Transcript of Video Blog:

Hi everybody, it’s Rowan Smith with The Mortgage Centre. I’m going to do a little top five list. These are top five things not to do once you’ve written an offer.

OK, so number one. Do not write an offer and leave on vacation. Now there’s a couple of catches to this, OK?

You can do it. But during the subject removal period I’m going to need you here. Your Realtor is going to need you here to sign things, review documents.

So don’t write an offer and expect to be able to leave town during the subject removal period. Especially do not be gone during the closing period.

Because you have to be here to sign in front of a lawyer, especially if you’re buying property in British Columbia. So you’ve got to be here.

Now if you’ve got two months from the time you write an offer to the time your completion is, feel free to be out of town for part of that time.

I mean everyone’s got work and business obligations. And they may want to take a vacation. That’s fine. But just keep those vacations coordinated with the home buying process. It’s a big item. So vacations are a very important thing.

Number four. Do not transfer your dollars around for your down payments. People will often be in an effort to be helpful to me, they will transfer dollars from their ING account into their CIBC checking. From that TD savings into their CIBC checking. From their RSP into their checking.

The problem is, then I get a copy of that checking account statement, and it looks like you got a whole bunch of money just flew into the account.

So what I end up having to do is document every large deposit on there. That means I have to get the ING, the TD account, the RSP account, and the CIBC checking account. I’ve got to get it all to track where every dollar is. It’s a lot easier to just leave the funds where they are.

And once we’ve got the down payment accepted by the lender, then you can move them around.

Number three is, do not buy lots of new things, especially on credit. And I’m referring to people that will gloat and they’ll get excited about buying their home. And so they’ll go to The Brick and they’ll buy a whole bunch of furniture on a “do not pay plan.”

And then they’ll go to Best Buy and they’ll buy appliances and all this type of thing. Do not do that.

Wait until you’re in the home. If you incur additional debt before the closing date and the bank finds out about it, they can pull that approval. Because you may not qualify even though you can afford, you may not qualify for that new debt in addition to the debts you already had.

Now this is even if those debts are going to be paid out prior to the completion with the sale of an old home. Just check with me first. Be very careful about buying new items.

Number two. And this is the most common one that I see of buying new items, is do not buy a new vehicle. Those vehicles, especially vehicle leases, have massive payments, or can have massive payments. And it can throw the debt servicing and your ability to qualify for the mortgage. Again, completely out of line.

So before you go do that, get your mortgage completely finalized. Have the approval ready. Have it instructed to the lawyer’s office, and then you can start shopping for a new vehicle. I still don’t recommend buying it until after you’ve purchased the new place, just to avoid any challenges.

And lastly, the number one that I consistently get that blows me away is, do not quit your job. From the time you write that offer until the time you move in you have to be prepared to stay in your line of work.

Now things happen. Sometime companies sell off divisions. You get transferred. Other times you may just get fired. That’s life.

But the reality is that you also will have a lot of choice in these cases many times. And there’s no need to quit your job right during that period of time.

So from the time you write that offer to the time you complete, stay on your job. Stay the course. What you do after you’re in the property is up to you. And life takes many changes and it’s unpredictable.

So there is no way that anybody can fault you if you lose your job two months down the road. Or you quit and transfer into a new role to get a pay increase or whatnot.

So there it is. The top five things not to do when you’re buying a home.

For The Mortgage Centre, I’m Rowan Smith.

Transcript of Video Blog:

Hey everybody, it’s Rowan Smith of the Mortgage Center. I’m here today to talk about appraisals. There seems to be a lot of confusion as to when appraisals are ordered, when they’re not ordered.

This blog today is going to detail in what circumstances it’s going to be needed. It’s a little counter intuitive. You see there’s typically an appraisal or some assessment of value 100 percent of the time. Does that mean that they go through the property and take pictures every single time? No.

So, I’m going to divide this into three categories, less than 20 percent down, 50 to 20 percent down and greater than 50 percent down. Those are the three main categories. You can argue with me a little bit on this, but that’s the three general guidelines.

Now, less than 20 percent down, the bank’s going to want to make sure they know the value of the property, but do they require an appraisal? The typical answer is not usual. The reason being is less than 20 percent down are insured by either CMHC, Genworth and Canada guarantee. It’s mortgage insurance. That’s that big insurance premium you hear about.

Now, in those circumstances those lenders typically, though not always, have a internal modeling software that looks at sales in the area and the last prices, listings, et cetera. And as long as you’re within a range of normalcy, not wildly above or below, they’re going to accept that value.

Now, there’s times when even when you’ve got the mortgage insurance, they still ask for appraisals. And that’s sometimes when there’s a rental component to the property or it’s particularly unique or a high-end home or for whatever reason that they don’t support the lending value of the home. So, that’s if there is less than 20 percent down, they typically don’t need appraisals. But, again, an assessment of value is always being done.

Now, from 50 to 20 percent down, you will almost need an appraisal 100 percent of the time. Now, some banks, a social bank, has an internal property assessment tool that they use, and they will do similar to those systems through the mortgage insurers.

They’ll do like an electronic appraisal, but they have some guidelines there. The property can’t be more than a certain value and all those eligible for homes beyond a certain age, size or whatnot. Usually, those electronic systems are only allowed in a major urban setting, whatnot.

So, most times 50 to 20 percent down payment, you’re going to require an appraisal. It costs about $250 to $300, depending on where the property is located. This is assuming it’s a general, normal transaction.

The appraiser will go to the property, takes some photos and walk through it and then prepare a report of anywhere from 40 to 70 pages, depending on the complexity and depending on the lending requirements. It outlines everything about the property and makes an assessment of value, based on other comparable sales.

Now, you may think to yourself. OK, well, if I’m putting 20 percent down or more, why do they want an appraisal. When I put less than 20 percent down, they don’t want an appraisal. And the answer is that when you’re putting 20 percent or more that bank is absorbing the full risk of that mortgage.

If you default on it or the property values fall and you walk away, they eat the loss versus the mortgage insurers are the ones that take the loss in the event that you’re putting less than 20 percent down. So, the bank leaves it up to them because they ultimately will be the one at risk to make an assessment of value.

So, less than 20 percent down, probably not an appraisal but you may have to, depending on the property. 50 to 20 percent down in that range, you’re going to need an appraisal of some kind, whether it’s an electronic one or whether it’s a walk-through.

Typically, it’s a walk-through. 50 percent or more down, we can often use tax assessed values because it is such a low amount of financing. It’s a very low risk to the lending institutions.

Some banks unequivocally demand appraisals 100 percent of the time. Other ones will use a property assessment tool if you have that much down the desktop or drive-by appraisals which are less costly and quicker to get. But it will still provide with some comfort.

Those are the situations where an appraisal will be required. If you’re being asked for one and you don’t understand why, just give me a call. I’ll give you an explanation for it.

I’m Rowan Smith from the Mortgage Center.

Transcript of Video Blog:

Hey, everyone. Rowan Smith with The Mortgage Centre, here today to talk about maternity leave and mortgages, because this is a big thing that comes up. People oftentimes end up going on maternity leave and then realizing the house is too small. They go to qualify for their mortgage and the bank tells them, “Sorry, you can’t qualify. You can’t afford it.” And they go, “But I’ve got a job I’m going back to, where I’m going to make $100,000 a year.” And they say, “Well, you might go back.”

Statistically, a very large percentage of women that take maternity leave don’t go back. So the bank has to hedge its bets. It has to look at, “Can you afford this now, with your reduced income? Can you afford it if you don’t have that income?” Most times, people come to me with maternity-leave questions, and there’s six months or three months left, and they’ve realized, “I’ve got to get into a bigger place. I’ve had my second or third child,” or whatever the case is. And, “I need more space.” The husband’s income maybe doesn’t qualify a loan, so the wife comes and starts the application process. Very common problem. They’re told no at most institutions.

Now, I have lenders that will treat maternity leave a little more favorably. If you’re going back to a decent job, and you’ve got a letter from your employer confirming that the position awaits you and the salary awaits you, we can generally use it. We can typically get around it if you’re otherwise strong clients with clean credit and if the income otherwise makes sense. If you’ve just gone on mat leave, and you’ve got a full year ahead of you, it’s a little harder, because that’s an extended period of time where you’re going to be forced to make payments that you would qualify with on your normal income on the EI or the government-subsidized maternity-leave portion.

Now, some companies are very good. Some companies actually offer women a top-up. So if you’re only going to get 60 percent of your income throughout the year when you’re on maternity leave… The companies, these are good employers, will pay a top-up to bring you back up to 100 percent of what you’d be earning. In those circumstances, we can definitely use it. But again, certain banks have just hard-and-fast policies where, “If you’re on mat leave, we can’t help you, ” and it doesn’t go much further than that in the discussion.

Well, I can help you. If you’re on maternity leave and you’re looking to find out if you can get a mortgage, yes, please give me a call. It’s Rowan Smith from The Mortgage Centre.

Transcript of Video:

Hi everybody. It’s Rowan Smith with The Mortgage Centre. I heard something today that made me angry enough I had to come and do a blog post on it, and it has to do with lender fees.

Many times when we’re doing a mortgage for residential purchase or refinance or something like that, there are no fees. Most times, I would say most transactions there are never broker fees.

The only time that broker fees apply tends to be when either there’s an extraordinary amount of work that has to go into it-far and above what would be normally asked. I’ve never levied that in my career. Alternatively, it can be when you’re doing some private lending. The reason is private lenders do not pay the brokers.

Now, what’s making me upset was that we’ve sort of gone back to the old days of cowboy financing. What I typically will see in a private mortgage if someone doesn’t qualify under bank guidelines but they’d still like to raise some financing, they’d get a first mortgage. Maybe they have a big down payment. It’s called 25 percent.

They go to a lender. They get a rate of… I’m just grabbing numbers here. Nine percent, let’s say, and they were going to pay a three percent fee. Well, that fee typically will be divided up between the lender and the broker. So the broker would be getting some of the three percent, and the lender will be getting the balance.

Now, what’s sort of happening is we’ve started to see a trend where brokers are calling the lenders and saying, “Listen, will you charge the client a slightly higher rate and take one percent fee, and I’ll take four?”

Now, on a small mortgage where it’s maybe $50,000, it’s not a tremendous amount of money. But a lot of times these large first mortgages are being done on properties that someone’s going to buy and flip. Maybe they don’t qualify under normal guidelines. But they have good income. Or maybe they’ve got money offshore or what not.

Four percent on some of these mortgages is outrageous. And brokers who are charging these fees shouldn’t be allowed to get away with it. I don’t know how they get their clients. I certainly don’t know how they keep their clients. But I know that I’m out there looking to eat their lunch.

If you know anybody that’s being told they have to pay a five percent fee on their mortgage, and as long as the mortgage is excess of what, $100,000. That becomes a very large chunk of change, a very big piece of money that someone’s making on one transaction. Those transactions are no more difficult than a straightforward bank transaction that they’re doing. In fact, they’re oftentimes less difficult because the broker doesn’t have to document the file the way they would with a bank.

Anybody paying those types of fees please call me. It’s Rowan Smith from The Mortgage Centre.

I have taken a LOT of calls on private lending recently, and I figured it was time to do a new post on the topic and explain when it does and does not apply.

Transcript of Video Blog:

Hey everybody, Rowan Smith from the Mortgage Center.

I want to talk to you about private lending. There’s a lot of confusion as to where it is. People will often say to me, “I tried to get five percent down with my bank, but I couldn’t document my income . So I was wondering if you have any private lenders.” And the answer is, with five percent down, “No.”

Private lending is restricted, generally, on the strength of the property and the size of your down payment. Now, sure, credit and income play a role; they want to make sure you know how to pay your bills and they want to make sure you have income. But they may not seek to verify it in exactly the same fashion that the banks will.

Many times, they won’t look at it at all. They’ll assume that if you’re stoking down 30 percent or 40 percent of the property’s value and if you have payments of $1,500 a month, that you would be a fool to do so if you didn’t have a means of making those payments, that’s equity lending.

And equity lending is really based on the quality of security, it’s proximity to major arterial routes, to urban centers, to schools, et cetera, et cetera, et cetera, predominately focused on resale value. So, if you’re buying a unique property up in the Coot Knees, and you’re trying to get 95 percent financing. If the banks won’t do it, FC and HC won’t do it, you’re not going to get it from a private lender outside of the bank of mom and dad.

Now, in cases where private lending is required, someone with poor credit, maybe their credit is below what the bank’s threshold is. And, maybe they have a large down payment. A classic example of this is someone who’s gone through a bankruptcy, who owns a business and maybe still makes very good money but, due to one reason or another, was forced to declare bankruptcy and they’ve got 30 percent down. And they’re trying to buy a place and they’re being told everywhere, “No way, we can’t due to credit.”

That’s a perfect candidate for private lending and usually they can get some reasonable rates in those circumstances assuming the property is, again, solid and secure because that’s kind of the backbone of private lending.

Another thing, is if the property doesn’t conform to standard uses. For example, a former grow op or former meth lab, or land-only on service lots, and that kind of thing. These are places where banks don’t really like to lend, at least not at the four percent range or five percent range, but that’s still good business and those properties still have value. So, if you’re a borrower looking to get some sort of land loan or a former grow op financing so you can fix it and sell it for a large profit, those are definitely the ones that we can help you.

Lastly, people that just can’t document their income. Maybe they’ve got fantastic credit. They run a small business and they make good money each year, but due to write-offs and tax-efficient accounting, they’re not able to prove their income. And if the banks don’t believe how much income they’re earning, but they have a sizable down payment, again, we might have to go to private lenders. Not always. We often have equity programs at banks and whatnot, if they have enough of a down payment.

But sometimes, there’s that gap between what the banks will do on an equity basis and between what they will do on a stated income or full income basis. And, in that gap, is where private lenders tend to make their money.

Lastly, weird situations. So, banks will often demand independent legal advice for a spouse buying a home without the other spouse on title or maybe you’re trying to do an equity takeout for investment purposes in another property. The numbers don’t quite jive because the banks don’t give you credit for your rental income the way that they used to. These are all perfect examples of places where private lending is required.

A common one is also construction or buy, fix and flip. These are places where you can use a private lender who’s not going to ask you a billion and one questions like the banks are going to ask you. I can make the process a lot easier.

Now, in exchange for all of this freedom, in exchange for all these abilities, you’re going to pay a higher rate. So, if the banks are charging four percent, you’re probably on a first mortgage looking anywhere from 6-1/2 to 12, depending on the risk that you pose as a borrower and that the property poses as security to the lender.

Now, there’s also second mortgages, third and so on and so forth, maybe you don’t want to break your first mortgage because you’ve got a fantastic rate on it, but you need 20 grand to consolidate some credit card debt and get the creditors off your back. These are all ideal things for private lending.

If you have a situation that doesn’t fit the bank, but you’ve got some equity and, generally, you need about 20 percent equity in the property, or 20 percent down for private lending to be considered effective, then please give me a call.

For the Mortgage Center, I’m Rowan Smith.

Transcript of the video:

Hi everybody, it’s Rowan Smith with The Mortgage Centre. It’s been a little while since I did a post, and I’m busy cleaning up a lot of problems. I figured that this would be a great to do a blog specifically targeted toward realtors for things to do during the offer process regarding contracts that will make life infinitely easier for me if I’m trying to do financing for you, or for any of the banks that are trying to do financing with you.

So, the first thing has to do with contracts and signatures. There’s a number of financial institutions that insist that the contract signatures be witnessed. Now, I know that the real estate board doesn’t require that every single contract signature be witnessed. They’ll allow it to be unwitnessed, but the banks want it witnessed in many, many cases. The CIBC is particularly strict on this matter, so you must have all witnessed lines filled out and signed.

The next thing is the property condition disclosure statement. Oftentimes, if the person has never seen the property, the seller has never seen the property, maybe because it’s been an investment property. Or they bought a rental five years ago, and they haven’t been inside of it, and they can’t answer a lot of the questions. We still need something to show that there has, in fact, been… A property condition disclosure statement has, in fact, been issued.

If I go to them and say, “Oh, no. There isn’t one,” but there has to be, oftentimes the contract will specifically make mention of the fact that a PCDS makes up a component of this contract, so you have to provide it. If there is no way they can answer those questions, have them just throw a line through it. Put, “Never lived in,” and sign it. That’s better than me not having anything, because I go to the bank, and the bank says, “What are we hiding? Is it a grow-op?” And they just don’t want to put that down, a past grow-op, a meth lab, or anything of that nature.”

So, property condition disclosure statements, even if they’re going to be blank, you still need them.

Subject to removal deadlines. Try to line them up, not on a Saturday or Sunday. I get this constantly, where we get a contract. The subject to removal date is set to a Saturday, which is no better than the Friday. So, getting the extra day on the weekend doesn’t really help us for financing anyway. It doesn’t really help us, because the banks aren’t going to be open to work with us.

If you’re going to go for Saturday, you might as well go for Monday, and on that note, be cognizant of when holidays are. We’ve been having a lot of contracts come in lately, especially during the May long weekend with the subject to removal date on the actually holiday, which, again, I can’t have a bank look at anything, so it might as well have been the Friday before, which doesn’t help anybody.

Be particularly cognizant during the negotiation time, and during the excitement, and the back and forth on the prices. You have the subject to removal deadline, and we set it for, say, June 14th. And as the dates progress, and the negotiation takes a few days, no one ever bumps that out. And then once we’ve finally got it accepted, we have one day or two business days to get an approval done, which might be possible, but it might not, depending on which bank the client has to go with.

So, just make sure that as the negotiation proceeds, and as it get further and further along in the contract negotiation process, that the subject to removal dates are being bumped up correspondingly, so we still have a number of good days in there.

Lastly, when it comes to strata documents, if you have a listing and you’ve… Typically, the protocol in this market, being such as it is, realtors usually don’t order the strata form B, and all the strata documentation when they take the listing. In a perfect world, that would be the case, but I understand there’s some cost to do that, so it’s not always in your best interest, especially if you feel that the owner has listed it too high, and would not list lower, and you don’t think it’s actually going to go through.

That said, if it’s a competitively priced property, either A: Order the form B and all of the strata documentation up front, or you have to be willing to pay for it on a rush basis. I had three deals in that last month were my buyers were buying a property. The listing agent did not order up the strata documents, and then, of course, it was part of our contract. Once that buyer requested them, it then took seven days, because the realtor didn’t want to pay the extra $100 or $50, or whatever it is for a rush.

Now had they ordered them initially, there wouldn’t have been that fee. Of course, that’s a separate issue. But had they ordered them on a rush basis, we would have had them in 24 to 28 hours, and there would have been no problem.

Instead, we had to extend, extend, extend and it really annoyed the sellers and the buyers involved, and it could have easily been taken care of by just getting those documents on a rush basis.

So, those are the thing that I consistently see, I think, that realtors can do a lot better of. The realtors that I work with on a regular basis all are very good at this. But as I meet new people who are agents coming into the field, this is something that will come back and make your life a lot easier, if you can follow these tenets.

For The Mortgage Centre, I’m Rowan Smith.

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.

Have you ever wondered if you can get a line of credit secured with your home? Maybe you wondered if you can get a line of credit along with your mortgage?

There are several specific criteria that need to be met in order for you to get a line of credit. The most important criteria is EQUITY.

Watch this video blog for more info and and a more in depth explanation.

Transcription of Video Blog:

Hey everybody, Rowan Smith with The Mortgage Centre. I want to talk today about lines of credit. More specifically, mortgage lines of credit. A lot of times people will come to me and they’ll want to get a line of credit, along with their financing for their purchase, for renovations and whatnot.

Now, generally, if it’s going to be a mortgage, you’re going to have to have 20% down payment or 20% equity in the property before you can start getting a line of credit. Because CMHC, who governs less than 20 percent down purchases, doesn’t not allow an interest only product at this time; they do, but no lenders really support it.

So you’ve got to have 20 percent down if you want to start getting the ability to have a line of credit. Now what I mean by that is if you have 20% down and you pay it down so that you now have 30% equity in the property, you could borrow that 30% to 20%, that 10%, you could get that in the form of a line of credit assuming that your income and credit qualify for it.

So, if you’ve just bought something with five percent down and want renovation funds, a line credit with the mortgage is not part of the option. What you can do is get an unsecured line of credit through your financial institution you bank with. They can supply that to you, you can use that. Now you will not get mortgage rates on that line of credit, but it’s really the only option.

Alternatively, there’s a Purchase Plus Improvements Program if you want money for renovations. I’ve covered it in detail in the prior blogs, please do a search and you can watch it. It’s a good three or four minutes and it explains how the Purchase Plus Improvements Program works, or Refinance Plus Improvements.

If you’re applying for a line of credit increase – maybe you already own your property, you’ve got a substantial equity position at home and you simply want to increase that line of credit, come and talk to me. There’s many institutions which we can stick a line of credit behind any other mortgage.

So if you’ve a RB Royal Bank first mortgage, we can stick a line of credit behind that and get you mortgage rates on that line of credit. You don’t have to go to your bank if that’s the case. It’s only the unsecured lines of credit which you need to speak with your bank about.

If you’d like any clarification on this or need a line of credit, please give me a call. It’s Rowan Smith from The Mortgage Centre.

In this post I look at CMHC fees:

What are they?
How are they calculated?
If you paid them once, do you pay them again?
Is there a way to avoid them or pay a reduced amount on your next home purchase?

Enjoy!

Video Transcription:

Hi, everyone. Rowan Smith at the Mortgage Centre. I want to talk today about CMHC fees. Specifically, when they apply, what they are, and if there are ways to avoid them on the next purchase.

First off, what is it? CMHC: Canada Mortgage Housing Corporation. It’s a government organization that’s set up, and it governs the lending to Canadians for mortgages in excess of 80 percent financing.

So if you have less than 20 percent down, you will face CMHC fees. These fees are a sliding scale. They can range from 1.5 percent up to 3.5 percent of the mortgage amount, depending on how much you’re putting down. So the more you put down, the less your fee is going to be.

Now these fees are nonnegotiable. They’re at every single institution. There’s no way to go around them. It doesn’t matter if you’ve had a 30-year banking relationship with your institution or not, they will be charged. The government’s mandated that way.

If you’re going to buy one property, let’s say it’s a $400,000 home, and you put five percent down. You’re a first-time home buyer. You want to take the maximum amortization. That’s going to have a 3.15 percent CMHC premium. On that amount, you’re looking at $11,000 or $12,000 added to the mortgage.

You don’t have to write that check up front. You don’t have to be able to write a $12,000 check. It gets added into the mortgage, and you pay it back over the life of the mortgage. However, you still pay it. You pay it one way, when you sell the house or whatever.

Now if you move from one house and decide to move to another one and upgrade in five years’ time — if you don’t need any additional dollars — you can port your mortgage over to that home and not pay any additional CMHC fees.

However, if you have already paid CMHC fees and you need more money, it’s going to be the lesser of. There’s a calculation, but you only pay CMHC fees on the new dollars that you borrow.

If you’re going from a $400,000 home with five percent down to a $550,000 home with five percent down, you would be borrowing that difference between your old mortgage and what you need on the new one. You’re going to get CMHC premiums on that amount added again to the mortgage.

Now, if you go sell that home and then subsequently six months later go and buy another one, you can apply for some sort of a rebate through CMHC. How they calculate that rebate is not really precise.

It’s something where I’ve had to send it in to them, and they’ve come to an agreement. But if you’ve already paid CMHCs before, you should be able to get either a rebate or a reduction.

I’ve got a client right now who’s in a situation where they’re selling a place, moving to a new home, and they’re requiring a significant increase in the funds. But the bank would not let them port that mortgage over there.

It had to do with the type of product they had, the internal policies. It upset the client, so they came to me and said, “Can you do our mortgage instead?” I showed them. They said, “Well, wait. We’ve already paid CMHC fees. Why do we have to pay it again?”

Now if you’re going to port your mortgage from house one to house two, you can do that. The problem is that you have to retain the original amortization of that mortgage. If you had a 35-year mortgage, and you’re four years into it, and you decide to go to the new property, you’re going to have to retain that 31 years of amortization.

Now if you’re like many people in Vancouver, you need a full 35 years to qualify in order to get approved. If that’s the case, you’ll have to pay it off, pay the CMHC premiums all over again.

If, however, you can get qualified and approved without adjusting your amortization, then you can move it over there and not suffer the CMHC premiums.

Clear as mud. I’m sure it’s a complicated topic, but if you have a situation where you’re worried about paying CMHCs twice, please give me a call. I can run through your options. Rowan Smith for the Mortgage Centre.

In this video, I look at what fixed and variable mortgages are as a refresher for past viewers or of my first time buyers.

Transcription of Video Blog:

Hi, everybody. It’s Rowan Smith from the Mortgage Centre.

I want to talk today about fixed or variable. Specifically, I want to define what they are so that when someone is telling you they got a fixed rate at a certain percentage or variable rate at another that you understand what exactly they’re saying so that you can compare apples to apples.

A fixed-rate mortgage is just that. The rate is fixed for the life and the length of your term. If you got a three-year term, and it’s at 3.25, you pay 3.25 throughout the entire term. If it’s a five-year term, and it’s 4.25, you pay 4.25 for the entire term. It does not matter if interest rates go up or go down; your rate is fixed, and your payment is fixed.

A variable-rate mortgage, conversely, is one where the payment fluctuates according to some other interest rate, usually prime rate. Prime rate is dictated by the Bank of Canada and the banks that match or try to follow very closely their prime rate.

Now if you have a prime-rate mortgage, the best available in the market that I have today, it’s prime minus 0.55. Prime rate is 2.25; that means a net rate of 1.7. So 1.7% on a variable versus, say, 4.25 on a five-year fixed. So variable has a substantial savings. However, your payment can and will rise if prime rate goes up.

There are different types of variable. There’s variable capped, where there’s a limit to how high it can go. Before that, you won’t be get getting 1.7. You’ll probably be getting closer to 3% in today’s markets.

You’re going to give up something in terms if you want more security. Whether it be a fixed rate or a fixed payment, you’re going to pay a higher rate.

I’ve seen several ads, and I saw one institution run an ad where what they had was on their whiteboard out front of their institution. It said, “Five years, 1.75.” Of course, clients are calling me saying, “My bank’s advertising 1.75.”

What they don’t put on that sign is it’s a variable. Now you can guarantee that it’s going to be below the fixed rate that I’m quoting if you’re getting a variable rate, because variable rates are generally lower. But they do have that upside risk that your payment could rise.

So there it is: fixed and variable. For the Mortgage Centre, I’m Rowan Smith.