Hey everyone, hope Father's Day is off to a good start on this sunny day in Montreal. Today, I got inspired to write about having a green home. Often we all talk about being green by participating in our city's recycling and composting programs. I think we are all pretty green minded but post-recycling and car pooling we're not sure what next.
Personally, I don't think we do enough for the environment nor are living in a sustainable manner. As home owners or future home owners there are three ways you can help your pocket and help the environment, by: either buying an energy efficient home, making energy efficient renovations to your new home or renovate your existing home.
When buying an energy efficient home (or making energy efficient saving renovations), should you meet certain criteria both CMHC and Genworth will refund 10% of your insurance premium. On a mortgage of $200,000 you would save approximately $500 on your premium. According to the Quebec Government, by making these changes you'd save approximately 20% on your energy costs. Furthermore, through the Quebec Government's Novoclimat 2.0 Program you'd receive an additional $1000 in financial assistance. Is saving $1500 upfront and 20% on your energy bills enough? Let's take this discussion a bit further...
As many of your know I like Mike Holmes and the innovative ideas he shares. If you read his website you will see lots of green home ideas, which includes: roofing, heating and cooling, alternative lighting, power, and improving the building envelope. The aspect I find most interesting is water use. Mike talks about greywater, which is "used water that comes from sinks and drains, as well as reclaimed rainwater collected from a home’s roofs." The greywater is then held, filtered and sent back into the house for re-use. The water cannot be used for drinking, showering or bathing but definitely useful for watering the lawn, laundry, washing your car, and flushing toilets.
Mike states there are no Federal or Provincial building guidelines for greywater systems. In addition "Each individual municipality accepts or rejects proposed greywater systems that homeowners might want to install."
I am glad that Mike and people like him are sharing these ideas. I just wish our governments were a bit more ahead of the times by adopting more green building codes and help bring these topics into mainstream discussion.
Sunday, June 15, 2014
Thursday, June 12, 2014
A reverse what? A reverse who? A reverse mortgage
Afternoon #mortgageland, it's a drizzly day in Montreal but still a great day regardless. On 3 June 2014, Montreal's CJAD 800 AM hosted an interview about reserve mortgages with Kelley Keehn (personal finance expert and speaker). At the time, I tweeted through @cdnmortgages, that I would write an article about that conversation hence voila!
A reverse mortgage is designed for seniors. To qualify you must be 55 and older. Ideally by 55, you have little or no mortgage on your home. Everyone's desire is to have decent quality of life especially in the later stages of life and sometimes that is challenging with shrinking pensions. A reverse mortgage can unlock up to 40% (depending where you home is located) of the value of your home. These funds can be used at your discretion for: travel, pay debts, help others, renovate your home. I agree with Kelley that a reverse mortgage should be a last resort option as it is an expensive option.
A reverse mortgage is payment free because the interest is accrued and added to your mortgage balance over time. When you pass away or should sell your home then your mortgage shall be repaid back to Chip (the sole reserve mortgage company in Canada). Be aware this option does chew through the equity in your home. There are alternative options to a reverse mortgage. For instance, it can make more sense to take on a mortgage or line of credit up and put aside some proceeds to cover your payments over next few years. It's all depends on your needs, the costs and comfort level.
Reviewing article: "The bank said no - now what?"
Good afternoon Montreal Real Estate world. Today, I am reviewing an article that caught my eye in the National Post entitled "The bank said no - now what?" Susan Smith does a great job painting the current mortgage landscape and impact of the post-2008 Federal Government rule changes. However, I'd add a couple things. Susan Smith discusses how the rules changes have impacted certain consumers, I shall solely focus on the self-employed.
The Self Employed: Okay, here is the unplugged truth for anyone self employed. Is it really harder for self employed people to qualify for a mortgage? I'd say it depends on your specific circumstances (declaring income and credit quality are the usual suspects). According to Susan, "The government...tightened requirements for the self-employed, requiring independent validation of income statements." In other words, the Federal Government is forcing the self employed to declare more income on their income taxes. It is much harder to get a mortgage with an "A-lender" under the self employed program without declaring anything reasonable. For example, the most common insured self-employed program would be Genworth's Alt-A program. They require strong credit history, a +680 score, incomes taxes to be filed and up-to-date for 2 years, and no income tax arrears owed. Generally, when applying for a mortgage your income declared on line 150 of your notice of assessment can be multiplied by 2-2.5 of the stated income. Usually, this type of financing referred as "common sense financing." In other words, say you are a plumber or electrician declaring $45,000 personally hence we may be able to an auto-declared income under this program at $90,000 in order to qualify for your mortgage. In such cases your mortgage would incur an extra mortgage insurance premium.
As the article points out, there are alternative lender options like Home Trust or Equitable Bank that exist. Using an alternative bank the interest rate can be between approximately between 3.89-6.99% depending on the term. Rates here as understandably based on risk. The "country’s 2.75 million self-employed workers – a group that, according to Statistics Canada, has a higher median net worth than paid employees." Self employed individuals are made out to sound more risky compared than salaried individuals. The self employed must declare more income whether we like it or not. Sometimes it makes sense to work with an alternative lender for 1-3 years but with a mortgage plan you can switch to an "A -lender" thereafter depending on your circumstances.
The article mentions private lender, I shall write a separate blog entry on that subject.
The Self Employed: Okay, here is the unplugged truth for anyone self employed. Is it really harder for self employed people to qualify for a mortgage? I'd say it depends on your specific circumstances (declaring income and credit quality are the usual suspects). According to Susan, "The government...tightened requirements for the self-employed, requiring independent validation of income statements." In other words, the Federal Government is forcing the self employed to declare more income on their income taxes. It is much harder to get a mortgage with an "A-lender" under the self employed program without declaring anything reasonable. For example, the most common insured self-employed program would be Genworth's Alt-A program. They require strong credit history, a +680 score, incomes taxes to be filed and up-to-date for 2 years, and no income tax arrears owed. Generally, when applying for a mortgage your income declared on line 150 of your notice of assessment can be multiplied by 2-2.5 of the stated income. Usually, this type of financing referred as "common sense financing." In other words, say you are a plumber or electrician declaring $45,000 personally hence we may be able to an auto-declared income under this program at $90,000 in order to qualify for your mortgage. In such cases your mortgage would incur an extra mortgage insurance premium.
As the article points out, there are alternative lender options like Home Trust or Equitable Bank that exist. Using an alternative bank the interest rate can be between approximately between 3.89-6.99% depending on the term. Rates here as understandably based on risk. The "country’s 2.75 million self-employed workers – a group that, according to Statistics Canada, has a higher median net worth than paid employees." Self employed individuals are made out to sound more risky compared than salaried individuals. The self employed must declare more income whether we like it or not. Sometimes it makes sense to work with an alternative lender for 1-3 years but with a mortgage plan you can switch to an "A -lender" thereafter depending on your circumstances.
The article mentions private lender, I shall write a separate blog entry on that subject.
Thursday, May 15, 2014
Reviewing Mike Holmes on renovations and creating value
Mike Holmes is back at with another article that I enjoyed reading entitled, "Fix-ups to push up your property value." In the article, Mike shares how to create value or increase value in your home, which I would add is also applicable to investment properties.
Mike poses the most fundamental question: What does valuable mean? Not every renovation adds value to your property. Sometimes renovations solely make the property more durable or energy efficient (new windows, doors, insulation). I agree with Mike, that these make for a happy homeowner because energy costs can decrease. I think that when it comes to renovations it all depends what your goals are. Perhaps your goal is an income goal or you want to flip the property or perhaps you'd like to renovate, rent and refinance the property to buy more.
Mike's tips are awesome:
1. Don't curb curb appeal
2. Fix roof problems
3. Clean the property before listing
I have some clients that realized that the the cost of renovations don't always translate into 100% market value. This is especially applicable with a purchase plus renovations or refinance plus renovation project financing. Depending on the size of the renovations you're looking at it's worth to have a proper home evaluation to determine present and future value post-renos.
At the moment the vibe I am feeling in the Montreal market is: renovate, maintain and hold your properties. It's a good time the weather a bit of the market storm.Your thoughts?
Mike poses the most fundamental question: What does valuable mean? Not every renovation adds value to your property. Sometimes renovations solely make the property more durable or energy efficient (new windows, doors, insulation). I agree with Mike, that these make for a happy homeowner because energy costs can decrease. I think that when it comes to renovations it all depends what your goals are. Perhaps your goal is an income goal or you want to flip the property or perhaps you'd like to renovate, rent and refinance the property to buy more.
Mike's tips are awesome:
1. Don't curb curb appeal
2. Fix roof problems
3. Clean the property before listing
I have some clients that realized that the the cost of renovations don't always translate into 100% market value. This is especially applicable with a purchase plus renovations or refinance plus renovation project financing. Depending on the size of the renovations you're looking at it's worth to have a proper home evaluation to determine present and future value post-renos.
At the moment the vibe I am feeling in the Montreal market is: renovate, maintain and hold your properties. It's a good time the weather a bit of the market storm.Your thoughts?
Sunday, April 13, 2014
"O’Leary Mortgages is No More"
A few sources including Canadian Mortgage Trends are reporting that O'Leary Mortgages have closed up shop. Rob McLister, Mortgage Columnist for the Globe & Mail, wrote that " In sum, O'Leary Mortgages was a pilot project that didn't generate the returns O'Leary envisioned. The problem might have been that he treated it like a pilot project and didn't make the investment needed to grow consumer awareness and differentiate his offerings." I would also argue that the direct consumer model wasn't best suited. Perhaps offering O'Leary Mortgages through brokers could have helped?
Some also argue that O'Leary's personality wasn't the ideal "poster child" for the mortgage industry in Canada. Regardless of what one thinks of the man, it's always a shame to lose another virtual lender in Canada. Unfortuanately virtual lenders like ING, Macquarie etc have come and gone. As a mortgage broker, I meet with clients from all sort of backgrounds and I can tell you that lender variety is critical more than folks realize. Furthermore, having more virtual mono line lenders is important as their mortgage conditions, i.e. "fine print" is usually better and more consumer friendly.
Some also argue that O'Leary's personality wasn't the ideal "poster child" for the mortgage industry in Canada. Regardless of what one thinks of the man, it's always a shame to lose another virtual lender in Canada. Unfortuanately virtual lenders like ING, Macquarie etc have come and gone. As a mortgage broker, I meet with clients from all sort of backgrounds and I can tell you that lender variety is critical more than folks realize. Furthermore, having more virtual mono line lenders is important as their mortgage conditions, i.e. "fine print" is usually better and more consumer friendly.
Thursday, April 10, 2014
Mortgage Minute commentary: "If you want to have a mortgage in retirement, be prepared to make some big sacrifices"
Garry Marr from the Financial Post wrote an article on 5 April 2014 entitled, "If you want to have a mortgage in retirement, be prepared to make some big sacrifices." In the article, Garry quotes Will Dunning, Chief Economist with the Canadian Association of Accredited Mortgage Professionals, stating "..among homeowners 65 years or older, 35% have a mortgage," and fortunately "Among those with a mortgage, the average loan-to-value is 33%."
As a public policy nut and a mortgage broker I am pleased to see seniors have strong equity (one hopes they would by that age) in their properties but the question is why are seniors even having mortgages past 65 years? Simple! It seems that seniors are refinancing lately to help to bail out their "kids," now adults, that are carrying a high debt burden. Is life harder now versus then? Was credit just not as available as it is now? Quite probable. Garry states "Most [financial] planners seem to think it is a disaster waiting to happen because seniors don't usually have the income in retirement to support debt repayment and that means major lifestyle changes."
I've personally witnessed several situations like this where a client needs money to pay debt, owes money to revenue Quebec, or has an active consumer proposal and we look to leverage a parent or family member's property. In such circumstances, I usually sit the entire family down to discuss options including pros and cons. If we remortgage the parent's house to pay off their kids debts I make sure:
As a public policy nut and a mortgage broker I am pleased to see seniors have strong equity (one hopes they would by that age) in their properties but the question is why are seniors even having mortgages past 65 years? Simple! It seems that seniors are refinancing lately to help to bail out their "kids," now adults, that are carrying a high debt burden. Is life harder now versus then? Was credit just not as available as it is now? Quite probable. Garry states "Most [financial] planners seem to think it is a disaster waiting to happen because seniors don't usually have the income in retirement to support debt repayment and that means major lifestyle changes."
I've personally witnessed several situations like this where a client needs money to pay debt, owes money to revenue Quebec, or has an active consumer proposal and we look to leverage a parent or family member's property. In such circumstances, I usually sit the entire family down to discuss options including pros and cons. If we remortgage the parent's house to pay off their kids debts I make sure:
- that we have pre-planned exit strategy before doing anything. Sometimes it can take 6 months to 3 years to fix the problem and then we refinance again to pay back the parents.
- that the kids in turn pay the new mortgage because the new mortgages payments are generally lower than paying for a full unsecured debt load
Monday, April 7, 2014
Reviewing Mike Holmes: "Home Inspections Benefit Buyers and Sellers"
I always try to keep an eye out on articles written by Mike Holmes. This time Mike writes about the benefits of home inspections. Mike's article is actually reprinted in yesterday's Montreal Gazette. It shouldn't come as no surprise that we're in the buying season and that it's a good idea to get a home inspected by a professional before buying. Having said that, Mike also suggests that you have an inspection completed on your own home before listing it for sale.
Mike suggestion makes total sense because selling one's own home can be an emotional process and it's a good idea to get an idea of any unforeseen problems you might have with your home. Wouldn't you rather have your inspector catch any issues up front than a potential buyer's inspector? Being more proactive will most likely get you a better sale price in the end. It will be up to you whether you decide to fix an pre-identified problems. Should you not repair any issues in advance of listing then expect your price to negotiated hard once a buyer's inspector finds problems or repairs to be completed.
Mike also suggests that you have your inspection report ready and available for any future buyers (referencing even the contractors used) visiting your home. Here Mike is also very skeptical of inspectors that are referred by real estate agents. He says you want to get an inspector that does the job not one that lightly reviews a home and may not "catch" all problems. A home inspector in such a situation might do this because they want to keep getting referrals from the agent. Last year, I had two purchase transactions where I was shocked that my client's inspectors did not catch some major items and now my clients are now either in court or given up and financing the problems themselves.
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Mike Holmes at a speaking engagement Photograph by: Alex Schuldt/The Holmes Group, Postmedia News |
Mike also suggests that you have your inspection report ready and available for any future buyers (referencing even the contractors used) visiting your home. Here Mike is also very skeptical of inspectors that are referred by real estate agents. He says you want to get an inspector that does the job not one that lightly reviews a home and may not "catch" all problems. A home inspector in such a situation might do this because they want to keep getting referrals from the agent. Last year, I had two purchase transactions where I was shocked that my client's inspectors did not catch some major items and now my clients are now either in court or given up and financing the problems themselves.
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