Transcript Home Ownership and You

Sagamok Anishnawbek
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Established to facilitate on-reserve market
based housing across Canada.
Works with First Nations in establishing and
supporting on-reserve home ownership.
Works with approved lenders who agree to
participate in the program.
First Nation and the Fund guarantee the
mortgage with the approved lenders.
INAC not involved in the process.
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Qualified Band members can either build,
purchase, renovate or refinance a home on
Sagamok Anishnawbek lands.
Apply for mortgage with approved lenders.
If approved, both the First Nation and the
Fund guarantee the loan.
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Purchase of an existing home on reserve land
up to $100,000- 5% down required.
Building a new home on reserve land up to
$150,000 – 5% down required.
Renovation of an existing home on reserve
land from $5,000 to $50,000 – 5% down.
Refinance of an existing home with additional
for renovations of $10,000 to $60,000 not to
exceed $150,000
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First Nation conducts internal credit check to
ensure no accounts in arrears.
Community member qualifies for preapproved mortgage
Must demonstrate they have 5% equity
Community member provides proof of life
insurance for amount of loan.
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Independent Appraisal and Home inspection
conducted.
Appraisal determines value of home.
Home inspection identifies any deficiencies.
If there are deficiencies, seller could rectify
before sell or the cost of deficiencies should
be deducted off the selling price and rectified
after the sell.
First Nation holds CP of property until
mortgage is full paid.
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Renovations can be included in mortgage,
provided you are within the maximum loan
amount of $100,000.
Should get quotes from contractors before
you close the deal.
Maximum amortization period is 25 years.
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Choose a design – blue prints from local
hardware stores are popular. (Rona) Must
meet local building code.
First Nation holds CP until mortgage is paid.
Must be on a serviced lot (Water, sewer,
septic, gas, hydro, road access)
Sagamok tenders out construction to eligible
contractors:
◦ Ask for proof of liability insurance of at least $1.0
million.
◦ WSIB in good standing, capable of financing project
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Loans advances are based on progress
inspections.
NSTC Inspector responsible for inspections.
Up to 6 inspections are allowed.
Your equity of 5% is the first draw.
Should ask for compliance inspections to
ensure your home is being built to local
codes.
Maximum amortization period is 25 years.
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You will be required to provide fire insurance
prior to moving in. Loss payee will be the
bank.
You should consider estate planning:
◦ Establish a Will to convey how you wish to dispose
of your home if you pass away.
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First Nation holds CP until loan is fully paid.
Confirmation you hold CP on property.
Provide list of renovations. North Shore Tribal
Council develop specifications for contractors
to bid on.
Sagamok tenders out all work as per
Tendering policy.
◦ Contractors have liability insurance & WSIB in good
standing.
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NSTC Inspector will be responsible for
inspections. Two are allowed, one at 50%
complete and the other at the end of the
project.
Must provide proof of fire insurance.
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Refinance of an existing mortgaged home on
Sagamok Anishnawbek reserve land.
CP held by First Nation
Maximum amortization is 25 years
In order to qualify, an additional loan for
renovations must be included subject to a
minimum of $10,000 and up to $60,000.
Refinance mortgage during term. You don’t
have to wait for it to renew.
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Straight transfer of an existing mortgage is
also allowed.
Can only transfer mortgage when it is
renewing. No renovations required.
• Submit Expression of Interest to Sagamok Housing
Step 1
• Internal Credit Check by First Nation.
• Housing issues letter of Conditional Letter of Support.
• Apply for a loan or mortgage with bank.
Step 2
• Will need proof of income, assets, and all your debts.
• Apply for life insurance for amount borrowing.
•If you qualify for the mortgage, the First Nation and the Fund will provide
the bank with a guarantee for your loan.
Step 3
•Provide copy of loan agreement to Housing
• Sagamok Anishnawbek issues BCR for the
guarantee.
Step 4
• First Nations Market Housing Fund issues credit
Step 5 enhancement certificate guaranteeing the loan.
Step 6
• You can begin your project. New Construction,
Renovation, Purchase or Refinance
Construction
Purchase
Renovate
Max. Loan
$150,000
$100,000
$5,000-$50,000
Max. Amortization
25 years
25 Years
up to 10 Years
Down Payment
5%
5%
5%
Life Insurance
Mandatory
Mandatory
Mandatory
Fire Insurance
Mandatory
Mandatory
Mandatory
Who Holds CP?
First Nation
First Nation
First Nation
Appraisal
N/A
Mandatory
N/A
Debts to FN
Reviewed
Reviewed
Reviewed
Home Inspection
N/A
Mandatory
N/A
Construction
Contractor
Contractor
Contractor
Progress
Inspections
Up to 6
Yes, if renovations
included.
2 @ 50% and final
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Next Section deals with finances.
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Gross Debt Service Ratio (GDS) measures how
much of your gross monthly income is spent
on combined housing costs – monthly
mortgage payment & utility cost. Should not
exceed 32%.
Total Debt Service Ratio (TDS) measures how
much of your gross monthly income is spent
to service your mortgage and all other debts
and obligations. (i.e. credit cards, car
payments). Should not exceed 40%.
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Credit Report gives a snapshot of your
financial history, such as your previous and
current debts and whether or not you’ve had
any problems paying off those debts.
Fixed rate vs. variable rate
◦ A fixed rate mortgage has a set interest rate for the
term of the mortgage; the rate does not fluctuate
with market changes.
◦ With a variable rate mortgage, the interest rate rises
and falls from time to time as market rate changes.
Therefore, you payments vary.
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Gross up factor for on reserve income. To
account for the fact that aboriginals working
on reserve are not subject to income taxes,
banks will gross up your income by a factor
of 25% or more.
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Loans are approved on the strength of the
applicant and not the strength of the
guarantee.
What does this mean?
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Good Credit
Income sufficient to support mortgage payment
Good job tenure (usually two years)
Current debt load is not too high
You have 5% down for construction or purchase.
Monthly Debt Payments
Average Monthly Amount
Personal loans or lines of credit
$
Car payments or lease payment
$
Student loans
$
Credit Cards (3% of credit limit)
$
Other loans
$
Current mortgage, if refinance
$
Total Monthly Debt Payments
$
Monthly housing cost shouldn’t be more than 32% of your
gross monthly income. (mortgage and heating expenses)
GDS Calculation
*Your Gross Monthly Income (gross up 25% if on reserve)
$
Your spouse’s gross monthly salary
$
Other monthly income
$
(A) Total month income
$
(B) Multiply amount (A) X 0.32 = GDS
$
• Take your yearly income and divide by 12.
• $40,000/12 = $3,333
• If on reserve then $3,333 X 1.25% = $4,166
Your entire monthly debt load shouldn’t be more 40% of your
gross monthly income.
TDS Calculation
(A) Total Monthly Income
$
(C) Multiply (A) x 0.40 = TDS
$
(D) Total Monthly Debts (earlier slide)
$
(D)-(C) = Monthly Income left for housing
$
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Band Member works for the First Nation, with
an employed wife who works off reserve.
His income $36,000, Her income $34,000
Visa Credit limit $10,000 – balance is 3,450
Amex limit is $2,500 – balance is 1,120
Loan with TD Bank - $25,000 – Payment $425 per
month
◦ Leon's Credit Card limit is 3,000 – Balance $2,900
◦ Ford Credit approved $30,000 – Payment $450 per
month
◦ GMAC - $20,000 – Payment is $300 per month.
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Monthly Debt Payments
Average Monthly Amount
Personal loans or lines of credit
$425
Car payments or lease payment
$750 (Ford Credit & GMAC)
Student loans
$
Visa (3% credit limit of $10,000)
$300
Amex (3% credit limit of $2,500)
$ 75
Leon's (3% credit limit of $3,000)
$ 90
Total Monthly Debt Payments
$1,640
Monthly housing cost shouldn’t be more than 32% of your
gross monthly income. (mortgage and heating expenses)
GDS Calculation
*Your Gross Monthly Income (gross up 25% if on reserve)
$3,750
Your spouse’s gross monthly salary
$2,833
Other monthly income
$
(A) Total month income
$6,583
(B) Multiply amount (A) X 0.32 = GDS
$2,106
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Take your yearly income and divide by 12.
$36,000/12 = $3,000
On reserve than $3,00 X 1.25% = $3,750
$34,000 / 12 = $2,833
Your entire monthly debt load shouldn’t be more 40% of your
gross monthly income.
TDS Calculation
(A) Total Monthly Income
$6,583
(C) Multiply (A) x 0.40 = TDS
$2,633
(D) Total Monthly Debts (earlier slide)
$1,640
(D)-(C) = Monthly Income left for housing
$993
Monthly Payment
Mortgage
$526
$100.000
$657
$125,000
$789
$150,000
$920
$175,000
$1032
$200,000
$1,315
$250,000
$1,578
$300,000
$1,841
$350,000
4% interest Rate at 25 years
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Your calculations may show that you will have
trouble meeting monthly debt payments and
that you will likely have trouble getting
approved for a mortgage. Here are some
things you can do:
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Pay off some loans first
Save for a larger down payment
Revise your building cost or renovations cost.
Meet with a credit counsellor who can help
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You can phone Equifax or other credit ratings
agencies to get a free copy of your credit
report. (May take a few weeks)
For a fee, you can also go online and order an
electronic copy you will get it instantly.
Provide details of your credit history.
Low credit score indicates poor credit history
(600 or less).
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I will be here for an hour after the
presentation if you would like to ask any
questions.