What to Consider When Buying a Cottage

Recreational real estate transactions are unlike any other property dealings. Here’s what to keep in mind.

The beginning of the cottage season is a good opportunity for a reminder that recreational real estate transactions are unlike any other property dealings.

Speaking to about 1,000 real estate lawyers at a Law Society seminar earlier this month, Midland lawyer Fred Hacker pointed out that the main difference in cottage deals is the emotional fervour that surrounds the transactions.

“Buyers aren’t buying a piece of real estate,” Hacker said. “They’re buying their sanctuary, their retreat, the focus of their family life, a lifestyle and the stuff of dreams.

“And sellers aren’t just disposing of real estate; they’re parting with memories, sentimental attachments, their history, and, in many cases, the best years of their lives.”

With this emotional context as a background, Hacker spelled out a number of pitfalls that distinguish cottage real estate.

Perhaps the biggest issue is whether a cottage property has proper access by public road, private road, unauthorized roads across private property or Crown land, or by the use of launch ramps or marinas for properties with water access only.

Making sure the deed describes the entire property the purchaser intends to buy is another big issue. Septic beds, wells and even all or part of the cottage itself may be located on a neighbour’s land due to historical sloppiness in marking property boundaries.

The critical need for a land survey is often overlooked. A survey will disclose whether the cottage is built entirely on the owner’s land underneath it, whether there is a shore road allowance, and whether the water frontage has decreased due to erosion or increased as a result of land fill.

“Waterfront” properties may not extend to the water’s edge, and a 66-foot shore road allowance is often owned by the municipality or a third party, with the cottage, dock or boathouse sitting on top of it. Docks or boathouses are frequently built on government-owned lake beds, usually without permits.

Previous owners may have “shored up” the water boundary to prevent erosion or to increase their lot size. Typically, the “filled lands” are not owned by the seller.

Hacker pointed out that low water levels on the Great Lakes are at a crisis point and cottage properties that once had their dock at their door now have hundreds of feet of ramps and docks as water levels recede. Cottages sitting on a bay where the water levels have dropped may see their waterfronts shrink as side lot lines are projected out towards the water, and begin to overlap each other.

As if these problems are not enough, cottagers may have to deal with contaminated soil, environmental restrictions, endangered species protection areas, development limits, aboriginal land claims, zoning bylaws, and illegal construction of cottages or septic systems without permits.

Sewage is a major issue in cottage country, and some buyers express shock when they find out their new island cottage is not connected to municipal or any other system.

Many buyers assume that cellphone service, Internet service, land-line telephone service, cable television, garbage and snow removal, natural gas and other subdivision staples will be available at a cottage. In fact, not even hydro service is a given and electric generators or propane appliances may be necessary.

Furniture and personal effects are often sold with a cottage, but unless the offer is very well drafted, problems can arise when the agreement simply says something like “all contents as viewed.”

Hacker also noted that if buyers have a principal residence elsewhere, the cottage will be subject to capital gains tax on a sale unless title is held in the name of an owner who can legally declare it a principal residence.

Hacker’s main point was that the types of issues that are confronted in cottage country may vary from region to region. And they can be exceptionally different from the issues encountered in in urban real estate transactions.

If you’re buying or selling a cottage this year, make sure that your real estate agent, insurance broker and lawyer have a firm grasp of the complexities of recreational property transactions.

 

Source: Bob Aaron, homeownership.ca
 

 

What is Credit and How Can it Affect Your Mortgage Application?

What is a credit Score?

Your credit score is a number (called a beacon) that illustrates your financial health at a specific point in time. It also serves as an indicator of your financial past and how consistently you pay off your bills and debts. This is one of the factors mortgage professionals consider in qualifying you for a mortgage.

Since becoming a Mortgage Broker with CENTUM, I have encountered a number of clients who are completely unaware of their credit situationIt’s extremely frustrating when trying to buy a house, thinking you have done everything right when it comes to your credit, only to find out you don’t qualify. I have put together a few different credit situations and some tips to help you keep your credit in check so you can prepare for the purchase of your home.

1) No Credit or Limited Credit

This has been one of the most common things I have come across with my clients. Responsible clients who only buy things they can afford. They don’t believe in credit cards or racking up debt. These are probably the most frustrated clients when I tell them they don’t qualify right now because they have been working hard to save up money for their down payment and don’t understand why having debt is a good thing. I was one of these people!

From a lenders perspective, having no credit cards or loans makes it hard for them to determine how you are with making payments. This makes them feel more at risk giving you a loan, especially a considerably sizable loan like a mortgage. Lenders like to see at least 2 active trade lines (trade lines are what we call your credit cards, loans, line of credits) on your credit report. Your credit report tracks EVERYTHING so when a lender can look at this report and see you are responsible with your credit and that you are making your payments on time, they are far more likely to want to give you a mortgage.

Some people are afraid to have a credit card thinking they will go out and buy things they don’t need. You don’t have to get a credit card and go buy a new 52 inch TV with it. Use it to buy things you would normally buy anyway, like groceries or gas. With the increased use of online banking, it’s easier than ever to pay off your credit card without even leaving your house. Plus, you don’t pay debit fees for the transaction! And don’t close credit cards you’ve had for a long time just because you don’t want to deal with them anymore, they help provide credit history.

2) Damaged Credit

This category is a little trickier. By Damaged, I mean people who have been bankrupt, done consumer proposals or just don’t pay their bills on time.  You may feel like you are a lost cause but you aren’t. Meeting with a mortgage broker really helps your chances of getting into a home as most Banks have little tolerance for people with poor credit, whether it be current or in the past. A broker has many more options, so if it can be done at all, a broker will get it done.

Not everyone with credit problems have them because they made bad choices. They are sometimes the cause of circumstances beyond ones control such as a divorce, a death in the family or a job loss. All these things can cause people to get behind on their bills. As in many cases, time heals all wounds meaning the further you distance yourself from the bankruptcy (or missed payments), the better your chances are of getting a mortgage. The lenders we use that are willing to work with clients who’ve had past bankruptcies normally require a discharge from that bankruptcy and a full year of re-established (good) credit.

Some ways to avoid damaging your credit score are*:

–          Always pay your bills in full and on time. If you can’t pay in full, make at least the minimum payment EVERY time. That $10 minimum payment on your credit card may seem like no big deal but not paying it will show up on your credit report

–          Pay off debts (such as loans, credit cards, line of credits etc) as quickly as possible

–          Never go over your limit on your credit card, try to keep your balances well below the limit. Normally under 75% usage is the guideline

–          Reduce the number of credit cards and loan applications you make. Each time you make a credit inquiry, it shows up on your credit report. Multiple inquires on your credit bureau start to make lenders question why you are applying for so many? Are you being turned down and wanting to try another one? Looking for anyone that will give you credit? Numerous inquiries will also take points of your credit scores. This is another advantage of working with a broker, only one credit report is pulled and we can use it to apply with multiple lenders

3) Good Credit

This is the category everyone should strive to be in. Good credit always makes life much easier. Typically a beacon score of 680 or higher is considered to be in the “good” category. These are the people that always pay their bills on time, don’t rack up credit cards beyond that 75% usage and pay down their loans in an efficient manner.

4) Here are a few other things that affect your credit score **:

–          Age, address, phone number, dependents, length of time with same employer

–          Utilization

–          Type of credit

–          Level of indebtedness

–          Inquiries

–          Length of credit history

–          Might want to keep trades with long positive history

–          Employer on the credit bureau

–          Bad debt stays on for 7 years

Canada has 2 credit-reporting agencies: You can contact either one to get more information on your own credit history. Equifax Canada –  www.equifax.ca and TransUnion Canada www.transunion.ca. Its always a good idea to know what is happening on your credit report. It’s easier to clean up problems before you are under the time crunch of a live mortgage offer.

For more information on how to improve your credit score, contact me anytime!

Naomi 1

 Naomi Hamm, Mortgage Broker

 Office: (204) 727-2177

 Cell: (204) 724-7290

 Email: naomi_hamm@centum.ca

 

*source – CMHC website

**source – Equifax Canada

Commercial Mortgage Basics

A commercial mortgage is a loan made using real estate collateral to secure payment. It is a mortgage that a company or individual can use to purchase a property either for their own use or lease to a third party.

The following are some basics you should know before entering into the commercial loan process.

1)      Down Payment requirements – Commercial mortgages generally require 25% or higher for down payment, either for purchase or refinance, with up to 20 years amortization. The higher down payment serves as a buffer from potential losses in the event of loan default.

2)      Application fee – Typically there is a minimum 1% lender fee charged to the borrower. The lender charges this to process the documents in which the borrower details the financial situation for the loan.

3)      Given the complexity of commercial mortgages, higher legal and appraisal costs will be incurred. Depending on the project, appraisal cost can be in the neighbourhood of $1500 and up.

4)      The terms of a commercial mortgage depend largely on the overall strength of the deal. This includes positive personal credit rating, credit worthiness of the business, business’ current stability and profitability.

5)      Interest Rates for commercial mortgages are usually higher than residential mortgages. Interest rates will also be determined by the overall strength of the deal. The stronger the deal, the better the interest rate.

If you have any questions on how one of these items may affect you, please call us. It is important to get it right!

 

Should you take the largest mortgage possible?

Be it at the home purchase stage which means making the smallest down payment possible, or refinancing and taking out the maximum amount of equity, many Canadians today believe that they should have the largest possible mortgage.

It seems that gone are the days of working to retire debt free, and to own your home out-right.  It is this exact reason that the government has restricted the rules around mortgage lending, to try to curb the attitude that our homes are ATM machines.

We tend to forget that a mortgage is essentially assigning title to the home or granting ownership of the home to a lender.  Yes, equity remaining in the home is ours and we benefit from increased value, but we do not truly own that home until it is debt free.  If we do not pay the mortgage, the lender has the ability to remove us from the home.  For people who took advantage of 100% financing, until they are in a positive equity situation, they are in truth renting that home as the money they are ‘investing’ is paying off debt.

In some situations maximizing the equity in your home might make sense.  With a structured investment plan in place, you can make that equity work for you.  But it is also important to remember that mortgage interest is calculated as compounded interest.  I have yet to see an investment plan that so favours the investor by paying a return that is compounded at the same rate.  That is not to say that using equity as an investment tool is not smart, it just means that we have to be careful to place our funds in the right investment.

The same applies to using equity in your home for home improvements.  A renovation can dramatically increase the value of your home, but then also consider a few things before you proceed.  Are you doing the renovations in order for the home to better function for you and your family or are you doing it simply to increase value?  What are your plans with the home – live out your days there, or sell in the next five years?  All of these questions and many others need to be taken into account before you make the decision to move forward.

If you want to renovate your home because you want to improve functionality or better enjoy the aesthetics of the home; your  choices in finishes might be very different then if it is to get the home ready for sale.  For instance: I once saw a home for sale in a middle class neighbourhood which proudly advertised that the kitchen sink was a unique high end designer brand.  Out of curiosity I went online and looked it up… I was shocked to discover that the sink came with a price tag of just over $6,000.00 Canadian.  I also found a sink that looked almost identical for $900.00.

I can’t speak for everyone but I just can’t justify in my mind paying six thousand dollars on a sink, as I am sure most people would agree.  The point is, renovations need to make sense and need to fit the home and the neighbourhood if it is your intention to simply increase the value.

This is where speaking to professionals comes into play and illustrates the need to have someone who is truly Looking out for your best interest.  Be it consulting with a design professional, a realtor, investment advisor or a mortgage broker – we need to make sure that our decisions make sense for our own personal situations.  It is why shopping for a mortgage by only comparing interest rate can seriously impact our financial situation in the future.

Home ownership needs to be about much more than having the biggest and best home or a mortgage with the lowest interest rate, it has to make sense and align with our lifestyle and financial goals.  We need to be smart about the decisions we make today to better prepare for our future.  It is why at Centum Mortgage Choice we encourage you to look beyond just getting a mortgage and getting a home ownership solution.

 

IMG_2894 Chris Turcotte, Owner/Broker

 Office: (204) 727-2177

 Cell: (204) 720-4002

 Email: chris@christurcotte.ca

 

Why You Should Use a Mortgage Broker

Investors are increasingly prepared to go it alone in this slower market where even the big banks are quick to whip out low rates to compete. But there are remain key reasons for using mortgage brokers. WhichMortgage.ca outlines those considerations and explains why savvy investors continue to rely on brokers.

Mortgage brokers keep up-to-date with the latest product offerings from lenders and have intimate knowledge of various features and options, especially for investors often facing business-for-self restrictions and the intractable “Four-door Rule.”

6 reasons to use a broker

1. Choice: If you go direct to your bank, you will only be offered products from that financial institution. Mortgage brokers have relationships with several different lenders and are knowledgeable across each lender’s range of products.

2. Works for you: As small business owners, word-of-mouth makes or breaks mortgage brokers. Hence they are motivated to act in the clients’ best interests.

3. Skilled negotiators: Mortgage brokers’ skill and experience, combined with their relationships with lenders, help them negotiate rates that are often better than what borrowers could achieve on their own.  That remains true even in this competitive environment.

4. Goal-orientated:  Are you looking for the cheapest rate? Are you interested in paying off your loan sooner? Are you planning on buying another investment property? A mortgage broker will interview you to find out what you want out of your home loan and work to find the best product to suit your needs and home ownership goals.

5. Paperwork: Mortgage brokers help their clients complete and submit the mortgage application, as well as gather the documentation required by the lender.

6. Read the fine print: After you’ve received your loan approval, the mortgage broker can help you understand the document and conditions of the contract. As well, the broker can walk you through the next steps leading up to the closing of the mortgage transaction.

Source: WM, whichmortgage.ca 

4 Questions to ask your Mortgage Broker

Let your mortgage broker guide you through the process of securing a mortgage

If you’re in the market for a new home, chances are you’re also shopping around for a mortgage. It’s an intimidating process; after all, it’s probably the biggest financial commitment you’ll ever make. A certified mortgage broker can help you navigate the journey by “giving you unbiased advice to better understand mortgage products and how they affect you,” says Tracy Irwin, a Toronto-based mortgage broker. Ask the following four questions to get the most out of your first meeting.

How much can I afford?

“Usually people pick their homes before they pick the financing but it should be the other way around,” Irwin says. She advises determining what you can afford before delving into your home search. Typically, your total housing costs — including mortgage principal and interest payments and heating and housing taxes, should not exceed 32 per cent of your gross monthly income. Your total debt load, including your home costs and other debts such as credit cards and car loans, shouldn’t exceed 40 per cent of your gross monthly income. A mortgage broker looks at your current sources of income and  credit report to help you determine what type of home you can afford.

What should I take into account for the future?

According to research conducted by Genworth Canada, roughly 70 per cent of Canadians would be concerned about paying their mortgage if interest rates were to rise, or if their partner lost their job. “Everyone’s excited about buying a beautiful home but not really thinking about what that means long term,” Irwin says. What you can afford today might not be the most practical choice in years to come. Will you still be able to make payments if you factor the costs of parental leave and daycare into your monthly budget? What if your job situation changes or your interest rates rise? Your mortgage broker should take all these factors into account when negotiating your mortgage rate with lenders.

What type of mortgage should I consider?

Fixed and variable interest rate mortgages are the two most popular options. A fixed interest rate is set in stone when you sign for the mortgage; it won’t change for the entire term. A variable rate, however, will change according to market interest rates. While market fluctuations are hard to predict, “your broker can give you historical data and information around the economic cycle to help you make this decision,” says Irwin. “The advice we give changes based on what the economy is doing.” Your broker will also determine your tolerance for risk and advise you on the best option based on your financial fitness.

How much do I need for a down payment?

Many first-time home buyers assume they need to make a large down payment in order to get the best mortgage rate, but that’s not the case. Mortgage insurance products, such as Genworth Canada’s Homebuyer 95, let first-timers put as little as five percent down and still get the same competitive mortgage rates as those who put down 20 per cent or more. Your mortgage broker can help you decide how much of a down payment you’ll need to get the home you want while still maintaining your budget over the long term.

 

Source: Jennifer Goldberg, Genworth.ca

4 Homebuying Mistakes New Canadians Make

Avoiding common homebuying mistakes can make your transition to Canada that much easier. When Charles Waterman was finally able to purchase his first home in Canada, he was thrilled. “It was a feeling of accomplishment and satisfaction,” says the native Barbadian. “It gave me a sense of pride to live among other homeowners in Toronto.”

Now a real estate agent, Waterman helps other new Canadians become homeowners. In his line of work, he’s seen immigrants make the same errors as they search for their first property. Here’s his advice on how to avoid common mistakes new Canadians make when entering the real estate market.

Relying on outdated information

It’s a great idea to ask friends and family living in Canada for advice on the homebuying process, but keep in mind their knowledge may be out of date. “Many new Canadians rely on information from friends and family that have lived here a long time, not current information,” says Waterman. “Several years ago, new immigrants had to put down 35 per cent on a home, but today mortgage insurance allows new Canadians to put down as little as 5 per cent.”

Familiarize yourself with current mortgage regulations by contacting a local mortgage professional before starting your home search. Citizenship and Immigration Canada’s website is also a good source of up-to-date information for new homebuyers.

Overlooking benefits to new Canadian homebuyers

There are several assistance programs available to new Canadian homebuyers. For example, the federal Home Buyers’ Plan allows first-timers to withdraw up to $25,000 per year from a Registered Retirement Savings Plan (RRSP) to put towards the purchase of a home. “A new Canadian homebuyer can deposit funds into an RRSP for 90 days before buying a home and receive a tax benefit,” Waterman says.

Newcomers may also be also eligible for the First-Time Home Buyer’s Tax Credit, as well as other assistance programs that make buying a home more accessible.

Thinking it’s too hard to build credit history

“You can find a house you love and even if you have the money to put towards a down payment, you need to have established credit in Canada in order to qualify for a mortgage,” says Waterman. Some financial institutions don’t acknowledge international credit reports, which can make it difficult for newcomers to secure a Canadian credit card when they arrive. However, there are steps you can take to build your credit history in Canada. Demonstrate your financial reliability by opening a Canadian bank account and using it regularly. Paying down department store credit cards, car leases and other small loans also help show lenders that you’re able to make consistent payments.

Assuming a Canadian mortgage is out of reach

“New immigrants may believe that they’re unable to get a mortgage at all because they haven’t worked long enough in Canada,” Waterman says. But that’s not always the case. According to research conducted by Genworth Canada, more than half of new immigrants polled had successfully purchased a home within three years of arriving in Canada. If you have proof of a steady job, you moved because of a job transfer, or you’re working in the same field as you did in your home country, you may be eligible for a mortgage sooner than you think. Contact a local mortgage professional to discuss your options.

 

Source: Jennifer Goldberg, Homeownership.ca

 

5 Signs You’re Ready for Homeownership

You have poured over online listings, determined your “must have” home features and scoped out the market in your town. But are you really ready to become a homeowner?

You are, says Stuart Levings, Genworth Canada’s chief operations officer, if you’re doing these five essential things.

1) Saving at Least Five Percent for a Down Payment

Mortgage insurance programs, like Genworth’s Homebuyer 95, let first time buyers purchase their first home with as little as five percent down. Setting up a savings plan and budget can help you save that five percent sooner. “In absence of doing that, as we all know, money finds a way of leaving your wallet,” Levings says.

2) Budgeting for Extra Fees

Having your down payment set aside isn’t enough. “You also need to think about the costs of closing on a home, which can often run up to three percent of the cost of the home,” Levings says. Those extra costs could include title insurance, legal fees and a home inspection fee.

3) Doing Your Homework

Unless you already work in the world of real estate and mortgages, home buying education must be self-taught. You’ll need to understand the process and legalities of working with a real estate agent, making an offer, securing financing, closing a home and getting insured. Exploring helpful online resources such as centummortgagechoice.com will help you find tips, mortgage calculators and useful information.

4) Building a Good Credit Score

A low credit score can affect your ability to buy a home “quite severely because there is a minimum score required,” Levings says. According to Canadian government regulations, 600 is the lowest score you can have to qualify for a mortgage. But Levings warns “many insurers will not even go that low depending on other criteria, such as the amount of money you’re putting down, because the more you put down, the less risky you are in the eyes of a lender.” He recommends going into a home search with a credit score of 650 or higher. A solid history of paying debts such as a car lease and credit card accounts with limits upwards of $1500 can boost your score.

5) Getting the Right Advice

“You need to deal with a professional realtor and mortgage broker,” Levings advises. “Brokers are a good source of information for your mortgage options.” A financial planner can also help you create a realistic budget and save for that down payment.

 

Source: Jaclyn Tersigni, Genworth.ca

 

 

Thinking of Building? – Construction Loan Tips

Building a home is a complex process that involves multiple professionals including builders, lawyers, appraisers and lenders. To make sure this all goes smoothly, you want to find a mortgage broker who understands the construction process as well as the complexity of the mortgage procedure.

Required Documentation for Construction Mortgage:

–          Copies of all quotes

–          Plans and House Specs

–          Confirmation of the builder’s New Home Warranty

–          Offer to Purchase for land and Copy of Title to prove ownership as land must be owned before construction begins

–          Full blueprint appraisal will be requested by the lender with 4 additional inspections at different stages of construction. All are done at the clients cost

 There are 3 main categories of new construction financing:

–          Completion Mortgage – Buying a newly constructed home

–          Self Build – Building a house yourself

–          Progress Draw Mortgage – Hiring a Contractor to build for you

For a completion mortgage, you purchase your home brand new and pay through way of mortgage when the build is 100% complete.

For both self builds and using a contractor, you will require a Progress Draw mortgage. Funds are advanced in intervals as the house is being built. There are usually 4 draws, each requiring an inspection which will detail the percentage of completion prior to advancement of funds.

These 4 draws must follow certain completion stages:

–          First Advance: excavation, foundation , slab, beams, columns, joists and sub-floor

–          Second Advance: backfill, framing, sheeting, roof roughed in, electrical, plumbing, insulation & vapor barrier, roughed in heating, heating equipment and exterior doors & windows

–          Third Advance: exterior finish, basement floor, interior doors, interior wall and ceiling finish

–          Final Advance: finish floor, complete electrical (including fixtures), complete plumbing (including fixtures), finish carpentry, painting, site work & improvements

Draws will be issues based solely on the appraisers determining percentage complete on inspection report. For example, if the property is valued at $300,000 and the appraiser indicates that at the first advance 9% of the build is complete, then the first draw payment would be as follows:                    $300,000 x 9% = $27,000

Features of a Construction Mortgage:

–          Buyer owns the land that the house is being built on

–          4 draws/advances of funds

–          Verification by an appraiser in the form of a report completed at the end of each stage

–          Down payment required upfront – the land value cans sometimes be used for down payment

–          Interest is charges during construction, varying from lender to lender. Typically at Prime + 2-4% with a time frame of completion of 6-9 months

It is important to keep in mind:

–          You must qualify with the lender for 15% over the blueprint appraised value to cover any possible overages.  Ex.  Value  = $300,000 x 15% = $345,000

–          Ensure you have additional funds available as you may be required to pay any short falls in payments to the contractors during the draw/advance process. These monies will come back to you upon completion of the project.

Finding a mortgage broker who is experienced and knowledgeable with construction mortgages will benefit you through the building process. An experienced broker will walk you through all the steps and assist with any hurdles that may come up along the way.

If you have any questions on how one of these items may affect you, please call us. It is important to get it right!

Beef with the Bank?

It has been all over the news this past week, Canadians across the country are outraged that our banks would outsource jobs to temporary workers and lay off people to do so.  Not only are people crying foul, but if rumours are true, many are closing their accounts with the big five and moving their business to Credit Unions and other smaller institutions.

Some in the media have argued that it is the nature of being a part of a global economy.  That might be true and it might not be.  The realtiy for many people is that it does not, and will not, diminish the emotion behind the outrage felt by so many people.

In Manitoba we are very fortunate in that we have options because  there are other banks and institutions that can provide us the service we require.  It all depends on personal choice and if you decide that you can’t support the big five, that is a decision that only you can make.

Choice is something that mortgage brokers at Centum Mortgage Choice give you when you are seeking home financing.  Instead of having to select from one brands choices, you get to choose from multiple options.  It is much like eating on one restaurant as opposed to being in an area where there are many restaurants.  Our brokers pull all of the different options together for you, and they help to ensure that the mortgage you end up with fits your goals, lifestyle and tolerance for risk.  We can’t forget that they also typically can get you a lower rate than your bank will give you!

At Centum Mortgage Choice we pride ourselves on being considered one of the most innovative companies in the mortgage industry in Manitoba.  With our 15 representatives in Manitoba we have access to the lowest rates and a huge selection of products for you.  We strongly believe that every Brandonite and Manitoban serves to have the right to experience financial freedom, and it is our job to give you the mortgage advice so that you can do just that.


IMG_2894 Chris Turcotte, Owner/Broker

 Office: (204) 727-2177

 Cell: (204) 720-4002

 Email: chris@christurcotte.ca