Talking Mortgages with Rebecca Awram

If you’re buying your first home (even if you’re a seasoned homebuyer), mortgages may be a tricky thing to wrap your head around. But they don’t have to be. We approached Mortgage Advisor Rebecca Awram at Origin Mortgages for her insightful advice on financing your home purchase. Keep reading to discover her top five mortgage tips.

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Why You Should Always Use A Licensed Inspector When Buying A Home

Your Mortgage Matters by Vancouver Mortgage Broker Rebecca Awram

Anybody who decides to buy a home makes a long-term commitment. Most home buyers intend to make payments on their mortgage for decades. They also commit to pay for insurance, taxes, and of course, repairs and maintenance. It is important to get information about the condition of the home before settling on a sales price or even deciding to buy.

Sellers should disclose any issues that they know about, but average homeowners may not even be aware of some potential problems with the house that they want to sell. Consciously or unconsciously, they also might be motivated to dismiss other issues as unimportant or unlikely to get noticed. Getting an unbiased and knowledgeable third-party professional protects buyers from accidentally making a bad financial choice.

How Do Licensed Home Inspectors Help Buyers?

A professional home inspection provides a buyer with a good defense against paying too much for a home with damage or defects. A typical inspection costs between $300 and $500. The exact price depends upon the geographical area and size of the home.

If that investment protects a home purchaser from overpaying for a house with a cracked slab or major electrical problems, it will seem like a bargain. Leveling a house can cost thousands of dollars and so can a big rewiring job.

In some cases, major problems may deter buyers. They may hope to move in quickly and would rather just buy another house than have to wait to get repairs made. In other cases, uncovered defects in a house may give the buyer a chance to negotiate terms.

With real estate, almost everything is negotiable. A buyer might demand that major issues get repaired and reinspected at the seller’s expense before closing on the home. If the seller refuses to make repairs, it might also be possible to ask for a lower sales price in exchange for accepting the home as it is.

Is A License Home Inspector Needed For A Newly Built House?

Some buyers may not think they need to spend the money for a licensed home inspector on a new house, however, it is a mistake to think that a house that has just been built to code is entirely free of problems.

Even if the new home comes with a warranty, it is usually better to make sure that all issues get settled before closing. People who invest in a new house want to move in and get comfortable quickly. They do not want to spend time hassling with a warranty company and waiting for repair crews to show up.

In fact, many experienced home buyers actually think an older home is more likely to have the “bugs” worked out of it. A home’s age is not a good way to judge its condition. The important thing to remember is that a professional home inspection can ensure that you know exactly what you are paying for.

Getting A Professional Home Inspection

It is a good idea for the buyer to attend the inspection. Inspectors provide a written report, but they can provide more information in person. It might be a good idea to bring the real estate agent along, too. Prospective buyers might bring a notebook and camera along to record information about any defects the inspector uncovers.

If the inspector does note defects, buyers should be sure to get these issues evaluated in more depth before agreeing to close. For example, if the inspector finds a problem with the heater, bring in an HVAC company to learn how much the problem will cost to repair.

It is fine to shop around a bit to find a competitive price for a home inspection. It is also a good idea to learn about the inspector’s professional credentials and experience. Most established inspectors will also be happy to offer references.

About the Author

JD Stratis is debt-reduction specialist and a successful business operator. He owns a site, WillowbrookCredit.ca which is dedicated to finding solutions for people who are experiencing credit problems.

What is a Monoline Lender?

What is a Good Interest Rate on a Second Mortgage in BC? 3.70%!!

Rebecca Awram - Vancouver Mortgage Broker

NOW STARTING AT 3.70%!!

A second mortgage is a lien on your property in second position behind your first mortgage. This is considered by most lenders in British Columbia to be a higher risk position, and thus their second mortgage rates are typically priced according to this risk.

second mortgageAs a general statement, you can expect most interest rates on second mortgages to be higher than the interest rates on first mortgages. If the mortgage broker arranging your 2nd mortgage can do it through the same lender as your first mortgage, that can be a good strategy for getting a better rate on your second mortgage.

Alternately, if your loan-to-value is quite low (the ratio of your existing mortgage to the value of the property) and your credit is good, we can arrange a line-of-credit in second position, a ‘second mortgage line of credit’ at the same rates as we would get for a secured line of credit in first position. This is the optimum situation! In these situations, we can often place the 2nd mortgage for prime plus half a percent.

But, sometimes you’re maxed out already, or your credit is bruised. In that situation, a mortgage broker that is experienced in arranging second mortgages will spend a lot of time shopping for the best rate and terms from many private and institutional lenders. This will save you a lot of money on your second mortgage.

It is important to not fall prey to the cute little jingles and songs you hear on radio and television ads for private mortgage lending in the lower mainland. If you go to them for your second mortgage, you will often pay a lot more than if you had your mortgage broker negotiate your interest rate for you. In fact, those same lenders often give mortgage brokers better rates on the same file that was already submitted by a consumer directly!

Rebecca has lots of experience negotiating rates and terms for second mortgages in British Columbia. She’ll take the time and effort required to submit your file to multiple lenders and make sure you get the best rate on a 2nd mortgage. Her office is in Vancouver and she lives in Maple Ridge, so wherever you are in the lower mainland it is convenient for her to come see you for a private and confidential consultation.

Bad Credit Mortgages in British Columbia

Rebecca Awram - Vancouver Mortgage Broker

Good people can have bad credit!  We all face bumps in the road…. there can be many reasons why we have damaged our credit and find out at our local BC bank that we can’t get us the mortgage we had hoped for. Late payments, collection items and disputed accounts are all examples that can lead to the arranging of a mortgage for people with poor credit.

The good news is that even people with bad credit can get a mortgage! The not so good news is that people in this situation will pay a higher interest rate and possibly even a lender fee. So, a poor credit mortgage should not be viewed as a long term strategy. They are a short term strategy.  It is just a step in the rebuilding process, and a good mortgage broker that specializes in poor credit will help you come up with a good plan.

A bad credit mortgage is a means to an end, it is not the end itself. Everyone needs an exit strategy. Working with a BC mortgage broker that specializes in poor credit mortgages can help you get back on track, and find out what steps are necessary to repair the credit and come up with a plan to return you to a conventional mortgage with an A lender. A mortgage for people with damaged credit is best optimized over one, two or three years. If you keep your credit neat and clean over the period of time recommended, you should be able to transition to a mortgage with best market rates.

mortgage application

Often, consumers will hear catchy little songs and jingles on the radio or television from lenders that offer private financing. It can be tempting to contact them yourself and put a bad credit mortgage in place. This is not a good idea. Those same lenders often have better rates and terms available for brokers that call with the exact same client!! That’s because they know that brokers are contacting MANY alternate lenders, and that they must offer their best rate right away or they will lose out to another lender.

Someone with great credit will often receive a similar good rate no matter what bank they go to. It is very, very different for bad credit mortgages. A mortgage broker skilled in placement of mortgages for people with damaged credit makes a big different on the rate, fees and terms that are presented to you. If you’ve already approached a private equity lender yourself, be sure to get a second opinion from your broker. It can save you a lot of money, and working with a professional ensures you come up with a solid plan.

Rebecca is licensed to place mortgages anywhere in British Columbia. Her office is in Vancouver BC and she lives in Maple Ridge, so most areas of the lower mainland are convenient for her to come meet you and discuss your options, privately and confidentially.

Advice for Improving Credit Scores

Rebecca Awram - Vancouver Mortgage Broker

Anyone who has ever been granted credit will have a credit history. Your creditors send monthly updates to the credit bureau, and this data forms your credit history and your ‘beacon’ score. It creates a permanent record regarding what you owe, what your minimum payments are and whether or not you pay your debts in a timely fashion. Data is typically kept on the record for 6-7 years, including collection items (paid or unpaid), public records, consumer proposals and bankruptcies.

Credit scores influence many things

Credit Score, report and historyA good credit history is important, as not only does it strongly affect your ability to borrow money, it also heavily influences the interest rate that the lender will make available to you. It can also affect you in other ways, such as a landlord refusing to rent you a place to live because of a poor credit history.

  1. You have the right to see your credit report, so be proactive and check your credit file online with Equifax and Transunion, the two main credit bureaus in Canada. Find out the areas for improvement, and also if there are any errors. Mistakes are not as uncommon as you’d think.
  2. Pay your bills on time! So incredibly obvious, yet so very important. Even one or two late payments per year can have a strong downward impact on your score.
  3. Avoid excessive credit checks. Multiple hard enquiries can have a negative effect on your score. Checking the score yourself online or through the mail is a ‘soft’ enquiry and has no impact on your credit file. Mortgage brokers will pull your credit once, and use that for multiple submissions to different lenders – a clever strategy!
  4. Abstain from spending over 70% of your credit card limits in any given months, even if you pay it off in full every month. And absolutely never go over limit.
  5. Even if you pay all your bills on time, it is a liability to have a lot of credit extended to you. It hurts your score, even when you aren’t using it. Avoid applying for extra cards you don’t need, especially if it’s just for that great ‘introductory’ rate!
  6. When cancelling cards you no longer want or need, try to keep the ones with the longest account history. That’s an asset!
  7. Collection records are bad news! If you are disputing a debt, and the collector is threatening sending it to a collection agent, try to stop that from happening. It doesn’t matter whether you are right or wrong, once it’s on your credit bureau, it is very time consuming to have it removed. Especially if it’s for a small amount, consider if it may be wiser to pay the debt and then continue your dispute to have it refunded.

Talk to a mortgage broker for more information

Rebecca Awram, a mortgage broker serving the Greater Vancouver and Fraser Valley area, offers complimentary credit counselling to all her clients. Phone her at 604-614-2382 or email her anytime to find out more!

Closing costs on property purchase

Rebecca Awram - Vancouver Mortgage Broker

The majority of home buyers, especially those purchasing for the first time, are surprised by all the items that require payment besides the down payment.  It can be a bit of a shock!  While a competent mortgage broker will review the closing costs with you in person, this list can also help you plan.

Canadian lenders and insurers need to see that you have the available funds to pay for your closing costs. If your mortgage is high-ratio (less than 20% down payment) it is a rule that you have to prove that 1.5% of the purchase price is available in liquid funds or in your debt ratios to pay for this. Regardless of your actual closing costs, it is an arbitrary amount that must be verified, often by way of providing a copy of your bank statement.

Here are some closing costs that you can anticipate:

Appraisal Fee

house on mortgage and tax caluclatorTypically $250 – $350, it is required to confirm the value of the property you are buying. Lenders and insurers will use the appraised value or the purchase price, whichever is LOWER, to assess value. Some lenders use an automated valuation system, and do not require an appraisal. Many mortgage brokers also cover this cost.

Site Survey or Title Insurance

Your notary or solicitor will recommend the better choice for your particular situation.  In some cases the seller may already have a valid site survey that you can obtain for free.  If not, title insurance is incredibly less expensive ($200 – $300)  and many lenders make it mandatory anyway. Most solicitors will recommend the underwriter they prefer for title insurance.

Home Inspection

This is an optional but very clever investment.  Ranging anywhere from $400 – $600, it reassures you that the home has no major problems.  Your realtor or mortgage broker can likely make some educated recommendations

Lender/Broker Fees (Rare)

These usually only occur in high-risk or private financing, and are often a flat fee or a percentage of the amount being borrowed.  Either way, they should be disclosed to you up front.

Legal Fees

All purchases require a conveyance to register title, and all mortgages need to be registered on title.  A lawyer or notary can complete this service for you. The margin on this service to be quite wide, so it is definitely worth your time to call around a get a few quotes, as rates can range from approximately $700 – $1500.  Experience realtors and mortgage brokers often have some recommendations.

Home Insurance

Fire insurance as an absolute minimum is required by all lenders, except perhaps on strata properties.  Your lawyer or notary will make sure you have this in place before your mortgage closes.

Mortgage Insurance

If your down payment is less than 20%, then mortgage default insurance from CMHC or Genworth is mandatory. This is a one-time premium that insures the lender against default of the mortgage.  The premiums range from.50% to 2.75% depending on different variables in your application.   These premiums are not typically paid up front, they are can be added to the mortgage.

Life Insurance and/or Mortgage Balance Insurance

Various policies are available for unforeseen events, such as death, disability, critical illness or loss of job.  I recommend using an insurance broker, so that they can shop all the insurers and find the best policy for your particular situation.  At the very least, DO NOT take the mortgage balance coverage offered by your lender, as it is not portable.  If you move your mortgage at the end of the term (or at any time) you cannot take the insurance with you.  That means you have to start over with a different underwriter, and switching to new policies when you are five years older is not a great idea. Get one that’s portable that you know you can keep for the life of your mortgage.

Property Purchase Tax

Also known as the land transfer tax, it varies from province to province.  In British Columbia it is 1% of the first $200K and 2% of the balance; some exemptions exist, such as that for first time homebuyers.  This is usually the single largest closing cost for most home purchases.  It is particularly startling for those buying their second home, if they were exempt from it the first time, they didn’t know how much they were saving!

GST/HST

It is payable on brand new construction only.  Sometimes the builder or developer will include it in the purchase price.  Also, there are partial rebates available in BC on hst. The hst in BC is being phased out in 2013.

Annual Property Taxes

These are pro-rated on the Statement of Adjustments calculated by your notary or lawyer.  The purchaser owes for the portion of the year that they have possession of the property, if the property taxes are already paid for the year.  Alternately, sometimes you get a credit for months that the seller has had possession and you will be paying the taxes later that year, after the purchase.

Moving Expenses

Stating the obvious, but it is a closing cost!  Some people are lucky to have friends, and the very lucky have friends with trucks. The rest should be sure to get a number of quotes.

Contact Rebecca Awram for more information

Community Lending Centre is here to help you with any questions you may have about closing costs. Feel free to call us at 604-614-2382 or send us an email.

When to break your mortgage term

Rebecca Awram

A regular enquiry that I receive is from clients only part-way through their term that would like to take advantage of refinancing into a new term with a lower interest rate. Seems like a no-brainer, right? Not always! Almost all closed mortgage terms come with penalties to ‘break the contract’ and pay out early.

The penalty will depend upon your mortgage

Mortgage lenders will charge you a penalty to break your term/contract with them. If you have a variable rate mortgage, the penalty is three months interest. If you have a fixed rate mortgage, it will be either three months interest, or an ‘interest rate differential‘ calculation, whichever is higher (of course!). The IRD equation is different among lenders, but basically is intended to compensate them for the loss of re-investing your mortgage dollars at a new, lower rate. Every lender has a somewhat different equation that they apply, so you must contact your current mortgage lender to get the exact penalty amount.

house on a chart showing fluctuating mortgage ratesEssentially, in times of decreasing fixed mortgage rates, IRD penalties can be quite high. During periods of flat or rising fixed rates, it is likely that just the three month interest penalty will be applied. The penalties can seem unfair, but keep in mind that you are asking the mortgage lender to break a contract with you. If it were the other way around, and they wanted to break the mortgage contract with YOU because rates were rising and they could invest that money somewhere else for more money, that probably wouldn’t go over so well with you! The numerous complaints about these penalties tend to cluster around the fact that IRDs weren’t explained properly at the time of signing, and also that there should be one universal equation to determine them. Some organizations and individuals have lobbied the Canadian government to do something about this.

Once you know the penalty amount, your mortgage advisor can work out the math on your situation to let you know if you would save money after paying the penalty. For example, if you’re currently paying a fixed rate of 5.5%… but can re-finance for 3.49%… the monthly savings may add up to considerably more than the penalty. Alternately, the penalty could be higher than the savings. Every case is different, so consult a professional! Often you can add the penalty to your new mortgage, so that there is no out-of-pocket expense. Additionally, if you have unsecured debt at substantially higher interest rates that you can roll into the mortgage, the savings are compelling (think: credit cards, lines of credit, car payments, etc).

Many people are choosing to get out of their variable-rate mortgages right now with an eye to future increases in the prime rate, especially if they have a small margin (i.e. prime minus .20 or less). This creates an attractive time to lock-in historically low rates. Even though no one can accurately predict the moves of the Bank of Canada, we cannot dispute the attraction of 5 year fixed rates that are around 3% with most lenders at the time of writing.

Should you break your mortgage term?

The decision to stay or go is intensely individual. There is no one answer, as everybody’s penalties and potential savings are different.  There is no obligation to contact your mortgage broker and find out how this might save you money.

 

Rid yourself of high interest holiday debt

Your Mortgage Matters by Vancouver Mortgage Broker Rebecca Awram

Plan to minimize spending that’s racking up interest on credit cards/unsecured loans

mailbox full of high interest credit card statementsMany people suffer from post New Year’s hangovers as their holiday spending account statement sbegin to arrive in their mail/inbox. This year start the year off with a plan to minimize your monthly expenses and your interest carrying costs by conducting a no-cost, no obligation financialcheck up with your Origin Mortgage Advisor.

They are uniuqely equipped to provide both mortgage, unsecured and RSP loan options to assist you in having a plan for 2013…and beyond.

As an example, please see before and after scenarios for clients that took steps to rid themselves of high interest debt, and their result was a monthly savings of $1670 and an ability to reduce their mortgage amortization by 10 years.

Before Balance Payments After Balance Payments
Mortgage $250,000 $1390.00 $300.00 $1434.00
Car Loan $15,000 $439.00 $0 $0
Credit Cards $25,000 $750.00 $0 $0
RSP Loans $10,000 $525.00 $0 $0
Total $300,000 $3104.00 $300,000 $1434.00

Monthly Savings of $1670!

You can use these savings to eas your monthly cash flow, and/or apply it to pay your mortgage down faster! For example, by putting $800 of the $1670 of the new cash flow savings against the mortgage, you can reduce the amoritization by 10 years and save almost $40,000 in interest over the mortgage term.

Origin Mortgage Advisors who have access to low rate Visa Cards with initial rates as low as 4.9% and ongoing rates as low as 9.9%. These Visa Cards are specially designed to help you minimize your interest costs if a new mortgage advance cannot completely payout your higher interest debt.

Get a financial check-up from a mortgage broker

Start the New Year right with a no cost, no obligation financial check-up with your Origin Mortgage Advisor. Call Vancouver Mortgage Broker Rebecca Awram at 604-612-2382 for more information.




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