June 21, 2018

Benefits Of Being A Private Lender

What is a Private Lender?  Well, that is someone like you or I that invests our money into mortgages.  It could be a 1st mortgage or a 2nd mortgage but usually a 2nd mortgage.

Typically a client would be referred to me because they require a mortgage for a debt consolidation, equity take out for renovations, purchase an investment property, pay Revenue Canada taxes or divorce.

Here are some examples for obtaining a 2nd mortgage:

  1. The cost to break the 1st mortgage to refinance their property is cost prohibitive
  2. With the new lending guidelines implemented January 1, 2018, they cannot meet the debt servicing guidelines
  3. Poor credit
  4. Illness: I have financed mortgages where the client has been in arrears due of loss of income while going through chemo or other illnesses

Reasons to lend your money into a 2nd mortgage:

  1. Higher interest rate, return on your investment 8-12%
  2. I will do all the credit checks, verify employment and income to ensure you are secure in the knowledge that these clients can repay your mortgage
  3. We do an appraisal to verify there is realistic value and equity in the property
  4. You are putting your money into the real estate market instead of the stock market
  5. You can go see the property: you can see, feel and touch your investment

As in all relationships, it has to be a win win situation, it has to be good for both parties.  Typically interest rates would be in the 8-12% range depending on how much equity is in the property, reasons for late payments on the credit bureau, purpose of funds, etc.  I meet with every client and actually go to the property to get a feel for home’s value and condition.  I am very experienced lender and have personally been lending in private mortgages for 20 years and have a proven track record.

I am always looking for new private lenders.  If you are interested, please call me, we can meet and I will show you examples of a typical client file, what documents I would provide, interest rates and the procedures we would follow.  I look forward to hearing from you!

Colleen Saunders is a 25 year veteran in the mortgage industry serving Oakville, Burlington, Mississauga and Toronto and offering all mortgage related services such as 1st & 2nd mortgages, private mortgages and more.

To contact Colleen, please fill out the form on  www.mortgagesbycolleen.ca  or call 416-459-2406

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Divorce And Taxes

I receive a number of referrals of clients going through the divorce process and wanting to purchase their own home.  As we are moving into tax time, I felt this article may be timely on working with Canada Revenue Agency (CRA).

  1. Are You Separated in the Eyes of Canada Revenue:  CRA considers you separated when you live separate and apart for a period of 90 days.
  2. Inform CRA: the CRA expects you to notify them when your marital status changes. You can call, do it online, or fill out and mail a marital status change form.
  3. Write-Off Legal Fees Where You Can: It may be a pleasant surprise after paying those big legal bills that you may be able to write-off a portion of those fees. The CRA will allow you to deduct legal fees that were paid to obtain or collect child or spousal support.
  4. Claim the Eligible Dependent Tax Credit: If you have children, you may be able to claim them as eligible dependents. If you have primary custody of those children, the credit may go to you. If you have shared custody, then you will have to decide which parent will claim the credit
  5. Support Payments & Taxes:  Child support is not taxable in the hands of the person who receives the support, and the person who pays it can’t claim the support as a deduction.  Spousal support, however, is fully taxable as income. Additionally, if you are paying spousal support to your ex, you can claim it as a deduction on your return.
  6. Who Receives the Child Benefits:  If you have joint custody of your children, you may have to share child benefits with your ex. You may see a rise in the benefit amount, as your household income has decreased, but the CRA may split the benefit 50/50 between you and your ex.  There are also certain spousal tax credits you will now be no longer eligible for. The pension income amount, the disability amount, and the tuition, education and textbook amounts, can no longer be shared when you split. But, your lower household income may mean an increase in the amount of child benefit you are entitled to.

This is very general info, please check with your lawyer or accountant for more info.  If you need a referral of a good divorce mediator or accountant, let me know.

Colleen Saunders is a 25 year veteran in the mortgage industry serving Oakville, Burlington, Mississauga and Toronto and offering all mortgage related services such as 1st & 2nd mortgages, private mortgages and more.

To contact Colleen, please fill out the form on  www.mortgagesbycolleen.ca  or call 416-459-2406

https://www.moneytalkgo.com/divorce-2/

Advantages & Disadvantages of HELOC

What is a HELOC?  A HELOC is a ‘Home Equity Line of Credit”.  Often consumers think there is no mortgage registered against their home but in fact there is.  A collateral mortgage/charge is registered for the amount that you are authorized to borrow as security in support of the loan amount.

A HELOC is typically requested when you want access to short term financing, for example, doing renovations, debt consolidation or investment and know there will be monies coming in through commissions, sale of stocks, inheritance, etc. that will be used to pay down the loan amount.

The advantage of a HELOC is you only pay interest each month on the amount your borrow.  Whereas when you take out a mortgage, you draw down the full amount and therefore pay interest on the total mortgage amount.  You are also required to make regular monthly payments, so the mortgage is amortized over, say, 25 years in order to pay the mortgage off in full.

The disadvantage of a HELOC is because you pay interest only, if you don’t purposely pay down the HELOC loan, then the balance never reduces.

HELOC’s have increased in popularity over the past number of years because of the low interest rates and because they are fully open with no penalties for repayment.  This type of borrowing has contributed to increased consumer debt as about 40% of HELOC borrowers don’t regularly pay down the principal.

With interest rates rising, it may be a good time to have your HELOC replaced by a traditional good old mortgage product!

Colleen Saunders is a 25 year veteran in the mortgage industry serving Oakville, Burlington, Mississauga and Toronto and offering all mortgage related services such as 1st & 2nd mortgages, private mortgages and more.

To contact Colleen, please fill out the form on  www.mortgagesbycolleen.ca  or call 416-459-2406

New To Canada Mortgage Rules

I have had a number of enquires recently on whether the New To Canada Program requirements have changed.  Individuals that have immigrated or relocated to Canada within the last 5 years can purchase a property with as little as 5% down payment.  Here is the criteria in order to qualify for a mortgage:

  1. Purchase price must be less than $1,000,000
  2. Under $500,000 you can purchase with 5% down payment
  3. If the property is between $500,000 and under $1,000,000, you can purchase with 5% on the first $500,000 and 10% on the portion over $500,000
  4. Maximum 2 units with 1 unit being owner occupied
  5. Maximum 25 year amortization
  6. Minimum 3 months full time employment in Canada (transfers under a corporate relocation program are exempt)
  7. Strong international credit report and/or 2 alternative sources ie rental payment history or hydro/utilities etc
  8. 5% of down payment must come from own resources and not a gifted down payment
  9. Must have immigrated to Canada within the last 5 years
  10. Must have a valid work permit or obtained landed immigrant status
  11. No Guarantors permitted
  12. Foreign Diplomats who do not pay tax in Canada are ineligible for this program
  13. This program is not available for Business For Self Alternative financing or Investment Properties

If you would like further information, please call me directly!

Colleen Saunders is a 25 year veteran in the mortgage industry serving Oakville, Burlington, Mississauga and Toronto and offering all mortgage related services such as 1st & 2nd mortgages, private mortgages and more.

To contact Colleen, please fill out the form on  www.mortgagesbycolleen.ca  or call 416-459-2406

Paying Down Debt vs RRSP Investment?

It has always been a dilemma of whether you should use any excess cash to contribute to your RRSP or pay down your mortgage.  The current economic equation has recently tilted in favour of paying down debts vs. building up assets but only for those people with a low tolerance for any investment risk.  The current interest earned from GICs, term deposits and government bonds remains pathetically low.  At current deposit rates of around 1%, it takes 72 years to double your retirement nest egg if you only earn 1% per annum.

Here is how to think about the trade off between paying down your mortgage versus saving in your RRSP.  Every dollar you don’t contribute to your investment portfolio will earn the mortgage rate you are paying on that dollar.  If your mortgage is costing you 3%, then every dollar you don’t invest but instead use the money to pay-down debt will earn the said 3%.  If you are paying 10-23% like on many credit cards, the argument to eliminate the debt is even stronger.

Of course, if your investments are invested aggressively under the expectation that they will earn more than the mortgage rate you are paying, then you can justify not paying down your mortgage.  After all, borrowing at 3% makes sense if you expect to earn much more.

To quote the Review of Financial Studies “Households with high interest debt have a reduced benefit to equity participation and in many cases should not own any stocks…repayment of outstanding debt almost always yields a higher rate of return than many of the safe (investment) assets.”

Look at both sides of your balance sheet at the same time.  Add up all your debts and compare the interest cost of all your liabilities against the interest you will be earning on your retirement investments.  If the former is greater than the latter, it is time to pay down some debt and forgo the investment plan contribution.  Oddly enough, not contributing to your RRSP might make you wealthier in the long run.

Colleen Saunders is a 25 year veteran in the mortgage industry serving Oakville, Burlington, Mississauga and Toronto and offering all mortgage related services such as 1st & 2nd mortgages, private mortgages and more.

To contact Colleen, please fill out the form on  www.mortgagesbycolleen.ca  or call 416-459-2406