Some financial advice is so oft-repeated that everyone takes it for granted: You shouldn’t bring debt into retirement. Debit cards are safer than credit cards. Older folks should invest more conservatively. As they used to say on Seinfeld: yadda, yadda, yadda.

The problem is a lot of that is bad advice. At best, it fit a bygone era; at worst, it was never right and is dangerous.

Click here for a list of favourite financial chestnuts courtesy of the Globe and Mail.

Questions on the right mortgage for you?

Contact The Angela Calla Mortgage Team

callateam@dominionlending.ca 604-802-3983

Fraud and investment scams abound at all levels of the real estate market – whether it be a contractor who charges hundreds of dollars for work not done to an “investment agent” who embezzles hundreds of millions.

 Protecting yourself can require a measure of vigilance and legwork, but it can also come down to exercising skepticism and common sense.

Click here for the top six real estate scams and how to avoid them from the Globe and Mail.

Have questions on a mortgage?

The Angela Calla Mortgage Team is here to help

callateam@dominionlending.ca 604-802-3983

The Angela Calla Mortgage Team is committed to giving you information in real time so you can use it to your advantage. By contacting us today to see what your options are under the current guidelines we can help you renew or refinance your current mortgage today before these policies come into place by years end. If you have questions on your mortgage, or for someone that you care about, please call or e-mail us today.

Stricter Debt Ratio Standards on the Way

If you’re a typical borrower, your debt ratio’s will largely determine if you’re approved for a mortgage.

For applicants who push the limits of qualification, those approvals have been tougher to come by. That’s a direct result of last year’s mortgage rule tightening, which imposed stricter debt ratio calculations (among other things).

And by year-end, those calculations will get even more conservative.

On June 27, CMHC issued new guidelines for calculating debt ratios and confirming income documents.

“Under current practice, CMHC stipulates standard formulas for calculation of debt service ratios but has not been specific as to how each key input is to be treated,” says CMHC spokesman Charles Sauriol.

These new guidelines will clarify that, and they become effective on CMHC-insured mortgages on December 31, 2013. (In practice, many lenders already apply them.)

These standards will apply to all insured 1-4 unit residential mortgages, regardless of the loan-to-value ratio. Uninsured (conventional) mortgages are allowed different policies, but most lenders will use the same rules for all their approvals.

Here are some of CMHC’s newly minted insured mortgage “clarifications” that will have the largest impact on your borrowing abilities:

• For variable income: Lenders must use “an amount not exceeding the average income of the past two years.” Variable refers to things like bonuses, tips, seasonal employment and investment income.
• For guarantor income:  A guarantor’s income must not be used in GDS/TDS ratios “unless the guarantor…occupies the home and is the spouse or common-law partner of the borrower.”
• Unsecured credit lines & credit cards: For these debts, “No less than 3% of the outstanding balance” must be included in monthly debt payments. Interest-only payments are no longer considered on credit lines. Furthermore, lenders must assess the borrower’s credit history and borrowing behaviour when determining the amount of revolving credit that should be accounted for in debt ratios.
• Secured lines of credit:  Lenders must factor in “the equivalent” of a payment that’s based on “the outstanding balance amortized over 25 years.” That payment must use the contract rate (of the LOC) or the 5-year Benchmark rate (V121764) published by Bank of Canada (if the contract rate is unknown). Again, interest-only payments are no longer allowed for debt ratio calculation purposes.
• Heating costs:  Lenders must now obtain the “actual heating cost records” of a property. When no such history is available, the heat expense used in debt ratio calculations “must be a reasonable estimate taking into consideration factors such as property size, location and/or type of heating system.” That’s why some lenders have now moved to a set heating cost formula, like:

         (square footage x $0.75) / 12 months

Compared to past methods (which entailed flat heating costs, like $100/month), the new guidelines can double or triple the heating cost that must be factored into debt ratios on larger properties, and reduce it on smaller ones.

It’s important to repeat that most of these policies are already being followed by most lenders. But there are exceptions.

Those exception-case lenders are commonly viewed as go-to sources when borrowers have tight debt ratios. These new guidelines are designed to minimize those “loopholes.”

All of this has come about, in part, because of Ottawa’s rule changes last July. At that time, the government fixed the maximum Gross Debt Service and Total Debt Service ratios for insured mortgages at 39% and 44% respectively.

Sauriol says that change “reinforces the importance for CMHC to ensure that debt service ratios provide the same measure of a specific borrower’s ability to service the mortgage debt, regardless of the lender submitting the application to CMHC for insurance.”

Courtesy of CMT

Angela Calla, AMP

Dominion Lending Centres-Angela Calla Mortgage Team

Host of The Mortgage Show Saturdays at 7pm on CKNW AM980

Phone: 604-802-3983 Fax: 604-939-8795

“An introduction to someone you care about is a big responsibility…it’s also the biggest compliment a client can give us & it’s not taken lightly. We pledge to treat everyone that is referred to us with the utmost respect & professionalism”.

www.angelacalla.ca

Reach my Team Chris Adkins & Denzil Anderson at 604-939-8777 & callateam2@dominionlending.ca

The Ottawa family who received a $10,000 cheque from an embattled rent-to-own business say they can’t cash it because the owner’s bank halted the payment.

Chantal Scott took the $10,000 cheque — delivered to her door on Tuesday evening by company owner Jean-Claude Lacasse — to a Laurentian Bank of Canada branch on Wednesday afternoon.

Full story here:

http://www.cbc.ca/news/canada/ottawa/story/2013/07/03/ottawa-rent-to-own-fraudulent-cheque-bank-certified-chantal-scott-lacasse-golden-oaks.html

We alwaya reccomend these fundementals if you are renting and looking to buy.

1. Practice homeownership- calculate what it would cost to own and make that payment every month, with the remainder over and above the rent going to your personal savings account.

2. Have the savings portion go into your savings via automatic withdrawl, take advatage of an rrsp program if your company offers one as that will be off of pre-tax dollars.

3. Know your credit and how to maintain the best score.  Most rent to own victims are individuals hope to restore their credit and that’s why that option is considered and appears attractive in the first place. Unfortunitaly a rent to own does not help restore or esablish credit.  Renting to own puts you not in control of your own money.

If you would like to understand your options to purchase a home or would like to calculate a budget, contact the Angela Calla Mortgage Team directly to help you at 604-802-3983 or callateam@dominionlending.ca

Thank you for visiting

These days, getting hitched and buying a home seem to go hand in hand. But if you want your wedded bliss to last, avoid these three classic mistakes.

Top three mistakes newlyweds make in their real estate purchases:

1. Focusing on the interest rate

Who can resist an ad that promises you’ll only pay 2.99% over five years for a fixed-rate mortgage? Very few, it seems. But the lowest interest rate doesn’t necessarily mean the best mortgage for your situation, says Angela Calla, an accredited mortgage professional with Dominion Lending Centres in Vancouver and host of radio’s The Mortgage Show. She says such a mortgage likely has restrictions and penalties. Younger couples may need a more flexible mortgage – one that allows them to pay more when they have more and less when a spouse is on maternity leave or facing job loss, for instance.

While the payments required to carry a hefty mortgage are lower than, say, a decade ago, Calla says the strategy should be to repay the debt as quickly as possible. That means paying more money towards the mortgage than you technically need to. This strategy will pay off greatly when interest rates return to more normal levels. “Today’s interest rates are a gift and young couples have a great opportunity to pay off a significant part of their mortgage,” she adds.

But are they doing this? By and large, the answer is no. Many newlyweds tend to lack an overall plan for paying off the mortgage, notes David Field, a financial advisor with WSC Insurance Group in Oakville, Ont.

2. Not talking about their finances

Picture it: A young couple goes out for a Sunday drive and spots a new housing development in a trendy area. They see the open house signs and decide to take a quick look, since they’re in the neighbourhood anyway. Presto! They’ve found their dream starter home. Calla hears a version of this scenario more often than she’d like. The problem is, couples haven’t run the numbers ahead of time. “A lot of times, they don’t take the time to get preapproved for a mortgage before looking. They don’t even understand about each other’s credit situation,” she says. “One of them may not be in a financial position to even purchase a home. That can put a damper on their plans moving forward.”

3. Not factoring in other expenses

Young couples definitely know the amounts of their mortgage payments for the next three to five years. But when Field asks his newlywed clients about their property taxes, home insurance policy premiums and how much they are setting aside for emergencies, details get scarce. Many couples’ budgets are more mortgage-heavy than they should be. But taxes and insurance can rise significantly each year, and that translates into a lack of cash flow.

The lesson here? Make sure you are saving properly for retirement and emergencies, then see how comfortably your mortgage, utilities and property taxes fit into what’s left over. “If your cash flow is too tight, if something happens like losing your job or having a new baby, you are really constrained,” says Field. “A new marriage has its ups and downs as it is; adding money problems to the mix really affects the marriage.”

5 year fixed interest rates have bumped up over 70 basis points in just  2 weeks, making the 10 year the best opportunity for borrowers to protect themselves.

With mortgage rates at all-time lows, it seems longer terms are making a comeback. It turns out that fashion isn’t the only thing that comes back into style!

In fact, 10-year fixed mortgage rates have never looked so sexy. If you owned a home in the 80s or 90s, you may notice the 10-year term comeback!

 Following are three reasons to consider a 10-year mortgage term:

 1. After 5 years, you only have to pay three months’ interest to get out of the mortgage. This is currently the lowest penalty available to for a fixed rate – much more attractive than facing a much higher interest rate differential (IRD) penalty!

 2. You don’t need the equity out of your home for your next purchase as you can buy again with a 5% down payment. For instance, if you purchase with 5% down, your property would have to go up over 25% for you to get equity to use as a down payment for a second home, which is not likely in five years.

But, you can turn your current condo into a rental and buy your next home with 5% down (with a combination of savings or a gift). Rental mortgages usually require a 20% down payment, whereas primary residences typically require just 5% down. Purchasing a condo to live in until you’re ready to buy another home, and then renting out the condo, is a great way to become a real estate investor without having to come up with a 20% down payment.

 3. If you’re on a fixed income, taking advantage of a longer term fixed-rate mortgage can definitely be beneficial. Currently, with our historically low interest rates, a five-year fixed rate is around 3.19% and 10-year is around 3.99%. So, if after 5 years rates have risen to 3.8% or higher (which is very likely), you would have been ahead taking the current 10-year.

Instead of guessing how much longer rates will remain at historic lows, if you’re on a fixed income, you know you’ll be paying the same rate for 10 years. And, chances are, after 10 years are up, you will be in better shape financially and have more equity in your home.

The return of the solid 10-year means you have options. It may not be the best option for everyone and the market may change in a few weeks to make it less attractive. I will show you how all the products apply to you to ensure you receive the best product for your goals!

Thanks for visiting

Angela Calla, AMP

Dominion Lending Centres-Angela Calla

Host of ” The Mortgage Show” Saturdays @ 7pm on CKNW AM980

Phone: 604-802-3983 Email: callateam@dominionlending.ca

* rates are subject to change and final approval

Marriage is such an exciting milestone that offers so much hope for the future by uniting two partners to establish roots together. I have found that it’s important to consider the following when setting out on the marriage journey to ensure your financial house remains in order, since financial strain can put a lot of pressure on relationships:

 1. Your partner’s credit history/spending style. When you’re considering buying a home together, it’s important to know what you’ll be dealing with even before you decide to get preapproved for a mortgage. If you need to fix up your credit, for instance, knowing ahead of time can save lots of hassles down the road.

2. Setting up title. This may depend on your credit score as well, and also spark the conversation of your comfort level of equally being on title (meaning both borrowers will be using our first-time homebuyer’s status, provided you qualify). Another option is for one borrower to appear as a guarantor on the title (meaning the other spouse can use the first-time homebuyer status next time and have a potential future savings of $6,500). 

3. Down payment. If part of your down payment is a gift, some family members don’t want to give it unconditionally. They often want something in writing to ensure their family member gets back the gifted amount if you don’t happen to live happily ever after. If this is the case, you want to discuss this in advance so it’s one less discussion to have when purchasing a home together.

4. Focusing on rates. Regardless of your marital status, rate fixation is a trap many Canadians fall into. The right mortgage terms play the biggest role in becoming mortgage-free faster. Borrowers don’t want the lowest rate but, rather, the lowest cost of borrowing and transparency. We even help you with future insurance portability (mortgage and life). Failing to discuss your options with an independent mortgage broker and looking at more than just rate can easily mean you will owe more at the end of your mortgage term.

When you work with an unbiased mortgage professional our service is free and we are here to help you throughout the ever-changing market and your lifecycles to ensure you are presented with the best possible mortgage options. Building the best foundation by thinking ahead will help you stay ahead financially and minimize financial stress on your relationship.

Do you know someone who should have a discussion with our team about purchasing a home? Please forward this along to them and introduce us in an email, so we can help them build a plan!

Angela Calla, AMP

Dominion Lending Centres-Angela Calla

Host of ” The Mortgage Show” Saturdays @ 7pm on CKNW AM980 Phone :

604-802-3983 Fax: 604-939-8795

Email: acalla@dominionlending.ca

www.angelacalla.ca

Have you ever wondered if there was a way to get a mortgage larger than the purchase price of your home to do some renovations?

Do you want to do some renovations on a property you would like to purchase and don’t have the money or think you can afford to renovate?

The answer for you may exist in the Purchase Plus Improvements Program. This is a product available through the Angela Calla Mortgage Team where you can purchase a home and add 10%-20% or a maximum amount of $40,000 to your mortgage in order to improve the quality of your home at today’s record low rates when you’re making less than a 20% down payment.

How it works:

Improvements cannot exceed 10-20% or the lesser value of $40,000 of the property’s value or as improved. You would have to qualify for the full mortgage and improvement amount, and the advance would be given to you in one lump sum after the work has been completed. The extra funds are held in trust with the lawyer until the lender approves the appraisal or receipts, depending on the lender’s policy, to confirm the work is complete. Two to three quotes from a contractor will be required by the lender to review for approval, and the work should be completed within 90 days (some lenders will allow for a longer timeframe). Each case is different and we will help you every step of the way!

4 top reasons to consider this product:

1) You will not be accumulating outside debt at a higher interest rate, keeping with an affordable budget for buyers. Borrowers who use a line of credit or credit card would have higher carrying costs, when compared to fully discounted mortgage rates.

2) Helps quickly improve your new property’s value.

3) The appraiser/lender has to confirm the work has been completed, but it is not essential to confirm an increase in value of 20% for some lenders.

4) Lenders will generally have a policy requiring the work to be completed within 90 days, but some lenders have different timelines.

What renovations apply:

Different lenders have different policies, but most lenders approve fixed assets (eg, countertops, floors, paint, etc).

Understanding the numbers:

It’s important to keep in mind that the banks would prefer for you to pay for renovations via a line of credit or credit card as they earn much more money off these products. If you consider that a payment on a $10,000 loan not included in your mortgage works out to $300 dollars a month and $10,000 within a mortgage is approximately $50 a month, if you qualify, this product can save you $250 a month.

The Angela Calla Mortgage Team is always here to ensure you have the best product available for your needs, while saving you the most amount of money throughout the life of your mortgage.

Worried about the stress of living through renovations? This video is worth watching, FairTradeWorks make renovating easy! http://vimeo.com/67174441

 Angela Calla, AMP

Dominion Lending Centres-Angela Calla

Host of ” The Mortgage Show” Saturdays @ 7pm on CKNW AM980 Phone :

604-802-3983 Fax: 604-939-8795

Email: acalla@dominionlending.ca

www.angelacalla.ca