Latest statistics indicate that Canadians are currently carrying over $450 BILLION in consumer debt!

Mortgage Brokers are often called in to help refinance someone’s home in order to repay credit card debts. With current low mortgage rates, it certainly is advantageous to pay off high interest unsecured debts in order to lower monthly carrying costs.

Credit as a lifestyle.

If we could describe one of the biggest changes in our society in the last 40 years is our blasé attitude towards the use of credit. Baby boomers as a group have set the pace and trend on a number of development when they became consumers. One of the main one is the use of credit to finance a lifestyle some say would make our pre depression era generation squirm.

Modern society has brought consumerism to a whole new level. Big box stores, island getaways, niche products and services all contribute and fuel a never ending demand.

A lot of these trends are fuelled by easy credit and lenders as well as credit card issuers have stepped up to the plate by offering access to funds to anyone who wants and qualifies for it.

But with “great powers comes great responsibilities” to quote Spiderman’s Uncle Ben!

We teach our kids to read and write but not how to budget.

So it is no surprise that many consumers get caught in the credit card quagmire with often a one way ticket to bankruptcy.

So it is important as a consumer to stop and take a good look at your buying habits and how you use credit.

Ask yourself these questions:

Do you carry balances on numerous cards or just one or two?

Do you know the exact balance owing on your credit card/s without looking at your statement?

Do you only make the minimum payments or try to pay off balances as much as possible?

Do you worry if you will have enough money left over at the end of the month?

Those are some of the questions you should be asking yourself if you haven’t already. For this is the first step to financial control.

If you find yourself in a financial jam you can certainly apply measures to get out of it.

If it is to overwhelming make a point to consult a professional that deals with these situations and can offer credit counseling.

You can start by putting in place measures that won’t put you in financial trouble again. That is where scissors come in handy. Cut up merchant credit cards that charge high interest.

Snip your way to financial freedom and make a point to pay off your full balance at the end of the month. This way you won’t pay any interest.

Make a point to use only one credit card. This allows easier debt management.

Bottom line is this; don’t get caught in the financial roller coaster. You owe it to yourself and your family to set in place financial stability in your household. It is important that you teach your children proper budgeting techniques.

If you lack the knowledge, then this is a great opportunity to educate yourself and acquire a crucial life skill. Contact your local Dominion Lending Centres mortgage professional today!

Courtesy of Danel Girard, AMP – DLC Service First Mortgages 

The fast pace of buying and selling real estate is daunting. Throw in trying to manage closing dates, possession dates and access to the proceeds for the purchase and you have a recipe for disaster.

I recently received an email from a potential client asking these very questions:

“I was wondering how the process usually goes, for looking at a new place. We had planned to use our equity in this home as the down payment for a new place. But if we can’t unlock that equity until the closing date, what usually happens in the interim?  Do we have to find a place to rent?…a month or longer? When we bought this place, it was our first home purchase, so moving to a new one is new to us. I don’t understand how we are supposed to start looking for a place after subject removal (which is 30 days after tomorrow), when we can’t access the equity to make a down payment.”

This scenario happens much more often than one thinks. In order for sellers to access their equity to become buyers they are required to utilize a bridge loan to transition into their “next” home. The bridge loan allows you to purchase a new property before the sale completes on the existing or current residence.

Most lenders have a 45 – 60-day window to exercise this option, with a range of daily rates and admin fees. The four vital components to a mortgage application are income, credit worthiness, the subject property and down payment.

The first three have been approved; now how does one unlock the down payment? Easy. The borrower is required to supply the fully executed purchase and sale contract, subject removal addendum and the current mortgage statement for the existing property. This provides confirmation that you have sold the property on X date as well it confirming the sale price less the possible real estate commission fees and closing costs. Once the current mortgage amount is subtracted the net proceeds are yielded, leaving you your down payment amount.

As mentioned above, there are fees to access bridge financing, as well as a daily interest rate. If the purchase of the next property completes the same day as the sale, then it is handled at the lawyer’s office internally and the funds are transferred accordingly.

The equity is yours to access right now. The lenders verify your equity with the conditions provided.

Here is an example of the timeline and fees of how the bridge loan scenario can be utilized:

Existing home sold, completing December 14, 2016 $600,000

Current outstanding balance $400,000

Equity remaining $200,000

New home purchase, completing November 30, 2016

The lender has approved the down-payment amount. Because the proceeds are still secured against the existing home we had to provide confirmation that the funds were available. We determined there was $200,000 by way of sales contract, subject removal addendum and the current mortgage statement.

The second layer to the bridge loan is the cost of borrowing the $200,000. Bear in mind the funds are still tied up in the existing property. The cost to borrow the $200,000 temporarily is Prime + 2% (daily rate) plus an administration fee of $250.

$200,000 x 4.70% / 365 (days) = $25.76 per day to borrow $200,000

There is a 14-day completion difference. The total cost to utilize a bridge loan is $360.64 (in interest) + $250 (admin fee) = $610.64.

All-in-all this is a very inexpensive and easy way to access the equity you have built up in your current home. Remember, lenders are in business of making money…this is simply a cost of doing business.

Be sure to surround yourself with industry professionals (like the mortgage brokers at Dominion Lending Centres) to make sure nothing is overlooked or miscalculated.

Courtesy of Michael Hallett, AMP – DLC Producers West Financial

Your maximum mortgage amount is determined by your credit profile, your usable income (which is determined by each lender), your down payment among other requirements. Not all applicants fit into one box and this is why you should never trust the “What do I Qualify for Mortgage Calculators”.

Let me tell you a story about Jack and Jill who want to buy a home with city water for their growing family (yes, I have been reading a lot of nursery rhymes lately with my toddlers and have always thought they were a couple).

Jack has a long-term $65,000 per year salaried job with guaranteed pay. Jill is just out of nursing school and has been working as a temporary part-time employee making $25 per hour. They have one child and earn Child Tax Benefit income of $350 per month. They figure because Jill typically works 20 hours a week that they should be able to use all their income of $7,933 per month to qualify.

They decide to check out their bank’s online mortgage qualifying calculator. They are excited as they have $25,000 saved to cover the down payment and closing costs and their bank’s calculator says their “income” is sufficient to buy a $375,000 home.

After getting an accepted offer on a home they head to their bank to get a mortgage. The banker checks their credit, runs some numbers and determines shelter costs (mortgage payment, property taxes and heat) at today’s rates will be $1,993 per month for the property.

It turns out that with Jack and Jill’s credit report results, both with a credit rating of 650 (an average rating but not excellent) that they cannot go over 35% of their usable gross income for shelter expenses. The key words here are “usable income”. The banker then explains that though Jill is now earning income that they would not consider this temporary positions income in calculations until she has at least 2 years from the same employer to show income stability. The bank also does not use Child Tax Benefit income. The 35% of their usable income (Jack’s salary only) works out to $1,895, which is not enough to cover the shelter expenses for the purchase . They do not qualify for the purchase with their bank.

Jack and Jill thought it would be no problem. They are upset and confused so they contact a Mortgage Broker recommended by The Old Woman who just moved out of the shoe. The broker reviews their application and reconfirms that their application doesn’t fit with their current bank (which the broker also works with).

However, the broker has a relationship with many lenders including one that helped the Old Woman move out of the shoe. This lender will uses the Child Tax Benefit income. This means with the brokers connections that their usable income will increase by $350 per month putting them at $2,018 of income allowed to be used towards shelter expenses and above the $1,993 required to buy the home. They have now been approved to buy their dream home and are looking forward to running water.

This is just one example of why the “What can I afford calculators” may give you false results which ultimately could result in disappointment.

Never trust the calculators and always place a subject to financing clause if you make an offer on a home. More importantly consult with a Dominion Lending Centres Mortgage Broker before you start your home search so you know your buying power.

Courtesy of Kathleen Dediluke, AMP – DLC Integrity Mortgage 

Now a days with the amount of information that is shared on the Internet and social media, identity theft and Ponzi schemes are happening regularly. Homeowners are taking the necessary steps to protect one of their largest investments which is their home. However, the last thing you want to worry about is yet another way to lose your hard-earned money.

But as a homeowner, you need to be aware of crimes on the rise known as mortgage fraud and real estate title fraud.

Mortgage fraud

Some borrowers may think that providing false documents and making false statements is not a big deal. However, the Criminal Code clearly states that obtaining funds, including mortgages by providing false information is a crime.

The most common type of mortgage fraud involves a criminal obtaining a property, then increasing its value through a series of sales and resales involving the fraudster and someone working in cooperation with them. A mortgage is then secured for the property based on the inflated price.

Following are some red flags for mortgage fraud:

• Someone offers you money to use your name and credit information to obtain a mortgage.
• You are encouraged to include false information on a mortgage application.
• You are asked to leave signature lines or other important areas of your mortgage application blank.
• The seller or investment advisor discourages you from seeing or inspecting the property you will be purchasing.
• The seller or developer rebates you money on closing, and you don’t disclose this to your lending institution.

Title fraud

When you purchase a home, you purchase the title to the property. Your solicitor registers you as the owner of the property in the provincial land title office.

Title fraud normally starts with identity theft. This occurs when your personal information is collected and used by someone identifying themselves as you. There are several ways criminals can steal your identity without your knowledge which includes:

• Dumpster diving
• Mail box theft
• Phishing
• Computer hacking

Sadly, the only red flag for title fraud occurs when your mortgage mysteriously goes into default and the lender begins foreclosure proceedings. Even worse, as the homeowner, you are the one hurt by title fraud, rather than the lender, as is often the case with mortgage fraud.

Unlike with mortgage fraud, during title fraud, you haven’t been approached or offered anything – this is a form of identity theft.

Here’s what happens with title fraud: A criminal – using false identification to pose as you – registers forged documents transferring your property to his/her name, then registers a forced discharge of your existing mortgage and gets a new mortgage against your property. Then the fraudster makes off with the new home loan money without making mortgage payments. The bank thinks you are the one defaulting – and your economic downfall begins.

The following are ways you can protect yourself from title fraud:

• Ensure you keep personal information confidential when on the internet or phone until you know who are dealing with, how it will be used and if it will be shared with anyone.
• Only carry minimal information and identification in your wallet, don’t have your social insurance card with you.
• Check your credit report regularly. You can get them free when you request them from the Equifax and Transunion when they mail them to your home. If you notice anything suspicious, contact the credit bureau right away.
• Check your financial, bank and credit card statements regularly for any inconsistencies and unknown charges.
• Consider obtaining a title insurance policy, as title insurance protects against many title risks associated with real estate transactions.
• Check your mailbox for mail on regularly, if not every day.
• Shred and destroy any financial and personal identification documents, as well as any unsolicited credit card applications rather than just simply throwing them away.
• If you don’t receive your bills or other mail, follow up with your creditors.
• If you receive credit cards that you didn’t apply for or if you did apply for them and didn’t receive them.
• Contact your mortgage lender first if you are having difficulty making your mortgage payments.

The following are ways to protect yourself from title fraud when purchasing or refinancing a home:

• Make sure you work with a licensed real estate agent and is familiar with the area you are interested in buying. Select to work with someone that can provide trusted referrals and check on them.
• Check listings in the community where the property is located – compare features, size and location to establish if the asking price seems reasonable.
• Always view the property you are purchasing in person, don’t buy without seeing it first.
• Beware of a real estate agent or mortgage broker who has a financial interest in the transaction.
• Ask for a copy of the land title or go to a registry office and request a historical title search.
• In the offer to purchase, include the option to have the property inspected and appraised.
• When giving a deposit when purchasing a property ensure the funds will be held “in trust” with a solicitor or a real estate agency and not directly with the seller.
• Insist on a home inspection to guard against buying a home that has been cosmetically renovated or formerly used as a grow house or meth lab.
• Ask to see receipts and permits for recent renovations.
• Consider the purchase of title insurance.
• Review and make sure you are comfortable with the terms and conditions with the mortgage commitment letter or approval.
• Review the “cost of borrowing disclosure statement” and be aware of any additional fees or charges. Ask questions if you are not sure.
• Know and understand what you are signing. If you have questions, ask. If you are not comfortable or something is not right, do not sign the documents.
• You might want to consider using your own solicitor for legal advice if you are asked to use the same lawyer as the seller.

“Straw buyer” scheme

Another term for mortgage fraud is the “straw” or “dummy” homebuyer scheme. For instance, a renter does not have a good credit rating or is self-employed and cannot get a mortgage, or doesn’t have a sufficient down payment, so he or she cannot purchase a home. He/she or an associate approaches someone else with solid credit. This person is offered a sum of money (can be as much as $10,000) to go through the motions of buying a property on the other person’s behalf – acting as a straw buyer. The person with good credit lends their name and credit rating to the person who cannot be approved for a mortgage for his or her purchase of a home.

Other types of criminal activity often dovetail with mortgage fraud or title fraud. For example, people who run “grow ops” or meth labs may use these forms of fraud to “purchase” their properties.

It’s important to remember that if something doesn’t seem right, it usually isn’t – always follow your instincts when it comes to red flags during the home buying and mortgage processes. Get in touch with your local Dominion Lending Centres mortgage professional to learn more.

Courtesy of Alisa Aragon, AMP – DLC Canadian Mountain View 

As the dust is settling on the major changes to the mortgage qualifying rate and it is back to work as usual, some Canadians are starting to realize that there were some other significant changes that affect us all.

Starting this year you must now declare which property is your principal residence. There will be a form with your tax return that you must fill out. The purpose of this of course to make sure that the house flippers of the world pay their fair share of income tax on monies earned by buying and selling homes. This will also affect foreign owners, when they sell property in Canada, even though a family member may have lived in it they will now pay capital gains. They are closing some rather large loopholes in the system where many people have taken unfair advantage.

Another point that was probably missed by most is that if you have a home with a legal suite, when you sell the home you will have to pay capital gains on the portion that is rental. Many of these suites collect rent that is never reported to CRA and people avoid taxes by just pocketing the money. For many years now if you collected rent but didn’t report it on your taxes then you were not allowed to use it as income to apply for a mortgage.

This may also open up another legal/accounting question for parents that co-sign on their children’s mortgages. In Alberta at least when you co-sign you are usually on the mortgage and on title. Will it mean that when that home is sold will there be legal and tax ramifications when the home is sold.

Lots of unanswered questions on that subject that you will need to consult your accountant and your Dominion Lending Centres mortgage professional about before proceeding.

Courtesy of Len Lane, AMP – DLC Brokers for Life 

Everyone knows that Mortgages come with a rate attached to them. But few know that each Mortgage Product has a PERSONALITY too!

The Personality of a mortgage product is a key component in selecting the right mortgage for you and your unique needs. So sit back, take some notes, and take your mortgage on a little coffee date—lets get to know it a bit better shall we?

8 Questions You Should Ask:

1. What is the penalty to break my mortgage, if I want to upgrade, refinance or sell?

Just how flexible is your mortgage? A no frills approach would be along the lines of a 12-month principle and interest penalty to break the mortgage —which means you may be stuck with the Lender and the terms that they give!

2. What are my prepayment privileges?

You will want to know how much extra you can put toward your mortgage principle-be it monthly or annually. This could mean a basic 0-20% monthly payment with or without an anniversary or lump sum payments. But this begs the question: How much do you REALLY need? Statistics show that 17% make lump sum payments, and 23% of us make additional monthly payments. Statistics show us that most BUT not all of us do not need more than 10% when looking for prepayment privileges but it’s always important to have the additional room when needed.

3. Is my mortgage portable?

This may seem like an odd question, but you will want to be able to bring your mortgage with you with NO penalty and keep your interest rate intact if you sell your current residence and buy another (portable). Often the case may be with a “no frills” mortgage, that you either can’t or you have restrictions placed on it. Also, it’s important to know that if you are in a Variable Rate Mortgage (AVRM) most lenders will not allow you to have a portable mortgage at all.

4. Can I Blend & Extend or Assume my mortgage?

You will want to ask your broker/lender if your rate can be blended or if the additional monies that you want to borrow for purchase can be extended. In addition, finding out if you sell your home, and someone can take over the remaining terms is a key question to ask—with a “no frills” you are out of luck with that one!

5. How long can my Amortization be?

We all want to know: how long will it take to pay off my mortgage (amortization) at the contract rate?? This question is an important one to ask as this impacts debt servicing and monthly payment. With your no frills you have a max of 25 years!

6. Does the mortgage that I am looking for apply to an investment property?

Looking to get into the real estate investment biz? Make sure you get a good broker/lender on your side! A no-frills mortgage won’t let the mortgage you are looking at apply to investment property’s (rental) – leaving you with a higher rate and unlikable terms.

7. What will my rate be if I go from a Variable Rate Mortgage (AVRM) to a Fixed Rate?

Asking this simple question at the start of your mortgage product search, can save you a lot of heartache. With a no frills mortgage you get the Standard Rate, not the best rate—which means you may be paying a lot more than necessary!

8. How is my mortgage going to be registered? Standard or Collateral charge?

A mortgage that is being registered as a standard charge can be transferred/switched at no costs at the time of renewal. A mortgage that is being registered as a Collateral Charge will typically incur a cost in renewing your mortgage that you must pay for.

These 8 questions are the ones you should always ask before signing on the dotted line of a mortgage. They make up the mortgage personality, and help to establish your future! All Dominion Lending Centres mortgage brokers are committed to finding you the best product to meet your unique circumstances. So remember, before you sign make a date with your mortgage and get to know each other a bit better.

Courtesy of Geoff Lee, AMP – DLC GLM Mortgage Group

Last week we touched on TD’s 0.15% move with existing variable rate mortgage clients. There is nothing new to add as TD remains the only lender to make such a move with variable rate clients. Perhaps TD back downs down soon, perhaps other banks join them – time will tell.

The fresh news on rates is that most lenders, not all, hiked the venerable 5-year fixed rate for new applicants by as much as 0.25%.

WHAT DOES IT ALL MEAN?

• A 0.25% hike equates to a ~$12.50 per month payment increase per $100,000 borrowed. Hardly a show stopper for many buyers.

• These moves are not surprising considering the timing is just a few weeks after the bank’s fiscal year end, and reflective of similar moves in November’s past. The increase is usually followed by a decrease during the heat of the following Spring market.

• Long term fixed rates are driven by the bond market, not the Bank of Canada – There is little chance of the BoC increasing Prime anytime soon (NOTE: the next BoC rate announcement is scheduled for December 7, 2016 – watch the Dominion Lending Centres website for more information from our Chief Economist, Dr. Sherry Cooper).

• This is a mosquito bite, not a shark bite.

• Everybody be cool.

And in other news…

THE VACANCY TAX

Vancouverites voted favourably on a motion put forth by the Ministry of Plenty to have telescreensinstalled in their homes to be monitored by a another division of city hall. Said division, The Ministry of Truth will be run by one Winston Smith. The purported purpose of the telescreen monitoring program will be to confirm that you are in fact residing in your residence, and thus the telescreen monitoring program ensures your avoiding tens of thousands in potential fines for waste. Said waste being owning something you are not using regularly.

Expect similar legislation to soon extend to automobiles, why should we build more cars when yours can be put to use by all night delivery drivers while you sleep? After all what is yours is really all of ours.

Proposals are also said to be in the offing to levy fines for unused exercise equipment, with the said fines being redirected to healthcare costs inevitably incurred from lack of use (exercise). So pluck that laundry off your Nordic track, elliptical machine, and treadmill and get hustling. Big Brother is watching…on your newly installed telescreen.

In case you skipped middle school English class and believe I am being serious… click here

Of course all such taxes are for our own good, the greater good, and there will be no negative consequences whatsoever…

Courtesy of Dustan Woodhouse, AMP – DLC Canadian Mortgage Experts 

I want to share with you a story. Below is the story of John, and if you ever want to own a home, you need to read his story.

John was a 25 years old. He was good with money. He went to school and he worked his butt off to support himself. John had been saving $250 every pay cheque for the past 2 years allowing him to accumulate $12,500. This was hard for John as he was barely making $15 an hour and was not left with much spending money after each payday. Six months ago, John started a new job working full time getting paid more than $25 an hour. With the increase in income, he bought a new car with monthly payments he could easily make. Financially, John was feeling confident.

John called his mortgage broker to tell him the good news. He had his 5% down payment, had his new full time job getting more than $25 an hour and was ready to put in an offer on a $250,000 condo. John was excited- he’d been saving for 2 years, he could finally move out and have his own home. Unfortunately, John’s mortgage broker informed him that even though he had the 5% down payment and full time job, he wouldn’t be able to buy a home for at least another two years!

What the heck happened?

Well, a couple things.

First, John’s credit report wasn’t strong enough and his score was too low because of unpaid parking tickets and short credit history. Second, John didn’t know about closing costs so his savings were short thousands of dollars. Third, John didn’t know about the ratios lenders look at when qualifying a potential borrower. His $450 a month car payment took away his ability to qualify for an additional $100,000. To top it all off, John wasn’t even guaranteed 40 hours a week at this new job. Due to this, John’s broker informed him that a lender will require a 2-year average income. Of course, 6 months ago John was only earning $15 an hour, giving him a 2-year average income significantly lower than what he had now.

How to avoid being like John:

Do an application with a Dominion Lending Centres mortgage broker, these are FREE. They’ll be able to tell you exactly what you can afford, exactly how much you need to have saved, and where your credit score needs to be and how to get it there. Many of you reading this are a year or two away from wanting to purchase your own home but even if you are 5 years away: call a mortgage broker, take 20 minutes, do an application, and get qualified!

Purchasing a home is one of life’s biggest and most stressful moments and you need to be prepared for it so you don’t waste time and money like John. This is my entire reason for being a mortgage broker; someone who can be an expert for others to rely on for help. Use a Dominion Lending Centres broker, find an expert, get qualified.

Courtesy of Ryan Oake, AMP – DLC Poducers West Financial

I had a client, who at 84 years old sold his home in order to purchase a home closer to his daughter and her teenage son. Although most people prefer to age in their own homes, this client lived far away from his family, and at this stage in his life, he preferred to be closer to them; family was very important to him and he missed them very much. However, he was concerned: at this age and stage of life, would he be approved for a mortgage?

Here are the numbers:

• Client 84 years old
• Sold his existing property for $380,000 with a small mortgage of $80,000
• The purchase price of his new home was $420,000, but the bank was unable to qualify him for a conventional mortgage.
• Client was referred to me and we were able to qualify him for a CHIP Reverse Mortgage in the amount of $167,495.
• Client only needed $120,000 for the purchase but he took $130,000.

This client was very happy after his loan was approved. In fact, he went to the branch a couple of days after to make sure that the extra $10,000 that he had taken had been deposited into his account. As soon as it was confirmed, he withdrew $5,000, placed it in a Christmas card, sealed it and put it in his safety deposit box. He later told the banker that he was going to give the $5,000 to his grandson as a Christmas gift.

You see, my client’s grandson plays hockey and he had the opportunity to play in a tournament in Europe over the March Break, and it would cost $5,000 to get him there. At 84, my client wanted to make sure that the money was safely set aside should anything happen to him between May and Christmas, to ensure that his grandson would have the money to participate in this hockey tournament.

It was very important to him to be able to provide this gift to his grandson so that he could make a difference in his life. I am proud to have had the opportunity to help my client make this wish come true.

To learn more about how a CHIP Reverse Mortgage can help you or a loved one, contact the mortgage professionals at Dominion Lending Centres.

Courtesy of Liz Prendergast – HomEquity Bank, Business Development Manager