I don’t mean to sound like an infomercial…but with yesterday’s rule changes…I feel this is important to get the word out before this program gets pulled.
If you’re a Buyer or a Realtor and have clients with no savings (but they must have a little something to cover closing costs ie. Lawyer fee and PPT if applicable) we can still mortgage which is creatively 100% financing. The rate they will pay is 4.94% and it will be a 5 year closed term. They MUST have good (a.k.a. excellent) credit with minimal other debt (what’s considered minimal all depends on the Buyers income level).
Who do you know who is still renting? Imagine a rate BELOW 5% and FREE 5% (non-repayable a.k.a. FREE) imagine if they’re first time Buyers too! The reason I’m so excited about this product is that when I bought my first place I paid 7.09% and had to put down 12K! Imagine my delight if someone proposed to me 4.94% and a free 5% (in my case 12,000.00 hard earned dollars meticulously saved up since childhood!)
Each Buyer is different and factors such as job stability, overall debt servicing with the slightly higher qualifying rate must be considered and will lower the overall approval amount.
4.94% gives them a fantastic rate considering they get 5% for FREE!It works out to just under 3.90!) when you consider the FREE MONEY the Buyers get.
This is truly an amazing opportunity for the right Buyer. Who knows when the finance minister will change the rules again! Sorry for sounding like an infomercial but I love this program and thinks it’s an unbelievably great oppotunity for Buyers today.
For years Americans have enjoyed the benefits of being able to deduct the interest paid on their residential mortgages and save on income tax. Some people may say that this benefit is partly why Americans have encountered so much housing trouble as this concept encourages you to keep a high mortgage balance…after all the interest is tax deductible, why not? Luckily or not, in Canada, we are more conservative. While we don’t have all the same benefits in Canada, there is a way to build your net worth and benefit from some legal tax deductions. Fraser Smith popularized this strategy with the release of his book entitled “The Smith Manoeuvre”. He’s not reinventing the wheel with this book; however he does bring forth a lot of common sense and good advice. His book takes up many pages and to offer a summary in this space would not be doing anyone justice, therefore I will offer up the basic idea behind it and give you some recommendations as to whether or not it’s right for you.
The book explains in detail the concept of borrowing money against the equity in your home and then investing that equity in order to make that portion of the interest paid tax deductible. As you build your equity, your investment portfolio builds and so does your tax deduction. It’s in my view a very sensible approach for Canadians and our sensible approach to fiscal matters is perhaps something that has contributed to enabling our real estate market to remain quite stable despite the economic doom and gloom down South.
This strategy is for you if you have at least 25% equity in your home and are not adverse to some risk associated with investments. This strategy is not for you otherwise. It’s a bit complicated to manage and few lenders offer the right type of mortgage product to enable the reallocation of debt from one account to another. Currently I’m aware of 3 lenders who do offer the types of mortgages to keep your accountant and Canada Revenue Agency happy. Merix Financial, FirstLine Mortgages and National Bank offer these types of “all-in-one” sort of mortgages that can automatically reallocate the equity to a readvancable credit line.
For more info or to find out if it’s right for you feel free to call me anytime at 604-790-7253 or send me an email to firstname.lastname@example.org.
Don’t open any new creditor accounts. If you already have enough credit cards etc…please don’t open or take out any new loans. A new loan will report on your credit score as an R0 and will be considered “too new to rate” and will take big points bite off your credit score.
Pay everything on time. If you haven’t been paying stuff on time, start NOW. You don’t have to pay off the whole balance, but do make a little more than the minimum payment required.
Keep balances LOW versus your available limits…as low as possible. Let’s say you have a VISA with a 10,000 limit…please try to keep that limit below 7000.00 and do this with all your revolving credit accounts. It’s better to spread the debt over different accounts than to accumulate it all on one credit card. And being over your limit takes a big hit on your credit score.
Don’t close any old credit accounts…the longer you have had a good account open, the better. Even if you don’t use that student Visa with the 500.00 credit limit…if you’ve had that card for the past 10 years…GREAT! Close it after the mortgage!
If you do not have any credit…or have had credit issues in the past and have NO CURRENT credit…open an RRSP loan. Banks won’t do a credit cheque on an RRSP loan for 2000.00 or less and it’s an instant approval. These loans will report to the credit bureau and will boost your score faster than a secured credit card would…plus think of the tax savings, take some of those tax savings and put it down on your loan. But, if you have a long term plan in mind…don’t pay off that loan too quickly! It should be reporting to the credit bureau for at least 1 to 2 years. Then, once you have had this reporting for 6 months, you can then apply for an unsecured VISA or MC as your second piece of credit on the way to building your credit worthiness for a mortgage or other major loan.
It always surprises me when I hear people say they simply renewed with their existing bank or mortgage lender. With today’s historically low rates compared to just a few years ago, it’s important not to be too quick to renew or refinance your mortgage with your existing lender until you check out all your options. Yet approximately 70% of Canadian mortgage holders will do just that, and the usual result is a typically higher interest rate and a mortgage product that might not be best suited to specific needs. Lenders are counting on the fact that most homeowners are too busy to ask all the right questions or to even inquire about getting a better rate. Don’t let this happen to you!
You should recognize that you are now negotiating from a position of strength as your mortgage principal has dropped and in most cases your home value has increased. Lenders will most likely see you as a lower risk borrower and consequently you should be getting the best rates and terms available. That won’t happen if you simply sign the renewal document provided by your existing mortgage holder. We make the lenders compete for your business to be sure you do in fact get the best mortgage possible. We’ll review your current situation and ensure you get the best rate and terms suited to your needs. We can even sometimes hold the best interest rates up to 120 days before your renewal date! It’s definitely worth a quick call to ensure you’re making the right decision.
Find all your tax info for the last 2 years (just in case we need to use overtime income, part time income etc or if you’re self employed.
Ensure your cheques (used for the pre-authorized withdrawals and account ownership confirmations) are pre printed and not blank without your name on top. Handwritten name and addresses are not acceptable by many lenders. Request printed cheques if you do not already have them.
Make sure you have a full 90 day history of the account or accounts where you’re holding your downpayment. If your downpayment is coming from multiple accounts, we will need all account histories, or if it’s being transferred from an RRSP etc make sure you have an older statement to prove the funds are over 90 days old. This is to satisfy Canada’s anti-money laundering laws.
Gifted downpayments are allowed if from an immediate family member (parents or siblings only). If it’s not from immediate family, the bank considers this downpayment to be borrowed and we must factor in the cost of this loan into your overall debt servicing which can affect how much you can borrow.
Ask your employer for a job letter now. The job letter should state how long you’ve been at your job, your annual income if you are salaried or your hourly rate and how many hours you are PAID for each week.
Child tax benefit income is allowed by most lenders, but not all. Have birth certificates ready so that we may prove your child’s age and the continued receipt of this money.
Spousal alimony may only be used if its court ordered and we must show a 3 month history, have the separation agreement ready.
Keep all your pay stubs, all bank statements, all Gv’t cheque stubs etc from now until you’re formally approved.
If you’re self-employed, it’s always a good idea to sign up with Revenue Canada’s online service in order to access all your tax info online. Please phone Revenue Canada and ask for an “E-Pass” and password to be sent.
Ask your Realtor for 7 BUSINESS DAYS for “subject removals” this will ensure we have time to formally get you approved BEFORE you pay for an inspection or any other out of pocket expenses.
Many people have been phoning and asking us about how best to take advantage of the Home Renovation Tax Credit. Many people don’t know how to take full advantage of this…and time is running out.
HRTC is a non-refundable tax credit based on allowable expenses for work done, or renovation items purchased after January 27, 2009, and before February 1, 2010. The HRTC is claimed when filing your 2009 taxes and can only be claimed for renovations and alterations that add to the value to your home or apartment / condo.
The 15% non-refundable tax credit can be claimed on eligible expenses of more than $1,000 but not more than $10,000. The maximum tax credit that can be claimed to reduce your federal income tax is $1,350.
Get your contracts in writing and keep your receipts. The cost of routine repairs and maintenance items that are not integral to your residence are not eligible…items such as gutters, sheds etc…not elligible. If you have questions on a particular item, please call.
Examples of eligible expenses and purchases are:
Renovating a kitchen, bathroom, or basement
New windows, doors, or flooring
Building an addition, garage, deck, shed, or fence
A new furnace, fireplace, water softener, or water heater
A new driveway
Re-shingling a roof
Painting your house
Costs associated with permits, professional services, equipment rentals, and incidental expenses associated with the list above.
These are just some of the qualifying purchases, as your Mortgage Professional I can show you how to best take advantage of all the home owner and tax saving strategies.
Change your payments. Simply increasing your payment frequency to bi-weekly or weekly costs nothing and can save thousands of dollars over the life of your mortgage. If you can afford to pay a little extra, consider accelerated bi-weekly or weekly payments—these are equivalent to making one extra monthly payment per year which results in substantial savings. Or you can make a lump sum payment which can realize savings several times as great over the life of your mortgage. It’s not rocket science or reinvention of the wheel, but it works!
Next Blog posting, how to make your mortgage tax deductible!!