By: The Canadian Press, Published on Fri Jun 28 2013

Mortgage rates are on the rise. If you have been thinking about buying you might want to do sooner than later.

We’re seeing most all lenders now up to the 3.19% 5yr fixed term rates or higher on pre-approvals.   The bond markets are still showing signs of movement, so it could go up a bit from here.  If you are thinking of purchasing, refinancing, or renewing within the next 90-120 we encourage you to do a pre-approval and get a rate hold locked in through us.

If you are seeking an approval on your purchase, refinance, or renewal, then there are a couple non-preapproval lenders that can offer a slightly lower rate on approvals only.  Also, if your financing closes or can close in 30 days or less you can obtain a quick close discount closer to the 2.99% range right now.

If you are thinking about buying a home within the next 4 months you should call in to get pre-approved to lock in today’s interest rates.

For more information call Chita at 780-932-2225 or visit: http://www.edmontonmortgagesource.com/

While you are house hunting, please ensure to keep your credit in good standing. Any default payments or increased debt will affect your capacity to purchase.
Here is a quick checklist to help me provide prompt service:
o Income Verification: Letter from employer & recent pay stub
*If commission and overtime provide most recent 2 years consecutive
“Notice of Assessments”
o Down Payment Verification: Own source: 3 months bank statements of deposits, RRSP’s, investment
OR
Gifted: gift letter, bank statement to show funds received
o Lawyer information
o Void Cheque or Preauthorization Payment form
o Copy of Photo-identification
o Copy of Offer to Purchase (provided by Realtor)
o Copy of MLS listing (provided by Realtor)
Please call anytime if you require additional information or clarification.

What is Mortgage Loan Insurance?

Mortgage Loan Insurance (also referred to as “Default Insurance”) protects lenders/banks from loss due to borrower default on a mortgage. Default Insurance provides a necessary safety net to the financial system, helping to ensure the availability of mortgage funding.

Banking laws require Default Insurance when the down payment is smaller than 20% of the lesser of the purchase price or the appraised value of the property. Even when down payments are 20% or larger, lenders may still require Default Insurance due to individual borrowing circumstances, such as property location or property type. There are 3 insurer in Canada; CMHC, Genworth and Canada Guaranty.

Who pays the Default Insurance premium?
The borrower pays the insurance premium. The premium can be paid in a single lump sum or it can be added to your mortgage and included in your monthly payments. Most borrowers add the premium to their mortgage.

How do consumers benefit?
Consumers can become home owners sooner. Default Insurance enables consumers to borrow from us to purchase homes with a down payment as low as 5%, rather than needing to save 20%.

How much does Default Insurance cost?
Default Insurance is calculated as a percentage of the mortgage amount and is based on the size of the down payment and the amortization period.

The following table lists the standard premiums.

You’ve found a house that you like but it needs improvements. The Purchase Plus Improvement program will allow you to add the renovation cost to the purchase price, so you can benefit from a low mortgage interest rate and make only one payment.
Before, you go and make an offer, there are a few conditions that will help determine whether this program suits your needs. One of the first misunderstandings with Purchase Plus Improvement, is that most people do not realize that they will have to pay for the renovations themselves, until the work is completed. The lender will mandate that the solicitor “hold back” the additional cost added to the mortgage, that represents the improvement amount. Once the work has been completed, an appraiser will have to supply the lender with an inspection report, to verify the work has been completed as agreed. The lender will instruct the solicitor to release the funds from his trust account, to pay for the improvements. My advice in these circumstances, is to take advantage of family, or lines of credit to finance these costs until completion. Some renovation companies my not require payment until work is complete.
Secondly, CMHC and Genworth both have guidelines regarding maximum improvement allowance. The improvements cannot exceed 10% of improved value or $40,000.
Thirdly, before I can submit this type of transaction to the lending institution, you will need to supply me with a quote and/or a renovation contract. For self-renovations provide cost of supplies from Home Depot/ Rona. Note, lender will not pay for borrower’s own labor.

Please ensure to keep all invoices and receipts. All invoices and receipt must also be provided to the lender before instructions are sent to the lawyer to release funds. The cost of appraisal is the responsibility of the borrower.
Here is an example of a Purchase Plus Improvement mortgage. The house is priced at $300,000 but it needs another $20,000 in renovations. You can add in the renovations cost to the purchase price and CMHC or Genworth will lend against the total value (purchase price plus the renovation cost).
Purchase price $300,000
Renovations $20,000
Total cost $320,000
Lending value $320,000
Max. Mortgage $304,000 (95% of $320,000)
Min. down payment $ 16,000
Please don’t hesitate to contact me if you have any questions or require additional information.

As, April 19, 2010, CMHC made changes to minimum down payment requirement for purchasing rental/investment property. Also, rental income allowance to help qualify has been reduced. Ultimately both initiatives have made it more difficult for investors to purchase additional properties.

In order to purchase a rental property, minimum 20% down is required, hence, making it conventional. For investors to acquire multiple units, they will need to qualify for the mortgages using their own income and rental income.

Different lenders use different formulas for rental income. It is important to ensure you maximize your purchase power by using lenders that will allow more of your rental income.

The most conservative lenders use only 50% of the rental income. This amount is added to the applicant’s income and maximum 44% of that income can be used for housing costs and debt (i.e. Mortgage payment, property tax and heat)

Some lenders will allow you to use all of your rental income given they are declared and verified on your income taxes. These lenders will simply take the positive cash flow to add to your income or add the deficit as a liability.

Other lenders will use a rental worksheet. These worksheets will equate to 70% utilization of rental income.

Since, rental properties are not insured, each lender has their own nuances on requirements. This is where it gets tricky. In cases where investors’ portfolios include multiple units it is important to work with a mortgage associate prior to purchasing to review the portfolio and discuss various options. Also, since large portfolios also involve more documentation it would speed the purchasing process to ensure all documentation is in order.

Feel free to call if you have any questions or would like some more information.