Julie: A single mom, who makes $35,000 per year just bought a house in Guelph

In my next series of blog postings, I'd like to share with you some of the clients that I've helped...because every mortgage has a story!  This is a great story about Julie, a single mom with one child who works part-time.

Julie's almost 40 years old and has never owned a home. She has great credit, not alot of debt and pays almost $1300 per month in rent.  That's the going rate in Guelph when renting a nice town house.  The only thing that was holding Julie back was her ability to save for a down payment.  On an income of $35,000 per year - there's not much left over while you're raising a child on your own.  Julie was referred to me through a friend that I helped several years ago.

This is how I helped her buy a semi-detatched house in Guelph for $200,000.  Because Julie had great credit she qualified for a "no down payment mortgage".  Essentially, the financial institution lent her the five per cent requirment for a down payment on a house.  The rates are a little higher with this kind of mortgage, but the monthly payments on the mortgage plus property taxes where approximately the same amount that Julie was paying in rent.  So she knew she could do this.  Julie and her daughter are moving into her home at the end of February.  She's happy and I'm so glad that she decided to buy instead of continuing to rent.

If you've got questions about how to get into a house please call or e-mail me.  My number is 519-763-3900 ext.1001. E-mail: lastovic.s@mortgagecentre.com.

Ugh, taxes again!

I'm just in the process of finalizing my income taxes for last year, so taxes are top-of-mind for me. I've seen a lot of clients recently who are behind in their income taxes and/or property taxes. Are there any quick fixes to bringing your income or property taxes up-to-date if you're refinancing your mortgage or moving.

You may wonder why this is relevant. Most mortgage companies (bank or wholesale bank) will require confirmation that your income and property taxes are up-to-day, if you’re selling a house or renegotiating your mortgage.
I recommend paying your property taxes directly to the City of Guelph (or any other city/town you live in). I like being in control of that. Most municipalities allow pre-authorized debt and you can even pull the forms off the web site.

Here's the link for the City of Guelph's pre-authorized debit for property taxes http://guelph.ca/living.cfm?subCatID=2035&smocid=2608

If you’re behind in your property taxes, look for ways to pay them off by borrowing from a family member or putting them on credit. If you renegotiate your mortgage you can then use the extra money through the refinance to pay back the money. Then make a promise to yourself to do pre-authorized debit either through your mortgage holder or directly through the city.

You can employ this strategy with your income taxes as well.

Is this the year to buy your first home?

With low interest rates and home prices in Guelph remaining stable, 2012 will be a good year to buy a home if you don’t already own one!  

Canada Housing and Mortgage Corporation (CMHC) states that many of the potential first-time buyers of 2011 didn’t buy a house when they could qualify for one because of the unpredictable job market.  However, Guelph’s employment rate has always been strong boasting an unemployment rate of just over 4% - one of the lowest in the country.

Here are a few tips if you’re considering buying your first home in 2012…

How do I know I can qualify for a mortgage?

There are several  “on-line” mortgage calculators that will give you a rough idea of a mortgage amount that you can qualify for based on your income and your debts.  But don’t use this as a true mortgage pre-approval.  Why? There are many factors that can influence your ability to really qualify for a mortgage loan, such as credit history and income stability.  For example, if you work at a job that pays an hourly rate and your are entitled to overtime, overtime income can only be used to help you qualify for a mortgage, based on a two year average.

A good credit is also essential to qualify for a mortgage loan.  If you’re interest in obtaining your own credit history you can purchase it at www.equifax.ca.  Otherwise if you consult your mortgage broker they will review your credit history with you.

How to come up with a down payment?

The minimum down payment required to buy a home is 5% of the purchase price.  You can get a loan from the bank for the down payment, from savings, or through a family gift.  If you have great credit history and good job stability you may also be able to qualify for a mortgage – even if you don’t have the full 5% saved.

How much can I buy?                                      

There are two ratios that are used to help determine how much you can qualify for in a mortgage.  They are the Total Debt Service Ratio (TDSR) and the Gross Debt Service Ratio (GDSR). Essentially, these ratios compare the carrying costs of the house (mortgage payment, property taxes heat and debt) to your gross income.  These ratios should be between 32 and 44 per cent.  What I’ve found is that most home buyers can qualify for more of a mortgage, than they feel they need.  Have your mortgage broker work with you to help you develop a budget and determine what the ideal monthly mortgage amount should be based on your budget.  We can then help you work back to determine the purchase price.

What's in store for Guelph's housing market in 2012?

As I’m doing my own business planning for 2012, many should also consider what their housing prospects will be for 2012. If you’re thinking about buying your first house or moving to another home, understanding the forecast and the local housing will help you be better prepared.


Thanks to Canada Market and Housing Corporation who has collected housing data for decades in Canada, they have a library of historical information and have a good handle on what may happen in 2012.

A few highlights for Guelph housing in 2012:

2012 will be your opportunity if you do not own a home

Price appreciation in Guelph on average is modest for 2011. That’s great news for individuals who currently do not own a home. With consistently low mortgage rates predicted into 2012, if you’re in the market to buy your first home, it will be an affordable purchase.

I should also mention that the mortgage industry is riddled with bankers and mortgage brokers who have varying levels of experience and motives. If you’re a first-time buyer the best way to find a good mortgage profession to get your mortgage pre-approval is to go through a recommendation or source a company that has an established business and reputation. Remember that a true mortgage broker (one who doesn’t work for the major banks) has several options from many institutions available so that you get the best combination of rates and features to help you achieve your budget goals.

Own a house and moving up? Don’t be surprised at your home’s value

Net appreciation growth in home values in 2011 is expected to be modest in Guelph and throughout 2012. The final appreciation growth number for 2011 in Guelph will be approximately 2%, and less than 1% in 2012.

Guelph will continue to be in an overall balanced home market, which means that there are an equal number of buyers and sellers. This translates into little upward pressure on home prices. If you are moving up into the >$500,000 price range this is certainly an opportunity for you if you’ve done a good job at paying down your existing mortgage.

More to come...stay tuned!

Be your best, reach your goals...

I'm just returning from The Sales Mastery Conference in Palm Desert, California. The Duncan Group is a company that is commited to helping mortgage professionals be the best that they can be.

Below is a list of some key ideas that will not only help mortgage professionals but anyone who's interested in being their best! I've summarized some key thoughts:

- Own the clock: do one thing at a time, don't multi-task. Do fewer things, more often and get better at them.

- Who do I need to become to achieve the goals that I want and the people that I want to attract?

- Become an expert for my clients and my strategic business partners.

- Think BIG don't be fearful of disrupting the status quo - operate at level 10.

- Seek out failure and embrace it.

- Often the thing that you don't want to do the most, is the thing you should be doing the most.

- Little changes over time create mammoth impacts in the future.

Divorced/Separated: Avoid going back to renting

When a couple decides to separate, normally their largest asset is their matrimonial home. I have worked with several lawyers who see the value of consulting an experienced mortgage broker for their clients. Why not call a mortgage broker directly and have them review your options, even if your mortgage is through a chartered bank? Mortgage brokers can be a good, unbiased source of information that will help you be financially objective in a time which is often emotional.


If your budget will allow, attempt to make your next move into a house that you purchase instead of resorting to renting. It can be difficult once you begin renting to get back into home ownership. Rent is expensive in Guelph, and if you have a family, you may find yourself paying more money towards rent, that could otherwise go to paying down a mortgage.

Here are some key things to consider if you’re going through a separation or divorce when reviewing how to divide the asset of your matrimonial home:

Understand how much equity you have in the matrimonial home

Getting pre-approved is always a good first step even if you’ve owned a home before your separation. Work with your mortgage professional to help you determine home much equity you have when this asset is divided. In many instances if you’ve owned your home for 10 years, and the equity in your house is divided – after paying out consumer debts there may only be 5 to 10 percent left over to put as a down payment on your next house. I often find that people over-estimate how much equity they actually have. Ensure that you consider the penalty to discharge the current mortgage on your matrimonial home including the legal and the land-transfer tax on your next purchase (in the case you are selling the matrimonial home).

Child support can be used if there is a 6 month history

Explain to your mortgage professional what child support you’re entitled to receive as noted in your separation agreement. If the separation is recent, you may not be able to use child support as a supplement to your income to help you qualify for a new mortgage. That’s because most financial institutions require a six-month history of the child support payments. However, if you are required to pay child support, this will immediately count as a liability which will limit the new amount you can qualify for in a mortgage.

Mortgage brokers have more options than your bank

Don’t be discouraged if you initially went to your own bank and they told you could be pre-approved for a mortgage significantly less than what your own living expectations are. Banks aren’t flexible in their mortgage-lending criteria. True mortgage brokers who have access to mortgage products outside of chartered banks can give you options. Your mortgage broker can help you work through scenarios because they have good, cost-effective options that will help you buy your next home after a separation or divorce.

If you want to pay off your mortgage faster – read this article

If you got a new mortgage before 2008, you may have a mortgage that has an extended amortization of 35 or 40 years. In 2008, many first-time home buyers where keen to choose longer amortizations to keep monthly mortgage payments low. Although longer amortizations can keep mortgage payments affordable, it also means that it takes longer to pay down the principal on the mortgage.


I normally recommend going with as short of an amortization as your budget can afford. There is considerable interest cost savings on shorter amortizations.

Here are a few tips to help you pay down your mortgage faster…

Know the difference between bi-weekly and bi-weekly accelerated payments

There is a difference between bi-weekly and bi-weekly accelerated payments. The difference lies in how the payments are calculated, which make them accelerated. Here is an example of a $200,000 at 4% based on a 25 year amortization. Look at the savings!

                         Principal        Interest      Total payment   Real amortization       Balance 5 years

Bi-weekly            $180.24       $304.89       $485.13              25 years                        $174,107.21

Bi-weekly            $221.1        $304.89        $526.03               21 years, 11 mnths        $168,231.61
Accelerated

 I’ve have clients bring their mortgage statements to my office looking for mortgage advice and had no idea that they were not paying accelerated payments, which was their originally request.

Set lifestyle priorities that include making extra payments on your mortgage

I did a mortgage earlier this year for a client who became angry that the option of a bi-weekly payment was not available to her, instead of only a bi-weekly accelerated payment. The difference in payment between the two options was about $40 per payment higher on the accelerated option. The bi-weekly accelerated payments on a 30 year amortization also allowed her to shave three years off of her mortgage. When I asked why the accelerated option was problematic, she stated that she had a certain material lifestyle she wanted to lead and that extra money would help with that lifestyle.

In times of economic and financial instability, setting priorities that include debt pay down, such as mortgage principal pay down is crucial. Your home is virtually the most valuable financial asset you have. By paying down your mortgage it will place you in a better financial position, now and in the future.