Borrower or credit costs can be outrageous. To go get a line of credit, you are usually paying upwards of 6% to 7.5%. These lines of credit can be based on interest only or principle and interest payments. This kind of loan is based on how the lender views you as a risk. In other words, they look at the amount of money you are making and the amount of debt you have and then decide how much credit they are willing to give you. Usually, these loans are not very big as there is no security. And even though a lender considers your income vs your debt for a mortgage you will not get as much as you would get through a mortgage BECAUSE….

…a mortgage is based on securing a loan against a property. If you fail in making a mortgage payment and eventually go into foreclosure, the lender always has a property that they can sell in order to get their loan back. The lender looks at you as a risk, but they look at the property as a potential asset.

While the lender is taking advantage of your property by leveraging it against you as a risk, you also have the ability to do the same thing.

A great product that is available to owner-occupied properties is a Home Equity Line of Credit or HELOC (pronounced Hee – lock) as it is known in the banking world. A HELOC is a product that uses the equity that is built up in your owner occupied home and uses it as a line of credit, securing it against your property. The result is a line of credit with a very manageable interest rate (usually around 3.2% in today’s market) that you can use toward anything you want. We recommend that you don’t use it for everyday expenses as that can get you into a lot of trouble. But there are strategies that you may want to consider such as:

a. That much needed home renovation

b. College tuition for your children or yourself!

c. If your income and debts are within lender guidelines, you may even be able to use your HELOC for a down payment on an investment property

d. So much more!

Generally speaking, you can borrow in a HELOC up to 80% of the appraised value of your property (minus your mortgage of course). This is considered a revolving loan where you can take or pay back cash as often as you want without having to reapply for a loan. But note that when you sell the property, your HELOC gets paid back with the proceeds of the sale (if necessary) and that line of credit is no longer available to you.

Make sure you don’t get a HELOC mixed up with a Home Equity Loan. This type of loan is based on a one time loan for a specific or one time occasion such as a vehicle. On this type of loan the rate and monthly payments are fixed and you pay it back on a scheduled payment plan, much like a mortgage. However, interest rates on these types of loan are generally a little higher than the HELOC loan.

In order to get a HELOC you will likely have to pay for an appraisal (around $250 – $300) and then the legal fees (around $500 – $750). However, you don’t have to pay any banking fees (like having a chequing account) as it is considered a revolving loan.

If you are interested in finding out what your HELOC options are, please contact a mortgage professional at Dominion Lending Centres. We’d be pleased to discuss your loan options with you.

Courtesy of Geoff Lee, AMP – DLC GLM Mortgage Group 

After diligently saving your pennies and carefully managing your credit to be as strong as possible you are finally ready to start house hunting for that perfect dream home. Between you and your new life lies the seemingly terrifying mortgage process so let’s go over what you can expect so there are no surprises along the way.

1. Pre-approval

The first step should always be to choose a great mortgage professional (like the fine folks at Dominion Lending Centres!). Referrals from friends and family and your real estate agent can help with this. You are trusting the largest loan you are likely to take to this person so make sure they know what they are doing. They are going to take an application, pull your credit, and determine what your maximum purchase price will be. You will be asked to provide a whole bunch of paperwork to verify your information

• Letter of employment and pay stub
• Down Payment Verification
• 2 Year’s Notice of Assessment and/or T4’s
• Void Cheque

This list is the very least of what you may be asked for. If you are self-employed, separated, previously bankrupt, new to Canada, receive bonuses or many other scenarios then you will likely be asked for much more. Given the current state of the economy and the record levels of attempted mortgage fraud, the banks have to be very careful these days.

The other real benefit to the preapproval is that you can house hunt with confidence knowing that your entire situation has been assessed. You will not look at homes out of your price range either which can save you the heartache of falling for a home you cannot afford. It also makes your offer very strong if you find yourself in a competition with another buyer.

2. Approval

Hopefully you provided the bulk of the paperwork for the preapproval but you may be asked for updated information such as a more recent paystub or bank statement.

At this point your application is re-assessed by the lender. They will take a look at the property you are purchasing and make sure it fits their guidelines. Then it is sent off for mortgage default insurer approval and once then you will get the official approval to sign. Make sure that you do not remove the financing condition until all lender conditions are met. Your mortgage professional will tell you when that is.

3. Final steps

Once you have met all of the conditions, the lender will send the paperwork over to the lawyer’s office. It takes the lawyer a few days to get things ready for you to sign and when you go you will be asked for:

• Balance of the down payment in the form of a bank draft
• 2 forms of ID
• Void Cheque

The day of funding, the lender sends the funds to the lawyer who sends them to the seller’s lawyer who upon receipt of the funds gives the all clear and you will be given the keys to your new home.

It is a great idea to call your lender a bit after the mortgage closes to make sure everything is set up the way you wanted.

Make sure to ask questions at each stage of the mortgage process. The onus is on you as the person signing the contract to understand the loan you are being offered and the terms it comes with. There are so many resources available to you as a home buyer that it is easy to learn a bit about mortgages before you sign.

It can seem a bit daunting but we broke it down into bite size pieces so you will be ready to navigate it like a boss and before you know it the realtor will be handing you your keys and your new life can begin.

If you are ready to start talking about your mortgage, call any of the mortgage professionals at Dominion Lending Centres today!

Courtesy of Pam Pikkert, AMP – DLC Regional Mortgage Group 

In a nutshell, a CHIP mortgage or “reverse” mortgage is a mortgage that is secured by the client’s principal residence and as long as one of the client’s lives in the house, it never has to be repaid, not even the interest. “CHIP” stands for “Canadian Home Income Plan” by the way; however the lender who does these types of mortgage in Canada is called Homequity Bank.

It is probably easiest to explain using an example: Let’s assume a husband and wife aged 70 and 69 respectively live in a home that has been appraised at $500 000 and has no mortgage on it right now. Based on the value and their ages, CHIP would allow them to borrow up to $195 495 against the house. They do not have to take the full amount and can in fact choose a monthly income supplement. For example they could choose $50 000 in a lump sum and then $1 000 per month for the next 140 months.

So long as one of the applicants remains in the house, they never have to make a payment. If one of the spouses moves to a retirement home and the other stays in the house, they still don’t have to make any payments. Snowbirds also qualify……so long as the house remains your primary residence.

Here are some of the “requirements”:

• Minimum age 55 for all applicants
• Must be principal residence (no rentals)
• All persons on title must be on mortgage

Two GREAT features of CHIP MORTGAGES:

1. NO INCOME VERIFICATION: Since the mortgage is not expected to be repaid until the house is sold or until the last homeowner leaves the property, no income verification is necessary. This is a great advantage to those who are “asset rich” but don’t show much income

2. NO CREDIT REQUIREMENTS: Many retirees have little or no credit history which makes it very difficult to get a loan or mortgage. With the CHIP mortgage no credit is no problem!

Common questions:

1. Does the bank own my house? No, this is registered against the title of the home the same as any other mortgage. The “bank” cannot force the sale of your home provided one of the applicants still resides in it.

2. Will the equity disappear in my house? CHIP mortgages are designed to limit the risk of the mortgage amount exceeding the value of the home. Your home is still increasing in value and the CHIP mortgage is only a portion of the value of your home so in most cases, the equity in your home continues to increase.

3. What is the cost to set up a CHIP mortgage? There is a fee ranging from $995 to $1495 to set up the original mortgage, plus you must pay for an appraisal and a lawyer to register the mortgage. This is clearly explained in the application process so you will be fully aware of all costs prior to setting up the mortgage.

4. What if I have an existing mortgage? A CHIP mortgage can still be set up however you must pay off the existing mortgage with the funds advanced. This is a common strategy for those who are about to retire and don’t want to make mortgage payments anymore.

If you have any other questions, please contact a Dominion Lending Centres mortgage professional.

Courtesy of Brian Mill, AMP – Neighbourhood DLC

There has been much hand-wringing about the overheated housing markets in Vancouver and Toronto. Accelerating price gains in the past year are indicative of a buying frenzy, especially in Vancouver, which is clearly unsustainable. New listings are way down, new supply is constrained, and buyer euphoria seems to be suggestive of panic fear of missing out — all of which has made housing less affordable and far out of reach of most middle-class households.

Housing affordability is a hot-button political issue, so it is not surprising that the B.C. government, facing an election in less than a year, has felt compelled to do something to dampen the fervor. Time will tell how impactful the new tax will be, but one thing is certain: Housing in Metro Vancouver will remain unaffordable for most households.

RBC estimates that owning a single-detached home in the Vancouver area would require 120 per cent of a typical household’s income. In other words, unless the buyers have access to a huge downpayment (thanks, let’s say, to Mom and Dad), it is out of reach. Even condos are too expensive for average earners in Vancouver.

In the Toronto area, owning a single-detached home is also a stretch — eating up roughly 72 per cent of typical household income — but condo ownership is still reasonably viable for many, requiring about 37 per cent of average household income.

But this is really no different than many other global cities. Average earners typically can’t afford to buy a home in San Francisco, New York, London or Sydney, and there is nothing government can do to change this. Scandinavian and some other European governments built subsidized housing in metro areas, but it is doubtful that Canadians are willing to pay the kind of taxes that would require. Besides, land shortages in Vancouver and Toronto are part of the problem.

Increasing housing supply through changes in land use restrictions might help at the margin, but density and greenspace markedly impact the quality of life. Public transportation pressures are already endemic to Vancouver and Toronto and densification along major public transit routes is already underway.

As we have seen, it is politically enticing to blame the affordability problem on foreigners. They don’t vote in Canada, so they are easier to tax. Other countries have done it. For example, the U.K., Hong Kong and New Zealand have imposed capital gains taxes on foreign-owned properties that are not a primary residence. Australia has limited foreign purchases to newly constructed or renovated homes, and Switzerland sets quotas for personal-use only purchases.

Canada could also impose a tax on property flipping by foreigners (or anyone else) — say a capital gains tax on properties sold within two years of purchase. Or we could penalize foreign owners of vacant properties that are not properly maintained.

The fact is, as other countries have seen, this might take some of the steam out of the markets, but it will not make housing affordable for average earners in Vancouver. It just won’t.

Notably, there are early signs that the red-hot markets are cooling, at least a bit. Resales have slowed in the past few months, and housing starts have picked up. Boomers are downsizing and much more of that will come over the next decade. I believe house price inflation will slow in the next year, which should encourage many who are thinking of selling to put their properties on the market. So while housing in Vancouver and Toronto will remain expensive, the pace of appreciation is likely to slow.

Will prices fall enough to make them affordable? No. Even if prices fell 30 per cent, it would simply take them back to where they were a year or so ago. Over-extended first-time homeowners would continue to make their payments as long as they don’t lose their jobs, because Canadians don’t walk away from their homes.

Courtesy of Sherry Cooper, Chief Economist, Dominion Lending Centres 

A short time ago Canada Mortgage and Housing Corporation (CMHC) changed the rules on how much down payment buyers have to have in place to buy a home worth more than $500,000. The new rules stated that you have to have 5% on the first $500,000 and 10% on the remaining balance up to $999,999. After that point they require 20% but that’s another article altogether.

With the recent changes, they also allowed for the use of 100% offset should the home have a legal suite. This was great news for some parts of the country as housing costs increased over the million dollars in prices in Vancouver and Toronto. Does it have much effect on other parts of the country?

Recent numbers would say no. With housing prices in the west decreasing just about everywhere else but Vancouver, the average Canadian first time buyer will not likely apply for a mortgage that is in this price range. The idea of wanting the big home as the first home is something that first time buyers will not be doing. Even in the Vancouver markets, the buyer for the million plus property is most likely a move up buyer.

I look at my own nephews and nieces and they have bought closer to their lifestyles. My niece in Vancouver, who is a single young professional, chose more the loft style home and while living in 400 sq ft. is foreign to most of us, it is a choice she had to make to be in downtown Vancouver and able to walk to work.

Probably where we have seen the biggest impact of these new rules is in Ft McMurray, AB. While prices are down  in Ft McMurray, there are still a lot of homes that are in the $850,000 to $900,000 range – most built during the boom times with full legal suites.

I recently had a file that was in the $900,000 price range with a full legal suite. While the clients had the required down payment of 5% and 10% on the balance of the mortgage, the lender decided they wanted 20% down on the property even though CMHC had said yes to the mortgage. I’m sure this is happening in more than one location across Canada especially in areas where the prices have been fluctuating up and down over the last few years.

With ever changing markets and regulations, be sure to get advice from your Dominion Lending Centres mortgage professional before you buy your dream home.

Courtesy of Len Lane, AMP – DLC Brokers for Life 

I have asked this question quietly to myself more than once over the years.

***For a post on the nuts & bolts of the new BC 15% foreign tax legislation click here – this post is specifically about the unbelievable way in which we are implementing it.

A few points about me, for perspective:

• I am second generation Canadian.
• I speak just one language.
• In my work as a Dominion Lending Centres mortgage professional, I do not work with foreign buyers (although I have had conversations with a few over the last few weeks).
• I am married to a woman born in the UK whose parents immigrated to Canada 43 years ago.

So, what does it mean to be Canadian?

Most recently I ask this question as witness to a growing tide of anger and resentment fueled by anecdotal and hyperbolic Vancouver real estate stories. Stories that all too often cast one particular group of people in a negative light. Stories of questionable studies based solely on people’s birth-names. Inaccurate tales of $31M student-owned mansions, and $51.8M estates purchased by a ‘former duck farmer’.

Seriously, are such stories relevant to our lives?

How many of us were in the market for a $30M mansion? Does it matter what a millionaire today did decades ago for a living? What has any of that got to do with the price of tea in… anyways.

The average sale price of 80% of homes in the Greater Vancouver Regional District (GVRD) has been $597,000.00 this year. There are more than 100,000 sales per year in BC, and we focus on a handful… as if they explain what drove prices of detached homes in Chilliwack up by ~50% in just over a year.

Impressions

Such stories have left readers and residents alike under the (false) impression that 95% of foreign money is dirty money, 95% of foreign buyers are criminals, and 66% of all real estate sales in Vancouver are to these damn crooked foreign buyers with their dirty money. And with the majority of ‘exciting’ real estate stories focused on a specific group of ‘foreign buyers’, is it any wonder that when we hear the words…

• foreign buyer
• dirty money
• money launderer
• bidding war

… we can think of one nationality alone.

(I have not even used the word, but you have thought it ten times over already haven’t you?)

So what?

Well, we have been suckered, played, used. That’s what.

Media stories have inadvertently, in a quest for clicks, shares, and eyeballs, created a pressure cooker which primed the government to act, or overreact, triggering knee-jerk legislation with little evidence of forethought or industry consultation. And so we have a new Foreign Buyer Property Transfer Tax. In itself this is less of an issue, but what is staggering is the decision to implement this tax on binding contracts due to complete following August 2nd  – even though they were entered into, in good faith, weeks, months, or even years ago .

This is the heart of the issue: not the tax itself, but the way it is being brought in.

We will talk another day about the validity of the tax itself, whether it is too high or too low, along with the (non) impact it will have on house prices.

Today let’s focus on one key point, a point that has me struggling with how our government has portrayed us as Canadians on the world stage.

The point that should truly blow your mind and have you questioning the accuracy of this post is, in a word:

Retroactive

The retroactive caveat in this legislation is an offence to all that it means to me to be Canadian. This poison pill flies in the face of good-faith dealings, besmirching the closely held value that our word is our bond.

What am I talking about?

Suppose you got off a plane from Los Angeles, Rio, London, or wherever, just three months ago to open a new division of your employer’s company and you fell in love with Vancouver, as so many do. You thought, ‘Wow, this market is moving fast. I am going to buy. Even though your Permanent Resident status has not yet been approved,  the application is in the works and there is no reason not to buy. After all, you are young, educated, and healthy – just what Canada looks for in new immigrants. Perhaps you’re not wealthy, but you have managed to amass some savings, and being skilled and in demand locally, you will soon be on your way to becoming Canadian.

So, on the weekend of July 16th you write an offer. Over the following week the Canadian bank approves your mortgage and on July 22nd you remove conditions and go firm on your offer. You are now in a binding contract to purchase and have handed over a significant deposit – nearly all of your life’s savings in fact.

Things are moving fast as the purchase completes August 3rd.

On July 25th you get a panicked call from the law firm handling your purchase. A new tax has been announced and you need to come up with an extra $90,000.00 in nine days. The price just went up. Up how, you wonder?!?!!

You pause. Are you in the fourth dimension? Are you in some third-world banana republic? ‘Repeat that a second time’, you say.

‘A 15% provincial tax is now due on your purchase’.

A tax that did not exist the day before.

‘OK, and if I cannot pay this amount?’ you ask

You forfeit your deposit. A deposit of how much? $30,000.00 – $120,000.00 depending upon how the contract was negotiated.

You are stuck between a rock and hard place.

Kind of like Mac Kerman is.

Is this the foreign buyer you thought was being hit with this tax?

Or Mr. Howard Dresner, another painful story of a fellow purchasing a $568,000.00 townhouse

Or Mr. Hamed Ahmadi, a local tax paying resident, with his life savings on the line due to a $54,000 tax on his $360,000 condo purchase.

Hold On!

Aren’t all foreign buyers absentee multimillionaires based in…? (You did it again didn’t you?)

The thing about a retroactive tax is that a multimillionaire can afford either to pay it, or more significantly, to walk away from their contract and deposit and simply not complete – leaving the local Canadian seller in a bit of a jam to say the least. Watch for these stories over the coming weeks.

But you did not know that foreign buyers are often people you work with, or work for, play hockey with, people who look like you, talk like you, and in fact have applications in for permanent resident status because they also love Canada – just like you.

The Mac Kermans in this situation, along with any Mexican nationals, may have some luck as there is the suggestion that this Property Transfer Tax contravenes NAFTA.

Regular folk

What about the people being crushed by this tax who are living here, working here, and paying Canadian income tax? Their crime in all of this? Simply waiting for the painfully slow process of Permanent Resident status approval. These are people just like you and me, or like our parents or our grandparents (many of whom bought homes prior to having citizenship or PR cards themselves). These folks are buying $300,000 to $600,000 properties. In many cases having a random charge of $45,000-$90,000 stacked without warning onto the previously agreed-upon price will ruin them. It is simply not something they can deal with. Could you, your parents, or grandparents have? Could your siblings? Your children?

I Am Canadian

Aside from the very real personal impact this is having on our fellow about-to-be-Canadians,perhaps most important of all, we seem to be overlooking the negative impact such underhanded dealings have on our reputation internationally as Canadians.

To me, being Canadian means being fair in all dealings, both personal and professional.

Maybe I watched too many Clint Eastwood or John Wayne films growing up, but my word is my bond and my handshake means as much as any contract. And speaking of contracts… is Canada not a country with a stable government that operates under the rule of law, in which citizens have rights? Should that same protection not be extended to those who enter into contracts with us?

All bets are off

As it stands now, with this tax being levied on unsuspecting buyers, if one enters into an agreement with a Canadian – be it verbal, handshake, or formal contract negotiated in good faith – it is simply not worth the paper it is printed on.

We as individuals tend to honour our end of a bargain under any and all circumstances. Indeed, on a personal level we behave with honour far more often than not. Yet in this instance, if this legislation stands, we are allowing our provincial government to act dishonourably on our behalf and allowing them to make us all, as Canadians, appear untrustworthy.

Precedent & Uncertainty

Just what sort of precedent might this set? The Mayor of Toronto seems on side with pulling a similar move.

Hearing such sentiments, would you as a foreign buyer enter into a binding purchase agreement anywhere in Canada at this point?

Would you risk a tax being imposed on your binding contract due to little more than a political whim? A tax that you might not have the funds to meet. After all, it was 15% this time; perhaps in Toronto it will be 50%. Perhaps in BC it will be 55% next week, 32% the week after, who knows? There is no longer any certainty in dealing with us.

This method of implementation creates doubts and serious instability in dealing with Canadians.

The Bigger Picture

On a larger scale, this should spur second thoughts for any foreign entity considering entering into any agreement or contract in any and all financial sectors anywhere in Canada. After this, how can we be trusted?

A message is being sent loud and clear: You may think you have a deal with us, but we are Canadian and Canadians change the terms of their deals with no notice, no compensation, no consideration, and no thought as to the long term damage to our national reputation.

You think this is just about Vancouver real estate? Were I an American, a European, or anything but a Canadian myself, I would have to think twice about doing any sort of business with Canadians moving forward.

I am Canadian.

I am embarrassed to be.

Let’s fix this!

If our government does not fix this mistake in time – and there is still time – then they should expect a massive class-action lawsuit, countervailing tariffs from other countries, at the least some sort of reaction from our trading partners.

Some of us might be thinking ‘Yeah, we really stuck it to those multimillionaires from that one country’. However, by failing to apply the tax to new purchase contracts only, or perhaps phasing it in over one year, or even 90 days… by hammering on people already locked into agreements… we are sticking it to ourselves in ways we have not yet imagined.

No doubt the 90% of the 737 people polled who approve of this tax don’t realize that it is being forced on people who are already in firm contracts and cannot magically complete their purchase within one week. People who are not multimillionaires. People from the USA, Europe, and South America. People living and working and paying taxes here right now.

Conveniently, in their announcement of the tax the government used the example of $300,000.00 tax amount on a $2M home to illustrate the math, again fueling those same images in your mind. Images of multimillionaires.

Again we were all played.

Cooler heads may oppose the tax itself by accurately pointing out that while it is a cash-grab for the government, that is all it is. This legislation has no teeth around the flow of ‘dirty money’, other than perhaps increasing the flow of said money by 15%. And in a market where $2M homes shot up to $3M in less than a year, is the new price of $3.45M really a showstopper for many of these buyers? Time will tell.

But how do you think the buyers in the $500,000 price bracket are dealing with a $75,000.00 bill that was not part of their original agreement to purchase?

There will be fallout from this, not just for ‘foreign buyers’ but for many Canadians.

Prices?

The value of real estate in Vancouver? Unlikely to be a casualty at all; it is exceedingly resilient.

The damage will be 99% collateral, failing to hit the intended target.

Courtesy of Dustan Woodhouse, AMP – DLC Canadian Mortgage Experts 

As a Dominion Lending Centres mortgage broker, I often see in the lender’s conditions sheet a request for the lawyer to obtain title insurance. We all know that this is a measure to protect the lender and to allow for the deal to proceed if there is a delay with the title or the other lawyer.

However, did you know that title insurance is also available for the new home buyer? Why would you recommend that they spend more money when they have already have to provide a down payment, pay legal fees and moving expenses? It’s the right thing to do.

Title insurance protects you from unknown defaults in the title. This is coming up more and more now that people who bought homes in the 1960’s and 70’s are moving into retirement homes after many years in these homes. You may not realize that in 1973 Mr. Jones made a verbal agreement with his neighbour Mr. Smith to allow his garage roof to straddle the property line. Now the neighbours want you to move the roof over 6 inches to comply with their property survey. Who pays for this? Fortunately, if you have title insurance with either FCT or Stewart Title, they would.

Another very important reason to consider title insurance even when you own the property free and clear is identity theft.

There was a very enterprising fraudster operating in southern Alberta a few years ago. He would search land titles for properties in rural areas where the owners had no mortgages or liens. He would then go into a bank posing as the property owner and ask to re-finance the property. If it was worth $500,000, he would ask for $200,000. He would then say that he was going to Arizona for 3 months and wanted to pay his first 3 months on the mortgage up front.

The bank rep would be impressed by the fraudster’s responsible behavior and agree to accept the pre-payment. The fraudster would put a few more deals like this and then leave well before the 3 months was up. The property owner would then be contacted by the bank asking for the late payment in month 4 and would have no idea he had been a victim of fraud. If he was fortunate enough to have title insurance, the insurer would pay for his legal representation and settle the claim with the lender.

I recommend title insurance to my clients for all the above reasons but by mentioning this to them I am also showing my clients that I want to protect them. It’s one more way Dominion Lending Centres can differentiate ourselves from the banks.

Courtesy of David Cooke, AMP – DLC Westcor 

When you purchase a property, you may be a little overwhelmed by all the insurance offers related to purchasing a new property that come your way. Mortgage Insurance, Condo Insurance, Mortgage Default Insurance, Earthquake Insurance; the list goes on and on. It can be confusing and it is important to know what insurance covers what.

For instance, Mortgage Default Insurance is solely for the purpose of the lender and not to be confused as mortgage default insurance for the consumer. Yet, you, the consumer, are responsible for the cost. If you put less than 20% down on a property purchase, you are responsible to pay for Mortgage Default Insurance which covers the lender if you should default on the payment of your mortgage. As well, conditions of the mortgage may require that House/Condo Insurance needs to be purchased in order to fund the mortgage as to protect the consumer and ultimately the lender from severe losses. This kind of insurance may or may not be mandatory.

Alternatively, Mortgage Life Insurance is not mandatory and is purchased to cover the mortgage if the consumer becomes seriously ill or even dies unexpectedly during the term of the mortgage. Usually, this is purchased when the owner of the house has a family or dependents that will inherit the property and would not be able to financially carry the property without the primary owner’s income. The only difference between Term Life Insurance and Mortgage Life Insurance is that the Mortgage Life Insurance is meant to pay off the consumer’s mortgage. But, depending on the policy, the money that is issued on the Mortgage Life Insurance can be designated for the mortgage only. Or, it may be available for other, more necessary expenditures. It all depends on the policy.

Mortgage Life Insurance is certainly a recommendation for those that have not yet saved up enough to be able to secure themselves with savings such as RRSPs or Pensions. Whether the consumer purchases it through a referral from their Mortgage Broker or perhaps has it already through their employment, Mortgage Life Insurance is a wise choice for anyone who wants to set their future up securely.

Top 9 Benefits of using Mortgage Life Insurance

1. Peace of mind – having Mortgage Life Insurance creates a sense of security that your loved ones will be well taken care of if you, as the main breadwinner of the family, pass on.

2. Easy to get – Mortgage Life Insurance is based on the mortgage and your age. There are a list of standard questions to answer but coverage will never be denied.

3. Mortgage paid off in the case of death – having Mortgage Life Insurance ensures an extra level of coverage, whereby any other policies that are held will be able to assist with other needs.

4. Family can stay in their home – if there is the unfortunate life event that is the death of the Mortgage Life Insurance policy holder, the mortgage will be paid off which will allow the family to stay in their home and not become displaced, causing more despair than needed.

5. It protects your family’s finances – Mortgage Life Insurance pays off the mortgage, which means that your family’s finances stay intact.

6. Lost wages – if you become seriously ill, Mortgage Life Insurance can cover your mortgage payments for a specified time period (ie up to 3 years). Unexpected life events such as a serious

car accident can result in missed mortgage payments as a result of loss of wages as you need to recover from injuries.

7. Portability – some Mortgage Life Insurance policies are portable. Which means that if you buy a new property, you will be able to transfer your Mortgage Life Insurance to a new property. Make sure you ask your Insurance Provider if the insurance they are recommending is portable. Take note that when the bank offers you Mortgage Life Insurance you will not likely be able to transfer your Mortgage Life Insurance to a new lender, thereby limiting your future financing options.

8. If you are a young buyer, your Mortgage Life Insurance premiums will be very low. Which means that this insurance is extremely affordable for a young, and likely, first time home buyer.

9. Good health now results in coverage for unexpected illness later on. After illness strikes, it is more difficult to acquire life insurance.

Mortgage Life Insurance is an option that anyone with a mortgage can consider. However, it is important to know what your options are in regard to the Mortgage Life Insurance itself. Asking your Mortgage Broker for a referral to a reputable and credible Insurance Representative is paramount in finding an Insurance Broker that knows available products, that specifically fits your needs. Every individual is unique and needs an insurance product that is fashioned for their individual situation. A good Insurance Representative will be a Broker that knows what insurance products are out there as well as knows what you, the consumer, needs. The great thing about taking on Mortgage Life Insurance is that you can cancel anytime if at a later date you find an insurance product that suits you better.

Remember to take inventory of insurance products you are already signed up with. If your employer provides you with a benefits package, make sure you find out exactly how much coverage you have and if that coverage will adequately provide for your financial needs. If it does, then maybe you don’t need any Mortgage Life Insurance. On the other hand, if your current coverage won’t be enough, then maybe a good Mortgage Life Insurance policy is something to consider.

For more information regarding Mortgage Life Insurance contact any of the 2,500 mortgage professionals at Dominion Lending Centres and we’ll put you in contact with an Insurance Representative that will provide you with viable Mortgage Life Insurance options.

Courtesy of Geoff Lee, AMP – DLC GLM Mortgage Group 

When considering buying your first home, I am sure you will have many questions. I hope to give you some insight to what lenders are most importantly looking for when qualifying for a mortgage.

1. What’s the best rate I can get?

The rate that you receive depends on a number of things. I get a lot of clients that are what I like to call “rate sensitive” this means that they are fixated on the lowest rate and don’t understand why they may not be able to get the advertised rate.

A number of those rock bottom rates you see advertised have conditions to them. For instance they may be only for a 30 day quick close, or they may not be portable.

Some factors that determine rate are employment (self employed, full time, part time, etc.) credit score, down payment, income and more.

Until a full application’s been received and credit has been checked you cannot be guaranteed a rate.

2. What’s the maximum mortgage amount for which I can qualify?

This of course is going to be based on your income and liability circumstances. There are two calculations brokers use to qualify a borrower. The first is your Gross Debt Service (GDS) ratio. GDS looks at your proposed new housing costs (mortgage payments, taxes, heating costs and strata/condo fees). Generally this amount should be no more than 32% of your gross monthly income. For example, if your gross monthly income is $4,000, you should not be spending more than $1,280 in monthly housing expenses. Lenders and brokers calculate your Total Debt Service (TDS) ratio. The TDS ratio measures your total debt obligations (including housing costs, loans, car payments and credit card bills). Your TDS ratio should be no more than 41-44% of your gross monthly income (this is dependent on credit score as well).

Keep in mind that these numbers are prescribed maximums and that you should strive for lower ratios for a more flexible lifestyle.

3. How much money do I need for a down payment?

The minimum down payment required is 5% of the purchase price for houses under $500,000. For homes over $500,000 10% down payment is required on the amount over $500,000. If you want to avoid CMHC mortgage insurance than 20% down payment or greater is needed.

4. What happens if I don’t have the full down payment amount?

There are programs available that enable you to use other forms of down payment. Your RRSPs can be used without being taxed if you pay back within 15 years, gifted funds from parents are also accepted. Some lenders will also allow a flex down program to be used. This is where based on qualification you can use a line of credit towards your down payment.

5. What will a lender look at when qualifying me for a mortgage?

These are the most important factors a lender will look at when qualifying for a mortgage such as employment history, income, debt, credit history and the value/kind of property.

Most importantly, the lender is looking to make sure you can afford the home you’re wanting to purchase. Second most important thing they consider is the value in the home. The lender wants to make sure that if you default on payments that they have security in the home.

Overall lenders are looking for stability. They want to see this with employment, debt re-payment, and credit history. It’s important for you to have good credit, and minimal liabilities. Make sure you’re never late never late on any loan or credit card payments. This shows you are responsible and less of a risk for the lender.

6. Should I go with a fixed or variable rate?

This ultimately depends on your risk tolerance. If you’re a first time home buyer you may feel a lot safer going fixed as you know what you’re expected to pay for the term of the mortgage.

However, variable rates can save you a lot of money, I mean thousands.

If you want to choose a variable rate and qualify for one (as it’s a bit tougher) just know and understand that you run the slight risk of it possibly rising while in your term if the prime rate moves up, but you can never predict this. There are much smaller penalties with a variable rate than a 5 year fixed.

Your Dominion Lending Centres mortgage professional can discuss all the differences and benefits for you.

7. What credit score do I need to qualify?

A credit score of 680 and up is a good credit score that can offer you the discounted rates. There are lenders that lend on lower credit scores but usually at a bit higher rate.

8. What happens if my credit score isn’t great?

If your credit isn’t the greatest there are ways to increase your score. Most credit reporting companies report every month. So luckily you can change your score within a few months time if you do the right things. The most important thing is to pay down your credit cards so the balance is no more than 30% of the limit.

Even better…pay off your credit card balance in full, if you can have a $0 balance owing that’s the best!

Don’t go taking out any large loans before a mortgage approval. It’s best to wait till you’ve actually got the property in your hands. You don’t want to do anything that could jeopardize your approval or have a lender pull an approval from you as they re-checked your credit prior to closing and now see an expensive car loan.

Make sure everything is up to date. No overdue collections still showing or an old bill showing up on there when you paid it ages ago, but never got removed for some reason.

9. How much are closing costs?

Closing costs on average are 1.5% of the total purchase price. This is a guideline to go by, but not exact. Closing costs will cover things like, inspections, lawyer fees, property transfer tax, appraisals, and title insurance.

10. How much will my mortgage payments be?

This is going to depend on many different things. The size of your down payment, the interest rate, the purchase price, amortization chose, whether or not you’re paying mortgage insurance (CMHC) and also the frequency of payments ( bi-weekly accelerated, or monthly).

If you have any other questions, please feel free to contact any of the Dominion Lending Centres mortgage professionals from all across Canada!

Courtesy of Danielle Spitters, AMP – DLC Valley Financial Specialists 

Are you an adult with an aging parent(s) and are you concerned about your parents’ ability to remain financially independent? Today, Canadian adults have many responsibilities, including the concern for their children’s well-being, as well as their parents’ quality of life and their debt. As life expectancy rises for the senior demographic, there is a growing trend of retirees not saving enough for retirement. Many Canadians overestimate how long their money will last, in part due to their longer-than-expected lifespan.

How can you help your parents maintain their financial independence?

Among the many concerns we have for our aging parents, the biggest concerns include their ability to retain their standard of living. Many senior Canadians prefer to stay in the comfort of their own homes to age-in-place, but we have noticed that their finances are not as stable as we anticipated and they may be struggling with:

• Health/Medical costs & expenses – Your parents’ health care costs are piling up.
• Monthly bills – You notice that your parent(s) are struggling to pay monthly utility and phone bills.
• Renovations and retrofits – Your parents’ home may require repairs. Their home may need retrofits in order for them to maintain their lifestyle, for example, they may need to install a stair lift because of knee problems.
• Revenue Canada debt – Your parent(s) struggle to pay their taxes and now have accumulated debt.
• Property taxes (in arrears) – Your parent(s) have forgotten one too many payments.

If your parent(s) are stressed over their finances, you can help them maintain their independence by introducing them to financing options to help them regain control of their retirement. The CHIP Reverse Mortgage from HomEquity Bank is a great option for older Canadians because it has helped thousands of senior Canadians deal with the most common financial struggles.

How a Reverse Mortgage can help

The CHIP Reverse Mortgage can provide your aging parent(s) with financial independence by unlocking up to 55% of the value of their home (tax-free) without them having to sell or move, in either a lump sum amount or monthly advance.

Contact your Dominion Lending Centres mortgage professional to get your free estimate or to find out more information about how a CHIP Reverse Mortgage can help.

Courtesy of Yvonne Ziomecki, HomEquity Bank – Senior Vice President, Marketing and Sales