Home Ownership and You

Sagamok Anishnawbek

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.

First Nations Market Housing Fund

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.

How Does it Work?

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

Type of Loans for homeowners

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.

Pre-Qualification Stage

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.

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.

Purchase of an existing 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

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.

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.

Building a New 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.

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.

Renovations of an existing Home

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.

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.

Refinance of an existing Home

Step 1

• Submit Expression of Interest to Sagamok Housing• Internal Credit Check by First Nation.• Housing issues letter of Conditional Letter of Support.

Step 2

• Apply for a loan or mortgage with bank.• Will need proof of income, assets, and all your debts.• Apply for life insurance for amount borrowing.

Step 3

• If you qualify for the mortgage, the First Nation and the Fund will provide the bank with a guarantee for your loan.

• Provide copy of loan agreement to Housing

What’s the Process?

Step 4

• Sagamok Anishnawbek issues BCR for the guarantee.

Step 5

• First Nations Market Housing Fund issues credit enhancement certificate guaranteeing the loan.

Step 6

• You can begin your project. New Construction, Renovation, Purchase or Refinance

What’s the Process?

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

Program Details

Next Section deals with finances.

15 Minute Break

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%.

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.

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.

Terminology

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.

Are you Financially Ready?

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 $

Test Yourself

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 $

First Affordability Rule

• Take your yearly income and divide by 12.• $40,000/12 = $3,333 • If on reserve then $3,333 X 1.25% =

$4,166

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

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 $

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

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.

Example – Currently rent

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

Example

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

First Affordability Rule

• 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

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

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

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

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

Affordability

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

Will you have trouble Qualifying for a Mortgage?

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).

Credit Report

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

Thank you