Spencer Murray

Does the home you are purchasing require upgrades or renovations? Will a new roof, central air, a new furnace, upgrades to the electrical or plumbing system, new doors, windows, a new kitchen or bathroom, or any other renovation increase the value of the home?

With a Purchase Plus Improvements mortgage product you can add the cost of these renovations to your mortgage at the time of purchase.

This is how it works.

At the time that you’re submitting your mortgage application for approval, you provide a written quote from a licensed contractor detailing the improvements with estimated costs. Your application is submitted and approved for a mortgage in the amount of the purchase price plus the improvements. The lender will instruct your solicitor to hold back the cost of the renovation work. Once the work has been completed, the increase in the value of the home will be confirmed by an appraiser. It is then that the lender will instruct the solicitor to release the held back funds to you to pay your contractor.

You have found a home to purchase for $150,000, you have a 5% down payment, and would like to add $25,000 worth of improvements.

• Purchase Price of Home = $150,000.
• Contractual Estimate of Improvements = $25,000.
• $150,000 + $25,000 = $175,000.
• Lender and Insurer Must Approve Home Value of $175,000.
• Minus 5% Down Payment of $8,750.
• Total Mortgage Amount = $166,250.

Your Lawyer will register your mortgage for the amount of $166,250 but be instructed to hold back $25,000. Once your Contractor completes the improvements within 90 days, an Appraiser will confirm the completion and your lawyer will be instructed to release the $25,000 held back so you are able to pay your contractor.

Everyone is a winner! The purchaser is happy because they got $25,000 of improvements done to the home, with payments spread out over the amortization of the mortgage. The lender is happy because they now have a mortgage on an improved home!

Title insurance is an insurance policy that protects you, the home owner, against challenges to the ownership of your home OR from problems related to the title to your home. The policy provides coverage against losses due to title defects, even if the defects existed before you purchased your home. A title defect is a problem with the title which prevents free and clear ownership.

There are many types of defects such as encroachments (from neighbouring properties), unpaid liens, etc. Title insurance policies protect you for as long as you own the property. It protects against a number of risks that a solicitor’s opinion on title may not cover.

These risks include:

• Title fraud and forgery, which results in someone claiming to own an interest in the title to your land.
• Encroachments that would be disclosed by a new survey (for example, a neighbour’s deck partly on your land).
• Easements – the right acquired for access to or over another person’s property for a specific purpose, such as for a driveway or public utilities and upon purchase you may be unaware of these easements.
• Zoning non-compliance (i.e. where the property use does not meet the local municipal by-laws) OR when someone else is claiming to have an interest in your land (i.e. a previous owner of the property not being discharged from title).

Title insurance is generally purchased when you buy your home or when you refinance it, although it can be purchased any time after you buy your home. You will only make one premium payment when you first buy the insurance. Your lawyer can explain the coverage further and can order the policy on your behalf.

Finding the right mortgage isn’t easy. Let me do the work for you!

• You get the advantage of having access to many lenders and their products.
• You’re making one of the biggest purchases of your life. We’ll educate you about the options and products available to you – We give you all the proper information for you to make an informed decision.
• Every individual’s personal financial situation is unique. We take the time to find the right options to fit your individual needs.
• A second opinion may save you thousands of dollars. We save you time and money!
• Applications are approved within 24-48 hours.
• Best yet, it’s all done at no cost to you.

If you are interested in increasing your regular monthly cash flows, paying down your mortgage quicker and providing yourself with capital growth, owning a rental property may be for you.

Along with these benefits you also have the ability to pay less taxes by deducting your rental expenses from your income, keeping more money in your pockets. These expenses include rental utility bills (if included in the rent); maintenance fees and upgrade expenses; property management fees; insurance premiums; and best of all – your mortgage interest and property taxes!

“Don’t wait to buy real estate, buy real estate and wait” – T. Harv Eker

There are different types of rental properties I have products for including condos, townhouses, single family homes, duplexes, triplexes and four-plexes. I’ll find the right product for you! After all, I’d like my mortgage to be paid for, wouldn’t you?

Why wait? Apply Here.

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Your credit can sometimes be the one variable holding you back from obtaining the financing needed to obtain a mortgage. I have listed some TIPS on how to not only improve your credit, but keep it in good standing while you are waiting to purchase a home.

• Payment History – This accounts for about 35% of your credit score. Carrying balances from month-to-month and missing payments are two factors. Other factors include the number of missed payments – 1 missed payment in 8 -10 months is not bad, and how long the payment was outstanding matters. TIP: Pay the minimum by the due date.
• How Much is Owed – This looks at the total outstanding balance in relationship to the total of all credit limits and accounts for 30% of the credit score. TIP: Pay down your debt to at least 30% of the global loan limits.
• Account History – The length of time your credit account(s) have been active accounts for 15% of the score. The older the credit, the higher the value TIP: It is best to cancel newer credit accounts before older ones.
• Recent Inquiries – This accounts for 10% of your score. Too many inquiries can send a message that a client may need money, which has a negative impact on your credit score. A client ordering his or her own credit report has no impact.
• Type of Credit – This accounts for 10% of your credit score. Credit is either revolving (credit cards) or instalment (car loans). Higher credit scores are given to people with a blend of credit from various sources.

I’ve had a few people ask me over the past couple weeks about collateral mortgages. I figured I’d publish some information on the differences between a conventional mortgage (mortgage charge) and collateral mortgage (collateral charge). Which is registered against your property?

Conventional Mortgage

A conventional mortgage is what you think it may be – just your regular mortgage. It consists of you knowing your payments, interest rate, amortization period and the day your mortgage could be paid in full. An example would be a property with a purchase price of $270,000. A 20% down payment would result in a conventional mortgage of $216,000 with a 5 year term, an interest rate of 2.54% and an amortization period of 25 years. Your monthly mortgage payment would roughly be $971.92 plus property taxes.

After the 5 year term has passed, the balance of your mortgage has declined (assuming you haven’t refinanced to take out some equity) and your mortgage would be up for renewal – subject to the then current interest rates being offered by lenders. Your monthly payment would then possibly change as well. At this time, other lenders will allow you to ‘transfer’ or ‘switch’ your mortgage at no cost to you. You also have the ability to have another lender approve a second mortgage for a second property or a Home Equity Line of Credit behind your first mortgage.

Collateral Mortgage

With a collateral mortgage, the lender will issue what is basically a promissory note or loan agreement secured by the collateral security of a mortgage against your home. This type of mortgage allows for the lender to register your mortgage for up to 125% of the value of your home. For example, the purchase price (and value) of $270,000 and a 20% down payment would result in a mortgage registered in the amount of $337,500, yet you would only receive $216,000. It does allow you to borrow more money from the same lender, upon approval, without having to register another mortgage or incur lawyers fees to refinance your mortgage.

The issues presented here are as such.

1. After your 5 year mortgage term has passed you would not be able to easily switch your mortgage to a new lender to take advantage of the best interest rates at that time – you are essentially ‘stuck’ with that lender because of the collateral charge on your property. With a collateral mortgage, you forego your ability to shop for and obtain the most competitive rates other than what your lender is offering you.

2. If you are wanting to refinance your mortgage to consolidate debts, or renovate your home and your lender declines – you would not have the ability to approach another lender for the funds. On paper, it also looks as if you have more debt registered to your name than what you actually owe (from the paragraph earlier, your mortgage can be registered at 125% of the value of your home).

3. Lenders may also use their ‘right of offset’ within the Canadian Law to utilize the equity in your home on your collateral charge mortgage to pay out any other outstanding debts (Lines of Credit, Credit Cards etc.) you have with them.

Unfortunately the aspects of a collateral mortgage are not necessarily discussed or disclosed in detail upon signing your mortgage agreement from your lending institution. In recent years, banks have now made it evident that their clients are signing a collateral charge mortgage.

As a mortgage agent, I am advising you to ask a lot of questions with regards to your mortgage and have your lawyer review all paperwork before signing a mortgage commitment.