9 May

Sole Proprietors

General

Posted by: Sarah Boudreau

Sole proprietors are individuals who run their own business and do not have it set up as a corporation or partnership. The biggest difference between them and a corporation is that a sole proprietor does not have separation between their business and themselves. This means that when taxes are filed, all costs that are essential to the operation of the business are tax deductible on the individuals tax return. For example, an electrician who operates as a sole proprietor may earn $80,000 a year in income. However, costs such as materials, vehicle expenses, office space, or marketing (to name a few), are subtracted from the gross income- $80,000 in this case.

If those costs added up to $15,000 in a fiscal year, that sole proprietor really only earns $65,000 of income in the eyes of the lender. That is because the amount they are taxed on is the net income of $65,000 not the gross business income of $80,000. When submitting an application for a sole proprietor, you can either use a 2-year average of the net business income (income qualified) or state the income (stated files) based on history of earnings and the businesses write offs/expenses.

Majority of the time, we take the previous two years of income reported on line 236 of the T1 Generals, add them together, and divide that by two. If a business earned $80,000 of gross income and $65,000 of net income in year 1, and then $90,000 of gross income and $70,000 of net income in year 2, their income in the eyes of the lender is $67,500 ($65,000 + $70,000 = $135,000/2 = $67,500). There is an opportunity to “gross up” the 2-year average by 15%, but that requires a closer look at what the business has claimed as write offs for their business expenses. A gross up of 15% on $67,500 of income would equal $77,625.

Operating a business as a sole proprietor is a small cost when comparing it to a corporation, main reason being there is only one tax return prepared for both the business and the individual. The down side, an individual must pay income tax at the personal tax rate on the entire net income, whether they required all that income or not.

A corporation on the other hand, pays income tax at a different tax rate lower than the personal tax rate. That way, an individual only needs to take the income out of the corporation that they need, decreasing the amount of income tax they pay on their personal tax return (if money is left inside the corporation).

If you have any questions, give me a call.

2 May

What’s Your Best Rate?

General

Posted by: Sarah Boudreau

By Len Lane- DLC Brokers for Life

 

You know, at one time I could give you a quote over the phone and not worry that I would be too far out. Today is a totally different story, here are some of the variables that come into play:

 

1. What’s your credit score? A 700 FICO score is the new 650 for many lenders as their investors demand better quality borrowers.

2. Where is the property located? Rural areas are getting harder to finance.

3. Is it an insured file, are you putting less than 20% down payment?

4. Is it insurable? Are you putting down more than 20% on the purchase but it can qualify under the stress test, currently 5.34%?

5. Is the loan to value going to be 65% or less? You get the same rate as the guy with 5% down and have to qualify with the same criteria.

6. Are you looking to refinance or buy a rental? Sorry both are uninsurable and have to qualify at 5.34% but you have to pay a higher interest rate.

7. So how about your employment; have you been on your job or at least in the same industry for the last 2 or more years?

8. Down payment requires a 90-day statement of where it has been kept, please be sure that it was in a bank as anything else seems to be picked to death. Larger gifts lately have required the giftor to show the money was in their account. God forbid they should have won it at a casino as they will want the print out from the cage boss, especially in B.C.

9. How fast is your deal closing, as there are quick close rates usually for insured deals.

10. While supposedly everyone is to be able to qualify at 44%TDS and 39% GDS, it’s not always the case as CMHC is still in some instances lower than a 680 FICO score and is wanting the client to be qualified at the old standard of 42% and 35%, which again cuts back the qualifying amounts.

 

As you can see, what’s your best rate has a lot of things come into play today and anyone who gives you a rate over the phone has hopefully asked you at least some of these questions. The best rate today is more about what fits your situation but the old adage of who, what, where and how still apply. Once we have asked the questions, we have to audit the answers to make sure it’s the best fit for your situation. If you have any questions, contact me anytime.

11 Apr

A Shifting Market….. Again

General

Posted by: Sarah Boudreau

By Angela Calla- Dominion Lending Centres AMP

The recent data sure has changed the tone of rates in the coming months.

The prime rate – what variable rates are based on, while a few short weeks ago was expected to rise three times in the next 18 months now with the data on the slowing of the market and uncertainty in projects moving forward as expected, there are signs increases could be delayed until next spring.

The bond market– what fixed rates are based on, has dropped, which means rates (after the banks have hung on as much as possible ) should come down slightly.

What does his mean for borrowers? Let’s break it down per segment

  1.  Homebuyers – more affordability due to the recent dip in prices – pending price category anywhere from 10-30%. Remember, working with an unbiased mortgage professional we do a full look back upon closing to ensure the lowest cost of borrowing.
  2.  Home sellers – price sharp if you want to sell or else no point in being on the market
  3.  Renewals rejoice – payment shock shall be reduced upon renewal.
  4. Those carrying debt outside of a mortgage ex: credit cards, car payments, lines of credit – now is your time to see how much money moving that debt into a new restructured mortgage will  improve your cash flow. It’s the most effective strategy for protecting your credit.

The most constant theme in everything above: The market is always changing, yesterday’s news is exactly that. Aligning yourself with the frontline experts who will help you with clarity in the ever-changing market. This is why while experts can give you the data on the current market – it’s always subject to change. The decisions a borrower makes is their responsibility to adapt to. If you have any questions, contact me directly.

4 Apr

When Death Strikes Suddenly

General

Posted by: Sarah Boudreau

By David Cooke AMP Dominion Lending Centres

Recently I was finishing up a mortgage with a young couple who had just had a beautiful baby girl. I brought up the topic of mortgage and life insurance as well as getting a will written up. The response from the husband was that it was such a morbid topic and a real downer when they were excited about their new home.

The fact is that people, even young people die from car accidents, cancer, and even accidental drownings while on vacation. It’s a topic everyone avoids but it needs to be addressed, particularly when you are taking a major financial step like buying a home. What would happen to your spouse if you died suddenly with your mortgage not paid off?

I spoke to a major Canadian mortgage company about this topic.
I asked if the surviving spouse would be kicked out of the house. “ When someone dies who was on our mortgage we want to know right away . We ask for a copy of the death certificate so that we can take them off title. We will let the mortgage run it’s term if payments are being made on time. Many surviving spouses receive a life insurance policy and can pay off the mortgage or at least keep up the payments. We will renew the mortgage if payments are up to date. However, should the surviving spouse want to refinance the mortgage they would have to re-qualify for it.”

So what can you do to make life easier for your family should you die with a mortgage on your home? The easiest option is to have sufficient life insurance to ensure that they can keep up payments or to pay off the mortgage. Dominion Lending Centres mortgage professionals all offer MPP (Mortgage Protection Plan), a life insurance policy that pays off the mortgage in full in case of the death of the policy holder. The payments never go up because the mortgage balance is going down as the insured person gets older.

Another option is term insurance or whole life insurance. Speak to your favourite insurance broker about this.
Finally, if the surviving spouse is 55 or older, and they can’t afford to maintain the mortgage, a reverse mortgage may be the solution. No payments are made on the principal unless you decide you want to. When the widow(er) moves out the sale of the home pays off the mortgage and interest.

While it can be a “downer” to talk about death and disability, a responsible home purchaser needs to have the conversation with their Dominion Lending Centres mortgage professional at the time of their purchase, refinance or renewal. The sudden death of a family member causes enough grief for the survivors, why add to their misery. As the old commercial used to say “Why wait for spring, do it now”.

28 Mar

The #1 Misconception About Mortgage Financing

General

Posted by: Sarah Boudreau

By Chris Cabel – Dominion Lending Centres – AMP

 

It is a reoccurring but common misconception that you will qualify for a mortgage in the future because you have qualified for a mortgage in the past.

This is not accurate!

Do. Not. Assume. Anything.

Even if your financial situation has remained the same or has improved, securing mortgage financing is more difficult now than it has in recent years.
The latest changes to mortgage qualification by the federal government has left Canadians qualifying 20-25% less. On top of that, guidelines that lenders would use in determining your suitability have been replaced with non-negotiable rules and declarations.

As mortgage professionals, we keep up to date with the latest trends going on in the mortgage world by understanding lender products and staying attentive to evolving changes.

From experience, we can tell you that having a plan is crucial to a successful mortgage application. Making assumptions about your qualification or just “winging it” is a recipe for disaster. Here are a few points on why a mortgage broker is a must for the first time home-buyer.

1. We have access to over 40 different lenders, not just one
2. We work for you, not for the lender
3. We will guide you through the application process
4. We save you valuable time by shopping for you
5. We pull your credit once — if you go to multiple banks, you will have multiple credit pulls

If you are thinking about buying a property, please feel free to contact me and I can help you devise a full-proof plan!

21 Mar

NUTS & BOLTS OF THE FEDERAL 2019 BUDGET | WHAT YOU REALLY NEED TO KNOW!

General

Posted by: Sarah Boudreau

By Geoff Lee – Dominion Lending Centres, AMP

On March 19, the Federal Government announced the official 2019 budget. One major topic on the discussion table (and one we were all holding our breath for) was the discussion of affordable housing in Canada. So just what happened on “Budget Day?” Here are the highlights of the 2019 Federal Budget:

MORTGAGE INDUSTRY RELATED:

CMHC First Time Home Buyers Incentive Plan

-This would give first time home buyers the ability to share the cost of buying a home with CMHC
-For existing homes – the incentive would provide up to 5% (funding/equity sharing) of the PURCHASE PRICE
-For newly constructed homes the incentive would provide up to 10% (funding/equity sharing) of the PURCHASE PRICE
-Funding/Equity sharing means that CMHC would cover a percentage of the purchase price

Example:

  • 400K purchase price, 5% down payment (20K), AND 5% CHMC shared equity mortgage (20K), the size of the insured mortgage would be reduced from 380K down to 360K, which would lower the monthly payment amount for the first time home buyer

To qualify for the program:

  • 120K max household income
  • Cannot borrow more than 4x their annual household income – making max purchase price approx. 505K
  • 100k household income would mean max 400K mortgage in order to use this program.

HOME BUYERS PLAN RRSP INCREASE

An increase of the previous $25,000 for RRSP withdrawal amount through the Home Buyers Plan to $35,000
These were the only two key changes that came out of the Federal Budget (so far). It provides minimal assistance for First Time Home Buyers, especially in a market like Vancouver and the Fraser Valley, who have home prices well above the 505k purchase price limit. However, it could provide assistance to those looking to purchase condos or townhomes ore in more rural areas. One area that will remain the same for the mortgage industry is the continued B-20 stress testing measures (which have recently come under fire)

The predicted start time is Fall 2019 for these guidelines. We will keep you updated on any new additions or changes as the information becomes available. If you have any mortgage related questions, contact me anytime.

21 Feb

Tax Rebates for Homeowners

General

Posted by: Sarah Boudreau

By David Cook AMP

Dominion Lending Centres Jencor Mortgage.

 

It’s getting to be that time of year when we are collecting our tax receipts to file taxes and hopefully get a nice cheque back from CRA:

 

1st Time Homebuyer’s Tax Credit
If you purchases a home in 2018 don’t forget to apply for the $5,000 tax credit. This could result in up to $750 in cash back in your pocket. In order to qualify you must have purchased a home in 2018. It must be registered in your name or your spouse’s. You and your spouse can not have owned a home in the previous four years. What that means is if you owned a home 5 or 6 years ago you would qualify as a first time homebuyer because of the amount of time you had been renting and not a homeowner. Homes include mobile homes, modular and floating homes.

GST/HST New Housing Rebate
This rebate is for people who built a home during 2018 and they can apply for a tax rebate. However, they can also qualify if they owned a home and did major renovations such as adding an addition to a home.
Granny Suites – you may also qualify for this rebate if you converted a non-residential building into a residential property. That means that if you turned your garage or barn into a granny suite for you or a family member you can claim the rebate.
Co-op Shares – if you purchased shares in a housing co-op for you or a relation to live in as your primary residence , the rebate can also be claimed.

Land Transfer Tax Rebate
If you live in Ontario, B.C. or PEI you also may qualify for a fist time homebuyers rebate on the land transfer tax and for the city of Toronto you can apply for a $3,725 municipal land transfer tax rebate. Put it all together and there’s a lot of money available for first time homebuyers if they know they qualify. Be sure to check with your Dominion Lending Centres mortgage professional to see if you do qualify.

31 Jan

RRSP Season Is Upon Us

General

Posted by: Sarah Boudreau

It is RRSP Season!

RRSP season is upon us. We have an opportunity for First Time Homebuyers to obtain a down payment of up to $25,000 to help with a home purchase this Spring.

How does it work?

We can assist clients in setting up a loan for the purchase of an RRSP at the time we begin the pre-approval process. The borrowed funds are placed into an RRSP account and can then be withdrawn after 90 days to be used for a down payment under the Canadian First Time Homebuyer’s Plan. The rate, term, and repayment of the loan are determined by the issuing lender on a case-by-case basis.

This can be a fantastic opportunity for someone to get into the market this spring, even if they don’t have their down payment set up yet.

What is the catch?

Clients MUST have great credit to qualify for this program and they must be able to afford the monthly loan repayment, along with the usual mortgage qualifying criteria.

Bonus:

Many clients who take advantage of this program also end up with a healthy tax rebate when they file their taxes.

The RRSP deadline is February 28th. Please contact me for more details about this program or with any other questions you might have.

 

17 Jan

A Shifting Market…. Again

General

Posted by: Sarah Boudreau

The recent data sure has changed the tone of rates in the coming months.

The prime rate – what variable rates are based on, while a few short weeks ago was expected to rise three times in the next 18 months now with the data on the slowing of the market and uncertainty in projects moving forward as expected, there are signs increases could be delayed until next spring.

The bond market– what fixed rates are based on, has dropped, which means rates (after the banks have hung on as much as possible ) should come down slightly.

What does his mean for borrowers? Let’s break it down per segment:
1. Homebuyers – more affordability due to the recent dip in prices – pending price category anywhere from 10-30%. Remember, working with an unbiased mortgage professional we do a full look back upon closing to ensure the lowest cost of borrowing.
2. Home sellers – price sharp if you want to sell or else no point in being on the market.
3. Renewals – rejoice – payment shock shall be reduced upon renewal.
4. Those carrying debt outside of a mortgage ex: credit cards, car payments, lines of credit – now is your time to see how much money moving that debt into a new restructured mortgage will improve your cash flow. It’s the most effective strategy for protecting your credit.

The market is always changing, yesterday’s news is exactly that. Aligning yourself with frontline experts will help you with clarity in the ever-changing market. While experts can give you the data on the current market – it’s always subject to change, and I will always do my best to keep you informed.

Original article posted by:
ANGELA CALLA
Dominion Lending Centres – Accredited Mortgage Professional
Angela is part of DLC Angela Calla Mortgage Team based in Port Coquitlam, BC.

22 Nov

Why You Should Buy Now

General

Posted by: Sarah Boudreau

Why you should consider buying now and getting ahead of the market correction:

Rates are going up. Fast. Why?

5 year fixed rates are up about 1.25% since last year this time.

The Federal Government. They have taken steps in attempt to regulate our housing market in the last few years. Toronto and Vancouver housing markets have grown beyond economic norms due to a variety of factors. The government began its steps to manage this by implementing new mortgage guidelines and rules nation-wide. Many of these are direct to the consumer, such as the benchmark qualifying rules, restrictions on rental and investment mortgages, and foreign investor restrictions/taxes. In addition, there have been new rules that are indirect to the consumer, and unfortunately not as publicized. Intense OSFI regulations have affected all lenders, including the major banks, monoline lenders, trust companies, credit unions and private lenders. Perhaps most notable, is the drastically increased capital reserve requirements for mortgage lenders. The government mandated a 3 year time window for mortgage lenders to fund these capital reserve requirements. Much of this is being funded by increased mortgage rates for the consumer. In addition, there have been regulations implemented regarding back-end insurance for conventional borrowers. The cost for this is also funded by the consumer in the form of higher interest rates.

Canadian Bond Yields. Bond yields determine the discounted 5 year fixed rate. They have been trending upwards, especially in the last 18 months.

US Economics. (Aside from social political views of course) the Trump administration has grown the US economy, and they are incurring the longest expansion in US history. Basic economics will tell us that a recession is due soon. When that occurs, it will likely drive our interest rates downward. Timing for this is difficult to predict, and I am by no means an economist.

Most Canadian Economists predict that 5 year fixed rates will rise another 0.5% by this spring, and another 0.50% through 2019. Mortgage holders and prospective buyers should expect rates to be around 5% in the next 2 years, at which point we predict a further stagnation in the market and then rates dropping again.

Why Should I buy now, with all off this market correction business going on? I’m waiting for prices to drop.

Now is an opportunity to get ahead of the housing market with a 5 year fixed rate.
For example:

If monthly payment is your concern:

• Buy a home at $400,000 today with 5% down @ 3.69% and your payment will be $2012.96
• If you wait for a year, and rates are 4.69% and you want to have that same payment, you’ll have to buy a house for $361,000. You would be looking at a monthly payment of $2229.26 on a $400,000 purchase
• This is a huge range in the Calgary market. Depending on the area you’re looking at, this can be the difference between condo or freehold, or attached or detached. Housing prices are not going to drop that quickly, these things take time. Also, if you work with us on a pre-approval, we can hold your rate for 120 days while you shop.

If longer term interest savings is your concern:

• Buy a home today at $400,00 with 5% down. 3.69% and monthly payment at $2012.96
• After 5 years your principle paydown will be $53,045.00
• Buy a home next year at $400,000 with 5% down. 4.69% and monthly payment at $2229.26
• After 5 years your principle paydown less payment differential will be: $34,168.00
That’s $18,877.00

If qualifying is your concern:

• If your annual household income is $92,000 today, you would qualify for the above loan scenario ($400,000 with 5% down) assuming you have good credit and do not have excessive loans/debts.
• If rates are 1% higher next year, with 5% down, you would only qualify to buy at $366,000.

Whatever your scenario may be, you can feel free to call me for mortgage advice.