13 Oct

MORTGAGE BASICS – TYPES OF INSURANCE

General

Posted by: Shari Letsos

MORTGAGE BASICS – TYPES OF INSURANCE

In part one of this two-part series, we will look at the types of insurances you will hear about during the mortgage process. Sometimes it is a good idea to revisit the basics when looking at a complex thing like a mortgage. There can be misunderstandings which crop up. The mortgage process can be very stressful as you wait for some anonymous entity to decide whether or not you are able to buy the home of your dreams. It is no wonder that things can get missed. Fear not! We will take a look at some of the basics so you can avoid things best avoided.

1. Mortgage Default Insurance – There are three mortgage default insurance providers in Canada. CMHC, Genworth and Canada Guaranty. If you are purchasing a home with less than 20% down you will have to be approved by both the lender and the default insurance provider for the loan. They are looking at your credit, employment stability and the property itself to make their decision. If you default on the mortgage, the bank or mortgage provider is made whole on any shortfall. The cost is a set amount based on how much you are putting down and will be added to your mortgage so you do not have to worry that you need to come up with extra funds for it. As of today based on a standard borrower the premiums are shown in the following table though it is an important note that the premiums are higher in certain cases.
LTV Ratio Premium Rate
Up to 65% 0.60%
65.01% – 75% 1.70%
75.01% – 80% 2.40%
80.01% – 85% 2.80%
85.01% – 90% 3.10%
90.01% – 95% 4.00%

2. Title Insurance – This is required on most mortgages these days. The cost is around $250 and will be collected from you at the lawyer’s office. Title insurance is often used instead of a Real Property Report as it is quicker and less expensive. If for example, the garage on your new home had been constructed offside of where it should be, it is the responsibility of the title insurance to make it right. This could happen by getting the city to allow it or in the worst case, to cover the cost to move the garage.

3. Home Insurance – You have a legal responsibility to make sure you have property insurance. This protects you against things like fire, flood or theft. You will be required to provide verification of the insurance when you meet with the lawyer. You will probably want to do a bit of research before choosing your company. Not all insurance policies are equal and a truly awful time to find that out is after a horrible event.

4. Life Insurance – You will be offered life and disability insurance with your mortgage. Most of us assume that we have sufficient coverage through work but the protection of your family and their home should be given serious consideration. You are not obligated to accept the insurance provided to you but please factor the cost of sufficient coverage into your budget when you are thinking of buying your home. A few things to consider:

– The younger you are when you get insurance the cheaper it is.
– If you leave your current employer or get laid off and have developed a health concern it can be problematic to find affordable if any coverage.
– If you choose the insurance from the mortgage lender or bank you may find yourself tied to them indefinitely if you experience a change in your health. This could mean higher rates at renewal.
– Disability is the number one reason for foreclosure in Cana which goes to show that it can and does happen too many of us.
And there you have the four types of insurance which will be discussed around your mortgage. If you have any questions, please contact me.

Shari Letsos
Senior Mortgage Professional
Cell: 604-723-7721
www.Shariletsos.ca

Sletsos@dominionlending.ca
Dominion Lending Centres Mountain View

9 Oct

SAVING FOR A DOWN PAYMENT

General

Posted by: Shari Letsos

What prevents many potential homeowners from buying a home is the lack of a down payment.
Many first-time home buyers are receiving down payment gifts from family.

Unfortunately, many are not in this position and need to plan to save their own down payment.
When you can visualize the benefits of owning your own home and it becomes your number one desire, most of us can save that down payment.
Every time you feel like spending money that is not a need and takes away from you down payment, consider what you could be giving up, your home.

I recently did a mortgage for a couple buying their first home. During the process, they told me that 25 years ago they moved into a brand new rental home and they just finished paying off the landlords mortgage. The house had gone up about $800,000 in value over the 25 years. If the couple would have had their down payment and bought the home they would have a home worth over $1,000,000 paid for.

Here are some tips
Avoid borrowing money for a depreciating asset like a car or furniture. Did you know that most people who buy furniture interest free for a year do not pay it off and end up paying about 29% interest on that loan?

Open a Tax Free Savings Account (TFSA) and start contributing monthly. Try and maximize what you can put in the TFSA. Turn it into a game and see how fast you can make it grow. Remember the end game is your own home.
The Business Insider reports that 62% of your expenditure is spent on three areas: Housing, transportation and food. Focus on cutting down expenses in these areas and put the extra money in your TFSA. It may be tight living in a smaller place for a few years or even staying at home for a few years to save up that down payment, but if you could look down the road 25 years and have a choice of buying your first home or owning a million-dollar home with no mortgage, what would you choose? You need to keep that vision of owning you own home if front of you to make the sacrifices worth it. The longer you rent the more you are paying off someone else’s home.

I read a stat that 43% of the annual food cost are eating out. Then there are prepared meals that involve no cooking that when included add up to 60% of your food budget. I recently had a friend that stopped eating out and is now putting about an extra $350 a month in his investment account.
Create a budget, control your spending, and buy groceries on sale. Use the Flipp app and find the lowest price on main items and price match. You can save $100’s of dollars doing this.
All these savings can go into your TFSA. Ask friend for their money saving ideas. Stay focused and before you know it you will have your down payment.

If you have any questions, please contact me.

Shari Letsos
Senior Mortgage Professional
Cell: 604-723-7721
www.Shariletsos.ca

Sletsos@dominionlending.ca
Dominion Lending Centres Mountain View

6 Oct

AVOIDING “STICKER SHOCK” WHEN IT COMES TO MORTGAGE RENEWAL

General

Posted by: Shari Letsos

AVOIDING “STICKER SHOCK” WHEN IT COMES TO MORTGAGE RENEWAL
Imagine that, a few years from now, the time has come to renew your mortgage.

Several years back, you got a $350,000 at the then great rate of 2.24%. Your mortgage payments are $1522 per month.

Because we are now in what the financial brainboxes call “ an escalating rate environment “ – normal people just say rates are going up – when you open your renewal notice you might encounter the same feeling you get when you look at the price of a car you like.

When you actually do look at the renewal notice, you see that the remaining balance on your mortgage is now $294,662, the new ( very competitive rate ) is 3.25% and that the new payment is $1668, actually $150 dollars a month MORE than you were paying previously. You think “WHAT THE….???”

This type of sticker shock is a new sensation to an entire generation of Canadians. Brokers are fond of talking about the fact that rates had not moved in 7 years but we rarely talk about the fact that rates have been trending down for more than twenty years and chances are, if you’ve had a mortgage for any time during that period, the payment at renewal has always been lower than when you started out.

‘Well, what’s to be done’, you ask? ‘How do I avoid “sticker shock”?

The key to avoiding that sinking feeling is to increase your payment slightly every year. You can find out how much to increase it during your Annual Mortgage Review. By increasing your monthly payment by even 2% a month, you can potentially avoid that sinking feeling – and pay off your mortgage even faster!

But wait; “Annual Mortgage Review? Qu’est-ce que c’est”, you ask.

An annual mortgage review, done with either your mortgage provider’s representative or your own mortgage representative ( i.e. your friendly Mortgage Professional) is just a quick check up to discuss what the current balance is, how things are going and do a quick review of your early payment privileges, increased payment privileges and potential prepayment privileges.

Its best to have these annually because , well, the average human needs to be shown the same information seven times to learn it – save time and start today. If you have any questions, please contact your local Dominion Lending Centres mortgage specialist.

Shari Letsos
Senior Mortgage Professional
Cell: 604-723-7721
www.Shariletsos.ca

Sletsos@dominionlending.ca
Dominion Lending Centres Mountain View