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Mortgage-Matters

Invest in Kelowna real estate

You may have heard recently that analysts indicate now is a great time to invest in Kelowna real estate.

They make that suggestion because Kelowna offers higher returns on real estate investment than Vancouver and boasts a host of new developments at lower costs.

There is high demand for real estate being driven by a high job growth rate.

Purchasing and investing in real estate has always been attractive for those looking to generate additional income and benefit from the wealth created with increases in property values over time. Is investing in real estate right for you?

The Attraction

Diversification is key to anyone’s investment portfolio whether you are talking about mutual funds, TFSAs, stocks, bonds, RESPs, RRSPs, etc.

Diversification helps balance risk and provides a level of confidence that your investments are still going to be there when you are ready to liquidate them, such as at retirement etc. Some would consider adding real estate, other than their principal home, to their portfolio to ensure full diversification.

A real estate investor can still use a relatively small amount of down payment or capital to purchase a property, and this can provide an attractive return on investment (or ROI). This return is generated from a combination of monthly income and property value increases.

The monthly income is generated by taking the rent collected from tenant and then deducting all the expenses. To ensure that there is a positive cash flow, smart real estate investors work with a mortgage broker and realtor who can assist with the analysis.

Equity is built in the property by way of appreciation of value over time as well as with each mortgage payment.

With mortgage interest rates at record lows and an abundance of potential tenants in our local area, there is a high demand for real estate investors to take the plunge.

Here’s another way to look at it as well. Real estate investment is also beneficial for those who have a hard time saving money, as it can act as a sort of forced savings account.

Essentially, as you pay down the principal of a mortgage, you're reducing debt and building equity. Then, when you go to sell the property, the money you receive back from the sale is considered your forced savings.

So What is the Risk?

Like any investment, there is risk and it is possible to lose money in real estate, albeit relatively low.

Real estate has shown to appreciate steadily over the long term, and has for the past 25 years, so the chances of someone losing money on a purchase are pretty slim.

However, keep in mind that doing your due diligence before an actual purchase is key. You must take into consideration certain factors when choosing a property, such as desirability of location and stability of the market in that area.

The first step, before you start looking at properties, is to know your financing options particularly with the new mortgage qualification stress test coming into play on Jan. 1, 2018. You also need to have a plan and understand your acquisition and exit strategies.



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Review your mortgage today

There has never been a better time to review your current mortgage particularly with the new rules that will require a stress test for all mortgages.

Life changes, families grow, job’s move, retirement objectives shift. There are any number of reasons why your mortgage and possibly your entire financial picture should be evaluated from year to year. Maybe there are no changes needed but if there are, it’s better to identify them early.

The mortgage that you signed up for a few years ago may no longer be the best fit for you. Doing a financial check-up is a very smart thing to do annually. Many often just wait for the renewal letter before they look at their mortgage and then go back to their current lender without considering whether that mortgage meets their current needs.

Here are some reasons why you should be reviewing your mortgage today – before the new mortgage rules are implemented.

Your mortgage is up for renewal in the next six months

Mortgage renewals in particular are one of the most neglected decisions made during the life of a mortgage. Many homeowners stay with their existing mortgage lender because they believe it is too time consuming to shop around for a better rate. Or, they simply think that the offer from their existing bank is the best deal available. Unfortunately, that is not correct! 

Bank renewal rates are extremely high because most people unfortunately do not take the time to shop around at renewal time. The reality is,you are not going to take the same care and diligence that you did when you first took out your mortgage.

As a result there is very little incentive for the bank to offer you their best rate at renewal time. They are really hoping that you will just sign the renewal notice you receive in the mail and be done with it.

You have high interest credit card debt

There are great possibilities for real savings by using the equity in your home as a debt consolidation tool.

The most attractive reason for consolidating debt into a mortgage is that there will definitely be savings simply by lowering the interest rate you are paying on your debt. Another reason would be to lower your monthly payments.

This could free up cash flow to start investing and saving for retirement.

You are planning for home renovations

If you are planning a renovation soon, use the equity in your home by refinancing your current mortgage to take advantage of today’s low interest rates. You can spread out the repayment over a longer period of time and use funds at rates that are lower than a credit card or unsecured line of credit.

There are so many things that a mortgage can do for you. It can help you become more tax efficient, build wealth for retirement, renovate your home, consolidate high interest credit card debt or perhaps invest in a business and so much more.

Don’t wait for your mortgage to come up for renewal and don’t wait until after you have made a major change in your personal situation. By reviewing annually you will ensure you stay financially fit and ahead of these mortgage rule changes.

These new mortgage qualifying rules could definitely hinder some of your future plans so please give me a call at 888-561-2679 or email [email protected] for a no obligation review of your mortgage.



Keep calm and call a broker

Keep calm call a mortgage broker

You have no doubt heard by now that major mortgage rule changes will come into effect on Jan. 1.

There will be lots of talk over the next few weeks as to whether these changes are necessary, unnecessary, good or bad. There will be comments that "no one will ever qualify for a mortgage again" and that "Canada’s housing market is crashing."

The reality is that people will continue to buy and sell homes and obtain mortgage financing. Will it be more confusing and difficult? Most definitely.

Could your purchasing budget be significantly reduced? Yes.

This is why it is more necessary than ever to have a mortgage broker assist you to make the right decision about mortgage financing and help you navigate the complicated world of mortgages.

Regardless of all the commentary, these mortgage rule changes will be happening as the government will not reverse its decision. So how do you react?

As it becomes more and more difficult to qualify for mortgage financing, working with a mortgage professional that can offer you choice and options will be important rather than a single financial institution that can only offer their suite of products.

Here’s a short reminder on how a Mortgage Broker can assist you.

  • I work with Canada’s leading financial institutions including banks, trust companies, and credit unions. Did you know that you can only access many of the largest mortgage companies in Canada by working with a mortgage broker? Many of these lenders have the most favourable terms available.
  • When you work with me to find you the very best mortgage, and negotiate on your behalf, there is no cost to you. The lender pays me a fee for finding and bringing them the business. You are dealing with an expert as my business is only mortgages.
  • I also have lenders available that specialize in providing mortgages for clients who are self-employed, contract employees, have seasonal income, have trouble proving income, or lack some of the standard documentation. I am an expert in negotiating the best rates for all Canadians, but understand that sometimes you may have challenges in your past that I can work through with you, to get you back on track.
  • You deal with me directly through the entire process, from our very first conversation right until the mortgage process and funding is complete. I am also there after funding to manage your mortgage ensuring that you are paying the lowest overall cost on your mortgage going forward.

If you have any questions about your mortgage options please give me a call at 888-561-2679 or email [email protected]. I would love to have a conversation with you.



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Buying a rental property

Buying an investment property can be a daunting process and is different than buying your primary home.

You may feel unsure of all the steps and what you should be looking for (cash flow, exit strategy synergy, profit, return on investment and more.)

Organizing your financing is always the first step for any property purchase and you may be worried about qualifying for financing and these could be some of your concerns.

  • You are a new investor and you don’t where to start
  • You are self-employed, so your income on paper is low
  • You haven’t filed your income taxes for a while
  • Your current real estate investment portfolio is too large
  • You have limited liquid assets and you need access to cash
  • Poor credit or blemishes in the past
  • Concerned about property management
  • Interested in Rent to Own but you have no potential clients and tenant buyers
  • Concerned about qualifying tenants so that you minimize delinquency in rent
  • Little or no down payment available

The first step should always be to get your financing in order by knowing exactly what you qualify for and how many properties you can purchase — knowing this means you can go property hunting with confidence as well as execute on any potential opportunities that might come your way.

By being confident that you are pre-approved means that you can negotiate with leverage when you find the perfect investment opportunity and also be comfortable in the knowledge that you have aligned your mortgage financing to maximize cash and profit.

Ensure that you are working with an expert who will complete a full analysis of your current situation and understands your future plans for real estate investing.

The last thing you want to happen is to find yourself running into a financing ‘wall’ because your current lender has restrictions on the number of investment properties you can own or a maximum number of doors that they will finance.

Your financing review should include the following understanding that a lender is going to first review you as the borrower and will look at the following:

  • Your Credit Rating: In order to qualify for the best options and rates you will require a higher credit score. However, there are lenders that will provide financing for lower credit scores but the rates will be higher and there could be fees.
  • Sufficient Income: Are your debt services ratios in line with qualifying within lender guidelines.
  • Proof of Down Payment, Closing Costs and Liquid Assets: You can’t purchase a rental property with a minimal down payment and a 20 per cent down payment is required. Lenders must see that you have sufficient liquid resources to not only cover the down payment and closing costs but you must also have some savings as a ‘fall back’ position in case there are emergency repairs required on the property or to cover possible tenant vacancies.

Once you have found a suitable property then a lender will review the property including its market value, condition, positive cash flow, etc. and recommendations for suitable financing can then be made by your financing expert to ensure that your acquisition and exit strategies are aligned with the right mortgage financing.

Please give me a call at 888-561-2679 or email [email protected] if you would like to discuss opportunities for purchasing a rental property.



More Mortgage Matters articles

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About the Author

April Dunn is the owner and a Mortgage Broker with The Red Door Mortgage Group – Mortgage Architects. She has been assisting clients to purchase, refinance or renew their mortgages for over 20 years.

April has experience as a Credit Union manager, a Residential Mortgage Manager with a large financial institution and as a licensed Mortgage Broker. By specializing in Strategic Mortgage Planning she has the tools available to build a customized mortgage plan, with the features and options that meet your needs.

April provides a full range of residential and commercial mortgage financing options for clients all over the province of British Columbia and across Canada through the Mortgage Architects network.

Contact e-mail address: [email protected] or by phone at: 888-561-2679.

Website:  www.reddoormortgage.com



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The views expressed are strictly those of the author and not necessarily those of Castanet. Castanet does not warrant the contents.

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