Benefits of Buying Vs. Renting

Interest Rates - Bank of Canada London Community Mortgage Movement

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Here’s a general list of the benefits of buying vs. renting that will be sure to help you in making your big decision when it comes to looking for a new home.

Buying a home is an investment

Buying a home is a great investment. Over time, your home will very likely increase in value. Your equity will also build over time when you make your monthly mortgage payments and will grow more the longer you stay in your home. Simply, renting is not an investment – you’re paying someone else for money you could be using for an investment! Why not pay a mortgage instead that will benefit you in the long run?

Freedom

Have you ever had those landlords who never let you make the place you’re living in, your own? You had to keep the walls a pale white, or had to deal with an old bathroom or kitchen that barely does its job? As a homeowner, you can fix these things and make the home truly your own. You won’t have to worry about what colours you’re allowed to paint the walls or having to get permission to make changes to that old kitchen or bathroom.  

Generally over time, buying costs less than renting

Have you ever experienced a landlord increasing your rent each year? With paying a mortgage, you won’t have to deal with that if you opt for a fixed mortgage rate! This makes it easier to budget since it will stabilize your monthly finances. Also, your home will increase in value for your benefit, and each payment you make impacts your equity. With renting, there is no chance for money to be made. Also, when you’ve paid off your mortgage, guess what that means? No more mortgage payments – the house is all yours!

Family stability and being part of a community

Do you remember growing up in your family home and how special that home was to you and your family? If you’re planning on starting a family or thinking of moving to a new home to make life better for your family, buying a home will create a space that will be more important to you and your family than any investment. Without getting too cheesy, owning a family home is really something special: you can watch your kids grow up and make family memories that you’ll never forget.

Also, when you pick a great neighbourhood to live in, you’re sure to build a sense of community with your neighbours and foster a great environment for your children to grow up in.

Make sure to talk to your mortgage broker for more information on how buying is the right choice for you.

Bank of Canada reveals latest interest rate decision

Interest Rates - Bank of Canada London Community Mortgage Movement

The Bank of Canada has raised its benchmark interest rate by a quarter of a point. This is the fifth time since last summer that the Bank of Canada has pushed up the cost of borrowing for Canadians.

The central bank’s target for the overnight rate is now set at 1.75 per cent.

The cost of loans linked to the big bank prime rates are headed higher in the wake of the Bank of Canada’s decision to raise its key interest rate target by a quarter of a percentage point. The Canadian banks each raised their prime lending rates to 3.95 per cent from 3.70 per cent, effective Thursday, October 25, 2018.

The increase followed governor Stephen Poloz’s first policy meeting since Canada agreed with the United States and Mexico earlier this month on an updated North American free trade deal. It was the bank’s first rate decision since Canada agreed with the United States and Mexico earlier this month on an updated North American free trade deal.

So far, the Bank of Canada has stated that Canadians have been making spending adjustments in response to earlier rate hikes and stricter mortgage policies — and credit growth continues to moderate. Household vulnerabilities — while still elevated — have edged down as a result.

Consumer spending is expected to continue expanding at a “healthy pace,” thanks in large part to the steady rise of incomes and the strength of consumer confidence. It projects exports to keep growing at a moderate clip, even though they will face limitations from several factors — including transportation capacity constraints, global trade uncertainty and stiff competition, particularly from the U.S.

Known as the target for the overnight rate, the benchmark is what Canada’s big banks charge each other for short-term loans. It filters down to consumers, because it affects the rates the banks offer their customers for things like variable rate mortgages and savings accounts.

The bank says households have already made spending adjustments in response to earlier rate hikes and stricter mortgage policies _ and credit growth continues to moderate.

Things Not To Do Before Closing

Things not to do before closing a sale

You have worked to secure financing for your mortgage, you have a great rate and terms for it. Everything is good, all you must do is wait for advancement of funds.

Sometimes you might suffer a lapse in judgement when it comes to the closing the sale of your home. It is sometimes a stressful time when it comes to these types of events, especially if it is your first time purchasing a home.

A mortgage lender might suggest a simple course of action, however sometimes this is misinterpreted by the buyer. Here is a list of things you should NEVER do in the time between your financing complete date (when everything is setup and looks good) and your closing date (the day the lender advances funds).

Don’t do anything that would reduce your income

When it comes to your employment don’t do anything that would jeopardize your employment or income with your existing employer. Getting a raise is fine but dropping from Full Time to Part Time status is not a good idea. The reduced income will change your debt service ratios on your application and you might not qualify.

Do not close any credit accounts

Even if you realize that you never use a certain credit card, for example, cut it up if you must, but do not cancel that line of credit while you are waiting to close the purchase of your home.

Don’t apply for new credit

if you find yourself at shopping for new furniture and they want you to finance your purchase right now… don’t. By applying for new credit and taking out new credit, you can jeopardize your mortgage. It is best to wait until everything is finalized before going out and buying new furniture for the house.

Do not buy anything with your closing cost. Nothing.

This means not one thing. Yes, you might need a washer and dryer, but wait until you close to order it. Don’t take a salesperson’s word that they’ll just write it up and hold it for you, because somebody will enter it into the store’s computer by mistake. Typically, the lender wants to see you with 1.5% saved up to cover closing costs… this money is used to cover the expense of closing your mortgage.

Mortgages and Entrepreneurs

Mortgages and Entrepreneurs London Ontario

When we are talking about mortgages, most of us assume it is about families and having a stable income that can pay off the mortgage after a certain time. What is rarely talked about is mortgages and entrepreneurs and their plans; as we know being self-employed means your salary can vary monthly, versus being an employee at a company with stable pay.

Back in July of this year, the CMHC announced the implementation of new mortgage lending rules designed to help the self-employed secure mortgages and maintain their position in Canada’s housing market. This will all take effect on the 1st of October this calendar year!

Self-employed Canadians have faced many obstacles when trying to obtain loans, primarily due to their variability of incomes. Since those that are self-employed are not on a payroll, lenders required a more rigorous proof of income, including but not limited to requiring at least two years of proof of income, audited financial statements, a good credit history, regular and stable patterns of income, and a large deposit for the home they are seeking to purchase. Sounds complicated, right?

One of the most difficult barriers to overcome in securing a mortgage is the very reasonable inclination of a small business owner (and their accountant) to do everything legally possible to reduce taxable income to reduce the amount of tax paid by the self-employed. In the case of obtaining a mortgage, the self-employed ideally needs to demonstrate the largest possible income to help to secure a loan. The two purposes are conflicting, with no clear solution.

To address the inequities and difficulties faced by the self-employed, the CMHC has proposed the introduction of several new, more flexible factors that can be used by lenders to assess the mortgage application of a self-employed person. Lending institutions will now be able to include factors such as enough cash reserves, the acquisition of an established business, and their training, education, and previous employment experience, including for businesses that have been operating for less than two years.

With these new changes, these will greatly assist not only self-employed Canadians, who according to the CMHC represent 15 percent of the workforce, also young entrepreneurs seeking to enter the housing market for the first time.

Bridge Financing, What Is It?

Bridge Financing London, Ontario Mortgages

What is Bridge Financing?

It is a useful tool made available to borrowers when the closing date of the home they are purchasing is before the closing date of the home they are selling. This is generally common in a seller’s market, buyers often explore the idea of making a firm offer without conditions, even if they have their own house to sell.

Bridge Financing means that the lender is comfortable making an interim loan between the closing date of the new purchase and the closing date of the buyer’s own firm sale. Basically, it is closing the gap between the two firm closing dates that do not coincide.

Bridge financing is not the same as being able to carry two separate properties.

However, bridge financing is not applicable if your home is not sold firm, you are talking about carrying two properties (owning two homes). Carrying is when the buyer owns two homes simultaneously for any length of time. They are also qualified to carry the total sum of the two mortgages.

So, what is required to set up bridge financing? Your lender will ask you for a copy of your firm purchase agreement and firm sale agreement.

This is a great stress reliever and helps with leaving a buffer of time for the buyers to get settled into their new home before their own purchasers will show up on their previous home’s doorstep looking for a clean and empty property. This also give the buyer some flexibility when it comes to accepting an offer on their own home, that firms

Bridge financing is quite common and a wonderful option but its a conditional on your own home have a firm offer in place.

When it comes down to it, you should make it clear with your lender whether you are looking to mortgage two homes or bridge the gap between 2 firm sales before you firm up your financing.

Why The Best Mortgage Rate May Not Always Be The Lowest

Mortgage Rates London Ontario

Just like when looking for a car, it isn’t always the best option to choose the cheapest one you find, it is the one that is best suited for you and your lifestyle. So just like when looking at mortgages, choosing the one with the lowest interest rates might not be the best option for you, as it could end up costing you more.

How can it cost me more?

One of the reasons why some of the interest rates are low, is that they come with restrictions and sometimes aren’t that flexible. While lenders can entice you with low fixed rates, they might be able to get that money back further down the road with penalties and fines if you were to adjust or change your mortgage. This is not an uncommon practice, similarly insurance companies do this by offering us less for insurance but charge us a higher deductible if something were to happen with our car.

Just like interest rates with additional features and flexibility, these can cost a bit more than a fixed, low interest rate. By paying a little bit extra in interest rates, you can have a little bit of breathing room when it comes to an unexpected change in events and you may need to change your mortgage.

Some Considerations

Here are some questions you should ask yourself when you consider locking in your next mortgage:

  1. What if I need to refinance due to an unexpected job loss, break-up, unexpected home repairs, etc.?
  2.  Can I put extra money down to pay off the mortgage? If so, how much and when?
  3. Are my closing dates flexible? What happens if they aren’t?
  4. What if I move and sell my house before the mortgage is up?

So, what is the best rate?

Life is unpredictable! We may not be able to foresee our future, especially when signing our first mortgage. A no-frills, low-interest mortgage that can end up penalizing you for adjusting or breaking your mortgage can be devastating! The last thing you want is to be penalized a substantial amount on fees and penalties in unexpected charges.

We’ll sit down with you and go over your present situation, as well as discuss your future needs. We can go over all the options available and choose the best options that will suit your needs.

 

What’s The Deal? Needing an Appraisal with 20% Down Payment

Need An appraisal with 20% Down Vlog

I’m Andrew Young of Mortgage Wise Financial and Community Mortgage Movement.

What’s the deal with Needing An Appraisal When You Have 20% Down?

To begin with, an appraisal is an unbiased estimate of the value of a home you want to buy or already own by a third party appraiser. It is basically an analysis of recently sold properties, active properties, terminated properties, and expired properties around your area to determine the value of your home right now. Most lenders will consider recent within the last 30 days.

A lot of people ask me “Why do the lenders need an appraisal when I have 20% down or more?”

This a real easy question to answer. When you have less than 20% down for a down payment, a lender has to go to CMHC, Canada Guarantee, or Genworth to get third party insurance. This then means that the onus is on the insurance company if you were to default on your mortgage.

When you have 20% down or more, this means that the onus is on the lender itself. Therefore the lender wants to make sure that the value for the home, if the worst-case scenario were to happen (you were to default on your insurance). They have to go in, take the home and then sell it again on the market.

This is why you need an appraisal, even if you are paying 20% or more for your down payment

I’m Andrew Young and that’s the deal.

What’s The Deal? – Bloopers

What's The Deal Bloopers

I’m Andrew Young of Mortgage Wise Financial and Community Mortgage Movement.

And what’s the deal with my inability to get my lines right?

Here is the deal, I can’t always get my lines right or joke around in between takes. Here are some of the bloopers while filming. While working on these videos I have compiled some footage of me forgetting some of my lines, playing around with “what’s the deal” and trying to figure out which one would work best.

Looking for help with refinancing or renewing your mortgage? Feel free to reach out and I’ll make sure I find an option that is suitable for you and your needs!

For those of you who don’t know me, I am a leader in the mortgage industry and in the London, Ontario community. Not only do I help with finding a suitable solution to my clients needs I also help with supporting the London, Ontario Community. I am involved in several London, Ontario not for profits and on multiple boards and committees in the London, Ontario and surrounding areas.

Myself and Community Mortgage Movement is a group of caring and compassionate advocates who are creating a cooperative approach to funding community initiatives. Not only do I want to help grow the London, Ontario community, I want to help develop sustainable funding to support local businesses and community partners.

For your viewing pleasure, I’m Andrew Young and that’s the deal!

What’s The Deal? Low-rate Mortgage Offers

London Ontario Low-rate mortgage offers

I’m Andrew Young of Mortgage Wise Financial and Community Mortgage Movement.

What’s the deal with super low-rate mortgage offers?

I just want to go over a few different things before you lock yourself into something you don’t really want or something you don’t really need. What I want you to understand is what are you sacrificing to get a very low interest rate? Here are a couple things you should watch out for on low-rate mortgage offers.

Low-rate Basic Mortgages

These are low-rate mortgages that sometimes may include a reinvestment fee. A low rate basic mortgage will offer you an unbelievably low interest rate. So, what are you sacrificing with this type of mortgage? One of the main things you are giving up is your flexibility. Let’s say you were to break your mortgage after the first five years, there is generally a percentage of a penalty you will pay. So, if you break your mortgage early, you will generally have to pay a penalty (this is normally around 3%). These mortgages need to make their money somewhere! So, let’s say you have a mortgage of $400,000 that is a $12,000 penalty fee!

Reinvestment Fee

Some lenders are adding reinvestment fees into their mortgages. Some of the mortgages that we have seen here have these reinvestment fees added into their mortgage, they have a gradual decline over the five-year period, some dropping by .25% each year.  If you are 99% percent sure that you are going to stay at this property for five years it might be worth it to just wait it out, if not you should start considering other options.

What I like to do is a suitability analysis. We try not to sell rates as much as possible, I would prefer to find out what you need first before I come up with a solution.

I’m Andrew Young and that’s the deal!

Self Employed & Looking For A Mortgage?

Self Employed London Ontario

What’s the deal with being self employed?

I’m Andrew Young from Community Mortgage Movement and Mortgage Wise financial here to talk to you about being self employed and getting a mortgage if you are self employed.

So, you’re self employed? Well congratulations! So now you want to purchase a home – so, what do you need when it comes to looking for lenders?

Most lenders generally want to see at least 2 years minimum self employed or sub contracted income. When it comes to income, lenders will use a 2-year average from your line 150 from your T1 Generals or your Notices of Assessments. Don’t worry there are some opportunities when it comes to grossing up your income by a certain percentage or we also can add back some of the expenses to help get you to the mortgage amount you are looking for.

There is also the opportunity to use the Stated Income Mortgage Program. What is the Stated Income Program? Stated Income means exactly that. When a mortgage application is created, for a self-employed or commissioned applicant, and the entire income amount is not verifiable in traditional documents, for example a Notice of Assessment, the applicant may apply under the Stated Income program to allow an income adjustment to help qualify them for a home purchase or re-finance.

So, using the Stated Mortgage Program we take your stated income and inflate it by a reasonable rate to take into consideration, due to your profession (this is to consider your expenses and cash components of your job). All of this is to help make sure we can get you to the mortgage you want to be approved for.

I’m Andrew Young and that’s the deal!