A Young Homebuyer's Checklist

(NC)—Almost two-thirds of young Canadians (63 per cent) are looking to purchase their first home within the next two years, according to a recent RBC Home Ownership Poll. But these 18-34-year-olds have significant concerns about making the leap. Almost half of respondents (49 per cent) in this age group cited affordability as a reason they had not yet purchased a home, while one-third (34 per cent) said they were saving money for a large down payment.

“Buying your first home is a major milestone and you want to ensure you are both financially and emotionally prepared,” says Michael Schmidt, manager of client segment strategies. “There are no 'do-overs' when buying your first house, so it's important to arm yourself with the right advice to avoid unexpected costs down the road.”

First-time buyers could also benefit from the wisdom of current owners. Three-in-five Canadian homeowners admit they made at least one mistake when they bought a house, including underestimating or overlooking significant renovations that the property needed, not having a bigger down payment, and lack of a home inspection.

Schmidt provides the following tips to combat some of common home buying mistakes:

• Put saving on autopilot: Down payment saving takes discipline. So when you get your paycheque, pay yourself first. One of the easiest ways to commit to this plan is to arrange for pre-authorized transfers from your bank account to your savings account.

• Understand the total cost of owning a home: Purchasing a house is more than just a regular mortgage payment. Budget for both one-time expenses (such as land transfer tax, property surveys, and legal fees) and ongoing costs (property tax, utilities, condo fees) and balance those costs against your lifestyle.

• Create a rainy day fund: Major repairs and upgrades are inevitable. Keeping a separate emergency fund will ease unexpected costs such as a leaky roof or a furnace repair.

More information is available online at /www.rbcroyalbank.com/mortgages/first-time-home-buyers.

www.newscanada.com

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Second Mortgage Loans vs. Home Equity Loans

It’s not surprising that some homeowners confuse the terms “second mortgage” and “home equity loan.” After all, a second mortgage is a type of home equity loan. But more often than not, home equity loan is used to describe a home equity line of credit, or HELOC. If you want to take advantage of the equity that you have built up in your home, you will need to decide if a HELOC or a true second mortgage is best for you.

Before discussing which might be better for your purposes, let’s look at some of the basics of each. A second mortgage pays out a fixed sum of money to be repaid on a set schedule, like your initial mortgage. Unlike refinancing, the second mortgage does not supersede the first mortgage. Second mortgages are usually 15 to 30 year loans with a fixed rate of interest. Like the initial loan, the rate of interest and points (if any) will be based on your credit history, the price of the home, and the current interest rate. While the interest rate on a second mortgage may be a little higher, the fees are generally lower.

HELOC, however, is similar to a credit card, and it may even include a credit card to make purchases. Like credit cards, interest is charged, and the amount you can borrow is based on your credit worthiness.

To determine the limit of your HELOC, lenders will look at the appraised value of your home, you may have access to up to 80% of the appraised value or purchase price of your home (whichever is lower), less any prior outstanding mortgage charges. As your mortgage balance decreases, your available rate increases.

Your current financial needs will help to determine which type of loan is right for you. If you need money for a one-time expense, such as building a new deck or paying for a wedding, you would probably opt for the fixed-rate second mortgage.

But if you forecast a recurring need for extra money, such as tuition payments, you may prefer a HELOC. A line of credit allows you to borrow when you need the money and, if you pay back the amounts quickly, you can save money over a second mortgage. You also need to consider your spending habits. If having another credit card in your wallet would temp you to spend more often, then you are not a good candidate for a HELOC.

Once you make an initial determination about which loan might be right for you, you will need to discuss the details with a professional.  We recommend that you speak with an independent mortgage broker with experience in this sector to help you make the most effective decision among the products available.

Why work with an independent broker?

§  Because they are not loyal to any one financial institution (i.e. like a bank consultant), the options presented will be greater.

§  Independent mortgage brokers scour the market for the best mortgage products – not just those being pushed by a particular company. As the mortgage broker fee is paid by the lending institution, it’s a decision that doesn’t cost you anything. 

(Source: AllBusiness.com)

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TIPS TO CONSIDER BEFORE BUYING A HOME

You’re about to invest in your most valuable asset. Below are our top 8 recommendations to make you more confident as you start your home buying journey.

1.    Your Credit Rating
Getting your finances in order is probably the most important step you should take. You must know exactly what your credit reports say about your financial history before you apply for a mortgage, because the reports play an important role in the mortgage approval process and in determining the interest rate and other loan terms that a lender offers you.

2.    Understanding How Mortgages Work
Get familiar with the mortgage laws, structure and options. That way, you will be able to decide on the right loan and lender – crucial to your home buying success. It’s up to you to determine which lender is best for your needs, and it’s always a good idea to have at least a bit of background about the loan process before you talk to a lender.

3.    Getting a Mortgage Pre-Approval
Do you know how much house you can afford? Probably not, unless you’ve talked to a Mortgage Broker or Lender. Pre-approval helps you in other ways. Consider this scenario. A home seller gets two similar offers. One is accompanied by a letter from the buyer’s bank that states she is pre-approved for a mortgage in the amount of the offer. The other has no supporting documents. Which offer do you think the seller will consider first?

4.    Sorting Out Your Needs and Wants
Buying a home isn’t as difficult as you might think, even if you’re short on funds. But the process will go a lot smoother if you get familiar with your real estate market and narrow down your wants and needs before you start looking at houses.

5.    Preparing to Work with Real Estate Agents
Real estate agents represent buyers, sellers, or both. It’s essential to understand agent duties and loyalties before you make that first phone call.

6.    The Great Home Search
The Internet is a great tool – you can spend endless hours searching the public version of the Multiple Listing Service website. You can also pick up House For Sale magazines and read classified ads in your local newspapers. You might even plan an afternoon drive to preview neighbourhoods. These are all excellent ways to see what’s available out there.

7.    Pre-Offer Investigation
Deciding whether or not you want to buy a house involves a look at its structure and its features, but there are many other topics that are every bit as important to your purchase. Appoint a professional to conduct the home inspection. Study what kind of house it is and consider its market value.

8.    Making the Offer
There’s no one set of instructions that can cover all the differences in real estate laws and customs that exist throughout, so its important to meet with your agent, attorney or advisor to fine-tune your offer and take care of all the contractual considerations.

 

(Source: HGTV.ca) 

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10 WORST FIRST-TIME HOME BUYER MISTAKES

Are you gearing up to buy your first place? Arm yourself with these tips to get the most out of your purchase and avoid making 10 of the most costly mistakes that could put a hold on that sold sign.

1.      Not Knowing What You Can Afford
As we’ve all learned from the subprime mortgage mess, what the banks says you can afford and what you know you can afford or are comfortable with paying are not necessarily the same. If you don’t already have a budget, make a list of all your monthly expenses (excluding rent). Subtract this total from your take-home pay and you’ll know how much you can spend on your new home each month.

2.      Skipping Mortgage Qualification
What you think you can afford and what the bank is willing to lend you may not match up, so make sure to talk to your mortgage broker and get pre-approved for a loan before placing an offer on a home. Beware that even if you have been pre-approved for a mortgage, your loan can fall through at the last minute if you do something to alter your credit score, like finance a car purchase.

3.      Failing to Consider Additional Expenses
Once you’re a homeowner, you’ll have additional expenses on top of your monthly payment. You’ll be responsible for paying property taxes, insuring your home against disasters and making any repairs the house needs. If you’re purchasing a condo, you’ll have to pay maintenance costs monthly regardless of whether anything needs fixing because you’ll be part of a building strata.

4.      Being Too Picky
Go ahead and put everything you can think of on your new home wish list, but don’t be so inflexible that you end up continuing to rent for significantly longer than you really want to. First-time homebuyers often have to compromise on something because their funds are limited.

5.      Lacking Vision
Even if you can’t afford to replace the hideous wallpaper in the bathroom now, it might be worth it to live with the ugliness for a while in exchange for getting into a house you can afford. If the home meets your needs in terms of the big things that are difficult to change, such as location and size, don’t let physical imperfections turn you away.

6.      Being Swept Away
Minor upgrades and cosmetic fixes are inexpensive tricks that are a seller’s dream for playing on your emotions and eliciting a much higher price tag. If you’re on a budget, look for homes whose full potential have yet to be realized. First-time homebuyers should always look for a house they can add value to, as this ensures a bump in equity to help you up the property ladder.

7.      Compromising on the Important Things
Don’t get a two-bedroom home when you know you’re planning to have kids and will want three bedrooms. Don’t make a compromise that will be a major strain.

8.      Neglecting to Inspect
Before you close on the sale, you need to know what kind of shape the house is in. You don’t want to get stuck with a money pit or with the headache of performing a lot of unexpected repairs.

9.      Not Choosing to Hire an Agent or Using the Seller's Agent
Once you're seriously shopping for a home, don't walk into an open house without having an agent. Agents are held to the ethical rule that they must act in both the seller and the buyer parties' best interests.

10. Not Thinking About the Future
It's impossible to perfectly predict the future of your chosen neighbourhood, but paying attention to the information that is available to you now can help you avoid unpleasant surprises down the road.

(Source: Globe & Mail)

www.philrom.com

Using a Mortgage Expert

Using a Mortgage Expert has never been more important....

With the recent changes to the Mortgage Industry that have been implemented by the Canadian government over the last several months, the need to work with an Certified Mortgage Expert has never been more important. The changes have impacted who can qualify to get a mortgage, the amount of down payment required for certain mortgage products and how much a qualified borrower can qualify for. Other factors such as types of credit you have, and a borrowers credit score can affect the qualifying process as well!

A Certified Professional Mortgage Broker, uses his experience and knowledge of a constantly changing mortgage industry,to show the market to the benefit his customers.  Another benefit of using the services of a Certified Professional Mortgage Broker Expert, is that he has access to a variety institutional lenders as well as private lenders, and is able to provide unbiased advise, unlike Bank Mortgage Specialists who are employed by there institution and can only offer there products.

In this new lending environment it only makes sense to work with a Mortgage Professional to provide you the most complete advise available to make a truly educated borrowing decision.

Recent Government Changes to Mortgage Qualifying

What changes has the government made that affect the way someone qualifies for a mortgage?...
One of the key factors that the government has changed is the maximun ratios based on gross income that someone is allowed to borrow, commonly referred to as GDS and TDS, which stands for Gross Debt Service and Total Debt Service.  GDS represents the percentage of your gross income that you are allowed to borrow to satisfy the mortgage payment, property taxes, and an estimate of home heating costs, and the TDS considers the GDS ratio as well as any other revolving debts a borrower may have as well, such as car payments, credit card payments and loan payments.  These ratios have been 32% and 40%, for GDS and TDS respectively for many years and very rarely been connected to any other lending criteria.  The maximum ratios are now directly connected to a borrowers credit score; if a borrower's Beacon score is 680 or less the maximum GDS and TDS is now 35% and 42%, if a borrower's Beacon score is 680 or higher, the maximum GDS and TDS now are 39% and 44%.
To Put it into perspective let us assume the following scenario;

• a couple earning $80,000 in combined gross income, and a $500 car payment
• property taxes of $4,000 per year, and $1,000 annual heating costs
• a 25 year amortization at 3.19% for a 5 year closed term

If Beacon Score is 680 or less	If Beacon Score is 680 or higer
Maximum Mortgage qualified for is: $396,000	Maximum Mortgage qualified for is: $450,000

You can see from this example that there is quite a bit of difference in the qualifying amount, depending on the borrower's credit score.
To find out more about this or other Qualifying changes, please contact me to discuss or arrange a meeting to review your options.

Real Estate and Mortgage Stats!

Welcome to the April issue of the News & Rate Advisor.

Current Discount Mortgage Rates	Apr 2013
Variable Rate	2.70%
1 Year	2.74%
2 Year	2.69%
3 Year	2.69%
4 Year	2.99%
5 Year	2.89%
7 Year	3.59%
10 Year	3.69%
Prime Rate	3.00%
* Rates subject to change and OAC.

Canadian Qualifying Rate	Apr 2013
Rate	5.14%

Source: Bank of Canada

Current Posted Mortgage Rates	Apr 2013	Apr 2012	Apr 2011
1 Year	3.00%	3.20%	3.70%
3 Year	3.55%	3.95%	4.45%
5 Year	5.14%	5.44%	5.69%

Source: Bank of Canada

Nationwide Building Permits.	Feb 2013	Feb 2012	Feb 2011
Residential	$3,582,691,000	$3,953,284,000	$2,979,492,000
Commercial	$2,371,468,000	$2,571,781,000	$2,822,234,000
Total	$5,954,159,000	$6,525,065,000	$5,801,726,000

Source: Stats Canada - preliminary figures

Current Bank of Canada Rate & Prime Rates	Apr 2013	Apr 2012	Apr 2011
Bank Rate	1.25%	1.25%	1.25%
Prime Rate	3.00%	3.00%	3.00%

Source: Bank of Canada

Average House Prices by Province	Feb 2013	Feb 2012	Feb 2011
National	$368,895	$372,763	$365,192
Yukon	$327,725	$342,872	$299,393
Northwest Territories	$301,980	$386,700	$381,492
British Columbia	$529,922	$576,916	$587,576
Alberta	$378,685	$359,721	$352,076
Saskatchewan	$280,915	$263,489	$251,302
Manitoba	$259,397	$243,192	$222,071
Ontario	$392,962	$390,901	$359,592
Quebec	$271,912	$264,733	$251,902
New Brunswick	$156,119	$156,507	$151,063
Prince Edward Island	$157,361	$155,137	$134,135
Nova Scotia	$211,772	$222,620	$207,051
Newfoundland	$295,588	$258,965	$240,403

Source: CREA - Most Recent Month Reported

Average House Prices by City	Feb 2013	Feb 2012	Feb 2011
Yellowknife	$301,980	$386,700	$381,492
Vancouver	$760,976	$806,094	$791,604
Victoria	$463,265	$464,570	$490,970
Edmonton	$334,347	$329,820	$311,674
Calgary	$438,755	$405,687	$400,879
Saskatoon	$313,781	$297,628	$287,202
Regina	$310,551	$285,374	$272,609
Toronto	$510,580	$502,508	$454,470
Hamilton-Burlington	$375,381	$356,980	$331,741
Ottawa-Carleton	$348,386	$349,797	$337,797
Quebec City	$267,826	$253,915	$244,326
Montreal	$325,261	$320,243	$300,471
Fredericton	$166,687	$161,785	$152,696
Saint John	$171,191	$180,104	$175,371
Halifax-Dartmouth	$259,606	$265,230	$261,638
Winnipeg	$270,463	$250,753	$228,180

Source: CREA - Most Recent Month Reported

No Down Payment.......You may have an Option!

Cashback for Down Payment Mortgage!!!!
......as low as 4.85% 5 Year closed term!!!!
If you do not have the minimun 5% down payment, you still have an opportunity to purchase a home!!! If you have good credit ( a minimum beacon score of 650), a steady job and the money to pay for a lawyer and the closing costs, you may qualify for the Cashback for Downpayment Mortgage. The way it works is quite simple, the lender will provide you with 5% of the purchase price as a cashback to be applied as the 5% downpayment on your purchase, so you still have 95% financing but did not have to get a gift from family or save up the 5% yourself.  This program allows buyers who have been putting of the purchase decision to finally get into the realt estate Market!
To find out more please feel free to contact me and discuss your options!

Click this link to Contact me now!