As property prices continue to rise across Canada, the conversation around “how to climb the property ladder” has made a subtle shift to “how to get on the property ladder in the first place.” Especially if you’re single.

Whereas before it was assumed anyone would qualify to buy a starter home (or condo), nowadays with increased housing prices and the government making it tougher to qualify for a mortgage through a financial stress test, becoming a homeowner isn’t a walk in the park. Qualifying for a mortgage on a single income is becoming increasingly difficult.

Unfortunately, just because you have a proven ability to pay rent on time doesn’t mean you will qualify to make mortgage payments in the same amount. So if you are looking to get into the housing market, but don’t qualify on your own, maybe you should consider co-ownership as an option!

So what is co-ownership anyway? Well, co-ownership is when more than one applicant takes on the financial responsibility of owning a property together. Co-ownership can take on many forms. Obviously owning a home with your spouse or life partner is the most common form of co-ownership, while having your parents co-sign on a mortgage is another. But for the sake of this article, let’s think past these arrangements.

Did you know that there are really no limitations with whom you can purchase a property? This is assuming they meet the lending criteria.
Maybe a brother, sister, cousin, neighbour, co-worker, friend, your mechanic, financial advisor, or some distant relative just happens to be looking to get into the housing market as well? There is a good chance that by combining your incomes together, you will qualify for a mortgage that neither of you would qualify on your own. Bringing someone else into the picture, or even a group of people, can significantly increase the amount you qualify to borrow on a mortgage. Most lenders will accept up to four applicants on a mortgage, while some lenders have even gone as far as launching products designed to make buying with friends and family easier. Buying a property with someone(s) in a co-ownership arrangement is becoming way more commonplace.

However, before making the decision to buy a house with someone, there is no doubt going to be a list of things you are going to want to work through. You will want to get everything out in the open and ask yourself questions like…

• Do I trust this person?
• Can I live with this person?
• Am I comfortable making decisions about the home with this person?
• How will conflict be managed when it arises?
• What happens if either party runs into financial trouble?
• What is the exit plan?

The more you work through ahead of time, the better chance you have at successfully co-owning a house with someone. A lot of people who purchase a property in a co-ownership agreement treat it like a business arrangement.
If you’d like to talk more about what this would look like for you personally, please don’t hesitate to ask.

Courtesy of Kris Grasty, AMP – DLC Canadian Mortgage Experts

Many homeowners have beliefs about how a CHIP Mortgage works but are not clear on the main benefits and protection offered by the program.

Top 3 Misconceptions About a CHIP Mortgages:

1. The Bank Owns Your Home.

Over 50% of Canadian homeowners over the age of 65, believe the bank owns your home once you’ve taken a reverse mortgage. Not true! The bank simply registers their position on the title of the home the same as any other bank would register a mortgage. The difference is in the collection of payments on the mortgage. With a CHIP Mortgage the home owner does not have to make payments. The mortgage payments can be capitalized back into the mortgage. The full amount of principal and interest is payable when the home is sold or the homeowner(s) die.

2. Your Estate Can Owe More Than Your Home

A CHIP mortgage cannot seek any further compensation from the borrower – even if the collateral asset (property) does not fully cover the full value of the loan upon payout of the mortgage. Therefore, when the last homeowner dies (and the reverse mortgage is due), the estate will never be responsible for paying back more than the fair market value of the home. The estate is fully protected – this is not the case for almost any other mortgage loan (specifically secured lines of credit) in Canada, which is full recourse debt.

3. The Best Time to take a Reverse Mortgage is at the End of Your Retirement

•  91% of Canadian seniors have no plans to sell their home (CBC News “Canadian Boomers Want To Stay In Their Homes As They Age).
•  You are missing out on a huge tax-saving opportunity by not taking out CHIP mortgage in the beginning of your retirement.

“Research has consistently shown that strategic uses of reverse mortgages can be used to improve a retiree’s financial situation, and that reverse mortgages generally provide more strategic benefits when used early in retirement as opposed to being used as a last resort.” – Jamie Hopkins, Forbes

In Canada, a CHIP reverse mortgage can be set-up to provide homeowners with a monthly draw out of the approved amount. For example: client at age 65 is approved for $240,000 and decides to take $1000/month. This is deposited into the clients’ bank account over the next 20-years. They use those funds to increase their monthly cash flow or invest the money till they turn 71. Interest accumulates in the CHIP Mortgage only on the amount drawn (i.e.: not on the full dollar amount at the onset).

This strategy allows clients to draw down less income from their savings/investments to support their retirement lifestyle. In turn, this can create some excellent tax savings, since home equity is non-taxable. Imagine lowering your nominal tax bracket by 5 – 10% each and every year over a 20 year period! The tax savings can be huge. You are also able to preserve your assets allowing them to grow which can generate a higher rate of return when invested over a greater period of time.

Courtesy of Pauline Tonkin, AMP – DLC Innovative Mortgage Solutions

Although going through the pre-approval process is more important than ever, the actual term ‘pre-approval’ is often misleading. It really addresses just a few variables that may arise once in the middle of an actual offer.

The pressure in many markets has never been greater to write a condition-free offer, yet due to recent changes to lending guidelines by the federal government, the importance of a clause in the contract along the lines of ‘subject to receiving and approving satisfactory financing’ has also never been greater. (There are variations to be discussed with your Realtor around the specific wording of such clauses.)

Often clients are reluctant to write the initial offer on a property without feeling like they are 100 per cent pre-approved, an understandable desire. The risk being that many clients then falsely believe they have a 100 per cent guarantee of financing, and this is not at all what a pre-approval is.

A lender must review all related documents, not just the clients personal documents, but also those from the appraiser and the realtor as the propety itself must meet certain standards and guidelines.

The pre-approval process should be considered a pre-screening process. It does involve review and analysis of the clients current credit report, it should also include a list for the client of all documents that will be required in the event that an offer is written and accepted. Ideally your Mortgage Broker will review all required documents in advance, but few lenders will review documents until there is an accepted offer in place.

Clients should come away from the initial process with a clear understanding of the maximum mortgage amount they qualify for along with the various related costs involved in their specific real estate transaction. Equally as important; a completed application allows the Mortgage Broker to lock in rates for up to 120 days.

Why won’t a lender fully review and underwrite a pre-approval?

• Lenders do not have the staff resources to review ‘maybe’ applications – they have a hard enough time keeping up with ‘live’ transactions.
• The job you have today may well not be the job you have by the time you write your offer. (ideally you do not want to change jobs while house-shopping)
• If more than four weeks pass then most of the documents are out of date by lender standards, and a fresh batch needs to be ordered and reviewed with the accepted offer.
• The conversion rate of pre-approvals to ‘live transactions’ is less than 10 per cent, and this alone prevents lenders from allocating resources to reviewing pre-approvals.

It is this last point in particular that makes it so difficult to get an underwriter to completely review a pre-approval application as a special exception. Nine out of ten times that underwriter is spending their time on something that will never actually happen.

The bottom line is that a clients best bet for confidence before writing an offer is the educated and experienced opinion of the front-line individual with whom they are directly speaking, Dominion Lending Centres Mortgage Broker. Although this individual will not be the same person that underwrites and formally approves the live transaction when the time comes, they likely have hundreds of files worth of experience behind them. That experience is valuable.

It is due to the disconnect between intake of application and actual lender underwriting a live file that having a ‘subject to receiving and approving satisfactory financing’ clause in the purchase sale agreement is so very important.

Without a doubt the most significant factor in recent years which has undermined clients preapprovals is the relentless pace of government changes in lending guidelines and policies. Change implemented not only by the Government also by the lenders themselves. It is very easy to have a pre-approval for a certain mortgage amount rendered meaningless just a few days later through changes to internal underwriting guidelines. Often these changes arrive with no warning and existing pre-approvals are not grandfathered.

So, while it is absolutely worthwhile going through the pre-approval process before writing offers, and in particular before listing your current property for sale it is most important to stay in constant contact with your Mortgage Broker during the shopping process.

Be aware that aside from the key advantage of catching small issues early and securing rates a pre-approval is NOT a 100 per cent guarantee of financing.

If more than four weeks pass then most of the documents are out of date by lender standards, and a fresh batch needs to be ordered and reviewed with the accepted offer. The conversion rate of pre-approvals to ‘live transactions’ is less than 10 per cent, and this alone prevents lenders from allocating resources to reviewing pre-approvals.

Courtesy of Tracy Valko, AMP – DLC Forest City Funding

Often, when we talk to you about mortgages, Mortgage Professionals will provide you a set of choices involving banks, credit unions and single service mortgage providers called a “Monoline” and a recommendation.

Many times, if it’s a good fit, we recommend a Monoline, as your first option.

It’s important to recognize the differences between the two, Monoline and Bank, because they are very different businesses and how they approach mortgages can have a very significant impact on you.

Monoline mortgage companies are in the business of providing nothing but competitive mortgages to you, your family and friends. It’s important to stress that they offer competitive mortgage products. As a group, they provide great rates and more importantly, flexible mortgage repayment terms, all in an effort to be competitive.
They want your mortgage business because it’s their sole business line and they want to do well, both for you and for their investors.

The big banks are not in the mortgage business. They are in the financial services business. It’s very important to understand that their focus is not about being competitive in the mortgage business.

“Huh?” I know, it doesn’t seem to make a lot of sense, but let me explain…

When you work at a bank, you hear all the time that the bank doesn’t make any money on its mortgage portfolio. You come to see how true this is when you see the incredible focus that a bank has on minimizing costs, how it’s almost impossible for you to step out of the normal process to help clients with special circumstances.

Because maximizing profit is the true goal of minimizing costs, every bank follows the “Golden Mean”.

In art, the Golden Mean is a strict proportional guideline for creating great art.

For a bank, the Golden Mean of profit is the strict proportion of average products and services per client. Their golden number is that each client has an average of more than of 2.75 products and services. For example, if you have a chequing account, a mortgage and a Visa, you’re profitable for the bank. Move any one of those and you’re not profitable anymore.

The intense focus on profit and managing costs means you pay more for mortgage financing. Not on something as obvious as interest rate, but on the options. Say for example you’re in a fixed rate mortgage and you need to pay out your $350,000 mortgage out before the five year term expires. Its not that uncommon, probably two in five of you reading this will do it.

If you were to pay out two years into a five year term, depending on who you’re dealing with, the penalty can be a little as $1,500 or as much as $13,000 depending on the lender you choose. Banks typically charge higher penalties because they’re not in the mortgage business – they don’t need to be competitive and also as a way to closely manage costs.

This post and some of the recent articles you’ve seen floating around may lead you to think that your average Canadian Bank is a manifestation of Mr. Robot’s Evil Corp. They’re not; managing costs is what drives profit for them – saving 10 cents means 3 dollars more profit – so even phone to phone contact for them is considered an extra cost.

The most important thing for you to remember is that they’re not really in the mortgage business, that’s why you need to connect with a Dominion Lending Centres mortgage specialist – to understand all your options.

Courtesy of Jonathan Barlow, DLC A Better Way

The question most often asked: ‘Is my mortgage portable?’

The answer most often given: ‘Yes.’

This answer is increasingly wrong.

In reality you qualify to move ~80% of the balance… maybe.

If you are thinking of:

• Moving (upsizing or downsizing)
• Locking a variable-rate mortgage into a fixed-rate product

… you would be well served to keep reading.

The above question is incomplete. To be fair, you would have no way of knowing this. The person answering it should know better than to give you a one-word answer.

The proper question: ‘Do I need to re-qualify for my current mortgage to move to a new home?’

The proper answer: ‘Yes, your mortgage is portable, but only if you re-qualify under today’s new and more stringent guidelines.’

The person answering the portability question should only be your Dominion Lending Centres mortgage specialist. They alone can answer the question accurately, and only with a complete and updated application, along with all supporting documents to confirm the maximum mortgage amount under current guidelines.

Too many clients learn this lesson the hard way. They sell their existing property before speaking with their Mortgage Broker, and in some cases they also enter binding purchase agreements under the mistaken assumption they can just port their mortgage.

Key Point – Do not ask if your mortgage is portable (99% of them are). Ask if you currently qualify to move your mortgage to a new property.

Key Point – The federal government has created a dynamic in which there are two different qualifying rates for mortgage approvals. And the one used yesterday to get you into a five-year fixed rate mortgage is not always the same one that is used if you want to move that same mortgage to a new home down the street, even just one day later.

Key Point – One day into your five-year fixed mortgage, you are now subject to the stress test. In a nutshell, the stress test applies the higher qualifying rate and effectively reduces your maximum mortgage approval by ~20%.

Meaning that you may only be able to port 80% of the current balance to another property… just one day later.

So, what’s the fix?

The best fix – The government could add a simple sentence to their lending guidelines along the lines of ‘If a borrower qualified for their mortgage at the five-year contract rate at inception, then the borrower shall be allowed to re-qualify at that original rate when moving their mortgage to a new home.’

Currently this fix does not exist.

The current fix – Well it’s no big deal at all. You simply pay a penalty to break your current five-year fixed mortgage and then apply for a new five-year fixed mortgage. Said penalty amount? Typically, around 4.5% of the mortgage balance – i.e., a $14,000 penalty on a $300,000 mortgage balance.

Seems reasonable, right?

It’s entirely unreasonable. This is a horrible ‘fix’, because it is not a fix at all. If you bought with 5% down, and then a few months later were transferred to another province and had no choice but to move, this represents your entire down payment vanishing due to an oversight by the federal regulators.

If you have been personally caught in this ‘portability trap,’ it felt more like total devastation than it did ‘anecdotal’. And by all means you should make your voice heard. Share your story with via www.tellyourmp.ca

Courtesy of Dustan Woodhouse, AMP – DLC Canadian Mortgage Experts

Paperwork-it’s a fact of life. You need it and we as mortgage professionals also need it. Below is a list of must have documentation BEFORE you start going through the mortgage approval process.

Personal Information
This will be the basic information we require to start your mortgage process. It will include your age, marital status, and number and age of kids. For this first step, a divorce/separation agreement if you are going through a divorce or were previously divorced will also be required.

Employment Details
Your employment details will require more paperwork than your basic details. This will include:

• Proof of income (T4 slips, job letter, paystubs, and/or personal income tax returns – T1 Generals)
• Notice of Assessments from the last two years

If you are self-employed then you will also need to provide any incorporation documents, financial statements and submit full personal tax returns (T1 Generals) as well as a CRA Notice of Assessment (NOA) for both the corporation as well as you personally. If you don’t have these documents on hand or can’t find them, we highly recommend using a document service like Easy NOA. We have had clients use them with fantastic results and no hassle on your end. Check them out by visiting their website – easynoa.ca.

Other Income Sources

• Typically, this is a statement on your part but the lender might ask for back-up documentation. This may include:
• Pension documentation and information
• Rental income property income documentation
• Part time work paystub with job letter
• Child Tax Benefit documentation
• Child/Spousal support documentation
• Investment Income documentation
• Disability income documentation

Documentation of current property
If you already own a property, you will need to have a copy of your current mortgage statement on your current property and a copy of last year’s property tax statement. You may also be asked to provide this year’s up to date property tax statement.

Keep in mind that every person’s situation is unique and this list only outlines the traditional documents required to pursue your mortgage. For example, if you receive child support you will need to have proof of that (i.e. copy of your separation/divorce agreement and the last three months bank statements showing the payment of the child support to you) or if you have experienced bankruptcy you will need to provide a list of debts paid off with a copy of your bankruptcies discharge papers.

Again, we know that sometimes things get lost or misplaced (we have been there too!). If you find yourself scrambling to find one of these documents or another document that your mortgage broker has requested, a service like Easy NOA can have it delivered to your inbox within 24 hours. Having these documents on hand in preparation for going through the mortgage approval process will make the entire experience run much smoother—and make it an enjoyable one!

Courtesy of Geoff Lee, AMP – DLC GLM Mortgage Group

Prepayment Privileges

You need additional financing. Do you prepay your existing loan? We remind readers that commercial mortgage borrowers do not enjoy the privileges afforded personal borrowers. Section 10 of the Interest Act, allowing borrowers to repay loans after 5 years, with a 3 month interest penalty, does not apply.

In fact, for the most part, commercial mortgage borrowers who’ve secured fixed rate mortgages, do not enjoy any prepayment privileges. Commercial mortgages are typically closed for repayment for the duration of the term.

Mortgage Term Selection

Important considerations include what your investment strategy is. If you are a buy and hold investor, a longer term loan may be preferable. On the other hand, if you are adding value with the intent of selling over the near term horizon, then perhaps a shorter mortgage term is appropriate.

What are Your Options?

What does a borrower do if additional funding is required mid term? Several obvious options are available:

• Refinance your present mortgage and secure a new loan for the higher required amount.
• Secure a 2nd mortgage for the required amount of additional funds.
• Refinance other real estate within your portfolio.

Any of these strategies are viable, but all come with costs. A refinancing mid term necessitates negotiating a prepayment privilege. Your lender may simply not entertain the request, or if they do, the prepayment privilege may be costly. The 2nd mortgage option is certainly viable. However interest rates will be higher than the 1st mortgage, and additional loan processing fees, legal fees, and likely 3rd party reporting will be required. Refinancing other assets may be an option, if you have a portfolio of properties, however similar additional costs will be incurred.

Additional Financing with a Blend and Extend Mortgage.

The most straightforward approach to securing additional funding, may simply be to approach your existing lender and request a “blend and extend “ mortgage. In simple terms, you are asking your lender for new money, to layer over the existing mortgage. What they will do is structure a new loan with the old (i.e. existing mortgage amount) at the contract rate, and blend it with the new money at the new contractual rate.

What are the Benefits?

1. No Breakage Fees. You are essentially keeping your existing loan, so no prepayment penalties/breakage fees are required.

2. Lower loan processing costs. Your existing lender already has a Mortgage/Charge on your property. They could quite possibly could re-advance funds with the existing security documentation in place. As well, the lender’s lawyer may be able to realize savings inasmuch as they would be familiar with your title situation.

3. Competitive borrowing costs. While you are not likely to secure funding at today’s market rates, depending upon the relative amount of new funding required, you will likely be able to realize a weighted average interest rate lower than your present rate.

4. A Longer Term can be secured. Most lenders are quite receptive to granting a new longer term with the requested additional funding. Extending the term, when market rates are lower than your contract rate, will further decrease the blended rate. The option to blend the new money for the remaining term (known as Blend to Term), while less common, will still result in a lower interest rate payable.

Securing additional funding mid term shouldn’t be difficult. Your personal situation will dictate the approach most beneficial for you. While refinancing and secondary financing are viable options, they can be costly solutions. Consider approaching your existing lender for a Blend and Extend loan. Its an underutilized but nevertheless effective tool to secure your required additional funding.

Courtesy of Allan Jensen, AMP – DLC The Mortgage Source

Being fully pre-approved means that the lender has agreed to have you as a client (you have a pre-approval certificate) and the lender has reviewed, approved ALL your income and down payment documents (as listed below) prior to you going house hunting. Many bankers will say you’re approved, you go out shopping and then they sorry you’re not approved due to some factor. Get a pre-approval in writing! It should have your amount, rate, term, payment and date it expires.

Excited! Of course you are, you are venturing into your first or possibly your next biggest loan application and investment of you life.

What documents are required to APPROVE your mortgage?

Being prepared with the RIGHT DOCUMENTS when you want to qualify your mortgage is HUGE; just like applying for a job or going for a job interview. Come prepared or don’t get hired (or in this case, declined).

Why is this important?

You can have a leg up against the competition when buying your dream home as you can have very short timeline (ie: 1 day to confirm vs 5-7 days) for “financing subjects.”
Think? You’re the seller and you know the buyer doesn’t have to run around finding financing and the deal may fall apart? This is the #1 reason deals DO fall apart. You will likely get the home over someone who isn’t fully approved and has to have financing subjects. The home is yours and nobody’s time is wasted.

If you just walked into the bank, filled an application and gave little or no documents, and got a rate – you have a RATEHOLD. This is NOT a pre-approval. This guarantees nothing and you will be super stressed out when you put an offer in, have 5-7 days to remove financing subjects and you need to get any or all of the below documents. That’s not fun is it? Use a Dominion Lending Centres mortgage specialist ALWAYS. We don’t cost you anything!

When you get a full pre-approval, you as a person(s) are approved; ie: the bank’s done their work of reviewing (takes a few days) to call your employer, review your documents, etc. All we have to do is get the property approved, which takes a day or two. Much less stress, fastest approval…faster into your home!

Here is exactly the documents you MUST have (there is NO negotiation on these) to get your mortgage approved with ease. Key word here is EASE. Banks/Lenders have to adhere to rules, audit files and if you don’t have any of these or haven’t been requested to supply them…a big FLAG that your mortgage approval might be in jeopardy and you will be running around like a crazy person two days before your financing subject removal.

Read carefully and note the details of each requirement to prevent you from pulling your hair out later.

Here is the list for the “average” T4 full-time working person with 5-15% as their down payment (there is more for self employed, and part-time noted below):

Are you a Full-time Employee?

1. Letter of Employment from your employer, on company letterhead, that states: when you started, how much you make per hour or salary, how many guaranteed hours per week and, if you’re new, is there a probation. You can request this from your manager or HR department. This is very normal request that HR gets for mortgages.
2. Last 2 paystubs: must show all tax deductions, name of company and have your name on it.
3. Any other income? Child Support, Long Term Disability, EI, Foster Care, part-time income? Bring anything that supports it. NOTE: if you are divorced/separated and paying support, bring your finalized separation/divorce agreement. With some lenders, we can request a statutory declaration from lawyer.
4. Notice of Assessment from Canada Revenue Agency for the previous tax filed year. Can’t find it? You can request it from the CA to send it to you by mail (give 4-6 weeks for it though) or get it online from your CRA account.
5. T4’s for you previous year.
6. 90 day history of bank statement showing the money you are using to put down on your purchase. Why 90 days? Unless you can prove you got the money either from a sale of a house, car or other immediate forms of money (receipt required)…saved money takes time and the rules from the banks/government is 90 days. They just want to make sure you aren’t a drug dealer, borrowed the money and put it in your account or other fraud issues. OWN SOURCES = 90 days. BORROWED is fine, but must be disclosed. GIFT is when mom/dad give you money. Once you have an approval for “own sources” you can’t decide to change your mind and do gifted or borrowed. That’s a whole new approval.

Down payments
Own Sources: For example for “own sources”: if you are a first time buyer and your money is in RRSP’s then, have your last quarterly statement for the RRSP money. If your money is in three different savings account, you need to print off three months history with the beginning balance and end balance as of current. The account statements MUST have your NAME ON IT or it could be anyone’s account. I see this all the time. If it doesn’t print out with your name, print the summary page of your accounts. This usually has your name on it, list of your accounts and balances. Just think, the bank needs to see YOU have money in your (not your mom’s or grandparents) account.

GIFT: If mom/dad/grandparents are giving you money…then the bank needs to know this as the mortgage is submitted differently (this is called a GIFT).

If you are PART-TIME employee?
All of the above, except you will need to bring 3 years of Notice of Assessments. You need to be working for 2 years in the same job to use part-time income. You can have your Full-time job and have another part-time gig…you can use that income too (as long as it’s been 2 years).

If you are Self Employed?

• 2 years of your T1 Generals with Statement of Business Activities
• Statement of Business Activities.
• 3 years of CRA Notice of Assessments
• if incorporated: your incorporation license, articles of incorporation
• 90 day history of bank statement showing the money you are using to put down on your purchase

Going to the bank direct is such a big disservice to you. That is like walking into Ford and asking for a Mercedes or Toyota. As a broker: I am FREE! I work with ALL the banks and know ALL the rules. The bank you choose pays me to give you great service and a fantastic product. There are over 300 of them…so don’t sell yourself short.

Courtesy of Kiki Berg, AMP – DLC Hilltop Financial

Once your mortgage has been funded by your lender, you need to decide on how frequently you want to make your mortgage payments.

Most people want to pay off their mortgage as quick as possible to save paying interest.

We’ll discuss various mortgage payment options and then do the math by crunching mortgage numbers, keeping in mind: the longer it takes to pay off your mortgage, the more interest you pay.

Monthly: Most people’s typical payment option. Monthly payments will have the lowest payments therefore your mortgage will be paid off the slowest. For many people this is the most comfortable option, since it’s only one payment a month to plan for.
Bi-Weekly: Take your monthly mortgage payment multiply by 12 for a year, then divide by 26.
• You will make a mortgage payment every 2 weeks for a total of 26 payments per year.
• This will not help to pay your mortgage off any sooner than regular monthly payments.
Semi-Monthly: You make payments twice a month for a total of 24 payments a year.
• This will not help to pay your mortgage off any sooner than regular monthly payments.
Weekly: Take your monthly payments, multiply by 12 for a year, then divide by 52 weeks.
• This will not pay down your mortgage any sooner than regular monthly payments.
Accelerated Bi-weekly: Your monthly payment divided by 2.
• This option creates 2 extra bi-weekly payments a year, meaning you would be making 13 monthly payments a year (instead of 12). The two extra payments go directly to paying down the principal on your mortgage.
Accelerated Weekly: Your monthly payment divided by 4.
• This option creates 4 extra weekly payments a year, meaning you would be making 13 monthly payments over a year (instead of 12). The 4 extra payments go directly to paying down the principal on your mortgage.

I’ve crunched mortgage numbers by putting together a table using:
• $250,000 mortgage
• Mortgage rate 2.99%
• 5-year term
• Compounded semi-annually
• 25-year amortization
You can see how choosing the accelerated option pays your balance down a lot faster than regular payments.

Mortgages are complicated…  Don’t try to sort all this out on your own.  Call me and I would be happy to go over your payment options with you.

When you purchase a property, you may be a little overwhelmed by all the insurance offers related to the purchase of said property. 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 (there are three mortgage default insurers in Canada – CMHC, Genworth, and Canada Guaranty) is solely for 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 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 8 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 pass on.
2. 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.
3. 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.
4. It Protects your Family’s Finances – Mortgage Life Insurance pays off the mortgage, which means that your family’s finances stay intact.
5. Lost Wages – if you become seriously ill, Mortgage Life Insurance can cover your mortgage payments for a specified time (ex. up to 3 years). Unexpected life events such as a serious car accident can result in missed mortgage payments because of loss of wages as you need to recover from injuries.
6. Portability –certain 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.
7. The Younger you are, the Less Expensive– Which means that this insurance is extremely affordable for a young, and likely, first time home buyer.
8. Good Health = 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 regarding 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 later 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 your 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