Mortgage Matters

Currently we are dealing with Brian; he has great income which includes a car allowance.  Brian is wishing to purchase his first home.  The scenario is as follows, he receives a car allowance of $900 per month, since he feels that the company is paying for his car, he leased a car with a monthly payment of $850 which is covered by the allowance. The common rationale behind this is that the two will cancel each other out. However, this is not the way the lenders look at the car allowance.

Upon applying for a mortgage pre-approval Brian discovered that the car payment is added to his monthly expenses making his total debt ratio to income quite high. Even though Brian’s car allowance is added to his gross income this does impact how much he can qualify for:

Scenerio 1:  No car allowance – company car
Purchase Price: $280,000  Down Payment: $20,000
Income: $49,200

Debts:
CIBC VISA $200/m

Mortgage Expenses:
Mtg Payment (based on purchase price – down payment) $1,129.30/m
Heat $75/m
Taxes $233/m

Total Debt Service: 40% of gross income-  client would qualify for purchase

Scenerio 2: Car allowance and car payment
Purchase Price: $280,000  Down Payment: $20,000
Income: $60,000 (added $900/m for car allowance to income)

Debts:
CIBC VISA $200/m
Car $850/m

Mortgage Expenses:
Mtg Payment $1,129.30/m
Heat $75/m
Taxes $233/m

Total Debt Service: 49% of gross income- client does not qualify – maximum purchase price $180,000

As you can see Brian’s purchase price is severely decreased by having the extra expense of his car allowance. Brain’s purchase price is going to be approximately $180,000 a substantial difference from the $280,000 he would qualify for without it. Many companies offer car allowances as opposed to company cars.  Before signing for any debt it is always advisable to talk to your financial advisor/accountant, and if you are looking to purchase a home in the future, sitting down with your mortgage broker could help reduce a lot of stress and frustration.  We have sometimes worked with people for years prior to them purchasing, it is never too early to plan for your future goals.

Charmaine Idzerda, Mortgage Broker (FSCO Lic#: M08000747) Verico Designer Mortgages Inc. (FSCO#: 10194)

Mortgages Car Allowance, company car, Mortgage Pre-approval

Relief for Homeowners During Difficult Times

Genworth Financial Canada has expanded its Homeowner Assistance Program to help

Canadians keep their homes when confronted with job loss or other life challenges such as a serious illness or marital separation.

The company works with homeowners and their lenders to find ways to bridge the gap between current circumstances and a long term solution.

Genworth has recently expanded its program to offer a new Homeowner Assistance

Evaluator, an online tool which prompts the homeowner to input details of their current situation. The Evaluator then provides potential solutions that can be discussed with their lender or a Homeowner Assistance Specialist to determine the best course of preventative action.

Homeowners are encouraged to be as proactive as possible when faced with a financial hardship as no one benefits from a mortgage in default. When it comes to prevention strategies, there’s no substitute for being educated and knowing all of your options.

The Homeowner Assistance Program is an integral part of every Genworth-insured mortgage, and is available at no additional cost.

CMHC’s Guide to Dealing with Mortgage Payment Difficulties

When unforeseen financial circumstances impact your ability to make regular mortgage payments, it’s important for you to take quick action. With early intervention, cooperation, and a well executed plan, you can work together with your mortgage professional to find a solution to your financial difficulties.

For mortgages insured by Canada Mortgage and Housing Corporation (CMHC), CMHC provides mortgage professionals with tools and the flexibility to make timely decisions when working with you to find a solution to your unique financial situation. These tools include:

Converting a variable interest rate mortgage to a fixed interest rate mortgage in order to protect you from a sudden interest rate increase, should one occur. Offering a temporary short-term payment deferral. Additionally, extending the original repayment period (amortization) in order to lower your monthly mortgage payments may be an option.  Adding any missed payments (arrears) to the mortgage balance and spreading them over the remaining mortgage repayment period, or offering a special payment arrangement unique to your particular financial situation.

CMHC is also willing to consider other alternatives proposed by the mortgage professional to resolve or avoid mortgage payment default. In every case, the options available will depend upon your individual financial circumstances.

For more information on getting help with your mortgage payments please call Verico Designer Mortgages Inc at 1-866-824-8057.

Uncategorized

The provincial government has released new rules governing how the Harmonized Sales Tax (HST) will be applied to new home buyers and the housing industry in general.
This is the second HST notice posted by the government relating to this industry.
The government’s notice provides information to help homebuyers and the housing industry prepare for the proposed Harmonized Sales Tax which, subject to legislative approval, would come into effect on July 1, 2010.
The announcement relates to rebates for new homes and new rental homes; homes with leased land; owner-built homes; new mobile homes and new floating homes; and other related issues.
The Ministry of Revenue has a comprehensive list of transition rules and explanations relating to the HST on its website.

Buying a Home?
The HST will not apply to resale homes.

Enhanced New Housing Rebate
Buyers of new homes will receive a rebate of up to $24,000 regardless of the price of the new home.
This rebate ensures that buyers of homes priced up to $400,000 (about three-quarters of new homes built in Ontario) will, on average, pay no more - or possibly even less - tax than under the PST system.

New Rental Housing Rebate
New rental housing, including residential investment properties, will receive a similar rebate. This rebate will also support affordable rental housing in Ontario.

Transitional Rules
For some purchases of new homes that straddle the implementation date of July 1, 2010, the provincial portion of the HST will not apply, depending on when the written agreements of purchase and sale were entered into and when ownership or possession are transferred.

For any questions about how the new HST will affect you call Verico Designer Mortgages at 1.866.824.8057

Mortgages HST