Expenses, such as movers, Post Office Change of Address and Mail Forwarding service

$______________

Utility Connections (telephone, electricity and gas, cable, internet etc.)

$______________

Lender / Mortgage Broker Fee (if applicable)

$______________

GST (currently 5%) on all new home purchases (if applicable)

Kelly Hudson
Mortgage Broker
604-312-5009
Kelly@KellyHudsonMortgages.com
www.KellyHudsonMortgages.co m

4 Things to Consider When Refinancing Your Mortgage

Fri, 11 Feb 2022 23:15:34 GMT

What is mortgage refinancing?

Refinancing your mortgage is the process of “breaking” your current mortgage agreement and starting a new mortgage agreement with a new lender. Your new mortgage pays off your old mortgage, and you can borrow additional money or choose different terms from your original contract (assuming you have enough income for the higher debt).

Which kinds of refinancing are available?

In theory, any aspect of your mortgage can be renegotiated (rates, amortization, terms etc.). Do you want to spread your payments over longer to reduce monthly costs? Or secure a lower interest rate to make your mortgage more affordable?

If your home has a large amount of equity (which is when it’s worth a lot more than you owe on it), then you can use refinancing to release some of this value.

When your home rises in value, say you bought in $500,000 in 2019 and in 2022 your home is worth $700,000 (a lift of $200K), you can request your current lender (or a new lender), add some of your additional equity to your mortgage.

There are many great reasons people refinance their mortgage including:

Home repairs & renovations
Debt consolidation – rolling high interest loans/credit card balances into your mortgage
If you are finding that all your money is disappearing each month and you’re having trouble getting by, a new mortgage can help restructure your monthly debt payments giving you some breathing room
Getting a better interest rate.
Finance the education of you or your children,
Help your children buy their own home (gifted down payment)
Kick-start a business.
Purchasing second properties (recreational property or rental/investment property)

Although there are many great reasons to consider refinancing your mortgage, it’s not for every homeowner. Before moving forward, consider these four factors:

1. Your current equity

Your home equity refers to how much of your home’s value you own. When you refinance, you can borrow up to 80% of your home’s current value minus how much you still owe on your current mortgage (assuming you can afford the higher amount).

When refinancing a mortgage – maximum equity you can take out is 80%
When refinancing into a Home Equity Line of Credit (HELOC) – maximum equity you can take out is 65%.
Keep in mind when refinancing your mortgage, it comes with all the same processes and fees you experienced when you first got your home loan. You need to income qualify for the higher mortgage amount using the current stress tested rate, along with having great credit. There are costs to refinancing (see below).

2. The cost of refinancing

Refinancing involves a few associated costs, so it’s important to calculate whether you stand to gain more from the deal than you’ll spend.

Penalties: If you’re breaking your mortgage before the end of its term, your lender is going to charge you a penalty. BLOG Mortgage Penalties – Ouch… How Much??

The cost to break your mortgage will vary depending on how early you’re breaking your existing mortgage contract as well as your specific lender.

Variable rate penalties are typically three months interest
Fixed rate penalties are typically an interest rate differential
It’s important to factor in penalties when breaking your mortgage contract.
Find out in advance from your current lender what the penalty will be.

Home appraisal: Your lender will need a current valuation of your property to determine how much equity you have in your home.

Closing costs: These can include legal fees, home appraisal, title insurance, administrative fees, reinvestment fees, and a discharge fee along with the costs to re-register your new mortgage at the land titles office.

3. The current interest rate

A common reason Canadians refinance their mortgage is to take advantage of lower interest rates. Even a 1% difference can save hundreds of dollars a month on a large mortgage. The long-term savings with the new rate may be worth the upfront cost of refinancing.

With interest rates at a historic low, many homeowners are opting to refinance now so they can lock in their rates before they rise again.

4. Finding the right mortgage for you

When you refinance, you have the chance to select new mortgage terms. You aren’t tied to your same lender or even the same type of loan you had previously. The best thing you can do is to consider all your options with a mortgage broker.

A low-interest rate is absolutely important, but even more important is to make sure you’re paying the least amount of money to your bank over your term . Interest rates definitely factor into this but having a flexible mortgage with the right features will protect you and your valuable equity.
Some lower rate mortgages look good on the outside but can be restrictive and come with large penalties.
A low-rate mortgage with poor features, coupled with bad advice, will cost you dearly. You need to go into the mortgage process with eyes wide open.
There is an interesting stat in Canada - 60% of homeowners break their mortgage around the 36-month mark. Lenders are counting on this; paying a high penalty is factored into their projections and their bottom line. BLOG 9 Reasons Why People Break Their Mortgages

Do the math - with preliminary numbers in hand, you’ll know if refinancing makes financial sense for your situation.

Refinancing is a financial tool that can make a significant difference with homeowner’s current financial picture. If you have reviewed the information above and want to evaluate the pros and cons of a mortgage refinance, let’s set up a time to chat.

You work hard to build the equity in your home — make it work for you!

Kelly Hudson
Mortgage Broker
604-312-5009
Kelly@KellyHudsonMortgages.com
www.KellyHudsonMortgages.com

BC Property Assessment vs Home Appraisal

Fri, 07 Jan 2022 21:04:44 GMT

What is BC Assessment?

It’s January and in BC homeowners have started receiving their property assessments.

To see the most recent assessment for a property, click on BC Assessment and type in the property address.

The real estate market is the single biggest influence on market values. Market forces vary from year to year and from property to property. The market value on an assessment notice may differ from that shown on a bank mortgage appraisal or a real estate appraisal because BC Assessment’s appraisal reflects the value as of July 1 of 2021 , while a private appraisal can be done at any time.

Use your BC Assessment as a starting point for the value of the property you're planning for your home purchase… Do not rely on BC assessment for the exact value of the property you’re considering purchasing. Markets in BC change quickly both increasing and decreasing in value depending on the area and the economy.

What is a Home Appraisal?

An appraisal is a document that gives an estimate of a property’s current fair market value.

Often there is no connection between BC Assessment and appraised value. Therefore, lenders require an appraisal – an independent evaluation of the property's value at this point in time.

Primarily home appraisals are completed at the request of a lender. Lenders want to know the value of a property in the current market before they are willing to lend against the home.

When an appraisal is done, consideration is given to the property, the home, its location, amenities, as well as its physical condition.

Who pays for the Home Appraisal?

Typically, the borrower pays the cost of the appraisal, and upon completion, the appraisal goes directly to the lender (does not go into the home buyer’s hands).

I know it sounds odd, but brokerages, lenders and appraisers cannot just show the buyer the appraisal on a property, even though the borrower paid for it.

Think of an appraisal as an administrative fee for finding today’s current value of the property

What if you offered $475,000 and the home appraisal came in at $450,000?

The main reason the buyer pays for the appraisal, is that if the mortgage doesn’t go through, the lender does not want to be on the hook for paying for the appraisal and not getting the business.

Other reasons for getting an Appraisal:

to establish a reasonable price when selling real estate.
to establish the replacement cost (insurance purposes).
to contest high property taxes.
to settle a divorce.
to settle an estate.
to use as a negotiation tool (in real estate transactions).
because a government agency requires it.
lawsuit.

Getting your home ready for an Appraisal:

The appraiser report involves a report including pictures of the home and property with the appraiser’s value of the property, along with a short summary of how that information was derived.

BLOG Need an Appraisal – 7½ Tips for Success

Home Appraisal Costs

Appraisal costs do vary. Most home appraisals start around $400 (plus tax) but they can go much higher depending on:

location
how expensive the home is
complexity of the appraisal
how easily the appraiser can access comparable data.

BC Assessment vs Appraised value. Lenders want an appraisal – a professional, independent evaluation of a homes value now!

Are you thinking of buying a home? As you can tell there is lots to discuss, let’s have a chat!

Kelly Hudson
Mortgage Broker
604-312-5009
Kelly@KellyHudsonMortgages.com
www.KellyHudsonMortgages.co m

Mortgage Purchase Plus Improvements - December 2021

Thu, 09 Dec 2021 00:27:39 GMT

Purchase Plus Improvements Mortgage

Not every home is move-in ready. Have you found your dream home, only to find out that it needs TLC and you need to do some renovations? The costs of renovations can really add up, and you might not be able to afford them. Luckily, there is a program that will allow you to purchase a property, that also covers the costs of renovations—a purchase plus improvements mortgage.

With one manageable mortgage, you can have your home — plus add in the costs of renovations — sometimes with as little as 5% down.

What is purchase plus improvements mortgage?

This program allows you to borrow the cost of renovations (up to a certain percentage) and add it to the home price, rolling it all into one easy-to-manage mortgage payment.

Once you take possession of your new home, you can start the upgrades immediately. This type of mortgage comes with a few extra requirements before signing, such as providing quotes for the work that needs to be completed.

There is a stipulation, however, that requires improvements to be permanent in nature, including items such as paint, cupboards, flooring, roofing, furnace, etc. As such, appliances and other non-permanent fixtures are not covered within a Purchase Plus Improvements mortgage.

7 Steps: How the Purchase Plus Improvements Mortgage Works

1. You can get a mortgage approved with as little as a 5% down payment and include some home improvement costs into the mortgage amount.

The renovations must increase the property value.

2. When applying for a purchase plus improvements mortgage, the contractor’s quote for the work to be completed, MUST be provided upfront to the lender, along with your offer to purchase the home.

In other words, when you submit your mortgage application, lenders need to have the contractor quote(s) outlining the work to be done and what the cost will be.
In most cases, the improvements work will need to be done by a licensed contractor
Renovation Time Limits: typically, the improvements need to be completed within 90 days, (some exceptions can be made).
The Purchase Plus Improvements program is NOT available after the mortgage has been funded.

3. The contractor(s) quote needs to outline the work to be done and the cost for said improvement.

4. Once your home purchase has completed, the homeowner must come up with the funds to complete the home improvements. Funds could come from a line of credit, credit card, store credit card (i.e. Home Depot), gifted money or credit from the contractors you will be using. The bottom line is that you need to figure out how to pay for the improvements upfront.

You will not receive any funds for the renovations until after the work is completed and reviewed by the bank representative.

5. Once the renovations/improvements have been completed, an inspection report from an appraiser is required so the lender can confirm that the improvements were completed and are good quality.

Once you prove the improvements requested are finished, the lender will allow your lawyer/notary to release to you the purchase plus improvement funds

6. Once the improvement funds are released, you use the money to pay off your improvements.

7. With the upgrades done, and all the mortgage details taken care of, you can fully enjoy your new home-sweet-home.

The Purchase Plus Improvement program is available with the best mortgage rates, including fixed and variable.

Purchase Plus Improvements is a great program, which may make it easier for you to decide which home is best fit for your situation.

Would you like more information regarding Purchase Plus Improvement mortgages? Give me a call and let’s have a chat.

Kelly Hudson
Mortgage Expert
Mortgage Architects
604-312-5009
Kelly@KellyHudsonMortgages.com
www.KellyHudsonMortgages.com

Rent-To-Own When Buying a Home - It’s Complicated!

Thu, 11 Nov 2021 22:48:47 GMT

The three biggest requirements of buying a home typically include:

1. Great credit

BLOG 8 Credit Rules You Need to Know, Before You Buy a Home

2. Provable income to support the mortgage payments

3. Down payment & closing costs

If you lack the resources to buy a home the traditional way or perhaps need time to repair your credit, you may want to consider purchasing a home through a rent-to-own program.

BLOG 7 Tips for Buying Your First Home in BC

In a nutshell – buyer beware!

When a seller advertises that they will consider doing a rent-to-own deal, they will be looking for someone to lease the house with two contracts. One contract will be a regular rental-lease contract, and the second contract will deal with the purchase part of the home.

The home purchase contract will be for usually a period of one year to three years.

Many people think that the seller will simply set aside some of the rental money as a down payment contribution, but this is not exactly the case.

The buyer has to pay the regular amount of market rent, and in addition they will have to pay an additional monthly installment, that will be credited towards the down payment.

Critical information to start the process

1) Hire a lawyer who has extensive experience with Rent-To-Own agreements to write up the Rent-To-Own contract.

2) Rent-To-Own purchase agreement signed by all parties.

3) Appraisal of the property prior to signing the Rent-To-Own agreement.

4) A market rent appraisal of the property done prior to signing the Rent-To-Own agreement.

5) The monies being put towards the “deposit”, (typically $500-1000/month above the rent), MUST be refundable to the renter, should they decide not to purchase at the predetermined, contracted time.

6) The monthly amount above the rent (which becomes part of the down payment) must be kept in a separate account to show accumulation of the “down payment” funds.

7) Keep records for EVERY Rent & Monthly installment payment made to seller.

At the end of the Rent-To-Own contract, you must be able to qualify for a mortgage for the remaining balance of the mortgage.

It is imperative that you get independent legal advice (with an experienced Rent-To-Own Lawyer) for any Rent-To-Own contract that you sign.

The Pitfalls

1) There is NO guarantee that you will qualify for a mortgage at the end of your term; hence you may lose some/all of your deposit.

2) You are buying a home based on an estimated future value, so you could be paying an over-inflated price. What happens if your house de-values over the term of your Rent-To-Own contract?

3) If you end up with a “private” mortgage, there are hefty fees & higher interest rates.

4) You need an initial deposit (usually 5-10% of the value of the home).

BLOG 5 GREAT Reasons To Provide a 20% Down Payment when Buying a Home

5) Terms are usually 1-3 years, so if you’re credit/income challenged, you may not qualify for a mortgage at the end of your contract.

6) You must complete certain purchase/rent-to-own documents up front (for lender’s future use) or you won’t get the mortgage (check with your lawyer to see which documentation you require).

These items can include: up front appraisal, option purchase agreement, market rent reports and more. These documents must be completed and dated at the start of your agreement.

7) Very few lenders will mortgage on Rent-To-Own.

8) If you have less than a 20% down payment and need mortgage default insurance – you must comply with another set of lending rules with the Mortgage Default Insurers.

BLOG Everything You Need to Know about Mortgage Default Insurance

Rent-To-Own does have restrictions compared to purchasing a home outright.

The property is still owned by the landlord, which means that you will have to follow the rules that the landlord has. Violating your lease, such as having pets when your landlord does not allow pets, might mean that your right to purchase agreement will become null and void, meaning that you will lose your option fee and rent credits deposit.

Do you have any questions about buying your first home, let’s have a chat.

Kelly Hudson
Mortgage Broker
Mortgage Architects
Mobile: 604-312-5009
Kelly@KellyHudsonMortgages.com

Understanding Condo Fees in BC

Fri, 22 Oct 2021 17:41:03 GMT

If you’re interested in buying your first condo or townhouse then there are some additional costs you need to consider.

First-time condo/townhouse buyers will usually be confused by the monthly maintenance fee that is charged by condo buildings. They can add up to a large percentage of your total housing costs when you combine them with your property taxes and mortgage payments. But what is a condo maintenance fee (also called a condo or strata fee) and what will it cover? How does a strata fee compare to the costs associated with owning a house?

Every building requires maintenance to stay in good condition. To think otherwise would just be naïve.

The maintenance/condo/strata fee is your share of the total cost of maintaining the whole building.

The condominium corporation is registered as a non-profit, therefore the strata council must use the money generated for the maintenance and operation costs of the condominium.

The strata fee each unit pays is calculated by dividing the total expenses of the unit entitlement (the square footage of each strata lot). This means that a two-bedroom unit will have higher strata fees than a studio apartment. The condo fees are also recalculated each year and may go up or down depending on the annual operating budget of the building.

The strata fee will vary between different areas and buildings. The rate will be determined by several factors including the age of the building, the management style, the contingency reserve fund (CRF) and amenities.

Maintenance/condo/strata fees in Greater Vancouver typically range from $0.30 to $1.00 per square foot.

Where Does the Money from the Strata Fees Go?

There are two funds that must be maintained by every strata corporation in BC . They are the operating fund and the contingency reserve fund (CRF).

The operating funds are used to pay for the regular expenses that come up over the course of the year.

Some items are legally required to be included in the condo fees, these include insurance, Contingency Reserve Fund, and exterior maintenance. The other items are optional and depend on the building itself, the bylaws of the condo, and the preferences of the condo owners.

Condo fees can be used to pay for the following things:

Insurance
Contingency Reserve Fund
Exterior Maintenance
Electricity
Heat
Landscaping Costs
Professional Management
Water and Sewer
Parking
Amenities
Recreational Activities
Security Personnel
Cable TV and Internet
Caretaker Costs

Condo fees are based on the annual budget, most condo boards/strata councils set up monthly payments for homeowners.

Sometimes the heating, cable and internet costs will be included in the strata fee. This may increase the strata fee cost; however, those services could be offered for cheaper than it would cost to purchase them independently.

Some of the strata fee may go to cover amenities. Of course, it’s nice to have a gym and a swimming pool, but are you going to use them?

Will they be worth your money?
Remember that you must pay for amenities included in your strata fees even if you don’t use them.

Every condo is required to maintain a contingency reserve fund (CRF) by law. This fund covers any expenses that pop up less than once a year. It’s typically used in the upkeep of the building, such as financing a new roof, siding, windows/doors, parking, repairing heating and plumbing equipment.

The depreciation report can be used to help a strata council prepare for both annual and long-term repairs. It will also give an idea on the financial obligations for both the present and the future. Strata corporations stay in control of their long-term planning by making CRF contributions part of the annual budget. The amount for each year is decided on by a majority vote of the owners at the annual general meeting.

Do Your Homework

Smart condo buyers should review Strata and Annual General Meeting minutes along with the depreciation report to get a history of the building and any current outstanding issues.

The strata minutes will also provide you with a look at the management style of the building.

Are the problems in the building fixed correctly, or are they just being repaired with temporary solutions that keep maintenance fees down?
Does the management provide regular maintenance such as window cleaning and power washing?
Higher strata fees in a building are usually the result of regular maintenance which will keep strata fees down in the long run.

You can also have a professional home inspector review the minutes to determine if what they see during the inspection is reflected in the minutes. The home inspector will help you gain an understanding of any special assessments and the depreciation report.

One last thing to consider is the “special assessments” category. These are one-time fees used for repairs that are not covered by the Contingency Reserve Fund. They may also be quite substantial, especially if you live in an older building.

One of the most important aspects of buying a condo is understanding what is covered by the monthly maintenance fees, so you can compare with other condos.

If you have questions about buying your first home, let’s have a chat.

Kelly Hudson

Mortgage Broker

Mortgage Architects

Mobile: 604-312-5009

• Canada Mortgage and Housing Corporation

If Your Marriage is Ending and You Want to Keep the Family Home, Consider a Spousal Buyout

Thu, 23 Sep 2021 20:50:36 GMT

In 2020 in Canada, there were about 2.71 million people who had obtained a legal divorce and did not remarry. This figure has been steadily increasing since 2000, when there were about 1.88 million divorces in Canada.

What do you do about your home/mortgage if your marriage is coming to an end?

There are a few options.

1. You can sell the family home and split the equity in the home.

• Assuming there is enough equity, each party could take their share, go out and buy a new home.

2. OR if you have enough cash, you could pay out your spouse for their share of the equity in the home.

3. OR for those that want to remain in their home, especially those with children, the Spousal Buy-Out Program may be a good option.

If you decide to buy out your ex-spouse, you will need to refinance the property as banks/lenders will not allow you to simply take over someone else's loan or remove an individual from your loan agreement. You must requalify for the mortgage from Square 1.

• If you are financially stable and can qualify for a mortgage on your own, buying out your ex may be the right option for you.

The Spousal Buy-Out Program , backed by all three of Canada’s mortgage default insurance providers allows one party to refinance the shared home up to 95% of its appraised value.

• Sagen™

• Canada Guaranty

BLOG Everything You Need to Know about Mortgage Default Insurance

To qualify, both you and your ex-partner must currently be on the mortgage for the family home.

• The mortgage default insurer, may allow you to use the Spousal Buy-Out Program to pay off other debts outside the separation agreement, further assisting with the transition.

The cost of purchasing a home, can be high. Fortunately, the Spousal Buy-Out Program was designed to help.

• It can also diminish the costs of home ownership by allowing individuals to bring on a co-signer, such as an existing family member or even a new partner, to assist.

BLOG Would a Co-Signer Enable You to Qualify for a Mortgage?

Requirements for a Spousal Buyout Product

The rules for the 95% mortgage product are quite stringent, starting with:

1. Before a marriage can end, couples must go through a legal separation. When both parties are sure that the marriage is over, a legally binding separation agreement must be drafted, which covers the custodial arrangement for any kids and spousal support.

• To use the spousal buyout mortgage plan, in Canada you MUST have a legally authorized separation agreement. This agreement will also lay out how assets will be divided up, including the home/mortgage.

2. An appraisal. An appraisal report will already have been obtained to determine the Equalization of Assets during a divorce.

• Regrettably, in most cases, the same appraisal is not acceptable to a lender unless it was originally ordered by a third party (such as a Mortgage Broker or lender or lawyer) for the dual purpose of Equalization of Assets and Financing.

• Also, an Appraisal Report is acceptable for 90 days (less with some lenders). If the appraisal was ordered early in the divorce proceedings, another one may be needed by the time the details are settled.

•If the value changes over that time, the negotiations between parties usually start again to determine payout amounts.

3. An Agreement of Purchase and Sale between the parties.

4. Debt Payout List.

• This is an optional one-time option for paying off additional debts outside of the separation agreement. You can only use the proceeds to buy out the other owner’s share of equity or pay off joint debt as explicitly noted in the signed separation agreement.

Calculate Mortgage Payments

• If you are simply looking for rough numbers on qualifying without a credit check or gathering documents, Download my Mortgage Planner which allows you to run multiple scenarios to see if the Spousal Buyout Program is an affordable option for you.

Going through a Divorce or Separating is stressful and having to deal with selling a home you love certainly compounds that stress. The Spousal Buyout Program allows you to maintain some of your routine and security by ensuring you – and your children – can remain in the home you love.

If you are facing a marital breakdown, make sure that you reach out to your trusted Mortgage Broker to ensure you have all the information you need to make the right decision regarding your mortgage and your home.

Let’s have a chat to discuss your next steps.

Mortgages are complicate… BUT they don’t have to be… Engage a Mortgage Expert.

Kelly Hudson

Mortgage Expert

Mortgage Architects

Cell 604.312.5009

7 Tips for Buying Your First Home in BC

Thu, 15 Jul 2021 18:03:09 GMT

As a BC Mortgage Broker, I am often asked "what do I need to know when buying my first home?"

Buying your first home is both exciting and nerve wracking. My goal is to simplify and educate you about mortgage financing, so you make good decisions based on your situation.

Being prepared is the first step. The decision to purchase your first home can be a huge, life-changing event and you need to know exactly what you are getting into.

To get you prepared with the knowledge you need, check out my 7 tips to consider when you buy your first home in BC.

1. Strengthen your credit rating

It’s pretty simple: the higher your credit score, the lower your mortgage interest rate will be.

Spend the time now to improve your credit. Check your credit report. Many credit reports have errors, so you need to ensure that your credit bureau is current and correct.

ALWAYS pay every single one of your bills on time. Set up automatic payments if you have had any late payments over the last couple of years.

Stop applying for any new credit a year before you are considering buying and continue until you sign the closing papers on your home. Spend a maximum of 30% of credit limits on your credit cards.

BLOG: 8 Credit Rules You Need to Know, Before You Buy a Home

2. Use a Mortgage Broker and figure out how much you can afford to spend

The home buyer's mantra: Get a home that is financially comfortable.

Mortgage Affordability: you have two options:

1) If you are simply looking for rough numbers on qualifying without a credit check or gathering documents, Download my Mortgage Planner which allows you to run multiple scenarios:

2) If you are looking to get a full Pre-Qualification, my process is a little different than others. I typically start with clients completing an online mortgage application to gather your basic information. I then run your credit bureaus, after which, I will provide you with a tailored list of supporting documents.

In my experience, having these documents up front is vital to ensure that the budgets and details provided to you are accurate and your mortgage financing is based on your specific information.

Kelly’s recommendation: 1 year+ prior to going home shopping, estimate the mortgage payment for the home in your intended price range, along with other expenses (such as taxes, strata, insurance and utilities). Then bank the difference between the “new” home payments and what you're paying now. Not only will that simulate ownership, but it also helps you save for your down payment!

3. Save your down payment

Start now to build your down payment. To avoid paying Mortgage Default Insurance you need to have a minimum 20% down payment.

Building your savings account, beyond what you need for the down payment and closing costs. Lenders want to see that you're not living paycheck to paycheck. Having a rainy-day fund will make you a much more desirable candidate for lenders.

4. How long will you live in your new home?

Short-term home ownership can be an expensive proposition.

The transactional costs of buying and selling a house can be substantial including: realtor’d fees, legal fees, Property Transfer Tax, selling in a down market, moving, etc.

If you don’t plan to live in your new home for at least 3-5 years, you may not gain enough equity to make selling worthwhile.

5. How much house you need?

Buying a cheaper, smaller home might sound like a good place to start but could end up costing you more if you need to move due to changes in your lifestyle, including a growing family. Then again, buying more house than you currently need will cost you more with higher mortgage payments, higher maintenance, energy and tax costs.

Prioritize your housing wish list. They say that the 3 most important things to think about when buying a home are location, location, location. In Greater Vancouver your first choice for location i.e. Kitsilano or Yaletown may not be within your means. You also need to think about how the new home space will be used and whether it will fit your lifestyle now and in the future.

6. Remember closing costs.

While you’re saving your down payment, you need to save for closing costs as well.

BLOG: Don’t Forget the Closing Costs When You Purchase a Home

In BC you need to pay Property Transfer Tax

BLOG: BC’s Property Transfer Tax & First-Time Home Buyers

7. Shop for a Realtor that has your best interests in mind.

Interview at least three Realtors. Get referrals from people you trust who have recently bought or sold, including me, your mortgage broker. I work with a lot of realtors, some of whom are outstanding in their field. Once you’ve decided which Realtor is the best fit for you, they can help you focus your search to find your perfect home.

There is no cost for the Realtor for the home buyer since the home seller pays the commission for both the buyer & sellers realtor.

Besides the 7 tips I’ve listed above, there are many other things you should need to be aware of prior to buying your first home.

Let’s have a chat to discuss your next steps for home ownership and mortgage financing.

Mortgages are complicated… BUT they don’t have to be… Engage a Mortgage Expert.

Kelly Hudson

Mortgage Expert

Mortgage Architects

Cell 604.312.5009

Kelly@KellyHudsonMortgages.com
www.KellyHudsonMortgages.com

4 Things That Will Kill Your Mortgage Approval… Prior to Getting the Keys to Your New Home

Tue, 15 Jun 2021 19:00:20 GMT

You found your dream home and have an accepted offer. You supplied all the needed documentation to your mortgage broker & LENDER, and you are waiting for the day that you go to the lawyers to sign the final paperwork and pick up your keys on possession day...

Suddenly your lawyer calls to say that there is a problem. Why is this happening? Everything has been signed and conditions have been removed.

What many home buyers do not realize is that your financing approval is based on the information the lender was provided at the time of the application. If there have been any changes to your situation, the lender is within their rights to cancel your mortgage approval.

Short Version: It is critical that you maintain the same financial position that you were in when you applied for your mortgage. The lender reserves the right to withdraw financing if your financials change and you no longer qualify for the mortgage. In other words:

don’t apply for any new credit & don’t have your credit bureau run again (in case it lowers your score)
don’t make any big purchases and increase your debts from what they currently are.
make sure that your employment situation stays the same.
make all your payments on time!

Longer version: Here are 4 things you absolutely must avoid to ensure that you get financing for your dream home.

Credit – Hard inquiries on your credit bureau could impact your credit score, including a new credit card (or 2) could lower your credit score.
BLOG 8 Credit Rules You Need to Know, Before You Buy a Home
BLOG Solving the Puzzle – 5 factors used in determining your Credit Score

Debt - A week or two before your possession date, the lender can obtain a copy of your credit report and look for any changes to your debt load. Your approval was based on how much you owed when you applied. Buying a new car or items for the new home need to be postponed until after you take possession of your new home.
Don’t be fooled by “Do not pay for 12 months” sales campaigns. You now owe this money regardless of when the payments start. Don’t buy a new car and don’t buy furniture for the new home. This will increase your debt ratio and could nullify your financing.
Don’t Co-Sign loans for someone else
BLOG Would a Co-Signer Enable You to Qualify for a Mortgage?
Before making any decision on a large purchase, check with your Mortgage Broker. You need to ensure that your mortgage affordability still works with the additional debt.

Changing Jobs
There are many opportunities that some with a new job, however before deciding to change your employment situation, keep the following in mind:
Quitting/being terminated from your job. Lenders want to ensure you can afford your mortgage up until your possession date. If they find out you no longer have employment income and can’t afford your mortgage payments, they can pull your mortgage funding.
If you are accepting a new position, you need to check if you will be on probation. Mortgage lenders typically will NOT accept employment income until you’ve passed probation.
If your income situation is changing
i.e. bonuses, overtime & commissions, lenders typically require a 2 year history to prove the additional income is ongoing, before including them with your annual income.
If you are considered a contractor or self-employed – you must provide 2 full calendar years history (plus your Notice of Assessment tax returns). BLOG Self Employed?? Here’s What You Need to Know About Mortgages

Making Late Payments
While waiting for your mortgage to complete, make sure you pay all your debts on time!
The lender can run your credit bureau anytime up until possession date… if they see a lower credit score and/or you’ve missed payments or increased your debt load they can pull your mortgage funding.

Getting approved and staying approved for a mortgage does not have to be difficult – you need to work with your mortgage broker to ensure there are no surprises.

Mortgages are complicated, but they don’t have to be… Engage an expert!

Kelly Hudson

Mortgage Broker

Mortgage Architects

Mobile: 604-312-5009

First-Time Home Buyer Incentive Update

Thu, 20 May 2021 04:31:42 GMT

First-Time Home Buyer Incentive (FTHBI) Update!

The first-time home buyer incentive is a Government interest-free loan for qualified first-time home buyers to help to reduce their monthly mortgage payment without increasing their down payment.

The FTHBI contributes between 5% and 10% of a first-time buyer’s down payment.

By delaying the repayment of this interest-free amount, first-time home buyers can save money over the course of their mortgage. Launched in September 2019, the first-time home buyer incentive is offered by the Canada Mortgage and Housing Corporation (CMHC).

Please note, the first-time home buyer incentive is a shared equity mortgage . That means the Federal Government will technically be a part-owner of your home, although you’ll have exclusive access to it. The government shares in any increase or decrease in the home value until the loan is repaid within 25 years (or when you sell the home).

Expanded FTHBI Program Now Live!

First time home buyers purchasing a home in the Toronto, Vancouver, or Victoria Census Metropolitan

Areas are now eligible for an increased Qualifying Annual Income of $150,000 (instead of $120,000) and an increased total borrowing amount of 4.5 (instead of 4.0) times their qualifying income.

Find out if the home you are looking to buy is part of the Toronto, Vancouver or Victoria Census Metropolitan Area!

Use our updated calculator to review different scenarios and inform your decision

The FTHBI works like this:

You receive a 5% incentive of the home’s purchase price of $200,000, or $10,000. If your home value increases to $300,000 your payback would be 5% of the current value or $15,000.
You receive a 10% incentive of the home’s (new build) purchase price of $200,000, or $20,000 and your home value decreases to $150,000, your repayment value will be 10% of the current value or $15,000.

Just as the name implies, this incentive is for first-time homebuyers. You are considered a first-time homebuyer if:

you have never purchased a home before.
you did not occupy a home that you or your current spouse or common-law partner owned in the last 4 years (the 4-year period begins on January 1 of the fourth year before the Incentive is funded and ends 31 days before the date the Incentive is funded)
you have recently experienced the breakdown of a marriage or common-law partnership (even if you don’t meet the other first-time home buyer requirements)

Use this calculator to find out if you qualify for the First Time Home Buyer Incentive.

Click here to Get more details on the First-Time Home Buyer Incentive (PDF)

The bottom line… Is the first-time home buyer incentive right for you? Maybe… Maybe not…

You need to decide whether you are eligible for the incentive. Then, crunch some numbers to determine your mortgage affordability with and without the incentive.
If you want to buy a home that’s more expensive than the maximum allowed under the FTHBI then it might not be for you. On the other hand, understanding the different options available to you might influence your purchasing decision.

It’s impossible to accurately predict future home prices and, therefore, how much the incentive will actually cost you, since you are sharing 5-10% of your home equity with the Federal Government with the FTHBI.

Let’s have a chat to help you determine if the first-time home buyer incentive is right choice for your situation.

Mortgages are complicated, but they don’t have to be… Engage an expert!

Kelly Hudson

Mortgage Broker

Mortgage Architects

Mobile: 604-312-5009

BC Property Tax

Wed, 07 Apr 2021 19:29:16 GMT

BC Property Tax - What You Need to Know When Buying a Home

When you own, lease or gain an interest in a property (e.g. land, home, etc.) located in the province of B.C. you must pay property taxes for every year you own your home.

Property taxes in B.C. are due the first business day after July 1.

Home Owner Grant

The home owner grant reduces the amount of annual property tax you pay for your principal residence.

Find out what you may qualify for as a B.C. resident.

If you buy a home at another time, for example in September, unless the property seller has stated they are responsible for pay property taxes in the Contract of Purchase and Sale, then you must pay your share of the year to avoid a penalty.

Consider these examples:

Before July 1

If you buy your home before July 1 or before the taxes are fully paid, you’ll receive the sellers part of the property taxes. You’ll be responsible for paying the total amount of the property taxes.

• Possession date: April 1

• Taxes: $3,500 less $570 (Home Owner’s Grant) = $2,930

• January 1 to April 1, 2015 is 90 days. $2,930.00 x 90 days = 26,370 ÷ 365 days in a year = $722.46

You’ll receive $722.46 from the seller towards total cost of the property taxes, which you will pay in full by July 1.

After July 1

If you buy your home after the seller has paid for the full tax year, you’ll have to reimburse them.

• Possession date: September 1

• Taxes: $3,500 less $570 (Home Owner’s Grant) = $2,930

• September 1 to December 31, 2013 is 122 days. $2,930 x 122 days = 35,746 ÷ 365 days in a year = $979.34

You’ll need to reimburse the seller $979.34 on the Statement of Adjustments to compensate them for already paying the taxes for the full year.

BC Property Tax updates:

February 16, 2021

Retroactive home owner grant applications for 2020 are now being accepted online. Learn more about applying for a retroactive grant and about other information updates at gov.bc.ca/homeownergrant

December 31, 2020

The home owner grant application process has changed.

Effective 2021, residents in municipalities no longer apply for the home owner grant through their municipal office. Everyone will now apply directly to the province using a new online system that’s easy to use and will process applications faster.

The system will be available in early 2021. Visit gov.bc.ca/homeownergrant for more information.

Mortgages are complicated, but they don’t have to be… Engage an expert!

Kelly Hudson

Mortgage Broker

Mortgage Architects

Mobile: 604-312-5009

Cash Back Mortgages – 6 Things You Need to Know

Mon, 08 Feb 2021 19:33:26 GMT

You often see Cash Back Mortgage ads as a lure from the major banks offering cash back incentives on their Mortgage products. Cash back mortgages are becoming increasingly popular among home buyers, particularly those who have limited cash. *Cash Back funds cannot be used for your down payment.

What is a Cash Back Mortgage? The deal is simple: some mortgage lenders offer cash back programs, allowing a 1-5% of the property’s Mortgage value to be rebated to the borrower upon closing. The bank gives you cash up front to use however you want, except as the down payment.

Purchasing a home comes with many expenses besides saving for the down payment. The cash-back funds can be used for covering closing costs, moving expenses, renovations, paying off debt… any reason you may need additional cash.

Borrowers should be aware that Cash Back products come with catches:

1) Higher interest rates. The cost of the upfront cash is a higher interest rate, depending on how much “Cash Back” you get. The higher interest rate is what pays for the cash the bank is “giving” you.

With the Cash Back mortgage, the homeowner could pay a significantly higher amount of interest over the term of the mortgage.

Homeowners need to work with their mortgage broker to crunch the numbers and decide on the best option for their situation:

Continue save for your down payment & closing costs

BLOG Would a Co-Signer Enable You to Qualify for a Mortgage?

Overpay in interest, with the hopes of becoming a homeowner and eventually compensating for the higher interest rates with a possible increase value in the property.

$38,000 difference over 5 years. It’s pretty clear why a Cash Back Mortgage may not be a great deal for the home buyer.

2) Cash back mortgages are only available on fixed-term mortgages of five years. The mortgage must be insured or insurable so that means the property value can’t be any higher than $999,999.

3) Claw back penalties: If you need to break your mortgage early, whether to sell or refinance your home before your 5-year mortgage term is complete.… you have to pay the Penalty PLUS return the Cash Back portion to the bank. The Cash Back Penalty is sometimes prorated OR sometimes you need to pay the full amount back, depending on the lender. Check the fine print of your mortgage contract.

4) Variable rate mortgages are not available for Cash Back.

5) Limited availability: Most lenders offering Cash Back Mortgages are looking for A+ borrowers with a solid credit profile, steady provable income, and typically 5% or more down payment.

6) Cash Back mortgages are available for purchases and mortgage transfers of owner-occupied homes only and not second homes or rental properties.

READ the FINE PRINT. Many people are so excited about the cash back (FREE money who wouldn’t be excited!!!) , they miss the fine print on lender’s websites and in their mortgage contract. When a deal seems to be too good to be true, there is always a catch… There is NO Free lunch!

Cash Back mortgages are not offered by all lenders. As a mortgage broker, I have several lenders that offer various types of cash back mortgages. We will review your personal situation, crunch the numbers to ensure that you are fully aware of all the pros and cons of committing to a Cash Back mortgage.

If you are interested in learning more about a Cash Back mortgage or if you currently have a Cash Back mortgage and have questions, let’s have a chat.

Buying a home is both: exciting and nerve wracking. My job is to simplify and educate you about mortgages, so you make good decisions based on your situation.

Kelly Hudson
Mortgage Expert
Mobile: 604-312-5009
Kelly@KellyHudsonMortgages.com
www.KellyHudsonMortgages.com

What is Title Insurance? Why Do You Need It?

Tue, 10 Nov 2020 19:48:00 GMT

When you are buying a home, you need to make a lot of decisions in a short time. Regardless of how prepared you are, there are a lot of moving parts and it can feel overwhelming.

When you use mortgage financing to purchase a Canadian residential property, your lender will almost always require you to buy title insurance to cover the original mortgage amount.

You will have a Title Insurance discussion with your lawyer or notary just before your mortgage finalizes, when you are signing your final mortgage documents.

In the past, lenders required clients to provide a survey certificate, which is more expensive (combined it with a lawyer’s opinion of title), which is more costly and is also getting harder to find these days.

Over the years, this requirement has changed. Now, most lenders in BC require title insurance for all properties in lieu of a survey certificate.

Title insurance is generally purchased at the time your mortgage closes. In BC, for purchases under $1 million, title insurance costs approximately $200-250.

Title Insurance is a one-time cost that is usually included in your final closing costs.

What is title insurance and why is it important?

Title insurance is designed to protect the lender (and you, should you buy the personal Buyer Title Insurance policy) against title fraud and potential defects relating to the title of your home.

Some of the risks that title insurance protects you against include:

If an innocent homeowner is defrauded through transfer of their title and the fraudster who then takes out a mortgage and takes off with the money, then the lender now bears the risk of loss. This could make the small cost of Title Insurance worth it for you in BC.

If you are considering the purchase or refinance of a home, consider title insurance. Talk to your Real Estate lawyer/Notary to understand the benefits of Title Insurance for your situation.

Mortgages are complicated… you need to engage an expert!!! Give me a call and let’s discuss a mortgage that works for you (not the bank)!

Kelly Hudson

Mortgage Expert

Mortgage Architects

Mobile 604-312-5009

Mortgage Penalties – Ouch… How Much??

Tue, 13 Oct 2020 19:12:00 GMT

Buying a home is both exciting and nerve wracking! Everyone's home purchasing situation is different, based on the 4 strategic priorities that every mortgage needs to balance:

The details in the mortgage contract can far outweigh the rate being offered.

When looking at a mortgage – Interest rates are very important, but even more important are the terms of the mortgage contract.

When I talk to mortgage clients – I explain the terms of the mortgage including the penalties associated with breaking a mortgage prior to the maturity date.

No one signs a 5-year mortgage contract expecting to need to break their mortgage.

Regrettably, life happens and 60% of homeowners, break their mortgage before it matures!

The penalty for breaking a fixed rate mortgage is usually the greater of 3-months’ interest, or the Interest Rate Differential (IRD) – whichever is higher !!!

In some cases, when your mortgage is very close to maturity, the 3-month interest penalty will be higher, but otherwise the Interest Rate Differential (IRD) penalty tends to be much higher than 3-months interest.

Variable rate mortgages usually use the 3-month interest penalty.

With the Interest Rate Differential (IRD) penalty, there can be vast differences from one lender to another.

The IRD penalty is typically based on 4 things:

Penalties for breaking your mortgage . Please check out this GREAT 3 minute video from the Globe & Mail explaining how Banks calculate mortgage penalties for both Variable & Fixed mortgages and how banks squeeze even more money out of their clients by giving discounts off their inflated posted rates VIDEO Drawing Conclusions: How much does it cost to break a mortgage?

When mortgage shopping, you need to consider the interest rate, along with the terms of the mortgage including:

More information about mortgage penalties

· Bank charges $30,000 mortgage penalty to woman forced to sell home due to pandemic June 1, 2020

· When it comes to mortgage break penalties, big banks are often the worst Globe & Mail Nov. 14, 2019

When you get a mortgage, no one thinks about breaking a mortgage and the penalties. Being educated about all aspects of a mortgage, can make a huge difference to your bottom line.

Let’s have a chat and find a mortgage that works for you, not the bank!

Kelly Hudson

Mortgage Expert

Mortgage Architects

Mobile 604-312-5009

6 Tips for Success on Multiple Offer Home Purchases

Wed, 09 Sep 2020 22:59:00 GMT

The real estate market in Vancouver and Toronto is once again on a rampage!

There is low home inventory levels and historically low interest rates, making newly-listed homes sell quickly! Many homes are receiving multiple purchase offers, which is excellent news for sellers

… not such good news for buyers.

As a home buyer, you need to be prepared!!

Buying a home is exciting, but having to compete for a home on which there are multiple offers increases a home buyers stress level. During multiple offer situations, the seller has no obligation to accept or negotiate any of the offers. Moreover, the seller has the liberty to choose the best offer to negotiate and they will accept the one that best reflects their needs.

While price it is important, it may not be the only factor sellers consider. Other factors they will look at include subject conditions and completion and possession dates.

Six tips for going into multiple offer situations

1. Work with a Mortgage Broker to Get Pre-Approved , versus Pre-Qualified

So you’ve gone into the bank and after a couple of questions they tell you are Pre-Approved… If you haven’t provided any documentation or run your credit – you’ve probably got a rate hold.

An important aspect of buying a home is knowing how much you can afford. Work with your Mortgage Broker to determine what you are comfortable paying on a monthly basis fits your budget. Make sure you know the highest amount you can offer.

There are major differences between pre-qualification and pre-approval.

In a multiple-offer situation, having a Pre-Approval Certificate is extremely important and often helps the seller choose who they want to work with.

2. Engage an experienced Real Estate Agent

Having the right Realtor can be critical to your interests. Your agent should be very experienced in working with Multiple Offers. Make sure they know and respect your spending limit.

3. Consider doing a home inspection ahead of time

Do everything possible to arrange for a pre-inspection of the property. It shows the seller that you are serious about purchasing. The seller may consider your offer more readily if it doesn’t include a “subject to inspection” clause. It is inadvisable to buy a property without a home inspection; it could cost you in many ways down the road.

4. Be very flexible

Winning in a multiple offer situation is sometimes as easy as agreeing to certain seller conditions such as: closing dates, purchasing a property “as is” or even tightening the subject removal dates.

Have your Realtor ask the seller’s Realtor for ideal closing dates. This may be important to the seller if they have already bought another property and want to move ASAP or if they want to remain in the home and rent back for a few months. Try to have as many of the seller’s preferences as possible satisfied when making your own offer. Being flexible and trying to make the transaction as easy as possible for the seller could win over a higher-dollar offer.

5. Write a letter

You may wish to draft a personal letter (including a family picture) or even make a video for the sellers explaining how much you love their home and would like to raise your family there. It creates an emotional connection. Buying and selling a home is an emotional time for everyone, especially if the seller has lived there for a long time raising their own family. Sometimes, it’s not about the highest offer; some sellers might feel a strong connection to you and your family and decide they want to sell to someone who will really appreciate their home.

6. Know when it’s time to “Just Say No!”

Multiple offer situations are stressful. You need to know what you can afford to spend and stick to your budget. Remember it’s your money and your life, so you get to make the final decision.

Purchasing a home is not just about being smart, it is also about being comfortable regarding the decision you made. You need to find a home that will be a great place to create wonderful memories and start building equity.

Any questions? Give me a call!

Kelly Hudson

Mortgage Expert

Mortgage Architects

Mobile 604-312-5009

· Borrowing against home equity

Home Equity Line of Credit (HELOC) – Good or Bad??? Mostly it depends on your financial discipline …

Wed, 19 Aug 2020 01:28:00 GMT

More and more Canadians are using the equity in their homes as an ATM. The most common options are Lines of Credit (LOC) and Home Equity Line of Credit (HELOC).

Line of Credit

A line of credit is an agreement by a financial institution (lender) to loan money to a borrower up to an agreed upon maximum. Interest is charged on the money that is withdrawn from the line of credit. i.e. if you have a Line of Credit for $10,000 and have borrowed $1,000 you only pay interest on the amount of money you have borrowed.

Typical rates for a LOC are Prime plus 2-4%

The actual rate available to a borrower will vary depending upon several factors including:

Home Equity Line of Credit (HELOC)

A home equity line of credit (HELOC) is a secured form of credit . The lender uses your home as a guarantee that you’ll pay back the money you borrow. A HELOC resembles a second mortgage but functions like a credit card.

A home equity line of credit (HELOC) is a form of loan that lets you borrow money against the equity in your home. Unlike a traditional mortgage, most HELOC’s are not constructed to fit a pre-determined amortization, although regular, interest payments are required by most lenders.

HELOC borrowers should recognize that, over time, these products can also significantly add to consumer debt loads, since the revolving nature of HELOCs can also lead to greater persistence of outstanding balances.

A HELOC can be a worthwhile investment when you use it to improve the value of your home. However, when you use it to pay for things that are otherwise not affordable with your income or savings, it can cause problems for people who lack financial discipline, become a bad debt.

Typical HELOC rates are Prime + .50-1% (depending on your agreement, your lender may be able to change the rate at anytime)

People choose HELOCs primarily for three reasons:

Calculating a Home Equity Line of Credit (HELOC)

As per the Office of the Superintendent of Financial Institutions (OSFI), a HELOC can give you access to a maximum of 65% of the value of your home.

HELOCs have a few disadvantages:

More information regarding HELOC’s:

The biggest challenge with using a HELOC instead of a mortgage, is that most people pay the interest only. By paying interest only, you have the lowest payment, BUT then “life happens” and you do not put any money on the principle to lower your debt.

With a traditional mortgage you pay both principle and interest, so every payment you make lowers your principle, and ultimately you pay off your mortgage.

HELOC’s are inherently riskier products, given their revolving nature and persistence of debt balances.

Using a home equity line of credit HELOC to buy your home.

While home equity lines of credit can provide people with low interest rates and flexible lending terms, “there’s more to this arrangement than meets the eye,”

Buying a house with a home equity line of credit has benefits that a mortgage doesn’t offer.

There are approximately 3 million HELOC accounts in Canada with an average outstanding balance of $70,000

Can you pass the HELOC knowledge test?

Despite Canadians’ confidence in their knowledge about how their secured line of credit works, the majority seemed fuzzy on the details. When you use your home as collateral, the bank has legal rights to your property, and you cannot close on a sale of that home without paying back that loan.

For example, of those who said they did have a home equity line of credit:

HELOC’s for some can be a dangerous trap because they tend to spur people to spend more, which leaves them with more combined debt than someone without a HELOC.

Without understanding all the implications of this type of borrowing, consumers could risk their future credit or run into issues when they sell or refinance their home.

Here are a couple articles that may answer some of additional questions (or create some new questions!!) regarding HELOC’s.

· Home Equity Loans: What You Need to Know

Let’s discuss a mortgage that works for you (not the bank)!

Kelly Hudson

Mortgage Expert

Mortgage Architects

Mobile 604-312-5009

Mortgages for Presale Homes Purchased PRIOR to Jan. 1, 2018

Fri, 14 Aug 2020 21:10:42 GMT

What You Need to Know about the New B20 Mortgage Rules!!

The best part about buying a presale (especially for first time home buyers) is it allows you to buy a home for the cost of a deposit (typically 20%).

You then have months or even years to get your affairs and financing in order.

While you are waiting for your presale to complete:

many buyers continue to save money while renting or living at home
see increases with their wages
if the economy is strong, build your equity when the property prices increase.

The main drawback is time, and perhaps new mortgage regulations.

When you sign your Presale agreement, the developer will have an estimated completion date… regrettably, that completion date can be pushed back numerous times.

Perhaps while you’re waiting for your new home to be built – new government mortgage rules are updated like B20.

In the fall of 2016, the federal government implemented a B20 rule, where only people with a 20% down payment would be able to qualify for their mortgage at a 5-year fixed rate. If you chose anything other than a 5-year fixed, you had to qualify using the Bank of Canada’s five-year benchmark rate.

Jan. 1, 2018 a new federal government mandated B20 stress test was implemented . This stress test removed the ability for anyone to qualify at their 5-year interest rate (contract term) – regardless of down payment size.

B20 Stress test – The stress test means that financial institutions will vet your mortgage application by using a minimum qualifying rate equal to the Bank of Canada’s five-year benchmark rate (currently 5.14%) OR your mortgage interest rate plus 2% (which ever is higher).

What this means to you: with the new B20 stress test you now have 20% less affordability. This could be a problem if you were on the edge of what you could afford when you bought your presale.

If you bought a presale and your completion date is in the next 3-4 months, contact me and we’ll work together to secure you a mortgage.

Many lenders we work with, grandfathered mortgage rules for presales contracts signed prior to Dec. 31, 2017.

What this means: people who bought a presale with 20% down, can still qualify for a mortgage using the lenders 5-year fixed contract rate.

Presales are a way of life in Greater Vancouver & beyond!

Give me a call and let’s discuss a mortgage that works for you (not the bank)!

Kelly Hudson

Mortgage Expert

Mortgage Architects

Mobile 604-312-5009

Buying a rental property? What you need to know about Rental Add-Back vs Rental Offset

Thu, 21 May 2020 13:59:00 GMT

Add-backs and offsets are two different methods for accounting for the rental income from an investment property.

If you are considering purchasing a rental property, understanding how add-backs and offsets work, is important when qualifying for your next mortgage.

Please note that regardless of the method used, lenders do not use 100% of the rental income, typically they use around 50%.

Rental Add-Back

Many lenders use the add-back method to account for the rental income on investment properties.

This means is that they will add a percentage of the rental income to the rest of your income. This will be used to calculate your ability to make payments on the rental mortgage and your other debts, hence the term add-back.

For example, if rent is $2000 a month ($24,000 per year) and the lender allows 50% add- back, therefore $12,000/year. An additional $12,000 income will not make a big difference to the amount of mortgage you can qualify for

Additional Mortgage available with $12,000 rental income (rule of thumb is 4-5 times) = $48,000-60,000 additional mortgage affordability

Rental Offset

In contrast, a Rental offset approach gives you more bang for your buck, since you can use a percentage of the rental income to offset (subtract from) your rental expenses.

A lender will typically use 50% of the rental income to offset the mortgage Principle, Interest and Tax mortgage payments (PIT) .

Therefore, if your rental property earns you $2,000 per month, and the lender will allow for 50% offset i.e. $1,000 to offset (subtract from) the PIT payment.

To see how this works, let’s assume PIT payments equal $1,200. Since you earn $2,000 in income, and the lender uses a 50% rental offset rule, you deduct $1,000 from the $1,200 PIT payment.

Therefore, only the $200/month difference must be covered by your other income.

With Rental add-back – the whole PIT $1200 for the rental property must be covered by your income (including the $12,000 rental income with 50% Add-back).

The bottom line is, it is very difficult to qualify for financing on rental properties using the 50% add-back rule, especially in areas like Vancouver or Toronto which have higher home prices.

Regrettably, there is no standard with lenders regarding Rental income. Some lenders use Rental Add-Back while others use Rental Offset rules.

To overcome this financing obstacle, you need to work with your mortgage broker to decide which lender(s) have the best rental options for your situation.

Mortgages are complicated, but they don’t have to be… Engage an expert!

Give me a call and let’s discuss a mortgage that works for you (not the bank)!

Kelly Hudson
Mortgage Expert
Mortgage Architects
Mobile 604-312-5009
Kelly@KellyHudsonMortgages.com
www.KellyHudsonMortgages.com

4½ Types of Home Ownership – Freehold, Leasehold, Strata or Cooperative

Thu, 12 Mar 2020 04:14:00 GMT

In general, there are four common types of property ownership in Canada: Freehold, Strata, Co-Operative and Leasehold with advantages and disadvantages to each of the type. Therefore it’s important for home buyers to know the differences between the different types of property ownership when they’re shopping for a new home.

Freehold Property Ownership

Freehold is the most common type of property ownership in Canada.

It’s what we traditionally think of as property ownership; you own the building and the land it sits upon. A freehold interest (also known as a fee simple) is the more precise term for what we ordinarily refer to as “ownership” of a home

You own the building and grounds it rests upon for an indefinite period of time and have full use and control of the land and buildings on it, subject to any rights of the Crown, local land use bylaws and any other restrictions in place at the time of purchase. You have the freedom to make changes to building and yard (subject to zoning, bylaws and permit limitations) and are responsible for cost and maintenance.

Most single-family homes are freehold.

Strata Property Ownership

Most condo and townhouse developments are strata properties. Single-family detached home strata properties are rare, but the do exist.

When you buy a strata property, you have strata title with full ownership of all the interior elements of your unit, you also share ownership of common property that exists within the strata. Oftentimes this shared common property includes parking, hallways, amenity rooms, gym space, laneways, and the building’s entrances and exits.

As a strata owner, you are responsible for the maintenance and upkeep of your unit but the costs of looking after the common property are covered by monthly fees charged to every owner.

These strata/condo fees are proportional to the size of your unit; if you own a large two-bedroom unit you’ll pay more than someone living in a small bachelor suite.

As strata properties are comprised of a number of people sharing common spaces, there are rules and bylaws that govern how those spaces can be used. There may also be rules that regulate what you can do in your own private space so it doesn’t have an adverse impact on your neighbours, or the common spaces owned by everyone.

These rules are set by a council of owners that is elected by owners in the strata. The council is also responsible for the strata corporation that is set up to administer the strata. They set budgets, hire contractors, adhere to maintenance schedules, get repairs done, deal with complaints and infractions of the rules and bylaws.

Co-op Property Ownership

Co-op property ownership is similar to owning a unit in a strata.

In the cooperative form of ownership, each owner owns a share in a company or cooperative association which, in turn, owns a property containing a number of housing units. Each shareholder is assigned one particular unit in which to reside.

But instead of owning the interior of your own unit and sharing ownership of common property, owners in a co-op each own a share of the corporation that actually owns the building or complex. That share ownership then gives you the right to occupy a unit within the co-op, provided you don’t break any of the co-op’s rules and you pay your housing charges on time.

As you are not buying into the actual real estate when you purchase a co-op, you’ll require a different kind of financing from your lender called a share loan. It works much like a mortgage except your share in the co-op is the loan’s collateral, instead of the property.

Like a strata, all owners in a co-op share the expense of repairs and maintenance through monthly fees.

Owners in a co-op must follow rules and regulations set and administered by a co-op board which is elected by members of the co-op. The co-op board also has the power to approve or reject prospective new members, which must comply with provincial human rights legislation.

Leasehold Property Ownership

You would own the actual building or unit, but would rent or lease the land itself for a set period of time and there are varying lease terms.

Living in a leasehold property is like living on borrowed time. Leasehold interests are frequently set for periods of 99 years, but regardless of the length of the original term, you will only be able to purchase the remaining portion. Of course, the shorter the remaining portion, the less you, or the person who eventually purchases from you, will be willing to pay for the leasehold interest.

When you buy a leasehold property, you own the building but the property on which your home sits is owned by somebody else who has leased it back to a builder or developer. Typically, those leases last for 99 years. When the lease expires, the property’s owner could choose to renegotiate the lease to current market rates. Or they could reclaim the property as their own for redevelopment after buying out owners at fair market value.

There are 3 types of leased land: government (federal, provincial or municipal), First Nation reserve land and private companies/individuals can also own leasehold land.

Most developers prepay the cost of leasing the land, then incorporate that into the selling price of their projects. If they didn’t do that, then you’ll be paying rent on top of your mortgage payments, strata fees and taxes. And you won’t be protected from periodic adjustments to reflect the current value of the land.

While most properties appreciate over time, a leasehold property can actually depreciate, especially as the lease gets close to expiring. That uncertainty over a property owner’s future plans for their property can make it more difficult to get financing for a leasehold property. The lender could require a larger down payment, or it could be amortized over a shorter period of time.

Despite their uncertainty, leasehold properties can be a good option for property ownership, especially if they’re still early in the lease period. They can be cheaper than freehold properties or offer better value in desirable neighbourhoods. But the uncertainty that comes with leasehold can make them a poorer investment than other types of property ownership.

Leasehold interests can become particularly risky real estate investments as they approach the end of their lease, as the owner of the property can choose to resell the leasehold interest, redevelop the land entirely, or leave the area vacant.

Before you put too much effort in buying leasehold, find out how long the head lease is; most Financial Institutions require it be a minimum of 5 years longer than the amortization of the mortgage loan.

Co-owning a Property

There is another option for property ownership, called co-owning. It is becoming a viable option for some families who’ve been priced out of owning a home.

Co-ownership is when two or more owners enter into a legal agreement to own a single piece of property. Usually co-ownership involves family members, such as parents and grown offspring, who may share the same home or live autonomously in separate dwellings like a house and laneway house.

Co-ownership agreements are complex documents, with plenty of legal protections to safeguard both parties in the agreement as well as the lender financing the mortgage. If co-ownership is an option, you need to engage a lawyer experienced in constructing such agreements.

Information on obtaining a mortgage for Leasehold or Cooperative Ownership

Typically, you will find your Mortgage Lender more cautious about financing Leasehold and Cooperative property as they are considered a riskier type of collateral and may come with a higher mortgage interest rate and/or higher down-payment.

Speak to your Mortgage Broker to obtain more information.

Mortgages are complicated, but they don’t have to be… Engage an expert! Give me a call and let’s discuss a mortgage that works for you (not the bank)!

Kelly Hudson

Mortgage Expert

Mortgage Architects

Mobile 604-312-5009

Solving the Puzzle – 5 Factors used in Determining your Credit Score

Sun, 16 Feb 2020 19:23:00 GMT

A credit score is a number that lenders use to determine the risk of lending money to a given borrower . Credit card companies, auto dealerships and mortgage bankers are three common examples of types of lenders that will check your credit score before deciding how much they are willing to lend you and what interest rate. Lenders grant you credit based on your:

Your credit score shows whether you have a history of financial stability and responsible credit management. It can range from 300 to 900, the higher the score, the better. In Canada there are 2 major credit agencies – Equifax and TransUnion that compile credit scores based on the information in your credit report. The credit-scoring algorithm looks at the credit-utilization rate used by lenders to evaluate consumer credit risk. Below are general guidelines

Each agency reports a slightly different score, but they should both paint a similar picture of your credit history.

The 5 Biggest Factors That Affect Your Credit

Mortgages are complicated… but they don’t have to be! Engage an expert!

Kelly Hudson

Mortgage Expert

Mortgage Architects

Mobile 604-312-5009

How to Verify Your Down Payment When Buying a Home

Thu, 30 Jan 2020 21:16:00 GMT

Saving for a down payment is one of the biggest challenges facing people wanting to buy their first home.

To fulfill the conditions of your mortgage approval, it’s all about what you can prove (hard to believe – but some people have lied in the past – horrors!).

Documentation of down payment is required by all lenders to protect against fraud and to prove that you are not borrowing your down payment , which changes your lending ratios and potential your mortgage approval.

DOCUMENTATION REQUIRED BY THE LENDER TO VERIFY YOUR DOWN PAYMENT This is a government anti-money laundering requirement and protects the lender against fraud.

1. Personal Savings/Investments: Your lender needs to see a minimum of 3 months’ history of where the money for your down payment is coming from including your: savings, Tax Free Savings Account (TFSA) or investment money.

2. Gifted Down Payment: In some expensive real estate markets like Metro Vancouver & Toronto, the bank of Mom & Dad help 20% of first time home buyers. You can use these gifted funds for your down payment if you have a signed gift letter from your family member that states the down payment is a true gift and no repayment is required .

3. Using your RRSP: If you’re a First Time Home Buyer, you may qualify to use up to $35,000 from your Registered Retirement Savings Plan (RRSP) for your down payment.

4. Proceeds from Selling Your Existing Home: If your down payment is coming from the proceeds of selling your currently home, then you will need to show your lender an accepted offer of Purchase and Sale (with all subjects removed) between you and the buyer of your current home.

5. Money from Outside Canada : Using funds from outside of Canada is acceptable*, but you need to have the money on deposit in a Canadian financial institution at least 30 days before your closing date. * Current sanctions imposed by Canada

Most lenders will also want to see that you have enough funds to cover Property Transfer Tax (in BC) PLUS 1.5% of the purchase price available in your account to cover your closing costs (i.e. legal, appraisal, home inspection, taxes, etc.).

Buying a home for the first time can be stressful, therefore being prepared with the right documentation for your down payment and closing costs can make the process much easier.

Mortgages are complicated, but they don’t have to be… Engage an expert!

Give me a call and let’s discuss a mortgage that works for you (not the bank)!

Kelly Hudson

Mortgage Expert

Mobile: 604-312-5009

Kelly@KellyHudsonMortgages.com

www.KellyHudsonMortgages.com

BC Property Assessment vs Home Appraisal

Wed, 08 Jan 2020 16:37:00 GMT

What is BC Assessment?

It’s January and people in BC have started receiving their property assessments.

To see the most recent assessment for a property, click on the link BC Assessment and type in the address.

The real estate market is the single biggest influence on market values. Market forces vary from year to year and from property to property. The market value on an assessment notice may differ from that shown on a bank mortgage appraisal or a real estate appraisal because BC Assessment’s appraisal reflects the value as of July 1 of the previous year, while a private appraisal can be done at any time.

Use your BC Assessment as a starting point for the value of the property your planning your home purchase… Do not rely on BC assessment for the exact value of the property you’re considering purchasing. Markets in BC can change quickly both increasing and decreasing in value depending on the area.

An appraisal is a document that gives an estimate of a property’s current fair market value.

Often there is no connection between BC Assessment and appraised value. This is why lenders want an appraisal – an independent evaluation of the property’s value at this moment in time.

Primarily home appraisals are completed at the request of a lender. Lenders want to know the value of a property in the current market before they are willing to lend against the home.

The appraisal is performed by an “appraiser” who is typically an educated, licensed, and heavily regulated third party offering an unbiased valuation of the property in question, trained to render expert opinions concerning property values.

When an appraisal is done, consideration is given to the property, the home, its location, amenities, as well as its physical condition.

Appraisals may also be required when an owner has less than 20% down payment and needs mortgage default insurance .

Who pays for the Home Appraisal?

Typically, the borrower pays the cost of the appraisal, and upon completion, the appraisal goes directly to the lender (does not go into the home buyer’s hands).

I know it sounds odd, but brokerages, lenders and appraisers cannot just show the buyer the appraisal on a property, even though the borrower paid for it.

You need a Home Appraisal since the lender doesn’t want to lend on a poor investment and the appraisal helps the buyer decide if the property is worth what they offered (especially in hot markets like Vancouver & Toronto).

Why don’t you get a copy of the appraisal? The appraiser considers their client to be to the lender (the reason the appraisal was ordered). The lender has guidelines for the appraisal, and the appraiser prepares his report according to those parameters.

The lender is free to share the appraisal with the borrower, but the appraiser cannot share it. This is because the lender is the client… NOT the borrower!! It doesn’t matter who pays for the appraisal.

Sometimes an appraisal can come in lower than the purchase price, causing angry calls to the Appraisal Institute of Canada (AIC) , and the answer they give is: the Brokerage or Lender is the client of the appraiser, and as such has ownership of the report.

One of the main reasons the buyer pays for the appraisal, is that if the mortgage doesn’t go through, the lender does not want to be on the hook for paying for the appraisal and not getting the business.

Lenders are also aware that home buyers could take the appraisal and shop it around with other Lenders to try and get a better deal.

It is rare for Lenders to share the report. With most appraisal companies, the appraisal may be provided after the closing of the mortgage transaction and must have the lender’s approval.

After the funding of your mortgage, some mortgage brokers may offer to refund your appraisal fee.

While a lender does not have to release the entire appraisal, there are some pieces of information that remain the personal property of the buyer, and PIPEDA legislation guarantees them access to that. However, any information on the report that does not relate to the property itself (such as the neighboring properties or other data about the community) would come off the report before the lender provided it.

Some other reasons for getting an Appraisal:

The appraiser report involves a report including pictures of the home and property with the appraiser’s value of the property, along with a short summary of how that information was derived.

BLOG Need an Appraisal – 7½ Tips for Success

Home Appraisal Costs

Appraisal costs do vary. Most home appraisals start around $350 (plus tax) but they can go much higher depending on how expensive the home is, location, complexity of the appraisal and how easily the appraiser can access comparable data.

BC Assessment vs appraised value: lenders want an appraisal – a professional, independent evaluation of a homes value, at this point in time!

Mortgages are complicated, but they don’t have to be… Engage an expert!

Give me a call and let’s discuss a mortgage that works for you (not the bank)!

Kelly Hudson

Mortgage Expert

Mortgage Architects

Mobile 604-312-5009

How to Verify Your Down Payment When Buying a Home

Tue, 10 Dec 2019 18:55:00 GMT

Saving for a down payment is one of the biggest challenges facing people wanting to buy their first home.

To fulfill the conditions of your mortgage approval, it’s all about what you can prove (hard to believe – but some people have lied in the past – horrors!).

DOCUMENTATION REQUIRED BY THE LENDER TO VERIFY YOUR DOWN PAYMENT This is a government anti-money laundering requirement and protects the lender against fraud.

3. Using your RRSP: If you’re a First Time Home Buyer, you may qualify to use up to $35,000 from your Registered Retirement Savings Plan (RRSP) for your down payment.

Buying a home for the first time can be stressful, therefore being prepared with the right documentation for your down payment and closing costs can make the process much easier.

Mortgages are complicated, but they don’t have to be… Engage an expert!

Give me a call and let’s discuss a mortgage that works for you (not the bank)!

Kelly Hudson

Mortgage Expert

Mortgage Architects

Mobile 604-312-5009

Mortgages for Expensive Homes – Not as Easy as it Sounds!

Thu, 31 Oct 2019 23:44:00 GMT

Large home purchases that require a mortgage present unique challenges in the Canadian Mortgage market. Sliding scales, director approval, multiple reviews, it all adds up to difficultly getting larger mortgages approved, unless you’re working with an experienced mortgage broker.

In 2012 the government of Canada removed the mortgage insurers ability to approve mortgages of $1 million (or more) with less than 20% down payment. As a result of this change, the minimum down payment for homes over $1 million starts at 20% of your purchase price and increases.

Since any home purchase over $1 million cannot be insured against default, the lender applies a sliding scale to reduce their potential for loss if the borrower defaults. Consequently, large mortgages present a unique challenge, especially in the Vancouver/Toronto market.

Depending where you live, most lenders consider home purchases over $500-750K to be large enough for them to want to mitigate their risk. In larger urban centres like Vancouver & Toronto, lenders will consider purchases up to $1 million before increasing the down payment with sliding scale.

Sample sliding scales for Vancouver/Toronto

Every lender has their own risk level for expensive home purchases.

As you can see, the typical lender sliding scale for jumbo mortgages is very punitive and can result in a much higher down payment when purchasing a home over $1 million.

Lenders want to alleviate the higher risk on purchases of expensive homes, because there is a smaller pool of potential buyers compared to lower home prices. This makes expensive homes more vulnerable to market corrections. If there is a price correction, it can be more difficult for lenders to get their money back, should they need to foreclose.

Lenders are risk adverse! When they perceive a risk, they are either going to charge higher interest rates OR lessen their risk with a sliding scale, requiring home buyers to put a larger down payment on properties over their threshold.

Example:

20% down payment = $300K versus sliding scale $400K down payment required – Yes sliding scale can make a big difference in your required down payment!

Sliding scale is designed so that as a property’s price increases, you need a larger down payment.

To minimize the size of your down payment, you need an experienced mortgage broker who works with a multitude of lenders, giving you the most flexibility with sliding-scale.

Other points to keep in mind with a large mortgage:

Another important point to keep in mind, when real estate prices flatten or drop, lenders can become much more conservative when underwriting higher-end real estate. As such, there can be wide disparity in the value different lenders will assign to a property.

Partnering with an independent mortgage broker will help ensure that you and your property are matched with the lender who is offering the best fit for your situation.

If you know anyone looking for a high-end home, who needs a mortgage, I can help them arrange the financing. We’ll work together to figure out a budget and down payment (based on sliding scale). Then, we will work with a lender for a pre-approval, so we have a clear picture for affordability. BLOG Pre-Approved for Your Mortgage… What Does that Really Mean???

Mortgages are complicated, especially over $1 million… you need to engage an expert!!! Give me a call and let’s discuss a mortgage that works for you (not the bank)!

Kelly Hudson

Mortgage Expert

Mortgage Architects

Mobile 604-312-5009

Everything You Need to Know About the First-Time Home Buyer Incentive

Wed, 04 Sep 2019 18:05:00 GMT

On Sept. 2, 2019, the Canadian federal government launched the new First-Time Home Buyer Incentive (FTHBI). The intent of the plan is to help makes mortgages more affordable for qualified first-time home buyers. The government has allocated $1.25 billion over three years for the First-Time Home Buyer Incentive. Mortgages approved under the program can close Nov. 1, 2019 or later.

The FTHBI will start providing interest-free shared-equity loans to interested home buyers in the form of down payment assistance. The federal government will help with your down payment in exchange for an equity share in your home.

How the program works:

Participants must put down at least 5% of the home’s value with their own money, while the government (through the Canada Mortgage and Housing Corporation) would contribute an additional 5% of the down payment if the purchase is of an existing home, or 10% if it’s a new build .

Home buyers don’t need to make any monthly payments (principal or interest) on FTHBI, and the loan must be repaid after 25 years or when the home is sold.

The CMHC shares proportionately in any future gains or losses in home value.

How does this help you as a first-time buyer?

The additional down payment from FHTBI helps reduce your mortgage default insurance premium, and lowers your monthly mortgage payments, which can result in significant savings over the life of your mortgage.

Who is eligible for the Incentive? To qualify for the Incentive, the following must apply:

The mortgage of a property cannot exceed more than four times the maximum household income of $120,000 , which caps out at $480,000. This means the highest price for a home available to be purchased through this program will be between $500,000 and $575,000 , depending on the size of your down payment.

Sadly, if you’re looking to purchase property in a city like Vancouver or Toronto, it won’t be a house. Pricing in these markets is competitive and the cost of a home is steep. In July 2019, the average price of a home in Vancouver was $826,165 and in Toronto, $982,427, Bloomberg reports.

CMHC President and CEO Evan Siddall has responded to criticism over the effectiveness of the program in these markets by saying: “No program is going to work as well in higher-priced markets. Using 2018 data, 2,300 home buyers would have qualified in Toronto and 1,100 in Vancouver. Around 25% of home sales in Toronto in 2018 were for homes under $500K and 17% in Vancouver.”

The CMHC expects 100,000 home buyers to participate in the program over the next three years.

How Much Will This Program Save Me?

If a family is looking to purchase a new $500,000 home with a $25,000 down payment, this program could save them as much as $286 per month or more than $3,430 a year . This statistic will change depending on the type of home purchased, amount of FTHBI (5% or 10%) and in which market it is bought.

How Do I Apply?

Work with your mortgage broker to complete and sign the application documents . Your mortgage broker will submit the application to the Program Administrator on your behalf and at your request.

Restrictions

Additional Information

The government’s contribution to your down payment will be registered as a second mortgage against your home

Repayment of the government’s share is triggered by either the sale of your home or when you hit the 25 years.

Other Programs to Help Homeowners

Government of Canada Programs to Support Home buyers check out the link for programs that government offers to help home buyers

Resources

Legal Documents and Forms

To learn more and apply for the First-Time Home Buyer Incentive, visit www.placetocallhome.ca/fthbi/first-time-homebuyer-incentive

Mortgages are complicated, but they don’t have to be… Engage an expert!

Give me a call and let’s discuss a mortgage that works for you (not the bank)!

Kelly Hudson

Mortgage Expert

Mortgage Architects

Mobile 604-312-5009

Need an Appraisal – 7½ Tips for Success

Wed, 07 Aug 2019 14:48:00 GMT

Do you need to get a current value of your property? Then you are going to need an appraisal.

Banks and other lending institutions want to know the “current” market value of your home before they consider loaning money on the property. An appraiser checks the general condition of your home and compares your home to other similar homes which have recently sold in order to define a comparable market value for your home.

Here are 7½ tips that can help you get top current market value

Short version – Prepare your home as if it was going to be sold!!

Long version… If a picture is worth a thousand words, think what kind of story the pictures from your home are telling?

In the world of mortgages, lenders seldom set foot on the property before making a loan decision.

Instead, they rely on their trusted list of approved appraisers. All a lender usually gets is the appraiser’s pictures of your property and their comments about how your home was appraised.

Tip #1 – Clean up. The appraiser is basing the value of your property on how good it looks. Before the appraisal, prepare your home as if you’re selling it. Clean and declutter every room, vacuum, and scrub. Do whatever you can to make your home as presentable as possible.
Tip # 2 – Pay attention to curb appeal. An appraisal is all about first impressions. And the very first one the appraiser gets is when they walk up to your property. Spend an hour or two making sure the outside of your house, townhouse or condo is warm and welcoming.

Tip # 3 – The appraiser must be able to see every room of the home, no exceptions. Refusal to allow an appraiser to see any room will be noted in the appraisal can be a game stopper. There are times when it is not appropriate for the appraiser to take pictures of certain things and appraisers and lenders understand this, but refusal to grant access could kill your deal.

Tip #4 – Make a list of upgrades and features. It’s important that the appraiser is made aware of any updates you’ve made, especially those which are hidden, like new plumbing and electrical. If possible, give the appraiser this list. That way they have a reference as to what has been updated and how recent or professional that work was done.

Tip #5 – If you need to spend to update, be prudent. Many people think “bathrooms and kitchens” are the answer for getting high prices on home value. They aren’t. First, consider that kitchen and bathroom remodels can be some of the priciest reno costs. For that reason, it may be more prudent to spend a bit of money, for just a bit of updating. Paint, new flooring, new light or plumbing fixtures don’t break the bank, but can provide a dramatic impact and improve your homes value.

Tip #6 – You know your neighbourhood better than your appraiser does. Find out what similar homes in your neighbourhood have sold for. Your property might look like one down the street, but if you believe the value of your property is worth more, let them know why.

Tip #7 ½ – One last tip – don’t annoy the appraiser with questions and comments and follow them around. Instead, simply be prepared to answer any of their questions and, if you do have concerns or queries, wait until they’ve completed their viewing of the property, then ask.

Mortgages are complicated, but they don’t have to be… Engage an expert!

Give me a call and let’s discuss a mortgage that works for you (not the bank)!

Kelly Hudson

Mortgage Expert

Mortgage Architects

Mobile 604-312-5009

20 Terms that Home Buyers Need to Know

Tue, 09 Jul 2019 02:41:00 GMT

Buying a home is one of the most important financial decisions you will make.

It’s common for a first-time home buyer to be overwhelmed when it comes to real estate industry jargon, so this BLOG is to help make some of the jargon understandable.

To help you understand the process and have confidence in your choices, check out the following common terms you will encounter during the home buying process.

Mortgages are complicated, but they don’t have to be… Engage an expert!

Give me a call and let’s discuss a mortgage that works for you (not the bank)!

Kelly Hudson

Mortgage Expert

Mortgage Architects

Mobile 604-312-5009

Credit Cards for the Credit Challenged

Mon, 03 Jun 2019 15:37:00 GMT

If you want to buy a home and don’t have a bucket load of cash – you are going to need a mortgage.

I n order to get a mortgage, you are going to need credit…

When you get a mortgage, banks lend you “their” money and secure the loan against the property you are buying. Therefore they want to know how you’ve handled credit in the past.

If you have bad credit, you need to improve your credit to get a mortgage/better interest rates.

When you have had credit challenges – you are going to be limited with the number of credit card companies willing to offer you credit.

In order to buy something on credit, most lenders follow the Rule of 2

One of the quickest ways to rebuild your credit is to get 2 credit cards.

Since you’ve had credit blemishes in the past, many credit card companies aren’t interested in giving you more credit.

One way to get a credit card for the credit challenged, is to get a secured credit card .

DEFINITION of Secured Credit Card

Five Tips for Wisely Using a Secured Credit Card

I’ve worked with many clients that have had credit issues. My clients have had success with Capital One Secured MasterCard and Canadian Tire cards.

For other options, check out this BLOG I found Top 6 Secured Credit Cards for Canadians

Please note: Prepaid Credit Cards do NOT help you build credit. You’ve prepaid the amount on the card, so no one is actually offering you any credit.

Need more information about credit… check out my BLOGs

Mortgages are complicated, but they don’t have to be… Engage an expert!

Give me a call and let’s discuss a mortgage that works for you (not the bank)!

Kelly Hudson

Mortgage Expert

Mortgage Architects

Mobile 604-312-5009

BLOG 5 GREAT Reasons To Provide a 20% Down Payment when Buying a Home

7 Steps to Buying a Home

Tue, 09 Apr 2019 21:34:00 GMT

I’ve created a 7-step checklist to help you understand the home buying process

Step 1: Down Payment

The hardest part to buying a home is saving the down payment (a gift from the Bank of Mom & Dad also works) .

For any home purchases with less than 20% down payment, you are also required to purchase Mortgage Default Insurance. BLOG Everything You Wanted to Know about Mortgage Default Insurance

Step 2: Strategize, Define Your Budget and get Pre-Qualified

Unless you can afford to buy a home, cash in hand, you are going to need a mortgage .

You need to get pre-qualified, which should not be confused with the term pre-approved.

The big difference is that no approval is ever given by a lender until they have an opportunity to examine the property that you wish to purchase. The bank may love you… but they also must love the property you want to buy.

Pre-qualifying will focus on gathering documentation to prove the information on your mortgage application including credit, debt load, income/employment, down payment etc.

BLOG Pre-Approved for Your Mortgage… What Does that Really Mean???

Mortgage brokers will make sure you get a great mortgage rate. Just as important as rates are the terms of your mortgage which should include:

We also discuss what type of mortgage fits your current situation

Step 3: Set Your Budget

Keep in mind that just because you’re pre-qualified for a certain amount of mortgage, doesn’t mean you can actually afford that amount. Prepare your own monthly budget to be sure.

Typically, your total home payments (including mortgage, property taxes, strata fees & heat) should not exceed 32-39% of your gross (pre-tax) income.

Step 4: Find the Right Property – Time to Engage a Realtor

Once you have been pre-qualified for a mortgage, based on your budget… you need to find a realtor.

Selecting the right real estate agent is a very important step in the home buying process. When you work with an agent, you can expect them to help you with many things, including:

I recommend interviewing at least 3 realtors. You will quickly decide who has your best interests in mind. Do you want to deal directly with a realtor who’s going to work with directly when you go home hunting, or do you want to deal with a BIG name realtor, who has buyers & sellers realtors working under them? There are advantages to each – you need to decide what is the best fit for your situation.

Get referrals for realtors from friends and family… OR ask me, I have a group of realtors that I know and trust.

Step 5: Mortgage Approval

Once you have found the property you would like to call home, your mortgage broker will send your mortgage application and property information to the lender who is the best fit for your situation, based on your input.

If the lender likes your financial situation and the property, they will issue a “commitment” letter outlining the terms of the mortgage. The lender will send you a list of documents, so they can verify and validate all the information you told them on the mortgage application.

Step 6: Time for the Solicitor (Lawyer or Notary)

Once the lender has reviewed and approved all your mortgage documentation and the property documentation, your file will be sent to your solicitor (in BC you can use a lawyer or notary). They will process all the necessary title changes and set up a time for you to meet, review mortgage documents and sign.

On the closing day the documentation for your home purchase will be filed at the land titles office by your solicitor. Typically, the possession date is 1 or 2 days later, giving time for the money (down payment & mortgage) to get to the home seller. On possession day you set up a time to meet with your realtor to get the keys.

Congratulations you’re done – you now own your home!!

Mortgages are complicated, but they don’t have to be… Engage an expert!

Give me a call and let’s discuss a mortgage that works for you (not the bank)!

Kelly Hudson

Mortgage Expert

Mortgage Architects

Mobile 604-312-5009

5 Reasons Why You Don’t Qualify for a Mortgage

Wed, 13 Feb 2019 23:52:00 GMT

It’s not just because of finances

As a mortgage broker I receive calls from people who want to know how to qualify for a mortgage. Most of the time it comes down to finances but there are other reasons as well.

Here are the 5 most common reasons why your home mortgage loan application could be denied :

1. Too Much Debt

When home buyers seek a mortgage, the words “debt-to-income ratio” quickly enters into the vocabulary, and it’s not without reason. Too much debt is a red flag to lenders, signifying you may not be able to handle credit responsibly.

Lenders will analyze how much debt you carry and what percentage of your income it takes to pay your debt. Debt ration is just as important as your credit score and payment history.

Two affordability ratios you need to be aware of:

Check out my BLOG 3 “Rules of Lending” what Banks look at when you apply for a Mortgage in Canada

If you don’t have a good debt to income ratio, don’t give up hope. You have options available including lowering your current debt levels and working with your Mortgage Broker.

2. Poor Credit History

Some people don’t realize if they are late on their credit card/loan/mortgage payments the lender sends that information to the credit bureaus.

Your credit history is a great way for a lender to tell whether you’re a risky investment or not. Lenders look not only at your minimum credit score, but also at whether you have a significant amount of late payments on your credit report.

Your Mortgage Broker will run your credit bureau to see if there are any challenges you need to be aware of. Check out Solving the Puzzle – 5 factors used in determining your Credit Score

3. Insufficient Income and Assets

With the high price of homes in the Vancouver & Toronto area, sometimes people simply don’t earn enough money to afford: mortgage payments, property taxes and strata fees along with their existing debt (credit cards, loans, lines of credit etc.).

You need to prove your previous 2 years’ income on your taxes with your Notice of Assessments (NOA). This is the summary form that the Federal Government sends back to you after you file your taxes, showing how much you filed for income and if you either owe money or received a refund.

If you can’t provide documentation to prove your income, then you will likely get denied for a home mortgage loan.

Some home buyers will need to provide more money for a down payment (perhaps a gift from their family) or try to purchase a home with suite income. In some cases, home buyers will need to add someone else on title of the home, in order to add their income to the mortgage application.

4. Down Payment is Too Small

A lender looks at the down payment as how much of an investment a buyer will be putting in their future home. Therefore, bigger is always better when it comes a down payment to satisfy your home mortgage loan application. Start saving now.

To qualify for a mortgage in Canada the minimum down payment is 5% for the purchase of an owner-occupied home & 20% for a rental property.

In Canada if you have less than 20% down payment, the federal government dictates that the home buyer must purchase CMHC Mortgage Default Insurance which is calculated as a percentage of the loan and is based on the size of your down payment. The more you borrow the higher percentage you will pay in insurance premiums. Check out Everything You Wanted to Know about Mortgage Default Insurance

For those with less than 20% down payment, the maximum amortization is 25 years, with more than 20% down payment 30-35 years (depending on the lender). Check out 5 GREAT Reasons To Provide a 20% Down Payment when Buying a Home

5. Inadequate Employment History

Most lenders will want to see a consistent employment history of 2 years when applying for a mortgage, because they want to know you’re able to hold down a job long enough to pay back the money they’ve loaned you.

To prove your employment, you will need to prove a Job Letter with salary details.

If you’ve been denied a mortgage, chances are it was because of one of the above five reasons. Don’t be deterred, with a little patience and some work on your end, you can put yourself in a position to get approved the next time you apply.

The chart below lists the 10 main reasons people either don’t want or can’t get a mortgage.

Mortgages are complicated… BUT they don’t have to be! Engage an expert.

Give me a call and let’s discuss a mortgage that works for you (not the bank)!

Kelly Hudson

Mortgage Expert

Mortgage Architects

Mobile 604-312-5009

9½ Steps to Repair and Improve Your Credit

Mon, 04 Feb 2019 20:04:00 GMT

Your credit score says a lot of things about you and can affect many aspects of your life.

Though credit scores aren’t always an indicator of financial health, they are used in a variety of ways that could have a major impact on your life. Interest rates (including mortgage rates) are almost always determined by your credit score. Some employers & landlords may require a credit check to see if you have past credit issues.

Remember this is your credit report, not your “I’m Fiscally Responsible” report. Lenders want to know how you have historically handled credit in order to determine if you are a good credit risk. Higher risk = higher rates!

The Rule of Two:

So, if your credit score sucks, it could be costing you.

The good news is, you don’t have to live with bad credit forever. There are plenty of things you can do to improve your credit score. Use the 9½ tips below, to improve your credit score

#1 Know Your Credit Score and Credit History

Request a free copy of your credit report from both of Canada’s credit agencies (TransUnion and Equifax). You are legally entitled to one free credit report yearly from each credit agency. Check out my BLOG How to Get a FREE Copy of Your Credit Bureau

#2 Review both TransUnion & Equifax Reports for Any Errors or Discrepancies.

If you find any errors in your credit report, you should dispute them with Equifax or TransUnion and request to have them correct any errors. For contact information: How to Get a FREE Copy of Your Credit Bureau

#3 Pay On Time, EVERY time!

This might seem obvious, but you need to make your payments on time, every time! This is crucial to repairing and maintaining your credit rating. The largest percentage of your credit score is based on your payment history!! Even being a couple of days late will have a negative impact on your score. Staying current with your payments has a huge positive impact. If you can’t pay the balance off in full, pay the minimum amount on time!

#4 Don’t Go Over Your Card’s Credit Limit

Going over your credit limit, even once will have a huge negative impact on your credit score. You need to be aware of your credit limit and your current debt levels to avoid this.

#5 Pay Off Any Overdue Accounts ASAP

Paying off a collection account will not remove it from your credit report, so do your best to avoid going to collections. If you have any overdue accounts that have gone to collections, negotiate to pay them off ASAP.

#6 Reduce Your Debt

Easier said than done, but if you want to increase your credit rating, you need to reduce your debt. The closer you are to your credit limit, the lower your score. In a perfect world you only want to use about 30% of your available credit. If you have a lot of credit card debt you might consider a loan (with lower interest rates than the credit cards) to consolidate your debts.

#7 Limit Your Inquiries for New Credit

You lose points from excessive hard inquiries on your credit bureau. Any attempts to take on multiple loans/credit cards will look bad in your report.

#8 Avoid Closing Credit Cards

Account age is a factor that reflects positively on your credit score. Too many new accounts lowers your average account age and negatively impacts your credit score. For the same reason, you may want to keep an old account open, even if you are not actively using it.

#9 Time is your Friend

When rebuilding your credit, time will be your best friend. The impact of past credit problems lessens with time, so that a late payment from a year ago will have much less weight than a late payment today. Get current and stay current.

#9.5 Protect Your Credit from Identity Theft

As more of our personal information gets circulated via the internet, there’s more room for “bad people” to steal your personal details so that they can make fraudulent purchases in your name. This can be extremely damaging to your credit history. You can protect your credit history from this by paying for a service that can alert you to fraud.

For more information check out Solving the Puzzle – 5 factors used in determining your Credit Score

Mortgages are complicated… BUT they don’t have to be! Engage an expert.

Give me a call and let’s discuss a mortgage that works for you (not the bank)!

Kelly Hudson

Mortgage Expert

Mortgage Architects

Mobile 604-312-5009

BC Property Assessment vs Home Appraisal

5 C’s of Credit to get a Mortgage

Fri, 18 Jan 2019 23:19:00 GMT

Whether you are buying your first home or have been a home owner for years, when you are looking at purchasing a property, finding the best mortgage solution for your specific situation can be an intimidating experience.

Working with a licenced mortgage broker will ease that tension, along with knowing the basics of what lenders are looking for will help you better understand the process.

The Five C’s of Credit/Mortgages

The five Cs of credit is a system used by lenders to gauge the creditworthiness of potential borrowers. The system weighs five characteristics of the borrower and conditions of the mortgage, attempting to estimate the chance of default and, consequently, the risk of a financial loss for the lender.

Higher Risk = Higher Rates!

Know Your 5 C’s:

Every client has individual mortgage needs when buying a home and my goal is to find a mortgage loan that’s right fit for your situation! The first step in getting the mortgage process started involves understanding what lenders are looking for in order to get mortgage approval.

The approval process is called the Five C’s of Credit and they consist of:

Solving the Puzzle – 5 factors used in determining your Credit Score

8 Credit Rules You Need to Know, Before You Buy a Home

9½ Steps to Repair & Improve Your Credit

3 “Rules of Lending” what Banks look at when you apply for a Mortgage in Canada

* Everything You Wanted to Know about Mortgage Default Insurance

The goal is to get a yes with your lender. The Five C’s of credit outlined above determine a borrower’s ability and willingness to make payments. Understanding what a lender is looking for allows you to set yourself up to put your best foot forward.

There you have it – the 5 C’s that lenders analyze when reviewing a mortgage application.

If you have any questions or concerns feel free to contact me anytime, I’m here to help!

Mortgages are complicated… BUT they don’t have to be! Engage an expert.

Give me a call and let’s discuss a mortgage that works for you (not the bank)!

Kelly Hudson

Mortgage Expert

Mortgage Architects

Mobile 604-312-5009

How to Get a FREE Copy of Your Credit Bureau

Wed, 07 Nov 2018 02:42:00 GMT

Think of your credit score as a report card on how you’ve handled your finances in the past. A credit score is a number that lenders use to determine the risk of lending money to a given borrower .

There is always someone willing to lend you money however, higher risk = higher rates!

For more information check out my BLOG Solving the Puzzle – 5 factors used in determining your Credit Score

Step 1 for good credit – you need to know your credit history

I recommend you order a copy of your credit report from both Equifax Canada and TransUnion Canada, since each credit bureau may have different information about how you have used credit in the past.

Ordering your own credit report has no effect on your credit score.

Once you have obtained your free credit report, check it for errors:

If you find any errors on your credit report, you need to dispute them with your credit bureau.

How can I get a copy of my credit report and credit score?

There are two national credit bureaus in Canada: Equifax Canada and TransUnion Canada. You should check with both bureaus.

Credit scores run from 300 to 900. The higher the number, the greater the likelihood a request for credit will be approved.

The “free-report-by-mail” links are not prominently displayed, since credit bureaus would love to sell you instant access to your report and credit score online.

Equifax, the instructions to get a free credit report by mail are available here .

Equifax Free Credit File Options for Canadian Residents

You may request a free copy of your credit file through one of the options below:

The form must be completed, with photocopies of your identification to:

National Consumer Relations;
P. O. Box 190, Station Jean-Talon
Montreal, Quebec H1S 2Z2
Or by Fax: 514-355-8502

If/when you complete the identity validation process, your credit report will be sent to your home address via Canada Post within 5-10 days.

Click here to purchase your one-time Equifax credit score and report OR your Equifax credit report .

Correct an Inaccuracy on Your Equifax Credit Report

If you find any information that you believe is inaccurate, incomplete or a result of fraud, you have the right to file a dispute with Equifax Canada . You will need to complete the Credit Report Update form enclosed with your package. You can also review how to dispute information on your credit report for additional details on the Equifax dispute process.

For TransUnion, the instructions to get a free credit report by mail are available here

Online New! Quick and easy online access to view and download your free yearly Consumer Disclosure.

By Phone Request your Consumer Disclosure by phone using our Interactive Voice Response system: 1(800) 663-9980 (Prompt 1)

IVR or Interactive Voice Response is an automated tool that guides you through the use of your touch-tone phone or voice. The TransUnion IVR serves consumers who wish to obtain a copy of their Consumer Disclosure through a secure and effective channel without having to wait to speak to a representative. It is a service provided to you free of charge which asks you a series of questions to authenticate your identity in order to provide you with a copy of your Consumer Disclosure. If/when you pass the authentication process, your Consumer Disclosure will be sent to your home address via standard mail.

Mail It’s easy to request your free Consumer Disclosure by mail. Simply download and complete the Consumer Request form.

Click here to purchase your one-time TransUnion credit score and report OR your TransUnion credit report .

Credit Report Disputes – You can dispute your TransUnion credit information or update personal information on our credit report in three ways.

Equifax & TransUnion do NOT offer a free service to access your credit score.

Keeping an eye on your credit score is important — if there’s a problem or an error, you want to know and have time to fix it before you apply for a loan.

For more information check out 9½ Steps to Repair & Improve Your Credit

Mortgages are complicated… BUT they don’t have to be! Engage an expert.

Give me a call and let’s discuss a mortgage that works for you (not the bank)!

Kelly Hudson

Mortgage Expert

Mortgage Architects

Mobile 604-312-5009

Solving the Puzzle – 5 factors used in determining your Credit Score

7 Tips for Buying Your First Home in BC

Wed, 17 Oct 2018 17:49:00 GMT

As a licensed Mortgage Broker, I am often asked “what do I need to know when buying my first home in BC?”

Everyone has their own aims and objects when buying their first home. As a Mortgage Broker, I specialize in making sure your financing is in order to facilitate your dreams of owning a home.

Buying your first home is very exciting, but it can easily be overwhelming. Being prepared is the first step. The decision to purchase your first home can be a huge, life-changing event and you need to know exactly what you are getting into.

To get you prepared with the knowledge you need, here are my 7 tips to consider when you buy your first home in BC.

1. Strengthen your credit rating

It’s pretty simple: the higher your credit score, the lower your mortgage rate will be.

Spend the time now to improve your credit. Check your credit report. Many credit reports have errors, so you need to ensure that your credit bureau is current and correct.

ALWAYS pay every single one of your bills on time. Set up automatic payments if you have had any late payments over the last couple of years.

Stop applying for any new credit a year before you are considering buying and continue until you sign the closing papers on your home. Spend only 30% of credit limits on credit cards.

8 Credit Rules You Need to Know, Before You Buy a Home

2. Find a Mortgage Broker and figure out how much you can afford to spend

The home buyer’s mantra: Get a home that’s financially comfortable.

Contact me, your Mortgage Professional. I work with you up to a year in advance to analyze your situation, and tell you how much mortgage and monthly payments you can afford.

Lenders like to see that you spend a maximum

1 year+ prior to going home shopping, calculate the mortgage payment for the home in your intended price range, along with the increased expenses (such as taxes, insurance and utilities). Then bank the difference between the home payments and what you’re paying now. Not only will that simulate ownership, it also helps you save for your down payment!

When you are ready to start shopping for your home, as your Mortgage Broker, I gather all your financial documentation that the lender requires, in order to figure out much you can afford to spend. Then I work with you to get a preapproval and lock in a low interest rate to protect you in case rates rise between now and the time you by your new home.

What is the difference between a Mortgage Broker & a Mortgage Specialist (hint – specialists work for the bank)!!

3. How long will you live in your new home?

The transaction costs of buying and selling a house are substantial including : real estate fees, legal fees, Property Transfer Tax, selling in a down market, moving, etc.

If you don’t plan to live in your new home for at least 3-5 years, you may not gain enough equity to make selling worthwhile.

Short-term home ownership can be a pretty expensive proposition . If that is the case, holding off on purchasing could be your best option.

4. How much house you need?

Buying a cheaper, smaller home might sound like a good place to start, but could end up costing you more if you need to move due to changes in your lifestyle, including a growing family. Then again, buying more house than you currently need will cost you more with higher mortgage payments, higher maintenance, energy and tax costs.

Prioritize your housing wish list. They say that the 3 most important things to think about when buying are home are location, location, location. In Greater Vancouver your first choice for location i.e. Kitsilano or Yaletown may not be within your means. You also need to think about how the new home space will be used and whether it will fit your lifestyle now and in the future.

5. Build a savings account

Start now to build a healthy savings account. To avoid paying CMHC Mortgage Default Insurance you need to prove you have a 20% down payment.

Building your savings account, over and above the money you will require for the down payment and closing costs. Lenders want to see that you’re not living paycheck to paycheck. If you have three to five months’ worth of mortgage payments in your savings, that makes you a much better loan candidate.

Everything You Wanted to Know about Mortgage Default Insurance

6. Remember closing costs.

While you’re saving your down payment, you need to save for closing costs too. They’re typically 1% to 3% of the purchase price and due on the completion date.

In BC you need to also pay Property Transfer Tax (PPT). The amount of tax you pay is based on the fair market value of the land and improvements (e.g. buildings) on the date of registration unless you purchase a pre-sold strata unit . The tax is charged at a rate of 1% for the first $200,000 and 2% for the portion of the fair market value that is greater than $200,000. 3% on the portion over $2,000,000 and if the property is residential, a further 2% on the portion greater than $3,000,000

Don’t Forget the Closing Costs When You Purchase a Home

7. Shop for a Realtor that has your best interests in mind

Interview at least three Realtors. Get referrals from people you trust who have recently bought or sold, including me, your mortgage broker. I work with a lot of realtors, some of whom are outstanding in their field. Once you’ve decided which Realtor is the best fit for you, they can help you focus your search to find your perfect home. There is no cost for the Realtor for the home buyer since the home seller pays the commission.

Besides the 7 tips I’ve listed above, there are many other things you should need to be aware of prior to buying your first home.

Mortgages are complicated… BUT they don’t have to be! Engage an expert!

Kelly Hudson

Mortgage Expert

Mortgage Architects

Mobile 604-312-5009

5 GREAT Reasons To Provide a 20% Down Payment when Buying a Home

Thu, 16 Aug 2018 14:56:00 GMT

There are many challenges that come into play when you’re in the market to buy a home.

Buyers say the number one obstacle to homeownership is saving enough for a down payment, the amount that the buyer provides toward the purchase of their home.

Exactly how much do you need to put down? Assuming you can finance the debt with your current income you can get a mortgage for as little as 5% down PLUS pay for Mortgage Default insurance if you put less than 20% down.

A smart rule of thumb is always try to put a least 20% down.

Although that may be a challenge in Greater Vancouver where the current Vancouver MLS stats indicate an average house price of $1,227,420

Let’s discuss which mortgage down payment works for you NOT the bank!

Kelly Hudson

Mortgage Expert

Mortgage Architects

Mobile 604-312-5009

Want to Buy Rural Property? 6 Things to know before you buy!

Tue, 07 Aug 2018 04:50:00 GMT

Living in the country has extreme appeal for some people. Space, peace and quiet, big home, big yard, place to raise your family… the list goes on. If you are considering buying a rural home, there are a number of things to consider, not the least being how different it is to get a mortgage.

When lenders are considering your mortgage file it’s always about managing risk. Higher risk, higher rates. The risk that you’ll pay them back as agreed and they don’t have to seize the asset and sell it to recoup their investment.

Mortgage lenders don’t like waiting years to get their money back on a non-performing loan, so they have implemented special rules related to rural properties to reduce their risk.

A rural property, for most lenders and their home appraiser, includes only one house, the garage and 10 acres in the valuation, any additional buildings will not be considered. This policy applies to both conventional and insured mortgages.

Here are 6 things to think about before plunking down your hard-earned cash on a country home.

Hire a real estate agent knowledgeable about rural properties and local zoning laws. The names of the zones and the related details are determined by each local government so there may be variation between communities throughout each province.

Many lenders will not mortgage properties that are zoned agricultural.

Water & Septic – In order to live in a house, you need to be able to drink the water and flush the toilet. In the country you need to take care of these yourself. When buying, if you are not on municipal water, your water will probably come from a well.

Land – most lenders will mortgage a house, one outbuilding and up to 10 acres of land, anything above this amount will not be considered in the mortgage.

Appraisal – Your lender will want to see an appraisal to ensure the value of your land. The appraised value may come in lower than expected, because rural properties do not turn over as quickly as city properties.

Wood Energy Technology Transfer ( WETT ) – If there’s a wood stove or wood-burning fireplace, you make want to make your offer conditional on receiving a satisfactory WETT inspection report, which confirms the safeness and correct installation of the wood-burning unit.

Buy (or Check Into) Title Insurance – Many buyers don’t realize that farmland, particularly larger, more remote tracts of land, may have been used as a dump-site for toxic chemicals.

House/Content/Fire insurance – Lenders want to ensure you have insurance in place to protect their investment. If you can’t get insurance – it has the potential to be a serious problem, since your mortgage company may not advance the closing funds.

If you are considering buying a home in a rural area, you need to have a frank discussion with your realtor, mortgage broker and lawyer before submitting your offer.

Mortgages are complicated… you need to engage an expert!!! Give me a call and let’s discuss a mortgage that works for you (not the bank)!

Kelly Hudson

Mortgage Expert

Mortgage Architects

Mobile 604-312-5009

What is the difference between a Mortgage Broker & a Mortgage Specialist (hint – specialists work for the bank)!!

Fri, 13 Jul 2018 00:20:00 GMT

With the importance of real estate in Canada, it is vital to understand how the various professionals in the sector operate when buying a home.

Sooooooo… what is the difference between a Mortgage Specialist & a Mortgage Broker?

On the surface they sound the same

WRONG!!! There are many differences… Let’s check some of them out!

For additional information check out my BLOG Top 10 Reasons to Use an Independent Mortgage Broker

Mortgages are confusing… Give me a call and let’s discuss a mortgage that works for you (not the bank)!

Kelly Hudson

Mortgage Expert

Mortgage Architects

Mobile 604-312-5009

Don’t Forget the Closing Costs When You Purchase a Home

Tue, 26 Jun 2018 16:49:00 GMT

The purchase price you negotiate when buying or selling a home is just one part of the total cost for buying a home. In addition to the purchase price there are several other fees – known as closing costs – all of which you need to factor in to your purchase price.

Closing costs tend to be hidden costs when buying a home. It’s not a set number, but a compilation of various administrative, legal fees and other one-time expenses associated with the purchase of a home that are due on the completion date.

These costs can add up, so you’ll need to factor these costs into your cash-on-hand budget.

Many first-time home buyers under estimate the amount of cash they will need for closing costs. Typically, you’ll want to budget between 1.5% and 4% of the purchase price of a resale home to cover closing costs.

Of course, these are estimates — the actual amount you will need could be higher or lower, depending on factors like where you live, the type of home you’re buying, or if it’s a new construction (+5% GST).

To help you plan the purchase of your property, here’s a snapshot of the extra fees you can expect to pay once you’ve settled on the price of your home.

Here’s an overview of what you can expect.

Legal Fees:

Legal/Notarial Fees and Disbursements. The lawyer/notary is the person who goes through all the paperwork and makes sure that everything is legitimate and binding. They confirm that all the items that were agreed to by the buyer, seller/builder, and lender are written and worded correctly. Your legal representative should also be able to walk you through each document that you sign so that you understand what you’re agreeing to. Legal fees range from $500 to $2,500. You will also need to reimburse them for their out-of-pocket costs that they incurred while handling the various searches and registrations, including title insurance (see below), property and execution searches, and the registration of the mortgage and deed. These disbursements are repaid to the lawyer on the closing date, as well as incidentals such as couriers, certified cheques, and photocopying, the land transfer tax, the down payment, and any interest adjustments.

Title Insurance:

Title refers to the legal ownership of the property. The deed is the physical legal document that transfers the title from one person(s) to another. Both the title and deed of the home must be registered with a land registrar.

Most lenders require title insurance as a condition of granting you a mortgage. Your lawyer or notary helps you purchase this.

Title insurance protects you from title fraud, identity theft and forgery, municipal work orders, zoning violations and other property defects. It can also protect you against fees and costs that were not caught in the searches your lawyer conducted prior to the sale (Yes this can happen!).

Title insurance premiums range from $150-$500 depending on the value of the property.

Fire/Home Insurance:

Mortgage lenders require that you have fire/home insurance in place by the time you complete the purchase of your home.

Property insurance protects you in case of fire, windstorms or other disasters. It covers your home’s replacement value. The amount required is at least the amount of the mortgage or the replacement cost of the home. This cost can vary on the property size and extras being insured, as well as the insurance company and the municipality. Home insurance can vary anywhere from $400 per year for condos to $2,000 for large homes.

Adjustments:

An adjustment is a cost to you to pay the seller for the seller prepaying for something related to the house including property taxes, condo fees, heat etc. on your behalf.

Simply put, if you take possession in the middle of a month, the seller has already paid for the whole month and you must pay the seller back for what they’re not using. These adjustments are prorated based on the date you complete your purchase of the home. The most common adjustments are for property taxes, utility bills & condo fees that have been prepaid.

Property transfer tax (PTT) in British Columbia:

Is a tax charged to you by the province. First-time home buyers are exempt from this fee if they are purchasing a property under $500,000. All home buyers are exempt if they are purchasing a new property under $750,000.

GST:

Is a federal value added tax 5% on the purchase price of a new home. If someone has lived in the home, the home isn’t subject to GST.

Interest Adjustment Costs:

Most lenders expect the first mortgage payment one month after completing the purchase of a home. If you close mid-month, please note some lenders expect the first payment, or at least the interest accrued during that time, on the 1st day of the next month. When arranging your mortgage, ask how interest is collected to the interest adjustment date.

Other closing costs:

Will your new home need furniture? Carpets? Lighting? Window coverings? Appliances? Do you have the equipment you need to maintain the lawn and gardens? Are you hiring movers or renting a truck? Will you need boxes, bubble wrap and tape for the move?

Congratulations!! You’re all caught up on your closing day costs. Now its time to get your keys and enjoy your new home.

Mortgages are confusing… Give me a call and let’s discuss a mortgage that works for you (not the bank)!

Kelly Hudson

Mortgage Expert

Mortgage Architects

Mobile 604-312-5009

BC’s Property Transfer Tax & First-Time Home Buyers

Tue, 01 May 2018 18:04:00 GMT

What is Property Transfer Tax?

Property Transfer Tax (PPT) is a tax payable to the BC Provincial Government by purchasers of real estate in BC. The tax applies to all types of real estate, whether residential, commercial or industrial.

How is PPT calculated?

In BC you are charged property transfer tax when you make changes to a property’s title

The amount of tax you pay is based on the fair market value of the land and improvements (e.g. buildings) on the date of registration unless you purchase a pre-sold strata unit .

The property transfer tax rate is:

What is Fair Market Value ?

Fair market value is the price that would be paid by a willing purchaser to a willing seller for a property in the open market on the date of registration. This is usually the actual purchase price paid for the property.

What is the “Additional Property Transfer Tax”, or what is sometimes called the “Foreign Buyers Tax” ?

Your proportionate share is the percentage of interest that you are registering on title with the Land Title Office. If the property transfer is registered on or after February 21, 2018 and is within the following areas, the tax amount is 20% of the fair market value of your proportionate share:

For additional information check out “Foreign Buyers Tax”

How does a buyer qualify for the First Time Home Buyers Exemption?

You may qualify to reduce the amount of tax you need to pay if:

First Time Home Buyers’ Program

The First Time Home Buyers’ Program reduces or eliminates the amount of property transfer tax you pay when you purchase your first home. If you qualify for the program, you may be eligible for either a full or partial exemption from the tax.

If one or more of the purchasers don’t qualify, only the percentage of interest that the first-time home buyer(s) have in the property is eligible.

Do I Qualify?

To qualify for a full exemption, at the time the property is registered you must:

Purchaser must move into the property within ninety-two days after registration of the purchase of the property and reside in the property for at least one year; and the property must:

You may qualify for a partial exemption from the tax if the property:

To estimate Your Property Transfer Taxes Click here

Newly Built Home Exemption

To qualify for the Newly Built Home Exemption and avoid paying the Property Transfer Tax, the following criteria must be met:

If you qualify for the exemption, you may be eligible for either a full or partial exemption from the tax.

If you paid property transfer tax when you purchased vacant land and you now have a newly built home on the land, you may be eligible for a refund of the property transfer tax you paid.

Do I Qualify?

To qualify, the property (land and improvement) transfer must be registered at the Land Title Office after February 16, 2016 and you must be:

and the property must:

You may qualify for a partial exemption, if the property:

To estimate the amount of your exemption Click Here

Are there other exemptions?

Yes, such as a transfer of a principal residence between family members. For details on this and other exemptions, go to Property Transfer Tax Exemptions

Please note: Property Transfer Tax should not be confused with Property Tax. Property Tax is the tax paid on an annual basis to the local City/Municipality where the property resides.

The Property Transfer Tax is a one-time tax paid to the BC Government by purchasers of real estate.

The Property Transfer Tax Act frequently changes along with the exemptions for payment of this Tax – for current information Click Here

Mortgages are confusing… Give me a call and let’s discuss a mortgage that works for you (not the bank)!

Kelly Hudson

Mortgage Expert

Mortgage Architects

Mobile 604-312-5009

Kelly Hudson
Mortgage Expert
DLC – Canadian Mortgage Experts
Mobile: 604-312-5009
Kelly@KellyHudsonMortgages.com
www.KellyHudsonMortgages.com

History of Mortgage Changes up to April 2018

Wed, 11 Apr 2018 22:27:00 GMT

Every time you turn around, seems like there is another change to qualifying for a mortgage. Let’s walk through some of the mortgage changes over the years…

History of mortgages in BC

Before 2007-2008

During this time, lending and mortgages policies were much more lenient! 100% financing was available, 40-year amortizations, cash back mortgages, 95% refinancing, 5% down payment required for rental properties. You could qualify for Fixed and Variable term mortgages at the discounted contract rate. There was NO limit for your Gross Debt Servicing (GDS) if your credit was strong enough. Lenders had relaxed lending guidelines when debt servicing secured and unsecured lines of credits and heating costs for non-subject and subject properties.

The financial crisis of 2007–2008, is considered by many economists to have been the worst financial crisis since the Great Depression of the 1930s. It began in 2007 with a crisis in the subprime mortgage market in the United States and developed into a full-blown international banking crisis.

Due to the financial crisis, the Canadian government got involved, therefore many new mortgage rules have been implemented over the last 10 years.

July 2008
We saw the elimination of 100% financing, the decrease of amortizations from 40 to 35 years. The introduction of minimum required credit scores. Total Debt Servicing (TDS) could be maxed out to 45%.

April 2010
Variable Rate Mortgages, along with 1, 2, 3 & 4 year Fixed Term Mortgages now need to be qualified at the 5-year Bank of Canada’s posted rate. If you had a 5 year Fixed mortgage, you could qualify at the discounted contract rate.

Investments properties, which previously needed only 5% down payment, now require a minimum 20% down payment. Introduction of new guidelines which factored in rental income, property taxes and heat for affordability.

March 2011
The 35-year amortization was dropped to 30 years for conventional mortgages. Refinancing dropped to 85% from 90% and the elimination of mortgage insurance on secured lines of credit.

July 2012
30-year amortizations dropped again to 25 years for High Ratio Mortgages (less than 20% down payment). Refinancing also dropped down from 85% to the current 80%. Tougher guidelines within stated income mortgage products making financing for the Business for Self more challenging. The disappearance of true equity lending. The largest changes were:
• Ban mortgage insurance on any million-dollar homes
– 20% minimum requirement for down payment for homes over $1m
• Elimination of cash back mortgages
• Federal guidelines introduce a minimum 5% down payment on owner occupied homes

February 2014
Increase in mortgage default insurance premiums. *
• By law, anyone putting down less than 20% of the purchase price of a home in Canada must pay mortgage insurance, even though the homeowners themselves don’t benefit from that coverage. Rather, it’s a fee, borrowers pay so, if they default on loans, their lenders aren’t on the hook, instead, an insurance payout would cover any defaulted loans.

February 2016
Minimum down payment rules changed to:
• Up to $500,000 – 5%
• Up to $1 million – 5% for the first $500,000 and 10% up to $999,999
• $1 million plus homes require 20% down payment (no mortgage insurance available)
• Exemption for BC’s Property Transfer Tax on NEW BUILDS regardless if one is a 1st time home buyer with a purchase price of $750,000 or less.
– BC Property Transfer Tax (PPT) arrived March 7, 1987, with Social Credit premier Bill Vander Zalm government’s first budget and it has survived every change of government since then.

July 2016
The introduction of the foreign buyer tax stating that an ADDITIONAL 15% Property Transfer Tax (only to Metro Vancouver) is applied for all non-residents or corporations that are not incorporated in Canada purchasing property.

October 17, 2016: Mortgage Stress testing
Mortgages with less than 20% down payment (requiring Mortgage Default Insurance) now have to qualify at Bank of Canada 5 year posted rate (currently 5.14%).

November 30, 2016 : Monoline Lenders
Portfolio Insured mortgages (Monoline lenders) greater than 20% have new conditions with regulations requiring qualification at the Bank of Canada 5 year posted rate, maximum amortization of 25 years, max purchase price of $1 million and must be owner-occupied.

March 17, 2017
Increase in mortgage default insurance premiums.*

January 2018 : The Office of the Superintendent of Financial Institutions (OSFI) announces Stress Testing for all mortgages, no more bundling and other restrictions
• If your mortgage is uninsured (greater than 20% down payment) you will now need to qualify at the greater of:
– the five-year benchmark rate published by the Bank of Canada (currently 5.14%)
– OR the contractual mortgage rate +2%
• Lenders will be required to enhance their Loan to Value (LTV) limits so that they will be responsive to risk. This means LTV’s will need to change as the housing market and economic environment change.
• Restrictions will be placed on lending arrangements that are designed to circumvent LTV limits. This means bundled mortgages will no longer be permitted.

*A bundled mortgage is when you have a primary mortgage and pair it with a second loan from an alternative lender. It is typically done when the borrower is unable to have the required down payment to meet a specific LTV.

February 2018 – Premier John Horgan’s NDP government took steps to dampen speculation with BC real estate by imposing a new speculation tax and increasing the foreign buyers tax to 20%.
• Both measures are aimed at slowing the flow of global capital (that critics say is driving up BC home prices) and extends beyond Metro Vancouver.
• Raising the foreign buyer tax from 15% to 20%. The higher tax now covers Victoria and Nanaimo land districts on Vancouver Island, the Fraser Valley, Kelowna and West Kelowna.
• The speculation tax, is intended to get tax from absentee investor homeowners who often declare little or no income tax in BC but are believed to have substantial global incomes. The tax will start at 0.5% of a home’s assessed value for the 2018 tax year and increase to 2% in 2019.

BOTTOM LINE: How can you keep up with all the mortgage changes?

The home buying industry has always been one of change, which has shifted and altered based on the economy and what is currently going on in Canada and BC.

Give me a call and let’s discuss a mortgage that works for you (not the bank)!

Kelly Hudson

Mortgage Expert

Mortgage Architects

Mobile 604-312-5009

9 Reasons Why People Break Their Mortgages

Fri, 02 Feb 2018 18:34:00 GMT

Did you know that around 60% of people break their mortgage before their mortgage term matures?

Most homeowners are bli ssfully unaware that when you break your mortgage with your lender, you will incur penalties and those penalties can be painfully expensive.

Many homeowners are so focused on the rate that they are ignorant about the terms of their mortgage.

Check out my BLOG Mortgage Penalties – Ouch… How Much??

There are a variety of different mortgage choices available. Knowing my 9 reasons for a possible break in your mortgage might help you avoid them (and those troublesome penalties)!

9 reasons why people break their mortgages:

1. Sale and purchase of a home
• If you are considering moving within the next 5 years you need to consider a portable mortgage.
• Not all of mortgages are portable. Some lenders avoid portable mortgages by giving a slightly lower interest rate.
• Please note: when you port a mortgage, you will need to requalify to ensure you can afford the “ported” mortgage based on your current income and any the current mortgage rules.
2. To take equity out
• In the last 3 years many home owners (especially in Vancouver & Toronto) have seen a huge increase in their home values. Some home owners will want to take out the available equity from their homes for investment purposes, such as buying a rental property.
3. To pay off debt
• Life happens, and you may have accumulated some debt. By rolling your debts into your mortgage, you can pay off the debts over a long period of time at a much lower interest rate than credit cards. Now that you are no longer paying the high interest rates on credit cards, it gives you the opportunity to get your finances in order.
4. Cohabitation & marriage & children
• You and your partner decide it’s time to live together… you both have a home and can’t afford to keep both homes, or you both have a no rental clause, or??? The reality is that you have one home too many and may need to sell one of the homes.
• You’re bursting at the seams in your 1-bedroom condo with baby #2 on the way.
5. Relationship/marriage break up
• 43% of Canadian marriages are now expected to end in divorce. When a couple separates, typically the equity in the home will be split between both parties.
• If one partner wants to buy out the other partner, they will need to refinance the home
6. Health challenges & life circumstances
• Major life events such as illness, unemployment, death of a partner (or someone on title), etc. may require the home to be refinanced or even sold.
7. Remove a person from Title
• 20% of parents help their children purchase a home. Once the kids are financially secure and can qualify on their own, many parents want to be removed from Title.
–Some lenders allow parents to be removed from Title with an administration fee & legal fees.
–Other lenders say that changing the people on Title equates to breaking your mortgage – yup… there will be penalties.
8. To save money, with a lower interest rate
• Mortgage interest rates may be lower now than when you originally got your mortgage.
• Work with your mortgage broker to crunch the numbers to see if it’s worthwhile to break your mortgage for the lower interest rate.
9. Pay the mortgage off before the maturity date
• YIPEE – you’ve won the lottery, got an inheritance, scored the world’s best job or some other windfall of cash!! Some people will have the funds to pay off their mortgage early.
• With a good mortgage, you should be able to pay off your mortgage in 5 years, there by avoiding penalties.

Some of these 9 reasons are avoidable, others are not…

Mortgages are complicated… Therefore, you need a mortgage expert!

Give me a call and let’s discuss the best mortgage for you, not your bank!

Kelly Hudson

Mortgage Expert

Mortgage Architects

Mobile 604-312-5009

9 tips for high value home appraisals

What is a BC Property Assessment vs a Home Appraisal?

Fri, 02 Feb 2018 18:32:00 GMT

What is BC Assessment?

It’s January and people in BC are getting their property assess ments.

To see the most recent assessment for a property, click on the link BC Assessment and type in the address.

Use your BC Assessment as a starting point for the value of the property your planning your home purchase… Do not rely on BC assessment for the exact value of the property you’re considering purchasing. Markets in BC can change quickly both increasing and decreasing in value depending on the area.

An appraisal is a document that gives an estimate of a property’s current fair market value.

Often there is no connection between BC Assessment and appraised value. This is why lenders want an appraisal – an independent evaluation of the properties value at this moment in time.

Primarily home appraisals are completed at the request of a lender. Lenders want to know the value of a property in the current market before they are willing to lend against the home.

When an appraisal is done, consideration is given to the property, the home, its location, amenities, as well as its physical condition.

Appraisals may also be required when an owner has less than 20% down payment and needs mortgage default insurance .

Who pays for the Home Appraisal?

Typically, the borrower pays the cost of the appraisal, and upon completion, the appraisal goes directly to the lender (does not go into the home buyer’s hands).

I know it sounds odd, but brokerages, lenders and appraisers cannot just show the buyer the appraisal on a property, even though the borrower paid for it.

Why don’t you get a copy of the appraisal? The appraiser considers their client to be to the lender (the reason the appraisal was ordered). The lender has guidelines for the appraisal, and the appraiser prepares his report according to those parameters.

Lenders are also aware that home buyers could take the appraisal and shop it around with other Lenders to try and get a better deal.

It is rare for Lenders to share the report. With most appraisal companies, the appraisal is only provided after the closing of the mortgage transaction and must have the lender’s approval.

After the funding of your mortgage, some mortgage brokers will refund the appraisal fee or sometimes the lender may agree to reimburse the cost of the appraisal.

While a lender does not have to release the entire appraisal, there are some pieces of information that remain the personal property of the buyer, and PIPEDA legislation guarantees them access to that. However, any information on the report that does not relate to the property itself (such as the neighboring properties or other data about the community) would come off the report before the lender provided it.

Some other reasons for getting an Appraisal:

The appraiser report involves a report including pictures of the home and property with the appraiser’s value of the property, along with a short summary of how that information was derived.

Home Appraisal Costs

Appraisal costs do vary. Most home appraisals start around $350 (plus tax) but they can go much higher depending on how expensive the home is, complexity of the appraisal and how easily the appraiser can access comparable data.

BC Assessment vs appraised value: lenders want an appraisal – a professional, independent evaluation of a homes value, at this point in time!

Are you thinking of buying a home? As you can tell there is lots to discuss, give me a call and let’s have a chat!

Kelly Hudson

Mortgage Expert

Mortgage Architects

Mobile 604-312-5009

Mortgage Payment Options… So Many Choices… Which is the Best Option for Your Situation?

Wed, 15 Nov 2017 03:32:00 GMT

Once your mortgage has been funded by your lender, you need to decide on how frequently you want to make your mortgage payments.

Most people want to pay off their mortgage as quick as possible to save paying interest.

We’ll discuss various mortgage payment options and then do the math by crunching mortgage numbers, keeping in mind: the longer it takes to pay off your mortgage, the more interest you pay.

Monthly: Most people’s typical payment option. Monthly payments will have the lowest payments therefore your mortgage will be paid off the slowest. For many people this is the most comfortable option, since it’s only one payment a month to plan for.

Bi-Weekly: Take your monthly mortgage payment multiply by 12 for a year, then divide by 26.

Semi-Monthly: You make payments twice a month for a total of 24 payments a year.

Weekly: Take your monthly payments, multiply by 12 for a year, then divide by 52 weeks.

Accelerated Bi-weekly: Your monthly payment divided by 2.

Accelerated Weekly: Your monthly payment divided by 4.

I’ve crunched mortgage numbers by putting together a table using:

You can see how choosing the accelerated option pays your balance down a lot faster than regular payments.

Mortgages are complicated… Don’t try to sort all this out on your own. Give me a call and let’s figure out what your best mortgage option will be!

Kelly Hudson

Mortgage Expert

Mobile: 604-312-5009

Kelly@KellyHudsonMortgages.com

www.KellyHudsonMortgages.com

Self-Employed?? Here’s What You Need to Know About Mortgages

Fri, 13 Oct 2017 19:36:00 GMT

Why, why, why it is so challenging for entrepreneurs to obtain a mortgage in Canada?

If you’re among the 2.7 million Canadians who are self-employed, regrettably your income is not as easy to document as someone who’s traditionally employed.

Since 2008, mortgage regulations in Canada have made it more challenging for those who work for themselves to qualify for a mortgage due to tighter restrictions on “stated income” loans. In 2012, Canada’s Office of the Superintendent of Financial Institutions (OSFI) introduced Guideline B-20, which requires federally regulated banks to evaluate applications for residential mortgages and home equity lines of credit with more scrutiny.

These rulings made it more challenging for the self-employed to prove income.

Here’s what Self-Employed home buyers need to know:

6. If you have less than 20% down payment, Genworth is the only option of the 3 mortgage default insurers that still has a stated income program.

Self-employed home buyers, who can document proof of income, can generally access the same mortgage products and rates as traditional borrowers.

Tips for self-employed applying for a mortgage to ensure the process goes smoothly:

Many high net worth business owners with low stated incomes turn to private mortgage lenders for financing, since they can’t prove their income.

It is difficult to navigate which lenders specialize in self-employed mortgages. Using a mortgage broker has obvious advantages, since mortgage brokers have access to multiple lenders and have a broad knowledge of the mortgage market.

Being self-employed need not be a deterrent to buying a property. Let’s have a chat so I can connect you to the lender most suited to your situation.

Kelly Hudson

Mortgage Expert

Mortgage Architects

Mobile 604-312-5009

*3 “Rules of Lending” what Banks look at when you apply for a Mortgage in Canada

Bridge Financing – How Does It Work??

Tue, 19 Sep 2017 01:57:00 GMT

Rarely in life do things go as planned, especially in real estate.

In a perfect world, when buying a new home, most people want to take possession of their new house before having to move out of the old one.

This makes moving a lot easier and allows you time for painting or renovations prior to moving into your new home.

Where it gets complicated, is most people need the money from the sale of their existing house to come up with the down payment for the new house!!

This is where bridge financing comes in.

Bridge financing allows you to bridge the financial gap between the firm sale of your current home, and the firm commitment to purchase your new home.

Bridge financing allows you to access some of the equity in your existing property, which you can use towards the down payment on the new property you are buying.

Where many people get confused is that in order to secure bridge financing, you must have a firm sale on your existing house. That means all subjects have been removed!!

If you haven’t sold your home, you won’t get the bridge financing, because there is no concrete way for a lender to calculate how much equity you have available and if you can afford your new home.

For most people, unless you can qualify & pay for two mortgages, you should always sell your existing home before purchasing a new one. Why???

If you have sold your existing home but your closing date is after the closing date of the new property you just purchased, then bridge financing is your best option:

What happens if I don’t sell my home?

Banks will not provide you with a bridge loan if you don’t have a firm sale agreement for your home since the loan can’t be open-ended. If you don’t have a firm selling date you may need to consider a private lender for the bridge loan.

Private Financing

If you have purchased your home and it is closing and your existing home has not sold, then you may have to take out a private loan:

Your bank doesn’t do this type of financing. You must use a specialized mortgage broker who has access to individuals that lend money out privately.

Bridge financing & private financing are solutions when your buy and sell days don’t work.

Don’t waste your time trying to sort all this out on your own. Give me a call and let’s figure out what your best option would be.

Kelly Hudson

Mortgage Expert

Mobile: 604-312-5009

Kelly@KellyHudsonMortgages.com

www.KellyHudsonMortgages.com

Notice of Assessment (NOA) – What are they? Why banks want them? How to get them!

Wed, 09 Aug 2017 18:42:00 GMT

What is a Notice of Assessment and why should I care… if I want a mortgage?

Definition: The Notice of Assessment (NOA) is the form that the Canada Revenue Agency (CRA) issues to all Canadian taxpayers after processing their tax returns. This CRA tax assessment summarizes the results and states the amount of taxes to be paid or refunded.

It doesn’t matter what you tell the Canada Revenue Agency you earned last year, they decide what your income is and what you to pay taxes on.

Notice of Assessments (NOA’s) from Revenue Canada are required by banks/lenders when applying for a mortgage especially if you are self-employed or you need to include overtime and/or bonuses for income qualification.

Lenders always look at NOA’s to ensure you have no taxes owing to Revenue Canada. If you have any taxes owing to the government, it is difficult to get a mortgage. Most lenders feel if you don’t pay your taxes, do we really want to lend you money??

It is very important to have your 2 most recent NOA’s when qualifying for a mortgage.

Misplaced your Notice of Assessments?? You can request a new copy be mailed to you by Revenue Canada. They take up to 10 business days to arrive so it is best to request them before you get pre-approved for a mortgage.

How to get a copy of your notice of assessment (NOA) or reassessment

Online

Call 1-800-959-8281 to request an income and deduction printout which will show the information on your latest notice of assessment or notice of reassessment.

Before you call , check out Getting or changing personal tax information to know what information you should have on hand.

Email

Previously, you had to wait on Canada Post to mail you a password for online access to your CRA account. You can now get your CRA password emailed .

You need to be VERY patient with getting through on the phone line!! If the line rings through your wait time is usually less than 5 minutes… you may have to keep calling though to get a line. Wait times will vary based on the time of the year.

The process: Go to the CRA website and click on the My Account link and then follow the prompts to register. Once you are registered it will give you an option to have an access code mailed or emailed to you.

For quicker turn-around use the email option.

You then need to contact CRA to confirm your identity. There is a “contact us” link on that page that sends you to the number 1-800-959-8281

Press * As soon as the call goes through to the voice recording, this will skip the recording and directly connect you to an agent.

Next, you need the tell the agent you want to confirm your identity for My Account to have the access code emailed. The agent will ask you for your SIN, birth date and address on file, along with questions from your most recently filed tax return.

You should have your NOA or a copy of our tax return from your Accountant on hand for the call. If you lost your current NOA then the agent will ask for an older tax return or NOA.

The agent will then email you a code right away.

Then you must log back into your new My Account, enter the code when asked and you will have full access. The NOAs can be found under “view mail” which is a link on the left-hand side of the home page.

Now you know why Notice of Assessments are important to lenders and how to get a copy if you’ve misplaced yours!

For other mortgage terms check out my BLOG 10 Helpful Words to Know when Buying a Home

Give me a call and let’s have a chat about a mortgage that works for you… not the bank.

Kelly Hudson

Mortgage Expert

Mobile: 604-312-5009

Kelly@KellyHudsonMortgages.com

www.KellyHudsonMortgages.com

Is your mortgage insured or insurable or uninsurable???? Should you care??

Tue, 11 Jul 2017 04:26:00 GMT

Why should you care if your mortgage is insured or insurable or uninsurable ??

Insured Mortgages

The absolute best rates are for mortgages that are insured by one of the 3 Canadian mortgage default insurance companies: CMHC, Genworth or Canada Guarantee. You pay for the mortgage default insurance upfront. The lender benefits since they have little or no risk for their money, since the mortgage is insured.

Insurable Mortgages

The mortgage is “stress tested” at a higher than the borrower would be paying to ensure borrowers can afford their mortgage if the rates raise (at time of this BLOG, the Canadian qualify rate is 4.64%). Maximum amortization 25 years.

Lenders may choose to pay for mortgage default insurance on mortgages where the borrower has more than 20% down payment. This insurance protects the lenders from a loss. In the mortgage industry, we call this back-end insuring.

Uninsurable Mortgages include:

The changes have limited the mortgages that lenders are allowed to insure using Canadian Government backed insurers. Essentially the Government is intentionally passing on the risk to Lenders by implementing stricter insurance qualifying guidelines and limiting mortgages that can be insured to what they consider lower risk.

The responsibility is now on the lender to absorb more costs if a borrower defaults. The end result is no surprise… lenders pass the additional costs on to borrowers.

The following is a list guidelines the government has issued for insurers – anything outside this means your mortgage rate could be higher.

As an independent Mortgage Broker, about 40% of the mortgages I do fall “outside the box”. I have a vast amount of mortgage options available to cover your “inside” and “outside” the box mortgage requirements.

Give me a call and let’s have a chat about a mortgage that works for you… not the bank.

Kelly Hudson

Mortgage Expert

Mobile: 604-312-5009

Kelly@KellyHudsonMortgages.com

www.KellyHudsonMortgages.com

Pre-Qualified for Your Mortgage… What Does that Really Mean???

Wed, 10 May 2017 22:06:00 GMT

There is a myth out there that once you’re pre-qualified for a mortgage, you’re good to go out and buy a home… with a no subject offer… DON’T do it!

Pre-qualified means that based on being able to PROVE (through documentation) your CURRENT income, expenses, down payment and credit bureau you SHOULD be able to get fully approved once you find the right property (this is the first half of the equation).

Remember that there cannot be any major changes to the your mortgage application details prior to the completion of their purchase as it may affect the your qualifications and change the conditions of the approval.

I always recommend my clients put in a “subject to financing” clause with their realtor when they are putting in an offer to protect themselves.

Here’s why:

The lender can like you and your financial picture, BUT the lender doesn’t know which property you want to purchase (this is the other half of the equation). Here are 3 examples:

A bidding war has bid up the price and the best offer (yours) has been accepted. YIPPEE!!! The lender sends in their appraiser to determine the value of the property. The appraisal comes in at a lower price than your accepted offer DRATS!! Depending on the amount of your down payment, you may have to come up with the difference between the appraised value and your offer, since lenders will only offer a mortgage based on the appraised value of the home.
You are buying a condo/townhouse and the strata minutes indicate that there are: leaks, electrical issues, roofing problems, etc. that the strata needs to act upon. If the Strata doesn’t have a big enough contingency fund, the lender can decline due to potential special assessments down the road.
Property zoning – if the zoning is anything other than residential then your options will be limited. Some condos are zoned commercial if there is a large commercial component to the complex. Industrial, Agricultural Land Reserve (ALR), or leasehold (government or otherwise) limit a buyer’s options.

As you can tell “you may be pre-qualified” but most certainly the subject property is not!!

There are several properties that most lenders will not touch these days. Here’s a (partial) list of property details that can affect most lender’s decisions on approving your mortgage:

The lender reviews the details of each property in detail once you have an accepted offer in place.

It’s important that the real estate agent discloses the information to their buyer ASAP so that it can be brought to the lender’s attention. The agent should be proactive in getting all documentation pertaining to the building/property, so that the buyer can make an educated buying decision. Many of the issues stated above can affect the long-term value and marketability of a property.

If you have a “subject to financing” clause in your purchase agreement, and you can’t find a lender (for whatever reason), then you can back out of the deal with no financial repercussions.

In my opinion you need to always put in a “ subject to financing clause” as that’s the best protection you have. With subject free offers you could forfeit your deposit (and facing potential legal action from the seller) should you want to cancel your contract after the agreement has been made, even though you were technically “pre-qualified”.

As you can tell there is lots to discuss about buying homes including being pre-qualified!!

As an independent mortgage broker, I work with 90+ lenders, which gives my clients access a wider variety of lender choices to find you a mortgage for challenging situations.

Give me a call and let’s have a chat!!

Kelly Hudson

Mortgage Expert

Mortgage Architects

Mobile 604-312-5009

Kelly@KellyHudsonMortgages.com

www.KellyHudsonMortgages.com

10 Government Plans that Save You Money When Buying a Home

Thu, 04 May 2017 00:46:00 GMT

Spring is a busy, busy time in the BC Real Estate market. This BLOG is to let potential home buyers know that both the federal and the BC provincial government offer resources, grants and rebates for new and current home owners.

There are several savings programs available. You need to be aware of all the government programs available to you when making financial decisions.

I’ve included a Top 10 list of these programs… there are others available.

Are you looking at buying a home? As you can tell there is lots to discuss including government programs, give me a call and let’s have a chat!

Kelly Hudson

Mortgage Expert

Mobile: 604-312-5009

Kelly@KellyHudsonMortgages.com

www.KellyHudsonMortgages.com

Everything You Wanted to Know about Mortgage Default Insurance

Wed, 15 Feb 2017 06:18:00 GMT

Home buyers say the number one obstacle to homeownership is saving enough for a down payment.

There are many challenges that come into play when you’re in the market to buy a home.

When you buy a home, your best option is a 20% or higher down payment. For many Canadians, a 20% down payment is prohibitive.

What can you do if you can’t make such a big down payment? You can get mortgage default insurance to help lenders feel less risk about approving you for a mortgage with less than 20% down.

Exactly how much do you need to put down?

Assuming you can finance the debt with your current income, you can get a mortgage for as little as 5% down PLUS mortgage default insurance.

CMHC is a federal Crown corporation, while both Genworth and Canada Guaranty are private insurers.

As a borrower, your lender selects the mortgage insurer, not you. Each mortgage insurer has their own criteria for evaluating the borrower and the property, and they decide whether or not your mortgage can be insured. Therefore, it’s possible that your lender may approve your mortgage application, but the mortgage insurer won’t. In that case, you won’t be able to get a mortgage unless your lender decides to try another insurer. Since there are only 3 insurers – 3 strikes and you’re out!

How Mortgage Default Insurance works:

If you stop making payments, the mortgage default insurer would protect your lender from financial losses. If you have mortgage insurance for the property, the lender can make a claim on the policy and the mortgage insurer will pay the lender, but you’re still responsible for any balance remaining to the insurer.

In other words, if the sale of the property isn’t enough to cover the balance of the mortgage owing to the lender, you don’t get off scot-free, your lender or insurer are able to come after you personally for the remainder of the balance.

Mortgage Default Insurance Exceptions:

Why is mortgage default insurance necessary?

The Canadian Federal government requires you to get mortgage default insurance if you have less than a 20% down payment.

Mortgage default insurance offers a benefit to the home buyer. Without mortgage default insurance, lenders would charge much higher interest rates, since you are higher risk than someone with more than 20% down payment. Even though you pay mortgage default insurance, you’re benefitting from paying less interest on the total mortgage amount.

When you buy a home, your best results will come when have a minimum 20% down payment, check out 5 GREAT Reasons To Provide a 20% Down Payment when Buying a Home

If you can’t save 20% down, then mortgage default insurance could allow you to buy your home.

Would you like more information regarding mortgage default insurance? Give me a call and let’s have a chat.

Kelly Hudson

Mortgage Expert

Mobile: 604-312-5009

Kelly@KellyHudsonMortgages.com

www.KellyHudsonMortgages.com

BC HOME Partnership Program starting Jan. 16, 2017

Fri, 27 Jan 2017 21:31:00 GMT

Metro Vancouver is expensive and large down-payments are a result of high real-estate costs. The BC HOME Partnership Program matches down payments to a maximum of 5% of the home value. This addresses one of the biggest challenges facing first-time home buyers… saving a down payment.

To be clear, this is not a grant. The loan doesn’t reduce the income-qualification requirement for new homeowners. It provides a five-year interest-free loan.

The BC HOME Partnership Program (BC HOME loan) was created for first time home buyers who have good credit and strong income but do not meet the requirements for a minimum 5% down payment. The BC Home Partnership Program allows BC residences to buy their home with a 2.5% down payment.

The BC HOME loan is only available to eligible homebuyers requiring an insured first mortgage for the purchase of their home with less than a 20% down payment.

The home must be occupied as the homebuyer’s principal residence for the first 5 years (or less if the home is sold).

How does it work?

The BC Government will match the home buyer’s down payment with up to 5% of the price of a home (as long as the home is worth less than $750,000).

The BC HOME loan is for a 25-year term, which is interest and payment free for the first five years. The loan will be registered on your property title as a second mortgage .

The home buyer may repay the BC HOME loan in full or in part at any time with no penalty.

At the start of year 6, interest will start accruing and the homebuyer will begin making monthly payments of principal and interest, amortized over the remaining 20 years. The first 5 years the homebuyer was not required to make payments of principal and interest.

When you sign up for the program, the BC Government will set the interest rate for year 6-10 at the Royal Bank of Canada Prime Rate (currently 2.7%) plus 0.5% = 3.2%, and reset the interest rates at the 10 ^th , 15 ^th and 20 ^th anniversary dates.

Thus, starting in year 6, the homeowner must pay back both their original mortgage and the BC HOME loan.

Making Sense of It

New applicants must first qualify under the new mortgage rules to qualify for BC HOME Partnership Program

In the fall 2016 the Federal Government announced major changes to Canada’s housing rules with a mortgage rate stress test (bench mark currently 4.64%) being the most significant.

As of Oct. 17, 2016 a stress test of 4.64% for approving high-ratio mortgages has been applied to all new insured mortgages. Another aspect of the stress test require that the home buyer will be spending no more than 39% of income on home-carrying costs like mortgage payments, heat, property taxes & 50% of strata fees (if applicable). Another measure called total debt service (TDS) must not exceed 44% and includes home carrying costs PLUS all other debt payments (credit card, loans, lines of credit, etc.).

Due to the newly imposed Stress Test, the borrowing power of many Canadians was reduced by about 20%.

How do I know if this program is right for me?

If you’re a first time home buyer affected by these changes, you need to seek the advice of an independent mortgage broker. I will work with you to understand the new home buying rules and help you buy your first home.

How to apply Program Overview and Applicant Information

The best time to apply is after you’ve saved for a down payment and worked with your mortgage broker to get Pre-Approval/Rate Hold for a mortgage.

Once you have a Pre-Approval, you apply for the BC HOME Loan before you start house hunting.

Learn more about the BC HOME Partnership program and how to Apply Online with supporting documents. Only completed applications with all supporting documents will be considered.

BC Housing will evaluate your application and determine your eligibility. You will be emailed once your application has been processed.

If your application is accepted, you will receive confirmation of pre-approval and a Homebuyer’s Package, which includes detailed information on the steps you need to take to receive the BC HOME loan.

Once approved, applicants can make an offer on a home knowing the loan amount that will be available to them from BC Housing. They will also know the legal costs they’ll have to pay to take out the BC HOME loan.

Are You Eligible?

To qualify for BC HOME Partnership loan, everyone who appears on the title of the home must meet the following criteria:

Other criteria are:

Use the online calculator can help you determine if you meet BC HOME Partnership eligibility criteria.

The BC HOME Loan program ends March 31, 2020.

Would you like more information regarding BC HOME Partnership Program? Give me a call and let’s have a chat.

Kelly Hudson

Mortgage Expert

Mobile: 604-312-5009

Kelly@KellyHudsonMortgages.com

www.KellyHudsonMortgages.com

Purchase Plus Improvements Mortgage

Mon, 16 Jan 2017 19:19:00 GMT

Many home hunters know the feeling of seeing a place that’s almost perfect, but it needs a few renovations to make it their dream home. Maybe you want to tear out the kitchen floor, update an ugly bathroom, or create more natural light by installing larger windows.

Purchase Plus Improvements (PPI) is for home buyers wanting to purchase a home that has great potential but needs some TLC. With the PPI, the lender is able to provide additional financing to improve the subject property. The program allows you to make improvements immediately after taking possession of your new home and have renovation the costs rolled into one easy-to-manage mortgage.

How the Purchase Plus Improvements program works:

The Purchase Plus Improvement program is available at the best mortgage rates, including fixed and variable .

Acceptable Loan Purpose:

The Purchase Plus Improvements is a great program, which may make it easier for you to decide which home is best fit for your situation.

Would you like more information regarding Purchase Plus Improvement mortgages? Give me a call and let’s have a chat.

Kelly Hudson

Mortgage Expert

Mobile: 604-312-5009

Kelly@KellyHudsonMortgages.com

www.KellyHudsonMortgages.com

BC Introduces Innovative New Program to Help First-Time Homebuyers

Thu, 15 Dec 2016 20:19:00 GMT

BC Home Owner Mortgage & Equity Partnership*

In a move to help BC citizens and residents buy their first home, the BC government announced today that it is launching a new program to augment down payments for first-time buyers.

The B.C. Home Owner Mortgage and Equity Partnership program contributes to the amount first-time homebuyers have already saved for their down payment, providing up to $37,500, or up to 5% of the purchase price, with a 25-year loan that is interest-free and payment-free for the first five years. Through the program, the Province is investing about $703 million over the next three years to help an estimated 42,000 B.C. households enter the market for the first time.

During the first five years, no monthly interest or principal payments are required as long as the home remains the homebuyer’s principal residence. After the first five years, homebuyers begin making monthly payments at current interest rates. Homebuyers will repay the loan over the remaining 20 years, but may make extra payments or repay it in full at any time without penalty. The loan must be repaid in full when the home is sold or transferred to another owner.

To be eligible, buyers must be preapproved for an insured high-ratio first mortgage (mortgage down payment is less than 20% of the home price). On completion of the sale, program funds will be advanced and the loan will be registered as a second mortgage on the property’s title.

Applications will be accepted starting January 16, 2017. This will be a three-year program with loans advanced from February 15, 2017 until March 31, 2020.

Eligible homebuyers

All individuals with a registered interest on title must reside in the home and:

The first mortgage must be high-ratio insured from an NHA approved lender for more than 80% of the purchase price.

Eligible Properties

Any legal, self-contained, mortgageable residence located in BC

Home Partnership Loans

The loan is due and payable in full upon

Bottom Line: This is a bold and innovative step to help potential new buyers to meet the greatest hurdle of first-time homeownership—the down payment. The Federal Government’s new mortgage regulations released in October hit first-time homebuyers hard, so this program will be welcome relief for B.C. residents. The B.C. government estimates that it will make more than 42,000 new loans over the three-year life of this program, amounting to $703 million in new funding available for qualified first-time homebuyers to come up with their down payments. This is particularly important for BC, which has the highest home prices in Canada.

Need help in understanding mortgages? Give me a call and let’s chat.

Kelly Hudson

Mortgage Expert

Mobile: 604-312-5009

Kelly@KellyHudsonMortgages.com

www.KellyHudsonMortgages.com

* Dr. Sherry Cooper Chief Economist, Dominion Lending Centres

5 Reasons Why You Don’t Qualify for a Mortgage

Tue, 20 Sep 2016 19:30:00 GMT

It’s not just because of finances

As a mortgage broker I receive calls from people who want to know how to qualify for a mortgage. Most of the time it comes down to finances but there are other reasons as well.

Here are the 5 most common reasons why your home mortgage loan application could be denied:

1. Too Much Debt

Lenders will analyze how much debt you carry and what percentage of your income it takes to pay your debt. Debt ration is just as important as your credit score and payment history.

Two affordability ratios you need to be aware of:

Rule #1 – GROSS DEBT SERVICE (GDS) Your monthly housing costs are generally not supposed to exceed 32% of your gross monthly income.

Rule #2 – TOTAL DEBT SERVICE (TDS) Your entire monthly debt payments should not exceed 42% of your gross monthly income.

Check out my BLOG 3 “Rules of Lending” what Banks look at when you apply for a Mortgage in Canada

If you don’t have a good debt to income ratio, don’t give up hope. You have options available including lowering your current debt levels and working with your Mortgage Broker.

2. Poor Credit History

Some people don’t realize if they are late on their credit card/loan/mortgage payments the lender sends that information to the credit bureaus.

Your Mortgage Broker will run your credit bureau to see if there are any challenges you need to be aware of. Check out Solving the Puzzle – 5 factors used in determining your Credit Score

3. Insufficient Income and Assets

If you can’t provide documentation to prove your income, then you will likely get denied for a home mortgage loan.

4. Down Payment is Too Small

To qualify for a mortgage in Canada the minimum down payment is 5% for the purchase of an owner-occupied home & 20% for a rental property.

In Canada if you have less than 20% down payment, the federal government dictates that the home buyer must purchase CMHC Mortgage Default Insurance which is calculated as a percentage of the loan and is based on the size of your down payment. The more you borrow the higher percentage you will pay in insurance premiums. Check out Everything You Wanted to Know about Mortgage Default Insurance

5. Inadequate Employment History

To prove your employment, you will need to prove a Job Letter with salary details.

The chart below lists the 10 main reasons people either don’t want or can’t get a mortgage.

Do you want more information for your next mortgage? Give me a call and let’s chat.

Kelly Hudson

Mortgage Expert

Mobile: 604-312-5009

Kelly@KellyHudsonMortgages.com

www.KellyHudsonMortgages.com

Why You Need to Prove your Down Payment when Buying a Home

Mon, 05 Sep 2016 21:04:00 GMT

If you want your mortgage approved, you need to document the heck out of everything!!

Why? Two reasons:

So, even though you know you can be trusted…. your lender needs to be able to PROVE it. If you can show that you didn’t borrow the money for your down payment, you are more likely to get approval than if you have a super high debt ratio.

How do you document the heck out of everything?

That depends on where your down payment is coming from. Each source will have different documentation to support verification. Most sources need a 3-month record of your past transactions.

Here are the five possible sources for your down payment. Click to see specific details about the documentation you require. How to Verify Your Down Payment When Buying a Home

Make sure you read the details well in advance of your mortgage application. Or give me a call and I can answer your questions.

Check out my other BLOG 5 GREAT Reasons To Provide a 20% Down Payment when Buying a Home

Kelly Hudson

Mortgage Expert

Mobile: 604-312-5009

Kelly@KellyHudsonMortgages.com

www.KellyHudsonMortgages.com

In Vancouver Area? Need a renovation? In 5 weeks? On TV?

Fri, 02 Sep 2016 16:31:00 GMT

W Network is casting for a new reality show “Worst to First” where they help you create your dream home.

If you’re located in the Greater Vancouver area and want to reno your house make your dream home a reality, submit an application here: https://castingcall.typeform.com/to/uU68ub

Kelly Hudson

Mortgage Expert

Mobile: 604-312-5009

Kelly@KellyHudsonMortgages.com

www.KellyHudsonMortgages.com

How to Verify Your Down Payment When Buying a Home

Wed, 31 Aug 2016 04:18:00 GMT

Saving for a down payment is one of the biggest challenges facing people wanting to buy their first home.

To fulfill the conditions of your mortgage approval, you need to document the heck out of everything. Documentation of down payment is required by all lenders to protect against fraud and to prove that you are not borrowing your down payment , which changes your lending ratios and potential approval.

DOCUMENTATION REQUIRED BY THE LENDER TO VERIFY YOUR DOWN PAYMENT

Most lenders will also want to see that you have 1.5%-3% of the purchase price available in your account to cover your closing costs (i.e. legal, home inspection, taxes, etc).

Buying a home for the first time can be stressful, therefore being prepared with the right documentation for the down payment and closing costs can make the process much easier.

Give me a call if you have any questions about substantiating your down payment or any other questions regarding mortgages.

Kelly Hudson
Mortgage Expert

Mobile: 604-312-5009

Kelly@KellyHudsonMortgages.com

www.KellyHudsonMortgages.com

6 Tips for Success on Multiple Offer Home Purchases

Wed, 17 Aug 2016 18:32:00 GMT

The real estate market in Vancouver and Toronto is once again on a rampage!

There is low home inventory levels and historically low interest rates, making newly-listed homes sell quickly! Many homes are receiving multiple purchase offers, which is excellent news for sellers

… not such good news for buyers.

As a home buyer, you need to be prepared!!

While price it is important, it may not be the only factor sellers consider. Other factors they will look at include subject conditions and completion and possession dates.

Six tips for going into multiple offer situations

1. Work with a Mortgage Broker to Get Pre-Approved , versus Pre-Qualified

In a multiple-offer situation, having a Pre-Approval Certificate is extremely important and often helps the seller choose who they want to work with.

2. Engage an experienced Real Estate Agent

Having the right Realtor can be critical to your interests. Your agent should be very experienced in working with Multiple Offers. Make sure they know and respect your spending limit.

3. Consider doing a home inspection ahead of time

4. Be very flexible

5. Write a letter

6. Know when it’s time to “Just Say No!”

Multiple offer situations are stressful. You need to know what you can afford to spend and stick to your budget. Remember it’s your money and your life, so you get to make the final decision.

Any questions? Give me a call!

Kelly Hudson
Mortgage Expert

Mobile: 604-312-5009

Kelly@KellyHudsonMortgages.com

www.KellyHudsonMortgages.com

How to Understand Condo Fees in BC

Tue, 05 Apr 2016 16:56:00 GMT

If you’re interested in buying your first strata unit then there are some added costs of condo living that you need to consider.

First-time condo buyers will usually be confused by the monthly maintenance fee that is charged by condo buildings. They can add up to a large percentage of your total housing costs when you combine them with your property taxes and mortgage payments. But what is a condo maintenance fee (also called a strata fee) and what will it cover? How does a strata fee compare to the costs associated with owning a house?

Every building there is requires maintenance to stay in good condition. To think otherwise would just be naïve.

The condo fee is your percentage share of the total cost of maintaining the whole building. Condo fees are not a way for the building management to make a little more profit. Each building is registered as a non-profit corporation. Because the condominium corporation is registered as a non-profit they are unable to use the money generated for anything other than the maintenance and operation costs of the condominium.

The strata fee will vary between different areas and buildings. The rate will be determined by a number of factors including the age of the building, the management style, the contingency reserve fund (CRF) and amenities. For example the condo strata fees in Vancouver are typically 35-50 cents per square foot.

Where Does the Money from the Strata Fees Go?

There are two funds that must be maintained by every strata corporation in BC. These funds are where your maintenance fees end up. They are the operating fund and the contingency reserve fund (CRF).

The operating funds are used to pay for the regular expenses that come up over the course of the year. Condo fees are used to pay for the following things:

Some items are legally required to be included in the condo fees, these are insurance, CRF, and exterior maintenance. The other items are optional and depend on the building itself, the bylaws of the condo, and the preferences of the condo owners.

While condo fees will typically need to be paid annually most condo boards will offer people the chance to pay on a monthly basis.

To provide you with an example; the heating, cable and internet costs will sometimes be a part of the strata fee. These are things that fall under the operating fund and, while they may increase the strata fee, will be offered for cheaper than it would cost to purchase each item independently. These are the kind of expenses that provide a good reason to have higher strata fees.

You also need to consider that some of the high strata fee may go to amenities you have no interest in ever using. Of course it would be nice to have a gym and a swimming pool, but are you actually likely to use them? Will they be worth your money? Remember that you will have to pay for amenities in your strata fees even if you don’t use them.

Every condo is required to maintain a contingency reserve fund (CRF) by law. This fund covers any expenses that pop up less than once a year. It’s typically used in the upkeep of the building, such as financing a new roof or repairing heating and plumbing equipment.

Do Your Homework

Smart condo buyers will take a look at the strata minutes for a history of the building, along with taking a look at the depreciation report . This will give them an idea of what repairs will need to be made in the next 30 years.

The strata minutes will also provide you with a look at the management style of the building. Are the problems in the building fixed correctly, or are they just being repaired with temporary solutions that keep maintenance fees down? Does the management provide regular maintenance such as window cleaning and power washing? Higher strata fees in a building are usually the result of regular maintenance which will keep strata fees down in the long run.

You should also consider having a professional home inspector review the minutes to determine if what they see during the inspection is reflected in the minutes. The home inspector will help you gain an understanding of any special assessments and the depreciation report .

There is one last thing to consider is the “special assessments” category. These are one time fees used for repairs that are not covered by the contingency fee. They may also be quite substantial, especially if you live in an older building or conversion. The good news is that once the bill is paid off you should expect to see a drop in maintenance fees, as was seen during BC’s Leaky Condo Crisis .

One of the most important aspects of buying a condo is understanding what is covered by the monthly maintenance fees so you are able to compare two buildings properly.

To fully understand condo strata fees it is important to understand how, when, and why your money will be spent.

If you still have questions about condos, mortgages or buying a home then please give me a call. I’m more than happy to chat with you.

Kelly Hudson

Mortgage Expert

Mobile: 604-312-5009

Kelly@KellyHudsonMortgages.com

www.KellyHudsonMortgages.com

Monoline Mortgage Lenders Can Offer Better Options than BIG Banks!

Thu, 10 Mar 2016 22:55:00 GMT

Monoline lenders are an important cog in the mortgage market. Their variety of mortgage products and low pricing, improve consumer choice and have forced the dominant Canadian Banks to be more competitive.

What is a monoline lender? A monoline lender, by definition, is a mortgage lender that focuses only on mortgages and are only accessible through the mortgage broker channel. Some of the larger Monoline lenders are: First National , MCAP , RMG Mortgages , Street Capital , and CMLS .

Advantages of dealing with monoline lenders include:

Of course, this scenario would never actually take place, since another bank/lender would certainly come in and purchase all of their mortgages. You would simply receive a letter saying that your payments are now being directed to another Lender, but your mortgage contract remains the same because, well after all, it is a contract and a binding agreement! … In essence, nothing would change!

Overall, Monoline Lenders offer better options than the big banks . Simply look at the posted rates for fixed term mortgages and the favourable penalty calculations. To find out whether a monoline is right for your mortgage, you’ll need to use a mortgage broker to access their services (and you can bet your bank won’t tell you about Monolines).

If you have any further questions about Monolines, mortgages or buying a home, please give me a call, I’m happy to have a chat.

Kelly Hudson

Mortgage Expert

Mobile: 604-312-5009

Kelly@KellyHudsonMortgages.com

www.KellyHudsonMortgages.com

8 Credit Rules You Need to Know to Get a Mortgage

Mon, 07 Mar 2016 19:36:00 GMT

If you plan to buy a home, you need to know how to manage your credit NOW!

Managing credit correctly requires some discipline. If you let your spending get out of control and take on too many credit cards or loans, you could face big money troubles, making it challenging to qualify for a mortgage.

When it comes to borrowing money, it’s important to have guidelines.

Here are 8 rules of credit that everyone should follow so your finances and your credit score stay in good standing.

When you are getting a mortgage, banks want to know how you’ve handled credit in the past, which gives them an idea of how you will handle your mortgage payments. Furthermore, a high credit score will give you the best mortgage interest rates when buying your home.

1. Pay your bills on time every time . Spotless payment history is crucial when it comes to establishing a good credit score. The payment history accounts for the largest percentage of your credit scoring and one missed bill will cost you. A recent late payment can cause up to 100-point drop on a credit score of 780 or higher.

2. High credit balances = Low credit scores . The closer you get to your credit limit, the lower your score.

3. You need to have established credit (the rule of “2”) Credit agencies and lenders are looking for:

4. Some types of credit are better than others

5. Be careful with joint credit (spouse, family, friend)

6. Applying for more credit… lowers your score

7. Closing your credit account… lowers your score

8. Don’t let someone else wreck your credit – be aware of your credit score

One way to improve your credit score:

For further information on Credit Score check out my blog Solving the Puzzle – 5 factors used in determining your Credit Score

If you have any further questions about credit, mortgages or buying a home, please give me a call – I am happy to have a chat.

Kelly Hudson

Mortgage Expert

Mobile: 604-312-5009

Kelly@KellyHudsonMortgages.com

www.KellyHudsonMortgages.com

BC Provincial Budget 2016 – Things of Note for Home Buyers

Wed, 17 Feb 2016 19:19:00 GMT

The BC Minister of Finance has announced several changes* that will impact home buyer’s including:

* the full details of the changes haven’t been released, so we will know more shortly.

There is some good news for First Time Home Buyer’s and those looking to upgrade to a brand-new home.

Contact me, so I can give you an unbiased view of which mortgage product is right for you since I have access to 90+ financial institutions.

My services for a typical mortgage are FREE and I help people save money!

Let’s have a chat to discuss your best mortgage option, not the banks!

Kelly Hudson

Mortgage Expert

Mobile: 604-312-5009

Kelly@KellyHudsonMortgages.com

www.KellyHudsonMortgages.com

What happens to your mortgage payment if interest rates double??

Mon, 15 Feb 2016 19:17:00 GMT

Are you freaked out with the thought of rising mortgage interest rates?

One thing you can do to alleviate that fear is to educate yourself. Once you know your situation and facts, you can make an educated decision to worry about rising mortgage rates… or not!

Let’s ask few questions – what is your current mortgage rate? How much are your monthly payments?

What would happen if your mortgage rates doubled, when it comes time to renew (typically 5 years)? Will you be able to afford your home? Will you have to adjust your lifestyle?

Mortgage rates in Canada are tied to Bank of Canada lending rate – banks borrow their money from Bank of Canada, and then turn around and lend money to you and me. They charge a bit extra (no surprise) – since they’re in business of making money.

It’s easy to understand now the Bank of Canada lending rate is tied to mortgage rates in general. If Bank of Canada brings their rate up, historically all banks follow the trend and raise their rates – because they don’t want to lose money.

Does a doubling of the interest-rate double your mortgage payment? The short answer is NO it does not.

Let’s discuss the math and the logic.

I have used 25-year amortization, the maximum allowed for purchases with less than 20% down payment. This is usually the first time home buyers – which tend to be the highest risk group.

I’ve used a $100,000 mortgage as an example, which makes it easy to do the math for higher mortgages.

One option for lower mortgage payments if interest rates doubled, would be to refinance and extend the amortization from remaining 20 years and push it out to 25 years.

The net monthly payment increase, at the 5-year renewal would be is $134.94 per $100K of the original mortgage balance.

The net monthly payment increase, at the 5-year renewal refinanced over 25 years would be is $73.02 per $100K of the original mortgage balance.

Now for the Logic:

Think of how much money you made 5 years ago… do you make more money now? Do you think your household income will increase over the next 5 years? Do you think your additional income; would be enough to offset what you would pay if your mortgage rate doubled?

Over 5 years, an average family would experience an increase in household income.

After looking at the math and the logic, clearly a doubling of mortgage interest rates would be unlikely to cause any kind of significant crisis for the majority of average homeowners, and there are options available:

Rising mortgage rates in have been discussed for quite some time and will continue to be discussed as long as people have mortgages.

The best way to you prepare for the adversity of higher interest rates, is to shrink your mortgage balance as much and as quickly possible, especially with the current low mortgage rates so more of your money pays off the principle.

If you have any further questions about mortgages, please call me at 604-312-5009.

My services for a typical mortgage are FREE and I help people save money. I LOVE my job!

Kelly Hudson

Mortgage Expert

Mobile: 604-312-5009

Kelly@KellyHudsonMortgages.com

www.KellyHudsonMortgages.com

Cash Back Mortgages – There’s no FREE Lunch!!

Sat, 30 Jan 2016 23:09:00 GMT

You often see Cash Back Mortgage ads as a lure from the major banks offering cash back incentives on their Mortgage products. Cash back mortgages are becoming increasingly popular among borrowers, particularly those who have limited down payments.

So here’s some quick words of advice. STAY AWAY FROM CASH BACK Mortgage offers!

What is a Cashback Mortgage? The deal is simple. Various lenders offer cash back programs, allowing a percentage of the property’s Mortgage value to be rebated to the borrower upon closing. The bank gives you cash up front to use however you want, except as the down payment .

The cashback on mortgage option can definitely help when it comes to paying closing costs, but borrowers should be aware that these products come with catches:

1) Higher interest rates The cost of the upfront cash is a much higher interest rate — usually about 2% higher than a Mortgage Broker negotiated rate. The higher interest rate is what pays for the cash the bank is “giving” you.

The homeowner would be pay a significantly higher amount of interest over the term of the mortgage. Homeowners need to crunch the numbers to calculate what’s more worthwhile:

$48,000 difference over 5 years. It’s pretty clear why a Cash Back Mortgage is not a great deal for the consumer and why I discourage it’s use.

2) Clawback penalties: If you need to break your mortgage, whether to sell or refinance your home before your mortgage term is complete.… you have to pay the Penalty PLUS return the Cash Back portion to the bank. The Cash Back Penalty is sometimes prorated sometimes NOT depending on the lender, check the fine print of your contract.

3) Variable rates are not available: Another downside to cash back mortgages, is that they are not available for variable rates. For people who can tolerate fluctuating variable interest rates, variables have shown the potential over the long term to save you interest. That option is not available with a cash back mortgage.

4) Limited availability: Most lenders offering Cash Back Mortgages are looking for A+ borrowers with a solid credit profile, steady provable income, and typically 5% or more down payment.

5) The Office of the Superintendent of Financial Institutions (OSFI) reiterated it doesn’t like the Cash Back Mortgage practice at all, recommending mortgage default insurers not underwrite loans that use cash back for a down payment.

READ the FINE PRINT – Many people miss the fine print on lender’s websites and in their mortgage contract. When a deal seems to be too good to be true, there is always a catch… There is NO Free lunch!

If you have any further questions about cashback mortgages or any other mortgage products, please call me at 604-312-5009

Kelly Hudson

Mortgage Expert

Mobile: 604-312-5009

Kelly@KellyHudsonMortgages.com

www.KellyHudsonMortgages.com

Mortgage Penalties – Ouch… How Much??

Fri, 01 Jan 2016 03:16:00 GMT

When I talk to mortgage clients – I explain a number of items including the various penalties associated with breaking a mortgage prior to the maturity date.

No one enters into a 5-year mortgage contract (term) expecting to need to break their mortgage.

Regrettably life happens and 60% of home owners, break their mortgage before it matures!

There are penalties to break your mortgage, so please check out this GREAT 3 minute video from the Globe & Mail explaining how Banks calculate mortgage penalties for both Variable & Fixed mortgages and how banks squeeze even more money out of their clients by giving discounts off their inflated posted rates Drawing Conclusions: How much does it cost to break a mortgage?

To break a mortgage, lenders usually use a 3-month interest penalty, or an Interest Rate Differential penalty (IRD).

The penalty for breaking a fixed rate mortgage is usually the greater of 3-months’ interest, or the Interest Rate Differential (IRD). In some cases, when your mortgage is very close to maturity, the 3-month interest penalty will be higher, but otherwise the IRD penalty is much higher than 3-months interest. Variable rate mortgages usually use the 3-month interest penalty. Some variable mortgages offering lower rates, however, will use an IRD or, in some instances, are closed (you cannot break them) without a bona fide sale of the property. This is also the case for some niche fixed rate mortgage products. With the IRD penalty there can be vast differences from one lender to another. The IRD penalty is based on 3 things:

Check out my BLOG Fixed vs. Variable Rate Mortgages – Pros & Cons

When mortgage shopping, you need to consider the interest rate, along with the terms of the mortgage including:

Let’s have a chat to discuss the next steps to your home ownership.

Kelly Hudson

Mortgage Expert

Mobile: 604-312-5009

Kelly@KellyHudsonMortgages.com

www.KellyHudsonMortgages.com

The Liberal Effect on Home Ownership & Bank of Canada Rate remains the same

Thu, 22 Oct 2015 23:17:00 GMT

1. Balancing the budget is not a priority until 2019. Trudeau is expected to go on a spending spree suggesting a greater supply of government debt and potentially higher long-term yields to come, which could mean at slightly higher fixed mortgage rates than we’d otherwise see.

2. No cut in Bank of Canada prime rate: More spending by Ottawa puts less pressure on governor Stephen Poloz to stimulate the economy with rate cuts. The implied probability of a rate hike by next October has almost doubled, from 8% yesterday to 15% as we speak. 3. Wider RRSP Access: The Liberals say they’ll open access to the RRSP Home Buyers’ Plan particularly for homebuyers coping with significant life changes (divorce, death of a spouse, a sick or elderly family member, etc.). More access to down payment funds will prop up housing sales and home ownership slightly, and support home prices.

4. More “Affordability”: The Liberal platform includes a review of housing policy in high-priced markets. The new government will “consider all policy tools that could keep home ownership within reach.” What that means, we’ll have to wait and see. It could definitely be positive for renters and income property investors, given the Liberals have promised to “direct CMHC…to provide financing to support the construction” of new rental housing.

5. First-timer Support: Trudeau’s government will add more flexible programs for first-time homebuyers. This could mean any number of things, potentially even higher amortization limits for new buyers.

As always, I am available at any time to discuss, plan, help, and listen to your questions, concerns, and feedback. And please forward any of my emails on to anyone who you know would be interested in receiving it, because your referrals are what keep me in business!

Thanks for reading!
Kelly

Kelly Hudson

Mortgage Expert

Mortgage Architects

Mobile 604-312-5009

Why you should use a Mortgage Broker, NOT your bank!!

Wed, 21 Oct 2015 19:40:00 GMT

By Kelly Hudson, Mortgage Expert
DLC – Aegis Mortgage Services

Securing an affordable mortgage is one of the biggest challenges — especially for first-time buyers .

There are generally two ways to get a mortgage in Canada: from a bank or from a licensed mortgage professional.

Most people think of their bank first, when considering a mortgage. They think their loyalty will earn them the best mortgage rates.

Regrettably, you probably won’t get the best deal from your long-time lender.

Think about it: you and your bank have 2 opposing views

Working with your bank on your mortgage, is like asking the coach for the opposing team to tell you how to score on their team.

While a bank only offers the products from their particular institution, licensed mortgage professionals send millions of dollars in mortgage business each year to Canada’s largest banks, credit unions, trust companies, and financial institutions; offering their clients more choice, and access to hundreds of mortgage products! As a result, clients benefit from the trust, confidence, and security of knowing they are getting the best mortgage for their needs.

Kelly as an independent mortgage broker , can shop around your mortgage to the 90+ lenders to find the best rates and terms for your mortgage.

Not only will you end up with more appealing interest rates, but you can also find the products you’re looking for that your own bank may not offer — such as a mortgage for the self-employed, or a home loan if you don’t qualify under standard guidelines or have credit blemishes.

Most banks and credit unions register your mortgage as a collateral mortgage, meaning that although you can borrow more, you may not be able to move to another lender at the end of your current term. You may also have other unpaid debts registered against your home, which will be tacked on to your mortgage. For more information on Collateral Charge Mortgages check out my BLOG Collateral vs Conventional Mortgages… What the Banks don’t want you to know…

As an independent mortgage broker, Kelly has your best interests in mind when choosing the right products because she works for you, not the banks.

To make the process even easier, you can even apply for a mortgage through Kelly online .

To find out more about what Kelly can offer you, visit her website or call 604-312-5009.

Let’s discuss a mortgage that works for you (not the bank)!

Kelly Hudson

Mortgage Expert

Mobile: 604-312-5009

Kelly@KellyHudsonMortgages.com

www.KellyHudsonMortgages.com

Mortgage Payment Frequency – Accelerated Bi-Weekly vs Bi-Weekly Payments

Thu, 20 Aug 2015 19:54:00 GMT

One decision you will need to make when you get a mortgage is, how often you want to make your payments.

With constant demands on your cash flow, you’ll want a way of fitting your mortgage payments into your bill paying financing. Banks/Lenders give you a choice of up to six payment frequencies so you can choose when and how often you wish to make your mortgage payments.

Let’s compare the 3 most popular options: monthly, bi-weekly & accelerated bi-weekly.

Lenders offer the choice of paying your mortgage with accelerated or “rapid” bi-weekly payments along with a non-accelerated or “regular” bi-weekly payment. This can cause confusion as most people assume that repaying a mortgage with bi-weekly payments will shorten the amortization, regardless of whether it is an “accelerated” or “regular” payment.

To help resolve this confusion, it is important to think of your payments as a stream of income for the Lender.

Mortgage payments are comprised of a blend of interest & principal.

The Lender’s minimum payment stream is 12 monthly payments

With accelerated bi-weekly, you are paying one extra month’s payment amount towards principal repayment (equivalent of 13 months of payments). This accelerated repayment of principal is what shortens your amortization and saves you interest.

Bi-Weekly payments

With a regular (non-accelerated) bi-weekly payment plan, the Lender takes 12 months’ worth of payments and divides this by 26 to come up with the bi-weekly payment. With this adjusted payment the Lender still receives a stream of income of 12 months payments per year. There is no additional money (principal) available to accelerate the amortization.

Accelerated Bi-Weekly paymen ts

With an accelerated bi-weekly payment plan, the Lender takes 13 months’ worth of payments and divides this by 26 to come up with the accelerated bi-weekly payment. With this adjusted payment the Lender now receives income from 13 months of payments per year. There is $38.36 in additional money, applied to the principal to accelerate the amortization and pay off your mortgage earlier with less interest.

Example

Monthly Mortgage Payments

Monthly payments are payments made once per month (12 payments per year). Based on the above example, the total annual mortgage payments are $20,937.72 ($1,744.81 x 12).

Bi-Weekly Mortgage Payments

Bi-weekly means payments are made every 2 weeks (52 weeks/year = 26 payments). You are making a total of 26 payments in the year.

To calculate Bi-Weekly payments, you take the monthly payment x 12 then divide by 26 ($1744.81 x 12 = 20,937.72 / 26 = $805.30). At the end of the year Bi-weekly payments still only add up to $20,937.80 ($805.30 x 26), the same as if you made monthly payments of $1,744.81.

The little bit of savings come from the fact that you are paying down the principal quicker because your making payments every 2 weeks as opposed to once per month.

Accelerated Bi-Weekly Mortgage Payments

Accelerated bi-weekly mortgage payments are a bit different.

To calculate your accelerated bi-weekly payment, take the monthly mortgage payment, $1744.81 multiply x 13 (since you are making 1 extra payment per year) $22,682.53, then divide it by 26 (every 2 weeks). As per the example, you’re total annual mortgage payment is $22,682.53 ($1744.81 x 13) divided by 26 = $872.41/

Essentially you’re making one additional monthly payment per year ($22,682.53 – $20,937.72 = $1744.81).

By making accelerated bi-weekly payments, you will be saving money on interest and reducing your amortization period.

What happens to my mortgage with different payment frequencies?

The following chart shows the impact on your mortgage

You can align your mortgage payments to when you are paid by your employer. For some people, the financial burden of accelerating their payment at the time of funding is not an acceptable option, hence the choice of a regular payment plan.

Some Lenders offer their clients the option to change their payment frequency once a year, as per the Lender’s prepayment privilege guidelines.

There are lots of great ways to reduce the time it takes to pay off your mortgage. I would be happy to discuss various mortgage options and get you on the fast track to saving money with little effort.

Whether you’re purchasing a new home, looking to refinance your existing home or looking to get pre-approved for a mortgage, I have the knowledge, and experience to help.

Let’s discuss a mortgage that works for you (not the bank)!

Kelly Hudson

Mortgage Expert

Mobile: 604-312-5009

Kelly@KellyHudsonMortgages.com

www.KellyHudsonMortgages.com

How LOW Can Mortgage Rates Go???

Tue, 21 Jul 2015 02:41:00 GMT

How LOW Can Mortgage Rates Go???

Somewhat expectedly , on July 15 the Bank of Canada (BOC) cut their Benchmark Interest Rate for a second time this year by 25 basis points, down from 0.75% to 0.50%.

There is a direct correlation between the BOC’s key interest rate and consumer “Prime Rate” which affects everything from variable rate mortgages to lines of credit.

Prior to July 15 the consumer Prime Rate with all major financial institutions was 2.85%.

The other major banks, (Scotia, RBC, BMO etc.) lowered their prime rate by 15 basis points (still not the full 25 basis points) and TD followed suit.

If you recall, back in January when the BOC cut their key rate from 1.00% to 0.75%, TD was the first out of the gate again, and they stated that they wouldn’t be cutting their Prime Rate at all! However within a few days, RBC and Scotia both announced a cut on their Prime down to 2.85%, and TD quickly followed suit.

What should you do with your mortgage?

In my opinion, variable rate mortgages (VRM) are still your best bet – for a few reasons:

Even if we assume no further rate cuts will happen over the balance of 2015; we’re unlikely to see a rate increase in the short to medium timeframe.

It’s a great time to get your mortgage or line of credit paid down!

Some interesting things to consider:

The Globe and Mail wrote a good piece about this on July 15: Five things to watch after the rate cut .

As always, I am available at any time to discuss, plan, help, and listen to your questions, concerns, and feedback.

Let’s have a chat to discuss your next steps to home ownership.

Kelly Hudson

Mortgage Expert

Mortgage Architects

Mobile 604-312-5009

* Drawing Conclusions: How much does it cost to break a mortgage?

Fixed vs. Variable rate mortgages Pros & Cons

Tue, 30 Jun 2015 19:57:00 GMT

As an independent Mortgage Broker, I am often asked “should I choose a fixed or variable rate mortgage”

Buying a home is very exciting, but it can easily be overwhelming.

Understanding how mortgages work is your first step. Education is a huge part of my job, I give people as much information (as you can handle), so you make the best decision regarding a mortgage for your particular circumstance.

When deciding on a mortgage you will need to choose between a variable or fixed rate mortgage. Your income, size of your mortgage, lifestyle and risk tolerance will help you determine which product best suits your particular circumstance.

The key to variable and fixed rates is to understand how interest rates are calculated and how these impact each type of mortgage:

Fixed & variable mortgage rates Pros & Cons

According to Robert Abboud, an Ottawa – based CFP and the author of No Regrets: A common sense guide to achieving and affording your life goals , Ram Balakrishnan, blogger, and Dr. Moshe Milevsky, the York university professor whose initial 2001 study became the impetus behind the current belief that you’ll always save with a variable rate mortgage, a variable rate mortgage may not be in your best interest.

According to Milevsky’s 2001 study (and the updated study released in 2008), homeowners who opt for a variable rate mortgage save approximately $22,000 in interest payments over a 15 – year period.

For that reason, Milevsky, and others, have voiced their support for locking – in to a fixed rate. The rationale: any savings you see from currently low variable rates will be eaten up when you’re forced to renegotiate your mortgage in five years. That’s because as rates slowly creep up over the next five years, your monthly payments remain the same — and this results in a larger percentage of your payment going to interest payments, rather than repaying the principal.

To help you decide whether a variable or fixed mortgage is the best option for you, answer the following 4 questions:

If you answered YES to any of these questions, you need to seriously consider a fixed – rate mortgage. Despite the temptation of saving money with a variable rate mortgage, a fixed rate will provide a level of stability and predictability that your situation requires.

Mortgage borrowers need to understand and measure risks when deciding between a fixed-rate mortgage (stability) and a variable rate mortgage (balance between risk & reward).

Besides the Fixed vs Variable rate mortgages, there are many other factors you need to be aware of prior to buying your home.

Let’s have a chat to discuss your next steps to home ownership.

Kelly Hudson

Mortgage Expert

Mortgage Architects

Mobile 604-312-5009

3 “Rules of Lending” – What Banks look at when you apply for a Mortgage

Wed, 20 May 2015 23:12:00 GMT

Buying a home is usually the biggest purchase most people make and there are a lot of factors to consider. My job is to provide you with a much information (as you can handle!!) so you make the best decision based your particular situation.

T he 3 “rules of lending” focus on determining the maximum size of mortgage that can be supported by your provable (what you paid taxes on) income.

You need to consider two affordability ratios:

Rule #1 – GROSS DEBT SERVICE (GDS) Your monthly housing costs are generally not supposed to exceed 36-39% of your gross monthly income. Housing costs include – your monthly mortgage payment, property taxes and heating. If you are buying a condo/townhouse the GDS will also include ½ of your strata fees. The total of these monthly payments divided by your “provable” gross monthly income will give you your Gross Debt Service.

Mortgage payments + Property taxes + Heating Costs + 50% of condo fees / Annual Income

Rule #2 – TOTAL DEBT SERVICE (TDS) Your entire monthly debt payments should not exceed 42-44% of your gross monthly income This includes your housing costs (GDS above) PLUS all other monthly payments (car payments, credit cards, Line of Credit, additional financing, etc.). The total of all your monthly debts divided by your “provable” gross monthly income will give you your Total Debt Service.

Housing expenses (see GDS) + Credit card interest + Car payments + Loan expenses / Annual Income

What about the other 56% of your income?? This is considered to be used up by ‘normal’ monthly expenses including: taxes, food, medical, transportation, entertainment etc.)

For more information on Credit Scores – see my previous BLOG Solving the Puzzle – 5 Factors used in Determining your Credit Score

Mortgages are complicated, but they don’t have to be… Engage an expert!

Give me a call and let’s discuss a mortgage that works for you (not the bank)!

Kelly Hudson

Mortgage Expert

Mobile: 604-312-5009

Kelly@KellyHudsonMortgages.com

www.KellyHudsonMortgages.com

Top 10 Reasons to use a Mortgage Broker!

Sun, 19 Apr 2015 21:56:00 GMT

A recent Bank of Canada report confirmed that “… mortgage borrowers who use a mortgage broker pay less, on average, than borrowers who negotiate with lenders (banks) directly…” But according to the 2013 CMHC Consumer Survey only 23% of consumers getting a mortgage used the services of broker to arrange their mortgage.

Your home will likely be the biggest investment you will make. Mortgage shopping can be daunting and stressful for those who’ve never done it before, so it’s tough to know when you’re getting the best rate, OR if the terms and conditions of the mortgage are best suited to your specific circumstances. As a licensed Independent Mortgage Professional, I am often asked “why should I use a Mortgage Brok er?” Here is my answer every time. Every person has their own goals and plans. Mortgage Brokers specialize in making sure your financing is in order, in order to facilitate your dreams of owning a home.

Mortgage rates and products are constantly changing. By choosing to work with a Mortgage Professional, you can access all your mortgage options with just one phone call and one application.

Contact me today for your mortgage evaluation.

Kelly Hudson

Mortgage Expert

Mobile: 604-312-5009

Kelly@KellyHudsonMortgages.com

www.KellyHudsonMortgages.com

Solving the Puzzle – 5 Factors used in Determining your Credit Score

Sat, 11 Apr 2015 03:57:00 GMT

A credit score is a number that lenders use to determine the risk of lending money to a given borrower. Credit card companies, auto dealerships and mortgage bankers are three common examples of types of lenders that will check your credit score before deciding how much they are willing to lend you and at what interest rate. Lenders grant you credit based on your:

Willingness to Pay
Ability to Pay
Risk and return on their investment

For more information about credit, check out my new BLOG 8 Credit Rules You Need to Know, Before You Buy a Home

Mortgages are complicated… but they don’t have to be! Engage an expert!

Kelly Hudson

Mortgage Expert

Mobile: 604-312-5009

Kelly@KellyHudsonMortgages.com

www.KellyHudsonMortgages.com

5 GREAT Reasons To Provide a 20% Down Payment when Buying a Home

Tue, 07 Apr 2015 02:46:00 GMT

There are many challenges that come into play when you’re in the market to buy a home.

Buyers say the number one obstacle to homeownership is saving enough for a down payment, the amount that the buyer provides toward the purchase of their home.

A smart rule of thumb is always try to put a least 20% down. Although that may be a challenge in Greater Vancouver where the current Vancouver MLS stats indicate an average house price of $1,227,420

Let’s discuss which mortgage down payment works for you!

Kelly Hudson

Mortgage Expert

Mobile: 604-312-5009

Kelly@KellyHudsonMortgages.com

www.KellyHudsonMortgages.com

Warm Wishes for a wonderful Easter with friends and family

Sun, 05 Apr 2015 18:17:00 GMT

Kelly Hudson’s home made Easter sugar cookies

Collateral vs Conventional Mortgages… What the Banks don’t want you to know…

Mon, 23 Mar 2015 16:35:00 GMT

Revolving Mortgages may sound like a great idea…BUT they are the Golden Handcuffs that bind you to your bank!!

When shopping for a mortgage you’ll probably ask the usual questions regarding: rate, term, payment frequency, but you probably won’t ask if a conventional or collateral mortgage is going to be registered against your property. So what exactly is the difference?

Not all mortgages are created equal. There’s a major distinction that you need to be aware of: collateral (revolving) mortgages vs. conventional mortgages. Most of Canada’s big banks and Credit Unions now register mortgages as Collateral Charges without informing the client of the pros and cons.

Since most lenders weren’t doing a good job of informing their clients – changes were implemented in the Canadian 2014 Budget and effective January 31, 2015 “consumers require sufficient information in order to more clearly understand the costs and consequences of a collateral charge mortgage relative to a conventional mortgage.”*

Conventional Mortgage is the “normal” mortgage we have known for the last 30 years. A conventional mortgage establishes a set amount you are borrowing including: the interest rate, terms, repayment schedule and the amortization (so you know when you’ve paid off your home). This information is in a document that’s registered with your provincial land title/registry office. i.e. $300,000 mortgage, 3% interest, 5 year term, amortized over 25 years

Collateral Mortgage differs from a conventional/standard mortgage in some very important ways. Pay attention here!

In a Nut Shell:

The Details: With a collateral mortgage, the BIG difference is in the terms and conditions . On a debt as large as your mortgage you MUST understand the fine print (so engage an independent mortgage broker like myself and ask lots of questions)!

1. A collateral charge is non-transferable. It can’t be assigned (transferred or switched) to a new lender like a regular mortgage. When your mortgage term is over (i.e. after a 5 year term) most consumers have the opportunity to “switch” their mortgage to a new lender for better interest rates or terms, but only if it is registered as a conventional mortgage.

In contrast under the conventional charge mortgage, your other debts are kept separate and your mortgage is unaffected by life’s lumps & bumps along the way.

3. When registering a collateral mortgage, the lender can register up to 125% of the value of your property at rates as high at Prime + 10% ( regardless of what you signed for ). Any future borrowings that you may want to leverage from your home will have to come from your current collateral mortgage holder.

4. A collateral charge a revolving loan or re-advanceable Which means the lender can lend you more money after closing, without you needing to refinance and pay a lawyer. This is similar to how a line of credit works.

5. Lenders advertise Collateral/Revolving Mortgages as cheap ways to refinance, but they fail to mention that what you save in legal fees can easily be consumed by potentially less-than-favourable rates on any new mortgage money you borrow.

In summary, if you don’t believe that you’ll need to refinance or extract equity from your home, then a regular/conventional/standard charge mortgage would be your best choice . It will give you the ability to shop around your mortgage and move to another lender at renewal for better rates/terms, without incurring legal fees. If you need to borrow more with a conventional mortgage, you have the option of a second mortgage or line of credit.

Collateral/Revolving Mortgages… the Golden Handcuffs… What the Banks don’t want you to know… A Collateral mortgage for the average person will cost you more than you will save!

Let’s discuss a mortgage that works for you (not the bank)!

Kelly Hudson

Mortgage Expert

Mobile: 604-312-5009

Kelly@KellyHudsonMortgages.com

www.KellyHudsonMortgages.com

*Government of Canada – Budget 2014 Collateral Charge Mortgage While many consumers continue to choose a traditional mortgage to secure their home loans, many are increasingly choosing collateral charge mortgages. The impacts of having a collateral charge mortgage may differ from traditional mortgages. For instance, switching between lenders may be more difficult. To make an informed choice, consumers need sufficient information to clearly understand the costs and consequences of collateral charge mortgages relative to traditional mortgages. The Government will require enhanced disclosure, better equipping borrowers to understand these impacts.

Will the Bank of Canada cut interest rates again tomorrow (March 4, 2015)?

Tue, 03 Mar 2015 15:36:00 GMT

Dr. Sherry Cooper Will the Bank of Canada cut interest rates again tomorrow

(March 4, 2015)?

In January, the Bank of Canada cut interest rates by one-quarter-percentage point. This led to a number of our offices reporting higher than usual activity over the last month.

So, will the Bank of Canada make an additional cut when they meet tomorrow?

Dr. Sherry Cooper – our very own Chief Economist – offers her insight in this first of many upcoming Youtube videos. Click HERE to watch!

Will @BankofCanada cut interest rates again March 4th? @DLCCanadaInc’s @DrShirleyCooper offers her insights. VIDEO: http://youtu.be/smVbZkjEedA

7 Tips for Buying a First Home in BC

Fri, 28 Nov 2014 17:25:00 GMT

Down-To-Earth Advice & Tips on Your Next Mortgage in BC

As a licensed Mortgage Broker, I am often asked “what do I need to know when buying my first home in BC?”

Everyone has their own aims and objects when buying their first home. As a Mortgage Broker, I specialize in making sure your financing is in order to facilitate your dreams of owning a home.

To get you prepared with the knowledge you need, here are my 7 tips to consider when you buy your first home in BC.

1. Strengthen your credit rating

It’s pretty simple: the higher your credit score, the lower your mortgage rate will be.

Spend the time now to improve your credit. Check your credit report. Many credit reports have errors, so you need to ensure that your credit bureau is current and correct.

ALWAYS pay every single one of your bills on time. Set up automatic payments if you have had any late payments over the last couple of years.

Stop applying for any new credit a year before you are considering buying and continue until you sign the closing papers on your home. Spend only 10-30% of credit limits on credit cards.

2. Find a Mortgage Broker and figure out how much you can afford to spend

The home buyer’s mantra: Get a home that’s financially comfortable.

Contact me, your Mortgage Professional. I work with you up to a year in advance to analyze your situation, and tell you how much mortgage and monthly payments you can afford.

Lenders like to see that you spend

3. How long will you live in your new home?

The transaction costs of buying and selling a house are substantial including : real estate fees, legal fees, Property Transfer Tax, selling in a down market, moving, etc.

If you don’t plan to live in your new home for at least 3-5 years, you may not gain enough equity to make selling worthwhile.

Short-term home ownership can be a pretty expensive proposition . If that is the case, holding off on purchasing could be your best option.

4. How much house you need?

5. Build a savings account

Start now to build a healthy savings account. To avoid paying CMHC Mortgage Default Insurance you need to prove you have a 20% down payment.

6. Remember closing costs.

While you’re saving your down payment, you need to save for closing costs too. They’re typically 1% to 3% of the purchase price and due on the completion date.

7. Shop for a Realtor that has your best interests in mind

Besides the 7 tips I’ve listed above, there are many other things you should need to be aware of prior to buying your first home.

Let’s meet over coffee or chat via conference call to discuss your next steps.

Kelly Hudson

Mortgage Expert

Mortgage Architects

Mobile 604-312-5009

The 5 Biggest Factors That Affect Your Credit

Solving the puzzle – 5 Factors used in determining your credit score:

Mon, 22 Sep 2014 23:02:00 GMT

A credit score is a number that lenders use to determine the risk of lending money to a given borrower . Credit card companies, auto dealerships and mortgage bankers are three common examples of types of lenders that will check your credit score before deciding how much they are willing to lend you and at what interest rate.

Lenders grant you credit based on your:

– Willingness to Pay

– Ability to Pay

– Risk and return on their investment

Your credit score shows whether you have a history of financial stability and responsible credit management. It can range from 300 to 850, the higher the score, the better.

In Canada there are 2 major credit agencies – Equifax and TransUnion that compile credit scores based on the information in your credit report.

The credit-scoring algorithm looks at the credit-utilization rate used by lenders to evaluate consumer credit risk. Below are general guidelines

– Below 600 poor

– 600-619 average

– 620-679 better

– 680 + superior

Each agency report a slightly different score, but they should both paint a similar picture of your credit history.

– Payment history (approximately 35% of your score) A good record of on-time payments will help boost your credit score.

– The factor that has the biggest impact on your score is whether you have paid past credit accounts on time.

– Outstanding debt (approximately 30% of your score) Balances above 50 per cent of your credit limits will harm your credit. Aim for balances under 30 per cent.

– Part of the science of scoring is determining how much debt is too much for a given credit profile.

       – Credit account history (approximately 15%of your score) An established credit history makes you a less risky borrower.
                      – Lenders want to see that you can responsibly manage your available credit over time.
       – Recent inquires/New Credit (approximately 10%of your score) When a lender or business checks your credit, it causes a hard inquiry to your credit file.
                      – Apply for new credit in moderation since opening several credit accounts in a short period of time can represent greater risk
      – Types of Credit In Use (approximately 10%of your score) If you have a mix of different types of credit, such as credit cards, store accounts, installment loans and mortgages.
                      – How many total accounts you have and potential credit.

Contact me today to discuss how to improve your credit score, before you are ready to apply/renew your mortgage.

Kelly Hudson

Mortgage Expert

Mortgage Architects

Mobile 604-312-5009