# Second look at posting and Mortgage stuff would be appreciated...



## Fu22y_Lojik (13 Aug 2012)

Gents,

Posted to Borden (yay..... :-X) and am currently on house hunting trip. So long and short I was hoping some of you Barrack Room Brokers could have a look at my financials a bit here and let me know if I am missing anything.

Sold our house in Ottawa for $294K, bought house in Borden for $260k. Our mortgage has about 200k outstanding on it at 4.155%. It is a 5yr fixed and we have 3 remaining. We are going to be breaking it and applying our posting allowance as an interest rate buydown. This has our interest rate at about 2.52%. We save the penalty cost easily in the three years remaining and get two extra years at a great rate. 

I have asked Brookfield if they will cover the cost of penalty, and it is a kind of yes, kind of maybe, depending on how much I have in envelopes. I am no expert with this Brookfield crap, and am just wondering if I am missing anything here.  If you guys and gals had some tips or know if I am missing something, have questions I should ask, please let me know. Haven't moved in ten plus years so a bit confused. Plus I know some of you folks are way better versed at this kinda stuff. I'm really good at computers  

Thanks so much in advance.

Fuzz


----------



## DAA (21 Aug 2012)

If I understand you correctly, you are going to take out another 5 year fixed mortgage?  You do know that mortgage breaking penalities are no longer reimburseable after 1 Sep 12?  Also, you need to confirm just what your current penalties are going to be to break your existing mortgage, vice port it if possible, as there are two calculations used by the lending institution to determine the cost.  Either three months of payments or the Mortgage Interest Differential and it is the higher of the two that is used.

Personally, I would never recommend anyone in the CF take a 5 year fixed but rather 3 as a max.  Come 1 Sep, anything beyond a 1 year fixed is a gamble.

Seen alot of pers remew existings with a 5 year fixed mortgage, only to then jump at an OUTCAN posting and get burned with 5 figure penalties.....


----------



## Pusser (21 Aug 2012)

Even before the upcoming change that will eliminate reimbursement for mortgage breaking fees altogether, the CF has been enforcing a policy for several years now that you must port your mortgage if at all possible.  The fact that you personally will be financially better off by breaking a mortgage and getting new terms is not considered suffiicient justification for reimbursement of any penalties (i.e. if the only reason you are actually better off is because the Public picks up the tab) for the penalty.

You may need to re-think this before you commit to anything as you could get burned in the end.   Porting a mortgage (which is normally penalty-free) is usually the preferred option.


----------



## DAA (21 Aug 2012)

Pusser said:
			
		

> You may need to re-think this before you commit to anything as you could get burned in the end.   Porting a mortgage (which is normally penalty-free) is usually the preferred option.



Well said......  The problem generally occurs where the mortgage has been renewed after the initial term and people don't take into consideration how much longer they will be in their current location.  Also, if your posted OUTCAN, the mortgage would have to be discharged in full and this is primarily where I have seen the penalty hit come from in the last few years.  What is not being considered is the way the penalty is calculated by the lender, which in most cases is 3 months interest but where the current market rate is lower, then the Interest Rate Differential (IRD) is used which can be substantial.  The biggest penalty I have seen was $28,000.....ouch!!!  And the CF only reimburses three months of interest from Core with an additional three months from Custom.  Definitely not enough when the IRD calculation is being used.


----------



## Pusser (21 Aug 2012)

If you are posted OUTCAN, an option to consider is to rent out your house while you are away.  The upside is that someone else gets to pay your mortgage and you can often write-off certain expenses (e.g. repairs, renovations, property taxes, mortgage interest, management fees, etc) against your income tax as business expenses.  The downside is that being a landlord (particularly an absentee one) has a few a challenges of its own.

If you return to the same location at the end of your OUTCAN posting, your house is waiting for you.  If you don't go back to the same location, you can sell it then and port the mortgage penalty-free.  Although the CF will cover closing costs on the sale of the house on return to Canada, there may be some tax implications because CRA won't consider it your primary residence if you don't re-occupy it (i.e. you may have to pay tax on the difference in value from when you moved out to when you sold it).


----------



## DAA (21 Aug 2012)

Close but not quite.  Reimbursement of Real Estate and Legal Fees on Sale is limited to no more than one year before or two years after the COS date of that posting.   If you opt to keep the home and rent it out, then you would be paid the "Real Estate Incentive" (ie; 80% of the commission to a max of $12K) and as a result you waive any future reimbursement at the time of sale if it falls outside the time limitations.


----------



## Pusser (21 Aug 2012)

It's been awhile, but I do believe the Military Foreign Service Regulations allow this timeframe to be extended until your return to Canada.


----------



## DAA (22 Aug 2012)

That only applies when tasked away from your unit (ie; TD or Attach Posting).  Chap 12 of the IRP manual covers postings to and from Canada and there is no entitlement for the sale of a previously owned residence.  Had this situation for someone a few years back that was returning from OUTCAN and who hadn't sold but rented instead.  It was a double edge sword....the time limitations had expired plus the home did not qualify as the principle residence.  Today, Brookfield will keep your file open for two years from the COS date and if you don't finish your relocation processing by then, they will close it out.


----------



## Scott (22 Aug 2012)

Don't be so quick to suggest that owning an income property is all gravy. Even the best property agent can land you with dirtbags and leave you holding the bag. Then you'll just have to shell out even more to get someone to attend hearings so you can get what's rightly owed to you. I highly reccommend reading up on your jurisdictions rules and regs LONG before making a decision like this as it is not one to be made willy nilly. Unless you have rented to someone you just do not know. And even if you have rented a place to someone, unless you've had issues you still don't know.

Trust me.

Edit: spelling and clarity


----------



## Pusser (22 Aug 2012)

Scott said:
			
		

> Don't be so quick to suggest that owning an income property is all gravy. Even the best property agent can land you with dirtbags and leave you holding the bag. Then you'll just have to shell out even more to get someone to attend hearings so you can get what's rightly owed to you. I highly reccommend reading up on your jurisdictions rules and regs LONG before making a decision like this as it is not one to be made willy nilly. Unless you have rented to someone you just do not know. And even if you have rented a place to someone, unless you've had issues you still don't know.
> 
> Trust me.
> 
> Edit: spelling and clarity



Fully agree.  You must go into this sort of thing with your eyes wide open.  There can be huge issues.  Personally, I've been fairly lucky, but I've seen the horror stories as well.


----------



## Scott (23 Aug 2012)

At minimum, before renting your home out, some things you need to ask yourself and prepare for:
-do you need a property manager? Some charge half of first month's rent and then either a percentage or flat rate for every month thereafter. What services do they offer you for the money? 
-do you have a POA in place so a family member can take action in case the need arises?
-what are the local tenancy laws/regs? Is it wise for you to invest a couple hundred bucks in a lawyer to help you better understand them?
-what are you offering? Space? Space plus utilities? Space plus utilities and snow removal/lawn cutting? You need to be specific.

Plus a long list of others, but there are the most important ones. A good management company can help you with the toughest of questions and may even be able to provide insight into local laws/regs. However, there is no substitute for a lawyer in these cases.

My best advice:
After getting used to local laws/regs you can go find out how your ''pool'' is for tenants. If you're like me then word of mouth might suffice and may make you feel better renting to someone you know of. Or you can go through Kijiji or an agent. You need to know how to screen applicants or the method used by your agency. Are credit checks permissible? Is asking for a co-signor allowed? What ''rules'' do you wish to put into place and are they allowable under local laws?

I hired an agency to get our first tenants. They did a good job finding people and vetting them, from what I can see. Then the tenants pretty much failed at life. When we finally took back possession of the house we found that they had not made a trip to the curb with the garbage for the entire nine months they lived there. I am just in the process My wife is just in the process of handing in the paperwork so we can go after them but it will be mid October before we get a hearing and then more time for a decision then we have to have the decision enforced. It could be Christmas before we see money back for costs incurred in August, and that's only if we have a mechanism to collect.

I can't really blame the agency. They did their job. I failed at not conducting more walk through inspections, but I have since learned. I have also learned not to take what a tenant tells you at face value. If I had subscribed to that line of thinking I would have been tipped off long ago, would have done inspections, and would have found the mess. Anyway.

Get good tenants and you're golden. Get dirtbag dregs of society and you might spend a lot of those ''honey I love you'' calls talking about next steps to get what's rightfully owed to you - and good tenants can look the same as bad ones. Nae good.

If anyone wants some tips on keeping an eye on things that I have used then PM me. I am not posting them in public. Dirtbags who do not pay rent have more money to snoop internet forums and become better at being dirtbags.


----------



## Pusser (23 Aug 2012)

Like I said, I was fairly lucky.  I had great tenants and rented out my house for seven years.  I would say that contracting a property management company to look after the house (and your tenant) is an absolute must.  My agency, vetted all prospective tenants (including credit checks) and even offered opinions on the pros and cons of each candidate.  You need to watch for red flags:

1)  Two unemployed moms with six kids between them wanting to rent a three bedroom/one bathroom house - big red flag - saw one of them getting a cheque refused at Shoppers Drug Mart a few weeks later.

2)  Single guy wanting to rent a three bedroom house for when he was in town managing his nondescript "import/export" business - perhaps smaller, but still  a pretty big red flag

3)  Older couple who are all smiles when being shown through the house by the rental agents, but who call me later and tell me that I don't need a property manager, because "I'm pretty handy and I can look after the place for you." - big red flag - I also called the property management company and told them how their client had tried to cut them out.

4)  Steadily employed (charge nurse at local hospital) divorced mom with adult daughter (also employed) - much better vibe

I chose Number 4 and it worked out great.  When it became painfully apparent that I wasn't getting back to that location anytime soon, I sold that house for a tidy profit.

Remember that you have a fair bit of leeway with this.  It is a private transaction and you are allowed to choose the "best fit."  If you're not comfortable with someone, just say no.


----------



## Scott (23 Aug 2012)

Pusser said:
			
		

> Remember that you have a fair bit of leeway with this.  It is a private transaction and you are allowed to choose the "best fit."  If you're not comfortable with someone, just say no.



Please be careful giving this sort of advice out. It is not nearly so cut and dried, depending on which province you live in. Ontario, for example, has a myriad of folks just waiting for something resembling discrimination on behalf of the landlord/agent so they can file suit. ''Not being comfortable'' is just not enough.


----------



## Pusser (23 Aug 2012)

Scott said:
			
		

> Please be careful giving this sort of advice out. It is not nearly so cut and dried, depending on which province you live in. Ontario, for example, has a myriad of folks just waiting for something resembling discrimination on behalf of the landlord/agent so they can file suit. ''Not being comfortable'' is just not enough.



Granted, I've never rented out a house in Ontario, but I still wouldn't get too worried about this.  There is a difference between renting out an apartment in a complex (the sole purpose of which is to generate revenue for the landlord) and finding someone to look after your house while you are out of the area for a few years.  I would agree that you cannot turn down a prospective tenant over something frivolous, but you can say that you simply got a better offer.  In the private sector, a better offer is really in the eye of the beholder.


----------



## Scott (23 Aug 2012)

Pusser said:
			
		

> Granted, I've never rented out a house in Ontario, but I still wouldn't get too worried about this.  There is a difference between renting out an apartment in a complex (the sole purpose of which is to generate revenue for the landlord) and finding someone to look after your house while you are out of the area for a few years.  I would agree that you cannot turn down a prospective tenant over something frivolous, but you can say that you simply got a better offer.  In the private sector, a better offer is really in the eye of the beholder.



Pusser,

Go and do some reading here: http://novascotialandlords.ca/forum/ before you say anymore. The name Nova Scotia Landlords is misleading as this links to an Ontario based forum. Have a peek at some of the horror stories on there.

I am going through Tenancy Act issues in NS right now and I can tell you, without a doubt, that it is not so easy as just getting someone to watch over your house for you. And under the eyes of all of the legislation I have read there is not one iota of difference between the ''hobby'' landlord and the multi million dollar property management agency. Howeever, the deep pockets of the investment agency can handle a bump in the road - the small business landlord could get fucking ruined.

If I was still in the CF and thinking of renting out my home while gone I would most definitely spend some time worrying about this.

You obviously got lucky. Good. But there is no discernable difference between someone who will live right and someone who will trash your home. That's why it cannot and should not be taken lightly.

I am sensing a trend here....


----------



## Pusser (23 Aug 2012)

I agree that renting out your house should not be taken lightly.  It takes research and work to protect yourself and your house.  What I wouldn't get worried about is in turning down a prospective tenant because I wasn't comfortable with the situation, understanding that I would need to fully justify that lack of comfort.

True, the legislation does not differentiate between the "hobby" landlord and the multi-million dollar landlord; however, the application of that legislation can.  Case in point:  under the NS Tenancy Act, Ministerial approval is required to evict a tenant who has lived in the house/apartment for five years or more.  That's what the legislation says; however, in discussing this with the appropriate ministerial office, I was informed that if I as the owner wished to re-occupy the house as my primary residence, then Ministerial approval would be automatically granted.  This is obviously different to how the large scale landlord with revenue-generating properties would be treated, yet the legislation doesn't say that.

Renting out your house, to which you presumably wish to return at some point, presents some challenges and risks, but I do see a difference between this and investing in rental units in order to generate income.  There are a great number of similarities, but also some differences.  One needs to consider all of this before going down this road.


----------



## milnet (23 Aug 2012)

This is kinda off topic but in relation to mortgages and moving...I am new to the military life and I was wondering does the CF covers your realestate fees as well once you sell your house and are posted?


----------



## Scott (24 Aug 2012)

Pusser said:
			
		

> True, the legislation does not differentiate between the "hobby" landlord and the multi-million dollar landlord; however, the application of that legislation can.  Case in point:  under the NS Tenancy Act, Ministerial approval is required to evict a tenant who has lived in the house/apartment for five years or more.  That's what the legislation says; however, in discussing this with the appropriate ministerial office, I was informed that if I as the owner wished to re-occupy the house as my primary residence, then Ministerial approval would be automatically granted.  This is obviously different to how the large scale landlord with revenue-generating properties would be treated, yet the legislation doesn't say that.



Your case in point is a little foolish. The corporate landlord doesn't ever want to evict the tenant who has security of tenure, that tenants has, in all likelihood, been a good one. The guy with the one property might have circumstances change and thus need the property for personal use, nothing to do with the tenant. Evictions for this reason can happen any time, not just when security of tenure exists.


----------



## DAA (24 Aug 2012)

Lil.k said:
			
		

> does the CF covers your realestate fees as well once you sell your house and are posted?



Yes, provided you are "authorized" to move your DHG&E...


----------



## CMFL (22 Oct 2012)

Hello DAA,

I just noticed your post from the summer and would be pleased as a mortgage agent with Mortgage Forces to provide you with any assistance or information you require - if you are still looking for help.

Please feel free to reach out to me via email at gilmana@mortgageforces.ca at your convenience.

Alan


----------

