All posts by That Mortgage Man

What is crowdfunding?

For those looking to get into the real estate game without becoming a landlord, one alternative to the traditional bricks and mortar is mortgage investing.

Crowdfunding is no longer a buzzword reserved for start-ups and tech entrepreneurs. Today, crowdfunding is a well-established vehicle for entrepreneurs to leverage the power of the “crowd” while enabling the crowd to participate in exciting and/or lucrative projects.

Real estate crowdfunding allows individuals to invest in existing apartment buildings or in buildings under development — an opportunity that currently is available only to wealthy individuals or institutions.

Equity crowdfunding allows small and medium-size businesses to raise capital without the time and expense of issuing detailed financial reports and offering shares for sale on the stock market. It is viewed as a low-cost alternative to taking a company public by issuing shares in an initial public offering. Equity crowdfunding would allow a large number of investments from individuals to be pooled in exchange for securities.
Continue reading here…. story via Canadian Real Estate Wealth

They haven’t been built yet but Kelowna homes are being snapped up

The current housing market in the country is a hot topic, and nowhere is it hotter than in British Columbia, so it might be surprising to hear that real estate is being snapped up and sold out within a matter of hours after hitting the market.

There is more than enough data to show that the real estate market in the Okanagan is unaffordable for most, prompting developers to come up with unique ideas. Micro suites, eco-friendly buildings, and ranchers are just some of the new developments popping up in places such Kelowna and Penticton and they are selling out faster than anyone expected.

Continue reading here…… story via Kelowna Now

I’m Going to Buy A House. What Do I Do!?

Buying a home means finally being able to call a place yours, and making your decorating dreams a reality. But, before you can start moving in sofas and painting the walls, you have to actually purchase the home! And what a huge commitment that is, requiring you to research neighbourhoods, tour different properties, send in mortgage applications and file what seems like mountains of paperwork.

But, there is light at the end of the tunnel, and that is finally owning a home that you can use as an investment. Need some help preparing for this? Take a look at the tips below, which I’ve gathered through extensive research watching way too many home improvement shows.

Step 1: Figure out your Budget

You have to create a budget that is realistic for your income and the expenses you already have. If you don’t set this, then you could easily end up looking at dream homes that you could afford, if you’re willing to live without things like food… or heat… or electricity.

So, set your budget by taking into account your income each month. Then, subtract all your normal expenses (yes, add in dining out, gas, heat, etc.). Next, subtract your anticipated monthly mortgage payment along with taxes and insurance. You should have an idea of what you can afford when you do this, but be honest with yourself so you get the most accurate results.

Step 2: Set up Savings

How much money do you have set aside for a rainy day? You need an emergency fund, and that’s even more true when you own a home. You need to have money set aside for plumbing emergencies, a new roof, living expenses if you were to lose your job and other things that could happen (even though you don’t want them to). A good rule of thumb is to save half a year of living expenses.

Step 3: Figure out What You Want

Before buying a home, you need to think about what your priorities are with the actual home. For example, would you rather buy one that’s move-in ready, or one that is going to require some repairs? You should also think about the location, whether or not you will have to move in the near future (if you’re going to have kids), if you would want to do renovations and other things that impact your enjoyment with a home.

Step 4: Do Your Own Research

Your real estate agent will help you with finding a great home when you’re ready, but you can still research homes yourself to get an idea of what you really want. Take some time to look up information on different neighbourhoods, layouts of homes you might want and other things that will make the searching process easier in the future. Don’t rush yourself and remember that this is one of the biggest investments you’ll ever make, so you sure you’re satisfied with it.

Story via www.joesamson.com

The nitty gritty on hybrid mortgages – part two.

Continuing on from my last post, here we get into the nitty gritty on what it really means to put your eggs in more than one basket….

The costs

One knock against hybrids is that they’re more expensive at renewal. They must be refinanced, which usually entails legal fees. By contrast, when you switch lenders with a standard (“non-collateral”) mortgage, the new lender usually pays your legal and appraisal costs.

This disadvantage is most applicable to folks with smaller loan sizes. If your mortgage is $200,000 or more, those refinance costs equate to a rate premium of less than a one-10th of a percentage point on a five-year mortgage. That’s peanuts for the diversification benefits of a hybrid rate, especially if you can find a lender or broker to cover those refinance costs.

Hybrids to avoid

There’s a strategy in bond trading called laddering. That’s where you buy multiple bonds with different maturity dates to lower your risk. If rates dive, your long-term bonds will still pay higher interest. If rates soar, your short-term bonds will mature quicker, letting you reinvest in better rates sooner.

Homeowners can ladder, too. One method is to get a combination mortgage and set up five segments: a one-, two-, three-, four- and five-year term. That way, only a portion of your borrowing will mature every year. So you’ll never have to renew the entire mortgage balance at unfavourable rates.

That may seem appealing on the surface, but it’s really a sucker’s play. The problem is, whenever any segment comes up for renewal, the lender has you over a barrel. Lenders aren’t charities. They maximize revenue at maturity by evaluating your available options. They know that people with staggered terms have to pay a penalty to leave if they don’t like the lender’s offer. Those penalties can cost thousands (or tens of thousands). So lenders typically give lacklustre renewal rates to borrowers with differing maturity dates.

Quick perspective: If you have to pay a rate that’s even two-10ths of a percentage point higher, that’s roughly $1,800 in extra interest over 60 months on a typical $200,000 mortgage.

The best combos

If you’re going to go hybrid, match up the terms. For example, pair a five-year fixed with a five-year variable. That way, both portions mature at the same time. Then, if you don’t like your lender’s renewal quote on one portion, you can fly the coop with no penalties.

And by all means, shop around. The majority of hybrids have junk rates. Look for rates that are within 0.15 percentage points of the market’s best, for each segment in the mortgage.

Should you get one?

Virtually no one on Earth can consistently time interest rates. No banker, no broker, no economist, no Bank of Canada governor, not even money managers paid millions. But with hybrids, timing matters less. They take the guesswork out of rate picking.

Granted, if you’re a well-qualified, risk-tolerant, financially secure borrower, you’re often better off in the lowest-cost standard mortgage you can find. And there’s historical research to back that up. But if your budget has less breathing room or rate fluctuations make you slightly queasy, hybrids are worth a look.

Just be sure that your mortgage is big enough, that all portions renew at the same time and that you avoid hybrids with uncompetitive rates on one or more portions.

Are you the right fit for a hybrid mortgage?

“… Divide your investments among many places, for you do not know what risks might lie ahead.”– Ecclesiastes 11:2

That passage was written before 900 BC. That’s how long people have been talking about the benefits of diversification. Yet, three millennia later, 96 per cent of mortgage borrowers still put all of their eggs in one basket. They pick only one term and go with it.

Maybe its time to put your eggs in two baskets? Enter the “hybrid mortgage”.

A hybrid mortgage lets you split your borrowing into two or more rates. The most common example is the 50/50 mortgage, in which you put half your mortgage in a fixed rate and half in a variable rate.

Some hybrids let you mix the terms (contract lengths) as well. You might put one-third in a short fixed term, for example, and two-thirds in a long term. With certain lenders, such as Bank of Nova Scotia, National Bank, Royal Bank of Canada, HSBC Bank Canada and many credit unions, you can mix and match rates and terms in almost infinite combinations.

The point of a hybrid mortgage is to reduce your exposure to unexpected adverse interest-rate movements. If variable rates shoot up and you have half your borrowing in a long-term fixed rate, you’ll feel less pain than if you had your entire mortgage in a variable or shorter term. Conversely, if rates drop, you still enjoy part of the benefit.

Hybrid mortgages can fit the bill for folks who:

  • Are torn between a fixed and variable rate;
  • Think rates should stay low but who can’t bear the thought (or cost) of them soaring;
  • Want a lower penalty if they break their mortgage early (big penalties are a common curse of longer-term fixed rates);
  • Have a spouse who has the opposite risk tolerance.

So why, then, is only one in 25 borrowers choosing hybrids, a number that hasn’t changed much in years?

Well, for one thing, hybrids are misunderstood. They’re also insufficiently promoted, entail more closing costs and (often) have uncompetitive rates. But not always.

Continue reading here…..

Which mortgage term will save you money over the next five years?

A significant “negative shock” to the economy: That’s what it’s going to take to lower interest rates again, says Canada’s most powerful banker.

And Bank of Canada head Stephen Poloz isn’t betting on that happening any time soon. Neither are bond traders, the big guns that bet billions of dollars every day on the direction of interest rates.

So let’s suppose – just for fun – that they’re right (since we all know how often markets and economists aren’t right). If we are actually near a bottom in rates for a few years, what’s the best way to play your mortgage?

Well, it just so happens that there’s an app for that. It’s called a spreadsheet and I’ve taken the liberty (well actually the Globe & Mail has) of putting mine through its paces and model out which mortgage term (or combination of terms) yields the lowest hypothetical cost of borrowing over the next five years.

Keep in mind that what I’m about to tell you doesn’t apply to everyone. It presupposes that you:

  • Are a borrower who qualifies for the best advertised rates in the market;
  • Can handle higher interest rates and rising payments;
  • Are comfortable with making a five-year fixed mortgage payment.

But if any of the above listed points sound like you, lets read on…. (story via The Globe & Mail

As always if you have any mortgage questions THIS Kelowna mortgage broker is always ready to help 🙂

5 reasons (besides low interest rates) why Toronto and Vancouver real estate may only get hotter

Being a Vancouver boy at heart, I love the great reads that pop up around the web about the thriving real estate market there. Bidding wars, “knockdown” shacks being sold for 2.4 million…… It’s the stuff real estate enthusiasts love to sink their teeth into.  We love to know the ins and outs and the “why’s”.

Low mortgage rates, supply and demand, foreign investment all are playing leading roles in the fiery dramas that are unfolding in the Toronto and Vancouver housing markets. Everyone has their favorite lead actor/villain driving these two markets skyward, but there are more pieces to this house shaped puzzle….

Continue reading here, story via Buzzbuzzhomenews

Mortgage tip of the week: Have your team of experts assembled

Congrats, you have made the choice to jump head first into the housing market! Now get your team assembled…. Before you start looking at places speak to a mortgage broker and get a real estate team lined up. When it comes to buying a home, you usually have to make quick decisions – especially when you’re in a competitive market! In some cities, there’s a good chance you’ll have to make an offer on the same day you see a place, so there truly is no time to waste.

Start by getting pre-approved for a mortgage, so you know what your budget is and how much a bank will actually give you. Hire an experienced real estate agent who understands what you’re looking for and knows how to get it. Get the names of home inspectors and real estate lawyers in your area. And make sure your down payment is saved up and available to be withdrawn.

Happy hunting 🙂

Doing renovations? Update your home insurance!

It’s spring! For many of us the inspiration to “move this” or “update that” has been nagging at us all winter and the warm days have put your motivation into overdrive. Before you get “too inspired” and run out to your closest Home Depot make sure you read the fine print of your home insurance policy…..

Homeowners need to regularly check and update their home-insurance policies or risk having insufficient coverage when disaster strikes, insurance experts say.

The need to review and update a policy is especially important for those who have done renovations because changes to the property could render the policy void if the insurer hasn’t been informed.

Craig Richardson, vice-president of claims operations at TD Insurance, says the insurance company should be contacted even before a contractor starts work.

He noted that renovations also provide an opportunity to make other improvements that might help save a few dollars on your home insurance at the same time.

Things such as a sewer backup valve or an alarm system can be more easily installed if other major work is already being done.

“If you’re already in the process of doing renovations, it may be cheaper to do it while work is ongoing,” Mr. Richardson said.

But even without major changes to the property, policies should be reviewed annually just to be sure they match the homeowner’s needs.

Continue reading here……. story via Globe & Mail