1 Sep

What does the APR on some of the documents mean and how is it different from my mortgage rate?

General

Posted by: Joel Olson

On some of our forms you will see an interest rate and an annual percentage rate. This two numbers are not the same.

:The definition of an APR is  the interest rate for a whole year (annualized), rather than just a monthly fee/rate, as applied on a loanmortgage loancredit card, etc. It is a finance charge expressed as an annual rate”

In other words, your APR includes the cost of your mortgage for the year, For example should you pay $1000 in legal fees and $1000 in interest fees for one year on the mortgage, and your mortgage is $100,000. Your APR would be 2%.

In most cases, in terms of a mortgage this is an irrelevant number. However, if you were given a credit card with a 30% APR and 5% interest rate, you would know there is a a fee you are paying that you are not aware of.

1 Sep

How long will it take to get an approval?

General

Posted by: Joel Olson

A single individual at a lender with the computing power of a Commodore 64 surrounded stacks of paper files is expected to review and approve not only all of your files documents, but those of 16 other files within a single workday.

 

The process depends on a complete documents package being submitted on day one and that will receive the fastest response, and even then that response may well be two, three, or even five business days away is vital.

 

i.e.

Switch – Submit 45 days in advance – ‘File Complete’ 30 days prior to maturity

Refinance – 10 business days for review, 30 days to fund from date of submission

Purchase (no conditions) 5-10 business days for review – ‘File Complete‘ 15 days prior to funding

Purchase (with conditions) 3-5 business days for review – ‘File Complete‘ 15 days prior to funding

 

 

 

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.

 

 

29 Jun

How does it work to buy a foreclosure?

General

Posted by: Joel Olson

From time to time their may be a foreclosure that comes on the market that may be of interest. They are a little different, than purchasing a regular property.

The lender will always want an appraisal- if you are putting less than 20% down, the mortgage insurer may order and pay for it- but if not you will need to have us order you an appraisal. The value is very rarely a concern. The lender is looking at the condition of the property, and should it be in poor condition or need lots of repairs they may decline to finance it, even if you are a very good borrower.

Once your offer is accepted and conditions are removed, a court date is set, once a court date is set, you will have you offer accepted in court and a court order can be prepared. However, in court there is allowed to be other bids, and if someone else bids higher, they will be able to have the house over you. It is a good idea to be prepared to increase your offer in court- you need to check with us before, and the offer should still not exceed your appraised value. If you need to increase your offer, but are not sure you can approved for the difference, you can do so, but you need to make sure you can pay your increase in cash. Its also important to know that even if you can afford a higher amount of payments, a lender will still not finance you for more, if you bid above the appraised value.

7 Jun

When will an appraisal be required and who pays for it?

General

Posted by: Joel Olson

Every mortgage needs some consideration of value. Your downpayment and the type of property you are buying will determine when an appraisal is needed.

Despite contrary belief, a bank or a lender does not always pay for an appraisal. Although, this doesn’t apply in every situation – here is an idea of when an appraisal will be required.

If you put down less than 20%, a mortgage insurer will have their own valuation system. If it fails, then they will order an appraisal at their cost. The lender, the mortgage broker, and the client do not get to see this report or know information about it. If a property fails the valuation and there is a concern surrounding the property such as conditions, a private sale, or a foreclosure then a lender may require you to pay for an appraisal as part of your conditions.

If you put more than 20% down, an appraisal will be always be required. Some lenders have valuation systems that they will charge a fee for, but these are usually exclusive to bigger centers and only for owner-occupied properties. In this situation, it would always be a client cost. Sometimes lenders will order an appraisal for you and not charge you upfront, but they will add this expense to their closing costs. This often makes it seem that you don’t need to pay the appraisal cost but in reality, it’s still billed to you.

7 Jun

How does a mortgage broker get paid?

General

Posted by: Joel Olson

Our services are free! Well, sort-of… to you anyway! Picture this. You go to your bank, and you ask to speak to a Loans Manager. You have an appointment and you see a few different people, but you don’t pay for any of them. Yet, somehow they are all getting paid. So, instead of all that money going to a bank employee, it goes to us. And still, the cost to you is nothing.

There are certain times when a broker fee is charged, but these are rare and will be disclosed in the commitment that you sign with us.

7 Jun

What is default insurance?

General

Posted by: Joel Olson

If you put less than a 20% downpayment on any home you are purchasing in Canada, you are required to have mortgage insurance added to your loan. This is not an out of pocket expense, but it is added to your mortgage and your balance. There are three companies that offer mortgage insurance in Canada, CMHC, Genworth and Canada Guaranty. All of them have some different rules and policies. It’s important to note that you must also have your loan approved by them in addition to the lender.

There are some situations where you are still required to have insurance even if you put a sizeable downpayment down. These situations can include self-employment, unique property type, etc

Default Insurance doesn’t benefit you, it benefits the lender. If you don’t pay your mortgage, the insurance company agrees to pay back the losses to the lender as a result of your default.

The cost of insurance is described as follows:

A non-traditional downpayment is when you borrow the downpayment. The first table describes the premium you will pay, and the second describes the premium you will pay if you have already owned a house with default insurance on the new amount. For example, should you have a mortgage of $200,000, but are now taking out a mortgage of $300,000 – you would only pay a premium on the difference.

Up to and including 65% 0.60% 0.60%
Up to and including 75% 1.70% 5.90%
Up to and including 80% 2.40% 6.05%
Up to and including 85% 2.80% 6.20%
Up to and including 90% 3.10% 6.25%
Up to and including 95% 4.00% 6.30%
90.01% to 95% —
Non-Traditional Down Payment**
4.50% 6.60 %