Mylene Lim

Homeowners in B.C., particularly condo and townhouse owners, are now bracing themselves to deal with the hike in insurance premiums for strata buildings, anywhere from 50 to 500 percent. Over and above that, the deductibles are also going up anywhere from $10,000 or $20,000 to as high as $150,000 or $500,000.

Why is this happening?

Strata Property Act requires that all strata corporations carry insurance for the value of the building. And as property values have skyrocketed in the recent years, it naturally follows that the insured amount will have to go up as well. Some insurers are reviewing their underwriting criteria and how much risk they are willing to take. There are about 65 insurers in B.C. and not all of them offer insurance to B.C. strata corporations. There are also fewer companies offering strata insurance in B.C. than in other provinces, thus reducing competition.

Added to that, B.C. has also had its share of wildfires and flooding, not to mention the global impact of catastrophic events, which by trickle-down effect, ultimately affects BC residents since our insurers have to re-insure the coverage from global insurers.

According to the Insurance Bureau of Canada, insurers were paying about $500 million annually in the whole of Canada in the past. This amount has drastically gone up to around $2 Billion in 2018.

What is the impact of the increase of insurance premium on homeowners?

If you’re a condo or townhouse owner, you many want to look into what kind of increase will be coming your way if you haven’t done so as of yet. Homeowners will see an increase of about 20% or more in their monthly strata fees to cover the hike in insurance premiums. There may be some buildings, which may  require a special levy to homeowners in order to augment their contingency fund to cover deductible in case of a claim.

Aside from insurance premiums going up, deductibles on insurance claims are also expected to increase. This deductible will definitely have a huge impact to the financial reserves of the strata companies as well as to the cost of individual condo owners. Individual condo and townhouse owners may have to contend with shouldering the full load of an insurance claim. For example, a condo owner may get distracted resulting in an overflow of water, damaging his unit and several units below with an expected repair cost of $250,000. If the strata has a high deductible claim, say $500,000, the strata may decide not to file a claim through the building’s insurance, therefore either leaving the owner responsible or use the building’s owner-contributed contingency fund for the damage.

For those looking to get into the real estate market, you will have to do your due diligence and review the overall condition of the property – this includes the physical and the financial structures which includes the insurance policy of the strata corporation.

If you have any questions about pre-approval, renewal, refinance, how to get out of debt faster, or a confidential and complimentary review of your overall financial situation, please don’t hesitate to contact me.

At the end of each year, you should review your financial situation to ensure that you are on the right track for a secured financial future.

CREDIT

Make sure that you are using your credit wisely so you keep your options available if or when you need them. It is advisable that you check your credit report regularly – or at least once a year – so you know where you stand and whether your credit has been compromised in any way, especially through fraud. Most banking institutions offer a free soft check on you credit report. Soft checks are when the regular credit reviews don’t affect your credit score.

There are some people who have the mistaken notion that it is more responsible not to use credit lines at all. But this actually works to your disadvantage. Not having any activities submitted to the credit bureau would mean that financial institutions have no way of determining what your credit habits are and you will most likely get turned down if you need to avail of a loan or credit card in the future.

SAVINGS

Although majority of us find this a difficult exercise, we should consciously make a disciplined effort to set aside a certain portion of the money we earn every month. Incorporate it in your budget to set aside a percentage  – maybe 10% of earned money – at the end of each month.  Just think of it as another utility payment that you have to make.  The savings will start to build and you may find yourself with a comfortable amount that you can draw on in case of emergency or when you retire.

RETIREMENT

Retirement planning is part of the overall savings picture. If you can, work an RRSP contribution into your budget as soon as possible so you will be much further ahead when you want to put your feet up and enjoy. Contributing to an RRSP also gives you a tax break at the end of the year and you can use your tax return money to put towards paying down your mortgage or put it towards a vacation. Both of those are win-win scenarios.

MORTGAGE

Home ownership is generally the largest investment that most Canadians will ever have in their lifetime. And it therefore follows that mortgage will comprise the biggest debt that will be carried by homeowners. You should regularly review your mortgage to ensure that you have the best mortgage structure tailor fitted to your current requirement.  

Take a few minutes to review your debt-structure. If you are making high monthly payments on high-interest loans and/or credit cards, maybe you can restructure the debts by refinancing your credit accounts into your home. This generally reduces the amount of interest you are paying overall and lowers your monthly payments. At the same time, if you take advantage of an accelerated payment structure (bi-weekly or weekly) and bump up your minimum required payment by the 15-25% that your institution allows, you can pay down your principal and be mortgage free much sooner!

If you currently have a mortgage rate anywhere over 3%, you should do yourself a favour and consult with a mortgage professional to determine if you can get a better mortgage with lower rates.

INSURANCE

Make sure you are adequately covered with insurance so that you can protect yourself and your family in the event of a crisis or emergency. Whether it be home, health, life or disability insurance, it is always a good idea to review all of your insurance coverage at least once a year to make sure you are fully covered.

Most clients may benefit more from having independent mortgage insurance coverage as opposed to taking the insurance coverage offered by the institution that has your mortgage. If your mortgage insurance is through a company that is independent of the bank, you would have the ability to keep the coverage and premium you initially had even if moving your mortgage to another institution at a better rate works better for you.

Critical Illness Insurance offers protection should you become affected by one of the approved conditions and is often paid in a lump sum amount once you have survived the specified waiting period. It gives you the assurance that the costs of a serious medical condition, as well as living expenses, will be covered.

Whether you’re a speculator or not, all homeowners in the largest urban areas of BC will have to apply for exemption from the province’s new speculation tax. Areas subject to the speculation tax are Greater Victoria, Nanaimo, Kelowna and Metro Vancouver including Abbotsford, Mission and Chilliwack (excluding Bowen Island and Lions Bay).

 

It is the responsibility of all homeowners to apply for exemption from getting taxed before the deadline on March 31^st, 2019. If there are multiple owners of a home, a declaration must be completed by each owner, including spouses. Those who do not qualify for exemption, or do not apply, will be sent tax bills due to be paid by July 2^nd, 2019. However, you may still get a rebate within six years if you mistakenly pay the speculation tax.

 

The Ministry of Finance announced that they would start mailing the speculation and vacancy tax declaration letter by mid-February.  The Ministry said the imposition of speculation tax on speculators and empty homes may discourage real estate speculation and thereby make housing more affordable. The new tax which was announced in the February 2018 budget was described as a way to encourage owners of empty residences to put their houses up for sell or rent out, especially in areas where the shortage of housing is most felt. Although the aim was to target out-of-province real estate speculators and the government claims that 99% of British Columbians will be exempt from the tax, an estimated two-thirds of those who will be paying will be British Columbians.

 

The tax rate is 0.5% of a home’s assessed value in 2018 that will be $5,000 per year for a property assessed at $1 million. This rate will go up to 2% in 2019 for out-of-province owners, foreigners and families where more than 50% of income in the household comes from outside of Canada.

 

Owners are exempt from paying this tax if the property is considered their principal residence, they rent it out at least six months of the year, they are disabled, the property was just inherited, the value is below $150,000, or the property is vacant because the owner is away for medical reasons, residential care, work or spousal separation.

 

Strata properties (condos and apartments) in buildings where no rentals are allowed will be exempt in 2018 and 2019, to give time to the stratas to change their bylaws. First Nations, local government, charities, co-ops and some non-profit organizations may be exempted from said tax.

 

British Columbians with second homes who aren’t exempted will still get a tax credit intended to cover the tax on the assessed value up to $400,000, with the remaining value of the property then taxed at the full rate.

 

For more information, please feel free to contact me:

Cel: 604 783 9097/ Email:mylene.mortgage@gmail.com/ Web: www.MyleneLim.ca/  FB: Mylene Lim

When you were applying for your mortgage, you went about it like pro – you shopped around for the best product suited to your needs, reviewed the terms and conditions and negotiated for the interest rate. Or perhaps, being a new buyer, you were just happy to be approved for a mortgage – any mortgage at any rate. Then you just sat back and enjoyed your home for the last five years or so. And now you got a notice in the mail that your mortgage is up for renewal…

What should you do? Do you just assume you are being offered the best product after your last negotiation five years ago and sign on the dotted line? Of course you should not! It’s a new ball game altogether so you have to do your due diligence to find out what products are available for you in your present situation.

1st consideration: Are you just wanting to renew your existing mortgage or do you want to take advantage of your increased equity to take out some money against your property. The first option is considered a renewal while the second option is considered a refinance or equity take-out. A renewal is generally straightforward with minimal documentation while a refinance would require you to submit income documentation, get a credit record check and a new appraisal of your property.

2nd consideration: What is the best rate available for you? Oftentimes, your lender would send you a renewal rate that may not necessarily be the lowest they could offer. They do this because they know that a lot of borrowers do not know any better or that borrowers do not want to go through the hassle of negotiating for a lower rate. A few hours reviewing different options may save you hundreds, if not thousands, on your mortgage payments.

3rd consideration: By now you’ve been down this road a few years so hopefully you have gained some insight that not all mortgages are the same. You now have an idea that you could have more flexibility with regards terms and conditions of your mortgage. You can go for variable instead of fixed rates or vice versa. You can go for 30 or 35 years amortization instead of 25 to lower your monthly payments and alternatively you can opt for shorter amortization period. You can opt to pay a bigger lump sum amount at each calendar year to pay off your mortgage faster. You can opt for a product with minimal penalty if you want to break the mortgage early.

There are so many lending institutions in the market with so many products for you to avail of. Without the added stress of a home purchase and with more time to review your options, there is no reason for you to just sign on the dotted line when that renewal notice comes in the mail. Take the time necessary to sit down with an experienced mortgage professional to go what the industry can offer you.

Mylene Lim is an experienced licensed mortgage broker at Dominion Lending Centres – Clear Mortgage. She specializes in arranging very competitive residential and commercial mortgages for her clients. For more information, please contact her at Cel: (604) 783 9097; Email:mylene.mortgage@gmail.com; Web: www.BestOptionMortgages.ca; FB: Mylene Lim, AM

When we purchase a property, we tend to leave the preparation of the purchase agreement to the realtor. Understandably so because the contract comprises of pages upon pages of mostly legal and technical stuff that we entrust our realtor to review with our interest in mind. But there are some things in the contract that may inadvertently affect your mortgage approval that you need to be aware of. Here are some of them:

 

Furniture included in the purchase – If there is a value associated to these items then lenders will take these values into account and if there is zero value then it needs to be stated in writing. It might be a good idea to have a separate agreement on the furniture that go with the property purchase.

 

Changes on the contract – If you have made price changes in the contract after you’ve done your due diligence with the property, the lenders will adjust your mortgage amount accordingly.

 

Property size – Most lenders have a minimum square footage on properties they will finance. Generally, lenders tend to shy away from properties smaller than 700sqft for single detached houses and 500sqft for condos.

 

Cash Back – Although we are seeing less and less of this product, lenders will normally reduce your mortgage amount accordingly.

 

Illegal activity that had taken place on the property – Anything that had happened in the property that is noted in the seller’s Property Disclosure Statement, or through lender’s own research on the property, would be a factor in the approval.  Some of which may be that the property is a former grow-op or a meth den.

 

Appraised value of the property – The appraisal itself may cause the lender to take a second look at the condition of the property. If the appraisal comes too high or too low compared to the fair market value in the area, the lender may want an explanation on the discrepancy.

 

Physical condition of the property – For single detached properties, lenders may limit their review on the appraiser’s report. However for condos or apartments, lenders will review the state of the whole building including the projected repairs or upgrades in the future. They will look at the finances of the property strata management to make sure that there is or will have enough funds to cover ongoing and projected costs.

 

The above are some of the factor reviewed by the lender before they issue a firm mortgage commitment. After you have spent time and effort looking for that dream home, the lender will in turn review their investment in the property based on their set criteria. This concerted effort between you and the lender is beneficial to ensure the solidity of property you are purchasing.

 

Mylene Lim is an experienced licensed mortgage broker at Dominion Lending Centres – Clear Mortgage.  She specializes in arranging very competitive residential and commercial mortgages for her clients.  For more information, please contact her at Cel: (604) 783 9097; Email:mylene.mortgage@gmail.com; Web: www.BestOptionMortgages.ca; FB: Mylene Lim, AMP