Mortgage Qualifying Rule Changes

General Nathan Lawrence 19 Oct

 

 

 

 

What you need to know:

Over the past few months, the government has been once again reviewing mortgage lending rules and working on changes to those rules.  Earlier this week, OSFI which is the regulator that governs how Federally Regulated Lending Institutions do business, announced changes to the Mortgage Qualifying Rules.   Those changes will reduce the size of the mortgage that you can now qualify for.

What you need to do:

Buying a new home?

If you are looking to purchase a new home you need to look into how the new rules impact your pre-approval.  This is even more important for those that are looking to purchase their new home after January 1st 2018.  The Mortgage Qualifying Rule Changes will have an impact on the max purchase price starting in the new year.

 

Thinking about refinancing?

If you have been thinking about refinancing, you need to speak with your Mortgage Broker. The Mortgage Qualifying Rule Changes will mean that you will qualify for a smaller mortgage starting in the new year.  If accessing the equity is important, then you should take the steps now to get things moving forward.

 

When do the new rules come into effect? –  January 1st, 2018

When do you need to act?   NOW!!!  – Connect with us directly to see how the new Mortgage Qualifying Rule Changes will impact you

For more specific information, please refer to the link below for a full 2 page PDF detailing the new changes.

October 2017 – Mortgage Qualifying Rule Changes

As always, you can connect with our team anytime to chat about your mortgage or mortgage related needs.

 

 

More Rule Changes on the Way?

General Nathan Lawrence 4 Oct

More Mortgage Rule Changes on the way??

One of the only guarantees in life is change.  Over the past few years, the real estate and mortgage markets have been in a constant state of change due to a high number and frequent amount of regulatory changes.  Currently the industry is bracing for another round of government imposed Mortgage Rule Changes that will mean changes to how you as a mortgage holder will qualify for your next mortgage.

If you are…

  1. Currently looking to purchase a home or investment property

 

  1. Thinking about refinancing to complete some much-needed repairs or consolidate some higher interest rate debt.

Then you should read carefully:

In short, the proposed Mortgage Rule Changes and qualifying guidelines are going to reduce the borrowing capacity of everyone (regardless of down payment amount) that is trying to qualify for a new mortgage.  The proposed mortgage rule changes in their current form would lead to a reduction of qualifying power of up to about 20%.

 

What do you need to know/do?

  1. If you are currently house hunting and you think there might be a chance that you may not purchase until the new year, then you need to speak with your mortgage specialist to see how the proposed changes might impact your purchase plans. Once in place, any pre-approval you have in place will need to be updated.   When or if the new guidelines come into effect, your planned purchase price could be impacted.  Speak with your Mortgage Agent to find out if your max purchase price will reduce because of the pending changes. The impact on your qualifying limit might mean that you should consider moving quickly on a new home/property purchase.

 

  1. Thinking about refinancing? Then now is the time to act.  If you have been holding off on that planned refinance, its time to consider moving forward.  The proposed changes could reduce your placed refinance by upwards of 20%.   Potentially trapping your equity in your home and reducing your ability to access the funds you need.  This round of proposed mortgage rule changes will not just impact home purchases. These mortgage rule changes are expected to impact your ability to refinance your current home/properties.

 

The take-away…

Do not let the government’s proposed lending rule changes get the better of you.  Know what’s coming and plan for it as best as possible.  Speak with us today about how the changes may impact your mortgage plans.

Home Buyers Guide

General Nathan Lawrence 2 Oct

Our Home Buyers Guide

Purchasing a home can feel like an overwhelming process…Our Home Buyers Guide is a great resource…There is a lot to consider:

  • Income
  • Down Payment
  • Credit History and Score
  • Rate Options, term lengths and Fixed vs. Variable
  • Countless lenders to choose from
  • Government Lending Rules

Our Team is here to help you understand the process and provide you with insight into what options make sense for you.  In today’s lending environment there will always be bumps throughout the process, but with our experience we will help you navigate the financing process.

 

Looking for more information?

Great….check out our new Home Buyers Resource Package!

DLC_HomeBuyersGuide_lakehead-nathan_01

Have Questions?  Feel free to connect with us online, over the phone, or in person.

Have you ever wondered if you can get out of renting and purchase a home to call your own?

Stop wondering and give our team a call today.  We will start the process and help you put a plan in place to get you ready to purchase your 1st or your next home.

 

Happy House Hunting!

Bank of Canada Rate Change – Should I lock in?

First Time Home Buyers Nathan Lawrence 13 Sep

This past week the Bank of Canada increased their lending rate for the 2nd time in as many months.  The changes in the Prime Lender Rates means that those with a variable mortgage rates will have seen that their mortgages rates adjusted alongside the changes to Prime Rate.  For those of you with variable rates, the first thing that probably crossed your mind was “should I lock in?”

 

Even though your interest rate may have increased, it does not mean that you should immediately lock into a fixed rate mortgage.  An associate of ours from B.C, Dustan Woodhouse had this to share earlier this week about the increase:

 

“If your discount from Prime (now 3.20%) is 0.50% or deeper – then the variable rate product remains a really great place to be.

 If your discount from Prime is 0.25% or less, then depending on which lender you are with you may consider converting to a fixed rate, BUT…

Keep in mind the penalty to prepay (i.e. refinance or sale of property) a variable early is ~0.50% of the mortgage balance, whereas if in a (4yr/5yr or longer) fixed rate mortgage the penalty can be closer to 4.5% of the mortgage balance ***depending upon which specific lender you are with and how long of a term you lock in for.

It is usually to the lenders greater benefit that you lock into a fixed rate, rarely is it to your own benefit.”

 

I could not have summarized it any better myself, so I won’t try.

 

So what should you do?

The first thing that you should be doing is avoiding the immediate draw or feeling of “I need to lock in”.  There are several different aspects of your mortgage and personal financial situation that should be considered prior to locking in.  There are many questions to ask yourself prior to locking in and most of which the lenders are unlikely to ask you. Your lender is re-active, not pro-active – you need to be pro-active. And sometimes being pro-active results in no action being taken at all.

Simply because the Bank of Canada increased interest rates twice, this does not immediately mean that they will do it again.  There are many economic factors outside of their control that will impact their decisions regarding future potential increases.

Presently, the key is not to react quickly.  If you have questions about your specific situation and how the increase may impact you, feel free to give us a call to chat about things in more detail.  Allow us the opportunity to ask the questions that need to be asked prior to making a quick switch.

 

Food for thought…

Back in 2010 rates increased 0.25% three times, and that sat stagnant for nearly five full years before two 0.25% decreases back downward.

In other words the last time Prime was pushed as high as it stands today, it sat there for five full years. And was then cut.

 

The next Bank of Canada meeting is October 25, 2017.

I will be watching and waiting.

 

Why Making Debt Reduction Should be Your Primary New Years Resolution

General Nathan Lawrence 5 Jan

Now that we are 5 days into 2017, there is no better time than right now to ask yourself how are you doing so far on those New Year Resolutions which you promised yourself you would keep this time.  Be honest with yourself.  Have you taken any steps towards achieving your goals?   If you have not yet taken any steps to kick those bad habits, then there is a very good chance that you are well on your way to completely missing the mark on this year resolutions….AND ITS ONLY DAY 5!!

The challenge with most resolutions and the reason that most of us fail at keeping them, is that the resolutions we set are way too large in scale for us to achieve in a reasonable time frame.  Resulting in quick failures or that we lose interest too quickly in the “work” it takes at achieving them.   There are however, those few select individuals that seem to always manage to keep at it. The trick is to break that big, scary resolution into short term attainable goals…which is what we are going to do right now:

So here is what I would like you to do right now.

Step 1:  Find that list of resolutions that you jotted down on the cocktail napkin at your New Year’s Eve Party, crumple it up, and toss it in the recycling bin (its 2017 after all and if you don’t already recycle, let’s make that resolution #2 on the new list).

Step 2: Next, grab a pad of paper and pen then find a quiet place to think.  In big bold letters, write down “Reduce High Interest Debt”.

Step 3: Now, we take that big lofty goal and break it down in to 3-5 more manageable goals.

 

Goal #1 – Set up an automatic monthly payment for each of your credit cards.  Taking this step will ensure that you will never miss a credit card payment (great credit management that is vital when it comes to managing your credit score).   Try to set automatic payment at an amount higher than the required minimum payment, this way you start making some positive headway right off the start.

Goal #2 – Review/Reduce your spending – This is often much easier than we might think.  Take 30 minutes right now to review your monthly spending habits.  Create a monthly budget of all your spending from last month.  It does not have to be anything special. Simply list the items you spend money on and how much (ie. Cable TV = $150.00, Netflix = $8.99, Cell Phone = $95.00, home phone = $35.00, and so on).

Goal #3 – Next, start thinking about what you are using vs. not using.  For instance, we live in a cell phone world. When is the last time you used your home phone?  Can it be cancelled? Instant savings!!  Or how about the fancy (and expensive) Cable TV package?  Do you actually watch it or do you spend your TV time on Netflix?  Can the Cable TV be cancelled? Instant Savings!!   Have you shopped around for Home/Auto Insurance lately? Possible Savings here as well.  Make a short list of expenses that could be cancelled or adjusted to improve your spending habits, then act on making those changes!

Goal #4:  In the scenario outlined in Goal #3, if you do cancel the home phone and cable TV package, there is a monthly expense savings of $185.00.  Here’s the trick…do not do what the average person does which is to simply find other ways to spend that “new-found” money.  What you, the person trying to keep their resolution does, is set up a second automatic payment towards one of your debts for $185.00 (additional annual debt reduction of $2,200, not including the interest savings).

Goal #5:  Leave the plastic at home!! If you tend to use your credit card and find yourself regretting those purchases down the road, leaving the credit card at home can help address that extra spending.  If your credit card is not readily available, you will not be able to use it for those miscellaneous purchases that you would come to regret later.

Goal #6 – Assess your overall financial situation to see if there are any opportunities to restructure which could help improve your monthly cash flow or save interest.  Your mortgage is the first place to start.   Some simple adjustments could end up saving you a large amount of interest over the life of your mortgage.

 

Breaking that large, overwhelming resolution of “Reduce High Interest Debt” into much more manageable tasks makes it a very attainable resolution.  If you managed to complete even just a few of these 6 goals, you will find yourself in a better position this time next year!!   Not to mention the fact that better control over one’s finances will likely increase quality of life and reduce stress….so in fact, you’ll knock two additional resolutions off your 2017 list in the process!!

House of Horrors – Cautionary Tales of Home Purchases Gone Wrong

General Nathan Lawrence 28 Oct

In honour of Halloween next week we compiled a couple spooky home purchases for you (all based on true stories of course)! Here are 2 short stories of home purchases that went wrong, they should make you squirm a little but keep in mind that not every home purchase ends up in nightmares like these!  These stories, although very rare occurrences as part of the home buying process, highlights the reason why working with a Real Estate Professional and hiring a home inspector is incredibly important.

This Home Renovation Went Nuclear

Wally Davis a resident of Port Hope, ON wanted to build a room in the attic of his home. However, where he lives is the location of a former radium and uranium refinery that left contamination spread around the town. When testing the home for contamination it was discovered that there was contamination in the roof, on the floors, in the walls, and everywhere else in the home. Wally who bought the house in the 90s paid just $130,000 for his home, a decade later it cost the town of Port Hope $464,615 to clean up the house. The Davises were well taken care of while their house underwent renovations but it was a long drawn out process that kept them away from their home for some time.

(Source)

Sometimes you need Spidey Senses when Buying a Home

This house isn’t haunted but it would sure be scary to live in! Brian and Susan Trost purchased their home in the summer of 2007. A 2,400 sq.-ft home over-looking a beautiful country club. Shortly after they moved in Susan started noticing webs and then started to see spiders every day. The Trosts then called pest control who identified the spiders as brown recluses (they have a venomous bite and can sometimes leave a person with what looks like a flesh eating disease). The home had drywall and insulation removed and they both sprayed and put down pesticide powder. When that didn’t solve the problem the Trost took the previous owners and State Farm Insurance to court. During the trial a University professor estimated the spider population to be “immense” with a total of 4,500-6,000 spiders. The house was then put into foreclosure and unfortunately the Trost have not been living in it for over 2 years.

(Source)

Things You Should Never Throw Away …

General Nathan Lawrence 8 Jun

There’s always the saying reduce, reuse, recycle but that’s not really what this post is about. We are more interested in looking at the things you should never throw away in order to get your mortgage approved. Part of the mortgage approval process is providing documents to confirm the details in your mortgage application. It’s nice to say that you make a million dollars a year but the lender is going to require proof that is actually true! Here are some key documents that the majority of lenders require to approve you for a mortgage:

  • Notice of Assessments – The information you receive in the mail from the government regarding your tax returns. You should have at least 2 years of these on file.
  • T1 Generals – Especially if you are self-employed but sometimes lenders will request these for further income details. These documents break down your income and are what you submit to the government for your taxes.
  • Paystubs – Usually you will want to start saving these for a few months when you know you are in the market to buy a home, most lenders will require your most recent one.
  • Property Tax Bill – If you are planning to refinance your home.
  • Separation Agreements – You should always keep a copy of this in your files.
  • Yearly Mortgage Statements – Once again if you are planning to refinance or if you plan to sell and buy a new home.
  • ROE or Last Paystub – If you move jobs it’s always a good idea to keep a copy of your last paystub or your Record of Employment.

 

Now don’t tell your mortgage broker that you’ve thrown these away! And rather than having these documents in a cluttered pile we thought we’d share some really cute filing cabinet ideas with you that we found on Pinterest!

Your Credit Report

General Nathan Lawrence 1 Jun

In the first blog post in this particular series, we went into detail about managing credit payments and how your payment history impacts your credit score.  Managing your monthly debt payments is extremely important and is often times underestimated by consumers.

Almost equally as important as managing your monthly credit payments, is also your ability to manage the outstanding balances that you carry on your credit cards and debt.  This particular aspect of managing your debt really applies to anything that would be considered a revolving debt:

Revolving Debt can include:

  • Credit Cards
  • Line of Credits
  • Home Equity Lines of Credit.
  • Any debt that allows you to use the credit, pay it off and then use it again.

The trick when it comes to managing the balances on revolving debt is knowing that you need to keep the outstanding balance below 65% of the limit.  The credit system is designed to look for red flags that indicate consumers might be at risk of defaulting on their debt.  One of those red flags is how much of your available credit limit you have used up.   If you have a few credit cards and all of those credit cards are maxed out, then it indicates to the credit agencies that you might be relying on your credit to manage your daily expenses and obligations.

The Dreaded Household Budget

General Nathan Lawrence 17 Feb

We’ve all thought it…URGG!…that darn B-Word!!  BUDGETS!!!   The very next thought is always…”it’s ok, I don’t need to do a budget, I’ve got a good handle on our monthly finances.”

But do you really?

The reality is that you won’t truly know until you’ve assessed your spending habits.

Budgets are hard; however, they are not hard because they are a lot of work or because they are too complicated.  Doing a monthly budget is actually a very simple process, we are just afraid of what the outcome might be.

A budget is about taking control of your finances and understanding where your money is going.  Have more money leaving your bank account than is actually going in?  Then this simply highlights a need to tighten the belt a bit.  A budget is really about two things:

  1. Developing an action plan, and
  2. Taking Action.

When it comes to your personal finances,

Your Budget = Your Action Plan

Sticking to your budget = Taking Action 

So grab your pen!  Take 15 minutes right now to go through this simple budgeting exercise to get the ball rolling:

 

Item Totals Notes

INCOME

 {Enter Monthly Net Income Here} *Remember this should be your after tax income.*If you are paid bi-weekly, you need to properly convert to monthly. The Calculation is (Bi-weekly pay X 26)/12
Total Monthly Income {Add up all Net Monthly Income}  

 

 

 

EXPENSES

*Here is all of your monthly expenses. The trick here is to make sure you think of everything and to be honest with yourself
Mortgage/Rent {Enter Monthly Bill Amount Here}
Property Taxes {Enter Monthly Bill Amount Here}
Home/Auto Insurance {Enter Monthly Bill Amount Here}
Utilities (Gas, Hydro, Water) {Enter Monthly Bill Amount Here}
Groceries {Enter Monthly Bill Amount Here}
Vehicle Fuel {Enter Monthly Bill Amount Here}
Home Phone/ Cell Phones {Enter Monthly Bill Amount Here}
TV / Internet / Netflix {Enter Monthly Bill Amount Here}
Home Security {Enter Monthly Bill Amount Here}
Vehicle Payments {Enter Monthly Bill Amount Here}
Gym Memberships/Sports {Enter Monthly Bill Amount Here}
Monthly Kids Activities {Enter Monthly Bill Amount Here}
Monthly Subscriptions (Magazines, Apple Music, etc.) {Enter Monthly Bill Amount Here}
Any other monthly expense {Enter Monthly Bill Amount Here}
Total Monthly Expenses {Add up all Monthly Bills Here}
 

SAVINGS

*Most of the time we forget to budget our savings (RESP, RRSP, TFSA)
Tax Free Savings Account {Enter Monthly Contribution Here}
RRSP {Enter Monthly Contribution Here}
RESP {Enter Monthly Contribution Here}
Savings Account {Enter Monthly Contribution Here}
Total Savings Contributions {Add up all monthly Contributions}
 
Monthly Net (Loss) {Take your total net income – Total Monthly Expenses – Savings Contributions} *This final number is important and will provide some good insight into your financial strength.

 

Here is the Key…

  • Is the final number a positive number? If so, you’re doing well. However, even with a positive number there is always room for improvement.  Take a look at your expenses and really assess what you’re paying for and what you’re actually using.  Is there potential for additional savings?
  • Is the final number close to 0.00? If so, you’re doing ok, but your spending needs to be watched closely. Take a hard look at your expenses and see if there is any room for you to make some cuts.  Maybe you’re not using that monthly TV Package?  Maybe you have some monthly subscriptions you can cut?  Turning that 0.00 into a strong positive number can make a huge difference in the long run.
  • Is the final number a negative number? If so, you need to take action right now!! Cut some costs.  Basically you have more money going out each month than you have coming in.  If something isn’t done soon, you’re going to find that your credit cards or lines of credit will start to grow. Sit down as a family and work out where you can adjust your spending…always start with the non-essential costs (TV, monthly service subscriptions, etc)

Some quick spending tips that can help save you more:

  1. Grocery Shopping – Plan your meals for the week based on what is on sale in the grocery store. Do the weekly check of the flyers and start trying to buy the items that are on sale.
  2. Fuel – Nowadays, many households have 2 vehicles. And it’s very common for people to default to the nicer or bigger vehicle when leaving the house.  Try to use the more fuel efficient vehicle as much as possible.
  3. TV subscriptions can be a killer – Sit down as a family and really think about how much you use it. Maybe a simple Netflix or CraveTV service will work just fine (and cost a fraction of the cost).
  4. Cell phone bills always running over each month? Make sure that you have wireless setup rather than data when at home or at work. You would be surprised how much of a difference this can make.

If you would like to sit down with our team to see how we might be able to help with restructuring your budget with a refinance, simply give us a call.

Feeling the Winter Blues

General Nathan Lawrence 13 Jan

We sometimes overlook the simple things that can positively change the way we think during the cold winter months.  Your home is the best place to start. During the winter months we tend to hibernate at home, so why not look at ways to do things in your home to make you feel better about yourself and your home? This will help you stay motivated and inspired during the cold winter months.

Plan that much needed home renovation!

Look at areas of your home that you have been thinking to change or upgrade. Spend some time and start to visualize the home that you want.  Then take the time and start planning for that dream home renovation. Get everything organized now, and you just might have hammers swinging by spring time.  Your next step, find out if it is financially feasible. Consult with a mortgage professional about a renovation mortgage and an interior designer to review your home projects with you. Knowing that you are financially prepared and working with professionals towards a home project will keep you excited and something to look forward to.

Keep your home and yourself, healthy and fit!

Start by giving your home a good cleanse.  LET GO of what is not needed or you have no use of. If you haven’t used it in a long time then you don’t need it. Having a clean and organized home will in turn make yourself feel better about spending time indoors.  Fill your fridge and freezer with healthy foods.  Winter months are good to pre-make meals in advance and freeze. Soups, stews, sauces, and healthy loaves and muffins are easy and fun to make.

Dress up your house…in a budget friendly way!

Do little things in your home to keep yourself motivated, energized and inspired.  Add budget friendly décor pieces such as candles, warm throws and pillows, fresh flowers, fill glass vases with outdoor pieces like pinecones or grass stocks.  Update cabinet hardware or light fixtures. Replace old towels with new soft towels, or even simply change your bathroom curtain and hooks to make it feel like a new space. These are all ways to stay connected to your home to help with the winter blues.

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