What’s Next for your Home After a Separation?

Mortgage Tips Kim Stenberg 28 Oct

Growing up, most people dream about living a fairytale with a wonderful partner and a life of bliss. Unfortunately, real life is not always a fairytale and not every relationship lasts forever. In fact, latest statistics show that 38 percent of all marriages in Canada end in divorce.

Separating, whether through divorce or ending a common law relationship, is never an easy step. Losing someone close to you (whether for the better or not) is hard – but it doesn’t have to mean losing your home too. Most individuals who are going through a separation feel as though they are forced to sell their home and split the equity depending on your agreement, but there is another way.

spousal buy-outs

Spousal buy-outs are one of the mortgage industries best kept secrets and we want to blow the lid on this great alternative! While not everyone will want to remain in their home, many individuals may opt to remain rooted – especially for those with children who are already enrolled in school and happy in their neighborhood. This is where the Spousal Buy-Out Program comes in.

Backed by all three of Canada’s mortgage insurance providers (Canada Mortgage and Housing Corporation, Sagen™ and Canada Guaranty), this program is designed to allow one party to refinance the shared home up to 95% of its appraised value. In order to qualify, both you and your ex-partner must currently be on the deed to the property. As a one-time opportunity, the Spousal Buy-Out Program can also be used to pay off other debts outside the separation agreement, further assisting with the transition.

Now you may be thinking “I wish I could, but I can’t afford it”. Well, don’t sell yourself short just yet! We understand the cost of purchasing a home, whether outright or from your partner, can be high. Fortunately, The Spousal Buy-Out Program was designed to help YOU and mitigates these costs by allowing individuals to bring on a cosigner, such an existing family member or even a new partner, to assist.

If you are separating from your spouse or partner and would really like to hold onto your shared home, there are a few things you will need including:

1. AN APPRAISAL

An appraisal report will likely have been obtained to determine Equalization of Assets. However, in some cases the appraisal may not be acceptable to a lender unless it was originally ordered by a third party. The appraisal must also have been produced within 90 days (less with some lenders) to ensure accuracy. If the original report was previous to 90 days, a new one must be obtained (talk to your mortgage broker first).

2. A SIGNED SEPARATION AGREEMENT

To qualify the lender must be provided a signed copy of the separation agreement. The details of asset allocation must be clearly outlined.

3. AN AGREEMENT OF PURCHASE AND SALE

A standard agreement of sale indicating the new ownership.

4. AN EMPLOYMENT LETTER OR RECENT PAY STUB

This is required so the lender can verify your ability to manage your mortgage payments.

5. DEBT PAYOUT LIST

This is an optional one-time option for paying off additional debts outside of the separation agreement. The proceeds can only be used to buy out the other owner’s share of equity and/or to pay off joint debt as explicitly noted in the signed separation agreement.

Moving on in life can often be difficult, but this program allows you to maintain some of your routine and security by ensuring you – and your children – can remain in the home you love.

How do I know if I have Homeowner’s Title Insurance?

Mortgage Tips Kim Stenberg 27 Oct

Title insurance can cover potentially massive losses and completely turn around what would otherwise have been an awful situation. When unexpected issues come up, it’s important to make sure you’re protected—you might not have the policy you think you do.

There are two types of title insurance policies: lender policies and owner policies. The common confusion comes from the fact that they both often just go by “title insurance” in conversation. Their premiums have the same structure of a low one-time fee, and they offer slightly different coverage. But the main difference lies in who the policy protects, the lender or the owner—you.

Lender policies or loan policies have a shorter expected shelf life than homeowner policies. They’re tied to the loan itself, so if you refinance the mortgage with a different financial institution, you’ll need to factor in the cost of a new policy. Most lenders will require you to get a lender policy as a condition of securing your mortgage from them, and it does provide you with some benefits, like a faster, more affordable closing and some fraud protection. But the fact that so many lenders require it often leads to confusion for homeowners down the road.

If you consult the closing documents from your home purchase and see a title insurance item, it would be easy to think you’re fully covered. But you need to check that you have an owner’s policy as part of your closing documents as well, not just a loan policy. Even if you notice this issue long after closing, it still might not be too late to get yourself covered. As long as you get it before you learn of any title defects or other covered risks, an existing homeowner’s policy can help you get the level of coverage you need.

Note: a homeowner’s policy can protect you against certain known title defects on a case-by-case basis. You should consult your lawyer or notary to see if your known title defect can still benefit from coverage.

Homeowner’s title insurance policy: more protection for you and your title

A homeowner’s title insurance policy protects you and any heirs who might inherit your property. Owners may have one without even knowing it. When a friend, colleague or your legal advisor talks about title insurance, this is almost always the policy type they mean. Because you only pay the policy premium once—at a time when you’re tracking all the other moving parts of closing on your home—if you have a homeowner’s title insurance policy, it’s easy to forget. There’s no monthly premium to remind you of the policy, and it might be years from the purchase of your home before you need to make a claim.

Make sure you’re informed: Check that you have the protection you need!

It’s always a good idea to make sure you’ve verified your coverage. Here are three easy steps to know where you stand:

  1. Check your real estate closing documents from your lawyer or notary. Remember to verify the policy type, even if you see title insurance in the closing documents—it could just be the lender policy.
  2. Ask your real estate lawyer or notary. They would have been the one to actually order your homeowner policy if you got it at purchase, so they can find out directly from the insurance provider for you.
  3. Call us. If you are a policyholder, we’ll have your policy on file and will be able to send you a copy. Please call our customer service line at 1.877.888.1153 Monday to Friday between 8:00 a.m. and 8:00 p.m. EST.

If you find out you don’t have title insurance yet, it’s time to get more protection with an FCT existing homeowner policy.

Insurance by FCT Insurance Company Ltd. Services by First Canadian Title Company Limited. The services company does not provide insurance products. This material is intended to provide general information only. For specific coverage and exclusions, refer to the applicable policy. Copies are available upon request. Some products/services may vary by province. Prices and products/services offered are subject to change without notice.

Finding Your Financial Freedom

Mortgage Tips Kim Stenberg 14 Oct

Many Canadians will spend their entire lives without proper financial education. With the help of Enriched Academy, an online financial education platform, Our House Magazine has collected some insight and tips from experts on financial literacy to help Canadians achieve their dreams, from homeownership to a comfy retirement.

Money. It’s virtually impossible to get by in life without it, and everyone wants more of it. But many people struggle to manage their money and make it work for them. And all the stats are going in the wrong direction. More and more Canadians are struggling with debt and get by living paycheque-to-paycheque with no idea or strategy on how to turn it around.

Luckily there are many resources out there to help guide you in the right direction. How you use the information to form a strategy will determine your financial future. Jay Seabrook is the co-founder of Enriched Academy, an educational program dedicated to providing financial literacy and awareness to teens and adults.

He explained that most people don’t even get started on a healthy financial journey because of some basic money myths like, you need money to make money or it’s too complicated to understand.

Seabrook suggested there are two key metrics people need to be aware of: their net worth and how much is needed to save every month to reach financial freedom.

Net worth is a valuation of your assets minus your liabilities or what you own and subtracting what you owe. While a general rule of thumb is putting away 10 per cent of your pre-tax income a month, Seabrook suggested the number may not be enough to meet your financial goal. You’ll need to create a proper budget to determine that number you really need to put away to reach your goals.

He added by getting a handle on those two aspects and tracking them on a regular basis, chances of getting to financial freedom are dramatically higher.

Financial literacy is something deeply personal to the 42-year-old entrepreneur.

Like most people, Seabrook grew up with very little financial education. That reality hit home after college when he moved to Whistler, B.C. for work. While he was surrounded by some of the wealthiest people in the world, he couldn’t scrounge enough money for a ski pass – the purpose of moving to the resort community in the first place.

Seabrook didn’t turn his fortunes around until he met a mentor who showed him a path forward.

“Life is a buffet table of the things you can do, but I was on the bread and water part of the buffet table, and I have no idea how to get access to rest of it. It drove me crazy,” he told Our House Magazine. “I wanted this better life, but I didn’t know how to get it.”

By the mid-2000s, Seabrook got into the ground floor of an upstart mortgage company in Dominion Lending Centres. He eventually invested in the company and worked his way up to VP of operations. Along the way, he met his business partner and Enriched Co-founder Kevin Cochran, who was also finding success at DLC. The two entrepreneurs used their own personal experience and what they had learned over the years to create the educational platform. Enriched launched in 2011, and short time later Seabrook and Cochran got a break with a winning pitch to the Dragons’ Den that eventually grew to its current online education platform.

Now the two entrepreneurs are busy teaching the techniques and tools they’ve learned to a mass audience. Seabrook was quick to point out financial freedom won’t happen overnight, but it doesn’t take a lifetime to get there either.

“It’s actually a lot easier than people think,” he said, adding the “biggest hurdle for most people is suppressing the instant gratification of spending in the moment”.

“People spend their entire lives trying to make money, why? They want a nice lifestyle and get to a point where they can enjoy the best things in life, but if you don’t have a plan, you probably won’t get there. If you’re really serious about getting to a place where you make more money from passive income than all the hours you put in, you have to start learning it. If you get clear on some of your goals, you’ll get there.”

 

Published by DLC Marketing Team

10 Mortgage Mistakes

Mortgage Tips Kim Stenberg 16 Sep

10 Mortgage Mistakes.

Whether it is your first house or you’re moving to a new neighborhood, getting approved for a mortgage is exciting! However, even if you have been approved and are simply waiting to close, there are still some things to keep in mind to ensure your efforts are successful.

Many homeowners believe that if you have been approved for a mortgage, you are good to go. However, your lender or mortgage insurance provider will often run a final credit report before completion to ensure that nothing has changed. Changes in your credit usage and score could affect what you qualify for – or whether or not you get your mortgage at all.

To avoid having your mortgage approval status reversed or jeopardizing your financing, be sure to stay away from these 10 mortgage mistakes:

1. BEEFING UP YOUR APPLICATION

This is not a time to try and ‘beef up’ your financials; you must be honest on your mortgage application. This is especially true when seeking the advice of a mortgage professional, as their main goal is to assist you in your home buying journey. Providing accurate information surrounding your income, properties owned, debts, assets and your financial past is critical. If you have been through a foreclosure, bankruptcy or consumer proposal, disclose this right away as well. We are here to help!

2. GETTING PRE-APPROVED

With all the changes and qualifying requirements surrounding mortgages, it is a mistake to assume that you will be approved. Many things can influence whether or not you qualify for financing such as unknown changes to your credit report, mortgage product updates or rate changes. Getting pre-approved is the first step to ensuring you are on the right track and securing that mortgage! Most banks consider pre-approval to be valid for four months. So, even if you aren’t house-hunting tomorrow, getting pre-approved NOW will come in handy if a new home is in your near future.

3. SHOPPING AROUND

One of the biggest mistakes people make when signing for a mortgage is not shopping around. It is easy to simply sign up with your existing bank, but you could be paying thousands more than you need to, without even knowing it! This is where a mortgage broker can help! With access to hundreds of lenders and financial institutions, a mortgage professional can help you find a mortgage with the best rate and terms to suit YOUR needs.

4. NOT SAVING FOR A DOWN PAYMENT

Your down payment is a critical part of homeownership and a useful financial tool that you should utilize when purchasing a home. A down payment reduces the overall amount of financing you need and increases the amount of equity right from the start. Down payments also show the bank you are serious. In Canada, the minimum down payment is 5% (with mortgage insurance), with the recommended being 20% if possible.

5. CHANGING EMPLOYERS OR JOBS        

As employment is one of the most important factors that determines whether or not you qualify for financing, it is important not to change employers if you are in the middle of the approval process. Banks prefer to see a long tenure with your employer, as it indicates financial stability. It is best to wait for any major career changes until after your mortgage has been approved and you have the keys to your new home!

6. APPLYING OR CO-SIGNING FOR OTHER LOANS

Applying for additional loans or financing while you are currently in the midst of finalizing a mortgage contract can drastically affect what you qualify for – it can even jeopardize your credit rating! Save any big purchases, such as a new car, until after your mortgage has been finalized.

Also, just as applying for new loans can wreak havoc on a mortgage application, so can co-signing for other loans. Co-signing signifies that you can handle the full responsibility of the debt if the other individual defaults. As a result, this will show up on your credit report and can become a liability on your application, potentially lowering your borrowing power.

7. AVOIDING CREDIT MISSTEPS

As mortgage financing is contingent on your credit score and your current debt, it is important to keep these things healthy during the course of mortgage approval. Do not go over any limits on your cards or lines of credit, or miss any payment dates during the time your finances are being reviewed. This will affect whether or not the lender sees you as a responsible borrower.

Also, although you might think an application with less debt available to use would be something a bank would favor, credit scores actually increase the longer a card is open and in good standing. Having unused available credit and cards open for a long duration with a good history of repayment is a good thing! In fact, if you lower the level of your available credit (especially in the midst of an application) it could lower your credit score.

8. HAVING TOO MUCH DEBT

Credit card debt is on the rise and overuse of lines of credit can put you at risk for debt overload. Large purchases such as new truck or boat can push your total debt servicing ratio over the limit (how much you owe versus how much you make), making it impossible to receive financing. Some homeowners have so much consumer debt that they aren’t even able to refinance their home to consolidate that debt. Before you start considering a new home, make sure your current debt is under control.

9. LARGE DEPOSITS

Just as now is not the time for new loans, it is also not the time for large deposits or “mattress money” to come into your account. The bank requires a three-month history of all down payments and funds for the mortgage when purchasing property. Any deposits outside of your employment or pension income will need to be verified with a paper trail – such as a bill of sale for a vehicle, or income tax credit receipts. Unexplained deposits can delay your mortgage financing, or put it in jeopardy if they cannot be explained.

10. MARRYING INTO POOR CREDIT

Having the financial talk before getting hitched continues to be critical for your financial future. Your partner’s credit can affect your ability to get approved for a mortgage. If there are unexpected financial issues with your partner’s credit history, make sure to have a discussion with your mortgage broker before you start shopping for a new home.

If you are currently in the midst of a mortgage application, or are looking to start the process, don’t hesitate to reach out to a Dominion Lending Centres Mortgage Professional today to ensure that you do things the RIGHT way to succeed with your home purchase.

Published by DLC Marketing Team

Down Payment – Getting it right the first time

General Kim Stenberg 25 Feb

Down payment is an essential component of every application when purchasing property – minimum amount required AND verifying the source of the money.

The federal government has imposed strict rules (FINTRAC anti-money laundering and anti-terrorist financing regime) that ALL federally regulated banks and lending institutions must follow.  This legislation came into effect as an attempt to prevent unscrupulous individuals from using cash down payments when purchasing properties as an easy way to launder money.

Link to more info here: https://www.fintrac-canafe.gc.ca/fintrac-canafe/antimltf-eng

 

Most Common Down Payment Sources:

GIFT (from an immediate family member): if you are receiving any  portion of the down payment as a financial gift we will provide you with a gift letter to be signed by the individual(s) gifting the funds, as well as confirmation funds have been deposited to your account

SALE OF ANOTHER PROPERTY:  copy of the Sale Contract and Trust Ledger OR Statement of Adjustments & Disbursements (from your lawyer) to verify net sale proceeds

“OWN RESOURCES” if funds are coming from your chequing/savings account(s), Investments (RRSPs, TFSAs, mutual funds, stocks, bonds, etc.), or an accumulation of these accounts, we require a 90-day history (3 full months)

A common hesitation we hear from clients is about their bank statements, which obviously include a lot of personal details. We understand your concerns and have policies and procedures to make sure your privacy and personal information is protected.  On this note, we require unaltered bank statements; blacked out names, account numbers, or any other details are NOT acceptable and will be rejected by the lender.

TRANSFERRING FUNDS from one account to another; any large transfers or deposits will have to show a (90-day) history/source of where the money went and/or where it came from.

Large or unusual deposits need to be verified as an acceptable source for down payment:

  • Received a gift from an immediate family member? Easy, we’ll provide you with a gift letter to be signed by the individual who gave you the funds
  • Sold a vehicle? Easy, provide bill of sale
  • Tax refund from CRA?  Easy, provide Notice of Assessment confirming amount
  • Transfer from your TFSA to chequing account?  Easy, provide the 90-day history for the TFSA along with withdrawal
  • *CASH DEPOSITS* less than $1,000, fine, but cash deposits over $1,000 that you cannot provide confirmation for?  Lenders will ask for source of funds.  Money that is “under the mattress” could be a deal breaker.  Funds must be deposited into a Canadian account at least 90 days prior to you placing an offer on a property.  Please talk to us BEFORE making any deposits, we will guide you on how to handle this properly.

 

CONVENTIONAL vs HIGH RATIO MORTGAGE

If your down payment is LESS THAN 20% of the purchase price, your mortgage is considered a High Ratio / Insured. These mortgages require mortgage default insurance, and the insuring companies (CMHC, Genworth, or Canada Guaranty) charge an insurance premium which is added to and paid along with your mortgage.

If your down payment is 20% OR MORE of the purchase price, you will have a Conventional Mortgage, and mortgage default insurance is not required.

 

TRADITIONAL vs NON-TRADITIONAL DOWN PAYMENT

A traditional down payment comes from sources such as savings, RRSPs, the sale of a property, or a non-repayable financial gift from an immediate family member.

Planning on borrowing money from a friend, credit card, unsecured line of credit, or personal loan?  This is considered non-traditional down payment. Additional qualifying criteria applies, we need to know this up front.

 

RRSP / HOME BUYERS PLAN

Qualifying home buyers can withdraw up to $35,000 from their RRSPs to assist with the purchase of a home – tax-free and interest-free – as long as those funds are repaid into the RRSP over 15 years. If you do not repay the amount due for that year (i.e. $35,000 / 15 years = $2,333.33 per year), it will be added to your (taxable) income for that year.

If you buy a qualifying home together with your spouse or partner, each of you can withdraw up to $35,000. The funds are not required to be used only for the down payment, but for other purposes to assist in the purchase of a home.

 

FIRST-TIME HOME BUYER INCENTIVE PROGRAM

This program launched in September 2019 to help qualified first-time homebuyers reduce their monthly mortgage payments by offering additional 5% down payment for a purchase of a resale (existing) home or up to 10% additional down payment for purchase of a newly constructed home.  It is a shared-equity mortgage with the Government of Canada; the effect of the larger down payment is a smaller mortgage, and ultimately, lower monthly costs.  The homebuyer will have to repay the Incentive based on the property’s fair market value at the time of repayment – after 25 years OR when the property is sold, whichever comes first.  The government shares in both the upside and downside of the property value at time of repayment.

 

MONEY FROM OUTSIDE CANADA

Using funds from outside of Canada is acceptable, however, you need to have the money on deposit in a Canadian financial institution for at least 30 days before your closing/possession date.

 

CLOSING COSTS

In addition to your down payment, lenders want to see that you have additional funds available for closings costs; such items as land transfer tax*, legal fees, GST/HST-if required, property tax adjustments, and interest adjustments.  The general guideline for closing costs is 1.5% of the purchase price.

*We do not have land transfer taxes in Alberta and it is highly unlikely that your closing costs will actually be 1.5% of the purchase price.  But, keep in mind that this number is commonly used by lenders when accessing overall risk/fallback, and to approximate funds that they want to see, in addition to the down payment.

 

Please be upfront with your broker and discuss your down payment at the beginning – doing so will save everyone time and stress later in the process 😊

 

Purchase PLUS Improvements

Mortgage Tips Kim Stenberg 3 Jul

Great neighbourhood, amazing yard, love the floor plan …

You’ve found the PERFECT HOME!  Almost.

Maybe you want to update the kitchen, replace the windows, or finish the basement.

With Purchase Plus Improvements, customizing your dream home is simple and affordable.  Buy your new home and include the renovation costs in the mortgage with as little as 5% down.

 

  • Immediately increase your home’s property value
  • Include the renovation costs at a great interest rate
  • Complete the upgrades right away and live in the home you really want!

 

EXAMPLES

  • New flooring
  • Fresh paint
  • Updated kitchen
  • New siding, eaves or facia
  • Finish the basement
  • Build a new garage
  • New roof
  • Updated bathroom
  • New windows
  • New doors
  • More efficient furnace or central air system

 

THE PROCESS

STEP 1:  Once you find a house that you like, we get you an approval based on the accepted purchase price. From there, you’ll need to get quotes from licensed contractors for the renovations/improvements. Some lenders will allow you to do the work yourselves; quotes will be for materials only.

STEP 2:  We will then have your mortgage approval revised to include the cost of the renovations.   Add the amount of the quotes to the purchase price and this becomes the new “value” of the home; your down payment is now based on this amount.

 

STEP 3:  Take possession of your new home. On your possession date, the lender advances all money (including cash for improvements) to your lawyer; seller gets their portion for sale price, the additional funds for improvements are held in trust until all work is completed.

STEP 4:  Get started on your renovations; most lenders require the renovations/improvements to be completed within 120 days after taking possession.  After all the work has been completed, we order an inspection report from an appraiser to confirm.

STEP 5:  Lender instructs your lawyer to release the funds to you.

 

VOILA!  The renovation costs are built into your mortgage at a low interest rate, you’ve increased the value of your property, and you have the beautiful home you’ve dreamed of.

 

Contact me for more details!

The Property Flip

Mortgage Tips Kim Stenberg 13 Dec

Flipping properties can be a very lucrative business — if done correctly!
Many clients have the vision and come across great opportunities, but their main obstacle is often CASH — finding the funds to get started.

Typically when you are purchasing a property that you do not intend to occupy as your primary residence, you’ll need a minimum 20% down payment to proceed (based on the purchase price OR current appraised value of the home, whichever is lower). If your credit, income, or “debt ratios” don’t fit standard guidelines, there are more flexible lenders out there, but prepare to increase your down payment from 20% to 25-40%.

In addition to credit, income/employment, the property itself must also be in fairly good condition for a bank to provide financing.

If the property is a ‘fixer upper’, ‘handy man special’, ‘foreclosure’, ‘former grow-op’, ‘under construction’, ‘environmental factors’, etc etc etc, it WILL be an issue for the lender … BUT it’s usually in these situations that a buyer can snag a good deal for a flip!

Introducing, THE PROPERTY FLIP MORTGAGE, an exclusive financing solution that allows borrowers to leverage their real estate up to 80% of the AFTER-RENOVATED Property Value and get in with as little as $10,000 DOWN PAYMENT!

In other words, keep the rest of your capital for the renovation costs and then SELL for a profit OR refinance the renovated property (if the property will be kept as a rental).

This type of mortgage could also be used if you were looking to renovate your own property and then sell at a much higher price — you’ll be in a position to make much more on the sale of your property to help with your next purchase.

Here is an example to illustrate how these clients kept $50,000 in their pocket to complete a successful flip:

TYPICAL FINANCING:
Purchase Price: $300,000
Down Payment (20%): $60,000
Cost of Renovations: $30,000
Total OUT OF POCKET Expenses: $60,000 + $30,000 = $90,000 (plus carrying costs)
Improved Property Value $400,000

PROPERTY FLIP MORTGAGE:
Purchase Price: $300,000
Down Payment: $10,000 (leaving $50,000 in your pocket for the improvements!)
Cost of Renovations: $30,000
Total Out of Pocket Expenses: $40,000 (plus carrying costs)
Improved Property Value: $400,000

Our lender conducts their own in-house No Fee Valuation to save you money and take advantage of quick closings, plus their mortgage is OPEN (no payout penalties when the property sells). They also provide a fantastic flip analyzer spreadsheet which is designed to calculate and budget all the costs and variables in a flip to ensure the deal is profitable and to decide:
A) If based on a certain profit objective, what the maximum purchase price can be for the property, or
B) If it is profitable enough at a certain purchase price

Profitability is the first underwriting filter; will the borrower make money?
If the answer is YES and the deal makes sense, let’s get to work!

Give me a call find out more.

Kim Lindsay
Mortgage Broker
780-221-0132
kim@kimlindsay.ca

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