What is the purpose of Private Lenders?

Ask Angela

Question: What is the purpose of Private Lenders, if you already have Banks and what you call Mono Lenders?

Answer: Private Lenders are becoming more important in the mortgage world, as the Finance Minister tightens mortgage rules.

Here is a break down of the functions of various mortgage lending institutions:

Banks:  some banks will give mortgage brokers lower interest rates for the clients. They have a limited amount of options and products. Clients have to exactly fit with their products. The Bank can only offer their own products, options and services.  The bonus when dealing with a bank is that you can have all your banking in one place, ie credit cards, bank accounts, car loans and mortgages. Very Secure

Mono Lenders:  Usually on line and limited amounts of offices. Only product is mortgages. Pays commissions to brokers for clients.  Low over head.  Competition among the many Mono Lenders, keeps interest rates low. Each have their own niche. One may accept lower credit scores while another may have better prepayment options.
Governed by the same rules that all Canadian Banks must follow. Very secure.

Credit Unions:  They are community based, so may finance a project that no one else will if they can see the value in improving the community.  Credit Unions are based in the community, they will look at funding a mortgage, because they know the community and believe it is non risk, while other lenders in major cities have no idea what the community is like. There motto is 'if it makes sense they will finance it'  Great for small town lending, where the other bigger lenders will not lend because of the population limits.  Very Secure.

Private Lenders: More and more Canadians are not fitting in with the strict rules for mortgages. Private Lenders are becoming more popular.
There are a multitude of reasons why borrowers seek to obtain financing from private lenders.
These include:

• greater restrictions on traditional bank and trust company lending requirements, such as loans based on land value rather than borrower income;
• borrower’s that have a non-salaried income and do not therefore satisfy financial institutions’ structured lending guidelines;
• urgency to complete a transaction; and
• borrower’s with poor or no credit history rates
• construction loans

Private lenders vary from individuals loaning small amounts of money, either directly or through their RSP plan, to mortgage investment corporations that not only lend to individuals for personal borrowing, but also finance land acquisition and pre-development phases of residential construction projects.

As you can see there are many choices to choose from and your mortgage broker narrows down the list, to get you a well planned mortgage that will be truly unique and in the best interests for you.

Always, call a mortgage professional, to get a free no obligation quote.  It can only save you money.

Questions or comments-- akroemer@mortgagegroup.com
                                           250-650-4182

Ask Angela- Pre Approvals

Ask Angela- Pre Approvals

Question: I am so stressed out right now. Two months ago my husband and I, received a pre-approval to buy a home. We found one in our price range and went to our mortgage person. Our application was denied because we bought a brand new car a month ago and have payments on the car. What can we do?

Answer: When you get a pre approval it is for that moment, if your finances stay the same or get better (income raise), the pre approval should be good in most cases.
Pre approvals are just a estimate of what you can afford and whether or not you could qualify for a mortgage, based on the information you have disclosed. But, when you change your financial picture, as you did when you took on car payments,your application needs to be updated with the new information and sent in for another pre approval. With the new pre approval, you will find out how much you can spend on a house.
Unfortunately, you will have to search for a new house, less in value, or increase your down payment or pay off the car, to put you back where you were.

OTHER REASONS WHY YOUR APPROVAL WILL GET DENIED:

Looking at the main causes of home buyers going from pre-approved to declined during the mortgage underwriting process, you will find a number of reasons, it can fall apart. Disclose everything to your mortgage broker and when the lenders come back with questions, be prepared to show paper work and a full explanation. There is a fine line between not disclosing and fraud and since the Lenders do not know you personally, it may be hard for them to tell what your intentions were. Mortgage fraud is expensive to the lenders and they want to make sure they are not taking on any undue risk.

Follow these steps for disclosure and your pre approval should get approved:

- owing back income taxes to the government, most people do not disclose this to tier mortgage broker, because they never think about it.

- shopping for additional credit during the mortgage loan process. Many borrowers believe that once they've obtained the initial pre-approval, they are all good, their credit will not be checked again, leaving them free to take on new debts. Well, 99% of lenders today will recheck your credit the day before closing, looking for new debts that could cause you to no longer qualify for the home. Mortgage brokers should be telling their clients not to take on any more debt until the purchase of the home is done.

-undisclosed family relationship with your employer. They're different rules for home buyers who work for a family member. When you work for a family member, there's a higher chance of fraud because that family member may be more willing to lie about how much you earn or your role in the company. Always disclose this to your broker, especially if you are paid more because of family ties, The lenders may look at the average wage in your occupation and if yours is substantially higher they will look deeper or because it was not disclosed, they may not want to do business with you. Too much risk.

- having a relationship with the seller of the home. When a home buyer and seller have a relationship, there's more room for side deals when it comes to down payment and inflating the value of the home. This makes lenders nervous. You see, lenders rely on an arm's length transaction, where the buyer and seller do not know each other, to make sure the buyer has done their due diligence in shopping for the home.

-making large undocumented deposits into your bank accounts. Most mortgage loans require 90 days worth of Bank Statements. So, if Uncle Fred gives you a large amount of money for your down payment because you are his favourite niece or nephew, get him to sign a gift letter to give to your broker, there must always be a paper trail for your deposited funds.

-a drastic change in your employment. This could include changing positions, changing employers, having your compensation structure change, or losing your job altogether. Changing jobs while you're in the middle of the mortgage process can make things more complicated and ultimately affect the credit decision. The lenders are looking for employment stability.

- Owing property taxes on any other property you own.

-not disclosing mortgages that are owed to private individuals.

-failing to disclose child support or alimony payments you're required to make

-failing to disclose or attempting to hide any other pertinent information.

- always be transparent with the lender through your mortgage broker. If you have forgotten a payment, like Dell or Easy home make sure you tell your broker, so they can update your application.

For questions or comments email akroemer@mortgagegroup.com

Is Your Bank Baiting You With Low Rates?

 

 

Is your Bank baiting you with low rates? Always get a second opinion with a mortgage professional. I have the rates and the options. Second opinions are always no obligation, free and I will show you how to save thousands of dollars on your mortgage with the options alone.
akroemer@mortgagegroup.com

How to Trash Your Credit Score in a Hurry

www.kroemermortgages.com

This is certainly a tongue-in-cheek article, but this is precisely what some people do to their credit without knowing how it  lowers the scores.   As mortgage brokers and mortgage professionals in the Comox Valley.  I am constantly telling my client what not to do, but I believe this article tells why in the best way adding humour to a dry and serious subject most people do not want to talk about,


You don’t need a good credit score, right? After all, do you really need lower interest rates? Plus, lower insurance rates are kind of over-rated anyway. There is no need for a mortgage or car loan too. Any mortgage broker or mortgage professional can tell you how to increase your credit score, but have you been told how to trash your credit score in a hurry?

If you are ready to really take your credit score down a notch or two, here are some solid ways to take your rating to new lows:

1. Pay Late
One of the best ways to bring your score down in a hurry is to pay late. Since payment history accounts for the largest chunk of your credit score (35%), paying late can be one of the best ways to drop your score.

Even better is if you can skip a payment altogether. Skipped payments can weigh on your credit score like few other individual items. It’s also worth noting that an account doesn’t have to be credit related in order to affect your score. Repeated missed payments or late payment made to utility companies or landlords can result in reports made to the credit bureaus. And never underestimate the power of ignoring payments altogether and having your account sent to collections.

Bigger payment issues, like foreclosure or filing for bankruptcy can result in a 200 to 300 point drop in your credit score. Now that’s the big time.

2. Add More Debt to Your Budget
Trash your score

The more debt you use, the lower your credit score. With credit utilization accounting for 30% of your credit score, you can do some serious damage just by running up the credit card bills. If you are squeamish about paying late or missing payments, you can live beyond your means and just add more debt.

If you begin using more of your available credit, your credit score will reflect that. Someone with a good credit score will try to keep credit utilization to no more than 30% of what’s available. But if you want to keep your score low, you need to pile the debt higher. Carry a balance from month to month, paying only the minmum or a very little more, and you can work on building up your credit utilization.

3. Ignore Your Credit Report
You can’t improve what you aren’t aware of. One of the best ways to stay in the dark about your situation, and to keep your credit score low, is to ignore your credit report. Your credit report is a history of your credit related transactions. However, sometimes the information is inaccurate. This inaccurate information can impact your credit score.

Now, if you’re committed to keeping a low credit score, you don’t need to even look at your credit report. No reason to dispute errors if they are helping keep your score down. Plus, ignoring your credit report can leave the door open for identity thieves. When one of these scammers open an account in your name, that can be a great help in bringing down your credit score.

 

 

4. Apply for Lots of New Credit
If you are running out of room on your current credit cards, you might consider getting a new credit card. Applying for lots of new credit can be a great way to bring your score down a little bit. It’s not as dramatic as missing payments, but this strategy still has its place.

When you apply for a lot of new credit, it can appear that you are trying to run up your balances. Several hard inquiries into your situation in the space of a few months can lower your score a little bit. Soft inquiries, like those for “pre-approved” offers won’t bring down your score, though. If you really want to create maximum impact, you need to get out there and apply for more credit.

Applying for new credit card can just take a few minutes, most big box stores have people set up to take your application.

 

5. Go Get a “Shady” Loan

The types of credit accounts that you have only account for about 10% of your credit score. However, every little bit helps when you are trying for the lowest possible score. One way to ding your credit a little bit more is to get a “shady” loan.

Payday loans and car title loans are valued differently from more conventional loans from respected lenders. These types of loans, along with sub-prime credit cards and cards from retailers, can weigh on your score.

Note- Car title loans is a loan against your car at places like pay day loans. Get a loan in less than a hour using your car title. |It is not the loans you get from a car dealership.


by Miranda

Mortgage Planning- Now And The Future

Ask Angela

Question:  Mortgage Planning, what do I need to know about planning a mortgage?

Answer: There are several steps to mortgage planning. I have outlined the steps briefly, please connect with me for any questions.

1.  make the decision you want to purchase a home

2. talk to a mortgage professional- get a pre approval on what you can afford now.
 Also, look into the future and discuss with your mortgage broker, if they haven't already asked you, what events may be happening in the next 5 years.  Will there be more children, will you retire, will you lose your job because of shut downs, will there be a sickness that will cripple the income?

Some life events you cannot plan for, but other events you can.

With the events you can plan for discuss with your broker.  Right now you may be able to afford a much more expensive house, but if you should start having children, or retire soon the payments may  not be affordable.

If you should lose your job or have an illness that will lower your income, Buying insurance may cover you until you are back up on your feet.

3. put a plan into action on what you need to do to purchase a home.

4. execute the plan, whether it is saving for a down payment, finding the right realtor or finding the right home.

5. now it is mortgage time. You have covered yourself as best as you can.

6. You now have a home.

Have Questions?
Want more information?

Connect with Angela at akroemer@mortgagegroup.com

Bank Rates vs Mortgage Broker Rates

 

Ask Angela

 

Question:  My bank just gave me a sweet deal.  The same rate as a mortgage professional quoted. Should I take the sweet deal my bank offered?

 

 

Answer:  With the limited information, I can give you general information on what to look for.

 

1)  What options came with the banks' deal?

 

2) Will the bank give you good prepayment options? Only once a year, anytime or none at all?

 

3)  What will the difference be in penalty calculations? The banks have higher posted rates which is the rate they use for penalty.

 

If you are not sure of any of the above, ask your bank.  Get your mortgage professional to figure out the difference of any of the above scenarios.

 

You may have a good deal or you may have a deal that will not be a sweet deal in the end.

 

Mortgage professionals always will give you free unlimited, unbiased quotes. 

 

Most people these days sign up for a 5 year mortgage, but need to change their mortgage before the 5 year mark, paying thousands in penalties.  It is much better to pay less than more.

 

Call for a mortgage consultation  250-650-4182

 

akroemer@mortgagegroup.com

 

 



Looking for a 2nd or Private Mortgage?

Can't qualify for a traditional mortgage? If you need a second mortgage, or private financing, call me today.

With all the mortgage changes over the past few years, its becoming more and more difficult to obtain a mortgage.

If your lender's told you they won?t renew your mortgage, you need extra funds and have equity in your home, or you need short term financing call me today.

Reasons for needing a second or private mortgage may include:
-Low credit score
-Prior bankruptcy
-High debt servicing
-Current lender won't renew your mortgage
-You're buying a home and can't get the amount mortgage you need
-Your home is being foreclosed
-You need some quick financing

For questions please call or email Angela Kroemer, Mortgage Professional with TMG The Mortgage Group Canada Inc.
250.650.4182
akroemer@mortgagegroup.com

or visit KROEMERmortgages.com

April 1-Switchback to GST/PST- Housing Market Effects?

 On April 1 2013, British Columbians will see the switch from HST to GST/PST.  Is there any savings for home buyers to wait until April 1 2013?

This is what is being said about the switchback to GST/PST:

-The switch back to GST and PST has been months of headaches for B.C. brokers, and an unwelcome brake on new home buyers waiting for the April 1 deadline.

-People buying new homes are holding off until April 1, so they can save on taxes. There is a savings to be had on new home construction.”

-B.C. homebuyers are waiting until April 1 to buy and save money, when that province’s HST reverts back to separate GST and PST.

 -The builders have been seeing this too,  adding that the concurrent cooling off of the once red-hot west coast housing market has contributed to a quiet winter for brokers.

But another side effect of the return to the GST and PST is the mountain of new paperwork and accounting.

 

What will be the savings?

The province’s harmonized sales tax is 12 per cent, consisting of 7 per cent provincial sales tax and 5 per cent goods and services tax. Given the option to pay 5 per cent instead of 12 per cent on a home worth hundreds of thousands of dollars, homebuyers are waiting the next few weeks – and delaying the usual spring bloom of business for brokers.

 

Ask Angela- Buying a Home in the US

Ask Angela

Question: While I was surfing the web, I came across a website, something about buying a home in the US and you were featured as one of the mortgage professionals, but of course when I have time to read about it, I can't find the site. Can you please send me that site.

Answer: This site is www.canadabuysouth.ca .
It was started to help Canadians find and buy property in the US or International(soon to come). The website is still growing, with the additions of international Realtors and financing.

It is very helpful for anyone who wants to source out a home in the US or internationally. Vacation home buyers, rental home buyers are eager to find the foreclosures in the States.

How do you find a Realtor in the States to help you find what you are looking for? You go to Canadabuysouth.ca.

How do you get the financing for the home. You go to Canadabuysouth.ca and find a mortgage professional for your province.

You can also contact me, tell me where and what you are looking for, I can introduce you to the Realtor that will look after you.

This website is unique as it brings everyone together in one place, with a common goal of helping you with a real estate purchase in unknown territory.

Did you miss the RRSP Deadline? Pay Down Your Mortgage Instead.

Making an extra payment on your mortgage is money in the hand, says Don Pittis. It's a safe, tax-free investment with a guaranteed rate of return. (iStock)

Did you miss the RRSP deadline?

That might not be a bad thing.

Pay Down Your Mortgage Instead.

In a volatile market, a mortgage is a safe investment with a guaranteed rate of return

Gosh, what an awful time to have to invest in an RRSP. Not that I'm saying don't do it. Just commiserating.

But on the bright side, that means there is finally something really good about being burdened by a mortgage. And it doesn't matter whether house prices keep rising slowly, shoot up in a bubble or if the bubble pops and they move in the other direction.

Let me explain.

Rule No. 1 of investing in RRSPs is "Don't lose your money." Essentially, there are two ways to win from an RRSP. The first is a straight bet that you will one day be poorer than you are now. The other is a tax break on your sheltered earnings.

 

 

The RRSP advantage

The first advantage of an RRSP reminds you of the old life insurance joke: "You bet you are going to die. The insurance company bets you are going to live. And you hope they win."

In the RRSP case, you hope you will get richer and richer as you get older but are betting that you won't. You are betting that, with a lower income in retirement, you will pay less tax on your sheltered savings when you pull them out of your RRSP account than you saved on your taxes when you put the money in.

The second major advantage of a tax-sheltered savings plan like an RRSP is that compound interest and capital gains can accumulate tax-free between now and retirement. If the investment shrinks, all you are doing is sheltering your losses. And in a tax-savings vehicle, that's crazy, because you don't pay taxes on losses.

The trouble is, right now, "Don't lose your money" is not such an easy rule to follow. Not with any certainty.

 

 

Safe vs. risky choices

In general, there are two kinds of RRSP investments. Safe investments that pay low interest and risky investments that may fall in value. Currently, neither is a sure thing. The safest investments — like GICs and the best-quality bonds — pay very low interest rates. That means safe investors suffer from the "real rate gap."

Real rates are not something we talk about a lot because during times of moderate inflation, they don't really affect our daily lives. Especially for working stiffs. You earn money, then you spend it. And in general, while prices rise over time, incomes rise at about the same rate.

But when you are tucking away cash with the plan of spending it 20 years from now, suddenly, everything changes. Real rates really matter.

 

Losing money while you save

The real rate means the difference between what your money will buy now and what it will buy a year from now. To find out whether you are winning or losing on your investment, you calculate how much you earned in dollar terms and then subtract the rate of inflation.

Right now, short-term GICs are paying well below the annual rate of inflation. Longer-term GICs pay a little more, but if interest rates rise, you will likely be stuck well below the rate of inflation over the investment's term. The final result? Safe investments are losing you money.

So, what about putting your money in stocks? Odds are, in the very long term, they are going to go up. But clever people are warning that stock returns are not going to be good over the next decade.

"You may keep up with inflation, but not much more," wrote John Coumarianos in a recent commentary for the Wall Street Journal's MarketWatch website.

Worry-free investment

If you have a mortgage, rather than choosing between a pittance and a nerve-wracking risk, you have a third choice. You can make an absolutely safe, tax-free investment with a guaranteed rate of return by paying off your mortgage.

Elsewhere in this special series on retirement planning, there is a warning about relying too much on real estate to fund your retirement, and that is a perfectly valid piece of advice.

Certainly, it is best to buy a house that you can afford. And, of course, it is always possible to sell your house and buy something smaller, using the difference to pay down your mortgage. But if you already have a mortgage, there is only one way out: you have to pay that money.

Also, the money you owe on your mortgage does not change with the value of your property. Whether the value of your house doubles or falls by half, the money you owe on your mortgage will always be with you. In most parts of Canada, even if house prices tumbled enough that selling your house would not cover the cost of your remaining mortgage debt, you would still owe the balance.

All this means that if you have a big mortgage, at RRSP time, that makes you a very lucky person.

The profits of paying it off

All the banks have mortgage calculators.

Every mortgage is different, and you can use the calculator to find out your own rate of return, but here is one example:

If you add a one-time extra payment of $5,000 during the first year of a $200,000, 25-year mortgage with a four per cent interest rate, it shortens the length of your mortgage payments by an entire year. In other words, a $5,000 pay-down in the mortgage earns more than $12,600 in tax-free cash that the mortgage holder would otherwise have to pay.

In the current economic climate, homeowners with a mortgage are the lucky ones, says Pittis, because they can delay the difficult decision of where to invest their hard-earned retirement nest egg. (Bruce Reeve/CBC)

If you have a four per cent mortgage, it means you are effectively getting a safe and reliable four per cent on your money — and potentially more if rates rise, which they are likely to do since, as these historical charts show, mortgage rates are already hovering around a 40-year low.

    

I say this pay-down "earns" — rather than "saves" — you money, because unlike what you "save" by buying a dress or suit jacket on sale, this is real money in your pocket. For every year you reduce your mortgage, it is like being (in the case above) $12,600 richer, and since you are not used to having it, you can pour that cash into a tax-free account.

The down side? Paying down your mortgage is only a temporary solution. Paying extra cash on a mortgage every year makes it disappear fast. The more you pay, the sooner you will have to make the difficult decision about where to invest your hard-earned retirement nest egg. RRSP or TFSA? Safe investments or stock?

But for now at least, if you have a big mortgage, you are one of the lucky ones.

By Don Pittis, CBC News

Posted: Jan 4, 2013 5:13 PM ET

 

3 Home Buying Clauses to Be Careful With

 

No matter how much you want that home, don’t drop these three important buying conditions.



 Homeownership has always been touted as the sure way to financial security.


No matter how anxious you are to own your own home, don’t rush the transaction. If you’re feeling pressured to make an immediate offer but haven’t taken the time to become familiar with the local market, you won’t know if you’re getting good value for your money. Worse, you may be tempted to do something not so smart in your emotional desire to "win” a bidding war. Take a breath.

 One of the conditions that’s quickly excised is the "financing condition.” Hey, you got a pre-approval, right? You don’t need that conditional on financing clause, right? Wrong! No matter how much you want that home, no matter how sure you are that everything will be fine, don’t do it.

Pre-approvals come with the proviso that they are financing approvals in principal only; they can be revoked by the lender if they are perceived to be a bad decision—if your circumstances change, or if the house appraisal is lower than the purchase price. And that’s why the "conditional on financing” clause is important.


Another clause you should always include is the "conditional on sale of existing home clause,” which eliminates the likelihood that you’ll end up desperate to find a buyer for your home because you’re having to carry two mortgages since your old haunt hasn’t sold yet. If you have to carry two mortgages for three or four months, you’ll be motivated to accept less than your house may be worth.

And don’t skip the "conditional on inspection” clause or you might end up with a house that’s falling down around your ears. Don’t let desperation to buy that house overcome your good sense. Ignoring the potential problems inspections are designed to ferret out can be horribly expensive.

Buying a home is a complex process. Don’t rush into it and don’t rush through it. You’ll likely have to live with your decision for a long, long time. Talk to some friends and family who have bought recently and try to get a feel for the process. Pay attention to the details. And ask lots of questions. The more you know, the better a homebuyer you’ll be.




From Gail Vaz-Oxlade

kroemermortgages.com