 Mike Toporowsky AMP
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| Blog Description |
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| Builder Mortgage discussion |
Tuesday, August 31, 2010 |
Builder mortgage discussion
Feel free to respond with questions if you are about to embark on the adventure of building your own home (or having one built for you).
There are dramatically different ways of financing your brand new build.
1) You can save and build it yourself. Don't laugh, I know a few folks who built their new home over time. They bought material when they could afford it and completed their own construction. They have to meet building code and pass inspection, so this is obviously not going to be everybody's method of getting their dream home built. If you find yourself running short of cash, you will most likely need to use a private mortgage firm (arranged by a mortgage broker). Banks have a strict policy regarding the finance of partially built homes and while they will do the financing when the home is complete, you need to get a temporary private construction mortgage to help you get the home finished.
2) You can find a builder who will build you a home from their blueprint selection. In some cases the builder is well established and will build the home for you, with as little as 5%-10% deposit (up front). Before you put down your deposit, you need to get pre-approved for your mortgage. The construction might take up to a year, so the rate is not necessarily going to be the one available today. You don't want to place your deposit and then try and find a mortgage, because if you can't get the financing you need, you forfeit your deposit and the builder sells your home to somebody else. Most banks will pre-approve you for your mortgage, but you will need to lock in your rate 120 days prior to completion. There are a few bank branches who will hold today's rate for 12 months. However, if the construction goes into overtime, you will get the rate that exists at the time of completion.
3) You can choose to have your home custom built. You now need to contact your mortgage broker to discuss the need for both construction financing and completion financing. If you plan on using high ratio financing through CMHC (minimum down payment) you will need to involve the bank's underwriters before construction begins. They have many rules that they need to follow to stay qualified under CMHC guidelines. Schedules for building and timetables for draws are strictly adhered to.
The bank may automatically include completion financing at the end of the construction period. This does simplify the process for all concerned.
4) You can do a self-build through the bank. In this case, you need to get your financing arrangements done before you put the shovel to the ground. That means construction financing and completion financing. The difference here is the CMHC rules are going to place you under the same timetable as a regular builder. So line up your trades and make sure you have an experienced construction supervisor looking after the build schedule. You will also need to get your own Home warranty insurance. All new home construction needs new home warranty type insurance and it will probably cost you close to $2500 for the one time premium. All new home builders are faced with this expense too. The New Home Warranty folks will want to have their inspection team view the project periodically. Once the construction is at least 95% complete, CMHC will allow the bank to fund your long term mortgage (completion mortgage).
5) You can finance the construction loan through a private mortgage lender. The advantage is a lack of red tape and some flexibility on the construction schedule. Private lenders can let you draw down as you need funds. Some only charge for the outstanding funds (some charge for all funds from day one). If you use a private lender, you can avoid a CMHC premium. If the cost of building is $300,000 (including lot) and the final value of the home is $400,000, you're sweat equity is 25%. You can now qualify for a conventional completion mortgage and avoid any CMHC premiums. The downside is that the private mortgage rates are higher and they will charge you a lender's fee. The broker will also need to charge a broker fee, because private lenders normally do not pay a finder's fee to the broker. If the build is efficient and you get everything built on schedule, you will still save money.
Due Diligence items to do before signing the construction contract...
-Check with the Better business bureau to see how they rate your builder, or contractor.
-Quickly interview the neighbours to see what their opinion of the area is. They might point out a parking nightmare problem or loud noise issues.
-Check the internet for any news stories about your new neighbourhood or builder
-If you have time, have your lawyer review your construction contract before signing. All contracts are slightly different and you want to know the pitfalls.
- Make certain your financing is approved (or pre-approved for a completion mortgage).
- Private construction draw payment schedules are usually negotiable. Let your broker know what kind of payment schedule works for you. Most of the time interest is brought current when the next draw is taken.
- Make sure your accounting allows for a 10% construction holdback. Once the project is inspected and complete, these funds can be released by the lender's lawyer.
- If you run into overtime on the build, most lenders will give you a time limit and then complete the construction themselves. This cost either comes out of the holdback or is tacked on to the total mortgage.
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posted by MIke Toporowsky at 6:12 pm - 0 comments
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| Business Cycles |
Wednesday, August 25, 2010 |
Business Cycles
The past few years have seen a fair share of wild economic conditions. The Bulls and The Bears each having their day. Sounds like an NBA playoff. Think you've seen everything? Relax their isn't anything new about the economy that hasn't happened in history. To prove it, just talk with some of the senior business executives who have experienced business over the past 40 years.
Everybody has been touched by the positive and negative cycle in some way.
Hopefully we all learn something from the past cycle and use that knowledge toward the next "Oil-Boom" or the next "Housing-Bubble" . The key message to learn is..."Don't get stressed, because it's only an economic cycle". If you leveraged everything against a growing real estate market, well you will probably have learned that moderation is the key. Become a mentor to others, because when the next economic down-turn happens, you can be a key consultant on when to get out of the market and wait. What you learned in this cycle will help you to have a net gain at the end of the next cycle.
I invite your feedback
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posted by MIke Toporowsky at 8:23 am - 0 comments
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| Seven Must Have Real Estate Contract Conditions |
Wednesday, August 25, 2010 |
Seven Must Have Real estate Contract Conditions
Amy Fontinelle
When you formally make an offer on a home you want to buy, you'll fill out a lot of paperwork specifying the terms of your offer. Aside from such obvious things as the address and purchase price of the property on which you're making an offer, there are some items you should be sure to include in your real estate purchase contract.
1. Finance Terms
If you are like most people and you won't be able to buy the home without obtaining a mortgage, your purchase offer should state that your offer is contingent upon obtaining financing at a specified interest rate. If you know you can't afford the monthly payment on the house if the interest rate is higher than 6 per cent, don't put 6.5 per cent in your offer. If you do that and you are only able to obtain financing at 6.5 per cent, the seller will get to keep your earnest money deposit when you have to back out of the offer.
If you need to obtain a certain type of loan in order to complete the deal, you should also specify this in your contract. If you are paying all cash for the property, you should state this as well because it makes your offer more attractive to sellers. Why? If you don't have to get a mortgage, the deal is more likely to go through and closing is more likely to happen on time. (Learn more in
2. Seller Assist
If you want the seller to pay part or all of your closing costs, you must ask for it in your offer. The offer should state the amount of closing costs you are requesting as a dollar amount (e.g., $6,000) or as a percentage of the home's purchase price (e.g., 3 per cent).
3. Who Pays Specific Closing Costs
The agreement should specify whether the buyer or seller will pay for each of the common fees associated with the home purchase, such as escrow fees, title search fees, title insurance, notary fees, recording fees, transfer tax and so on. Your real estate agent can advise you as to whether it is the buyer or seller who customarily pays each of these fees in your area.
4. Home Inspection
Unless you are buying a tear-down, you should include a home inspection contingency in your offer. This clause allows you to walk away from the deal if a home inspection reveals significant and/or expensive-to-repair flaws in the structure's condition. For example, if the home inspection reveals that the home needs a new roof at a cost of $15,000, the home inspection contingency would give you the option to walk away from the deal.
5. Fixtures and Appliances
If you want the refrigerator, dishwasher, stove, oven, washing machine or any other fixtures and appliances, do not rely on a verbal agreement with the seller and do not assume anything. Specify in the contract any fixtures and appliances that are to be included in the purchase.
6. Closing Date
How much time do you need to complete the purchase transaction? Common time frames are 30 days, 45 days and 60 days. Issues that can affect this time frame might include the seller's need to find a new home, the remaining term on your lease if you are currently renting, the amount of time you have to relocate if you are moving from a job, and so on. Occasionally, the buyer or seller might want a closing as short as two weeks, but it's difficult to remove all the contingencies and obtain all the necessary paperwork and funding in such a short time period.
7. Sale of Existing Home
If you are an existing homeowner and you will need the funds from the sale of that home to buy the home you are making an offer on, you should make your purchase offer contingent upon the sale of your current home. You should also provide a reasonable time frame for you to sell your home, such as 30 or 60 days. The seller of the property you're interested in is not going to want to take his property off the market indefinitely while you search for a buyer.
There are many other things that go into a thorough real estate contract, but for the most part, you shouldn't have to worry about them. Real estate agents will commonly use standardized, fill-in-the-blank forms that cover all the bases, including the ones described in this article.
If you want to familiarize yourself with the details of the purchase agreement form you're likely to use before you write your offer, ask your real estate agent for a sample agreement, or search online for the standard form that is common in your locality. (If you are looking for a good deal and have time to wait, a short-sale house may be for you. To learn more, read Purchasing A Short-Sale Property.)
The Bottom Line
Even though these forms are common and standardized and a good real estate agent would not let you leave anything important out of your contract, it is still a good idea to educate yourself about the key components of a real estate purchase agreement.
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posted by MIke Toporowsky at 8:22 am - 0 comments
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| Is your mortgage Locked in...try a blend and extend |
Saturday, August 7, 2010 |
Is your mortgage locked in...try a blend and extend
If you are locked into a long term fixed rate mortgage and would like to take advantage of rates that are currently much lower, you could ask your lender for a "blend and extend"? Refinancing your mortgage, well before your renewal date, is not an option, because the interest rate differential penalty would be staggering.
What I am talking about is a compromise solution that allows both borrower and lender to win...at least a little bit.
For example, if you took out a mortgage 2 years ago, with a 5 year term at 5 percent annual interest and today's rate is 4 percent, you could ask for an early renewal. If the bank is allowed to do this, they will certainly not purposely lose a guaranteed higher rate in favour of a lower rate. Instead, they will offer you an option to average the 2 rates together and then renew for a new 5 year term.
Why would the bank allow you to do this? Remember, currently they are lending the 5 year mortgages at 4% so by taking your existing rate and reducing your interest, they now extend their earnings from their investment with you and will benefit from a longer
earning cycle.
You benefit by having a lower rate and a lower payment with the same principal reduction and schedule as before. If your strategy is a long term ownership of the property, this proposal works well.
Not all lenders will do this, because sometimes the way a mortgage is funded will dictate the lender's flexibility. You can get your broker's advice before you talk to your lender, but is usually fairly simple to approach your existing lender to discuss the option directly.
Have you experienced a Blend and Extend...share your stories
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posted by MIke Toporowsky at 8:49 am - 0 comments
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| Choose your mortgage words carefully |
Monday, August 2, 2010 |
Choose mortgage words carefully
Many consumers fail to understand meaning of terms
Garry Marr, Financial Post
When it comes to your mortgage contract, watch your language.
Most consumers only look at their mortgage contract --one of the most important documents they will ever sign -- just before they are about to close on a house, says Toronto real-estate lawyer Steve Brett.
"It's very rare they come to me [first]. In residential transactions, they usually strike the deal first," he says. "The mortgage commitment comes shortly prior to closing. I'll talk to people over the phone and they'll say, 'These are the terms of the deal--is that the way it should be?' "
For about $200, Mr. Brett says a consumer could run a pre-approved mortgage by him before buying a house. "But in 35 years, I've never had that happen. I sometimes might get asked [to look at a mortgage contract] on refinancing."
Even the most basic mortgage contract terms, such as what constitutes the "prime rate" on a variable-rate mortgage, can create confusion.
"There can be different meanings to things like the prime rate or the base rate," Mr. Brett says. "They could have prime rate of 2%, but the base rate for residential mortgages might be prime plus one [percentage point], so their prime rate becomes 3%. Clients could get into difficulty thinking they are getting a heavily advertised prime rate but they are not."
He had a customer come in recently with an offer of financing from a mortgage broker that said he was getting the "prime rate" from a specific company. "I pointed out that [their version] of prime rate might not be the same as the banks'. He might have to pay a higher rate. His prime could be bank prime plus half a percentage point."
A bigger issue for consumers might be what their contract says about locking a variable-rate mortgage into a fixed rate during the term of the contract, usually five years. If they take advantage of the ability to lock in the rate, who gets to decide what that rate will be?
"It can be pretty open-ended. The banks' posted rates, for example, are not the real rate," Mr. Brett says. "You've got the right to lock in, but you are going to want to negotiate that rate and all the bank is obliged to do is give you the posted rate."
Mr. Brett says a preferable position would be to have a contract that says you have the right to negotiate at certain discounts to the posted rate if you lock in. "You always have the right to go elsewhere," he says, adding that can mean financial penalties.
Gary Siegle, a Calgary-based regional manager with Invis Inc., a mortgage broker, advises consumers to forget what is said to them verbally and try to understand what the terms in their contract actually mean.
"If it says you get the prime rate, you need to know how they will be establishing [that rate]. Is it on the company website? Is it based on the Bank of Canada rate?" Mr. Siegle says. "Consumers hear these words all over the place and they need to establish what they mean. You need to make sure your contract has a measurable rate."
He says most variable-rate mortgages are pretty standard: The consumer gets the prime rate plus or minus a certain number of basis points. There is little room for argument.
The debate begins, he says, when consumers want to lock in their mortgage and start stumbling over the terms in the contract. Defining the rate, however, is usually the biggest issue. "Often, that part is not clear," Mr. Siegle says.
So, make sure it is before you sign. |
posted by MIke Toporowsky at 7:37 am - 0 comments
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| 50/50 Split Mortgages |
Monday, August 2, 2010 |
What is a 50/50 Split Mortgage and why should you be asking questions?Gary Marr, Financial Post Published: Saturday, June 13, 2009
Don't handcuff your mortgage
Take a few important moments to read about the 50/50 Wi$e Mortgage
Would you like to pay an extra $300 per month on your mortgage? Not likely.
That hasn't stopped a number of Canadians, with the deal of a lifetime on a variable-rate mortgage,
from switching over to a more expensive fixed-rate product and paying the extra freight.
A fear of rising rates is driving the rash decision. But if you've finally managed to pin your banker to
the ground, why on Earth would you let him off the mat?
More than 28% of Canadians have a variable-rate product tied to prime, according to the Canadian
Association of Accredited Mortgage Professionals (CAAMP). If you negotiated a deal before October
of last year, chances are you are now borrowing money for as little as 1.35%. That's based on deals
that at one point saw the banks giving 90 basis points off prime. Prime is now 2.25%.
The average sale price of a home last month in Canada was $306,366. Based on a 25% downpayment
and a 25-year amortization, your monthly payment would be $962.61 at 1.35%. Convert that to a fiveyear
fixed-rate term and you're probably going to have to consider a 4% mortgage rate and a monthly
payment of $1,289.04.
Rates are rising fast. Most major banks upped their five-year rate by 40 basis points this week,
although discounters were still offering 4% this past week.
"It's not a mass rush yet, but we are starting to see ... people locking in. But variable rates are still so
good," says Joan Dal Bianco, vice-president of real estate-secured lending, TD Canada Trust. She
stops short of questioning why a consumer would pull out of these "deals" that are no longer available
on the market.
Try to get a variable-rate mortgage today and the best you can probably hope to get is 60 basis points
above prime, or 2.85%.
The landscape changed dramatically in October during the credit crunch. As the Bank of Canada
lowered rates, the major banks reluctantly lowered prime because of the massive amount of
customers with variable-rate products negotiated under the old, higher terms.
"Bonds yields are going up rapidly and people are starting to realize the rates are going to go up," Ms.
Dal Bianco says. Throw in the fact the Bank of Canada used the weasel word "conditional"(on
inflation rates)when it promised not to raise rates until June, and you can understand why some
people think today's record-low prime rate might not hold.
But if you're someplace between 60 to 90 basis points below prime, the rate is going to have to go up
pretty fast to justify locking in today at 4%, even though that is just slightly above the all-time low hit
last month for a five-year term.
"I don't understand why you would lock in," says Jim Murphy, chief executive of CAAMP. "Sure, if
they start to rise, but [Bank of Canada governor Mark] Carney says they won't rise, so you've got
another year at that prime-minus rate."
Don Lawby, chief executive of Century 21 Canada, says even when rates do start to increase, they are
not going to jump significantly right away. You are not going to get 4% on a fixed rate again, but
double-digit rates seem unlikely. "The only logic two locking in would be for someone very sensitive to
any rate change and they just want to be secure," Mr. Lawby says.
But at what price? If you're using the "feeling secure" logic, why not go for the 10-year fixed-rate
product? Rates on that product can be locked at 5.25%, ridiculously low by historical standards. Yet
fewer than 10% of Canadians consider a 10-year product.
There are some compromises you can make. For starters, there is nothing to prevent consumers from
having a blended mortgage at most Canadian banks. Some banks will let you take half your
outstanding debt and lock it in. Diversity is preached for stock portfolios, but few people seem to
adhere to the same philosophy when managing their debt.
Consumers might want to take their cue from business. Few companies would want all of their debt
coming due at the same time -- it presents too much risk. The other option is knocking down
principal: Make payments based on a 4% rate and have that extra $300 go straight to your principal
every month.
The bottom line is if you've got a deal on your mortgage, why would you give it back?
Dusty wallet Double check your credit card statements. DW is in a bit of a skirmish with Visa over a
taxi cab bill. Of course, DW is too cheap to use cabs, but does succumb to them to get to and from
airports on vacation. Last trip, the family took an airport limousine and paid the $56 charge. Guess
what? The same amount was billed a month later. So far, the taxi cab company has yet to produce a
second receipt. In the interim, DW had to pay the second $56 charge. |
posted by MIke Toporowsky at 7:36 am - 2 comments
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| Finance said... |
Wednesday, April 28, 2010 @ 12:12 am |
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Tuesday, February 16, 2010 @ 11:10 pm |
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| Mortgage Strategy |
Thursday, July 29, 2010 |
Mortgage StrategyYou keep hearing financial experts telling you that your personal mortgage strategy needs to match your mortgage selection.
Selecting a mortgage should be easy, right? I mean our parents were never given a choice. They walked into their bank and the loans officer slid a contract in front of them and they signed. There were few choices anyway and back then shopping for rates and features was unheard of. Everybody offered the same thing, so you went with the flow.
Since the dawn of the mortgage specialist, there have been many new options available to today's customer. The products are driven by customer demand and new lenders creating niche markets of boutique mortgage products. The big 5 Canadian banks pick and choose the ones they like and incorporate them into their own mortgage programs and there you have the evolution of the need for mortgage strategy.
So, how do you choose? First, your current circumstances will play a large roll in what you should choose. You make the best decision you can, with the information that you have available. That way you can always feel good about your decision.
Fixed closed mortgages are the traditional comfortable stress free mortgages that are the same as the ones our parents got. Why would you choose this mortgage? You will know what your payments are for the term that you choose, because the only time you negotiate rate is when they get renewed, when your term is up (6 month-10 year term options). The lifetime (amortization) of these mortgages can be up to 40 years (35 year CMHC maximum). If you can lock in a rate near the historic lows, you will benefit over the long-run. If you have pre-payment options you can pay your mortgage way ahead of schedule.
The negatives...payments are slightly higher than variable rate, penalties are very high to pay it out.
I recommend this payment if you are traditional and don't like stress. I also recommend this if you are living close the the end of your budget.
Fixed Open Mortgage If your plan is to mortgage for a short term, the fixed open mortgage is a good value. There are no penalties to break the contract. As an example, if you are buying to fix up a property and flip it for a profit, this would be a good choice.
The negatives...rates are about 4 percent higher than regular rates, because the lender knows he will not get a penalty when you are ready to pay it out. If your original plan to pay out this mortgage falls through, you will have to continue paying a very high rate, until you figure out how to either refinance or sell.
I recommend this if you have a short term plan, because the penalty savings will make sense.
Variable closed mortgage are for those customers who can afford to weather increases in interest rates. Rates currently are low and are forecast to stay low for a while, but when they do move, there is really only one way they will go. The penalty to break these contracts is usually a 3 month interest penalty, whether you refinance or sell. Currently these rates are extremely low and if you do the math, they can currently save you a lot of interest. Look for the terms that offer you prime or better. Sometimes you can get your variable rate at less than prime, so whenever the rates move you are below the lender's prime rate for the term of your variable rate mortgage. As an example prime minus .25% will give you the rate some of today's brokers are advertizing for 2% because 2.25% (today's bank prime) minus .25% = 2.00%. Another example is if the rate swings to say 2.50% your rate will be 2.25% etc. Read the previous variable rate blog.
The negatives...if the rate doubles (historic average rate in Canada is 7.5%) can you afford to pay twice as much as you are currently paying? The lender will offer to let you fix your rate if the rate starts to climb. You will be able to lock in at the new rate available, not today's historic low rates.
50/50 Split mortgages are the product of the evolution of mortgages. They are a split between a closed mortgage (to protect at least half of the mortgage at today's fixed rates) and a variable rate mortgage (to gain the benefit of today's incredible floating rates). The rate you pay is the average of the 2 plans. So you could pay 4% on a fixed 5 year plan and 2.25% on a variable, so your starting rate would be between the two rates. Now, if the variable rates skyrockets you still pay the average between the two products but half of your mortgage will anchor you, so the fluctuation will not be too stressful. For example, if within the 5 year term the variable jumps to 5%, your average rate would only be 4.5%.
The negatives...not many. You will have payment adjustments to make on half of your mortgage (assume they will eventually go up, not down). You will still have a penalty, but it won't be as high as the fixed closed rate.
I do recommend this mortgage if you are just slightly adventuristic and can afford to increase your payment a bit.
Watch for my next blog to see part 2 of this mortgage strategy feature.
What would you like to know about mortgage strategizing?
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posted by MIke Toporowsky at 9:05 pm - 0 comments
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| How do Mortgage Changes affect you? |
Wednesday, June 23, 2010 |
How do mortgage changes affect you?
Plenty of confusion over government rules
BY BILL MCFARLANE, CALGARY HERALD
Unless you're a turtle, you don't want your home to be a big weight on your back.
But for many people, the thought of buying a home is just that, a weight.
Where to look? What to look for? How much to pay?
What is the impact of the new the government rules for qualifying for a mortgage? The considerations go on and on.
You can take much of the anxiety out of the process by doing some homework first.
The best place to start is figuring out just how much you can afford. After all, answering that question will help you focus on your realistic options.
First, there is plenty of confusion
over the recent government changes made to qualify for a new mortgage.
To begin, you can still have as little as five per cent as your down payment to purchase a home you are going to live in.
The down payment change the government made in April was for people who already own their home and want to refinance it to do things like renovations, take a major vacation or pay some debts.
In that case, they must have 10 per cent equity and can take the mortgage up to a maximum of 90 per cent of the appraised value of the home.
You must qualify at the government prescribed rate when:
- The mortgage is more than 80 per cent of the value of the purchase cost
- The fixed term of the mortgage is less than 5 years
- Or the mortgage is a variable rate mortgage, you must qualify at a government prescribed rate.
At the time of writing this article, the prescribed rate was 5.99 per cent.
However, if you select a five-year closed term mortgage or longer, the actual mortgage rate you are paying on your mortgage will be the rate at which you will qualify.
The significance here is that actual mortgage rates being charged now on five-year terms are significantly lower than the prescribed rate of 5.99 per cent.
Next, get a fix on your net worth. That's the difference between your assets (what you own, such as savings accounts and bank deposits, stocks, bonds, vehicles and so on) and your liabilities (what you owe, such as loans, credit card balances, unpaid bills, your existing mortgage, etc.)
You'll need this information when visiting your financial institution to discuss a mortgage.
It will also help you assess how much you have available for your down payment and other costs.
When you look at what you can afford, don't just consider the purchase price.
There are all sorts of "extras" associated, including the inspection fee, appraisal fee, legal fees, closing costs, property insurance and moving costs.
It all adds up, perhaps tacking on two per cent or more to the price of the home -- which in this market comes out to several thousand dollars.
Then there are the financial obligations that you must be prepared to assume on an ongoing basis:
- Monthly mortgage payment;
- Property/school taxes;
- Utilities; on going maintenance and,
- With a new home, you will have:
- Landscaping;
- Fencing and decks;
- Driveways, etc.
A turtle might be able to stick its neck far out, but you don't want to. By realistically evaluating your financial situation and accounting for all expenses, you can establish just what you can afford up front, and the maximum you can put toward your monthly housing costs.
That's a lot to think about.
© Copyright (c) The Calgary Herald
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posted by MIke Toporowsky at 9:35 am - 0 comments
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| Private mortgage lenders are not all created equal |
Sunday, June 13, 2010 |
Private Lenders are not all created equal
Shocked! Confused...I didn't think so, because most folks like yourself already realize that anybody can be a private lender. It's true; and you can even use your self directed RRSP as a mortgage lending fund.
As a mortgage broker I continuously interview many potential private lenders...some with experience and some are trying to start.
I always complete a background check on them. Much like a mortgage applicant I need to know who's lending the money, not just who is borrowing it. Does the money come from traceable sources? Does the lender have any kind of public record? I need to know who I can stake my 30 year reputation on, because I will always be known by the deals I complete.
My favorite private lenders have a some of these unique qualities...They are not nervous, they are sworn to uphold the privacy act, they know what mortgage niche they like to lend in, they are there when I need them, they are fair (but not greedy), they use common sense and my customers always give positive feedback from the experience. Every private lender wants to know what the exit strategy is for their investment, it is critical to their decision.
As a mortgage broker I need to rely on a few different types of private lenders. Some specialize in the short term stuff (like bridge financing and interim/construction financing). Some are looking for long term boring stuff that that makes a better return than their current mutual or savings. Some are even asking for high risk, but their rates reflect the risk (be prepared if you need one of these loans). You often hear about "equity lenders". Equity lenders lend based on the value of your home. If there is enough equity then they will lend you the money. Be prepared to pay both a high fee and a high rate. Even if they offer a low rate for 6.85% at say 6 months to a year and they get a 6% lender's fee from you...do the math. That low rate just jumped to the mid teens, and the lender yielded what he wanted. Yes, I have private equity lenders in my lists too, but i make sure they are ethical and I also make sure the deal is a win-win for everybody. There must be a clear exit strategy.
If your mortgage broker specializes in private lending, like I do, they will have a complete mix of potential lenders they can call on. My only real challenge is that during the really cold snaps in Alberta, my private lending sources are all down south waiting out the sub zeroes. That being said, if you would like to have a coffee and talk about how you can be added to my list, just contact me at mike@RealMortgageSolutions.ca . I have a close circle of licensed leading mortgage professionals whom I consult with and when the right deal comes along, your RRSP can suddenly become your great performer. |
posted by MIke Toporowsky at 9:36 am - 0 comments
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| Reverse Mortgages |
Sunday, June 13, 2010 |
Reverse Mortgages
I was totally ignorant of the benefits of a Reverse Mortgage plan, until I took the time to corner the local CHIP rep.
Until that meeting, I was totally against the reverse mortgage in any way shape or form, because I thought they were designed to benefit CHIP more than the home owner.
I was WRONG! There are definitely times when a CHIP mortgage plan makes sense. I was even hurting myself as a well rounded mortgage broker. My local broker rep is Terry and he was totally aware of the criticisms and negativity associated with the plan. It will not work for everyone and sometimes even CHIP can't help, but for those folks who i can help, this plan is a beaut (That was my best Don Cherry impression). Poor Terry, I absolutely hammered him with questions that I had prepared before my inquisition.
He was very composed and resolved in the fact that in CHIP's 26 year history they have helped thousands of Canadians live in their homes until they were ready to move...not because they were forced out with high bill payments.
I called my friend in the financial planning industry to ask him his opinion of the CHIP reverse mortgage plan. He was opposed to it, but it was more or less along the same reasoning that I had...negative press. When I started pointing out real life scenarios that made sense, his negative push-back because less and less. While he was not yet 100% on-side he did promise to educate himself in the product and report back to me when he was done.
What I learned was... that by keeping an open mind and listening to the benefits of a tried and true plan I could better serve the needs of my customers (who need to be 60 years of age or older for this product). |
posted by MIke Toporowsky at 9:36 am - 0 comments
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Mike Toporowsky AMP
Real Mortgage Solutions
Email:
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