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. 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. 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 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. 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. 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. 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 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. 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. 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. 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. 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. 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 Next Section deals with finances. 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%. 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. 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. 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. 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 $ 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. ◦ ◦ ◦ ◦ 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 • • • • 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 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 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). I will be here for an hour after the presentation if you would like to ask any questions.