Choosing the right mortgage to meet your needs is a process best handled with the support of a mortgage professional. Just as there are many homes to choose from, there are many types of mortgage financing options.

Choosing the right mortgage can save you thousands of dollars and give you the flexibility to make informed choices in your life. It is important to take the time to review each option considering your personal and financial goals and resources. This will help you make the best decision and get you into the home of your dreams.

An important first step in choosing the right mortgage begins with asking yourself a few questions.

What kind of property are you buying?

You may want a starter home such as a condo to build equity that you can rent out later or sell and buy another home. Or you may prefer to buy a house with suite income. In each case you will want to consider how much you can afford including the strata fees and property taxes.

How long do you plan to stay in this home?

If you only plan to live in your home for 5 years or less, you may want to keep your options open and consider a variable or short term loan when choosing the right mortgage. If you are settling in for the long haul you may consider a longer term fixed rate mortgage or a combination of mortgage terms (fixed and variable). Each come with different benefits and deserve consideration as part of your home purchase and mortgage planning.

Would a fixed mortgage or variable be best for you?

A fixed rate mortgage is exactly that, a mortgage with a fixed rate over a fixed period of time. A variable rate mortgage is based on the prime lending rate (ie. Prime – .5% or 2.5%). As the prime lending rate moves up or down (in relation to the overnight lending rate set by the Bank of Canada) your cost of borrowing will fluctuate. If you need to know exactly what you will be paying every month for the full term of the mortgage (ie. 5 years) then a fixed rate mortgage may be best for you. Typically the cost of borrowing over time is lower with a variable rate mortgage. However, the interest rate environment can change and you should review both options when choosing the right mortgage with your mortgage broker.

How much do you have for a down payment and other costs?

If you have access to funds in your own account, RRSP or family gift, you may want to make a larger down payment to lower your mortgage payment and avoid high ratio insurance premiums.

Any purchase with less than a 20% down payment is a high-ratio mortgage and must be insured by the Canada Mortgage and Housing Corporation (CMHC) or Genworth Financial Canada (Genworth). The fee for this insurance varies according to the amount borrowed and the percentage of your down payment, ranging from 1.00% to 2.90% of the mortgage. This one-time, upfront fee can be added to the mortgage.

If the home may need some renovations, you could consider a purchase plus improvement mortgage. It is also prudent to keep some funds in your savings for at least 3 months of mortgage and property taxes as a buffer.

Other Factors to Consider in Choosing the Right Mortgage

Loan Term

A short-term mortgage is usually for three years or less. Short-term mortgages are appropriate for buyers who believe interest rates will drop at renewal time. Long-term mortgages are suitable when current rates are reasonable and borrowers want the security of budgeting for the future. The key to choosing between short and long term is to feel comfortable with your mortgage payments and how long you are making those payments. After a term expires, the balance of the principal owing on the mortgage can be repaid or a new mortgage agreement can be established at the current day interest rates.

Open or Closed Mortgage

Open mortgages can be paid off at any time without penalty and are usually negotiated for very short terms. They are suited to homeowners who are planning to sell in the near future or those who want the flexibility to make large, lump-sum payments before maturity. Closed mortgages are commitments for specific terms, 1-10 years for example. They can come with fixed interest rates or variable interest rates. If you want to pay off the mortgage balance, you will need to wait until the maturity date or pay a penalty on the outstanding balance, if any.

For help in choosing the right mortgage, contact a mortgage professional at Dominion Lending Centres.

Courtesy of Pauline Tonkin, AMP – DLC Innovative Mortgage Solutions 

Welcome to your free financial check-up, discussing 5 key factors to assist you in ensuring you are on the right track to a solid financial future.

Credit

Ensuring you are using credit wisely will pave the way to making sure you have options available to you if or when you need them. One thing we can all do is check our credit report on a regular basis – at least once each year – so you know where you stand and whether your credit score has been compromised in any way, especially through fraud. You can contact Equifax at 1-800-465-7166 or go to the website at www.equifax.ca for more information.

There are many people who believe that it is more responsible to not use credit at all but, in fact, if you don’t have any credit accounts reporting to the credit bureau, financial institutions have no way of knowing how responsible you are with credit and you will likely be turned down if you need a loan or credit card in the future.

Making payments on time is critical to maintaining a good credit score but also keeping your account balances below 75% of the maximum limit is another way of boosting your credit score. If you have multiple accounts, spreading the balances evenly among them using balance transfer methods can help to bring some accounts in line.

It’s wise to pay off your higher interest credit accounts first but that decision needs to be balanced with whether to pay down the higher-payment accounts.

Savings

The old adage, “10% of the money you earn should be tucked away into savings” is a good one. Although it may be difficult to be disciplined enough, if you “pay yourself” every month, the savings will start to build and you may find you don’t need to rely on credit to handle those unexpected expenses.

I personally have a monthly allotment that I transfer to my savings account the same day each month. I have a reminder in my phone to physically do the transfer and it is built into my budget as if it were another utility payment I have to make.

Taking advantage of a Tax Free Savings Account (TFSA) is a great way to earn higher interest on your savings as opposed to the low rate you are paid for a standard bank savings account. If your TFSA is managed by a Financial Planner you can see very good returns on your investments. Any money earned within your TFSA is tax-free and can be withdrawn at any time.

Retirement

Part of the savings picture is, of course, planning for retirement. If you can, work an RRSP contribution into your budget as soon as possible so you will be much further ahead when you want to put your feet up and enjoy.

I follow my Financial Planner’s recommendations when it comes to how much I contribute each year. As I am self-employed, the amount I contribute each year varies but I always make a contribution.

Contributing to an RRSP also gives you a tax break at the end of the year and you can use your tax return money to put towards paying down your mortgage or put it towards a vacation. Both of those are win-win scenarios.

Mortgage

Being the largest loan most Canadians will ever have, your mortgage deserves attention and regular check-ups. Choosing the right mortgage structure for you and taking advantage of today’s historically low rates, can put you on track to huge savings.

Take a look at your debt-structure. If you are making high monthly payments on high-interest loans and/or credit cards, you could easily restructure your circumstances by refinancing your credit accounts into your home. In most cases, this reduces the amount of interest you are paying overall and lowers your monthly payments. At the same time, if you take advantage of an accelerated payment structure (bi-weekly or weekly) and bump up your minimum required payment by the 15-25% that your institution allows, you can pay down your principal and be mortgage free much sooner!

In today’s mortgage climate, if you currently have a mortgage rate anywhere over 4% you should do yourself a favour and have me do a Free Mortgage Analysis for you so you can see apples to apples whether there are any financial advantages to breaking your existing mortgage for a better rate. When you can see the costs vs. benefits in black and white, the answer as to whether to refinance will be crystal clear.

Insurance

Making sure you have adequate insurance is essential in protecting yourself and your family in the event of a crisis or emergency. Whether it be home, health, life or disability insurance, it is always a good idea to review all of your insurance coverage at least once a year to make sure you are fully covered.

Mortgage insurance is a great idea but most clients benefit more from having independent mortgage insurance coverage as opposed to taking the insurance coverage offered by the institution that has your mortgage. The average Canadian makes a change to a mortgage every 38-42 months, you may have to re-apply for the same coverage at an older age and higher premiums. If your mortgage insurance is through a company that is independent of the bank, you would have the ability to keep the coverage and premium you initially had even if moving your mortgage to another institution at a better rate works better for you.

Another way to go is Term Life Insurance. Securing a policy that will cover all costs and pay out all obligations should anything happen to you will give your family peace of mind in the worst circumstance.

Critical Illness Insurance offers protection should you become affected by one of the approved conditions and is often paid in a lump sum amount once you have survived the specified waiting period. It gives you the assurance that the costs of a serious medical condition, as well as living expenses, will be covered.

Wrap Up

I recommend talking to your Dominion Lending Centres mortgage professional to make sure you make the best decision on all insurance needs.

I hope you have found some value in the information provided. As always, I recommend seeking out the experts and gaining knowledge before making any important decisions that will affect your future.

Courtesy of Kristin Woolard, AMP – DLC National 

Interest rates are only one of many features that should be looked at when you are applying for a mortgage. But all things being equal, the interest rate may be more important than you think.

I was reviewing mortgage options with a client and the only thing they were interested in was the mortgage rate. There was no concern about all the other conditions that could end up being quite costly and since I could only offer him what he considered a small reduction, the client said “the bank’s rate was only a little higher and I feel more comfortable leaving everything I have with my bank for such a small difference.” What was the difference? I will get to that in a minute.

The mortgage renewal form you get in the mail is another cautionary note. I have had clients send me a copy of their renewal form. So far, in every case the renewal rate was higher than what I was currently able to get them. The last one I saw was .25% higher than what I could offer.

According to a recent Maritz/CAAMP survey, clients who used the services of a Mortgage Broker benefited with an interest rate .045% lower than those that dealt directly with their lenders.

So what does this fraction of a percentage mean for you? Let’s look at a $500,000 mortgage at 2.64% compared to 2.84%. That is only .2% or, to look at it a different way, it is about $50 a month or $600 a year savings by taking the 2.64% mortgage.

Here are a few options to increase net worth.

1. You take the 2.64% rate and you invest the $600 a year into a growth mutual fund that averages 10%. Even though over the years, as your mortgage goes down, the savings may not be as great, you make up the difference and keep investing that $600 a year for the next 30 years. That is a small difference, but in 30 years it has added up to over $100,000 in your tax free savings account.
2. You take out the 2.84% and say I like my bank and I am comfortable with the bank making the extra money and increasing their bottom line off my mortgage.
3. With interest rates being so low, you could look at increasing your cash flow by stretching out your amortization and lowering your payment. Then you take the extra cash flow and invest it with your financial adviser in your tax free savings account.
4. If you have extra equity in your home and have not contributed to your Tax Free Savings Account, consider refinancing and topping up your TFSA. As of 2016, the accumulative amount you can contribute is $51,000 per person 19 years or old in BC. So that would be $102,000 per couple. Invest that $102,000 and get an 8% return, you end up with $698,544 tax free money after 25 years and you paid back the mortgage and interest payments. If rates stayed the same throughout the 25 years at 2.69%, the whole $139,906 would be paid back. So you make a tax free profit of $558,638 by freeing up some capital to invest. Your total cost is $37,906 in interest.

There are many details to a mortgage and the rate is just one of them. Any of us here at Dominion Lending Centres would be happy to review your future mortgage needs to make sure you are maximizing your mortgage to your benefit.

Courtesy of Kevin Bay, AMP – DLC Producers West Financial 

The great majority of us are in mortgage contracts that contain a prepayment privilege of some sort. “Privilege” being the key word here. Not all mortgage contracts contain such privileges, but that’s a story for another day.

The mortgages that do allow prepayment privileges, usually allow at least 15% of your mortgage to be paid down, interest and penalty free, each year. On a $300,000 mortgage, that is $45,000 that you’re able to put directly towards your principle balance. That’s more than enough for the average Canadian, based on our saving habits.

But how many of you are actually taking advantage of even a portion of your prepayment privilege? For those of you who didn’t raise your hand, what are you waiting for?!

Never before has there been such a great opportunity to get ahead on the largest debt most of us will ever take on. We are paying less interest with each payment than we ever have before (just ask someone who owned a home in the ’80s). There’s never been a better time to increase your payments and begin knocking years off your amortization.

By simply adding $100 to your monthly payment on a $300,000 mortgage, you effectively reduce your amortization by almost 2.5 years!

Imagine what it would feel like to have no mortgage payments for the next two and a half years… Think of the things you could do or the savings you could accumulate in that time!

Now is the time to really chip away at our principle balance so that we can be in a financially stronger position when rates finally do begin to normalize. Odds are, if you aren’t taking advantage of pre-paying your mortgage today, you likely won’t when interest costs are higher either.

Don’t wait any longer – make a lump sum payment today and enjoy the benefits tomorrow! Should you need any more advice, please contact us at Dominion Lending Centres.

Courtesy of Jeff Ingram, AMP – DLC Canadian Mortgage Experts 

The Big Short – An American film about American finance.

Many Canadians, particularly those in Vancouver and Toronto where real estate is spoken of like a sport, will gravitate to the film The Big Short over the coming weeks. It is an adaptation of an excellent book written in 2010 by Michael Lewis. As a Canadian Mortgage Broker who read the book when it came out to better understand the differences between the two countries’ mortgage markets, I was into a theatre within the first few days of its release.

Short version:

Ryan Gosling is the only significant Canadian content in this film.

Long Version:

This is an American tale about an American debacle that takes place due to American finance policies. A tale, a debacle, and policies vastly different from anything we have happening in Canada. As with most things Canadian, our finance system is in fact far more conservative and quite sedate. It is as solidly built, resilient, and popular as Mr. Gosling himself.

Five key differences between the US and Canadian housing markets

One.

In the USA in 2006 ‘subprime’ mortgages accounted for more than one in three new mortgage applications. Over half required little to no documentation of income at all, and little to no down payment. In the movie there is a case, likely not far from reality, of a property financed in the name of a man’s dog. A system so lax that even your pet could qualify for a mortgage.

In Canada, even in 2006, subprime loans accounted for less than 1 in 20 applications, still fewer today. Even in cases of limited documentation, the Canadian system typically required 35% down payment. Equity = security.

Two.

The US system had Mortgage Brokers packaging up loans with little to no oversight or review on a Friday, and selling them the following Monday to an investor on Wall Street who was in turn re-selling the debt to yet another investor in another country. All the while, credit rating agencies focused on maintaining their initial (heavily biased) ratings of mortgage bonds, even as the mortgages inside the bonds were sliding into default, because if they did not maintain the ratings then ‘some other ratings agency’ down the block would get paid to assign a stable rating. It was (and remains) a system designed to offload risk as if all the players involved are playing a protracted game of musical chairs. They all know the music might stop at some point, but are willfully blind to it.

And hey, last time the music stopped the people turning a blind eye got little more than a slap on the wrist, and most kept their jobs and were paid their annual bonuses anyways.

In Canada, the lender, often a Credit Union or Chartered Bank, has rigorous approval standards that leave most applicants’ heads spinning, with some wondering if a hair sample will also be required. Mortgage Brokers in Canada are licensed and regulated. More important still, few Canadian mortgage applicants ever pay any kind of fees or higher-than-market rates. Nor have I had any clients simply sign documents without spending the time to understand exactly what they are signing on for.

Three.

The US system created A.R.M.’s, an unbelievably good deal on paper… at first. Recall the subprime mortgages from point 1 above. Well, about 90% of those mortgages (the ones written for people with no income) were written as A.R.M.’s.

Mr. & Mrs. American, please sign here for your A.R.M.

What’s an A.R.M.?

This was a question that millions seemed either not to ask, or did not dwell long on the answer to.

A.R.M. = Adjustable Rate Mortgage:

The pitch in 2004: “Today and today only, we can give you a 1.00% rate with interest-only payments for the first three years (Yes it gets better still: interest-only payments). That’s right, your payments will be just $415.80 per month on a $500,000 mortgage. In three years the interest rate will reset (keyword there: reset) to 4% over a 30-year amortization, but no need to worry about that as we will just refinance you at that time or flip out of the house since it will be worth so much more; just look how much it has risen in price since I started speaking a few minutes ago…”

“What’s that? How much is the payment at 4%? Why, you’re the first one to ask me that in months. I am not even sure. Let me figure it out ”(Leaves to find office manager, who in turn finds a guy that was in the business a few years earlier when math was still important. Returns.) – “It would be $2,377.59 per month. Yes, that is much higher, but hey it’s only $415.80 for now, and three years is an awful long ways away”.

In Canada it is rare to see a ‘teaser rate’ mortgage as we call them, as the optics are not great around such products since 2007. However, when you do see a mortgage product such as this in Canada, the qualifying rate used is not the artificially low teaser rate as with the US system, it is the higher (inevitable) interest rate that is used to ensure that the borrowers will have stability.

In Canada we have variable-rate mortgages which are significantly different products and again use a qualifying rate much higher than the effective rate. At the time of this writing a variable rate mortgage is at a net rate of 2.20%, but the qualifying rate used is 4.64%. In other words, the Canadian system goes the opposite path of the US system. We ensure an applicant is well overqualified for the mortgage they are applying for.

Four.

Many US residential home builders are publicly traded companies, and as another by-product of the bubbly finance system at the time, vast sums of money were thrown at them to build, build, build, and build. In 2004 it was estimated that 40% of US real estate purchases were investment or vacation homes.

In 2006 there were already vast numbers of partially constructed homes that were no longer selling, there were no buyers for them. The overbuilding was significant, and as the economy slowed it was one more layer on a rapidly rolling snowball that became an avalanche.

Meanwhile in Canada… more than 90% of real estate purchases are for owner-occupied properties, with less than 4% of mortgages being written for investment properties. Supply in most markets remains tight. Markets like the city of Vancouver, have seen the last single-family home site created. In fact, single-family homes are dwindling in many urban centres as consolidations occur to create new multi-family sites. With geographical constraints such as mountains, coastlines, borders and agricultural lands among the myriad of limitations to growth (a.k.a. ‘sprawl’), the supply side of the equation in cities like Toronto and Vancouver will not be easily remedied anytime soon.

Five.

Mortgages in many states are ‘non-recourse’ loans, meaning that the lender cannot go after the borrower for any monies owed over and above the final sale price of the asset pledged. In states such as California and Arizona, this led to many ‘strategic defaults’ by borrowers. Essentially these were an exit plan for home owners with otherwise good credit and stable incomes who found themselves saddled with a mortgage balance more than double the market value of the home. Looking at how long it would take to pay the debt, and whether the home would ever recover its value, many people chose to throw the keys to their homes — or at least their second, third and fourth homes — on the desk of the bank and walk away.

This played a role in foreclosures rising to 14.4% of all mortgages in the USA by September 2009.

Meanwhile in Canada, all mortgages are full recourse, which means that the lender can (and will) chase the homeowner to the ends of the earth for repayment of any loss, garnisheeing wages if need be to collect monies owed.

In 2009 Canada also hit a record high foreclosure level… of 0.41%. This is just slightly above the twenty year average.

Conclusion

As the movie ends it is a scene of massive government bailouts, another thing that no Canadian bank required through that period of time (in fact Canadian Banks were the only lenders in the G7 that did NOT require Government assistance). It was also a scene, unchanged to this day, of little fault being found with those who built a system doomed to failure. There were no jail sentences for those involved in perpetrating what became a massive global economic meltdown. It was as if this were something that just happened on its own. A force of nature.

In the USA there was clear evidence of fraud at all levels in a broken system that rewarded multiple layers and players to look the other way and ‘go along to get along’.

In Canada we are conservative by nature. As a Mortgage Broker myself, I am on the front lines dealing daily with fiscally prudent clients who opt to borrow, in most cases, significantly less than they (painstakingly) qualify for. I then get on the phone to fiscally prudent underwriters at fiscally prudent lenders and work through a hurricane of paperwork for an approval.

Also, I have not met a Canadian Mortgage Broker with a lounge sized fully stocked bar in their offices serving Caesars at noon as if work is just one big party (see the movie). Alas, we are a far more boring bunch here with actual work in our workdays.

As much as many would like to draw comparisons to the Canadian and USA real estate markets, there are few commonalities to be found that are any more logical than the following theory:

‘Ryan Gosling starred in a film about the US mortgage meltdown, Ryan Gosling is Canadian, Ryan Gosling is mortgage meltdown, mortgage meltdown is Canadian’…um ya – Illuminati confirmed!

Great flick though, an excellent adaptation of a great authors work.

Courtesy of Dustan Woodhouse, AMP – DLC Canadian Mortgage Experts 

On Friday, Finance Minister Bill Morneau announced changes to down payment requirements. Effective February 15, 2016, the minimum down payment for new insured mortgages will increase from five per cent to 10 per cent for the portion of the house price above $500,000. The five per cent minimum down payment for properties up to $500,000 remains unchanged.

Homes priced at more than $1 million by law require a minimum down payment of 20 per cent. This announcement therefore focuses on homes priced between $500,000 and $1 million.

In the Mortgage Professionals Canada (MPC) Fall Report, Chief Economist, Will Dunning discusses why raising the down payment could cause problems for the housing market, including this cautionary observation: “Rising prices have made it increasingly difficult for first-time home buyers to accumulate down payments. Increasing down payment requirements would, most likely, severely dampen housing demands from people who are financially well-qualified to make their monthly mortgage payments.”

MPC notes that the 10% requirement does represent a graduated approach while the Ministry of Finance commented that they believe this will only impact 1% of home purchasers.

Also, buyers will require greater savings in order to qualify for a mortgage. See the chart above, contact Dominion Lending Centres.

Courtesy of Mark Alltree, AMP – DLC Innovation Group 

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.

Courtesy of Kris Grasty, 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 Mortgage 

There is a misconception out there that once you’re pre-approved, you’re good to go. A pre-approval simply means that based on your CURRENT income, expenses, down payment and credit you SHOULD be able to get fully approved once you find the right property (this is the first half of the equation). Many places won’t even pull a credit check (which is extremely important) and will just run a basic mortgage calculator and say “everything looks good” but that doesn’t mean anything. You leave thinking great, I’m pre-approved!

I always recommend that people put in a “subject to financing” clause with their realtor when they are putting in an offer to protect them each and every time. Here’s why:

You could be pre-approved but the lender still doesn’t know which property you’re purchasing (that’s the other half of the equation). Let’s say you find the house of your dreams (well within the maximum price that the mortgage broker went over with you) but we find out that the house was a former grow op. In this case, very few lenders will even look at this (even if it’s been fully remediated and there’s a stamp from the city saying it’s all good) and if they do, they’ll usually require a substantial down payment and further air quality testing that you must pay for as mould spores can grow behind walls and become airborne years later. Yes this is an extraordinary example but it can also happen where a bidding war has bid up the price and the best offer (yours) has been accepted. The lender sends in their appraiser to determine the value of the property and it may come in at a lower value than your accepted offer and so you’d have to come up with more money for a down payment (which you weren’t prepared for or don’t have).

If you have a “subject to financing” clause in your agreement, then you have a way out and can look for another property with no issue at all. If you don’t have a “subject to financing” clause at all and you’ve already given your deposit to the realtor (because you were under the impression that you were going to be approved), then you’re out of luck and will be stressed out and scrambling to find a lender that will help you out, even though you were technically “pre-approved”.

So in summary, always put in a “subject to financing clause” as that’s the only protection you have. This is much cheaper than forfeiting your deposit (and facing potential legal action from the seller) should you want to cancel your contract after the agreement has been made.

Better yet, contact your local Dominion Lending Centres Mortgage Professional and have them do a proper pre-approval and have you fully prepared for what most likely will be the largest purchase in your life!

Courtesy of Joe Cutura, AMP – DLC Canadian Origin 

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 Charania, AMP – DLC Regional Mortgage Group