Are you thinking of buying a new “turn-key” home?

I hope everyone has had a great week. Last Tuesday, I took tothe CJAD air waves with a new call-in show on mortgages on debt. I usuallyco-host the show with Terry Kilakos but this time I ran solo as Terry was awayat a mortgage conference. I had some very interesting callers asking aboutrefinancing, the advantages of using a mortgage broker and some questions aboutmanaging debt load. I was hoping to get a caller asking about “turn-key” homesas this is the focus of this week’s article. 

By my definition a “turn-key” purchase refers to you as aconsumer approaching a builder to purchase a new home. Typically, in such casesthe builder is creating multiple homes that are expected to be delivered atsome point in the near future (say 6 to 12 months away).  Some builders have their own bankrepresentatives on-site to assist with your financing needs however their mortgageproducts may not necessarily be best suited for financial circumstances andneeds. As always some planning is not a bad idea. 

When you identify serious interest in a turn-key home thebuilder literally reserves that property for you. In most cases, they will askfor cash deposit(s) and you may be permitted to customize the home. After signingthe pre-contract you may lose your job, get sick whatever the reason. What’s importantis to be aware of the pre-contract exit policies because at a certain point intime you may not be able to back-out. Also, keep in mind that even if you signyour mortgage papers today, rates and mortgage products change over time especiallyif the home is ready in 6 months. You can always switch banks at a later dateif you feel that you’ve found something better for your needs. The builder’s goalsare to complete the house quickly and sell just as fast. As long as you have afinal mortgage approval they will get paid. Keep in mind that the caveat isthat some builders may not permit you to seek financing elsewhere but I haveyet to see that occur.

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

Mortgage show on CJAD 800AM

Afternoon all, just wanted to thank all the listeners last night. I usually help co-host the show with Terry Kilakos but this time it was my first night at the helm solo. I really enjoy working with Abe Hefter from CJAD. Terry was returning from a national mortgage conference and couldn't make the show but glad that he called in from Toronto. The calls that came in were awesome as was all the feedback from everyone after the show.

Most of the callers focused their questions on refinancing, bad credit and one caller asked about purchasing a property 50/50 to help a friend.  I will keep everyone posted for our next show.

Catch me live on CJAD 800AM tomorrow from 7-8 PM

Catch me tomorrow night live from 7-8pm on CJAD 800AM, where I will answer callers' questions about mortgages, debt, and maybe a little about sex, drugs and rock n' roll. Hey gotta keep mortgages interesting. Look forward to the show

http://cjad.player.amri.ca/

Are you thinking of building your own home?

This week I’d like to share some thoughts about new constructions. Lately, I’ve had quite a few clients that have decided to build their own homes. New constructions are different from “turn-key homes”.  A new construction is a unique home where you directly hire a professional to build your home. In a turn-key home you approach a builder who is selling say twenty new homes that will be ready next spring.  

This week’s article is inspired by a couple that I have been working with from St Lazare area who are building a new home with a contractor in Hudson.  If you’re considering building your own dream house then here are a couple steps to keep in mind. First and foremost the banks will require that you purchase the land needed outright.It is possible to finance the purchase of land but typically most will purchase outright. Next, it is suggested that you partner with a construction company or contractor who has experience with this type of project. Here you and the builder will need to pen to paper in terms the project scope. The banks want to see housing specs, costs and timelines. Before you buy your land or hire a contractor it’s a good idea to confirm with the lender whether the contractor is acceptable for the bank. Certification is essential here.

With land in hand and bank approval on the contractor it’s also very important to clearly get a final approval on financing before you break ground. It’s also a very good idea to know how many funding dispersals the contractor will need over the life of the project. Typically, the bank will provide funds at every critical phase of the construction. You as the borrower will typically be paying interest only on the portions borrowed. Once the house is completed then the construction loan would be converted to a conventional mortgage. The banks will furthermore send an evaluator at every critical phase before funds are dispersed.

In general terms, the above covers an ideal outline how anew construction should be managed. Lately, I have also come across new constructions where the client approaches me after they have bought the land and completed 50% of the house. Banks don’t like to get involved in such late stage projects. Such late stage projects can be financed but through a private lender over the short term and after completion it’s possible to refinance the property with a conventional bank. I have also seen projects where the client came to me at such a late stage where both conventional banks and private lenders would not finance the completion of the home. In that case it was heartbreaking as the client found out very late that given the location of the home and construction costs it did not fetch his expected market value hence there was no interest to finance the rest of the house.

On a personal note, I wanted to thank everyone for the great questions the past couple weeks. I really appreciate the feedback and enjoy interactive part of these articles. If you have any specific questions you’d like to discuss in next week’s article please feel free to contact me.

As a new homebuyer, can renovations costs be rolled into my mortgage?

Welcome to the new winter buying season. Yes, I know I said the “w-word” already, i.e. winter. If you are thinking of buying a new home for next spring or summer then it’s not a bad idea to plan a little ahead. My next couple articles in the coming weeks will focus on home buying. There are three types of construction and renovations mortgages. First, there is a self-built home where you require multiple cash disbursements, a “turnkey” construction where the home would be built by a certain date with one disbursement and finally a purchase with renovations. This week I’d like to focus on the third type, buying a home and rolling renovations costs into the mortgage. 

For example, I had a recent client that bought a home in Vaudreuil-Dorion.This client loved the house but it needed a little TLC in the kitchen and wood floors throughout the first floor. Most bank products of this nature permit you to buy the home and you can make renovations between 5-20% of the purchase amount for a maximum of $40,000. This renovations portion simply gets added on top of the mortgaged amount. If you exceed $40,000 it is still possible to get the funds needed but at that point it is typically seen as a construction loan as the renovations required would be considered major at that point. 

It’s also a good idea to be as clear with yourself with what type of renovations you really would like to do and make sure that the money spent actually adds bang and value to the home. This latter point is important.You probably have a pretty good idea of your personality and what your future plans will be. Some clients will make the purchase with renovations with the expectation to hang onto the home for the medium to long term which is fine. However if you are expecting to refinance in the future here is where the value-added will be important.

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

Realtor-rating site Canadian first: Brokers’ track records posted

Allison Lampert from the Gazette just published an interesting article about rating real estate brokers. It's definately worth a read..
 http://www.montrealgazette.com/business/Realtor+rating+site+Canadian+first/5684436/story.html

Homeownership and Bankruptcy

The past few weeks I’ve been touching upon bad credit and alittle about bankruptcy, this week I will touch upon homeownership andbankruptcy/consumer proposals from a mortgage perspective. On an annual basis, approximately100,000 Canadians go bankrupt or file for a consumer proposal. [1] If you are a homeowner and your realizingyour debt load is getting overwhelming and you’re using credit to pay debtsthen it might be a good idea to check out your options. I would say that some waitway too long to address the problem or simply don’t know where to turn for help.In most cases, your options are a debt consolidation loan, refinance your home,work with a credit counsellor, file for bankruptcy or file for a consumerproposal.

Before making a decision it’s not a bad idea to go step-by-step. A mortgage specialist can help you weighbetween a debt consolidation loan and/or refinancing your home. The goal herewould be to consolidate your debt load into one lower mortgage payment and/orone bank loan that encompasses all your debts. If your debt load is too largeand you owe more than equity available then I would suggest speaking to acredit counsellor or bankruptcy trustee. Credit counselors generally work for non-profits that genuinely can help you create a personal budgetand give you valuable money management advice. A bankruptcy trustee is licensedto review your options and should it get to that point advise you between aconsumer proposal or bankruptcy. Typically, if you have a lot of equity in yourhome then it could be seized and sold to repay your creditors. The seizure ofyour home depends on your specific circumstances. 

To put things into better perspective, in 2010 there were 7288Quebecers that received foreclosure notices and of that amount 42% had theirproperties seized. Upon closer inspection only 175 Montrealers in 2010 losttheir homes.[2] Atface value looks that sounds pretty good, especially compared to the UnitedStates however keep in mind we are at record lows with regards to interestrates. Many of these mortgages will also be coming up for renewal where the newfuture rates could be much higher Also, if you have received a 60 day noticefor your home there are options but very individual case specific. 

I hope that you feel more at ease knowing that if you havebad credit, considering a bankruptcy or consumer proposal there are optionsavailable to you. There are also options available if you presently own yourhome and have filed for a consumer proposal within your mortgage term. If youhave any specific questions please feel free to contact me.

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[1] Office of the Superintendent of BankruptcyCanada, Statistics.

https://www.ic.gc.ca/eic/site/bsf-osb.nsf/eng/h_br01011.html

[2]Lamey, Mary “Quebec foreclosure rates dropping” Montreal Gazette, 12 May 2011.

http://www.montrealgazette.com/business/Quebec+foreclosure+rates+dropping/4772026/story.html