1. Improve personal monthly cash flow – The new mortgage should help you feel more in control of your spending. Consolidate multiple payments into one mortgage payment that is lower than the total of the payments in their current state.

2. Save you interest – Yes an alternative lender comes with a higher rate, but your broker should be able to explain why that is. By consolidating your high interest credit card debt and loans into a new mortgage with an alternative lender, you will still likely save a lot of interest.

3. Develop a recovery plan – You need an exit strategy so your mortgage will be back with an A-Lender as soon as possible. This means discussing credit recovery techniques such as getting secured credit cards and credit management.

We’re here at Dominion Lending Centres to help you put together a strategy!

Courtesy of Nathan Lawrence, AMP – DLC Lakehead Financial 

ob-sess(ed): the act of being preoccupied or fill the mind continually, intrusively and to a troubling extend.

As mortgage consumers, we get obsessed with obtaining the best rate – we are caught in the cross-hairs of lender marketing. Lenders spend millions of dollars annually to pitch their message; some listen and some don’t. As consumers, we all want make sure we are getting the best value for our money. When entering into the world of purchase and owning real estate, there should be a detailed plan laid out for one to follow. We should make sure all our plans fit the mortgage products we inherently rely on. Would you put a square peg in a round hole?

Along with making sure the mortgage product is suitable, there is also an element of competition between friends, family members and even colleagues at work. Consumers thought process goes something like this (…and I was once part of this faculty)…”I need to get the lowest rate so that I supersede the rate that (enter name here) got…” That statement couldn’t be further from the truth – it’s 100% wrong.

We all want to pay as little as possible up front, but never put any thought into life’s uncertainties. What if you need to break the mortgage?, to consolidate some debt, require equity for a renovation, moving to another town/city where your current lender does not lend, leverage equity to take advantage of some financial planning strategies…the list goes on.

60% or 6 out of every 10 mortgages that originally opt for a 5 year fixed term are changed/broken/altered 38 months into the contract. The act of breaking one’s mortgage will yield a penalty on the outstanding balance for 22 months. The penalty will be either an Interest Rate Differential calculation or 3 month interest, whatever is greater. There is so much more to choosing a mortgage rate and term than just the 5 bold character,s ?.??%  being advertised.

Borrower’s have to look past the numbers and educate themselves on the terms of that rate being offered; the fine print!

Depending on the RATE and its terms, that penalty can be dramatically different. Lenders all have a suite of various products to fit you, the consumer’s, wants and needs. It’s up to you and your Mortgage Expert to navigate through the gauntlet of rate sheets and product information to find what works for you and your specific scenario. As Mortgage Experts, we here at Dominion Lending Centres have access to a wide range of lenders; major chartered banks, credit unions and investment lenders. At times there could be a difference of 10 to 20 basis points (0.10-0.20%) from lender to lender.

Let’s take for example a rate of 2.44% vs 2.64% for a 5 year fixed term. It’s obvious which one most borrowers would gravitate to, but is it worth it? What are the pitfalls? These two rates have drastically different penalty structures even though they are offered by the same lender. The 2.44% rate holds a 3% penalty on the outstanding mortgage balance (OSB). The 2.64% rate calculates the Interest Rate Differential (IRD) or 3 months interest, whatever is greater to determine the penalty.

Here is an example of what it would cost to exit these mortgage contracts early. We will use the 60% rule along with a starting balance of $330,000, 25 year amortization and $0 prepayments made to the principal for the first 38 months.

Rate 2.44% 2.64%

OSB @ 38 mos $298,401.05 $299,153.80

Penalty 8,952.03 $2,468.02

Difference $6,484.01

Monthly payment $1,468.45 $1,501.39

Difference over 38 mos $1,251.72

Same term but a different mortgage product yields a difference in penalty of $6,484.01. Over that same 38 month term, the higher interest will have an ‘out-of-pocket’ difference of $1,251.72. Now ask yourself, with all of life’s uncertainties, which would you prefer, the 2.44% or 2.64% rate? I would choose the higher rate and pay $5,232.29 less.

This is where having a knowledgeable Mortgage Expert from Dominion Lending Centres working for you pays off in spades. We will review your plan and recommend the best mortgage product. Make sure you examine all aspects of the mortgage, 60% of 5 year fixed mortgages are altered. Here’s yet another reason to always consider variable rate mortgages, much more flexible and only yield 3 month interest penalty on the OSB no matter where you are in the contract timeline.

If you are looking for personalized mortgage advice, contact me at Dominion Lending Centres anytime!

Courtesy of Michael Hallett, AMP – DLC Producers West Financial 

There are a million variables that determine how one can qualify for a mortgage. The banks, mortgage lenders and credit unions all have different guidelines to be able to qualify under their programs, and then we have the mortgage insurers and multiple other regulatory bodies that affect decisions as well. Variables such as: income type (Employee, Self Employed, pension, etc.), affordability ratios, down payment/gift/equity, credit quality, property type and the list goes on.

The rules for each one of these criteria can differ from one credit score, income type, etc. to the next and unraveling them all is like peeling an onion – there are a lot of layers.

Income – From the lenders’ perspective, the most stable income type for a consumer (based on historical data) is the ‘Employee’. The ‘Employer’ essentially holds the risk of their employees’ personal income taxes, so the employee is the favoured choice. Ideally, they prefer to see the client with the same employer for 2 years, changing positions isn’t usually a bad thing within that employer, depending on how that new income is generated. For example, salaried positions are least risky as they are the most stable. Getting into salaried plus over time (OT)/bonus/commissions is an entirely new set of criteria. IF we need to use either of those ‘bonus’ types of income, the rules now state that you have to qualify on your most recent two years of income and preferably at the same employer. In either case, the banks are looking for the least amount of risk when providing any sort of loan. So, it’s easy to presume longevity and consistency rule. Remember, that’s the perfect scenario, there are always exceptions based on the quality of the other variables.

Down Payment – The strongest types of down payment/equity are those where they are earned yourself-it shows character. To prove the ‘earned’ down payment/equity, we need to show them verification of the funds over a 90 day period whether it’s coming from your saved up bank accounts, RRSP’s, GIC’s or investment statements. They are looking for the anomalies in the deposit amounts and any large irregular looking deposits need to be accounted for and usually explained. Equity is confirmed via mortgage statements and the sale contract or appraised value. There are other types of down payment as well, for example, gifts from immediate family members, sale of existing assets or borrowed from your existing home or line of credit(unsecured borrowings have tighter qualifying guidelines).

Credit – Credit scores range between 300-900, the higher the better. In Canada, to qualify for the best products and rates that the banks and lenders offer, they want to see your credit score above 680, and preferably over 720 plus. The score isn’t the end all be all either these days, they want to see longevity and differing types of credit. The rule of thumb is two years of credit, over two thousand dollars on two different loans and both loans open today (whether it be two credit cards at $2000 with zero to low balances or car loan and a credit card or other variations as well)-again longevity and consistency here rules.

Affordability Ratios – In the mortgage world this is called your Debt Service Ratios. Total Debt Service Ratio (TDSR) and Gross Debt Service (GDSR) are the ones used on the residential side of mortgage applications. The lenders are using your qualifying income vs all of your monthly obligations to come up with the ratios. Just like your golf score, the lower the ratios, the better your chances of qualifying for a mortgage. The better credit quality clients can have TDSR ratios as high as 44% and 39% for GDSR, but usually 40% is used as a historical rule of thumb.

Property Type – We all know there are a lot of variables here, especially in Alberta. Anything outside of a regular home zoned as a ‘single family residence’, will likely be scrutinized further and may come with additional qualifying factors.

These are just some of the basics that the lenders look at to aid in qualifying you for a mortgage. To put it simply, the least risky client is a two year tenured salaried employee, has saved up their own down payment or has equity in their own home, has low TDS/GDS ratios, is buying a single family ‘re-marketable’ home in a densely populated area, their credit score is over 750 and has well over two years of credit on more than two loans. In a perfect world, the banks want everyone to look like this, but we all know that isn’t so.

Courtesy of Jean-Guy Tourcotte, AMP – DLC Regional Mortgage Group 

One thing Canadians have in common is that most of us are paying off a mortgage.

The mortgage market can sometimes be confusing. There are a vast array of choices – open, closed flex down, equity take-out, cash back, and of course the rates themselves. While we would not attempt to try to muddle through the intricacies of insurance or investments without expert help, we will often go it alone when it’s time to get a mortgage.

We will call a variety of banks and other lenders in an attempt to get the best rate. After numerous phone calls you get back to your original lender, and they agree to meet your best rate. Why should you have to spend so much of your time finding the best rate? If you are not quick enough the rate may change before you lock it in.

There is a solution to this problem – use the services of a mortgage broker. 85% of Americans use mortgage brokers today but only 33% of Canadians do; mainly because they do not know what a mortgage broker is and what they do.

What is a mortgage broker? A mortgage broker is an individual who represents a mortgage brokerage firm. The brokerage has access to over two dozen banks, trust companies, insurance companies and other lenders at their fingertips. By dealing with these lenders on a day-to-day basis, we have access to wholesale lending rates which can save you thousands of dollars. It should also be noted that the majority of mortgage brokerages are not owned by the lenders they represent. Brokers work for the borrower, not the lenders. Mortgage software allows us to scan all the lenders for the best rate for the term you are looking for in seconds. In addition we will advise you on the best options for your own personal situation. Newlyweds with no cash can purchase a house with 0% down under certain conditions. Some lenders will even give you 1-5% cash back. Wouldn’t that come in handy for buying curtains and furniture for your new home?

Now this sounds great! Everyone could use an expert to save them money, but how much does it cost? The majority of mortgages are arranged at no cost to the consumer. The lenders pay a finders fee to the brokerage firm for finding and arranging the mortgage. If you have an unusual credit history which involves more work, a set fee would be agreed upon before we start on the application.

Why would you choose to use a mortgage broker instead of your bank?

Lower Interest Rates

Wholesale mortgage rates are discounted an average of 1.20% over what the bank will offer you. A 1% interest discount on a $150,000 mortgage can save you more than $7900 in interest costs over a 5 year term.

Best Mortgage Options

By shopping the lenders’ market we can find you the best options for your particular situation. Banks are limited to the products carried by their institution.

Bank Loan Officers are employees of the bank

Mortgage agents work for you, the borrower.

Fast Service

A mortgage broker can often get your mortgage approved in a day. In addition we can meet you at your home, office, or wherever it is convenient for you.

As you can see, mortgage brokers offer convenience, service and great rates. It’s no wonder more and more Canadians are choosing to call a mortgage broker when it is time to renew their mortgages. As the #1 mortgage brokerage company in Canada, we here at Dominion Lending Centres are ready to help you!

Courtesy of David Cooke, AMP – DLC Westcor 

In order to stimulate sales and maintain price points on new properties, sellers (and developers) will offer incentives to buyers versus lowering the price of a piece of property. A common incentive is to include a “decorating allowance”. Decorating allowances can be any amount but common ones are between $5,000 and $10,000. This basically means that the purchaser will be credited on the statement of adjustments the amount of the decorating allowance at the lawyer’s/notary office when closing.

However, decorating allowances can pose a problem with obtaining financing. Often times, the lender will reduce the amount of the mortgage proceeds by the amount of the decorating allowance. This is because the lender will not lend on perceived credit. A decorating allowance is perceived by the lender as credit.

What does this mean? When you apply for a mortgage, you are applying for the full purchase price of the property. If the new property price is $500,000, you are applying for $500,000 plus GST minus the down payment of at least 5% ($25,000). The total mortgage amount to be applied for equals $500,000 (purchase price $500,000 + GST ($25,000) – down payment ($25,000) = $500,000).

However, the lender will not lend on the decorating allowance, so the lender will release the mortgage amount minus the decorating allowance. For example, if the decorating allowance is $5,000, then the mortgage proceeds will be $495,000 instead of the $500,000 originally applied for, which leaves you $5,000 short for the purchase price. The seller will then credit your mortgage $5,000 (decorating allowance) which will make your mortgage $5,000 less (mortgage of $495,000). But keep in mind, you have to provide the full $500,000 as this is the purchase price.

Bottom line…. if you accept a “decorating allowance” it will be a credit to your mortgage and you have to provide the cash for the decorating allowance up front as the lender will not lend on a decorating allowance. If you need more information, Dominion Lending Centres can help!

Courtesy of Wrenetta Sinclair, AMP – DLC GLM Mortgage Group 

Well the word is out…Canada is in a technical recession…so what does that mean for Canadian mortgage holders? The main question that I have been asked is, “how will the recession impact interest rates or my mortgage?”

For those currently in the middle of a mortgage term, there will be minimal to no impact on your mortgage. If you have a fixed rate mortgage, nothing will change as long as you continue to make your mortgage payments. If you have a variable rate mortgage, this will likely work in your favour for at least a little longer.

With rates staying low, it is a good time to take a look at your current mortgage term to see if there is an opportunity to restructure your financing into something that is going to take advantage of the low rates.

Currently looking at purchasing a new home? The main concern with a recession is an impact on employment. If there are changes to your employment, it is important that you review these changes with your Mortgage Broker. Not expecting there to be any changes? Then, just like those that currently have a mortgage, take advantage of the low rates and make sure you understand the fine print in the mortgage contract that you are signing up for…especially the details about pre-payment penalties.

Courtesy of Nathan Lawrence, AMP – DLC  Lakehead Financial

This Global News headline caught my eye recently; 25,000 Vancouver homes claim their total income is less than they spend on housing.

Reading the story, I was curious about a few things:

1. How were shelter costs calculated?
2. What was the assumption re average mortgage balance/rate/payment?
3. Were the ~47% of mortgage free Vancouverites factored in?
4. What of retirees on fixed incomes, yet with zero mortgage.
5. Part time income, owners of business, contractors, etc.

None of these were addressed in the Global News Story, so I clicked the link for the story source website.

Click here to do the same.

Still not finding the detail desired I explored the entire site and clicked the Blog link.

This is where things got more interesting. ‘Full Time Employee income only’ – that’s not what the Global News Headline reads…

But there was still one more click required to find the gold, or absence thereof.

The ‘Read On’ button.

Clicking this we find some pretty interesting data. Here it is stated explicitly, and in direct contrast to the Global News Headline that “the ‘affordability’ map linked above uses individual income for full-time employees instead of combined household income, which differs from how affordability is usually calculated.”

The next sentence…

“The reason is that the data I had did not have the household income.”

So we have a news headline that stirs up inaccurate thoughts with inaccurate wording based on a story with (self-admitted) incomplete data.

Consider the many other sources of income that have been excluded in this study, that absolutely exist in real life and are completely acceptable when qualifying for a mortgage.

1. Permanent part time work (many nurses and teachers fall into this category with income still exceeding $40,000 per year).
2. Business owners.
3. ‘self-employed’ contractors.
4. Basement Suite income.

These are just a few examples of perfectly legitimate taxable income not factored into this study.

Perhaps the sentence that best encapsulates this entire situation is the final one in Mr. Von Bergman’s Blog post; in relation to the data map being built on limited employee info, rather than total household income: “But I am lazy, so for now that’s it”

Mr. Von Bergman is perfectly entitled to be lazy and not put forward a complete story, we are not paying him to do the work. In fact, he comes across as a perfectly logical guy.

However, Global News should be held to a higher standard.

Courtesy of Dustan Woodhouse, AMP – DLC Canadian Mortgage Experts 

We all know the real estate industry is hot right now and for many getting into the housing market, it can be a pipe dream. With tightening government and lending regulations, historically low interest rates and soaring housing prices, it can be a daunting endeavour for anyone.

Whether you are a first time home buyer, wanting to upsize to accommodate your growing family or purchasing an investment property, these are the factors that lenders will be looking at. This will determine which mortgage type and interest rate will be available to you.

Know Your 5 C’s:

Collateral – The property itself that you are hoping to purchase.

Capital – Where is your down payment coming from? At a minimum, you need 5% down for a “high ratio” insured mortgage or a “conventional” mortgage with 20% down. This money can come from your own resources or can be gifted from a family member. Requirements will vary, so make sure to check with your mortgage professional.

Credit – Do you have proven credit and show a good history of repayment?

Capacity – The most important by far! How are you going to pay for your mortgage? Proof of income and requirements differ depending on whether you are salaried, self- employed, paid hourly or somewhere in between!

Character – Are you a super person? This is the least important factor to lenders these days.

Just as important to consider, when deciding on your mortgage, is to determine your current financial situation and longer term goals. This will help you decide which mortgage term and amortization (for example a 5 year term with a 25 year amortization) and mortgage rate (variable or fixed) is best for you. Finally, don’t forget to discuss the FEATURES that come with your mortgage as this could save you thousands of dollars and potential grief over the term of the mortgage. These features can include pre-payment options, lower early payout penalties and portability, providing you with flexibility and options for paying down your mortgage faster or making changes, should the need arise.

Mortgages are NOT a one size fits all, so always make sure to contact and discuss your options with a licensed mortgage professional BEFORE preparing to find the home of your dreams.

Courtesy of Jordan Thomson, AMP – DLC City Wide 

We often see ads from the major lenders offering cash back incentives on their Mortgage products.

Gone are the days where a Cash Back Mortgage could be used to facilitate a purchase without the required minimum of a 5% down payment. Cash Back incentives are now made available for other enticing uses; New Furniture and Appliances, Renovations and the other great hook…..Apply the cash back portion directly on your Mortgage for a better effective rate!

Just a few weeks ago, I was emailed an offer from a major lender who shall remain unnamed;

“NEW PROMO … Cash back for purchases. Effective 5 year Rate as low as 2.62%….”

First off, the Cash Back Mortgages are offered at a premium (higher) compared to other standard rates available. The ploy suggested by the lender here is pay it straight down on principle and lower your effective interest rate over time.

READ THE FINE PRINT

The kicker here and warning to all….there IS a catch! If you are to break the mortgage midterm, whether to sell your home or refinance, you not only have to pay the interest penalty, you also have to return the Cash Back portion to the bank. Even if you used it to pay down your Mortgage. This is in the fine print on the websites and in your contract for you to see.

I have seen this happen to a few people that I know and it ended up being a $10,000 – $20,000 factor in their decision not to move or change careers!

There are other more cost effective ways to obtain financing in better programs such as Purchase Plus Improvements, or Home Equity Lines of Credit (HELOC), that expose you to less future risk and still provide you with flexibility to accomplish your goals.

This is why you need a certified Mortgage Broker – like the fine folks at Dominion Lending Centres – working for you. We know of these programs and can offer advice on which ones most suit your situation.

Couresty of Kris Grasty, AMP – DLC Canadian Mortgage Experts 

Are you or someone you know above the age of 55 and having trouble making ends meet? Are funds needed to cover the costs associated with an illness, disability or life event? Perhaps it’s time for a home repair or renovation, such as a kitchen or bathroom. Pay for the kids education? Do you have a mortgage and can’t afford the payments anymore?

Perhaps the funds are just not available and you don’t have enough income to qualify for a mortgage but you have lots of equity in your home, or it might even be paid off.

Here’s where the CHIP program, also known as a “Reverse Mortgage”, becomes the solution. Yes, I’ve seen the commercials on TV and have heard the myths and negative “energy” around it. However, let’s first discuss what this mortgage can do.

• Borrow up to 50% of the value of the home and make NO PAYMENTS as long as you live in the home. The interest payments are added to the mortgage loan amount and are only due when you vacate.
• The amount that you are eligible to borrow is determined by your age and the location of your home, therefore, the younger you are the less you can borrow, eliminating the risk of eroding all your equity over time.
• You maintain full ownership of the home.
• Your only obligation is to keep the home in good condition, keep the property taxes and home insurance up to date.
• You will never owe more than the value of the home.
• You do not need to qualify for the loan.
• 99% of the time, equity is realized upon sale.

There are many myths out there about reverse mortgages, here are some –

1. The most common myth is that you will lose all your equity in your home. Untrue! You will be provided with a schedule showing you how the equity in your home is expected to grow over time using 3 possible growth scenarios. Figures that are used are conservative, therefore, you could realize even more equity when the home is sold by yourself or your estate.

The amount of remaining equity depends on how old you were when you obtained the mortgage and how long you’ve had the loan when you leave the home. Plus, the value of the home at the end of the loan.

2. If I die, my spouse will be left with a big mortgage to pay off. This is not true as the loan is not due until you or your spouse leave the home.

3. It is costly to set up this mortgage. Set up fees include a property appraisal, legal and admin fees; usually a few thousand dollars or less. The mortgage can be used to pay the fees. This is not much different than a high risk mortgage. Remember NO payments!

It’s important to understand that there is a growing senior population and people are living longer. Employment pensions are disappearing, government pension payments are small. CHIP offers an affordable solution for seniors who want to spend their retirement in a comfortable, stress-free way.

For more info, contact your Dominion Lending Centres mortgage specialist, we have the details and will only consider this option for you when it is in your best interest.

Courtesy of Anne Martin, AMP – Neighbourhood DLC