Purchase Plus Improvement Mortgage

Is the home you are going to purchase need some renovations? A purchase plus improvement mortgage helps home buyers pay for their renovations, with one manageable mortgage, and as little as 5% down!

Purchase Plus Improvements is for consumers looking to purchase a home that has great potential but needs a little TLC. This program allows you to make improvements immediately after taking possession of your new home and have the costs rolled into one easy-to-manage mortgage.

The purchase plus improvements mortgage is a very helpful mortgage program for many. It is specially valuable when you find the perfect neighborhood, location, home structure, and price only to be disappointed when they walk in and find pink shag carpet and 30 year old built in appliances.

Purchase Plus Improvement Defined
When a client is purchasing a home and wants to add cosmetic changes through a renovation process using funds advanced by the lender to complete and pay for the renovations.

The Steps to a successful Purchase Plus Improvements Mortgage:

Once the purchase contract is in place, you need to obtain quote(s) on the work to be completed. The quote(s) should be obtained from a reputable contractor or well known company and should be written professionally on letterhead including labor and material costs in an itemized fashion making review simpler.

Once your mortgage is approved and all conditions are met, the lender will advance the entire mortgage amount to the lawyer and condition for the lawyer to hold back the amount equivalent to the renovation cost.

For example:
You purchases a new home for $300 000 with 5% down payment and adds $15 000 in improvements.  The new purchase effectively becomes $315 000 and a 5% down payment on this amount is now required.  The lawyer will receive funds in the amount of 95% of $315 000 and will pay the seller the $300 000 owing and then proceed to hold back the remainder of the funds until the improvements are complete.  Once the improvements are finished and inspected, the improvement funds are released. It is very important to remember that the improvement funds are not released until 100% of the improvements are complete.

Dispelling the biggest question with purchase plus improvements mortgages
The lender will not pay for your improvements up front, rather you will be reimbursed once they are fully complete to the lender’s satisfaction.

Frequently Asked Questions

Q: What is the maximum amount of improvements you can obtain?

A: The maximum amount of improvements allowed are equal to 10% of the purchase price. For Example, if the purchase price is $300,000, the maximum improvements allowed are equal to $30,000 or 10%. If you require more you will require a construction mortgage.

Q: What are cosmetic renovations?

A: Cosmetic renovations are usually smaller adjustments/renovations to the home’s interior or exterior appearance. Examples would include: New Carpets, New Kitchen Cabinets, New Paint, New bathroom fixtures, etc.

An example of a larger but acceptable improvement would be: The addition of a detached Garage, or full basement development. These items are designed to add value to the home and not to correct deficiencies or structural concerns.

Q: What if you want to do the work yourself?

A: Lenders will only compensate for material costs used to complete the improvements. For Example: A client  is very handy and has a background or trade that would allow them to competently complete a small upgrade or renovation on their own, the lender will not compensate for their labor, rather just the materials.  In this case we would ask for a professionally completed and itemized material quote from a hardware depot/store.

Q: Can you use this program to purchase new appliances?

A: That is a great question, in my opinion it should be yes.  However chattel items such as Fridges, Stoves, Microwaves, Dishwashers, etc. cannot be included in this program. These items can be removed from the home upon sale and we cannot include them to directly impact a property’s value.

Link to CMHC Purchase Plus Improvement Program

Source: Mortgage Showdown

Is Your Mortgage Up For Renewal?

With every mortgage renewal comes the opportunity to reflect and assess your mortgage needs before you decide on a new mortgage product. Whether your term is 6 months or 10 years, your mortgage lender will mail your mortgage renewal agreement 30-60 days prior to maturity. Most mortgage renewal agreements are at posted rates. I recommend that your speak with your mortgage professional prior to signing your mortgage renewal, chances are you will get a better mortgage offer than what is offered on the renewal.

You do not have to renew your mortgage with the same lender. You can choose to move your mortgage to another lender if it offers you terms and conditions that suit your needs better. When you refinance your mortgage with a new mortgage lender, the new lender will process the mortgage application as if you are applying for a new mortgage.

If you decide to switch your mortgage to another lender, make sure you verify the costs of changing lenders, such as legal fees to register the new mortgage, fees to discharge the previous mortgage and other administration fees. You can ask if your new mortgage lender will pay for part or all of these fees.

The great news is that upon your renewal date (maturity) you can switch your mortgage to another lender without paying a penalty. This is a great opportunity to discuss your mortgage strategy with your mortgage professional without incurring a penalty if there is another lender that meets your needs or offers a superior mortgage product.

Follow these simple steps to make sure you secure the mortgage renewal that’s right for you:

1. Start early. Did you know that most mortgages can renew as early as 120 days in advance? This option allows you to lock your mortgage in at current rates and renew early without paying a prepayment charge.
2. Consult your mortgage professional. They’ll make sure you have the latest product and mortgage information to help you make a final decision.
3. Renew at maturity. Many people wait for their mortgage to reach maturity before thinking about their mortgage renewal. If this is the case for you, some banks and lenders will offer you the lowest posted rate within the last 30 days of your mortgage term if you choose a fixed rate mortgage. This way if rates increase you are protected during the mortgage renewal process.
   
   
   
   
   
   
   
   
   
   

Bank Mortgage Advisor's Vs. Mortgage Brokers?

When looking for solid trust worthy mortgage advice who do you turn to? Mortgage brokers or bank mortgage advisor'?

Bank Mortgage Advisor

A mortgage advisor at a bank is very much like a mortgage broker in terms of service, availability, flexibility and knowledge, except they work for their respective bank only.  A mortgage advisor will meet with you and work with you just like a mortgage broker to see what your best mortgage strategy and options will be in terms of getting a mortgage.  They can negotiate with the bank on your behalf to get the best deal on a mortgage.  They get paid by the bank, either through commissions, or salary + commission, or just salary.

Mortgage Broker

A mortgage broker is a professional who is a freelancing agent.  They go between the lenders and the borrowers (you) and are paid a commission from the lenders for securing a good borrower.  They don’t work for any one financial institution.  They work for themselves or a team, and have contacts to lots of lenders.  They seek out clients interested in borrowing for or against a home and connect them with a lender that will work for them.  Some can even go between you and the banks for a mortgage. Many people say their mortgage broker can get a better rate than if they went to the banks themselves.  Some people also say that a mortgage broker helped them get approved even though their credit history was poor.

So who to choose? Let’s look at the pros and cons of each.

Bank Mortgage Advisor Pros

• Flexibility: You can see them on your time when and where you want.
• They can offer bank perks such as: discount banking fees, lower interest lending products etc.
• They often pay the appraisal fee.
• Face to face personal meetings.
• Security: Banks likely will not close down.
• Service:  Larger network of support services, there is always someone to talk to at your local bank if you have any questions or concern.

Bank Mortgage Advisor Cons

• You have to do the shopping of different lenders.
• Posted rates are often not as low as mortgage broker posted rates.
• If your credit history is poor, banks may not approve you.

Mortgage Broker Pros:

• Flexibility: You can see them on your time when and where you want.
• You often get a very competitive rate.
• They may be able to get you approved with more than one lender.
• If your credit score is poor or bruised, they may find a lender who will work with you.
• You don’t have to negotiate, they will do the negotiating for you.

Mortgage Broker Cons

• The lenders that offer the lowest rates are often located in different provinces with no local branch service.
• The lenders that offer lower rates are often smaller, unknown companies.
• Some lenders pay higher commissions to brokers than other lenders, a broker may place your mortgage with a higher risk lender because of a higher paid commission.
• Additional mortgage broker fees depending on the type of mortgage needed.
• If you have an issue with your broker you have to deal with the broker, there is typically no "higher authority" to make a complaint to.

After reviewing the pros and cons of each it's ultimately your decision and comfort level on who you would like to work with. If you have a good credit history, then shop around at the banks to see what is offered to you. Each bank mortgage advisor is different but most will provide the best rates and solution for you the first time. If your credit history isn’t the best, then going through a mortgage broker might be the best option for you as you have a greater chance of finding a lender.

Take the time to do your research in finding the right advice because it is the biggest financial decision you will make in your life!

Success

"What's your best rate?"

"What's your best mortgage rate?" This is the million dollar question... or is it? I am asked this everyday, my response is "What is your mortgage strategy?" Most people are thrown off by this response as they do not have a mortgage strategy. The truth of the matter is that there are so many different mortgage rates and products that without developing an in depth personal mortgage strategy we really don't know what the best rate is for you and your mortgage plan.

Are you purchasing your first home?

Are you refinancing an existing home? Are you going to sell this home within the next 3-5 years?

Are you renovating your home?

Are you consolidating debt?

Do you own an investment property?

Do you need cash back?

Tailoring a mortgage to a client's needs is something many mortgage professionals do not do enough of. As a Mortgage Advisor it is my commitment to discuss all your mortgage options, and answer all your questions and concerns.

The lowest rate says nothing about the quality of the mortgages and the service provided, your ability to qualify or the support you can expect with a given rate. Keep in mind, most deeply discounted rates come with little service or mortgage planning. If you want someone who takes time to carefully review your best alternatives and warn you of lender restrictions, and be available for your mortgage needs before, during and after the mortgage process it is rational to pay 5-10 basis points extra for that service (2.99% instead of 2.89% for example). That difference is minimal when you need the right advice, because bad mortgage selection will balloon your cost of borrowing after closing.

Get Pre-Approved Today

Considering buying a house? Perhaps you want to upgrade to a new larger home. Ever think about a second home, cottage or investment property? Your first step is getting pre-approved to find out what you can afford.

If you’re thinking about buying your first house, one of the first questions you may ask yourself is, “How much can I afford?” Read the following mortgage affordability tips before you set out to find the home of your dreams:

Consider your annual household income. This is a key factor when determining how much of a mortgage you can afford. In addition to calculating your annual household income, consider any income changes that may impact your ability to make your payments. For example, if there are currently two major income sources within your household, would you still be able to afford your mortgage if one was removed? What if a child comes into the picture and your partner decides to become a stay-at-home parent? Consider all factors before deciding.

Consider your down payment. Currently, you are required to have at least a 5% down payment when buying a house. The size of your down payment is one factor in determining the size of mortgage you can afford.

Consider your debt. When determining “How much can I afford?” one of the other important factors to take into account is the amount of debt you currently have. The lower your debt-to-income ratio, the more money you’ll likely have to put towards your mortgage. In addition, your debt level will also help to determine how large of a mortgage you will qualify for.

Consider your amortization period. If you are simply trying to keep your regular mortgage payments low in order to comfortably fit the payment into your budget, you will probably want to apply for a mortgage with a longer amortization period. However, if you don’t mind a somewhat larger regular mortgage payment in order to save money on interest in the long run, you may want to consider a shorter amortization period.

Consider your closing costs. Closing costs are an often overlooked expense that will definitely help determine how much money you can afford as a down payment.

Consider your property taxes, various types of homeowner’s insurance such as damage, title etc and additional expenses. Lastly, there are a few additional expenses that may impact how much money you have to put towards your mortgage each month. Expenses like property taxes, homeowner’s insurance and even things like home maintenance should be factored in before making your final decision. These costs are often overlooked but should be considered before settling on the home of your dreams.

An experienced mortgage professional helps you answer the question “How much can I afford?”
Buying a home is a big financial decision. When you start out by knowing what mortgage you can comfortably afford and what houses fit into your price range, you will be prepared to find the ideal house for
 your situation.

Get pre-approved today 1-866-890-9066

Service vs. Rate

Canadians today are savvy and educated when it comes to shopping for mortgage financing. Healthy competition is good for any industry and great for Canadians as a whole because it gives us multiple options to choose from. But how do you decide which financial institution to finance your mortgage with?

Most banks, brokers and mortgage lenders offer similar rates and products that range from 10+ basis points (0.10%.) For example as of the writing of this post, a 5 year fixed rate mortgage ranges from 3.29%-2.99%. You may may shop around to different lenders until you find the lowest rate, but a word of caution, make sure you are getting the right advice and service from your mortgage professional.

Ask your mortgage professional the following questions;

What are my pre-payment options?
Ensure that you are being informed on your pre-payment costs. A lower rate or discount mortgage may be great but you also may have very limited pre-payment options, or the mortgage can be locked for the full term meaning it cannot be paid out.

How are penalties calculated and applied?
Make sure that your aware of any penalties by paying the mortgage off early. Is the penalty 3 months of interest. Interest rate differential? Can the mortgage be paid out mid term or only from a bona fide sale?

Can I port or transfer my mortgage?
Ensure that you know if you can port your mortgage to another property without being charged a penalty during the term of the mortgage.

Is my mortgage standard charge or collateral?
Get clarification if the mortgage charge is standard or collateral. See my post on collateral vs. standard charge mortgages.
http://drmortgages.blogspot.ca/2013/02/collateral-vsstandard-charge-mortgages.html

Does my mortgage lender have a local branch?
This in my professional opinion is one of the most important factors when deciding where to place your mortgage. A lot of mortgage brokers will place your mortgage with a lender that may be located in another province altogether. This means the only way you can get assistance and proper service is via phone or email. It can be very frustrating if you have an issue, problem or concern with your mortgage and the only means of contact to get resolution is by phone or email. However if your lender has a physical branch located in your community, it's much easier to walk into the branch and get  direct personal service, and you are more likely to get your concern addressed and resolved immediately.

To put this into perspective take for example a $200,000 mortgage amortized over 25 years at a 5 year rate of 3.09% and 2.99%. The difference in the monthly payment is $10.28 or thirty four cents a day. Would you pay thirty four cents a day for the peace of mind, knowing that if you have a concern you can have it addressed right away by your local branch personally and not have the headache of problem resolution over the phone?

I have new clients come to me constantly who want to switch their mortgage for this reason and this reason only. They have stated that they would gladly pay a slightly higher rate to get the better service of a local branch presence.