Guest Post by Jason Dodd, Vice President, Verico Maximum Mortgages Inc.


Doing your research and talking to the right people can help you save thousands of dollars on your largest debt obligation, your mortgage. Surprisingly many clients are unaware of options, terms, rates and conditions that are attached to their mortgage financing. This summary will help with ideas on how to go about getting a mortgage and show you how to save money on your mortgage.


1) Consult multiple people/sources before deciding -

Many times it starts with your realtor making a recommendation for a broker or banker. The important part is to at least contact a couple people who deal in mortgage financing. Many people ask me why I would suggest this when I am trying to earn their business? Well I feel it is important for clients to experience the advice and expertise of more than one person before jumping into a large debt obligation. Mortgages are more than just rate, you need to understand the options, terms, rates and conditions which cumulate to give you a full mortgage package. Many clients are surprised at restrictions or high penalties that were not explained initially, that come back to cause high cost and aggravation in the back half of their mortgage term. Initially you should talk to and work with someone who can fully explain the process and the mortgage and is able to provide you with multiple options.
Knowledge is power and peace of mind when getting into a mortgage and home ownership. Many clients who are just comfortable with their bank are surprised to find out the large amount of good offerings that are available elsewhere in the market.


2) Utilize pre-payment options -

There is more to this than most people even consider and each client is very different. Many lenders offer varying degrees of pre-payment options and some are better suited to specific borrowers. This is a great discussion piece and you can literally save a lot of money by having the correct pre-payment options that align with your borrowing and home goals. This is why selection becomes important when deciding on a lender, if you just look at one option how will you know what is out there? By making small adjustments to monthly payments and choosing accelerated biweekly/weekly options you can dramatically reduce interest over the life of your loan. I find April is a great time to decide if you would like to make lump sum payments as spring is coming(home repairs) and also the tax man will either give or take away some money at that time. This might determine how much or little you can put towards your home.

 

Consider a mortgage of $400,000.  5 year fixed rate of 2.59% and monthly payments. 

Your Monthly payment would be $1809.84 and you would pay $47753.89 in interest over the term and $60836.51 principal pay down.

Utilizing some pre payment options that are manageable can make a significant difference under the same scenario.

Changing payments to Bi Weekly accelerated $904.92.  Applying a lump sum payment annually of $1200 (or increase payments $100 each month).

Interest is reduced to $46467.79 but you increase your principal pay down up to $77,171.82.  A significant difference with making minor changes to your overall monthly budget.

 

3) Choose the correct term-

I have lost count over my 14 years in the industry of times I have seen clients aligned with incorrect terms. Discussing life changes, job movement, home ownership goals starts to uncover the best options for financing. 5 year fixed terms are popular because of stability and security (good points) but some clients are  saddled with large penalties if they have to break early due to life changes or circumstance. Often this can be prevented by picking a shorter term or variable (closed or fixed) or open term that can accommodate more readily some uncertainty for future plans. This alone could save you thousands of dollars down the road if you anticipate some uncertainty of plans in the future. Good brokers will give you options on shorter terms as well as an option so you can consider them as well, certainly a worthy discussion.


Feel free to contact me if you have questions on various lenders and options and rates.
Happy to talk about this important subject
Regards, Jason Dodd, Vice President-Associate, Verico Maximum Mortgages Inc.
F: 403-451-1660, C: 403-815-0565, Jason@maxmort.ca, www.jasondodd.ca

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As we enter the spring market on the start of what seems to be a strong upswing in our market, we are once again seeing more multiple offers on property. Surprised aren't you?

 

It is about inventory, numbers and affordability.

 

Considering the mortgage rule changes that came into effect in the fall of 2016 and the pricing in our market, it isn't surprising in the starter and mid size home detached home segment especially.

Mortgage changes:
The mortgage rule changes reduced the buying power of anyone utilizing a mortgage with less than 20% of purchase price for a downpayment. Where previously folks utilized the bank rate for their mortgage for qualifying (example 2.79%), they now must qualify using a benchmark rate (4.64%) set by the Bank of Canada. This can reduce buying power up to 20% for some folks.

Detached homes:
With most detached homes in our market starting in the $400,000s and quickly moving up from there, there is a large segment of folks looking in the pricing zone. When you line up typical incomes, mortgage approval ratings based on those incomes and the price of typical detached homes in our city, it is no small surprise that more folks are being squished into a smaller pricing zone than previously.

More buyers + less inventory = Multiple Offers

How do you stand out when putting forth an offer in competition?

 

As a seller you are looking for security of the transaction. Let us say Mr and Mrs Seller have a home for sale in NW Calgary for $450,000. It is in great shape, in a great community and presents well. After going on market they receive 4 offers. They are all somewhat similar. How do Mr and Mrs Seller choose? Their home is going to be conditionally sold for over a week waiting out someone completing their financing and completing a home inspection. Is it a strong offer from a prepared buyer or a buyer on a whim that hasn't done their due diligence?

The first place to review is financing. What is the amount each potential buyer is borrowing? It would seem someone with 5% downpayment is in a stronger financial position than someone with a 20% downpayment and more likely to complete their qualifications but is that true? What if they ar all purchasing with a 5-10% downpayment? As a seller's realtor, my first question to each buyer's realtor is if the buyers are pre-qualified to purchase. As a buyer it is your choice what you disclose. Do you think having a prepared letter confirming your preapproval from your lender could help you? I'd recommend having that in your back pocket. It might just be what wins the purchase when sellers are looking at 4 similar offers. Peace of mind can be worth a lot.

You may be tempted to simply exclude some conditions from your offer to win. I would highly discourage you from doing that. You never know what a home inspection could uncover on that 'great deal' or if your bank would withdraw a mortgage approval due to a unique history on a property. Win smart and be prepared instead. Having a great Realtor that knows how to negotiate a win helps too. Give me a call anytime. I am happy to answer your questions.

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For many people the word 'condo' means an apartment. But as development styles have evolved, the term condo or condominium can refer to any kind of property including detached homes, attached homes such as duplexes and townhomes and the typical apartment in Calgary. A condominium is a term that refers to legal ownership, not property style. Condominium ownership combines individual ownership of a living unit with shared ownership of the common property and shared participation in the condominium corporation.

 

Over the years some common condo examples include a complex of semi-detached duplexes such as villas or townhomes. Each owner owns their unit but shares common property such as the back greenspace, clubhouse, street, snow and lawn maintenance and other services. Often exterior maintenance is also part of the responsibility of the condo corporation. This concept appeals to those that enjoy owning their own home with the benefits of a lock and leave lifestyle without worrying who will cut the grass.

 

Another example is a street or community development where a number of detached homes are developed under a bareland condo structure. Each owner owns their home (their unit) and land, but share common property such as the road, snow maintenance, amenities, security, etc. All of the units (detached homes) form a condo corporation with set rules, responsibilities and condo fees.

 

A condominium structure, whether apartment, townhouse, duplex or detached dwelling, appeals to many. It is important to understand that when you purchase a condo that you purchase a unit and also a portion of the responsibility of the condo corporation. The value of similar units between different condo corporations can differ substantially even if the units seem similar due to the management and financial stability of the condo corporation.

 

As part of purchasing a condo, there are additional due diligence steps a buyer should take including a review of the condo documents.

 

Additional Resources:

Buying and Owning a Condo - Service Alberta

 

Condominium Buyers Guide - CMHC 

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It is March 2 in Calgary on a sunny and chilly day. I'm reading in detail the monthly statistics package released by the Calgary Real Estate board as it shows in numbers what we have been feeling out in the market place over the last few weeks. The market felt like it was turning. There was optimism regarding our economy, stabilization of markets and folks were starting to ask a lot more questions. More sold stickers were going up. Inventory numbers are lower compared to last year with sales trending much higher.

 

Now that the numbers are out, they speak to that change. The graphs and charts show curved lines across many metrics. Sales to date across the city are up 21.5% year to date and we have a 14% reduction in inventory so far compared to last year. Now don't get me wrong. We didn't just jump back to before the downturn in terms of sales or pricing but we are now consistently trending upward in sales. Whether pricing soon follows will depend on the supply and demand balance of the spring market. Year over year benchmark pricing for detached homes in the northwest and west have already moved to the positive.

 

The one segment that has been strongly negatively adjusted in terms of pricing over the last two years has been apartments. With pricing down the market responded in February with a jump in sales. In Feb 2016 only 168 apartments sold. Now in Feb 2017 we saw 236 sales. So far year to date the sales of apartment units in Calgary is up 29% compared to last year (as of 1 pm March 2.). That metric for February alone was an increase in sales by just over 40%. That is significant.

 

If you are considering a sale or purchase now is the time you really need to get some good advice and a responsive Realtor that answers their phone, makes calls, follows up and makes things happen for you. There are some communities that are seeing spikes and others are not. Why? Many folks are seeing the writing on the wall and jumping on those homes in preferred neighbourhoods. Folks looking for lots are back seriously considering. First time home buyers are making calls and getting pre-approvals locked down.

 

If you have been waiting for the bottom to make some decisions now is the time to crunch some numbers. Call me. I'm happy to help.

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