Your mortgage broker is here to help

For many people in Canada, they are first-time home buyers. Or if they are new to Canada, it’s their first home purchase in a new country. They may not be aware of the rules and guidelines. It’s the job of your mortgage broker to make you aware of what is expected from you to avoid disappointment.

Mortgage Documentation
90-day bank statements – It’s important to make your clients aware that they need 90 days of bank statements to show they have saved the funds needed for the down payment and closing costs. Closing costs vary by province, so it’s important to let out-of-province buyers know exactly what the costs are in their new home. I like to explain that the 90-day statements is meant to prevent money laundering. A few years before this law was enacted, gangs would find an elderly couple and offer them the down payment funds asking only to be allowed to grow a few plants in the basement.

Some people are very private and don’t want you to know how much they spend on lottery tickets. They will blank out everything on the statement except for the down payment funds entering the account. This will not be accepted by lenders and is a big red flag for them.
Another problem that can arise with statements is if the clients print them online. As a security precaution, many banks allow printouts but they remove the name and/or account number from the statements. The easiest thing to do is to have them go into a branch and ask for a printout and have it stamped by a teller.

Employment Letters- Many small employers will give a hand written employment letter. This is acceptable but a letter written on company letterhead is better. The letter should state the name of the employee, their job title when they started with the firm, if they are full or part time and what their gross annual income is. If there’s an overtime or bonus component to their pay, this should be clearly explained and how much of their gross is straight salary.

After the Mortgage is approved
It is important for home buyers to know that while the mortgage has been approved they need to avoid doing anything to change their financial situation before possession day. That means they should not quit their job, buy lots of new furniture or a car. Lenders will often check the credit bureau a few days before possession day to see if there’s been any changes. If the debt ratios are out, the mortgage could go sideways. Taking a few minutes to explain this is prudent but it also shows you care. Dominion Lending Centres mortgage brokers are not big banks, we are people who live in the community and we want to see our clients in homes and living happy lives. It matters to us.

– by David Cooke

Is easy money coming to an end?

In a previous post, I discussed interest rates and their effect on real estate values. I argued that they did indeed alter buyer perceptions, and consequently value and price. But what about absolute interest rate levels? Is easy money coming to an end?

Many lack any experience of high interest rates
In a June 5, 2017 Globe and Mail article entitled Remember When: What have we learned from the 1980’s and that 21% interest rate?, author Richard Blackwell quotes CIBC World Markets deputy chief economist Benjamin Tal “We have a generation of Canadians who have never experienced high, or even rising, interest rates,”. He goes on to say “For them, those extremely low interest rates are a given.” Are interest rates likely to test those levels in the future? Likely not, for a host of reasons. First, inflationary pressures seem not to be as prevalent. Yes, you could argue there is price volatility, and a quick trip to the local gas station will confirm that opinion. However globalization seems to have had a positive impact over the past several years. The article states that “Low-priced imports from developing countries have helped keep domestic prices down, and that situation is not likely to change significantly in the next while.” Second is the shifting demographics in Canada, baby-boomers are aging and downsizing and exiting the housing markets. Demand for funds, while still robust, is tapering off.

Is easy money coming to an end?
If inflationary pressures are generally in check, and aging baby boomers are inevitably curtailing spending, are we in for an extended period of low interest rates? Not so fast. In a recent Reuters article entitled Tide about to turn for markets as easy-money decade comes to an end, authors Sujata Rao and Dhara Ranasinghe suggest that “While markets reached dizzying heights during the easy-money era, that flood will dry up the the end of the year. For the first time since 2011, the central banks are expected to suck out more cash in 2019 than they pump in.”

Implications for Property owners
If the era of low interest rates is ending, what will rising rates mean for for commercial real estate buyers? One of the most important considerations in real estate acquisition is cash flow, both current, and anticipated. The absolute level of interest rates, and consequently mortgage rates, speak directly to the performance of commercial real estate. Why? Because of the direct impact on the present value of future cash flows. Your cash flow after debt repayment is eroded by increasing interest rates, and strangled by absolute high interest rate levels. High interest rates lessen future cash flows, which lowers the value of the asset.

Historically inflation rate increases often happen in tandem with interest rate increases. Inflationary pressures seem not to be in evidence, at least not to the degree as we’ve seen previously. One interesting byproduct however, is that while property owner cash flow may erode, inflationary pressures often do increase the value of hard assets. So while increasing interest rates and inflationary pressures erode cash flows, savvy investors often turn to real estate as it has an uncanny ability to whether the storm of inflation.

– by Allan Jensen 

What happens when your credit card account is closed

I have been working in the mortgage industry since 2005. I have had all sorts of clients over the years. Every once in a while I get someone who has a car loan , a couple of credit cards but there’s a collection from a credit card, a dentist or some other creditor. When I ask why this has not been paid, I am told that they had a dispute with this firm and they are not going to be pushed around. The client doesn’t care if the account is sent to collection, they won’t pay it just on principle.

While I admire people who stick to their guns, they are on a slippery slope and things will not work out well for them. Sometimes they think that because the account is closed they don’t have to pay anymore. This is totally wrong.

CREDIT SCORES WILL DROP
As the creditor has reported your late or missing payment, your score goes down with the credit reporting agencies every month until you get to 120 days late or the creditor closes the account. However, they may send your account to a collection agency who will add their fees to the account and threaten or harass you. While you may not owe the money to your original creditor, they have sold the debt to someone else. You still owe your original amount and probably more with interest accruing every month.

Something that most people do not realize is that this refusal to pay an account means that you won’t get a mortgage or any new credit lines until the problem is resolved. The longer you hold out, the more likely that you will need to use a B lender for your next mortgage and car loan. I have seen car loans with 26% interest and mortgage with 16% interest over the years.
My advice is don’t ignore the problem. Get it resolved as soon as possible. I know that you want to stick to your guns but it’s going to end up costing you a lot of money. If you have any questions, contact a Dominion Lending Centres mortgage broker near you.

– by David Cooke

Reverse Mortgage – Need to Know

HomeEquity Bank is the only bank in Canada that currently offers the CHIP Reverse Mortgage as well as a secondary product, Income Advantage. These two products are options for homeowners unlike anything else out there. Instead of borrowing money to purchase a house, they will lend you money if you already have purchased one (as long as you qualify).

Recently I finished a half-day seminar where I was educated on the different HomeEquity Bank offers through the CHIP Reverse mortgage and their Income Advantage products. Below I would like to share with you some of the key benefits and summarize the different ways you can potentially use these products.

CHIP Reverse Mortgage

• Loan-to-Value:

  • 55% maximum (dependent on property and applicant age)

• Mortgage Amount:

  • Min. $25,000 initial advance

  • Min. $10,000 for subsequent advance

• Terms:

  • 6 month fixed, 1-yr fixed, 3-yr fixed, 5-yr fixed

  • 5-yr variable rate

• Amortization:

  • None

• Payments:

  • No regular monthly payments required

• Debt Servicing:

  • None required (Just max. 55% LTV)

• Credit Bureau:

  • None

Now obviously there are other items such as appraisals, property taxes that need to be paid regularly, document requirements, and prepayment privileges as well as fess. However, the information listed shows you the vast differences between a traditional mortgage and a CHIP reverse mortgages.

If an applicant is over the age of 55, lives in their own home as well as owns it (at least the majority), and their property meets all the age and locations requirements, they can apply to have access to this product. Refinance, home improvements, in home medical care, gifting money to child or grand-child, supplemental income, all of these things can be achieved with a CHIP Reverse Mortgage.

Income Advantage

• Loan-to-Value:

  • 40% maximum (dependent on property and applicant age)

• Mortgage Amount:

  • Planned advances from $500/month or $1,500 a quarter

  • Min. $10,000 for subsequent advance

• Terms:

  • Planned advance: 5-yr variable rate

  • Lump-sum: 5-yr fixed, 3-yr fixed, 1-yr fixed, variable rate

• Amortization:

  • None

• Payments:

  • No regular monthly payments required

• Debt Servicing:

  • None required (Just max. 55% LTV)

• Credit Bureau:

  • None

The Income Advantage program is a lot like the CHIP Reverse Mortgage program, however, the Income Advantage is geared more towards people who want a stream of income they can rely upon every month. You can still do lump-sum advances but the main difference is it allows you to set-up planned advances.

Using HomeEquity bank can be extremely advantageous for a lot of people in Metro Vancouver. It allows people to access the cash in their home without being burdened by any lack of financial income and it can allow people to help their children or grandchildren by advancing the money and gifting it to them for their own home purchase.

When it comes down to it all, there are really two main things these two products do. One, is it allows for an income stream based on the home you live in and age, regardless of employment or credit history. Two, it allows parents or guardians to provide money from the equity in their home now, to the beneficiaries who would one day in the future be recipients if included in an estate will- an advance on an inheritance.

There are many things to consider with HomeEquity’s CHIP Reverse Mortgage and Income Advantage Program, if you or someone you know may benefit from secondary or primary income, support for medical expenses, home renovations, travel, or wanting to help family members with their financial needs, please do not hesitate to contact a Dominion Lending Centres Mortgage Broker.

– by Ryan Oake

When double dipping is okay

Perhaps you remember the Seinfeld episode where George Costanza catches someone double dipping in the salsa. While this is considered unsanitary and bad manners, some forms of double dipping are okay.

Sometimes two levels of government want you to do something, so they offer you an incentive. The idea is that people’s behavior over time changes and it becomes the norm to do this.
Several years ago when I was having my furnace cleaned and serviced, the service man told me that the firebox had rusted and fumes could flow through my home. He turned the furnace off and told me that I needed a new one.

At the time, the local natural gas company was offering discounts on furnaces for people who switched over to their company. The local electricity provider offered lower rates to people who bought a heat pump and the federal government had a program to encourage people to become more energy efficient. As a result, I was able to triple dip – I got a discounted more energy efficient furnace with air conditioning and a new lower rate for electricity.

That program is gone now but there are others that you can benefit from. At this time Alberta residents are being bombarded with ads and flyers from window companies. They say that if you replace your windows now you can qualify for a $1,500 rebate through the provincial government. What they are not telling you is that you can double dip. If you get an energy audit before the windows are replaced and you apply to your mortgage default insurance company , whether it’s CMHC, Genworth , or Canada Guaranty, you may qualify for a 15% rebate on your premium ! On a $400,000 mortgage with 5% down you pay $16,000 in fees. How nice would it be to get $2,400 back?

The programs vary from province to province and cover windows, hot water tanks, appliances. You can check out what’s available here or ask your Dominion Lending Centres mortgage broker for more information. Go ahead and double dip.

– by David Cooke

Buying a home as a new Canadian

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?
This process can take some time but again, that is why you have a DLC broker at your fingertips!
By the way, welcome to Canada!

– by Karen Penner

Toys and buying a home

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.

– by David Cooke

7 Sure-Fire Ways to Grow Your Credit Score

Have you ever wished for a simplified guide on how to actually GROW your credit score? Well today is your lucky day! We have had years of experience working with individuals who come to us with poor or damaged credit and we have found 7 steps that prove to be tried and true in fixing it.

First off though—why are we so focused in on credit scores? Simply put, your credit score details your history of borrowing money. It shows how timely you are on payments; how responsible you are with it and how you manage it.

In a Nutshell: Your credit score represents to the lender that you have proven yourself capable of paying your bills on time and are responsible when managing credit. You credit score will also impact the interest rate that you receive. So, when we are talking about mortgages, your credit score=very important.

Now that we have that covered, here are our 7 sure-fire ways to grow your credit and make the mortgage application process, a breeze:

1. Have at least 2 credit lines at all times
This means that you should always have 2 “tradelines” going. Whether this be 2 credit cards, a credit card and a line of credit and a car loan etc. You want to show that you can manage credit, and this is one easy way to do it. As an added note, the limit on the credit lines will need to be set at a minimum $2,000.

2. Make your payments on time each and every month
No skipped payments! You should ALWAYS make the minimum payment required on all your lines of credit each month.

3. Do not let your credit be pulled too often.
This one is something people often forget about. Having your credit pulled for new credit cards, car loans, and other things frequently raises a red flag for lenders and can significantly lower your credit score

4. Do not exceed 50% of the available credit limit on your credit card or credit line.
We know this one can be hard to do. One easy way to monitor this is to only use a credit card for certain fixed bills such as a cable/internet bill, cell-phone bill, etc. This way you can easily keep track of what credit you have used and what is available still.

5. If you have missed a payment, get back on track right away.
If you did, by chance, miss a payment, do not fret. Instead, get back on track with your month by month payments. Lenders would look at the one missed payment as an abnormality versus a normal occurrence if you are back on track by the following month.

6. Make sure each partner has their own credit.
We cannot tell you how frustrating it can be for couples when they realize that all their credit cards and lines of credit are only under one name…leaving the other person with no proven track record of managing credit! We advise clients to both grow their credit by making sure all joint accounts report for you both.

7. Do not exceed the Credit limit.
It is important to not go over or exceed the credit limit you have been given. Having overdrawn credit, shows the lender that you are not able to responsibly manage credit.

If you follow these 7 steps and are responsible with your credit, you will have no problem when it comes time to purchase a home! In need of more advice? Contact a Dominion Lending Centres Broker-they will be more than happy to help you.

– Geoff Lee

5 GREAT Reasons To Provide a 20% Down Payment when Buying a Home

There are many challenges that come into play when you’re in the market to buy a home.
Buyers say the number one obstacle to home ownership is saving enough for a down payment, the amount that the buyer provides toward the purchase of their home.
Exactly how much do you need to put down? Assuming you can finance the debt with your current income you can get a mortgage for as little as 5% down PLUS pay for Mortgage Default insurance if you put less than 20% down.
A smart rule of thumb is always try to put a least 20% down. Although that may be a challenge in Greater Vancouver where the current Vancouver MLS stats indicate an average house price of $1,227,420

1. Easier to service your debt. Putting 20% down reduces the size of your monthly mortgage payment, making you more likely to qualify for and afford, your mortgage. Lenders want to make sure you can service your debt with your current income using 2 rules:
o Rule #1 – GROSS DEBT SERVICE (GDS) Your monthly housing costs are generally not supposed to exceed 35-39% of your gross monthly income. Housing costs include – your monthly mortgage payment, property taxes and can include heating. If you are buying a condo/townhouse with strata property then the GDS will also include ½ of your strata fees.
Principle + Interest + Taxes (+ 50-100% Strata Fees if applicable) Gross Income

Rule #2 – TOTAL DEBT SERVICE (TDS) Your entire monthly debt payments should not exceed 40-44% of your gross monthly income. This includes your housing costs PLUS all other monthly payments (first mortgage, property taxes, maintenance fees, additional financing, car payments, charge accounts, etc.).
(Principle + Interest + Taxes) + Other Payments Gross Income

2. A Smaller Monthly Mortgage Payment! You pay LESS!! I’m all about making smaller mortgage payments and having money for the fun stuff in life. More money down means, you borrow less money, which means you will have a smaller mortgage, which means you have smaller, more affordable mortgage payments.

3. No private mortgage default insurance. Putting 20% down allows you to avoid paying for mortgage default insurance.
o In Canada, mortgage insurance is required federally on high-ratio mortgages (a down payment of less than 20%). This insurance, which protects the bank/lender in case the borrower defaults, gives lenders the flexibility to offer homebuyers with low down payments the same low interest rates they would offer to homebuyers with more equity.
o Mortgage insurance premiums are based on the amount of the mortgage. The higher the loan-to-value ratio, the higher the premium cost. In other words, the lower your down payment, the more expensive the insurance. This premium may be paid in cash in a lump sum upon closing, it is usually added to the mortgage amount and paid over the length of the mortgage.
o Canadian Mortgage & Housing Corp. (CMHC) and Genworth Canada provide mortgage default insurance. Click on CMHC or Genworth for the sliding scale, the bigger your down payment the less insurance you pay. Once you hit a 20% down payment, mortgage default insurance is no longer mandatory.

4. Pay Less Interest over the Life of the Loan. You pay less interest with 20% down payment, since you’re putting more money on the house compared to if you put 5% or 10% down.

5. Instant Equity Building. A significant down payment builds instant equity in your home. A 20% down payment immediately puts equity into a home when you purchase it. That down payment gives you some cushion, in case the market takes a downward turn.

If you have any questions contact a Dominion Lending Centres mortgage professional near you.

– by Kelly Hudson

Mortgage brokers have solutions

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. Don’t worry , your Dominion Lending Centres mortgage broker knows the rules and can guide you through the process.  Calling us can get you into a home faster than you thought possible.

– David Cooke