A private mortgage can improve your financial well-being and using a reputable mortgage agent/broker will advise when it is suitable for your circumstances to enter into a private mortgage. Your mortgage agent will also advise a financial action plan to refinance you down the road to return to the prime lending marketplace.

Here are the facts on mortgage lending and when to use a private mortgage:

There are several types of mortgage loans in Canada including first mortgages, second mortgages and lines of credit. As we all know, these are available through well- known prime lending institutions like banks, credit unions, trust companies and independent financial institutions that only deal in mortgages to qualified borrowers.

There are also the institutional “alternative” lenders that have all the products mentioned above, however, they loan their money to individuals who do not meet prime lending guidelines. These loans would be considered “riskier” due to the fact that the borrower may not be able to prove income and may have challenged credit which will not meet the prime lender’s guidelines. These institutions often charge lender fees and higher interest rates. Institutional alternative mortgage lenders are most often used as a temporary solution that alleviates an immediate situation that once resolved, the mortgage is moved to a “prime” lending institution. Often times the alternative lenders restrict their lending areas, loan to value and credit and income criteria.

When a borrower doesn’t meet the alternative lender’s lending criteria, a private mortgage can be arranged for a temporary solution, just like the alternative lender. Investors/Lenders are usually individuals or private corporations, Self-Directed RRSP program lenders, who loan their own personal/corporate funds; believing investment in real estate is stable and want to earn a higher return on their money than they can make at their financial institution. These investors will take a more personal approach to the loan and are ready to hear your story, (usually with a sympathetic ear) and assess the amount of risk that they are being asked to take on. Income and credit is reviewed, but with less stringent guidelines than the alternative lenders. Again, lender fees and possibly brokerage fees will be charged.

Consider this scenario to explore why a private mortgage can work for you.

You worked for the same company for 10 years, they went bankrupt and shut down, it took you 9 months to find another job, but in the meantime, you used up all your savings as your EI payments weren’t enough. Your payments are behind on your $40,000 worth of debts which cost $800 monthly, and you owe $10,000 in property taxes and to CRA. Your house is worth $300,000, your current mortgage is $175,000, you need $50,000 to pay it all off plus $4,000 (estimated) to set up of a second mortgage including legal fees. It makes sense to retain your 2.25% first mortgage in order to give you time to restore your credit history and income. Therefore, a private second mortgage suits the situation. A second mortgage of $54,000 with interest only payments at 11% will cost you $484 monthly, creating a savings of $316 monthly plus CRA and the property taxes are paid off.

Some other reasons to borrow private funds.

• purchase property where you don’t qualify with more “traditional” lenders
• pay off/consolidate debts into your property
• renovate your home
• pay for medical expenses
• supplement your first mortgage
• improve cash flow
• pay off debts to CRA or property taxes
• pay for your children’s post-secondary education

Yes, private mortgages do have higher rates and fees, however, your mortgage agent is obligated to ensure that all parties to the transaction are fully aware of the costs going in and will provide the reason behind choosing a private mortgage. Your mortgage agent will outline why you don’t qualify for a prime or institutional lender at this time and review the financial benefits of entering into a private mortgage. Your mortgage agent will also explain the exit strategy to pay off the private mortgage down the road with the goal to get you back into the prime lending market.

Ask your Dominion Lending Centres mortgage broker if a private mortgage is right for you!

Courtesy of Anne Martin, AMP – Neighbourhood DLC 

There was a 62 year old male and his 61 year old female wife living in Kelowna. One day the male had a massive heart attack and died instantly. Insurance paid off all the debts.

The husband had always looked after the financial affairs. The widow knew nothing about financial matters and couldn’t even balance a cheque book. She started receiving credit offers in the mail and responded to them.

A son, living elsewhere, visited his mother one day and found out that she had accumulated new debt in the amount of $40,000. The widow could not keep up with all the payments with the reduced pension income so the son took her to her local financial institution that the couple had dealt with for many years.

They met with the branch manager and arranged a term mortgage to pay off the debts and gave the mother a $5,000 limit credit card.

The son again visited the mother one winter day 2 years later and found that her gas had been turned off due to nonpayment. She was using a space heater to keep warm. He couldn’t understand why there was a problem. He did some investigating and discovered that the branch manager had given his mother a secured line of credit with a limit of $90,000 and a $15,000 credit card.

The widow had maxed out the line of credit and the credit card. Because of a poor market and deferred maintenance of the property, the home could not be sold even after it was listed for 6 months. The son arranged for his mother to live with her daughter in Alberta. He cleaned out the home and took the keys and gave them to the branch manager telling her that he didn’t know what else to do.

Maybe the widow would have been best served if she had been presented with either the option of a term mortgage or a reverse mortgage; and then the widow might have been able to stay in her home for the rest of her life. Unfortunately, she wasn’t presented with the option. Why is this story important? Because the widow was my mother.

If you know someone who can benefit from a CHIP Reverse Mortgage, please contact a mortgage professional at Dominion Lending Centres.

Courtesy of Bob Urbanovitch, Business Development Manager – Home Equity Bank 

1. Have you explored all your options. Once you receive your mortgage renewal statement, there is nothing easier than signing on for another term, heck 70% of everybody that received them from their current lender just signs over thousands of dollars. This may make sense in some cases, but your family and financial situation may changed over time. I can look for opportunities that may meet or exceed your current expectations.

2. Are you comfortable with your current payments. If your monthly payments are barely letting you break even each month then it might be time to reduce payments. On the other hand, if you are earning more income then why not pay down your mortgage faster and save thousands in interest over time. Have you reviewed your prepayment options?

3. Do you need cash flow for other things. Your priorities may have changed since you purchased the home. Things like your child(s) post secondary education, planning a career change or a major purchase may now be front and centre. With ‘today’s’ current market, there may now be access to additional equity in your home that can be used for other purposes.

4. Can you handle fluctuating rates. Some homeowners are comfortable with the ebb and flow of interest rates and some are not. It is best to base your decision on your personal situation and not what you read in the daily news. I can help you decide on a fixed or variable rate mortgage options, but ultimately it’s your decision.

5. Will you sell soon. If so, consider a shorter term mortgage that has flexible manageable terms if you decide to sell your home.

6. Are you thinking of a major renovation. Upgrades can increase the value of your home but the cost of having the work done can tie up a lot your money. Make sure to allow for ample finances to complete.

7. When do you want to be ‘mortgage-free.’ Increasing your payments will raise your monthly expenses now, but you will ultimately save thousands on interest in the long term. A mortgage-free lifestyle could be just around the corner.

8. Could you use your home equity to fulfill other goals. Refinancing a mortgage can be one way to free up cash you need for other things, which could even include purchasing another property.

9. Have your insurance needs changed. If your home equity has increased, there may not be the need for default insurance anymore.

10. Are you getting the best rates and terms. In a competitive mortgage environment your good credit history can make refinancing your mortgage work to your advantage. Dominion Lending Centres analyzes mortgage markets daily to ensure you don’t miss any money saving opportunities.

Courtesy of Michael Hallett, AMP – DLC Producers West Financial

The next time you’re looking for a mortgage for that new house or you’re up for renewal on your existing mortgage, think about using a mortgage broker – their services are free and they offer you an abundance of choices the banks simply can’t compete with.

Mortgage brokers have access to a vast array of lenders – up to 200+ institutions, including the big banks – which enables these professionals to negotiate the best possible mortgage products and rates on your behalf. In comparison, if you approach your bank with a mortgage request, they can only offer you a narrow choice – namely, their own products.

Mortgage brokers do their homework on available mortgage products and keep themselves abreast of any new products, or changes to existing products, to ensure they find the best mortgage to fit your specific needs.

Unlike the banks, mortgage brokers can also cater to self-employed borrowers as well as those who have suffered credit blemishes due to life experiences such as divorce or illness. Brokers will listen to your story, whereas the banks have a very narrow view of what fits into their financing box – and this is unnegotiable.

If you’re thinking of buying a home, Dominion Lending Centres mortgage professionals can find the best mortgage rate and term for your unique situation.

Top Reasons for Using a Broker:
1. Choice – access to multiple financial institutions
2. Costs – using a broker is free and they can negotiate lower rates for you
3. Knowledge – brokers stay up-to-date on available products and services
4. Flexibility – mortgage products are even available for the self-employed or those who have credit blemishes

Courtesy of Alim Charania, AMP – DLC Regional Mortgage Group 

Buying a new car or your first home, what makes the most sense?

We all need a roof over our head and some means of transportation to get us to and from work. Sometimes it can be a tough choice when there is only so much money. “Do we buy the new car or our first home?”

One of the most common roadblocks for first time home buyers in qualifying for a new home is the “auto payment”. I meet many first time home buyers who have done all the right things; paid down debt from student loans and credit cards, saved for a down payment to buy their first home and then a few months before getting ready to shop for their home they buy a new vehicle that comes with a big monthly payment for the next 5 years. The high auto payments push their debt servicing over the limit making it impossible to qualify for the mortgage. The result – they are left paying rent and a high car payment. Those new set of wheels could cost you more than you think.

https://www.youtube.com/watch?v=OetRbvBsO7o

Buying your first home is a big deal. So before you make any purchases for big ticket items like a new car – talk to your Dominion Lending Centres mortgage specialist. He or she will review your personal situation, income and expenses, and discuss your options so you know what you can afford. They will guide you through the criteria to qualify for a mortgage so you can fully understand the process and all the costs associated with buying your new home. Then you can choose the right vehicle for your budget and your needs.

Buying a new car or your first home can be an easier decision if you have the numbers in front of you to make an informed decision.

Courtesty of Pauline Tonkin, AMP – DLC Innovative Mortgage Solutions 

As the average age of our Canadian population gets older (according to Employment and Social Development Canada, our country currently has over 5 million people over 65 years old), it is no doubt that you or your loved one may be faced with growing concerns about the ability to live life without financial constraints or difficulties. It may be mounting medical expenses or the limitations of living within a fixed income, or carrying debt load into retirement.

On the other hand, it may be the time to enjoy travelling or helping out grandchildren with university tuition, even the purchase of a home in sunnier climes. Perhaps it’s time to enjoy an active retirement and downsize into a smaller home!

Whatever the situation may be, a Reverse Mortgage might just be the perfect fit for you to find that extra income you hold in your home.

WHAT IS A REVERSE MORTGAGE:

A Reverse Mortgage is a loan secured against the value of your home.

Unlike a loan or a regular mortgage, with this type of mortgage, you are not required to make payments. You only repay the loan when you move or sell your home.

A Reverse Mortgage is a means for homeowners, aged 55 years or older, to access a portion of the stored value in their home to use today while still retaining ownership. In effect, converting the equity to cash, which can be received in a lump sum payment, regular payments or a combination of the two.

Advantages:

• Payments from a reverse mortgage are tax-­â€free income.
• There are no payments to make as long as you or your spouse lives in your home. The principal and interest are only due when your home is either sold or you move out..
• The freedom to eliminate monthly payments can be a benefit for stretched budgets.
• You can repay the loan at any time.
• If the investment market takes a downturn, a reverse mortgage could fill the gap until your investments stabilize or reach maturity.
• The amount you owe can never exceed the value of your property.

Advantages of Revers Mortgages Continued…

* You and your beneficiaries will not be responsible for any shortfall if interest rates increase and housing values drop.

* Interest paid on the reverse mortgage is tax deductible if the proceeds were used to earn investment income

A CASE SCENARIO

Mr. and Mrs. Walsh 82 and 78 years old, found that the townhome they were in no longer suited them as Mr. Walsh has deteriorating health and was having trouble managing the stairs. They were ready to find a nice little condo to settle into.

Challenge:

Mr. and Mrs. Walsh had some concerns, as, now that they were on pensions, they were unable to qualify for the difference they needed. They owned a $400,000 townhouse with a $250,000 mortgage.

Solution:

Sold their current home for $400,000.

Purchased a $230,000 condo with a $125,000 down payment, proceeds of which were from the sale.

They got a $105,000 CHIP Reverse Mortgage on the new property to cover the difference.

• No income
• No credit requirements and most of all no payments for as long as they live in their home
• If one partner passes away, nothing changes
• Provides them with complete control over their home and with peace of mind and living life on their terms!

There are some out of pocket costs associated with setting up this type of mortgage (Appraisal and legal advice) with the set up fees coming out of the proceeds of the loan. The interest rate is a bit higher than if you were purchasing a home but still competitive with variable or fixed rate options available.

Unlocking the value in your home with a Reverse Mortgage may just be the answer to bring you peace and security in your financial health. As always, get professional advice from Dominion Lending Centres so we can help you determine whether or not this product is right for you!

Courtesy of Jordan Thomson, AMP – DLC City Wide Mortgage 

A “Gifted” Down Payment is very common for first time buyers. Essentially, a buyer’s family member (usually very nice, warm and loving parents) will offer up money to go towards the down payment. Often this is done because their son or daughter doesn’t quite have enough funds saved up for the full 5% down payment. Or, because they want to make sure their child has enough money to make up 20% for a down payment to avoid CMHC premiums.

All that is required for documentation is a signed Gift Letter from the parents, which simply states that the money does not have to be re-paid, and a snapshot of the son or daughter’s bank account showing that the gifted funds have actually been transferred.

A gifted down payment is viewed as an acceptable form of down payment by almost all lenders. Talk to your Dominion Lending Centres Mortgage Professional to make sure that your lender accepts “gifts” as an acceptable down payment.

Courtesy of Jeff Ingram, AMP – DLC Canadian Mortgage Experts

Not long ago, someone contacted us wishing to refinance their mortgage. They presently held a mortgage from one of the big banks. When this homeowner originally obtained her mortgage, the bank offered her a discounted rate of 2.99%. It matured in July of 2016, however, when they contacted us at Dominion Lending Centres, they wanted to refinance to improve their cash flow because of recent major renovations. The mortgage was over $600,000.

At first thought, an Interest Rate Differential (IRD) penalty might seem to be so small because of the effective rate of 2.99%, that only a 3 month penalty would apply to break their existing mortgage. Wrong. Because the rate for the original mortgage was discounted from 4.64%, 4.64% was used when calculating the IRD penalty. So, instead of paying $5,157 dollars, the client was told they had to pay over $23,000 in order to break their mortgage with the bank.

A mortgage broker-channel lender, and there are many, uses the contract, or effective rate, when they calculate the IRD penalty on fixed rate mortgages, unlike the banks. Because they use the actual contract rate, the penalty would have been the lower one in the example above. An amortization scenario would determine if breaking the existing mortgage would be worth it by seeing the crossover point in time for making up the difference in savings. In the case above, it was not worth breaking, and the client had to wait until their mortgage matured.

The banks have, in recent years, implemented a new way of registering mortgages to assist in these situations. They often now register the loan as a collateral charge loan rather than a mortgage. This allows the bank to refinance the home loan on a house without a penalty if the client needs extra cash in the future. The disadvantage to this is that in order to break the loan agreement, even at maturity, the client either has to pay a lawyer or title insurance company to help break the loan agreement, costing approximately $600-$1000. Aware of this, at renewal, the bank can price the renewal rate accordingly, as they are aware that the client must pay this fee in order to leave the bank.

When purchasing a home or renewing or refinancing, it pays to ask details about pre-payment privileges and the costs associated with discharging your mortgage before the maturity date, as well as how the loan is going to be registered, ie. as a regular mortgage or a collateral charge loan.

Courtesy of Daniel Lewczuk, AMP – DLC Parato Mortgage Group 

Whether you are a first time buyer, looking at buying a bigger house or downsizing, if you are looking at buying an investment property it is important to be prepared. This spring a sellers’ market is in full swing, which is more noticeable in certain areas of the Lower Mainland. With historically low interest rates, buyers are making the jump into homeownership, because for many, their mortgage payments will be less than what they are paying in rent. It is certainly a great time to get into the market. However, in a sellers’ market, buyers find themselves in competition with other buyers to purchase a home.

Buying a home can be exciting but having to compete for a home can add a bit more stress. In this case, a property’s asking price and what the property will sell for is quite different, and in most cases the selling price will be well above and beyond the listed price.

When a homebuyer goes into a multiple offer situation, they are less in control. As a buyer, you need to prepare yourself in doing work upfront and with the understanding that you might not get the property in the end.

During multiple offer situations, the seller is not obligated to negotiate or accept any of the offers. The seller has the liberty to choose the best offer to negotiate and they will accept the offer that best reflects their needs. While price is important, that will not be the only factor they consider. They will also look at things such as subject conditions, completion and possession dates.

Here are some things you can consider which may help you feel more in control of the situation when going into multiple offer situations:

• Get pre-qualified by a Mortgage Expert – One of the most important aspects of buying a home is knowing how much you qualify for. You will know what you are comfortable paying on a monthly basis but also what is the highest amount you can offer. While you might have been qualified, the lender still has to approve the property you are buying.

• Prepare and have all your documentation ready – It is important that you provide your Mortgage Expert with all the documentation the lender is going to require upfront. Especially since time will be of essence, you don’t want the added stress of getting documentation when you are in the middle of negotiations and during the subject condition period.

• Having the right real estate agent – It is critical that you have an agent that has your best interest in mind. As a buyer, it is not your job to seal the deal, it’s your agent’s responsibility to know what your limit is and respect that. Don’t let your agent try to upsell you on the price and encourage you to go above your budget. It’s their job to research comparable properties in the area and advise you, but you are the one that makes the final decision. After all, it’s your money.

• Set your boundaries – Once you set your budget, stick to it. Determine exactly how much you can go over if you end up in multiple offers. Don’t get sucked in by emotion and peer pressure because in the end, it can cost you a lot more money.

• Consider doing a home inspection ahead of time – The buyer could consider your offer more readily if it doesn’t include a “subject to inspection” clause.

• Be flexible – Winning a multiple offer situation might be as easy as agreeing to the seller’s conditions such as closing dates, buying the property “as is” or even tightening the subject removal dates. This is important if the seller has already bought another property and is anxious to move on. Agreeing to make the transaction as easy as possible could mean winning over a more generous offer. Buying a property “as is” and limiting the subject conditions (such as requesting that a missing knob or floor tile be replaced) might work in your favour too. If your agent is aware of any information about the seller’s situation and if you can be flexible in any way, take advantage of this opportunity that might help you get your offer accepted.

• Write it down – Perhaps you might want to write a quick letter to the seller explaining who you are and why you want to buy their home so much. Buying and selling a home is an emotional time for everyone, especially if the seller has lived in that home for a long time and raised their family there. Sometimes, it’s not about the highest offer but it can certainly also be about an emotional connection. Even though your offer might be lower than the others, some sellers might feel a strong connection to your story and decide that it’s not about the money but about someone who will really appreciate a great home!

• Know when it is time to walk away – Multiple offer situations can be stressful and sometimes listing agents strategically set the price of the home below market value to start a multiple offer situation. Make sure you stand firm.

Buying your home is about a great investment and you have to be smart about it. In the end, it’s about being comfortable on what you are paying a month and happy with the decisions you make. After all, it’s about finding a home that will be a great place to start building equity and creating memories.

Courtesy of Alisa and Jorge Aragon, AMP – DLC Mountain View 

Okay, so here we are… we have worked together to secure financing for your mortgage. You are getting a great rate, favourable terms that meet your mortgage goals, the lender is satisfied with all the supporting documents, we are broker complete, and the only thing left to do is wait for the day the lawyers advance the funds for the mortgage.

Here is a list of things you should NEVER do in the time between your financing complete date (when everything is setup and looks good) and your closing date (the day the lender actually advances funds).

Never make changes to your financial situation without first consulting me. Changes to your financial situation before your mortgage closes could actually cause your mortgage to be declined.

So without delay, here are the 10 Don’ts of Mortgage Closing… inspired by real life situations.

1. Don’t quit your job.

This might sound obvious, but if you quit your job we will have to report this change in employment status to the lender. From there you will be required to support your mortgage application with your new employment details. Even if you have taken on a new job that pays twice as much in the same industry, there still might be a probationary period and the lender might not feel comfortable with proceeding.

If you are thinking of making changes to your employment status… contact me first, it might be alright to proceed, but then again it might just be best to wait until your mortgage closes! Let’s talk it out.

2. Don’t do anything that would reduce your income.

Kind of like point one, don’t change your status at your existing employer. Getting a raise is fine, but dropping from Full Time to Part Time status is not a good idea. The reduced income will change your debt service ratios on your application and you might not qualify.

3. Don’t apply for new credit.

I realize that you are excited to get your new house, especially if this is your first house, however now is not the time to go shopping on credit or take out new credit cards. So if you find yourself at the Brick, shopping for new furniture and they want you to finance your purchase right now… don’t. By applying for new credit and taking out new credit, you can jeopardize your mortgage.

4. Don’t get rid of existing credit.

Okay, in the same way that it’s not a good idea to take on new credit, it’s best not to close any existing credit either. The lender has agreed to lend you the money for a mortgage based on your current financial situation and this includes the strength of your credit profile. Mortgage lenders and insurers have a minimum credit profile required to lend you money. If you close active accounts, you could fall into an unacceptable credit situation.

5. Don’t co-sign for a loan or mortgage for someone else.

You may have the best intentions in the world, but if you co-sign for any type of debt for someone else, you are 100% responsible for the full payments incurred on that loan. This extra debt is added to your expenses and may throw your ratios out of line.

6. Don’t stop paying your bills.

Although this is still good advice for people purchasing homes, it is more often an issue in a refinance situation. If we are just waiting on the proceeds of a refinance in order to consolidate some of your debts, you must continue making your payments as scheduled. If you choose not to make your payments, it will reflect on your credit bureau and it could impact your ability to get your mortgage. Best advice is to continue making all your payments until the refinance has gone through and your balances have been brought to zero.

7. Don’t spend your closing costs.

Typically the lender wants to see you with 1.5% saved up to cover closing costs… this money is used to cover the expense of closing your mortgage, like paying your lawyer for their services. You might think that because you shouldn’t take out new credit to buy furniture, you can use this money instead. Bad idea. If you don’t pay the lawyer… you aren’t getting your house, and the furniture will have to be delivered curb side. And it’s cold in Canada!

8. Don’t change your real estate purchase contract.

Often times when you are purchasing a property there will be things that show up after the fact on an inspection and you might want to make changes to the contract. Although not a huge deal, it can make a difference for financing. So if financing is complete, it is best practice to check with me before you go and make any changes to the purchase contract.

9. Don’t list your property for sale.

If we have set up a refinance for your property and your goal is to eventually sell it… wait until the funds have been advanced before listing it. Why would a lender want to lend you money on a mortgage when you are clearly going to sell right away (even if we arranged a short term)?

10. Don’t accept unsolicited mortgage advice from unlicensed or unqualified individuals.

Although this point is least likely to impact the approval of your mortgage status, it is frustrating when people, who don’t have the first clue about your unique situation, give you unsolicited advice about what you should do with your mortgage, making you second guess yourself.

Now, if you have any questions at all, I am more than happy to discuss them with you. I am a mortgage professional and I help my Dominion Lending Centres clients finance property every day. I know the unique in’s and out’s, do’s and don’ts of mortgages. Placing a lot of value on unsolicited mortgage advice from a non-licensed person doesn’t make a lot of sense and might lead you to make some of the mistakes as listed in the 9 previous points!

So in summary, the only thing you should do while you are waiting for the advance of your mortgage funds is to continue living your life like you have been living it! Keep going to work and paying your bills on time!

Now… what about after your mortgage has funded?

You are now free to do whatever you like! Go ahead… quit your job, go to part time status, apply for new credit to buy a couch and 78″ TV, close your credit cards, co-sign for a mortgage, sell your place, or soak in as much unsolicited advice as you want! It’s up to you!

But just make sure your mortgage has funded first.

Also it is good to note, if you do quit your job, make sure you have enough cash on hand to continue making your mortgage payments! The funny thing about mortgages is, if you don’t make your payments, the lender will take your property and sell it to someone else and you will be left on that curbside couch.

Obviously, if you have any questions, please get in touch with us here at Dominion Lending Centres!

Courtesy of Michael Hallett, AMP – DLC Producers West Financial