Did you know that 30% – 40% of couples who get divorced so so over money. Divorce isn’t cheap either, so now is the time to fix your fighting and your finances!

Are second mortgages a good idea? Sure, as long as you have an exit strategy and how it will get paid off at the least amount of cost.

With any debt consolidation loan, second mortgage or other options; you want to ensure you can afford the payments, look at all debt repayment options and work with a debt or mortgage planner to ensure you are achieving your goal. Don’t just band aid a problem…

So let’s take a look at a real life household family situation…

Jack and Jill own a home, have two young kids, a furry friend, a camping trailer and two vehicles. Jack and Jill both work making about $110,000 a year combined. In the past, Jill took a few years off on maternity leave and during that time, the income dropped and the debts increased. The hot water tank flooded the basement, so add $3,000 for a new tank onto the credit card. They figure they can pay it off in a few months. Then, Jill’s best friend decided to have a destination wedding! Well fun times, but it also costs Jack and Jill $5,000 to go to Hawaii to be part of the wedding. In keeping up with the Jones next door, they bought a trailer to go camping and the proud owner of  a $45,000 loan of 8% and $300 a month payments. What’s $300 right? Then Jack needed a Dodge Ram 1500 to tow their new trailer and got a $45,0000 loan at $700 per month. Yikes, insurance for those just increased your monthly payments from $130 a month to $160 a month…oh and the GAS! It’s for the family, so they tighten their budget spending.  While camping, Jack injures his back while goofing around with his ATV and is off work for 2 months and collecting EI…and the debt snowball monthly payment crunch effect begins and so does the depression, fighting and sometimes separation. Not enough money at the end of the month.  Sound like your family? This was also my story about 16 years ago, so I can empathize with you.

Getting out of debt might require some hard decisions, such as selling assets. Challenge is the value of the new trailers, trucks and toys drops up to 10% when you drive it off the lot and your loans are usually higher than your toys. Many times there is lots of equity in home that you just can’t access right now due to credit issues or you just don’t want to break your existing mortgage (eek penalties). In a year or two you know you can wrap all the debt into your 1st mortgage and your payments will all be back in affordability line. It’s all in the planning and everyone’s family and financial situations are unique.

“Why not just get a consolidation loan from the bank”, the client asks…

Absolutely! IF you can qualify. If your financial strife has caused you late payments, then your credit score took a swan dive to the “sorry can’t help you land” from the Bank.

Also, Banks can only loan you up to 65% of the value of your home due to new government rules and you need to have enough income to qualify for your new loan. Today, there are more declined debt consolidation loans than ever and people are seeking out expensive debt repayment programs or bankruptcy options that have up to $4500 in freaky fees and can kill your credit for up to 7 years. While these programs can be helpful for some, they’re not always required to fix the problem.

How do second mortgages work out there in Google Land?

Just Google second mortgages and you may find many well know companies and mortgage experts who offer them. They may be called home equity loans, debt consolidation loans or freedom loans…they are all second mortgages with a “pretty name” and no plan.  Finding the right company who isn’t going to charge you a 10% fee, 14% rates and huge renewal fees is another story. An example of a second mortgage story where this happened. Client needed $40,000, finance company charged a $4000 fee and 11% rate for a 1 year term with a renewal rate of $2000. Bad planning here. Paying 10% fee and $2000 renewal rate is highway robbery in my opinion!

If you own a home, I can help. Maybe it’s not a second mortgage you need…maybe it’s a reality check conversation and some idea tossing and budget planning.  If it is a second mortgage you really want or need…I have made it my mission in life to make sure the average family going through life events isn’t getting screwed along the way.

Courtesy of Kiki Berg, AMP – DLC Hilltop Financial

Just because you are a Canadian citizen living abroad doesn’t mean that you are exempt from the rules for foreigners buying real estate in Canada.
Foreign ownership applies if:
• You don’t reside in Canada for more than 6 months a year (even if you are Canadian)
• You don’t report your working income to CRA
So how does one go about gaining purchasing property in Canada when you are a foreign buyer?

1. Understand Your Employment Status

For your employment status, there are two categories you may fall into: Business for Self or not Business for Self (employed by someone else).

If you are Business for Self, you must meet the following requirements:
• Be in business for a minimum of 2 years
• Verify 2 years of business for self through something equivalent or similar to yearly financials.
• Verify current year’s financial history (personal & company if applicable)

On the other hand, if you are employed by someone else, you only need to show a letter of employment and your latest paystub.

2. Understanding Down Payment Requirements

Down payments for foreign investment in property have a few requirements as well. The down-payment typically will need to be 35% down. The exemption to this and when 25% down would be accepted, would be if you are a Canadian citizen living abroad or if you are a US citizen.

Another requirement, the money for a down payment and closing costs must be on Canadian soil 30 days prior to the completion date (with exception of 15 days depending on the lender and circumstances). Lenders may also require a deposit of 12 months’ principle and interest payments in a Canadian account.

The other and final requirement for a foreign real Estate investment is to have a Canadian bank account registered in your name.

3. Understanding Your Financial Profile

Your unique financial profile may need to feature a number of different things. This may include:
• International credit bureau to view your credit history
• A bank reference letter
• All current debts you have outstanding

Once we have compiled that information and any other that is required, it is on to the next set of requirements: Property requirements!

Property and Loan Requirements

For foreign real estate, there are a few conditions the property and the loan will have to meet. First is the type of property. The property can be owner occupied, a second home, or an investment property. Next, in terms of the loan, there are two things that need to be considered. These are the rates and the length of the loan. The rates will be the best discounted rates your mortgage broker can get at the time of purchase. As for the length of the loan, the term of the contract can be up to 10 years long, with an amortization of the loan of 25 years and up to 30 years on exception.

Final Take-Away

Purchasing foreign real estate does not need to be difficult. The best advice is to stay transparent, open and follow the requirements. As an extra piece of advice, here is a checklist to follow to make it go even easier:

• Proof of “out of Canada” permanent resident address
• Contact and use a Canadian solicitor/lawyer who is familiar with foreign investors
• Contact and use a Realtor familiar with foreign investment purchase.
• Be prepared to have to make a physical appearance in Canada to complete the purchase transaction
• Ensure you have the ability to transfer monies from your Canadian bank account to the TRUST account set up by your Canadian Solicitor/Lawyer’s firm.
• Be prepared for the purchasing process to take 30 days or longer

One last consideration. As of August 2, 2016, the Ministry of Finance of British Columbia has applied an additional 15% property transfer tax to certain BC residential property purchases to anyone who is a foreigner (or foreign entity such as a corporation).
a. This is applied only to the Greater Vancouver Regional District – please contact GLM Mortgage Group for an exhaustive list of the areas affected.
b. This affects anyone who are foreign nationals including foreign corporations or taxable trustees.
* Please note that the corporation can be incorporated in Canada. However, if the corporation is controlled in whole or in part by a foreign national or other foreign corporation the tax applies.
c. The additional tax applies in addition to the general property transfer tax.
d. The additional tax does not apply to non-resident property (commercial properties).
e. The additional tax will be paid with at the statement of adjustments when signing at the lawyer’s office.
f. There are heavy fines associated with avoidance of this tax (ie purchasing a property through a Canadian relative who holds the property in trust) and can even result to up to two years in prison.)

The only way that this foreign buyers tax is exempt for a nonresident when purchasing in the Greater Vancouver Regional District are borrowers that have a current work permit/visa and will maintain the property as their primary residence and reporting and paying taxes in Canada

In closing, if you follow the basic steps laid out in this article and work with a skilled broker you can get into your Canadian property faster, easier, and with minimal stress!

Courtesy of Geoff Lee, AMP – DLC GLM Mortgage Group

For many people, saving enough for a down payment on a house is not an easy task. (You can’t rely on finding One-Eyed Willy’s treasure like they did in the Goonies movie, either!) Once you have an idea as to how much you can afford on your home, relative to your salary and monthly costs, it’s time to get that down payment! For a starter home, a 5% down payment is often enough.

Your down payment can come from several sources, including your Tax-Free Savings Account (TFSA), Registered Retirement Savings Plan (RRSP) or a gift from immediate family, such as parents or grandparents.

TFSA

The TFSA lets you save your extra cash for just about anything — including a new house— without paying any tax on the growth within the account or on withdrawals. Since the TFSA was introduced in 2009, it’s estimated that only around half of Canadians have opened one, so be sure to start yours today. Should you use your TFSA for your down payment, you pay no taxes on the withdrawal.

There are many clever ways to make the TFSA and RRSP work together to improve your wealth. Generally, RRSPs are a good choice for longer-term goals such as retirement, while TFSAs work better for more immediate objectives, such as a house down payment.

RRSP

With the federal government’s Home Buyers’ Plan (HBP), you can use up to $25,000 of your RRSP savings ($50,000 for a couple) to help finance your down payment on a home. To qualify, the RRSP funds you’re using must be on deposit for at least 90 days. For first-time home buyers, taxes are not paid on withdrawals of your RRSP and the repayment period starts the second year after the year you withdrew funds.

Gifted Down Payment

A Gifted Down Payment is very common for first time buyers. Often this is done because their son or daughter doesn’t quite have enough funds saved up for the full 5% down payment. Or, because they want to make sure their child has enough money to make up 20% for a down payment to avoid Canada Mortgage and Housing Corporation (CMHC) premiums.

If you put down 20% or more on your down payment, it can all be from a gift. If you put down less than 20%, part of the money can be a gift, but part must come from your own funds. This minimum contribution varies by loan type. You can only use gift money on primary residences and second homes.

All that is required for documentation is a signed Gift Letter from the parents, which states that the money does not have to be repaid, and a snapshot of the son or daughter’s bank account showing that the gifted funds have actually been transferred.

A gifted down payment is viewed as an acceptable form of down payment by almost all lenders. Talk to a Dominion Lending Centres mortgage specialist to make sure that your lender accepts “gifts” as an acceptable down payment.

Courtesy of Max Omar, AMP – DLC Capital Region

In the midst of the booming real estate market in Canada (mainly in Vancouver and Toronto), many Canadians are entertaining the idea of downsizing in order to sell their homes at a high value and purchase a smaller home or condo at a lower price.

Is downsizing the way to go? What are the costs associated with downsizing? The truth is, there are many costs to downsizing, and not all of them are obvious.

Why Downsize?

Canadians have many reasons to downsize. They include:
• Less house to upkeep
• Move closer to loved ones
• Spending the winter in a warmer place, therefore they don’t live in their home year round
• Getting equity out of their home to help fund retirement

Costs to sell your home

But let’s break down the more obvious costs of downsizing so that you can weigh the financial pros and cons. Keep in mind that the example below is for illustration purposes only. There may be other expenses not mentioned, but the key expenses are highlighted.

Let’s use the example of a home that will sell for $1,000,000 which is the approximate average cost of a detached home in Toronto. The home still carries a $200,000 mortgage, which would equate to a net amount of $800,000. However, there are costs that you must deduct from the total sale that can eat into your lump sum.
• Realtor commission (between 1%-7% depending on where you live in the country and what you are able to negotiate). In Toronto, the standard realtor rate is 5%. In this example of a $1,000,000 home, you would need to pay the realtor $50,000.
• Closing costs and legal fees – Approximately $1,500
• Miscellaneous costs – $1000
• This leaves you with approximately $747,500
• And an approximate cost of selling your home at $52,500

In addition to these reasons, these are some other costs that are associated with downsizing:

• The cost to fix up your home for the sale – Fresh coat of paint, minor repairs, kitchen/bathroom renovations, roof repairs and maybe even the cost to stage the home.
• The cost to part with old furniture – When you downsize, you typically have to get rid of furniture, books and other items that take up space. You may even decide to keep the items in a storage unit, which can cost money monthly (a typical 50 square foot unit can range from $125-$200/month plus HST, a mandatory monthly insurance premium and a set-up fee or refundable deposit)

Costs to buy your downsized home

There are also costs associated with buying your new downsized home. If you intend to purchase a smaller home (semi-detached, townhouse or condo), most of the money you earn from the sale of your home will go towards the purchase of your new downsized home. Here is an example of the expenses you may incur when you purchase your downsized home:

Let’s use the example of a condo with a cost of $500,000 which is the average cost of a condo in Toronto.
• Land transfer tax in Ontario for a $500,000 property is $6,475. Find out the land transfer tax in your province by visiting your local government website on land transfer taxes. For Ontario, visit the Government of Ontario land transfer tax page.
• There may be a Municipal Land Transfer Tax (MLTT) in addition to the provincial land transfer tax. For instance, in Toronto, the MLTT for a $500,000 condo would be $5,725. Visit your local municipality website to find out the calculation for your MLTT.
• Title insurance and legal fees – Approximately $1,500
• Moving costs – Approximately $2,000
• There may be a property tax adjustment – This would depend on when the seller paid the property taxes and when the buyer takes possession of the condo. In most cases, the buyer will have to pay the seller the difference depending on when they took possession of the property. If the seller is behind on payments, then the municipality requires that the seller pays off the taxes from the proceeds of the sale.
• Purchase of new furniture to fit smaller condo – Approximately $10,000 – $15,000
• Monthly maintenance fee for condo living – Approximately $500/month or $6,000/year
• This leaves you with approximately $221,800 from the sale of your $1,000,000 home before you deduct the cost of condo maintenance fees at $6,000/year.
• And the additional cost to purchase your downsized home at $25,700
• The total cost of downsizing from a $1 million home to a $500,000 condo would cost approximately $84,200 in your first year alone.

Although you sold your $1,000,000 home and downsized to a $500,000 condo, with all of the added expenses, you would only take home just over $215,800 after your first-year maintenance fees. This is the reality of downsizing. It isn’t as clear cut as the selling value of your home minus the buying cost of your downsized home. Although there is a return, the process of buying and selling has the added costs that can make or break your decision to move.

If you are downsizing because you need extra cash to help you with your retirement, an alternative is the CHIP Reverse Mortgage. With a reverse mortgage, you can stay in your home and still have the extra cash to help you with your retirement. To find out how much money you can get with a reverse mortgage, talk to your Dominion Lending Centre mortgage specialist today or if you decide to downsize, talk to your mortgage broker or a lawyer to find out your true cost of downsizing before making the final decision.

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

Sometimes it is a good idea to revisit the basics when looking at a complex thing like a mortgage.  There can be misunderstandings which crop up.   The mortgage process can be very stressful as you wait for some anonymous entity to decide whether or not you are able to buy the home of your dreams.  It is no wonder that things can get missed.  Fear not!  We will take a look at some of the basics so you can avoid things best avoided.

Property Taxes – There are 3 ways to pay the property taxes.

1. Have your mortgage company collect them with your mortgage payment. This can be a nice way to keep the withdrawals from your account to a minimum.  The taxes are collected at the same time as your mortgage payment and remitted to the municipality on your behalf.  Your property tax bill will still be sent to you but it will clearly show that the taxes have been paid by the mortgage company.  Things to make note of: some banks charge a fee for this service which could be avoided if you chose a different option.
2. TIPPS or the Tax Installment Program Payment System – Most municipalities allow you to sign up for free for the program. Generally an amount of 1/12 of the tax amount is withdrawn from your bank account on the last business day of the month.  Your property tax bill will come to you showing that you have opted in to the TIPPS program.  Depending what time of year you took possession of the home the amount can reflect a balance owing or a tax credit but you can rest assured that you are OK and will not have to come up with a large amount at the end of the year.
3. Lump Sum – You can make a once a year payment to the municipality. This is not ideal for everyone as it requires you to come up with a large amount of funds. Your tax bill will show clearly that the funds are outstanding.

What else should you know about property taxes?

1. Tax Adjustment – Depending on the time of year that you are purchasing your home, you may have to reimburse the seller if they have pre-paid the taxes for the year. This is why you are required to have an extra 1.5% of the purchase price available for closing costs.   Your lawyer will be the one to determine this and if you opt for the TIPPS program you can avoid the extra lump sum all together.
2. You have to pay your taxes. We all know that but you should know what happens if you do not.  First of all you will begin to incur penalties and extra fees.  Then they can put a tax lien on the title and finally they can seize the property and sell it.   Mortgage lenders have the legal right to ask for verification that your property taxes are being paid.  Should they discover you have not done so, they will charge you a fee and take over the payment of the property taxes.  At that time they will collect a monthly amount from you to cover the past due and the amount owing going forward.  Taxes trump mortgages and the bank could lose out if the property was siezed.   It can be very hard to get a mortgage if you have a tax lien.  Lenders tend to shy away from this scenario.
3. It is not always up to you. Given the issues raised in the previous point, many banks will not allow to you to choose the yearly option.  They require verification that you are on the TIPPS program or have the taxes included in the mortgage

I strongly recommend that after your mortgage funds you contact the mortgage company and confirm that you are set up the way you wanted.  I have witnessed a few cases where things went sideways and all of a sudden people had to pay double property taxes for a year until they were caught up.

And now you know how to navigate property taxes like a pro.

Courtesy of Pam Pikkert, AMP – DLC Regional Mortgage Group

Do successful entrepreneurs just open their doors for business without a business plan? Does a chef open a restaurant without a menu? Do pilots depart the hanger without a flight plan? Can you build a house without architectural plans?…I could go on forever! The answer is NO to all the above.

I’m a planner. Whether it’s for personal or business purposes, I always have a plan. I operate best when I know what is happening and how I’m doing it. Planning is the key ingredient to crossing the finish line successfully.

Case in point…

When it comes to acquiring a mortgage, whether it’s your first, second, third…or tenth you need to establish a PLAN! You need to connect with your trusted Dominion Lending Centres mortgage broker to start the application process.

Am I suggesting you need to create a full blown SWOT analysis (Strengths Weaknesses Opportunities and Threats) to seek mortgage financing?

No… but it wouldn’t hurt.

All joking aside, you should have an action plan: PLAN A and possibly a PLAN B. If you need a PLAN C then there should have been more preparation put into PLANs A and B.

THERE ARE 4 PARTS TO EVERY MORTGAGE.

1. DOWN PAYMENT – How much skin-in-the-game are you putting in? Where is it coming from, saved or gifted? Where is it now?
2. CREDIT – How long have you had it? What are the limits and how do you utilize it? How many forms of credit do you have?
3. INCOME – How long have you been at the current job? Salary or hourly? Have you jumped around to different industries or stayed within? Self-employed or employee?
4. SUBJECT PROPERTY – Where is the property? What is the property? Condo, townhouse, detached, farm on acreage with coach house and out-buildings? Age? Materials used to build? Remaining economic life? Square footage? Past or present issues?   

Before you find the subject property to purchase, the best course of action is to prepare. Why try to obtain financing in three to six days when you could have reduced the stress level by planning ahead of time. Mortgage Brokers call it the Pre-Qualifying Process. As a mortgage professional, I review the first three parts of the application and lock in a rate for up to 120 days.

Some people may ask WHY plan or WHEN to start planning. The main reason one should plan is to simply make sure there are no hidden surprises. If there are any negative aspects to the file, a plan would give us time to find a solution. When the decision has been made to purchase or re-finance (and mortgage funds are required), that is the exact time to connect with your Mortgage Broker. The time is now… immediately. A plan will double your success rate for obtaining approval for mortgage financing.

Courtesy of Michael Hallett, AMP – DLC Producers West Financial

Congratulations – you are moving into your new home! Whether you are starting with a plain new build or an older resale home, there’s no better way to make it yours than by putting your stamp on it. Invest a weekend or two into warming up a featureless space or refreshing someone else’s old homestead. It’s easy with our 10 steps to home sweet home.

Step 1: Change the locks
Secure your home by changing the locks as soon as you take possession.
Even DIY beginners can change a deadbolt lock. A replacement deadbolt set can be installed in place of the current lock – no drilling required.

Another alternative is to rekey the lock. Purchase a rekeying set from the same manufacturer as the existing door lock, and reset it for a new key.

Step 2: Get a professional deep cleaning
Hire professional cleaners to deep-clean and detail your home before you move your possessions in. Without any furniture to work around, they’ll have access to every nook and cranny. Yes, you’ll have to clean again after moving day, but the heavy lifting (scouring, scrubbing and scraping) will have already been done!

Step 3: Clean the guts of your home
Years of dust, pet dander and detritus collect in the mechanicals of any home. One of the most effective ways to refresh a resale home is to get right into the guts of it: the mechanicals. Have your ducts, furnace and air conditioning unit professionally cleaned. Change the filters as required to maintain that clean, fresh air.

Step 4: Apply a fresh coat of paint
Painting provides the most bang for your home improvement buck. Whether the walls of your home are dingy or you’re simply not feeling the magic of “beige,” it takes just hours to repaint your space with a colour that makes your heart sing.

Step 5: Freshen up the floors
Worn out floors can put a damper on that new-home buzz.
If your hardwood has seen better days, hire pros to refinish it, or tackle the project yourself by renting a floor sander and varnishing over a weekend.

Steam-clean wall-to-wall carpet and clean laminate flooring with special laminate floor cleaners, although if either is too far gone, you may want to replace it.
Personalize your space while protecting your floors by adding area rugs and runners throughout your new home.

Step 6: Neutralize any odours
Resale homes, particularly fixer-uppers, can come with lingering smells. Steps 2, 3, 4 and 5 will dramatically reduce any unpleasant odours. Stubborn odours require spot treatments, such as the following:

• Put dishes of activated charcoal, also called activated carbon (available from aquarium stores), in musty, damp basements. Run a dehumidifier during the spring and summer.
• Place a sock filled with dry coffee grounds or baking soda in closets, refrigerators or freezers to absorb stale odours.
• Pour white vinegar down a stinky drain.

Step 7: Give your windows a new view
Dirty windows and screens can make rooms feel dingy. A thorough cleaning will have your windows shining, and your indoors will feel brighter and fresher, too.

If your home came with the previous owner’s window coverings, be sure to clean or launder them (it’ll remove allergens as well as reduce any lingering odours). Or consider replacements more specific to your design tastes.

Step 8: Brighten your lights
A well-lit home feels inviting and warm. If your rooms feel dim, replace the existing bulbs with bright, energy-saving CFL bulbs. Dated lighting fixtures can foil your redecorating efforts, so consider replacing them. You can donate them to a Habitat for Humanity ReStore shop – after all, your taste may be urban-contemporary, but someone else may be looking for the perfect retro pendant!

Step 9: Replace the switch plates
A screwdriver is all it takes to swap out lighting switch plates. This easy change gives an instant lift to any room. With a little DIY expertise, screwdrivers, pliers and a voltage tester, you can install energy-saving dimmer switches, instead.

Step 10: Display your art
Finally, dress up your walls with your favourite artwork and family photos. Get your kids’ kindergarten masterpieces onto the fridge, and deck out your mantel with family photos.

There’s a reason why we remove personal photos and mementos when selling a house: it’s so potential buyers see a clean slate. Now that you’re in your own home, go wild and make it yours! And if you have any questions, please contact your local Dominion Lending Centres mortgage specialist.

Courtesy of Marc Shendale, Genworth Canada – Vice President Business Development

Figuring out whether you can afford to borrow money for your business is a crucial step in the loan process and one you should definitely take before approaching potential lenders. But determining if you have the resources to make your loan payments can be a bit tricky.
Think Outside The Borrower’s Box

If you want a loan, you’ll need to start thinking about the loan process from the lender’s point of view. So, before you take out your calculator, familiarize yourself with a few key questions. These are the questions lenders have in mind when determining whether you’ll get a loan:
1. Can you pay back the loan?
2. Will you pay back the loan?
3. What are you going to do if you can’t pay back the loan?
If you can answer those three questions, you’re going to find success with small business lenders.

Can You?

Banks and other lenders use several tools to determine if a business entity is a good candidate for a loan, one of which is a debt service coverage ratio (DSCR). On one side of this ratio is the cash that you, the business owner, have available to pay back a loan in a given year. On the other side is the amount of money you’re borrowing per year, plus interest.
Figuring out your own DSCR isn’t as difficult as some lenders might have you believe. Start by calculating the cash available for your business. Cash available, or cash flow, is the movement of money into and out of your business, measured over a certain period of time — usually weekly, monthly or annually.
To calculate cash flow, start by adding the money that you have on hand at the beginning of the month (starting cash) to the money that comes into your business throughout the month (cash-in). Cash-in includes all the money you receive in sales, paid receivables and interest in a given month. Adding your starting cash to your cash-in will give you your total cash for the month.
Next, you’ll need to calculate how much cash is going out of your business every month (cash-out), including all your expenses for the month. Subtract this number from your total cash for the month to determine the monthly cash flow for your business.
Once you have a number for your monthly cash flow, multiply it by 12 to get your annual cash flow. Then, you can take a deep breath, because the hard part of figuring out your DSCR is over.
The other side is simple – You just do a calculation to determine what the annual debt payments would be on the proposed loan.
Of course, it’s hard to know exactly how much money you’ll end up receiving from a lender or what the terms of the loan will be, but you can make an estimate based on what you know you need to grow your business and the published interest rates for the lending institution you wish to use.
Now that you have both numbers calculated, you can put them side by side and start answering the question you started with: Can you afford a loan?
Business owners with a DSCR of 1.25:1 — also known as 1.25 times coverage — are considered to be a good credit risk, and are usually able to afford, and therefore secure, financing. However, sometimes, businesses that are growing very quickly and those that are expanding to bigger commercial spaces get loans despite having less cash flow.

Will You?

Figuring out your cash flow is crucial to determining whether you’ll qualify for a loan. However, lenders aren’t just looking at your business’s finances when determining your credibility. More often than not, they’ll also want to know whether you, the business owner, are financially up to par.
Lenders use another tool, called a debt-to-income ratio (DTI) to determine your suitability for a loan. Figuring out your DTI is easy after you’ve already calculated your DSCR. First, tally up your monthly personal debts, including car loans, credit card payments and other debts you might have. Also include your housing expenses, like mortgage payments, property taxes and homeowners insurance.
Divide your total monthly debts by your monthly gross income and then multiply that number (which should be a decimal) by 100 to get a percentage. Most traditional lending institutions look for DTIs no higher than 36 percent.
If, when calculating your DTI, you found that your income far exceeds your debts, you can expect lenders to add some of this excess income to the available cash of your business. This could be a good thing for businesses whose debt service coverage ratios are in need of a boost.
Of course, the question of whether you will pay back a loan can’t be answered by numbers alone. This is why lenders turn to credit scores in addition to DTIs, DSCRs and the other number-crunching tools of their trade.
Lenders pull credit scores to determine if the business owner is a good credit risk. Basically do they have a history of paying their bills.
If the prospective borrower’s answer to that question is no, then chances are that he or she isn’t going to get a loan. However, traditional lending institutions — like banks — tend to put more emphasis on credit scores than other, nontraditional lenders. So if you don’t have great credit, you should consider shopping around.

What If?

If you can answer, can you pay back your loan, and will you pay it back? — in the affirmative, then you’re well on your way to securing financing. But first, you’ll have to answer one final question: What will you do if you can’t pay back the loan?
This question is certainly not as easy to answer as the other two, because it means admitting a hard truth: You need to have a plan in case your business doesn’t work out.

So What’s The Right Answer?

For some business owners, the right answer is a backup plan in the form of collateral or capital — having assets that the bank can claim if you don’t pay up or extra cash flow that you can redirect toward your loan payments. But for business owners without this cushion, the backup plan takes the form of what lenders call a personal guarantee.
Signing a personal guarantee on a business loan means that, if you can’t pay back the loan through the business, you’ll be required to pay it back out of your own pocket.
But taking personal responsibility for your business debt is a risky move. Therefore, consider the decision carefully before answering this third question. You can contact Dominion Lending Centres Leasing Division if you have any questions.

Courtesy of Jennifer Okkerse, DLC Director of Operations, Leasing Division

The market is constantly changing these days, so if you asked me about affordability just a few weeks ago, I would have had a different answer, as the seller’s market has quickly shifted to a buyer’s market – for now, anyway.

This spring, many first-time homebuyers were quickly being priced out of the market due to multiple bidding scenarios that saw houses sell well over their asking prices. This was not an ideal situation for any buyer – let alone first-time buyers on a particularly tight budget.

And while affordability was going by the wayside just a few weeks ago, so too were having a condition of financing and a home inspection included in the purchase offer.

Weighing the no condition of financing risks 

Going in firm (with no conditions) on an offer to purchase is incredibly risky for numerous reasons.

In a state of panic during multiple bidding scenarios, many homebuyers opt to take the no conditions route in the hopes that it lands them the home of their dreams. What it often does instead, however, is land them in hot water. Once a firm offer has been accepted by the seller, the purchaser is bound to that contract, which means they can end up in a lot of legal trouble if they can’t secure financing on that property by the agreed upon closing date.

On the flip side, if a purchaser places a condition of financing within the purchase offer, they have time after the offer is accepted to arrange the mortgage. If they’re unable to arrange financing by a specific date noted in the contract, they can simply walk away from the deal with no repercussion.

It’s important to note that lenders loan money based on appraised values, not on the selling price.

What happens if I forego a home inspection? 

When things go wrong with a house, they can prove extremely expensive – especially when pertaining to the home’s structural integrity. After all, a home inspection looks at much more than the mere cosmetics of a property that can be seen through an amateur’s eye.

Home inspectors are professionals who look at homes every day and know the ins and outs of pretty much anything that could go wrong with things such as the roof, foundation, electrical, plumbing and so much more.

And, on the financing side, foregoing an inspection can also prove risky. What you may not know is that lenders don’t only lend based on the borrower’s financial situation, but also based on the conditions of the property that you want to purchase. It’s part of a lender’s due diligence to ensure the property is livable and worth the amount of money that you’re willing to spend.

The safest move is to consult with a Dominion Lending Centres mortgage professional before making any offers to ensure your bases are covered and you’re not bound to a contract you simply can’t fulfill.

Courtesy of Tracy Valko, AMP – DLC Forest City Funding

Why is it important for you to have a mortgage manager? Reaching your financial goals is attainable!

There are some things to consider before securing your mortgage:
Is there a potential of you buying an investment property or a vacation home? Are you considering scaling up or downsizing? Do you think you might move or port your mortgage or retire within the next five years? All these scenarios come into play when setting up your mortgage.

If you had $500,000 cash to invest, how often would want your financial advisor to review your investments?

Why is it different when you are $500,000 in debt with your mortgage?

Why not have an active mortgage broker looking after your $500,000 debt?

Active financial advisors aim to grow your net worth by investing wisely.
Active Mortgage brokers will help you grow your net worth by reducing your debt and growing your asset base. You will cover only half of the prosperity equation without a mortgage broker.

Consider this: your bank’s main goal is to make money for the bank. This is understandable as they are in business to make money. As reported, banks make billions of dollars every quarter, in part, thanks to you. On the flip side, a mortgage brokers is an advocate for you and their main goal is to get you the best mortgage to meet your goals. This comes in many forms, not just the interest rate, although it is important there are other areas that could cost you more money in the long run.
An active mortgage broker can save you thousands of dollars over the life of your mortgage.
Most mortgages are set up on a five-year term. A lot can happen in five years.

Changes in life happen. You are forced to move, or you would like to move to a bigger home, down size, buy an investment home a recreational property, or take equity out to buy a business or perhaps retire.
Mortgage rules continually to change. What worked last year may not work this year. It is important to review your situation with your mortgage broker before making any major decisions with your current mortgage.
Being in the right mortgage may be the difference between being able to buy that investment property or recreational property. It may be the difference of paying a $3,000 penalty or an $18,000 penalty to close out you mortgage.

Remember, it is not getting a mortgage that is important, it is getting the right mortgage that will help you meet your future goals.
When it comes to your renewal time it is important to once again review your options with your mortgage broker.
Your current lender may not have the best rate or option for you at renewal time as there are many lenders and there are many options to choose from. At renewal time, you can change lenders with no penalty. Renewal time is also a good time to take extra equity out of your home to pay off debt, for investment purposes or to pay for that new kitchen you wanted.

I have called many clients well before their mortgage is due when I recognized it would save them thousands of dollars to refinance early. Moves like this help clients pay down their mortgage faster, provide extra cash flow for investments, and provide funds for renovations or a down payment on an investment property.
Having someone manage your mortgage can be a great benefit for you and your family.
If you currently do not have an active mortgage manager, a Dominion Lending Centres mortgage broker would be happy to become your mortgage manager.

Courtesy of Kevin Bay, AMP – DLC Producers West Financial