In light of recent events in the news, it only seems natural to start talking environment. While there are those who still don’t believe in global warming, hard scientific data shows the seas are rising. Not only that, this trend will continue full steam ahead into the foreseeable future. So, whether you currently own waterfront property or are simply dreaming about it, there are real concerns to be aware of. Here I’ve compiled (almost) everything you need to know about global warming and waterfront property.
When we hear the term “flooding the market” we don’t normally associate it with tsunamis or soil erosion. But for coastal dwellers all over the world, this is reality. Just a few months ago The New York Times published an article on the perils of climate change for real estate. They didn’t mince their words either. In it, a number of economists reported their predictions. Primarily that “the economic impact of a collapse in the waterfront property market could surpass that of the bursting dot-com and real estate bubbles of 2000 and 2008.”
Yikes.
According to Coastal Zone Canada (CZC), over 7 million Canadians, or roughly 20% of us, live in coastal areas. This includes the Atlantic, Pacific, Arctic and Great Lakes. With more than 240,000 km of coastline, 70% of which is found in the north, Canada has more waterfront than any other country in the world. And, as the CZC points out on their website, human activity “many kilometres away can ultimately have profound effects on the coast.” Not only are coastal ecosystems exceptionally vulnerable to climate change and natural disasters, so are the livelihoods of those who make a living from their resources.
The Canadian Disaster Database reports that storm events causing “significant damage” are more common along the east coast than any other. Though there are no shortage of examples here in BC. In 2009, the Fraser Valley and Metro Vancouver suffered severe rainstorms for a period of 3 days in January. This caused flooding, mudslides and landslides that went on until the month’s end. Altogether, the estimated cost of damages was approximately $16.5 million.
But what does that mean for current or would-be waterfront homeowners?
Primarily designed to tackle sea-level rise and coastal flooding, recent BC projects have made steps in the right direction. These include upgrading Metro Vancouver’s dike system, and the placement of protective boulders off the coast of West Vancouver. As outlined in the Government of Canada’s Marine Coasts in a Changing Climate, coastal erosion and flooding has historically been combated by building seawalls and dikes. But if we are to truly adapt to a changing climate, we’re going to have to change our mentality as well.
WHAT THE FUTURE HOLDS FOR WATERFRONT PROPERTY

Adapting means using a combination of measures. For example, ‘soft-armouring’ is a term that refers to a number of less aggressive measures. This includes:
• Maintaining and restoring beaches, marshes and coastal vegetation: can help soften the blow from tides and storms.
• Restoration of salt marshes: work to halt soil erosion.
• Use of clean dredged sand to replenish protective beaches: preventing further erosion.
• Managed retreat: though usually a “last resort,” this option involves planned abandonment and gradual relocation of assets based on future risk assessment for natural hazards.
Soft-armouring is thought not only to be more efficient and less financially costly, but more sustainable over the long-term.
Gibsons, B.C. is an interesting example of a town following this protocol. It’s new development plans factor in both sea-level rise and the possibility of future flooding. If you are looking into waterfront property, it is essential to look into whether the area has a climate change program. A local government that understands what climate change is can make informed decisions with respect to real estate.
Also look into local regulations, bylaws, and zoning and building codes. See if there are policies to deal with infrastructure and vulnerability. This should include a plan for managing changes like ocean acidification, storm surges, adaptation and preparedness for coastal change. In your home structure it’s important to look into what your storm-water drainage system is capable of handling. Perhaps, look about 30 or 40 years into the future of the area. While you might not stay in the same home for all that time, it’s likely you will remain in the same community.
Adequate planning, preparedness and throwing your naiveté out the window is a good start. Because even when the biggest storm arrives, you will not be the one caught with your eyes closed.

Courtesy of Atrina Kouroshnia, AMP – DLC City Wide Mortgage Services

I recently read an article by Jamie Hopkins in Forbes magazine, entitled “Americans Don’t Even Know What Their Most Important Retirement Asset Is.”
The article highlighted three common misconceptions about reverse mortgages and unsurprisingly, they are prevalent in Canada as well as in the U.S.
Top 3 misconceptions about Reverse Mortgages:
1. The bank owns your home.
2. Your estate can owe more than your home
3. The best time to take a Reverse Mortgage is at the end of your retirement

Let’s examine each misconception in more detail.

1. The bank owns your home.
Over 50% of Canadian homeowners over the age of 65, believe the bank owns your home once you’ve taken a reverse mortgage. Not true! We simply register our position on the title of the home, exactly the same as any other mortgage instrument, with the main difference in the flexibility of not having to make P&I payments on the reverse mortgage.
2. Your estate can owe more than your home.
A reverse mortgage, unlike most traditional mortgages in Canada, is a non-recourse debt. Non-recourse means if a borrower defaults on the loan, the issuer can seize the home asset, but cannot seek any further compensation from the borrower – even if the collateral asset does not fully cover the full value of the loan. Therefore, when the last homeowner dies (and the reverse mortgage is due), the estate will never be responsible for paying back more than the fair market value of the home. The estate is fully protected – this is not the case for almost any other mortgage loan in Canada, which is full recourse debt. So read the fine print the next time you offer to co-sign for a loan for mom!
3. The best time to take a Reverse Mortgage is at the end of your retirement.
This is a common mistake that reflects an “old-school” financial planning mentality. For the majority of Canadians (without a nice government pension), the old school financial planning mentality is about cash-flow, and is as follows:
a) Begin drawing down non-taxable assets to supplement your retirement income.
b) Once your non-taxable assets are depleted, begin drawing down more of your registered assets (RSP/RIF) to supplement retirement income.
c) Once your registered assets are depleted, sell your home, downsize and re-invest to generate enough cash-flow to last you until you die.
The problem with the “old-school” financial planning model is two-fold:
1. 91% of Canadian seniors have no plans to sell their home (CBC News “Canadian Boomers Want To Stay In Their Homes As They Age).
2. You are missing out on a huge tax-saving opportunity by not taking out a reverse mortgage in the beginning of your retirement.
“Research has consistently shown that strategic uses of reverse mortgages can be used to improve a retiree’s financial situation, and that reverse mortgages generally provide more strategic benefits when used early in retirement as opposed to being used as a last resort.” – Jamie Hopkins, Forbes
In Canada, a reverse mortgage can be set-up to provide homeowners with a monthly draw out of the approved amount. For example: client is approved for $240,000 and decides to take $1,000/month. This is deposited into the clients’ bank account over the next 20-years. Interest accumulates only on the amount drawn (ie: not on the full dollar amount at the onset).
This strategy allows clients to draw down less income from their registered assets to support their retirement lifestyle. In turn, this can create some excellent tax savings, since home equity is non-taxable. Imagine lowering your nominal tax bracket by 5 – 10% each and every year over a 20 year period? The tax savings can be huge. You are also able to preserve your investable assets, which historically, can generate a higher rate of return when invested over a greater period of time.
In summary, Canada and the U.S. both have aging populations and both have misconceptions about reverse mortgages. Learning about these misconceptions will allow you to offer your clients the best advice on how to balance retirement lifestyle and cash-flow, with the desire for retirees to age gracefully within their own homes. If you have any questions, please contact your local Dominion Lending Centres mortgage specialist.

Courtesy of Roland Mackintosh, Business Development Manager with HomEquity Bank

Mortgage brokers have a reputation as superheroes. Although we cannot leap tall buildings in a single bound we can do extraordinary things.
Is the down payment money coming from outside of Canada? I had a client who had a joint account with her father in Japan. She showed me bank statements with the money in the account and leaving Japan. I had another bank statement showing the funds coming into her Canadian account. Finally I showed the foreign exchange rate for that day from Yen to CAD. The bank accepted this as a suitable paper trail.
An unusual down payment source? I had a client who sold his vintage Cadillac for his his down payment. A copy of the registration, the bill of sale and a bank statement showing the funds going into his account was deemed fine by the bank.
Is your down payment coming from multiple sources? I recently had two brothers purchasing a home together. They both had their money in RRSP’s and TFSAs. It took some explaining but we were able to show all the down payment and closing costs coming from four different sources.
Several years ago I had a client defaulting on two mortgages. Foreclosure was just days away.
I was able to consolidate the two mortgages, pay them out and get a reasonable payment schedule for one year. After the year , I moved him to a regular lender and arranged for a line of credit so that he could pay for some home renovations with a low interest rate secured against his home.
I had a couple who wanted to buy a home. The husband had had a business failure and it had affected his credit. I could only use the wife’s credit and her income for this purchase. She was a foster mother with six children. Her income was good but not high enough. I was able to get the lender to gross up her income by 25%, as her income was tax free. This was enough for them to buy a large home for the couple and their foster children.
Small towns can also pose unique problems. I had a client who wanted to refinance his home. I checked his credit report and found a credit card that he did not have. He told me that there were five people with his name in this small town. He also revealed that he had an account at Home Hardware that was not reporting on the credit bureau. The manager was a friend and thought that the loan would hurt his credit so they made an informal arrangement to pay it off.
Did I mention that he had three jobs? He worked as a tire installer, and invoiced the company from his firm. I was able to get a lender to accept this client his varied income and got the mortgage . Come to think of it , perhaps mortgage brokers are superheroes. If you have a difficult situation the best person to speak to is a Dominion Lending Centres mortgage professional, if it can be done legally, a broker can do it.

Courtesy of David Cooke, AMP – DLC Westcor

The following is from an interview with HGTV’s Bryan Baeumler for the Summer issue of Our House Magazine. Baeumler has called the state of the prime minister’s residence in Ottawa a national embarrassment, but successive occupants have been wary of a backlash should they launch an expensive rebuild. Baeumler thinks it can be done for a fraction of the cost cited.

Over the last decade as Canada’s No. 1 do-it-yourself builder, Bryan Baeumler has proven he’s not afraid to tackle a difficult renovation or build. But there’s one address even he might have to think twice about before getting his hands dirty.

For years, 24 Sussex Drive in Ottawa, better known as the official residence of the prime minister, has been in disrepair and in need of a complete makeover. And Baeumler hasn’t been shy to offer his opinion about the Canadian version of the White House. During a television interview, he called the home an “embarrassment.” The comment may have made some waves, but he isn’t about to walk it back. And he has the knowledge to back it up.

He’s talked to prime ministers and their families who have lived there and understands the history behind the home. As he explains, it wasn’t originally built for the leader of the country and during a massive renovation years ago, much of the heritage was stripped away. Also, the home is filled with asbestos and the heating and ventilation systems are inefficient.

While 24 Sussex may desperately need a little more than hammer and nails, Baeumler believes politics has left the residence in its shabby condition. Successive prime ministers have been reluctant to be the one to spend the money needed to make the home livable.

“The guy that’s in there that pulls the trigger and says, Let’s fix my place up,’ he’s going to get roasted and I think that’s an asinine and immature way for our political system to operate,” Baeumler says. “I think it’s the wrong view for Canadians to take. It’s not the prime minister’s house, it’s owned by Canada. To me it’s not political, it’s a piece of our Canadian infrastructure the government and people of Canada own. It’s a dump, so let’s put it out to a couple architects to rebuild it.”

He also suggests the cost doesn’t need to be in $1,500-per-square-foot range that’s been floated around. Instead, he believes it can be done properly for about $300 to $400 a square foot.

So is he the right guy to take on the job? While he admits it would be a cool project, he says there are other talented builders in the country who could do a great job.

“I like a challenge,” he says. “My favourite jobs are where we go into an old heritage home built on a stone rubble foundation that is in imminent collapse as possible and restructuring that thing and turning it back into something that’s a work of art. That’s the kind of stuff I would love to work on. Twenty-four Sussex is a home like that, but I think there’s much more interesting properties in Canada for sure.”

Courtesy of Jeremy Deutsch, Lead Writer – Dominion Lending Centres

Some of you are going to ask what is a ARM and VRM? These two acronyms are mortgage speak for adjustable rate mortgage and variable rate mortgage. These two mortgage products are both based on the prime rate of interest, in most cases this is 2.70% at the bank. TD chose to be higher by .15% at 2.85%, so it isn’t controlled by the Bank of Canada. It is an individual financial institution policy.

With the Bank of Canada hinting strongly at moving up the interest rate, most likely by .25%, we will see an increase in the prime rate most likely to 2.95%. If you have an adjustable rate mortgage then you will see your monthly payment increase to match this new rate. So an Adjustable Rate Mortgage moves up with prime and you continue to gain ground by making your payments.

Variable rate mortgage is different. The VRM works like this, your monthly payment will stay the same but you will now be paying less to principal and more to interest. Not a good scenario if you are trying to pay down your mortgage and gain some equity. In this changing market, we suggest that you review the scenario with your lender and make sure that you are keeping up with gaining on your mortgage. The other scenario can also be that if you don’t adjust your payment that you could end up paying only interest and not be paying down the principal at all. And remember, a Dominion Lending Centres mortgage specialist can help answer any questions you have.

Courtesy of Len Lane, AMP – DLC Brokers For Life

Parents are always worried about something with their children, and where they are going to live and how they are going to afford it is no exception.
The bank of mom and dad is a common source of down payment for their children, and the strategy continues to grow with the significant rise in prices and wage gap growing in today’s marketplace.
For example, some people in the upper middle class are buying properties for their kids and grandkids and the benefits are multifaceted: they generate income now, while someone else pays the mortgage (a tenant) and the value increases.
The families can then refinance at a later date and gift some equity that was pulled out what was essentially paid for by a tenant and continue generate income to assist with retirement, since a lot of these homeowners don’t have the company pensions that were available a generation ago. However, even this group feels they are in crisis by not having enough cash flow to save for retirement. But with the above strategy, essentially your downsized home was purchased early with the basic principal of time working in your favour to get further ahead financially so everybody wins without sacrifice in this scenario.
Our demographics are changing rapidly and this is something that is motivated by families who want to keep their children close to them and hope to have them enjoy the same lifestyle they have created. The majority of Canadians implementing these strategies are households earning $200,000 a year and have a net worth of over $2 million, including real estate.
The amount parents have gifted their children has changed dramatically with the inflation changes over the years. In the 1980s, a gift for a down payment averaged $10,000, but today that amount is between $200,000 and $500,000!
According to mortgage insurer Genworth Financial, 40 per cent of first time homebuyers in Vancouver had help from their parents, compared to 22 per cent in the rest of Canada.
These strategies are often not commonly considered and depending on the mortgage-provider choices you make early on, having a provider like a Dominion Lending Centres mortgage professional who focuses on these wealth building strategies will help you avoid missing opportunities.
Anybody can get you a mortgage, however, a proactive provider can assist you and show you what the wealthiest Canadians are doing so you don’t not miss opportunities.

Courtesy of Angela Calla, AMP – DLC Angela Calla Mortgage Team

You have a family member that doesn’t qualify for a mortgage on their own and needs a co-signor. Since you’re a nice person, and of course would like to see your son/daughter/parent/sibling in a better position, you agree to co-sign for the mortgage.

If I had a dollar for anytime I’ve heard the phrase “but I’m only co-signing right, they can’t come after me for the money or touch my house?” I’d be rich!

There are many common myths around co-signing. Here’s only a few and the truths associated with each one…

• I’m only co-signing for my family member to get the mortgage and that I won’t have to ever make payments. False: You are equally responsible for making the payment on the mortgage. If the borrowers default, you will be required to pay.
• I can’t be sued for non-payment since it’s not my mortgage. False: The lender has all legal collection methods available to them to collect payment from you, including obtaining judgment in court and possible garnishment of wages and bank accounts.
• The bank can’t take my house if the borrower loses theirs. False: As per the second myth above, judgment action can also involve seizure and sale of any of your assets including and not limited to your own home.
• I’m only a co-signor or a guarantor so I’m protected from not having to pay. False: Whether you are the borrower, co-signor, or guarantor, you are fully responsible for the debt.
• Co-signing on this debt won’t affect my ability to obtain credit in the future. False: Not only will you legally have to declare the co-signed debt when you apply for credit, but also most lenders in Canada are now reporting to the credit bureau and it will appear when you apply. Either way, the mortgage payment must be factored into your debt service ratio.
• Since this is only a five-year term, I am automatically released from this mortgage in five years. False: Regardless of term, you remain on the mortgage until it is paid in full or released only with approval from the lender.

Here’s a few tips and questions to ask before agreeing to co-sign on a mortgage…

• Know the borrowers’ situation. What is there credit like? Are they drowning in debt? Why exactly is a co-signor required?
• Is there an exit strategy to have your name released and how long will that take?
• Add your name to title of the property so that the borrower cannot add a second mortgage to it. This is an asset that you have an interest in and therefore should protect it.
• Get independent legal advice about your obligations as a consignor.
• Be prepared to make the mortgage payments of the borrower doesn’t.
• Don’t be afraid to say no to co-signing if it doesn’t feel right.

Knowledge of the borrowers situation, your obligations, and potential ways to protect yourself (and of course setting emotions aside) is the best advice for anyone co-signing. And if you have any questions, please contact your local Dominion Lending Centres mortgage specialist.

Courtesy of Sean Binkley, DLC Key Mortgage Partners

Thinking about buying your first home?

The race to home ownership is more like a marathon than a sprint: diligent planning, pacing and strategy are the keys to success. Are you ready to approach the starting line? Here are five ways to shape up and boost your financial fitness so you’re set for success.

1. Check your credit score
First things first: order a copy of your credit report and credit score. Your credit score, which is calculated using the information in your credit report, is what lenders look at when considering you for a mortgage. Your score impacts whether or not you get approved and what interest rates you’re offered.

2. Reduce (or eliminate) credit card debt
Ideally, your credit card balance should be zero. But if, like 46% of Canadians, you carry a balance each month, make it your priority to chip away at it. You’ll boost your credit score while reducing the amount you’re paying in interest, freeing up more cash for saving and investing.

Use one – or, better yet, both – of the following strategies to make a dent in your debt:

• Make more money (i.e., take on a side gig, work overtime hours, pick up odd jobs)
• Save more money (i.e., sacrifice your satellite TV package, swap your gym membership for running outdoors, cut back on eating out)

3. Bulk up your savings

Now’s the time to save aggressively, stashing that cash in a registered retirement savings plan (RRSP) or tax-free savings account (TFSA). Use automated savings to ensure that money goes straight from your checking account to your savings, investment accounts or both.

Remember: As a first-time homebuyer, you can withdraw money from your RRSP to put toward a down payment. (Generally, you’ll have up to 15 years to pay it back into your RRSP.)

4. Stick to a budget

As points 2 and 3 illustrate, getting financially fit takes determination and commitment. It can feel less overwhelming when you’ve got a snapshot of goals and actions right at your fingertips. Sit down with your partner to create a monthly budget. And stick to it.

A smartphone app can be a game changer in keeping you organized, accountable and on track with your financial fitness plan.
5. Keep your eyes on the prize

Stay inspired, motivated and positive by remembering why you’re working so hard to boost your financial fitness: to buy your first home!
Crunch preliminary figures online to come up with ballpark estimates on how much home you can afford.
Raise your real estate IQ by watching HGTV shows, researching neighbourhoods, perusing listings and attending open houses.
That will make you a more educated shopper once you’re ready to enter the market qualified with a mortgage pre-approval. Do your research now, so you can hit the ground running when you’re ready to buy. And if you have any questions, please contact your local Dominion Lending Centres mortgage specialist.

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

This is the fourth part of a series by Pam Pikkert of things the average mortgage professional wished people knew so that they would not be held back by inadvertent missteps.

Life can go sideways and that is a fact. Illness, divorce, death, longest recession in 30 years or whatever the cause is, before you know it you can find yourself with an awful credit rating and are unsure of what to do. These are the things we mortgage professionals wished you knew.
1. Even though a company has written off a debt, you still have to clear it up. You will be unable to get a mortgage in place until all outstanding debts show as settled with a balance of $0. That can happen through negotiations and payment directly with the company, through an orderly payment of debts or through bankruptcy. We would advise extreme caution when it comes to anyone promising they can rebuild your credit immediately for a price.

2. You need to re-establish your credit as soon as you can. The magical number in the mortgage universe is 2. You need to get two types of credit for two years with each a minimum balance of $2,000. The clock starts counting on the date of bankruptcy discharge or OPD settlement.

3. If there was a foreclosure in your past, you are going to have a very hard time getting a mortgage. No mainstream or near prime lenders will consider this type of an applicant anymore which would leave your only option a private lender where you will pay higher interest rates. If you think you are heading towards this, then call a mortgage professional ASAP. There are investors out there willing to buy you out and wait to turn a profit when the market turns. Alternately, you could work out a deficiency sale with your mortgage lender and/or mortgage insurer which will allow you to purchase in the future.

4. After a bankruptcy or OPD, you cannot have ANY late payments. Not a single one. The lenders will accept that you were hit with a life event but you have to prove it will not happen again. Even one late payment on your cell phone is reason for a decline. The onus is on you to show them it will never happen again.

5. You can purchase a home with 5% down after you have properly established your credit again. Make sure you have the two credit types reporting as above first of all. The next step is to save. You are going to need the 5% to put down plus be able to show you have 1.5% for the closing costs and then you should also have an additional 3.5% in savings to show you have a fallback position in case you are struck by life again. The lenders and mortgage insurers really like to see that.

So it will not be easy but it is possible and the sooner you start the sooner you can buy a new home. Call your Dominion Lending Centres mortgage professional today to get an action plan in place.

Courtesy of Pam Pikkert, AMP – DLC Regional Mortgage Group