Preparing for The Spring Market with Mortgage Broker Laura MacCormack

We sat down with mortgage broker Laura MacCormack to discuss what you can expect from the 2016 real estate market. Whether you already own, are thinking of selling, or looking to invest, Laura’s got expert advice on how knowing the numbers will put you in the best possible position for a successful year.

1. What can home buyers expect for the 2016 spring market in mortgage rates? Economy and rates wise, currently fixed rates have been on the rise with the major banks, with only a slight 0.20-0.30% rise over the past 2 – 3 months. The Bank of Canada makes its next overnight target rate announcement on January 20th which if changed could possibly affect prime rates for variable rate mortgages. See more on prime vs. variable rates.
2. How does the new Home Owner Grant change affect home buyers? The City of Vancouver increased the threshold to $1.2 million from $1.1million. It means that all homeowners who live in a property assessed under $1.2 million can claim a home owner’s grant every June, which equals $570 off of their taxes each year. But if your property value according to BC Assessment is over $1.2 million, you no longer qualify for this grant. In reality, most single family homes in the Vancouver area are valued over $1.2 million and thus the $100,000 increase won’t make a huge difference. However, it will benefit people with smaller lot sizes, and those who live in attached properties such as condos, townhomes and duplexes.
3. What are the key differences in mortgages between buying a home to live in vs. for investment? When you are buying a home to live in (owner occupied) you can qualify for a high ratio mortgage, insured by CMHC, Genworth, or Canada Guaranty, meaning you can purchase a home with less than 20% down payment (min 5% down payment is required). Your insurance premium will also be included in the mortgage and is based on the mortgage amount and down payment percentage. Here is a simple calculator that helps you estimate the mortgage insurance premium. Keep in mind premiums are higher if you are self-employed and you state your income higher than what is on your income taxes. If you are buying a real estate rental/investment property, the minimum down payment required is 20%. Many lenders also apply higher rates for rental properties than if the property were owner occupied. If you are buying an investment property and do not own a current owner occupied property, it is best to speak with a Mortgage Broker to discuss your options.
4. What are the benefits of using a Mortgage Broker? Customer Service. Mortgage Brokers do not work set hours and are on call for you in the evenings, on weekends, or via email/text. We work for the client, not the bank. If you are in the home-buying process and have questions, or need to ensure you can qualify for a certain amount when putting in an offer on a home which isn’t necessarily during bank hours, we can help.Education. I educate my clients to help them understand their credit score and overall credit bureau and offer advice and tips on how to build a stronger score and bureau. I’m also very strategic about when I pull their credit bureau, so it’s not done more times than necessary.Time Saver. I save my clients precious time so they don’t have to shop around for a mortgage. I work with over 20 lenders and it is my job to find the lender and mortgage product that best suits their needs.Guidance. I’m my clients’ personal guide through the buying process. I’m there every step of the way to the day that they move in and throughout their entire mortgage term. I ensure they understand the difference between all the different types of lenders and educate them on the pros and cons of rates and special offers. My ultimate goal is to ensure my clients are comfortable with their mortgage, the payments, the lender, and that they understand the lender’s policies and penalty calculations.Rock Solid Relationship. It is essential that you find a Mortgage Broker you trust. I recommend to my clients that they interview me as if I am being hired to work for them and that they work with the person they trust and feel will take the best care of them.
5. How do home buyers determine their budget and assess financial situation? One of the first steps I take with my clients is to understand their financial position, their income, debts, liabilities and overall budget. If my clients don’t currently do a monthly budget, I suggest that they start one to understand how much they are comfortable paying each month for their mortgage (not inc. property taxes, strata fees, etc). A simple monthly budget is your income minus all fixed and variable expenses to show where you spend your money and whether you are running a deficit each month. Excel or Google Sheets are great and simple tools to use for this. It’s also important for clients to track their net worth and liabilities.
6. Outside of a loan, what other expenses and fees should buyers factor in? During the buying process there are always unexpected expenses, these can include: the appraisal fee (approx $300), home inspection (approx $500-800), and the Property Transfer Tax (1% of the first $200,000 and 2% of the balance).If you are a first time home buyer and buying a home valued under $475,000 you will qualify for the Property Transfer Tax credit, otherwise the Property Transfer Tax has to be paid at completion and cannot be included in your mortgage and must be paid from own resources (cash, not borrowed funds).There are also the legal fees plus disbursements. These can range from $1300-1600 and include title insurance which is required by many mortgage lenders in BC). Once the purchase in complete, be prepared for your first mortgage payment, strata fees if applicable, property taxes, utilities, and home insurance.
7. What are some of the common mistakes home buyers make? Not getting properly pre-approved before they start the homebuying process. Talking to your bank and having them say you qualify for $500,000 based on only a verbal discussion is NOT a pre-approval. A rate hold is also not necssarily a pre-approval.Working with multiple Mortgage Brokers. I recommend clients interview each broker and find the person they want to work with. If you work with two Mortgage Brokers at the same time, they will find out as your credit bureau states which banks or brokers have pulled your credit. Also, you do not want two Mortgage Brokers submitting your files to the same lenders; it looks unprofessional.Not understanding the difference in penalty calculation between banks and other mortgage lenders and how this may affect them down the road.Not understanding that Mortgage Brokers services are usually FREE!
8. Any pro tips to share?Check your credit bureau with Equifax.ca annually for fraud, collection items, missed payments, or any other pertinent information. Always have your own credit cards.Secondary cards to your spouse’s card does not show on your credit bureau. Mortgage lenders require borrowers to have at least two credit cards (or a line of credit, car loan, revolving loan and a credit card) with a minimum of $2000 limit for at least 2 years, and the ideal score is over 680. Interested in learning more about the new BC assessment valuations? See the details here. Laura is always ready to talk, contact her for a consultation.

Stayed tuned for part two of Laura’s tips!