How the mortgage industry became green

When I started working as a broker in 2005, the mortgage industry and the financial industry in general weren’t very eco-friendly. Let’s face it. When someone buys a home, there’s a paper trail. Starting with the mortgage pre-approval which can run four pages,  the Offer to Purchase, which is another 12 pages, income documents, notices of assessment, appraisal, and MLS listing condo documentation to add to the pile of paper. Often you would end up with a stack of paper 50-60 pages high. I needed a copy, the lender needed a copy and then my broker needed to keep a copy on file for seven years. I found that I was going to Staples and buying a case of 5,000 sheets of paper every year. I recall going to my broker’s office and seeing the admin assistant struggling to find a place to put another big box of files as the storage room was full.
What a difference a few years makes. Lenders started to accept documents in PDF format, saving us from faxing them, while brokers and lenders started to use secure servers to store the documents and the paper pile dropped for me from 5,000 sheets a year to less than 500. With photo scanning apps on phones, I expect that the paperwork will continue to shrink.
However, there are other signs of greening in the financial sector. Products like CMHC’s Purchase plus Improvements allow us to encourage our clients to change their windows and doors for more energy efficient ones, adding insulation and putting the renovations into their mortgage. In addition, if the repairs result in an Ener-guide reading of more than 82, or if they buy a new Built Green Canada home, they can qualify for a 15% rebate in their mortgage default insurance premiums.
We may not be building windmills or using solar power, but the Mortgage Industry has definitely become greener in the past decade. If you have any questions, contact a Dominion Lending Centres mortgage professional near you.

– by David Cooke

What is a Collateral Mortgage?

A collateral mortgage is a way of registering your mortgage on title. This type of registration is sometimes used by banks and credit unions. Monoline lenders, on the other hand, rarely register your mortgage as a collateral charge – which is an all-indebtedness charge that allows you to access the equity in the home over and above your mortgage, up to the total charge registered.

What this means is that you may be able to get a home equity line of credit and/or a readvanceable mortgage, or increase your mortgage without having to re-register a mortgage. This is a real benefit to you in some cases because re-registering your mortgage can cost up to a thousand dollars.

However, there are some negatives to having a collateral mortgage.

• First and most glaring – because it is an “all indebtedness” mortgage – it brings into account all other debts held by that lender into an umbrella registered against your home. This means that your credit cards, car loans, or any related debt at your mortgage’s institution can be held against your home, even if you’re up to date with your mortgage payments.
• Secondly, if you want to switch your mortgage over to a different lender, they may not accept the transfer of your specific collateral mortgage. This means you’ll need to pay additional fees to discharge the mortgage and register a new one.
• And lastly, collateral mortgages make it more difficult to have flexibility to get a second mortgage, obtain a home equity line of credit from a different institution, or use a different financial instrument on your home. This is because your collateral mortgage is often registered for the whole amount of your property.

To recap, collateral mortgages give you the flexibility to combine multiple mortgage products under one umbrella mortgage product while tying you up with that one lender. While this type of mortgage can be a great tool when used correctly, it does have its drawbacks. If you have any questions, a Dominion Lending Centres mortgage professional can help.

– by Eitan Pinsky

The Statement House – Our House Magazine

Iseela Ibrahimi wanted wow. The successful Dominion Lending Centres mortgage broker had purchased numerous homes in the past, but she wanted her latest home in Caledon, Ont. to be something special.

Ibrahimi bought the brand new 4,500 square-foot home in 2014, but quickly had her heart set on a major renovation.
“I knew the end product from a typical builder would never make me happy,” she said. “I wanted to create something that, no matter what your style is, it would still have that statement and it would still have that wow factor.”

By 2016, she was ready to take her vision to the next level. While Ibrahimi had a keen eye for design, it wasn’t her expertise. So she partnered with Oakville designers Parkyn Design to turn her ideas into a reality. What followed was a stunning transformation. Instead of cookie-cutter, Ibrahimi got a completely custom high-end look. From the front foyer all the way to the bedrooms, Ibrahimi said she got the flow she wanted, calling it “transitional but classy at the same time.”

“They’ve nailed it for me,” she said of the work by the design team at Parkyn, adding they brought what was in her mind to life. She also added it was important the design was going to stand the test of time. The renovation took five months to finish, but Ibrahimi pointed out the complete transformation, including the furniture, wasn’t really done until the end of 2017.

Pictures of the redesigned home have found their way onto the popular design website Houzz and are getting a little bit of buzz. While Ibrahimi admits it may not have logically made sense to renovate a near brand-new home, she said it was a personal decision. And now having time to settle in, she couldn’t be more satisfied with her decision.
“The whole point of this was you can still create what you want to create as long as you’re OK with where you are.”

– by Jeremy Deutsch

5 ways you can kill your mortgage approval

So, you found your dream home, negotiated a fair price which was accepted. You supplied all the needed documentation to your mortgage broker and you are waiting for the day that you go to the lawyer’s to sign the final paperwork and pick up the keys.

All of a sudden your broker or the lawyer calls to say that there’s a problem. How could this be? Everything has been signed and conditions have been removed. What many home buyers do not realize is that your financing approval is based on the information the lender was provided at the time of the application. If there have been any changes to your financial situation, the lender is within their rights to cancel your mortgage approval. There are 5 things that can make home financing go sideways.

1 Employment – You were working for ABC company as a clerk for 5 years making $50,000 a year and just before home possession you change jobs. The lender will now ask for proof that probation for this new job is waived and new job letters and pay stubs at the very least. If you change industries they will want to see more proof that you are capable of keeping this job.
If your new job involves overtime or bonuses of any kind that vary over time, they will ask for a 2 year average which you will not be able to provide.
Another item that could ruin your chances of getting the mortgage is if you decide to change from an employee to a self-employed contractor just before possession day. Even though you are in the same industry, your employment status has changed . This is a big deal killer.

2. Debt – A week or two before your possession date, the lender will obtain a copy of your credit report and look for any changes to your debt load. Your approval was based on how much you owed on that particular date. Buying a new car or items for the new home need to be postponed until after possession of your new home.
Don’t be fooled by “Do not pay for 12 months” sales campaigns. You now owe this money regardless of when the payments start. Don’t buy a new car and don’t buy furniture for the new home. This will increase your debt ratio and can nullify your financing.

3. Down payment source – And yet again I reiterate that the approval is based on the initial information you have provided. You will be asked at the lawyer’s office to verify the source of the down payment and if it is different than what the lender has approved, then you may be in trouble. For example, you said that you were going to save the funds and then at the last minute Mom and Dad offer you the funds as a gift. There’s no problem accepting the gift if the lender knows about it in advance and has included this in their risk assessment, but it can end a deal.

4. Credit – Don’t forget to make your regular credit card payments. If your credit score falls due to late payments, this can kill your financing. If you have a high ratio mortgage in place which required CMHC insurance, a lower credit score could mean a withdrawal of their insurance once again , killing the deal.

5-Identity Documents – This can be a deal killer at the lawyer’s office. The lawyer is required to verify your identity documents and see that they match the mortgage documents. Many Canadians use their middle names if they have the same name as their parent. Lots of new Canadians adopt a more Canadian sounding name for their day-to-day lives but their passports and other documents show another name.

Be sure to use your legal name when you apply for a mortgage to avoid this catastrophe . Finally, keep in touch with your Dominion Lending Centres mortgage professional right up to possession day. Make this a happy experience rather than a heartbreaking one.

– by David Cooke

Brokers More Important Than Ever

Nearly half of all existing mortgage in Canada will be up for renewal in 2018. Stated in a Financial Post article by Armina Ligaya, CIBC Capital Markets estimates 47% of all existing mortgages will need to be refinanced in 2018. All of this coming on the heels of rising interest rates and changes to key mortgage regulations.

With this renewal number hovering around 50%, almost double from previous years, big banks will be fighting hard to keep their clients and handle their mortgage- as they should. However, is staying with the bank you got your mortgage with 1, 2, 3, even 5-years ago in your best interest?

Think of the rising housing prices, the rule changes to back-end insured mortgages, the multiple stress tests as well as the implementing and removing of programs such as the B.C. Home Partnership Program. All of which has just happened in the past couple of years.

With all these changes, should you not be speaking with a licensed mortgage broker to determine what is in your best interest?

The options that are available through other lenders can be quite advantageous. From opening up Home Equity Line Credits with a big bank, to Manulife One Account access and the lowest interest rates available on Switch Mortgages where lenders will help compensate the administrative costs.

One of the more common scenarios we are seeing is people upgrading their homes with marriage, children, or promotions/relocation with work. Clients know it is happening in the near future but do not have an exact timeline. Wanting a 5-year fixed mortgage but worried about the possibility of upgrading after just 2-years, we usually suggest working with a Monoline Lender. Sticking with a Big Bank like CIBC or RBC and having this scenario happen could potential result in penalties of $10,000-$15,000 where that same penalty might only be $3,000 with a Monoline Lender.

It is always best to consult with a Dominion Lending Centres mortgage broker before signing your bank’s renewal letter. We offer free pre-qualifications, no client-relationship contracts, and credit assessments to see your eligibility on receive A-Rates, all without your credit score taking a hit.

– by Ryan Oake

It’s not all about the rate: Amortization & Renewals

Have you spoken to a mortgage broker lately? When it’s time to renew your mortgage you have the freedom to do a number of things that are not possible at any other time without a financial penalty. Renewal time is an opportunity.

Have you looked at your mortgage amortization lately? Let’s say that you started your present mortgage 10 years ago and you had a 30-year amortization. You now have 20 years left on your mortgage but your situation has changed. Your children have grown up and one is ready to leave for college and another one will follow in a couple of years. An easy way to help the kids out would be to refinance your home. However, the rules have changed and if the value of your home has not risen a lot and you have not paid down the balance, you may not have the 20+% you need to withdraw the equity.

Another possible solution would be to use the amortization on your mortgage to help you achieve your financial goals.
You can extend the amortization and lower your monthly payments thus freeing up cash flow.

Here’s an example. With a balance of $400,000 on your mortgage:

By adding 5 years to your mortgage you can lower your payments by $320 a month. If that’s not enough and you have more than 20% equity , in other words, your mortgage is less than 80% of the value of the home, you can extend your mortgage to 30 years with most lenders.

This will free up $520 a month. When your children graduate you or your mortgage broker can contact the lender and have your amortization lowered again. Note that changing the amortization can result in costs. Check with your Dominion Lending Centres mortgage broker before you make any changes to your mortgage.

– by David Cooke

Improving your credit score

Your credit score is a big factor when you apply for a mortgage. It can dictate how good your interest rate will be and the type of mortgage you qualify for.

Mortgage Professionals are experienced helping clients with a wide range of credit scores so we can find you a mortgage product even if your credit is far from perfect.

The good news about your credit score is that it can be improved:

• Stop looking for more credit. If you’re frequently seeking credit that can affect your score as can the size of the balances you carry. Every time you apply for credit there is a hard credit check. It is particularly important that you not apply for a credit card in the six months leading up to your mortgage application. These credit checks may stay on your file for up to three years.
• If your credit card is maxed out all the time, that’s going to hurt your credit score. Make some small monthly regular payments to reduce your balance and start using your debit card more. It’s important that you try to keep your balance under 30% or even 20% of your credit limit.
• It’s also important to make your credit payments on time. People are often surprised that not paying their cell phone bill can hurt their credit score in the same way as not making their mortgage payment.
• You should use your credit cards at least every few months. That’s so its use is reported to credit reporting agencies. As long as you pay the balance off quickly you won’t pay any interest.
• You may wish to consider special credit cards used to rebuild credit. You simply make a deposit on the card and you get a credit limit for the value of that deposit. They are easy to get because the credit card company isn’t taking any risks.

Contact a Dominion Lending Centres Mortgage Professional if you have any questions.

-by Tracy Valko

5 Things to know before buying a Rural Property

After several years as a home owner, my friend was set to buy the home of his dreams. He always wanted to own an acreage outside of town. He had visions of having a few animals, a small tractor and lots of space.
As a person with experience buying homes, he felt that he was ready and that he knew what he was getting into. Wrong. As soon as you consider buying a home outside of a municipality there are a number of things to consider, not the least being how different it is to get a mortgage.

Zoning – is the property zoned “residential”, “agricultural” or perhaps “country residential”?

Some lenders will not mortgage properties that are zoned agricultural. They may even dislike country residential properties. Why? If 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 there are many obstacles to this.
If you are buying a hobby farm, some lenders will object to you having more than two horses or even making money selling hay.

Water and Sewerage – if you are far from a city your water may come from a well and your sewerage may be in a septic tank. A good country realtor will recommend an inspection of the septic tank as a condition on the purchase offer. Be prepared for the inspection to cost more than it cost you in the city. Many lenders will also ask for a potability and flow test for the well. A house without water is very hard to sell.

Land – most lenders will mortgage a house, one outbuilding and up to 10 acres of land. Anything above this amount and it will not be considered in the mortgage. In other words, besides paying a minimum of 5% down payment you could end up having to pay out more cash to cover the second out building and the extra land being sold .

Appraisal – your appraisal will cost you more as the appraiser needs to travel farther to see the property. It may also come in low as rural properties do not turn over as quickly as city properties. Be prepared to have to come up with the difference between the selling price and the appraised value of the property.

Fire Insurance – living in the country can be nice but you are also far from fire hydrants and fire stations. Expect to pay more for home insurance.

Finally, if you are thinking about purchasing a home in a rural area, be sure to speak to a Dominion Lending Centres mortgage broker before you do anything. They can often recommend a realtor who specializes in rural properties and knows the areas better than the #1 top producer in your city or town.

– by David Cooke

Why We Chose a Mortgage Broker

For Arthur Dubreuil, the recent purchase of his new house will sound like a similar story for many homebuyers. Looking to upsize to meet the needs of his growing family, the Toronto area resident looked east outside the city for a more affordable option. What he found was a perfect affordable 2,000 square-foot home on an acre of land in the community of Cobourg, Ont.
“The price point and what you get for the value moving out of the city… we couldn’t have something like that in the city,” Dubreuil said. So when it was time to get financing, he turned to a trusted source, a Dominion Lending Centres mortgage professional he used in the past.

With the help of a mortgage broker, Dubreuil was able to move in to his new home at the beginning of the year. And with a three year-old son getting ready to start school soon, he figures his family will be in their new home for many years to come.

Q: Why did you chose a mortgage broker?
A: I got pre-approved at the bank before I did anything. The interest rates were higher with the bank then by choosing my mortgage broker. I used my broker prior with my last home when I got my first mortgage. It seems like things are a lot clearer using a broker rather than using a bank. They’re [the banks] not very forthcoming. When I went to the bank they were telling me all these different things, basically the mortgage and rate were not negotiable. My broker found me the cheapest rate he could find. He actually got me a better rate.

Q: How was your experience working with a mortgage broker?
A: It was good. I had no issues, everything was professional. He was very straightforward with me, especially when it came to details about buying a house. Especially with these new rules and regulations put in place. He talked me through what my options were, and it worked out well.

Q: What advice would you give someone I your situation?
A: I just gave my buddy some advice, he’s doing the exact same thing but buying his first home. I told him everything you need to do. Clear away any debts and speak to everybody before you actually make a choice of what you want to do and get a mortgage. Go through your options rather than not. A lot of people just stick with the banks because they’re big and they’re trusted.

– by Jeremy Deutsch

Fake-ish News

Fake(ish) News: ‘Mortgage Rates Went Up Last Week

Real News: On April 27th TD increased their ‘posted rate’.

What’s a posted rate?

It’s the list price, the MSRP — you know that price that nobody actually pays…’rack rates’.

Posted is not Prime, Prime is not Posted – there is no connection between Posted and Prime.

So, what’s it mean to you?

Not much if you are in an existing mortgage. It’s really only relevant in two situations: you are either trying to qualify for a new mortgage (that just got a bit trickier) or you are breaking a fixed-rate mortgage early (as 60% of Canadians do) and well, you will now face an even larger prepayment penalty – interesting how the banks control that.

The unaffected: Variable-rate mortgage holders. There is no change to variable rates, and no change to variable rate product rock-bottom prepayment penalties.

Onward.

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

– by Dustan Woodhouse