Canadian Small Business Women

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How To Move Forward With Your Real Estate Investing Goals!

Amina

As a real estate investor, I took the time to get educated in various aspects of real estate before proceeding with my first investment property purchase. However, at some point I knew that getting educated was only part of the process – at some point I would have to pull the trigger, so to speak and actually purchase the property to meet my investing goals.

Everybody has reasons for starting their real estate investing career – mine started because I thought it would be a great way to supplement my income. I never expected to evolve and learn what I have learned to date. I keep expanding my goals and hopefully this post will inspire to keep expanding yours as well. I am now involved in residential, commercial and private lending for other investors and with so many different ways to invest the overall goal is to not only grow my own passive income but to also enjoy the journey.

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I love going to different meetup groups or getting out and meeting other investors – mostly to see what they are doing with their own portfolio’s and to learn about what path they took to achieve their goals. But today I am more picky on which ones I go to and how much I spend to attend a meeting. Factor in parking and gas, it can be a very expensive night with little or no return.

It can be advantageous to learn from others. Investors are a great group of people because they love to share their achievements and their struggles to get to where they are and so you get to learn for free. At the beginning of my real estate journey, I took the time to meet with investors I wanted to emulate and am grateful for those individuals who took the time to share their experiences and knowledge with me.

I have also met so many would-be investors who have attended every course available (some that cost thousands of dollars), will go to every meetup or investment club across Ontario, will speak to many investors and still not have the courage to pull the trigger and purchase that property – we commonly refer to this as analysis paralysis!

I recently met such a person and sometimes I can be very direct – mostly because I hate to see somebody waste so much money and not have anything in return. I met this person at an investor meeting and the charge was $20 to attend. I understand that sometimes investors who run these groups have to pay for the rooms so that is not a problem, however if you are attending a different meeting 2-3 times a week, that cost can add up.

So I met this gentleman at an event and we started talking! This specific gentleman thought that he could purchase a few properties and retire from his job within 6 months – unfortunately a myth that is perpetuated by many of these courses that charge thousands of dollars. We finally got around to the topic of the many courses he had taken to date over the last 3 years – in total he had spent close to $60,000 (one year’s annual salary) and had still not purchased a property.

I asked him what was holding him back and he said he did not feel ready and that he did not feel he had learned enough. I asked him what else he needed to know and he could not answer that question. He said he was taking another $10,000 course the following week that should give him the information he needed to proceed. I felt sorry for him because this is too often a reason I hear when people don’t feel ready to purchase a property yet.

Are you an investor who has yet to purchase your first property, even after attending many courses and seminars? What information are you lacking? What is holding you back?

By reaching out to an experienced investor and asking them the questions you most want to know, it might just give you the confidence you need to push forward. I recently did that with a new investor and one month later after taking my advice and doing some research on two markets we focused on, she is ready to pull the trigger on her first property!

If you are a successful investor and you come across somebody like this, please do them a favor and break down the myths for them; such as owning a few properties will not allow you to leave your job and retire; taking so many courses and spending so much money may or may not prepare you to purchase that property and finally being stuck in analysis paralysis will not prepare you to purchase your first property.

If you are a successful investor, don’t be afraid to share your experience with somebody like this – it may result in their success as well as yours!

I can be reached at amina@aminas-ms.ca or 416 697-5443.
To Your Wealth! Amina

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A Tale of Two Cities – An Investor's Story

Amina

This story takes place in modern day times! The story is about a real estate investor who has to decide between two properties. One property is in the bustling and over-priced city of Toronto and the other property is in a smaller community to the west known as Kitchener.

The Toronto property is in Guildwood – a sought after area of Scarborough but backs on to a Go Train track. The home is beautiful and offers a main floor with the potential for a basement apartment but it would need renovations to make it happen. The price is $749,000.

The property has been sitting on the market for 31 days in a sought after area because of it’s close proximity to the train tracks. What happens in a few years when my client wants to sell this property – will he have the same issues as the current owner? Even in a seller’s market? Probably!

The Kitchener property is in a sought after area with schools and shopping nearby and also has the potential to add a basement suite but the separate entrance would have to be built-in. The asking price is $325,000.

Seems like a no-brainer right? But let’s look at the numbers to see what makes more sense!

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I’ll base both scenario’s on the same interest rate of 5 year fixed of 2.59% with 30 year amortization. However with the Toronto property he would require a hefty 25% down in order to make the debt ratios work and with Kitchener only 20% down.

Toronto Property:

Purchase Price $749,000
Down payment 25% $187,250
Rate 2.59%
Amortization 30 years
Term 3 years

Monthly Mortgage $2,241.89
Property Taxes $350
Rental Income $1,850 + Utilities

Net Rental Income -$741.89
In order to give him the positive cash flow he needed he would need to finish the basement for another $30,000 – $50,000 and be able to rent it out for $950-$1,000 which would give him approx. $258 in cash flow.

Pros and Cons of this property:
• PRO -Close to highways
• PRO -Good area
• PRO- Higher appreciation
• CON -Backs onto Go Train
• CON-Needs to complete basement in order to cash flow
• CON -Needs 25% down to purchase this property – a hefty $187,250

Kitchener Property:

Purchase Price $325,000
Down payment 20% $65,000
Rate 2.59%
Amortization 30 years
Term 3 years

Monthly Mortgage $1,037.64
Property Taxes $275
Rental Income $1,450 + Utilities

Net Rental Income $138

The basement is finished – he just needs to build a separate access, which will cost approx.. $20,000 and he can then rent out the basement for an additional $900 in that area, which means he cash flows $1,037.64 – exactly what his mortgage is – he doubles his mortgage payment!

Pros and Cons of this property:
• PRO -He can easily build the access for 2nd basement suite
• PRO -He can cash flow even without adding the 2nd suite
• CON -Lower Appreciation
• PRO -Lower Downpayment needed
• PRO -Ability to Purchase another property with savings from down payment

With the Toronto property in ordinary circumstances he would have no issues renting it out but there is the train track to consider and not every tenant would be willing to live near a train trace, even if he was.

The Kitchener property although in a nice area, would not appreciate as much as the Toronto property. However with this property he would only be required to put 20% down, he would have twice the rental income (once he put the entrance to the finished basement in) and he would have enough money left over (in his budget) to purchase a second property within a few months.

When you are out there looking at properties I know you are doing a full analysis but also consider the pros and cons of the property itself. Look at it with the eyes of your potential tenant!

Happy shopping and I hope if you come across a Tale of Two Cities of your own, you will share it with us! I would be interested to know how you made the decision to purchase your rental property – was it as difficult for you as it was for my client? Please write and share your story!

I can be reached at amina@aminas-ms.ca or 416 697-5443.
To Your Wealth! Amina

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How to Deal with Property Tax Adjustments

Amina

It’s not unusual for Purchasers to get settled in their new home and get a Property Tax reminder stating they owe the whole years worth of taxes. Frightful right?

Just after moving in to her new home, my client received a notice in regards to the property tax adjustment and as a First Time Home Buyer, we had discussed this could happen so she did not freak out –completely!

Property Tax Adjustments

If you’re selling or buying a home there’s a great chance, that you’ll incur a Property Tax Adjustment to finish your real estate transaction. A Property Adjustment ensures that you don’t over or under-pay property taxes, and it guarantees that you pay the correct amount of taxes that should be incurred by your purchase date.

Property Taxes are typically levied on an annual basis effective January 1st and become due and payable on June 30th. Using these dates, this means that property taxes are payable six months after they become owing and cover six months into the future when paid on June 30th.

Certain borrowers (usually borrowers who have had to get a mortgage with a B lender, such as Home Trust or Equitable Bank to name a few), will have their property taxes paid by the lender. In this case, the lender may pre-colllect your property taxes six months in advance, which can put a hex on your budget. (Will cover this on a future post)

However, when you are in charge of paying your property taxes yourself, here’s what the calculation looks like.

Property Tax Adjustments are typically calculated as follows:

(# of Days in year to Closing Date)/365

x

Annual Property Tax Levy Amount

=Adjustment Amount

Property tax adjustments are based on two time periods; the sale closes prior to June 30th or it closes after June 30th.

  1. If the sale closes prior to June 30th, the BUYER will receive a credit for the amount of the year’s taxes owing to cover the portion of taxes not yet paid by the Seller. The BUYER is then responsible for paying ALL property taxes for the year by the due date;
    • Example – Mike is buying a home from Joe. The Sale closes May 1st and annual property taxes are $3,500.

(120 days to Closing Date)/365 x $3,500=$1,150.68

Mike will receive a Property Tax Adjustment credit of $1,150.68 on the purchase and will be responsible for all property taxes for the year.

  1. If the sale closes after June 30th, the SELLER will receive a credit for the portion of the year’s taxes, which are owed by the Buyer, because the Seller, in this case has prepaid the entire year’s property tax. This also means that the buyer requires more money upfront to complete the purchase (adjusted at closing) but will not incur additional property taxes in the year of purchase.
  • Example – Tim is selling his home to Mike and the sale will close July 14th. Annual property taxes are $3,500.

(194 days to Closing Date)/365 x $3,500=$1,860.27

Tim will receive a Property Tax Adjustment credit of $1,860 on the sale and Mike not be responsible for property taxes for the year.

Keep in mind that in some jurisdictions the municipality provides the option to pay property taxes by way of a monthly Tax Installment Payment Plan or TIPP for short. I live in Newmarket and my municipality allows me to pay over 10 months, which really helps when budgeting. By enrolling in this payment plan, property owners can make smaller monthly payments rather than one large lump-sum payment – a convenient option from a cash-flow perspective.

I can be reached at amina@aminas-ms.ca or 416 697-5443.
To Your Wealth! Amina

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Building My Retirement with Real Estate

Amina

Depending on whom you speak with there are many ideas of how to build a retirement nest egg. I have a specific plan for retirement that includes real estate. While many people still believe the stock market is the safer way to go, I decided long ago it was not for me.

For one, I did not want to invest and pay fees and for two I did not want to invest in the stock market, where I had relatively no control.

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It is no surprise that investing in real estate, is the safest (in most cases) investment there is and couple this with opportunities that abound in Canada, you have a recipe for success.

Long ago, before real estate and being a mortgage agent was a reality, I like everyone else invested in mutual funds, bonds and stocks. Unfortunately like so many other people, that all changed after the crash when almost my whole portfolio was decimated.

Thankfully I was youngish, and was able to start again. I took the reins and responsibility for my own retirement and investing goals and started to research everything that was available. At the time I was still working in film and television but slowly transitioning out to a new career in home staging. It was through home staging for real estate investors, that I was introduced to the wonderful world of real estate investing.

I researched everything from buy & hold, flipping and rent to own and in the end settled on rent to own, simply because I liked the idea of being able to help somebody become a homeowner and second I liked that the tenant was mostly responsible for the maintenance of the property – I was not interested in being a full-time landlord.

From rent to own I have moved again to a buy & hold four-plex with a JV partner and recently to lending my money. In addition, I have invested my RRSP’s into a syndicate product that will accrue for 5 years and pay annually 11% per year.

I must say that my favourite strategy by far is lending my money as it is bringing me similar or greater returns, however the risk is a bit higher. If you want the greater returns you need to be able to accept a modicum of risk…being a mortgage agent I know a good borrower when I see one – but even then things can go sideways in a minute, even with good planning!

I am in my upper 40’s and the crunch is on to make sure I have my retirement goals in check. My end goal is to purchase properties abroad that will provide me with cash flow and appreciation and one day a property when I am ready to retire, that I can move to.

Do you have a retirement plan? Is real estate a part of that plan? If not, are you perhaps interested in purchasing a rental property, lending your money or even investing in syndicate mortgages? If so, please reach out and have a discussion with me. There are many ways to invest in real estate that will provide you greater returns than what you will get through the stock market.

I can be reached at amina@aminas-ms.ca or 416 697-5443.
To Your Wealth! Amina

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MAKING YOUR RRSP’S OR TFSA WORK FOR YOU!

Amina

As a Real-Estate investor, I attend a lot of networking groups to meet like-minded investors, make new connections and of course learn something new that will help me improve or increase my portfolio.

As a mortgage agent, I have been researching how to help myself and others get access to 2nd mortgages but most people don’t know that you can use any of your registered accounts (RRSP, RESP, RIF, TFSA, etc) to invest in an arm’s length mortgage.

The distinction is arm’s length – which simply means that you cannot invest in your own mortgage or somebody that is related to you by blood. An arm’s length mortgage is one where you invest in another investor, a friend, a colleague, etc.

The process to use your RRSP, TFSA or other registered account is very simple.

You start by setting up a self-directed mortgage RRSP with a trustee that allows 2nd mortgages. There are only 3 in the market today, which include Olympia Trust, B2B Bank and Canadian Western Trust.

Once that fund is set up with the trustee, you then convert the assets to cash within the existing account. At this point, you can direct the trustee to transfer the cash to a new account within the RRSP – the key is that the funds must be in the RRSP.

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Things that you must consider:

-the mortgage that you are investing in cannot hold a title in the RRSP

-it must be administered by the trustee

-you can only lend on Canadian real estate

-only Olympia Trust will allow a position of 1st, 2nd or 3rd mortgage, which simply means that you can have other funding in place behind or in front of the fund as you are lender

-if the mortgage lending amount is over $50K, each side must have a lawyer

-all costs (appraisals, lawyers fees, commitment fee, etc) are borne by the borrower not by the lender (you)

 

This is a great way for borrowers or investors to grow their portfolio’s as it provides funding from people who have money in their RRSP’s . We all eventually run out of two things – the availability of capital and the ability to qualify for funding. You don’t have to go through the bank as you are dealing directly with the investor who is lending you money. Furthermore, if can work with your lender, it benefits you as the borrower to pay only the minimum for the first year and then the balance after the term is over + the principal as it helps with your cash flow. For the lender (private investor), they also benefit as the full payment at the end of the term allows them to roll out the money again into another investment without incurring any extra fees.

As the borrower, you are more than likely to keep getting a loan from the same investor once you show you can be trusted and keep to the payment schedule set out at the beginning of the term.

For larger projects you can consider syndicated mortgages. It works similarly but this is a pool of RRSP funds and is registered as one mortgage – the share of the amount paid back is split as to the amount that was contributed. So if one person put 10%, another put 20% and another put 70% – it would be split accordingly.

In this situation, you can also defer the payments from the borrower as it is a win-win for both the lender and the borrower.

In any situation – you want to make sure it’s a win-win for both parties. Especially when it comes to real estate investing.

Would you like to learn more about how to put your RRSP to work for you? Please contact me today if I can help you or if you know of somebody who can use my help!

I can be reached at amina@aminas-ms.ca or 416 697-5443.
To Your Wealth! Amina

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It's That Time of Year Again

Amina

It’s that time of year again when we get inundated with messages about topping up our RRSP’s or investing for the long run for our retirement, but how do you choose what to invest in?

The markets are down, the dollar is down and according to the press it’s doom and gloom on the horizon. But how do you as a savvy investor, cut through the headlines to figure out what is the best bet for your dollars?

Experts (who are they?) will say buy when the markets are down and sell when they are high, but when you look at your statement and you haven’t seen a high in your returns for a long time, who do you trust? How do you know that the more money you invest, will promise the returns you want?

time to invest

Well looking from the other side, here are some options you can consider that don’t depend on the stock markets and whether you should buy now or not?

Real Estate – buying single family, multi-family, commercial (plaza’s, strip malls, apartment buildings, etc) in a buy & hold strategy, can provide you with monthly cash flow as well as long term appreciation. Even when markets are down, your property will always serve you well as long as you keep the following points in mind:

  • Buy in markets that have population growth, job growth, infrastructure growth and a diversity of industries to service that market;
  • Buy low and sell high – this is also true in real estate, but it is more dependent on figuring out whether your property will cash flow positively while also paying down the mortgage. It does not make sense to invest in a property if it is not going to provide long-term wealth or cash flow – cash is king to a buy & hold investor. Furthermore, if you decide to sell a few years down the road, make sure you have maximized your returns so when you sell you are not on the losing end – remember buy low and sell high!
  • Using your RRSP’s to invest in a property; I spoke of this in my last article. By investing Non-Arms’s Length, you invest in a property that is owned by another investor, stranger, etc. the distinction is they cannot be related to you by blood (see last article Making RRSP’s Or TFSA Work)

If you don’t fancy investing in bricks & mortar properties, you might want to consider investing in development through Syndicated Mortgages. Syndicated mortgages have quickly caught on amongst savvy investors as they get to choose from a variety of different asset classes (single family developments, commercial, condo’s and hotels to name a few) to invest in. With a minimum investment of $30,000 and a fixed return of 8% per annum, you can’t lose. Here are some other benefits:

  • By investing your existing RRSP’s, they are held in trust by Olympia Trust – one of Canada’s biggest and most respected trust companies and not by the syndicated company themselves;
  • Your RRSP’s are not affected by the markets and thus you will continue to get a fixed return of 8% per annum regardless of whether the market is up or down or the dollar is up or down;
  • You get to choose where your money is invested and you don’t have to pay fees to invest ever!

Even though I love Investing in Real Estate, I don’t put all my eggs in one basket so I also invest in Dividend paying stocks. “The best way for people to get a decent return these days is to have a good portion of that return come from reliable dividends versus less reliable capital gains,” says Bob Gorman, market strategist at TD Waterhouse. “This is going to be the era of the dividend growth stock.”

Here are some tips that make Dividend Investing a versatile investment:

  • I invest only in blue chip stocks (yes stocks) that provide a consistent flow of dividends for the last 10 years and only 1 or 2 from each asset class (Utilities, Communication, Tech, etc)
  • I invest in 1 stock and then purchase more through cash injections into my account, without paying fees ever;
  • Picking the right dividend stocks is key. Avoid companies with the highest yields, because that may indicate the dividend is likely to be cut, and the stock price will suffer as a result. Instead, choose reliable dividend-payers that can maintain those dividends even in bad times, while also growing them consistently over time. Look for well-managed, profitable companies in stable industries with good balance sheets and modest growth. They should also pay out only a reasonable proportion of profits.
  • Invest in Canadian Dividend stocks in non-registered accounts (such as a TFSA) but hold your US Dividend stocks inside your RRSP to protect from US withholding taxes of 15%.
  • Pick Dividend stocks that have medium yields but also beat the rate of inflation – many stocks today don’t provide adequate returns after you factor in fees; by self-directing your investments, you can omit fees and maximize on the return.

Regardless of how you decide to invest your hard-earned dollars keep in mind that in order to maximize your returns and your retirement goals, be careful of what you invest in, how much or little you pay in fees and your time horizon. All of these facts will help guide you on your path to investing your RRSP’s this year!

To your Wealth!

Amina

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HOW TO GIVE THE MOST MEMORABLE GIFT EVER!

Amina

Each year as the Christmas season nears, the advertisements’ get hot and heavy for anything and everything that a person can shop and purchase as a gift for Christmas. Turn on the TV and you see ads that basically say you don’t love your girl if you don’t buy her diamonds. Flip through a magazine and it’s loaded with more advertisements than content. Sign online and no doubt you will find tons of ads that scream BUY, BUY, BUY!

We all like to get gifts, that’s a given. But have we become so material oriented that we’ve forgotten about the greatest gift of all? The gift of love, of giving of oneself, far outweighs any amount of money that could be spent and any material things money could buy. The old saying that money can’t buy love hasn’t changed.

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Many folks in today’s world are in such a hurry. We have instant oatmeal, instant coffee, instant messaging, microwave dinners, etc. We are in such a hurry to get somewhere that we fail to stop and see the beauty of where we are right now. It’s go, go, go, and don’t slow down for anything. While we are in such a hurry, we forget to take time and enjoy life. We often spend outrageous sums of money buying things for the people we love, yet deny them the greatest gift of all… ourselves. Come January we find ourselves in a perpetual state of debt again!

There is one perfect holiday gift. It’s a gift that can be shared and used throughout the entire year. It never gets overused. It never runs out of battery power. It never needs to get replaced. It’s the one thing you can never have too much of. That perfect gift is YOU!

Instead of spending a load of money for Christmas and going deeper into debt, wrap up something new and different this year. Wrap up a nice note that gives the gift of your time to those you love and that love you. Rather than trying to buy loads of stuff for your friends, kids, spouse, and loved ones, give the best gift there is, the gift of your time.

For instance this year, my family and I (6 of us including my husband, child, parents, father-in-law, sister and I) are each contributing $50 and buying a Christmas for a less fortunate family, including Turkey and all the trimmings and a gift for each child.

The most memorable Christmas gifts won’t be the ones that you spent hundreds of dollars on. It’ll be the gift where you gave yourself, when you spent time with the people that love you and that you love.

With this message in mind, I hope you give the most memorable gift to those you love and also receive the same from those that love you.

Merry Christmas and Happy New Year!

To your Wealth!

Amina

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Investing In Syndicated Mortgages Vs. Rental Properties

Amina

Over the past few months I’ve penned a number of articles on this blog looking at the benefits of non-traditional ways to invest equity, namely syndicate mortgages. However, how do you really know when you should be investing equity in syndicate mortgage options, and when it might be best to invest in a more traditional buy and hold property?

Firstly then, any kind of investment needs to be accompanied by solid research. Syndicate mortgages for example, are shied away from sometimes due to perceptions of high risk and insecurity. However, in reality, 90% of people who invest in syndicate mortgages make stable 8-10% returns per annum. Often as well, they profit from 2-4% annual bonuses and 90% of syndicate mortgage investors actually decide to re-invest in syndicate mortgages in the future. The key quite simply, is to do your own research and make sure to have as knowledgeable as possible a mortgage agent on your side. Moreover, this is even more important for people who choose to invest in buy and hold property.

With buy and hold properties for example, risks initially brought to mind when thinking about investing, are associated primarily with property values being at the mercy of volatile financial markets. The ultimate nightmare scenario if you like, is that investment properties might depreciate in value. However, what investors often overlook is the fact that investment properties overall have an average annual vacancy rate of 5%. Likewise, regardless of whether an investment property is tenanted or not, investors are still looking at 8% annual property management and 8% additional maintenance costs.

The key of course is to secure investment properties in slightly under market areas, with low vacancy. Likewise, if you have a significant amount of equity available, why not diversify?

With minimum down payments on investment properties standing at just 20%, anyone with equity in their properties can potentially benefit from investing in a number of properties all at once, but also with the right deal, still being able to invest in various syndicate mortgage options.

In fact, what it comes down to in many cases when choosing between syndicate mortgages and investment properties, is how passive a return people are looking for on their respective investments. Where syndicate mortgages guarantee 8% annual returns for no actual labour, investment properties run 8% management costs which many people choose to offset by managing projects themselves.

As a professional mortgage agent, I don’t try to sell people financial products that are in my interest. I build my reputation on getting my clients the best possible deals suited to every one of them individually. If therefore, you presently have equity to invest, but aren’t sure of what might be best for your specific situation, give me a call today or contact me directly by clicking here and let’s start talking about what the best investment strategy for you might be.

To your Wealth!

Amina

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Fixed Or Variable: Which Rate Is Best For You?

 

Amina

At present thousands of homeowners across Canada are eyeing their options with more than a little trepidation. The majority of Canadians after all, are risk averse and when it comes to our mortgage options many of us have traditionally chosen fixed rather than variable interest rates, in order to allow us to avoid sudden hikes in the Canadian Prime. In fact, even just the idea of being stuck on a variable rate after a hike in the prime leaves many of us on edge. Yes, we can lock the rate in if we think the prime is getting too high, but who is to say we’ll manage to do that right at the right moment? Rate hikes after all, can leave homeowners not just paying less off their principle, but them facing paying more interest over the long run.

All that said, recent studies have demonstrated that historically at least, homeowners on variable rates have actually saved more in the long term when compared to more risk averse homeowners opting for locked in rates. This being the case, between 2008 and the present, variable rate mortgage options have experienced something of a resurgence in popularity. Moreover, those who have been part of this resurgence have made significant savings. The Canadian prime has consistently fallen since 2008 in tandem with Central Bank instigated economic recovery measures. This being the case, those who elected for fixed rate mortgages back in the 2000-2008 (supposed) boom years, have been left feeling a little cheated to say the least.

The only question is: How low is too low? You see, a significant number of Canadians haven’t just opted for more variable rate mortgage options over the past decade. Rather, many Canadians have also risked incurring penalties in order to switch back on to variable rates in light of seemingly fantastic overall saving benefits. However, the variable rate party can’t last forever and the sense of this seems to get more tangible by the day.

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As of Sunday 11th of October 2015, the Canadian prime was standing at just 0.75%, that’s the lowest it’s been in over thirty years. Simple logic dictates then, that the rate can’t go much lower before being forced to rebound. Is this therefore the time to re-lock in variable rates? Expert economists who have been touting the virtues of variable rates have only been doing so after all, in light of a steadily declining prime rate going all the way back to 1979, and the reality is that the prime simply can’t get much lower. Or can it?

Whatever side of the fence you are on, you have to agree these are interesting times to say the least. One thing is for certain though, and that’s that now more than ever people need practical up to date mortgage advice, which they can trust over and above the usual sales pitches from all the big lenders. Being a completely independent mortgage agent, I can offer that advice. I make my business by building my reputation through my clients and if you need mortgage advice regarding the present rate fall and what it might mean for your future, I’d love to be able to help you in this regard.

 

To your Wealth!

Amina

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WHAT DOES STATED INCOME MEAN AND HOW DO YOU QUALIFY?

Amina

So recently I had a client come to me – he is self-employed and is also incorporated, and works as a self-employed contractor.  He was turned down by the banks, and in addition he was getting divorced and needed to find a home for himself and his child, when she would come to stay on weekends.

We sat down together and I explained that I could proceed one of two ways; because he was incorporated, I could “fully qualify” him IF I could prove his income through his NOA’s and T1 Generals as well as other supporting documentation.

If I could not qualify him as such, I would have to qualify him as a “stated income” applicant, which is more difficult to prove, as different lenders have different requirements.

When it comes to the self-employed, lenders have made it difficult to qualify for various reasons; as an entrepreneur and business owner they benefit from income tax credits and great reductions and write-offs on their personal tax returns.  This is a great advantage when it comes to the actual amount of taxable income they have to pay tax on at the end of the year, but the disadvantage is that their net income is incredible low.  This unfortunately impacts a self-employed client’s ability to FULLY qualify.

A stated income mortgage is where the lender fully understands the self-employed income dilemma and will accept a client simply “stating” an income on their application without having to show net taxable income on your tax return to prove it.

What’s important to note is that the interest rates and/or fees/default insurance premiums are based on the credit rating and available down payment and are sometimes a little higher than a more traditional mortgage and depending on the client can be worth it if home ownership is a more affordable solution than renting.

There are basically three ways to qualify under “stated income”

Type 1: Fully Insured

In this instance, I can look at “A” lenders based on beacon score and debt ratios – rates will be lower than 3% -this is stating income that makes sense compared to the T1 Gross income for the last two years; if an applicant has provable income either on their T2125 (part of the T1 General) or corporate financials and the gross can reflect adequate income to qualify, we can go fully insured with the following documents to prove this:

  1. Proof of self employment such as a business license, Article of Incorporation, invoices etc
  2. Last two years full Income Tax Return including your T1 General and all the attachments
  3. Last two years Notice of Assessments to confirm no income tax arrears
  4. A letter from the employer stating job title, income and start date for XXXXX
  5. Recent pay stub
  6. Proof of down payment, through bank statements, RRSP statements, etc
  7. … and any other documents the lender might deem necessary at the time ( this is lender specific as some will accept stated-income individuals and some will not)

Type 2: Stated income – best rates, 80% LTV 

When we cannot provide an avg. gross income of the two years to make sense for qualifying, we must go stated income under insurer guidelines.  Here are the documents that are needed:

  1. Avg. 6 months of deposits plus invoices through last 12 months bank
  2. Last two years Notice of Assessments to confirm no income tax arrears
  3.   Last 2 years corporate financials and/or last 12 months bank statements as long as they show business activity (keeping in mind that the lender may ask for 2 yrs) – i.e., deposits
  4.   Proof of self employment such as a business license, Article of Incorporation

Type 3: Stated income – posted rates, 80% LTV 

This is stated income when there are no documents to show your income – however the rates will be upwards of 5.99%.  The only documents needed in this case are:

  1. Last two years Notice of Assessments to confirm no income tax arrears
  2.  Stated income letter “stating” to what you make –to qualify you at an amount you need.  Ie. if you need $400K to purchase a home, we state you make at least $65,000/year

Keep in mind, that “stated income” needs to make sense for the industry you work in – ie, as this client is a self-employed contractor, he was able to qualify on Type 3 as the “stated income” amount was in line with the industry.

Not all “stated income” deals are funded, but mostly due to lack of paperwork and proof of income.  This client was successful in his goals to own a home because he was willing to work with me and was able to provide the paperwork that was being requested.  If you are a self-employed client and don’t know if you can qualify, a mortgage professional can be your best ally in qualifying for a mortgage.  Speak to me today if you have been denied by the banks – we are here to help!

To your Wealth!

Amina

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NO TIME OR MONEY BUT I WANT TO INVEST IN REAL ESTATE!

Amina

As a mortgage agent and real estate investor, I meet many first time as well as experience investors.  Knowing that the government won’t take care of us in our golden years, most of us have come to realize that investing in real estate instead of other types of investments, such as GIC’s or mutual funds for example, can provide us with long-term growth, security not to mention monthly cash-flow.

Being a real estate investor, I write a number of blog posts about investing and I attend a lot of real estate based networking events.  There is always something to learn!

But this is where the rubber hits the road.  The difference is in the investor who takes what they have learned and applies it to purchasing properties and the other, who keeps learning but is hesitant to take action.

I always ask what does it take? Why do some people take action and other sit on the sidelines and watch?

It is lack of confidence, time, or money or a combination of all three?

I can understand “I don’t have enough money”, however there is a solution to this.

I can also understand  “I do not have the time.”  Many people already have full-time jobs and cannot take on another job, such as full-time real estate investing.

Let’s look at a solution to both of these problems.

You don’t have money so what can you do?  Believe it or not, many people find themselves in this boat.  There are people with money, who don’t have the time to invest and need an experienced investor (this is where you come in having learned everything there is to know) to partner with them.  This is a joint-venture situation.  The partner with the funds takes out the mortgage and invests the funds.  You take care of the property, finding the tenant and ongoing maintenance and rent collection.  You both split the profit 50/50.  There are numerous ways to joint-venture with somebody but this is the usual.

The above solution also works for the person who does not have the time.  He or she works 60-70 hours a week and is making great money but they want more.  They want to make a better return on their investments and the time they have vested in their full-time job.

Once they start investing, many of these people see that the return on their time is better spent investing in real estate and learning more instead of just joint-venturing with other investors who have time.

It all comes down to what is more important to you – time or money? Or both?

For me, it’s both but I am far from that place where full-time investing takes over my present full-time job.  How will I get there?  By learning, taking action and making my investments work for me.

To your Wealth!

Amina

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Do you Qualify for a Fixed or Variable Rate Mortgage?

 

 Amina

Last week I was at the #CAAMP (Canadian Association of Accredited Mortgage Professionals) #Mortgage Symposium. The event happens once a year and highlights what happened in the #mortgage industry in the previous year and talks about the upcoming year and what we should expect.

It became very interesting when the #economist #Ted Tsiakopolous from #CMHC got up to speak. He spoke about the #Canadian #real estate landscape and provided #statistics. One statistic that was very surprising was the fact that only 30% of mortgages in Canada are #variable rate mortgages. So I thought this would make an interesting post.

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The first thing to note is the differences between fixed and variable mortgages. #Fixed rate mortgage – A #fixed rate mortgage is a mortgage where the #rate of interest and payment are fixed for a specific period of time. Generally known as the #mortgage term, it usually ranges from between 6 months and 10 years. As time goes on, more of the mortgage payment goes towards the #principal and less of the payment goes to the #interest. Furthermore, the #fixed rate mortgage is based on the #bond yield so as it rises, so do the fixed rates. #Variable rate mortgage – A #variable rate mortgage is a mortgage where the interest rate fluctuates with any changes in the lenders #prime rate. If interest rates go down, your mortgage payment will go down, but if rates go up, your payment goes up.  With some variable rate mortgages you can fix the payment and as long as rates stay below that required payment it will not change.  If rates rise high enough that you are not covering the necessary payment, your payment will be increased.

The important thing to note is that #qualification differs between fixed and variable and thus this is why it is only at 30% variable mortgages vs. fixed mortgages in Canada.

In a fixed mortgage, you will qualify at the #5 year fixed rate, which today is 2.73% and a 25, 30 or 35 year #amortization. The important thing to keep in mind is that with less than 20% down, you cannot qualify for an amortization greater than 25 years. The benefit of course with a #lower amortization is that you incur l#ess interest over the life of the mortgage.

Conversely in a variable mortgage, you must qualify at the #benchmark rate otherwise known as the #Bank of Canada #qualifying rate, which is currently 4.74%. if you remember only a few short weeks ago, the #BOC rate fell 5 #basis points after# oil prices also tumbled.

So which should you choose? Unfortunately it might not be up to you if your #GDS (#Gross Debt Service Ratio) and #TDS (#Total Debt Service Ratios) are not in line for qualifying for the Variable rate. Most “A” lenders look for a ratio of GDS – 32% & TDS-40%. “B” Lenders are more flexible but you will incur higher rates.

When I do a purchase analysis for my clients, I look at both options and present the pros and cons of both fixed and variable. I take into account my clients current monthly obligations, their current lifestyle and what they can afford.  Fixed or variable, it comes down to affordability and qualifiying. Don’t forget if you, a friend or family member have any questions about mortgage financing I’m here to answer those questions and to work with you to arrange the best product to fit your specific needs and comfort levels.

To your Wealth!

Amina

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TIPS TO PAYING OFF YOUR MORTAGE FASTER!

Amina

 

I had a great meeting last week with a prospective client.  They wanted to know how to pay off their 25 year mortgage in 10 years.  It was a huge focus for them, as they wanted to take the money left over after paying off their mortgage and put it towards their retirement savings.  They are both in their 40’s and want to be debt free by their early 50’s.

hour glassThey, like many people did not take savings seriously and so now in their 40’s find themselves with a hefty mortgage and not much in the way of savings.  I assured them that to do so would mean making sacrifices, such as less traveling, which they both love to do and eating at home instead of eating out, which they also love doing.  They assured me they were committed.  Of course there were many more sacrifices they would have to make but these were two of the biggest in their particular scenario.

Paying off your mortgage is the single most important step towards financial independence and a healthy retirement. Owning a principal residence outright gives you the financial freedom to channel money that formerly went to your mortgage into your savings or to pursue lifelong dreams or to invest in real estate, which in my opinion is the thing to do as it provides one with extra cash flow, which is another form of retirement savings.

If paying off your mortgage as quickly as possible is your goal you want to make sure you pay attention to the following tips.

Tip #1. First you want to make sure you have a good credit rating.  You can pull your credit report from Equifax here: (http://www.equifax.com/equifax-credit-score/)

By pulling your own credit bureau, you will be sure that when you speak to your mortgage agent or broker, there won’t be any surprises and if there are, you have already taken care of them.  You want to make sure that there are no “monsters in the closet” and that you are aware of your past credit problems, so that you can be prepared to discuss them with your mortage broker.

A good mortgage broker, will make sure that they explain your past indiscretions to the lender and that it does not impact your ability to qualify. You also want to make sure that you are not behind on payments as these can impact your score. It can make the difference between getting a great interest rate and one that is not that great. This can also impact the amount of interest you are paying on your mortgage.

Tip #2. You should be pulling your credit bureau every six to twelve months before shopping for a mortgage, just to make sure everything is on the up and up and that you are not faced with disappointment when it comes time to shop for that mortgage.

Tip #3. Don’t quit or change jobs just before applying for a mortgage, as that can drastically affect your ability to qualify.  Lenders want to see at least 6 months on the job.

Tip #4. The next step is maximizing your down payment.  The minimum required for most mortgages in Canada is 5% (depending on your credit rating) but by paying at least 20% down upfront, you cut down on your principal and interest payments and also avoid having to pay CMHC fees. Remember CMHC insurance protects your lender and not you in case of default so why incur that extra cost?  Of course it’s not always easy to pay 20% down so what else can you do?

Tip #5. You can be mindful of the amortization period.  Many people confuse amortization with term.  Amortization is the life of your mortgage, while the tem can run from 1-10 years with a fixed-rate or variable-rate interest mortgage.  After each term expires, you renew for another term.  Amortization on the other hand, defines how much interest you will pay over the life of the loan.  For example, you might pay less monthly (Principal + Interest combined) with a longer amortization, but the interest portion will be higher. Amortization can run anywhere from 15 years to 35 years (with at least a 20% downpayment). Interest can be the killer.  It can amount to thousands of dollars over the life of your mortgage.  Imagine what you can do with that extra money?

Tip #6. When it comes time to get that mortgage, don’t just go to your bank.  It is understandable that people want to stay with the same institutions that they regularly bank with or have their credit cards and car loans with but it doesn’t always pay to get your mortgage there.  By speaking to a mortgage agent or broker, you can shop around or more importantly they can shop around on your behalf.   Your mortgage agent will get you the best product and rate that works for you.  They have access to more than 40 lenders with different solutions and products, while the bank only has one – themselves.  Furthermore, the bank will push you to insure your mortgage and just like CMHC, the beneficiary of this insurance is the bank not you.

I remember when my husband and I went to get our first mortgage more than ten years ago – just like most, we went to our bank, thinking that since we had all of our business with them, it would make sense to get our mortgage there.  We were shocked when they offered us a rate that was higher than prime at the time and would not even consider a rate reduction based on our years of patronage.

On the advice of a friend, I called a mortgage agent and he was able to negotiate a great rate that was 2% lower.  It saved us years of mortgage interest and was a less stressful expeience overall.

Tip #7. Furthemore, rate is not the only thing you should be concerned with; you want to know if the mortgage will be compounded monthly or semi-annually.  Again this comes down to how much interest you will be paying – the less often the interest is compounded the better—semi-annual compounding could save you hundreds of dollars or more in interest.

Tip #8. Make sure you understand the difference between the variable rate and the fixed rate products, but more importantly how the penalties could affect you if you were to break the mortgage beforfe the term ends.  A variable rate mortgage will cost you 3 months interest, but a fixed rate mortgage will cost you the IRD, which is the difference between the posted rate and the discounted rate, multiplied by the number of months left on the mortgage.  In some cases it can cost you thousands of dollars in fees.

Tip #9. You want to take advantage of any and all prepayment privileges.  This can also help you pay your mortgage off faster as you can make annual prepayments of 10% to 20%, which goes directly towards the principal.  Not all mortgages allow this option so make sure that your broker factors this in, if this is important to you.

Tip #10. Finally and maybe most importantly, as it also has to do with budgeting and savings, is your payment schedule.  Don’t choose something that you can’t stick to, as it will make your life and that of your budgeting very difficult.  By paying bi-weekly instead of monthly, you put more money towards the principal as you have two extra payments every year.  However, if get paid monthly and you are now paying bi-weekly, you may find yourself stretched too thin.  Ask your broker to run different scenarios for you so you know what you can and cannot afford.  The last thing you want to do is get into a mortgage that you can’t afford.

Paying off your mortgage early will take lots of sacrifice, great budgeting and keeping steadfast to your goal, but if you can follow these tips, the rewards will be aplenty!

To Your Wealth!

Amina

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FINDING PASSION IN WHAT YOU DO!

Amina

The other day I was speaking with a friend I had not seen in over a year and we got to talking about kids, family, marriage and finally work.  She asked me if I was enjoying my work after having had a great career in film and tv.  She had been working in the same job for the last 18 years and while she was building up a great pension, she had lost the passion for what she was doing and needed a change of life, so to speak!

Personally, I never thought after working in film and television that I would find something that had made me as happy as I was then – but I was wrong!  I am absolutely loving what I do now and I will give you the same reasons I outlined for her.

I get to meet new people every day that need solutions to their current problems. For instance, perhaps it’s the clients, who were facing a possible bankruptcy and I was able to come up with a solution for them, which helped them avoid the bankruptcy, refinance their current mortgage and see a way to the future with one payment instead of 10 separate payments with all of their debts; or it was the client who had 10 days to close on an investment purchase or be liable to be sued by the seller and I was able to get them a mortgage that the bank turned them down for and add to their investment portfolio.;  or it could be the client, who came to me after approaching the bank and two other seasoned brokers because her case would have proven to be difficult – which it was – and I was able to get her out of her 7% – 1st mortgage, her 14% – 2nd mortgage and her $100K in debts and in the end got her a 4.7%- 1st mortgage for 80% LTV that helped her save her sanity and got her out of debt.  She has now been able to follow her life-long dreams of becoming a drug counsellor because of the amount of money she was now saving, which was put to further education for her degree.

These are the stories that keep me going every day!

Another reason I love this career is that I get to put the same tactics for lack of a better word, that I used in film and tv to each mortgage case and/or client.  What do I mean? – well for instance, with every film or tv project that I was producing and/or production managing, I would start with a budget – I do the same for each client as I want to see where I can save them money.  Next I would look at what each project needed – everything from casting, wardrobe, sets, etc.  I do the same with a mortgage – what does the client need? Is it s a straight refinance, purchase or debt consolidation?

Each mortgage is different and the parameters are never the same –if we treated each mortgage and/or client like a one-size fits’ all situation, not only would we be failing as mortgage agents, but we would end up failing our clients as well.  Being able to use the same “out of the box” thinking that I was able to use in my previous career, keeps me waking up every day with a smile on my face, ready to welcome any challenge presented to me.

Have I found passion in what I do? Absolutely and I am greatful for this new-found passion everyday!

 

To your wealth!

Amina 

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