Canada is made up of hundreds of thousands of people, and while some did not start here, they have made it their home. Buying a home, especially when you are new to Canada can be mind boggling, BUT, we have a mortgage for you!
The New to Canada Program is designed to help new Canadians purchase their first home sooner and become established faster.
What are the qualifications for this program?
Firstly, you must have immigrated or relocated to Canada within the last 3 to 5 years to qualify for the New to Canada Program. You must have proof that you have been working full time in Canada for at least 3 months and that you are not on probation with your employer. The lender will require a letter of employment from your employer with your salary and employment status. Copies of your valid work permit or landed immigrant status card (front and back) will also be a requirement.
Down payment is a minimum of 5% and at least 5% of the funds must come from your own savings and be verifiable with 3 months worth of bank statements from a Canadian Bank. Some lenders will allow the 5% to be a gift from an immediate family member and a gift letter from the lender will be required. Please speak to your broker in advance when a gift is being used. That way we can provide you with information for monies coming from other countries and ensuring you are following all the banking rules and regulations. With a minimum of 5% down payment you will need default insurance, and that can be provided by Canada Guaranty, Genworth or CMHC (Canada Mortgage and Housing). Each of these insurers offer programs that will work with the lender.
The lender will need to see your credit bureau and, as you are new to Canada, you may be just starting so we will require an international credit report from your country of origin. Just starting up your credit, we can assist you with that by providing valuable information to get you ready for the road to home ownership. You can obtain an International or U.S. Bureau by contacting Equifax and they will point you in the right direction. Your international credit report is taken into consideration by the lender as it will show that you are a responsible borrower and have kept your accounts in good standing. We would advise that a letter of recommendation from your current bank be done as that is also very helpful in the process. If you cannot provide an international credit bureau, the lender will ask you for to confirm your good standing by providing 12 months history of bills that must be paid on time (rent, utilities, cable or insurance premiums).
Working with your Dominion Lending Centres Mortgage Professional will provide you with options and answers to your questions. Our advice is always free, we are here to help you make home ownership a reality.
Remember, when looking for your home, use a professional to assist with not just financing but the search as well. Realtors are great negotiators and can also help you determine your requirements in a home, “needs vs wants”. Do you need to be close to schools, public transportation, etc?

Courtesy of Karen Penner – AMP – DLC Jencor Mortgage Corporation based in Calgary, AB.

In 2005, I was asked to do a pre-approval by a couple hoping to buy a home. I went through the application with them and pre-approved them for $320,000. They were astounded. They told me that their bank told them that they were qualified to a maximum of $260,000. They wanted to know how I could get them more money. I looked at their credit reports and quickly found the answer.

I pointed out to them that they both had $10,000 unsecured lines of credit. They said that the bank had offered this to them several years ago but they had not used them. The zero balances confirmed their story. What they didn’t know was according to the bank’s rules, they had to consider these lines of credit as being fully utilized. The bank considered them as each carrying $300 in monthly payments that did not exist. My lenders took a zero balance as being a zero balance and I was able to get them more money and more house.

Last year I had a young man who wanted to buy a new home. He was very surprised when I told him he couldn’t afford it according to the new stress test rules. The reason being, he had a $950 a month truck payment. The only solutions available were to sell the truck, or negotiate a new payment plan by stretching out the payments for another year.

The moral of the story is that it’s important to let clients know that other debts outside of their mortgage can affect how much house they can qualify for, and that buying a vehicle or new toys like a trailer or boat before going to see their local mortgage broker, can be a costly mistake. Your Dominion Lending Centres mortgage broker can help you through the whole home buying process but you need to have them involved early in the process. Our job is to make people’s dreams come true and we do it a lot better than the banks.

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

A lot of people are getting stressed out by Canada’s new mortgage stress test. In the past, if you had a good sized down payment (ie 20%) someone with a low income could purchase a home even if they did not meet the debt level guidelines for insured mortgages of 32/40 . Later this was changed to 35/44 which made life even easier but – no more.

What is a person with a low income, good credit and a good down payment supposed to do now?

Here’s a solution – get a roommate. If you purchase a home with a friend who is going to share the other bedroom of your condo or take over the basement, the rules do not allow you to include the rent. But there are plenty of homes out in the market with a legal basement suite, a duplex or perhaps a granny suite over the garage. As long as the income portion of your property is zoned for a rental portion, you can claim a portion of the rent as income and qualify for more house.

There are certain minimum guidelines for lenders – they usually want a separate entrance, kitchen and washroom. They may ask for a separate hot water tank as well. Lenders will credit 50% -85% of the rent towards your annual income.

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

Recently, two of my lenders came out with new products – Interest only mortgages. We have had these available from private lenders for many years but at much higher interest rates. They are useful for real estate investors and people who have consolidated debts and need six months to a year to get back on their feet. These new mortgages are not meant to be short term solutions but they are meant to be used for a minimum of two years and preferably for five years.
So who in their right mind would want a mortgage for five years where the principal doesn’t go down?

1- real estate investors- some investors are looking for cash flow; this is a perfect product for them. They want to keep monthly payments to a minimum so that they ca use the extra cash to buy other properties, or for income to live on. They will eventually sell the properties for a lot more cash when they are ready to retire.

2- Seasonal workers- Lobster fisherman, lumberjacks , oil patch workers and workers in the trades who have to go back to school every year for three years are the people who this product works for. During spring break-up when the oil patch closes for several weeks , the bills don’t stop coming. Working with your Dominion Lending Centres mortgage broker you can design a mortgage to help you through the periods when there’s no income coming in. The best strategy for you may be to step up the mortgage as interest only and then have the broker calculate what a normal amortizing mortgage payment for you would be. During your period of no income, you pay the minimum payments and then when you get back to work, you bump your payment up to normal or even slightly higher to make up for the shortfall.

These interest only mortgages are available with a variable rate, a fixed rate , a variable interest only plus a fixed amortized rate or a combination of any of the above rates. This allows you and your broker to customize mortgage payments to make the best mortgage for your particular situation. It’s like a tailor-made suit. It’s exactly what you need.

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

Living in the country has extreme appeal for some people. Space, peace and quiet, big home, big yard, place to raise your family… the list goes on. If you are considering buying a rural home, there are a number of things to consider, not the least being how different it is to get a mortgage.

When lenders are considering your mortgage file it’s always about managing risk. Higher risk, higher rates. The risk that you’ll pay them back as agreed and they don’t have to seize the asset and sell it to recoup their investment.
• Mortgage lenders don’t really want to own your property, because foreclosing on your property means it will take time and effort to get the homeowner off the property, list it for sale, then actually get it sold where they can finally get (some of) their money back.
• With rural properties, depending on remoteness of location and condition of the property, it could take months to sell when compared to the quicker sale for a home in an city where there is much more demand.

Mortgage lenders don’t like waiting years to get their money back on a non-performing loan, so they have implemented special rules related to rural properties to reduce their risk.

A rural property, for most lenders and their home appraiser, includes only one house, the garage and 10 acres in the valuation, any additional buildings will not be considered. This policy applies to both conventional and insured mortgages.

Here are 6 things to think about before plunking down your hard-earned cash on a country home.

Hire a real estate agent knowledgeable about rural properties and local zoning laws. The names of the zones and the related details are determined by each local government so there may be variation between communities throughout each province.

Many lenders will not mortgage properties that are zoned agricultural.
• Why? Lenders are all about risk.
o If you buy a rural property and you default on your mortgage, the process of foreclosing on an agricultural property is very different and difficult for lenders. Taking a farm away from a farmer means taking their livelihood away, so the government has implemented many obstacles to prevent this.
• Provided you are not planning to grow crops or raise animals for sale, financing a home in the country can be similar to financing an urban home.

Water & Septic – In order to live in a house, you need to be able to drink the water and flush the toilet. In the country you need to take care of these yourself. When buying, if you are not on municipal water, your water will probably come from a well.
• Many lenders will ask for a potability and flow test for the well because a house without water is very hard to sell.
• Chances are your sewerage may be in a septic tank. You need to have the septic system inspected by a qualified septic inspector. At a minimum, ask the homeowner to agree to a warranty clause in the agreement that the system has been in good operating condition and it will remain that way until closing.
• Both the well equipment and septic system can be very expensive to repair or replace. Thus, when you buy in a rural location, be sure you include these with your conditions.

Land – most lenders will mortgage a house, one outbuilding and up to 10 acres of land, anything above this amount will not be considered in the mortgage.

Appraisal – Your lender will want to see an appraisal to ensure the value of your land. The appraised value may come in lower than expected, because rural properties do not turn over as quickly as city properties.
• Be prepared for the inspection to cost more than it cost you in the city, since the appraiser needs to travel farther to see the property.
• If you LOVE the place and have to have it, be ready to have to come up with the difference between the selling price and the appraised value of the property.

Wood Energy Technology Transfer (WETT) – If there’s a wood stove or wood-burning fireplace, you make want to make your offer conditional on receiving a satisfactory WETT inspection report, which confirms the safeness and correct installation of the wood-burning unit.

Buy (or Check Into) Title Insurance – Many buyers don’t realize that farmland, particularly larger, more remote tracts of land, may have been used as a dump-site for toxic chemicals.
• Buying title insurance, or checking the title for the specific property, will let you know if the property has been listed as a toxic dump-site, or a hazardous waste site.
• Your insurance company may insist on a copy of title insurance before they agree to issue a policy.

House/Content/Fire insurance – Lenders want to ensure you have insurance in place to protect their investment. If you can’t get insurance – it has the potential to be a serious problem, since your mortgage company may not advance the closing funds.
• Living in the country is nice, however you are also far from fire hydrants and fire stations, you will pay more for home insurance.

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

Picture this: You’ve finally been able to put away enough for a down-payment on your dream home. It’s taken you five years of diligent saving, but you did it! You have also been diligently working on improving your credit score and paying off debts and are at a place of financial stability. So, first of all, KUDOS TO YOU! Second…now what do you do? Here are the 3 steps that will take you from browsing new homes to getting the keys to your new place.

STEP 1: PRE-APPROVAL

This should actually be the step BEFORE house-hunting. Visiting your broker to get pre-approved is the first step anyone looking to buy a home should do. When you meet with your broker for the first time they will:

Have you fill out an application (or you might be able to fill out one online)
Pull your credit
Determine what your maximum purchase price will be.

Be aware that you will also be asked for additional information and documents when you visit your broker to apply, including a letter of employment/pay stub, down payment verification, 2 years notice of assessment, T4’s, a void cheque, and a number of other potential documents (click HERE to see our article outlining what you might be asked for).

Once you are pre-approved it’s house hunting time for you! The benefit to having this done BEFORE you start looking is that you can work with your realtor to find properties within that price range.

When you do find just the right home for you, it’s on to step 2…

STEP 2: APPROVAL

If you were able to provide the bulk of the paperwork for your pre-approval, then it will be smooth sailing from here! You may have to supply a few pieces of updated information (such as an updated paystub or bank statement) but otherwise it’s up to your mortgage broker and lender to do the hard work at this point.

Your application will be re-assessed, and the lender will take a look at the property you are purchasing. Once the lender confirms that the property aligns with their guidelines it is sent off to the mortgage default insurer for approval. At this point, make sure that you do not remove the financing condition until all the lender conditions are met.

Now that you have final sign-off and are waiting for the final conditions to be met, it’s on to step #3.

STEP 3: FINAL STEPS

Your broker will notify you once the conditions have all been met, and the lender will send the paperwork over to the lawyer’s office. The lawyer will take a few days to go through the mortgage and prepare it for your final sign off. When you go, you will be asked to present:

Void Cheque
2 forms of ID
Balance of the down payment in the form of a bank draft

On the day of funding, the lender will send the funds to the lawyer who sends them to the seller’s lawyer who upon receiving the funds will give you the all clear.

All that’s left is to hand you the keys to your new home!

As one final step, keep asking questions at each stage of the mortgage process. You should check in with your Dominion Lending Centres mortgage broker if you have any questions along the way-they are happy to guide you through the process of not only getting a mortgage but also having a mortgage too!

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

After you have purchased your new home, closed on your new mortgage, and are all moved in, what comes next?

Well, when it comes to your mortgage, the next step is to either refinance, renew, or transfer your mortgage. This decision can be made one month into your new mortgage or one month before your new mortgage is set to mature. Below is a break-down on what a refinance, renewal, and transfer mean.

Refinance
Refinances are when you decide to access the equity in your home. When your home rises in value, say $400,000 in 2016 to $500,000 in 2021, you can request your current lender, or a new lender, to pay you a portion of that increase in cash and they will in turn add that same portion to your mortgage for you to pay back- with interest.

There are many reasons to refinance; for home repairs, purchasing second properties, financial assistance with other outstanding loans or to have access to cash for larger purchases. It is only a refinance when you change the amount of your mortgage and borrow against the equity you have in your home.

Renewal
Renewals are quite straight forward. At the end of your mortgage term, your lender will offer you a renewal letter stating the remaining balance on your mortgage, what the remaining amortization is, and what interest rate options they can offer you.

The term can be 5-years for example, but most mortgages are on what’s called a 25-year amortization- the length of time it takes to pay off the entire mortgage. The 5-year term is just a length of time you are guaranteed a certain rate before you need to renew it. Renewals generally do not require any re-approval, documents, or applications as no new money is being added, the property is the same, and so is the lender. It is straight forward and allows you to continue paying your mortgage, just on a different interest rate.

Transfers
Transfers are a lot like renewals, the one difference is you are switching lenders. You are not adding more money, selling or buying a new home, everything is remaining the same except who you are paying interest to. One reason someone may want to transfer their mortgage from one lender to another is bad customer experience. Another could be to take advantage of a lower interest rate. Another reason could also be to take advantage of a lender’s product like a Home Equity Line of Credit or high pre-payment privileges.

Transfers are becoming more and more common as lenders are constantly looking to add clients and customers to their brand, being able to take advantage of interest payments as well as offer other products.

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

Porting a mortgage is something similar to transferring a mortgage. Transfers are when you move your current mortgage to a different lender in order to take advantage of different interest rates or mortgage products.

Porting a mortgage is when you keep your lender, but move your mortgage to a different property. Now, not every lender allows you to port a mortgage, and not every property can qualify for a port.

One of the other things to keep in mind with porting a mortgage, you are generally only porting the balance remaining on your mortgage. If you need more money, you will need to re-qualify to blend your mortgage. If you do not want to blend and extend your mortgage term, you will need to come up with the additional funds on your own.

The ability to port a mortgage is really important, especially if you are in a fixed mortgage with a big bank, as it can be used to avoid paying a pre-payment penalty to break your mortgage early.

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

With most of the summer still ahead, it seems like the best time for rest and relaxation. Or… it could mean the perfect opportunity to make those changes around the house that they have been waiting to do since the Spring!

A renovation or remodel on your home could mean excellent returns on your investment. We’ve all seen the TV shows, like Fixer Upper or Love It or List It on HGTV, that demonstrate just how far a fresh coat of paint and decluttering can go to help raise the value of your home when trying to sell it. Sometimes a renovation budget can be as easy as a can of paint but there are other times that you need to add an extra bathroom or bedroom which cost substantially more.

Whatever the reason for your renovation, the question remains: how do everyday people get the money for these fixer-upper projects?

CASH OR CREDIT

For renovations under $5,000, you could probably pay cash or with your credit card. Saving up for these smaller renovation projects can prove very lucrative over the long term, especially if you want to make your everyday living experience a little more comfortable and/or are trying to increase your property value. As we’ve seen on the home renovation shows, the money that is invested in the renovations is likely going to see returns when selling a home.

For projects over $5,000, the projects are more elaborate and may or may not see the types of returns the smaller upgrades can. (Here’s an article with examples of renos that add value, and those that don’t.) However, they mean a lot for your living conditions. When considering these larger projects, there are a number of ways you could find the means to pay for them.

PERSONAL LOANS

The banks will likely suggest a Personal Line of Credit for these types of projects, however, you could also apply for a personal loan from the bank. The personal loan usually has a lower interest and can be paid off through regular payments in a few years. The line of credit may be better suited for ongoing or long-term projects, where you can access funds as you need them, and pay interest only on the amount used.

SECURED LINE OF CREDIT & HOME EQUITY LOANS

A secured line of credit is another option for bigger renovation projects. To secure one, you will likely need a credit score at or above 700 and have a good history of repaying debts in a timely fashion. They offer the advantages of regular lines of credit and loans, plus they often come with preferred interest rates. Since they will likely be secured by your home’s equity, they will require some set-up costs, such as legal fees.

For seniors looking to make adjustments to their home, they can apply for SHARP, the Seniors Home Adaptation and Repair Program. It provides low-interest home equity loans to help seniors with the necessary repairs, adaptations and renovations to their homes, up to a maximum loan of $40,000. In order to qualify, seniors need to have an annual total income of $75,000 (or less) and a minimum of 25% home equity in their primary residence.

MORTGAGE REFINANCING

Refinancing your mortgage may offer some advantages when looking to complete larger-scale renovations to your home. With mortgage interest rates still relatively low, much lower than those on a credit card or loan, refinancing may be an advantageous option. When refinancing, you will likely receive a lower mortgage rate that reduces the overall cost of the loan, ultimately resulting in savings. Refinancing at a lower rate could allow a homeowner to “cash out” with enough funds for the planned home repairs – without an increase in mortgage payments. The additional funds for the renovation are added to the total mortgage and spread out over a longer period of time.

RENOVATING A NEW HOME PURCHASE

If your planned renovations are for a new home you’re thinking about buying, you can also add that cost to your mortgage. If the price of the home (or condo) is $250,000, you can add the $10,000 (for example) renovation budget and secure the mortgage for $260,000, with the same amortization rate. This results in a lower interest rate, compared to a credit card or loan, and allows you to spread repayment over a longer period of time.

GRANTS & REBATES

In good Canadian fashion, the federal, provincial and municipal governments along with local utilities offer grants and rebates for energy-saving renovations. For example, CMHC Green Home offers a premium refund of up to 25%. You may be eligible if you buy, build or renovate for energy efficiency using CMHC-insured financing. Below is a list of other available financial options to help with your environmentally friendly home improvements.

CMHC Green Home premium refund
Environmental incentives (Alberta)
ENERGY STAR® rebates and incentives
Energy Efficiency Alberta (Home Improvement Rebates)

REMEMBER!

Whenever you decide to embark on a renovation project, remember to set money aside for any unexpected costs that may come up. By having this buffer, you are able to adjust your plans without renegotiating your finances or having to reapply for new funds.

Also, every homeowner’s financial needs are unique, so it’s best to meet a qualified professional to explore your options.

Courtesy of Max Omar – AMP – DLC Capital Region based in Edmonton, AB.0

Rising Interest Rates and the Impact on Real Estate Values. Is there a direct connection? In a post entitled Interest Rates and Property Values. What’s the Connection?, I suggested that there was. An example was given which suggested that mortgage lenders would be directly impacted by a rise in rates, as their underwriting parameters, most notably debt service coverage requirements, are directly impacted. An inability for a buyer to secure the required financing amount, in an environment of increasing interest rates will, I argue, impact their willingness to offer as high a purchase price. Arguably a lower debt level will necessitate a greater amount of equity. This directly diminishes an investors cash-on-cash return. The inevitable result will be a softening of values, since buyers will want to offer less.

Are there Other Factors?
The above noted rationale, for establishing the link between interest rates and values, does however ignore other factors which may impact market sentiment.

A recent study by Manulife Asset Management raises some interesting observations. In their March 2018 report entitled Canadian Commercial Real Estate Outlook, Manulife’s study observed that in fact there was no consistent relationship between real estate values and interest rates. One of their important findings was that although interest rates have been rising since November 2016, largely as a result of economic growth and higher inflationary pressure, capitalization rates actually declined. Why? Well apart from the sentiments of an individual buyer and lender, which is what I referenced in my earlier post, Canadian investors enjoyed improving real estate fundamentals. Yields were seen to be attractive in comparison to other investments, and there was a rise in foreign investment. All contributed to a support for commercial real estate fundamentals and stable or enhanced values.

Capitalization Rate Refresher
You may recall that capitalization rates are comprised of a nominal “risk-free” rate (often associated with a Government of Canada benchmark bond yield), plus a risk premium attributed to a specific property type or asset. If, as it appears, overall capitalization rates have declined, could it be that the “risk-free” rate is falling as well? I will encourage you to take a look at the Manulife report and come to your own conclusions. From a lender’s perspective, I do not doubt that rising rates have a bearing on what a buyer will pay for a property. I suspect real estate appraisers will be like-minded. The Manulife study does however caution us that there are macro-factors at play as well, and a strong economy is supportive of longer term stability, and indeed growth, in the Canadian Commercial real estate market.

Courtesy of Allan Jensen – AMP – DLC The Mortgage Source based in Ottawa, ON.