Helping you get a headstart on homeownership

As we close out 2024 and prepare to ring in 2025 today’s column will be short and sweet. Well, short in any case. I think many of us tough out difficult financial situations until we are through the holidays. We put on a brave face and do our best to make everyone’s holiday season fun and festive. January hits as does reality when we look at our bills and our account balances. If you are feeling overwhelmed with your financial commitments and don’t know where to start, a conversation with your mortgage professional might be a good place to start. If you have equity in your home it may make more sense to remortgage and consolidate your consumer debt. My advice is to try not to do that if you can avoid it, but feeling like you shouldn’t then falling behind with your credit cards and other loans will do more damage to your financial health in the long run. Credit counselling organizations are already advertising heavily to this target audience. Clients sometimes think (or are led to believe) that this is an easy solution and better for their credit long-term. Not all credit counselling agencies are created equal and I can’t count how many clients are still dealing with the fallout from these arrangements years down the road.  If you have tried to refinance in the past and been told no, it may be worth taking another look at this approach. Lenders change their policies and your situation likely has changed as well. Going into January can feel a bit heavy after the holiday celebrations and I encourage you to take a close look at your finances and set yourself up for a successful year.

Navigating Bridge Financing When Selling and Buying a Home When clients are selling one home to buy another, realtors strive to align the sale date of the current home with the purchase date of the new one. However, when clients need a few days or even months to transition between homes, bridge financing may be a viable option. What is Bridge Financing? Bridge financing allows clients to buy a new home before selling their current one. Depending on the lender, arranging bridge financing can be straightforward, but not all lenders offer this service. In such cases, private bridge financing might be necessary. Key Considerations Before You Begin Before agreeing on dates with your realtor, it’s crucial to explore your options: Traditional Banks & Monoline Lenders : Bridge financing is usually simple to organize, with an administrative fee (around $250) and daily interest on the borrowed funds. Strategic Timing : In some instances, bridge financing might not be an option, requiring careful coordination of sale and purchase dates. When Bridge Financing Might Not Work Your lender doesn’t offer bridge financing. The cost of bridge financing seems excessive. Your current home is on First Nations land (terms of lease agreements often preclude bridge loans). Private bridge financing costs far outweigh the benefits. Alternative Solutions If bridge financing isn’t feasible, there are alternatives: Shipping Containers : Companies like Securite or Big Steel Box can provide a container for temporary storage. It’s delivered to your home before the sale, stored securely, and then transported to your new home on possession day. This approach might involve a hotel stay or staying with friends or family. For example, a recent cost-benefit analysis showed clients saving approximately $4,500 by opting for a shipping container over private bridge financing—even after accounting for hotel stays and dining out. When Bridge Financing Works For those able to use bridge financing through a monoline lender, the process is simple and cost-effective. One client paid a $250 fee and approximately $650 in interest for a week, giving them the flexibility to clean both homes and move at a relaxed pace. Plan Ahead If you’re planning to have sale and completion dates on different days, consult your mortgage professional before finalizing contract dates.  Thank You for a Wonderful Year As we head into the new year, I want to express my gratitude for your trust and support. Wishing you and your family warmth and happiness in the year ahead!

Last Minute Mortgages Do your homework. Be prepared. Make good decisions. Don’t gamble on an outcome. Maybe most importantly don’t rush. These are lessons that can be applied to almost every aspect of our lives.  This week I jumped in to help another broker. A client of his had written an offer on a new home priced at $1,000,000. The client’s current home was owned free and clear (no mortgage outstanding) but was worth slightly less than that. The broker had a mortgage arranged to cover the difference between the purchase price and the anticipated sale proceeds of the current home. The client removed all of the subjects on his purchase before his current home was sold – basically rolling the dice and assuming it would sell. I bet you already know where this is going. There is a plot twist though. As it turns out, the other broker is unexpectedly away dealing with a health emergency. The client’s original home has not yet sold. He has to complete the purchase on his new home by the end of next week. We scrambled this week to line up private financing to cover the shortfall needed to complete the purchase of the new home. The broker had urged the client not to remove subjects on the purchase until the other home was sold. I have seen the email. The client decided to move forward regardless. This client is fortunate that he still qualifies for the new mortgage even with the current home not sold. The client will, however, be covering some unanticipated expenses. Between fees for the private loan and additional legal fees the client will be paying over $10,000 at closing on top of the expected closing costs for the purchase. As well, the monthly payment on the private loan is approximately $4500 per month so we are all hoping an offer comes in soon. The thing about houses is that they make them every day. Maybe not everyday but certainly new homes come onto the market all the time. Its hard if you are emotionally attached to the idea of a shiny new home, but I lean to the conservative side and encourage my clients to look at the long term outcome should all the pieces not fall into place. As we move into (what we expect to be) a busy spring market, I encourage you to make thoughtful decisions and not put your financial well-being at risk by jumping into something you shouldn’t.

Time is of the essence. Whether you are looking for a mortgage preapproval, have an accepted offer on a home, or are in the middle of a refinance, we are generally working towards meeting a deadline whether it is a financing subject removal date or an upcoming renewal date. I feel like mortgage professionals all have their individual styles and processes as to how they work with their clients. One of the things I’ve learned over the years is the importance of gathering my clients’ documents upfront and reviewing them thoroughly. There are times when a client calls with an accepted offer so we are starting a little behind with respect to document collection. Another of the things I’ve learned over the years is that regardless of how thorough I try to be when collecting and submitting clients’ documents to lenders there are often additional requests for clarification that come from the lender. Hands-down I feel like organizing and sending your paperwork to your mortgage person is the most frustrating part of the process for clients. So what can you do to make this smoother? First, if you receive a list of required documents please provide them all. Take a minute to confirm that your documents clearly show your name and account number if applicable. Send all pages of the documents; don’t guess at the pages you think the lender needs. There are reasons lenders need specific documents and information. They are doing their due diligence to do their best to avoid mortgage or identity fraud. They want to make sure you truly have the capacity to make your mortgage payments. Most days I spend time explaining to my clients why we need particular information and documents and help them access and submit them. If paperwork is not your forte I completely understand the frustration as you do your best to send your information. Even if paperwork is your forte I get your frustration. Why is there such a high level of due diligence on our parts? I recently had a chat with a friend that works at a TD branch. Because of the three billion dollar fine that TD was handed in the US their mortgage rates are suddenly a wee bit higher and they don’t have the same wiggle room they did earlier in the year. This is also due to the mortgage interest rate environment overall. However, when huge fines like this cut into profitability the loss has to be covered from somewhere. Thorough document review and multiple ways to verify information feel like a pain but if these steps help identify potential money laundering or fraud this will save us all as consumers from higher interest rates and even stricter lending guidelines. It's important to understand when you feel like the paperwork is driving you crazy. If you are having troubles finding the necessary paperwork, pick up the phone and speak to your mortgage professional. There may be alternate ways to access or confirm the same information. The more organized you can be with your paperwork, the smoother your mortgage approval will be.

Things are picking up. I have seen a significant increase in the number of purchases I am working on with clients. I’ve done an informal poll of some of my realtor and broker friends and we are all seeing the same increase in activity. This week I attended a learning session about the recent and upcoming changes to mortgage rules. This year it has felt like changes have been rolled out so often that its hard to stay on top of new policies. I thought it might be good to go over some of these changes as they will benefit many homeowners and homebuyers. Please note that this is a quick explanation and you may have questions or need clarification on some of what follows so please make sure you speak with your mortgage professional before moving forward with a purchase. In the order the changes were discussed in our session, here is a high-level overview for you. Effective August 1, 2024 first-time home buyers (FTHB) were able to purchase a newly built home using a thirty year amortization with a minimum down payment. Prior to this change the maximum amortization allowed for buyers with less than twenty percent down was twenty-five years. Key to note here is that the definition of a FTHB for purchasing homes is based on the CRA explanation of home buyers starting out or starting over; this includes buyers who have not owned their primary residence (nor lived in a home owned by their significant other) for the last four years. It also includes buyers who are recently separated or divorced. Also key to note is that only one of the borrowers must qualify as a FTHB for these rules to apply. For the purposes of Land Transfer Tax in BC, even if clients are considered FTHB under mortgage rules, they will still have to pay Land Transfer Tax if they have ever owned a home anywhere in the world. There is a small increase to the insurance premium (,2 per cent) if borrowers elect to use the thirty year amortization. Effective December 15, 2024 the price cap for insured mortgages will be increased from $1,000,000 to $1,500,000. Clients will be able to purchase a home up to this price with a minimum down payment of five per cent of the first $500,000 and ten per cent of any balance over that and up to $1,500,000. For the full $1,500,000 the minimum down payment will now be $125,000 as compared to the previous minimum down payment of $300,000. Trying to come up with the required twenty per cent down payment has been a barrier for many borrowers. The changes coming into effect December 15 also include the ability for repeat buyers to new builds with a thirty year amortization. As well, all FTHB will be eligible to qualify based on a thirty year amortization regardless of whether they are buying a newly built home or an existing home. For these guidelines to apply mortgage applications must be submitted AFTER December 15. The final change I’m going to touch on today rolls out effective January 15, 2025. Existing homeowners will be able to refinance their homes up to ninety per cent of the as-improved value of their home if they are pulling equity to create a secondary suite in their home using a thirty year amortization. What does “as-improved value” mean? With these applications we will need to order an appraisal which shows the current value of the home as well as the value of the home once the proposed work is completed. Current rules limit refinances to eighty per cent of the value of the home so I see this as a significant benefit for clients who are maybe newer to the housing market and can really use the income from a secondary suite. There are of course requirements for this program including: Either the borrower or close family member must live in one unit of the property You can add more than one unit to the home (up to a total of four) providing zoning allows for this Units must be completely self-contained Financing limit cannot exceed actual costs of the work Is your head spinning yet? Mine certainly is, trying to keep all of these changes straight. Many lenders are still determining their own policies as to how they choose to incorporate these rule changes into the mortgages they offer. It is important to speak with a mortgage professional to see how these changes may impact your borrowing power. As I mentioned we are already seeing a definite increase in purchase activity. It will very interesting to see if there is a flurry of activity following the implementation of the December 15 changes as well.