Existentialism via your Mortgage

Mortgages brokers are essentially salespeople. I've been doing this for a couple of years now and I can honestly say I don't think we really see ourselves as that though. Maybe it is because we don't sell our clients anything tangible. We sell percents, theoretical savings, education and insurance. If I want to continue the sales pitch- peace of mind. Salespeople are usually equated with cars, televisions and furniture. Not future savings.

We don't sell you houses; that is the profession of Realtors and a good one is worth their weight in commissions. We definitely don't buy you houses as ultimately it is your name on the title deed. You are the home-owner, no matter how big or small.

I find you the right lender for your needs. The lender is the one who will probably give you the largest amount of money in your life. And while you don't technically see it in nice crisp $100 bills like in the movies, you do become responsible for it and most importantly, paying it back.

that's a whole lot of house right there...

So what is a mortgage broker? As I mentioned earlier, we sell you numbers and savings. If it helps to be more tangible, we find you the right lender for your needs.You don't pay us to do that; instead the lender pays us.

I think the biggest question out there is 'Why bother?'.

Why use a mortgage professional

Just asked this question today.

Mortgage Math or How to save $17,529

Mortgage Math or... How to save $17,529 dollars*.

You like math? I don't. All those numbers mixed in with the alphabet...it always seemed fishy to me but apparently, if you do it right, it can allow us to put a man on the moon or shoot a camera to Pluto, a gazillion miles away. Which is odd as sometimes my computer can't find the Internet signal from the basement of my house.

And bank math? It takes a special type of person to want to really sit down and figure out where you are in the future regarding retirement savings, especially if you are only given a 30 minute appointment.

I, personally, have lots of trouble ever imagining myself living mortgage free, it's easier to believe I am paying rent for the rest of my life. It's just too far in the future for me. It may as well be Pluto.

But one of the advantages of a mortgage broker is if you ask, I will show you the savings when you refinance or switch your mortgage. One of the more frustrating issues for people looking to refinance or switch is the penalty payout hidden in the fine print of most fixed mortgages. It can run into the thousands of dollars and it is a hard pill to swallow, particularly if you are only going to save 1% on a new interest rate. That's usually enough for people to walk away from looking further.

On Networking

I get it. We live in the age of social media which means social marketing which means social networking. Everything we do on the computer, one of the most non-social activities we partake in short of masturbating is considered a 'social' activity of some sort.

And if you are in sales, be it cars, telephones, mortgages, financial planning, laptops, Amway or self-publishing you are continually being told "you have to get out there and market yourself!"

I was approached recently about marketing my ...talents... on a website. It was a great place for people to see that I am someone who was willing to pay X amount per month to prove that I am a mortgage broker. Once my name was on that list, it gave me the opportunity to be lumped in with 18 other brokers in my area who were getting their name out there.

Yes, a lot of my social contact is through the computer - Facebook is still my go-to but it's primarily for my true friends and family. I'm not too keen on friending someone because we are in the same industry.

I'm also on LinkedIn which is apparently like Facebook, only it is more acceptable to reach out to complete strangers and friend them. I don't know why Jim from Atlanta Mazda wants to link with me but whatever, that's what I'm supposed to do. Keep it professional.

I was on Twitter but that seemed sad/funny. It was like being at a convention of Late Night joke writers. Perhaps because that was where my taste ran to. If you tweeted something funny, I'd follow you. If I wanted other people to follow me, I'd tweet at someone famous and all of their followers would read it. Then some would follow me. Once I realized I was saying I tweeted someone as if it was a valid form of deep interaction, I deleted my account.

I don't have snapchat. My understanding is it allows you to send a picture then it will delete immediately after being opened. This seems like something all fathers should make sure isn't installed on their daughter's cell phone. I can't imagine how many dick pics have been sent out in an odd new-age social media flirtation ritual.

Pinterest seems like every art/craft teachers' wet dream. It seems to be a website that allows you to see all the cool and cheap shit you won't ever do with cinder blocks or pallets. I don't know how that helps me sell you a mortgage.

I'm digressing... social media. Point is, I'm not very good on social media. I like my blogs, I like Facebook. I don't use it too often to market myself and that would make most networking authorities cringe. I stand by the best referral is word of mouth. I don't know of anyone who was approached because they tweeted something.

But it's a changing battlefield apparently. I have to get on the social marketing/networking train or step off the tracks.

Another Case for Variable Rate Mortgages

Questions found on the Internet that may be relevant to people who read this blog.

Hi anonymous Internet Advisor...

I am currently coming up to the end of my first mortgage term. I went with a 5 year fixed term @ 3.45%, which at the time was a great rate. My bank is now offering 2.25% variable, which would bring my mortgage down by $150/month. I've never been a risk taker financially, which is why I went with the safe bet on the original term. However, I am starting to wonder what the real level of risk is, and if it might be to my benefit to switch to the variable rate, since it is so low right now.

I guess what I am really wondering is, how often do variable rates change, and what are the chances that they would jump way up. I am in Canada if that is relevant.

Sexy Time Talk With a Mortgage Assassin (Part 1)

Hello Ladies...

Let's talk about two things that go together like chips and salsa, fish and chips, or fish and chips and salsa... you know, like a fish taco. So fish and tacos. I'm talking about sex and mortgage brokering, the hottest combination out there. Except for fish tacos.

Are you saying fish tacos are sexier than mortgages? 

To some people, that answer is a most definite yes. Especially with a chilled glass of Courvoisier.

Surely there are some sexual benefits of being a mortgage broker? 

Let's put it this way... Every time I hear 'Oh, you're a mortgage broker? You want to make out?' it instantly makes me think of three things;

1) you are pretty drunk and have low standards
2) you dig people prying into your personal financial affairs in order to get you the lowest interest rate possible when borrowing huge amounts of money
3) you are probably a business account manager for a national lender

The Mortgage Broker And You

Hi.

You want to buy a house or perhaps you have one and it's time to renew. Where is the first place you turn to for help? Your bank. After all, you have most likely been with them since you opened your first savings account, an idea that was forced upon you by your parents. They will know what to do and they will help you because you've been with them 10, 20 years.

I totally get this kid...

And they do help you. You go in, talk about purchasing a house and they say we will give you the money to buy this house and you can slowly pay us back over the next two or three decades with this little amount of interest tacked on. Next thing you know, you've signed some papers, told your Realtor and by this time next month, you are a proud new homeowner!

Yes, mortgages are complicated. Some are more complicated than others. Hotels, apartment buildings, skyscrapers, they all have mortgages of some type. But let's just keep things simple. I'm talking to you, the simple home owner or buyer.

Do you Like Money?

Have you considered that your house is perhaps your most tangible asset? If you are in need of money (and let's face it, a lot of us are) perhaps there is a way to tap into your house's equity. Use that money to pay down your debts, leaving you with more money for you on payday!

What's the matter with that idea?

There will be more about the concept of cashing in on your home's equity later but for now, let's just call this a teaser...

Decreasing Debt Loads, the Wolf in Waiting

The Wolf In Waiting

Let's go house shopping! 

If there is one thing I have heard too much of in the world of finances is that Canadians have an insanely high debt ratio. Very few people care about this. Mainly because they aren't in the financial industry. But I'm here to tell you every time there is a news story about the Prime Rate, Bank of Canada or Canadian Real Estate bubble there is usually a caveat about how much the average Canadian is in debt. We have heard it so much we have tuned it out, much like the phrases 'historically low interest rate' or 'continuing war in Afghanistan'. In effect, we are being trained (conspiracy theorists can submit theories in comments) to ignore that little boy who is crying Wolf. Nobody is telling us to stop spending money. In fact, it's the opposite. We need to keep spending money to keep the economy in motion. It's why it has 'never been easier' to qualify for financing that new house, car, big screen television. It's why Black Friday has become a North American institution; more important to Americans that Thanksgiving.  

Q; Am I ready for a loan?

Question,

Hi, I received an inheritance a few years ago and purchased a property with it in which I rent on a month to month basis for $1600. i have $55-$60k I'm willing to put down for a down payment. my question is: is it possible for me to qualify for a loan and use my income from my home to pay for mortgage and other fees? I have only been working since April 2014. is my only option to continue to work? thank you for reading.


Answer,

There's a lot of vagueness to this question; For instance, you don't specify how much of a home are you looking to buy or much of anything of your current situation, other than you have a large amounts of savings. Also, does the property you purchased with your inheritance also has a mortgage attached to it? I would think it does so basically I believe you are asking if you could pay for two mortgages based on solely the $1600 month rental income you receive because you want to leave your job ('is my only option to continue to work?')

Quick answer. No. 

Longer Answer; Why I say that - let's say you buy something small in a small town, like a condo that lists for $150,000. The minimum 5% down is $7500. Let's add in the extra expenses roughly and say with fees and such you pay $10,000. You now have a house with roughly a $142000 mortgage. Let's make your mortgage $700/monthly on a 25 year amortization. You have income of $1600 coming in (assuming there is no mortgage) leaving you with $900 a month revenue and your savings of roughly $45,000.

A lender would think positively on your original application only if you have your tenants under some type of long-term contract - not just a verbal month-to-month agreement. You would need to have to have them sign something. Your work history is short so the will want to see two years of taxable income so your rental income has to be declared as well. They will want to see at least a 3 month history of your savings in your bank account, or a letter from a trustee/lawyer declaring it to be an inheritance and not, say, from drug smuggling. Also, you give no indication of your credit score, which is evidence of you being able to go into debt and repay it on a convenient monthly schedule. Why should a lender believe you would pay them back that $142,000?

Now it sounds like you want to quit your job and live off that $1600 a month (which being month to month would be considered a 'high-risk' income; what do you do if the renters leave without notice?) while maintaining 2 houses. How long do you see this working out? Poverty line in Canada is around $20,000/yearly, which is where you would be without your job. You would have to find a way to pay for 2 sets of property taxes, 2 sets of repairs, 2 sets of utility bills (if your renters suddenly move out which they could as you don't have them under contract). This doesn't even include your own personal expenses, such as transportation, education, food, clothing, etc.

While $45,000 in savings sounds like a lot, truth is it's not that much of a safety cushion if you are not steadily replenishing it via employment.


I hope that helps to give you an idea where you stand and what lenders consider when approving mortgages; for more information give me a shout and I can go through this in better detail as you provide me better detail.

Buying a home with your parents?

(credit to reddit)

Questions from real people, just like you!

So my parents and I are tossing the Idea around of purchasing a whole duplex together, but are a little unsure of some of the details.

Like, what if I don't like their couch?

When it comes to a split mortgage, what is the required minimum down payment? I know in Alberta Canada where we're from, it would be a 5% minimum for me as a first time buyer, but they would required 20% as this would be there second home, so am I just lumped in with them?

If so, would it be possible to make the small down payment under my name via a gift from them and have them purchase half from me directly?

How is the mortgage rate calculated?

With my salary being lower, and with less credit history, would they just take our average, combine it, or just take the highest person into account?

Before anyone comes in and hassles me about a joint mortgage or minimum down payment and whatnot, please keep this all hypothetical. My mom just tossed the idea at me and it got me really curious about these factors. Thanks for the help!

Ok, let's break down this scenario and answer the questions piece by piece.

If it's in a blog, it must be legit.

No matter if a mortgage is split, shared, lumped, thrown at a wall and eaten by the dog the required minimum down payment is 5% of the sale price. To protect lenders against foreclosures or people just walking away from a property, that 5% shows that the property owners have some vested interest in keeping the house.

Yet, this is a duplex - so legally a duplex has 2 different titles (call'm right side and left side). Each side would have a separate deed. In your scenario, it sounds as if your parents are trying to purchase two houses and want you to share the risk in that purchase. Or, they could want you to start being a homeowner and so are planning on you living/renting in one side of the duplex while they live in the other. You should clarify what they are thinking long-term with the other side of the duplex.

Being a parent I can see the benefits of what they may be trying to do; they are starting you on the road to being a responsible home-owning adult, yet keeping you close enough to watch over. It's a lifestyle choice you need to make.

Will they like your choice of friends and/or roommates?

First-time home buyers receive a tax credit but have to plan on using the home as their primary residence within the year. You can find more information here.

They can gift you the 5% down payment, no problem. A simple gift letter stating so would do it. They must realize and state that this is a gift, not a loan. But they also have to have enough equity to have another down payment for the other side of the duplex.

The mortgage rate is calculated by basically taking your overall expenses and dividing it by your monthly income. You need to have a certain amount of disposable income that indicates you can afford the mortgage payments. A good rule of thumb is no more than 40% of your monthly income go to debt, leaving you 60% to cover the mortgage.

Lastly, if you decide to become an 'investor', meaning your parents add your name and income (assuming you are of legal age) to their mortgage application then the lender will review the strength of the application and then offer you a mortgage rate - that is why I suggest a broker - there are over 50 lenders that I have access to, all have their own rules and different guidelines and rates that a typical Big 6 bank doesn't offer.

My advice?

Ask more questions. I don't know your age, your lifestyle, your culture, your future plans. Consider the location and if you want your parents living right beside you. While they might mow your lawn and take out the garbage for you, they might (gasp) expect you to do it!

Also the recent drop in gas prices (as of Jan 2015) and Alberta's reliance on the industry doesn't bode well for real estate prices so you may want to wait a bit to see what happens.

On the plus side, the drive to do laundry would be short

As always, good luck. Take your time and be informed when you decide to become a home-owner. It's a large responsibility that can wait until you are truly ready. 

3 Great Questions for a Mortgage Broker...

3 Great Questions for Me, a certified Mortgage Broker


1) Can I ask you a question?

2) Is there anything interesting about being a mortgage broker?

3) I'm planning on buying a house with my BFF but we don't want to get married. Is that possible? What happens if we split, I mean, they decide to move out and get their own place?

Platonic BFF's since 1969