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  #11  
Old 2014-03-27, 10:04 AM
MortgageGuy MortgageGuy is offline
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Cool rental property question...

I was asked the following question in the Ottawa forum...
Hi Dan,
Just curious, how does someone go about buying another house that they would want to use as a rental income? For the minimum 5% down payment, do you just use your house as equity or do you need to get the minimum 5% down to ensure you could buy to do that?
I'm interested in extra money in my pocket and since I don't want tenants living with me I've heard owning a rental property is another good way to make that extra money that would in essence pay off your mortgage.


The key here is that you are purchasing a “rental property” not a principle residence, therefore you are forced by current rules to put in 20% down payment.
There is no flexibility here. No bank can lend over 80% of purchase price without the mortgage being insured through CMHC, Genworth or Canada Guaranty. And the insurers have been regulated that they are not able to insure rentals over 80%. Thus to purchase a rental property that will not be occupied by you, anything less than 20% down payment is NOT permitted. You can still purchase a duplex to owner occupy one unit, and rent the second unit up to 95%.
The only exception is purchasing what CMHC calls a “second home”
CMHC Second Home
“At initiation, the property that secures a CMHC insured mortgage loan must be intended for occupancy at some point during the year by a borrower; or a relative of the borrower on a rent free basis.
Lenders must confirm owner occupancy and maintain the confirmation on file.”
No rent can be used in the qualifying of the purchaser. This product is NOT meant for a cottage, CMHC has a specific product for cottages.
The perfect use of this product would be in the purchase of an apartment or house for your son/daughter while going to university in another city.
But this is the only scenario that CMHC will finance up to 95% when it is NOT your principle residence.
It IS possible though in either the second home or rental scenario to borrow the down payment from a secured L/C on your existing residence whether it be 5% or 20% down.
Hope this answers your question.
Dan
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Dan Faubert
Ottawa-Carleton Mortgage Inc.
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dan@mortgagemoney.ca
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  #12  
Old 2014-03-28, 09:12 AM
MortgageGuy MortgageGuy is offline
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Default Sub 3% 5 yr fixed mortgage rates...

So as many of you have heard, lenders are again throwing around the 2.99% 5 yr rate. If only the fine print was as loudly advertised. Here are some of the clauses.
“Prepayment charges will apply. Full repayment before maturity can ONLY be made IF YOUR PROPERTY IS SOLD to an unrelated purchaser at fair market value or if the mortgage is renewed or refinanced into another BMO mortgage product.”
“The penalty on the Low Rate Basic mortgage is 3% OF THE MORTGAGE BALANCE or IRD”
“The Low Rate Basic Mortgage can only be ported on a straight port, YOU CAN'T DO AN INCREASE AND BLEND ON A FUTURE PURCHASE.”
“Lender provides NO BRIDGE FINANCING”
“Sorry we don’t offer No Fee Transfers”, or “you must close in 30 days”
The one time you need a feature and you don’t have it, is the day the savings in rate will haunt you. Oh I’ll never have to pay my mortgage off during term- SURE, NO ONE EVER GETS DIVORCED. Just one example of life circumstance that you can’t control, and one of the clauses in the BMO mortgage that could prevent you from allowing a partner to take over the matrimonial home.
Increase and Blends are not allowed- well forget about buying another home during your mortgage term- you’ll just have to wait till your term is up before you move, NONSENSE.
I’m all for everyone getting the best rate(and saving money), but to give up important features in a mortgage, or to accept restrictive clauses for .05% or .10% to me, makes no sense. On a $400K mortgage, even at .10 % lower in your mortgage rate, it only equates to a $22 per month lower mortgage payment. $1,320 in payments over the 5 years. An insignificant savings if anything happens in your life that any of the above clauses or restrictions causes you to be impacted by them.
So PLEASE, remember that rate is NOT everything. Ask questions and know what you are signing up for at all times. Don’t just listen to the news, you rarely get the fine print. I wouldn’t put family into these mortgages.
So if you want 120 day rate hold, full privileges, no restrictive clauses, offers bridge financing, ability to increase and blend, reasonable penalties to break, and offer no fee transfers…
then the best published rate today is 3.09% 5 yr fixed.
And its still possible that that rate may fall some more.
Feel free to call anytime if questions,
Dan
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Dan Faubert
Ottawa-Carleton Mortgage Inc.
Brokerage Licence # 10419
dan@mortgagemoney.ca
www.mortgagemoney.ca
https://www.fb.com/OttawaMortgageMoney
"Great Mortgage Rates"

613-222-2624 anytime
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Last edited by MortgageGuy; 2014-03-28 at 09:16 AM. Reason: revision
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  #13  
Old 2014-03-30, 01:53 PM
MortgageGuy MortgageGuy is offline
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Default HELOC question

I was asked the following question from the Ottawa site that I thought may be of interest to others…
Hi Dan,
You have a very informative thread here and you provide great advice. I have a few questions for you and I hope you don't mind me asking them.
“We are getting to our mortgage renewal which in a year and the bank called to ask about a HELOC program. Do we take this option now? We don't need the HELOC but it is a benefit if we need to do major home renos. Also, next year we are thinking of doing a remortge the home during the renewal to take out the equity we have build up over the 5 yrs. Is there a negative impact of having a HELOC signed up before the renewal? Any thoughts and recommendations?”

By getting a HELOC, as I have mentioned previously, your mortgage will be switched into a collateral mortgage(see my previous posts on collateral mortgages). Funny why they would want you to do this? Anyhow if you NEED a L/C then you take it, but if you don't need one yet, then don't.
My recommendation is when you know how much $ you will need next year for the reno, take it at that point as an increase to your existing 1st mortgage and leave it as a fixed rate. I don't know the amount of the reno in $'s, but if you're looking at a large amount, would you want that amount to be on a floating rate? That will be an important question at that time. Remember that we’re at an almost historical low, for rates at this time.
I have a client currently taking out a $100K for a reno and we have simply increased their existing fixed rate mortgage by that amount.
So if the timing of the reno is close to the time of your upcoming renewal, I would wait and do the increase then, when you can also shop around for best rates. Remember that 4 months in advance I can hold best rates for your maturity date. If you would like, email me with your maturity date I can also put an alert in my calendar to let you know what rates are available at that 4 month mark.
Have a great day,
Dan
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Dan Faubert
Ottawa-Carleton Mortgage Inc.
Brokerage Licence # 10419
dan@mortgagemoney.ca
www.mortgagemoney.ca
https://www.fb.com/OttawaMortgageMoney
"Great Mortgage Rates"

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  #14  
Old 2014-03-31, 12:54 PM
MortgageGuy MortgageGuy is offline
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Default follow up to the HELOC question

And a follow up to the question…
Essentially, if we do this HELOC it will become a collateral mortgage on the full amount. So, in future, we can't switch with another bank for a better rate? Also, what if I just wanted the HELoC as a LoC? I wanted to pay off say a car or CC's? Would it be in our best interest to do this ahead of time and when renewal comes we don't need to requalify for this type of product? I was told that to qualify for a HELOC might be difficult after a renewal. Any thoughts on this? What if we wanted to use the HELOC for an investment property down payment? Would that be a wise decision considering the interest can be written off?”

If you take a HELOC, they will re-register the full mortgage amount as a collateral mortgage. Therefore YES, you will no longer be able to leave the bank without paying legal and appraisal cost, even on the maturity date of the mortgage. You will always have more flexibility on your renewal date, as the lender knows you can leave them if they are not competitive. If you are going to refinance your home then the maturity date is the ideal time to do it. There should be no difference in qualifying for a HELOC regardless of before or after the renewal.
Funds form a HELOC can be used for any purpose, whether for investment property down payment or to consolidate debts. Again the question do you want money on a floating rate or fix it into your existing mortgage. I believe that your home should always remain your nest egg, therefore unless there are strong reasons to use a L/C I don’t recommend getting one. I see far too many times the equity in someone’s home becoming an ATM machine. But when the need is there(high interest rate credit debt or an investment comes along) then the equity in your home could be the cheapest solution to a debt problem or an opportunity that you don’t want to pass up.
Dan
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Dan Faubert
Ottawa-Carleton Mortgage Inc.
Brokerage Licence # 10419
dan@mortgagemoney.ca
www.mortgagemoney.ca
https://www.fb.com/OttawaMortgageMoney
"Great Mortgage Rates"

613-222-2624 anytime
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  #15  
Old 2014-04-01, 12:44 PM
MortgageGuy MortgageGuy is offline
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Post 2.98% 5 yr fixed rate

For the record, I do have this mortgage available, I just wouldn't take it myself, or would I recommend it to family.
But if you want it can I get it.
Dan
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Dan Faubert
Ottawa-Carleton Mortgage Inc.
Brokerage Licence # 10419
dan@mortgagemoney.ca
www.mortgagemoney.ca
https://www.fb.com/OttawaMortgageMoney
"Great Mortgage Rates"

613-222-2624 anytime
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Last edited by MortgageGuy; 2014-04-01 at 12:45 PM. Reason: edit
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  #16  
Old 2014-04-03, 10:30 AM
MortgageGuy MortgageGuy is offline
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Default Condo sales and the CRA

An interesting article that I had saved a week or so ago but forgot to send out...
http://business.financialpost.com/20...-condo-profit/
A little worrisome I guess if you are a condo investor, buying on speculation
Dan
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Dan Faubert
Ottawa-Carleton Mortgage Inc.
Brokerage Licence # 10419
dan@mortgagemoney.ca
www.mortgagemoney.ca
https://www.fb.com/OttawaMortgageMoney
"Great Mortgage Rates"

613-222-2624 anytime
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  #17  
Old 2014-04-04, 03:40 PM
MortgageGuy MortgageGuy is offline
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Cool Weekend Mortgage Rates, April 4th

Just a weekend update of where current rates are at. These mortgages come with full privileges, and are NOT “no frills mortgages” which have restrictive clauses.
Best Rates that I would recommend...
4 yr fixed closing within 120 days 2.84%
5 yr fixed closing within 120 days 3.09%
5 yr fixed closing within 6 months 3.44%
5 yr fixed closing within 12 months 3.94%*
*(this lender requires a $500 deposit before committing- non-refundable if you don’t take the mortgage with them in the end) but if you're closing a year from now, its a great rate guarantee. Remember if rates do not rise, you will get normal discounted rates prior to closing.
Best variable Prime -.55% 5 yr variable(3-.55=2.45% today)
7 yr fixed closing within 120 days 3.70%
Remember I'm always open for questions!
Have a great weekend,
Dan
__________________
Dan Faubert
Ottawa-Carleton Mortgage Inc.
Brokerage Licence # 10419
dan@mortgagemoney.ca
www.mortgagemoney.ca
https://www.fb.com/OttawaMortgageMoney
"Great Mortgage Rates"

613-222-2624 anytime
Off 613-563-5070

Last edited by MortgageGuy; 2014-04-04 at 03:41 PM. Reason: edit
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  #18  
Old 2014-04-08, 08:55 AM
MortgageGuy MortgageGuy is offline
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Cool payment holiday, skip a payment

I was asked the following in the Ottawa Forum...
Hi Dan,
Can you let me know how TDs payment vacation works and if there is any major downside?
I have a mortgage with TD on what is now a rental property (used to be my primary residence)
Is there any major conditions before using it? And any major drawbacks, other then owing more at the end due to interest?
My plan if I can would be to use it, and to put the payment I would of made on my rental on my primary residence... however it sounds like that is too good to be true lol.


Though it is called different things, a number of banks offer this option to miss a mortgage payment.
I know T.D. advertises this option, but I'm afraid I don't know the fine print as I rarely deal with T.D. As I have mentioned they now register all mortgages as collateral.

Anyhow, I don't need to know the details. Missing ANY mortgage payment, whether given the lenders blessing or not is NEVER a good financial decision. Remember your mortgage is amortized over 25 or longer, so if you miss a payment they will obviously just tack on the interest to your outstanding principle. Thus going backwards in your debt payment strategy. Never a wise move. A debt is a debt, we need to pay them off. If you are in some dire financial position, and I stress dire, never miss any payments on any debts.

As you have mentioned, the whole concept is "to good to be true" and there is no financial benefit in using it. Even with your rental, not even any wise financial tax strategy. Make the mortgage payment.
Dan
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Dan Faubert
Ottawa-Carleton Mortgage Inc.
Brokerage Licence # 10419
dan@mortgagemoney.ca
www.mortgagemoney.ca
https://www.fb.com/OttawaMortgageMoney
"Great Mortgage Rates"

613-222-2624 anytime
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  #19  
Old 2014-04-11, 10:27 AM
MortgageGuy MortgageGuy is offline
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Default April 11th Best rates and off topic MH730 CNN article

Just a weekend update of where current rates are at. These mortgages come with full privileges, and are NOT “no frills mortgages” which have restrictive clauses. No changes from a week ago.
Best Rates that I would recommend...
4 yr fixed closing within 120 days 2.84%
5 yr fixed closing within 120 days 3.09%
5 yr fixed closing within 6 months 3.44%
5 yr fixed closing within 12 months 3.94%*
*(this lender requires a $500 deposit before committing- non-refundable if you don’t take the mortgage with them in the end) but if you're closing a year from now, its a great rate guarantee. Remember if rates do not rise, you will get normal discounted rates prior to closing.
Best variable Prime -.55% 5 yr variable(3-.55=2.45% today)
7 yr fixed closing within 120 days 3.70%

And totally off topic a great CNN article(video) on how deep in the ocean flight MH370 could be http://cnn.it/1erGp6z and the difficulties with reaching/finding the wreckage.
Have a great weekend,
Dan
__________________
Dan Faubert
Ottawa-Carleton Mortgage Inc.
Brokerage Licence # 10419
dan@mortgagemoney.ca
www.mortgagemoney.ca
https://www.fb.com/OttawaMortgageMoney
"Great Mortgage Rates"

613-222-2624 anytime
Off 613-563-5070
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  #20  
Old 2014-04-14, 10:01 AM
MortgageGuy MortgageGuy is offline
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Cool Be careful before you break that mortgage...

A good article on penalties and a reminder of the Sub 3% 5 yr fixed restrictions.
http://business.financialpost.com/20...that-mortgage/
A couple highlights
"Breaking a mortgage is not a minor issue when you consider 9% of borrowers end up refinancing their mortgage before the term is up, according to the Canadian Association of Accredited Mortgage Professionals."

"Ms. Parsons says people have become so focused on getting the lowest rate, they are paying too little attention to the terms of the contract which may be onerous. BMO’s own advertised 2.99% rate on a five-year fixed rate closed mortgage, which has gained so much attention, has a key stipulation that you can’t get out of the mortgage unless you sell."

So a reminder, that even when you have a mortgage with normal flexible clauses, the IRD penalty when calculated on any "bank" mortgage that shows "posted rates" on their web sites, can be large.
Feel free to ask your questions here, I am happy to answer!
Have A GREAT DAY,
Dan
__________________
Dan Faubert
Ottawa-Carleton Mortgage Inc.
Brokerage Licence # 10419
dan@mortgagemoney.ca
www.mortgagemoney.ca
https://www.fb.com/OttawaMortgageMoney
"Great Mortgage Rates"

613-222-2624 anytime
Off 613-563-5070
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