HOW TO AVOID COSTLY HOUSING MISTAKES DURING DIVORCE!
Divorce is a very difficult and emotional time. Emotion and finances don’t often mix well
together.
What you need most are straight forward, specific advice about how divorce affects the
matrimonial home, your mortgage and taxes making critical decisions easier.
Professional, neutral third party information can help you make more logical, rather than
emotional decisions.
A few basic questions are:
1. Who wishes to continue to live in the house?
2. Will the familiar surroundings bring you comfort and emotional security or unpleasant
memories?
3. Do you want to minimize change, for example keeping the kids in the same school in
order to minimize disruption etc?
4. Do you want to move to a new place that offers a fresh start?
All have financial consequences to your decision process:
1. What can you afford?
2. Can you manage the old house on your new budget?
3. What are all the costs involved?
4. Is refinancing possible or is it better to sell and buy again?
5. How much house can you buy on your new budget?
There are four main options available:
1. Sell the house and divide up the proceeds.
2. Buy out your spouse.
3. Have your spouse buy you out.
4. Retain Joint Ownership with one spouse living there for foreseeable future.
Circumstances warrant postponing a financial decision until a later date.
This is also largely a legal matter so you must understand the law. Also everything
needs to be agreed upon in writing.
We have extensive experience in this area and we are here to help guide you in making
the best informed decisions for you to ease your financial situation. We will also be able
to provide you with names of experienced legal practitioners. However please
understand that it is best done after an initial financial forensics first.
If you or someone you know are or have separated or are in the midst of divorce, please
give this article to them.

THE TRUTH ABOUT THE ‘CASH BACK’ MORTGAGE
We often see ads from major banks offering cash back incentives of their mortgage
products. Gone are the days where a cash back mortgage could be used to facilitate a
home purchase without the required minimum 5% down payment.
Cash back incentives are now available for enticing uses such as new furniture and
appliances, renovations and the other great hook...apply the cash back portion directly
to your mortgage for a lower ‘effective’ rate!
A recent Bank ad reads “NEW PROMO...Cash Back for purchases.” The monies can be
used for any purpose. However the ad goes on to say that if you use the funds to pay
down your mortgage that “The Effective 5 Year Rate can become as low as 2.62%...”
while you are borrowing at 4.64%.
LOOK OUT. READ THE FINE PRINT. WE SAID LOOK OUT AS IN DON’T DO IT!
This is nothing but a ploy for them to make more profit off you, making it sound so good.
The truth is on a $250,000 5 year term 25 year amortization 5% cash back mortgage
receiving $12,500 you would end up paying $16,902.60 or a whopping $4,402.60 more
to the bank. The rate you get is 4.64% versus 2.62%. In other words you pay a premium
of 2.02% on your entire mortgage not just for the extra money.
Even if you apply the extra funds to pay down your new $262,500 mortgage which only
gets you back to square one, you still are required to pay the additional $4,402.60 to the
Bank. Believe it or not the ‘effective cost’ of the extra (Cash Back) money is
approximately 36%, that’s right.
THIS IS NOTHING MORE THAN A SHELL GAME!!! The Banks offer Cash Back
mortgages because they are so profitable. In fact it’s actually worse than borrowing the
money from your credit card. Why would anyone borrow more simply to apply the (much
higher cost) money against their mortgage? This makes zero sense, but people do it all
the time, and for the ‘privilege’ (I use this word, tongue in cheek) they pay the Bank
$4,402. more. Blows the mind doesn’t it?
For this reason we always always tell our clients to find another way if they absolutely
need extra money and NEVER get a Cash Back mortgage.
This is but one of dozens and dozens of examples (tricks) used to take advantage of the
uninformed consumer. Let’s be frank, trying to deal with a Bank on your own leaves you
open to losing big and in the grand scheme of things is the reason Bank profits continue
to hit new highs.
Especially when getting a mortgage (in the hundreds of thousands of dollars) it makes
sense to have a professional mortgage expert on your side to avoid things like this.
We can help you save tens of thousands of dollars and avoid stepping of a mine, as in
mortgage minefield.
Our service is always in your best interests. Please call us first or at the very least, get a
second opinion.

TOP 5 REASONS PEOPLE DON’T QUALIFY FOR A MORTGAGE There are many reasons for getting declined, here are the most common. 1. LACK OF DOWN PAYMENT: The minimum down is 5% of purchase price. This amount must be saved, not borrowed. However a gift from immediate family member is acceptable. It can also come from your RRSP’s. 2. INSUFFICIENT INCOME: Often people purchase a home thinking they can afford it when they can’t. This is a waste of everyone’s time. Get pre-approved first, and not by a bank because it is worthless since the banks do not check your credit or verify your income. We do so you can count on our pre-approvals. 3. NEW MORTGAGE RULES: If you have less than 20% down the maximum gross debt service ratio allowed is 39% of your income versus 32% for less than stellar credit. Including consumer debt the ratio is 44% of income, 40% for poorer but still acceptable credit. 4. CREDIT ISSUES: If you have been late on credit card, loan, cell payments your credit score will go down. If any delinquency has been sent to a collection agency your score will drop like a stone. Too many credit inquiries in a short period of time by you also lowers your score and will stay on your report for 7 years. The banks will automatically decline you. If the issue is isolated or a blip with overall good history, we can help you. KNOW YOUR SCORE. The banks will not advise you on credit. We do. Will pull it for you and give you professional advice to set you straight. 5. TOO MUCH DEBT: Many people have bad spending habits and are poor with finances. You can no longer refinance your home above 80% loan to value to payoff high interest debt. Most do not understand what their capacity or limits to borrowing are. When buying a house you can get approved only to be declined later if you make purchases (new car, truck etc) before you close your purchase. We see this happen too often. Effectively your debt service ratios get checked again prior to closing and they have become too high. We always advise our clients not to buy any big ticket items until after they are in their new home. If you are a first time home buyer (even if you are not but have some debt load), it is essential that you come to us first (not a bank) to review your credit situation. We are experts and will give you invaluable advice going forward.

WHY YOU CAN’T RELY ON A BANK MORTGAGE APPROVAL 1. PREAPPROVAL: Well it starts with the pre-approval you get from your bank. They tell you how much you can afford and you go out and buy a home only to get declined. Shocking? Embarassing? Yes both. But Why? Because the bank does not check your credit, your employment or income, so their so-called Preapproval is worthless. We see this all the time. 2. CREDIT: Do you know that after you have been approved for a mortgage for a house you bought that the bank does another check closer to closing? Yes and if you miss any payments on other credit items, you are toast, done like dinner. 3. CHANGING JOBS: If you change your job between the time you bought a home and close the purchase, the bank can cancel your mortgage and you are liable to the sellers. 4. BUYING A VEHICLE: Happens all the time. Bank approved purchasers get declined because they went out and bought a new car or truck. The bank declines them because they can no longer meet debt servicing requirements. 5. DOWN PAYMENT: The bank finds out you have borrowed your down payment. A big NO, NO and they pull their mortgage approval. Circumstances like these happen every single week of the year, probably daily across the country. A stream of people come to us throughout the year under great stress asking us to help them from losing the home of their dreams. The difference between going to the bank and coming to us is well, night and day. The banks want your business but only if you are pristine. The big problem is that it is easy to get a bank approval, but because they do not give you any professional advice whatsoever, to ensure you don’t do anything to mess things up, you are vulnerable to Murphy’s Law, which is, “Whatever can go wrong, will go wrong.” Those who choose us first are informed. They understand that such a big investment should be put in the hands of professionals who will give them the best advice and mortgage product/solutions. We are licensed specialists and mortgage professionals who care about you and want to make sure your home purchase runs smoothly. The banks sell multi products and simply do not have the expertise we do to better ensure and optimum solution. And we go to great lengths to educate your about the process, so that your expectations are realistic and there are no unpleasant surprises. For your next mortgage, isn’t it obvious who you should call?

KNOW WHAT’S SECURED AGAINST YOUR HOME
Most people don’t know it.
It’s not disclosed at the time of sale and comes as a shock at time of refinance. And it
happens all the time.
Nancy and John did a kitchen and bathroom renovation and put it all on their credit
cards and (LOC) line of credit. The cost was $57,000. Their plan was to refinance their
mortgage when all was done. But they hit a stop sign at the bank.
Having had sufficient equity to refinance, their refinance was approved only to be
declined at the last moment (at closing). What happened was that two liens had
previously been registered (by the air conditioning and water conditioner companies)
against their property which the bank insisted needed to be paid off because their debt
service ratios were too high. They couldn’t borrow any more on the mortgage from the
bank and came to us to see if we could find a solution because their credit card and
LOC payments were killing them.
We went to work. Because they had excellent credit we found a prime lender (we have
many lenders and options than the banks) who would accept their higher debt service
ratios and approved them at the higher amount to be able to pay off the liens.
They were thrilled with the new mortgage with an incredible rate of 2.05% which
included a line of credit facility. This was over a half per cent less than what the bank
gave them.
But there was one more issue. With the two liens added to their new mortgage rendered
it in excess of 80% based on bank value thus making it ‘high ratio’ and would have
required an extra mortgage insurance premium. Fortunately we were able to find them a
appraiser who could support a higher (than bank) ‘after renovation’ property value
keeping the mortgage in the conventional range avoiding any insurance premium.
We see situations like this all the time. Our advice to you whenever you buy major
appliances that you ask the supplier if the loan will be registered against your property.
If the answer is yes, it’s best to find another option. Calling us would be a good start.

COME CELEBRATE OUR 15TH YEAR ANNIVERSARY
Dear Customers, Friends and Community Partners please join us on Sunday October
18th for our Customer Appreciation Day & 15 Year Anniversary Celebration from 1 to 4
pm at our front parking lot on Tower Street.
What fun it will be for all, and especially for us to see you and thank you personally for
your patronage over the years. Also an opportunity to catch up, to share, to meet new
people and to look forward to the future together.
It’s really hard to believe that we have been serving fellow citizens of Wellington, Centre
Wellington and Wellington North Counties for a decade and a half already. How time
flies by doesn’t it?
We continue to love what we do more than ever. It has been so rewarding to have
helped people in difficulty, improve their lives and to assist the rest of the spectrum of
folks from all walks of life.
It has been a trip for sure and one that will endure for years and years to come, as our
business begins its next chapter growing as a family business with daughters involved
going forward to carry on helping, caring, giving all they can to make a positive
difference in people’s lives.
We are having a professionally catered barbecue, face painting and will be giving away
free pumpkins along with draws for great prizes including a free vacation for one lucky
family.
To attend please RSVP by calling or emailing us. We look forward to seeing you then.

Phil and Sue recently received a renewal offer from their bank. They currently have a variable rate mortgage and they noticed that the higher fixed rate offer at 2.64% had a lower payment ($1,298.14) than the lower variable rate offer at 2.14% with a $1,482.17 payment. This didn’t make sense to them so they called us to see if they could meet with us to look at it.

We met and our analysis showed that we could get them a payment of $1,199.60 per month versus the banks offer at $1,482.17. A huge savings. 

We then had to extrapolate to determine the effective amortization used to obtain the higher variable bank offer and payment.  As it turns out the payment the bank showed was based on an effective amortization of approximately 23 years when the fixed rate payment was based on the actual and correct remaining amortization of 29 years. In other words 6 years less amortization increases the payment substantially. But why would the bank do this we all wondered? Was it a mistake?

The question was, why would the bank use different amortizations to show payments and not compare apples to apples? It was obvious that the fixed rate payment looked more attractive than the variable. But again why?

The truth is that the banks want everyone to go ‘fixed’ versus ‘variable’. Reason being if the borrower has to break the mortgage during the term due to moving, separation, divorce, job loss or relocation and even death of a spouse (stuff most think will never happen but does and the banks know this) the banks will make a lot more money from the penalty.

So we called the bank with Phil and Sue in our office and were told the variable rate payment was based on a 3 year ‘fixed’ rate payment, not the stated 2.14%. What? Even though in fact the fine print stated this, most people never read the fine print and if they do it is mumbo jumbo to them. This appears to be another tactic by the banks to get borrowers to opt for the fixed rate option because the variable payment is much higher. People always want the lower payment right? And the banks know this.

As it turns out Phil and Sue, we learned after probing about their future are planning to move next summer. We won their business over after showing them that typical penalties from our lenders are four times (75%) less. Case in point the bank penalty had any borrower taken the 2.64% ‘fixed’ option would be $9,695 as compared to $2,133 from our lenders, some $5,429 less. Incredible! Reality hits you in the face. You go to sell your house. You have to factor in Realty commissions etc., and if you ever get into a bank collateral mortgage when selling you must pay off all your other debt instruments with the bank like loans, credit cards, lines of credit etc., because they all become secured under a bank collateral mortgage. We never put you into one of those.

Folks, we invite you to bring your bank renewal offer in to us to look at because we can save you thousands of dollars, oh and by the way we will put you into much safer (non collateral bank) mortgage.

For your next mortgage isn’t it clear who you should choose?  We don’t play games and we protect you. Please spread the word.

BUYING RESALE HOMES NOW A LOT EASIER!
Our homes in time (usually within 10 years) become outdated. Today renovating your
current home is more difficult because refinancing to do so is now limited to a maximum
of 80% of value. Hence the only other option is to buy. Studies show that majority of
purchasers of resale homes are not satisfied with the home they buy and would like to,
for example, upgrade the kitchen, bathrooms etc. As a result many buy a new home
instead but often are stuck with an inferior location, no trees, landscaping etc.
Now you can purchase a resale home AND RENOVATE it at the same time to your
tastes. This is called PURCHASE PLUS IMPROVEMENTS and is a really excellent
program that gives you up to $40,000 on top of the purchase price for renovations and
upgrades that add real value to the home.
Let’s say you buy for $400,000 and you want to upgrade the kitchen and master bath.
You determine through written plans and contractor quotes that the cost will be $40,000.
If the home is appraised taking the upgrades into account and confirms a value of
$440,000 you can qualify for up to a 95% mortgage. Note, the size of down payment
can be whatever you wish.
You must however submit your plans and quotes for approval at the same time the
mortgage is applied for. Therefore it is best to put in your offer a condition that allows
you sufficient time to obtain quotations AND gives you a financing clause that is longer
than usual (we suggest two weeks versus 5 days) giving you enough time to put your
plans in place and also enough time to get the financing. Your Realtor will negotiate the
timing via the Seller’s agent.
Once you close the purchase and sale you still only need a minimum 5% down payment
and the work must be completed in 90 to 120 days from closing. The extra $40,000 is
held in trust by your lawyer until the work is compete as verified by an appraiser. This
wrinkle means two things. One your contractor will not be paid until upgrades are
finished. Two, you will likely still need to pay the contractor(s) an up front deposit.
Contractors should have no problem with this arrangement when they are shown the
offer and mortgage approval at the higher amount which will cover the appraisal.
This is a really excellent program to help you find a home you will really love.
Please call us first to sit down and discuss this program with us, so that you fully
understand how it works.

BANKS STEALING FROM PRIME RATE REDUCTIONS
When is enough, enough? Profit taking that is. Bank profits have been soaring endlessly
without fail, quarter after quarter, year after year, and yet their appetite for more is
unquenchable.
Most recently, once again they have not passed on to the consumer the full value of the
quarter point prime rate reduction by The Bank of Canada.
The B of C is trying to stimulate a sluggish economy while the Big Banks are thwarting
B of C’s efforts (our federal government) by grabbing much of the decrease in prime
rate.
TD was first to announce that they are reducing prime by only 10 basis points or 40 per
cent while keeping the other 60 per cent to pad their profit margins. Do you think they
are the least bit afraid of the feds?
Next RBC, CIBC and BNS announced they would pass on 15 basis points or 60 per
cent of the reduction. A little nicer, but still not nearly enough is it? This should be our
money, our savings. We think that this should be illegal. We can bet that when prime
increases next, the banks will pass on 100 per cent of any increase, or who knows add
on an extra .10% or ten extra basis points together, because they are not held
accountable.
We are seeing a very dangerous trend where the banks can seemingly do whatever
they want.
What’s going on anyway?
Should not be held more accountable? A lot more accountable?
While the Feds have the power to keeps the big bad banks in line, they are not doing
so. However we the people (cumulatively speaking) still have the power to force the
banks to relent. Just take the recent attempts to introduce ‘User Pay Fees’ which were
designed to start charging consumers a fee just to make a loan, line of credit, credit
card and yes even a mortgage payment. In short we could not make the required
payments of debt obligations without paying an additional ‘fee’ to pay. Crazy right?
We consumer backlash made short order of that one. The same could potentially
happen if Canadians are vocal about the outlandish profit skimming above.
Isn’t it time we the consumer be heard again? What is at stack is not just the one 40%
bank ‘take’ last week but actually the previous one as well.
Please stand up and be heard because we are going to. Go Canada!