Don't let Christmas ruin your finances

Christmas is not that far away, and that means more and more people are starting to worry how they're going to cope financially. Here are some tips on how to reduce your financial stress.

1. Save up for Christmas

If you set aside a small amount of money each month, you will hopefully have enough money by December to cover your Christmas costs and there will no need to use the credit card.

2. Budget, budget, budget

Draw up a budget. If you plan ahead and work out exactly what you need to buy, you’ll be less likely to waste money on stuff that you don’t actually need. It also makes sense to set some priorities. Do you need to buy presents for every member of your family?

3. Shop around and get cashback

You cut your Christmas costs by shopping around and see who is offering the best deal. You could get some more money back if you use a cashback credit card for your spending

4. Use only cash to purchase items. 

Avoid credit cards if possible. You could spend more than you can afford to repay and That's the situation you want to avoid most of all.

Enjoy your holidays without financial stress. 

Become an informed client.

For more information contact your Toronto Mortgage Broker 

at 416-920-9931

Follow me on Twitter

Like us on Facebook

Tips on how to reduce your mortgage and save for the long term.

1. Always go biweekly on your mortgage payments and NOT monthly. Monthly payments will work out to 12 installments and biweekly will end up to be 13 monthly payments a year.

2. Always try to exercise your pre-payment privilege each year. Most banks yyou can put 10-20% on the original mortgage towards the principal. So when you have extra money, your tax refund or vacation pay, put it towards the mortgage principal.

3. Go variable but make your mortgage payments based on the fixed. This way you will be throwing more principal towards your mortgage

4. Sometime’s it not only the mortgage that people have to pay. It is also the other debt such as car loans and credit cards. It is best to refinance the mortgage plus the debt and make one payment and that way you are able to save money and be more aggressive on your mortgage payment

That is why is important to speak to the mortgage broker to teach you all the options you can exercise.

Become an informed client.

For more information contact your Toronto Mortgage Broker 

at 416-920-9931

Follow me on Twitter

Like us on Facebook

Can I get a mortgage under a business name?

The short answer is yes.

Buying real estate with a corporation can protect you from personal liability and it is a great way to separate business from personal holdings.

Often these are set up to protect a consumer's personal assets in case litigation is brought against his or her business. Setting up a mortgage through a corporation can be challenging, but is not difficult.

 

You will Need

 

• Business Articles of Incorporation or Business registration
• Business financial statements
• Business account statements
• Personal and corporate tax returns
• Personal Guarantee…meaning whoever owns the business must sign off on the mortgage.
• You must be self  employed for at least 2 years or more
• Your must put down at least 10% or more as a down payment
• You and the company must have excellent credit

Also, if you are planning to buy a rental investment property it would make financial sense to put in under a corporate company to save on the capital gains when it is time to sell in the future.

Also be an informed client.

For more information contact your Toronto Mortgage Broker 

at 416-920-9931

Follow me on Twitter

Like us on Facebook

What is Title Insurance?

Title insurance originated in the United States some 150 years ago, and until recently was not something available in Canada. The most recognizable Title Insurance companies in Canada include Chicago Title Canada and First Canadian Title

In a nut shell, Title Insurance is insurance that, protects the insured against loss resulting from title and survey defects that would otherwise have been revealed by an up-to-date survey, property report or building location certificate. Title Insurance also protects the insured against losses associated with fraud and forgery as it relates to the title.

The difference between Title Insurance and conventionally thought of insurance is that Title Insurance protects the insured against matters that happened in the past as opposed to things that might happen in the future.

There are two types of Title Insurance available and include policies for property owners and lenders. Title Insurance for owners protects the owner against loss to the owner of the property while policies for lenders ensure that the mortgage is valid and enforceable against the property. When purchased, the policy stays in effect for as long as the owner retains an interest in the property and is generally transferable in case of the owner’s death. Title Insurance is available for both residential and commercial properties.

Taken from Chicago Title Canada, risks insured against include the following:

• The un-marketability of the Land.
• Lack of a right of access.
• Someone else has an interest in the title.
• A document is not properly signed, sealed or delivered.
• Forgery, Fraud, duress, incompetence or impersonation.
• Future frauds and forgeries affecting title.
• Defective registration of a document.
• Restrictive covenants limiting the use of the Land.
• Liens arising from mortgages, taxes, utilities, judgments or condominium charges.
• Builder’s Liens.
• Rights of possession arising from leases, options, family law or homestead rights.
• Easements over the Land.
• Enforced removal of existing structures because they encroach onto adjoining land or easements, or because they violate municipal by-laws.
• The house cannot be used as a single family residence because it violates a restriction or zoning by-law.

A big benefit of Title Insurance is the fact that in most cases, it eliminates the requirement for a survey certificate and is generally more cost effective than having a survey completed. The policy is purchased prior to closing on the property or mortgage transaction and is typically ordered by the Lawyer or Notary prior to the purchase or registration of the mortgage.


While most properties qualify for Title Insurance, your Lawyer will advise you if the property is eligible. 

Always be informed…

For more information contact your Toronto Mortgage Broker 

at 416-920-9931

Follow me on Twitter

Like us on Facebook

What is the difference between a Co-signer and a Guarantor?

People often use the terms guarantor and co-signer interchangeably, but they have very different responsibilities and rights. A co-signer is basically a co-owner and he or she is registered on the title and is equally accountable for mortgage payments.

A guarantor, on the other hand, personally guarantees mortgage payments will be made if the original applicant defaults, but has no claim to the property because he or she is not on title. It's a huge responsibility for Guarantors who have the obligations of the mortgage but don't have any claim to the property.

Lenders require co-signers and guarantors usually due to poor credit, insufficient employment history, inadequate down payment or questionable income.

Sometimes, if one spouse is an entrepreneur and does not want to risk losing the house should the business go bankrupt in the future, they can simply become a guarantor on the mortgage and keep themselves off title.

After a period of time, a guarantor or co-signor can be removed off title should the owners of the property be able to qualify on their own. But a lawyer will need to be used to remove the guarantor or co-signor off title.

Before you co-sign or guarantee a mortgage read the document carefully and know your rights.

Always be informed…

For more information contact your Toronto Mortgage Broker 

at 416-920-9931

Follow me on Twitter

Like us on Facebook

What is a Beacon Score?

It is a score that the credit bureau assigns to each client when they have some sort of credit such as credit cards, car loans, RRSP loans, unsecured and secured line of credits.

Most banks look for a minimum score of 620. Below 620, usually the “A” banks will not approve and most people will need to look at the B banks or go private.

What affects the beacon is also if the clients make any late payments, have too much debt and only pay the minimum on the credit card, the score will go down drastically.

To increase you credit score; try to use only 1-2 credit cards or not at all. Always pay your bills in full or at least pay the minimum on time. Late payments will remain on your credit history for seven years. Any collections will also show up on the credit bureau.

It is important to understand your beacon score cause that will decide if you can buy or refinance your house or not.

Be an informed client.

For more information contact your Toronto Mortgage Broker 

at 416-920-9931

Follow me on Twitter

Like us on Facebook

What is a Status Certificate and why is it important?

A Status Certificate is a report on the current status of a condominium corporation. If you are buying a resale condominium, it is important that your agreement of purchase and sale is conditional, upon review of the Status Certificate by your lawyer.

The Status Certificate provides valuable information directly from the condominium corporation, examples of such information include, Arrears or increases in common expenses; Whether any major work needs to be done to the building; The amount of the reserve fund and whether the reserve fund is sufficient for any major work.

The Status Certificate also provides information about any claims against the corporation and whether the corporation is involved in any proceedings. This is important because if there are high value claims against the corporation and the corporation’s insurance does not provide coverage; the corporation can either increase the common expenses or levy a special assessment against the unit owners. If you are buying a condominium, you need to know of any potential significant increase in your monthly common expenses. .

The Status Certificate package includes the corporation’s financial statements, declaration and by-laws. The Financial statements are a good indication of a corporation’s financial stability.

So, it is imperative to have a qualified lawyer to review the status certificate carefully before buying a condominium.

Be an informed buyer

For more information contact your Toronto Mortgage Broker 

at 416-920-9931

Follow me on Twitter

Like us on Facebook

What are Closing Costs?

Closing costs are a list of charges that your lawyer presents to you on the closing date which unfortunately surprises many people. According to CMHC and Genworth, one should have, in addition to the down payment, at least 1.5% of the purchase price for closing costs (we say 2-2.5%, just to be on the safe side). The costs vary among provinces, and for that matter, among cities.

Below you will find a brief explanation of these costs. Please note that not all of them may apply to your specific situation, and there may be more that apply in your circumstance. Use this is a  guideline, and then talk with your lawyer who can provide a more realistic estimate for your situation, since he or she is the best resource for your closing costs.

Appraisal Fee: The appraisal provides the lenders with a professional opinion of the market value of the property. This cost is normally the borrower's responsibility and it ranges as low as $70 for a drive-by appraisal to as much as $350 for a full appraisal, and the average being $250, plus H.S.T. Occasionally, the costs could be slightly higher for larger, custom-built homes, or homes in remote parts.

Home Inspection Fee: A professional inspection of the home, top to bottom, is for the benefit of the buyer, therefore, that's who absorbs the cost. A typical home inspection can cost anywhere from $300-$400, but our opinion is that they are well worth the investment. New home buyers may not worry about it, but a definite must for buyers purchasing properties older than 5 years. When hiring a home inspector, make sure the inspector has liability insurance, just in case a mistake is made.

Fire Insurance: All mortgage lenders will require a certificate of fire insurance to be in place from the time you take possession of the home. The amount required is generally at least the amount of the mortgage or the replacement cost of the home. This cost can vary on the property size and extras being insured, as well as the insurance company and the municipality. The cost can vary anywhere from $250-$600 for most properties.

Provincial Sales Tax of 8% (P.S.T.): If your mortgage is CMHC or Genworth insured (less than 20% down payment), there is P.S.T. of 8% in Ontario, payable at closing, on the CMHC or Genworth fee. While the insurance premium can be added to the mortgage amount, the P.S.T. must be paid at closing. For example, a mortgage that results in a $1,000 insurance fee, will have to pay $80 in PST upon closing.

Land Survey Fee Or Title Insurance Fee: A recent Survey of the property is usually required by the lender, and if one is not available, it normally costs anywhere from $600-$900 for a new survey. In lieu of the Survey, most lenders today will accept Title Insurance, at a much lower price of approximately $225.

Legal Costs and Disbursements: A lawyer or notary will charge a fee for their professional services involved in drafting the title deed, preparing the mortgage, and conducting the various searches. The disbursements, on the other hand, are out-of-pocket expenses incurred, such as registrations, searches, supplies, etc., plus H.S.T.

Land Transfer Tax: Most provinces charge a land transfer tax, payable by the purchaser, and the amount varies from province to province. This tax is based on the purchase price. In Ontario, first time home buyers who purchase a new home get a refund up to $2000.

New Home Warranty: In many provinces, new homes are covered by a new home warranty program. The cost to the purchaser for this warranty is approximately $600 and should the builder default or fail to build to an agreed-upon standard, the fund will finish or repair the deficiencies.

Closing Adjustments: An estimate should be made for closing adjustments for bills that the seller has prepaid such as property taxes, utility bills, and other charges. Any bills after the closing date are the purchaser's responsibility. Your lawyer/notary will let you know what they are exactly once the various searches have been completed.

HST: On the purchase of a newly constructed home, HST is payable, but make sure you know who pays this, you or the builder. Therefore, on the offer, the purchase price will say "Plus HST" or "HST Included", and who gets the HST new home rebate. A lot of builders have included this cost into the purchase price so that the buyer does not have to come up with that at closing. (As well, this tax is also charged on all professional fees).

Always be an informed client.

For more information contact your Toronto Mortgage Broker 

at 416-920-9931

Follow me on Twitter

Like us on Facebook

What is Equifax and Transunion?

Equifax and Transunion are consumer credit reporting agencies.

The Equifax and Transunion credit report offers vital information about your credit history. The information in your credit report serves as a reference point for banks considering your creditworthiness.

Your credit report will contain information on whether or not you have missed, or have been late on your payments in the past and how late you were. It will also provide details such as your current and previous addresses, social security number, any credit card accounts and current balances you may have, as well as past credit card accounts  even if those accounts have been closed or canceled.

This report also lists any auto loans and mortgages along with balances and how diligent you are about making the payments.

All banks will use Equifax and or Transunion. So it is important to check both agencies at least once a year to thoroughly review your credit history, and to check for errors or signs of identity theft in your credit report. .

Be an informed client.

For more information contact your Toronto Mortgage Broker 

at 416-920-9931

Follow me on Twitter

Like us on Facebook

What is a conditional offer?

When you buy a house, there is usually a clause based on the following:

1. A home inspection
2. Selling your house
3. And most often, arranging mortgage financing.

There is a 5 day clause where you will need to arrange the mortgage. However when there are bidding wars, at times, you are advised to go with a firm offer so that the vendor can accept your offer compared to others.

But that can be dangerous because:

• If you are putting down less than 20% as a down payment, it is the Insurance (through CMHC/Genworth or Canada Guaranty) that has the power to approve your deal or not.
• The bank may require an appraisal and if the house is in bad repair the bank will not finance it. At times, if the appraisal is less than what you bought for, you will need to put more money down as a down payment.
• If it was a “grow-op” the bank will not finance it

As strategy it may be best to reduce the days on financing from 5 days to 2 or one day.

So if someone tells you to go firm on an offer, they better have the entire money to lend you. Otherwise, you must and should always place a conditional offer on what you buy. 

Always be informed

For more information contact your Toronto Mortgage Broker 

at 416-920-9931

Follow me on Twitter

Like us on Facebook

What is a private mortgage?

It is a mortgage that is held by a private individual where the client could not get approved through an A or B bank.

People will use a private mortgage for the following reasons:

1. If the mortgage is in arrears with the bank
2. If there is a grow op of marijuana
3. If there is a bankruptcy and the client has not or just been recently discharged
4. If the client needs money for construction
5. If the client does not show a lot of income
6. If the client has very bad credit

These mortgages are short-term for only 1 yr until the client gets their situation better. The interest rates are higher, but it is better than paying 19-25% on their credit cards.

The public sometimes is upset to pay a private individual higher interest rates, but they are upset to pay the bank the higher interest rates? Go figure.

The public needs to understand that the banks will take a snapshot photo of your current situation. Once looking at the photo, if they do not like it they will not be able to help you out.

Thankfully, these private individuals do exist to help you short-term and get you out of this situation and when there are improvements we can move you back to the bank.

That is why it is important to understand that the banks are running a business and the client cannot take it personally.

It is important to be informed and educated.

Video http://youtu.be/trEJaYtozLY

For more information contact your Toronto Mortgage Broker 

at 416-920-9931

Follow me on Twitter

Like us on Facebook

Is it better to pay your property taxes with your mortgage payment?

That depends. Some Lenders require you to.  If they don’t require you to, then it depends on you. Do you have the discipline to save $200-300 a month until the tax bill comes? If not, then let the bank pay your property taxes. It will be more convenient for you, and likely less stressful.

However, that convenience will cost you more money in the long run. In the first year on the mortgage, the bank will collect a little bit more than the actual taxes. The bank wants to make sure that they have a cushion built in for the future, should you default on the property taxes.

If you default, any taxes owing to the government are always in first position and take precedence over any outstanding mortgage balance. You must always pay your taxes first or the bank will pay them on your behalf and chase you down to settle the tax bill that you now owe to the bank!

The moral of the history is: if you cannot afford to pay the mortgage payments plus the property tax bill, then you cannot afford the property, it’s that simple. Don’t mess with the tax man!

Be an informed client. Seek professional advise. 

For more information contact your Toronto Mortgage Broker 

at 416-920-9931

Follow me on Twitter

Like us on Facebook

Tips on how to improve your credit score

Avoid late payments on your credit cards. If you can, don't wait until the end of the month to pay you credit card bills. If you buy something today, go the bank the next few days and pay it off in full or make the payment earlier and not wait until month end. Also make more than interest only payments.

Do not let people pull your credit too regularly because your score will go down. 
Only pull when necessary to buy a property.

Do not close your credit cards.
The older your accounts, the better your score is

Avoid having high balances on your credit cards. 
Try to stay below your credit card limits and not be over the limit. Your credit card balance should be no more than 80% of your credit limit. 

No credit is bad credit. 
Try to establish some credit to show that you can be responsible with your payments. Worst case, use cash as collateral to secure credit 

Avoid bankruptcies, credit proposals, judgments and collections.

Always be an informed client.

For more information contact your Toronto Mortgage Broker 

at 416-920-9931

Follow me on Twitter

Like us on Facebook

Four tips to ensure you can deduct interest on your debt

 

Ms. Smith owned a principal residence and a rental property. She owned her residence free and clear without any debt secured by the property. She had taken out a mortgage to purchase the rental property and was able to deduct her interest on that mortgage since the property earned rental income. That is, she directly used the mortgage proceeds for the purpose of earning income, so the taxman allowed the deduction for her interest costs. She then swapped the properties so that her principal residence became a rental and her rental became her principal residence.

Ms. Smith still wanted to own her residence (the former rental) free and clear of debt, so she borrowed funds against the new rental property (her former home) and used the proceeds to pay off the debt on her new residence (the former rental). Follow me? CRA then denied Ms. Smith her interest deduction going forward. They went to court over the issue, and CRA won the battle in court.

The ideas I mentioned before that your intention or purpose for borrowing money is irrelevant when it comes to deducting interest. Further, the assets you pledge as security for the debt are also irrelevant. All that matters is direct use of the borrowed money. So, what could Ms. Smith have done differently to enable a deduction for her interest? More importantly, what can you do today to ensure that you’re entitled to deduct interest on your debt? Here are a few ideas:

1. Sale to a friend: 

Ms. Smith could have sold her principal residence to an accommodating party – say, a friend or relative – in exchange for a promissory note. She could have then borrowed money from the bank to repurchase that property from her friend or relative. Her friend or relative could have then used the cash to repay the promissory note owing to Ms. Smith. If Ms. Smith then used the property to earn rental income (as she did), then she would have been able to deduct the interest on the new debt.

2. Sale on the open market: 

Suppose you have non-deductible interest on some debt. If you have other cash or marketable securities available, consider taking that cash or selling those securities for cash, using the cash to pay down your non-deductible debt, and then borrowing to invest in new assets (perhaps replace those same securities you just sold) with a purpose of producing income. Presto, you should be able to deduct your interest costs now. Just be sure to count the tax cost associated with selling any marketable securities beforehand. If you don’t like the tax hit you’re going to face when selling those securities, consider the next idea instead.

3. Transfer to a corporation:

Suppose you have non-deductible interest on some debt and you have other assets, perhaps marketable securities available. Consider transferring those assets to a corporation (even if these assets have appreciated in value there should be no tax to pay if you make an election under Section 85 of the Income Tax Act when making the transfer; see a tax pro). In exchange, take back a promissory note for the cost amount (that is, the adjusted cost base) of the assets transferred (the promissory note cannot be for more than the cost of those assets, otherwise you could trigger some tax). Then, borrow funds from the bank to subscribe for more shares in your corporation. The corporation can use the new cash to pay off all or part of the note owing to you. You can then use the cash to pay down your non-deductible debt. You should now be able deduct the interest on the new debt since the proceeds are used to invest in shares of your company.

4. Take out paid-up capital: 

Once again, suppose you have non-deductible debt. Suppose you also own shares in a private corporation and you have “paid up capital” in those shares (generally, you’ll have paid-up capital in shares to the extent you have subscribed for those shares using cash). Your corporation can then make a tax-free return of all or some of that paid-up capital to you (see a tax pro for different ways to do this). You can then use that cash to pay down your non-deductible debt. Finally, you can then borrow funds to reinvest in more shares of the corporation, or to lend money to the corporation (even at zero interest; CRA’s Interpretation Bulletin IT-533 confirms that interest will generally be deductible in this case).

Always be an informed client.

For more information contact your Toronto Mortgage Broker 

at 416-920-9931

Follow me on Twitter

Like us on Facebook

What is the Bank of Canada Rate?

It is a rate which is currently at 1% that the government lends to the bank. The bank, in turn, lends to the public at 3% which is called the prime lending rate. The prime lending rate affects everyone who has secured or unsecured lines and variable rate mortgages.

The Bank of Canada Rate is a mechanism to control inflation in this country. Mortgage rates are controlled by the bond and the stock market.  Thus, the Bank of Canada and mortgage rates are not the same. Mortgage rates change more often than the Bank of Canada rate. The Bank of Canada Rate usually stays the same for 4-6 months and sometimes it may be longer.

The Bank of Canada is represented by Stephen Poloz and it is expected that the Bank of Canada Rate (known as prime) will remain the same until the beginning of 2015.

The Bank of Canada Rate will remain the same for the following reasons.

1. Indeed inflation has gone up and Canadians are feeling the pinch on gas and food prices. However, the inflation rate has not passed the desired thresholds that will trigger an increase anytime soon.
2. The Canadian dollar is still strong which is good for us to buy American Dollars or Euros. But it is not good for the manufacturing sector since our exports are affected by the dollar. A stronger dollar means less exports are being made. People who work in the factories are seeing that things are indeed slower.
3. Also, if the Bank of Canada rate goes up, the foreign investors like it and it in turn increases the Canadian dollar.
4. But if the Prime lending remains low, the real estate market will be strong since a lot of people are able to buy, and or renovate. So the construction sector is strong.
5. Although our economy is stronger among the G8 Group, we are still affected on what happens worldwide. We are not immune. So things that happen in Europe, Asia and the United States do have a ripple effect in Canada.

But with a majority government in Ottawa, the Bank of Canada doesn’t want to increase prime too soon. So for now, anyone who has a variable rate mortgage, STICK WITH IT. 

Always be an informed client.

For more information contact your Toronto Mortgage Broker 

at 416-920-9931

Follow me on Twitter

Like us on Facebook

Buy A New House or Sell Your Old House First - Chicken Or The Egg?

The huge question looms: does one buy the new house first? Or sell the old one?

The second-or third-time buyer will need to consider the matter of an existing house, ongoing mortgage payments, and the cash needed for the down payment required to close on the new house. You have the money of course, there is real equity in your current home, but until that home is sold that cash is locked up securely in your current mortgage bank's vault.

So, what comes first, the chicken or the egg? Sell first, and, particularly in a sellers market, risk becoming homeless, or perhaps worse, moving in with the in-laws while the furniture is in storage

Or, in a buyers market, find the perfect house but you are unable to make an offer because your house might take a while to find a buyer.

What are my options?

Do your homework. Get pre-approved for a mortgage

• If you decide to own two homes, look into a refinance of your existing house which will give you the funds for the down payment of the new house.
• Arrange for a home equity line of credit. However, you must put that line of credit in place before listing your house. The bank will send out an appraiser and he will probably notice and report the sign on your front lawn.
• Arrange a bridge loan. However, a firm sale and purchase must exist.

Always be an informed client.

For more information contact your Toronto Mortgage Broker 

at 416-920-9931

Follow me on Twitter

Like us on Facebook