WHY WE WORKED WITH A BROKER

We recently had a couple come into our office who we had worked with in 2011. They had some life changes that had occurred in the past 7 years and were unsure if they could make things work. They came back to speak with us and shared a little bit of their story and thoughts on working with a broker. Check out their story below! **Names Changed for privacy purposes**

Jane and her husband Kevin never in a million years would have thought that they could own a detached home in the Fraser Valley. One look at the market and they felt “stuck” where they were in their two-bedroom townhome in Kamloops, British Columbia. They had purchased their townhome in 2011 by working with us at Dominion Lending Centres.

They loved their little home but a job opportunity for Kevin opened up and the need for more space (with baby #2 on the way) was pulling them towards the Fraser Valley. Now they had their doubts about being able to afford a house in the Lower Mainland. They had strong credit and very little debt, but there is always the “unknown” when you are looking at buying a home. They decided to reach out to their us again—and we were all in to make their dream become a reality!

After a few weeks of shopping around they found a picture-perfect home in the Valley for $675,000—and were able to move in just last month (just in time for the holidays!)

When asked why they opted to work with a broker, they said it was due to the ability of Mortgage Brokers being a “One stop shop”—no shopping around from bank to bank or having to have your information pulled and sent off to several different lenders. It was all done for them. They were able to send all of their information and let us do the rest. And the best part for Jane and Kevin? We got them a great rate back in 2011 and were able to do the same in 2018!

Why else should you choose to work with a broker instead of the bank? Just a few reasons for you…
1. A broker can access rates that your bank can’t. They can access:
i. Tier 1 banks in Canada
ii. Credit Unions
iii. Monoline Lenders
iv. Alternative Lenders
v. Private Lenders

This extensive network allows brokers to ensure that you are not only getting the sharpest rate, but the mortgage product is also aligned with the client’s needs.

2. A broker will negotiate on your behalf, directly with a lender. There is no “grunt work” needed on your part—your mortgage broker does it all for you.
3. A Mortgage Broker can produce and show you several different options so that you can select the optimal product for your specific needs. A broker won’t just look at the rate, they will also look at:
i. Prepayment options
ii. Costs of Borrowing
iii. Portability
iv. Blending and Extending
v. Penalty to break
4. A broker can save you some serious cash! Because they have access to a multitude of different lenders and can offer discounts the bank can’t people end up saving money when they work with a mortgage broker.
5. Working with a broker means you have someone on your side—always. Mortgage Brokers will work to provide you with industry information and updates long after your mortgage is completed. They want to make sure that the product that was right for you when you signed is still the right one for you today and in the future.

Mortgage Brokers are a dedicated group of individuals who work directly for the client, not the lenders or the bank. Brokers are problem-solvers, advisors and honourable individuals. We work hard to give our clients the best that we can in an industry that constantly is evolving and changing.

Kevin and Jane made the right choice working with us here at DLC.

-Geoff Lee

HOW A SIDE HUSTLE CAN CHANGE YOUR HOME-BUYING OUTLOOK

So you want to buy a house, but you’re short on the downpayment. Have you ever considered getting into some sort of “side hustle.”

The term side hustle describes something you do to make extra cash outside your full-time job.
Anyone can make a hundred bucks on the side by literally doing anything – mowing lawns, walking dogs, shoveling snow, babysitting, tutoring, making deliveries, becoming an Uber driver, selling products on Amazon, participating in focus groups, blogging, vlogging, marketing – truly an infinite number of things you can do.

Even though a side hustle is extra income, it will be difficult to use when qualifying for a larger mortgage since brokers need to see a two-year history of that income first.
What that extra cash can help you with is for a downpayment and hustle income is super charged. Why? Lets find out.

Option #1:
You work your regular 40-hour work week and during your off time you like to indulge. This means eating out at restaurants/take-out, shopping, going to the movies, clubbing, etc. We’re talking about $200 a week on these activities.

Option #2:
You work your regular 40-hour work week and during your off time you work towards developing your side hustle. Let’s assume you are able to work a few nights a week and make $200 a week extra income. Obviously you still want to have some fun, so on your “off time” you only spend $100 a week on these activities.

Let’s look at the scenarios after one full year of working.
In this case, your full-time job pays $40,000 a year after tax.

Option #1:
You have made $40,000 but spent $10,400 on fun. Now you are left with $29,600 to live off of while also saving for a down payment.

Option #2:
You have made $40,000 from your full-time job and $10,400 from your side hustle but spent $5,200 on fun. Now you are left with $45,200 to live and try and save for a down payment.
That puts an extra $15,600 in your life that can be utilized on paying down debt and/or saving for downpayment.

Now that you have the idea that a side hustle may work in your favour, brainstorm some ideas and start making that extra money! If you have any questions, contact your local Dominion Lending Centres mortgage professional.

-Chris Cabel

WE’RE NOT JUST A MORTGAGE COMPANY

Well, it finally happened. I was meeting with a financial advisor today and they looked at my business card and asked “Why does it say Dominion Lending Centres and not Dominion Mortgage Company?”

I have been waiting 7 years to hear this question. I had an answer all ready for today. I said “that’s because we are not just a mortgage company, we’re a lending company. This provided me with a segue into a conversation about how we do equipment leasing, factoring and cash advances.

I meet plenty of small business owners who are trying to build their business and also buy a home. In one case, the business owner had opened a machine shop. He bought $100,000 or more of equipment. As he did not have a long established business, lenders insisted that he put the loans in his own name. As a result, he had lots of business loans outstanding and was still showing little income. As he had incorporated, we were able to free up his credit by having DLC Leasing purchase the equipment and he leased it back. This provided a good tax break his accountant liked and it freed up his personal credit, which I liked.

Long story short , Dominion Lending Centres is a small/ medium business owners best friend.
We can help you get into a house where other companies see obstacles. If you are in a situation like this, contact your local Dominion Lending Centres mortgage professional and get some help.

HOW TO RENEW YOUR MORTGAGE IN 5 SIMPLE STEPS!

If you have a mortgage, you’ll be completing a mortgage renewal when your current term has finished.
While most Canadians spend a lot of time and expend tons of effort shopping for an initial mortgage, the same is generally not the case when looking at mortgage renewals.

So what is a mortgage renewal?

Mortgages terms are locked in rates that are *over a set term* which can vary from 1-10 years.

About 3 months before the end of your term, your current lender will suddenly become your best friend showering you with attention and trying to entice you with early renewal offers…And the first offer is never their best. It really shows how they value the relationship.
“Please, please sign here on the dotted line to renew… it’s sooo easy!!”

You have 3 options

1. Sign and send back with no alterations or changes (don’t do it, really I mean it… don’t do it!!)
2. Check the market to make sure you are getting the best rate and renegotiate with your current lender
3. Talk to a mortgage expert and together we can discuss the best options available for your situation

Lenders know that 80% of people will sign their renewal forms because it’s fast, easy and convenient. Banks & lenders push this “take it as it is” tactic to borrowers to ensure they make the highest profits to keep their shareholders happy. As an educated consumer, you need to take the time to ensure you are being offered the best possible rate & terms you can get.
Remember all those hours of research you did regarding lenders and mortgage rates when you were buying your first home… don’t forget!
It is true that signing the renewal document is easy, however it is in your best interest to take a more proactive approach. Money in the lenders pocket comes directly out of your pocket.

5 steps to save you money on your mortgage renewal

1. Receive the renewal offer from your current mortgage lender and examine immediately. This gives you enough time to make an informed decision
2. Do your online research about the best current rates for you
3. Call your current lender and negotiate!
4. If your lender will not offer you a better rate then it is time to move your mortgage. You will have to complete a mortgage application and gather applicable documentation just like you did for your original mortgage, but we will help with most of the work!
5. Take a look at your budget and see if you can increase the amount of your mortgage payments. This will eventually save you money by paying off your mortgage faster

Your mortgage is one of your biggest expenses. For this reason, it is so important to find the best interest rates and mortgage terms you possibly can.
As you can tell there is lots to discuss about mortgage renewals. We can help. Contact a Dominion Lending Centres mortgage professional today!

-By Chris Cabel

THE #1 MISCONCEPTION ABOUT MORTGAGE FINANCING!

It is a reoccurring but common misconception that you will qualify for a mortgage in the future because you have qualified for a mortgage in the past.

This is not accurate!

Do. Not. Assume. Anything.

Even if your financial situation has remained the same or has improved, securing mortgage financing is more difficult now than it has in recent years.
The latest changes to mortgage qualification by the federal government has left Canadians qualifying 20-25% less. On top of that, guidelines that lenders would use in determining your suitability have been replaced with non-negotiable rules and declarations.

As mortgage professionals, we keep up to date with the latest trends going on in the mortgage world by understanding lender products and staying attentive to evolving changes.

From experience, we can tell you that having a plan is crucial to a successful mortgage application. Making assumptions about your qualification or just “winging it” is a recipe for disaster. Here are a few points on why a mortgage broker is a must for the first time home-buyer.

1. They have access to over 40 different lenders, not just one
2. They work for you, not for the lender
3. They will guide you through the application process
4. They save you valuable time by shopping for you
5. They pull your credit once — if you go to multiple banks, you will have multiple credit pulls

If you are thinking about buying a property, please feel free to contact a Dominion Lending Centres mortgage professional where we can help you devise a full-proof plan!

– By Chris Cabel

A bank that may not be familiar to you

Quiz time! Who is the largest non-bank mortgage originator in Canada with over $100 billion dollars in mortgages under administration? Answer – First National Financial Corporation. If you’ve never heard of them before, don’t feel bad. The only way to get a First National mortgage is through the broker channel. They do not have any branches anywhere in Canada. How did First National become #1?
Service – First National are fast. They will accept your application, underwrite it and if approved you will get a response within 4 hours. The industry average is 24 hours. Mortgage brokers use First National for clients who have very good credit salaried income and need an approval or pre-approval quickly.

Another nice feature of First National is that they will provide pre-approvals. Many lenders do not want to spend the time and money to provide these but First Nat have always provided pre-approval that are underwritten. What this means is that an underwriter has reviewed your application and if everything in it is straight forward they foresee no problems with an approval for the specified amount of money.

Additionally, if the home you are purchasing is 5 years old or older, a First National mortgage may be for you. They offer Echelon Home System Warranty Program. This is a warranty on your electrical, heating and cooling systems as well as your plumbing. Most hot water tanks have a 6 year warranty. After that it can cost you $20 a month for a warranty program with your utility company. Echelon is free for the first 12 months and then it costs you only $17 a month. Any calls you make for repair work have a $50 call fee but everything else is covered by the warranty. Imagine your hot water tank breaking down on Sunday afternoon. In addition to paying a service call fee of probably $100 you would be paying time and a half for weekends. The tank alone could be $800+. It’s worth it.

Finally, First National introduced something new in fall 2018, a second mortgage. If you have a need for funds for renovations or something else substantial and you are part way through your First National mortgage term you can now obtain a second mortgage. No need to break your mortgage and incur penalties. When your first mortgage term ends, the second mortgage is rolled over into your first mortgage so you don’t have two different expiration dates for your mortgage. This is unheard of for a non-bank to do.
Remember, you can only get First National through the broker channel. Be sure to ask your Dominion Lending Centres mortgage professional if this would be a good mortgage for you.

– by David Cooke

Interest rate cut more likely than hike in 2019

When the Bank of Canada decided this month to keep its benchmark interest rates stable at 1.75%, it signalled the weakening economy makes it unlikely a rate increase is anywhere on the horizon.

Inflation is not where it should be, we’re not in a deflation mode right now, but inflation is under control and there’s no real need for them to raise interest rates.

Because many of the economic indicators are pointing downward, this puts the bank in a position where it can’t raise rates. This makes refinancing a more attractive option for some homeowners this year.

A lot of economists are saying that Canada is heading back into another crisis, which is an indicator that rates may drop again. This new norm will probably stay around for a little while, but rates will eventually go up. And when it goes up, people have to be obviously prepared for it.

So, for now, homeowners shouldn’t worry too much about a sudden jump in rates. While this may be a new normal, if the economy begins a turnaround, they should be ready or a bump in rates, but I don’t think it’s going to happen the next couple of years.

Usually, Canada’s economy runs almost parallel to that of our southern neighbour’s. However, the two economies seem to have gone their separate ways lately.

There’s a divergence right now that is going to occur between the Canadian and U.S. economies. When people talk about the U.S. sneezing and Canada catches a cold—this is not what’s happening right now. There’s a divergence in the interest rates. Where in the States rates are going up, in Canada, rates cannot go up because of the way our economy is actually going.

The news isn’t all positive for Canadian homeowners though. Read our recent blogs on why too many Canadians are now ineligible for mortgages and why Montrealers in particular will see their municipal tax bills rise in the coming years. If you have any questions about mortgages, contact your nearest Dominion Lending Centres mortgage professional near you.

– by Terry Kilakos

2019 Budget Announcement – Policy or Politics?

In the wake of the 2019 Budget Announcement, I find myself wondering if the Affordable Housing Incentive is good policy or just politics? Since the inception of Jan. 1 2018 “Stress Test” we have seen the struggle to qualify for mortgages countrywide. This didn’t just affect the major centers such as Toronto and Vancouver, its dark aurora has cast itself out to the more rural parts of the country where property values may not be as high, but income relativity has made it equally as hard to qualify. I live and operate my Mortgage Brokerage from Lindsay ON (City of Kawartha Lakes) and depending on the repayment terms, I am feeling like this may complicate future borrowing for individuals that accept it or may not make a dramatic difference for them today… I understand that much of the changes are widely unknown yet, but it’s still worth considering the practicality of what is proposed.

When reading the parameters around the new changes, they have an eerie resemblance to a program that already exists in the City of Kawartha Lakes and a lot of other municipalities in Ontario.

Homeownership 10% Down Payment Assistance Program. “The Homeownership Program provides up to 10% in down payment assistance to eligible applicants. Approved applicants would then be provided 30 days to supply proof of financing, an agreement of purchase and sale as well as an acceptable home inspection report. To qualify for the program, applicants must be renting in the City of Kawartha Lakes or the County of Haliburton, be at least 18 years old, have a gross household income at or below $76,100 and be eligible for financing from a financial institution. The selling price of the home must be at or below $363,127. Applicants must also be a first time home buyer and the home must be located in the City of Kawartha Lakes or the County of Haliburton.

The kicker with this “interest free and potentially forgivable loan” is that if you sell the house or rent it out, you are required to pay back the original investment of 10% + 10% of the capital gain on that property. I have seen folks use this program and with their hard work, money and time renovating the house along market appreciation, the value go up on their property in excess of $200,000 and now have to pay $20,000 back to the municipality along with the original investment received. Not knocking that program at all as it has helped many of our residents get into their first home, as in most cases the only thing holding them back was saving up the down payment in a market that has inflated rental rates.

Now, getting back to the New Federal Policy, they have not yet explained (or likely even discussed) the repayment terms but my best guess will be that it’s along the same lines and the provincial program. Using the highlights from Geoff Lee’s blog, see proposed “Share Equity” idea.

CMHC First Time Home Buyers Incentive Plan
-This would give first time home buyers the ability to share the cost of buying a home with CMHC
-For existing homes – the incentive would provide up to 5% (funding/equity sharing) of the PURCHASE PRICE
-For newly constructed homes the incentive would provide up to 10% (funding/equity sharing) of the PURCHASE PRICE
-Funding/Equity sharing means that CMHC would cover a percentage of the purchase price

Example:
o $400,000 purchase price, 5% down payment ($20,000), AND 5% CHMC shared equity mortgage ($20,000), the size of the insured mortgage would be reduced from $380,000 down to $360,000 which would lower the monthly payment amount for the first time homebuyer

To qualify for the program:
o $120 max household income
o Cannot borrow more than four times their annual household income – making max purchase price approx. $505,000
o $100,000 household income would mean max $400,000 mortgage in order to use this program.

So if the first-time homebuyer still needs to have a minimum 5% down of their own resources (unlike the local program discussed above), and most will be buying a resale home, their proposed fix for this demographic is to share the 5% cost of the house? Using the example above, it would reduce the borrowers monthly payment by approximately $120 per month or a little more than 6.00% reduction in monthly mortgage payment. Saved money each month is certainly helpful, but will this be something that we look back on in years to come as a real difference maker? Could there have been other ways to assist our first time homebuyers? Did we get our fair chunk of consideration? Whatever the right answer is, as we await the great reveal of repayment terms, we as Mortgage Brokers/Agents need to be cautiously optimistic that this will help our clients but understand that it may negatively effect some too… I hope for our clients sake this turns out to be good policy and not just politics. I await the reveal.

– by Dustin James

Federal budget 2019: A closer look.

I have been fielding quite a few questions about the announcement of the new First-Time Home Buyer Incentive program. To begin with, these programs are not scheduled to begin until September of this year assuming no governmental changes.
I have taken the time to break down the math a little further to show the potential savings.
Bear in mind that the incentive funds of up to 10% on a new home and 5% on an existing home are merely an interest free loan that must be repaid upon sale of the property. This is for first time home buyers and household income cannot exceed $120,000 per year.
I will use the example that was in the budget release that illustrates the very maximum benefit available.

Details of the example

-New home purchase price: $400,000
-Household income: $120,000
-Down payment from the buyer: $20,000
-CMHC Incentive Loan: $40,000
-Assuming level fixed rate of 3.5% with an amortization of 25 years.

*Mortgage default insurance (CMHC) is required for a home purchase with less than 20% down payment. The insurance premium percentage decreases for each additional 5% down payment. The buyer with the standard 5% down mortgage pays a much higher premium.
When underwriting the original mortgages, the buyer that is using the CMHC incentive loan is allowed to have more ongoing debt payments outside of the mortgage. The incentive buyer can have monthly debt payments up to $1,650 per month, when the standard 5% down buyer can only have up to $1,100.00 per month.
I will take it a step further with the longer-term effects after the sale of each home. I will use a market value increase of 15% over 5 years bringing the sale price to $460,000.00.

It is very clear from the above financial illustration that the benefits of the CMHC incentive loan are realized in the up-front savings on the insurance premium and the reduced interest costs during the mortgage term. If this program comes into effect, I will be advising buyers to set the mortgage payments as close to the 5% down level as possible to further leverage the benefit and put more in their pocket after the sale. If you have any questions, contact a Dominion Lending Centres mortgage broker.

– by Kevin Carlson