Tap Your Home’s Value in Your Retirement

Are you near retirement but have not saved enough cash? Do you know that you can use your home’s value as extra retirement fund?

Your home is essentially a bank of wealth of the money you paid for it throughout the years.  The equity you’ve built up in it is a cash resource if only you know how to unlock it.

So, how do you unlock it? Below are 3 ways how.

Buy A Smaller House

Downgrading to a condo, a retirement facility, or a smaller house will leave you with plenty of spending money after you sold your current home. This is especially true for hot markets such as Toronto and Vancouver where selling now is very much in the favour of the seller right now.

But what if you wish to remain in your current home? Are there still ways to tap your home’s value then? There are! Two potential solutions are getting a home equity line of credit or getting a reverse mortgage. These are explained below.

Get a Reverse Mortgage

A reverse mortgage gives you flexibility because it allows you to get your money either as advanced in stages or as a lump sum. Another advantage is that there are no required  principal or interest payments. You won’t be required to pay up the loan until you sell the property, move, or die – in which case your estate will be charged. What you will be required to do is to keep paying the insurance and property taxes for the lender.

Reverse mortgages does have disadvantages, the most notable of which is the high cost because the typical interest rate is double that of a conventional mortgage. Note that although you are not required to pay interest payments, they will be added to your balance increasing it significantly over a few years.

Apply for A Home Equity Line of Credit

Getting a home equity line of credit is a less expensive option compared to other choices like a reverse mortgage. A HELOC will let you borrow up to 65% of your home’s value and you can choose to withdraw only the amount you need. You won’t be required to make regular payments nor withdraw an initial amount.

Note that a HELOC requires regular interest payments (you only pay interest on actual withdrawn amount) and that getting approved might prove difficult if you wait until you are actually retired before applying for one because a key factor that lenders consider is having regular income – something you won’t have if you apply for a HELOC too late. Know too that failure to pay down the road will mean that you’ll be forced to sell your home. This is why you have to really evaluate if this is right for you.

Unlocking your home’s value in your retirement can help you in a lot of ways, but understand that some solutions might be better for your specific needs. Ready to tap your home’s equity now? Contact us and we will assist you each step of the way!

 

New Mortgage Regulations To Be Announced

Risks of high real estate prices and household debt will be addressed by the new OFSI residential mortgage lending guideline updates.

Mortgage Updates

Some of the risks that are part of partaking in the mortgage market will become significantly lower when tighter mortgage lending rules are implemented with the oncoming stricter regulations. The updates will be finalized by the end of this month, said the federal financial regulator.

The new updates will come in effect 2 to 3 months after the final changes to the residential mortgage lending guidelines or B-20 of the Office of the Superintendent of Financial Institutions (OSFI). This was shared in a speech at Economic Club of Canada in Toronto by OSFI head Jeremy Budin.

The superintendent shared that the majority of changes will be quite similar to what was proposed in July, which includes a stress test for uninsured mortgages and prohibitions on co-lending arrangements that aim or seem to circumvent regulator requirements.

Budin says that they are doing this because they plan to act before lending risks become actual problems.

New Mortgage Stress Test

If implemented, the stress test will mean that homeowners will have to prove that they have the means or capability to continue making payments should interest rates increase. The stress test include those who were not required mortgage insurance, to begin with, and those who have a downpayment of 20% or more.

Rudin’s statements came after the Bank of Canada hiked up their interest rates twice this summer amidst unexpectedly strong economic numbers. He told reporters that the upcoming changes are to help provide support to the lending system as nobody can predict what will happen to house prices in the future.

Crackdown on Co-Lending

Budin said that the OSFI’s crackdown on bundled or co-lending mortgages (those mortgages wherein unregulated providers team up with federally regulated lenders to finance a property) is geared at making sure that financial institutions stick to rules that specify how much they can lend.

He added that the system needs to attain more integrity but that he also acknowledges that the changes to rules may push those thinking of buying a home to use riskier financing options, for instance, shadow banking. He further said that they recognize the fact that some lending activities might move outside the federal sphere but that does not stop them from acting on their responsibilities and mandate.

Safety Measures?

The more limiting lending rules by the banking regulator came into fruition after Ontario government chose to implement some changes in April in an effort to cool down the housing market. They’ve implemented a foreign buyers tax similar to what was implemented in Vancouver for the same purpose.

Note that the latest figures from the Real Estate Board of Greater Vancouver show that home sales in September of this year is higher than that of last year and that the home price index is up by 10.9% compared to the same period a year ago.

Worried about your home loan application because of this update? We can help! Contact us today for assistance and more information on how we can give that to you.

6 Things You Must Know About A Home Equity Line of Credit

Getting a home equity line of credit is increasingly becoming popular for homeowners who need some extra spending money. It is also relatively easy to qualify for compared to other types of loans as long as what the homeowner owes is less than the equity built in the home.

The above are just some of the important things to know about getting a home equity line of credit. The following are a must read if you’re trying to finalize your decision about getting a HELOC.

Know Your Exact Equity

Because a HELOC lends you money against the value you already own in your home, you have to know what percentage of the home you already paid for. That value is your equity. To get that, you have to subtract what you still owe to the current value of your home. Divide the result by your home’s value and multiply by 100. The end result is your equity.

Example, your home is worth $300,000 and you still owe $210,000. Your equity is $90,000. $90,000/$300,000 is 0.30. Multiply that by 100 and you get 30% equity.

Find Out If You Are Eligible

A good credit score and a minimum 20% equity are usually the most common requirements. Your lending professional can also help you with this.

Understand Draw and Repayment Periods

Your HELOC has a draw period and a repayment period. The draw period is the span of time wherein you have access to the money and can be as long as 10 years. The repayment period is the span of time wherein you are expected to pay and can’t withdraw more money. This can last up to 20 years. Note that you are expected to pay the interest on the outstanding balance and the principal for both period.

Your Interest Will Be Variable

A HELOC will only charge you interest on amount withdrawn, no matter what full amount you have access to. This is why your interest will change by how much you withdraw along with other factors such as the prime rate. A HELOC’s interest is also lower by comparison to other types of credits or loans. Some lenders may also offer you a fixed rate.

Enjoy Spending Flexibility

A HELOC allows you to withdraw the amount you need when you need it (subject to terms and regulations). It gives you freedom similar to withdrawing from a savings account or using a credit card.

Use Your Equity in A Smart Way

Most people use a HELOC to invest on home improvement or for college funds. It can also be used to consolidate debt so you can save money in the long run. It can also be used to fund a dream wedding or a much deserved vacation.

Still have questions about getting a home equity line of credit? Let us answer them for you! Contact us for assistance about getting a home equity line of credit today! Your HELOC approval await you!

Ontario Tightens Rules Against Double-Ending by Real Estate Agents

A fine that can go as high as $50,000 awaits real estate agents who engage in unethical double-ending. Double-ending is when brokers, salespersons, and brokerages push through a real estate deal while representing more than one party in the deal.

When Interests Are Conflicted

Regulatory changes are being introduced by Ontario to address scenarios wherein real estate agents are representing both sides of a real estate sale, truly a conflict of interests. It is to be noted that although Ontario is getting stricter on the practice of double-ending, this move did not go into banning the practice.

The changes were announced at Queen’s Park by Minister of Government and Consumer Affairs Tracy MacCharles. The announcement means that those brokerages, salespersons, and brokers who are representing more than one side at a sale will now be subject to stricter rules.

The proposed legislation is also raising the fines for those who violate the code of ethics of the real estate industry. The new fines are up to $100,000 for brokerages and around $25,000 to $50,000 for individual brokers and salespersons.

The Media Brought Light Into the Issue

MacCharles told reporters that what the government is doing is a response to an issue that’s been circulating in the press, wherein one agent is representing both sides in a transaction. She added that they won’t be banning double-ending, but will put a limit to the situations that it’s acceptable to take place.

MacCharles mentioned certain situations such as in some locations wherein there are very few agents, a family situation, or in some industrial or commercial situation where the expertise and representation of a real estate professional is needed – are good examples where double-ending is allowed.

It was also mentioned that the ideal situation is still wherein a seller and a buyer would have different representatives as what is referred to in the industry as the ‘designated representation model’.

​MacCharles further shared that the disciplinary actions against those who choose to not comply with the new rules will be up to the Real Estate Council of Ontario.

Double-ending is a real problem as was uncovered in an undercover investigation made by CBC’s Marketplace. Their investigation revealed that some Toronto real estate agents are offering unfair advantages to potential clients in an attempt to secure a deal from both ends.

Big Changes Ahead

The new rules include disclosing to clients when double-ending occurs, a move applauded by Ontario Real Estate Association CEO Tim Hudak, who believes that this is a big step towards the right direction and allows for more trust and better business practices. Other real estate experts have a neutral stance on the issue but acknowledged that full disclosure would be best, more so for sellers who bought from the same agent and want to sell their home with the help of someone they already know and trust.

Concerned about getting the best deal that will work for you when refinancing your mortgage, applying for a second mortgage or a home equity loan? Let us help you! Contact us today!

Reasons to Get a Second Mortgage

It seems that getting a second mortgage is very popular these days, but why are people getting a second mortgage, to begin with? Is it a safe or a wise decision to do it when you’re not yet paid with your first mortgage? We have answers (and more) below!

First, What is a Second Mortgage?

Investopedia defines a second mortgage as a subordinate mortgage that is approved while the homeowner has another mortgage in effect.

This type of mortgage is backed by your home; which is why it is required that you have some equity before you can apply for it. By applying for a second mortgage, you’ll be able to refinance up to 85% of your home’s value, freeing fund to use for other purposes.

It is the freeing of some funds that is the main reason why most people apply for a second mortgage. Once they are approved, they usually use it for the following:

For Investing

It is no secret that you need money to make more money. In the case of investments, the bigger capital you put in it, the larger the gains that you can get.

For Further Schooling or Self Investment

Getting ahead in life for most people means needing to have the credentials for some positions, hence the need for further schooling. In some instances it is needed for a career change or just to be a better version of one’s self. Unfortunately school is not cheap and requires a significant investment on your part. If you qualify for a loan and have the means to pay the future monthly payments, why not go for it?

For Investing in a Second Property

Buying a second property for a vacation home, a rental, or an investment property requires some capital as most banks ask for a minimum 20% downpayment. Tapping into the equity of a home you already own allows you to come up with the funds for this quickly. By doing this, you van effectively grow your assets as long as you won’t default on your monthly payments.

For Paying Debts with a High Interest Rate

Credit card companies can charge as high as 30% interest on your balance. This is a lot of money that simply goes to the banks, burying you deeper in debt. By taking a second mortgage to pay loans like this, you can pay your way out of debt faster.

For Funding a House Renovation

Spring is just a few months away or perhaps you will want to get renovations done before winter. You will need a substantial amount of money to make this possible. Taking a personal loan for this purpose is usually met with a rejection but with a second mortgage, you can get what needs to be done completed by the time you want it. This is especially handy for repairs and renovations that preserve the home such as a roof replacement.

How to Get a Second Mortgage?

Getting a second mortgage is not as challenging as most may think more so if you get the help of a licensed mortgage broker. Our mortgage professionals at Mortgage Central Nationwide will help you throughout the process of mortgage application until you finally qualify for a loan. We will ensure that your mortgage will have the lowest possible interest rate and that the terms will be exactly what you can manage so you won’t fall behind on your monthly payments. Simply contact us at your earliest convenience.

 

When (and How) to Use Second Mortgages

Determining when is the right time to take advantage of your home equity is a tough decision for most homeowners. Some worry that they may not be able to pay back a second mortgage and some don’t apply for a second mortgage because of fear that they won’t be approved or that the process would be too difficult.

The truth is, using a second mortgage is a powerful financial tool that homeowners can use to their advantage, more so if they are struggling to get approved for an unsecured loan.

Why Apply for A Second Mortgage

People get second mortgages for a variety of personal reasons, mostly when they need a significant amount of money quickly. Reasons usually range from wanting to invest in another property, having a tough time financially, wanting to renovate their home, consolidating credit card debt, or securing bridge financing. Add to this the fact that the interest rates for second mortgages are currently very low, then the appeal of getting a second mortgage is understandably quite strong.

Assess If You Really Need A Second Mortgage

Second mortgages come with good benefits but is still a huge financial responsibility. It is only smart to try to look for other options that may be better and with fewer risks. After all, using your home as a collateral is not to be taken lightly. You can take a look into possibly opting for a personal loan or a cash advance. They do come with strict requirements such as having a good credit and a stable job and have a higher interest rate, but if you only need a small amount, then they can be better options for you.

If your needs can’t be met by the other options above, or if your qualifications for their requirements are a bit lacking, then a second mortgage would be the right choice  for you. Ask yourself if you can afford paying off the second mortgage and what are you going to so should you decide to sell the house later. It’s about anticipating your future needs and planning ahead too.

Second mortgages do come with attractive benefits too, such as low interest rates, can be easier to pay off, and with more borrower-friendly application. Another thing is that because they are secured through your equity, you will be able to borrow a larger sum as compared to other types of loans.

How to Secure A Second Mortgage

You can get a second mortgage by applying to a trust company, a major bank, or a private mortgage lender. Generally speaking, the best interest rates are offered by banks although their requirements are often very strict. Your best option if you can’t meet most banks’ lending requirements is approaching a private mortgage lender or a trust company.

Choosing which one would be best for your needs and means can be very tricky. The process may also require more paperwork than you think. That is where professional mortgage brokers like us from Homebase Mortgages come in. We take care of the details to ensure you are well taken care of and you get approval for your application the soonest time possible.

Need more answers about when and how to get a second mortgage? Let us help! Contact us today!

8 of the Best Home Updates to Get Your Money’s Worth

Nearly all home updates can improve the aesthetics and function of your home, but some give you more value to each of your dollar spent. We’ve compiled the best home updates that are worth your money to give you an idea which home upgrades to go for more so if you’re planning to sell in the near future.

Backsplash

Adding a backsplash can be as good as a remodel for your kitchen and obviously a lot cheaper. Subway tile backsplash is very popular amongst buyers too and can potentially increase a home’s asking price by as much as 6.9% according to statistics. They can also be installed in your kitchen in just a day or two.

Bathroom Vanity

The bathroom is one of the rooms that can make or break a sale. People truly appreciate bathroom vanities these days so adding one will not only give your bathroom an overhaul that has the same effect as a renovation but will also add to your home’s buyer appeal. A vanity can be installed over the weekend and relatively cheap compared to other home upgrades.

Barn Doors

Barn doors are not just for following trends but also a smart way to free up space while updating a room. They can be installed over closets or in rooms that have little floor space to begin with.

Cabinets

There is a huge difference between attractive functional cabinets versus new cabinets, with form and function winning most of the time. If your cabinets are already a good style, repainting or refinishing them will do. If your cabinets needs to be replaced, choose a Classic style as they tend to appeal to most people.

Energy Saving Thermostat

Using an energy-saving thermostat is not going to magically increase the resale value of your home but this is is an investment that you can benefit from in the long run in terms of potential savings on your energy bill. Some homeowners who did this reported a savings in their power bill of about $200 to $300.

Functioning Fireplace

Most home buyers still appreciate a functioning fireplace in a home. It isn’t just for beautiful holiday photos! Survey says that a functioning gas burning fireplace can increase a home’s buyer appeal, more so if you have a wood burning fireplace.

Landscaping

Your home’s curb appeal will not only increase your home’s resale value but will make you love your house even more (humans inherently love beautiful things). Get to planting some flowers, adding turf to your lawn, and trimming bushes. Its good weekend exercise, adds so much value for a little investment, and psychologically proven to improve your mood. What is not to love?

Paint

Painting a new color is the easiest and perhaps the cheapest way to update and freshen up a room, more so if you choose good colours with a nice contrast. Don’t get overboard though and keep most walls neutral. A pretty grey can modernise an otherwise outdated room in a jiffy!

Ready to go for the best home updates described above but need help with funds? We can help at Mortgage Central Nationwide. We’re here to assist you with mortgage refinancing, getting a second mortgage, accessing your equity via home equity loan, or applying for a private mortgage. Contact us for details!

Should You Get A Private Mortgage?

A significant number of Canadians are borrowing from private lenders to purchase homes because not everyone can get mortgages from Canada’s lending institutions and big banks.

The Dream of Home Ownership

The above is the reality of the housing situation these days as traditional lenders get stricter in their lending practices because of the rising real estate prices and low interest rates. After all, they are also businesses that have to weigh factors and lending in present time can be quite risky.

The situation is made worse by the fact that down payments have also risen, with homes costing a minimum of half a million needing a down payment of at least 10% of the home’s value. That kind of money is not something that everyone can produce out of pocket; hence, most Canadians will have to resort to loans to make their dreams of home ownership come true.

Light at the End of the Tunnel

Private mortgage lenders are a blessing to many Canadians because they allow those who need funds to borrow via a private mortgage. A private mortgage is not the same as borrowing from a trust or bank as the funds come from a private individual or a business.

The business of private lending accounts for about 4% to 5% of the mortgage market in Canada. While this figure is still small, this is a huge leap considering that private mortgages used to be less than 1% of all mortgages during the recession of 2008 and 2009.

With the above said, it is hard to deny that private lenders play a significant part in Canada’s real estate landscape, more so that those who are self-employed (15% of Canada’s workforce), turn to them because they can’t get a traditional mortgage without third-party income validation.

Private mortgage lenders are also a top option for first-time homebuyers who have bad credit, have an illness, have lots of debts, have just divorced, have lost a job, is a non-resident, or owe back taxes. These people are potential homeowners who happen to not have a good income record or do not possess as big enough take home salary such as in the case of small business owners who have just started their companies.

It should be noted that borrowing from a private mortgage lender means paying higher interest than what a traditional lender charges. With this mentioned, private lenders also help borrowers repair and rebuild their credit ratings so that they can get better rates with other lenders in the future.

Benefits of a Private Mortgage

There are many ways to determine whether a private mortgage is right for you but the best way in our opinion is to weigh the benefits of a private mortgage that you can avail of. They are as follows:

  • There is less red tape
  • Enjoy mortgage flexibility
  • Higher lending risk tolerance
  • Good rates.
  • Real time lending speed
  • Real-world purchasing advice from the lender
  • Easy pre-approval of mortgage

Need help getting a private mortgage? Contact us at Mortgage Central Nationwide. Our professional mortgage brokers will help you get in touch with a private lender and help you with your private mortgage application.

 

How to Use Home Equity to Unlock Tax Deductions

Do you know that there is a way for the CRA or Canada Revenue Agency to allow something that would be akin to letting taxpayers deduct mortgage interest from their taxes just like what our American neighbours have down south?

How?

By using the Smith Maneuver, a way to deduct from taxes created by retired financial strategist Fraser Smith from Victoria, BC two decades ago. The Smith Maneuver goes around the fact that although mortgage interest is not tax deductible in Canada, loans on investment are.

How to Use the Smith Maneuver

By making use of the Smith Maneuver, a Canadian who has some substantial non-registered investments can use the funds from the investments to purchase a residence or pay off an existing mortgage. Now, you have to note that depending on your mortgage and whether it is closed or open, paying it off before the end of term may warrant prepayment penalties. You have to keep this in mind to assess whether using the Smith Maneuver would truly benefit you.

Let’s say that the numbers are in your favour. A few days after using the Smith Maneuver, you will be able to use your property as collateral when applying for a separate loan for investing purposes. Also keep in mind that a substitute of collateral may later be agreed to between you and the lender if you decide to move houses while this is ongoing. Once this is done, you can then reinvest funds from your loan into qualified, non-registered investments and deduct the interest on the investment loan from your taxes. Be sure to stay away from RRSPs and TFSAs as those are categorized as registered investments!

How the Smith Maneuver Can Benefit You

Strategizing using the Smith Maneuver allows you to use your home equity to invest and grow your assets over time because it lets you deduct from your taxes as you continue to grow your investments. It is making your money work for you and not the other way around while still keeping everything legal. Yes, this deduction is legal and permitted by the CRA though it would be best to ensure that you still keep a record of all tax deductions just so you have complete documentation in the event that your deductions are questioned.

When Would the Smith Maneuver May Not Work for You

The Smith Maneuver isn’t the answer everyone is hoping for. In the case of Canadians who take out mortgage loans to buy rental property, the high interest rates associated (because lenders usually add a premium to homes that are not occupied by the legal owners) may not make the maneuver worth it at all. It is therefore helpful to compare mortgage interest rates and really do your research to ensure that you won’t be at the losing end.

Just to add, under CRA rules, if you’re someone who does at least half of your work from home (in your home office), you may be able to deduct some or your home office’s cost from your taxes although note that this does not allow deductions of your actual mortgage. This is still a win, right?

Do you want to know more about how some loans can help you out? Contact the mortgage experts at Mortgage Central Nationwide or apply for your own home equity loan in minutes today!

Tips and Tricks for Success in Real Estate Investing

Real estate investing can seem like an easy way to make some money, after all, plenty of people have found it to be very financially rewarding. The thing is, people who find success with it typically do their homework to minimise risks. Find out how you can do the same below!

Find a Good Real Estate Agent

If you’re investing in rental property, the best real estate agent you can find is someone who is also an area investor. Better if your agent can show you some of their properties together with what they are charging for rent. You can also ask your agent for details such as names of other investors they helped. A good real estate agent will either have a team of real estate professionals such as insurance advisers, home inspectors, lawyers, accountants, property manager, and mortgage brokers; or have refutable contacts that can be shared with you.

Think Long and Hard about Location

Real estate is all about location. An area in decline will be a loss in the future no matter how cheap the property is. If big chains such as Home Depot and Tim Hortons are moving in, then that area is either on the way up or is a prime location because big chains use a lot of research before setting up business in any location.

Draw a Partnership Agreement if Investing with Others

Good relations now can turn sour in the future when money is involved. If a real estate partner passes away, loses a job, or ceases to be a friend, problems can ensue later on. With a partnership agreement, what to do in situations like these are decided early on and will help you avoid an expensive mistake later on.

Invest for the Long Term

When you buy and hold real estate for the long term, you can manage expenses and income easier plus plan to pay the mortgage with the income coming in.

Be Careful Who You Rent Out To

Depending on where your property is, renting out homes to students or certain rooms to other people may need to be done with a permit and certain legal parameters in place such as complying with fire code or procuring a license.

Find a Dependable Property Manager

This would be best if you’ll be renting out quite a few properties (more than 3) because when you have a property manager, you can be a bit more relaxed. Property managers handle repairs and minor problems for your rental properties. They also help find tenants for you. Just note that property managers often get 10% of the monthly rent.

Don’t Rush into Leasing Your Property

Evicting a problem tenant can last months so making sure your potential tenants present no issues is paramount. You may have to ask for references and draft a lease agreement several times before both you and your potential tenant reach an agreement.

Being a landlord isn’t guaranteed easy money. You’ll have to ensure that you’ll still have something left after all bills are paid off and the monthly mortgage has been taken care of. When done properly, investing in rental real estate can be very rewarding and will be free from investing mistakes.

Interested in taking your real estate investing to the next level and are looking for a loan? If you own your home, you’re approved in just 24 hours! Apply today!