Wednesday, May 8, 2019

Case Study: 85% rental offset on a basement rental.

  • To purchase a new home with basement rental unit
  • Qualify for 80% LTV using the rental unit income
  • Stable salaried position earning $75,000
  • $800/month rental income as proven by signed lease agreement, and can provide fair market rent analysis with 2 comparables
  • 580 FICO due to missed bills during time of marital breakdown
  • Excellent mortgage repayment history
  • GDS/TDS is 24/35% with stressed TDS of 44% using the mortgage rate plus 200bps
  • $450,000 property value
  • Self-contained basement rental unit with own entry, full kitchen and bathroom
  • Good condition, well maintained property
  • Suburban area with DOM under 30
Down Payment
  • $30K from client's own savings
  • $50K gifted from family member

Deal Rationale:

Client was offered the following options:

  • A 1 year mortgage at 80% LTV for 5.14%
  • A 2 or 3 year mortgage at 80% LTV for 5.39%

The client chose the 1 year term at 5.14% offer and we used the client's $800 in monthly rental income to offset the client's expenses:

Mortgage Details
Property Value$450,000
Mortgage Balance$360,000
Mortgage Rate5.14%
Stressed Rate7.14%

85% Rental Offset
Salaried Income$75,000
Monthly Expenses (PITH)
Stressed Monthly Mortgage Payment
85% Rental Offset
Stressed TDS44%

Good or bad credit,
Call Us for all your Mortgage Needs.
Call +1 416 822 5886

Tuesday, April 23, 2019

Tips on Guiding Seniors Through the Funeral-Planning Process

The death of a loved one is a difficult time for families to endure. There often is confusion, shock, denial, despair, anger, and almost every other possible human emotion. There can be great financial stress as well due to the expense of the funeral itself and uncertainty about the future if the deceased was the primary income earner.

Because of this stress, many people opt to pre-plan their funerals as part of their routine estate planning. A pre-planned funeral can help your family better deal with your death. Here are some ways to make a funeral and other arrangements less of a burden on you and your family.

The Ins and Outs of Funeral Pre-Planning

When a funeral is pre-planned, every aspect can be considered, from the wording of the obituary, type of service, casket model, and more. People tend to have strong personal opinions on such decisions as to whether to be buried or cremated, whether to have an open-casket service, and even what musical selections will play during their funeral. Pre-planning allows individuals to organize the exact funeral they desire. Again, this is not a morbid thought but a way that you can lessen the burden when you pass away. With pre-planning, families can feel assured that they are following the deceased’s wishes.

The financial aspects of a funeral are addressed with pre-planning as well, from payment in full of an amount sufficient for a funeral. Pre-planning my provide you with the option of pre-paying for your funeral, possibly securing lower rates and avoiding the problem of liquidating estate assets to pay for a burial.

Most funeral homes offer pre-planning services, where they can discuss your wishes and create a roadmap in the event of your death. There are some obvious potential problems with a pre-planned arrangement. For example, you might not be living near the funeral home at the time of your death -- you are likely hoping your funeral plans will be long off in the future, and who knows what life you’ll be living then.

Other arrangements for handling the payment portion of a funeral is to take out an insurance policy with a benefit that would cover funeral expenses or to set up a burial trust fund.

When the Funeral Is Not Pre-Planned

Although many are arranging their funerals in advance, most people don’t like to think about their deaths, so they neglect pre-planning arrangements. In the event that you are guiding someone through the loss of a loved one, there are several ways to provide support and help them make choices in a stressful moment.

People grieve in their own way, so it’s not especially helpful to be intrusive during this time. Offer your support in tangible ways, such as helping with funeral arrangements. Offer to speak with the funeral director yourself so that the grieving family member does not have to be inundated with the death process. However, make sure to include the person in decisions and listen to the funeral director’s advice. Since they deal with grief on a daily basis, they often can provide insight, guidance, and assistance during this time.

Beyond planning for a funeral, a grieving person might need your help in navigating the world after the death. When the funeral is over and the shock begins to subside, this person may need to create a new life. Offer to help address long-term decisions and connect with support services that may be available.

Death will bring shock and stress for families and surviving spouses. Consider how pre-planning can lessen that for your family, and when you know of others going through the stress, be there to provide support.

Hazel Bridges

Photo Credit: Unsplash

Wednesday, April 17, 2019

Bad Credit Mortgage

What is a mortgage actually?
It is money borrowed from banks and other commercial lending institutions to cover the cost of a home, and pay the principal back over time with interest. This type of loan is called a mortgage. When it comes time to purchase a home, many people are unaware of all the different mortgage options from which they can choose. Purchasing a new home is stressful enough, which is why it is imperative that you understand all of the different mortgage options you have available. Regardless of whether you are a first time home-buyer or you have been down this road before, it never hurts to have information about the various programs to see if a better option exists for your needs.
Attractive mortgage rates make this an optimal time to improve credit scores. If you have equity in your home but have had credit problems, a bad credit mortgage may provide an opportunity to set things in a rightful way. If you own your home, need bridge financing or have at least 15% toward a down payment, you have mortgage options despite credit blemishes.

Those with blights on their financial records often think a mortgage with bad credit is not possible. But whether you seek a second mortgage, equity line of credit or another type of home financing loan, bad credit mortgage loans are possible and may be the best way to repair and improve credit rating.
In fact, credit rating is not an important part of a loan assessment process for a bad credit mortgage process. The result is that securing home loans with bad credit is possible when a large enough down payment is made, or the credit rating has been improved, as well as meeting the basic criteria.
The greatest long-term benefit for the borrower with bad credit is that by making regular payments on their new loan for a reasonable period of time and it will strengthen their credit score. This better credit rating will then allow the borrower to refinance the bad credit home mortgage loan at a better interest rate in the future.

The process of getting a bad credit mortgage in Canada can seem overwhelming to first time homeowners, which is why it is important to do some research and work with a mortgage broker. Many people in this day and age get by just fine without owning or leasing a car. Some can even get along with no credit cards in their wallet. However, while lots of Canadians are content to rent apartments, there is certainly a large number of Canadians that are striving towards one goal, one of home ownership. Getting a house to raise their family in. However, for those with bad credit, their prospects can seem grim. In fact, bad credit mortgages are also known as high-risk mortgages, because of the level of financial risk that the both the borrower and lender are taking.
There are basic concepts that come along with mortgages in Canada.

Open mortgages
It allows you to pay off your mortgage in part or in full at any time without penalties, you can select any time to renegotiate the mortgage, flexible, but comes with a very higher interest rate.
Closed mortgages
It usually has a lower interest rate but does not have the flexibility of an open mortgage. You have a fixed or variable rate for a term, and to break this mortgage before the end of term will incur some costs.
Conventional Mortgage
If you have 20 percent of the purchase price on your new home to use for a down payment, you will be able to apply for a traditional mortgage. You may not have to apply for default insurance when applying for a conventional mortgage.
High Ratio Mortgage
high ratio mortgage is a mortgage in which a borrower places a down payment of less than 20% of the purchase price on a home. high ratio mortgage will require mortgage insurance. Mortgage insurance is usually purchased by the lender through one of Canada’s three default insurers.

Have you been rejected by your bank, because of poor or bad credit? Notably, many big banks consider borrowers who do not have a good credit rating to be high-risk.
Moreover, the big brick and mortar lenders have all but stopped lending to clients who don’t have a great income and perfect credit. More so, with the new lending rules in force in Ontario, homeownership is beginning to get elusive for many middle-class families.
Fortunately, there are still lots of options when it comes to bad credit mortgages in Canada. There are many monoline lenders with programs geared in making the dream of homeownership a dream come true. Same is true to those who want to a refinance or renewal of their current mortgage.

Do well to contact us for all your mortgage questions. We work with all major lenders including banks, credit unions and trust companies in Canada. We also provide private lending for clients, working with private lenders with very flexible terms, fees and rates. We will work with you, understand your unique needs and no matter your credit score, provide a solution to your mortgage needs. And our services are free.

200 Consumers Rd, Suite 700
M2J 4R4 Toronto ON
t: 416 822 5886

Monday, March 18, 2019

Income Replacement Insurance

Wednesday, February 27, 2019

7 Reasons Why You Should Invest in Life Insurance

Monday, February 25, 2019

Buy & Sell Planning for Businesses

Buy-Sell Life Insurance

Planning for the loss of a business owner or partner is crucial to ensuring the continuity of your business and protecting the financial security of your family and the families of each partner or co-owner.
To protect your business, your loved ones and your co-owners or partners, you can implement what is known as a buy sell agreement, which specifies what will happen to the interests of a deceased owner, partner or shareholder. 

Buy sell agreement helps preserves control and value of a business at the death of one of the owners/partners.

These agreements provide that the estate of the deceased owner will be paid a fair value for his/her interest and that the surviving owners will maintain control and ownership of the business. Life Insurance on the owners can be a source of money to fund this agreements.
The structure of the buyout and  Life insurance funding should be tailored to the objectives of the business owners.

There are three main methods to fund these types of agreements:

Criss-Cross Method

Each shareholder purchases a life insurance policy on the life of the other shareholder(s) and names himself or herself as beneficiary. Subsequently, the shareholders and company complete a Buy/Sell Agreement that requires the surviving shareholder(s) to purchase the shares of the deceased shareholder, usually at fair market value.
Upon death of a shareholder, the surviving shareholder(s) uses the insurance proceeds paid from the deceased’s life insurance policy to purchase the shares from the deceased shareholder’s estate.

Promissory Note Method

With this method, the operating company purchases a life insurance policy on the life of each shareholder. The company is named as the beneficiary of the policies and a Buy/Sell Agreement is put in place requiring the surviving shareholder(s) to purchase the shares of the deceased shareholder at fair market value. Upon the death of one of the shareholders, the company receives the insurance benefit and pays the proceeds to the surviving shareholder(s) as a capital dividend, allowing them to honor the promissory note.

Corporate Redemption Method

The operating company purchases a life insurance policy on the life of each shareholder, and the company is named the beneficiary of each of the policies. This method requires the company to purchase and cancel (or redeem) the shares of the deceased shareholder.
No matter what kind of business you are involved in—a corporation, a partnership, an LLC, or even a proprietorship you should strongly consider a buy-sell agreement.

Contact Us for a No Obligation Consultation Today.
T: 416 822 5886

Monday, February 18, 2019

Best Retirement Strategy with Individual Pension Plans (IPPs)

Individual Pension Plans (IPP’s) for Incorporated Businesses 

An IPP is a registered and defined-benefit (DB) pension plan which is usually set up for one person. It provides an added benefit for high-level executives and incorporated business owners. IPP’s are approved by the Canada Revenue Agency (CRA) and offer great savings solutions for individuals who are 40 years or older, have a T4 income of more than $100,000 and have factually maximized their pension and RRSP contributions. You can think of an IPP as an RRSP upgrade. It is designed to cater to high-income earners who are looking for tailor made packages because their requirements are not met by the RRSP setup. 

Comparison of RRSP and IPP:
Suppose you’re a 45 year-old executive who has worked for the same organization since 1991 and have an average T4 income of $100,000 per year. If you have an IPP along with an RRSP and you decide to max-out both, assuming a yearly rate of return of 7.5%, then at retirement you will have $4,796,518 in registered retirement savings. Using this tax solution, you will have a yearly benefit of $362,549 when you’re 69 years old which is fully indexed to the consumer price index. Now, if you just used an RRSP for the same time period i.e. from age 45 to 69 than you would only save $ 3,226,413 in tax-sheltered retirement assets. 

Introduced by the Federal Government in 1991, the IPP is a tax-avoidance structure with annual contributions fully deductible by the IPP sponsors or corporations. These contributions are also a non-taxable benefit for the beneficiaries until money is withdrawn from the plan. If you’re running an incorporated business, an IPP will let you invest hundreds of thousands of tax-deferred income dollars from your business into the IPP structure. This will ultimately give you non-taxable interest which will compound until you retire. 

Annually, this nest egg would give you a retirement income of $243,871 from age 69 onwards. This makes it very clear that an IPP implemented with an RRSP provides an additional $118,678 in annual income as compared to only utilizing the RRSP.