August 27, 2012
Jason Neumann, Realtor

Whether you are considering buying a new home or refinancing your existing mortgage, important personal information and documents will be required by lenders. This checklist gives an overview of the necessary documentation that most Canadian lenders require prior to approving and funding a mortgage. By providing these documents in a timely fashion, you will help to ensure a speedy approval/renewal process.

Buying a Home?

Information that describes the property you are purchasing:

• Contract of Purchase and Sale Agreement*
• MLS Detail Feature Sheet*
• Property Disclosure Statement (PDS)*
• Title search*
• Strata property information: Form B, Meeting Minutes, Strata Fees* **
• Name, address, telephone number of your solicitor/notary
• Confirmation of your down payment:
• Savings or investment statement from the last 90 days
• Sale of an existing property – a copy of the sale agreement
• Gift letter if down payment funds are from family, friend etc.
• Withdrawal from RRSP through the Home Buyer’s Plan

Employment verification:

• Copy of latest pay slip
• T4
• Letter of employment
• T1 General and Notice of Assessment (NOA) if self-employed

Refinancing Your Home?

Information that describes your existing property:

• Recent mortgage statement
• Current homeowner insurance policy
• Recent property tax statement
• Legal description of your property

Additional information that may be required…

As part of your application process, you may be asked questions relating to what you owe and own. Some projected expenses relating to your property such as taxes, heating costs and condo fees may be requested.

Once the Lender has Given Final Approval:

• A void cheque for the account that the mortgage funds are to be debited from.

This checklist is by no means exhaustive, as each lender has criteria that are important to them. Should you have any questions about applying for a mortgage or refinancing an existing property, speak with a mortgage professional. Your Realtor will be able to refer someone in your area.

*Your real estate agent will be able to provide these documents to your bank or mortgage broker.

**Typically required if purchasing strata-titled property.

Jason Neumann is a Realtor with CENTURY 21 Assurance Realty in Kelowna, BC. 

August 22, 2012
Matthew Chan, CA MBA AMP

If you're in a fixed-rate mortgage from last year or earlier, chances are you're at a fixed rate higher than the going rates today. We're still in the midst of all-time low interest rates. It's tempting to think you might be able to prune your expenses or cut the term of your mortgage by refinancing early.

But before you decide to refinance your mortgage, here are some tips on how to proceed so you won't be hit with any nasty surprises.

Step 1. Contact a mortgage professional

Choose your mortgage broker carefully. Here are some things to consider:

• How long has this mortgage broker been in the business?
• Does this mortgage broker specialize in refinancing?
• Is this person a full-time (vs a part-time) mortgage broker?
• Is this an independent mortgage broker or one employed by a lender?
• What type of professional designations or educational background does this mortgage broker have?

Step 2. Determine why you would like to refinance

Besides getting a better rate, you should consider other reasons for refinancing your mortgage. 

• Do you have some unsecured debt that you would like to consolidate? 
• Would you like to take out some money for investment purposes? 
• Are you very unhappy with your current lender? 

By determining your reasons for refinancing, you're in a better position to evaluate your options.

Step 3. Determine the short-term and long-term goals for your home

Before refinancing your mortgage, first evaluate what your goals are for your current home. If you're looking to sell and purchase a new home soon, consider holding off your refinance until you purchase your new home. You'd be saving yourself the time and trouble by applying for a new mortgage just once (when you buy your new home) instead of twice (the refinance and then buying your new home).

 Step 4. Determine what the penalty is to refinance

This is usually the biggest obstacle. In a fixed-rate mortgage, you are contractually obliged to keep your mortgage until it's up for renewal. As a result, if you refinance it before maturity, the lender charges a penalty. A penalty might be reduced or even eliminated if the refinance is done with the same lender (some lenders have options for an early renewal).

The payout penalty is usually the greater of two numbers:1)  3 months' interest, or 2) Interest Rate Differential (IRD).

 The IRD is probably one of the most misunderstood terms in the mortgage industry. It is explained by a major bank's website in this way: 

The IRD amount is equivalent to the difference between your
annual interest rate and the posted interest rate on a mortgage
that is closest to the remainder of the term less any rate discount
you received, multiplied by the amount being prepaid, and
multiplied by the time that is remaining on the term.

Huh?

A full explanation of the IRD process is beyond the scope of this article. However, the tactics that banks use to inflate penalties are very real. Here's a great article on the subject.

Note: Some "no frill" mortgages simply don't allow refinancing. If you have such a mortgage, check the terms and conditions.

Step 5. Calculate the real cost of refinancing your mortgage

Once you know the penalty amount and the rate you are eligible to get in the market today, you should be able to evaluate if it's worthwhile to refinance. At this stage, you should lean on your mortgage broker to evaluate the figures and provide some suggestions.

Even if the penalty for refinancing your mortgage is higher than your savings with the lower rate, it could still be worthwhile to consider a refinance for the following reasons:

• You are consolidating high-interest consumer debt (credit cards, personal loans, etc.) such that your overall cost of borrowing is lower after refinancing your mortgage.
• You are concerned about interest rates moving up, so by refinancing to a longer-term mortgage you expect to save money over the long term if rates move up in the future.

In some cases, a mortgage refinance can save thousands of dollars. At the current low interest rates, it's definitely worth checking with an independent mortgage broker to see if refinancing makes sense for you.

Matthew Chan has been a licensed mortgage broker since 2004 and has served on the Board of Directors for MBABC. Before becoming a mortgage professional, Matt earned a Chartered Accountant designation with a Big Four accounting firm and an MBA from the Rotman School of Management at the U of T. Canadian Mortgage Professional (CMP) magazine has included him in its 2012 Top 75 Brokers list.

Residential property sales in Greater Vancouver remained at a 10-year low in July, while the number of properties being listed for sale continued to edge down and prices remained relatively stable.

The Real Estate Board of Greater Vancouver (REBGV) reports that there were 2,098 residential property sales of detached, attached and apartment properties in July. That’s an 18.4 per cent decline compared to the 2,571 sales in July 2011 and an 11.2 per cent decline compared to the previous month’s 2,362 sales.

July sales were the lowest total for that month in the region since 2000. They were 31.2 per cent below the 10-year July sales average of 3,051.

“People appear to be cautious about making significant financial decisions right now. While our local economy appears to be quite robust, there may be some concern about the impact of international markets and the federal government’s tightening of mortgage regulations,” says Eugen Klein, REBGV president.

New listings for detached, attached and apartment properties in Greater Vancouver totalled 4,802 in July, the lowest number of new listings for any month this year. This represents a 5.8 per cent decline compared to July 2011 when 5,097 properties were newly listed for sale on the Multiple Listing Service® (MLS®) and a 14.5 per cent decline compared to the 5,617 new listings reported in June 2012.

At 18,081, the total number of active residential property listings on the MLS® increased 18.8 per cent from this time last year and decreased 2.2 per cent compared to the previous month.

“With a sales-to-actives-listing ratio of 11.6 per cent, conditions have favoured buyers in our marketplace in recent months,” Klein said. “That means buyers have more selection to choose from and more time to make a decision. For sellers, it’s important to price properties competitively. For information on local market prices, contact your REALTOR®.”

The MLS® Home Price Index (MLS® HPI) composite benchmark price for all residential properties in Greater Vancouver over the last 12 months has increased 0.6% to $616,000 and declined 0.7% compared to last month.

Sales of detached properties on the MLS® in July 2012 reached 787, a decrease of 28.4 per cent from the 1,099 detached sales recorded in July 2011, and a 13.3 per cent decrease from the 908 units sold in July 2010. The benchmark price for detached properties increased 1.4 per cent from July 2011 to $950,200 and declined 1.2 per cent compared to last month.

Sales of apartment properties reached 927 in July 2012, a 10.9 per cent decrease compared to the 1,040 sales in July 2011, and a decrease of 5.3 per cent compared to the 979 sales in July 2010. The benchmark price of an apartment property remains unchanged compared to July 2011 at $374,300 and declined 0.5 per cent compared to last month.

Attached property sales in July 2012 totalled 384, an 11.1 per cent decrease compared to the 432 sales in July 2011, and a 4.3 per cent increase from the 368 attached properties sold in July 2010. The benchmark price of an attached unit decreased 0.5 per cent between July 2011 and 2012 to $468,700 and is relatively unchanged compared to last month.

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