24 May

Cottage Dreamin’… The Domino Effect of a Refi

Success Stories

Posted by: Tracy Price

Cottage season has finally arrived and the appetite of wishful cottage owners is hot. We recently helped a couple turn their dream of owning a cottage into a reality, and then some.

Long-term clients Al and Lydia approached us a few months ago with their desire to buy a cottage. They had seen our signage stating “Buy a Cottage for 5% Down”, deemed a second home. They had been working hard over the past couple of years to save an extra $16,000 for 5% down payment and closing costs for the purchase of their dream cottage. They were excited about an affordable $250,000 waterfront property they had found, which was being sold privately.

We sat down, ran some numbers and the initial appointment resulted in some disappointing news. Despite their strong incomes, they couldn’t qualify for the second home purchase because they had two sizeable mortgages in their names. Their primary residence, and, they had also co-signed for their son’s first matrimonial home a couple of years ago. With the new ‘stress test’ in effect, they had to qualify at 4.64% and the ratios just didn’t work.

However, we found a way to make it work… that’s what we do! As it turned out, their son and daughter-in-law now had enough work history and high enough incomes to qualify for their own mortgage. We were able to refinance John and Sally’s house and remove Al and Lydia from title, freeing up enough room in their debt service ratios to enable them to afford the cottage with a high-ratio mortgage. Success #1!!

John and Sally were pleasantly surprised by the appraised value of their home and we were able to get them enough money to finally finish their basement and backyard. This saved them from having to put these expenses on a high-interest Line of Credit. Success #2!!

Given the massive increase in property values in Centre Wellington lately, we took a look at what else we might be able to do for Al and Lydia. They had always wanted to own a property that they can earn income from, but they didn’t know how they would ever be able to do that. Turns out, their property value had appreciated very nicely and it made sense for them to refinance their principle residence as well. We were able to get them enough money to purchase an additional cottage for $300K with 20% down, which they will be renting out starting this summer. Success #3!!

They were able to debt-service the three mortgages and are thrilled about achieving this type of property ownership, which will play a large part in their retirement security as they approach their golden years.

With some creative thinking, passion and dedication, we were able to help these two families achieve their dreams and beyond! Contact us to see how we can help you achieve your aspirations of cottage and/or rental property ownership. We love what we do, and it shows!

9 May

SURPRISE – WE ARE IN A REVOLUTION

Latest News

Posted by: Tracy Price

The pace of (technological) change is so fast now that it is considered to be of revolutionary proportion.

Much of what we have learned in our lives is about to become obsolete. In fact, much of it already has.

For example, our schools teach us to get an education, get a good job, get promoted and earn a higher salary, all without teaching us about financial literacy. Then we are told to save part of our pay, to put that into a savings account with interest rates less than inflation (which gets taxed…lol), to invest in RRSP’s, RESP’s etc., supposedly to grow into a retirement nest egg.

The problem is with fees and taxes, unless one invests in the stock market (risky) or real estate (less risky) it is impossible to become financially secure, let alone wealthy.

Some believe that the ‘system’ is designed to keep most people poor, or at least working hard their entire lives just to keep their heads above water. We are seeing this more and more and more.

From a technological standpoint, the advent of (ro) bots and artificial intelligence are about to disrupt our lives in every way possible in the years ahead. Driverless cars? How can this be possible? What is certain however is that bots will result in the elimination of tens of thousands of jobs as we know them, even entire industries.

More and more our lives are affected by the so-called ‘internet of things’. Everything is gravitating towards the Internet. The validity of getting a college or university degree (to get ahead) is being challenged like never before. In short, disruption of the status quo will become the norm.

Much of this coming change will force humans to think and act differently than we do today. However, it is within the internet that lies promise of a more prosperous future for many, in fact for everyone that embraces it because it is ‘levelling the playing field’ like never before.

The truth is that we are seeing more and more people becoming wealthy online. Starting an online business takes less effort, less capital and less time than a conventional grass roots start up. Money, lots of money is being made faster than ever before.

The internet also gives us the opportunity to educate and become informed in a more savvy, meaningful way, and the key is for us to forget what we’ve been taught about making money in the past. We need to learn how to educate ourselves, create our own jobs and make our own money moving forward. Growth in recent years in self employment has accelerated dramatically and will only continue to rise.

Undeniably, personal financial security and wealth creation is largely dependent upon how we view and understand today’s big bank culture and business practices, much of which has been chronicled in the media in a less than favourable light; such that it appears things have gotten ‘out of hand’ and in need pullback. Trust and transparency used to be the pillars of our financial system. Unfortunately, this is no longer the case. As politicians, governments and school systems have become outdated and less trusted, so have our banks.

Yet we continue to deposit our paychecks giving the banks free money with which to profit. The banks take fees in an instant while holding our cheque deposits for days (more free money) even when we have more than sufficient funds to clear the cheque. Lending practices including mortgages have in fact become predatory with (potentially harmful) terms and features that are not disclosed to the borrower, which is not only unfair, but not right. Bank mortgage penalties have been systematically manipulated such that when a mortgage is paid out prior to maturity, the lesser of 3 month’s interest somehow no longer applies. Rather the greater of, or the IRD interest rate adjustment factor does, costing Canadians often (tens of) thousands more. Many agree that today’s reality is that the banks’ quest for ever increasing profit at the expense of and on the backs of unsuspecting Canadians is unconscionable.

Just as Fintech (new financial technologies) have begun to revolutionize banking and financial services, we need to revolutionize the way we think about and treat our money. Those in the know pay no annual fees on credit cards, use online bank institutions who charge less or no fees, pay more interest, and they are more likely to obtain the services of a trusted and transparent independent mortgage (broker) professional.

We are reminded from time to time that many people still believe that to use our services means having to pay a fee. This could not be further from the truth since our services are free for arranging prime mortgages (OAC) on approved credit where we are paid a finder’s fee from the lender. Only more difficult, more time consuming mortgages and private mortgages require a fee from the borrower since that is the only way we can be compensated for our services.

Most importantly, we always put you the customer (your interests) first and foremost. We are all about helping you find the most advantageous, cost effective financing possible and our professional advice is invaluable.

If you have relied on the banks until now, perhaps it’s time to become more protective of your money and investigate the mortgage broker option.

Our industry has grown significantly, particularly over the past decade, and there is a growing awareness of the validity and value of our services. But we still have a long way to go before we are thought of as (mainstream) the better option when it comes to mortgage financing.

For your next mortgage need, be part of the revolution and call us first, or at the very least, get a second opinion and experience the positive difference.

2 May

PROPERTY GOES UP 100K IN 1 YEAR!

Success Stories

Posted by: Tracy Price

Leon bought a year ago.  It was tough for him to break into the market with a sole income, existing debt and a wife and three kids to support.  But with a lot of grit, a great realtor and a very good mortgage broker he found a house that no one wanted.  It was priced well below market value because it needed work.  Mostly garbage removal, paint and some new floors.  Leon and his wife were motivated to improve the property and spent a few thousand dollars for improvements on a credit card.

When Leon called for help with his debt (carrying approx. $30 000), being only a year living in the property, we thought it was doubtful there would be enough equity to qualify for more money.  It used to take almost five years for homeowners who purchased with 5% down to qualify for more money under a refinance.  You can now only refinance 80% of your property value, so for the longest time it was impossible for most people to pay off the debt by taking equity out. Leon had only scraped together 5% of the purchase price or about $10,500.  He asked a friend to help him with the legal fees and borrowed $3,000 from him.  So his value would have to go up substantially in order for him to get the money he needed.

Leon trusts us implicitly because we worked so hard to get him into a house.  I told him, the only way out likely was a private mortgage for a few years until his value was high enough.  He needed money for a new roof so we both agreed the best course would be some private money to get his payments under control.  We ordered the appraisal and imagine our complete shock that the value of Leon’s property had gone up $105,000 in one year.  So under the 80% rule, he could borrow $248,000.  That meant a prime mortgage at best rates and not a private 2nd mortgage.

What an amazing solution which surprised all of us.  After a year of purchase, Leon was able to pay off his entire debt load of $30,000, pay back his friend the $3,000 and put a roof on with some cash to spare.  We will be breaking his current mortgage with a minimal penalty (again good mortgage broker) and because he will now qualify under refinancing rules for a 30 year amortization, his mortgage payment is staying the same.  Leon now only has a mortgage to pay and he vows not to get into debt again.

We have never seen spikes in values year over year in our entire 25 years in business.  If you are in debt and stressed about it, call us now for an analysis of your situation.