I’m sure the only reason why you clicked on this blog link was because of the title as it seemed a bit strange – I too would be curious. Why would a Mortgage Expert publish a blog about BEERS, BIKES and MORTGAGES! Simple, all three share a common thread with me…they all interest me for various different reasons plus I felt the need to spice up my website content. Now that you are here, it’s my job to keep you reading until the end. I was tired of writing about the norm; comparing mortgage products, saving thousands of dollars, the dos and don’ts of… and ‘this’ vs ‘that.’ So herein lies the blog I started writing a few months back that covers BEER, mountain BIKE(ing) and MORTGAGE financing. They each have intertwined themselves into my life and really do go hand in hand…or hand to mouth as one might say. Bear with me, if you do stick around to the end, I will connect the dots.

For me, all three are gratifying on an individual level. Once you have acquired a taste for beer, tasting a new beer for the first time is exciting; will I enjoy it or not? How visually captivating is the packaging? What lasting memory will be connected, as beer is usually enjoyed in a social setting. Riding bikes provides me with a platform for exploration, something I have loved since childhood. Setting my tires into uncharted dirt instantly provokes an un-wipeable smile on my face as I navigate each and every corner of the unknown. Needless to say, I’ve had a few social beers after riding numerous bike trails across this fine province of ours. The mortgage financing industry is very similar to riding uncharted territory and enjoying a new flavor of beer, as I never know when or from where I will receive my next client referral. With every new client comes a new challenge of uncharted territory; no mortgage or scenario is the same as the previous one. I have to gather all the client’s intel and to compile their data which will enable me to structure their mortgage application accordingly. At the same time, I have to listen to their needs and wants so that they can attain their goals while pursuing a certain lifestyle. Much like riding bikes, we have to react quickly to what is around the next corner. Being an expert mortgage consultant requires the same tactic as we react to the marketplace on a daily basis.

To address ‘the elephant in the room’…NO, I don’t drink excessive amounts of beer. I do, however, like to try various flavors, especially nowadays with the whole craft beer scene upon us in Vancouver and the surrounding areas. We as consumers have been able to step away from the ‘big-box’ tasteless beers into something way more palatable. I’m sure we will soon see restaurateurs pairing beer with meals, just like the wine industry does so well. I once asked a friend ‘which’ beer I could grab him from the fridge, his response was, “cold,” and that has since stuck with as there is nothing better than a cold beer. As I am not here to shame or promote brands, I must say there are a few exceptions to that rule.

Another trait that these topics share is the huge choice of options within each space. There are thousands of different beer brands with each producing several within. How is one supposed to choose, as not all beers are going to be liked by every taste bud. It’s a good thing the providers have come up with tasting flights. This is a way to try multiple flavors of the same brand. The same issue comes with buying a bike, which brand? Which model, as each model caters to a different type of discipline in the world of mountain biking. Not every bike engineered will suit every rider’s personal riding style. For me it is easy, I have a friend who spends thousands of dollars on bikes each year and countless hours reading forums and articles about bikes; whatever he does…I do, as we enjoy the same type of riding! I guess I need to buy the Santa Cruz Nomad (OK, there, my one shameless plug). For now I’m stuck with one bike that does everything well, kinda like a variable rate mortgage. I call it my Swiss Army knife of bikes – it climbs and descends like a dream.

Being a mortgage expert, I have access to countless different lenders that cover endless mortgage scenarios and solutions. First and foremost, I educate myself on the wants and needs of the client, then advise. All mortgage consumers should create a relationship with one mortgage expert. Once that is set in stone the stress of ‘shopping,’ knowing if you are getting the best product or having to re-explain your story along with goals again and again, goes out the window. Not every mortgage is designed to fulfill each financing consumer’s needs. That’s why each industry described in this piece has professionals to guide us through the options.

The ultimate situation for me is when I can tie all 3 of these topics into one scenario. On numerous occasions I’ve had the opportunity to ride a bike trail that I have never ridden before, while at the end enjoying a crisp refreshing beer, all the while sharing the moment with a new client. I’ve had the chance to do this several times in my mortgage career and it’s an awesome feeling. You know you have a client for life when you can connect with them on a social level. This business isn’t about spending thousands of dollars on marketing, it’s much simpler…business filters down through friendship and commonality. A good beer; a fresh, new, loamy trail and a proven mortgage expert should never be kept a secret. As humans, we should be socially responsible to educate each other and share information.

Brad and Brenda have been putting some money in their RRSPs investments for the last four years. Their last statement shows that they have $12,500 in their RRSP’s savings, and they also have $5,000 in the bank in their savings account.

They decided to buy a starter home in Winnipeg, MB for the price of $250,000. According to their investments statement, they had enough money in their bank and RRSP account to put 5% down ($12,500) PLUS closing costs of 1.5% ($3750) of $250,000. If we add down payment and closing costs together, it comes to $16,250 – this is the amount they needed to buy this starter home.

They deposited $5,000 with an offer; their offer got accepted since their RRSPs investment statement shows another $12,500. They filled out the forms to withdraw all the investment money for the down payment. Once the money from their RRSP investment was transferred into their bank account, it had a $2,100 shortfall. Now Brad and Brenda has $14,150, but they need $16,250 to buy this home. Some funds do better than other funds – it totally depends on an individual portfolio.

Brad and Brenda must have knowledge of the actual amount in their RRSP investments instead of depending on investment statements.

Their meeting with a mortgage professional from Dominion Lending Centres could steer them in the right direction.

Courtesy of Gurcharan Singh, AMP – DLC Anderson Financial Team 

There you are, sitting down with your realtor and preparing an offer to purchase for that amazing home that you just looked at this afternoon. You get to the point in the conversation with your realtor about the need for a financing condition and you’re trying to remember what you talked about with your Mortgage Broker earlier in the week….were you approved? Pre-approved? Pre-qualified?

So here’s the thing, when it comes to placing an offer on a new property, the financing condition should always be there. The only reason for leaving the financing condition out of an offer is because you know that you could dip into your savings account right now and buy the house with cash if you had too.

If you cannot purchase the house with cash, then you really should have that pesky finance condition in the offer and here is why…

We know already that you’ve met with your Mortgage Broker, they have everything on file and they have told you that you’re pre-approved. It is important to understand that the pre-approval they issued is based on the information they have collected about you. However, they have no information about the house that you’re eventually going to purchase.

When your future lender reviews an application in full, there are two sides to your application. There’s you and then there’s the house. It’s important to note that the lender is investing in the whole package and at this point, no one knew what house you were going to buy. Your Mortgage Broker isn’t likely to receive any information on the specific property until you have an accepted offer. It is at that point when they will update your application and send in all of the details for a formal approval.

So you’re now wondering why all of this matters considering that during your pre-approval meeting your Mortgage Broker told you that you’re the perfect clients (great income, great credit, great down payment and just all around great people).

But what about the property? The lenders (and CMHC if you have less than 20% down) want to know that the same is true about the house you’re buying. Here are just a few questions that they are asking themselves about the house:

• Is it being purchased for fair market value?
• Is it located in a marketable neighborhood?
• Are there any major or obvious defects that could affect its value
• Is the house a previous grow op?

If something negative about the house comes back as part of the review, it could mean that the lender (or CMHC) could decline to finance the property. The financing condition gives you a way out of the agreement should something happen at this point. If you don’t have a financing condition, you could end up being legally tied to purchasing the home, with or without financing lined up. Definitely not a position you want to be in, so take the time to protect yourself by ensuring your offer to purchase includes a financing condition – and speak with us at Dominion Lending Centres.

Courtesy of Nathan Lawrence, AMP – DLC Lakehead Financial

It’s exciting! Brand new shiny homes, opulent new appliances and granite countertops followed by massive marketing with deep discounts, rebates, cashback, free tvs, offers to pay your strata and mortgage payments? Developers are throwing in these incentives to entice buyers and many are getting shocked with the ramifications when they close at the lawyers.

Nothing comes for free. Period. There is always a catch somewhere. From a mortgage perspective, I have had countless homebuyer mortgage files land on my desk because the bank wouldn’t or couldn’t approve your mortgage after you have already plunked down that 5-10% deposit. Which by the way is NON-REFUNDABLE in most cases!

Let me tell you a story about 28 year old Jim. He worked for a developer and was told it was a GREAT location to buy. He could move in and flip it in a few years with all the equity increase. He was excited! He strolled into the sales office and a BIG banker was there selling RATE. The banker asked a few questions, looked at his paystub and said your pre-approved! Jim put down a $25,000 deposit. The place would be ready to move in about 8 months. 6 months later, Jim goes to BIG BANK to get all his financing approved for his new shiny condo and “I am sorry, Jim…we can’t approve your mortgage”. Wait…WHAT?!

Jim was referred to me. I reviewed his income. His credit was great, he had his $25,000 down payment/deposit (5% down) in place…the problem was his INCOME. The banker person didn’t get enough information to ascertain that he really didn’t qualify right at the beginning. Why? While he was a T4, paycheque, tax paying employee, Jim worked for his family and lenders require that you have TWO years of working history when working for family. In addition, Jim ended up being off on medical for 4 months and his 2nd year of income was WAY lower than his first year – he didn’t qualify for his mortgage. He lost his $25,000 deposit.

There are MANY reasons why buying “brand new” requires a licensed mortgage broker to be watching your back. Right from the time you decide to put in the offer to the day you close at the lawyers.

Yes, many banks will OFFER to do a 1 year rate hold…but that is all it is…a rate hold. It DOES NOT mean you’re pre-approved or will get the approval come closing time. That’s NOT a risk you should take.

Here are the 4 COSTLY mortgage mistakes:

1. The value drops in your new place. If you are only putting 5-15% down payment, and your property closes in 6-12 months, you could be putting yourself at financial risk. Lenders lend money on the value of the property, not the purchase price. If you bought at $300k and the lender has it appraised before closing at a value of $280k…you only get the mortgage loan based on this VALUE amount. If you only have 5% down and no money to make up the cost…you will be up the creek (or borrowing from the bank of mom/dad or reducing your down payment). You’re on the hook for the difference! You promised to pay Mr Developer $300k to buy it, but the bank will only give you a maximum of 95% of the $280k value, not $300k purchase price. While in the Metro-urban cities this isn’t a concern today, certain areas in Alberta and rural areas this could be a factor.
2. Who is watching your credit score or your spending habits? It might be good today, but in 8 months you could decide to buy a new car (hey what’s $200 a month?). Well that $200 a month might be enough monthly debt to ensure you don’t qualify for a mortgage.
3. Who is making sure that if you change jobs, or go from full-time to part-time, that you still qualify? Part-time income is looked at ENTIRELY different than full-time. Maternity leave and disability…same story.
4. Those “perks” you are offered? They are called “Decorating Allowances” or “incentives”. They WILL be DEDUCTED from your purchase price/ value if it’s written INTO your contract of purchase and sale. This can be confusing and potentially have a financial impact if you have limited funds for down payment or are expecting a “cashback”.

What are they and when are they good? “Monetary cashbacks”, “cars”, “TVs, furniture, mortgage or strata payments for a year…will all be deducted from your purchase price. This is where the confusion lies and ends up costing you.

Say you put 5% down or $15,000 on your $300k home and that’s all you have. The Developer/Realtor offers a $15k incentive (such cash to go buy furniture) into the contract. The lender would remove the $15k from the purchase price meaning $300k p/price now = $285k with a max mortgage of $270,750. Remember, lenders LEND on VALUE! So you would need to come up with a down payment of $300k- $270,750 = $29,250. So you don’t actually GET the cash as it get cancelled out. The important clarification is, any builder incentive that becomes a “credit” at closing, will be deducted from the purchase price and could affect your down payment or expectation of a monetary rebate. If the LENDER is not aware of the “incentive” or credit and finds out after the fact when the lawyer sends in addendums to contract at closing, then this is where you could end up with an increase in down payment. This is where it is CRUCIAL for the mortgage to be submitted correctly and be in touch with the Developer/Realtor to prevent confusion or closing cost expectations. Many times this is more of a marketing ploy than any financial benefit to you.

So when are “incentives or decorating allowances” good? Exceptions to this would be stove, fridge, laundry or things that are necessary to LIVE in the property. They are not incentives.

These are just a FEW of the challenges. Please feel free to get that “rate hold” from the developer’s banker person…just ensure you have a licensed and experienced Dominion Lending Centres mortgage professional monitoring your file monthly until closing, so you DON’T LOSE YOUR DEPOSIT or end up at the lawyer’s office like a sitting duck, and no money to close your new dream home.

Happy home buying!

Courtesy of Kiki Berg, AMP – DLC Hilltop Financial 

When you write a contract to purchase a home, in the offer you’ll need to include a deposit amount, which you’ll agree to pay upon subject removal. This amount will then form part of the down payment upon closing.

This amount does NOT have to be a specific percentage of the purchase price – it can be as little as $500-$2,500 dollars. This deposit amount makes no difference in the legal obligation you’re bound to once the subjects are removed. As a result, the amount should not hold merit to whether your offer is more attractive. Please review this link from the Real Estate Council of BC http://www.recbc.ca/psm_section/acting-for-sellers/ and here is the info specific about deposits.

(i) Need for a Deposit
Contract law does not require that there be a deposit in order to create a binding Contract of Purchase and Sale. The requirement that a contract include some form of consideration is satisfied by the mutual exchange of promises by the seller and the buyer. However, it has long been recognized that including a deposit, often an amount between 5% and 10% of the offered price, represents an expression of the serious intention of the buyer.

The Council is aware that some buyers’ agents are drafting offers that do not provide for any deposit to be paid until after subject removal. One reason stated is a concern that the seller will not authorize the release of the deposit to the buyer if the buyer does not remove the subject clauses.

Some consumers, and perhaps even some licensees, are under the misconception that a Contract of Purchase and Sale is not binding on the parties until all subjects have been removed. The obligations under a contract are created once there has been an offer and acceptance (including counter-offers, if any). Some buyers believe that not including a deposit makes it easier for them to not proceed, if they choose, with their obligations under the agreement.

Buyers’ agents need to be cautious that buyers do not assume that, by not providing an initial deposit, they have somehow diminished their responsibility to make best efforts to satisfy the terms and conditions of the contract and to remove subject clauses.

It is the Council’s view that listing brokerages, in situations where buyers offer no deposit until removal of subject clauses, should advise sellers of the merits of a deposit being received from buyers. Increasing a deposit can be accomplished by way of a counter-offer from the seller.

As you can see, although it has become common for people to use 5-10% it is not required, and a seller can not just keep the deposit if something goes wrong.

This is especially helpful when the proceeds are coming from the sale of your property and you don’t want to pull money off of a credit card or line of credit – particularly in light of new mortgage changes that could give the lender the right to pull the approval if your balances owing on your credit report increase before closing.

There are some new developments if you purchase a brand new property that requires specific structures for the deposit, which can be staggered in stages and would require you to provide higher deposit amounts. Your realtor may, however, be able to negotiate different terms. This should be discussed upfront during the pre-approval process to ensure you protect yourself to the best of your ability by making a manageable deposit amount.

Sources for deposit/down payment and timeline considerations:

RRSP – You’ll need to bring a Home Buyers’ Plan (HBP) withdrawal form to the lender that holds the RRSP, and give them 7-10 days to release your funds. See the form here: http://www.cra-arc.gc.ca/E/pbg/tf/t1036/README.html

Investments – Best to allow 7-10 days as the required timeframe ranges depending on where investments are held. You must also ensure the market value is as expected upon cashing out your funds

Savings – Straightforward withdrawal

Gift – A gift letter will be required (most lenders have their own forms they want you to use) and then verification of the deposit into your account. Keep in mind that any deposit into your account above $2,500 is subject to further documentation. And if the gift is large, the lender has the right to seek further verification in accordance with the anti-money laundering act and OFSI guidelines (those who lend the gold make the golden rules!)

Upon subject removal, you’ll need to provide certified funds to your realtor, and forward a copy of the receipt to your Accredited Mortgage Professional (AMP) who is getting the mortgage approved for you.

Your Dominion Lending Centres mortgage professional is here to help guide you through the mortgage process, and give you clarity throughout each step of the home-buying process.

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

There are a growing number of families living in Vancouver, or moving to the region, who are choosing the option of buying a second home in the lower mainland or in one of the many great locations throughout British Columbia.

When it comes to mortgage financing, there are many lender programs available at the best rates. Homeowners buying a second home can purchase the second property with as little as 5% down with the following considerations:

1. Down payment can be from own resources or other sources

2. Property must be owner occupied during the year or occupied by a family member

3. Property can be new construction

4. A maximum of two homes can be insured by CMHC in Canada

5. Financing is available to permanent residents of Canada

6. Property must have year round access by car or ferry

7. Maximum $1,000,000 purchase price

8. No time shares or life leases and rental pool are excluded

For home owners buying a second home with more than 20% down payment, insurer guidelines may not apply and lender rules will assigned. Talk to us at Dominion Lending Centres for specific requirements to meet your needs.

Courtesy of Pauline Tonkin, AMP – DLC Innovative Mortgage Solutions 

mis-con-cep-tion (noun) – a view or opinion that is incorrect because it is based on faulty thinking or understanding; mistaken notion; an erroneous conception.

With not knowing how to start this particular blog post, I decided to look for some images that might summarize the topic best – What is the difference between a RATE HOLD and a PRE-APPROVAL?

I thought this picture 100% represented how these terms are perceived, you say one thing but you mean the opposite. For most people the term PRE-APPROVAL is more commonly used than the latter. The term RATE HOLD is generally only used in the broker/lender sphere.

Many years ago (seems like the ice age ago) one could place a phone call to their personal banker and lock in a mortgage, then it switched to only requiring a paystub maybe a bank statement and T4s.  Whereas now one requires their entire biography and proof of net worth followed by a blood sample… somewhat facetious, but there is more involved as lenders need to make an accurate risk assessment.

Times have changed and so should our line of thinking. Underwriting mortgages is not cheap and lenders have upfront costs that take years to recoup.

Rate Hold

These are generally automated where nobody even looks at the application.  The system only analyzes basic criteria; beacon score, loan-to-value, name and birthdate. No documents are even reviewed. A rate hold is simply just that, a rate hold. It’s just a certificate guaranteeing the stated rate for a stated period of time, usually to a maximum of 120 days. Rate holds are mostly utilized for borrowers who are going to purchase or refinance in the near future.

Pre-Approval

The pre-approval approach is generally a more detailed process, with all documents being reviewed, except for the subject property. The lender will have to approve the covenant based on the information provided such as employment, source of the down payment and credit history criteria. Approval of these three pillars is NOT a guarantee that the mortgage application will be approved. The lender still has to do its due diligence on the fourth pillar (subject property) as it must still meet all the lender’s and insurer’s guidelines if there is less than a 20% down payment.

The most common question you will hear during the purchase process is, ARE YOU PRE-APPROVED?

I have to worked with numerous clients that thought they were PRE-APPROVED by their ‘bank.’ But during the subject removal timeline found out that they were NOT pre-approved, all for various reasons. Instead there should be a series of questions asked:

• Have you consulted with your Mortgage Expert?
• If so, when was the last time you had a conversation with her/him?
• Is there a rate hold or pre-approval in place? Do you understand the difference(s)?
• Have you sent her/him your complete package of documents that was requested?
• Are there any changes to employment, credit, the down payment or the purchase price?
• Have you discussed the ‘plan’ for this property? This will determine the term and mortgage product chosen.
• …and much more…

As you can see, there is much more to consider than just, ARE YOU PRE-APPROVED?

No one mortgage is exactly the same as someone else’s. The mortgage process is a complex labyrinth of puzzle pieces that have to fit together perfectly. Note that the puzzle pieces are constantly changing in this industry.

Due to the steep underwriting costs of each mortgage application, most lenders are electing to follow the RATE HOLD process. By analyzing a complete 4 pillar mortgage application package (credit, employment, down payment and subject property), the lender is able to maximize dollars spent to acquire a new client. Navigating the RATE HOLD/PRE-APPROVAL process should be left up to your trusted Mortgage Expert.

The best PRE-APPROVAL is the one that comes from your Mortgage Expert because they can analyze and do a pre-underwrite even before doing a RATE HOLD. With their expert advice you can construct a strategy that is tailored specifically to your mortgage financing scenario.

If you have any questions, please don’t hesitate to contact us at Dominion Lending Centres!

Courtesy of Michael Hallett, AMP – DLC Producers West Financial 

What is a credit report and why is it necessary? It’s easy, it provides proof of your creditworthiness. Plain and simple!

In this day and age, it’s rare to find someone who doesn’t have some form of credit. This can include credit cards, personal loans, lines of credit, car loans,  student loans, mortgages and more. Anything that reports to one or both of the main credit reporting agencies in Canada, Equifax and TransUnion.

What this basically says is what your credit history and repayment habits are like. It reports when you paid on time, late or didn’t pay at all and you now have a collections company after you. It also reports when a creditor writes off a debt along with when there has been a bankruptcy or a consumer proposal. They also provide information on how well you have made your mortgage payments.

Your credit report will also show how much of your available credit has been utilized. So if the limit on your credit card is $2,000 and you owe $1,999, it gives the impression that you might be tight for funds and are using credit to keep afloat. Having several maxed out and over the limit debts can be a warning sign to credit issuers, along with mortgage lenders.

All this info creates scores which rate your credit worthiness. The higher the score, the better, especially when you are asking to borrow the most money you will probably ever ask to borrow – a mortgage on a house!

We have several categories of lending institutions. The best interest rates and terms are found with prime lending institutions such as the banks, monoline lenders (available through mortgage specialists), credit unions, etc. These options are usually only available to those with the best credit ratings.

There are lenders who will grant mortgages to those who have experienced credit challenges. Rates and terms are higher, often brokerage and lender fees apply. These “subprime” lenders also offer opportunities designed to assist those having difficulties to get out of the corner and improve their situation. Most of the time, these lenders are used in the short term until the borrower qualifies with prime lenders with better rates and terms.

There are circumstances where private lenders are also utilized. A good mortgage specialist will be able to assess the situation and tell you when this is necessary.

Of course, you will be notified well in advance anytime a fee will be charged by the broker or the lender.

Here’s what makes up your credit score and what impact they have on the bottom line. Payment History (how well you paid), Credit Debts (how many debts you have and how much they are utilized), Age of accounts (how long you’ve had these debts, the longer the better), Type of credit (they all impact differently, Credit Enquires, (are you a shopper spending lots of money, or in trouble?).

To find out how long negative comments stay on your credit bureau, check out this page on the Financial Consumer Agency of Canada’s website.

The biggest threats to your credit score are payments later than 30 days, maxed out credit cards, collections, proposals and bankruptcies.

The moral of the story….. Keep a close eye on those debts, keep payments up to date, don’t overextend yourself, and if you are having issues, talk with an advisor before it gets out of hand. There are many ways to prevent a credit rating breakdown, we here at Dominion Lending Centres can help.

Couresty of Anne Martin, AMP – Neighbourhood DLC Financial 

There is almost ALWAYS a mortgage solution. New to Canada? Self Employed? Maybe a few credit glitches in your past? You just need to ask the right mortgage consultant. Not everyone can qualify for bank mortgages today. It doesn’t make you a bad person, it makes you a business savvy person getting the best mortgage for your situation! With the mortgage rules constantly changing, private or alternative mortgages are becoming the only way some people can refinance or buy.

Did you know that according to a Globe and Mail report “self-employed now represent about 15.6 per cent of all working Canadians”?

There is a misconception that alternative or private mortgages are only for bad people. Some folks call it “subprime”. Don’t let the word “subprime” scare you as our lending practices here in Canada are very strict and all federally regulated.

What is Private Mortgage Financing and who uses it?

Private mortgage financing can be an excellent alternative for those that are either:
1. Self-Employed and declare little or no income
2. Micro-condos that are less than 600sqft (banks generally won’t finance these)
3. Foreign investors
4. Non-residents of Canada
5. Credit Challenged
6. Owe CRA back taxes
7. Property Taxes that are in arrears
8. People going through a foreclosure
9. Construction financing and commercial loans
10. Equity takeouts for starting a business
11. Short term financing that has is open and no penalties
12. Don’t want to refinance their 1st bank mortgage as the penalties are to high.
13. Requiring funds up to $20 million dollars

Banks and many mortgage brokers don’t specialize in private financing. It’s vital to ensure these types of mortgage files are submitted and packaged differently than a traditional bank type mortgage (Also known as A financing).

If it’s submitted without care and due diligence, you may pay a higher rate and HEFTY fees!

When you are applying for a traditional mortgage (meaning you are a typical T4 employed client, good credit and saved down payment) the CLIENT is qualified based on the PERSON first, then the property.

When you apply for private financing, the PROPERTY is qualified for the mortgage first and then a few details about the client.

The property and location, location, location is what the lender is lending on. A property in a marketable area such as Vancouver Westside, North Vancouver and West Vancouver are PRIME marketable properties that private lenders like. The risk is lower, so they can offer better rates. Certainly properties anywhere in Canada are all options for private financing, even in small communities as well. Mortgages are also available for remediated, non-remediated and legal grow op properties as well.

What about the Rates?

Valuable and marketable properties can get financing with 15-20% down, but you can expect to pay 2-3% higher rates than if you have 25% down, as there is more risk taken by the lender. The rates for a 1st mortgage today (2015) are as low as 5.75% for a strong mortgage file to 10% for a less desirable property. 2nd mortgages can range 12-15%. The bonus of course, it is you can opt to pay “interest only” and it can be fully open so you don’t have to pay the penalty to break the mortgage.

I hear there are fees?

There are almost always fees for private mortgages. This is how the broker is paid for working on your deal. A traditional bank mortgage doesn’t have fees as the bank pays the broker. Fees depend on your broker. I have seen as low as $500 to as high as 5% of the amount you’re borrowing; the average is 1% (for example: $400k mortgage would have a $4,000 fee), so good to ask this upfront and ask a few brokers that SPECIALIZE in private financing.

Having an EXIT strategy

If you get short term (1-2 year) private financing, as your mortgage broker, I want to ensure we have an “exit strategy” plan in place it have to moved to a traditional low rate mortgage soon. This is especially true if the reason for the private financing is credit, income or back taxes. We will work together to ensure this plan happens and is followed through.

What might this look like?
You want to purchase a $500,000 home in Vancouver

You’re paying fees to CHMC or another insurer with less than 20% down, so let’s look at fees in this hypothetical scenario:

With a traditional mortgage:
Purchase: $500,000 home
Down payment: 15% down – $75,000
CMHC fee: $7650.00 (built into the mortgage)
Payments per month: $1979.30 based on 2.69%, 5 year fixed, 25 year amortization
and LOTS of personal and property documents required! Here you would need excellent credit, proof of income, good job, saved down payment and weeks to close the deal.
OR
20% down or $100,000 down
$5,000 CMHC fee
Payments: $1852.81 per month.

Alternative mortgage, the simpler approach:
Purchase: $500,000 home
Down payment: 15% down – $75,000
Lender/broker fee: $8653.00 with 2% fee
Payments per month: $2271.51 per month, 6.5%, interest only, 25 year amortization.
OR
20% down – $8,000 fee
Payments: $2679.30 per month, Interest Only payments.
Next to no personal documents required to qualify

These are just estimates and ideas, but you get the idea. You’re paying a fee…one way or another.

This is just a sample…and certainly not a black-and-white scenario. Traditional mortgages qualify on strict matrix type qualifying rules, where private mortgages allow us to “think outside the box” to get your mortgage approved at the best rate for the property you are buying or refinancing. It is KEY to work with a mortgage expert that specializes in private financing and has connections and a good relationship to lenders.

There are many private lenders and their rates, fees and what they will fund vary. Contact us a Dominion Lending Centres so we can help you problem solve and find a reasonable solution that your bank can’t offer you. It’s quick and not as costly as it may seem, if it meets your immediate needs.

Moving up the property ladder is an exciting time in your life – having clarity on how the process works is key to your success.

1. Understand the terms of your mortgage and be prepared – get a pre-approval.

Just because you already have a mortgage now, doesn’t mean you automatically qualify for a new one. Policies change all the time along with your credit score, income type/structure & current debt load, which all contribute to what your current options are.

2. Have a deposit ready

These will be the funds you will use to put a firm contract in place. These cannot come from your sale proceeds initially unless the completion date has already passed and you have received the sale proceeds. You will need to have access to this cash up front and you may not qualify to borrow it from a lender, so being pre-approved will help you plan for that.

3. Get your dates in order.

Not many people can qualify to own 2 properties at once. This means you cannot buy another home or qualify for a bridge loan until someone has REMOVED subjects on your sale. Bridge financing is required when the sale of your place completes after the completion date of your new purchase, so the sale proceeds (down payment) aren’t available until after you’ve purchased a new home. Bridge loans come at a price – one that needs to be carefully considered. They usually include an admin fee, a short term higher rate charged on the amount being bridged and additional legal fees.

At Dominion Lending Centres, we will provide you with transparent, unbiased advice with the power of choice so you can make a decision with clarity moving forward with your plans. The service is free from the initial consultation to ongoing management and optimization of your mortgage.

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