31 Jul

When do I give my downpayment?

General

Posted by: Joel Olson

It’s important to know that at no point will use or the lender ever have your downpayment funds.

We are required to verify where the funds will come from and that you have access to them.

However, your lawyer or notary will collect the funds. The amount that you paid as a deposit to your realtor (or in the case of a private sale- the lawyer) will be deducted from what is needed for your downpayment. Your deposit is never in addition to your downpayment.

Prior to coming in to sign, they will ask you to bring in the exact amount owing, which will be the remainder of your downpayment, closing costs, and legals fees.

You will be required to bring in an exact amount- to the penny. The amount will need to be brought in as a bank draft. It is important that you communicate with your lawyer to make sure that you know how much money to bring in and when to bring the funds.

28 Jul

What extra documents are needed for construction?

General

Posted by: Joel Olson

When doing a construction mortgage, there are several other documents that you will need to supply.

 

  • Blueprints/Plans- you must have plans for your house that you are building. The plans that you submit to us, must be the plans that have been approved by the city. They are also the plans that the appraiser will rely upon
  • Construction Contract- you must have a contract with the builder you are using outlining all costs, timelines, and terms he is wanting from you. Common issues with builder contracts are:
    • Cost Plus Contracts- this is where a builder has the ability to increase the cost as the project goes. There is really nothing more dangerous than this. A contractor will need to provide you with a Fixed Cost Contract- which means the price is fixed the same. However, you must be aware that if you change anything in the contract a contractor can change their price.
    • Builders Liens- the government requires 10% to held back of every draw. When a contractor puts in the contract that you are to ignore this- this is illegal. Here is a great article on how this can effect you: http://www.lawsonlundell.com/media/news/253_BCBuildersLienAct.pdf
    • Payment schedule. You will generally be given four different draws at quaretly stages. Unless, you have cash reserves in which to pay in the interim, a construction mortgage will not allow getting paid every two weeks or weekly. Payment are made on completion and not on time frame.
  • Detailed list of quotes and contractors building the house. The above contract should have it, but if you are self-building you will have to supply
  • Building Permit
  • Home Protection Office Registration- you must register and receive a certificate for this.
  • New Home Warranty- you must get this regardless of whether you are self-build or contractor-build
  • Site Survey
  • Cost of Construction Fire Insurance- you must get insurance PRIOR to building on the lot

 

Some of these documents cannot be supplied till after financing is approved, but all documents must be supplied prior to a second draw.

 

For a look at how construction works check out our video on it

http://www.showme.com/sh/?h=QFHycdc

22 Jul

Why do I need I need a job letter?

General

Posted by: Joel Olson

Almost all lenders require a job letter from your employment in order to approve your income. The only time this would not be needed is when you are self-employed. There are many reasons that this benefits you.

  1. Let’s face it, you could’ve had a sick day, had to go home early, or had some other reason that you missed a few hours on your paystub. Almost all lenders who don’t require a job letter average your two paystubs together. This means that without a job letter you would qualify for much less
  2. A great time to buy a home is when you feel stability in your income. This often happens upon getting a new job, or a raise on your current one. Your paystub or previous tax year will not reflect that, but it may be needed in order to qualify for your new mortgage. A job letter takes care of that.
  3. There are only a small amount of lenders (all banks) who don’t require a job letter, but the all the lenders do offer much better pricing. Rate is one thing, however every lender that does not require a job letter will charge more on terms like penalties, etc.

The truth is that most people don’t want to get a job letter, because they don’t want to bother their employer, yet every employer will have had to write one at some point for some employee. It is also possible, that you have heard that a letter was not ever required for a mortgage, this was pre- government regulation in the last several years that requires lenders to be much more strict.

10 Jul

Rates are NOT rising- well, not the way you think-UPDATED

General

Posted by: Joel Olson

UPDATE: The Bank of Canada has increased their overnight rate to .75% as of July 12, 2017.

Despite many articles predicting interest rates going up. They are not. Well, not in the way you think.

This week the Bank of Canada will meet, as they do several times over the year to determine if its necessary to increase the Bank of Canada Prime Rate.  They have not done so since 2010. Although, it is yet to be confirmed- there is a possibility that this could in fact be the time they do exactly that.

The prime rate effects every variable rate mortgage, line of credit, investment in Canada. This alone is one of the major reasons that this decision is made with extreme caution. Essentially, in a very broad view the Bank of Canada rate is related to how much a bank pays to obtain and access funds. The bank then has their own prime rate that is directly linked to the Bank of Canada. Almost 100% of the time these prime rates match. However, last time the prime rate went down, it worthy to note that the banks didn’t pass on the discount right away, and they still do not pass on the full discount. The major bank world of Canada is small though- so their is very little room for difference between the major banks on these things, without the prospect of losing instant market share.

So, lets then assume that prime rate is increased, and the banks raise their prime rate to match that. That is likely what would happen. This means that if you have a line of credit or a variable rate mortgage that your interest rate will increase. The Bank of Canada hasn’t increased prime beyond .25% in over 25 years. So, let’s prepare for doomsday, if you have a $500,000 mortgage, your payment would in the most extreme examples increase by $62 per month. Obviously, as balances will be even lower for most people- that increase will be even less. To further frame this,  it is a little know fact, that many variable mortgages do not increase the payments. This means that your payment remains the same, but the ratio of principal to interest changes, so the risk of a rising payment is eliminated. The other thing to remember is that with a higher prime rate- its often a case that lender will create even bigger discounts on variables.

But- why bother? Still seems risky to you. The value of having a variable still will outweigh a fixed rate in many situations- here is a great rundown of that, but a great mortgage broker friend of mine

Life Is Variable, Perhaps Your Mortgage Should Be As Well

 

In any case, the world of interest rates has changed lots in the past twelve months. Be worried of anyone quoting you a mortgage rate after a brief two minute conversation. There is much to consider for your life, situation, future and also many terms on mortgages that restrict you in a way that it is unlikely you would even ask.