When is it time to think about saving for a down payment? I would say about a year before you think about buying a home. While that’s ideal in today’s world, we often do not have much time to save for a down payment. Sometimes your landlord is planning on retiring and wants to sell the property. How do you get a down payment?

Here’s a few ways to get a down payment for your home:

Save – it’s old fashioned but it works. Open a Tax Free Savings Account (TFSA) and put a set amount into it. If you don’t have the discipline arrange for automatic deposits from your bank account. How much can you save $50 a week? That’s $2,600 in a year. Not enough. How about $200 a week?
Stay at the Mom & Dad Hotel – while your parents may not be able to help you with a down payment they often have a spare room that you can stay in. One year of not paying rent would make a good down payment even if you chip in for groceries.
Extra Income – get a second job and bank every cent from it. I know of many young people who have a day job and are servers on the weekends.
Home Buyer’s Plan – the federal government will allow you to pull up to $35,000 from your RRSP account. This goes for your partner. You could put down $70,000 between the two of you. These funds need to be returned to your RRSP over the next 15 years. This is a great quick source for a down payment.
Take out an RRSP Loan – borrow an amount that you need for a down payment as an RRSP. Hold the funds for 90 + 1 days and you can withdraw the funds. The cons are that you now have more debt and you have to wait for 90 days. Most sellers want a possession day sooner than that.
Sell an asset. I had a client sell his vintage Cadillac Fleetwood for a down payment. Be sure to get a receipt or to sign a bill of sale with the purchaser to show where the funds came from. Rare stamps or coins, another property or vehicle are all acceptable assets.
The Bank of Mom and Dad – This may be the easiest way to get a down payment or it may not. Most parents are nearing retirement and trying to save funds. There can be creative ways to get a down payment. They might set up a a secured line of credit and use the equity in their home. You could make the payments over the next few years. Note: these payments must be included in your debt ratios. If they decide to gift you the funds and make the payments themselves a gift letter is all that’s needed. They could sell their home and move into a granny suite in the basement or over the garage.

Courtesy of David Cooke – AMP – DLC Jencor Mortgages in Calgary, AB

Working with your DLC mortgage professional can save you thousands of dollars by making the most of your variable rate mortgage in a shifting market.

In the past year we have seen an increase in the prime lending rate by 1%. For those home owners with variable rate mortgages who secured a low discount, savings can be gained moving to a new higher discount variable mortgage rate even if prime is higher than before.

How is that possible you ask?

Consider this. Ed and Anna refinanced their mortgage in 2016 at prime minus .15% (2.55% at the time). The original mortgage was $556,000 with payments of $2,206 per month. Since the prime lending rate has moved up the new effective rate is currently 3.55% (3.7% minus .15) with a payment of $2,442. Of that payment there is $1,533 per month in interest and $909 goes to principal pay down.

The current best rate is 2.75% (3.7% minus .95) so the new payment would be $2,233 per month. Of that payment $1,194 per month in interest and $1,039 towards principal pay down. If Ed and Anna choose to switch their mortgage to a new lender at the better rate in the end their payment is lower by around $100 and they save $340 per month in interest. They also have that bigger rate discount of .95% for the next 5 years so it puts them in a better place as rates move.

Even with the penalty for early pay out the savings is still thousands of dollars over the next term in their mortgage.

Consider making the most of your variable rate mortgage — contact a Dominion Lending Centres mortgage professional near you.

Courtesy of Pauline Tonkin – AMP – DLC Innovative Mortgage Solutions based in Coquitlam, BC

There’s nothing quite like stepping into your dream home for the very first time.

You have achieved your goal of homeownership! However, the journey from home seeker to home buyer can be challenging – unless you have a well-defined plan and guidance from the right professionals. As a mortgage broker, here’s how I will help you reach your objective:

STEP 1 GETTING TO KNOW YOU
In the discovery phase, we will discuss your situation, the essentials and “nice to haves” you’d like in your new home, and how long you plan to live there. Based on your desired move-in date, we’ll work out a timetable for your home-buying process.

STEP 2 BUILDING A BUDGET
I’ll help you create a monthly budget and then calculate a down payment and mortgage payments that fit into it. Together, we’ll also work through a financial check-up that considers how changes in income and expenses could affect your plan.

STEP 3 CUSTOMIZING THE SOLUTION
There are many different types of mortgages, and it’s important to select one that matches your current needs and preferences. I will ask you a series of questions that should help to reveal your priorities.

STEP 4 TESTING SCENARIOS
Together, we’ll try out different mortgage scenarios, and I’ll show you how changes in income, property taxes, condo fees, loans and other variables affect your maximum mortgage amount and mortgage payments. My goal is to make sure you can comfortably afford your mortgage.

STEP 5 ARRANGING PRE-APPROVAL
It’s a good idea to get pre-approval for a mortgage before you find your dream home and make an offer — that way, you can be confident that financing is available. I’ll walk you through the paperwork and guide
you towards the most suitable lender.

STEP 6 ANSWERING YOUR QUESTIONS
Now it’s time to get serious with a Realtor and view properties that fit your price range. If you have any questions along the way, be sure to give me a call.

STEP 7 SEALING THE DEAL
I’ll work closely with your Realtor & Notary to make sure everything is in place for the closing. That’s the day you pay your down payment and get the keys to your new home.

STEP 8 IT’S TIME TO MOVE IN!
From start to finish, the plan we develop together will see you through the home-buying process. Even after you’ve settled into your dream home, we’ll periodically review your current situation to determine if we need to make any alterations to your original mortgage plan

Courtesy of Terry Kilakos – AMP – North East Mortgages based in Ville Ste-Laurent, QC

A new survey has emerged showing that out of 1,901 owners and would be homeowners, 43% (more than two out of five) Canadians are not confident in their knowledge of the mortgage stress tests—despite them being in place for more than a year now.

We wanted to give you a brief set of notes regarding the guidelines. This is something you can use and reference whether you are a first-time home buyer or looking to refinance underneath these new guidelines. It gives a clear picture of what/how you are impacted as a buyer or someone who is looking to refinance.

Here’s what you need to know about B-20:

The average Canadian’s home purchasing power for any given income bracket will see their borrowing power and/or buying power under these guidelines reduced 15-25%. Here is an example of the impact the rules have on buying a home and refinancing a home.

PURCHASING A NEW HOME

When purchasing a new home with these new guidelines, borrowing power is also restricted. Using the scenario of a dual income family making a combined annual income of $85,000 the borrowing amount would be:

Up To December 31 2017 After January 1 2018
Target Rate 3.34% 3.34%
Qualifying Rate 3.34% 5.34%
Maximum Mortgage Amount $560,000 $455,000
Available Down Payment $100,000 $100,000
Home Purchase Price $660,000 $555,000
REFINANCING A MORTGAGE

A dual-income family with a combined annual income of $85,000.00. The current value of their home is $700,000. They have a remaining mortgage balance of $415,000 and lenders will refinance to a maximum of 80% LTV. The maximum amount available is: $560,000 minus the existing mortgage gives you $145,000 available in the equity of the home, provided you qualify to borrow it.

Up to December 31, 2017 After January 1 2018
Target Rate 3.34% 3.34%
Qualifying Rate 3.34% 5.34%
Maximum Amount Available to Borrow $560,000 $560,000
Remaining Mortgage Balance $415,000 $415,000
Equity Able to Qualify For $145,000 $40,000
Source (TD Canada Trust)

These guidelines have been in place since January 1, 2018 and we are starting to see the full impact of them for both buyers and those looking to refinance. Stats are showing that there is a slowdown in the real estate market, however there is also a heightened struggle for many buyers to now obtain approval under these new guidelines. It’s a difficult situation as the cry for affordable housing is still ongoing as the new guidelines may slow down the market but appear to further decrease the borrowing/buying power of individuals.
Keep in mind, this is just a brief refresher course on the B-20 guidelines. As always, if you have more questions or are looking for more information, we suggest that you reach out to your Dominion Lending Centres mortgage broker to discuss and get a full and detailed look at how it will impact you personally.

Courtesy of Geoff Lee – AMP – DLC GLM Mortgage Group based in Vancouver, BC

If you’re looking to get a mortgage and considering a mortgage broker, there’s a good chance you’re wondering about how much the service costs.

Good news! Clients looking to get a standard residential mortgage pay no fees to the broker.

On standard residential mortgages, it’s 100% free for the clients. We’re paid by the bank or by the lending institution that we give the mortgage to.

But it’s not the only advantage a broker can bring you. When you’re shopping for a mortgage at a bank, they’re only able to offer you something from their stable of products. A broker, however, is able to shop at different banks to get you the best product for your needs.

If you don’t fit in the bank’s box of products, then you don’t get the mortgage. When you go to a mortgage broker, the mortgage broker has access to every lender on the market and is able to sell you basically everything to find a solution that makes the most amount of sense for you.

Because they’re able to shop around, in many cases the broker is able to find you a better rate on your mortgage.

In addition, mortgage brokers are licensed professionals covered by provincial governing bodies that looks out for you, the consumer. In many cases, the person you’re dealing with at the bank is just a salesperson, without any requirement they be licensed.

So, if you’re in the market for a new home, try a mortgage broker. It’s the safer, smarter choice for your mortgage.

Courtesy of Terry Kilakos – AMP – North East Mortgages based in Ville Ste-Laurent, QC

For self employed clients, incorporation is a popular business structure we tend to encounter. Having a corporate structure to your business allows for effective separation between the individual and the business.

If you own your business and have it set up as a corporation, that corporation is essentially its own person. They have their own income through business revenue and have their own expenses required to carry out that business- marketing costs, material costs, office space, things of that nature.

When a corporation files taxes, they pay a lower tax rate than the personal income tax rate and only pay taxes on the net business income. The reason an individual might do this is because they do not need every dollar they earn to maintain their lifestyle. For example, if a corporation earns $150,000 and has expenses of $50,000 they pay taxes on $100,000 at the small business tax rate. If they only need to pay themselves $50,000 to maintain their lifestyle, they only pay personal income tax on the $50,000, the other $50,000 remains inside the corporation as retained earnings. If a sole proprietor earns $150,000 and has expenses of $50,000, they pay the personal income tax rate on $100,000, regardless of how much of that $100,000 they actually need.

When it comes to qualifying for a mortgage, a lender can look at the business income or the personal income they pay themselves. Adding the net business income or the personal income from year 1 and year 2 and dividing it by two is the income a lender will associate with that borrower. Keep in mind though this will also be affected if there is more than one shareholder. To find out how your income would be viewed by a lender if you have your business set up as a corporation, contact a Dominion Lending Centres mortgage professional near you.

Courtesy of Ryan Oake – AMP – DLC Producers West Financial based in Langley, BC.

Most Canadians are conditioned to think that the lowest interest rate means the best mortgage product. Although sometimes that is true, a mortgage is much more than just an interest rate. You can save yourself a lot of money if you pay attention to the fine print for the total cost of your mortgage.

In order to pick the best mortgage, you need to understand your options. This comes with mortgage intelligence, understanding how mortgages work and the pros and cons of the various options.
Once you’ve selected the type of mortgage, then you’ll need to shop for the most competitive option available to you and that means making some decisions based on your specific situation including:

• Are you planning to move in the next 5 years
• Will your family be growing/shrinking?
• Will your employment change and if it does will you need to relocate?
• Would thousands of dollars in penalties impact you if you need to break your mortgage?
• What types of debts do you have? Credit cards? Car loan? Student loan? Line of Credit?

Why do all this work? Because it will have a direct impact on your bottom line. A mortgage is made up of two parts—the principal and interest—you need to pay attention to how and when these parts get paid down. Ideally, you want to minimize your interest payments and maximize the principal payments.

New Government Stress Test Jan. 1, 2018 – whichever is the highest is how you must qualify for a mortgage.
• Qualify at the Chartered Bank Benchmark Rate (Government Rate) which fluctuates (currently 5.34%)
• OR the contract rate your lender gives you PLUS 2% i.e. 3.69% + 2% = 5.69%
• Since 5.69% is the highest – that would be the stress tested rate.
What this means to you is… if you have to qualify for a mortgage at a rate about 2% higher than the lender is giving you, your buying power decreases by about 20%.
To pick the best formula for your situation, you’ll first need to understand some of the factors that impact how much interest you’ll pay for your mortgage loan.

Understanding these 6 mortgage terms will help you make the best decision for your situation

Amortization

Amortization is a fancy word that means the “life of your mortgage” OR how long it takes to pay off your mortgage if you paid your mortgage for “X” years. The amount of your mortgage loan repayment is calculated based on a length of time you agree to pay off that debt. In Canada, the standard amortization period is 25 years.

• For a 30-year amortization you need a 20% or higher down payment
Picking the best mortgage is not just about qualifying for the mortgage. The amortization period is integral in the best mortgage decision because it will decide how much or how little interest you will pay during the life of the mortgage loan.
• The longer the amortization period (25 years vs 30 years) the more interest you will pay.
• Therefore, a shorter amortization period will lower your overall cost of borrowing BUT you must be able to afford the higher payments.
Once you’ve decided on your amortization, you will need to decide how frequently you would like to make your mortgage payments. Every mortgage payment (consisting of both interest and principal) will help reduce your principal (the amount of money you borrowed) and eventually reduces the overall interest you pay on this loan.
• Monthly, bi-monthly, accelerated bi-weekly or weekly mortgage payments.

Term

In the 1980’s mortgage interest rates were as high as 22%. Interest rates can change over time therefore, lenders don’t want to negotiate a 25-year loan at 4% interest if the interest rates go up to 10% in 5 years. To avoid the risk, lenders break your mortgage amortization into smaller terms.

• The term is shorter than the amortization period and locks you into your pre-negotiated rates during that time.
• The length of term you choose (most Canadians choose 5 years) will depend partly on if you think interest rates will rise or fall. Typical terms are: 1, 2, 3, 4, 5, 7 & 10.

About 3-6 months before your current term matures, your current lender usually sends you a renewal notice with options on rates for the various terms they offer (typically 1 to 10 years).
Once you get your renewal notice, you need to contact your mortgage broker to ensure you’re choosing the best option for your situation.

Closed Mortgage

A closed mortgage usually offers the lowest interest rates available.
Closed mortgages cannot be paid off before the end of its term without triggering a penalty. Some lenders allow for a partial prepayment of a closed mortgage by increasing the mortgage payment or a lump sum prepayment.

• If you try and “break your mortgage” or if any prepayments are made above the stipulated allowance the lender allows, a penalty will be charged.

Open Mortgage
An open mortgage is a more flexible mortgage that allows you to pay off your mortgage in part or in full before the end of its term without penalty, because of the flexibility the interest rates are higher.

• The interest rates for an open mortgage are typically 3-4% higher than a closed rate mortgage.
• i.e. a home buyer could pay 6.99% for a 5-year open mortgage vs. 3.99% for a five-year closed mortgage.
If you plan to sell your home soon or expect a large sum of money, an open mortgage can be a great option. Most lenders will allow you to convert from an open to a closed mortgage at any time (and switch you to lower rates).
Fixed mortgage – you have the same payment for the term of the mortgage

Variable mortgage – the mortgage rate and your monthly payments will vary depending on the Bank of Canada rate (Prime)

Fixed rate:
• Pro – you would have the same mortgage payment for the entire term of the mortgage
• Your mortgage payments are not affected by Bank of Canada Rate or Canadian Bond Yield
• Think of fixed rate as an insurance policy – you pay a premium to guarantee “fixed” rates for the balance of the term

• Pro – can port a fixed mortgage
• Con – higher interest rates
• Con – MUCH higher penalties if you need to break your mortgage (can be 4-5% of outstanding balance with Banks/Credit Unions)
• 60% of home owners, break their mortgage before it matures!
• Conclusions: How much does it cost to break a mortgage?

Variable rate:
• Pro – lower rates than the Fixed Rate – you would pay less now that you would for a Fixed Rate mortgage
• Pro – Penalty for breaking is 3 months interest (about 0.5-1% of outstanding balance).
• Pro – you can lock into a fixed rate mortgage (assuming your mortgage is in good standing) at any time, based on the amount of time remaining on your mortgage and the current posted rates.
• i.e. If you have a 5-year variable mortgage and you want to move to Fixed after 2 years, you would lock into the lenders current 3 year fixed posted rate
• Con – Cannot port a variable mortgage
• Con – Mortgage payments will increase/decrease based on the Bank of Canada rate – currently 1.75% and the lenders prime rate = Prime is currently 3.95%
• Bank of Canada meets 8 times a year
• Every 0.25% increase with the lender Prime rate will cost you an extra $13/$100,000 borrowed. i.e. $300K mortgage = will be about $39/month more/less

Courtesy of Kelly Hudson – AMP – DLC Canadian Mortgage Experts based in Richmond, BC.

To tap into your home’s equity, it all starts with refinancing your home. If you own a home, the equity you have built up in it is one of the most valuable assets you have available to you. It is also much more accessible than taking out a large loan. In many cases, home equity loans and lines of credit can offer you a lower interest rate as compared to other types of loans while providing you with access to credit for investment purposes. You can view an excellent comparison of loans here.

Often times we see clients who refinance in order to:
• Renovate their home
• Purchase a secondary property for investment purposes
• Debt consolidation
• Business Development
• Assisting their children’s post secondary education
• Financing thru a “life event” such as illness

In this particular article, we are going to highlight the value of utilizing your home’s equity to reinvest in other investments such as:
• rental properties
• stocks
• bonds
• mutual funds
• RRSP’s
• RESP’s
The first question that people ask is how much can I borrow? Generally speaking, you can borrow up to 80% of the appraised value of your house. For example, if your home value of $650,000 assuming one qualifies, they can access up to 80% of $650,000 which would be $520,000, if their current mortgage is $450,000 they may be able to get a home equity line of credit for $70,000 (totaling $520,000)

Working with your mortgage broker, you can go through the refinance and approval process if this is something you are interested in accessing. It is always a good idea to consult with your broker and understand the personality of your mortgage—there may be limitations of how much equity you can access and the conditions relating to the refinancing. There are also potential costs associated with this type of refinance including:
• Penalties to break your mortgage
• appraisal fees
• title search
• title insurance
• legal costs
Keep in mind that these potential costs can be rolled within your new loan amount and will not be “out of pocket.”
Now, if you have been approved and are utilizing your home equity for one of the above investments (after speaking to your financial planner/advisor first) and can expect to see a higher rate of return than the interest you are paying to borrow the money, then it is worth considering. We emphasize that you should always proceed with caution and get advice from sound professionals before choosing to invest your hard-earned money.

We have found that this type of investing works extremely well for many and is a safer and less risky way to access funds for further investment purposes. We recognize that this option may not be suitable or comfortable for some, but it is a viable way to capitalize on the equity sitting in your home and make it work for you!

Courtesy of Geoff Lee – AMP – DLC GLM Mortgage Group based in Vancouver, BC.

When applying for any sort of loan, one of the most important metrics a lender is going to look at is your credit score.

But what really is a credit score, who keeps track of it, and most importantly, how can you improve yours?

There are a few simple ways to keep your credit score in good shape.

First off, prioritize paying your bills on time. Missing payments on your credit cards, lines of credit and so on, can have a very negative impact on your score.

You can spend an entire lifetime building up for good credit. All it takes is one mistake to negatively impact you.”
Second, try to keep your credit cards at no more than 65% of their limit. This is the sweet spot that credit scorers are looking for.

Thirdly, you should avoid the “free credit score” services out there because they’re just looking to sell you credit, or sell your information to someone who does.

When you’re looking for credit, what they’re going to ask you is, ‘What are you looking for credit for?’ And you’re going to say, ‘Well, I’m looking to get a mortgage, or I’m looking to get a car loan.’ And then what they’re going to do is they’re going to sell your information to banks and mortgage brokers and people out there who are able to supply you with credit.

Instead, what you should do is go directly to the credit scoring companies. They’re required by law to give you your credit information directly, without affecting your score. TransUnion offers an online form, found here. Equifax has multiple types of credit reports you can order here.

You also want to try to limit the number of credit inquiries by different lenders. When you’re shopping around at different banks, the number of inquiries can add up as each bank makes an inquiry to see what they can offer you.

But as a mortgage broker, we have access to multiple lenders all at once.

You could effectively come see a mortgage broker, get one inquiry done, and that inquiry is good for 20 financial institutions, As opposed to having to go directly to every bank.

Courtesy of Terry Kilakos – AMP – North East Mortgages based in Ville Ste-Laurent, QC

Genworth Canada, one of the three mortgage default insurers in Canada, offers a program called Family Plan. It provides you with a solution which only requires a 5% down payment to take advantage of its unique solutions to family problems.

In the past, I have used this with clients who want to purchase a home for their child or children who are going to a post-secondary educational institution in another city. Why pay high rent in residence or in a run-down over-priced rental property near the college when you can purchase a property? There are a number of advantages to owning the property your child is living in.

1- you control the maintenance and upkeep for the property ensuring a safe environment for your child.
2- You are allowed to purchase a property with 2 units – this allows you to collect rent and lower the total cost for you. You should be able to write off any renovations or improvements you make to the property- check with your accountant first.
3- when your child graduates you can sell the property for a profit , helping you to recover some of the costs for your child’s education.

Elderly Parents
If you want to find a safe and comfortable place for your parents to live, buying a property such as a condominium apartment or town home may be a solution for you. Often parents are retired on fixed income and can’t get a mortgage . Now you can help.

Providing a Home for an Adult Entrepreneur
So your adult child has decided to start their own business and they want a home. The problem is that you need to show 2 years of successful business financials to prove you can afford mortgage payments. This program allows parents to provide a home for their child right now. An exit strategy can be for them to take over the mortgage payments and then get the next mortgage term in their own name a few years down the road.
As you can see, Genworth’s Family Plan is a very useful program that can help out in a number of different situations. Let’s face it families are unique and we need programs like this to provide solutions to our problems and challenges.

Courtesy of David Cooke – AMP – DLC Jencor Mortgages in Calgary, AB.