Looking to Buy and Renovate? Help is at Hand

Looking to Buy and Renovate? Help is at HandYou’ve found the home you love. The price is great and the area is ideal. Problem is, the kitchen and bathrooms need work. With closing costs and other expenses associated with moving, you wonder how you’ll be able to afford a renovation.There is an option. It’s the Purchase Plus Improvement Mortgage. You can buy your home and renovate it, and it all gets added to your mortgage with one easy payment a month at low rates.

This mortgage program is especially of interest to investors. Owners can mortgage up to four units with at least one unit as their principal residence.

These loans also consider the improved value of the home. For example, if you purchased a home for $200,000 and wanted $40,000 in renovations, you can likely get a mortgage for 95% of the improved value.

Funds are advanced at different stages of work. There are guidelines, and your mortgage professional will be able to help. Such mortgages are usually subject to a 10% holdback for 45 days after completion of work just in case of nonpayment.

To obtain a Purchase Plus Improvement Mortgage, you will need information about the following from your contractor:

Renovations: Description of the work; types of materials being installed, with applicable quantities; and total cost of all the work.

Additions: Description of the work; a copy of drawings; and a cost breakdown of all proposed work (for example, such items as excavations and foundations, framing, windows and exterior doors, electrical, interior painting, plumbing, and heating).


Guy Ward is a Mortgage Associate in Calgary, Alberta with TMG (The Mortgage Group Alberta).


How Your Home Could Help You Pay Off Your Debts

How Your Home Could Help You Pay Off Your Debts

For many Canadians, managing money is a stressful ordeal. When you’re mired in debt, it’s even more difficult.

You’re not alone, though. A recent survey by the Desjardins Group indicated that only 50% of respondents could take care of their needs and pay their bills for more than three months without relying on credit, while 14% would not last a month in cases of emergency such as job loss, accident or illness.

And if you think your income isn’t high enough, think again. Only 55% of those who made more than $55,000 a year said they could last over three months if something happened to that income.

Schools are starting to teach young people about budgets as early as the third grade, and secondary schools are revamping their courses to include money management and investment. That’s good for future generations, but what about now?

There are a few steps you can take before heading to a bankruptcy trustee. First, it’s important to get the best advice for your particular situation. That may include talking to a financial counsellor who can assess your situation and help you set up a budget.

Or you can talk to me about a debt consolidation loan using the equity in your home. You may have enough equity in your home to pay off your high-interest debt with a lower-interest remortgage. You’ll be able to save thousands of dollars in interest. By using a mortgage as a debt consolidation tool and freeing up your cash flow, you will also be in a better position to take advantage of your prepayment privileges to pay off your mortgage more quickly.

Guy Ward is a Mortgage Associate in Calgary, Alberta with TMG (The Mortgage Group Alberta).


Banks own the investment industry! A good thing?

Let’s face it!  In the battle for investment dollars the Canadian banks are clearly the winners!  Is this a good thing?

Once upon a time, the investment business was more of a cottage industry.  Portfolio manager and investment broker were ‘professions’ rather than jobs.  Smaller independent firms specialized in looking after their clients’ savings.  There were no investment ‘products.’  The landscape began to change dramatically – in 1988 RBC bought Dominion Securities, CIBC bought Wood Gundy and so on – when the banks decided to diversify away from lending and began their move into investment banking, wealth management and mutual funds.

Take mutual funds for example.  Over the past few decades Canadian banks have continued to grow their share of total mutual fund sales* – this should not surprising since by acquisition and organic growth in their wealth management divisions they now own the lion’s share of the distribution networks (bank branches, brokerage firms, online trading).

An added strategic advantage most recently has been the capability of the banks to successfully market fixed income funds since the financial crisis. Risk averse investors want to preserve their capital and have embraced bond and money market funds as well as balanced funds while eschewing equity funds altogether. With waning fund flows into stock markets, how can equity valuations rise?  It’s a self-fulfilling prophecy.

Many of the independent fund companies, born decades ago during times when bonds performed badly (inflation, rising interest rates) and stocks were the flavor of the day, continue to focus on their superior equity management expertise.  Unfortunately for the past few years they are marketing that capability to a disinterested investing public.

The loss in market share* of the independent fund companies to the banks continues unabated. Regulatory trends also make it increasingly difficult for the independent fund companies to compete.  Distribution networks nowadays (brokers, financial planners) require a huge and costly infrastructure to meet compliance rules.  Perhaps I’m oversimplifying, but once a financial institution has invested huge money in such a platform does it make sense to then encourage its investment advisers and planners to use third party funds?  Not really! Why not insist either explicitly (approved lists) or implicitly (higher commissions or other incentives) that the bank’s own funds be used?

Stricter compliance has made it extremely difficult for investment advisers to do what they used to do, i.e. pick individual stocks and bonds.  In Canada, regulators have made putting clients into mutual funds more of a burden in recent years.

To a significant degree, mutual fund regulations have contributed to the rapid growth of ETF’s (Exchange-Traded Funds).    An adviser will be confronted by a mountain of paperwork if he recommends a stock – suitability, risk, know-your-client rules) or even a mutual fund.  An ETF is less risky than a stock, and can be purchased and sold more readily in client accounts by trading them in the stock markets.  Independent fund companies that introduced the first ETF’s did well enough for a time but not surprisingly the banks are quickly responding by introducing their own exchange-traded funds.  For example:

TORONTO, ONTARIO–(Marketwire – Nov. 20, 2012) – BMO Asset Management Inc. (BMO AM) today introduced four new funds to its Exchange Traded Fund (ETF)* product suite.

In fact, the new ETF’s launched by Bank of Montreal grew 48.3% in 2011.  When it comes to the investment fund industry, go big or go home!  You’d think that Claymore Investment’s ETF’s would have it made with over $6 Billion in assets under management (AUM) but alas the company was recently bought by Blackrock, the largest money manager in the world with $29 Billion under management.  It will be interesting to see if the likes of Blackrock will have staying power in Canada against the banks.  After all RBC has total bank assets twenty-five times that figure.  Survival in the business of investment funds, and perhaps wealth management in general depends on the beneficence of the Big Five.

Admittedly, the foray of insurance companies  into the investment industry has been aggressive and successful for the most part.  With distribution capability and scale they certainly can compete, but the banks have a huge head start.  Most insurance companies are only beginning to build out their wealth management divisions.  I can see a logical fit between insurance and investments from a financial planning perspective, but then the banks know this and have already begun to encroach on the insurance side of the equation.  Nevertheless I would not discount the ability of the insurance companies to capture signficant market share.

So, is it a good thing that larger financial institutions own the investment industry?  Consider the world of medicine.  No doubt a seasoned general practitioner will feel nostalgic for days gone by when patients viewed them as experts and trusted their every judgement.  The owner of the corner hardware store no doubt holds fond memories of those days before the coming of Home Depot.  Part of me wants to believe that investors were better served before the banks stampeded into the industry but I’d just be fooling myself.  Although consolidation has resulted in fewer but more powerful industry leaders, the truth is that never before have investors had so wide an array of choices.  Hospitals today are filled with medical specialists, while banks and insurance companies too are bursting at the seams with financial specialists.

It is not fun becoming a dinosaur, but this general practitioner has to admit progress is unstoppable.

Malvin Spooner









*The industry charts are courtesy of the third quarter Scotiabank research report Mutual Fund Review.  The annotations are my own.

How to Purchase the Perfect Cottage Property

How to Purchase the Perfect Cottage Property
If you’re thinking about buying a cottage property, you’ll need a professional with specialized knowledge to help you make the purchase.

What everyone agrees on is that you should buy a cottage that is approximately two to three hours away from your home. Many lenders will not consider a vacation property that’s too off the beaten path.

Working with a local real estate agent might be a good idea simply because they know the area and probably know the property.

If you’re buying in the winter, a local professional can tell you if there are any hidden sins under the snow. This is important because late fall and winter are the best times to get bargain prices.

You should ask the following questions:


1) How many feet of waterfront are available?
2) Hoes the cottage include a dock?
3) What type of heating is used?
4) Is there electricity and what type of water source is used?
5) Is the property a freehold or on leased or Crown lands?


Getting financing for a cottage can also be easier if clients use a mortgage broker. We have access to the best rates and have a lot more flexibility to work around issues that a bank would not. A broker will usually get you the same rate for a cottage that you have for your primary residence.


Guy Ward is a Mortgage Associate in Calgary, Alberta with TMG (The Mortgage Group Alberta).




Invest Risk Free —- NOT!

I saw this headline on a half-page ad in the Vancouver Sun this past week – 4 colours – no-one could possibly miss it. The headline in very large print read INVEST RISK FREE with a very, very small asterisk directing readers to the bottom of the ad for the usual disclaimers.

I must say that it continues to amaze me that companies (in this case a very large bank) would continue to advertise such absolute rubbish. In this instance, the institution publishing the ad was promoting their version of an equity-linked GIC. The theme being, buy this product, hold it until maturity and regardless of what happens to the stock market index chosen as the benchmark, you will be guaranteed to get your money back. With this fact, the ad promotes this as a “risk free” investment – oh, by the way, this was for a non-registered product. If the benchmark market went up, then within certain limits, the holder would get back some interest return on the positive side – no losses.

Let’s examine this a bit more closely – has everyone forgotten about this thing called INFLATION? Or how about TAXES?? I am not going to do a lot of fancy calculations here – you can all do that on your own time.

Scenario ONE

Product pays ZERO interest at the end of the 5-year holding period – you get back 100% of your initial investment – so according to the bank in question – no loss – therefore risk free. Absolute nonsense! If no interest – no taxes so they drop out of this equation. But inflation is still here! If we assume that inflation stays at the current low level of 1.9% and it stays there for the next 5 years, then (ignoring compounding), your money has lost at least 10% in purchasing power – that is a LOSS to the investor and worse, it is a loss which is NON-DEDUCTBLE!!

Scenario TWO

Same as number 1, but let’s throw in an average gain of 3% for each of the next 5 years. Lowest marginal tax bracket currently in BC is about 25%. So 3% gross equals about 2.25% net, after tax. If we again subtract inflation of 1.9%, then the client is left with a real, net, after-tax, after inflation rate of return of .35% – yes .35% – but at least in this possibility, the client hasn’t lost any $$ nor have they lost any purchasing power. If the investor is in a 35% marginal tax backet or higher, then we are back to Scenario ONE but with a smaller net loss of purchasing power.

But – that is a lot of buts! Please, don’t be fooled – there is NO SUCH THING as NO RISK INVESTING!

STEP Mortgage: Is It Right for Your Needs?

STEP Mortgage: Is It Right for Your Needs?


If you’re researching mortgages, you will likely come across the Scotia Total Equity Plan (STEP) mortgage.

This is a readvanceable mortgage that allows you to automatically borrow up to 65% of your equity (80% if you lock in at least 15% to a fixed term mortgage).

It is similar to a home equity line of credit (HELOC), which is a credit line that is secured by the value of your house, less your mortgage.

On a regular HELOC, you would apply for a set amount, maybe $10,000 or $100,000, as long as the mortgage and the HELOC are less than 80% of your home’s value. The STEP gives you this amount automatically. You can set up a flat amount like other HELOCs, or you can have a line of credit that automatically increases as you pay down the principal on your mortgage.

The mortgage portion can have a mixture of terms and fixed and/or variable rates. For example, you can place a portion of the mortgage in a five-year fixed, some in a five-year variable and the remainder in a one-year fixed.

One benefit to this mortgage is that you can use the equity in your home as a tool for leveraged investing. For example, if you’ve recently paid down $5,000 of your principal, the credit line would increase by $5,000. You can then invest with this available credit and the interest would be tax deductible.

Since existing customers don’t get the best rates at renewal time, lenders give new clients better rates.

Having a STEP mortgage does make it difficult to transfer to another institution, but not impossible.


Guy Ward is a Mortgage Associate in Calgary, Alberta with TMG (The Mortgage Group Alberta).




How to Map Out a Property Investment Plan

How to Map Out a Property Investment Plan

When you’re poring over those New Year’s resolutions for 2013, a good property investment plan is something you might want to consider putting down on paper.

The start of the year is the perfect time to consider such a plan.

In the plan, you should map out your financial goals, determine what your net worth will be at the end of 2013 and figure out how much money you’ll need in order to retire.

Your goals may be weekly, monthly or for any period you like.

It’s also important to decide what to do when you achieve your goals and what to do if you don’t.

For example, if you purchase that property you were after, celebrate it.

If something happens and you don’t end up purchasing it, decide what you’ll do then.

It could be re-evaluating your goals, finding a new property or deciding on a new strategy.

Consider setting out a schedule to achieve those goals over the next three years, five years, seven years and 10 years.

Remember that your plan is dynamic, meaning it can and will change as your priorities change and because some of your investments may not work out the way you planned.

Look at the different investment strategies available to you and understand the types of properties you need to purchase, and then complete a cash-flow projection.

Any good real estate investment plan has a cash-flow analysis.

You’ll also have to decide on an exit strategy – when and how to liquidate your portfolio to get the maximum benefit from your investments.

Use the services of a good tax accountant, a good lawyer, a good mortgage broker and a good real estate agent.  They are all available to help you achieve success.

Guy Ward is a Mortgage Associate in Calgary, Alberta with TMG (The Mortgage Group Alberta).



Is an Equity Take-Out the Right Option for You?

Is an Equity Take-Out the Right Option for You?

If you’ve been a homeowner for many years, you may have substantial equity in your home.  While being in an “equity rich” position is nice, it may not always be the best use of your money. This is where an “equity takeout” mortgage can be very useful.  Simply put, an equity takeout is taking out the money you own in your property. It’s the value of your home less the amount of mortgage registered against it.

For example, if your home is worth $200,000 and you owe $100,000 on your mortgage, the equity, or the amount you own, is $100,000. Usually your property value will increase over time, which increases the amount you own.

An equity takeout can be used for different purposes, including:

  • Debt consolidation
  • Home improvements
  • Buying other properties
  • Purchasing other investments such as stocks or RRSPs
  • A child’s education

Once you’ve tapped into your equity, which can be up to 80% of the total value of the home, depending on your financial situation, the principal on the value of the home will increase.

For example, the principal on a property valued at $200,000 with a mortgage of $100,000 pre-equity takeout, will increase by the amount you decide to take out. If you opt for the entire 80%, you will now owe $160,000.

You can access your equity in a few forms: a fixed-rate mortgage, a variable-rate mortgage or a line of credit. Fixed and variable rates lock your mortgage into a term. The line of credit is more flexible, and the initial amount can be reused as you pay it down.

An equity takeout may not always be the best solution to your particular situation. Consider consulting with your mortgage professional. He or she can show you the various options and what the costs will be.

Guy Ward is a Mortgage Associate in Calgary, Alberta with TMG (The Mortgage Group Alberta).


How to Save Your Home in Times of Trouble

How to Save Your Home in Times of Trouble

It sometimes happens – a layoff, a job loss, an extended illness or just too much debt.

You can manage only minimum payments on credit cards, and you’re having trouble coming up with the mortgage payments on your home.

You hope that everything will work out, so you don’t do anything except wait it out.

When you fall behind on mortgage payments, though, it’s time to get proactive and start communicating.

The first thing to do is talk to your mortgage professional, who can advise you of your options.

Lenders are willing to work with homeowners to help them keep their homes and default insurers, for those who have high-ratio mortgages, offer a variety of programs to help prevent foreclosures.

Start by taking a good look at your income and expenses and put together a budget. This will give you a good snapshot of where you are financially. There are organizations that offer credit counseling and can help with preparing a budget.

Then look at ways to boost your income – a second job, selling household items or renting a room.

Following are some steps you can take:

Talk to Your Lender: They truly want to help you because it’s costly for them to start any foreclosure proceedings. They may lower your payments for a time or add the missing payments to the end of the loan.

Refinance: If you still have equity in your home and your credit hasn’t been damaged yet, you can still refinance.

Know When to Let Go: It may be impossible to hold on to your home.
And sometimes it’s best to let it go, take what equity you can and start again. This is when you need the help of a real estate agent who can set a realistic selling price so your home will sell in a timely manner.

Guy Ward is a Mortgage Associate in Calgary, Alberta with TMG (The Mortgage Group Alberta).


9 Keys to Getting Your Mortgage Approved

9 Keys to Getting Your Mortgage Approved

For some buyers, getting financed can be tough slogging.  It’s even more difficult if you’re self-employed.  Working with an expert to navigate the application and fulfilment process is a must. An expert can help you with things that you didn’t even know would come into play.

Following are nine ways buyers can maximize their chances of getting a mortgage:

  • Disclose all the properties you own. You have to tell your mortgage professional about all the properties you own and the mortgages on them. 
  • Keep your taxes up to date. Lenders may decline your application if you owe taxes to Revenue Canada.  
  • Communicate your reason for purchasing. Showing that you know what you’re doing will make it easier to get the financing required.
  • Make sure your property meets minimum requirements. Each lender has different guidelines.
  • Show where the down payment funds are coming from. This is critical. Lenders want to know that the deposit is liquid and accessible.
  • At the time of application, keep your current financial situation stable. For the best rates, all income needs to be verifiable.
  • Be conservative with the value of a property.
  • Don’t look for the lender with the cheapest interest rate and then try to fit the lender’s policy. A mortgage professional can help you plan your financing and structure your loan with the features you need.
  • Use a mortgage professional. The paperwork that lenders require can be significant, and it’s important to get it right.
Have a great Thanksgiving everyone!
Guy Ward is a Mortgage Associate in Calgary, Alberta with TMG (The Mortgage Group Alberta).