Key questions you should be asked by your broker/banker

The below are some questions you should be asked when seeking a mortgage.

Why?

2 main reasons you should be asking these key questions.: A) If you're only looking for the lowest rate, you should understand that low rates are important, but many of the lowest rates have detrimental terms and conditions that will cost you significant wealth and headaches down the road. B) It is important to make sure you protected against any unexpected life events and that you and your family are protected.

Questions you should be asked by your broker/banker.

1. Are you a first time home buyer?
2. Do you have an existing mortgage on your home?
3. How would you describe your risk tolerance?
4. Do you know the difference between fixed and variable rates?
5. Is a portion of your existing mortgage tax deductible?
6. How long do you plan on living in your home?
7. Do you have a personal or family cash flow statement?
8. Do you have a Will or Power of Attorney to protect your estate?
9. Have you reviewed your life insurance in the previous 2 years?
10. Could you afford your standard of living in the event of a premature death or illness?

**the above is only a sample of the questions we ask to properly provide a mortgage to clients

  Let me know if I can answer any questions,

John Panagakos
The Separation Mortgage Expert
john@johnpanagakos.ca
416-570-5646

Did you really save on your mortgage penalty?

I give a lot of respect for the professionals who are trying to assist with separation and divorce cases. We never know who is going to walk into our door, we don't know if one of the parties will cause delays and/or sometimes things get emotional for everyone. Imagine parenting plans, add CAS, a dash of constant bickering, a dose of unprofessional counterparts and a pinch of financial chaos and of course you need to do your job and represent your client to the best of your ability to find the best resolution.

I was reviewing a few cases with my team this morning and we thought it would be a great idea to discuss a specific file and a common situation we see.

Joe and Alyson (not their real names) were in the process of a separation. They decided to explore various options and interview lawyers/mediators/those who participate in Collaborative Practice. They finally made the best decision for the 2 of them and started on their journey to separation.

Joe had an above average understanding of finance but decided to follow recommendations from various professionals. One of the professionals assisting 'made a call', had their mortgage penalty removed and Joe could solely take over ownership of the house and mortgage amount.

Joe was thrilled!

Free money!

One night, Joe was telling his friends about his new found wealth. He saved over $8,000; everyone was excited for Joe. But, one of Joe's friends (a client of mine) asked Joe if he knew what the terms and conditions of this new mortgage were or if he knew what his future mortgage penalty would be? Joe's friend strongly suggested that he read the fine print and call my office to review the document to make sure he was in fact in a better position.

Was Joe really saving his mortgage penalty?

Monday morning, Joe called my office. He sent us the terms and conditions of his mortgage that was scheduled to fund later that week. Below is what we found:

Joe's terms and conditions; none of which was apparently disclosed to him

1 - Joe would need to repay the mortgage penalty savings if he broke his mortgage within 5 years

2 - Joe would also incur a mortgage penalty above and beyond the $8,000 savings noted earlier

3 - Joe could not port his mortgage to another property

4 - Joe's mortgage penalty would be in the $15,000 - $18,000 range if he broke the mortgage

5 - Joe was handcuffed to the bank, his house and to the mortgage

What we learned:

During the separation process, we all want the very best for our clients. Plus, who wouldn’t want to save $8,000 - the 'make the call' gesture was made in the best intentions for the client. However, we know what we don’t know; the terms of the conditions would have crippled Joe if and when (statistically when) he breaks his mortgage down the road. Joe would be solely responsible for a lump sum about in the range of $23,000 - $26,000 if he did not complete the term of his mortgage.

Joe and Alyson decided to split the penalty ($4,000 each) and allow Joe to enter into a mortgage where he had more control and favourable terms.

What Joe received

1 - Portability - Joe can take his mortgage with him to the next property if he moves

2 - Joe's penalty would be the lowest possible if he would break his mortgage

3 - Joe's cash flow increased by $1,300 per month

4 - Joe was able to afford other luxuries such as RRPS, RESPs and other investments with his increased cash flow

5 - Joe was in control of his mortgage

There is no doubt in my mind that family law professionals care deeply about their clients and their wellbeing. It is important that lawyers, neutrals, and other professionals that are involved in the separation process rely on and allow separation mortgage experts to inform clients about their options, penalties, and affordability. It does sound counterintuitive, but an $8,000 savings would have cost Joe 3 times the amount down the road.

Feel free to contact me if I can answer questions

John Panagakos
The Separation Mortgage Expert
john@johnpanagakos.ca
416-570-5646

Is the lowest rate the best option?

It is no secret that we all want low-interest rates, but some low rates have fine print attached to them which are not disclosed or overlooked by clients.

John and Jane are happily married and they are shopping for a home and a mortgage. They notice that some rates are slightly cheaper than other rates and are instantly intrigued by the 'mortgage special offer' they noticed online. They contact a mortgage professional and want the 'special offer', they ultimately would be saving $12 a month or $720 over 5 years.

2 years later, John and Jane decide to separate. It is decided that Jane will keep the home, she will give John some money from the equity of the home, he will be removed from the title of the home and then they will go their separate ways to live happily ever after.

John and Jane are having difficulty leaving their existing lending institution. The current offer to refinance their home is much higher than the competition and would save over $12,000 if they could make the switch. What they didn't realize, the 'special offer' had a bonafide sale clause attached to it and the only way they to leave their mortgage provider was to sell their home and the transaction needed to be at arm's length to be considered as a bonafide sale.

This is an actual case that we came across recently (I did not use clients real names). John and Jane used different mortgage professional to set up their original mortgage that apparently did not disclose this nor did their real estate lawyer.

It is important to always ask key questions when securing a mortgage; some of the questions are. Remember, a low rate may save you hundreds of dollars but the right mortgage product will save you thousands of dollars.

1 - Am I allowed to refinance my mortgage with another lender mid-term?
2 - What is your commitment to notify me/us if there is a competing lender that is offering a better rate mid-term and what is your process in doing so?
3 - Can you calculate my mortgage penalty right now?
4 - Does my existing lender have posted rates?
5 - If I can't contact you, can I have the contact information to your Associate or Assistant?

Thank you for reading! Feel free to contact me if you have any questions or feedback

John Panagakos
Separation Mortgage Expert
john@johnpanagakos.ca
416-570-5646

Should you appraise your Matrimonial home?

Why are appraisals important and why do you need them to determine house value?

Imagine you are separating from your spouse and you need to determine the value of your home. How do you do this effectively?

I have had numerous clients ask me how they can value their home and what is the best approach. Some decide to contact a few local experts for their opinion and others decide on an appraisal. Which one is better?

Option 1

Ask a couple of different realtors for a Comparative Market Analysis to determine that they think (their opinion) your home is worth. Your lawyers/mediator will need to determine what happens if the values from each respective realtor are different.

Pros
1 - Low cost
2 - relatively quick

Cons
1 - highly speculative
2 - holds no value with respect to obtaining a mortgage

These types of analysis can be quick to receive to evaluate your property. However, we have seen that there can be a bias between the realtor and homeowner or an unrealistic value provided. Unfortunately, these types of analysis can't be used to obtain a mortgage, you will need an appraisal from a third party appraiser who is accredited to obtain mortgage financing.

Option 2

A Matrimonial Appraisal is a professional and independent prepared appraisal that will determine the value of the matrimonial home without bias. This type of appraisal will provide the best property value indication. The appraiser should have a tenure of at least 5 years with a reputable appraiser group that can and will attend court proceedings in the event they need to defend their findings and evaluations.

Pros
1 - Accurate
2 - The appraised value is an excellent indicator for mortgage financing

Cons
1 - There is a cost
2 -  Can take up to 2 weeks

A Matrimonial Appraisal is the most accurate value we have seen. Although there is a cost to this, it ultimately protects the separating parties against bias or unrealistic values. If one of the separating parties decides to keep the matrimonial home, he or she may need a second appraisal to refinance the home, this appraisal will likely be a similar value to the Matrimonial Appraisal.

Hope you enjoyed reading! Let me know if I can answer any questions and/or if I can assit with your Separation Mortgage financing.

John Panagakos
Separation Mortgage Expert
john@johnpanagakos.ca
416-570-5646

Key Questions to Ask Your Mortgage Broker

I wanted to write about some key points regarding pre-approvals and rate holds.. Feel free to contact me if I can answer any questions or provide clarification with the below. The below is what separates the professional mortgage brokers from the so called 'specialists'. Thank you again for your attention during my presentation.

l have noticed that instead of a pre-approval many receive a rate hold instead. A rate hold is simply stating what a client thinks his or her income is and they are provided a mortgage rate (in other words, it is a false sense of security). A pre -approval includes, a credit check, reviewing income documents and analyzing commercial debt if applicable.

The pre-approval process is simple:

1. If you’re a salaried employee, bring your pay stub with you
2. If you’re self employed, you need your previous 2 years taxes

*if you feel like you are providing a ton of documents and information, you’re doing it right.

Questions you need to ask your mortgage professional:

1. Calculate my mortgage penalty using today’s rates.
2. Does my lender have posted – rates? – If you’re lender/bank had posted-rates, do not get a 5 year fixed mortgage.
3. Is there a sale clause? Can I only get out of my mortgage if I die or sell my house?
4. What is your commitment to me and your process if there is a future savings opportunity with a competing lending institution? Will you inform me?
5. Do you have an Assistant/Associate that I can contact if I can't reach you?

I hope the above information was helpful, let me know if you have questions,

John Panagakos
The Separation Mortgage Expert
john@johnpanagakos.ca
416-570-5646