You may have heard that rates are changing, and that is true. They don’t call it war for nothing and you need an expert by your side!

Think of mortgage brokers as your loyal soldiers. What we are seeing is exactly what we anticipated when prime rate goes up and discounts go down. Confused? Don’t be, variable rates are based on prime and both Bank of Canada Prime and Bank Prime are different.

What the new discount means is what it means – they anticipate prime to go up higher.

With current regulations, borrowers qualify for more mortgages on a variable rates! This is a shift from the previous policy where more Canadians were having to take fixed rates to qualify for the most.

These new discounts on new mortgages getting taken out there discount is lower off of the bank’s prime rate- this does not apply to an existing mortgage

Did you notice earlier I said the bank’s prime rate, you would think they are all the same… right?

This is not the case. In November of 2016 one Canadian lender broke the trend of their counterparts and raised their internal prime to immediately impact their existing customers by adding to their amortization. This discount below was for new clients they increased the discount so it looked bigger.

It’s important to note – each lender has unique criteria to be met to get these offers: some only for purchases, some only with switches, some only certain amortizations, and some only certain property types. The list goes on!

Remember your broker shops all these lenders without bias, while protecting your credit score to assist you in finding the best one. It’s important that we evaluate the following criteria with these lenders- here is an example of three lenders:

Lender one

Bank has a higher Prime than anyone else
No change to payment
Increases amortization which can put into effect a trigger clause- cash call in on mortgage or forced pre-payment and other costs such as appraisal at your expense
Not portable
Does have a 12 month penalty payback if getting a larger mortgage at new rates! Best one!
Have to go to branch to lock in and then be subject to their IRD (usually 3-5% of balance pending where you are in your term).
Based on history this lender is generally the first to raise their rates and last to decrease

Lender two

Prime rate consistent with all lenders
Change to payment so amortization doesn’t increase
NO trigger clause
Have to go to branch to lock in and face large IRD between 3-5%
Not portable but will refund you within 6 months if the mortgage is larger and will get rate available at that time

Lender three

Prime consistent with all lenders
Change to payment so amortization doesn’t increase
NO trigger clause
lender will pay back penalty within 3 months of getting a larger mortgage with them
your mortgage expert can assist you with lock in
If you lock in they have the lowest penalties in the country to break your mortgage in the future, generally 1-1.5% of the balance
With seven-in-10 mortgages breaking before the term is over, this should be weighted very carefully.

Let me demonstrate the following:

A mortgage that gets locked in with first or second lender above at $500,000, by the third year the cost to break a mortgage will be between $15,000 and $25,000. With the third lender the cost would be between $5,000 and $7,500.

What to do with this info?

These new wars apply to new mortgages. If you have a mortgage with a discount less than .50, a renewal upcoming, looking at accessing your equity for home renovations or to consolidate debt and you have a variable rate, it may be time to run the numbers to see if taking a new variable rate mortgage is beneficial for you. One of the significant benefits of having a VRM is to get out at any time with only three months interest penalty (unless a restrictive product was taken for a better rate or had a sale only clause).

As you can see we have only scratched the surface in terms of the differences. There are many other differences and mainly you have to consider as a consumer, do you want to be calling a bank branch and play Russian roulette with the education level and sales goals of the person who guides you through deciding what to do with your biggest asset? Or would you rather have a Dominion Lending Centres mortgage professional who is in the front lines proactively guiding you and assessing the economic factors to give you personalized advice based on their experience and knowledge of the mortgage industry.

Depends on what you value most!

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

So, you found your dream home, negotiated a fair price which was accepted. You supplied all the needed documentation to your mortgage broker and you are waiting for the day that you go to the lawyer’s to sign the final paperwork and pick up the keys.

All of a sudden your broker or the lawyer calls to say that there’s a problem. How could this be? Everything has been signed and conditions have been removed. What many home buyers do not realize is that your financing approval is based on the information the lender was provided at the time of the application. If there have been any changes to your financial situation, the lender is within their rights to cancel your mortgage approval. There are 5 things that can make home financing go sideways.

1 Employment – You were working for ABC company as a clerk for 5 years making $50,000 a year and just before home possession you change jobs. The lender will now ask for proof that probation for this new job is waived and new job letters and pay stubs at the very least. If you change industries they will want to see more proof that you are capable of keeping this job.
If your new job involves overtime or bonuses of any kind that vary over time, they will ask for a 2 year average which you will not be able to provide.
Another item that could ruin your chances of getting the mortgage is if you decide to change from an employee to a self-employed contractor just before possession day. Even though you are in the same industry, your employment status has changed . This is a big deal killer.

2. Debt – A week or two before your possession date, the lender will obtain a copy of your credit report and look for any changes to your debt load. Your approval was based on how much you owed on that particular date. Buying a new car or items for the new home need to be postponed until after possession of your new home.
Don’t be fooled by “Do not pay for 12 months” sales campaigns. You now owe this money regardless of when the payments start. Don’t buy a new car and don’t buy furniture for the new home. This will increase your debt ratio and can nullify your financing.

3. Down payment source – And yet again I reiterate that the approval is based on the initial information you have provided. You will be asked at the lawyer’s office to verify the source of the down payment and if it is different than what the lender has approved, then you may be in trouble. For example, you said that you were going to save the funds and then at the last minute Mom and Dad offer you the funds as a gift. There’s no problem accepting the gift if the lender knows about it in advance and has included this in their risk assessment, but it can end a deal.

4. Credit – Don’t forget to make your regular credit card payments. If your credit score falls due to late payments, this can kill your financing. If you have a high ratio mortgage in place which required CMHC insurance, a lower credit score could mean a withdrawal of their insurance once again , killing the deal.

5-Identity Documents – This can be a deal killer at the lawyer’s office. The lawyer is required to verify your identity documents and see that they match the mortgage documents. Many Canadians use their middle names if they have the same name as their parent. Lots of new Canadians adopt a more Canadian sounding name for their day-to-day lives but their passports and other documents show another name.

Be sure to use your legal name when you apply for a mortgage to avoid this catastrophe .

Courtesy of David Cooke, AMP – DLC Clarity Mortgage

Nearly half of all existing mortgage in Canada will be up for renewal in 2018. Stated in a Financial Post article by Armina Ligaya, CIBC Capital Markets estimates 47% of all existing mortgages will need to be refinanced in 2018. All of this coming on the heels of rising interest rates and changes to key mortgage regulations.

With this renewal number hovering around 50%, almost double from previous years, big banks will be fighting hard to keep their clients and handle their mortgage- as they should. However, is staying with the bank you got your mortgage with 1, 2, 3, even 5-years ago in your best interest?

Think of the rising housing prices, the rule changes to back-end insured mortgages, the multiple stress tests as well as the implementing and removing of programs such as the B.C. Home Partnership Program. All of which has just happened in the past couple of years.

With all these changes, should you not be speaking with a licensed mortgage broker to determine what is in your best interest?

The options that are available through other lenders can be quite advantageous. From opening up Home Equity Line Credits with a big bank, to Manulife One Account access and the lowest interest rates available on Switch Mortgages where lenders will help compensate the administrative costs.

One of the more common scenarios we are seeing is people upgrading their homes with marriage, children, or promotions/relocation with work. Clients know it is happening in the near future but do not have an exact timeline. Wanting a 5-year fixed mortgage but worried about the possibility of upgrading after just 2-years, we usually suggest working with a Monoline Lender. Sticking with a Big Bank like CIBC or RBC and having this scenario happen could potential result in penalties of $10,000-$15,000 where that same penalty might only be $3,000 with a Monoline Lender.

It is always best to consult with a Dominion Lending Centres mortgage broker before signing your bank’s renewal letter. We offer free pre-qualifications, no client-relationship contracts, and credit assessments to see your eligibility on receive A-Rates, all without your credit score taking a hit.

Courtesy of Ryan Oake, AMP – DLC Producers West Financial

Have you spoken to a mortgage broker lately? When it’s time to renew your mortgage you have the freedom to do a number of things that are not possible at any other time without a financial penalty. Renewal time is an opportunity.

Have you looked at your mortgage amortization lately? Let’s say that you started your present mortgage 10 years ago and you had a 30-year amortization. You now have 20 years left on your mortgage but your situation has changed. Your children have grown up and one is ready to leave for college and another one will follow in a couple of years. An easy way to help the kids out would be to refinance your home. However, the rules have changed and if the value of your home has not risen a lot and you have not paid down the balance, you may not have the 20+% you need to withdraw the equity.

Another possible solution would be to use the amortization on your mortgage to help you achieve your financial goals.
You can extend the amortization and lower your monthly payments thus freeing up cash flow.

Here’s an example. With a balance of $400,000 on your mortgage:

By adding 5 years to your mortgage you can lower your payments by $320 a month. If that’s not enough and you have more than 20% equity , in other words, your mortgage is less than 80% of the value of the home, you can extend your mortgage to 30 years with most lenders.

This will free up $520 a month. When your children graduate you or your mortgage broker can contact the lender and have your amortization lowered again. Note that changing the amortization can result in costs.

Courtesy of David Cooke, AMP – DLC Clarity Mortgages

After several years as a home owner, my friend was set to buy the home of his dreams. He always wanted to own an acreage outside of town. He had visions of having a few animals, a small tractor and lots of space.
As a person with experience buying homes, he felt that he was ready and that he knew what he was getting into. Wrong. As soon as you consider buying a home outside of a municipality there are a number of things to consider, not the least being how different it is to get a mortgage.

Zoning – is the property zoned “residential”, “agricultural” or perhaps “country residential”?

Some lenders will not mortgage properties that are zoned agricultural. They may even dislike country residential properties. Why? If you default on your mortgage the process of foreclosing on an agricultural property is very different and difficult for lenders. Taking a farm away from a farmer means taking their livelihood away so there are many obstacles to this.
If you are buying a hobby farm, some lenders will object to you having more than two horses or even making money selling hay.

Water and Sewerage – if you are far from a city your water may come from a well and your sewerage may be in a septic tank. A good country realtor will recommend an inspection of the septic tank as a condition on the purchase offer. Be prepared for the inspection to cost more than it cost you in the city. Many lenders will also ask for a potability and flow test for the well. A house without water is very hard to sell.

Land – most lenders will mortgage a house, one outbuilding and up to 10 acres of land. Anything above this amount and it will not be considered in the mortgage. In other words, besides paying a minimum of 5% down payment you could end up having to pay out more cash to cover the second out building and the extra land being sold .

Appraisal – your appraisal will cost you more as the appraiser needs to travel farther to see the property. It may also come in low as rural properties do not turn over as quickly as city properties. Be prepared to have to come up with the difference between the selling price and the appraised value of the property.

Fire Insurance – living in the country can be nice but you are also far from fire hydrants and fire stations. Expect to pay more for home insurance.

Courtesy of David Cooke, AMP DLC Clarity Mortgage

For Arthur Dubreuil, the recent purchase of his new house will sound like a similar story for many homebuyers. Looking to upsize to meet the needs of his growing family, the Toronto area resident looked east outside the city for a more affordable option. What he found was a perfect affordable 2,000 square-foot home on an acre of land in the community of Cobourg, Ont.
“The price point and what you get for the value moving out of the city… we couldn’t have something like that in the city,” Dubreuil said. So when it was time to get financing, he turned to a trusted source, a Dominion Lending Centres mortgage professional he used in the past.

With the help of a mortgage broker, Dubreuil was able to move in to his new home at the beginning of the year. And with a three year-old son getting ready to start school soon, he figures his family will be in their new home for many years to come.

Q: Why did you chose a mortgage broker?
A: I got pre-approved at the bank before I did anything. The interest rates were higher with the bank then by choosing my mortgage broker. I used my broker prior with my last home when I got my first mortgage. It seems like things are a lot clearer using a broker rather than using a bank. They’re [the banks] not very forthcoming. When I went to the bank they were telling me all these different things, basically the mortgage and rate were not negotiable. My broker found me the cheapest rate he could find. He actually got me a better rate.

Q: How was your experience working with a mortgage broker?
A: It was good. I had no issues, everything was professional. He was very straightforward with me, especially when it came to details about buying a house. Especially with these new rules and regulations put in place. He talked me through what my options were, and it worked out well.

Q: What advice would you give someone I your situation?
A: I just gave my buddy some advice, he’s doing the exact same thing but buying his first home. I told him everything you need to do. Clear away any debts and speak to everybody before you actually make a choice of what you want to do and get a mortgage. Go through your options rather than not. A lot of people just stick with the banks because they’re big and they’re trusted.

Courtesy of Jeremy Deutsch – Lead Writer, Dominion Lending Centres

Fake(ish) News: ‘Mortgage Rates Went Up Last Week

Real News: On April 27th TD increased their ‘posted rate’.

What’s a posted rate?

It’s the list price, the MSRP — you know that price that nobody actually pays…’rack rates’.

Posted is not Prime, Prime is not Posted – there is no connection between Posted and Prime.

So, what’s it mean to you?

Not much if you are in an existing mortgage. It’s really only relevant in two situations: you are either trying to qualify for a new mortgage (that just got a bit trickier) or you are breaking a fixed-rate mortgage early (as 60% of Canadians do) and well, you will now face an even larger prepayment penalty – interesting how the banks control that.

The unaffected: Variable-rate mortgage holders. There is no change to variable rates, and no change to variable rate product rock-bottom prepayment penalties.

Onward.

Courtesy of Dustan Woodhouse, AMP – DLC Canadian Mortgage Experts

Refinancing a home is one of those things where people understand what it is but have trouble explaining how it works. To put it simply, refinancing your home allows you to access the equity you have built up, by changing the mortgage amount.

Let’s say you bought a $300,000 condo and you paid 20% ($60,000) as your down payment and had a mortgage of $240,000. Over the next 4 years, you continue making payments and pay down the $240,000 you owed and now that amount is only $230,000. Your mortgage is up for renewal in a year, but you want to do some renovations and you need to access the equity in your home- this is where a refinance could come into play.

What this means is you will get an appraisal of your current home and submit that to a lender. Let’s say your $300,000 condo is now worth $350,000 and you owe $230,000. You have built up an additional $60,000 in equity ($350,000 – $230,000 owing – $60,000 initial down payment= $60,000). You have a mortgage of $230,000 on a home worth $350,000, therefor your equity in the home is $120,000.

To access that $120,000, you can refinance your mortgage. So let’s say you want to go back and take $50,000 from the $120,000 you have built up. Your new mortgage would go from $230,000 to $280,000, and that $50,000 is going to go from the lender to you. You are borrowing money from the lender, but adding that money back on top of your mortgage.

This is why people will refinance their home to make larger purchases. The bank will lend you the money now and get it back in the future, plus interest, because it is being added to the mortgage.

This is just one way people are able to use their home to access cash. Other ways people can do this, especially if they are looking to complete renovations, is through home equity lines of credit, collateral charges, and purchase plus mortgages. Knowing this before you buy can be extremely beneficial.

Courtesy of Ryan Oake, AMP – DLC Producers West Financial

What do you do when you’re tired of the 9-5 daily grind and want to strike out on your own? For gal pals April Brown and Sarah Sklash, it was obvious – buy an aging motel in the country and renovate it. If it sounds like a business plan that could never work, these two Millennials would prove you wrong.

“We were looking for a creative outlet and thought about doing something entrepreneurial for five years, but the timing was never right,” Brown told Our House Magazine. Welcome to the June Motel.

Brown and Sklash, who worked in public and relations and the government of Ontario in Toronto respectively, had frequently visited Prince Edward County. A day’s drive from Toronto or Ottawa, the pair started noticing the area was quickly becoming a food and wine destination. They’d been looking for a creative outlet for years but the timing was never right.

But at the start of 2016, the friends decided it would be the year they make some changes and venture out on their own. They brainstormed a bunch of ideas until an old 16-room motel called the Sportsman Motel came up for sale.

“We should buy that motel, it’s one of those lightbulb moments,” Brown recalled.

However, the two 33 year-olds had no interest in running the same motel. They had much bigger plans.
Having spent time south of the border in places like Florida and Palm Springs, they fell in love with the retro-looking motels they came across in their travels. This would be their inspiration.

“Really our idea was we wanted to reinvent the motel experience. We travelled to so many places that had done this so well,” Brown said.

The pair went all-in on the concept.

After running the 50-year-old motel as the Sportsman for a season, they spent the winter getting their hands dirty on a total remodel. As Sklash explained, they started with a tropical palm wallpaper design they liked, and the rest of the renovation took off from there.

The women designed the guest rooms themselves, but worked with interior designer Keri MacLellan of Four Walls Interior on the lobby. After months of sweat equity, the motel was completely remade and had a new name to fit the retro vibe. The June Motel.

Sklash noted the idea was to design the motel for “photo moments,” from the pink doors greeting guests as they drive up to the neon signs in the lobby.

“We wanted the whole design to be a place that people would want to share with social media,” she said, adding 90 per cent of guests discovered the motel through Instagram.

And that bit of strategy paid off. As soon the June Motel opened its doors, guests were sharing their experiences with the world. The motel got a ton of buzz and attention from major publications like Vogue and the Toronto Star.

The first year as the June Motel was a smashing success. And as Brown and Sklash get ready for their second full season, the motel is already booked full for weekends.

With one success under their belts, the entrepreneurs now have their sights on expanding their brand. They’re looking for property and new opportunities. “There’s such and appetite for unique accommodations within that millennial market, we figure why stop at one?”

Motel inspired? Before taking the leap, be sure to talk to a professional
April Brown and Sarah Sklash struck gold when they decided to buy an old motel and convert it into the June Motel in Ontario.

But the pair didn’t jump into the idea without coming up with a solid business plan. Besides doing their market research, they had to consider financing.

Brown and Sklash explained along with a bit of their own capital, they decided to do a vendor takeback mortgage, in which the seller finances the remaining amount owed on the property. They turned to local economic development agencies to help with the costs of the renovation. While the pair note buying a motel in the country costs less than an average home in Toronto, they recommend doing the research and coming up with a strong business plan.

That’s where Dominion Lending Centres Commercial can help out. David Beckingham, the president of DLC Commercial Capital Inc., noted commercial mortgages aren’t easy and can be a long process. He pointed out commercial brokers can help the buyer through the process, including the appraisal, environmental issues, accounting and presenting a deal to the lender they understand.

He suggested in a situation like the June Motel, DLC Commercial would offer new financing at more favourable terms that would repay the vendor takeback mortgage and provide new money to repay the equity the new owners have already put in.

“You need a commercial guy to look at it in a business way that can isolate and stabilize the issues,” he said, adding it’s important to have a professional who understands the market place and the nuances of the lenders.

Courtesy of Jeremy Deutsch – Lead Writer, Dominion Lending Centres