26 Jun

First Time Home Purchase vs Next Home Purchase – The Confidence Factor.

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Is there a difference between a first time home purchase and the purchase of perhaps the second in a line of homes?

The answer, which may be a surprise, is ‘no’.

The mechanics of buying a home is routine and unvarying; find a down payment, arrange for financing, find a new home, make an offer, agree a price, close the transaction and move in. Hey presto.

Sure, there may be some variations from purchase to purchase, but that’s basically it.

So, you ask, why doesn’t it feel that way when you’re in the middle of your first home purchase?

Similar to driving a golf ball straight down the fairway, where you need to practice, practice, practice, until you develop the muscle memory – the process of buying your first home needs to be so familiar you don’t think about it. You need to develop that same muscle memory.

You don’t have that “muscle memory” , that confidence for house buying when buying your first place. Your second home purchase is not easier, you are just feel like it is because you have the confidence of being familiar with the process.

My own father’s confidence in buying new homes would have surpassed most peoples confidence level having purchased, I think, 10 different homes during his lifetime. Each had its own special something that made it a home rather than just a house.

So, how do you channel that confidence? Gain that muscle memory?

Simple, get help from your friendly neighbourhood mortgage broker. We have many, many home purchases under our belts. We can be the difference between having the confidence to make that perfect drive or making a wonky slice into the trees.

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



Jonathan Barlow

30 May

Rocket Science; 5 Simple Steps to Owning Your Own Home.

Mortgage Tips

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The view from my sisters’ home.

Often, it can seem like the route to owning your own home can seem like a trip to the moon and back.

Really though, it comes down to five key steps:

1 – Manage your credit wisely.
If there is one thing that will gum up the purchase of that perfect home, it’s an unwise purchase or extra credit obtained. Keep your credit spending to a minimum at all times, make every payment on time and most of all pay more than the minimum payment. Remember that if you just make the minimum payment on your credit cards, chances are you will still be making payments 100 years from now..

2- Assemble a down payment.
At first glance, the challenge of finding a down payment can seem insurmountable. In fact, you just need to consider all the sources for down payment funds. yes, you will have saved some but remember you can also, in some situations, use RRSP funds, grants ( BC Home Equity Partnership for example ) and non traditional sources like insurance settlements, severance and of course, gifted funds from a family member. Don’t forget that you’ll need to demonstrate that you’ve had the funds on deposit for up to 90 days and also that you have an additional one and a half percent of the mortgage amount for closing costs.

3- Figure out how much you can afford.
Its at this point that most people usually stop and scratch their heads. Some even try and tough it out, using the raft of online calculators to figure it out but new mortgage rules can make even that a challenge.
If you talk to a mortgage broker ( like me! ) though, they can help you figure it out and even go as far as getting you a “pre-approval” from a financial institution. This can give you the confidence you need to actually start looking around.

4- Figure out what you want.
You’ll want to make a list of things your new home has to have and what the neighbourhood has to have. Things you want to think about are the things that are important to you now; is there access to a dog park? Is there ensuite laundry? Divide the list into things you can’t live without and things you’d like to have. It’s way easier to look when you know what you want to look at.

5- Look with your head, buy with your heart.
The final step is, with the help of a realtor, look at properties that meet your requirements. Yes, the market is a little frenzied at the moment, but remember, if your perfect property is sold to someone else, the next perfect property will soon appear.

When you do finally buy, chances are, you’ll buy with your heart. My sister Noona moved to London some years back and after settling in, decided to buy. Her list was fairly lengthy, one of the key elements was being able to walk to work. In a market similar to what we face now, she found a property that met most of her requirements. In the end though, she bought with heart, mostly because of the view from the balcony.

The decision which home to buy is a tricky thing, it should be made with your head and heart. Deciding, while balancing what you think and feel, really is rocket science.

I know that this may seem to be an oversimplification but really, the thing that complicates the process is your own emotions – all of the stress that comes along with making a life change can make the process challenging.  If you need help or advice in any one of the stages, just give me a call.

10 Apr

Managing Consumer Debt: The Side Door Key To Your New Home.

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With all the rule changes sweeping the mortgage industry, an important message seems to be getting lost – the one that shouts at you like your grade 10 gym teacher – Manage your consumer debt!!!

Yes, you’ll need to qualify at 4.64%- the stress test rate – for that new mortgage and ensure that your debt servicing is below 39% ( GDS) and 44% (TDS), but what does that really mean?

Well, GDS or gross debt servicing, is the calculation of how much of your income will go towards paying your shelter costs (mortgage, taxes, heat and condo fees mostly) compared to your gross income. ( My friend and co-worker Ralph E. once said – “I know its gross, you don’t have to keep pointing it out .” ) You have little control over GDS beyond making sure you’re buying something affordable.

TDS or total debt servicing is the ratio of how much you spend paying your debts versus your gross income ( that word again!). This includes the mortgage payment but it also includes loans, lines of credit and credit cards and while your debt may seem manageable, let me show you just one example of how it might not be.

Say, for example you make $65000 a year, have a steady job, worked for a number of years and saved $70000 ( with a little help from the bank of mum and dad ) towards your first place and no other debt.

By all accounts, you should- and do- qualify for a $330000 mortgage, but let’s add just one bit of consumer debt to the mix and see what happens.

When you got out of school, you did what most of us do; you ran up some credit card debt. Since then you’ve managed your money well and you’re left with one credit card as your one piece of consumer debt. It has a $10000 balance and more often than not, you pay more than the minimum payment of $100 but you do use the card regularly, so the balance never seems to come down.

The problem is, if you continue to make the minimum payment, it will take over 100 years to pay off the balance. What’s worse is; when we’re calculating the debt servicing for your new mortgage, we don’t use 1% ( the $100 minimum payment), we use 3% ( $300, what minimum payments used to be ).

Using the 3% payment calculation method raises your TDS by 5.5% and guess what? That’s correct, you no longer qualify for a $330000 mortgage. In markets where property values are going up, its critical to maximize the amount you can borrow, so this is not good news.

If you’re reading this and you’ve been thinking about buying a new home or your first home, it’s easy to feel a little crestfallen and think it will never happen. I urge you – DO NOT feel that way – your parents and everyone you know who owns has faced similar challenges.

I said that you have little control over GDS but the good news is that you do have control over your total debt servicing – it’s just a matter of carefully managing your consumer debt and being aware of what you are spending your money on. The first thing to recognize is that its your money and you need to take control of who you give it to. There is some great information on managing your debt here.

Even if your plans include a home purchase a few years off, now is the time to get the help you need from a Mortgage Professional – Just give me a call!

15 Mar

Why They’re Not Really In The Mortgage Business

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Mortgage financing

My other job…

Often, when we talk to you about mortgages, Mortgage Professionals will provide you a set of choices involving banks, credit unions and single service mortgage providers called a “Monoline” and a recommendation.

Many times, if its a good fit, we recommend a Monoline, as your first option.

Its important to recognize the differences between the two, Monoline and Bank, because they are very different businesses and how they approach mortgages can have a very significant impact on you.

Monoline mortgage companies are in the business of providing nothing but competitive mortgages to you, your family and friends. It’s important to stress that they offer competitive mortgage product. As a group, they provide great rates and more importantly, flexible mortgage repayment terms, all in an effort to be competitive.
They want your mortgage business because its their sole business line and they want to do well, both for you and for their investors.

The big banks are not in the mortgage business. They are in the financial services business. Its very important to understand that their focus is not about being competitive in the mortgage business.

“Huh?” I know, it doesn’t seem to make a lot of sense, but let me explain…

When you work at a bank, you hear all the time that the bank doesn’t make any money on its mortgage portfolio. You come to see how true this is when you see the incredible focus that a bank has on minimizing costs, how it’s almost impossible for you to step out of the normal process to help clients with special circumstances.

Because maximizing profit is the true goal of minimizing costs, every bank follows the “Golden Mean”.

In art, the Golden Mean is a strict proportional guideline for creating great art.

For a bank, the Golden Mean of profit is the strict proportion of average products and services per client. Their golden number is that each client has an average of more than of 2.75 products and services. For example, if you have a chequing account, a mortgage and a Visa, you’re profitable for the bank. Move any one of those and you’re not profitable anymore.

The intense focus on profit and managing costs means you pay more for mortgage financing. Not on something as obvious as interest rate, but on the options. Say for example you’re in a fixed rate mortgage and you need to pay out your $350000 mortgage out before the five year term expires. Its not that uncommon, probably two in five of you reading this will do it.

If you were to pay out two years into a five year term, depending on who your dealing with, the penalty can be a little as $1500 or as much as $13000 depending on the lender you choose. Banks typically charge higher penalties because they’re not in the mortgage business – they don’t need to be competitive and also as a way to closely manage costs.

This post and some of the recent articles you’ve seen floating around may lead you to think that your average Canadian Bank is a manifestation of Mr. Robot’s Evil Corp. They’re not; managing costs is what drives profit for them – saving 10 cents means 3 dollars more profit – so even phone to phone contact for them is considered an extra cost.

The most important thing for you to remember is that they’re not really in the mortgage business, that’s why you need to connect with one of us – to understand all your options.

If you want more information on this or mortgage financing in general, please give me a call today.

2 Mar

We work for you and only you.

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Five best reasons to work with a mortgage broker. Part 2

A Comforting blanket.

We work for you and only you.

Every time you seek credit or investment advice from a financial institution, the person you speak to is in a conflict of interest.

The conflict of interest exists because they are paid by the financial institution to sell you that institution’s products. They’ll take the time to try and find the appropriate product but if it doesn’t quite fit your needs, then you will be the one to compromise, not them.

If you’re shopping for mortgage financing with your bank, you may never be made aware of the conflict because the bank and its mortgage representative are not required to disclose the conflicts to you.

When you engage a mortgage broker, we work for you and only you. Our aim is to provide solid advice, a repayment strategy and ultimately the right mortgage financing. The ‘right’ mortgage financing might mean a five year fixed term mortgage, or it may mean a combination of a variable rate first mortgage and a smaller second mortgage. Its all about what’s right for only you.

Most of us access about 40 to 60 different lenders offering a wide range of mortgage products, one of which will be ideally suited to you.

Because we’re compensated by the lender you choose, we’ll be up front about the nature of that compensation to you.

Really, the service we provide comes down to choice; choosing the right mortgage financing from a range of lenders and products, or having only one choice. You can learn more about your options, here.

I imagine if you’ve gotten this far, you really want to be in control of your finances and be aware of your choices.

If that is the case and you do need help with or want your choices, please contact me.