When Is a Condo Not a Condo?

If you’re looking for a home you may have your eye on a particular condominium building in your city.  You should be aware, though, that different buildings may have very different ownership arrangements.  Here is a rundown of the three major types of apartment and townhome ownership interests:

Freehold Units
The overwhelming majority of condos are freehold strata units, where typically you have fee simple ownership of your unit.  The land as well as common areas such as underground parking, recreation facilities, and hallways are owned collectively by all the owners.  With most freehold condos, you pay monthly strata fees for upkeep of the building’s exterior.  With this type of ownership interest, make sure you know exactly what you are buying: in some cases you own your parking space, storage facilities, or perhaps your backyard if the unit is a townhome.

Leasehold Units
With a leasehold unit, you do not have fee simple ownership, but rather a lease from a landlord for the right to use the unit for a specific number of years.  Many leasehold arrangements are created with a period of 99 years, but no matter what the length of the original term, you may only purchase your unit for the portion of the lease that remains.  Needless to say, the fewer years left on the term of the lease, the less buyers will be willing to pay for the leasehold interest.

Landowners who lease their land are often municipal governments, First Nations groups, or private investors who normally lease to a developer who in turn arranges leases with individual users.

Co-op Units
Not to be confused with rental housing, with this arrangement you purchase shares in a co-operative association which owns the land and building including individual units and common areas, and you have a leasehold interest in your unit.  You usually pay monthly dues to the co-op board to cover the building’s taxes, maintenance and other common expenses.  Co-ops can impose strict guidelines for new buyers such as minimum income or a background check – a factor when you buy into the co-op or if you are selling your unit

New Videos Added to BCMortgage.ca

Two new educational videos were recently added to BCMortgage.ca – “First Time Home Buyer” Video and “Credit Scores – What you need to know about managing your credit scores”.

• First Time Home Buyer Video – We specialize in first time home buyers and we regularly offer home buyer seminars across the Lower Mainland.  For those who cannot attend the seminars, we suggest you listen to this online presentation.  You will learn why you should get into the market, the steps involved, how your qualification limits are arrived and the best way to obtain a mortgage.

• Credit Scores – What you need to know about managing your credit scores – In a world of tighter credit, having a great credit score is one of your biggest assets.  When purchasing a home, it could save you tens of thousands of dollars on interest costs.  Credit scores are used for a variety of types of loans such as credit cards, lines of credit and auto loans and leases.  This is why it is important to obtain the best possible credit score.

To watch these videos, please visit the Video page of BCMortgage.ca

Pre-Approvals: What You Need to Know

When searching for a home, it makes sense to get a mortgage pre-approval and line up the necessary documents prior to house hunting.What is a pre-approval? Its the process of determining how much money a prospective homebuyer will be eligible to borrow prior to a formal application for a mortgage loan, based on information they have provided.

With a pre-approval, you’ll get a good sense of how much you can afford, and you’ll be assured of a particular mortgage rate for a set period of time. With a locked-in rate, there is no risk of interest rate increases while you are house hunting. A mortgage broker may be able to obtain a longer pre-approval rate hold. Another benefit of a pre-approval is that you’ll be in a much better position to negotiate with sellers.

On the other hand, a pre-approval is not a rock-solid guarantee of financing, does not eliminate the need to make a conditional offer, and you still must consider all closing costs.

I always recommend that you get a pre-approval in person. While it is possible to get pre-approval over the phone or internet, you will get the most value by meeting your mortgage broker one-on-one. This will allow you to ask questions, run scenarios and learn all your options different options. Remember, the amount you are qualified to purchase is not just ONE number. It is a range of amounts based on several factors such as your income, the lender, the interest rate, the down payment, your credit, the type of property, etc. When you are meeting your mortgage broker, he/she should be able to run through the various amounts you will be qualified to purchase.

Learn more about the pre-approval process at BCMortgage.ca by visiting our website.

The Cost of a Cashback Mortgage?

I often get asked whether a cashback mortgage is a good option for borrowers. While a cashback may seem attractive, be aware that unlike other cashback products, mortgage cashbacks are not free. Lenders will increase the interest rate to cover the cost of the cashback.

One cashback product to consider is TD Canada Trust’s 7 yr, 7% cashback product. This product is offered by Invis (www.BCmortgage.ca). The current interest rate on this mortgage is 7.7%. You may think that this is a high rate of interest but this is because you get 7% of the mortgage amount interest-free. Yes, it is still more expensive than a traditional mortgage. For example, on a $300,000 mortgage (where you get a cashback of $21,000 or 7% of $300,000), you would pay interest over a 7 year period of $156,608. If you took a standard (i.e., no cashback) mortgage, and paid the current 6.2% interest on a 7 year mortgage, you’d pay total interest of $125,555. That’s a difference of $31,053. We still have to deduct the cashback of $21,000 to arrive at the net cost of $10,053 (or $31,053 less $21,000).

In essence, you’ve spent approx. $10K to get a $21K cashback. Is this worth it? For most people, the answer is no. However, if you are cash strapped or would like to purchase furniture or need money for legal costs, this could be a solution for you.

Besides the added cost of a cashback, borrowers have to be aware that cashbacks are only available for fixed mortgage terms. There are no variable rate mortgages that offer a cashback. This is a major disadvantage since this precludes you from enjoying the lower interest rate of a variable rate mortgage. Secondly, if you were to break your mortgage, you would have to return a pro-rata share of the cashback. For example, if you were to break your mortgage on the 5th year of a 7 year cash back mortgage, you will have to return 2/7th of the cashback you received when you took out the loan.

There are many lenders offering cashbacks. Since most consumers will not have the software to analyze each offering, we suggest you consult a mortgage broker at Invis (BCMortgage.ca) to help you decide which cashback offering is the best one to take.

Purchase Your Investment Property with No Money Down

Firstline Mortgages, a subsidiary of CIBC, is the first lender to offer zero down mortgages for rental properties. Mortgages will be insured by the Canadian Mortgage and Housing Corporation (CMHC). Previously, the minimum requirement was 10% down under Genworth’s Small Rental Programme.

To qualify, borrowers need good credit (min. of 680 beacon score) and proof of ability to support the debt. The property must meet Firstline and CMHC’s standard guidelines. Borrowers are will get Firstline’s best discounted interest rates. If you are interested in this programme, be sure to phone or email me for more details.

BCMortgage.ca Selected Finalist for the CMP Canadian Mortgage Awards

We are pleased and honored to be selected as a finalist for the CMP Canadian Mortgage Awards under the category MGIC Award for Best Internet Presence. This category recognizes mortgage websites that have harnessed the internet to provide customers with practical, effective and easily accessible facilities to help streamline the mortgage process. The winner will be announced on February 29 at the Canadian Mortgage Award ceremony in Toronto.

The selection is a recognition of our efforts to provide consumers with online, in-depth information on mortgage and home buying.