HW Advantage https://www.hwadvantage.com Your Mortgage Specialist Thu, 06 Aug 2020 12:44:53 +0000 en-CA hourly 1 https://www.hwadvantage.com/wp-content/uploads/2013/11/favicon-apple.png HW Advantage https://www.hwadvantage.com 32 32 Getting a Mortgage During COVID 19 https://www.hwadvantage.com/mortgage-education/getting-a-mortgage-during-covid-19/ https://www.hwadvantage.com/mortgage-education/getting-a-mortgage-during-covid-19/#respond Tue, 21 Jul 2020 12:43:53 +0000 https://www.hwadvantage.com/?p=1300 So much has changed over the past several months that it should be no surprise that getting a mortgage has also changed. Even with the economy reopening, mortgage lenders are becoming shy about qualifying new mortgage applications. Record-low mortgage rates and the potential for housing prices to drop have caused lenders to put in place […]

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So much has changed over the past several months that it should be no surprise that getting a mortgage has also changed. Even with the economy reopening, mortgage lenders are becoming shy about qualifying new mortgage applications. Record-low mortgage rates and the potential for housing prices to drop have caused lenders to put in place measures to reduce risk. While the measures will protect some Canadians, they also simply make it more difficult for others. Keep in mind that these changes apply to new mortgage applications, so if you need to renew a mortgage soon, the changes won’t affect you unless you shop around for another lender. 

Better Credit Needed for High-Risk Mortgages

In June 2020, the Canadian Mortgage and Housing Corporation (CMHC) announced that it was raising the minimum credit score that at least one borrower needs to be approved. The minimum score increased to 680 points from 600 points, a change from ‘Fair’ credit to ‘Good’ credit. The problem is that some people have seen their credit scores damaged in recent months when the economy was in lockdown. If that’s the case, it may simply delay some people’s plans or getting a mortgage to purchase a home. With uninsured mortgages (20% down payment or more), banks have also become a little pickier when it comes to credit. TIP: pay all your bills on time even if it is the minimum payment or if you are unemployed request a deferral as deferrals are not negatively impacting credit scores.   

Home Values…Where are they going?

There is definitely uncertainty in the housing market. Many experts predicted a drop in housing prices, while others were more optimistic that prices would remain stable. Surprisingly to just about everyone there has been a surge upwards in property values over the last 3 months. With unemployment levels high and many businesses struggling this surge is counterintuitive to most economic predictors. Some think it may be partly to do with the fact that banks are allowing deferred payments (on mortgages, car loans, credit cards, lines of credit) and our government providing income supplementation (such as CERB and CEWS). While these supportive mechanisms have been crucial to Canadians across the country some believe they also may be artificially propping up the housing market. I think it’s as important as ever to be extremely careful and prudent with purchasing, refinancing or investing in real estate during these uncertain times.  Work with mortgage brokers and realtors that share the same mindset as you.

Showing Pandemic-Proof Income

Before COVID 19, most lenders would accept proof of income in the form of a pay stub and job letter from the past 60-90 days. Nowadays, lenders are looking for proof of employment income from the last 14 days to prove that the pandemic has not affected income. If you are self-employed lenders will need 2 years tax returns and also require the last 6 months’ banking history to confirm income wasn’t significantly impacted by the pandemic. 

The added caution by lenders and CMHC’s new rules—which also include a reduction in the ratio of debt to income used to calculate eligibility, are meant to protect Canadians from undue risk if housing prices fall in the next 12 to18 months. These are smart precautions to take, even though they affect more homeowners than intended. Fortunately, there are two other national mortgage insurers (Genworth and Canada Guarantee) that have not followed the CMHC rule changes and are using the same qualification requirements as they were previous to covid19.

As always, you have options. Call us if you have questions about a new or existing mortgage and want to know how the recent changes affect you. We are here to help!   

 

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Tips for Getting Approved When You Are Self-Employed https://www.hwadvantage.com/mortgage-education/getting-a-self-employed-mortgage/ Fri, 03 Jul 2020 12:27:47 +0000 https://www.hwadvantage.com/?p=1288 Year over year we see an increase in the total number of self-employed Canadians. In 2020 it was expected that nearly 20% of the workforce would make their primary source of income from self-employment. Introduce in a global pandemic, rising unemployment, an economy in flux, “home offices” being the new norm, and that number is […]

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Year over year we see an increase in the total number of self-employed Canadians. In 2020 it was expected that nearly 20% of the workforce would make their primary source of income from self-employment. Introduce in a global pandemic, rising unemployment, an economy in flux, “home offices” being the new norm, and that number is sure to rise. Despite how common being self-employed is it still can be incredibly difficult for those individuals to get approved for a mortgage. However, there are ways to prepare yourself and make your dream of homeownership a reality.

Verifying Your Income

One of the biggest challenges when applying for a self-employed mortgage is to adequately prove your income. There are generally two ways of qualifying income for self-employed borrowers; “Verifiable Income ” or “Stated income”. Verifiable income requires two years of income tax returns and the self-employed income (after deductions / write off’s) declared to the CRA is the income that is used to qualify. This option will provide you with the best rates and mortgage terms available. “Stated income” is when we typically use business bank statements in lieu of income tax documents to confirm an income that is reasonable for the industry. In both cases, we have to verify the business has been operating for a minimum of 2 years and that personal income taxes are paid current. Speak to your trusted mortgage broker to determine which option is best for your situation and review the pros and cons of each.

Tax Deductions Inadvertently Make It Hard 

There are lots of good reasons to work for yourself, and many of them are related to your tax return. However, saving on your taxes can inadvertently make it harder for you to get a mortgage when you rely on your tax return to prove your income. Lenders want to see high income and low levels of debt. But when you work for yourself, you’ll use all appropriate business expenses you can to reduce your income for tax purposes. Unfortunately, this common tax strategy is not properly accepted by most Canadian Banks when it comes to qualifying for a mortgage. 

Keep Your Credit in Good Shape

Keep your credit score in good standing. Pay your bills on time and make an effort to keep from maxing out credit lines for long durations. This is always good advice when looking for a mortgage, as this is one of the easiest factors for lenders to consider. If you’re self-employed and have strong credit it shows lenders that you are financially organized and responsible. On the flip side, poor credit often is seen as a reflection of how you likely run your business and may lead to a declined application. 

Consider Alternative Lenders

Credit unions, non-bank lenders and private lenders are not required to use the mortgage stress test (though some voluntarily do) that the big banks are required to use. They also have underwriting practices that are more suitable for self-employed borrowers using tax strategies discussed above. Typically these options come with higher interest rates but are often preferred to not being able to take advantage of personal tax deductions you would in order to qualify with conventional lenders.  

Work With a Mortgage Broker

A mortgage broker can help match you up with a lender who is more willing to consider applications for self-employed people and offer the best rates for a self-employed mortgage. A broker can also help you determine what documentation you need, and give advice on how to get through the process successfully.  

Contact HW Advantage if you are self-employed and looking for a mortgage. Call 905-541-6961 or submit the form below if you are looking for the lowest mortgage rates and best terms in the Oakville and Burlington area.  

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Managing Your Mortgage During COVID 19 https://www.hwadvantage.com/mortgage-education/managing-mortgage-deferral-during-covid-19/ Wed, 20 May 2020 12:54:23 +0000 https://www.hwadvantage.com/?p=1264 This has been a trying time both emotionally and financially for many people who may have seen their income reduced or eliminated entirely as a result of the COVID 19 pandemic. Mortgages are often the largest bill you have to pay each month, and therefore can be particularly worrisome. Most mortgage lenders are on board […]

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This has been a trying time both emotionally and financially for many people who may have seen their income reduced or eliminated entirely as a result of the COVID 19 pandemic. Mortgages are often the largest bill you have to pay each month, and therefore can be particularly worrisome. Most mortgage lenders are on board with offering “assistance” to those who need it, but should you take it? What if your mortgage is coming up for renewal. Do you have a reason to worry? In this blog, we will cover only the basics of mortgages in the COVID 19 world and the various options to consider including mortgage deferral. Call us if you have any questions or concerns about new or existing mortgages. 

Mortgage Payment Deferral

In March 2020, mortgage lenders and banks began to allow borrowers to defer their mortgage payments for up to six months. It happened at a time when a lot of people were facing job uncertainty and much of the financial relief coming from the government to help businesses keep their employees was not yet in place. What was missing in the bank’s announcement was that mortgage deferral would come with an additional cost. Many homeowners were surprised to learn that while they were receiving relief from their payment, interest continued to incur which lengthens the total amortization of the mortgage and also increases the total cost of borrowing. Ultimately, the mortgage deferral option is helping many Canadians who are out of work, but because of the significantly increased cost to the borrower, we recommend it only be utilized as a last resort. Before making a decision it is important to discuss your options with your trusted mortgage broker. 

Pausing Accelerated Payments

One option to consider may be to simply adjust your mortgage payment frequency and type to make it more manageable. Making accelerated bi-weekly or weekly mortgage payments help you pay down your mortgage principal faster and this can be a great option for people that are paid regularly, bi-weekly or weekly, by their employer. However, if you are out of work or self-employed, changing your payment frequency for even a short time to ‘regular monthly’ may help by slightly lowering your monthly mortgage cost and improving cashflow.

Property Tax Relief

Many municipalities are allowing interest-free deferred property tax payments. This can save hundreds of dollars per month and help with cash flow for the short term. While you will eventually need to pay your property taxes back up to date and may incur additional interest costs, the costs will be significantly lower than deferring your mortgage payment. For example, the interest on annual property tax of $3000, $5000, even $10,000 a year will be significantly lower than the interest you’ll incur by deferring your payment on a mortgage balance of $300,000, $500,000, or even $1,000,000.

Lower Interest Rates

Borrowers with variable interest rate mortgages will benefit from reduced interest rates, in most cases, causing their mortgage payments to drop. The Bank of Canada quickly cut the prime interest rate by a total of 1.5% as the economy began shutting down. That meant that by the beginning of April, many borrowers had seen a similar drop in their interest rates, translating to lower mortgage payments. Also, fixed rates have decreased significantly over the past six months so we recommend looking into switching your mortgage to get the lowest rate possible and help with lowering mortgage costs. Contact us today to see if this is possible.

Refinancing, Re-amortizing, or adding a Secured Line of Credit

While considering all of your options it may be the best decision to refinance, re-amortize, or add a secured line of credit to your mortgage. To do this, you need to “income qualify” however it’s worth having a discussion with your broker about the pros and cons of these options before making a decision.

 Mortgage Renewals

Renewing a mortgage requires a much less rigorous approval process than applying for a new one. If your mortgage is up for renewal and you are currently unemployed you still should have nothing to worry about (as long as you are in good standing with your lender). Changes to employment status happen all the time and people don’t lose their homes over it. The downside of having to renew with your existing lender is that you do not get to shop around for the best mortgage rate or term available.

Get in touch with HW Advantage if you are concerned about your ability to make your mortgage payments or to qualify for a mortgage renewal. You may have more options than you know about, and we are here to help by phone or virtual appointment. 

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Now There is Less to Stress About the Mortgage Stress Test https://www.hwadvantage.com/mortgage-education/less-to-stress-about-mortgage-stress-test/ Thu, 27 Feb 2020 15:40:34 +0000 https://www.hwadvantage.com/?p=1240 What Changes to the Minimum Mortgage Stress Test Rate Means to Potential Homebuyers Getting a mortgage in Canada is about to get a little bit easier when the Department of Finance’s criteria for mortgage approval (the mortgage stress test) changes in April. This is good news for people getting into the housing market or renegotiating […]

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What Changes to the Minimum Mortgage Stress Test Rate Means to Potential Homebuyers

Getting a mortgage in Canada is about to get a little bit easier when the Department of Finance’s criteria for mortgage approval (the mortgage stress test) changes in April. This is good news for people getting into the housing market or renegotiating mortgages. Stay with me here for an explanation, but first, some background.

Before 2018, when you applied for a fixed mortgage, your likelihood of being approved depended on what you could realistically afford at that snapshot in time. That meant assessing your ability to meet the financial obligation of the mortgage at the interest rate offered to you at that time. Neither lenders nor homeowners looked past the future of the offered term to estimate whether that mortgage would be affordable in the future, should interest rates rise.

What is the Mortage Stress Test?

With interest rates certain to fluctuate, the ‘stress test’ was implemented to try and better protect homeowners from getting themselves into situations where future higher rates would make their mortgage unaffordable, effectively pricing them out of their houses and default. The stress test rate (or qualifying rate) is the minimum interest rate that lenders must use to qualify you for a mortgage. If you are deemed able to handle your mortgage payments at the stress test rate or higher, then you are more likely to be approved.

When first put in place, the stress test took a lot of people, especially younger, first-time buyers out of the housing market. But it was helpful in reducing the risk of people losing their homes because they could no longer afford their mortgage payments at higher rates. It’s the method used to set the qualifying rate used in the stress test that is changing on April 6.

Ultimately, Good News for Homebuyers

Without going into the nitty-gritty of how the stress test rate was and will be set, suffice to say that the rate is expected to decrease with the new method. Previously it was based on an average of the 5-year mortgage rates published by the Big 6 banks. But the general consensus is that published rates are not a realistic measure since the financial institutions rarely offer their published rates, keeping the stress test artificially high. Beginning April 6th, 2020, the minimum stress test rate will be based on the rates reported in ACTUAL mortgage applications in Canada, making it less arbitrary and more in tune with the market. The minimum stress test rate will be set weekly and posted on the Bank of Canada website. The bottom line is that with a lower rate, more people will pass the stress test and qualify for mortgages. Good right?

It is good, especially for younger people who may not have qualified before. There could be a downside though, in that with an increase in the number of potential buyers comes an increase in housing prices. But according to the Department of Finance news release, one of the reasons for the change is to help stabilize housing prices from continued high growth. So what now?

As it turns out, the new method also allows the Minister of Finance some flexibility in adjusting the minimum stress test rate by adding a buffer to the calculated average rate. Increasing or decreasing the buffer changes the stringency of the stress test when it is deemed necessary to put the brakes on a hot market or to stimulate a cooling one.

Ultimately, the new method of determining the stress test minimum rate is going to allow more people who may not have qualified under the old test, to buy the home they want which is a positive change. So far, the changes coming in April only apply to insured mortgages, where the down payment is less than 20% of the value of the home. However, consultations are ongoing to also rework how the stress test is calculated for uninsured mortgages.

Need a Mortgage Broker?

Contact HW Advantage mortgage broker in Burlington, Oakville, and Hamilton to further unpack how the changes to Canada’s mortgage stress test affect you. We can help find the best mortgage rates and the perfect mortgage product for you. If you are applying for a mortgage for the first time, re-applying or looking for a second mortgage we can help. Call HW Advantage at 905-541-6961, schedule an appointment on our website or fill out the form below to get in touch.

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Get Your Mortgage Pre-Approval and Be Ready For The Spring Market in Burlington, Hamilton and Oakville https://www.hwadvantage.com/mortgage-education/get-your-mortgage-pre-approval-and-be-ready-for-the-spring-market-in-burlington-hamilton-and-oakville/ Thu, 06 Feb 2020 14:37:49 +0000 https://www.hwadvantage.com/?p=1232 Why a Mortgage Pre-Approval is an Important First Step As the real estate market heats up in Burlington, Hamilton, and Oakville this spring, be prepared to see more homes for sale (inventory) but also more people looking to buy (competition). If you’re planning to purchase a new home and want to be prepared for this […]

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Why a Mortgage Pre-Approval is an Important First Step

As the real estate market heats up in Burlington, Hamilton, and Oakville this spring, be prepared to see more homes for sale (inventory) but also more people looking to buy (competition). If you’re planning to purchase a new home and want to be prepared for this market the first step in the buying process should be determining your budget and obtaining a pre-approval. This will provide you with an understanding of what you can afford, qualify for and give you the confidence to make a competitive offer. I can’t stress this enough: Do this before you start house shopping to avoid the disappointment of losing out on the perfect home!

Benefits of a Mortgage Pre-Approval

  1. Know your budget
  2. Lock in your interest rate for 120 days in case they rise
  3. Estimate your mortgage payments and plan accordingly
  4. Sort out any issue’s involving credit, income, downpayment up front
  5. Shop for your dream home with confidence

The Mortgage Stress Test in 2020

The mortgage stress test was launched in 2018 to ensure potential home owners could afford to make mortgage payments if interest rates were to increase or if their income decreased. At the time, the policy made sense. However, we’ve since learned that it’s causing future home owners to qualify for their mortgage at a higher interest rate despite receiving lower rates, which decreases mortgage affordability. This means that house shoppers are finding it more challenging to enter the real estate market then it should be for them. Prime Minister Justin Trudeau has requested his federal Finance Minister to review stress test qualifications and many are anticipating it to be lowered in 2020.

You’re in Good Hands With HW Advantage

Prepare yourself to shop in the competitive Burlington, Hamilton, and Oakville market by partnering with the industry leading HW Advantage team to get your pre-approval started. Preparation will pay off in the end and we make the no-obligation application process quick and easy. 

We offer:

  • Personal, Local Service (Hamilton, Burlington, Oakville, Mississauga, and surrounding areas)
  • Access to the Big Banks, Credit Unions, Mono-line Lenders, and Private Lenders – all in one place!
  • Preferred Lender Rates
  • Private Lending
  • Expert advice to guide you through the entire process
  • Connections to preferred Real Estate Lawyers, Realtor’s, Appraiser’s, Home Inspectors

Take the smart first step in the home buying process and turn to HW Advantage for personal and boutique mortgage advice.

Want to get started? Fill in our pre-approval form HERE or contact us by filling out the form below or by calling us a905-541-6961

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The Advantage Beyond the Mortgage Close https://www.hwadvantage.com/mortgage-education/the-advantage-beyond-the-mortgage-close/ Mon, 02 Dec 2019 20:42:41 +0000 https://www.hwadvantage.com/?p=1216 How our team is committed to supporting our clients beyond the close of business As in any industry you will meet the good, the bad and the indifferent; and yes, that unfortunately does include the mortgage arena. However, when you meet a mortgage broker who truly cares and understands the value of working for the […]

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How our team is committed to supporting our clients beyond the close of business

As in any industry you will meet the good, the bad and the indifferent; and yes, that unfortunately does include the mortgage arena. However, when you meet a mortgage broker who truly cares and understands the value of working for the client, you will never go without one again.

HW Advantage isn’t just our name, it’s our way of thinking. We look to provide advantages to our clients from their very first email or call and well beyond signing the final mortgage papers. We believe that when you close on your mortgage, that is only the start of our relationship. Unlike the big banks, it is our mission to save you the most amount of money and frustration over the lifetime of the mortgage.

The HW Advantage Promise When It Comes to Your Mortgage Close and Beyond

Getting the best mortgage for you is step one. Step two is making sure that your mortgage is working for you and your financial future. Here’s where our HW Advantage team differs:

Ongoing Management: We manage your mortgage in the same way a good financial planner manages your assets… constantly looking at new ways to save you money. Whether we recommend taking advantage of pre-payment options, accelerating your payments to pay down more principal each year, or consolidating higher interest debt, our number one goal is your financial health.

Access. We are available for a consultation or mortgage check-ups for all clients at any time.
Invest in Your Future. We track changes to the market and recommend ways to save on interest and / or use equity for investments.

Support. Life happens and we are on your team. We help clients manage mortgages and debt through challenging times, including separation, health problems, job loss, credit problems, etc… We are here for you.

Credit Improvement Strategy. Credit scores are so important in many areas of your life. We provide the advice and strategy you need to improve credit and eventually qualify for better rates, mortgages and more.

My Thoughts: If your mortgage broker or team is simply helping you get the mortgage you want and then you never hear from them again, that’s a red-flag that they don’t have your best financial health in mind. Find a broker who values your business enough to put in the work after you’ve signed.
 
Want to investigate a new mortgage close or renewal strategies? Contact us by filling out the form below or by calling us at 905-541-6961
 

Contact Us
Sending

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Where Key Federal Parties Stand on Housing https://www.hwadvantage.com/mortgage-education/where-key-federal-parties-stand-on-housing/ Tue, 22 Oct 2019 18:02:08 +0000 https://www.hwadvantage.com/?p=1199 Know more before you vote on Monday, October 21st There is no argument that this Canadian Federal Election is one of the most contentious in recent history. With arguably two key parties vying for control, the key issues that Canadians care about most are often left unsaid, opting to attack character rather than discuss policy. […]

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Know more before you vote on Monday, October 21st

There is no argument that this Canadian Federal Election is one of the most contentious in recent history. With arguably two key parties vying for control, the key issues that Canadians care about most are often left unsaid, opting to attack character rather than discuss policy.

We are here to help you look at each parties’ housing platform before you go into the voting booth on Monday. Here’s what the party leaders have released with regards to the Canadian housing market:
 

Liberal Platform

With a platform based on helping the middle class retain more of their money and climate change, the Liberal Platform, led by Justin Trudeau, has a combination of tax breaks and energy efficient bonuses for Canadian families. They pledge to:

  • Provide tax cuts that will save the average person another $292 / year
  • Expand the first-time home buyer incentive for people in Victoria, Vancouver and Toronto, expanding the value of a qualifying home from $500,000 to nearly $800,000
  • Increase first-time home buyers’ access to RRSPs for down payments up to $35,000
  • Crack down on property speculation with a consistent national tax on foreign-owned vacant properties, and a joint effort with provinces to combat financial crimes in real estate
  • Build 100,000 affordable homes over the next 10 years
  • Retrofit 1.5 million homes with energy efficient upgrades
  • Make Energy Star certification mandatory for all new home appliances, as of 2022
  • Give interested homeowners and landlords a free energy audit
  • Create a low-cost national flood insurance program
  • Offer interest free loans of up to $40,000 for Canadians looking to implement weather-based upgrades
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    Conservative Platform

  • A little harder to pin down as they have not released their full platform, but this is what we know that Andrew Scheer is saying will benefit Canadian home buyers and home owners, specifically younger Canadians:
  • Remove federal GST from home heating fuels
  • Increase mortgage amortization from 25 years to 30 years for first time home buyers
  • Review the Liberal-introduced Stress Test and remove for renewals altogether
  • Combat money laundering in Real Estate
  • Implement 20% “Green-Homes” tax credit for up to $20,000 over two years for energy-saving home upgrades
  • Make federal real estate available for housing developments
  •  

    NDP Platform

    A party for the people, Jagmeet Singh has been vocal about advancing the needs of middle and lower-class families. In housing, they would look to:

  • Create 500,000 affordable housing units over 10 years and
  • Introduce 30-year amortization period for first-time home-buyers
  • Double the Home Buyer’s tax credit to $1,500 for first time buyers
  • Waive the federal portion of the GST/HST on new affordable rental units
  • Implement a national 15-per-cent tax on home purchases by those who aren’t citizens or permanent residents
  • Support communities to increase the building of co-ops, social and non-profit housing; amount not specified
  • Invest $40 million in the Shelter Enhancement Program over the four-year term
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    Green Party Platform

    With a strong position on climate change and Canada’s role, the Green Party, led by Elizabeth May, is campaigning on a vision of Canada where homes are powered by renewable energy by 2030. Similar to the NDP, their families-first approach

  • Legislate housing as a legally protected fundamental right
  • Eliminate the recently introduced first-time home-buyer grant with a possible replacement
  • Restore tax incentive for the building rental housing
  • Build 25,000 affordable units and renovate 15,000 more every year
  • Create a dedicated federal housing minister position to tailor long-term affordable housing solutions within each province
  •  

    My Thoughts:

    There is a clear delineation between the left and the right when it comes to building affordable housing, green energy rebates/incentives, and the regulation or de-regulation of the mortgage/banking system. Depending on where you stand on these issues should help you determine which party to support. All sides seem to agree on wanting to make it a little easier for first-time home buyers to enter the market (likely after witnessing the results of the stress test), which I think is positive. However, what politicians say and what they do is any one’s guess. Don’t forget to VOTE!
     
    *Sources: BNN Bloomberg, CBC, Globe and Mail, Macleans.ca
     
    Want to investigate mortgage or renewal strategies? Contact us by filling out the form below or by calling us at 905-541-6961

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    New Government Shared Equity Plan… What is the Risk? https://www.hwadvantage.com/mortgage-education/new-government-shared-equity-plan-what-is-the-risk/ Thu, 19 Sep 2019 14:08:40 +0000 https://www.hwadvantage.com/?p=1190 The Government of Canada recently introduced an incentive program for first-time home buyers that has many people outside the industry wondering if it’s a good move to help the next generation get into a home, or if it doesn’t really quite fill the need. Essentially, the government is providing a first-time home buyer incentive in […]

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    The Government of Canada recently introduced an incentive program for first-time home buyers that has many people outside the industry wondering if it’s a good move to help the next generation get into a home, or if it doesn’t really quite fill the need.

    Essentially, the government is providing a first-time home buyer incentive in the form of a Shared Equity Plan. This means that the government will have a shared interest in your home and benefit from any increases in value or lose from any dips. They say this is to help first time buyers qualify for a home and reduce some of the expenses related to mortgage and closing costs.

    The parameters to qualify for this shared equity incentive are as follows:

  • Available for those with a combined income of $120,000 or less and who have never purchased a home before
  • It will provide first time home buyers with an additional 5% of purchase price for standard home or up to 10% from those purchasing new construction
  • Regardless of type of home, borrowers must have their own minimum 5% down payment
  • Total down payment amount (home buyers down payment + incentive) must be less than 20% of the value of the home
  • Maximum mortgage amount + incentive amount cannot exceed 4x income.
  • Must repay the loan at time of sale or at the end of the 25-year term
  • You can pay back this loan at any time, with no prepayment penalty
  • The repayment amount will be calculated based on the home value at time of repayment and an appraisal will be required
  •  

    The Numbers Behind the Shared Equity Plan:

    As enticing as this might sound to people struggling to get approved for a mortgage, a mortgage broker will give you the real numbers behind the incentive. Depending on your situation, what seems like a great short-term solution, may end up costing more than you’re willing to invest in the long term. While there is no interest on the loan, the government does get 5% of any increase in the value of your home when it’s time to repay the loan. On the other hand, they also share in any loss if the property’s value declines.

    Let’s look at this example… you decide to purchase a home priced at $400,000 and receive an incentive of $20,000. Let’s look at a few different pay-back scenarios:

    Scenario 1: You decide to repay the loan two years later. The home is now appraised at $500,000. That means that you have to pay the initial $20,000 with another $5,000 based on the increase in the value. So, you will have to repay $25,000. Not too bad.
    Scenario 2: You decide to repay the loan 2 years later, but the home has decreased in value, now appraised at $375,000. Rather than the $20,000 initial investment, you only are required to repay $18,750.
    Scenario 3: Congratulations on your growing family. That means you have outgrown your home and decide to move five years later. With your home now valued at $650,000, in addition to the $20,000 you owe another $12,500 for a total loan repayment of $32,500.
    Scenario 4: You decide to move 10 years later and your home value is now $900,000. What once seemed like a reasonable $20,000 interest-free loan, now costs you $45,000 to repay.

    My Tip: If you are certain that you can facilitate a quick turnaround on the loan payback, this might be worth-while to investigate. If you think that you won’t be able to pay for years, I would highly recommend working with a mortgage broker to find a financial institution who will approve your mortgage. If you are aiming too high, a mortgage broker can point you in the right direction to ensure you are getting in the home that is right for you.
     

    Want to get started? Contact us by filling out the form below or by calling us at 905-541-6961

     

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    The Pros & Cons of Co-Signing https://www.hwadvantage.com/mortgage-education/pros-cons-co-signing/ Thu, 04 Apr 2019 16:24:41 +0000 https://www.hwadvantage.com/?p=1123 When Qualifying for a Mortgage or Renewal is Just Out of Reach With stress tests and current home prices still out of reach, many Canadians are looking at co-signing in order to buy or re-finance their home. While this might not even be an option for some, for others there still seems to be a […]

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    When Qualifying for a Mortgage or Renewal is Just Out of Reach

    With stress tests and current home prices still out of reach, many Canadians are looking at co-signing in order to buy or re-finance their home. While this might not even be an option for some, for others there still seems to be a lot of mis-information out there on this topic, so let me set the record straight.

    Q. What is a co-signer?

    A. A co-signor is an individual who agrees to be named on both the mortgage and the title of a property to help another borrower qualify for the required mortgage financing.

    Q. What are the main reasons that I should consider a co-signer?

    A. Most often co-signers are engaged when a homebuyer can not qualify for a mortgage alone, typically based on income or job situation, such as those who have been self-employed for less than 2 years or those who don’t have enough tenure at their current job. The addition of a co-signer can help satisfy the income requirements needed to qualify for a mortgage or can also be enlisted for their strong credit, which can strengthen a mortgage application.

    Q. I have heard the terms Co-signer and Guarantor. What is the difference between the two and which makes the most sense for those looking to buy their first home?

    A. While adding a co-signer is the most common of the two, a guarantor, generally a spouse or immediate family member, is not named on the title of the property but is named on the mortgage. In most cases this person needs to occupy the property as their principal residence and have a valid reason for not being named on the title. For example, if one spouse is an owner of a corporation in an industry that is vulnerable to lawsuits, they will want to protect their home against future claims by omitting their name from the title. However, as a guarantor they are still recognized by the lender for their income and credit.

    Q. Who can co-sign? Does it have to be a parent?

    A. Most big banks and AAA lenders want immediate family members to be co-signers, however there are exceptions when friends and more distant relatives can be considered.

    Q. What is required of a co-signer?

    A. A co-signor has the same requirements as the main borrower(s), such as standard proof of income and credit. This will include the co-signer’s liabilities and other mortgages. Basically, the co-signer is not just another signature, but they have to be in good financial standing to help you improve your application.

    Q. If my financial situation changes, can the co-singer be removed from my mortgage and property title?

    A. This really depends on the lender, which is why we always recommend talking with a  knowledgeable mortgage broker when deciding whether to use a co-signer. Some lenders will allow the co-signer to be removed penalty-free within the mortgage term as soon as the main borrower(s) can show they can qualify on their own. There is typically a small legal fee (roughly $300-$500 depending on how expensive the art is in your lawyer’s office) to assume the co-signer off the title of the property. This is definitely something you’ll want to understand before signing on the bottom line.

    Q. Are there any drawbacks for the co-signer?

    A. Generally there is no financial burden to the co-signer unless the main borrower(s) defaults on mortgage or property tax payments. In this case the co-signers credit will be negatively impacted and the bank or municipality will go after the co-signer for payment. The other consideration is that if a co-signer is requiring credit of their own, the mortgage payment obligation, even if they are not the one actually responsible for making the payment, will be considered in qualification. There are ways to mitigate that impact but it requires further discussion.

    Q. Does getting a cosigner impact any first time home buyer incentives in Ontario

    A. Generally the lawyer registering the mortgage will set up first-time buyers as 99% owners of the property and co-signers as 1% owners. This has to be agreed upon by all parties involved but that way FTB will receive 99% of any rebates.

    My Tip: In today’s economic and housing climate, co-signers are becoming more of a reality for many first-time homebuyers. However, do not try to negotiate a mortgage, where a co-signer is involved, without the help of an experienced broker; there are too many details that could impact the parties involved, including the ones you read above. Plus, there may be some tips and tricks to getting that first mortgage approved without the need for a co-signer. Our HW Advantage team can talk you through your options and then you can weigh your options and make an informed decision.

     

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    January Mortgage Forecast https://www.hwadvantage.com/mortgage-education/january-mortgage-forecast/ Tue, 12 Feb 2019 19:36:44 +0000 https://www.hwadvantage.com/?p=1005 January Mortgage Forecast – 2018 was Stressful, but 2019 will be Hopeful  Let’s just say it… last year sucked for those most vulnerable trying to get ahead in the home ownership game. Thanks to the newly introduced “stress test” and rising rates, both fixed and variable, the housing market cooled considerably. Even as we prepared […]

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    January Mortgage Forecast – 2018 was Stressful, but 2019 will be Hopeful 

    Let’s just say it… last year sucked for those most vulnerable trying to get ahead in the home ownership game. Thanks to the newly introduced “stress test” and rising rates, both fixed and variable, the housing market cooled considerably. Even as we prepared to welcome in a new year, with all the hope that it so often brings, we were hit with the reality of North American markets trending downwards and whispers of a recession. 

    As we head into 2019 and look at the mortgage forecast, we expect to see the conversation around consumer debt take centre stage. For the first time in a while, Canadian households are feeling weighed down by their debt as rising interest rates take them further down that slippery slope.

    In 2018, the Bank of Canada increased its benchmark rate three times ending at 1.75 percent. Another two or three hikes sounded all but confirmed for 2019, but recently the Bank of Canada has cooled discussions of rate hikes and we are now hearing whispers of potential rate stabilization or even (gasp) decreases. 

    For the first time in a while, households are having to renew their mortgages at higher rates than what they last renewed at. Mainly because rates in general are up, but also because of the Government “Stress test” rules which have made it more challenging to shop around and qualify for the best rate… So now, for some, it’s a struggle to renew altogether at a rate that is feasible for their family to afford.

    A survey last fall by Ipsos Canada on behalf of insolvency trustee MNP found one in three Canadians worry that rising rates could push them into bankruptcy.

    There Are Options

    While many banks and lenders continue to make life difficult for many of my clients (they still don’t like you if you are self-employed), based on the property types they’ll lend on, and pricing according to the loan-to-value of the mortgage, there are still a number of options out there. Banks, credit unions, mono-line lenders and private lenders all have different pro’s and con’s so be sure to work with a trusted mortgage broker as you consider all your options for you and your family.

    We, as brokers, can help Canadians navigate this changing home ownership landscape. We know that households don’t have to play by the rules set by the big banks and can start to push back and get the mortgage that meets their needs. 

    My Tip: Continue to be optimistic. We are hearing rumblings of lower than expected Bank of Canada interest rate changes. We are also seeing provinces push back on the stringent rules surrounding the Stress Test altogether. The conversations are continuing and the stress test has already become a topic for this years federal election so stay tuned and informed! 

    Want to get started? Contact us by filling out the form below or by calling us at 905-541-6961. 

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