One thing Canadians have in common is that most of us are paying off a mortgage.

The mortgage market can sometimes be confusing. There are a vast array of choices – open, closed flex down, equity take-out, cash back, and of course the rates themselves. While we would not attempt to try to muddle through the intricacies of insurance or investments without expert help, we will often go it alone when it’s time to get a mortgage.

We will call a variety of banks and other lenders in an attempt to get the best rate. After numerous phone calls you get back to your original lender, and they agree to meet your best rate. Why should you have to spend so much of your time finding the best rate? If you are not quick enough the rate may change before you lock it in.

There is a solution to this problem – use the services of a mortgage broker. 85% of Americans use mortgage brokers today but only 33% of Canadians do; mainly because they do not know what a mortgage broker is and what they do.

What is a mortgage broker? A mortgage broker is an individual who represents a mortgage brokerage firm. The brokerage has access to over two dozen banks, trust companies, insurance companies and other lenders at their fingertips. By dealing with these lenders on a day-to-day basis, we have access to wholesale lending rates which can save you thousands of dollars. It should also be noted that the majority of mortgage brokerages are not owned by the lenders they represent. Brokers work for the borrower, not the lenders. Mortgage software allows us to scan all the lenders for the best rate for the term you are looking for in seconds. In addition we will advise you on the best options for your own personal situation. Newlyweds with no cash can purchase a house with 0% down under certain conditions. Some lenders will even give you 1-5% cash back. Wouldn’t that come in handy for buying curtains and furniture for your new home?

Now this sounds great! Everyone could use an expert to save them money, but how much does it cost? The majority of mortgages are arranged at no cost to the consumer. The lenders pay a finders fee to the brokerage firm for finding and arranging the mortgage. If you have an unusual credit history which involves more work, a set fee would be agreed upon before we start on the application.

Why would you choose to use a mortgage broker instead of your bank?

Lower Interest Rates

Wholesale mortgage rates are discounted an average of 1.20% over what the bank will offer you. A 1% interest discount on a $150,000 mortgage can save you more than $7900 in interest costs over a 5 year term.

Best Mortgage Options

By shopping the lenders’ market we can find you the best options for your particular situation. Banks are limited to the products carried by their institution.

Bank Loan Officers are employees of the bank

Mortgage agents work for you, the borrower.

Fast Service

A mortgage broker can often get your mortgage approved in a day. In addition we can meet you at your home, office, or wherever it is convenient for you.

As you can see, mortgage brokers offer convenience, service and great rates. It’s no wonder more and more Canadians are choosing to call a mortgage broker when it is time to renew their mortgages. As the #1 mortgage brokerage company in Canada, we here at Dominion Lending Centres are ready to help you!

Courtesy of David Cooke, AMP – DLC Westcor 

In order to stimulate sales and maintain price points on new properties, sellers (and developers) will offer incentives to buyers versus lowering the price of a piece of property. A common incentive is to include a “decorating allowance”. Decorating allowances can be any amount but common ones are between $5,000 and $10,000. This basically means that the purchaser will be credited on the statement of adjustments the amount of the decorating allowance at the lawyer’s/notary office when closing.

However, decorating allowances can pose a problem with obtaining financing. Often times, the lender will reduce the amount of the mortgage proceeds by the amount of the decorating allowance. This is because the lender will not lend on perceived credit. A decorating allowance is perceived by the lender as credit.

What does this mean? When you apply for a mortgage, you are applying for the full purchase price of the property. If the new property price is $500,000, you are applying for $500,000 plus GST minus the down payment of at least 5% ($25,000). The total mortgage amount to be applied for equals $500,000 (purchase price $500,000 + GST ($25,000) – down payment ($25,000) = $500,000).

However, the lender will not lend on the decorating allowance, so the lender will release the mortgage amount minus the decorating allowance. For example, if the decorating allowance is $5,000, then the mortgage proceeds will be $495,000 instead of the $500,000 originally applied for, which leaves you $5,000 short for the purchase price. The seller will then credit your mortgage $5,000 (decorating allowance) which will make your mortgage $5,000 less (mortgage of $495,000). But keep in mind, you have to provide the full $500,000 as this is the purchase price.

Bottom line…. if you accept a “decorating allowance” it will be a credit to your mortgage and you have to provide the cash for the decorating allowance up front as the lender will not lend on a decorating allowance. If you need more information, Dominion Lending Centres can help!

Courtesy of Wrenetta Sinclair, AMP – DLC GLM Mortgage Group 

Well the word is out…Canada is in a technical recession…so what does that mean for Canadian mortgage holders? The main question that I have been asked is, “how will the recession impact interest rates or my mortgage?”

For those currently in the middle of a mortgage term, there will be minimal to no impact on your mortgage. If you have a fixed rate mortgage, nothing will change as long as you continue to make your mortgage payments. If you have a variable rate mortgage, this will likely work in your favour for at least a little longer.

With rates staying low, it is a good time to take a look at your current mortgage term to see if there is an opportunity to restructure your financing into something that is going to take advantage of the low rates.

Currently looking at purchasing a new home? The main concern with a recession is an impact on employment. If there are changes to your employment, it is important that you review these changes with your Mortgage Broker. Not expecting there to be any changes? Then, just like those that currently have a mortgage, take advantage of the low rates and make sure you understand the fine print in the mortgage contract that you are signing up for…especially the details about pre-payment penalties.

Courtesy of Nathan Lawrence, AMP – DLC  Lakehead Financial

This Global News headline caught my eye recently; 25,000 Vancouver homes claim their total income is less than they spend on housing.

Reading the story, I was curious about a few things:

1. How were shelter costs calculated?
2. What was the assumption re average mortgage balance/rate/payment?
3. Were the ~47% of mortgage free Vancouverites factored in?
4. What of retirees on fixed incomes, yet with zero mortgage.
5. Part time income, owners of business, contractors, etc.

None of these were addressed in the Global News Story, so I clicked the link for the story source website.

Click here to do the same.

Still not finding the detail desired I explored the entire site and clicked the Blog link.

This is where things got more interesting. ‘Full Time Employee income only’ – that’s not what the Global News Headline reads…

But there was still one more click required to find the gold, or absence thereof.

The ‘Read On’ button.

Clicking this we find some pretty interesting data. Here it is stated explicitly, and in direct contrast to the Global News Headline that “the ‘affordability’ map linked above uses individual income for full-time employees instead of combined household income, which differs from how affordability is usually calculated.”

The next sentence…

“The reason is that the data I had did not have the household income.”

So we have a news headline that stirs up inaccurate thoughts with inaccurate wording based on a story with (self-admitted) incomplete data.

Consider the many other sources of income that have been excluded in this study, that absolutely exist in real life and are completely acceptable when qualifying for a mortgage.

1. Permanent part time work (many nurses and teachers fall into this category with income still exceeding $40,000 per year).
2. Business owners.
3. ‘self-employed’ contractors.
4. Basement Suite income.

These are just a few examples of perfectly legitimate taxable income not factored into this study.

Perhaps the sentence that best encapsulates this entire situation is the final one in Mr. Von Bergman’s Blog post; in relation to the data map being built on limited employee info, rather than total household income: “But I am lazy, so for now that’s it”

Mr. Von Bergman is perfectly entitled to be lazy and not put forward a complete story, we are not paying him to do the work. In fact, he comes across as a perfectly logical guy.

However, Global News should be held to a higher standard.

Courtesy of Dustan Woodhouse, AMP – DLC Canadian Mortgage Experts 

We all know the real estate industry is hot right now and for many getting into the housing market, it can be a pipe dream. With tightening government and lending regulations, historically low interest rates and soaring housing prices, it can be a daunting endeavour for anyone.

Whether you are a first time home buyer, wanting to upsize to accommodate your growing family or purchasing an investment property, these are the factors that lenders will be looking at. This will determine which mortgage type and interest rate will be available to you.

Know Your 5 C’s:

Collateral – The property itself that you are hoping to purchase.

Capital – Where is your down payment coming from? At a minimum, you need 5% down for a “high ratio” insured mortgage or a “conventional” mortgage with 20% down. This money can come from your own resources or can be gifted from a family member. Requirements will vary, so make sure to check with your mortgage professional.

Credit – Do you have proven credit and show a good history of repayment?

Capacity – The most important by far! How are you going to pay for your mortgage? Proof of income and requirements differ depending on whether you are salaried, self- employed, paid hourly or somewhere in between!

Character – Are you a super person? This is the least important factor to lenders these days.

Just as important to consider, when deciding on your mortgage, is to determine your current financial situation and longer term goals. This will help you decide which mortgage term and amortization (for example a 5 year term with a 25 year amortization) and mortgage rate (variable or fixed) is best for you. Finally, don’t forget to discuss the FEATURES that come with your mortgage as this could save you thousands of dollars and potential grief over the term of the mortgage. These features can include pre-payment options, lower early payout penalties and portability, providing you with flexibility and options for paying down your mortgage faster or making changes, should the need arise.

Mortgages are NOT a one size fits all, so always make sure to contact and discuss your options with a licensed mortgage professional BEFORE preparing to find the home of your dreams.

Courtesy of Jordan Thomson, AMP – DLC City Wide 

We often see ads from the major lenders offering cash back incentives on their Mortgage products.

Gone are the days where a Cash Back Mortgage could be used to facilitate a purchase without the required minimum of a 5% down payment. Cash Back incentives are now made available for other enticing uses; New Furniture and Appliances, Renovations and the other great hook…..Apply the cash back portion directly on your Mortgage for a better effective rate!

Just a few weeks ago, I was emailed an offer from a major lender who shall remain unnamed;

“NEW PROMO … Cash back for purchases. Effective 5 year Rate as low as 2.62%….”

First off, the Cash Back Mortgages are offered at a premium (higher) compared to other standard rates available. The ploy suggested by the lender here is pay it straight down on principle and lower your effective interest rate over time.

READ THE FINE PRINT

The kicker here and warning to all….there IS a catch! If you are to break the mortgage midterm, whether to sell your home or refinance, you not only have to pay the interest penalty, you also have to return the Cash Back portion to the bank. Even if you used it to pay down your Mortgage. This is in the fine print on the websites and in your contract for you to see.

I have seen this happen to a few people that I know and it ended up being a $10,000 – $20,000 factor in their decision not to move or change careers!

There are other more cost effective ways to obtain financing in better programs such as Purchase Plus Improvements, or Home Equity Lines of Credit (HELOC), that expose you to less future risk and still provide you with flexibility to accomplish your goals.

This is why you need a certified Mortgage Broker – like the fine folks at Dominion Lending Centres – working for you. We know of these programs and can offer advice on which ones most suit your situation.

Couresty of Kris Grasty, AMP – DLC Canadian Mortgage Experts 

Are you or someone you know above the age of 55 and having trouble making ends meet? Are funds needed to cover the costs associated with an illness, disability or life event? Perhaps it’s time for a home repair or renovation, such as a kitchen or bathroom. Pay for the kids education? Do you have a mortgage and can’t afford the payments anymore?

Perhaps the funds are just not available and you don’t have enough income to qualify for a mortgage but you have lots of equity in your home, or it might even be paid off.

Here’s where the CHIP program, also known as a “Reverse Mortgage”, becomes the solution. Yes, I’ve seen the commercials on TV and have heard the myths and negative “energy” around it. However, let’s first discuss what this mortgage can do.

• Borrow up to 50% of the value of the home and make NO PAYMENTS as long as you live in the home. The interest payments are added to the mortgage loan amount and are only due when you vacate.
• The amount that you are eligible to borrow is determined by your age and the location of your home, therefore, the younger you are the less you can borrow, eliminating the risk of eroding all your equity over time.
• You maintain full ownership of the home.
• Your only obligation is to keep the home in good condition, keep the property taxes and home insurance up to date.
• You will never owe more than the value of the home.
• You do not need to qualify for the loan.
• 99% of the time, equity is realized upon sale.

There are many myths out there about reverse mortgages, here are some –

1. The most common myth is that you will lose all your equity in your home. Untrue! You will be provided with a schedule showing you how the equity in your home is expected to grow over time using 3 possible growth scenarios. Figures that are used are conservative, therefore, you could realize even more equity when the home is sold by yourself or your estate.

The amount of remaining equity depends on how old you were when you obtained the mortgage and how long you’ve had the loan when you leave the home. Plus, the value of the home at the end of the loan.

2. If I die, my spouse will be left with a big mortgage to pay off. This is not true as the loan is not due until you or your spouse leave the home.

3. It is costly to set up this mortgage. Set up fees include a property appraisal, legal and admin fees; usually a few thousand dollars or less. The mortgage can be used to pay the fees. This is not much different than a high risk mortgage. Remember NO payments!

It’s important to understand that there is a growing senior population and people are living longer. Employment pensions are disappearing, government pension payments are small. CHIP offers an affordable solution for seniors who want to spend their retirement in a comfortable, stress-free way.

For more info, contact your Dominion Lending Centres mortgage specialist, we have the details and will only consider this option for you when it is in your best interest.

Courtesy of Anne Martin, AMP – Neighbourhood DLC 

Congratulations you have made it through one of the toughest financial times in your life. It feels good to have this under control and know there is a light at the end of the tunnel. I too have been down this road in 1998 and now I educate the RIGHT way to have a plan.

There is no shame in going through either a consumer proposal or bankruptcy. Life throws wrenches into our well laid out plans. This is why we have these financial resources to get us back on our feet.  What is most important is that we don’t make the same mistakes again, really get to know how the mortgage and credit world works and use a mortgage planner along with your trustee or debt counsellor to have a plan of action!

There are no quick fixes or programs to get you back on track! Don’t get sold on some “swindler” taking advantage of your situation. There is a company out there that will loan you $2,500 that you pay back over 2 years and they report it to bureau for you. The cost – $900! That’s crazy and completely unnecessary.

Here are the Coles notes on what you need to know for those in consumer proposal. Remember, every situation is unique, so always have an experienced broker work with you:

• You can refinance your home when in a consumer proposal and pay it out. You need more than 20% equity to do this. The sooner you pay it off, the faster it comes off your credit bureau.

• If you are going with an INSURED mortgage (ie. 5-20% down) then you must be discharged from consumer proposal for two years and your credit has to be re-established.

• Most lenders want the consumer proposal paid in full prior to mortgage approval. Very few will look your deal while in proposal.

• Area dependent – Fort Mac or small rural communities are harder to get approvals.

• We can use a bundled product strategy with a 1st mortgage to 80% LTV and 2nd mortgage to 90% to get your approval. Expensive, but works for many clients.

• You want to plan to have some savings that are more than just your down payment if you are buying. Don’t be house rich and cash poor.

• Sometimes we can use secondary credit like your car insurance, cell phone, or your rental payments to a landlord. If we can prove good repayment for the last couple years, we should be able to take it to a bank.

• Also, you really need to ensure that, at the three year mark after you are done, that your consumer proposal is removed from credit bureau. I have seen someone refinance 2 years into their 5 year proposal and pay it out and forget to remove it from the bureau a  year later, so it keeps hurting your score and years of damage for no reason.

How long does a consumer proposal stay on a credit report?

Once you enter into a consumer proposal, it will start reporting on both Equifax and TransUnion credit reports within 30 days. Depending on your consumer proposal agreement with creditors, you will be making payments in a consumer proposal generally between three to five years.

Consumer Proposal will stay on your credit report for 3 years from the date you are discharged (made your last payment) regardless if you are looking at your Equifax or TransUnion report.

Where do I start in building my credit again?

You can start rebuilding your credit as soon as you file your proposal. Bankruptcy is a bit different. You need to aim for TWO credit cards, open for TWO years, with an eventual available credit of $2500 each.  Just get TWO that start reporting.

1. Apply for a secured credit card with HomeTrust Visa. You give them $500, they give you a credit card.

2. Affirm Financial will approve $1000 credit card UNSECURED to those that are in consumer proposal.

3. Scotia No Fee Credit Card

4. TD Secured Credit Card

5. Capital One Secured Credit Card

6. Peoples Trust Secured Credit Card

Your credit and what have you can do to make it better:

They are lending YOU money, so a good broker will need to explain your situation, who you are, why you had issues and what you have done to improve your situation. This is called the 5 C’s of credit. This is a method used by lenders to determine the credit worthiness of potential borrowers. The system weighs five characteristics of the borrower, attempting to gauge the chance of default or you being a chronic mismanager of debts.

1. Character – When lenders evaluate character, they look at stability — for example, how long you’ve lived at your current address, how long you’ve been in your current job, and whether you have a good record of paying your bills on time and in full. If you want a loan for your business, the lender may consider your experience and track record in your business and industry to evaluate how trustworthy you are to repay.

2. Capacity – refers to considering your other debts and expenses when determining your ability to repay the loan. Creditors evaluate your debt-to-income ratio, that is, how much you owe compared to how much you earn. The lower your ratio, the more confident creditors will be in your capacity to repay the money you borrow.

3. Capital – refers to your net worth — the value of your assets minus your liabilities. In simple terms, how much you own (for example, car, real estate, cash, and investments) minus how much you owe.

4. Collateral – refers to any asset of a borrower (for example, a home) that a lender has a right to take ownership of and use to pay the debt if the borrower is unable to make the loan payments as agreed. Some lenders may require a guarantee in addition to collateral. A guarantee means that another person signs a document promising to repay the loan if you can’t.

5. Conditions – Lenders consider a number of outside circumstances that may affect the borrower’s financial situation and ability to repay, for example what’s happening in the local economy. If the borrower is a business, the lender may evaluate the financial health of the borrower’s industry, their local market, and competition.

It all starts with the planning the day you decide to file for a consumer proposal. If you are finding you are starting to fall behind in payments or considering a consumer proposal call us at Dominion Lending Centres –we may be able to help.

Courtesy of Kiki Berg, AMP – DLC Hilltop Financial 

As my client is telling me the reason for his credit woes, I just can’t help but think, “why are you here”? and more importantly “why are you wearing overalls”? Then for a moment I thought I might have said that in my outside voice! But he continues to talk and I realize that it was still my inside voice. Close call.

I have been a mortgage broker for 14 years – the last few years with Dominion Lending Centres. And just when I think I have seen it all, life smacks me in the head and says “snap out of it” there’s more to come.

In a profession where there is a lot of contact with the public, you are bound to find the odd duck or hundred. My colleagues used to joke that I had radar that attracted all the crazies to me, full moon or not.

Over the years I have come across situations with clients that, had I not lived it, I would have never believed it. I often take on the role of mortgage broker, counsellor, lawyer (with proper waivers), matchmaker, realtor, SPCA and so forth. Never have I had a job in which I have worn so many hats and thoroughly enjoyed each profession!

My fellow brokers I am sure can relate to some of the situations and throughout the years I have made notes of some of the funnier events that have come my way and decided to take this opportunity to share them; they are good for a laugh and in this business of stress, deadlines and rules, we all need a good laugh!

I will start with my client Frank (all names have been changed to protect the innocent. Ok maybe the guilty too). Frank was what I fondly referred to as a “biker dude”. He looked like a bad ass, dressed like one and smelled like one. Frank came to see me one day. He was dressed in leather chaps and biker apparel straight out of a Sons of Anarchy episode.

Frank came well prepared for the meeting, that is he was awake and sober. Well maybe awake. We discussed his desire to get a house legitimately…Is there any other way? I ended up telling Frank some of the documents I would need to see if I could help him. He left and I thought that’s the end of Frank. Two days later he has an appointment and as we sit in my office, he produces the documents that I had requested. I have to be honest, if he wasn’t there I may have smelled the Notice of Assessments to see if they had been freshly printed….from the CRA website. Of course that is what I meant!

Frank had good credit and a down payment but let’s just say his income was a little shy of what was needed to qualify for the loan and for that matter, so was his down payment. We discussed things a bit more and I told him I could likely help him if he could come up with some more money for the down payment. See in those days, equity deals were so easy and there was hardly any scrutiny of income, etc. Ah the good old days… But I digress.

I tell Frank “Listen, I am sure we can get you into a house. But we need a little bit more money down”.

He says “How much more”? And I say “Like about another ten percent”.

He sits there looking at me scratching his beard and I wonder if he is contemplating beating me up or what. I mean I am just the messenger. So I take a deep breath and jokingly say, “Frank can’t you go home and dig up a Tupperware container full of money?” He looks at me and says, “Let me see”.

Well within an hour he calls me and says I got the money, I’m going to put in an offer. Needless to say, Frank got into his house and I soon became the go-to-gal for the biker community.

A few months later, Frank was in his new house and he came by the office to thank me. He brought me a gift. He had been to a “convention” and thought of me and brought me a t-shirt which I proudly wore, at night, in the dark and only in my bedroom with all shades drawn. But I still felt kind of like a bad ass because I knew this t shirt was not something you could buy in a gift shop.

Frank continued to drop in just for visits and give me the occasional shirt. Over the years I saw Frank about town. He always gave me a bear hug (he was as big as a bear) and got me a coffee if we ended up in the same coffee shop. Frank became a good referral source. Without a doubt he was the sweetest biker dude I ever had the pleasure of working with. To this day I still have his t-shirts. But I still only wear them to bed in the unlikely event a rival gang sees me and decides to talk to me about my colours!

Courtesy of Maria Kyle, AMP – DLC Vintage Financial

Short answer: the longest possible amortization you can get!

However, the goal is to get the longest amortization possible, but then increase the payment or make lump sum payments to move the amortization to the lowest possible and therefore be mortgage free faster. I will explain more later.

Amortization is the total authorized repayment period of a mortgage. If you have a hi-ratio mortgage, by law – government guidelines, the maximum is 25 years. However, if you have a conventional mortgage or, in other words, at least 20% down or 20% equity, then you can amortize up to 30 years and in some cases with some of our lending partners, 35 years. Question: Why would you want a longer amortization? Well qualifying is based upon the payment. So it is easier to qualify with a longer amortization as a longer time frame means a lower payment. For example, you could qualify at 30 years amortization, but elect to pay bi-weekly accelerated based upon a 25 year amortization (an effective amortization of 22 years). The benefit of this strategy is that you can go back to the original amortization, less time elapsed, should you ever need to.

Let’s look at an example:

Mortgage of $300,000. Payment of $1,200/month based on a 30 year amortization. However, you elect to pay bi-weekly accelerated based on a 25 year amortization (effectively an amortization of 22 years – amortization is a function of payment). So bi-weekly is $680. However, 10 years into the mortgage you suffer a set back and are temporarily out of work. Only your spouse continues to work. You can approach the lender to “re-amortize” your mortgage, meaning 30 years less time elapsed, so effectively 20 years. However, in the 10 years that have elapsed, you have been making accelerated payments so your mortgage balance is lower than it would have been otherwise. The result is that your re-amortized payment is $1,000/month! Effectively built-in payment reduction insurance at no cost! Note: you could also use this strategy if rates were to rise substantially and you want to lower your payment!

Another reason to opt for longer amortization: Rentals, longer amortization means better cash flow! With a rental property, cash flow is King! If it pays for itself every month and the interest is tax deductible, who cares how long it takes to repay the mortgage? Every month it is building equity and eventually you will have enough equity you can refinance it to get a down payment to buy the next property and build up your rental property portfolio!

As always, get independent professional advice on which strategy and options are right for you. Your local independent Dominion Lending Centres Mortgage Broker can help.

Courtesy of Len Anderson, AMP – DLC Origin