Buying a Home that Requires Improvements

Question: We found our dream home - the only problem is it needs a new roof and the furnace is very old. We don't have the funds to do this AND buy the house. Do we have any options?

Answer: It is exciting to find the home that you've been looking for...not that exciting to know that, if you buy this house, you're going to have to put money into it right away. There are a couple of options that you can consider...

1. 100% Financing - Instead of putting your 5% down payment toward the purchase of your home you can use this money to do the needed repairs. So, if you were buying a home for $200,000.00 you can save the down payment of $10,000.00 and use these funds toward the new roof and furnace.

2. Purchase Plus Improvements - The repairs you need to do to the home, such as new roog and a new furnace, may be eligible for the Purchase Plus Improvement Program offered by some mortgage lenders. In essence, you can purchase a home and include the cost of any immediate renovations into the mortgage. If the estimate for a new roof is $5,500.00 and the new furnace is $7,500.00 the lender may see the "as improved" market value of the home to now be $213 000.00. Your mortgage would now be based on $213,000.00 and your down payment would be 5% of this new value ($10,650.00). Your direct, out of pocket, expense amounts to $650.00. The improvements are completed and paid for once you move in. This program is also available as Refinance With Improvements. Knowing all the options available for our clients is our job! The services of our mortgage agents are of no charge and can save you time and money.

Email Lisette at lharris@tmacc.com or call (905) 529-1199 with your questions!

How to Become Mortgage-free Sooner

Question: How can I become mortgage-free sooner?

Answer: Paying your mortgage off the traditional way takes 25 to 40 years and costs about TWICE the purchase price of your home. Here are some effective ways to pay off your mortgage sooner, build equity faster and save thousands in interest.

• Change your payments. Simply increasing your payment frequency to bi-weekly or weekly costs nothing and can save thousands of dollars over the life of your mortgage.
• All-in-one mortgage. Instead of making extra payments, consider switching to a mortgage that pays off the principal faster without costing you anything more.
• Merged account mortgage. If you'd rather not refinance your existing mortgage to switch to an all-in-one mortgage, consider a merged account mortgage. This system uses your existing mortgage (any type of first mortgage will work), and advanced line-of-credit (ALOC), and specialized software that makes a connection between your bank account, ALOC, and mortgage.

For more information, and help to decide which one of these options is the best way for you to become mortgage-free sooner, call us today for a free analysis at (905) 529-1199.

Variable Rate vs Fixed Rate

Question: Should I go Variable rate or Fixed rate?

Answer:Depends!

Variable rate is based on the Bank Prime, which is what financial institutions charge to the consumer. Bank Prime is based on the Central Bank Rate (the amount of interest the Bank of Canada charges financial institutions for short term loans). As the Central Bank Rate increases or decrease, so does Bank Prime and in turn the variable rate. Over the last three months prime has decreased a half percent.

The 5 year fixed rate is based on the bond market. As the bond market increases or decreases so does the 5 year fixed rate. This fluctuation does not apply to banks posted rates as it does to rates accessible to mortgage brokers. Fixed rates are currently on a downward trend.

Instead of trying to guess where rates are headed, consumers would do better to think about their own situation. They should evaluate their personal balance sheets and risk tolerance. The decision of whether to go short (variable) or long (fixed) will depend on the consumers' tolerance for risk as well as their ability to withstand increases in mortgage payments if prime increases.

Something to keep in mind is that variable rate mortgages allow consumers to lock in to a fixed rate at any time without costs, with fixed rates currently in a downward cycle; the long term benefit of locking in at a later date may prove to have substantial savings. While there's no up-front cost to the change, from variable to fixed, NOT all lenders will lock in at the fully discounted (very best) fixed rate mortgage. Consumers should be sure to ask their lender if they will get the same fully discounted fixed rate upon lock in and consumers should also know that every lender has a different variable rate product to offer.

Email Lisette at lharris@tmacc.com with your questions, or call (905) 529-1199