Golden Girl Finance
 
Mortgage Girl
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Home/Real Estate

Are you ready to stop renting?

December 29th, 2016 by

Take the quiz now to see if home ownership is in your near future!

 
 

Choosing to plunge into home ownership can be a daunting decision for some. This quiz should help determine if buying is your best bet. All you have to do is write down the letter that best describes your current financial situation and then count how many of each letter you have. The letter that you have the most of will correspond with an answer at the end of the quiz. Ready to get started?

Let's take a look...

Is your income reliable and continuing?

A) I receive regular pay cheques with a set income amount
B) I receive variable pay and the amount can fluctuate
C) Neither of these apply to me

Do you have savings available to put towards a downpayment?

A) Yes
B) No
C) Maybe

How is your credit?

A) Good
B) Bruised
C) Other or not sure

Do you owe on numerous credit cards?

A) No
B) Yes
C) Not sure

Do you have pets?

A) Yes
B) No
C) Not right now, but I want to get one

Do you need to make your space your own?

A) Yes
B) No
C) Doesn't matter to me

Are you planning a life change soon such as staring a family or returning to school to further your education?

A) Yes
B) No
C) Not sure

Do you know which neighborhood you want to live in?

A) Yes
B) No
C) Doesn't matter

Do you have experience making any large, regular, monthly payments?

A) Yes
B) No
C) Not sure

How do you feel about property repairs and maintenance?

A) I don't mind doing them myself
B) I'd rather call someone else to do them
C) I'm not sure yet

Are you just meeting monthly debt obligations or do you have extra funds at the end of each month?

A) I do have extra funds available
B) My budget is pretty tight
C) I'm kind of somewhere in the middle of those two depending on the month

If you answered...

Mostly A's: It looks like a home purchase may be in your future. Your steady income and good credit makes mortgage financing a viable option. Your need to customize your space makes ownership more desirable than renting as landlords often have restrictions on what kind of alterations you can make to your living space. If you are currently renting and thinking of taking the next step, you're half-way there. Be prepared for a mortgage payment and property taxes as well as all of the extra costs that come with home ownership such as repair and maintenance costs. Talk to other homeowners and get an idea of what you're getting into before you commit to a large purchase.

Mostly B's: Renting may be your best bet for now. Whether it's your debt level or maybe your income isn't steady, it's better to buy when you're ready rather than rush into a large purchase that isn't always easy to get out if it isn't working out for you. If the idea of fixing your leaky tap or painting your deck doesn't interest you, renting may be a lot more appealing as those repairs and maintenance can be done with a call to your landlord. Renting may make sense for the budget conscious and for those who may not yet be settled in their life due to just finishing school, or changes in a romantic relationship such as a break-up or an engagement. It is expensive to buy a home and just as expensive to sell that home if it is not the right time for you to make the commitment to owning a home.

Mostly C's: You fit somewhere between rent and buy and the decision comes down to you. To keep your options open, it makes sense for you to know how you look on paper. If you have a strong financial profile, you should not have any issues in qualifying for financing when you find your perfect property, though do look at getting a pre-approved mortgage.

The bottom line

This quiz is not meant to replace the advice of a professional. Knowledge is power when it comes to the housing market. Before you make a decision, do your research. Don't be afraid to ask your friends and family for professional referrals to ensure you can trust and speak freely and openly about your financial goals. Call a realtor to see what the price range is for properties you like. Ask them what kind of rent you would have to pay to live in that same area. It may help you with the decision making process. After you have those two numbers, contact a mortgage professional to see if you qualify for the mortgage and are comfortable with the payments required for that price range with the down payment amount you have available.

You should have sufficient information to determine whether it is better for you to rent or buy a home of your own. If you're still undecided, don't be afraid to rent until you've made up your mind. The real estate market will still be here when you're ready.

If you need a mortgage, call Jackie at 780.433.8412 or info@mortgagegirl.ca. Stay in the loop by following Mortgage Girl on Twitter: @Mortgagegirlca.

Home/Real Estate

Dominate your downpayment

October 24th, 2016 by

Exercise control over your mortgage options with a back-up plan and other strategies

 
 

When purchasing a home, the borrower is required to come up with a portion of the purchase price in addition to the mortgage, this referred to as the downpayment. There are multiple downpayment sources that are acceptable to most mortgage lenders, and this week I want to explore the most common ones. While you can still technically buy a home with zero downpayment funds on hand, given the process involved I’m not convinced it’s the best idea. If you’re main goal is to build equity in your new home as quickly as possible, the more funds you have invested into the purchase initially, the better.

The minimum downpayment required by most mortgage lenders is 5 percent of the purchase price, meaning they will not finance a first mortgage that is higher than 95 percent of the property purchase price. If you have less than a 20 percent downpayment, a high-ratio mortgage insurance premium will be charged, and it's often added to your total mortgage amount. The more downpayment funds you have, the lower the insurance premium. Keep reading for some brief details on eligible downpayment sources as well as what kind of documentation you can expect to be asked for as confirmation of those funds.

Saved

This describes any funds you have accumulated over time and would like to use towards your downpayment. These funds can be sitting in your bank account as savings, RRSPs or an investment account. Basically any account with your name on it where the funds have been accumulating over a period of time. You can expect to be asked to provide a 60 to 90-day transaction history of those funds, along with a paper trail for any unexplained and unusual large deposits made during that period. If the funds are coming from your RRSP, you may be asked to provide proof the funds have been withdrawn from your RRSP and deposited into your bank account. Be sure to fully research if you are eligible under the First Time Home Buyers’ Plan that allows for RRSP withdrawal without as many income tax ramifications.

Rent-to-Owns are also viewed as being a saved downpayment as long as the Rent-to-Own agreement clearly outlines a set monthly instalment portion is credited towards downpayment in addition to the market rent you have already paid. Be aware that some lenders may also require proof of the funds accumulating in a separate account. As not all lenders consider Rent-to-Owns as an eligible downpayment source, in this case, you may want to work with a mortgage professional with access to multiple lender options to ensure one can be found who will allow the downpayment to come from rent-to-own sources.

Gifted

An immediate family member can gift you the downpayment funds to use towards your home purchase. Your lender will request confirmation of deposit of the gifted funds into your bank account and your family member will be asked to sign a gift letter stating the funds do not need to be repaid. In some cases, the lender may ask for confirmation the gift provider has the available funds on deposit in order to give to you. If you have any questions or concerns as to whether you can meet the gifted downpayment requirements, have a discussion with your mortgage professional sooner than later to determine if an exception can be made. For example, if your gifted funds are coming from someone who lives in a different country, it is especially important to disclose this to the lender initially as there may be different guidelines to be met.

Another form of accepted downpayment is a gift of equity. This occurs when a property is being bought and sold between related family members. The selling party gifts a portion of the equity to the buyers as a downpayment, meaning no cash changes hands while the mortgage finances the rest of the home value. These types of transactions tend to come with a few more requirements, do ensure you find out the details upfront.

Borrowed

If you’re considering this option, I recommend investigating it carefully as it can be difficult to build equity when effectively borrowing 100 percent of the home value. Depending on your specific financial situation, this option may or may not be for you.

When borrowing the downpayment funds, the new monthly payment for that debt must then be factored into your debt servicing.  As an unsecured line of credit is most commonly used for a borrowed downpayment, you will be asked to provide confirmation that there are sufficient funds available for borrowing.

As the lender is not requiring the full 5 percent minimum downpayment from your own resources, you will likely still be asked to show the lender you also have funds in your bank account to cover the closing costs. This will be at approximately 1-1.5 percent of the purchase price and will include legal fees, any property tax or interest rate adjustments, and other miscellaneous moving expenses. For example, if your purchase price is $300,000, you need to show the lender you have at least $4500 available to cover such closing costs. Talk to your mortgage professional about the specific requirements and supporting documentation your lender will be looking for as the closing costs can be calculated differently depending on what province you are buying in and at what time of the year you are buying.

Financed

A less common version of a borrowed downpayment I want to mention is seller financing or a vendor-take-back mortgage. This type of financing is exactly as it sounds in that the seller agrees to take less money at closing and instead finances your downpayment or a portion thereof.  It is important to be aware of the many restrictions that come with this type of financing. If you’re exploring this route, you could still be asked to show some investment into the purchase from your own funds, so be sure to have a preliminary chat with your mortgage professional about how you would like to structure your mortgage.

There are many eligible downpayment options and you don’t have to pick just one type, you could have a combination of some or all of the above. Whatever route you’re taking to home ownership, reduce your stress by talking with an experienced mortgage specialist and getting a head start on the document requirements. You want to prevent surprises during the home buying process when it comes to one of the most vital components of qualifying for a mortgage to purchase a home.

For all your mortgage needs, contact Jackie at 780.433.8412 or info@mortgagegirl.ca. Stay in the loop by following on Twitter @mortgagegirlca.

Home/Real Estate

How To break up with your mortgage lender

September 30th, 2016 by

Things not working out with your mortgage lender? Here is your step-by-step guide to make a clean getaway

 
 

For whatever reason you’re thinking of cutting ties with your current lender, whether it be for a refinance or a renewal, there are a few things you should know before you make the move. To help with the preparatory work, I’ve included a few key steps that will help you confirm you've made the right decision by leaving your current mortgage holder. After you’ve done some preliminary research on your own by following the below guide, the next step is to contact a mortgage specialist to explore what options are available for you.

Step 1: Determine the payout penalty

If your mortgage is due for renewal, your term is over and you’re not breaking it early, you should not have a payout penalty. If you are still locked into your current term and you are not due for renewal within the next 6 months, before switching to a new lender you need to know what your existing lender will charge you to leave. These are known as payout penalties. While most “prime” lenders charge the higher of the two payout penalty options listed below, some “non-prime lenders” may also charge an additional payout fee. Hopefully you were made aware of the payout penalty calculations when you first took out the mortgage.

A payout penalty is charged when you pay off the mortgage balance owing prior to the renewal or maturity date, or pay the mortgage principal down beyond the allowable prepayment privilege amount. The most common payout penalty calculations are the GREATER of 3 months interest or interest rate differential (IRD).

3 months interest: (Amount currently owing on your mortgage) x (current interest rate charged divided by 365) x (90 days)

Example: $300,000 x .025 (2.5%) divided by 365 x 90 days = $1849 payout penalty

Interest rate differential– The IRD amount is calculated on the amount being repaid using an interest rate equal to the difference between your existing mortgage interest rate and the interest rate the lender can now charge today if they were lending the same amount of funds to someone else for the remaining term of the mortgage. This calculation is a bit harder to provide an example for as every lender uses different interest rate types to determine the fee to break your current mortgage. The best way to get a payout penalty estimate is to contact your existing lenders customer service department.

If there is sufficient equity in the property available, most borrowers will usually add their payout penalty to their new mortgage amount so they’re not paying that amount out of pocket.

Step 2: Confirm you can cover the costs

In addition to potential payout penalties and fees, there could be other costs associated with setting up your new mortgage with a different lender, which could include an appraisal fee and a mortgage re-registration fee. In addition to these fees, your existing lender will likely charge an administration fee or a re-investment fee for leaving them; typically that cost is approximately $200 -$300. You have a few options available to you to cover these costs; you can include them in your new mortgage amount, you can pay them out of pocket, or your new lender may cover some of those costs for you as an incentive to move your mortgage to them.

Step 3: Be prepared to re-qualify

Your new mortgage lender will not have any information about you, so you will be asked to re-qualify to show them you can afford the mortgage they’re about to give you. You will be asked for documentation to confirm your income, and your credit report is ordered as well. If your financial situation has changed since the last time you got a mortgage, the document requirements could be different than what you were originally asked for.

Step 4: Crunch the numbers

If you are refinancing your home to access some unused equity, the guidelines are different than if you are simply switching your existing mortgage balance to a different lender. The reason for this is you’re only able to refinance your home at up to 80% of your home value, so you need to make sure you have enough room in your new mortgage amount to cover all of your existing mortgage costs if you don’t want to pay them out of pocket. If you are considering switching mortgage lenders only for a better interest rate, again, you need to determine if it is the right decision for you as there is some legwork involved in meeting the approval conditions of the new lender. Based on my experience, if your existing lender is advised you are considering leaving for a lower interest rate, they may then offer you their best rate to keep you with them; you won’t know what they’ll do to keep your business unless you ask them.

Step 5: Use your support systems

If you have decided breaking up with your current lender and switching to a new lender is the best decision for you, work with an experienced professional you trust. Don’t be afraid to get a second opinion, ask your friends, your family, or read the reviews online. Picking the proper professional to work with can save you thousands so don’t underestimate the value in prioritizing the people part of the process.

I will leave you with a quick tip if you want to switch lenders at renewal time, but you don’t think it will be finalized by your renewal date. Renew your mortgage into an open term as this will afford you some extra time to move to a new lender and prevents a payout penalty when you actually do break up with your old lender.

For all your mortgage needs, contact Jackie at 866.932.8412 or info@mortgagegirl.ca. Stay in the loop by following on Twitter @mortgagegirlca.

Home/Real Estate

Can I get approved for a mortgage?

August 18th, 2016 by

Will your mortgage be approved or declined? Find out with the 5 'C's of credit.

 
 

When it comes to borrowing money, we’ve come a long way from just a handshake to seal the deal. Now there’s an application process that includes meeting the qualifying guidelines, review and understanding of any terms and conditions, paperwork to sign, and more that goes along with getting approved for financing.

If you’re wondering how it is determined whether a specific borrower is eligible to borrow money, how much they can borrow, and how you know if they qualify for lowest rates, then this is the article for you. Most lenders use the “5 C’s of credit” to determine the strength of a borrowers application and the stronger your application is, the more likely you will be approved for any type of financing.  I want to briefly outline the most important components of a mortgage application and how you can determine how you look to a lender on paper.

Credit

One of the most important and most talked about requirement of any financing application is your credit. When you’re applying for credit, your potential future lender will want to know how you have paid your debts in the past and how much debt you have in comparison to the limits available to you. Your credit report will also show how long you’ve had credit, if you’ve missed any payments, or if you’ve had any loans or debts go to collection. Most importantly, your credit report details are all tallied up to determine a final credit score that represents your overall credit habits. That credit score is critical to a lenders decision as they rely on it to determine if you will default on the mortgage they lend you.

A very strong credit report shows at least 2 years history of repayment habits on at least 2 debts such as a credit card, car payment or a line of credit. There should also be no late payments, collections or judgments showing up on your credit report. Lenders like to see at least a minimum 650 credit score in order for it to be considered ‘good’. If you have some “hiccups” on your credit report, that may still be okay if your other “4 C’s” below are strong.

Capacity

Capacity is the borrowers ability to repay the loan. When applying for a new mortgage, these are the details of your income and employment. There are many different types of employment income that are acceptable to include in qualifying. These would be salaried earnings, hourly wages, commission, self-employment income and many more types as long as it is going to continue being earned in the future. What determines whether the capacity is strong or not is how much of your income the new mortgage payment and other applicable carrying costs (like condo fees) are going to take up each month? Your potential lender will ensure your new loan is affordable for you so you are less likely to default and miss payments. If you are applying for credit that is unaffordable, you run the risk of getting declined due to lack of capacity to repay.

Capital

This ‘C’ also stands for cash, how much cash does the borrower have. Capital includes potential downpayment a borrower may have as well as the borrowers net worth (assets less any debts). These figures are important to the lender to determine what kind of initial investment into the property you are making, as well as to demonstrate you will have additional savings available after you complete the purchase of the home. The presence of a positive capital position demonstrates to the lender the borrower will likely be able to support their mortgage payments as well as afford the other costs that come along with home ownership.

Potential downpayment sources include savings, investments, borrowed from an unsecured debt like a line of credit, gifted funds from an immediate family member, vendor-financing, and a few more. To find out if your downpayment funds source is acceptable, reach out to an experienced mortgage specialist to discuss your specific scenario. They should be able advise if a lender will accept the origin of the funds, and provide a general idea of the documents you will be required to provide as confirmation.

Character

There isn’t a minimum score or specific dollar amount required when it comes to this category. Character represents what kind of overall impression you and your credit application make to both the mortgage professional you’re working with, and the potential lender you will be obtaining financing with. This is the portion of the application where the lender is ‘reading between the lines’ to determine if there are any underlying risks in lending to you.

Collateral

When it comes to mortgage financing, the collateral is the land and/or property used to secure the loan. Meaning if you don’t make the payments on your mortgage, the lender will take the property away from you in order to sell it and pay off the mortgage financing you owe them. For this reason, lenders take into account the characteristics of the property the borrower is trying to finance. If you’re looking for best rates, you will be expected to have both a strong mortgage application and a desirable property for financing. Desirable property being one with no features that would deter some buyers in the event the lender has to resell the property.

There are of course other components of the mortgage process that determine the borrowers eligibility for mortgage financing, though I find the “5 C’s of Credit” are basic building blocks we use to determine how the mortgage application should be structured in order to secure the highest chance of approval from a mortgage lender. It is critical you are honest and forthcoming with your information in the preliminary application process to ensure your mortgage professional has all the pertinent details they need to find a mortgage solution that meets your mortgage needs and one that you can qualify for.

If you have mortgage questions, contact the Jackie at 780.433.8412 or info@mortgagegirl.ca. Stay in the loop by following on Twitter @mortgagegirlca.

 

Personal Finance

Getting a divorce? Here's how to deal with the mortgage

July 12th, 2016 by

This is for anyone who has financed a home with a sibling, partner or spouse, common law or married

 
 

If you have financed a home with a sibling, partner or spouse, common law or married, and have decided to part ways; this is the article for you.  Based on my experience, one of the most stressful issue in a relationship breakdown is what to do about the jointly owned home and mortgage. Over the years I have helped many borrowers navigate their way through this process and for some it meant one of them could keep the home, while for others it was best that the home be sold.

If you find yourself in this situation, I will strongly advise this is one of those times when you MUST consult an experienced, knowledgeable mortgage professional for advice and direction. I say this because I personally have spoken with a number of recently separating partners who were told there was insufficient equity in the home for one partner to “buy out” the other and keep the home. They were not aware of a financing solution that allows one partner to refinance the home up to 95% of the current value regardless of the 80% refinance rule, because technically you cannot purchase a property you already own.

Determine the value of the home

Before you can agree on how to split up the assets and debts accumulated during the relationship, start with determining the value of the home, as it is most likely the largest asset and debt. This can be done with the help of a realtor for a preliminary market valuation, or, you could hire an appraiser to provide a detailed valuation analysis. Once you have the value on hand, subtract the balance owing on the mortgage and you now have the amount of “equity” in your home. Depending on how you both decide to proceed with the property, there may be other costs involved that should be considered when determining the “net equity” in your home. These costs may be realtor fees, payout penalties or joint debts that you’ve agreed to pay off.

Decide what to do with the property

Whether one of you is going to keep the property or you have decided to sell, there is some more information you should be aware of that should factor into your decisions:

  • If you do decide to sell the home to pay off the related mortgage, the current real estate market conditions determines your selling price. If you need to sell in a hurry, you may not get as much for the home as you originally expected. Ensure you leave a bit of wiggle room in case you can’t sell for as much as you’d like.
  • If one party refinances the home under their own name, thereby removing the other borrower from the mortgage and title, the individual keeping the home must qualify to carry the mortgage debt on their own. Before you get into negotiations involving the lawyer, it’s a good idea to speak to the mortgage professional sooner than later to determine if this option is feasible.
  • The third and probably least favorable option is keeping both parties on the title and the mortgage, with one person moving out. In this scenario, BOTH parties will have to declare 100% of the mortgage payment and other house related costs on any and all applications for future borrowings regardless of whether they live or don’t live in the home. This could be the scenario if neither party qualifies for the mortgage on their own, or the property cannot be sold for one reason or another. A temporary solution could be to look at renting out the joint home until there is a favorable option available for both parties.

Documents

In order to be eligible for the specialized 95% financing (apart from normal qualifying guidelines) you must provide a legal separation agreement which refers to the division of the equity. You’ll also be asked to provide a purchase agreement where the equity is being “gifted” to one partner from the other. This is in addition to regular income and credit supporting documents, and perhaps an appraisal to confirm the property value.

What not to do

Ensure you are doing all of the right things with your finances during this difficult emotional time to give yourself access to the most options when it comes time to split the home. Given you have made the decision to separate, be sure to keep your credit in check with no missed or late payments that could negatively affect your credit score.  If you are both bringing income into the household, make sure you are both aware of who makes what payments.

Get a consultation

If you’re just doing some preliminary research for now, make it a priority to contact an experienced mortgage professional. It doesn’t take long to run some numbers in order to determine if a certain scenario is do-able for you before you start the separation process with a lawyer. You can also work a few different scenarios if there is uncertainty around what amount the child support or alimony will be, and if qualifying is still even possible. The good news is the consultation with a mortgage professional is usually free, whereas most lawyers charge.

One size does not fit all

As each individual’s financial situation is unique, so are the solutions. These points should just act as a conversation starter as they do not replace an in-depth discussion with a qualified professional. It’s important to have a personalized consultation about your specific financial needs in order to determine an effective plan of action. There is a lot of information out there that may not be applicable to your situation so be sure you’ve explored the fine print to ensure you qualify before you commit.

For all your mortgage needs, contact Jackie at 780.433.8412 or info@mortgagegirl.ca. Stay in the loop by following on Twitter @Mortgagegirlca.