Hamilton Mortgage Source

0% and Small Down Payment Mortgages

Ironically, for many new home buyers, these types of mortgages are not ‘specialty mortgages’, but the norm. First time home buyers, or any home buyer for that matter, are able to purchase mortgages at the lowest interest rates with as little as zero down. This is done through the use of mortgage protection insurance that is provided by a number of companies such as Canada Mortgage and Housing Corporation (CMHC) or Genworth. These mortgage insurance companies operate separately from the mortgage lender through which your mortgage is held and charge a fee depending on the size of your down payment. As we can see, the less down, the higher the % fee. Any mortgage with a down payment of 20% or less must be insured.

Up to and including 80%	1.00
Up to and including 85%	1.75
Up to and including 90%	2.00
Up to and including 95%	2.75
Up to and including 97%	2.90
Up to and including 100%	3.10

These fees are based on the total original value of the mortgage and are then included in the total sum of the mortgage. So a $100,000 mortgage, zero down, would now be a $103,100 mortgage. Although it is preferable to attempt at least a 5% down payment (and a resulting 2.75% fee), a 100% mortgage can make sense since the value of housing in the Ontario area is forecasted to increase at a rate greater than 3% per year over the long term (not to mention the quality of life associated with owning a home). This said, it is always important to remember additional costs (closing costs) associated with purchasing a house that average 2-3% extra. These costs can be seen in my article here. Down payments or closing costs can be borrowed as long as debt service ratios are not over their limits (See lending criteria here).

 

The details of such mortgage insurance should be discussed based with me, your local mortgage expert.

Have a comment or question? Feel free to make a post!

New to Canada Mortgages

 Ontario presents excellent work and lifestyle opportunities for new immigrants to Canada. As exciting are the unique mortgage options that new Canadians to Ontario have.

Homes can be purchased with as little as three months work experience in Canada. But the New to Canada mortgage programs are especially valuable because traditional credit proof requirements are not necessary. This means that new Canadians can use other options to establish credit such as Canadian rental records, hydro payments or even a credit report from another country. These programs are available to those with three years or less in Canada.

There are some details that must be discussed regarding new to Canada mortgage opportunities, and a meeting with me should be scheduled to fully explain the various mortgage programs available.

Credit Impaired Mortgage

Sometimes things happen in our lives that affect us financially, and the result can be an inability to keep up with payments and expenses. As such, credit scores are affected negatively and sometimes severely. If this has happened to you, there is still a good possibility of attaining a mortgage from an alternative or non conforming lender. Specifically, non conforming lenders address the following situations:

• Poor credit
• No established credit
• Previous bankruptcy
• In consumer proposal
• In credit counselling
• Recently self employed and can't verify their income
• Foreigners investing in Canadian real estate

Mortgages can be provided to individuals in these situations but usually carry certain guidelines:

For example, in most cases 15% must be placed down on the property, although in some cases it can be as little as 10%. In tough credit situations, the down payment is the most important aspect of the mortgage. In line with this, the mortgage lender will likely require a more thorough property inspection to ensure that the asset will hold (or increase) its value. Also, the larger the down payment, the more flexible lenders become regarding the income source and rate.

 

Contact me for a discussion on how I can best serve you. No matter what your financial situation, your satisfaction is my promise.    

 

Questions? Feel free to ask below.

Make Your Mortgage Tax Deductable and Save Thousands

Although this is the longest article you will find on this site, the topic of making your mortgage tax deductible, commonly known as ‘The Smith Maneuver’, is one of great popularity. This article simply aims to explain how the Smith Maneuver Works, but entire books can be read on the subject, so it would be a good idea to contact me if you are interested in pursuing such a financial strategy.

 

A second, but less discussed method of making your mortgage tax deductible will also be reviewed. That is to start and operate a small home based business. We will see how this works in the later part of this article.

 

The Smith Maneuver in a Nutshell

Unlike our neighbors to the south, we are fully taxed on money we use to make our mortgage interest payments. In other words, you make money, it is taxed, then you make your mortgage payment. So hypothetically, a 5.5% mortgage could really feel like an 8% mortgage (because you have less available ‘mortgage payment income’ due to taxes). Our goal then is to make the system work more like this: You make money, you make your mortgage payment, then the remainder of your income is taxed. Here’s how this system works…

1. Sell all existing stocks or mutual funds from non RRSP investment accounts and use it towards a down payment for step 2.

2. Attain what is called a ‘readvanceable mortgage’. This mortgage is both a home equity line of credit and a regular mortgage at the same time. Importantly, as you pay off the mortgage component, your home equity line of credit available grows.  I offer some of these types of mortgages at great rates.

3. Use the home equity line of credit to purchase income producing investments, such as dividend paying stocks, mutual funds or possibly a rental property. Since with every mortgage payment your line of credit will increase, you would use this money (out of the now larger line of credit) to invest.

4. When tax season comes around, deduct the amount of interest paid on your home equity line of credit against your income. So for example, if you paid $7000 in interest and you are in a 40% tax bracket, you would get a cheque back from the government for $2800.

5. Apply the tax return and investment dividend income against the mortgage portion of your readvancable mortgage. This in turn will increase the line of credit portion of your mortgage, so now you can use that larger line of credit, again, to purchase more income producing investments.

6. Repeat steps 3-5 until the mortgage is totally paid off. You are now left with a large, tax deductible home equity line of credit and a much larger investment portfolio. (Yes, investments do go down over short term periods, but over the long term will rise).

This is a much faster way to pay down your mortgages and has some other very attractive advantages, but also carries some possible drawbacks. Contact me for more details on this subject.

 

Starting a Home Based Business to Make your Mortgage Tax Deductible

This method is more straightforward to explain. You would start by looking for a small home based business that you think you would have some fun with, or with a product or service you think that YOU would enjoy. This business could be as small as a Tupperware Salesperson or writing a book, but could also be a small home based franchise. Ultimately any way you could possibly make money out of the home counts!

You would then write off the mortgage interest on a reasonable portion of your home (not the entire home like the Smith Maneuver). For example, a kitchen used as a home office and the dining OR living room as a ‘meeting area’. You could then use the tax credit money, like the Smith Maneuver, to pay off more of your mortgage. Unlike the Smith Maneuver, there is no line of credit attached to the home. But there are some other benefits to owning a small business...

First you can write off other business related expenses, like a portion of your car and fuel, some dining expenses and more… For all business tax write-offs though, it is critical you know what you’re doing, because a government audit has the potential to get you into major trouble. This said, a good accountant or financial planner will help you maximize your tax benefits while keeping you safe. I know a few tax professionals myself. Contact me for their names.

Second, any profit you make from the business can be used to pay off your mortgage faster. Who knows? You could become very successful and start living much more comfortably. Even if you don’t make any profits though, you can still remain in business for a few years, and procure tax benefits until you will have to close up. These few years could mean thousands in tax and mortgage savings.

What do you think about making your mortgage tax deductible? Join the conversation and make a post below!

Mortgages for the Self Employed

If you are one of the more than 7 million Canadians who are either self employed or are paid on a 100% commission basis, then you may be wondering what mortgage options are available to you. Specifically, you may be wondering what proof of income is required given that the nature of running a business sometimes entails the understatement of your take home pay. Fortunately, there are some great mortgage options available to you that do not require the statement of any type of income. In other words, proof of income is not required for the self employed. Under the programs available, the self employed are still able to enjoy the lowest interest rates on the market, and can apply down payments of as little as 5%. There are a few details and requirements to consider when investigating such a mortgage strategy, however. Here are a few:

-         Must have full Canadian citizenship status.

-         At least two years of self employment proof is required.

-         No income tax arrears.

-         Credit score is a major consideration, especially in relation to the amount of down payment:

o       5-10% Down Payment  - 700 Minimum

o       10-15% Down Payment – 650 Minimum

o       15-25% Down Payment – 620 Minimum

For more details on the types of self employed programs available and how they can apply to you, contact me at your convenience.

How Mortgage Brokers are Benefiting Consumers

 Most Canadians still attain their mortgage from their local Bank. Although more individuals are shopping around for better terms and rates, the majority of Canadians do not receive their best possible mortgage. By using the services of a Mortgage Broker, consumers can be confident that their interest, not the Banks, is kept at the forefront, and that they will be provided the best possible rate and terms in the market, because the services of a Mortgage Broker represent all lenders in the mortgage market.

A Canadian Institute of Mortgage Brokers and Lenders (CIMBL) survey quantifies the value that mortgage brokers add with several interesting statistics. 

Some notable points include:

• Mortgage brokers, in part, have assisted Canadians negotiate roughly 1.38% off typical posted bank rates in the last year.
• The number of Canadians using mortgage brokers has jumped 24% since 2005.
• Among those who renewed or refinanced over the past 12 months, 84% remain with the same lender, most likely a mistake given the intense competition out there.
• 88% of Canadians say they are happy with their mortgage terms.   

So even if you are in talks with your Bank about attaining a mortgage, consider comparing the Bank’s service with that of a Broker. Mortgage Brokers focus on only one financial service, Mortgages, and this focus can help save you thousands of dollars over many years and lead to much a faster pay off.

Brent Richardson

Mortgage Identity Theft and How to Prevent It

Identity Theft

The mortgage industry has become a hot area for fraud. This, unfortunately, makes sense since such large amounts of money are involved. The central medium that fraudsters use for the achievement of their crimes is Identity Theft. Moreover, some Mortgage Brokers and Agents employ sloppy client privacy policies that help contribute to this problem. Put simply, a fraudster can steel your identity, take out a mortgage in your name, and ultimately ‘abscond’ with much of that money. This happens to the tune of over $1 Billion per year in Canada. What makes things even worse is that these fraudsters are very difficult to catch, and in many cases, it is very easy to accomplish. It’s one of those things that doesn’t happen to everyone, but it does happen to some. After reading this article and applying the advice, you can be more assured that it will not happen to you  

What, more specifically, is Identity Theft?

According to the Canadian RCMP website, identity theft is, “… the stealing, misrepresenting or hijacking the identity of another person or business and provides an effective means to commit other crimes”. For it to be accomplished, “vital information such as name, address, date of birth, social insurance number, and mother’s maiden name need to be acquired... The identity thief can take over the victim’s financial accounts, open new bank accounts, transfer bank balances, apply for loans, credit cards and other services, purchase vehicles, take luxury vacations, and so on”.

 

How do I prevent it?

In order to prevent Identity Theft and the resulting nightmare it would cause for you, follow this advice:

- Do not carry your SIN card in your wallet. This card is equilivant of your financial DNA, and if it gets into the wrong hands, unimaginable damage can be done to you. Memorize the number or keep the card at home.

- Shred your sensitive documents before putting them in the trash. Fraudsters are likely to check your garbage for letters that carry personal information when preparing to steal your identity.

- Sign all credit cards when you receive them and cancel ones that you don’t use.

- Never leave receipts around, destroy personal info that you don’t need.

- NEVER give your SIN or banking info over the phone.

- Ensure that the Mortgage Broker, or any one else that handles your personal information, has a good privacy policy and privacy control measures. Don’t be afraid to ask questions about how your information is treated.

 

This last part about ensuring that your partners in finance use the same, or better, diligence that you use is very important. Not all Mortgage Professionals use high levels of diligence and this is contributing to the over $1 Billion in fraud found yearly in Canada. Feel free to post any questions or comments below, or give me a call for more information on how to protect yourself against identity theft.