If you’re looking to purchase a home in Parkland County, Stony Plain, Spruce Grove or the Edmonton area, you might be wondering how you can reasonably determine what your price range is. Though you may have the ability to afford up to a particular amount, you should also ensure that you don’t overextend yourself. Make sure to leave room for the “just-in-case” expenses, and follow these tips to ensure you are remaining within your reasonable and affordable budget.

Get Expert Advice: Talk With Your Mortgage Specialist

First things first, before you begin your property search, whether you’re looking for Parkland County acreages, Edmonton acreages, or surrounding area, you should ensure you have an open and honest discussion with your mortgage broker or the mortgage specialist at your bank. When you are preparing for your meeting, ensure that you have your employment and income documentation to bring with you, as well as your previous year’s tax return. You should also have a list of any monthly expenses, and supporting documentation, such as information on car payments, student loans, and other monthly expenses.

Be sure you are honest and provide complete information to your mortgage broker regarding your income and monthly expenses, as this will help them determine what your affordable and realistic purchasing budget is.

Don’t Forget the Extras: Factor In Additional Expenses

When you are planning your affordable budget for your Spruce Grove real estate, either with or without your mortgage broker, you’ll want to ensure that you consider additional expenses on top of the basic mortgage costs. Discuss any additional mortgage insurance costs with your broker, as well as expenses such as maintenance fees and property taxes. Each of these aspects should come together to help you ascertain what you can reasonably afford, and, when considering these additional factors, your actual home budget may be tightened. Therefore, be sure not to forget the extras!

Have Foresight: Consider Closing Costs From the Start

Since your down payment amount on your mortgage for Parkland County real estate can significantly affect your monthly mortgage costs, you’ll want to ensure that you consider the amount of closing costs well before you get to that point in your real estate transaction. A possible problem arises when these costs aren’t factored into the equation from the start, and the buyer has to pull away from his down payment lump sum to come up with the money, thereby increasing his monthly expenses and perhaps overextending him financially. Therefore, ensure you are well prepared for the closing costs on your Stony Plain real estate, and get the figures from your mortgage broker or REALTOR® at the start.

As long as you’ve done your research on the matter, and factored in all of the aspects of your income and monthly expenses, as well as the additional fees of the real estate transaction itself, you will surely arrive at a number that is reasonable and affordable. Get your expert advice, do your research, and have foresight, and you should be in great shape!

If you’re still unsure, I am always willing to answer your Edmonton area real estate transaction questions! Call or text me at 780-910-9669, email me at barry@barryt.ca, or contact me here.

Do you have a mortgage on your Spruce Grove, Stony Plain, Parkland County or Edmonton area home coming up for renewal?  Do you expect the process to be just another rubber-stamping, or could there be problems?  A piece of legislation that came into effect on June 21, 2012 could cause you some grief if you have ever had any issue in your credit history. 

The mortgage debt crisis in the US of a couple years ago had people on this side of the border calling for tight controls on lending to prevent a similar calamity in Canada.  The Office of the Superintendent of Financial Institutions (OSFI) responded with several initiatives, such as decreasing the length of mortgage amortization to a maximum of 25 years from the previous 35 years, and limiting borrowing on a home equity line of credit to 65% of the home’s value from the previous 80%, among other things.  (See my blog articles:  “Changes to Mortgage Rules”  and “HELOC Rules Changing”)

A guideline from the OSFI that went into effect on June 21, 2012 (Guideline B-20 – Residential Mortgage Underwriting Practices and Procedures) is apparently being interpreted by some lenders to mean that a heavier hand is needed in assessing applications for mortgages and their renewals.  This means that people who were delinquent on bills in the past but who have now brought payments up to date and are now prepared to enter into a home purchase with an acceptable down payment, good income and so on are being denied a mortgage or a renewal of their mortgage.

Reading through the guideline and its accompanying information would suggest that there is a very broad base for interpreting it, making the scenario of sweeping mortgage denials possible.  But the guideline itself, as policy for Federally-Regulated Financial Institutions (FRFIs) to formulate their own rules and regulations around their money lending practices, contains cautionary wording that would seem to prevent such refusals, urging FRFIs to be reasonable in their procedures:

“Background and Credit History of Borrower

FRFIs should ensure that they make a reasonable enquiry into the background, credit history, and borrowing behaviour of a prospective residential mortgage loan borrower as a means to establish an assessment of the borrower’s reliability to repay a mortgage loan.

For example, a credit bureau score, offered by the major credit bureaus, is an indicator often used to support credit granting. However, a credit score should not be solely relied upon to assess borrower qualification, as such an indicator measures past behaviour and does not immediately incorporate changes in a borrower’s financial condition or demonstrated willingness to service their debt obligations in a timely manner.”

Fortunately, there are many lenders who recognize that their job is to do what they can to help their clients!  Fran Jenkins, Mortgage Specialist with ATB Financial in Spruce Grove, comments:

“First, I do not see any drastic tightening of credit lending at this time.  I have been aware in the past 3 years of such lenders as MCAP and Resmor Trust requesting full payment of mortgage funds at time of renewal.  These companies tend to operate differently than Chartered Banks and ATB Financial.

“Low credit scores do not automatically cause an application to be declined.  That is why there are individuals such as myself, with experience in lending, that can explain the reasons for the credit scores and do a full financial analysis to support an application.  Otherwise, if system generated, very few applications would be approved…

“I agree with the statement that slow payments is cause for concern on a lending application however there are many reasons why a client may have these slow payments.  Yes, keeping one’s payments up to date is important however not always possible.  This is what your Mortgage Specialist must understand.

“Today is no different than 20 years ago in the lending environment. You will be granted a Mortgage and/or Mortgage Renewal going thru the same process…..what is imperative is having the right Mortgage Lender supporting you as a client and going above and beyond expectations to make sure you are being presented in the correct manner.”

Fran Jenkins goes on to point out that it is true fewer high-risk applications are being approved these days, but even in boom times these borrowers should not have been approved.  High risk clients are those with bad credit who have neglected making payments for extended periods of time or who have even refused to pay back debts. 

Bottom line?  Chances are, if you have been conscientious about maintaining a good credit history and have a decent record of taking care of your debt load, the odd slip won’t be held against you.  And the trick is to shop around for a lender who will work with you to find the right mortgage for you.

Thanks to Fran Jenkins of ATB Financial for taking the time to provide her wisdom on this complicated topic!  You can contact her here:

FRAN JENKINS, B. Comm

Mortgage Specialist, ATB Financial

Cell  780 722 2266 |  Fax  1 888 722 8291

Toll Free 1 855 375 5022

EMAIL: FJenkins@ATB.com

Comments or questions about this article?  Call or text me at 780-910-9669, email me at barry@barryt.ca, or contact me here.

Do you have a HELOC (Home Equity Line of Credit) against your home in Spruce Grove, Stony Plain, Parkland County, the Edmonton region or elsewhere?  This valuable lending tool has many practical uses:

• Investment borrowing
• Borrowing for education
• Rental property investment
• Home improvements
• Debt consolidation
• Alternative to higher-rate loans
• Down payment source for a second property
• Emergency backup fund

At the moment a HELOC can allow homeowners to borrow up to 80% of their home’s appraised value at very reasonable interest rates.  But that is about to change within as short a time period as 3 weeks.

Fran Jenkins, Mortgage Specialist at ATB Financial in Spruce Grove, advises that the OSFI (Office of the Superintendent of Financial Institutions in Canada) has set out new lending guidelines for all federally regulated lenders to limit new HELOCs to 65% Loan-to-Value.  Banks have until the end of their fiscal years to comply, and for most banks in Canada, that means October 31, 2012 (up to March 31, 2013 for other institutions such as credit unions).  Expect to see most banks moving on this well before the official deadline.

While OSFI says that existing HELOC holders will be grandfathered, you may want to check with your bank to ensure that your HELOC is set up the way you want it, especially if you need a HELOC equaling 66% to 80% of your home’s value.

The new rules also affect readvanceable mortgages.

For more details on the new mortgage rules, read the article “OSFI Toughens Mortgage Underwriting” from Canadian Mortgage Trends.com.

Comments or questions about this article?  Call or text me at 780-910-9669, email me at barry@barryt.ca, or contact me here.

Have you been thinking now is the time to buy that new home in Spruce Grove, Stony Plain, Parkland County or the Edmonton area?  Make sure you read about the new rules for government-backed insured mortgages going into effect July 9, 2012. 

1)  Maximum amortization reduced to 25 years.  Until recently, amortization periods could be as long as 35 years.  That dropped to 30 years in 2011 but will now max out at 25 years.  The government points out that this allows Canadians to pay off their mortgages faster, meaning a faster build-up of equity and the payment of much less interest, but the bad news is many Canadians may no longer qualify for a mortgage.

2)   Maximum amount Canadians can withdraw in refinancing their mortgages decreased to 80% from 85% of the value of their homes.

3)   Maximum gross debt service ratio set at 39% and the maximum total debt service ratio at 44%.

4)   Government-backed insured mortgages only available to homes with a purchase price of less than $1 million.  Homes costing less than $1 million can still be purchased with 5% down but those above $1 million will require a down payment of 20%. 

Read the official Government of Canada announcement.

Wondering how to finance your home purchase?  I can help you find a lender.  Call or text me at 780-910-9669, email me at barry@barryt.ca, or contact me here.

Looking to buy your first home in Spruce Grove, Stony Plain, Parkland County or the Edmonton region?  The provocative question in the title of this blog entry is the opening line  of “Strategy for first homes“, an article from the January 28, 2012 edition of the Edmonton Journal (reprinted from the Financial Post).

The Canadian RRSP allows tax-payers to save money for retirement while getting a break on taxes.   Once withdrawn, taxes must be paid, and the amount can never be put back into the RRSP – with one exception.  First-time home buyers needing money for a down payment are allowed to borrow up to $25,000 (tax-free) from their RRSP funds, and they have up to 15 years to repay the amount.

But!  After reading the article, first-time home buyers might think twice about doing this.  The article explains with specific examples the permanent financial blow this deals to one’s retirement fund and subsequent retirement income.  Because the RRSP contains pre-tax dollars, the potential earning power of this money is greater than funds saved in other ways, and the loss of earning power is therefore greater also.  Loss of growth in one’s savings for retirement might be at least partially off-set by savings occurring from having a smaller mortgage, but prospective home buyers will need sharp pencils to calculate if this works for them.

Read the full article to see if this strategy is the best choice for you.

I work with mortgage brokers who can help you figure out the best way to get into the house you want.  Call me today at 780-910-9669, email me at barry@barryt.ca, or contact me here.

If you’re shopping for a mortgage in Spruce Grove, Stony Plain, Parkland County, the Edmonton region, or elsewhere, you have no doubt been faced with choosing between a floating, or variable, mortgage rate, or a rate that is fixed for a period of time.  Five-year fixed-rate mortgages are especially popular because they provide mortgage holders the security of knowing exactly how much they will pay over the term of the mortgage.  People choose fixed-rate mortgages despite the fact that variable-rate mortgages have been shown over time to save significant amounts of money.

But a recent article on the CBC News website entitled “5 reasons why a fixed-rate mortgage could be your best bet” could make the variable-rate mortgage crowd rethink their choices.

The article points out several factors that suddenly make fixed-rate mortgages attractive for reasons other than no surprises about the amount of your payments.  Posted mortgage rates are being discounted more than they used to be when a consumer locks in for 5 years.  Secondly, the gap between the higher rate for fixed-rate mortgages and the discounted variable rate is narrowing.  That is, the variable rate is not being discounted as much, and fixed rates have dropped.  What’s more, mortgage brokers may be able to negotiate a fixed rate that is considerably lower than the fixed rate offered by the big banks, a rate that is in fact only slightly higher than the variable rate.  Combine these bargains with a variety of fixed terms, some as short as two years, and all of a sudden the fixed-rate mortgage is a contender!

The article concludes by stating that rates are and will likely remain at historic lows so consumers can’t really go wrong no matter what kind of mortgage they choose.  Please read the full article for all the details.

I work with several mortgage brokers and would be happy to help you get pre-approved for a mortgage prior to showing you just the right property!  Call me at 780-910-9669, email me at barry@barryt.ca, or contact me here.

Technology has changed the way we do almost everything, including home buying, whether in Spruce Grove, Stony Plain, Parkland County, the Edmonton area or elsewhere.  Here are a few smartphone apps home buyers and investors might find useful.  (Many are available free for all types of smartphones; check with your app store.)

SHOPPING FOR HOMES

Google Maps and Google Earth for mobile can show you where homes are located, but you can learn much more about a property, giving you a feel for the neighborhood, the quality of other housing, accessibility, distance from busy streets and more.

Yelp Mobilewith its reviews of businesses can give you some idea about what a neighborhood has to offer (shopping, restaurants, gas stations, etc.).

Realtor.cais the official mobile app of the Canadian Real Estate Association (CREA) with access to about 350,000 Canadian properties for sale on the Realtor.ca website.  Search using your smartphone’s built-in GPS for properties near your location or a specific address; receive listing details, photos and agent contact info.

Zoocasa[iPhone; free].  Similar to Realtor.ca.  Search for properties based on your current location and receive full descriptions of properties.  This app also allows users to email listings from within the app.

Home Tracker [iPhone; $3.99].  Keep track of all the details of the homes you visit with your REALTOR®.  “HomeTracker allows you to document each property in detail as you visit it. Properties are grouped into a Tour, which is a set of homes you visited with your real estate agent, or homes in a specific area. In addition to storing property information, HomeTracker can easily take Photos, Map a property, E-mail property information, and perform a Google search!”

MORTGAGE APPS

There are plenty of mortgage calculator apps out there but most are not Canadian.  One with some limited application to Canadian situations is Canadian Mortgage Calculator.

CIBC Home Advisor app provides mobile access to mortgage tools, advice, neighborhood information.

“The CIBC Home Advisor App for iPhone and BlackBerry lets home buyers:

* Track and compare properties visited by taking and storing photos and completing a home buyer’s checklist for each home

* View neighborhood maps and get immediate access to average property valuations and trends

* Request detailed neighborhood reports for properties of specific interest

* Post, tweet, text or email details of the properties and neighborhoods you are considering to share them with family and friends in real-time

* Access four different built-in calculators to help determine what the customer can afford, if they should rent vs. buy, the equity in their home, or mortgage payment options

* Request a CIBC pre-approved mortgage certificate for financing to lock in an interest rate

* Contact the nearest CIBC Mortgage Advisor and arrange to meet to get advice on mortgage options.”

RECalc – Real Estate Mortgage Loan Calculator [iPhone; free]  “RECalc is a Real Estate Mortgage Loan Calculator that is also a traditional Mathematical Calculator.  You can use RECalc to calculate the Monthly Payment, Term, Interest Rate or Loan Amount for a loan, as well as standard mathematical calculations as you would in any other calculator. Once you modify any of the Calculation variables you can re-calculate any of the other values. You can also figure in Annual Property Tax, Homeowner’s Insurance and Mortgage Insurance, as well as a Down Payment amount/percentage.  RECalc supports semi-annual compounding (Canadian Amortization) in addition to normal monthly compounding.”

MISCELLANEOUS

Flashlight [iPhone; 99¢].  Turn your iPhone into a flashlight!   This app allows you to choose from a variety of styles and colors.  For even more features, try Flashlight+ [also 99¢]

Evernote [free; available for all smartphones and computers].  This handy app allows you to create and save all kinds of documents:  text notes, web pages, video clips, your digital photo scrapbook, and much more.  Text-recognition software makes for easy searching.

Awesome Note (+ToDo) [iPhone; $3.99].  Get organized with this versatile and customizable app that allows you to create regular notes, notes with photo attachments, To Do notes, Post-It style Quick Memo for quick jotting, daily diary, travel diary checklists, shopping lists, schedules, and more.  You can send notes as email and even synchronize your notes with Google Docs and Evernote.

Do you know of a great app that should be added to this list?  I’d love to hear from you.  Call me at 780-910-9669, email me at btwynam@telusplanet.net, or contact me here.

Ever heard of Interest Rate Differentials, or IRDs?  If you haven’t, and your mortgage contract contains a clause referring to it, you could end up with much, much less from the sale of your home in Spruce Grove, Stony Plain, Parkland County or the Edmonton area than you had anticipated.

I just re-read an email from Frank DeAngelis, a Spruce Grove lawyer (contact information below) who often handles the legal side of home sales and purchases for my clients.  Although the email was written a year ago, its content and advice are just as relevant in today’s real estate market:

“In the last few months the Real Estate Department at Main Street Law Offices has dealt with some very surprised and upset Vendors relating to the amount of their mortgage pay-outs. 

“Most Vendors seem to be expecting a three month interest penalty if they pay their mortgage out early.  However, MOST mortgages call for a three month interest penalty or an interest rate differential (“IRD”), whichever is HIGHER.  This higher cost effectively reduces the equity that Vendors have in their existing properties, making their next purchase difficult to complete as they were expecting more equity from the sale of the old house. 

“IRDs can be substantial and are a current concern due to the large decreases in interest rates over the past year.  For example, take a $300,000.00 five year mortgage taken out in 2007 at 6.5%.  With current rates at 4% or less, the pay-out penalty today with three years remaining on the term is $300,000.00 X 2.5% X 3 = $22,500.00

“We strongly recommend that you insist on your clients getting an estimated pay-out statement from their banker, including the IRD pay-out, in any circumstances where reliance is being based on an estimate of equity in the sale property.  This will help avoid closing surprises and assist us greatly in achieving ON TIME ^TM closings for your referrals. 

“Sometimes the bankers can help resolve the issue by “porting” the mortgage.  Each lender has different policies, so each case has to be addressed on its own merits.  We suggest you involve the bankers early to see what they can do to make this issue less of an impact on closing.” 

Frank C. DeAngelis, Barrister & Solicitor