suc-cess: the achievement of something desired, planned or attempted; accomplishment of an aim or purpose.

To be a Mortgage Expert producing volume in the Top 75 in Canada is a massive accomplishment. One that takes extreme dedication and hard work, something that I strive to achieve. While building a secure and stable mortgage practice foundation, my ultimate goal is to help each and every client with their specific scenario; every mortgage file is completely different from the previous one. Lost in the shuffle of numbers and mortgage applications are real life stories.

The Story

A few months back I had the fortunate pleasure of receiving a referral from a local Realtor. He had called to discuss and forward me some basic background information, but had asked me to call the client ASAP. Right away I recognized this was an opportunity to help someone better their current life. Long story short (details to follow), the client had been working with one of Canada’s top bank brands and due to some credit blemishes was not able to proceed with financing.

Without delay and armed with some basic ‘intel’ I called the client to discuss her unique situation. As she was providing extreme details about her credit I immediately knew which lender we would target to give her a second chance. Her credit had some bumps and bruises but she was determined to re-build it. Here’s an overview of what had contributed to a lackluster credit report with an overall beacon score of 596:

• Two separate collections; one from BC Hydro that was missed upon a move and the other was an unpaid collection from 2012 that was fraudulently added to her credit profile.
• Cared and assisted her grandmother through a health issue which meant taking time off of work, this subsequently meant some of her bills started compounding.

After the passing of her grandmother, my client’s main goal was to rebuild a safe, comfortable home for her daughter. The subject property ended up only being blocks away from her grandfather, which would allow them to be closer to him again which was another important step for them in the healing process.

During the underwriting and lender approval process I was optimistic, but at the very same time I was extremely honest about how her story could be perceived. The client had had some unfortunate circumstances that were out of her control but with my assistance I was confident that we would be able to overcome the ‘black-marks’ on her credit report and structure the application accordingly for us to obtain the financing she needed to buy her first home. By addressing all the possible questions upfront, we were able to mitigate the lender’s risk.

At the end of the process, we achieved what we had set out to do, obtain financing to purchase a piece of real estate. With initial contact made mid December 2014, after 76 emails and numerous telephone conversations, the client had received an accepted offer to purchase a townhome at the beginning of February 2015 and finally took possession in the middle of March 2015. I’m happy to say that this client was able to enter the market with a comfortable equity stake in her property.

Considering the credit report the rate we received, in my opinion, was exceptional at P+0.50% for 5 years which was amortized over 30 years and no additional lender fees added. I can honestly say that this was definitely one of the Top 3 most rewarding mortgage files I had the opportunity of working on. My client was able to press the ‘re-fresh’ button which enabled her to start a new chapter of her life.

The Testimonial

Here is the actual testimonial from the client:

“It was definitely a pleasure working with Michael from Dominion Lending Centres. From day one he was upfront and honest about my unique credit situation, however he was also the positive reinforcement I needed to keep going and give it a try. Even when the banks wouldn’t give me the time of day, he was certain we would find someone who would give me a chance. He was very patient with my questions (I am sure they seemed to be never-ending at times), and helped to guide me through the many different stages of purchasing a home.

Thanks to Michael and his dedication, he found a lender that would work with my situation and I now own my first home. He also has coached me on how to fix my credit rating, and I am pleased to say that my credit score is already considerably higher than when we began this process. I would highly recommend Michael to anyone looking for a mortgage!”

Courtesy of Michael Hallett, AMP – DLC Producers West Financial

What does all that technical mumbo jumbo mean? Here are some common mortgage related terms.

Getting a mortgage can be a daunting task. There is so much to know and understand including some pretty confusing language. Borrowers are often confused by terminology like the difference between amortization and term.

And by the way,

Term

The period of time you are under contract with a specific lender at the interest rate that they are providing for that time period

Amortization

A term used to describe the period of time over which the entire mortgage is to be paid assuming regular payments. Usually 25 or 30 years.

Here are some other mortgage related definitions.

Appraisal

An independent assessment of the property by a qualified individual.

Closed mortgage

A mortgage that cannot be repaid or prepaid, renegotiated or refinanced prior to maturity, unless stated in the agreed upon terms.

Closing costs

Costs that are in addition to the purchase price of a property and which must be paid on the closing date. Examples include legal fees, land transfer taxes, and disbursements.

Closing date

The date on which the mortgage closes either in the case of a refinance or new purchase.

Debt service ratio

The percentage of the borrower’s income used for monthly payments of principal, interest, taxes, heating costs, condo fees (if applicable) and debts. GDS is gross debt service – how much you spend on Principal, Interest, Taxes and Heating. TDS is total debt service – GDS plus all other debt payment obligations.

Default

A homeowner is ‘in default’ when he or she breaks the terms of a mortgage agreement, usually by not making required mortgage payments or by not making payments on time.

Down payment

The money that you pay up-front for a house. Down payments typically range from 5%-20% of the total value of the home, but can be anything above 5%, if you qualify.

Early Discharge Penalty

A penalty you may pay your lending institution for breaking the mortgage contract early. This is usually 3 months interest or the Interest Rate Differential (IRD), whichever is larger. See below for IRD.

Equity

The difference between the market value of a property and the amount owed on the property. This difference is the amount a homeowner actually owns outright.

Home Equity Line of Credit

A loan that is secured against your house, like your mortgage, but you obtain a maximum amount that you may borrow but only borrow in the amounts that are needed. You only make payments, minimum is interest only, on what you have borrowed at any given time.

High ratio mortgage

A mortgage where the borrower is contributing less than 20% of the value of the property as the down payment. The borrower may have to pay a mortgage default insurance premium such as CMHC insurance, usually tacked onto the mortgage amount.

Interest Rate Differential

A way lenders calculate the penalty for discharging a mortgage before the end of a closed mortgage contract.

The difference between the interest that the financial institution will make if you continued your mortgage to the end of the contract and what they will make by loaning it to someone else at the current interest rate.

Land transfer tax

A tax that is levied (in some provinces) on any property that changes hands.

Lump sum payment

An extra payment that you make to reduce the amount of your mortgage, usually as stipulated in your mortgage contract.

Mortgage

A loan that you take out using property as the collateral.

Mortgage broker

A company or individual that finds mortgage financing for individuals and companies whether for purchase, refinance, lender switches, etc. A broker does not actually lend money but seeks out a lender and arranges the mortgage terms.

Mortgage default insurance

Required if you are contributing between 5% and 20% of the value of the property as the down payment or to satisfy lender requirements, when necessary.

Mortgagee/mortgagor

Mortgagee is the lender; mortgagor is the borrower.

Mortgage life insurance

This form of insurance pays the outstanding balance of your mortgage in full if you die or become disabled. This is different from home or property insurance, which insures your home and its contents.

Mortgage interest rate

The percentage of interest that you pay on top of the principal amount of the loan.

Open mortgage

A mortgage which you can pay off, renew or refinance at any time. The interest rate for an open mortgage is usually higher than a closed mortgage rate.

Porting

Transferring an existing mortgage from one home to a new home when you move. This is known as a “portable” mortgage.

Refinancing

Usually renegotiating the terms of your mortgage, often increasing the amount of your current mortgage, usually at a new interest rate. The term of the new mortgage is usually equal to or greater than the term remaining on your current mortgage. Often the existing mortgage is paid out and a new one is established with a different lender.

Variable rate mortgage

A mortgage with an interest rate that changes with prime rate, usually expressed as an amount plus or minus prime rate.

Courtesy of Anne Martin, AMP – DLC Neighbourhood 

So, you’ve worked hard to save every penny and have managed to finally afford the down payment necessary on a home. You have searched high and low, only to find the house of your dreams at a price you can afford. Though your credit rating is good and you have a stable job, there are some key things to avoid while waiting for your mortgage to be approved.

Here are 4 things you must absolutely avoid to ensure that you get that dream house:

1. Buying a Vehicle

Your current car may have finally given up or a great deal has arisen, but before making any decision on a new vehicle, check with your mortgage professional. You need to ensure that the numbers you provided on your mortgage application hold true in order to be approved!

2. Changing your Credit or Payment Routine

Before putting extra money towards a debt or changing your payment schedule on any liability, you must check with your mortgage professional. Again, anything that doesn’t align to the information you provided on your mortgage application could put your approval in jeopardy.

3. Changing Jobs

There are many opportunities and challenges that come with any job, but before deciding to drastically change your employment situation, keep the following in mind:

• If you are accepting a new position you need to ask if you will be given a probation period. Any mortgage lender will not accept probationary employment on a mortgage application.

• If your income situation is changing, such as receiving bonuses, overtime, or commissions, you could be putting your approval in limbo. This is risky because these job perks require a 2 year history before a lender will accept them as income.
• If you cannot stand your job any longer and are considering leaving the position, you need to talk to your mortgage professional immediately. The information you provide on your application must check out, especially when it comes to your employment. Most likely, you will need to wait to leave your job until after the mortgage has been approved and you’ve taken possession of the home or you’ll risk losing your dream house.
• If you are considered a contractor or self-employed person, you must provide a 2 year history in order to be approved for a mortgage. If you are considering going into this line of work you’ll need to wait until after you take possession.

4. Making Payments Late

While waiting for your mortgage to be approved, make sure you make every payment early or on time! If your credit experiences even a slight drop because of a late payment or maxed out credit card, a lender will not approve your mortgage and will cancel the application.

Getting approved for a mortgage doesn’t have to be difficult! As long as you do your due diligence and know all the information, you will be on the path to a happy home-buying process. Contact Dominion Lending Centres to inquire about mortgage approvals. We’re always happy to lend a helping hand!

Courtesy of Alim Sharania, AMP – DLC Regional Group 

Back in June 2012 OSFI (Office of the Superintendent of Financial Institutions) rolled out their B-20 Residential Mortgage Underwriting Practices and Procedures, in an effort to force banks and lenders to follow more prudent underwriting guidelines.

One of the most impactful changes was imposed on borrowers who want to take a Variable rate, or a term of less than 5 years. Prior to the B-20, we were able to qualify clients for these types of products using a 3-year discounted rate. To put that in perspective, current 5-year rates are between 2.99% and 3.09%, whereas 3-year discounted rates are between 2.49% and 2.79%. Now, the B-20 mandates the following:

If a client is taking a 5-year fixed rate product, we are able to qualify them using the contractual rate (ie, the discounted rate that their mortgage will be based on) and, as mentioned above, those discounted 5-year rates are currently available between 2.99% and 3.09%.

However, if a client wants a Variable rate, or a term less than 5 years in length, we are forced to qualify them using the Bank of Canada’s posted rate, which is currently 4.79%. What this does is increases the qualifying payment, and since approvals are essentially based on an income-to-debt ratio, said clients will essentially qualify for a lesser purchase price if they want one of these products.

Now, just to curb any confusion, the qualifying rate is not the rate these clients are actually paying. The contractual rate for Variable rates is currently between 2.40% and 2.50% and 2, 3, and 4 year fixed rates range between 2.49% and 2.99%. The purpose of using the Bank of Canada’s posted rate to qualify for these products is simply to prove that these particular clients could potentially handle their mortgage at a higher rate. In the event that rates eventually increase, OSFI feels more comfortable knowing that these clients will still be able to afford making their mortgage payments as they have qualified at a rate as high as 4.79%.

And thus the reason that when clients ask me what they qualify for, I am now having to give them two different price points. One price point that they qualify for on a 5-year fixed product, and a second, lower price point, that they qualify for if they want all of their product options available to them.

Courtesy of Jeff Ingram, AMP – DLC Canadian Mortgage Experts 

Hi! My name is Tad Milmine and I am the creator and founder of Bullying Ends Here. With the new school year now underway I wanted to share with you my anti-bullying program and also thank Dominion Lending Centres for being my National Founding Sponsor.

I created Bullying Ends Here for two reasons. The first is because of my own challenges growing up in an abusive home full of addictions and neglect. I was locked in a basement for 12 years where I was only allowed to leave to go to school. One might think that would be a positive, however, for me, it was another challenge because I used to be terribly shy and introverted. I would cry with any sort of negativity towards me. Needless to say, my fellow peers would call me names on a daily basis so they could see me cry. This was a daily occurrence but escalated in time to physical assaults and threats. I kept everything in because I always felt that no one would understand because I was the only one feeling this way. On top of all of that, I was also holding in another secret, one that I didn’t understand, that I was gay.

I always had a dream that I wanted to grow up to be a police officer but never thought I would be good enough or would be accepted. At the age of 17 I ran away from home and started a new life. It wasn’t easy but I was committed. I accepted myself and began to believe in myself. At the age of 32, I believed in myself so much that I decided to try to achieve my childhood dream. I applied to the RCMP. Because I believed and that I tried, I achieved. I am currently a first responder Police Officer in Calgary.

But this is only half of the reason why I created this charity. The second is because in late October 2011, I was reading the news when I saw a headline stating ‘Ottawa Teen Takes His Own Life Because Of Severe Bullying’. This article was about a boy I had never met named Jamie HUBLEY. Reading his story would truly change my life because it was that night that I realized that there are young people today that still feel the way that I always felt….alone! I decided that I never wanted anyone to feel that way again and that I was going to at least TRY.

I created this very simple and unique program where I go to schools, corporations, community groups and prisons to speak to anyone that will listen about my story in hopes that they will see they are not alone. I created a website (bullyingendshere.ca) where people can reach out to me and know they always have a friend.

Since November 2012, I have personally received over 40,000 emails to which I respond to each and every one myself. Although I am not a professional or counsellor, I make a great friend who will listen.

Most incredible is the fact that Bullying Ends Here is credited with saving 32 lives to date!

I can also say that I have presented to over 150,000 across Canada.

One might look at this and say “wow what great success”, but I think it’s a shame that it is even required. I have made a promise to myself and everyone else that I will do all that I can to help make our world a better place and if that means I have to share my most vulnerable, personal moments in life, then so be it. If it helps just one person, then I will do it.

This “success” however does not come cheap. To travel coast to coast to coast (and soon beyond our coasts), costs money. I do not accept a single penny for my time or expertise, just hope to cover the costs associated with reaching in person. This program would not work if not for the direct, personal connection. I am so proud to say that Dominion Lending Centres (DLC) believes in making this world a better place just as much as I do. DLC has stepped up to be Bullying Ends Here’s Founding Sponsor. Because of this, the program can continue. We cannot stop now, there is much more to do and more funds are required. The only limitation we have currently is funding. Together we all play a role and we can do this!

This coming 2015/2016 school year will see Bullying Ends Here go to British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Nova Scotia, Newfoundland Labrador, New Brunswick and Prince Edward Island. Requests come from around the world including Japan, England, Ireland, Philippines, Taiwan, Australia and New Zealand to name a few. It should also be noted that I do all of this on my own time using vacation time or regular days off. My work as a Police Officer is kept separate as best as possible. This is how passionate I am on this topic. I made a promise to Jamie’s family that I will keep their son’s memory alive and that his passing would not be in vain. I know that Jamie would be very proud of the work we have been able to accomplish together.

I am proud of the relationship that DLC and Bullying Ends Here have and I look forward to keeping you updated on the journey that we are on together. We are not only changing lives, but SAVING them!

Courest of Tad Milmine, Founder – Bullying Ends Here 

Saving for a down payment is often one of the biggest challenges facing young people looking to break into the real estate market.  The source of your down payment could come from your own savings, a gift from a family member, your RRSP if you’re a first time home buyer or from the proceeds of selling your current home.

No matter where your down payment comes from,one thing that is for certain is your lender will be verifying your down payment prior to full approval. It’s required by all lenders to protect against fraud and to prove that you are not borrowing your down payment, which can change your lending ratios and your ability to repay your mortgage.

DOCUMENTS YOU WILL NEED TO SHOW WHEN VERIFYING YOUR DOWN PAYMENT

1. Own Savings/Investments:  If you’ve saved enough money for your down payment, congratulations!  What your lender will want to see is a 3 month history of any source accounts used for your down-payment such as your savings account, TFSA (Tax Free Savings Account) or Investment account.

Your statement will need to clearly show your name and your account number.  Any large deposits outside of your normal contributions will need to be explained i.e.  you sold your car and deposited $12,000 or you received your bonus from work.  If you have transferred money from one account to another you will need to show a record of the money leaving one account and arriving in the other.  The lenders want to see a paper trail of where the money came from and how it got in your account.  This is mainly to combat money laundering and fraud.

2. Gifted Down Payment:  Especially in the pricey Metro Vancouver and Toronto real estate markets, the bank of Mom and Dad is becoming a more popular source of down payments for young home buyers.  You will need a signed gift letter from your family member that states the down-payment is indeed a gift and no repayment is required on the funds.

Be prepared to show the funds on deposit in your account no later than 15 days prior to closing.  Again, the lender wants to see a transaction record.  i.e. $25,000 from Mom’s account transferred to yours and a record of the $25,000 landing in your account.  Documents must show account number and name.

Gifted down payments are only acceptable from immediate family members (parents, grandparents, siblings). You can learn more about gifted down payments and get a sample gift letter here.

3. Using your RRSP:  If you’re a First Time Home Buyer, you may qualify to use up to $25,000 from your Registered Retirement Savings Plan (RRSP) for your down payment.  To see if you qualify for the Home Buyer’s Plan to use your RRSP’s as a down payment visit here.  You will need to complete aForm T1036 to withdraw your funds without penalty.

Verifying your down payment from your RRSP is just like verifying from your savings/investment accounts.  You will need to show a 3 month history via your account statements with your name and account number on them.  Funds must have been in your account for 90 days.

4. Proceeds From Selling Your Existing Home:  If your down payment is coming from the proceeds of selling your current home then you will need to show your lender a fully executed purchase and sale agreement between you and the buyer of your home.  If  you have an outstanding mortgage on the property, be prepared to provide an up-to-date mortgage statement as well.

5. Money From Outside Of Canada:  Using funds from outside of Canada is acceptable but be prepared to have the money on deposit in a Canadian financial institution at least 30 days before your expected closing date.  Verifying your down payment from overseas will also require that you provide a 90 day history of your source account.

No matter what the source is, verifying your down payment will require you to show documentation of where the money originated from and be ready to explain any large deposits.  Making regular contributions into your savings or investment accounts will help develop a pattern of deposits and avoid any red flags.  Don’t stockpile your cash and make large lump-sum deposits.

Most lenders will want to see that you have 1.5% of the purchase price on deposit as well to cover your closing cost.  If you buy a home for $650,000 you will need a minimum of 5% down ($32,500) and another $9,750 (1.5%), for your closing cost.  You will need to show a total of $42,250 available on deposit.

Thanks for reading and if you need more information, please don’t hesitate to contact Dominion Lending Centres.

 Courtesy of Brent Shepheard, AMP – DLC Mortgage Evolution 

About 4 years ago, my wife and I bought a house in North Vancouver, BC. It was built in 1959 and was in need of some updates. We gutted the basement to the studs and converted it to a 2 bedroom suite. We put in new insulation (and topped up the existing attic insulation), put in a new furnace/heat pump, got new windows/doors, installed 2 bathroom fans, and got a new hot water tank.

It wasn’t well known at the time (there was hardly any advertising for it), but both the Federal and Provincial governments were offering rebates for making your home more energy efficient. I knew this because of what I do. These are things that we were going to do anyway so why not get some free money for it? Here’s what we did and what you’d have to do in order to take advantage of any rebates:

-hire an energy advisor (around $300) to come to your home BEFORE you start any work. They’ll do an energy assessment of your home and can give you suggestions on what will help improve your energy efficiency

-get the work done

-have the energy advisor come back to your home and document all of the changes that you made (you’ll need to have all of your receipts handy). They look after submitting for your rebate(s)

-deposit your rebate cheque (it’s also tax free which is an added bonus)

In my personal example, we maxed out both the Federal and Provincial rebates which totalled $12,000 at the time and improved our energy efficiency by almost 50% which was huge. We now save (on average) over $100 per month on our energy costs. $12,000 was really nice to get (although our renovation costs were FAR more than what we got back, it’s nice to get something).

Unfortunately, the Federal program is no longer around as it was limited to a certain number of households. Most provinces have their own energy rebate programs. In B.C., you can still receive thousands of dollars in rebates.

Does it make sense to apply for a rebate if you’re looking at changing 1 window or adding 1 bathroom fan? Probably not.

Yes we did do an extensive renovation. Yes it was during the time when rebates were being offered by both governments. My point is that new rebates are always being offered (again not really advertised) and so it’s important to stay in touch with your Dominion Lending Mortgage Broker on what’s available out there. More and more of my clients are renovating the homes that they’re buying, so this is just an added benefit.

Not planning on renovating your home anytime soon? There are other things that you can do to save some money. Do you have a pink or mint green toilet that you want to replace? Many municipalities offer rebates for buying low flush toilets. You can also buy weather-stripping at your local hardware store for about $10 and put it around your doors to help prevent drafts. It’s very easy to do and makes a big difference.

You can check to see what’s available in your province by checking out:
http://www.nrcan.gc.ca/energy/products/energystar/why-buy/14136

In B.C., please check out:
http://www.fortisbc.com/Electricity/PowerSense/Homes/HomeEnergyRebateOffer/Pages/Rebate-details.aspx

When in doubt, please consult your local Dominion Lending Centres Mortgage Broker for details on what’s out there and where to find it.

In the future, I believe that 2 things will really help make homes more marketable:

-being more energy efficient (energy costs are always going up)

-having a secondary suite to help pay your mortgage (especially in high priced markets such as Vancouver)

Courtesy of Joe Curtura, AMP – DLC Origin 

1. Make a double mortgage payment whenever you can. Doing this once a year can shave over 4 years off the mortgage! Sometimes you can skip a payment later on too…if you really, really need to. Try not to. If your payment is $2,000 a month, four years of no payments is $96,000!!

2. Increase frequency of payment. For Example going from monthly to bi-weekly accelerated can shave over three years off your mortgage! $2,000, three years of no payments is $72,000!!

3. Increase your payment. For example a one-time 10% increase can shave 4 years off the mortgage. That’s $96,000! Imagine if you bumped the payment 10% every year from the get go!!! You would be mortgage free in 13 years! Start to finish! Can’t do it? How about 5% every year….you would be mortgage free in 18 years! How about increasing the payment by the amount of your annual raise?

4. Lump sum payments…same idea…mortgage is gone way faster! Even just one payment a year equivalent to 1 monthly payment will give you similar results as #2 above! How about using your annual work bonus?

5. Renegotiate whenever rates drop to save interest and pay mortgage faster! Generally a good idea however *Caution* get independent professional advice (a cost benefit analysis) to make sure it makes sense for you at that time. I can help. A 1% reduction on a $300,000 mortgage will save $250 a month…times 5 years…that’s $15,000!!

6. Keep your credit rating high for best rate. Always pay on time. Never let payments slip past their due date. Always keep balances low in relation to credit limits on credit cards, lines of credit, etc. 50% or less is best even if you pay the balances in full every month. What generally reports to the credit bureau is the statement balance each month. So if your credit limit is $3000 and you are running $3000 a month through the card each month (to collect all those points you never spend or can’t use in blackout periods) and paying in full, it will look like you are maxing out your credit limit and your credit score will drop accordingly.

7. Increase your mortgage! Yeah I know sounds backwards! Do it to roll in your credit cards, line of credit, car loan etc for a better rate and a set payment plan. Oh you say you don’t want to extend the repayment period of that stuff by rolling it into your mortgage or you have a low or promo rate credit card (those never end well) I agree! Then keep the total payment amount the same but pay it in one neat monthly payment to the increased mortgage.

8. Make an RRSP contribution and use the refund to pay down your mortgage.

9. Go variable rate with your mortgage but keep payments as if fixed rate. Variable rates usually win out over fixed rates. By paying a higher payment you will pay off the mortgage faster. It’s also a buffer in case the rate rises above the fixed rate for short periods of time. *Caution* variable rates are not for everyone. Get independent professional advice to find out what is best for you. I can help!

10. Take your mortgage with you when you change properties to avoid penalty or higher rate on a new mortgage. This is called “porting”. Make sure that your mortgage has this feature. It is not widely known and could save you a ton of dough.

11. Set up auto savings every paycheque, even $10, when it reaches the amount of one mortgage payment, apply it to the mortgage. This concept goes nicely with #4 above.

12. Unhook from the money drip…stop paying with your fancy points credit or debit card. Way too easy to overspend! Go old school, go off the grid…PAY CASH, it works!

13. Don’t ever buy on layaway, you know, six months don’t pay schemes. You think…No problem I’ll just pay it in six months, it will be okay. Yeah right!

14. Downsize your house. Two good friends and clients of mine, having followed many of the tips here, are in great shape except they have a six bedroom house! Two people, six bed house – go figure! They are nearly debt free so no biggy, but can you say the same? Circumstances change, make the adjustments along the way!

15. Don’t want to move? Convert the basement/rooms to rental and use the income to pay down debt.

16. Convert your mortgage to tax deductible. If you are self-employed, own rental property or have investments, this is likely possible. I won’t go into details here, just ask me how.

17. Have a payment priority.

18. Pay off the highest interest rate first.

19. If you have tax deductible loans, pay them off last, slowest. Pay the non-tax deductible loans first and fastest.

20. Pay off ugly debt first. Stuff like credit card purchases.

21. Payoff bad debt next. Stuff like car loans, boat loans. Things that depreciate in value.

22. Pay off good debt (or shall I say “not so bad debt”) last. Stuff like mortgages, investment loans. Things that hopefully appreciate in value.

23. Buying a car? Finance it if you have to, don’t lease! *Exception* If you are self-employed it might make sense.

24. You have $20,000 in a secret bank account for a rainy day fund and $20,000 owing on a line of credit. Seriously? The bank account is paying you next to nothing (which is taxable income to boot) and the line of credit rate is way higher (and not tax deductible). You know what to do. You can keep the line of credit open and on standby for rainy day funds. Make it the secret line of credit that you have but never use.

25. Give your Banker more money. No really. Keep enough in your chequing account to meet the minimum requirement to waive your service charges. My bank charges $10 a month for 25 transactions and nothing, zero, zilch, zip if I keep $2,500 in the account. Let’s see $10 x 12 is $120 a year to pay off debt. I’d have to earn 5% with the $2,500 in my savings account to come out ahead. No brainer here. Oh yeah, if you need more than 25 transactions a month…see #12 above.

26. #26? BONUS TIP and MOST IMPORTANT. Let’s face it, you’re not the Government and you’re not a Bank, you can’t run deficits forever and you won’t get a bailout….stop procrastinating already! See 1 through 24 above and take action now!

Sidenote: *Caution* beware of some too good to be true ultra-low rate mortgages. These “no frills” mortgages are often loaded with restrictions like pre-payment limitations, fully-closed terms, stripped-out features, or unusual penalties. You really need to compare product to product. If you’re not looking at what you’re giving up, you may regret it in the future. This alone could prevent you from taking advantage of tips #1, 2, 3, 4, 5, 7, 8, 9, 10, 14, 16 and 22!

Courtesy of Len Anderson, AMP – DLC Origin 

Rent-to-Own, Lease to Own, R2O. They may seem like good options, but watch out for these pitfalls. They are a good program as long as you have a mortgage planner ensuring you are following a plan to succeed.

Rent to Own…what you NEED to know. My guess is you might check this option out if you:
1. Have NO credit.
2. Have credit challenges such as a bankruptcy or debt repayment plan.
3. You’re self-employed or on disability with little income to “declare”.
All valid reasons and you’re not alone. There are lots of people each year that contact me with these exact issues.

Rent-to-own or Lease-to-own is a great program for SOME people! The program allows you to buy a home today without having to meet the typical qualifications required by your banks. There is nothing cheap about these programs either.

The Pitfalls

There is NO guarantee that you will qualify for a mortgage at the end of your term; hence you may lose your deposit.

1. You are buying a home based on an estimated future value, so you could be paying an over-inflated price. What happens if your house de-values over the term of your R20 contract?
2. There can be (if the mortgage becomes “private”) hefty fees involved.
3. You DO need an initial deposit (usually 5-10% of the value of the home).
4. Terms are usually 1-3 years, so if you’re credit challenged, you may not qualify for a mortgage at the end of your contract.
5. If certain documents are NOT completed up front (for lender’s future use), you won’t get the mortgage. Certain items such as an appraisal up-front, option purchase agreement, market rent reports and such must be completed and dated in the beginning.
6. Only a handful of lenders will mortgage these.

When it comes time to finance your rent-to-own, you can waste a lot of time dealing with banks and lenders that don’t deal with Rent-to-Own contracts. Always connect with a mortgage broker who deals mostly with investors who thoroughly understands Rent-to-Own and, most importantly, which lenders will finance Rent-to-Own.

Remember Dominion Lending Centres have over 200 different mortgage programs that are likely BETTER, SAFER and give MORE OPTIONS than a Rent-to-Own. Banks are not your one-stop-shop for answering your questions.

Buyer Beware!

You will see many websites out there with Realtors advertising they have this program, or “middlemen” that also have these sites saying how easy it is. Remember “middlemen” and Real Estate people are sales people. They may NOT be licensed mortgage experts that specialize in credit repair or mortgage alternatives. They are there to SELL you a house. Without proper and continual guidance from an experienced, licensed mortgage professional you risk losing your deal at the end.

Courtesy of Kiki Berg, AMP – DLC Hilltop Finanical 

You’re likely asking yourself, what is the dilemma that self-employed workers face? Well, with more and more Canadians joining the ranks of the self-employment every year, one has to ask themselves how they are going to tackle the age old question, how much does one write off vs how much income does one claim on their taxes. We all want to earn as much money as possible and pay as little income tax as required.

This was my train of thought until the topic of ‘paying taxes’ was brought to my attention by a friend that’s an accountant. As he said, paying income tax isn’t such a horrible thing, in fact it’s a necessity which provides for our infrastructure and without it the ‘world’ we know would be drastically different. Here was the response from him after I re-posted a reference to INCOME TAX RELIEF DAY that I saw on social media.

“I would actually look at it more positively and say that I/we spent this money to live in a great country, province and municipality and it’s worth every penny in taxes spent. I will guarantee you there are billions of people on this planet that would switch positions with us in a second and remember this so called date (INCOME TAX RELIEF DAY) is based on the average Canadian family income of $45,000 and is based on all taxes including not just income taxes, but property tax, sales taxes, health taxes, fuel taxes and much more. So technically not all of it is going to Canada Revenue Agency (CRA). Some of it is going to municipal and Metro Vancouver. For more information go to the Fraser Institute website https://www.fraserinstitute.org/research-news/display.aspx?id=22954. ”

After reading over this message, it got me thinking about how some self-employed people report their taxes and the effect that it has on their chances of qualifying for a mortgage. Besides the duty to provide to our country, we all have a personal desire to provide as much as possible for our family. It’s a so-called ‘tug-of-war’ of who gets your money and how much of it. Here’s where the dilemma gets complicated if you want to borrow money from a lender to purchase residential real estate.

The federal Government of Canada regulates the CRA as well as the lending criteria and policies followed by ALL the ‘A’ lenders. ‘A’ lenders are our chartered banks and non-bank or monoline/investment lender. We also have credit unions that are provincially regulated but follow the CMHC lending criteria, which is federal. Having more ‘cash’ in your pocket actually allows you to borrow less. Showing more income claimed, which requires you to pay more tax allows you to borrow more money if desired. ‘A’ Lenders assess their risk management for lending money to borrowers on historical earning and in this case, if one is self-employed then they require a 2 year average based on T1 Generals or in some cases Notice of Assessments (NOA).

It’s a CATCH 22 and you (and your qualified accountant) need to decide which path you’re going to follow; write off maximum expenses and claim ‘little’ income or claim a ‘healthy’ income and pay more income. Neither is right or wrong.

Upon getting the urge to buy residential real estate a detailed conversation on how ‘your income’ is structured should be had with their Mortgage Expert and Certified General Accountant. Once you have chosen which style of accounting your business will adopt, you just have to be prepared to follow the lending guidelines. Plus, it’s really not that bad either way.

Let’s face it, everyone wants the lowest rate possible when it comes to their mortgage. As a Mortgage Expert, it’s something that I seek for every client. But not all clients are eligible for the lowest rate for a number of different reasons. Two main reasons are because of credit blemishes and, of course, lack of income reported.

BUSINESS CASE

The following is a fictitious scenario that represents a self-employed person that writes down expenses in order to minimize CRA income tax.

Jane is a business owner in Vancouver. She has a modest business that is experiencing growth year after year. Jane enjoys the many perks of being a business owner, especially the tax breaks that come along with it!  Since Jane is able to work with her certified accountant, and considerably write down her income, she often saves thousands of dollars a year on taxes.

Jane would like to purchase a new home. She has a 20% down payment to place on a home, and knows that she grosses more than $100,000 per year in her business. However, since she currently writes down her income to $20,000 per year, her Mortgage Expert has just informed her that she will need to state her  income with a ‘Non-Prime’ or ‘B’ lender for approval.

Now if Jane claimed $100,000 per year for the last 2 years, she may qualify for the best rate out there from an ‘A’ lender. However, let’s look at what that really means:

Jane has saved $23,299 per year because of the tax laws the government has legislated for self-employed business owners. Now let’s compare the interest on a ‘typical’ verified-income loan, and a ‘non-prime’ stated-income loan.

** For ease of comparison to BC yearly tax rate– 1 year term has been used. Rates are approximations for example purposes.**
Jane is paying $3,545 more in interest per year, but her income tax savings are $23,299 per year.  She is actually saving $19,754 per year more than the typical ‘verified-income’ employee that was able to receive a mortgage interest rate of 2.69%.

With all entrepreneurs there is one thing in common – they are all savvy and driven to succeed, or fail, on their own terms.

It takes an extreme amount of hard work to get a business from the infancy stage to a self-sufficient entity that produces a constant and steady flow of revenue. Business owners all want to save money while at the same time earning and establishing a presence in their chosen space. Business financials are all structured differently and, depending on how one chooses to operate, will dictate how they can proceed once it’s time to seek residential real estate financing.

If you are self-employed, make sure to consult with us at Dominion Lending Centres to find out how your mortgage can be tailored. Every mortgage scenario is completely different from the next, so make sure yours fits correctly and you are informed before you start the financing process.