10 Questions to Ask Your Home Inspector

The purchase of a home is likely the largest financial expenditure you’ll ever make. And getting your home inspected is an essential step in the home-buying process. No one wants to buy a money pit – and once you have signed on the dotted line, there is no turning back.

The best way to ensure you use a professional home inspector is to seek referrals from your mortgage professional, real estate agent or friends. Since you want to be able to trust your home inspector’s judgement, you have to ensure they’re not part-time home inspectors just trying to make some extra cash on the side, or they aren’t only home inspecting so they can also offer to complete any work for you that you need done on the home. To ensure the job’s done right, after all, the home inspection must not be biased.

The purpose of a home inspection is for the inspector to be able to tell you everything you need to know about the home you’re going to purchase so that you can make an informed decision.

Following are 10 key questions you can ask your home inspector before they’re hired to ensure the inspection will be completed professionally and thoroughly:

1. Can I see your licence/professional credentials and proof of insurance?

2. How many years’ experience do you have as a home inspector? (Make sure they’re talking specifically about home inspection and not just how much experience they have in a single trade.)

3. How many inspections have you personally completed?

4. What qualifications and training do you have? Are you a member of a professional organization? What’s your background – construction, engineering, plumbing, etc?

5. Can I see some references? (Make sure you also check the references.)

6. What kind of report do you provide? Do you take pictures of the house and add them to your report?

7. What kind of tools do you use during your inspection?

8. Can you give me an idea of what kind of repairs the house may need? (Be wary if they offer to fix the issues themselves or can recommend someone else to complete the job cheap.)

9. When do you do the inspection? (Let’s hope they don’t have a day job, and can only do them    at night when it’s too dark to see the roof. It’s best to stay away from part-time inspectors.)

10. How long do your inspections usually take?

10 Questions to Ask Your Home Inspector

The purchase of a home is likely the largest financial expenditure you’ll ever make. And getting your home inspected is an essential step in the home-buying process. No one wants to buy a money pit – and once you have signed on the dotted line, there is no turning back.

The best way to ensure you use a professional home inspector is to seek referrals from your mortgage professional, real estate agent or friends. Since you want to be able to trust your home inspector’s judgement, you have to ensure they’re not part-time home inspectors just trying to make some extra cash on the side, or they aren’t only home inspecting so they can also offer to complete any work for you that you need done on the home. To ensure the job’s done right, after all, the home inspection must not be biased.

The purpose of a home inspection is for the inspector to be able to tell you everything you need to know about the home you’re going to purchase so that you can make an informed decision.

Following are 10 key questions you can ask your home inspector before they’re hired to ensure the inspection will be completed professionally and thoroughly:

1. Can I see your licence/professional credentials and proof of insurance?

2. How many years’ experience do you have as a home inspector? (Make sure they’re talking specifically about home inspection and not just how much experience they have in a single trade.)

3. How many inspections have you personally completed?

4. What qualifications and training do you have? Are you a member of a professional organization? What’s your background – construction, engineering, plumbing, etc?

5. Can I see some references? (Make sure you also check the references.)

6. What kind of report do you provide? Do you take pictures of the house and add them to your report?

7. What kind of tools do you use during your inspection?

8. Can you give me an idea of what kind of repairs the house may need? (Be wary if they offer to fix the issues themselves or can recommend someone else to complete the job cheap.)

9. When do you do the inspection? (Let’s hope they don’t have a day job, and can only do them    at night when it’s too dark to see the roof. It’s best to stay away from part-time inspectors.)

10. How long do your inspections usually take?

10 Questions Mortgage Borrowers
Should Ask But Often Don’t

1. If I have mortgage default insurance do I also need mortgage life insurance?
•    Yes. Mortgage life insurance is a life insurance policy on a homeowner, which will allow your family or dependents to pay off the mortgage on the home should something tragic happen to you. Mortgage default insurance is something lenders require you to purchase to cover their own assets if you have less than a 20% down payment. Mortgage life insurance is meant to protect the family of a homeowner and not the mortgage lender itself.

2. What steps can I take to maximize my mortgage payments and own my home sooner?
•    There are many ways to pay down your mortgage sooner that could save you thousands of dollars in interest payments throughout the term of your mortgage. Most mortgage products, for instance, include prepayment privileges that enable you to pay up to 20% of the principal (the true value of your mortgage minus the interest payments) per calendar year. This will also help reduce your amortization period (the length of your mortgage). Another way to reduce the time it takes to pay off your mortgage involves changing the way you make your payments by opting for accelerated bi-weekly mortgage payments. Not to be confused with semi-monthly mortgage payments (24 payments per year), accelerated bi-weekly mortgage payments (26 payments per year) will not only pay your mortgage off quicker, but it’s guaranteed to save you a significant amount of money over the term of your mortgage. With accelerated bi-weekly mortgage payments, you’re making one additional monthly payment per year. In addition to increased payment options, most lenders offer the opportunity to make lump-sum payments on your mortgage (as much as 20% of the original borrowed amount each year). Please note, however, that some lenders will only let you make these lump-sum payments on the anniversary date of your mortgage while others will allow you to spread out the lump-sum payments to the maximum allowable yearly amount.

3. Can I make lump-sum or other prepayments on my mortgage, or will I be penalized?
•    Most lenders enable lump-sum payments and increased mortgage payments to a maximum amount per year. But, since each lender and product is different, it’s important to check stipulations on prepayments prior to signing your mortgage papers. Most “no frills” mortgage products offering the lowest rates often do not allow for prepayments.

 4. How do I ensure my credit score enables me to qualify for the best possible rate?
•    There are several things you can do to ensure your credit remains in good standing. Following are five steps you can follow: 1) Pay down credit cards. The number one way to increase your credit score is to pay down your credit cards so they’re below 70% of your limits. Revolving credit like credit cards seems to have a more significant impact on credit scores than car loans, lines of credit, and so on. 2) Limit the use of credit cards. Racking up a large amount and then paying it off in monthly instalments can hurt your credit score. If there’s a balance at the end of the month, this affects your score – credit formulas don’t take into account the fact that you may have paid the balance off the next month. 3) Check credit limits. If your lender is slower at reporting monthly transactions, this can have a significant impact on how other lenders view your file. Ensure everything’s up to date as old bills that have been paid can come back to haunt you. Some financial institutions don’t even report your maximum limits. As such, the credit bureau is left to only use the balance that’s on hand. The problem is, if you consistently charge the same amount each month – say $1,000 to $1,500 – it may appear to the credit-scoring agencies that you’re regularly maxing out your cards. The best bet is to pay your balances down or off before your statement periods close. 4) Keep old cards. Older credit is better credit. If you stop using older credit cards, the issuers may stop updating your accounts. As such, the cards can lose their weight in the credit formula and, therefore, may not be as valuable – even though you have had the cards for a long time. Use these cards periodically and then pay them off. 5) Don’t let mistakes build up. Always dispute any mistakes or situations that may harm your score. If, for instance, a cell phone bill is incorrect and the company will not amend it, you can dispute this by making the credit bureau aware of the situation.

5. What amortization will work best for me?
•    While the lending industry’s benchmark amortization period is 25 years, and this is the standard that is used by lenders when discussing mortgage offers, and usually the basis for mortgage calculators and payment tables, shorter or longer timeframes are available – to a maximum of 30 years. The main reason to opt for a shorter amortization period is that you’ll become mortgage-free sooner. And since you’re agreeing to pay off your mortgage in a shorter period of time, the interest you pay over the life of the mortgage is, therefore, greatly reduced. A shorter amortization also affords you the luxury of building up equity in your home sooner. Equity is the difference between any outstanding mortgage on your home and its market value. While it pays to opt for a shorter amortization period, other considerations must be made before selecting your amortization. Because you’re reducing the actual number of mortgage payments you make to pay off your mortgage, your regular payments will be higher. So if your income is irregular because you’re paid commission or if you’re buying a home for the first time and will be carrying a large mortgage, a shorter amortization period that increases your regular payment amount and ties up your cash flow may not be the best option for you.

6. What mortgage term is best for me?
•    Selecting the mortgage term that’s right for you can be a challenging proposition for even the savviest of homebuyers, as terms typically range from six months up to 10 years. The first consideration when comparing various mortgage terms is to understand that a longer term generally means a higher corresponding interest rate. And, a shorter term generally means a lower corresponding interest rate. While this generalization may lead you to believe that a shorter term is always the preferred option, this isn’t always the case. Sometimes there are other factors – either in the financial markets or in your own life – that you’ll also have to take into consideration when selecting the length of your mortgage term. If paying your mortgage each month places you close to the financial edge of your comfort zone, you may want to opt for a longer mortgage term, such as five or 10 years, so that you can ensure that you’ll be able to afford your mortgage payments should interest rates increase. By the end of a five- or 10-year mortgage term, most buyers are in a better financial situation, have a lower outstanding principal balance and, should interest rates have risen throughout the course of your term, you’ll be able to afford higher mortgage payments.

7. Is my mortgage portable?
•    Fixed-rate products usually have a portability option. Lenders often use a “blended” system where your current mortgage rate stays the same on the mortgage amount ported over to the new property and the new balance is calculated using the current rate. With variable-rate mortgages, however, porting is usually not available. This means that when breaking your existing mortgage, a three-month interest penalty will be charged. This charge may or may not be reimbursed with your new mortgage. While porting typically ensures no penalty will be charged when you sell your existing property and buy a new one, it’s best to check with your mortgage broker for specific conditions. Some lenders allow you to port your mortgage, but your sale and purchase have to happen on the same day, while others offer extended periods.

 8. If I want to move before my mortgage term is up, what are my options?
•    The answer to this question often depends on your specific lender and what type of mortgage you have. While fixed mortgages are often portable, variable are not. Some lenders allow you to port your mortgage, but your sale and purchase have to happen on the same day, while others offer extended periods. As long as there’s not too much time between the sale of your existing home and the purchase of the new home, as a rule of thumb most lenders will allow you to port the mortgage. In other words, you keep your existing mortgage and add the extra funds you need to buy the new house on top. The interest rate is a blend between your existing mortgage rate and the current rate at the time you require the extra money.

9. What steps can I take to help ensure I don’t become a victim of title or mortgage fraud?
•    The best way to prevent fraud is to be aware of how it’s committed. Following are some red flags for mortgage fraud: someone offers you money to use your name and credit information to obtain a mortgage; you’re encouraged to include false information on a mortgage application; you’re asked to leave signature lines or other important areas of your mortgage application blank; the seller or investment advisor discourages you from seeing or inspecting the property you will be purchasing; or the seller or developer rebates you money on closing, and you don’t disclose this to your lending institution. Sadly, the only red flag for title fraud occurs when your mortgage mysteriously goes into default and the lender begins foreclosure proceedings. Even worse, as the homeowner, you’re the one hurt by title fraud, rather than the lender, as is often the case with mortgage fraud. Unlike with mortgage fraud, during title fraud, you haven’t been approached or offered anything – this is a form of identity theft. Following are ways you can protect yourself from title fraud: always view the property you’re purchasing in person; check listings in the community where the property is located – compare features, size and location to establish if the asking price seems reasonable; make sure your representative is a licensed real estate agent; beware of a real estate agent or mortgage broker who has a financial interest in the transaction; ask for a copy of the land title or go to a registry office and request a historical title search; in the offer to purchase, include the option to have the property appraised by a designated or accredited appraiser; insist on a home inspection to guard against buying a home that has been cosmetically renovated or formerly used as a grow house or meth lab; ask to see receipts for recent renovations; when you make a deposit, ensure your money is protected by being held “in trust”; and consider the purchase of title insurance.

10. How do I ensure I get the best mortgage product and rate upon renewal at the end of my term?
•    The best way to ensure you receive the best mortgage product and rate at renewal is to enlist your mortgage broker once again to get the lenders competing for your business just like they did when you negotiated your last mortgage. A lot can change over a single mortgage term, and you can miss out on a lot of savings and options if you simply sign a renewal with your existing lender without consulting your mortgage broker.

Using Home Equity to Finance Cottage Improvements

With interest rates sitting at “emergency” levels – low rates never before seen by your parents and even your grandparents – now is an ideal time to tap into the available equity in your home or cottage to fund your renovation or landscape needs. But these rock-bottom rates won’t be available forever – the Bank of Canada estimates fixed mortgage rates will likely begin to rise this summer.

As a cottage owner, you understand the importance of maintaining your cottage and property to ensure it ages well with the times. But you also know that it can be daunting when you think about all of the ongoing costs for renovations and maintenance required to keep your cottage to your liking – especially if you also own a primary residence.

The good news is, if you have built up equity in your primary residence or even your cottage, refinancing your mortgage is a cost-effective way to have funds available for upgrades to your home away from home.

One refinance strategy that mortgage consumers often use involves extending their amortization period – to a maximum of 35 years (with no age discrimination on this product) – so they can lock into an excellent fixed rate for their mortgage and renovation expenses.

In addition to setting you up with a new lower mortgage payment, your mortgage professional can also find a lender that offers the most flexible prepayment privileges.

If you choose to refinance, it’s important to note that there may be penalties for paying out your existing mortgage loan prior to renewal, but these penalties will be offset by a lower interest rate and, at the same time, you can access extra money to put towards your cottage renovations.

By refinancing, thanks to lower interest rates, even though you’re taking on more debt, you can pay your mortgage off faster. Most mortgage products, for instance, include prepayment privileges that enable you to pay up to 20% of the principal (the true value of your mortgage minus the interest payments) in lump sum payments per calendar year. This will also help reduce your amortization period (the length of your mortgage), which, in turn, saves you money.

Some lenders also allow consumers to pay anywhere from an extra 20% of their monthly mortgage payment to up to double the payment.

Using a line of credit
Another option to enable you to access funds for cottage renovations is to take out a home equity line of credit (HELOC) on your primary residence. Although HELOC interest rates are lower than credit cards or other high-interest means of accessing funds, a refinance at today’s low rates is your best option.

A HELOC is a good tool for those who know they want to renovate their cottage in the future but do not know exactly when they want to make the improvements. In other words, a HELOC enables you to access equity on an add-needed basis and you only pay interest on the portion of the HELOC that you use. Another benefit is that you can pay the HELOC off at any time without a penalty.

There are also combination mortgage products available that enable you to have a portion of your mortgage in a fixed interest rate and another portion as a HELOC, which mean the HELOC can be used as a rainy day fund.

By using a HELOC to fund renovations, etc, the savings are substantial versus using a credit card or loan. Just the comparison of paying 3.25% interest with a HELOC compared to 18% for a credit card or loan clearly shows the HELOC advantage.

The other savings is seen in your monthly repayment of the debt. With loans or credit cards, the minimum is typically 3% of the total balance, whereas with the HELOC you’re only paying interest on the loan.

For instance, a $50,000 credit card balance with a 3% monthly payment means $1,500 must be paid each month. With the interest-only payment on the HELOC, you’re only required to pay $135 per month.

If your primary residence does not have enough equity for a refinance or HELOC but your cottage does, you still have options depending on whether your cottage is a vacation property (year-round with road access) or seasonal.

Financial institutions will lend on year-round property up to a maximum loan to value (LTV) of 95% (which means you will only have to have 5% equity remaining in your second home).

Most mortgage financing products are available for year-round cottages as long as the property is in good shape and is marketable. Your lender will want to know they will easily be able to sell your property if you do not continue paying your mortgage or HELOC.

When looking to access home equity, it’s best to speak to your mortgage broker to find an option that suits your unique needs.

Mortgage Product Comparison
Product    Amount    Interest Rate    Amortization    Monthly Payment
HELOC    $200,000    3.25%    25 Years    $541.67 (interest only)
5-Year Variable-Rate Mortgage    $200,000    2.00%    25 Years    $846.90
5-Year Fixed-Rate Mortgage    $200,000    $3.89%    25 Years    $1040.15

Could Your Mortgage Use a Spring Check-Up?

Now that spring is right around the corner, it’s a perfect time for your annual mortgage health check-up. If you make time for a quick review each spring, it may yield you some fruitful financial savings.

Your 2016 home loan review will examine the most common potential monthly savings opportunities, including high-interest credit card debt or fixed loan payments. Reviewing your options annually could result in having more money left over at the end of each month.

With interest rates at historic lows, now is the time to investigate all your options and perhaps save yourself thousands of dollars per year! Imagine what you could do with the savings – anything from renovating or investing to going on a much-needed vacation or putting money towards your children’s education.

Right now, you can lock into a five-year mortgage below 3%. You could have done the same in 2001 but it would have been about 7%. In 1982 it would have been 18%. Even in the low-rate days of 1952, it would have been about 5.5%.

Borrowing costs are lower than any time in modern history. If your current rate is above 4%, now may be a good time for a free spring mortgage check-up.

Completing a straightforward annual review will keep your home financing as lean and trim as possible. In other words, you will have a clean bill of mortgage health, which is just what the doctor ordered!

If you’d like a free mortgage check-up, call or email me today!