October 14, 2009
Book, Employed Persons, First Time Home Buyer, Pre Approval
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We pay taxes. This should not come a surprise to anyone. All levels of government require that we pay taxes. The city is no exception.
The way that the city of Calgary collects taxes is not through our income or by a tax on goods and services – they do it though the properties that are owned by businesses and home owners. The value of your home as assessed by the city of Calgary lets the them know what your portion of the tax bill will be for the coming year.
Lenders want to make sure you pay your city taxes. They believe that if people pay their taxes once per year (in June) that that tax bill can be hard for some families to pay. They want to make paying your taxes easier for you and this is why they encourage you to pay using a program offered by the city of Calgary called the TIPP program.
The following is an excerpt and link from the City of Calgary explaining the TIPP program.
Property Tax Installment Payment Plan (TIPP)
What is TIPP?
The Tax Installment Payment Plan (TIPP) is a popular program which allows you to pay your property taxes on a monthly basis instead of one payment in June.
Your payment automatically comes out of your chequing account the first day of every month, making budgeting easier and helping you avoid the risk of a 7% penalty.
How does TIPP work?
Each year property taxes are billed in May, due June 30 and cover the period from January 1 to December 31.
If you pay through TIPP you don’t need to worry about the payment deadline or late payment penalties. Your taxes are spread over 12 months, starting January 1, with your account being paid in full after your December 1 installment.
Your installment amount is calculated by dividing your most recent annual tax levy by 12, rounded up to the nearest dollar. This amount is paid through automated withdrawals from your bank account the first day of each month.
When you receive your annual tax bill in May your installment will be adjusted to reflect the actual tax levy, ensuring your account is paid in full by year end.
Your tax bill will show:
- The TIPP credit-to-date.
- The new installment amount for the remainder of the year.
- The date we will start withdrawing the new installment amount.
At year-end:
- TIPP automatically continues from year to year.
- All installment amounts are reviewed in December.
- If an adjustment is made to your installment amount, you will be notified.
http://content.calgary.ca/CCA/City+Hall/Business+Units/Finance+and+Supply/Property+Tax/Tax+Installment+Payment+Plan+TIPP/Property+Tax+Installment+Payment+Plan.htm
September 8, 2009
Book, Employed Persons, First Time Home Buyer, Interest Rates, Pre Approval
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Condominium fees (often referred to as condo fees) are the monthly fees that people who own a property within a condominium complex. These funds are used to cover the common use areas of the facility. Condo fees can range quite a bit in what they cover and how much the fees can be. Speak with a qualified Realtor to find out all about these fees and how they may affect you.
When people purchase or refinance a condominium property one factor we have to work into our qualification ratios, GDS and TDS, is the condo fees. Each of these ratios include a provision for condo fees.
So when we pre qualify people who are considering purchasing a condo it is best to get a sample of the range of what the monthly condo fees are for the properties you are considering. Because these number potentially have a large effect on what you qualify for it is important to be very conservative in these estimates used in the pre approvals.
What I often tell my customers is that if the condo fees are 10% more than what I put into the pre approval application then give me a quick call or email and I will run the numbers for them so we can be 100% sure that they will qualify with the new condo fees.
My services are complimentary so use me to help you get peace of mind.
August 30, 2009
Employed Persons, First Time Home Buyer, List, Pre Approval
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A key question for most first time home buyers is how often do I have to pay my mortgage?
In previous generations they only had one choice – monthly. This was largely due to the fact that each of these transactions were done manually at the bank level and to have more choices would make the task of processing these transactions very complex.
Today all of these transactions are done with computers. The computer uses its considerable ability to make payments as often as necessary for the exact right amounts. So today we have choices!
Most lenders give their customers four choices: Monthly, Semi Monthly, Bi Weekly and Weekly.
We still have the Monthly Payment option. Payments are made on a specific day every month. People typically choose the first of each month to make their payments. So for example if you have a mortgage payment that is $1000 you will then pay $1000 each month on the first of the month. Totaling 12 payments a year and $12,000 in payments every year.
The next option is Semi Monthly Payments. Semi Monthly means that you make two payments every month. This is a great option for people who get paid from their jobs twice a month. Payments are typically made on the 1st and 15th of every month. So to compare against the example shown above the semi monthly payments would each be for $500 and you would make two each month. So you would make 24 payments through the course of the year for a total of $12,000 in payments every year. This option is all about ease of budgeting and convenience.
Next on our list of payment options is Bi Weekly Payments. Bi Weekly Payments mean that you will make a payment every second week through out the year – typically every second Friday. This means that there will be two months where you will make one extra payment – these months are July and December. So the advantages are two fold. Firstly if you get paid every two weeks at your job then it makes budgeting easier. Secondly those extra two payments get applied directly to your principal thusly doing two things, shortening your amortization and reducing the total interest you will pay on your mortgage. So using the example above you would make payments of $500 every two weeks. Throughout the course of the year you would make 26 payment for a total of $13,000 a year with $1,000 applied directly to your principal.
The last option on our list is Weekly Payments. In this case you make your payments on a weekly basis. It maybe useful for people who get paid weekly. So with the example noted above you would have payments of $250 every week. 52 payments made every year for a total of $13,000 a year with $1,000 applied directly to your principle.
So when my customers ask which is right for them what I typically ask them is how often do they get paid then suggest that they choose a payment plan that mimics this.
One last key thing to note about payment frequencies is that with most lenders you can change your payment frequency at any time.
August 5, 2009
Employed Persons, First Time Home Buyer, Interest Rates, Pre Approval, Proving income
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A question I often get asked is, “How much will the lender allow me to borrow?”. For many this is the most basic and important question. While the answer is simple to figure out it is impossible to determine with any accuracy without taking a full application.
Lenders look at two key ratios to determine what you may borrow – Gross Debt Servicing Ratio (GDSR) and Total Debt Servicing Ratio (TDSR).
Each of these ratios look at key costs that all Canadian home owners carry and relate that to your income. Thereby letting us know what is the greatest mortgage payment that you can afford. From there we work the mortgage payment back to determine what the total loan amount will be.
Gross Debt Servicing Ratio (GDSR) takes into account the cost for just owning the property:
- Principle and Interest (PI) – this is your mortgage payment
- Taxes (T) – city taxes
- Heat (H) – we do live in Canada 
- Condo Fees (CF) – We use 1/2 of the condo fees and only if applicable to your situation
(PI + T + H + 1/2 CF)/Income=GDSR
Total Debt Servicing Ratio (TDSR) looks at the same things as Gross Debt Servicing Ratio but add a component for your monthly Consumer Debt Obligations (CD).
(PI + T + H + 1/2 CF + CD)/Income=TDSR
The upper limits of these ratios vary from lender to lender depending on their internal policies and from borrower to borrower depending on other factors in the application.
I would be glad to run these numbers specifically for you to help you in your real estate purchase or refinance.
July 28, 2009
Employed Persons, First Time Home Buyer, Interest Rates, Pre Approval, Proving income
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So you have moved into your first home.
It is everything you hoped it would be and you couldn’t be happier.
Lets take a moment to look back at the journey you traveled because you have come a long way.
First you made the smart move by starting working with a mortgage professional. Someone who knew what they were doing and genuinely wanted to help you through the process.
Second you figured out all about the mortgage process and how your situation fits into this. Most importantly you got a clear path forward of what needed to be done to get you into your new home.
Third you released all the stress from the process by getting all your ducks in a row before you put down an offer by gathering all necessary paperwork.
Fourth you put an offer on a place and felt relaxed and confident that it would easily get approved. Ant it did! We sent all the paperwork to the lender where it was quickly accepted.
Next you went to your lawyer’s office. They explained all the documents to you in an easily understood fashion. Then you signed the documents.
So now we are back to where you are right now – a home owner. Enjoy it because being a home owner is a very rewarding experience.