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Depreciation Report – Should You Buy A Strata Without One?

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Depreciation Report or the lack of a Depreciation Report, should this affect your next home purchase of a strata?

What Is A Depreciation ReportWhat is a Depreciation Report?

December 2013 the B.C. government directive took effect requiring condominiums to prepare a depreciation report. The depreciation report gives buyers a detail perspective on long term expenses in regards to the building.

Home Equity LoanRequirements

Strata corporations need to have a Depreciation Report every three years unless they hold an annual ¾ vote to waive the requirement. To learn more visit the Office of Housing and Construction Standards Depreciation Reports Guild 12 

What Is A Depreciation ReportWhat is the Purpose of a Depreciation Report?

The purpose of a depreciation report is to give a standard to all strata & strata companies to follow. This will help purchasers of condos and mortgage lenders of condos have a clearer view on the health of the building and the common property associated to the building.  Most buyers are focused on the finishes inside of the units but the true cost associated with the purchase is in the bones of the building and the depreciation report will one day help buyers & lenders make a more informed decision based on this report.

Should you purchase Strata without What Is A Depreciation Reportth out a Deprecation Report?

What affect if any would the purchase of a condo or strata unit without a depreciation report cause. You must remember that this report is there to bring all strata’s inline with a standard and this standard will not happen over night.

Home Equity LoanReasons strata’s do not complete the depreciation report:

  • Depreciation Reports are costly.
  • Strata’s feel the building is in sound shape.
  • Strata’s has knowledge that once the report is completed it may turn away potential purchasers.
  • If the Depreciation Report is poor lenders may require a higher rate of interest to offset risk.

What Is A Depreciation ReportHow will the lack of a depreciation report effect refinance?

Many lenders I send in refinance application on strata units to ask for the depreciation report prior to even considering the request. The uncertainty between different strata’s buildings is so high due to possible maintenance issues that some lenders have reduced the maximum they will consider for such refinances. The lack of a depreciation report could put some home owners looking to refinance strata’s into the alternative mortgage market.

Home Equity LoanAlternative mortgage market Requirements

There are three main types of Alternative Lenders in BC:

  1. B-Lenders(they have less stringent Debt Servicing Requirements & can look at stated income up to 75% but in most cases with strata’s they will only consider 70%) Fees & higher than bank rates due apply.
  2. MIC or Mortgage Investment Corporations. There is hundreds of MIC’s lending in BC and will look at a variety of property types. Some MIC’s will go up to 75% LTV on Strata units. Mortgage Investment Corporations come with a higher than average interest rate but will fund solely on the value in the home not current income or credit challenges.
  3. Private Mortgage Lenders. These are Individuals or Syndicates investing in all types of Real-estate in BC. Individual & Syndicated lenders can look at a broad variety of mortgages and can sometimes lend more creatively even on strata units. Broker & Lender fees can apply and these do come with higher than average interest rates solely based on equity not credit or income.

Home Equity LoanWhen applying through an alternative lender for strata properties they usually want to review the following:

  • 12 Months Strata
  • AGM Annual General Meeting
  • Financials
  • Depreciation Report (if available)
  • Form B for the Building

mortgageWith this information along with the application information Alternative lenders can make an educated decision how much they are comfortable lending on the property. These lenders take a more common sense approach unlike the banks.

Best 2nd Mortgage Rates BC.

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How To Afford A VacationWhat Rate Should I Pay For A 2nd Mortgage? What Your BC Mortgage Broker Should Know & Tell You!

I get this question every week, “What is your best rate for a second mortgage?”. The answer is not as simple as one might think.

Home Equity LoanIn determining the best Second Mortgage Rate as a Mortgage Broker there are a few pointed questions I must know:

  1. What are you asking for? A 2nd mortgage solely based on equity, not credit or income OR a Home Equity LOC which is income & credit based.
  2. Where is the home located
  3. Property Type, IE. (House, Condo, Townhouse, Mobile Home, Co-op, Leased Land, Native Lease etc.)
  4. LTV – Loan to Value: (Generally the lowest 2nd mortgage rates come at a Loan to Value of 50% or less.)
  5. Income: Although 2nd Mortgages are primarily equity loan based lenders do want to see a likelihood of payment so determining ability to pay can be a factor in getting the lowest rate 2nd mortgage.
  6. Credit: Again second mortgages are equity loans and credit isn’t a major factor in getting approved. Credit however can indicate a likely hood to pay as well show a lender what needs to be done in your financial picture to get you back to a bank in the future.
  7. The Plan: Getting an idea what you are using the money for & an estimate of how long you will need the money for.

In most cases borrowers are unable to determine much about an offer other than the interest rate put on the offer sheet.

How To Afford A VacationWhat are other factors to consider when obtaining the best 2nd mortgage rate?

  1. 2nd Mortgage should not to be confused with HELOC Rates or 2nd charge mortgages which are through a financial institution. These are Income, Credit & Debt Serviced qualified loans.
  2. Second Mortgages do come at a higher risk to a lender so Bank Rates do not apply.
  3. Broker & Lender Fees are commonly charged and in most cases get paid from the proceeds of mortgage.
  4. Legal Fees, in most cases there are two Lawyers/Notaries involved. Depending on the work required legal bills & all other costs generally come out to approximately $1,500. Case by case can have higher or lower results.
  5. Terms – Generally 2nd mortgages come with a 1 year term. Some lenders will do a two year term & in some cases three year terms are available.
  6. Not in all cases but in some a 2 year term comes with a bounce in rate in year two.
  7. The APR Annually Percentage Rate: The APR is the interest costs, plus the non-interest costs incurred to obtain the loan (not including value received items as outlined in the disclosure)expressed as a percentage of the average balance of the loan over the term. It is not the contract rate in the loan, which is used to calculate interest on the loan.
  8. Things to consider, what is the renewal fee? Some lenders have a set $300 or $400 renewal fee & others want a percentage of the total mortgage amount. This can significantly affect the cost of borrowing.
  9. NSF Penalties & Insurance Elapse Penalties – Some lenders will allow payments to be held with 48hours notice prior to deposit other lenders will not hold payments. Penalties can be as little as $50 and up to $400.
  10. Payment history – How is your payment history? Are you someone that from time to time has cash flow issues? Some lenders are flexible and understand that people go through some tough times & others have no patience for payment interruptions and will either not renew or demand to be paid out.

How To Afford A VacationNow where does the rate come in to play? People come to me all the time shopping from different Brokers & different lenders rates. My job is to educate my client in hopes that they believe in my process & my years of experience.

Now currently November of 2013 the lowest 2nd Mortgage Rate I have obtained for a client this year is 7.50% this was open with no lender fee.

Generally Rates start at 7.95% to 8.25% for between 50% & 65% LTV in Major centers. (Conditions Apply)

Depending on LTV Loan to Value, rates can go up but from my experience general rates in the current market place are between 10% & 12%.

mortgage_broker_first_time_home_buyer_bc_canada

For more information on Home Equity Loans or if you would like to get a no obligation quote please call me Jeff Di Lorenzo

The Mortgage Group Canada Inc. 1-877-744-3436

(Brokers Welcome)

Mortgage BC – Examples Of Mortgages BC

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Mortgage BC Lenders – How Do You Know What A Good Rate is On A 2nd Mortgage

I get this question all the time; What is your best rate Home Equity Loan?

I have decided to post some basic information on some of the last couple of months files I have closed. This  gives potential borrowers a broader understanding of mortgage rates on home equity loans and 2nd mortgages based on property types, property location, different LTV (loan to value) and quality of credit/income or ability to pay.

 

Private Mortgages Recently Funded

 

Home Equity LoanStrata Condo  North Vancouver BC

 

2nd Mortgage North Vancouver $90,000 @ 7.5%

39% Loan to Value

To consolidate Debt for pensioned home owners no income verification.

 

Home Equity LoanHouse in Dawson Creek BC

1st Mortgage Dawson Creek $55,000 @ 7.75%

26% Loan to Value

Pensioned Client with multiple collections on Bureau (BAD CREDIT) funds used to debt consolidate to lower payment.

 

Home Equity LoanHouse in Burnaby BC

 

3rd Mortgage behind bank 1st & LOC $240,300 @ 7.99%

65.41% LTV

Funds to payout $150,000 credit card debt balance to take care of medical bills. Stated income clients with great credit history but high credit card debt.

 

Home Equity LoanHouse in Vancouver BC

 

2nd Mortgage of $420,000 @ 10%

75% LTV

Payout 2nd mortgage & liens on title home was listed for sale. Client has rental income but bad credit.

 

Home Equity LoanManufactured Home in Louis Creek BC

 

1st Mortgage of $187,000 @ 10.95%

53% LTV

Funds used to payout 1st mortgage & family debt as well as business expansion for BFS stated income client. Client has low credit due to high balances but no missed payments.

 

Home Equity LoanHouse Vancouver BC valued at $5,850,000

 

2nd Mortgage $750,000 @ 11%

72% LTV

Funds used to debt consolidate and complete cosmetic construction of home. High income earner with great credit rating.

Home Equity LoanHouse West Vancouver BC 

 

2nd mortgage $150,000 @ 10.25%

Behind a 1st mortgage of $1,404,323

66.17% Loan to Value

Funds used to consolidate debts and do some home improvements. Good Employment but low credit due to high credit card balances not poor payment history.

Home Equity Loan

House Kelowna BC

 

2nd Mortgage $65,000 @ 6.24% (THE LOWEST 2ND MORTGAGE RATE I HAVE EVER OBTAINED A CLIENT)

41.45% Loan To Value

Client has excellent credit but low income due to the expansion of a new business. Funds for business expansion.