Getting the Most out of your home Reno

In today's strong housing market, it can be tough to afford that house of your dreams. That's why many buyers are opting to purchase the almost-home-of-their-dreams, and make the appropriate renovations themselves. If you're finding yourself in this boat, here are a few tips to keep in mind:


1. Take advantage of purchase plus improvements programs
If you're putting down less than 20% of the cost of your almost-dream home, you're going to have to purchase mortgage default insurance through CMHC or Genworth Financial. One of the bonuses to this is that you'll also likely qualify for their purchase plus improvements programs.


These programs allow you to tie the cost of your reno into your mortgage, so that you benefit from a lower interest rate on the borrowed funds. One of the catches, however, is that the funds are only forwarded to you after the renovations are complete and the final value of your home is appraised, which means, unless you have the cash on hand, you'll likely still have to take out that line of credit.

Here is a link to CMHC's website that explains their program in detail. 




2. Sign up for a home improvement credit card.
Many home improvement stores, such as Lowes, will offer six months interest-free on their brand's credit card. This can come in handy if you're applying for the above purchase-plus-improvements program, or if you will be able to pay off your renovation costs in that six month window.

3. Think beyond your own tastes.
If you're renovating with the hopes of increasing the value of your home so you can sell in the near future, it's probably best to avoid making any completely unique or "out there" decisions. Ask your contractor, or your home improvement store associate, to find out what trends are "in" right now. They'll likely be able to tell you whether more consumers are swaying towards thick or thin planks of hardwood, light or dark stain, or granite or quartz countertops.

How Maternity Leave affects your mortgage application

If you're having your first baby or your third nothing changes housing needs quicker than a growing family.  It's the most natural time to think about a move but if you're on maternity leave or facing one you are also dealing with adjusted incomes. So let's take a look at how lenders deal with maternity leaves.

Generally speaking, and I have to be general because of the vast number of lenders, the rules are simple.   If you're applying for a mortgage you need to declare your income.  Your income is the amount of money you were making before you started your maternity leave.  In order to substantiate your income you need the following:

• An employment letter from your employer that states when you started and how you are paid.  If you're paid hourly it will need to include the number of hours a week they guarantee you. The letter will state that you're currently on maternity leave and will include your expected date of return.
• If you're an hourly employee and wish to declare any overtime you will also need to provide copies of your tax returns for two years of employment showing consistency of income.
• if you are salaried you should provided a T4 for your last full year of employment.

If you don't have any of the above you move into the "gray" area and start asking for exceptions.  Exceptions are granted based on other strengths of your application such as, length of employment, size of the down payment, credit history etc.  Exceptions are dealt with on case per case bases but the more detail you can present to the lender the more likely you will get your exception. In my practice as a mortgage broker I would typically gather all the information and organize it to present to the lender.  It's important to show a clear financial picture of your ability to service the debt.  You don't want to get in over your head especially at this time of your life. 

Now with that being said let's talk about what you can afford.  I often have people in shock when I tell them how much the "qualify" for.  Never in their wildest dreams would they consider that much debt.  So here's where your common sense comes in.  Start with a budget and here is one of my favorites from CMHC.   Knowing what you can live with before you go looking for a mortgage will put you in the driver's seat. For example, it may not be wise to use your pre-maternity leave income to qualify for a mortgage if you're not planning to return. 

I also want to provide you with this work sheet also from CMHC (Canada's Mortgage and Housing Corporation) that will help you calculate your debt servicing ability .  I know it's long and tedious but well worth the effort.   Don't get frustrated.  If this doesn't work for you send me an email and I will send you another one.  They're too many for me to list here but the bottom line is you need to do your own work.  Advertising would have you believe you should shop for the best mortgage but I think you should know what you want before you go looking.

As always if you have any question email me.  If you don't get an answer email me again. We try to answer them all but we do miss some from time to time.  Have a great day. 

Does your mortgage need a Designer label?

As a mortgage broker  I can go to any mortgage lender in the market and there are a lot of them.  But there's one thing I find so strange.  Women, way more than men, don't feel so comfortable with "off market" lenders.

Off market or non-bank lenders are typically lenders that use alternate sourced funds to lend on mortgages.  For example there are a couple of lenders who use the Teachers Pension Fund or OMERS for their mortgages.  They are called "Mortgage Backed Security" or "MBS" lenders and they are essential in the market place for keeping rates competitive.  I wrote about them in a previous post.

When I consider a MBS lender for a client I have to be very particular.  The rules for using this money are a little restrictive especially on the pre approval.  Once you have a pre approval there is very little wiggle room to increase the amount or change closing dates once rates increase.  To explain what I mean would take all day and frankly you wouldn't read it.  You'll have to trust I know what I'm doing.

But here's the thing I don't understand.  Most times when I give my clients the option they usually want a well known lender.  Typically one of the "big five" with a recognizable logo.  It's not that I see anything wrong with that but I'm often curious as to why.  I would never talk anyone out of their decision because after all that is why I started Mortgages for Women.  I know better!  At the end of the day your mortgage needs to be about what you can manage and I guess there is some comfort in knowing your lender is "out there". 

Still, I would love to hear your feed back.  I've been doing mortgages for over 25 years and I think I'm a little desensitized to what it all means.  To me it's all debt and I would never myself shy away from an non-bank lender.  I'm looking forward to reading your comments on this. 

Sneaky ways to pay off your mortgage faster.

Canadians have long been known for their conservative spending (and saving) habits. Even in today’s credit-dominated culture, 86% of Canadian mortgage holders believe that it’s important to pay off their mortgage as quickly as possible, according to a recent Scotiabank study. The thing is, with living and housing costs escalating at a dramatic rate across the country, what we want to do – and what we’re financially capable of doing – are often two different things.

Very few Canadians have household budgets that can’t be trimmed, however. If you look closely, chances are there are monthly splurges and discretionary spending that could be going towards other things – like your mortgage. The secret is to put that cash towards the important areas before you know it’s even there.

One way to do that? Round up your mortgage payments – or increase them by 1% or 2% when you get your annual raise. This doesn’t have to amount to much – on a $500 biweekly payment, it could be as little as $5 – but it can shave serious years off your mortgage in the long run.

Invest in RRSPs – and put the annual tax return towards your mortgage. The quicker you do this – before the money has a chance to burn a whole in your bank account – the better. If you have other things to save for, such as an RESP or emergency fund, consider putting a percentage of your return into each savings account.

Accelerate! If you haven’t already synched your mortgage payments with your biweekly paycheques, do it now! It’s probably the easiest – and least intrusive – way to get an extra mortgage payment in each year.

How much house can you really afford?

Acquiring a mortgage - and acquiring a mortgage you can afford - are two separate things. Often, banks or lenders will approve you for much more than fits comfortably into your lifestyle. That's because they rely on two calculations - Gross Debt Service Ratio (GDS) and Total Debt Service Ratio (TDS) to come up with that magic number.

The problem with those calculations is that, while they take into consideration some household expenses to determine how much mortgage you can afford, they don't take into consideration all of them.
Such expenses as mobile phone bills, cable, entertainment, and groceries, for example, aren't factored into the equation - instead, they focus on the bare necessities such as heat, loan payments and credit card minimum payments. They also base the calculations on your gross household income - not your net (or after-tax) income, which can be a little misleading as well.
So how can you determine how much house you can really afford? Well, there seems to be a few differing "rules of thumb" out there:

1.  The price tag of the home shouldn't be more than two to three times your gross household income.So, if your household is making $100,000 per year, your home's price tag should fall between $200,000 to $300,000. Given today's real estate prices, many believe this adage is outdated.
2.  The total mortgage amount shouldn?t be above four and a half or five times your gross family income.So for the same $100,000 couple, that would take you to a $450,000 or $500,000 mortgage loan. Whatever down payment you've mustered to save will increase the home's price tag accordingly. While the previous example seemed a little low, many believe this number is a little high, and could cause homeowners to over-extend themselves.
3.  Find your own magic number.Depending on your lifestyle and where you choose to spend your money, your idea of home affordability will vary from someone who has completely different spending habits. That's why it's important to find out what number works for you.

Start by tracking your spending - most people underestimate exactly where their money is going. Next, figure out what extras you can do without - and which ones you absolutely can't. If you love dining out, for example, it's better to come to terms with this fact and buy more house than convince yourself that once you own a home you'll eat in every night.
With interest rates continuing to sit at record lows, it might also serve you to see what you can afford at a higher interest rate - say 6%. This can help you ensure that you'll be in a comfortable place both today and when it comes time to renew.

Women Build - Habitat for Humanity needs your help and Bon Jovi is involved

Guess what I'm doing tomorrow?  I'm taking part in the Toronto Habitat for Humanity Women Build project.  I am really excited about this and a little nervous.  I have no knowledge of any aspect of building a house but I think I'm about to learn.  So why on earth would I want to take part in something where I don't know a soul and have no skill?  Well the answers are simple (sort of).

First of all I love this project.  If anyone believes in the empowerment of families and pride of home ownership it's me.   Habitat for Humanity's mission statement says everything I believe in "To mobilize volunteers and community partners in building affordable housing and promoting homeownership as a means to breaking the cycle of poverty". There is so much I want to learn about Habitat and the best way is to roll up my sleeves and get in there.

                                                                 

The second reason is a little more selfish.  Mother's day is hard for me.  My mother died in March of 2009 and mother's day is the day I miss her the most.  I'm a mom myself so I would never let on to my kids how painful I find the day.  It's also my daughter's birthday.  She was born on mother's day and so I every year I share the day with her.  This year both kids are away living full and complete lives.  Yes I will get a call and at some point they will come around to see me but it's the time in between that is sure to get me down.  So when Habitat for Humanity invited me to be an angel on Mother's Day weekend I thought this would be a great way to spend the weekend with my mom the angel.  Giving back is so fulfilling and I've been truly blessed in my life. 

I'm a little nervous.  I don't know anyone who will be there except for Toolgirl Mag Ruffman who I met on twitter.  There are quite a few of Toronto's best of the best when it comes to females who will be leading the charge. I am going as a lone wolf.  No group of friends, no office chums, no corporate sponsor, just me.  So now for the money part.


I am going to raise $500 for this event.  I am asking everyone to help a very worthy family get a home of their own.  You can donate on line here:

http://my.e2rm.com/personalPage.aspx?registrationID=1076404&langPref=en-CA

and there's more.......

So you all know I'm the biggest Bon Jovi promoter and I have a big surprise for you.  Everyone who donates to Habitat for Humanity under my link will be in a draw for a VIP Chair from Bon Jovi's latest tour.

                                                                                      



Donations must me made by 5:00 today May 6th.  Hopefully I will be loading up the chair and delivering it someone who can either give it to mom for a mother's day gift or to a mom herself who can sit her chair on Sunday and let the masses adore her.  If you're not in the GTA I can't guarantee you'll have the chair this weekend.  Hey - you can always sell it on ebay - they're a hot item. 

It's not always about the rate people!

As a mortgage broker, one of the most difficult tasks can be to convince a headstrong client that, when it comes to finding the best mortgage, they have to consider more than rate. A recent report by ING Direct confirms this fact - with 71% of respondents confirming that rate is, indeed, the most important factor to them when choosing a mortgage provider. Only 10% said terms are important to them, while a shockingly lower 6% cited prepayment terms as an important factor.

In an effort to convince you that the entire mortgage picture is important, you may want to consider the following:
1) Looming interest rate increases
With many expecting rates to increase over the next few months and years, chances are high that when it comes time for you to renew your mortgage in 5 years time, your monthly payments will be higher (or the same) despite the fact that your mortgage balance will be lower. The more you prepay while rates are low, the more principle you'll tackle - and the easier the monthly payments will be when it comes time to renew or sell in favour of a larger home.

2) Save on income taxes
While it's true that the majority of mortgage holders don't take advantage of available prepayment privileges, it's definitely something to consider for anyone who makes an annual bonus (or commission). Because this extra income usually falls victim to high income taxes, it might be wise to sock them away in an RRSP, and then use the resulting tax refund to put towards a mortgage.

3) Increased flexibility.
Portability, refinance costs and early payout options may not mean much when you are buying that brand new home, but they mean a lot when that brand new home loses its charm - or if life takes a sharp turn and forces you to pick up and move. Paying a bit more now for these added options may be worth a lot of extra savings down the road - especially if you're at a less-stable point in your life.

 

Sex and Money

Ah yes.... the two things a marriage needs.  Whether you need a little or a lot of either or both it's important to agree. As for the sex talk I yield to those who know more than I do and there are many. I stick to the dull stuff.

While chatter about mortgages, debt, savings and retirement planning isn't likely to put one in a romantic mood, it's an important aspect of any marriage or co-habitational relationship.

Unfortunately, talking about money is typically the last thing anyone wants to do during their personal time. When you don't have enough of it - or when the debt is quickly piling up - it's much less enjoyable. But with financial matters being one of the top cited reasons for divorce, it should be an important aspect of every relationship. Below are a few strategies to take the fear out of your finances:

1. Know where you stand.
Dealing with your own finances is quite different than dealing with a couple's. Make sure you're both aware of your entire financial picture - money coming in, money going out, and all outstanding debts. You'd be surprised at how financial awareness - and a strategy to tackle any worries you may have - can quickly erode any fear you have about financial matters.

2. Get both members involved.
While one person may be more financially savvy than the other, it's important that both members of a couple are involved in the financial decisions. So when it comes time to renew that mortgage, for example, both members should meet with your mortgage broker and understand the pros and cons of the different products before selecting. In the same sense, you should periodically go through your expenses together and brainstorm ways to slash costs, and revisit your investment portfolio.

3. Arrange a financial "date night".
Even if you're not afraid to talk about money, it can be difficult to find the time to do so. For this reason, consider arranging a monthly financial date night. Open a bottle of wine, order some take-out, and take an hour or two to look at your monthly expenditures, the debt you've tackled and any other financial-related topics you've been thinking about. 

        

Now back to the good stuff..............