17 May

Thinking About Investing in a Rental Property?


Posted by: Kim Banting

You might be surprised to learn that you don’t need to be one of the uber-rich or make six figures to have a second property. You just need to have knowledge, determination and financial planning!

If you are considering purchasing that second property to use as a rental property, there are a few things to consider:

1. The minimum down payment required is 20% of the purchase price, and the funds must come from your own savings; you cannot use a gift from someone else.

2. Only a portion of the rental income can be used for the qualifying and determining how much of a mortgage you can afford to borrow. Some lenders will only allow you to use 50% of the income added to yours, while other lenders may allow up to 80% of the rental income while subtracting your expenses. This can have a much higher impact on how much you can afford.

3. Interest rates usually have a premium on them when the mortgage is for a rental property versus a mortgage for a home someone intends on living in. The premium can be anywhere from 0.10% to 0.20% on a regular 5-year fixed rate.
Rental income from the property can be used to debt service the mortgage application, but do bear in mind that some lenders will have a minimum liquid net worth requirement outside of the property. Also, if you do eventually want to sell this property, do note that it will be subject to capital gains tax. Your accountant will be able to help you with that aspect if you do decide to sell in the future.

Prior to taking on a secondary property, you will need to have your down payment in order (whether from savings or home equity) based on the minimum requirements, and also have sufficient credit score to qualify (680 or higher). In addition to the down payment, you will also need to pass the stress-test and prove that you can financially carry both mortgages.

If you are looking to purchase a rental property, give me a call before you start. I would love to help review your financial situation, current mortgage and equity, and help you make a plan. The keys to success are right around the corner with a little bit of expert advice!


13 Apr

Feeling Lost with Mortgage Terminology? This May Help.

Mortgage Tips

Posted by: Kim Banting

Buying a home is one of the most important financial decisions you will make. It’s common for a first-time homebuyer, or even someone who is experienced in the process, to feel overwhelmed when it comes to industry jargon.

To help you understand the process and have confidence in your choices, I have put together some of the more common mortgage terminology you will encounter during the home buying process! While I don’t expect you to read all of these now, I hope that this will be a helpful resource for you throughout your home ownership journey.

General Mortgage Terms

Amortization: The number of years that you take to fully pay off your mortgage (not the same as your mortgage term). Amortization periods are often 15, 20, 25 or 30 years long.

Assuming a Mortgage: Taking over the obligations of the previous owner’s (or builder’s) mortgage when you buy a property.

Buy Down Rate: The portion of the interest rate on a buyer’s mortgage that you assume when they buy your home. If you’re selling your home and the prospective buyer doesn’t like the interest rate on their mortgage, you can offer to add a certain percentage of it onto your existing mortgage. You can add a maximum of 3%.

Closing Date: The date on which the sale of a property becomes final and the buyer takes possession of the property.

Down Payment: The money that you pay up front for a house. Typically range from 5%-20% of the total value of the home.

Home Insurance: Insurance to cover both your home and its contents (also referred to as property insurance). This is different from mortgage life insurance, which pays the outstanding balance of your mortgage in full if you die.

Inspection: The process of having a qualified home inspector identify potential repairs to the property you are interested in and their estimated cost.

Lump Sum Payment: An extra payment that you make to reduce the amount of your mortgage principal.

Mortgage: A loan that you take out in order to buy property. The collateral is the property itself.

Mortgage Life Insurance: This form of insurance pays the outstanding balance of your mortgage in full if you die. This is different from home or property insurance, which insures your home and its contents.

Pre-Approved Mortgage Certificate: A written agreement that you will get a mortgage for a set amount of money at a set interest rate. Getting a pre-approved mortgage allows you to shop for a home without worrying how you’ll pay for it.

Offer to Purchase: A legally binding agreement between you and the person who owns the house you want to buy. It includes the price you are offering, what you expect to be included with the house, and the financial conditions of sale (your financing arrangements, the closing date, etc.).

Porting: Transferring an existing mortgage from one home to a new home when you move. This is known as a “portable” mortgage.

Pre-Payment: Repaying part of your mortgage ahead of schedule. Depending on your mortgage agreement, there may be a prepayment cost for pre-paying.

Refinancing: The process of paying out the existing mortgage for purposes of establishing a new mortgage on the same property under new terms and conditions. This is usually done when a client requires additional funds. The client may be subject to a pre-payment cost.

Renewal: Once the original term of your mortgage expires, you have the option of renewing it with the original lender or paying off all of the balance outstanding.

Term: The length of time during which you pay a specific rate on the mortgage loan (i.e., the number of years in your mortgage contract). This is different than amortization; mortgages are amortized over 20-25 years, with a shorter term (typically 6 months to 5 years). After the term expires, the interest rate is usually renegotiated with the lender.

Mortgage Types

Closed Mortgage: This type of mortgage must usually remain unchanged for whatever term you agree to. Prepayment costs will apply if you payout, renegotiate, or refinance before the end of term.

Convertible Mortgage: These offer the same security as a closed mortgage, but allows you to convert that to a longer, closed mortgage at any time – without prepayment costs. Typically associated with fixed rate mortgages.

High-Ratio Mortgage: This is the mortgage obtained when you have less than 20% of the total purchase price to put down as your downpayment. These mortgages must be insured, typically through CMHC, Sagen or Canada Guaranty.

Open Mortgage: This type of mortgage may be repaid, in part or in full, at any time during the term without any prepayment costs.

Rate Types

Fixed Rate Mortgage: An interest rate that does not change during the entire mortgage term.

Variable Rate Mortgage: An interest rate that will fluctuate in accordance with the prevailing market prime rate during the mortgage term.

Mortgage Rate: The percentage interest that you pay on top of the loan principal. For example, you may take out a mortgage of $100,000 at a rate of 12%. Your monthly payments will consist of a portion of the original $100,000, plus 12% interest.

Closing Costs

These are costs that are in addition to the purchase price of a property and which are payable on the closing date, such as the following:

Appraisal: The process of determining the lending value of a property. There is usually a fee to have an appraisal done.

Interest Adjustment: The amount of interest due between the date your mortgage starts and the date the first mortgage payment is calculated from. Sometimes there is a gap between the closing date of your home purchase and the first payment date of your mortgage, so an extra payment may be required to cover this. The payment is generally due on your closing date. You can avoid all this by arranging to make your first mortgage payment exactly one payment period (e.g., one month) after your closing date.

Land Transfer Tax: Tax that is levied (in some provinces) on any property that changes hands.

Legal Fees and Disbursements: Some of the legal costs associated with the sale or purchase of a property. It’s in your best interest to engage the services of a real estate lawyer (or a notary in Quebec).

Prepaid Property Tax and Utility Adjustments: The amount you will owe if the person selling you the home has prepaid any property taxes or utility bills. The amount to reimburse them will be calculated based on the closing date.

Property Survey: A legal description of your property and its location and dimensions. An up-to-date survey is usually required by your mortgage lender. If not available from the vendor, your lawyer can obtain the property survey for a fee.

Sales Taxes: Taxes applied to the purchase cost of a property. Some properties are sales tax exempt (GST and/or PST), and some are not. For instance, residential resale properties are usually GST exempt, while new properties require GST. Always ask before signing an offer.

If you are looking to purchase a new home (or your first one!), please don’t hesittate to reach out to me directly to set up a virtual appointment or phone call to discuss your situation. I would be happy to help you find the best mortgage to suit your needs!


25 Mar

Are You a First Time Home Buyer?

Mortgage Tips

Posted by: Kim Banting

Purchasing your first home is truly one of the most exciting and rewarding moments in life; regardless of whether you’re buying an apartment, townhouse, rancher or two-story family house. Not only is buying your first home an amazing accomplishment that comes with a great sense of freedom and security, but it is also a great step into the real estate market and can provide you equity and a leg-up towards future expansion.

As amazing as it is to be a first-time home buyer, it is important to remember that this is likely the largest financial decision you will ever make. There are a few questions you can ask yourself to make sure you’re ready to take this incredible leap!

1. Are you financially stable?
2. Do you have the financial management skills and discipline to handle this large of a purchase?
3. Are you ready to devote the time to regular home maintenance?
4. Are you aware of all the costs and responsibilities that come with being a homeowner?

If you’ve decided to take the plunge, you need to start by figuring out what you can afford. A great place to start is my app – My Mortgage Toolbox – which you can find on my website. This tool can help give you an idea of what you can afford, so you can start preparing your budget and down payment!

The minimum down payment on any mortgage in Canada is 5 percent but putting down more is beneficial whenever possible as it will lower the amount being borrowed. However, if you can only afford the minimum that is perfectly okay! Just remember, if you are putting down less than 20 per cent to purchase your home, default insurance will be mandatory to protect the investment.

Once you have your down payment, you will want to go through the pre-qualification and pre-approval processes for mortgage financing. Now this process is NOT a mortgage approval, but it will give you a head start and allows you to lock in at a particular rate and term (for up to 120 days) while you shop! While temptation will be to start looking at the very top of your pre-determined budget, it is important to remember that there will be fees, such as mandatory closing costs, and a little wiggle room is always a good idea.

As your dedicated mortgage professional, I can help you through the mortgage process. From pre-qualification to pre-approval to secured financing, I would be happy to lend my expert advice to your situation. I can also help you track down the best mortgage product, and rates, for you.

In addition, I have many contacts in the industry and would love to connect you with a realtor who will be your advocate while showing you homes and ensure that you do not encounter any hidden roadblocks.

When you are ready to take the next steps, feel free to contact me. I would be honored to help you get started on your home ownership journey!


19 Mar

5 Considerations Before Buying a Rural Property

Mortgage Tips

Posted by: Kim Banting

For the past year, the number of people looking to buy homes outside of the city has skyrocketed. Many want more space and are looking to rural properties, so I wanted to pass along some information to you!

Before you dive into country living, there are a few things you should know:

Check The Zoning: When it comes to buying rural property, it is important to check how the property is zoned. This is vital as zoning will determine how you are able to use the land, as well as what types of buildings are allowed and where they can be located. Is the property zoned as “residential,” “agricultural” or perhaps “country residential”? Depending on the zoning, it could affect the lenders available to you and what you qualify for.

Property Boundaries: Once you have determined how a property is zoned, it is important to look at the land. Getting a survey early in the process will help you mark the exact boundaries of your property to avoid future disputes. This is also a good time to get an appraisal done on the land and its value.

Considering the Land and Your Mortgage: What many people don’t realize is that land has a drastic effect on qualifying for a mortgage and what you can borrow. In fact, most lenders will mortgage: 1 house, 1 outbuilding and up to 10 acres of land. If you have a second building or extra land that is being purchased, you will need to consider additional funding on top of your typical 5% down payment.

Water and Sewage: When it comes to rural living, many people draw water from private wells and utilize septic tanks for sewage. To ensure everything is safe and in working order, it is a good idea to have an inspection done on the septic tank and water quality as a condition on the purchase offer. Due to the nature of these properties, be advised that inspections may cost more than it would in the city, but it is important as lenders may request potability and flow tests.

Coverage Matters!: When it comes to rural properties, there are two types of insurance that you should consider: Home Insurance and Title Insurance. Home Insurance will protect you from any loss or damage to buildings on the property, whereas Title Insurance will cover you for unpredictable or undetectable issues that can affect rights of ownership such as errors in the survey, errors from the lawyer, encroachments, unregistered easements or other encumberances.

If you are still thinking about purchasing a home in a rural area, I would be happy to help you determine your options. I know several realtors who specialize in rural properties and I can also help ensure you understand any differences in the mortgage process and qualifying that come with rural purchases.


12 Mar

4 Mistakes to Avoid Before Your Mortgage Loan Closes

Mortgage Tips

Posted by: Kim Banting

Ok, so you’ve gotten a pre-approval to buy a home! You are excited and ready to start shopping. But slow your roll… there are specific requirements that you must continue to meet until your closing date, or you risk the lender denying to forward your loan.

1. Change in Employment Status or Income
When you apply for a mortgage, you will need to show proof of employment and income. This includes not only how much you earn, but a history of employment that should go back at least 2-3 years. Your mortgage application was approved based on the employment information you provided and any change in this information may impact your ability to qualify for the same loan amount. If the lender doesn’t think you can still afford to make the monthly payments in the pre-approval, then your application will need to be recalculated.

2. Applying for Additional Credit
Your credit score is used to help determine the rate and amount you are qualified to borrow. The higher your credit score, the better rate you will qualify for. With that in mind, this is not the time to finance a new car or apply for a new line of credit or personal loan. This will impact both your credit score and your debt to income ratio and could cost you your pre-approval.

3. Missing Bill Payments
As I mentioned, your credit score and debt to income ratio are major factors in determining the mortgage loan amount you can borrow. Paying your bills on time is one of the most important factors in maintaining a healthy credit score and debt to income ratio. Your credit score decreases and debt ratio will change when payments aren’t made as agreed upon and the lender will see you as a higher risk of default. I mean, if you aren’t making your bill payments, why would you make your mortgage payments? Paying your bills on time is one of the simplest ways to ensure the pre-approval is maintained.

4. Change in Spending Habits
You may think that this is a good time to start shopping for new furniture for your new home. However, an increase in your spending during this time can change your debt to income ratio, and can cause a lender to revoke the pre-approved amount. It is important to not change your spending habits drastically during your pre-approval. Is racking up additional credit card debt worth losing your dream home?

The bottom line is that a mortgage pre-approval doesn’t mean your loan is in the bag. Any of the above factors can give the lender pause and concern about your ability to repay your loan and then you’ll be left starting the approval process over and likely getting less desirable terms.


3 Mar

What’s the Better Investment?

Mortgage Tips

Posted by: Kim Banting

I’m not a financial advisor, nor am I an expert in investing, but in these turbulent economic times it’s more important than ever to discuss this important and controversial topic…

Even today, both mutual funds and real estate still offer investment potential.

Wondering which is better?

Here are a few things to consider….

When you borrow to make either investment, the interest is tax deductible. But revenue property delivers further benefits: maintenance expenses and building depreciation are also deductible.

If liquidity is important, mutual funds offer faster access to cash than real estate.

In both cases, buying low is important – but with a revenue property you can buy even lower with a fixer-upper, do the work yourself, and create even higher profits.

Real estate offers leverage opportunities. Let’s say you make a 20% down payment on a $500K house and in two years it’s worth 10% more ($550K). The return on your actual investment is 50%!

Leveraging equities can be riskier because values change more rapidly. Plus, the bank won’t loan you $400K to buy a $500K stock.

Both real estate and mutual funds gain value over the long term. But revenue properties also yield monthly income which can cover mortgage payments. As you build equity, you have more funds to purchase a second property.

If you’re interested in investing in Real Estate, send me a message and we can book a free call today.


24 Feb

Think Beyond Good Rate

Mortgage Tips

Posted by: Kim Banting

One of the best reasons to work with a licensed mortgage professional is interest rate. Everyone is concerned with rates. We all want to get the best rate, and while it is true that big banks often have the lowest interest rates, it’s their terms and conditions that may not always be in your best interest.

As a Mortgage Agent, one of my jobs is to carefully review your lender’s terms and conditions with you to make sure you are clear about what you’re signing – you have a rate going into your mortgage, and another one going out, and I don’t want you to have any surprises!

As I mentioned, big banks often have the lowest interest rates, but if you have to break the term of your mortgage early, it’s going to cost you.

No one plans to break their mortgage term early, but life happens and statistics show that about 68% of Canadians will break their mortgage term at approximately the 36 month mark. When the term is broken, there is a penalty and it will either be 3 months interest or the interest rate differential.

The interest rate differential is not a standard calculation – every lender has their own method of determining this number and it could cost you tens of thousands of dollars!

This is just one great reason to think beyond the rate. Here are 4 more considerations that could help you save money and frustration over the life of your mortgage.

#1: Amortization: This is the length of time it takes to pay off your mortgage.

It’s tempting to choose a longer amortization because that keeps your payments low.

But lengthening your amortization means you’re paying off your mortgage more slowly, so you end up paying much more in interest. Choosing the correct amortization for your needs can help you become mortgage-free much sooner!

#2: Term: This is the length of time your rate is locked in.

Short or variable terms generally have a lower interest rate than longer terms.

But before you choose a term, consider where interest rates are going and how secure your financial situation is.

Can you afford a sudden rise in payments, or do you need the security of payment stability over the long term?

#3: Flexibility: Give some thought to what your situation and needs will be in five or ten years.

Is there the chance you’ll get transferred? If so, maybe you should consider a portable mortgage.

What if you get a raise and want to pay down your mortgage more quickly? In that case, you’ll wish you’d chosen one with low or no prepayment penalties.

It’s essential to consider these possibilities before you lock yourself in!

#4: Proactive service: With some lenders, once you’ve closed the deal, you never hear from them again.

But a reputable mortgage professional will stay on top of your mortgage on a regular basis, always looking for ways to help you pay less interest and become mortgage-free sooner.

Finding the lowest rate can be easy. But if you’d like some help adding these other vital factors into the equation, give us a call.

We’re happy to offer a free mortgage analysis to make sure you’re taking the shortest possible route to mortgage freedom!


5 Feb

3 Steps Before You Buy a Home

Mortgage Tips

Posted by: Kim Banting

There are 3 important things you need to do before you begin shopping for a home.

I know you’re excited, and you just want to jump right in, but there are a lot of obstacles that can pop up along the way, and you want to be sure that the decision you make is one you can live comfortably with for years.

1. First thing to consider, is having a plan to build the best down payment you can. I’m sure you’ve noticed that housing prices just keep on climbing. And yes, you have the option of putting 5% down and getting mortgage insurance, but this adds to your overall cost of buying. In the long run, the higher your down payment, the less interest you’ll pay – so start saving today, if you haven’t already.
2. Improve your credit score. Your credit score determines whether you’ll get a mortgage and what rate you’ll pay. The higher your score, the better your chances and the lower your interest rate.
3. Have a conversation about needs, wants and practicalities. Sit down with your partner and decide what you really need, what you can do without for now and what you’re willing to spend decades paying for. Go out and view some homes to see what’s out there and how much it costs – then set some firm guidelines and start budgeting. REMEMBER – your first home isn’t necessarily your forever home. This is going to help you get your foot in the Real Estate door and down the road, with equity, you will have more options.

Make an appointment to speak with a Licensed Mortgage Professional. We provide no cost assistance and advice to help you realize your dream of becoming a home owner.


19 Jan

6 Ways to Create Wealth


Posted by: Kim Banting

Did you know that most of the wealthiest people in the world got to where they are by investing in real estate? It’s actually been referred to as the #1 Millionaire-Maker.

By having an understanding of how money works and making smart, responsible choices, you can build a secure financial future for your family.

So let’s talk about the 6 ways that you can create wealth by investing in Real Estate.

1. Benefit from inflation – Inflation is only bad if you don’t own an asset that’s gaining value. If property values rise and rents rise, so do your profits.
2. Generate cash flow – Have you ever heard the phrase “make your money work for you”? Smart investing will make your mortgage payments for you. Once your mortgage is reduced or paid off, all this extra cash can be invested for retirement.
3. Reduce your taxes – The expenses of operating a revenue property are tax deductible. Bonus!
4. Asymmetric risk and reward – This is a fancy way of saying that you put down a small sum of your own money, borrow the rest, then, as the property increases in value, your equity position rises substantially. The bank takes most of the risk, while you enjoy most of the reward.
5. Asset appreciation – You may initially take on a lot of debt when you buy a revenue property, and that can feel a bit intimidating – but this is what is considered “good debt” that will generate investment-grade returns over time. It’s not like a car that begins to depreciate as soon as you buy it, real estate almost always increases in value.
6. Inexpensive source of funds – Once you’ve built some equity, you can access it at inexpensive mortgage rates to fund new investments and keep the ball rolling.

Of course, it goes without saying that you must be prepared and responsible, because if you aren’t you could get in over your head. However, the stability of investing in Real Estate has been proven to be the safest way to build your wealth.


4 Jan

4 Tips to Keep on Track with Your Budget


Posted by: Kim Banting

If you’re anything like me, keeping records of income and expenses–and convincing your spouse to do the same–can be a real challenge. I started this challenge for myself by first saving every receipt from every purchase I made for a month, then I divided everything into categories to see how much I was spending and where. Finally, I decided which changes were going to have the most impact.

Here are 4 simple tips you can try that you might find helpful…

#1: Budget Envelopes. This may seem a bit old-fashioned, but it’s a great solution for visual people. When you get paid, take out the cash you need for the month and divide it into envelopes labeled as groceries, dining out, movies, clothes, vacation fund, miscellaneous, etc. This obviously is going to work best for things that aren’t automatic withdrawals – you must be sure enough money is left in your bank account to cover these bills. Once an envelope is empty, it stays empty until next month. No excuses.

#2: Set Limits. Set a limit for all non-essential expenses. If something comes up, for example you want a new sofa or cell phone, discuss with your partner and plan to save up in the miscellaneous envelope or better yet, create a new envelope for that expense and decide how much you can put into that envelope each month to save up for it. If it is something you want sooner rather than later, you may need to cut back in another category to speed things up.

#3: Annual Projections. In addition to keeping track of each expense, figure out how much each one costs per year. When you see that your $4 daily coffee actually costs over $900 a year, you may consider making coffee at home. Do the same with lottery tickets, alcohol, snack foods, impulse spending on clothes, new electronics, and so on. Keep all your receipts and record them in a spreadsheet to keep track of how much you actually spend.

#4: Reverse Budgeting. This means that when you get paid, you pay all of your bills and essentials first, then, whatever is left – if anything – can be used for non-essentials. It isn’t as structured as my first 3 ideas and doesn’t help you to build your savings though.

I hope you found this helpful. When it comes to changing our spending habits, discipline can be tough – but it does become easier with practice. A wise person once told me that if you work hard and sacrifice now, life becomes simpler later, but if you keep life simple now, you will work hard and sacrifice for much longer.