Home Ownership and You

1. Home Ownership and You Sagamok Anishnawbek

2. First Nations Market Housing Fund • 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.

3. How Does it Work? • Qualified Band members can either build, purchase, renovate or refinance a home on SagamokAnishnawbek lands. • Apply for mortgage with approved lenders. • If approved, both the First Nation and the Fund guarantee the loan.

4. Type of Loans for homeowners • 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

5. Pre-Qualification Stage • First Nation conducts internal credit check to ensure no accounts in arrears. • Community member qualifies for pre-approved mortgage • Must demonstrate they have 5% equity • Community member provides proof of life insurance for amount of loan.

6. Purchase of an existing Home • 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.

7. Purchase of an existing Home • 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.

8. Building a New Home • 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

9. Building a New Home • 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.

10. Building a New Home • 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.

11. Renovations of an existing Home • 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.

12. Renovations of an existing Home • 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.

13. Refinance of an existing Home • Refinance of an existing mortgaged home on SagamokAnishnawbek 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.

14. Refinance of an existing Home • Straight transfer of an existing mortgage is also allowed. • Can only transfer mortgage when it is renewing. No renovations required.

15. What’s the Process?

16. What’s the Process?

17. Program Details

18. 15 Minute Break • Next Section deals with finances.

19. Terminology • 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%.

20. Terminology • 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.

21. Terminology • 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.

22. Are you Financially Ready? • Loans are approved on the strength of the applicant and not the strength of the guarantee. • What does this mean? • 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.

23. Test Yourself

24. First Affordability Rule Monthly housing cost shouldn’t be more than 32% of your gross monthly income. (mortgage and heating expenses) • Take your yearly income and divide by 12. • $40,000/12 = $3,333 • If on reserve then $3,333 X 1.25% = $4,166

25. Second Affordability Rule Your entire monthly debt load shouldn’t be more 40% of your gross monthly income.

26. Example – Currently rent • 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.

27. Example

28. First Affordability Rule Monthly housing cost shouldn’t be more than 32% of your gross monthly income. (mortgage and heating expenses) • 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

29. Second Affordability Rule Your entire monthly debt load shouldn’t be more 40% of your gross monthly income.

30. Affordability

31. Will you have trouble Qualifying for a Mortgage? • 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: • 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

32. Credit Report • 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).

33. Thank you • I will be here for an hour after the presentation if you would like to ask any questions.