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What to Know About the Latest Interest Rate Hikes

October 21, 2022 By Stan Savov

With recent Bank of Canada interest rate hikes, and more on the way, here is what you need to know about how these policy changes affect your mortgage.

First and foremost, the interest rate hikes directly affect individuals that currently have an adjustable-rate mortgage.

Depending on your mortgage amount, you’re looking at a potential mortgage payment increase of $40 per month for every $100,000 of balance owing. For example, if your mortgage balance is $400,000 then your monthly payment will increase approximately $160 per month.

As Canada’s lending prime has increased, variable rates increase as these rates are tied to prime. Payments need to increase to ensure the scheduled amortization remains the same. Hence you will still pay off your mortgage as the original amortization shows. For those individuals on a fixed-mortgage, you will not be affected by these interim changes outside of renewing your mortgage. If your mortgage is up for renewal, you will likely be renewing at a higher rate depending on your lender. If you’re still six months away from renewing, it may be a good idea to look into the options for early renewal to avoid getting caught up in another interest rate hike later this year.

All rates, fixed or variable are expected to rise more over the summer months. Please reach out to me today to discuss obtaining a rate hold. I can lock-in an interest rate for 90-120 days while you plan your next step whether it is renewing, purchasing or planning for changes.

If you’re not currently a homeowner, but were looking at getting into the marketplace, it is a good idea to revaluate your budget and potential calculations for homeownership to ensure that your estimates are in line with the new interest rates.

Download my mobile app My Mortgage Toolbox to play around with calculators and review your budget.

While interest rate hikes affect everyone, understanding the dollar value change for your situation and adjusting your budget accordingly, can help ease the pressure from increased mortgage costs. If you have any questions or are not sure what your next move should be, don’t hesitate to reach out to me today!

I’d be happy to help review your situation and walk you through your options.

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New Home Building Tips

October 21, 2022 By Stan Savov

5 Things to Consider When Building Your Own Home

Building a new home is an exciting adventure but requires very different considerations. To help you have the best experience, here are 5 of the most important things to consider.

So here are our new home building tips:

It’s All In The Numbers

Whether you are shopping for a pre-built home, or are looking to create your own from the ground up, it is vital to know what you can afford and stay within it.

This is the key to building a home that you will be able to enjoy for the next 20 or 30 years, while still maintaining your financial stability.

Overall, the average cost to build a house can range $300,000 to $350,000 for 1,000 square feet to double or triple that amount. For example, an average 2,500 square foot home could cost between $500,000 and $875,000 to build depending on materials, design, etc. Keep in mind, these costs don’t include the land or taxes on the construction and material.

Choose a Reputable Builder

This one seems pretty straight forward, but when you start looking it can quickly become overwhelming when you realize how many options there are. When it comes to determining the head contractor for your project, careful research is needed. Another option is to consult friends and family members who have gone through the process, or ask me, your mortgage expert and/or your realtor! They often have many qualified contacts in the industry or can help point you in the right direction.

Build a Home For Tomorrow

As tempting as it can be to personalize your home to the nth degree and include every cool little feature you can think of, it is important to always keep resale value and practicality in the back of your mind. Life can often throw a few curve balls that, for one reason or another, may result in your having to sell your home in the future. If that time should ever come, you will want to be able to appeal to all buyers easily and not have to hold the house longer than necessary. Ask yourself if the features you are putting into your home will appeal to others, and also if the design suits the neighborhood you are building in as well.

Go Green!

Now more than ever before energy efficient upgrades are easy to add to your home. To make your home as efficient as possible, it is important to incorporate these options into your design BEFORE you start building. Options such as energy efficient appliances, windows, HVAC systems, and more can save you money in the long run and may also make you eligible for certain grants and discounts. For instance, the Canadian Mortgage and Housing Corporation (CMHC) green building program rewards those who select energy efficient and environment friendly options.

Understand The Loan

Lastly, beyond the costs and design of building a new home, what does a mortgage look like for an unbuilt home? I suggest you provide me with a budget that includes both hard and soft costs, as well as the reserve of money you plan to have set aside in case you run into unexpected events.

Requirements for capital

A common mistake that many people don’t realize is you need capital upfront. The capital is needed for the initial down payment on the land/lot, as well as city red tape and permits to start the construction and throughout the build. It’s personal capital that is needed to finance the build to each stage of the construction. The draw mortgage will then advance money (the draw) to pay back the funds used to hit that stage of construction. For example, your capital finances the foundation of the home then the mortgage draw will advance funds to pay back that foundation capital. Then capital is used to get the house to the next draw stage which is generally framing, roofing, doors and windows (knows as “lock-up”) then the mortgage draw pays back the funds used to achieve the stage and so forth.

It is also important to note that the lender will consider the appraised value of the finished product. This value is determined before the project begins. In this example, the completed appraised value of the home would have to be at least $600,000 to qualify. In addition, the client will have to come up with the initial $150,000 to be able to finance the total cost of $600,000.

Additional Notes

When it comes to building your own home and construction loans, here are a few extra things to keep in mind:

Make your building plans in advance and stick with them to avoid costly changes during construction.
Depending on the lender, you may have a time frame within which you need to complete construction (typically between 6 and 12 months).
Construction loans are usually fully opened and can be repaid at any time.
Interest is charged only on amounts drawn; there are no “unused funds”
Once construction is complete and project completion has been verified by the lender, the construction mortgage is “moved over” to a normal mortgage

If you’re looking to build a home, don’t hesitate to reach out to me for friendly mortgage advice!

What are the home renovations with the best ROI?

October 19, 2022 By Stan Savov

When it comes to home renovations with the best ROI, we know things can add up quickly!

If you’re looking to update your home or make some changes to your space, there are a few simple things you can do that are affordable AND have a great return on investment:

1. Fresh Coat of Paint: It is amazing what a fresh coat of paint can do for the interior and exterior of your home or space. It is affordable, easy to do yourself and typically has a 60% return on investment, especially when it comes time to sell
2. Refresh Your Floors – Flooring is the most worn element in any home. While replacing it may seem tedious, these updates tend to have a great home return on investment garnering 100-150%. With options from updating carpet to hardwood, changing out your laminate or adding fresh tile to your bathroom or kitchen, new floors are an easy way to breathe new life into your home.
3. New Doors and Hardware – From installing brand new wood-stained garage doors to a statement front entrance to new baseboards and wainscoting or even a simple handle update, your home will feel fresh in no time! With a smaller WOW factor, even this minimal facelift can have a 50% return on your investment.
4. Updated Countertops and Cupboards – Kitchen renovations can typically be the biggest and most expensive, but they also have the best return on investment garnering a return of 75-100% after all it is the heart of the home. If you’re not ready to do a full kitchen renovation, consider updating your countertops and cupboard doors. You can expect to pay approximately $3,000 for granite or quartz countertops, which will freshen the space and make it look brand new!
5. Adding a Wooden Deck – Is your backyard functional? Does it scream summer get-together? If not, or if you think there is room for improvement, a great option can be adding a simple wooden deck! These can be built into almost any size or shape to suit your needs and is relatively affordable costing around $10,000 to $15,000 with a return of 80% when it comes time to sell the house.
  
  If you’re looking to do a reno, contact me today about utilizing your home equity or refinancing your mortgage to apply funds to your new project!

Job Loss and Your Mortgage Application

October 12, 2022 By Stan Savov

When it comes to a situation of job loss and mortgage application in process, there are a few things that you should avoid doing while you’re waiting for approval – such as making large purchases (i.e. a new car), applying for new credit, pulling additional credit reports, etc.

Another issue that can come up is the loss of your job…

What you can afford to qualify for in relation to your mortgage depends on your income. As a result, the sudden loss of employment can be quite detrimental to your efforts. So, what do you do?

Should You Continue With Your Mortgage Application?

If you’ve already qualified for a mortgage, but your employment circumstances have changed, your first step is to disclose this to myself, your mortgage professional. As the lender will verify your income prior to closing, your mortgage professional will need to update your file to advise them, otherwise it may be considered fraud as your application income and closing income would not match.

In some cases, the loss of your job may not affect your mortgage. Some examples include:

You secure a new job right away in the same field as previously. Keep in mind, you will still need to requalify. However, if your new job requires a probationary period then you may not be approved.
If you have a co-signer on the mortgage who earns enough income to qualify for the value on their own. However, be sure your co-signer is aware of your employment situation.
If you have additional sources of income such as income from retirement, investments, rentals or even child support they may be considered, depending on the lender.

Can You Use Unemployment Income to Apply for a Mortgage?

Typically this is not a suitable source of income to qualify for a mortgage with A-lenders, but it may still be an option for alternative or B-lenders. In rare cases, individuals with seasonal or cyclical jobs who rely on unemployment income for a portion of the year may be considered. However, you would be asked to provide a two-year cycle of employment followed by Employment Insurance benefits. Contact me and I can help you look into your options!

What Happens During Furlough?

If you did not lose your job entirely but have instead been furloughed or temporarily laid off, your lender may take a wait-and-see approach to your mortgage application. You would be required to provide a letter from your employer with a return-to-work date on it in this situation. However, if you don’t return to work before the closing date, your lender may be required to cancel the application for now with resubmitting as an option in the future.

Regardless of the reason for the change in your employment situation, one of the most important things you can do is contact me directly to discuss your situation. I would be happy to look at all the options for you and help with finding a solution that best suits you.

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