To access the monthly homeowners budget worksheet, please click the below link.

Monthly budget

Thank you,

Ben Bourgeois

ben@mortgagebyben.com

(780)974-5400

When purchasing a home most lenders require that the client have a 5% downpayment saved but some, including a few major banks, allow for the minimum 5% to come from borrowed funds such as an unsecured line of credit. To qualify for a program like this you need to have strong credit (650+), no late payments for an extended period of time and have strong employment history.

Now let me do a breakdown how much this is going to cost you based on an entry level single family home of $350000 at current interest rates.

Current mortgage rate – 3.09%
Line of credit – 9% (estimate)
Mortgage – $350000
Line of credit – $17500
Mortgage default insurance – $14000 (required with any purchase less than 20%)
Downpayment – $17500 (5%)
Mortgage Amount – $346500
Mortgage Payment – $1655.84
Monthly Line of credit payment (interest only) – $128
Monthly property tax (estimate) – $218.75

Estimated cost per month – $2002.59

When speaking about the benefits of renting versus buying, the obvious pros are having a sense of ownership, no landlord and complete control of your property. There are also major long-term economic benefits as well. Below you’ll find an estimate of how much equity you will have in your home after 5 years based on modest 2% year over year growth in property value.

Amount left on mortgage after 5 years – $297536.06
Estimated property value after 5 years – $385991.26 (based on a modest estimate of 2% YOY growth)
Equity in home – $88455.26

There are other things to take into consideration including the line of credit you opened up to purchase the property. Over 5 years if you only paid interest only it would cost you $7680, plus the $17500 would still be owing. If we factor this into your home equity, you would still be $63275.26 in the positive.

If you have any further questions about this please don’t hesitate to contact me by phone, email or text. Also if you are interested in getting qualified for a mortgage, feel free to fill out my online application @ https://secure.dominionlending.ca/?app=15608&lang=en

Thanks for reading,

Ben Bourgeois

(780) 974-5400

Ben @mortgagebyben.com

Last week the Bank of Canada changed its mortgage qualifying rate from 4.64% to 4.84%. This rate will continue to be used by all lenders for all conventional (20% or more down) and high ratio (less than 20% down) mortgages on a 25-year term or less. What does this mean for someone looking to purchase a home? It means you will now qualify for slightly less of a mortgage. Here’s an example. Lebron makes $60000 a year, has a $300 per month car payment, credit card debt of $2000, good credit and a 5% down payment. Factoring property tax, monthly heating costs of $100, under the old qualifying rate of 4.64% Lebron would qualify for $280000, under the new rules he would qualify for $275000. There’s a difference of $5000.

As always, if you have any questions please don’t hesitate to reach out. I can easily calculate how much you can spend a property, give you advice on best mortgage products or answer any other questions you may have.

*** Please note that certain lenders will still allow the use of their 5-year fixed rate on conventional mortgages on 30-year terms. If interested please reach out for details.

When taking a look at refinancing your home there are many factors to consider. Whether you’re refinancing to access funds for pleasure, an investment opportunity, debt consolidation or to help out someone you care about, I would take a look at the most common questions people have below.

– How much money will I save if I consolidate my existing debt? Credit card, car loans and lines of credit carry higher interest rates than mortgages. In many cases, this is a huge burden on your monthly cash flow. Refinancing your mortgage is often the best solution because interest rates are much lower than other credit products.

– How many years should I refinance for? Depending on your financial situation you may opt to increase your mortgage up to 30 years to keep your payments lower. You can then take advantage of prepayment privileges to increase payments or make a lump sum payment directly towards the principle.

– What will be the financial benefit if you’re using funds for investment purposes? It’s a good idea to find out from your mortgage professional what the interest cost will be on the funds you’ll be borrowing. This should be then factored into your projected margins.

– What will the total cost be? If you are in a mortgage term its best to find out how much the mortgage penalty will be to get out of your term early. We will also have to compare what you were paying for interest rate and what you’re going to be paying when you refinance.

– How much can I equity can I pull out of my home? In most cases, an appraisal will need to be completed. At most you’ll be able to refinance up to 80% of the value of your home.

When choosing a mortgage there are many things to consider with rate being at the forefront. The question is will the cheapest rate translate to savings in the future?

The answer is maybe but chances are probably not.

The majority of people sign a 5-year mortgage term but the average person only stays in that mortgage for 38 months. In many cases, the cheapest rate also offers the harshest mortgage penalties, restricted ability to bring your mortgage over to your brand new house and lower prepayment privileges. The difference between .10% on a $400,000 mortgage is about $20 a month. Typical low rate mortgages usually have a flat mortgage penalty if you break your term of 2.75%-3%. This means if you were to break your mortgage term at month 38 with a $400,000 balance it would cost you $11,000 – $12,000! Terrible! In the same scenario, a mortgage with a less harsh penalty would cost the consumer roughly $3,000. When you’re choosing a mortgage remember to get all the facts!

Another piece of advice is lenders are not like gas stations where virtually everywhere you go the price is the same. Make sure you do your homework with a variety different institutions which include big banks, credit unions and monoline’s to ensure you are getting the proper mortgage for the current you but also future you.

Thank you for allowing me to share my two cents!

Ben Bourgeois

– Build a Budget. The 4 factors that determine what you can afford from mortgage professional standpoint are credit, down payment, income, and debt. When trying to figure out what you can afford its best to speak to a mortgage professional in order to get an exact figure. It is also a good idea to speak to your mortgage professional about any sort of future liabilities you foresee and include them in your budget for a home.

– Investigate your Mortgage Options. Did you know that the average person stays in their mortgage term for 38 months? Did you know many discounted mortgage rates have much higher mortgage penalties and no prepayment privileges? When speaking to your mortgage professional make sure you’re getting all the facts!

– Choose a Realtor. An excellent realtor is a strong negotiator, consultant, and personal advisor. They will play an extremely important part in providing guidance on those tough decisions and making sure you get a home at a fair price.

– Choose a Lawyer. Make sure you have a lawyer that is experienced in the real estate law. It doesn’t hurt to have a lawyer look over any purchase agreement. They are also responsible for conducting a title search, transferring title, checking for liens and outstanding taxes on the property.

– Searching for a Home. When hunting for a home it is extremely important to create a list with all the things that you need in a home, wants and things you can’t live with. Factors may include future plans, current needs, and lifestyle. My recommendation is to create a checklist and bring it to every property you view. This will allow you to compare one property to another very accurately and help you make the correct decision. Provide this information to your realtor, they can help you narrow your search and provide excellent recommendations.

– Make an Offer. Your realtor will make an offer, this will include price, conditions, deposit and closing date. The seller will either accept, counter or reject the offer. This the area where your realtors strong negotiating skills will come into play.

– Home Inspections or New Home Warranty. Hiring an inspector is optional but it may be a good idea for a resale home. You can make your offer conditional on a home inspection which will allow you to negotiate repairs or withdraw your offer. New home warranty is typical when you purchase a brand new home. The builder provides a new home warranty to cover deposits, completion dates labor and material for at least one year after the home was built. It also protects against structural for a minimum of 5 years.

– Finalizing the Deal. Meet with your lawyer to discuss insurance, title, and conditions.

– Getting Ready to Move. It’s important to get everything in order like electricity, internet/TV, change all your mailing. If you rent, make sure you give your landlord sufficient notice.

– Closing Day. This is the day you officially take possession of your home! Your lawyer will complete the paperwork, your payments are finalized and you’ll receive your new set of keys and deed! Congratulations!

Speaking with a Mortgage professional and asking their opinion on whether or not you should go with fixed interest rate or a variable interest is one of the most common questions in the mortgage industry. Do you go with the cheaper 5-year variable rate, do you go with the shorter term cheaper fixed rate or do opt to go with the more expensive five-year fixed rate? This is a common dilemma, please allow me to shed my 2 cents on the subject.

The current state of the market is on a slight upward trajectory. Current fixed rates have risen the past five months slowly and could continue to climb. There have been new rules set in place which makes the market less competitive than it once was and more expensive for lenders to operate in. Unfortunately for the consumer these circumstances usually only translate into one thing, less money in your pocket. For these reasons, my suggestion would be to not go with a 2-year term which is currently sitting at about .25% lower than a standard five-year fixed term.  sure you get a slightly cheaper rate but what are the rates going to look like in two years? Is it worth the risk for .25%? Now that we have one option out of the way lets take a peek at how a variable mortgage looks vs five year fixed.

Variable mortgages are always the bank’s prime rate + or – basis points. The Bank of Canada sets prime rate which every lender but TD currently uses which is 2.70%. If prime rate fluctuates so does the interest rate you’ll be paying. Now there are two types of mortgages, high ratio(insured) or conventional (not insured). For this blog entry, I’ll compare two high ratio products. Currently, the best interest rate on a 5-year variable is prime -.70 which currently translates into a fantastic rate of 2.00%. The best 5 year fixed is 2.59. That’s a big difference! In order to understand variables rates further, let’s take a look at the history of the prime rate. What has it done the past 10 years?

http://www.tradingeconomics.com/canada/bank-lending-rate

Looking at the above link, if you were lucky enough to have prime -.70 since 2009 you would have been a major winner! This means you would have been paying between 1.55% and 2.3%. People who took the risk were rewarded. Now don’t rush out and get a variable mortgage just yet. If prime were to go up 1% in the next year you would definitely be on the short end of the stick. If prime were to go up 1% two and half years from now you would break about even.

Now the real question is “Where is prime rate going?” There are several different opinions, some economist say we’re in for a rise in prime rate, others think it will stay relatively the same. The fact is no one really knows. Very few predicted the economic crisis we had a decade ago and those that did not make it public knowledge. This is a classic risk-reward scenario. Are you someone who likes to roll the dice? Or are you someone who buys extended warranty with every product. My advice is if you like to gamble go with variable or if you like to play it safe go with a fixed rate.

• Get to know your credit history. You can request a copy of your credit bureau from Equifax or Transunion anytime. It is recommended to check your credit bureau annually.
• Pay your bills on time each month. At least make the minimum payment. If you skip a payment it will affect your credit bureau negatively.
• Keep your credit facility balances low.
• Maintain a credit history. Lenders will look at your credit to see how long your history is, minimum 2 trades lines is good and in good standing.
• Get help. There are many experts to help including your mortgage broker. Call me if you need some guidance.

Ben Bourgeois
Dominion Lending – GoToBrokers
www.mortgagebyben.com
ben@mortgagebyben.com
780.9745400

Do you find yourself looking at realtor.ca dreaming about home ownership one day? Do you play with the mortgage calculator to try and figure out what can afford? Please allow me to walk you through the banks qualifying process.

Let’s assume you have good credit, are gainfully employed and filed your taxes for the past two years.  Generally speaking, lenders will look at your tax returns, look at how much debt you owe, what the property taxes are going to be on your perspective home, heating costs and if you’re looking for a condo –  50% of condo fee’s into are thrown into the equation. What do they do with all this information? When it comes to qualifying for a mortgage your gross debt service ratio or GDS can’t exceed 39% (Mortgage, heat, tax payments) and your total debt service ratio or TDS can’t exceed 44% (All monthly debt + housing expenses). To make things even more confusing there was a new rule put into place called a stress test. In a nutshell, the government wants to make sure people can pay their mortgage if the interests rates climb, so instead of qualifying people on what they are actually going to be paying, you are going to be qualified the government benchmark which is currently at a 4.64% interest rate. (If this is lower than what you are paying currently, call me immediately) I know this is all pretty darn confusing. Let me show you an example.

Betsy has a $60,000 income with $8000 credit card debt, $20,000 down payment. Ideally, she would like to have something that’s $300,000. Assuming she’s buying a house where heating costs are $100 per month and property taxes of $2500 per year. Under our current rules, she would qualify!

This is how it’s broken down:
GDS – 38.73%
TDS – 43.530%

Now if you have any questions on what you can qualify for please don’t hesitate to give me a ring, text or an email, we can go over scenario’s and put your mind at ease.

Your Mortgage Professional,

Ben Bourgeois
Dominion Lending – GoToBrokers
www.mortgagebyben.com
ben@mortgagebyben.com
780.9745400