Divorce and separation: a potential mortgage and credit nightmare for women

Hey everyone. Hope everyone's week is off to a good start. Very cool yet sunny in Montreal. This week I've been inspired to speak about women, more specifically women that go through divorce or get taken advantage of by their spouse or partner. 

In 2013, I worked on a number of divorce and separation cases. In many of those cases either the women wanted to keep the family home or took their share of the profits and bought a new home for themselves (and often the children). I highly suggest any woman in a relationship or marriage to build independent credit of their partner. I am not paranoid and yes I still believe in the institution of marriage, however should anything happen or should you experience divorce it's always important to have credit. You might not be able to keep the house or your lender options may be very limited. When in doubt ask and plan ahead. 

Example 1: Divorced with joint credit 

I have one client that has three kids, works part time and she wanted to refinance to buy her x-husband out in order to keep the house. I found an excellent mortgage program but I had to get an exception from the lender because post-divorce she was removed from all the joint debts. Luckily she had just the minimum independent credit history to qualify for this program. Quite the close call!

Example 2: Common Law & Helping the Wrong Person

A more tragic and heartbreaking situation is when someone is in a common law relationship and helping the wrong person. In this case my client was taken advantage of by her partner. My client was committed to her partner and wanted to help him with his debts and give him a cash infusion for his business. Before she knew it he took the money and left. My client's credit cards were at limit and with a salaried job she was stuck paying. Over time she got more and more behind. By the time she sold the house and paid off all debts the credit damage was already done. Presently, I started to build a case for Equifax to see if the severe lates can be removed off her report. Presently she is trying to re-start her life with her daughter by buying a new home together. With the severity of lates all "A banks and lenders" won't be able to finance an insured purchase (she does not have enough down payment to work with an alternative or B lender). I will keep everyone updated on this story.

Both examples are sad to hear but unfortunately more and more common. In example 1, my client should have created her own independent credit years ago. I recommended that she create more credit today to have the necessary credit history tomorrow. In Example 2, I wish I met her years ago just as she was starting to become late on her debts. Many consumers don’t know what to do in that situation or as they become late they go see their bank and their own bank refuses or cannot help. With the emotional drain of separation or being taken advantage of it’s hard to know what to do.

Reviewing: Mike Holmes' article "8 Tips for planning a reno in 2014"

Hey everyone. I've been blogging a lot lately about renovations. I came across an article that might be of interest to folks. The Montreal Gazette published an article written by Mike Holme's entitled "8 tips for planning a reno in 2014."

In a nutshell, here are Mikes main renovation tips:

1. Right off the bat, Mike states, "Make decisions before you start. I've said it a million times. It takes longer to plan a renovation than to do it. The more time you spend making decisions before construction starts, the less time will be spent on actual labour, which helps control costs and work schedules."
2.  Find qualified pros: Mike suggest that you not rely on friends or family for recommendations and that you get 10-20 references for any contractor. He says, don't only look at recently completed projects and to check out work sites in progress.
3. Do a background check: Here Mike suggests that you do a background check. Bad contractors change incorporations to cover their tracks. Try speaking with the Better Business Bureau.
4.  Get a detailed contract: Mike states the more detail in the contract the better. It should review and specify every task. 
5.  Set up a payment schedule tied to project milestones: He also recommends that milestones be specified and that stages be completed and inspected before moving onto the next part of the reno.
6.  Discuss changes: Every time there is a change, Mike states, this causes delay and can increase costs. Speak openly with your contractor to ensure whether the change is worth this effort and delay.
7. Know the work schedule: This includes the daily work hours of the workers. Mike states if the workers visit the work site here and there at random hours then this will throw the timeline off track.
8. Should you stay or should you go? Mike suggest that during major renovations you should move out temporarily. Living through construction is never easy especially with young children and a busy work-life schedule. If you stay in your home Mike states that the workers will also spend more time cleaning daily at your expense rather than working faster towards project completion. 

Mike's tips are excellent. Like Mike, I am a huge fan of planning ahead before starting any project. The one part that Mike doesn't mention is financing. Here it's important to know what is your budget and how will you finance the renovation. Your dream project may need to be scaled down if it cannot be financed.

You may have the money in hand which helps tremendously or you may need a mortgage. Your two options here would be: 

(A) Auto-construction financing where the bank will give you a special mortgage that disperses funds (up to five dispersals) for the contractor at various milestones in the project. Here the bank will need to approve your contractor and project plan. 

(B) Refinance and use the net proceeds towards the construction. Here you will be in charge of the all the funds at once. Here the the bank may not need to see plans and budget. In both financing scenarios, it's important to stay on budget as the bank won't give you additional funds once the mortgage is notarized. 

Montreal real estate values and personal debt

Hey everyone. So I've disappeared from the mortgage blogging world the past few months but now I'm back. I enjoy blogging way too much and there's so much new mortgage info ideas that I've wanted to share with everyone.

I've noticed a couple things in the Montreal real estate and mortgage industry lately which is personal debt and market values. I don't have any concrete statistics yet but what I can say is that I'm seeing clients lately that bought the past few years are realizing they cannot afford both their homes and a growing debt load. For many it's becoming harder and harder to refinance one's home and pull some equity to pay off debt.

From time to time I read Garth Turner's blog. Garth spends a lot of time speaking out about Canadian real estate, the economy and debt. On 16 December 2013, Garth wrote in a recent blog entry entitled, "The Blame," where he states,

"Ultimately there’s nobody to blame but those who create the demand for over-valued assets. People keep buying houses regardless of the process, since they have an endless appetite for debt....Since we’ve achieved another all-time debt record, with $1.2 trillion in outstanding homeowner mortgages (doubled within the last decade) and unprecedented line of credit and credit card balances, the central bank is handcuffed. If rates rise to chill house horniness and temper our piggish appetite for even more debt, it’ll push the economy into true deflation and ugly employment numbers."

Market values, cheap debt and the economic growth are all tied together. The dilemma is cooling the market and trying to manage debt. On my end I'm seeing market values cooling in the greater Montreal area however because cheap debt is still available many are still taking advantage.

Municipal values of homes in the greater Montreal area have increased as much as 25% in some areas but property values have not followed suit. So what does all this mean for the average person? Good question. First, if you're feeling the debt pinch and don't see yourself paying off that debt quickly (i.e. work bonus, extra commission, extra over-time, an inheritance or willing the lotto) then perhaps it might be a good time to down size or refinance. Yes this can play with emotions and ego but could save you a lot of stress and frustration by simply maintaining the debt load.

I've recommended to some of my clients lately to sell their homes, pay off debt (including close certain trade lines or lower limits) and still put a good amount down towards a new home. What's important to keep in mind, is don't wait too long before you start becoming late or default on you debt obligations. I have many clients and individuals that I've met with that have waited too long and are now stuck with expensive short to medium term 2nd mortgages.