Tuesday, March 20, 2012

An important reminder: Don’t assume a pre-approval is set-in-stone

Bidding wars have become commonplace in hot markets across the country - and so have "clean" offers, or those that are free from all conditions. While forgoing something like an inspection is risky enough, at least buyers know what they're getting into. The most dangerous waived condition, in our opinion, is the condition of financing - primarily because many buyers assume that they're safe with merely a preapproval.

While a preapproval provides you with a rough estimate of how much money a bank would be willing to loan you, it's based solely on your income and level of debt. Since preapprovals are usually requested before a property is bid upon, the bank has no way of taking the property into account - so the financing offer isn't etched in stone.
A bank wants to know that the money it's investing is tied to a good property - one that is being purchased for fair market value and is in good condition. If you get caught up in a bidding war and end up submitting a condition-free offer, it's quite possible that the bank may not come through with the financing it tentatively promised - even if the price falls within the range of your preapproval. After all, if the bank thinks you drastically overpaid for the property, it's not going to give you a mortgage that might be worth more than the value of the home.

In addition, mortgage underwriting departments don’t review your supporting documentation (employment letters, paystubs, down payment confirmation) until you have written an offer on a home. In addition, banks will not submit your file to the mortgage insurer (CMHC, Genworth etc) until you have an offer on the table. If there are any issues with your paperwork or the mortgage insurer declines your file you may not get the mortgage.

That's why it's so important to include that condition of financing in your offer - or at least consult with your mortgage agent before opting to leave it out. While bidding wars are stressful experiences to say the least - especially if you've been through a few of them - so is being locked into a home offer you can't afford. Not only will it leave you scrambling for financing at the last minute (and potentially paying a way higher interest rate than you anticipated) but, if you can't find any financing, you could end up losing your deposit and potentially being subject to a law suit.

In your opinion, which scenario's worse?

-Axiom Mortgage Partners

Thursday, March 15, 2012

A great new service for the Edmonton area...

I heard this company on the radio this morning and thought it was such a great idea! I’m actually pretty surprised no one else has thought of it up until now.

We all know what a pain it is to organize all of your bottles and cans, heave them in your car and head down to the bottle depot only to wait in line. The process wastes your precious weekend. Thankfully, this company makes recycling easy! They will pick your bottles up at your door and leave you with cash! Contact them directly for more information or to arrange a pick up. I have a feeling they are going to be VERY busy...

"We are proud to be Edmonton's first company to offer bottle pickup services to both the residential and commercial markets. The Bottle Depot at Your Door is now expanding to serve the greater surrounding areas of the capital city as well.

We offer ultimate convenience for you to recycle your bottles and cans and receive cash without visiting a bottle depot."

No Lines. No Hassle. No Contracts. No Fees.

Bottle Depot at your Door

Monday, March 12, 2012

Demystifying mortgage prepayment penalties

When signing a new mortgage, it's easy to get caught up with things like rate and monthly payments, and overlook the features we may need down the road - like prepayment privileges. It doesn't help that, up until recently, financial institutions have been allowed to glaze over the details regarding prepayments - and their penalties.

Thanks to a new Code of Conduct created by the federal government and the Canadian Bankers' Association, however, the details of prepayments must now be front and centre on any mortgage document. In addition, should you decide to go ahead with a prepayment - or close or refinance your mortgage before your term is up - your financial institution has to clearly explain how much it's going to cost you, and show you their calculations for coming up with that number.

In a nutshell, here are some of the details of the new code - which must be adopted by all federally regulated financial institutions within the next six to twelve months:

Part 1: Information Provided Annually
This section of the code basically requires financial institutions to offer you regular updates on your loan. Every year, your bank must:
- outline what prepayment privileges are available to you, as well as the dollar amount you can safely prepay on your mortgage in the given year.
- outline how it will calculate your prepayment penalty, should you opt to go over your allotted amount.
- offer a customized portion of the annual update that will outline information on your particular loan (such as amount left on it, the mortgage interest rate, the remaining term, how the bank calculates the Interest Rate Differential, and where you can find the comparison rate) that will allow you to estimate the costs of paying it off early.

Part 2: Prepayment charge information
Should you opt to go ahead with a prepayment that is more than your annual allotted amount, your bank must:
- clearly outline the prepayment charge
- explain its calculations for coming up with that prepayment charge
- any other charges that may accompany the prepayment charge

Part 3: Enhancing borrower awareness
Financial institutions must also clearly explain - either on their websites or elsewhere - details about your mortgage, including:
- the difference between fixed versus variable
- the difference between open versus closed
- how to pay off your mortgage faster
- how to avoid prepayment penalties

The new code also requires banks to have a toll-free number that mortgage borrowers can call should they have questions about their prepayment penalties. If you would like to learn more about the new Code, feel free to view it on the Canadian Bankers' Association website, or give me a call!

For more information on the announcement click HERE!

Thursday, March 8, 2012

Variable rate mortgage holders rejoice!

In an announcement earlier today, the Bank of Canada has held steady on its key interest rate making this the 12th announcement with no changes...the next scheduled interest rate announcement is April 17th 2012.

Article: Bank of Canada rate holds steady for 12th time

Monday, March 5, 2012

Wary of catastrophe, experts provide tips for future condo buyers

In light of the recent news regarding several condominium complexes in Alberta that have had major issues with the construction of the buildings here is a great article on purchasing a condo! If you are considering buying a condominium this is a great story explaining what background research you should do before signing on the dotted line.

Article: Wary of catastrophe, experts provide tips for future condo buyers