26 Feb

That Conversation We Need To Have


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A common economic theory states that “there ain’t no such thing as a free lunch”. Seriously, it does.

Its a simple way of presenting the idea that nothing is free, that everything is paid for even if the costs are hidden.

Here are some services that appear free but in fact, are not:

Free chequing.

You may have seen ads for a free chequing account at your local financial institution, may have even signed up for one. You may indeed have a chequing account free of monthly fee but its never free. There may be a requirement to keep a minimum balance in your account, which is in its own way, a monthly fee. Even if there’s no minimum required, you’ll probably be confronted with loan application fees, investment account fees and the like, which replace the revenue the institution has given up by not charging you a monthly fee.

Zero percent vehicle financing.

Many of us are attracted to Manufacturers financing when we’re on the car lot. If we don’t need to pay interest for 5, 6 or 7 years why not? But really, how can the manufacturer afford to offer that? How do they cover the cost? Well, it’s a simple numbers game. The manufacturer thinks they’ll sell, for example, 100,000 “go faster stripes” models of their most popular car. Of that, they calculate that 10,000 people will apply and qualify for the financing and that the financing will cost the manufacturer 60 million dollars. To cover the cost, they add $750 to the purchase price of each vehicle sold. By doing so they turn a 60 Million dollar cost into a 15 million dollar profit.

No Cost Mortgage Financing.

When you use the services of a mortgage broker such as myself, you may have been told that most times, there is no cost to you. This is only partially correct. In fact, there is an indirect cost, in the form of commissions paid by the lender and perhaps also by the insurance provider to us, (if we refer you to an insurance provider if you believe you need insurance). Many lenders, lacking the resources to have an internal sales staff, rely on the Broker network for new business. The cost of those commissions are built into, you guessed it, your mortgage. Well, I hear you saying, what if I go directly to a bank or other lender, can I save that way?

In fact, the actual costs are pretty much the same, although better hidden. The bank pays its internal sales staff a commission or a “variable compensation” at a lower rate, but their office costs are the same, so costs turn out to be very similar. This is why the “best rate” is often widely available and why it’s really important to get advice on the best mortgage terms available as well.

Why are we having this conversation? Well, our regulator, the Financial Institutions Commission ( FICOM ) has made changes to make sure your mortgage broker does a better job of disclosing to you what and how we’re paid. I am telling you a little about it now, because I thought we should talk about it before the changes take place. After all, my job is to give you advice and make you aware of what’s going on. Now, hopefully, you’ll also be a little more aware of how I make my living.

If you want to read more about FICOM and its role in BC’s Financial Markets, you can go here.

22 Feb

Five Best Reasons To Work With A Mortgage Broker


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Working for You and You Alone.
When you engage a mortgage broker, we work only for you. We only have your best interests in mind. When you meet with a representative of a Financial Institution, they’re working for that FI, not for you.

Better Options.
Banks approve about 80% of the people that apply for a mortgage. What if you, or the property you want to buy fall into the other 20%? A mortgage broker can find financing for you, regardless of where you fall in the 80/20.

Better Advice.
When you meet with a broker, you’ll get an individual service experience that’s focused around your needs and requirements. When you go to a bank, you’ll get a scripted “guided conversation” which has been created by someone at their National Office to help their salesmen sell you their mortgage product.

Better Terms.
Depending on which lender you choose, your early payout penalty can be as little as $1500 or as much as $13000, for the same $350000 mortgage. A mortgage broker will help you choose the best terms for you.

Better Rate.
A mortgage broker can and will find you the best rate to suit your particular needs and history. Combine that with the best terms, and you could save thousands of dollars, even in the first five years of your mortgage.

Whether you’re ready to buy today or in the future, contact me and together, we’ll develop a mortgage strategy that will save you money and put home buying within your reach.

If you’re a first time home buyer or thinking about buying your first home, you can find some great tips and a planning guide on my other website.

If you have any questions, please feel free to give me a call at 778-230-2572.

20 Feb

Leaseholds, Part 4, Recreational Properties with an occasional Sasquatch.


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For most of us, the idea of owning recreational property in BC’s Interior is both alluring and hard to imagine. Leasehold opportunities exist more often than you would imagine.

If you are thinking about it, there can be some affordable options if you considering owning leasehold property, either on Crown Land or held by a private association or corporation, such as the parcel of leases around Horne Lake, on Vancouver Island.

The advantages with Crown Land leaseholds are that they are are always renewable ( the government has never as yet, refused to renew a Crown land lease ) where the land is used for residential purposes.

As well, the payments are calculated based on an annual payment of 3% of the assessed value and the leases written over a 30 year period. For more information on Crown Land visit Front Counter

As with all recreational properties, the challenge is finding a lender. Its best to be prepared with a fairly hefty equity stake, 35% or better puts you in a position to find a reasonable rate and flexible terms.

The Horne Lake Sasquatch

The first resident of the Horne Lake area was reputedly a local sasquatch. The Victoria Colonist reported on December 14, 1904 that four hunters saw a ‘hairy wild man with long matted hair and a beard’ racing at ‘tremendous speed’ through ‘unimpentrable undergrowth’.

As with much of our recreational land, the lake itself was opened up when logging began in the late 19th century. Ownership of the land itself changed many times over the last century, with some took to squatting on its shores during the 1930s.

Early in the 1960s, a German Prince acquired ownership of the lands and after initially attempting to have the cabins removed, agreed to lease back the land to the cabin holders.

In 1999, the families flagging fortunes forced the sale of the land to a local development corporation.

Subsequently, the land was sold to the cabin owners association, who have worked hard to make the community a success and to ensure that it meets local planning, environmental and fisheries requirements.

7 Feb

Leaseholds, Part 3 , Native Lands

Mortgage Tips

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As convoluted as the False Creek Leaseholds are, their situation can be much easier to understand and assess than Leaseholds on land held by our Indigenous peoples.

I say “held” because there are some important distinctions on how those lands are treated. Other than lands subject to modern treaty agreements, most Native Lands are held “in reserve”. This means that the land is not truly under the control of the Indigenous nation settled there.

While things are changing, very slowly, in the past, treaties made land use very restrictive.

In the case where leasehold lands are “on Reserve”, the ambiguous ownership has dictated that the lease payments be held artificially low, not in line with the true land value. Attempts to redress this have resulted in lengthy court battles and hard feelings, because while the native band hold the land, they don’t technically own it or control it.

With the progress made in modern treaty negotiations, several systems of Indigenous landholding are now in place. They are:

Lands held In Reserve.(Land management guided by the Indian Act).
Self Government First Nations Land Registry
Indian Land and First Nations Land Registries
Fee Simple ( the most commonly used title holding method for the rest of Canada)

By way of an example of a leasehold that works, lets look at the Tsatsu Shores development.

In 2004, the Tsawwassen First Nation signed a new treaty and became self governing. As part of the treaty, they took Fee Simple Ownership of their lands and now on them outright. Their own laws mean that only First Nations members can own the land however, an oceanfront development now exists on a strata leasehold basis.

Because the First Nation actually owned the land, they could partner with a developer to manage the project. The result has been a new opportunity for both the band and homeowners.

Because the properties are on leased land, the acquisition cost is lower than you might think.

Just a quick note about financing, lenders prepared to consider financing properties on leased land will generally require the financing to be default insured, because of the added layer of risk. If considering the opportunity, remember that you will need to qualify under the new stress testing rules as a result.

As always, if you have any questions, need help or would like to run through some scenarios, please call or email.

For more information on the Tsawwassen First Nation, go here.



Jonathan Barlow