26 Jan

What is a Property Assessment vs a Home Appraisal?

General

Posted by: Sharlene Scott

It’s the time of year when many homeowners are getting their property assessments.

The real estate market is the single biggest influence on market values. Market forces vary from year to year and from property to property. The market value on an assessment notice may differ from that shown on a bank mortgage appraisal or a real estate appraisal because an assessment’s appraisal reflects the value at a different time of the year, while a private appraisal can be done at any time.

Use your Assessment as a starting point for the value of the property your planning your home purchase… Do not rely on a provincial assessment for the exact value of the property you’re considering purchasing. Markets can change quickly both increasing and decreasing in value depending on the area.

What is a Home Appraisal?
An appraisal is a document that gives an estimate of a property’s current fair market value.

Often there is no connection between a provincial assessment and appraised value. This is why lenders want an appraisal – an independent evaluation of the properties value at this moment in time.

Primarily home appraisals are completed at the request of a lender. Lenders want to know the value of a property in the current market before they are willing to lend against the home.

The appraisal is performed by an “appraiser” who is typically an educated, licensed, and heavily regulated third party offering an unbiased valuation of the property in question, trained to render expert opinions concerning property values.

When an appraisal is done, consideration is given to the property, the home, its location, amenities, as well as its physical condition.

Appraisals may also be required when an owner has less than 20% down payment and needs mortgage default insurance.

Who pays for the Home Appraisal?
Typically, the borrower pays the cost of the appraisal, and upon completion, the appraisal goes directly to the lender (does not go into the home buyer’s hands).

I know it sounds odd, but brokerages, lenders and appraisers cannot just show the buyer the appraisal on a property, even though the borrower paid for it.

Think of an appraisal as an administrative fee for finding today’s current value of the property
You need a Home Appraisal since the lender doesn’t want to lend on a poor investment and the appraisal helps the buyer decide if the property is worth what they offered (especially in hot markets like Vancouver & Toronto).

Why don’t you get a copy of the appraisal? The appraiser considers their client to be the lender (the reason the appraisal was ordered). The lender has guidelines for the appraisal, and the appraiser prepares his report according to those parameters.

The lender is free to share the appraisal with the borrower, but the appraiser cannot share it. This is because the lender is the client… NOT the borrower!! It doesn’t matter who pays for the appraisal.

Sometimes an appraisal can come in lower than the purchase price, causing angry calls to the Appraisal Institute of Canada (AIC), and the answer they give is: the Brokerage or Lender is the client of the appraiser, and as such has ownership of the report.

One of the main reasons the buyer pays for the appraisal, is that if the mortgage doesn’t go through, the lender does not want to be on the hook for paying for the appraisal and not getting the business.

Lenders are also aware that home buyers could take the appraisal and shop it around with other Lenders to try and get a better deal.

It is rare for Lenders to share the report. With most appraisal companies, the appraisal is only provided after the closing of the mortgage transaction and must have the lender’s approval.

After the funding of your mortgage, some mortgage brokers will refund the appraisal fee or sometimes the lender may agree to reimburse the cost of the appraisal.

While a lender does not have to release the entire appraisal, there are some pieces of information that remain the personal property of the buyer, and PIPEDA legislation guarantees them access to that. However, any information on the report that does not relate to the property itself (such as the neighboring properties or other data about the community) would come off the report before the lender provided it.

Some other reasons for getting an Appraisal:

  • to establish a reasonable price when selling real estate
  • to establish the replacement cost (insurance purposes).
  • to contest high property taxes.
  • to settle a divorce.
  • to settle an estate.
  • to use as a negotiation tool (in real estate transactions).
  • because a government agency requires it.
  • lawsuit

Getting your home ready for an Appraisal:
The appraiser report involves a report including pictures of the home and property with the appraiser’s value of the property, along with a short summary of how that information was derived.

9 tips for high value home appraisals

Most lenders have an approved appraiser list which requires appraisers to have the appropriate designation. Lenders tend to reject appraisals that are ordered directly by property owners. Lenders want the appraisal to be ordered by the broker or the lender, primarily to avoid potential interference from the property owner.

Home Appraisal Costs
Appraisal costs do vary. Most home appraisals start around $350 (plus tax) but they can go much higher depending on how expensive the home is, complexity of the appraisal and how easily the appraiser can access comparable data.

Are you thinking of buying a home? As you can tell there is lots to discuss, call me today to have a chat!

Written by: Kelly Hudson, Dominion Lending Centres

21 Jan

How Mortgage Brokers Help You Get Approved By ‘A’ Lenders

General

Posted by: Sharlene Scott

Every year Canadian families are caught in unexpected bad circumstances only to find out that in most cases the banks and the credit unions are there to lend you money in the good times, not so much during the bad times.

This is where thousands of families have benefited over the years from the services of a skilled mortgage broker that has access, as I do, to dozens of different lending solutions including trust companies and private lending corporations. These short-term solutions can help a family bridge the gap through business challenges, employment challenges, health challenges, etc.

The key to taking on these sorts of mortgages is always in having a clear exit strategy, which in some cases may be as simple as a sale deferred to the spring market. Most times, the exit strategy involves cleaning up credit challenges, getting consistent income back in place and moving the mortgage debt back to a mainstream lender. Or as we would say in the business an ‘A-lender’.

The challenge for our clients over the last few years has been the constant tinkering with lending.

Guidelines by the federal government and the changes of Jan. 1, 2018 represent far more than just ‘tinkering’.

This next set of changes are significant, and will effectively move the goal posts well out of reach for many clients currently in ‘B’ or private mortgages. Clients who have made strides in improving their credit or increasing their income will find that the new standards taking effect will put that A-lender mortgage just a little bit out of reach as of the New Year.

There is concern that the new rules will create far more problems than they solve, especially when it seems quite clear to all involved that there are no current problems with mortgage repayment to be solved.

Yet these changes are coming our way fast.

Are you expecting to make a move to the A-Side in 2018?

It just might be worth your time to pick up the phone and give your Dominion Lending Centres Mortgage Specialist a call today.

I’m here and I’m ready to help.

 

Blog By: Tracy Valko, Dominion Lending Centres

18 Jan

9 Reasons Why People Break Their Mortgages

General

Posted by: Sharlene Scott

9 REASONS WHY PEOPLE BREAK THEIR MORTGAGES

Did you know that 60 per cent of people break their mortgage before their mortgage term matures?

Most homeowners are blissfully unaware that when you break your mortgage with your lender, you will incur penalties and those penalties can be painfully expensive.

Many homeowners are so focused on the rate that they are ignorant about the terms of their mortgage.

Is it sensible to save $15/month on a lower interest rate only to find out that, two years down the road you need to break your mortgage and that “safe” 5-year fixed rate could cost you over $20,000 in penalties?

There are a variety of different mortgage choices available. Knowing my 9 reasons for a possible break in your mortgage might help you avoid them (and those troublesome penalties)!

9 reasons why people break their mortgages:

1. Sale and purchase of a home
• If you are considering moving within the next 5 years you need to consider a portable mortgage.
• Not all of mortgages are portable. Some lenders avoid portable mortgages by giving a slightly lower interest rate.
• Please note: when you port a mortgage, you will need to requalify to ensure you can afford the “ported” mortgage based on your current income and any the current mortgage rules.

2. To take equity out
• In the last 3 years many home owners (especially in Vancouver & Toronto) have seen a huge increase in their home values. Some home owners will want to take out the available equity from their homes for investment purposes, such as buying a rental property.

3. To pay off debt
• Life happens, and you may have accumulated some debt. By rolling your debts into your mortgage, you can pay off the debts over a long period of time at a much lower interest rate than credit cards. Now that you are no longer paying the high interest rates on credit cards, it gives you the opportunity to get your finances in order.

4. Cohabitation & marriage & children
• You and your partner decide it’s time to live together… you both have a home and can’t afford to keep both homes, or you both have a no rental clause. The reality is that you have one home too many and may need to sell one of the homes.
• You’re bursting at the seams in your 1-bedroom condo with baby #2 on the way.

5. Relationship/marriage break up
• 43% of Canadian marriages are now expected to end in divorce. When a couple separates, typically the equity in the home will be split between both parties.
• If one partner wants to buy out the other partner, they will need to refinance the home

6. Health challenges & life circumstances
• Major life events such as illness, unemployment, death of a partner (or someone on title), etc. may require the home to be refinanced or even sold.

7. Remove a person from Title
• 20% of parents help their children purchase a home. Once the kids are financially secure and can qualify on their own, many parents want to be removed from Title.
o Some lenders allow parents to be removed from Title with an administration fee & legal fees.
o Other lenders say that changing the people on Title equates to breaking your mortgage – yup… there will be penalties.

8. To save money, with a lower interest rate
• Mortgage interest rates may be lower now than when you originally got your mortgage.
• Work with your mortgage broker to crunch the numbers to see if it’s worthwhile to break your mortgage for the lower interest rate.

9. Pay the mortgage off before the maturity date
• YIPEE – you’ve won the lottery, got an inheritance, scored the world’s best job or some other windfall of cash!! Some people will have the funds to pay off their mortgage early.
• With a good mortgage, you should be able to pay off your mortgage in 5 years, there by avoiding penalties.

Some of these 9 reasons are avoidable, others are not…

Mortgages are complicated… Therefore, you need a mortgage expert!

Give a Dominion Lending Centres mortgage specialist a call and let’s discuss the best mortgage for you, not your bank!

written by Kelly Hudson, Dominion Lending Centres

17 Jan

Bank Brokers vs. Mortgage Brokers, Here’s the Scoop.

General

Posted by: Sharlene Scott

BANK BROKER VS. MORTGAGE BROKERS | HERE’S THE SCOOP

Ask any mortgage broker and they can tell you that there are a handful of misconceptions that the public has about working with a mortgage broker. From questioning their credentials (we all are regulated and licensed with in our own province, and are constantly re-educating ourselves) to assuming that the broker does not have access to the same rate as the banks (we do in fact—plus access to even more lending options) mortgage brokers have heard it all!

With the recent changes to the B-20 guidelines taking full effect as of January 1, 2018 the mortgage landscape is changing and we firmly believe in keeping our clients educated and informed. With these changes, there have been a number of misconceptions that have come to light regarding mortgage professionals and their “limitations” and we felt it was time to address them:

Myth 1: Independent Broker’s don’t have access to the rates the banks do.

Fact: Not true. Brokers have access to MORE rates and lenders than the bank. The bank brokers only have access to their rates-no other ones. A mortgage professional has access to:

• Tier 1 banks in Canada
• Credit Unions
• Monoline Lenders
• Alternative Lenders
• Private Lenders

This extensive network of lender options allows brokers to ensure that you are not only getting the sharpest rate, but that the mortgage product is also aligned with the client’s needs.

Myth 2: The consumer has to negotiate a rate with a lender directly.

Fact: Not true at all! Your mortgage professional will shop the market to find the best overall cost of borrowing for the client. Broker’s will look at all angles of the product to ensure that the client is getting one that will suit their unique and specific needs. Not once will the client be expected to shop their mortgage around or to speak to the lender. This is different from the bank where you are limited to only their rates and are left to negotiate with the bank’s broker—who is paid by the bank! We don’t know about you, but we would much rather have a broker negotiate on our behalf. Plus, they are FREE to use (see myth #6)

Myth 3: A Broker’s goal is to move the mortgage on each renewal.

Fact: A Mortgage Broker’s goal is to present multiple options to consumers so they can secure the optimal product for their specific and unique needs. This entails the broker looking at more than just the rate. A broker will look at:
• Prepayment options
• Costs of borrowing
• Portability
• Penalty to break
• Mortgage charges

And more. If the Broker determines that the current lender is the most ideal for their client at the time of renewal, then they will advise them to remain with that lender. The end goal of renewal is simple: provide clients the best ongoing, current advice at the time of origination and at the time of renewal

Myth 4: The broker receives a trailer fee if the client remains with the same lender at renewal.

Fact: This is on a case-to-case basis. At times, there is a small fee given to the broker if a client opts to renew with their current lender. This allows for accountability between the lender, broker, and customer in most cases. However, this is not always the case and the details of each renewal will vary.

Myth 5: If a Broker moves a mortgage to a new lender upon time of renewal then the full mortgage commission is received by the broker, allowing the broker to obtain “passive income” by constantly switching clients over.

Fact: Let’s clarify: If a client chooses to move their mortgage at renewal after a broker presents them with the best options, then it is in fact a new deal. By being a new deal, this means that the broker has all the work associated with any new file at that time. It is the equivalent of a brand-new mortgage and the broker will have to do the correct steps and work associated with it.

A second point of clarification-although the broker will earn income on this switch, the income (in most cases) is paid by the financial institution receiving the mortgage, NOT the client.

Myth 6: It costs a client more to renew with a mortgage broker.

Fact: Completely false. Clients SAVE MONEY when they work with a mortgage broker at . A broker has access to a variety of lenders and can offer discounts that the bank can’t. Additionally, most mortgage brokers offer continuous advice and information to their clients. Working with a broker is not a “one and done” deal as it is a broker’s goal to keep their clients informed, educated, and well-versed as to what is happening in the industry and how it will affect them. When you work with a broker instead of the bank, you not only get the best mortgage for you, but you also have access to a wealth of industry knowledge continuously.

Mortgage Brokers are a dedicated group of individuals who work directly for the client, not the lenders or the bank. Brokers are problem-solvers, advisors and honourable individuals. We work hard to give our clients the best that we can in an industry that constantly is evolving and changing.

We encourage you to reach out to your local Dominion Lending Centres mortgage professional if you have any misconceptions or questions about working with a broker-we are happy to answer them and help you with your mortgage, your renewal, and everything and anything in between.

post written by Geoff Lee, Dominion Lending Centres