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7 Apr

My Favourite Books

Just For Fun

Posted by: Garth Chapman

These are the books that stayed with me, often for days after finishing them, and some for weeks.

GENERAL INTEREST:

  1. Three Day Road, by Joseph Boyden
  2. The Tiger: A True Story of Vengeance and Survival, by John Vaillant
  3. Guns, Germs and Steel: The Fates of Societies, by Jared Diamond
  4. An Anthropologist On Mars, by Oliver Sacks
  5. Final Rounds, by James Dodson
  6. Survival of the Sickest, by Sharon Moalem
  7. The Tipping Point, by Malcolm Gladwell
  8. 1491, by Charles C. Mann (about pre-Columbian Americas)
  9. Angela’s Ashes, by Frank McCourt
  10. No Country For Old Men, by Cormac McCarthy
  11. Positively Fifth Street, by James McManus
  12. I heard You Paint Houses, by Charles Brandt (inspired the movie ‘The Irishman’)
  13. Dances of Dependency, by Calvin Helin
  14. The Cellist of Serajevo, by Steven Galloway
  15. The Kalahari Typing School For Men, by Alexander McCall Smith
  16. A Time To Kill, by John Grisham
  17. A Painted House, by John Grisham
  18. The Goal, Eliyahu M. Goldratt
  19. The Imperial Cruise, by James Bradley
  20. Dublin, by Edward Rutherford
  21. The Millionaire Next Door, , by Thomas Stanley & William Danko

SCIENCE FICTION / FANTASY

  1. Stranger in a Strange Land, Robert Heinlein
  2. 2001: A Space Odyssey, by Arthur C. Clarke
  3. Foundation (the series), by Isaac Asimov (and there are so many more great books by Asimov)
  4. The Heechee Saga (the first 3 books of this series: Gateway, Beyond the Blue Event Horizon, Heechee Rendezvous), by Frederick Pohl
  5. Lord Valentine’s Castle (of the Majipoor series), by Robert Silverberg

BIOGRAPHIES AND AUTO-BIOGRAPHIES:

  1. Ben Hogan: An American Life, by James Dodson
  2. When I left Home, by Buddy Guy
  3. Guy LaFleur’s autobiography
13 Feb

Could Canadians gain access to longer-term mortgages?

Mortgage Facts & Stats

Posted by: Garth Chapman

In the USA 15-year and 30-year mortgage terms are very common.  So why not in Canada? Is it that there is less banking competition, or are there other forces at play?

Longer-term mortgages would benefit Canadian homebuyers by bringing more stability to the homebuying process, says a recent brief from the C.D. Howe Institute.

In “One More Case for Longer-term Mortgages: Financial Stability”, author Michael K. Feldman argues that mortgage periods of ten years or longer would decrease the number of renegotiations homebuyers would be required to engage in over the course of a decades-long amortization, thereby limiting their exposure to higher rates.

On the demand side, most Canadians simply don’t realize that longer-term mortgages are a possibility. “I think if you asked most people, they would think you can get a loan for five years or less, and that’s it,” Kronick says, adding that the institutions providing longer-term mortgages also charge premium rates to mitigate the losses in revenue they face from less frequent loan negotiations/interest rate hikes and early mortgage pay-offs.

More here 

1 Jan

Calgary Secondary Suites – What’s Happened and What’s Next? 

General

Posted by: Garth Chapman

  • From June 1, 2018 the City created a 2 year amnesty period, during which the City has created a grandfather program for existing secondary suites in single family homes, where you must show proof the suite was in operation prior to December 2007.
  • As of 2019 the grandfather program now effectively includes all existing secondary suites. No proof of prior operation is required.
  • City fees: Development Permit is $471 (currently zero under grandfather program) and Suite Registry is $232, so $700 in total plus drawings.  These fees are waived until May 31, 2020.
  • After the amnesty period legalizing a suite may mean the following additional costs:
    • Development Permit and Suite Registry fees, currently waived, may be applied ($700-ish).  It is quite possible the City will extend the waiver on either or both of those fees.
    • Starting in June 2020, all secondary suites (regardless of construction date) will need to comply with the National Building Code – 2019 Alberta edition.  This means the following:
      • The property will require a separate furnace for the suite
      • The furnace room will have to be fully drywalled (instead of the current $500 option for a sprinkler head in place of that).
      • There may be various other items required by the new code.
      • Costs will be 3 to 4 times higher than under the amnesty period, during which we legalized our four secondary suites.  A second furnace plus re-configuring the HVAC ducting can run up to around $10,000 especially if ceilings have to come down for the ducting work to be done. Drywalling the furnace room can easily run to $1,000 and above.
  • If a property owner calls the City or has a Contractor or Architect call the city on their behalf, the City will book an Inspector to come to the property (good to have the RPR with you) and the Inspector will complete the application on-site and submit it for you.  If you have a good Contractor experienced with legalizing suites you are better to go that way.
  • Try not to ask for exceptions in your application – if you are using an experienced Contractor you can on a few areas only.
  • Best suites are 4-level splits with 3rd level walkout. They show well and are nearly never vacant.  Carriage Suites (above garages are also excellent.
  • Properties built in the mid-1990’s and newer are best.
  • The City declared that after the two-year amnesty period ending June 1, 2020, owners of properties with illegal secondary suites could be subject to fines or penalties for advertising non-compliant suites for rent.  I suspect this will be extended beyond June 2020.

On Secondary Suites in Duplexes

  • On November 18, 2019, Council accepted the land use bylaw amendments that would allow for legalization of secondary suites in semi-detached dwellings (duplexes) in the following districts: R-C2, R-2, R-2M, M-CG, M-C1, M-C2, M-H1, M-H3, M-X1, M-X2, CC-MH and CC-MHX.
  • I don’t know yet when this new Bylaw will come into effect.  This may create an opportunity for investors on Duplexes.

Key Takeaways

  1. After the 2 year amnesty period to June 2020 (which could be extended) you won’t be able to advertise an illegal suite on Rentfaster etc, and will have to advertise on Kijiji. The City will be actively searching the market for illegal suites.  So in the near future, likely by 2021 or 2022, any landlord with an illegal suite will have a tough time finding renters, will have lower rents, will have the City actively looking for them and shutting them down, and will have lower property values than those with legal suites.
  2. More and more lenders are backing away from lending on properties that contain illegal secondary suites. This will only get worse.

Main page Secondary Suite website City of Calgary webpage:

https://www.calgary.ca/PDA/pd/Pages/Home-building-and-renovations/Secondary-Suites.aspx

Apply or Legalize an existing secondary suite webpages:

https://www.calgary.ca/PDA/pd/Pages/Home-building-and-renovations/Applying-For-A-Secondary-Suite.aspx

https://www.calgary.ca/PDA/pd/Pages/Home-building-and-renovations/Legalize-an-existing-suite.aspx

Current City of Calgary webpage listing all legal registered Secondary Suites webpage:

https://secondarysuites.calgary.ca/

1 Jan

Why Financial Independence is a Better Goal than Retirement

General

Posted by: Garth Chapman

I turned 65 this year, I’m not retired, and that is just fine with me. I enjoy what I do, especially on those occasions when I can truly help make a real difference to a family’s present or future.

In fact, it has long been my plan to not retire, but I wanted to ensure I didn’t HAVE to work.  My last 20+ years in business were primarily devoted to both enjoying what I do and to ensuring my own ‘Findependence’ or financial independence. Findenendence to me is largely about freedom to choose how you live your life.

I believe that this line of thinking helps to keep one young at heart. I particularly like how Clint Eastwood described how, at 89, he continues to work and behave like a much younger man. He said “I don’t let the old man in”.

Here’s an article on Financial Independence as a goal in place of retirement I think you might find interesting.

Why Financial Independence is a Better Goal than Retirement

7 Nov

The Real Estate Purchase Process

General

Posted by: Garth Chapman

With permission from the author, I am posting this very clear and concise description of the process from start to finish.  The author is well-known Edmonton real estate lawyer Darren Richards.  I have known Darren for several years and we personally use his services for most of our Edmonton area real estate transactions as well as the private lending that we personally provide to Northern Alberta borrowers.  And when my Capital Region clients need a real estate lawyer Darren is one of a very short list who I will refer them to.  Read Darren’s blog post here

19 Oct

Four Legal Pot Plants, What Are Lenders Doing?

General

Posted by: Garth Chapman

As we all know, recreational marijuana is now legal in Canada. The law is set, but implementation and how policies and guidelines will impact our industry are yet to be determined. Generally, 30 grams for personal possession, basically an ounce baggie for those who might relate and up to 4 plants at home.

For realtors, mortgage brokers and their clients we are facing many months of the lenders sorting out their guidelines. If a borrower or seller voluntarily discloses they have been growing four legal marijuana plants, which should produce more than 30 grams, as a point of interest, how will the lenders, mortgage insurers and home insurers react?

Lenders:

As of today, many lenders do not have a policy. Some say yes four plants will be OK, some say case by case, and some say four plants will be a hard no. For the common existing house stigmatized as a “grow-op”, there are still very few lender options. We do have a couple of lenders for fully remediated grow-ops, and CMHC does consider those applications.  

Mortgage Insurers:

CMHC says they will carry on the same as they have been. Genworth and Canada Guaranty are saying either, case by case or the policy will be determined shortly.

Home Insurers:

As or right now we have not been able to get any consistent information on this subject. However, home buyers and homeowners are encouraged to check with their provider for their policy information.

For those folks growing up to four plants and looking for financing, expect your clients to get mixed results from banks and many lenders. Some lenders are considering air quality tests, home inspections, statutory declarations and other means to determine if the home has been impacted or damaged by four plants. For now, we have identified willing lenders. CMHC will consider the applications.

Please contact your Jencor Mortgage Agent or me if your clients have any questions on how the new legalization laws affect their options or to avoid complications with four plant files.  

Croft Axsen – Jencor Mortgage Corporation 

13 Jul

Take Control Of Your Renewal Process And Save!

General

Posted by: Garth Chapman

Nationally, Alberta has the highest percentage of homeowners with mortgage renewals coming up within the next two years.

You may be coming up for renewal soon. You may be concerned rates are rising, even with a renewal a few years away. The consensus is rates are increasing in North America over the next year and may continue to do so in the foreseeable future.

The new government has significantly changed the mortgage market with their implementation of new rules and underwriting guidelines. Due to these changes lenders are now restricted on what they can do and what they cannot offer to their clients.  Some specific niche situations are now larger factors in whether or not you are approved.

Here are some questions to think about when you’re up for renewal:

  • Has your credit score changed?
  • What is the loan to value of the mortgage required?
  • Was your mortgage originally insured by CMHC or another mortgage insurance company?
  • Is this a simple switch to a new lender with no new money or a refinance with added funds?

 

Depending on how you answer these and other questions, we may very well be able to get you a lower interest rate with better terms then what your current lender offers.

Your existing Lender will typically offer you a renewal rate around 30 days before renewal. In an increasing rate environment, why wait until the 30-day mark? Most lenders can lock in a rate hold for 120days. If rates go up 0.5% during the 120-day period, and you are locked in and do not have to worry about the increase.  

What Can a 0.5% increase mean for you?

If you have a $350,000 mortgage, you could save $8000-$9000 over the next five-year contract. As well potentially lower your remaining balance by $3000-$4000 at the end of your term. Do you want to save $10,000 or more?

Contact one of our Licensed Mortgage Advisors and let them get you the best financing available to you

 

Croft Axsen,

Broker/Owner, Jencor Mortgage Corporation

6 Jul

5 Things To Consider When Buying An Acreage Or Country Property

General

Posted by: Garth Chapman

HOW MANY ACRES ARE YOU PURCHASING? 

For conventional mortgages,  lenders will finance a certain number of acres, a house & a garage. The number of acres that they will consider can vary based on the property location and the norm for that area. The minimum down payment can also vary based on the size and location of the land.  For example, a property that is close to a major urban area and under 10 acres would most likely be approved with 20% down payment. If it is a larger acreage 30+ acres and not within an hour of a major urban area, the minimum down payment will likely increase. 

For high-ratio / CMHC insured mortgages with a minimum of 5% down,  they will approve and ensure the value of the house, garage and the `residential component` of the land. If the norm / average acreage size for the area is 20 acres, this is what they will approve in land value. If it is 160k – then this is what they will approve. However, if you purchase a 160-acre acreage and all of the acreages surrounding it are only 20 acres – CMHC will likely only give value to the first 20 acres of land and the buyers will have to pay out of pocket for the value of the remaining land as determined by an appraisal.

It is typically easier to secure financing on CMHC insured Mortgages and it is not uncommon for lenders to require the mortgage is insured even if the buyers have a 20% down payment based on the purchase price. If it is a large acreage, has outbuildings of major value or is a mobile or modular home – these are all things that could result in either a larger down payment requirement and/or mortgage default insurance. 

If there is no home on the property a mortgage is not available and one would require a land loan. Land loans typically start at a minimum of 25% down payment and go up from there based on the location, size and value of the property, they also often come at slightly higher interest rates.

WHAT ABOUT POTABILITY? No mortgage unless there is good water! Potability reports are needed for all well water and will be requested either upfront with the lender approval or at the lawyers before closing.

WHAT ABOUT ZONING? Country residential is the easiest to finance. However, if the land is zoned Agricultural, but used as residential (no farming or commercial component) the lenders and insurers will consider this as well. Agricultural & Farmland that derives income is more difficult to finance. Lenders are wary as it is difficult to foreclose on agricultural land and if the Agricultural land has a farming component or income lender options become much more limited and down payment requirements increase.

WHAT IF THE PROPERTY HAS OUT BUILDINGS? Mortgages are for a house, garage and land – and that’s all.  If the property has an outbuilding of value the effective value of the property will often be reduced by the lender or insurer and this will affect the down payment requirements.

For example, if a client is purchasing a small acreage for 800k , and there is a brand new large heated shop, horse corrals and an arena on the property that the appraiser values in total at $ 160k, this would be deducted from the purchase price in the lenders eyes bringing the effective value down to 640k (800k-160k). The buyer would then need to have a minimum 5% down payment based on the 640k  effective value ($32k) PLUS 160k to make up the difference (value of outbuildings) for a total of $ 192,000.  Even though the buyer is technically putting more than 20% down based on the contract purchase price, the lender and insurer would consider this to be financed at 95% of the value of the home, garage and land and a CMHC premium would apply. 

OTHER FINANCING FACTORS TO CONSIDER: You may need to allow extra time for conditions to be removed on acreage purchases as  CMHC appraisals and well water testing can cause delays. 

As always with mortgage financing, the buyer plays an important role. For strong clients, the lender may make an exception to their policies. 

Written By: Cory Lewis – Jencor Mortgage Advisor

29 Jun

Understanding Mortgage Payout Penalties

General

Posted by: Garth Chapman

It is very common for people to believe that the rate is the most important consideration when selecting a mortgage product. In many cases, this is a reasonable assumption, many times customer are deciding between mortgage products that are very similar in rate. In this case, as in most, understanding the terms of the mortgage are more important than the interest rate. It is unfortunate that too many  Canadians find themselves learning about one of the most important terms which have a very negative effect on their financial situation when it’s too late, Payout Penalties.

When calculating a mortgage payout penalty, banks and broker lenders use the greater of:

  1.  A 3-month interest penalty or
  2.  The interest rate differential (I.R.D)

This is where the similarities end.  Banks calculate their I.R.D. based on the discount off the posted rate for the nearest term at the time of payout, while the broker lender uses a re-investment rate.  The bank discount is the discount you received at the time of approval.

The example that I am using is a mortgage with a balance of $400,000.00 at 2.79% with 26 months left on the original 5-year term.  The2.79% rate from your bank was a 2% discount off the original 5-year posted rate of 4.79%.  The broker lender does not deal in posted rates as such.

Interestingly enough, the bank posted rate for the nearest term of 2 years was 3.24%, and the reinvestment rate for the broker lender was also 3.24%.

For the broker lender, the reinvestment rate was higher than the rate on the mortgage paid out, so the 3-month interest penalty is charged.  The penalty worked out to $2,790.00.

The bank penalty was calculated using the original 2% discount subtracted from the 3.24% posted rate for a 2-year term.  This resulted in the penalty being charged as the difference of 2.79% minus the 1.24% or 1.55% differential for the remaining 26 months of the term.  The result was a penalty in the amount of $13,433.33 or a difference of $10,643.33.  The banks not only get to charge the higher penalty but also get to reinvest the money at the higher rate.  Win, win for the banks but lose, lose for the borrowers.

In the past three years, many Albertans had to sell their homes due to unforeseen circumstances. Do you not think that the $10,000.00 plus in penalty differences would have been better in the hands of these Albertans or your hands versus going to the Ivory Towers on Toronto’s Bay Street?

For all your mortgage financing requirements, please contact Jencor Mortgage Corporation.

Written by: Dave Melnyk, Mortgage Advisor – Jencor Mortgage Corporations

15 Jun

Could a Purchase plus Improvements be the answer?

General

Posted by: Garth Chapman

Turn the house you like into the Home you will buy!

Government restrictions on refinance guidelines have reduced the equity homeowners can access for renovations. High ratio buyers especially, in a market with slow growth value, may wait years before the house has appreciated enough that an 80% Loan to Value refinance provides any money. If home buyers want to do upgrades the time of purchase may be the only opportunity where they can add the cost of the renovations to the mortgage.

Use the Purchase plus Improvements to:

  • Add a new or updated kitchen
  • Develop the basement for more living space
  • Update or replace the carpeting or maybe adding hardwood
  • Add a garage or workroom
  • Add a media room or “man cave”
  • Add an additional bathroom
  • A new roof
  • A more efficient central air or furnace system
  • Add new siding, eaves or fascia
  • Replace or updating doors and windows
  • Add major landscaping

If the property isn’t exactly what you want: renovate, add, or upgrade it!

There are specific requirements for the purchase plus improvements program, please call to learn the details. Exceptions to the generally understood parameters are available. Renovating up front may be a buyer’s best option.