Reverse Mortgages

Anyone who has ever purchased a home is likely pretty knowledgeable about the mortgage process. But how many of us are familiar with the reverse mortgage?

Quite simply, a reverse mortgage is designed for home or condo owners 60 years of age and older who want to be able to access some of the equity in their properties without the demands of making monthly payments on a loan or line of credit.

A reverse mortgage can provide you with up to 40% of your homes appraised value, to be paid out in a lump sum, as needed, or by monthly, quarterly, semi-annual, or annual payments.

This influx of funds can provide the freedom to pay off debts, complete major home renovation projects, travel to dream destinations, purchase investment or recreational property, or supplement your retirement income.

And with that freedom also comes the knowledge that not one cent ever needs to be repaid until the home is sold.

So, what’s the catch?

Well, it depends on how you look at it.

While you maintain full ownership in your property, a reverse mortgage is registered on your title and must be repaid when you sell your home. Interest rates on reverse mortgages are higher than traditional mortgages or lines of credit, and because the interest accrues and is added to the balance, the amount of the mortgage gradually rises. Eventually you will end up with less equity for your estate or to pay expenses. If you look at it from the lender’s point of view, they are waiting for an unspecified period of time for repayment (as opposed to a traditional mortgage with regular monthly payments on the principal and interest) and the trade-off is higher interest rates.

Because property values will likely increase over the years and the loan is guaranteed to never exceed the fair market value of your home, most homeowners who take advantage of the reverse mortgage will usually have money left over once the property is sold and the loan is repaid.

The money obtained from a reverse mortgage is tax-free, won’t affect any type of government benefits you might already be receiving, and if you decide to invest some or all of the proceeds you might be able to deduct the interest against your income at tax time.

Some costs that the homeowner will have to incur in order to obtain a reverse mortgage include a home appraisal (around $200-$400), legal fees, and administration costs.Remember, a reverse mortgage is not for everyone. No one has an unlimited amount of equity built up – a reverse mortgage doesn’t change that fact.

As with any major financial transaction, it is advisable to get qualified independent advice you can trust before signing on the dotted line.

By Jacqueline Sharon

Making Your First Home Purchase Dream a Reality

Buying a home is more than numbers, dollars and cents. The pride of owning your own home is an incredible feeling, providing a place for you and your family to come together and build memories.

For many, getting through the process of buying a home can be daunting, if not downright frightening. Talk to anyone considering buying a home for the first time, and many will say the same thing: “There’s so much information – I don’t know where to start or where to turn for answers. It’s overwhelming.”

With all the potential pitfalls out there, it’s key to arm yourself with the right tools to help you navigate the intricacies of the home buying process. Getting the right information and help along the way will make this milestone purchase easier and hassle-free.

Knowledge is power

While partnering with a real estate agent and knowledgeable mortgage lender will go a long way towards home buying success, empowering yourself is also important. You are not alone, but you’re also your own best advocate.

Learn about the neighborhoods where you might want to live, and think about your day-to-day lifestyle when deciding what area – and type of home – is right for you. Take a home buyer education course – they’re often free and will help prepare you for the home buying process.

Real-ing and dealing

Partnering with a real estate agent can help make the process of buying your first home more efficient and hassle-free.  A real estate professional will help you assess your needs and wants in a home, and then utilize that information to narrow the field of available homes in your price range to a manageable pool. Well-versed in the local area, a real estate professional can help ensure you’re getting a better price, will negotiate on your behalf, and can protect your rights as a homebuyer. Your agent also may be able to make mortgage lender recommendations.

Find a financial partner, not just mortgage rates

Like buying a home, choosing a mortgage provider is about more than terms and rates – it’s about finding a company that has the knowledge to help you succeed.

“Find a lender who is also your financial partner,” says Mike Copley, executive vice president, retail lending at TD Bank. “Your mortgage advisor should work with you to find the borrowing solution that’s right for you, and make the experience as straightforward and hassle-free as possible.  Your lender’s commitment to you shouldn’t end with the closing of your loan.”

Some things to consider when selecting a mortgage lender: Will I be supported from application to closing – and beyond? Are there application fees? How quickly will I have a decision on my application? What type of mortgage should I choose? Does my mortgage provider service their own loans, or can they be sold to another institution later? Does my mortgage provider have a strong customer service focus, so I can ensure my needs are being met? The answers to these questions will help you forge the right partnership with the right mortgage lender.

There’s nothing to fear about buying your first home if you’re an educated consumer who finds the right real estate and mortgage team to help you make your dreams come true. So get out there and find your dream home!

Why Use a Mortgage Professional

There are generally two ways to get a mortgage in Canada: From a bank, or from a licensed mortgage professional.

While a bank only offers the products from their particular institution, licensed mortgage professionals send millions of dollars in mortgage business each year to Canada’’s largest banks, credit unions, and trust companies … offering their clients more choice, and access to hundreds of mortgage products! As a result, clients benefit from the trust, confidence, and security of knowing they are getting the best mortgage for their needs.  Mortgage professionals work for you, and not the banks; therefore, they work in your best interest. From the first consultation to the signing of your mortgage, their services are free. A fee is charged only for the most challenging credit solutions, and it’’s especially under those circumstances that a mortgage professional can do for you what your bank cannot.  Whether you’’re purchasing a home for the first time, taking out equity from your home for investment or pleasure, or your current mortgage is simply up for renewal, it’’s important that you are making an educated buying decision with professional unbiased advice.

For more information about obtaining a home mortgage in Edmonton, Canada, please contact Chelsea Boychuk at Dominion Lending Centres.

7 Key Questions To Ask Your Lender When Getting a Mortgage

Before you decide on a mortgage make sure you fully understand all the terms of the loan and make sure you know what you are getting yourself in for. Some home mortgages have features that may be risky and make it difficult for you to make your payments in the future. Be sure that you understand the loan terms, the risks and all the costs of the loan you are getting. To help you, below are 7 key questions to ask your lender about your mortgage BEFORE you accept a loan.

1.Will my interest rate ever increase, or is it fixed for the life of the loan?

* There are “fixed-rate” loans where the interest rate is generally the same throughout the life of the loan and then there are “adjustable rate mortgages” or ARM loans where your interest rate can go up or down after a short period. ARM’s are not bad loans and, in many cases could be a good alternative, but with an ARM there is more for you to look at and consider. You will want to find out how long the initial interest rate is fixed, and then how often your interest rate can change, is there a cap on how much it can change each time and is there a “lifetime” limit on how much it may change? Find out what the rate is tied to and how the adjustments are determined. Once you have all this information you can then compare all of the terms to other loans. You should also determine what your payment will become if the maximum adjustment upward happens and be comfortable that you will be able to afford the payment.

2. Can my monthly payment increase?

* Just like your payment may change if you have an ARM loan, some other loans may have provisions for a change in payment as well. This may be the result of a “buy-down” in the rate for a period of time, a lower introductory rate or other promotion. In addition, most mortgage payments include your home insurance and property taxes which most likely will increase in time so you should take that into account as well when determining what you can afford.

3. Will my payments reduce what I owe?

* You may think this is a silly question and may be saying “of course it will” but that is not always the case. There are “interest only” loans where none of your payment actually goes to repaying the loan, just the interest so your balance remains the same. There are also “negative amortization” loans in which your payment doesn’t even cover all the interest and you actually owe MORE on your loan each month than you did the month before.

4. Will I owe a balloon payment?

* Many home mortgages are “fully amortized” meaning you pay the loan off in full over time with your normal monthly payments but some loans have a “balloon” payment that comes due at some point. This balloon payment is usually the principal balance of the loan and therefore the typical borrower is not in a position to repay it at the time but must count on the ability to refinance or sell the property prior to the balloon coming due.

5. If I pay off my loan early will I owe a prepayment penalty?

* When lenders make you a home loan they incur some expense in doing so (processing, commissions, etc). They do this counting on collecting interest from you for a period of time so if you refinance your loan or sell your home and pay off the loan much earlier than expected their returns may suffer. To make up for this many lenders charge a “prepayment” penalty if the loan is paid off early. This penalty is typically thousands of dollars so you will want to know the amount up front, or better yet, find a loan without a prepayment penalty.

6. Will I have to prove my income, employment and assets to get the loan?

* Sometimes a lender will make a loan without requiring you to show that you are employed or proving that you have the ability to repay the loan. This type of no-documentation (“no-doc”) or low-documentation (“low-doc”) loan usually have higher interest rates or higher fees than traditional loans.

7. How much “cash out of pocket” will I need for this loan and when will I have to pay it?

* Some, or all of the fees you will be charged in connection with your loan will be added to your loan amount but some will have to be paid by you in addition to your down payment thereby increasing the amount of cash you will need to invest in the transaction. You cannot be charged any loan fees, other than a credit report fee, until you have received all of the disclosures required by law with all the terms and costs associated with the loan so don’t decide on, or commit to a loan, until after you have fully reviewed all the disclosures and understand how much cash you will need to come up with to complete the transaction.

By Dennis Norman, on August 26th, 2010

Why Rent When You Can Own!

At some point in their lives, most Canadians have probably asked themselves whether it is better to buy or rent a home. And purchasing a home is one of the biggest decisions most people ever make.

Ultimately, the decision is a personal choice, but it helps to look at the pros and cons of buying to determine whether home ownership is right for you.

Some Advantages of Buying a Home
Owning a home is generally considered to be a sound, long-term investment that can provide satisfaction and security for you and your family.

Each month when you make your mortgage payment, you are building equity in your home.
Equity is the portion of the property that you actually build through your monthly payment versus the portion that you still owe the lender.

At the beginning of your mortgage, more of your payments go toward paying off the interest and less toward paying off the principal. But the longer you stay in your home and the more mortgage payments you make, the more principal you pay off and the more equity you accumulate.

Most mortgages also offer you the option of making additional monthly or annual payments to reduce your principal faster. Some prepayment privileges, for instance, enable you to pay up to 20% of the principal per calendar year. This will also help reduce your amortization period (the length of your mortgage), which, in turn, saves you money.

There is also a tax advantage. If your home is your principal residence, any profit you make when you sell it is tax-free. A home can appreciate – or increase in value – as time passes, building more equity. As you build up equity, it’s usually easier to upgrade to a more expensive home in the future thanks to the profit you’ll make when selling your current home.

As an owner, you can also decorate and improve your home any way you like. Ownership tends to give you a sense of pride and can offer you and your family stronger ties to the community.

If you do decide that home ownership is right for you, it’s important to choose a home you can afford. If you can’t afford to buy your dream home, purchasing a more modest home can be a great place to start building equity that one day may allow you to buy the home of your dreams.

Since we’re currently in a buyer’s real estate market and interest rates have been dropping, now may be an ideal time to enter into home ownership for the first time.

Real estate is, however, usually considered the best investment over the long term.

When making the decision about whether to buy or rent, it’s important to carefully choose a home you can afford, and then weigh the pros and cons. Millions of people enjoy the rewards of home ownership but, ultimately, it’s a personal decision based on your own priorities.

If you’re thinking of buying your first home, I can answer all of your real estate and mortgage-related questions.

Your first step CALL ME! What have you got to lose???

Mortgage Brokers – Professional Mortgage Expertise

Variable rates, fixed rates, amortization and term, CMHC, pre-qualification, compounding interest, prime rate…What does it all mean?

For most home buyers, navigating the mortgage highway is, to say the least, a daunting experience. And if you’re a first-time home owner, the process can be downright terrifying.

So, where do you turn? A qualified mortgage broker can be a great source of information about all types of mortgages. Plus, they have the ability to shop around and personalize the mortgage that best fits your needs.

Brokers deal with a large variety of lending institutions, and are usually able to obtain discounts on most rates, as well as provide you with an unbiased objective opinion on what type of loan will work best for each individual situation.

Because of the wide array of lenders they deal with, brokers are usually more successful in attaining loans for clients with lower, non-salaried, or unconventional income.

Mortgage brokers are often more knowledgeable about the process than a typical loans officer at a bank or credit union who only deals with mortgage applications as a small part of their job.

The Real Estate Council of Alberta oversees the industry and its members adhere to a strict code of ethics and educational principles that provide them with a professional standard of practice. In order to be licensed by the RECA, potential brokers must write the Provincial Qualifying Exam and achieve a grade of 70% or higher.

Brokers charge a fee for their service which is typically paid by the lending institution. Most lending institutions pay similar rates, so the main focus of the mortgage broker is to find you the best rate and the best product. If there are any fees to be paid by the purchaser, the broker should let you know in advance.

When choosing a mortgage broker, enquire if they are licensed with the RECA, check with friends and family for any recommendations, and above all, ask a lot of questions.

How many years of experience do they have? You should find out how accessible they are. Can they meet with you during the evening or on weekends? Will they come to your home? Find out how long it will take for your approval to come through. Ask them how many options they will be prepared to give you.

It’s also a good idea to get quotes from two or three different brokers to make sure you’re getting the best deal possible.

A mortgage broker will help you decide which type of loan is best, fixed-rate or variable interest, inform you of the interest rate you will be paying, break down all the costs associated with the mortgage, and advise you as to whether or not there will be a prepayment penalty should you want to close out the mortgage early.

Finding a broker that you respect and trust will help guide you through the mortgage financing process with ease.

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