What do I need to think about when selling my home and buying a new one?

The holiday season is fast upon us. Good luck to us last minute shoppers this week! Wow this year has totally flown by. I wanted to send my best wishes and happy holidays to all the vistors to the North East site and all our clients.

In true holiday spirit, we all will eat a lot, find great gifts for those we care about but also have dreams of Santa getting us that new home. Okay well maybe not Santa... If you’re thinking about putting your home on the market in January or February and in the hunt for a new home then take a minute to plan ahead a little. It’s not a bad idea to first figure out how much your home may realistically fetch and how much you will have net left in your pocket after repaying the mortgage, mortgage penalty (if any), real estate broker fees, lowering personal debts, etc.

With an idea of down payment in mind then it’s a good idea to get pre-approved for a mortgage. Make sure your mortgage pre-approval holds the rate into spring or early summer. Together this will give you good idea about budget and what’s reasonable to expect. What’s important is not be financially over-stretched. The step after that is the fun part, start the house hunting process with a good real estate broker.

If you have any questions or experiences you’d like to share please feel free to contact me even over the holidays.

Residential Mortgage ABC’s

I hope that everyone’s had a great week. I’ve decided tofocus this week’s column on a couple mortgage basics. I often hear thatterminology and mortgage options are not properly discussed at the bank.Hopefully this helps...

Interest rate: isthe rate of return a lender receives for permitting you (the borrower) for aspecified term (or duration). 

Term: when yousign for a new mortgage you can usually choose the duration of your term (1, 2,3, 4, 5 years or more). If you decide to sell or refinance within your term youcan usually expect to pay a penalty to the bank. Upon completing your term, youare permitted to refinance or change banks without penalty. 

Fixed and variable: Fixedrates remain set throughout your mortgage term. Variable rate mortgages arealso set to a term but fluctuate based on the Bank of Canada. Choosing betweeneither is based on your personal risk tolerance and you must qualify. 

Amortization period:is the number of years it takes to pay back your mortgage. Maximum amortizationis currently 30 years but some lenders still offer 35 years but you need toqualify.   

Frequency:  refers to frequency of your mortgage paymentsuch as weekly, accelerate bi-weekly, and monthly. What frequency you choose isimportant as it help pay your mortgage down quicker.

Closed versus an openmortgage: If you are looking to buy a property and “flip-it” within 2-3months then an open mortgage may be what you’re looking for.  The rate is higher but you can break yourmortgage at any time without penalty. A closed mortgage is exactly how itsounds closed for the duration of your term and there are generally penaltiesfor breaking it.

Cash back: A cashback mortgage is great if you’re a first time buying and need a little helpwith your down payment.  If you have goodcredit then you could qualify to get up to 5% cash back to supplement yourexisting down payment.  Make sure youwill keep your home for your term otherwise you will have two penalties, themortgage penalty and you will also be expected to repay the cash backportion.  

Secured line ofcredit: is a line of credit attached to your home which is based on thesame principles as a variable mortgage. I would suggest that you use it as a short to medium term financial toolbecause the closer you get to your limit the more it could affect your creditscore. Lines of credit compound monthly.

If you have any specific questions or good and badexperiences you’d like to share please feel free to contact me.

What is a mortgage pre-approval?

Welcome to the calm before the upcoming buying storm. If youare thinking of buying between now and next summer then its good idea to getpre-approved by a bank. The mortgage pre-approval process is not that complexbut quite valuable. Think of it like a doctor’s check-up where your income,credit and downpayment are reviewed and “qualified.” All three factors areimportant considerations when a mortgage application is analyzed by not onlythe financial institution but also the mortgage insurer.

Some clients place ahead which is great but at times I havemet with clients after they have an accepted promise to purchase in play. Inmost cases that’s fine but I have seen more and more situations where the clientsrealize they are either over-budget, or don’t qualify due to other controllablefactors (that could have been fixed prior). It’s never fun to find out that inthe midst the financing deadline that you cannot qualify for a mortgage with anA-lender.  A pre-approval is also importantas it shows the real estate broker representing the vendor that you are aserious buyer.   

If you have any specific questions or good and bad experiencesyou’d like to share please feel free to contact me.

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.