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The number one question for any potential homebuyer or someone new to the mortgage process is “what does this process entail?”. The following is a simple outline to give you an idea of the process and help you understand what to expect as you embark on your home buying journey!

STEP 1 – BE PREPARED

Having the following information on hand before meeting with your mortgage professional will help them determine what you qualify for and help them determine the best mortgage product for you:

• Contact information for your employer and your employment history
• Proof of address and your address history
• Government-issued photo ID with your current address
• Proof of income for your mortgage application
• Down payment proof (amount and source)
• Savings and investments proof
• Details of current debts and other financial obligations

STEP 2 – GET PRE-APPROVED

One of the best things any potential homeowner can do when starting the home buying process is to get pre-approved. Mortgage pre-approval requires submission and verification of your financial history and can help you determine your price range, understand the monthly mortgage payment associated with that price range and provide the mortgage rate for your first term.

It is important to note that pre-approval does not mean that a lender has fully reviewed your documentation and you may still need the approval of a mortgage insurer. However, it does have a lot of benefits that can give you a “leg-up” in your search!

BENEFITS OF PRE-APPROVAL

Getting pre-approved not only makes the search easier by helping to determine your price range and budget, but pre-approval also guarantees the interest rate for 90-120 days while you search for that perfect home. Plus, the rate will automatically be adjusted down with any market reductions. Another benefit to pre-approval is that, when it comes time to purchase, pre-approval lets the seller know that securing financing should not be an issue. This is extremely beneficial in competitive markets where lots of offers may be coming in.

Quick Tip: Being entirely candid with your home-buying team throughout the process will be vital! Hidden debt or buying a big-ticket item during your 90-120 day pre-approval can change the amount you are able to borrow. It is best to refrain from any major purchases (such as a new car) or life changes (such as changing jobs) until after closing and you have the keys to your new home!

STEP 3 – HIRE A REALTOR

In today’s competitive real estate market, it can be very difficult to acquire property WITHOUT the help of a realtor. One of the reasons realtors are integral to the home buying process is that they can provide access to properties that never even make it to the MLS website. Realtors also gain access to information about homes that may come onto the market before a listing is even signed.

Most importantly though, a realtor understands the ins-and-outs of the home buying process and can tell you how to be successful in your endeavors to purchase a home by guiding you through the process from the first viewing to having your bid accepted.

STEP 4 – SHOP THE MARKET & MAKE AN OFFER

Once you have found the property that meets your needs, you’ll put in an offer that’ll be accepted or countered. This may go back and forth until you reach an acceptable price with the vendor.

STEP 5 – OFFER IS ACCEPTED

Once your offer is accepted with the condition of financing, you will need to do a few things to finalize the sale:

• Ask for a realtor intro between your mortgage professional and realtor.
• An appraisal may be required, which will be determined and arranged by your mortgage professional.
• Send in any remaining documents required for financing (income confirmation, down payment confirmation, etc).
• Arrange a home inspection.
• Receive the lender’s approval on property and final approval letter.

STEP 6 – REMOVE CONDITIONS

At this point, your financing is in place and you’re ready to proceed with the purchase of the property.

STEP 7 – LAWYER’S OFFICE

You’ll be asked to provide any money that’s to be used as your down payment, which is not already on deposit with your realtor. Typically, you’ll go in 1-2 days prior to the completion date.

Before you start on your home buying journey, be sure to take advantage of the expert advice that Jencor Mortgage Professionals can offer. As experts in mortgages, brokers can help walk you through the process and find you the best mortgage product to suit your unique needs! The best part? It won’t cost you a penny! Mortgage professionals are paid out by the lender when they register a new contract. Therefore, all that matters is finding YOU, the client, the best possible mortgage.

As always, feel free to call me with questions.

Sarah

Courtesy of the DLC Marketing Team

A mortgage pre-approval should be your first step when you are considering purchasing a home, whether it is your first home or fiftieth. A Jencor Mortgage Advisor will be happy assist you with this so that you are prepared when the right home comes along. With a pre-approval, you will:

• Know your Budget: Determining what you can afford and qualify to pay on a monthly basis will help determine the price point of homes you should be looking at.
• Have your Paperwork in Order: We will collect and review the bulk of the paperwork that the lenders will require from you up front, so that there are no big surprises later.
• Hold an Interest Rate: In most cases we can hold a ceiling interest rate for up to 120 days. That gives you 4 months to shop for a home with no worry about rates going up.

Feel free to reach out to me directly with any questions or to get started on the process.

Sarah

1. Management of the Paperwork and the Fine Print:

As the saying goes, “The devil is in the details”. Real Estate transactions are document heavy. They involve contracts, disclosures, waivers and more initials and signatures than you care to imagine. Let a Realtor tackle the paperwork for you. They are familiar with the documentation and terms used which can be an enormous help and can also save you from costly mistakes as a buyer or seller. Realtors have extensive knowledge on how to write up offers with conditions and terms to protect and benefit their clients based on their needs. They are also better equipped to help advise a client on if/when any conditions can be lifted.

2. Pricing Expertise:

Realtors have access to the data, education, tools, and experience needed to best advise on home values for both sellers and buyers. Many will even have niche markets in which they are considered experts, specializing in things like acreages, condos, or luxury homes.  They look at market trends, comparable pricing, housing market conditions and how different neighborhoods hold value when advising their clients. This information is crucial when making an informed decision on either selling or purchasing a home and for achieving successful results.

3. Negotiating Skills:

A good realtor is always a savvy negotiator. When we think of a good negotiator, the first thing we often think about is pricing: Getting a good “deal” on a sale price versus list price. Along with pricing, a realtor will also be well equipped to negotiate and leverage various terms, conditions, and timelines, so you can be sure you have addressed all the variables and are truly getting the best value, not just the best sale price.

4. Industry Network:

It takes a team of qualified professionals to ensure a real estate transaction goes smoothly. Realtors have an arsenal of reputable contacts in their back pockets to help with all aspects of a purchase or sale. Lawyers, Mortgage Professionals, Home Inspectors, Contractors, Home Stagers, Landscapers, Cleaners and Movers. I guarantee your realtor has someone they recommend with a history and track record of excellent service. Why gamble on a google search?

5. Professional Advocacy and Ethics:

Realtors must adhere to the Canadian Real Estate Association’s (CREA) rules, regulations, and strict code of ethics. They are educated professionals and it is their duty to offer honest and ethical advice. There are serious repercussions should a realtor act in a way that is deemed unethical. They are legally bound to work in your best interest.

Most of us only purchase a few properties in a lifetime and this may be your largest investment. Working with a seasoned professional who facilitates hundreds of transactions and has industry education and experience only makes sense.

As always, let me know if you have any questions or need some advice!

Sarah

PS: Many thanks to my colleague, Cory Lewis, for the original idea and much of the information in this blog!

Many people who have been renting are beginning to see more and more advantages in becoming a homeowner, in part due to the extremely low mortgage interest rate environment we are currently in. In many cases, the cost of a mortgage payment and property taxes is less than their current rent cost, on a monthly basis. Adding in the consideration of the aggressive principle paydown due to low rates, it can make a lot of financial sense to buy rather than rent. One of the main hurdles first time homebuyers face is saving up a down payment. It can be difficult to save up even the minimum 5% down payment, especially for young people just entering the workforce. For those with little to moderate savings, leveraging RRSPs can be a solution. Proper planning with RRSP contributions, and/or RRSP loans can help create a down payment fund. I utilized an RRSP loan myself for the purchase of my first home many years ago.

At Jencor, we have established a program for First Time Homebuyers to obtain a down payment of up to $35,000 to help with a home purchase this Spring through RRSPs.

How does it work?

We can assist clients in either transferring their savings to an RRSP account or setting up a loan for the purchase of RRSP funds. We will do this at the time we begin the pre-approval process. The 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 an RRSP loan are determined by the issuing lender on a case-by-case basis.

What is the catch?

Clients taking on an RRSP loan 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, as an RRSP purchase will reduce your gross taxable income. For example: An individual who purchases $10,000 in RRSPs (through cash or loan) might receive an additional $3000 in tax rebate from Revenue Canada. Those funds may be used to pay down the loan or directly towards a home down payment (***I am not an accountant, this is a general estimate based on an average applicant’s income, please contact your accountant for exact figures.***)

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

The RRSP deadline is March 1^st. 2021. Please contact me for more details about this program or with any other questions you might have.

It is that time of year again- many of us are thinking about purchasing a second home, for one reason or another. You may be dreaming about owning a lake front cottage or a condominium in one of your favorite local holiday spots. Others have children heading off to University in the fall – and those tuition and residence fees are adding up fast!

As a qualified buyer, you may purchase a second home as a recreational property for yourself or as a home for an immediate family member (university student child, elderly parent etc) with as little as a 5% down payment.

These types of properties are considered ‘owner occupied’ by the lender and insurance companies. As such, the mortgages are subject to standard insurance premiums, minimum down payment requirements, and the very best rates on the market.  On the down side, because any future potential rental income cannot be included in the application process for qualifying purposes, applicants must be strong financially and have unblemished credit. Properties valued over $1 Million will not be default insurable and require a larger down payment.

Second homes for a family member are most commonly properties purchased for children, perhaps while in university.  Some other families will purchase a second home for one spouse to live in while away from the primary residence for work or personal reasons. It is also a common program for purchasing a home for a senior parent who may be retired on minimal pension income and unable to secure a mortgage.

For a vacation or recreational property, there must be reasonable security for the mortgage lender. The property must be located in Canada and this program cannot be used for time shares or in a complex with rental pools. If the property is not fully serviced, winterized, or does not offer year round access, larger down payment requirements will apply. Bare or vacant land will also be looked at much differently, and these loans come with higher rates and down payment requirements.

If you don’t quite qualify on your own for a second home, you may consider co -purchasing with friends or family. For example, siblings can pitch in together to buy a home for mom and dad with 5% down.  Good friends can pool their resources to purchase a property with 5% down for their kids who attend University together to save on residence fees.  These are just some of the many possible scenarios that would apply to this program.

As always, do not hesitate to call or email me with any questions or concerns, and I am always grateful whenever you recommend me to your family and friends.

Sarah

PS: Many thanks to my wonderfully smart and talented colleague, Cory Lewis, for the original idea and many materials in this blog!

Divorce can be a very difficult time, and the changes to the mortgage rules over the last few years have made it even more difficult.

Most often, we see that one spouse will want to remain in the home and will need to buy the other out of the remaining equity.

In an amicable and/or settled situation, a Marital home buyout can traditionally be done one of two ways:

#1. Standard Refinance.

This can be a great solution; however, a standard refinance is limited to 80% of the value of the home. This leaves 20% of the equity inaccessible without a sale. The spouse that intends to keep the property will need to qualify for the mortgage and any other liabilities on their own.

#2. Insured Marital Home Buyout.

This works as a type of refinance, but is structured as a purchase, wherein one spouse purchases the home from the other. In the event there is less than 20% equity in these mortgages can be insured through CMHC, Genworth or Canada Guarantee (subject to regular insurance premiums or premium top-ups) and they can be done up to 95% of the value of the property, as per insurer guidelines and subject to sliding scale on properties valued over $500,000. Each insurer has slightly different program requirements, so depending on the needs of the client, we will match them accordingly. For example, CMHC will allow the equity in the home to be used only to cover the exact payout to the ex-spouse. Genworth and CG will allow funds advanced to include other marital debts to be paid out, provided they are specified in the separation agreement.

Documentation Requirements for Both of These Options:

At the time of mortgage approval, in addition to income verification and other standard conditions, lenders will require the following:

• Divorce/Separation Agreement. Lenders will not finalize a mortgage approval until there is a legal agreement in place outlining the split of assets. This protects both the lender and the client as a soon to be ex-spouse could make a claim against any assets in your name.
• Proof of Support Payments. If there are child or spousal support payments and these are needed as income for the buyer to qualify, further documentation will be required. The payment amounts should be specified in the Separation/Divorce Agreement and lenders will require a minimum of 3 months’ worth of bank statements showing the support payments are being made/received consistently on the same day each month and for the same amount.
• An Offer to Purchase between the two spouses for the subject property (in the case of spousal buyout)
• An Appraisal will be required in the case of a spousal buyout. As this transaction is not an Arm’s Length Transaction the lender or insurer will order an appraisal to be completed on the property to confirm market value.

We now have a 3^rd option, as we know many clients need access to their equity in order to fund their legal fees and cost of living BEFORE the separation details are agreed upon. The separation process can be lengthy, painful, and expensive. Often funds for day to day living expenses, monthly debt liabilities, and legal fees are tied up in the process. We have access to private lenders that understand the complexities of the separation process. If your client needs access to funds, even if a Lis Pendens has been issued, we can help.

If you think that I may be able to help you and your client, feel free to call or email me any time for more details.

What is the Cost of a 6-month mortgage payment deferral?

We will assume the deferral occurs in the first 6 months of the new mortgage, which is unlikely to happen but provides the most expensive case scenario. We will use the method used by most Credit Unions, and by TD Bank and others, whereby the bank will re-set you payment at the end of your current term, to have you pay back the accrued interest over the remaining entire amortization of the mortgage.  This keeps the amortization period unchanged from its original  length. This method is the most generous for your cash-flow, and is also the most expensive possible method.

• A $100,000 mortgage at 3.00% interest with a 25 year amortization would have a monthly payment of $473.25. We will assume it is on a 5-year term.
• If a client defers a $100,000 mortgage at 3% interest for 6 months you would accrue $1,500.00 in interest.  The interest each month for those 6 months is on a static balance rather than on a declining balance, so this amount is slightly higher than the $1,490.70 in interest you would pay if the payments were not deferred.
• Once the 5-year term ends, and the mortgage renews the balance owing is higher by the accrued interest, plus interest on that accrued interest, plus the principal not paid and the interest on the principal not paid. All of that adds up to $3,266.87. You would have not made 6 payments totaling $2,839.50.
• So upon renewal the balance owing would be $88,741.17 instead of the $85,474.30 it would have been without a deferral.
• Therefore the total cost of the deferral at the end of the 5-year term would be $427.37.  So the total cost of a 6-month deferral after 5 years is equal to 90% of one monthly payment.
• This assumes you pay all of that deferred money back on your mortgage at the end of that term. If you don’t then the cost will increase over time. Let’s look at that next.
• Assuming the new interest rate at renewal was unchanged at 3.00%, and renewing with a 20-year amortization, your new monthly payment would be $491.33 instead of $473.24, a difference of $18.09 per month.
• If you renewed again and again at the same interest rate until the mortgage was paid off you would have paid a total of $45,059.69 instead of $41,972.92, for a total cost of $3,086.77

TAKEAWAYS AND SUGGESTIONS:

• Taking a payment deferral on any debt is a defensive and protective move taken at a time of great uncertainty. You may need that money during this challenging economic time or you may not, but you won’t have it if you don’t take the deferrals available to you. And you likely don’t currently know if you will need it or not. If you know you will not need it, then why take it.
• If you take a 6-month deferral and you put that money into a separate bank account and spend of it only what you must, and then when the dust settles you pay what is left in that account directly on that mortgage you will reduce the long-term cost of the deferral.
• Or, if when the dust settles you decide it is more important to reduce your overall monthly debt payments by the highest possible amount, then take that remaining money and pay down the debt that would reduce your monthly payments by the largest amount, or the debt with the highest interest rate.
• It’s your money. Use it in the way that best serves you.

The following information is taken from a Money Coaches Canada article

Should I Defer my Mortgage Payments?

According to Vancouver based mortgage broker Marci Dean, each lender has created a policy around the deferral program. In some cases, the lenders default to a 6-month deferral and it’s up to the borrower to call/email to stop the deferral. For other lenders, it is month to month. In that case, borrowers will login or email their request to skip payment the following month.

Again, depending on the lender, interest will either be added to payments after the deferral or it will be added to the mortgage balance at the end of the term which will result in larger payments later.

Here are a few examples from bank lenders:

TD: Payments will be adjusted automatically at the start of your next term or, if you change anything else before renewal, at that time, to ensure your mortgage is paid off at the end of your original amortization period.

Scotiabank: A mortgage payment deferral means that payments are skipped for up to 6 months, during which interest is accrued to the outstanding balance of the mortgage. The amount is incorporated into the monthly payment when mortgage payments resume at the end of the deferral period.

CIBC: The interest that accrues during the deferral period will be added to the principal balance of your mortgage to provide you with immediate payment relief while experiencing temporary hardships. As a result, once payments resume, you will continue to pay interest on the principal, and your payments may increase after the deferral period.

I hope this information helps you in your decision-making and actions on your mortgage(s).  Do not hesitate to call or email me for further advice.

The Federal Government announced on March 18, 2020 that it would provide increased flexibility to lenders to defer mortgage payments. Then the big-6 banks announced they would be allowing up to 6 months of mortgage payment deferrals to assist those impacted by COVID-19.  The Monoline lenders followed suit.  Since then they have all been doing as best they can to accommodate the massive volume of calls and emails, while implementing new processes and procedures almost daily to help handle these inquiries.  Lenders are updating us daily/hourly as to what the best course of actions is, and I encourage you to contact your Mortgage Advisor for current advice.

Essential Services –Bankers, Mortgage Brokerages, Realtors and other Financial service providers have been declared essential services in Alberta. So we’re not going anywhere and will continue to be there to help you through this.

Banks are offering COVID-19 Relief on Auto & Personal Loans, Credit Cards, Credit Lines

Student Loans can be also be deferred. They are either Federal or Provincial, so check those programs.

Important note – a payment deferral is not a forgiveness of the amount owed.  It means the payments are deferred to a later time, when we will have to pay them back, with a cost of interest charges on the interest deferred (aka interest on interest).

Credit Union customers – access to a variety of programs and solutions designed to ease difficulties with loan payments and short-term cash flow. Check with your Credit Union.

Here is what we have learned so far:

• Many People are still under the impression that the Government is offering mortgage payment forgiveness or compensations of some kind. This is not the case. Effectively, the deferred interest is capitalized (added) into the mortgage balance owing.
• Banks are prioritizing clients based on need and next mortgage payment date.
• Regardless of how urgent your situation is, it is going to take time to get a response. It can be frustrating to wait on hold, or wait for an email response, but please contact them before you miss a payment, as to not damage your credit.
• NEVER EVER be late for or miss a mortgage payment.  Do whatever you have to do.  Pay with your credit card.  Borrow from family.  Anything.
• I have heard from a few clients who have received 6 months of deferred payments with no questions asked.
• Understand this is not always the case.  You may be asked about your employment status and other reasons you have for requesting deferral. Some lenders will ask about your net worth status and liquid assets available. (If you do your regular banking with the same lender that holds your mortgage, they can likely assess this internally).
• Things like whether or not your mortgage is default insured aka (CMHC), collaterally charged (has a HELOC on it), the loan-to-value ratio, and if you have been set up on accelerated payments or applied any lump sum payments in the past will be considered.
• Each lender has their own criteria for deciding what criteria they will use in making mortgage deferral decisions.  In my own experience with three lenders so far, and based on many of my clients experiences, the consensus so far seems to be that often the best results are received when speaking directly with a bank representative.  Not always, but most often. So in my opinion it is best to be willing to be on hold for an hour and maybe more, to achieve your desired outcome.
• Note- if you are a denied a deferral, try again via the same method or the other methods your lender offers (phone, website application or email).  There is still not full consistency within each lender on what is granted and what is denied from day to day and person to person.
• Some clients are offered a 1-month or a 3-month deferral only and encouraged to re-apply with new status going forward. * PS to Alberta residents * We have had clients in the oil and gas industry report they were asked by the lenders if their layoff was directly due to COVID-19, or other factors. GREAT QUESTION.  I believe the answer may be related to the apparent other challenges within the O&G industry and some lenders being sensitive to this as an area of risk to address.
• Mortgage distress, like any kind of distress, is relative.  For some people, mortgage distress is due to worry about the coming disastrous economic effects of COVID-19 on their job or business.  For other people, mortgage distress is being suddenly laid off with no income and unable to pay their Mortgage on Tuesday.  All are valid concerns, however, some lenders are prioritizing and only dealing with those not able to pay their mortgage payment due within the next few days.  If you don’t have concern about missing your next payment, consider sending an email or filling out a form for a call back later.  I know waiting can be frustrating.  In these times, exercising a little patience and freeing up the phone lines could help your friends and neighbours keep their home.
• If you believe you have some equity in your home, you might be able to avoid all of this by speaking to your Mortgage Broker and setting yourself up to access equity for an affordable fallback.  You should do this before there are any negative changes to your income or home value.  I would suggest NOW is the time.  You may be able to refinance to draw out an emergency fund, set up a home equity credit line, a reverse mortgage, or even private financing to bridge the gap at this time.
• Self employed and commissioned workers: Some lenders will require “proof” that you’ve been laid off or your income has been impacted by COVID-19 in order to defer payments.  For many of you, that is something that you won’t be able to document for months. I encourage you to speak with your Mortgage Broker NOW to explore your financing options outside of or in addition to deferred mortgage payments.
• Questions to ask your bank when you speak with them about a deferral:
  • Ask your bank about the details of what their bank is offering.
  • Does the deferred pay-down get added into the payments to keep the amortization the same, or is the amortization lengthened to fit?
  • Some banks cap the deferred interest within the remaining term, some within the amortization. If within term then the lower the term the higher the new payment will be after the 6 months is up will be. If within the Amortization then generally the impact is less as the timeline is longer.

See the CMHC webpage on mortgage deferrals here

COVID-19: Understanding Mortgage Payment Deferral

What are the costs to you of a 6-month Mortgage Payment Deferral?

Read a separate blog post on that here

Here is an article by Money Coaches Canada

Should I Defer my Mortgage Payments?

I hope this information helps you in your decision-making and actions on your mortgage(s).  Do not hesitate to call or email me for further advice.

** And my sincere thanks to my good friend and Jencor Mortgage Advisor Garth Chapman for his contributions to the updated material in this post.**