Looking to sell your existing home and upgrade?

Hey everyone, hope you are all eager for an early spring. I don't mind winter but this year I'm looking forward to a nice spring and with spring in the air many of you may be thinking about selling and perhaps upgrading to a larger home. Selling and buying is not too tricky but here are a couple quick tips to keep in mind:

1. Calculate how much money you will have net should you sell (at a responsible price), minus real estate broker fees (plus taxes), minus mortgage balance and bank penalty (assuming your mortgage is not portable or not worth porting).

2. Will the net proceeds all go towards the new down payment? Can I use some of that money to lower or pay off some debt?

3. Get pre-approved for the new purchase. You can get pre-approved without actually selling or listing. This not only helps set a budget for the new purchase, it also ensures that your credit, income, and incomes taxes are in order. It's not a bad idea to do all this before before listing your home.

4. Can I make a conditional offer on a new home pending the sale of mine? Yes you can however this type of offer is not the strongest because anyone else can walk-in and make an offer without that condition. In such cases, the vendor would give you 72 hours to sell your home otherwise you lose your offer. If your new purchase is really your dream home then sometimes it makes sense to first refinance your present home so you have the down payment. Thereafter you sell and port the new mortgage to the new home later.

5. What if the notary date for the sale of my home is scheduled after my new purchase? Not a problem. In such cases bridge loans are available through the banks.

Mike Holmes' magazine on mortgages & the buying process

This past weekend I was reorganizing my chaotic office and came across an old issue of Mike Holmes' magazine. In it there was an interesting article about first time buyers called "The first time home buyer's guide" published in the May 2011 edition. In the article Nathalie Rodriquez outlines a step-by-step process to buying your first home. Some of the content jumps between content relevant to Ontario residents and US citizens hence I have translated the information into what is important in Quebec plus added my two cents.


Save cash to build a down payment nest egg. Clearly this shouldn't be a surprise to anyone. We've discussed this issue on several radio shows and I've blogged about it.

Get a pre-approval letter. I agree a pre-approval is critical as it is an initial review of your finances, credit and ideally creates proper budget for a buying that first property.

• (A) All banks and mortgage insurers in Canada base their income to debt ratio based on your "total debt service ratio" or TDS. The TDS accounts for your gross declared income and takes a walk into the future by accounting for annual future mortgage payments, property taxes, home heating, and all outstanding debts. In short, between 42-44% of your gross income can be diverted to managing these total debts. Clearly the TDS calculation does not account for all household debt and other personal obligations. I like how the article emphasizes other debts and obligations but also future anticipated debts. This is something I always try to explain and drive home to clients that are looking to buy. Buying has to make sense now but also in the future. 

• (B) Another great point the article mentions is that if you have a pre-approval with a bank you are not obligated to stick with them. The only time pre-approval becomes binding is when your mortgage actually becomes notarized. Something not mentioned is that even if you've signed for the mortgage in-branch it isn't binding yet either. I have a client that went to "mortgage signing" at a branch and was so badly taken care of that she walked out and we moved the mortgage to a virtual lender that same day. 

• (C) A pre-approval I will add also is very helpful in that any problem areas such as credit, income taxes owed and filing your taxes can be quickly identified and addressed. Nothing worse than being under a financing deadline for a purchase and losing that dream house because your paperwork wasn't in order.

Work with a realtor and start house hunting. Find the right realtor that genuinely works with you. Don't be shy and interview realtors if you must. Also, Buying your first time house is a contact sport. In other words, get out there and see what you like and don't like. I also like how the article mentions to shop smart.  Do your homework on the property and area, i.e. drive past it during the night, get a feel for the road traffic around, research the quality of schools in the area, check out neighborhood websites. If any major renovations have been completed why not research the permit history.

Order an inspection & make an offer. A proper inspection can take 3 to 4 hours and you should have a report in your hands within a few days. The report should outline any fixes, current problems or even potential future problems. Rodriquez is correct in that both lenders and insurer won't provide a mortgage on a property if there are major issues such as foundation concerns. Given my experience if your inspection report highlights major foundation issues and your go back to the vendor to adjust the price, the bank will probably see the price amendment and they could ask questions. Rodriquez is not a fan of offering more than asking price. I agree that this could go against your pre-approval and all prior budgeting. Second, don't feel pressured by anyone. Keep in mind that there are many other options out there on the market. More and more properties will be put on the market in the coming weeks.

If you've never put in an offer on a house your real estate broker hopefully will help you out. With your inspection completed you may also be able to renegotiate that offer price. Don't be afraid to request a final walk through before closing at notary. Ensure that the property is in the same condition that you saw when you made your initial offer.

Closing & occupancy (aka act of sale or notary). A week or two prior to the closing date on the property your notary will call you to book your appointment and give a check list of things to bring with you (photo ID, certificate of location and proof of property insurance). Some notaries host one meeting for the title and hyothecary loan, while most will split them up into two separate meetings.

Overall Nathalie Rodriquez's article is useful for first time buyers. Some of the article is confusing as she flips between US and Ontario-relevant content. Having said that I like that she distinguishes between going with a bank or mortgage broker. I disagree with her point that through a mortgage broker banks won't be as willing to overlook credit issues. Lastly, I completely disagree with her that through a mortgage broker mortgage terms can be "riskier." As a mortgage broker I look out for my client's interests now but also help them plan for the future. Your not gonna get that experience at the bank.

Quick mortgage and buying tips for first time buyers

Are you thinking of upgrading your home? Are you tired of renting? Wellit’s definitely not too late as the buying season is upon us. Here are couplequick tips to keep in mind:

Tip #1: Make a personal budget. If you’ve been renting all yourlife and now looking to buy then it’s not a bad idea to put pen to paper andget an idea your monthly expenses.

Tip #2: Get a mortgage pre-approval with a mortgage broker.  A mortgage pre-approval will give you a good ideaof your buying power. Look closely at your future mortgage payments, taxes,heating, and new home insurance costs. Ask yourself, does this make sense? Doesthis fit within your personal budget?

Tip #3:  Save for a downpayment. Try to save at least 5-10% of your purchase price. You also canconvert your RRSPs to help you with that down payment. Did you know you can useup to $25,000 per applicant? If you only have a little aside but not enough fora full 5% then consider a "cash back mortgage" but look at the fine print.

Tip #4:  Build good credit.Credit is very important. As a first time buyer it’s a good idea to have atleast two major trade lines for good two years. Hmm I think I've said this before...pay your credit cards on time. Watch your limits. And keep those creditinquiries in check. Too many can definitely effect your credit score.

If you have a mortgage, debt-related questions or would like to sharean experience feel free to contact me.  Havea great week.

Tips on how to improve your credit score

Managing your personal debts is often on our minds but have you thoughtabout your credit report? I met with a client over the weekend who told me he’snever seen his credit report. So we pulled it together and had a look. To hissurprise his score was in the 640s which is decent but clearly he could havebeen over 750. The credit system in Canada is an algorithm that tracks ourconsumption of credit. This “points system” ranges from 300 to 900 points. Ideally,to get mortgage with a top bank, meaning best rate but also favourable conditionsshould be generally above 650.

Tip #1: Watch your credit limits. In this gentleman’s particularcase he had maxed out all his lines of credit personal and secured. I am not afan of lines of credit as it’s very easy to spend the money and once you exceed50% of your limit then your score begins to drop over time.

Tip #2: Watch out for those pesky credit checks. Every time you applyfor a cell phone, satellite TV, a retail card, and even your contractor maypull a credit check on you. They need your permission but they don’t alwaysask! Too many checks in a concentrated period of time can drop your scoresignificantly.

Tip #3: Pay on time and pay at least your minimum. Sounds simplebut pay all your credit cards, car lease, lines of credit and even that cellphone bill on time. Remember even a wire transfer of funds can take 3-5business days to clear. The credit report tracks payment history for 6-9 years. If you have any collections take care ofthem ASAP.

If you keep all three factors in check then your score will increase butkeep in mind positive results are not real time rather can take 2-4 months adjuston your report. If you have a mortgage, debt-related questions or would like toshare an experience feel free to contact me. 

Are you thinking of buying your first home?

The winter buying season is slowly upon us. If you’rethinking of buying your first home now is a good time to start planning ahead. Agood place to start is by putting aside some money towards a downpayment.Ideally, you need a minimum of 5% down for a home. If you don’t have exactly 5%then there are cash-back mortgage options available. In addition to downpayment,banks like to see that you have 1.5% of the purchase price meaning closingcosts such as notary fees and welcome taxes.

With some downpayment in hand you are now ready to getpre-approved. In other words, a pre-approval will access your buying capacity.Often times clients are anxious to know their buying capacity. That’s normal butit’s important to look closer into those numbers. A good rule of thumb is toask yourself, are these mortgage payments (including heat, property taxes,insurance) reasonable and sustainable for me over the next 5 years or so? Moreoften than not, I see clients that come to see me after they have bought andthey find themselves over-extended with mortgage payments and personal debts. Second,the pre-approval process will help identify any trouble areas that can hinderyour ability to buy (such as bad or no credit) but often such areas can befixed. This can take time but get you eventually into a position to buy.

With pre-approval inhand, I suggest meeting with a real estate broker. From there the home shoppingprocess can begin with a good foundation. 

If you have any specific questions you’d like to discuss innext week’s article please feel free to email me.