Tips, Advice, and Explanations from a Vancouver Mortgage Broker  

Posts Tagged ‘first time home buyer’

What Makes a Broker Different Than The Bank – Vancouver Mortgage Broker

Thursday, March 22nd, 2012

Transcript of Video Blog:

Hi everyone. Rowan Smith from the Mortgage Centre. I want to talk today about what differentiates me, a broker, from just walking into your bank. If the only thing in the world you care about is rate then perhaps the bank is the best place for you to go. They may not have the best rate for you, though. I’m just saying that if that’s the only concern you can shop with them first.

However, there’s often many other things that we need to look at. We need to look at prepayment privileges. We need to look at can you get out of the mortgage if you need to? We need to look at how does that stack up against the competition in other financial institutions. We need to know if you’re going to live there for the next few years or if you need a line of credit as part of your package.

We need to know the sources of your income to know if you fit under specific programs that will get you additional discounts. We need to know a lot more information than just what is the best rate. There’s many questions that you can ask us as brokers and what is your very best rate while it is one of those questions it’s often not the most important.

I’m going to give you a case in point. Today I had a client come to me who had been chomping on a couple of different mortgage brokers and was getting pulled in a lot of different directions. When I looked at the situation I realized that many of the options that they were being offered didn’t even apply to them based on how they reported their income. I clarified the situation for them, had the deals packaged and arranged within a couple of hours, sent off to my lenders, and already received a response in the same day.

Now, I can’t promise a same day response every time. There’s just a number of factors that prevent that depending on individual deals. It is possible in a very clean situation. What I can do and the value I provide is not just a great rate, although I’m always going to try to get you the best rate, it’s also advice on the other elements of the mortgage and on your lifestyle. We, as mortgage brokers, are specialists on the debt side of the equation.

We’re looking out for your best interest in a fiduciary duty to try to get you the best terms, rate, and product to satisfy your needs. We’re not product salesmen. We don’t just sell the best rate like a canned product that we take off the shelf and hand to everybody. If everybody qualified for the best rate all the time they wouldn’t need us. There’s a lot of us out there for a reason and that’s because we can help provide an immense amount of value in selecting a good lender or getting a deal done in a timely fashion or under specific guidelines or times of day that your bankers can’t match.

If you or someone you know would like additional advice and would like an independent third party, which is what we are, to look at the situation please have them see me. It’s Rowan Smith from the Mortgage Centre.

Can I Roll My Other Debts Into My Mortgage?

Friday, February 18th, 2011

Transcript of Video Blog:

Hi everybody, it’s Rowan Smith with the Mortgage Centre. We’re going to do something a bit little different here this week. It’s where I’m going to answer one of the most common questions I receive, which is “Can I roll my other expenses into my mortgage?” So let’s look at exactly how that would go down. Read the rest of this entry »

A “Variable” Mortgage is NOT and “Open” Mortgage – There is a difference

Friday, February 18th, 2011

Transcript of Video Blog:

Hi, everybody. I want to address a very common myth, and that’s that people think their variable rate mortgage, because it is open to fluctuations, is in fact an open mortgage. That’s not the case. There’s a lot of confusion as to what is an open mortgage versus a variable mortgage versus a closed mortgage or a fixed mortgage. Read the rest of this entry »

First Time Home Buyer Rights and Advantages

Tuesday, February 15th, 2011

Transcript of Video Blog:

It’s Rowan Smith from the Mortgage Centre. I want to address a very common myth that I hear about, that clients will come to me and say, “Well, I’m a first-time home-buyer, so don’t I get a better rate on my mortgage?”
Read the rest of this entry »

5 Steps in Arranging Financing – A How To Guide

Wednesday, May 26th, 2010

In this video I cover the 5 major steps in arranging financing on your home. Enjoy!

Transcription of Video:

Hi, everybody. It’s Rowan Smith at the Mortgage Centre. I’m going to cover today the five simple steps that you’re going to go through when you’re purchasing a home. There are many, many steps, and each of these steps has a sub step. But I think it’s important just to explain what you should be doing first. Now before you go looking at homes, before you go taking a Realtor and having them spend time driving you around, first you need to be pre approved. That’s number one.

During that pre approval process, what I’m going to do is work to get you the best rate held I can. I’m also going to let you know what documentation and paperwork you’re going to require in order to actually get a final approval.

A pre approval is just that, it’s a pre approval. You can’t rely 100 percent that that mortgage will be there. All that it really is doing is holding your rate, and the bank is saying if your financing documents show what you tell us, then you’re approved and we’ve got the rate sitting here for you. Step one, pre approval.

Step two is find a good Realtor. Now if you’re looking around, and you don’t know a Realtor in your area, usually I can point you in the direction of someone if you’re in the Vancouver/Greater Vancouver area.

However, I caution you against what we call DNA Realtors, which is a Realtor you’re dealing with just because of a blood relation. You’re going to want to get somebody that knows the market. Number two, get a good Realtor.

Number three, you want to start looking at homes at this point. Now you can start touring around. If you’re looking at condos or you’re looking at properties that you would call as unique properties, you’re
going to want to bounce them off the person that gave you that pre approval.

Many banks don’t finance certain types of property. Some banks aren’t doing rentals right now. Other properties aren’t doing rental condominiums. It depends on who your bank is and who you’re dealing with. Your mortgage broker can help you in that matter.

Step four, write an offer. Once you’ve got that offer accepted, that’s when the real process begins. That’s where I have to sit down with you now and provide all that documentation.

Hopefully, you’ve given it to me. I’ll have asked for it up front so I can review it ahead of time. But I’ll ask you for all that paperwork which we submit to the lender.

During that time, they’re going to give you an approval. Once you’ve got that approval, then you can remove your subjects. Your subjects are the “if” clauses in your contract, that your offer is, say, $400,000 subject if you get financing.

So those are the steps; find a good mortgage broker, find a Realtor, start looking at homes, write an offer, and remove subjects. Those are the five big things where the stress, and the time crunch, and the pressure is going to be more extreme.

Now after that period of time, there’s usually a period of waiting until you close at the lawyer’s office, but that comes much, much later.

If you have any questions or you want to know more about the process for your unique situation, please give me a call. It’s Rowan Smith from the Mortgage Centre.

Stephen Harper Proposed First Time Home Buyer Tax Credit

Friday, October 17th, 2008

On September 16th, Stephen Harper made an election announcement of a tax credit of up to $5,000 for First time home buyers which will provide tax savings of up to $750. The announcement was welcomed warmly by the Canadiam Home Buyers Association (CHBA).

CHBA President, John Hrynkow said, “This is a practical measure that will help many first-time buyers as they struggle to realize their dream of owning a home.”

This annoucement provides a subtle clue to the stance of the Conservatives as to the importance of home ownership to Canadians as well as the impact that the New Housing industry has on the national economy and overall well being. The New Housing market has been one of the key reasons, speculate economists, that Canada has fared well in the slowing economy as the New Housing industry has remained strong.

Mr. Harper indicated that if elected (and as of the writing of this article he has been re-elected) the Conservative government will phase in a tax credit over four years for up to $5,000 of the closing costs on the purchase of a new home. According to Mr. Harper, this will result in tax savings of $750 for first-time home buyers.

My opinion on this announcement is, “In this market? (Vancouver) Who cares?”

This $750, or even $5,000 is a drop in the bucket in terms of home ownership in Vancouver. Also, the only mention in the announcement is that this will be a tax savings of UP TO $750 for those first time home buyers who buy a “New Home,” not just “their first home.” So, it seems to imply that if a first time homebuyer is buying their first home, and it is NOT a brand new home, then they may not receive the tax credit. While I am not sure about precise percentages, I suspect that the RE-sale market is far, far larger than the new home market, and furthermore, that most of the people buying brand new homes are NOT first-time home buyers (unless buying a condo – to which it is unclear if this tax credit will apply).

In a market where a 1 bedroom condo is selling for upwards of $400,000 a $750 sounds like it will hardly make a dent. I know the government’s heart is in the right place, and across the country I am sure it adds up, in the aggregate, to a substantial tax savings for everyone. But on an indvidual basis, it doesn’t look all that great. Also, what elements of closing costs constitute a deductibe expense is another thing that isn’t clear.

Regardless, I don’t think it will have much economic impact, although I am pleased to see the government recognizing the importance of home ownership to Canadians.

First Time Homebuyer Benefits. What are they?

Friday, September 19th, 2008

I frequently have people come to me for a mortgage, and after I get them approved, get them a rate, and get it all lined up, they drop this line on me, “we are first time home buyers. Do we get a better rate or something like that?”

The answer: no.

There ARE benefits to being a first time homebuyer, but mortgage rate is not one of them. First time homebuyers pay the same rate (sometimes higher if they don’t have an established banking relationship with their bank) than people with established credit repayment histories.

The second question is: “do we have to pay the full CMHC fees as first time buyers?”

The answer: yes.

The only way to get a reduced CMHC premium is by purchasing an energy efficient home with an R rating of 77 or higher, or by already paying CMHC premiums in the past and needing to buy again.  Being a first time homebuyer doesn’t help you with the banks.

So where does it help you?

In most cases, it doesn’t. However, there are two elements of being a first-time buyer that are helpful:

1. You can withdraw up to $20,000, tax free, from your RRSP to assist in purchasing a home. This money can be used for a down payment, furniture, moving costs, or none of the above. It is up to you. This is only available to first time homebuyers (or those that have not owned property for 7 years or more). There are some repayment terms that you will need to be aware of. You will have to repay the $20,000 (or whatever you took out) over the next 15 years in 1/15th instalments. Failure to make an instalment simply means that the 1/15th for that year gets added to income and taxed. Alternatively, if you just continue making RRSP contributions, you can allocate whatever portion you like as a Home Buyer plan Repayment.

2. Property Transfer Tax. As a first time homebuyer, you can avoid the Property Transfer Tax (PTT) one time in your life. This can be a substantial savings, and should not be overlooked. If you are purchasing a property up to $425,000 (up to $450,000 with a pro-rated tax payment) you can avoid the tax altogether. The tax is calculated as 1% of the frist $200,000 of purchase price and 2% of the balance. So, on a $400,000 purchase, the tax would be (200,000 x 0.01) + (200,000 x 0.02) = $6,000!!! This is a huge savings a first time homebuyer, and is what people are referring to as first time home buyer discounts or advantages.

People often lose their ability to avoid this tax when their parents put the family home in their name as a child. The parents often are just trying to avoid the tax themselves, and fail to realize that this will have a huge impact on their children in the future. If you have owned a principle residence (technically anywhere in the world although it is tough for the government to police) then you are disqualified from this first-time home buyer savings.

Other than that, being a first time home buyer is the same as being a fifth-time home buyer or tenth-time home buyer. The process is costly, and there is little that can be done to get around this reality.

Mortgage Insurance vs Life Insurance

Saturday, April 26th, 2008

Many clients have asked about mortgage insurance, and several of them have asked for it by name. I highly recommend you NOT take your bank’s (or broker’s) offer of “Mortgage Insurance” whether it is life or disability, and instead speak to an independent insurance broker.

Many times, Mortgage Insurance underwriting is done AFTER there is a claim. In other words, clients will sign the insurance application, and, hearing nothing from the insurer, will assume they are covered. The insurance company will often only “underwrite” (assess whether or not you should get insurance) AFTER the client makes a claim. It will be when the claim is made that they will go over the original questionnaire, scrutinize the application, and then make a decision whether or not the client was insurable. This will potentially happen long after the client got the insurance and has been paying premiums! Life or disability insurance through an independent insurance broker is underwritten UP FRONT. This way, the client knows if they will be paid out in the event of the claim and will prevent any unwanted surprises in the future when it is too late.

The three videos below are all part 1, 2, and 3 of a mortgage insurance expose done by CBC Marketplace. They do a good job of showing some of the potential pitfalls of “mortgage insurance” and explain why it is not a great idea. Instead, they explain the stories of several Canadians who opted for Mortgage Insurance instead of independent life insurance.

Before you make a decision either way, check out the videos below!




Feel free to contact me with any questions and/or concerns about the foregoing video.

While I did not produce it, the video does demonstrate POTENTIAL problems that applicants may have with a Mortgage Insurance application.

Go independent! See a broker!