5 Smart Ways to Help Your Child Enter the Canadian Housing Market Later

Wondering if your kid(s) will be able to afford a home is every parent’s worry. With the skyrocketing home prices in Vancouver and Toronto in recent years, current homeowners with a child or a few are not so sure that their offspring will be able to afford homes in the cities they grew up in.

In an interview with CTVNews.ca, Toronto-based financial planner Shannon Lee Simmons shared one of the most common conversations with parents lately is what they’ll do if their child/children cannot afford to buy something. Annie Kvick, a Vancouver-based financial planner says that thinking of saving up cash for future housing for your child is a good problem to have, but warns parents that they should check their own financial situation first.

As a result of the conversations above, CTVNew.ca asked the two financial planners to share what actions the parents can take to save up for their child’s/children’s future housing dreams, and below are what they shared:

Save Future Funds via a Trust Fund

Kvick shared that this course of action will not be for every family because situations differ. The parents who opt for this can choose to go for an informal in-trust account or a formal in-trust account. An informal in-trust account holds the money until the child reaches legal age and the money is not subject to taxation. The downside is that the child can just use the money on anything after the holding period. A formal in-trust account allows the parents to dictate when and for what the money can be used for although it also often involves hefty accountant and lawyer fees.

Find a Way to Maximize Your Tax-Free Savings Account

The beauty of TFSA contributions is the parents will have full control of the money and will not have to pay taxes for the money’s growth. The parents can choose to give as much or as little of it to their offspring, but they really should just save it for their own retirement funds according to Simmons.

Decide to Downsize Later

Downsizing later allows the kids to move back home so that they can save up for their own future downpayment on their dream home. Simmons adds though that ideally, the children would be contributing some rent money or some extra cash for utilities and food so as not to deplete the parents’ resources. Kvick also adds that the longer the parents stay in their home, the higher the property’s value will be, which can allow parents to give more should they decide to help pay for their child’s or children’s future home(s).

Invest in Income Property Carefully

Simmons shares that some parents with a lot of equity are tapping into that equity to invest in income property with the intention of passing that investment to their children later when they retire. For this to work, investing in low-maintenance property like a townhouse or a condo is ideal. The next step is finding a condo or townhouse that can be rented out but with the rent being high enough to cover both mortgage and maintenance costs. Kvick shares that this strategy can offer huge returns if housing prices continue to rise.

Familiarize Your Children to the Stock Market

With the memory of the 2008 financial crisis still very fresh even in the minds of millennials, now is the time to point out that in the same period of time, house prices have been soaring up! Children and young adults need to realize and understand how to build wealth so they’d know how to protect it. By introducing children to stocks and teaching them how it works and letting them manage their own stocks, they’d be able to understand more the value of cash, investments, and their future.

Need help investing in a home? Speak with your trusty Toronto Private Mortgage Brokers today! We’ll strive to answer your questions and help you into a brighter financial future. Contact us now!

Why You Should Invest as a Private Mortgage Lender

Nothing beats diversification when it comes to building a solid investment portfolio.  Where to find a good investing opportunity then? The stock market is a favourite for many, but it comes with a high level of risk. You’ve also got government backed securities, something that offers little risk but is at the mercy of inflation. Why should it bpm2e a case of choosing the lesser evil when you can have the best of both worlds?

Do you know that private mortgages carry very minimal risks and offers a great ROI? That does sound great, doesn’t it? But if you’re not convinced yet about investing as a private mortgage lender, here are 5 reasons why being a private mortgage lender rocks:

Has Better Rates Compared to Banks

Private lenders can charge higher rates than banks, and consequently, can make more money than banks. With so many people having the ability to pay a high down payment but lacks the income verification or credit score to seal a deal with a bank, you won’t run out of buyers, more so if you factor in savvy brokerages who’ll connect you with such people for the benefit of all parties involved.

It Beats Being a Landlord

Being a landlord means having to take care of repairs and maintenance, both of which can get very expensive. Selling the property and acting as a private lender means you still get a steady source of income without having to shell out some cash for future repairs.

Saves You the Hassle of Dealing with Flakers

Buyers behave much better than renters. Why? Because as a private mortgage lender, you’re their lifeline back to better credit. Of course buyers can still present a risk, but if the buyer has put in around 30% down payment, there is actually less risk for you because it shows that buyer has some financial skill.

You Get to Set the Loan Terms

You don’t have to follow fixed rates for 15 to 30 years as a private lender. You can apply adjustable rates as long as the buyer agrees to it. The loan terms and duration can be exactly how you want it to be. Shorter terms means that you can get your investment back sooner so you can move on to more and better investments while longer terms presents you with a more predictable cash flow.

Lending Decision is All Yours

You don’t have to base your lending decision on the borrower. You set your terms and down payment your way. A large down payment means that the risk of default will be a lot less and the likelihood of the borrower falling behind on payments less of a worry too. Even in the case of default, you still can get a healthy profit from of selling the property.

Finding buyers and clients need not be a chore as a private mortgage lender. There are brokers like us that help buyers and clients find private lending sources like possibly you! Have any questions on private lending and how this can work for you? Contact us today!

 

Alternative Lenders – The New Choice for Canadians?

Loans are getting increasingly more difficult to procure these days, and when you can’t get a loan from banks or your parents, who can you turn to? More and more Canadians are actually resorting to borrowing from alternative lenders and it is becoming more than a trend, it is the future!

The Lending Problem

If you’ve been watching the news, the federal government has come up with some ways to tighten up the Canadian mortgage and lending market in the hopes of preventing a real estate collapse like the one that happened to our neighbour (the U.S.).

Changes such as the additional requirement of third party income verification for those who are self-employed and the capping on the amortization period of mortgages that are CMHC-insured are just some of the efforts made by the government that have placed lending on a leash. This resulted in people seeking out alternative lenders when their parents and/or bank can’t or won’t help, but do you know what are the pros and cons of borrowing from specific types of alternative lenders?

Numerous Options Are Within Reach

The great thing about being in Canada is that there are quite a number of different alternative lending options that are available depending on your personal requirements. You can opt for Pay Day Loans for small amounts, go for online consumer loans for medium-sized amounts, and of course, contact alternative home equity lenders if you need a sizable loan amount.

You may want to do your research first before going for a Pay Day Loan as most payday lenders have rates that are pretty steep, making as much as 250% of the original loan amount for loans that weren’t paid within 14 days (and these are loans that are only a couple of hundred dollars).

If you need just a few thousand dollars, let’s say about $10,000, then online consumer loan companies can offer you some help but keep in mind that interest rates can go as high as 35%.

If you’re a homeowner, then you can get loans from alternative lenders who cater only to homeowners like yourself. Alternative lenders can approve you for your first, second, and third mortgages with the help of professionals such as Toronto mortgage brokers. The obvious advantage is that you can probably borrow more and get less interest than both Pay Day Loans and online consumer loans, isn’t that much better?

You may also read up on home equity loans to be more familiar with what you will get yourself into should you choose the 3rd option.

How Homebase Mortgages Can Help

We can help you get a home equity loan approved quickly and with less fuss. All you have to do is to contact us so that we can help and guide you with your loan application. Our team of lending specialists will help you understand your alternative lending options, answer all your questions, as well as help you decide on what might be the best solution for your needs.

5 Ways to Turn Your Bad Credit Around with Refinancing

No one finds bad credit attractive. It is even much worse when you need to borrow from credit facilities because it shows all the skeletons in your borrowing history. Times when you’ve defaulted in your payments for one reason or another such as failing to pay on time can gravely affect a lender’s decision to give you mortgage. A pending loan that got out of hand and bad credit from previous borrowing will magnify the problem even more. If you’re aware of all this, then there’s hope in the horizon!

What to do then? How can you boost your credit score? Proactively trying to keep your financial health in good condition can prevent you from achieving worse credit in the future, but how?

Applying for a refinancing to get a new loan with better terms and payment plan can save you a lot of money. New mortgage terms can help you pay back your debt and therefore boost your credit score. Sounds like a plan? You bet!

So how can you get a new loan when you have a bad credit history? Here are tips to help you get refinancing at much better interest rates:

Tidy Up Your Paperwork

Wrong information can break your credit score. Check your credit documents and see if the information contained therein is valid. Rectifying errors can make you more eligible for refinancing at lower interest rates.

Make it Personal

You need to make your lender understand why you have a bad credit situation and the best way to do that is to meet your lender in person. By helping your lender understand your situation, you’re letting them see what you’re doing to pay back and that you care.

Know Your Ability to Pay

Things change, and what you can afford to pay a few months ago may be totally out of what you can afford now. The good news is that you can change your loan terms to help make payments easier for you. How can you do that? By refinancing! But remember that you have to be able to convince your lenders that you have the ability to pay your new terms. One thing you can do to convince them is to show proof of your ability to pay by depositing some money in the bank or by showing proof of your expected revenue. This often leads to favourable payment terms with lower interest rates so be sure that you can hold your end of the bargain!

Have Strong Guarantors

Pick your guarantors right. The people guaranteeing your loan should have a better credit rating and score than you because this shows lenders that your guarantors believe that you have the ability to pay your mortgage. After all, being a guarantor means they’re willing to pay your loan should you default on payment. Establishing that you have a low risk of defaulting will make your lender more willing to refinance your mortgage at more favourable rates.

Shop for a Better Lender with a Strict Loan Policy

Your main goal should be to get a better credit rating/credit score and to get out of debt, so don’t be tempted to go for loans with tempting terms such as those that allow you to withdraw extra payments. Facilities that tempt you to spend more are no better than parents who spoil their children and will do you more harm than good in the long run.

A better mortgage package means that you don’t have to borrow again, because hopefully, you’ll be able to have a better hold of your financial health. A great mortgage broker can guide you to the best lenders who can offer you the best rates and terms.

Looking for a mortgage consultant in Ontario to help you apply the tips above? Allow us help you with our 60 years of industry expertise fixing bad credit and helping people like you with their mortgage. Contact Homebase Mortgages today!

 

Toronto and Vancouver Mortgage Rules to Change Starting mid-February

Planning to purchase a new home? Moving to Toronto or Vancouver soon? You might be in for a surprise starting February 15,2016! Vancouver and Toronto’s housing markets are at a frenzy and the Liberal government turned to tweaking lending rules in an effort to cool them down.

The Big News

In an announcement a few weeks ago, it was revealed that new residential mortgages with portions in excess of $500,000 will be subject to a 10% down payment instead of the current 5% –  a change that will take effect a month from now. The first $500,000 will still be subject to a 5% down payment and existing mortgages will remain as is, with homes costing more than a million still having to follow the required 20% down payment, as shared by Finance Minister Bill Morneau.

Benjamin Tal, CIBC’s deputy chief economist says that Calgary could get hit hard by this change – because it has a relatively large share of high-ratio mortgages compared to other places.

A Matter of Safety?

Different policy changes had been placed in effect in recent years to limit Canadians’ vulnerability to financial risk in the event of a correction in the housing market. Since 2008, there has been four occasions when mortgage rules had been tightened to cool off blistering real estate markets. The cooling effect is indeed effective, albeit it should be noted that the effects are only temporary.

Morneau told reporters in an interview that the increase in down payment is believed to help with stabilising the entire market as well as make people more secure by creating a buffer. It is estimated that about 1% of the total market will be affected by this change; a number that is equivalent to an estimated number of less than 10,000 home purchasers.

Morneau further shares that the move is aimed to cool down and keep the housing market stable; more so for Toronto and Vancouver, both of which are sporting fiery hot real estate markets. 4% of Toronto’s home sales and 6% of Vancouver’s home sales are above $500,000; a big difference compared to the national average of only 1%.

The Minister also shared that the change is planned in such a way to not have a negative impact on certain markets, like Alberta’s where the situation is more challenging.

The announcement has been widely expected in light of growing concerns that homeowners could end up being in a very tight situation if prices suddenly collapse in an overheated market.

Comes with a Price

What does this mean for the aspiring home owner? A lot, apparently.

Those who may be planning to purchase a pricier home in Vancouver and Toronto might be ‘forced’ to put off doing so because they would have to save up more money for the down payment, not to mention having to meet some mortgage requirements like having a minimum annual income of $120,000 with no debts to qualify if someone wants to purchase a half million-dollar home. A family or individual with a monthly income of $7,000 after taxes and spends $5,000 to $6,000 on monthly expenses will need a few years to save up for the new down payment – something that’s not to be taken lightly.

Need help getting approved for a home mortgage or have some questions regarding this mortgage news? Meeting your real estate financing needs is our expertise! Contact us today!

Canadian Household Debt Soars to $1.64 for Every Dollar Earned

How’s your debt situation? If you’re making as much as you owe or more, then you’re doing great! The 3rd quarter of 2015 brought some attention-grabbing news as borrowing rose faster compared to income growth for the average Canadian household.

With the housing markets in Vancouver and Toronto still as hot as ever and the slow income growth in our oil-producing regions, debt level has risen and may continue to do so to record-high levels.

Statistics Canada released the data on mid-December 2015, sharing that the amount of household debt rose to 163.7% compared to household income for this year’s 3rd quarter, still a rise from 2nd quarter’s 162.7%. That’s owing $1.64 for every dollar of disposable income made for the average Canadian household.

Doug Porter, Bank of Montreal’s chief economist says that the combination of hearty borrowing and sluggish income growth brought the current deterioration in the headline as expected. He adds that mortgage growth is being driven up by Ontario’s and BC’s hot housing markets; in effect over-riding the oil-producing region’s softness. He further shares that income growth is being dampened by the continuing decline in oil and commodity prices.

More Significant Numbers

Disposable income did increase by 0.8%, but then household credit grew by 1.4%. To date, total household credit market debt is at $1.892 trillion (includes non-mortgage and mortgage loans plus consumer credit). The numbers are at $1.234 trillion for mortgage debt and at $572.3 billion for consumer credit debt.

Policy markets and economists continues to be concerned with what’s going on in the household market and the current numbers for household debt. Earlier this month, Ottawa made a move to require larger down payments for homes costing more than $500,00 to cool some of our hottest real estate markets.

Diana Petramala, TD Bank’s economist shared that the new rules will most likely only affect a small percentage of the housing market. She then adds that the debt to income ratio will likely to keep rising through 2016, given that there is rising unemployment. Oil producing regions such as Saskatchewan and Alberta will continue to have to deal with continued decline in home prices and rising unemployment.

Managing debts have not been a real problem for consumers in the past because of low interest rates; but then, what will happen when borrowing actually becomes ‘expensive’?

How Does Next Year Look?

This year’s report was released the day before the Bank of Canada was set to release its latest financial system review. The review will include potential vulnerabilities for the financial system and an examination of household debt.

Porter shares that the Bank of Canada’s policy is not likely to be affected much by the rising ratio of household debt to disposable income. He further shares that in the bank’s latest policy statement, the bank sees that the overall risks to financial stability are developing as expected despite the growing vulnerabilities in the household sector.

The household debt service ratio slipped to 13.6%, and the interest-only debt service ratio fell to a record low of 6.1%, while the ratio of total household debts to total assets rose 0.1% from 16.9% in the 2nd quarter to a solid 17% in the 3rd quarter.

Not sure what to make of these numbers? Contact your trusty Toronto mortgage brokers for help. We’ll make sure to answer your borrowing questions and assist you make smart informed decisions when it comes to your mortgage.

 

What is Mortgage Renewal?

mortgage renewalMortgage renewal is a hot topic for Toronto mortgage brokers, but what is it? When your mortgage runs out, you’ll have one of two choices: extend/“renew” your mortgage, or to pay up in full. Since most of us can’t get that much money up on the spot (which is why most of us got a Canadian mortgage in the first place) we have to renew. What you may not know is that you don’t have to renew with your present lender; you can make them renegotiate the terms of your agreement or you can find another lender altogether. Here we’re going to go over everything you need to know about mortgage renewal.

What is the Difference Between Terms and Amortization?

Most people make the mistake of not knowing the difference between mortgage terms and amortization. You’ll often have a 25 year amortization period (it was 30 but the mortgage rules have changed to a max of 25 years), but this doesn’t mean you have 25 years to pay off your loan in full; this is where mortgage terms come into play. Say you have a 25 year period for your mortgage but you have a 4 year (common) mortgage term. When that 4 years is over, you could end up with much higher interest rates or you could be on the hook for the full amount. This is when you need to speak with one of our Toronto mortgage brokers.

You probably already have a mortgage, and there’s little you can do about that now. But when it comes up for renewal, you’ll be able to renegotiate or find a better mortgage lender who can help you get the right Canadian mortgage. You can’t do this without a Toronto mortgage broker, so let us help you find the right mortgage for you!

Save Money with Renewal

Saving money with mortgage renewal means understanding how the process works. The difference between terms and amortization is a good example, but you’ll also need to know about penalties too. Penalties like pre-payment (paying EARLY) and late payment penalties will affect how much interest you get over the life of your loan. Caps on VRM or ARM (variable/adjustable rate mortgages) like lifetime caps and annual caps will keep your interest rates low and will help you know exactly how high or low things are going to wind up being.

Just because you get a mortgage renewal letter in the mail doesn’t mean you have to sign it. Talk to one of our Toronto mortgage brokers and make sure you’re getting the deal that’s best for you. Just because a renewal offers a 0% introductory rate doesn’t mean it will stay that way for long, and you’ll want to know for sure that you’re getting a great rate that sticks. We’ll be able to help you find the right mortgage renewal solution for your needs, at a price that’s right and with terms that fit your lifestyle. 

Understanding Canadian Interest Rates

canadian interest ratesUnderstanding Canadian interest rates work should be the first step on the road to getting a mortgage or any kind of financing. Interest represents the true profit for a bank or other lender when making a loan; you’ll want to speak with one of our Toronto mortgage brokers to make sure you’re getting the lowest interest rate! If the interest rate is low, the profit on the loan is lower and more of your payments will go towards paying the actual amount borrowed instead of profit out of thin air. In Canada there is a great deal of consumer rights protection over interest, but it’s still important to make sure that your interest rates are low.

What is Variable Interest Rates?

Many different types of mortgages will be packaged with a Variable Rate, or Adjustable Rate (aka ARMs). Variable rate interest isn’t necessarily bad, but it’s not necessarily all that great either. It can easily lead to more interest, which means more debt, which means more money to cover just the bare minimum.

It’s good to make sure that your VRM or ARM type mortgage has a reasonable “annual cap” and “lifetime cap” so it can’t shift too far beyond what you signed up for. So if right now you’re offered a 5% interest rate on an ARM, and the lifetime cap is fixed at 6%, your mortgage’s interest rate will never go over 11%. There can be caveats to this though, so you’ll want to speak with one of our Toronto mortgage brokers to make sure that you understand the rules of an adjustable rate mortgage before you sign on for one.

What Are Fixed Interest Rates?

Fixed interest rates are just what they sound like, fixed interest rates. They’ll usually remain around the same percent as what you signed on for, bar a few exceptions. Many lenders will have special clauses in the mortgage or loan contract that will give them the right to bump up the fixed interest rate to a higher number.

As mentioned earlier, the more interest that a lender can charge a borrower the more profit is generated from the mortgage. You’re going to need to have a Toronto mortgage broker look over your contract to make sure that none of these “special clauses” are inherently or overtly unfair. Prepayment clauses will bump up your interest rate for example if you pay your mortgage payment EARLY, penalizing you for being a “bad borrower” by paying off more of your principal and diminishing the amount they can collect in interest.

Interest rates are very important, and you’ll want to make sure that you’re getting the best rate for your situation. Just because you have bad credit or no credit doesn’t mean you have to accept a bad mortgage! If you’d like to know more about how you can get a mortgage tailored for your needs, speak with one of our Toronto mortgage brokers today! We’ll be able to help you better understand the role that interest rates play in the mortgage process.

How to Get a Refund on Mortgage Application Fees

2nd mortgage lendersSometimes things don’t go right with your mortgage application, and when that happens you need to make sure that you’re able to get a refund on your mortgage application fees. Whether you’re applying for your first mortgage or a home equity loan, in many situations you’ll be able to get your money back. Depending on the bank or lender you’re working with you’ll have better luck; just know that if you were denied due to credit issues you may not be able to get refunded. But hey, it never hurts to try right? Here we’re going to go over some steps you can try, so let’s get started.

Read Your Application

You’ll need to read your application to find out how long you have to get a refund. Every lender is different and you’ll want to make sure you have time left. Some only allow you a few weeks to get a refund, others have a longer or shorter time depending on the contract. If you’ve been pre-approved you don’t necessarily have to go through with the mortgage. But always read the application, it’ll have all the rules and information you need to figure out how long you have.

How long do You Have to Get a Refund?

Again, something you need to check out on your application. If you can’t find it (the legalese can be extremely thick when it comes to a home equity loan), you’ll want to call up your lender and ask them for more information. Ask if you’re able to get a refund for your application, and if you’re going to be able to do it within x amount of time. Many won’t refund the application fees, no matter what, but some will. It’s one of those situations where you’ll have to talk with them over the phone if you can’t locate the information on your own.

Written Request to Refund Your Application

Once you know you’re in the time limit and that you can request a refund (or at least try to!), it’s time to send a written request for a refund of your mortgage application fees. This needs to be sent via fax or certified mail; certified mail is usually your best option because you can prove they received the notice if they say they didn’t later. It costs a little now, but it’ll save you a big hassle later.

Bank on Any Leverage You Have

Your lender may deny refunding your home equity loan application fees, but now is the time to bank on everything you can. Point out your long standing relationship with the bank, point out any wrong doing or negligence on their part (“It took you 8 months to process my application, by then I already secured financing somewhere else!”) to see if you can get a refund. Sometimes they won’t do it, but sometimes they will. It never hurts to try and get your application fees back if you can.

How to Accelerate Your Payments on a 25 Year Mortgage

If you bought your house a few years ago and got a great low payment, but you’re starting to realize how all that interest is starting to rack up… it might be time to accelerate your payments. Here we’re going to go over everything that you need to do to make the most of the time you have left and how to save big on interest payments. Always remember the minimum interest payment is always the enemy of big mortgage savings, so you’re going to want to turn it up to 11! Let’s get started.

How Much Can You Realistically Pay?

This is a very important question to ask yourself. How much can you really budget for your mortgage payments? If you doubled or tripled your existing minimum payment, would you have to go without? You want to accelerate your payments, but you don’t want to do it to the point where you’re hungry and broke. You’re going to need to be very careful and examine every aspect of your budget each month. Take a few months if you have to, just to nail down how much you’re really spending and where you can cut to put more towards your mortgage.

Have a Conversation with Your Lender

After you know how much you can pay towards a mortgage (especially bridge mortgages), you’re going to want to talk to your lender. If you all of a sudden start paying a lot of money towards your mortgage they could become suspicious. You’ll need to be really careful to speak with them BEFORE you change your payments, so don’t forget!

Start Paying More

After you talk to your lender and you’ve figured out a realistic budget, it’s time to up your monthly payment; you can start off gradually, you can do it all at once, or you can just apply the extra from your tax return to bring down the principal – but whatever you do you need to do it! Don’t be afraid to keep paying more and more, knocking down your debt and getting on the road to being debt free.

Get Refinanced with a Broker

If you’re still having trouble with your payments even after you’ve been paying more and more, you may want to find a Canada mortgage broker to see if they can help you get refinanced. Mortgage brokers will work with different lenders to help you get a mortgage refinancing that works for you. When you get the right financing you won’t even need a bridge mortgage when you finally sell.

You’ll want to make a plan. Have a budget and stick to it, increase your payments over time and put any extra money you have towards paying off your home debt. That way you’ll be able to get things under control and have the chance to get free out under the thumb of debts.

Let us help you find the right loan, at the right rate and help you save money!