There seems to be some confusion about what it actually means to co-sign on a mortgage and you know that where there is confusion, your trusted mortgage professional seeks to offer clarity. Let’s take a quick look at why you may be asked to co-sign and what you need to know before, during, and after the co-signing process.

So why are you being asked? Last year there were two sets of changes made to the mortgage world which can likely explain why you are receiving this request in the first place.

The first occurred early in 2016 whereby the overall lending standards were increased in regards to an individual’s management of their credit and the resulting responsibility of Canada’s financial institutions to ensure they are lending prudently. We have seen an increase in requests for co-borrowers to help strengthen applications when credit or job stability is an issue.

The second happened just in October. A new ‘stress test’ rate applies which has especially impacted borrowers with less than 20% down. They must qualify at a rate of 4.64% though their actual interest rate is much lower. This has decreased affordability for many which means they could be looking for a co-borrower to increase how much home they can qualify for.

If it was me, I would ask questions as to exactly why the applicant needs a co-borrower. If it is a credit issue then you need to assess if that an acceptable risk. If it is a matter of not enough income, you need to assess that instead. What is the exit strategy for you all from this joint mortgage?

What can you expect? You will be required to complete an application and have your credit pulled. As you are now a borrower the banks will ask you for all the documentation that the main applicant has already provided. This can include but will not be limited to:

• Letter of employment
• Paystubs
• 2 years Notice of Assessments, Financial Statements and complete T1 Generals
• Mortgage statements on all properties you own
• Bank statements if helping with the down payment
• Property tax bills
• Lease agreements
• Divorce/separation agreement

So you get the idea. You are now a full applicant and will be asked for a whole bunch of paperwork. It is not just a matter of saying yes. Once the application is complete and all conditions have been met with the mortgage, you will have to meet with the lawyer as well.

What do you need to be aware of?

1. This is now a monthly liability according to the world. You will have to disclose this debt on all your own applications going forward. It can affect your ability to borrow in the future
2. Each lender is different in their policy as to how soon you can come off the mortgage. Familiarize yourself with this. Are you committing to this indefinitely or only for a couple of years?
3. Mortgages report on the credit bureaus so you could be adversely affected if there are late payments
4. If the main applicant cannot make the payment for whatever reason, you are saying that you will. Make sure your budget can handle that for a few months.

A few things you may want to consider if you do agree to co-sign:

• Ask for an annual statement to be sent to you as well on both the mortgage and the property taxes.
• Consider a joint account for mortgage payments so that you can check in every so often to ensure all payments are being made on time
• Talk about life insurance! If the worst occurs, then at least have enough of a policy in effect, with yourself as the beneficiary, to cover a year of mortgage, taxes and bills so that you are not hit with an unexpected series of expenses until the property sells.

So though you just want to help your loved one into their dream home, you are all better served if you know exactly what you are getting into and are prepared for the contingencies. We here at Dominion Lending Centres are ready to help!

Courtesy of Pam Pikkert, AMP – DLC Regional Mortgage Group

If you’re on the hunt for your first home and want to have a smooth and successful home purchasing experience avoid these common first-time homebuying mistakes.

1. Thinking you don’t need a real estate agent

You might be able to find a house on your own but there are still many aspects of buying real estate that can confuse a first-time buyer. Rely on your agent to negotiate offers, inspections, financing and other details. The money you save on commission can be quickly gobbled up by a botched offer or overlooked repairs

2. Getting your heart set on a home before you do your homework

The house that’s love at first sight may not always be what it seems, so keep an open mind. Plus, you may be too quick to go over budget or may overlook a potential pitfall if you jump in too fast.

3. Picking a fixer-upper because the listing price is cheaper

That old classic may have loads of potential, but be extra diligent in the inspection period. What will it really cost to get your home where it needs to be? Negotiating a long due-diligence period will give you time to get estimates from contractors in case you need to back out.

4. Committing to more than you can afford

Don’t sacrifice retirement savings or an emergency fund for mortgage payments. You need to stay nimble to life’s changes, and overextending yourself could put your investments – including your house – on the line.

5. Going with the first agent who finds you

Don’t get halfway into house hunting before you realize your agent isn’t right for you. The best source: a referral from friends. Ask around and take the time to speak with your potential choices before you commit.

6. Diving into renovations as soon as you buy

Yes, renos may increase the value of your home, but don’t rush. Overextending your credit to get it all done fast doesn’t always pay off. Take time to make a solid plan and the best financial decisions. Living in your home for a while will also help you plan the best functional changes to the layout.

7. Choosing a house without researching the neighbourhood

It may be the house of your dreams, but annoying neighbours or a nearby industrial zone can be a rude awakening. Spend time in the area before you make an offer – talk to local business owners and residents to determine the pros and cons of living there.

8. Researching your broker and agent, but not your lawyer

New buyers often put all their energy into learning about mortgage rates and offers, but don’t forget that the final word in any deal comes from your lawyer. As with finding agents, your best source for referrals will be friends and business associates.

9. Fixating on the lowest interest rate

Yes, a reasonable rate is important, but not at the expense of heavy restrictions and penalties. Make a solid long-term plan to pay off your mortgage and then find one that’s flexible enough to accommodate life changes, both planned and unexpected. Be sure to talk your your Dominion Lending Centres mortgage professional to learn more.

10. Opting out of mortgage insurance

Your home is your largest investment so be sure to protect it. Mortgage insurance not only buys you peace of mind, it also allows for more flexible financing options. Plus, it allows you to take advantage of available equity to pay down debts or make financial investments.

Courtesy of Marc Shendale, Vice President Business Development, Genworth Canada

While it’s certainly easy to be intimidated by the prices that you might see as you browse MLS into the wee hours of the night, mortgage interest rates are still at a historical low.  If you’re looking at purchasing for the first time, you’re thinking, “What does that mean?!”

With rates as low as they are, the cost of borrowing associated with your mortgage is lower than ever before.  You also need to look at other fees that can be tied to different mortgage products.  For example, some mortgages don’t allow for additional or increased payments, while others allow you to pay down your principal mortgage amount by up to an additional 20% per year, saving you money over the lifetime of your mortgage. It’s important to recognize and understand these options and fees, and that is where a Dominion Lending Centres Mortgage Broker comes in.  Brokers and their agents are experts in the products that they offer and will work to save you the most money.

Don’t worry!  A Broker can also help you take advantage of low interest rates as a homeowner, too!  It could be the right time to look at your other financials and consider consolidating other outside debts to take advantage of the savings that could be available to you.  It isn’t hard to see the savings between a balance owed on a credit card at 19% or the balance owing on your car at 6.25% and consolidating one (or both!) with your mortgage balance at much lower interest rate.  A broker can look at your current mortgage terms and timelines and can help you save a considerable amount of money each year!

A Mortgage Broker’s service doesn’t stop there.  Since the demand for new homes is so high right now, a Mortgage Broker will also help both first-timers and home-owners peeking around the markets with a pre-approval before you start considering making an offer on a new home. This means that you can confidently make an offer on the home that you love without making a condition on financing.  In a busy market, where purchases often end in bidding wars, having your financing in line could make your offer stand out against the rest.

Since properties are being scooped up like hotcakes, homeowners can also take advantage of selling their homes to downsize and save for retirement, or vacations, or spoiling their grandkids!

Now if you’d rather “love it” than “list it”, you can benefit from today’s high demand, too!  If you have been thinking about adding that basement bathroom, or are in need of upgrading your furnace and air conditioning units, a Broker can help you take advantage of the equity that you have gained in your home since you bought it.  In the last year, the demand for homes has soared, which means that your home could be worth a good chunk more than you might think.  Regardless of if your mortgage is up for renewal or not, a Mortgage Broker can help you make sense of the mortgage that you’re in, and look at payout options that could work in your favour.  And a mortgage evaluation will always be free with a licensed Broker.

Today’s market has a lot of characteristics that can work in your favour, but can also throw a little wrench in your plans.  Always make sure to sit down with a licensed, local Dominion Lending Centres’ Broker to make sure you’re armed with the knowledge that you need to get the most for your money!

Courtesy of Tracy Valko, AMP – DLC Forest City Funding

Most Realtors I speak with on a day-to-day basis have buyers starting to stack up like cordwood, and a very limited supply of properties to show said buyers.

Turns out the Pacific Ocean, US border, North shore mountains, and the ALR all remain intact. No expanded land supply in the Lower Mainland. Thus, no expanded supply of properties to market. Yet migration and immigration numbers remain strong, largely due to strong employment numbers and – despite the recent sub-zero temperatures – a pretty awesome climate in general.

Strong demand, strong employment numbers, and limited supply. Which leads to what in the months ahead?

Most likely it leads to several buyers feeling immense pressure to write subject-free offers. Perhaps the single worst idea in real estate.

Frankly, if the BC government truly wanted to do something to cool the market they would implement the same policy for used property transactions as exists on sales (and pre-sales) of brand new properties – a mandatory 7-day rescission period – a forced time of cooling-off during which one can get their finances in order, perform a property inspection, etc.

Think about this: In BC one cannot write a subject-free offer on a new build unit. And so there are no competitive bidding wars (lineups for three days in advance, yes, but risky binding contracts, no). In other words, the one type of property that presents the least risk – a brand new build subject to current building standards, fully inspected by the city, and covered under warranty… this is the one you cannot write ‘subject-free’ on.

Yet our policymakers think it is A-OK to walk across the street and write a blind-bid offer, perhaps paying 10% more than the next-closest offer, on a 100+ year-old house containing asbestos tiles, poly B piping, vermiculite insulation, knob-and-tube wiring, unauthorized renovations, work not done to code, etc.

Yeah, that’s totally cool. Go crazy.

If you are thinking that the industry loves this subject-free, rush closing date environment, you would be incorrect. Realtors, appraisers, lawyers, notaries, bankers and Dominion Lending Centres Brokers alike would all be quite happy to see some form of legislation implemented to slow buyers, and perhaps slow the market down in general. Removing the mechanism that creates this market madness would be applauded by all corners of the real estate industry.

A pre-approval is not worth the paper it is printed on, and once again this coming spring several buyers will succumb to the pressure to write subject-free offers based on a misunderstanding of how little validity a ‘pre-approval’ has. Hard lessons will be learned.

There is only one time that a buyer should even consider writing a subject-free offer, and that is when they have the capacity to close the purchase with cash. Otherwise, always insert into an offer a ‘subject to the buyer obtaining satisfactory financing’ conditions. Cover your buttocks.

Get ready for another rocking and raging spring market.

Courtesy of Dustan Woodhouse, AMP – DLC Canadian Mortgage Experts

Thinking of buying a property, but don’t know where to start? Well… that’s where a mortgage pre-approval comes in. Start here. Just like you wouldn’t go into a restaurant without having enough money to buy your meal, so you shouldn’t start shopping for a home without an understanding of how much you can afford. So let’s have a conversation about a mortgage pre-approvals so you can get this house hunting party started.

Although a pre-approval is the best way to get started, we have to be honest about what a pre-approval is and what it’s not.

NOT MAGIC. NOT BINDING.

Let’s start at the beginning and dissect the word pre-approval. Pre means before, in advance of, or prior to, and in this case means before the approval. A pre-approval is not an approval, let me say that again (in italics) for emphasis, a pre-approval is not the same as an approval. It’s not a guarantee of financing. it’s not magic, and unfortunately it’s not binding. There are a number of factors that come into play after the pre-approval is in place that can derail your dreams of homeownership.

• as a mortgage approval requires a property to be scrutinized, and a pre-approval doesn’t look at any property, it can’t be guaranteed.
• as your employment status can change after a pre-approval, all employment documents have to be verified as part of the approval process.
• a secondary credit report can be pulled by the lender or insurer after the pre-approval is in place, if there are discrepancies, they could decide not to proceed with financing
• mortgage rules can change and sometimes come into effect with no grandfathering.

SO WHAT GOOD IS A PRE-APPROVAL THEN…

A pre-approval is simply a formalized gathering of your ducks, and putting them in a row. It won’t guarantee you will get the mortgage, but it will certainly uncover any major obstacles that might be in your way. Consider a pre-approval a pre-screening, where we take a look at your employment, credit history, and your downpayment, and figure out the maximum mortgage amount you can qualify for. We will also have a look at all the mortgage options available to you on the market, so you can decide in advance what product meets your financing needs.

Obstacles, like what? Well, the truth is, you only know what you know, said in another way, you don’t know what you don’t know. Did you know that they figure about 10-20% of credit reports have some kind of error on them. By taking a look at your credit report as part of the pre-approval process (instead of when you have already found the house of your dreams), you have time to fix any errors before hand. This might not sound like that big of a deal, but it could be the difference between getting financing or not.

A pre-approval usually comes with a rate-hold, this is a good thing. Rates are like gas prices, they fluctuate and go up and down from time to time. As part of taking a preliminary look at your mortgage application, lenders will typically offer a rate hold for 90-120 days on a specific mortgage term. This means that if you find a property to buy in the allotted time, even if rates have gone up in the mean time, you will get the rate that was guaranteed. What happens if rates go down, well… you get the lower rate. It’s a win win.

IT’S A PROCESS

Buying a home is a process, a process that has a lot of steps that come into play. A pre-approval is one of the first steps you take. A pre-approval allows you to collect all your documentation ahead of time, handle any obstacles that may come up, have a look at your mortgage options, secure a rate hold, and will give you piece of mind as to the next steps in the process. Regardless if this is your first time buying a place or your twentieth, a pre-approval is the best place to start. Even if it doesn’t guarantee you will get the mortgage in the end.

So if you are thinking about buying a home, let’s get started, as we would love to help you secure a pre-approval. And if for some reason you are faced with some obstacles, we will help you get on track. Contact a Dominion Lending Centres mortgage professional today!

Courtesy of Michael Hallett, AMP – DLC Producers West Financial

So you have saved, and saved and you are finally ready to start house hunting…but before you do, there are a few things that you should be looking into BEFORE you start buying. Namely, your mortgage options. Did you know that there are various mortgage products? Or that each mortgage product has it own personality? They all do, and there is a mortgage product that is just right for you…we just have to find it first!

1. Understand your Expenses.

a. Do you know what you spend in a month? Do you have a monthly budget? With buying your new home, there are several associated costs that you should consider. These include the down payment, closing expenses, ongoing maintenance, taxes and utilities. If you have a budget, revamp it to maximize your saving. If you don’t have one, it is a simple thing to do! Track your spending by listing your household income and your expenses. This will give you what you spend in a month, how much you can save, and a guideline to follow.

2. Knowing your Job Stability

a. This is key to understanding and finding the right mortgage. You need to if you are in an in-demand occupation, or if your position maybe obsolete in a few years. You should also consider the length and term of your position—how long have you been there and how long are you planning to be there?

3. Consider your Limits

a. You and your Dominion Lending Centres broker need to understand what your payment and price limits are. This will determine if a fixed or variable rate mortgage is better for you.

b. You also need to know your amortization. This is the length of time that it will take for you to pay off your mortgage, based on the factors we previously discussed.

4. Know what you want in your home

a. To ensure that your home will grow with you consider these 4 questions:

i. Location: Are you close to the amenities you desire?

ii. Size: Can you comfortably accommodate your family and daily activities?

iii. Special Features: What do you want for added comfort & convenience in your home

iv. Lifestyle: Are you planning on adding to your family, or moving away soon?

Finally, and this is CRITICAL! Get PRE-APPROVED before you begin shopping for your new home. Know your financing, and what is available for you—this way you can shop stress free and you can negotiate for the home of your dreams!

Courtesy of Geoff Lee, AMP – DLC GLM Mortgage Group

One of the essential aspects of every mortgage application is the discussion pertaining to your down payment. Home purchases in Canada require a minimum down payment of your own funds to be put towards the deal. Your stake in the purchase. It is important that during the discussions with your Mortgage Broker that all the cards are on the table pertaining to your down payment. Be upfront about your down payment and where it is coming from. Doing so can save you time and stress later on in the process.

Most home buyers are aware that they will require a certain amount of money for a down payment. What many do not realize is that lenders are required to verify the source of the funds to ensure that they are coming from an acceptable source. Here are a few facts to keep in mind:

1. Lenders require a 90-day bank account history for the bank account holding the down payment funds. The statements must include your name, account number and statement dates.

2. A common hesitation that we often hear from clients is that their bank statements include a lot of personal details. As professionals, we completely understand our clients concerns pertaining to your personal information and we always ensure that information is protected. Statements provided with blacked out names, account numbers or any other details are not acceptable. Unaltered documents are a requirement of confirming the down payment funds.

3. All large or unusual deposits need to be verified to ensure the source of those large deposits can be confirmed and can be used towards the down payment.

• Received a gift from an immediate family member? Easy, Gift Letter signed.
• Sold a vehicle? Easy, provide receipt of sale.
• CRA Tax Return? Easy, Notice of Assessment confirming the return amount.
• Transfer of funds from your TFSA? Easy provide the 90-day history for the TFSA showing the withdrawal.
• Friend lent you money for the house purchase…. Deal Breaker.
• A large deposit into your account that you cannot provide confirmation for…. Deal Breaker!

4. You were told that your minimum down payment was 5%, great! However, did you know that you are also required to show that you have an additional 1.5% of the purchase price saved to cover closing costs like legal fees?

5. Ensure that the funds for the down payment and closing costs stay in your bank account once you’ve provided confirmation. Those funds should only leave your account when they are provided to your lawyer to complete the purchase. Lenders have the right to request updated statements closer to closing to ensure that the down payment is still there. If money is moved around, spent or if there are more large deposits into your account, those will all have to be confirmed.

The last thing that anyone wants when purchasing a property is added stress or for something to go wrong late in the process. Be open with you Mortgage Broker, we are here to help and to guide you through the process. Not sure about something pertaining to your down payment funds? Ask us. We are here to work you through the buying process by making sure you know exactly what you need to do.

Thinking about buying a home, rental or vacation property? Talk to a dedicated Dominion Lending Centres Mortgage Professional in your area to find out about what your down payment requirements will be.

Courtesy of Nathan Lawrence, AMP – DLC Lakehead Financial

Buying a home is a big step – a big, very exciting, potentially stressful step! How can you take the hassle out of the equation and keep your buying experience super positive? Easy… Surround yourself with a team of experienced professionals!

Many experienced realtors insist on starting your financing first, that’s where your Mortgage Broker comes in.

What is a Mortgage Broker? A Mortgage Broker is an expert in real estate loans that acts as a match-maker between home buyers looking for money and lenders with funds available to borrow. A broker will collect information from you about your employment, income, assets, loans and other financial obligations as well discuss your current budget, spending patterns and goals in order to get a thorough understanding of where you’re at and where you’d like to be. From here they assess the strengths and any weaknesses in your application and can advise on potential suitable financing options and any next steps you might need to take in preparing yourself for loan approval.

Talking with a Mortgage Broker before you start shopping is helpful for a number of reasons:

• You’ll develop a well-founded expectation of the price range and payments that you can afford.
• You’ll have a chance to address any potential gaps in your application for financing BEFORE you’re in a time crunch to meet deadlines for closing.
• Sellers may take your offer more seriously when you tell them you’ve been pre-approved for your financing putting you in a better position to negotiate (price, possession date, inclusions, other terms, etc).
• You and your Mortgage Broker will begin to compile your documentation so that your application is ready to go when you find the perfect home, leaving your mind free to start arranging furniture in your new place.

So why use a Mortgage Broker rather than your bank?

A Mortgage Broker has access to loans from a wide range of lenders. That means that you have more potential places to get approved, AND can take advantage of best products, top programs and lowest pricing!

A Mortgage Broker must complete a series of courses and pass the corresponding exams prior to obtaining a license to sell mortgages. In order to maintain that license a Broker must uphold the highest standards of moral, ethical, and professional conduct – including ongoing education and training.

A Mortgage Broker working with multiple lender options means that they truly SHOP for the best programs and rates for you based on comparisons and choices and don’t simply sell you the limited products they have to offer through a single bank source.

Mortgage Brokers work EXCLUSIVELY in mortgages so they are mortgage product specialists rather than banking generalists. Brokers deal with real estate transactions involving deadlines and conditions everyday as part of their job. They understand the urgency of meeting these commitments to ensure a successful transaction for everyone involved.

Learn more by contacting your Dominion Lending Centres mortgage professional today!

Courtesy of Mandy Reinhardt, AMP – DLC Canadian Mortgage Experts

First off, I’m sure some are saying what is Independent Legal Advice? ILA is just as it sounds – the need to seek independent legal advice. At Dominion Lending Centres, we always suggest that clients get ILA.

Many times especially, in private deals and builder mortgages, you will see that there is only one lawyer working for both parties. This means that the lawyer at some point must say to one of them, please be advised that should there be an issue with this file that I represent client A. Client B should then be aware that if he wants to make sure that he is being protected that he talk to another lawyer.

What is the difference between a Lawyer a Paralegal and a Notary Public?

First let’s look at the difference, first off, a lawyer is able to deal in all things pertaining to the laws of Canada in the province in which they are licensed. In real estate, they can do all the necessary steps including assisting a client in writing a real estate contract to representing them in court.

Paralegals do independent legal work under the general supervision of lawyers and that is the key difference, they can assist in just about every process that a lawyer might find themselves involved with but they are there to assist and not give legal advice.

BC Notaries are governed by the Notaries Act of BC and the discipline of their professional society. Today, the position of Notary as a member of one of the branches of the legal profession is sanctioned and safeguarded by law. BC Notaries are unique in North America, providing non-contentious legal services to the public. The definition of non-contentious is that it is legal work that relates to transactions occurring between one or more parties ie real estate. They are insured as we have learned lately from the case in BC but they cannot represent you in court as a lawyer would.

As you can see while there are several people who look like they can give Independent Legal Advice in the end only a lawyer can actually do that for you.

Courtesy of Len Lane, AMP – DLC Brokers For Life

We have all heard the horror stories about huge mortgage penalties. Like the time your friend wanted to refinance her home so that she could open a small business only to find out that it was going to cost her a $13,000 penalty to break her mortgage. This should not come as a surprise. It would have been in the initial paperwork from the mortgage lender and seen again at the lawyer’s office. A mortgage is a contract and when it is broken there is a penalty assessed and charged. You will have agreed to this. The institution that lent the money did so with the expectation that they would see a return on that investment so when the contract is broken there is a penalty to protect their interests. If you think about it, there is even a penalty to break a cell phone contract so the provider can recoup the costs they incurred so it stands to follow that of course there would be a penalty on a mortgage.

The terms of the penalty are clearly outlined in the mortgage approval which you will sign. The onus is on you to ask questions and to make sure you are comfortable with the terms of the mortgage offer. With so many mortgage lenders in Canada, you can very easily seek out other options if needed.

There are two ways the mortgage penalty can be calculated.

1. Three months interest – This is a very simple one to figure out. You take the interest portion of the mortgage payment and multiply it by three.

For instance: Mortgage balance of $300,000 at 2.79% = $693.48/month interest x 3 months or $2080.44 penalty.

OR

2. The IRD or Interest Rate Differential – This is where things get trickier. The IRD is based on:

• The amount you are pre-paying; and,
• An interest rate that equals the difference between your original mortgage interest rate and the interest rate that the lender can charge today when re-lending the funds for the remaining term of the mortgage.

In Canada there is no one size fits all in how the IRD is calculated and it can vary greatly from lender to lender. There can be a very big difference depending on the comparison rate that is used. I have seen this vary from $2,850 to $12,345 when all else was equal but the lender.

Things to note:

• You will be assessed the GREATER of the 2 penalties.
• You should always call your lender directly to get the penalty amount and do not rely on online calculators
• You can avoid the penalty by porting the current mortgage if you are moving or waiting until the end of the term
• A variable rate mortgage is usually accompanied by only the 3 month interest penalty

Given that 6/10 mortgages in Canada are broken around the 36 month mark, wouldn’t it be better to find out before you sign how your mortgage lender calculates their penalty just in case??…and the best way to get more information is to contact you local Dominion Lending Centres mortgage professional.

Courtesy of Pam Pikkert, AMP – DLC Regional Mortgage Group