MORTGAGE SOLUTIONS

With the long weekend upon us, you’re not alone if you have gardening on the brain – especially if your landscaping fantasies involve waving a magic wand and transforming the patch of weeds you currently call a “lawn” into a wistful and relaxing oasis.



If you've ever turned your house upside down searching for something (your car keys, your passport...your cat), you might feel at home at Austria's newest tourist attraction.

Smart mortgage consumers know that there’s more to a good mortgage than just rate. Flexibility – and features that will ensure you’re not stuck in a mortgage longer than you want to be –should also be considered when finding the mortgage that’s right for you.

So when looking for the utmost flexibility in your mortgage product, should you opt for an open or closed mortgage? Well, as usual, it depends. Basically, an open mortgage allows you to completely pay off your mortgage before maturity with no penalty – but it comes at a higher rate. A closed mortgage, on the other hand, usually allows you to prepay a portion of your mortgage – usually about 25% of your original principal amount, per year – and increase your payments, but if you want to fully pay off your mortgage, you’ll have to pay three months’ interest or the Interest Rate Differential (IRD), whichever is greater. While the calculations used to determine the IRD differ from lender to lender, it basically equates to how much money they would lose as a result of you paying off your mortgage earlier than agreed upon.

If you think you might pay off your mortgage completely before your agreed-upon amortization – or if you’re contemplating selling your home in favour of renting at some point – then an open mortgage would make more sense for you.

If paying off your entire mortgage quicker than the 25% prepayment privileges will allow is not an option for you, then it might make more sense to take the lower rate and the closed mortgage. Just make sure it’s portable – so you can take it with you, should you choose to move anytime soon.

House hunting can be a frustrating experience for a number of reasons – not the least of which is the well-staged online listing. You know the type – the MLS listing that features beautifully-staged photographs that make the home in question look like Spelling Manor, while in reality it’s nothing more than a 400 square foot shoe box.

To save you a bit of time – and grey hairs – below are a few tips for determining whether that listing really is reflective of your dream home:

Placement of furniture

This is a huge one. Envision your furniture – and then see if there are similar-sized items in the pictures. If the living room only features a love seat and a single decorative chair, it likely won’t be able to fit your three-seater couch. Same goes for the bedrooms – if they’re photographed with single beds, they likely won’t fit your King.

The fish-eye lens

Beware of photographs that look distorted. If they’re stretched or fish-eyed, you know there’s probably a reason.

Room dimensions

Get to know your ideal room dimensions – either by measuring your own home, or memorizing the room dimensions on a listing that you actually went to see. If you know how big you like your bedrooms, kitchens and living areas, it will be easy to filter the good listings from the bad.

The missing wall

Sneaky real estate agents will take pictures of a home’s best features – such as an exposed brick wall or beautiful fire place – and ignore the rest of the room. Try to keep the missing wall in mind and try to figure out where it stands in relation to the rest of the room. If it’s impossible to tell – and if there’s only one pic of each room – there’s probably a reason.

The Office of the Superintendent Financial Institutions (OSFI) recently proposed a draft of guidelines that, if adopted, would change the way banks underwrite residential mortgages.

For the most part, the proposed changes are things you would expect the banks to be doing anyway -- and many of them are. Putting these rules on paper would simply require all lenders to do them. A few of the other proposed changes are a little more controversial -- specifically those rules surrounding Home Equity Lines of Credit (HELOCs).

Below is a summary of some of the proposed changes:

- Mortgage default insurance (mortgage insurance) is often used as a risk mitigation strategy. However, mortgage insurance should not be a substitute for sound underwriting practices and should not be considered a substitute for conducting adequate due diligence on the borrower, or for using other risk proxies such as the minimum down payment.

- Loan To Value ratio should not be relied upon solely to assess the borrower’s demonstrated willingness and capacity to repay a mortgage.

- In addition to income and debt service coverage, a lender's assessment of a borrower’s capacity to service their debt obligations should include, where possible, substantiation of the borrower’s: Assets (e.g., savings, mutual funds and other investments); Current and anticipated living expenses (taking into account the composition of the household); Property ownership expenses (e.g., maintenance costs); and Recourse to repayment capacity from other sources, including guarantees, income, insurance or social support payments.

- When it comes to HELOCs, lenders should expect full repayment over time, and monitor the borrowers’ credit quality. The HELOC component of a residential mortgage should not be more than 65 percent of the value of the home (the current maximum is 80%).

- HELOCs should have clearly articulated amortization requirements in place for all outstanding HELOC balances. This could either include clearly-defined period (e.g., 5 years), after which the outstanding balance of the HELOC converts to a fixed-term with a reasonable amortization period; or a set percentage of the outstanding balance of the HELOC due each month that equates to a reasonable amortization period.

There is no better way to rid your home of unwanted items than a garage sale. And there’s no better time to place those household goods on display than the sunny summer months.

If you’ve been thinking about doing just that, here are a few tips to keep in mind:

1. Get the word out. An ad in the paper and cardboard street sign are no longer the most effective means of garage sale advertising. Instead, go where the bargain hunters hang out – namely craigslist, kijiji, and Facebook marketplace. Don’t completely neglect the social media realm, however – a large portion of your garage sale clientele likely still aren’t familiar with the wonders of social media

2. Know your price – but be willing to negotiate. Make sure all your merchandise is labelled clearly with the appropriate price. Remember that the entire reason people shop at garage sales is because they want a bargain – so be prepared to haggle. For those items that may have a bit of a higher value, try posting them on eBay instead.

3. Stage! During peak garage sale season, there will likely be a few other competing sales on the same weekend as yours. To ensure you’re getting the most traffic, stage your merchandise. Put your highest valued items in the most prominent location – and make sure everything is neatly organized.

There's been a lot of talk lately about the Federal government tightening mortgage rules once again to protect the fragile economy – and the housing market – from a devastating dip. With Canadians over their heads in debt, this could be a more effective means of economic control than resorting to a series of interest rate hikes.

In certain parts of the country – namely larger city centres like Vancouver and Toronto – the housing market is still climbing upward. While interest rate hikes would obviously curb this enthusiasm, they'd also make life difficult for anyone trying to get a loan – including small businesses, investors and students.

It seems lowering the maximum amortization from 35 years to 30 years is one step experts are predicting the Federal government may take. Increasing the minimum down payment from 5% to a higher number is another step. While this isn't something responsible homeowners would enjoy, it may be what's needed to prevent other households from living beyond their means (and preventing banks from taking advantage of consumers' desire to do so).

In the end, the government can only control so much. They can't decide who borrows money – but they can decide the terms and let the market sort itself out. When it loosened its grip in the 2000s, individuals who typically shouldn't have been able to acquire a mortgage did. While many played the game correctly, others didn't. Now it's up to the government to find that balance between a mortgage market that fosters homeownership and one that makes it accessible to the wrong people.

If you've been wanting to tackle a DIY home renovation project but are concerned you don't have the skillset or know-how to get the job done, why not enroll in a class?

Since the virtual collapse of the stock market back at the end of 2008, more and more individuals are looking elsewhere to store their nest egg, and ending up opting for a Mortgage Investment Corporation, or a MIC.

A MIC is similar to a mutual fund in the sense that investors pool their money to buy a variety of different assets. But instead of pooling it to buy stocks, they're buying real estate.  The funds are handled by a management company that, for a fee, chooses the real estate investments and pays out investor earnings.

The upside of a MIC is that it's a relatively safe investment vehicle to store your RRSP or other registered savings fund. While it won't get your rich overnight, it will offer you a steady return. And because it's tied to real estate – often in different markets across a province – the likelihood of property values tanking across the board is minimal.