Spruce Grove Mortgage Broker: Krista Rumberg
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First Time Home Buyer Incentive

When the federal budget came out earlier this year and the First Time Home Buyer Incentive (FTHBI) was announced, “I thought what a piece of garbage – that’s not going to help anybody!” Now that September second is here, I have had the FTHBI at the back of my mind while I am working on client’s mortgage applications, and I think I am changing my tune a little bit?

FTHBI: Thanks for the job security, feds!

It appears that the FTHBI may assist a small number of individuals who would not have qualified in the past and now they are qualifying for a mortgage – or giving them a bit more buying power. It’s not as easy to qualify for a mortgage as it was prior to fed’s implementing the benchmark rate (when Canadian’s need to qualify for a mortgage two percent higher than what they are paying or the benchmark rate – whichever is greater) but it’s a small step in the right direction. And by small step, I mean baby step.

I attended a learning opportunity on the FTHBI last week, as there has been very little published on how Canadians actually qualify for this program. Turns out you have to go to the National Housing Strategy website and fill out the application, sign it, and sent it to your mortgage professional.  We have to do some things on our end, as your broker, as does the mortgage lender – but overall it does not seem to be overly difficult to apply. Maybe, still, a bit taxing for consumers to understand.

This follows suit with this government, as the last several changes to mortgage rules have made it extremely confusing, to both mortgage professionals and consumers. I guess I should say thank you to the feds for giving me a bit more job security? There are still a lot of unknowns that will have to fall out in the wash on the FTHBI but again it’s a start.

The Biggest Unknown

Probably the biggest unknown is whether they are going to allow the FTHBI to work in conjunction with the spousal buyout program? The rules say that if you have gone thru a divorce, despite owning a home in the past four years you still qualify for the FTHBI (providing you meet the other qualifying criteria). In addition, you are allowed to piggyback mortgage insurer programs with the FTHBI. Therefore, I am inclined to say you can do a spousal buyout and use the FTHBI as part of your down payment.

But . . . there is also some wording that says down payment must come from savings, RRSPs, or gift . . . the missing word here that I would like to see is EQUITY. When you are taking over the matrimonial home from your ex your down payment is equity, not the three listed in the FTHBI.

I have submitted my first mortgage application combing the FTHBI with equity as down payment and we will see how this throws down? It’s the grey area that is not addressed. I’m not one to not challenge rules, so I’m happy to be one of the broker’s who has a challenging application submitted to the lender for approval, ready to argue for my client on Tuesday morning, if required.

The Numbers

Despite the fact that the FTHBI may be helping some people qualify, there are some things that consumers need to consider once they are into the program. It’s likely best to explain this via an example. Molly buys a “new to her home” using the FTHBI and her purchase price is 400,000. Therefore, her FTHBI is $20,000 which comes in the form of an interest-free loan (in addition to her $20,000 in savings). This loan is registered to her title in second position. The FTHBI needs to be paid back on sale or prior to 25 years, whichever comes first.

Let’s assume Molly wants to sell her home in ten years and she sells for $480,000. This means she will payback five percent which is now $24,000 (($480,000 – $400,000) x 5% = $4000 plus the original $20,000). However, if she sells in a depressed market and she sells for $331,040 she only pays back $16,552 (($331,040 – $400,000) x 5% = -$3,448. $20,000-$3448 = $16,552) So, despite the feds calling it “interest-free” – it’s not technically “free” as they get their share of your market increase if the economy goes in the right direction.

Drawbacks

In addition, you will see increased legal costs for both your purchase and your sale, as an extra lien will need to be registered and discharged. The FTHBI will also limit your access to a home equity line of credit as it is unlikely that a lender will be interested in registering their security in third position.

My Final Thoughts

Overall, I am interested to see how much this helps Canadians? I anticipate it’s likely to help lower-income, lower price point buyers outside of Toronto and Vancouver . . . so I’ll keep it as a tool in my mortgage broker toolbox and hope I can use it to my client’s advantage.

What Is Collaborative Divorce?

What is Collaborative Divorce?

I am a Collaborative Divorce Alberta Association professional that works with people through the association is helping find collaborative ways to separate and divorce.

Not all separations are “nasty” and sometimes people find that they need to go their own ways from each other. Through the collaborative divorce process there are professionals that have the same goal as you. They want to help you and your spouse reach a fair divorce settlement, based on your priorities and without the potentially huge expenses and stress associated with a settlement reached in court.

How can I help?

In the process of separation and divorce I work with families and their finances to keep family homes through spousal buyout and/or find mortgages that suit them in their new homes. We work together to find what is the best options for everyone.

It’s imperative to examine your finances to determine if you can comfortably afford to buy out your spouse. If you’ve decided to remain in your matrimonial home, but the mortgage payments, taxes, monthly bills and upkeep push you to your financial limit, the stress that this will put you under may not be worth staying put – even for the sake of keeping something constant in your children’s lives.

As a mortgage specialist who works with divorcing couples, I’ve adopted three key priorities to ensure I serve every client to the best of my ability, including:

  1. Operating with integrity by always ensuring my clients receive the best mortgage product and rate to meet their unique needs – both now and over the long term.
  2. Providing solutions, support and answers while navigating unchartered territory such as separation/divorce, which ultimately leads to financial independence.
  3. Keeping a positive outlook regardless of the situation at hand to help keep clients in a positive frame of mind while they complete their separation/divorce and split the matrimonial home.

Please contact me if you have any questions and I also encourage you to check out Collaborative Divorce Alberta Association for further resources.

Mortgage Broker Spruce GroveMortgage Broker Spruce Grove

Retirement With A Mortgage

There’s a chance you read the title to this article and thought “I’m a long way off from retirement”. That’s okay, chances are you know someone (maybe parents or relatives) who could use this information, feel free to pass it along.

If you find yourself in the position thinking about retirement and what options you have with your mortgage, you’ve come to the right place. As an independent mortgage broker, I can provide you with many more options than a traditional bank. You might be closer to retirement than you think, and a good mortgage can certainly help you along the way.

Although it’s ideal to have your mortgage paid off by the time you retire, that isn’t always possible. Especially in today’s economy. More and more Canadians are carrying mortgage debt into retirement, how well they do it relies on the options they have!

Let me outline some options you have:

Standard Mortgage Financing

Standard mortgages work if you’ve got a steady income, decent credit, and equity in your home. There is no reason you shouldn’t qualify for standard mortgage financing. This usually comes at the lowest interest rate and best terms. Even if you’ve already retired, some lenders use pension and retirement income to support your mortgage application.

Reverse Mortgage Financing

A reverse mortgage allows Canadian homeowners 55 years and older to borrow money from their home with no proof of income, no credit check, and no health questions. A reverse mortgage is a fabulous mortgage solution that has helped thousands of older Canadians to enhance their lifestyle.

Home Equity Line of Credit (HELOC)

A line of credit secured to the equity you have in your home is an excellent tool to allow you to access money when you need it, but not pay interest if you don’t. A lot of Canadians like the idea of rolling all their expenses and income into one account.

To figure out which option is best suited to you, contact me directly. Together we can assess your financial situation, put together a mortgage plan, and then see it through.

Questions on your mortgage, or want to compare your mortgage to what is currently available? Please email me.

Mortgage Broker Spruce GroveMortgage Broker Spruce Grove

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