Optimism For Future First Time Homebuyers

December 15th, the B.C. Provincial Government shared that it will begin offering financial assistance to B.C. first-time home buyers in regards to their down payment. They estimate that 42,000 new first-time home buyers will take advantage of this program over the next three years.

What the B.C. Government Will Provide: 

– A matched loan only to be used as funds for making a down payment on an eligible home

– Maximum available funds will be $37,500 or 5% of a home’s purchase price

-Maximum 25 years to repay

– 5 years of no required payments (includes no principal payments and no interest payments)

– This loan will be registered as a second mortgage on the newly purchased home

When This Program Begins:

– January 16th, 2017 applications will be accepted and this program expires March 31, 2020

To Qualify for This Program:

– Must reside in the home – Must be a First-Time Home Buyer (click here to see those qualifications)

– Property must remain principal residence for 5 years

– Property must cost less than $750,000 and not be used as a recreational or rental property

– Have resided in BC for at least 1 year

– Have a combined gross income of less than $150,000

– Have saved half the minimum down payment (2.5% of property’s purchase price)

– Have been pre-approved for a 1st mortgage before applying

Privileges of This Program:

– No prepayment fees (make lump sum payments or pay entire debt early at any time)

– No interest will begin accumulating until after the first 5 years have expired

Example:

Without this program, if you wanted to buy a $500,000 home for example, you would need a minimum down payment of $25,000 (5%) plus 1.5% for closing costs. With this program, the government will match a first-time home buyer’s down payment, up to 5% of the property’s value. So your $25,000 down payment can now be $12,500 because the government will lend you the remaining $12,500 (you still need 1.5% for closing costs).

If you originally wanted to make a 20% down payment and avoid insurance premiums, you can now do this with 15% of your own money down as the government will lend you the remaining 5%.

It is unclear the significance this program will have on housing prices and how it will affect demand here in BC- only time will tell us that. For right now though, future first-time home buyers can begin to feel very optimistic as the BC government has opened a door of opportunities for them, 3 months after CMHC’s news from October 2016 where they announced changes to qualifying requirements- affecting the majority of future first-time home buyers.

Below is a chart showing the steps a first-time home buyer must complete in order to successfully use this program in their future purchase. In order to become pre-approved with a lender, please contact your Dominion Lending Centres mortgage professional so we can begin that process (which is free).

By: Ryan Oake

Reading This Could Save You Thousands of Dollars!! (AKA How to renew your mortgage in 5 easy steps)

What is a mortgage renewal you ask?

Each mortgage has a set term which can vary from 1-10 years. Just before the end of your term you will receive an offer from your current lender and you have 3 options:

1. Sign and send back as is.
2. Check the market to make sure you are getting the best rate and renegotiate with your current lender
3. Move the mortgage to a new lender.

Option 1 is not a very good idea in my opinion. The onus is on you to make sure you are being offered the best rate. Banks are a business like any other and they are seeking to make the highest profits they are able as to keep their shareholders happy. There is nothing wrong with that. That does mean however that you as a savvy consumer should take a few minutes to ensure you are being offered the best possible rate you can get.

Think of it as the sticker price on a vehicle at a dealership. The rate you are being offered is a starting point for discussion, not the final price. Let’s look at an example:

• Mortgage of $300,000 with an amortization of 25 years.
• Your offer is for 3.19% for a 5 year fixed = $1449.14/month and you will owe $257,353.34 at the end of the term
• Best rate is 2.59% for a 5 year fixed = $1357.38/month and you will owe $254,372.59 at the end of the term

You would pay $91.76 less each month or $5505.60 over all 60 months and still owe $2,980.75 less.

So you need to ask yourself if you are OK handing that money over to the mortgage provider or if you would prefer to keep it yourself and I am pretty sure I know what your answer will be.

So here are the steps I mentioned to save yourself all that money.

1. Receive the offer from the mortgage lender and actually look at ASAP so that you have enough time to make an informed decision.
2. Research via the internet and phone calls to find out what the best rate even is.
3. Phone your current lender and negotiate! OK, you are going to have to get downright assertive and that may be uncomfortable but when you compare your comfort to the thousands of dollars you could save, you will see that it’s worth it.
4. If said lender will not offer you the rate then move the mortgage. You will have to provide paperwork and complete the application but if you keep in mind the example from above then I repeat, it’s worth it.
5. Take a look at your budget and see if you can increase the payments to decrease the mortgage and save yourself even more as the overall interest costs decrease.

Keep in mind when that renewal notice arrives that you literally have the power to save yourself money and you are not obligated to accept the first offer which is presented to you and I truly hope you do not. If you need some more information, please do not hesitate to contact your Dominion Lending Centres mortgage professional.

By: Pam Pikkert

Financing Solution – Home Equity Line Of Credit

The Home Equity Line of Credit (HELOC) lets you split up your mortgage debt and borrow against your equity at low rates.

The unique feature of this mortgage product is that you can slice the pie (the mortgage balance) into various segments. All of it is registered against the subject property title as just one charge. This gives you the ability to diversify your risk in the marketplace.

If you had a $480,000 outstanding mortgage against a property (with 20% equity or a value of $600,000) you could divide it up into different segments. For example, you might place $200,000 in a variable-rate mortgage, $200,000 as fixed term and $80,000 line of credit.

Spreading the risk across different markets helps you plan for the future, as there are different governing bodies controlling different aspects of the marketplace.

Variable-rate mortgages and lines of credit (LOCs) are based on the prime lending rate and controlled by the Bank of Canada. Fixed rates are based on bond yields and dictated by the lenders themselves. Most other lenders follow the trends of the major chartered banks in Canada.

There are two types of line of credit in Canada: secured (registered against real estate) and unsecured (guaranteed by one’s promise to repay). I can only assist with secured LOCs. The secured LOC means less risk for the lender as it is based on the market value of the home to a maximum of 80% loan-to-value. Therefor the rate is lower and the borrowing ceiling is higher.  On secured LOCs the rate is Prime (2.70%) +0.50% which is 3.20%.  This means that if you had a primary residence with a market value of $500,000 free and clear of any other type of mortgage then you could secure a $400,000 HELOC against it at 3.20%.

Unsecured LOC rates vary depending on lender, but a safe starting range is 5-7%. And on unsecured LOCs, lenders tend to forward much less than secured LOCs; they range from $5,000-$40,000.

Here is an example of a client I recently assisted. We were able to obtain a HELOC mortgage product from a Canadian charter bank.

• Current residence (located in the Greater Vancouver area) appraised at $1.15MM.
• Current mortgage balance, $445,000.
  Maximum loan limit, $920,000 (80% of market value: 1,150,000 x 80%).
  They opted to secure the current outstanding balance of $445,000 into a variable-rate mortgage at Prime-0.45% or 2.25%.
  The additional equity of $475,000 was set up for access across 3 different LOCs; one at $159,000 and two at $158,000.
  These clients now have access to $475,000 for any future needs: renos, emergency, investment opportunities, post-secondary education for their children.

But while a HELOC  allows for product diversification and long-term planning, it is not for everyone. It can be a bad idea if it’s just used as access to easy cash. One needs to possess high self-discipline, as the funds are extremely accessible. Using the home as a piggybank can backfire disastrously.

A HELOC is also not available to all homeowners. There must be enough equity in the home before a lender will consider it.

Please contact your Dominion Lending Centres mortgage professional to discuss the potential of structuring a HELOC mortgage product against your home.

By: Michael Hallett

Be the Sunshine For a Senior This Month

As Canadians, February can be one of the hardest months. It’s when the wounds of the holiday credit card bills are still fresh and taxes for the upcoming season need to be prepared. Financial stress may be at its peak. According to Statistics Canada, over 1.4 million senior Canadians reported feeling lonely. The loneliness and depression in seniors can lead to other health problems such as an increased risk of depression, cognitive decline and illnesses like coronary artery disease.

This is the perfect time to reach out to the seniors in your life. During these cold months, many seniors may remain indoors to avoid the bitter cold. The days are long and dark and seniors may have less family visiting, which also adds to their loneliness. Add the financial stress and February can become a very depressing and tough time for seniors.

So how can you help?

Many seniors are still not fully versed on a CHIP Reverse Mortgage, and in fact they continually have the wrong impression of the product. The CHIP Reverse Mortgage through Dominion Lending Centres, allows Canadian seniors to do the things they love to do, like travel with family or entertain more often at home.

In fact, data from a recent report on the use of funds of reverse mortgages in Canada shows that the top reasons for a reverse mortgage, are as follows:

• Debt – Debt relief or debt consolidation
• Health Care – Health care expenses, medical emergency or support work to pay off debt related to health care.
• Renovations – Home retrofitting or home renovations to help improve standard of living.
• Income Supplement – Clients use reverse mortgage funds to supplement their income. Whether they are still working or already retired, savings may not be sufficient to ease financial insecurities.
• Living Expenses – Daily living expenses such as groceries and household bills such as phone and hydro.

The cold months don’t need to be long and depressing, it can be a time of change and opportunity and a time to uplift seniors introducing them and educating them about the CHIP Reverse Mortgage solution. If not, simply lending an ear to listen to them can make all the difference in uplifting their spirits.

We all have the power to be the helpful hand so be the sunshine for other during these colder months!

By: Yvonne Ziomecki

What You Need To Know About No Frills Mortgages

You’ve been offered an amazing rate and you just can’t believe how much you will save. You’re super excited and getting ready to go sign off on the papers when you randomly run into a mortgage broker and mention the deal you scored. The broker says to you that’s an awesome rate, any idea what the penalty calculation is if you need to refinance in the future?. Wait what…isn’t it the same as the last mortgage I had?

Maybe but maybe not. There are a lot of new mortgage products available on the market that offer lower rates while giving up other benefits. These mortgage options may have higher penalties, lower prepayment privileges or even worse they could have a bone fide sale clause.

I don’t blame a consumer for always thinking rate first. The industry as a whole is guilty of shoving rates in our face anytime they possibly can. It’s the easiest part of a mortgage to compare and easiest to advertise. But definitely not the most important part.

Being aware of all the terms and conditions is the key to finding your best mortgage option. You should be aware that there are mortgages that may come with one or more of the following terms:

* Sales only clause, meaning you may not be able to refinance your mortgage until your term is up

* A higher set pay out penalty. Meaning you may have to pay more than the standard 3 months interest or Interest Rate Differential penalty.

* Smaller prepayment options

* and more!

Always ask these 5 Questions when offered a mortgage:

1. How is the pay out penalty calculated if I break the mortgage?

2. Can I refinance with another lender before my term is up?

3. Is the mortgage registered as a Standard or Collateral charge on my land title?

4. What are my prepayment privileges?

5. Is the mortgage portable and assumable?

Bottom line is that knowing all the fine print is essential in making an educated mortgage decision. We never know what is going to happen in life and saving a little bit on your mortgage rate may cost you more in the long run.

Contact your local Dominion Lending Centres mortgage professional today to discuss your mortgage options!

By: Kathleen Dediluke

Top Five Home Renovations That Increase Property Value

Looking to increase your homes property value? Here are five of the best renovations you can do to your home to increase property value. These five renovations can sometimes have a return on investment 5-6x what they cost.

# 5 Flooring

Flooring is one of the most important aspects of your house. You will see an immediate rise in property valuation with the installation of hardwood floors. Existing hardwood floors that you can refinish are ideal as they are less costly to restore and in higher demand than new flooring materials. For the bathroom, tile will always be in demand and retain value exceptionally well.

# 4 Fixtures

Kitchens often look tired and dated, in large part due to old fixtures. Replacing or updating cabinet hardware, light fixtures, countertops and faucets will result in an immediate increase in your home’s value. This small, but effective upgrade will also revitalize the entire home. Pot lights are in high demand in open concept style homes.

# 3 Bathroom

The bathroom is the second most important room in the home in terms of valuation. If you can add a three-piece bathroom to a home with only one full bathroom, you will see a dramatic rise in the market value of your home. While you should never compromise bedroom space for a bathroom, try sneaking one in dead space in the home. Scott managed to fit in a 3-piece bathroom under a staircase – the width of the room measured just 44 inches. As an added tip, use glass for the shower to make the bathroom feel more spacious.

#2 Kitchen

Kitchens are the single most important room in the home relating to valuation. The kitchen can make a significant difference in the value of your home. As such, it is crucial that you invest in having a modern, fresh and desirable kitchen. Modern cabinetry, under cabinet lighting and new appliances will all significantly increase the value of your home on the market. To save on cost without compromising construction and desirability, look at options like Ikea cabinets as opposed to custom cabinetry.

#1 An Income Suite

No surprise, but the single biggest way to increase the value of your home is to build an income suite within the property. Whether this is converting your basement into a rental, or another floor in the home, an income property will increase your home’s worth. The main reason for this is that it covers a portion, or sometimes all of your mortgage payments, and results in your home being cash flow positive – which creates real wealth that can supplement your income.

Speak with any Dominion Lending Centres mortgage professional about how Genworth Canada can help qualified home buyers make their new home just right for them, with tailored improvements, immediately after taking possession of the purchased property.

Check out this video for more information.

By: Marc Shendale

Remediated Grow-Op – A Good Investment?

It is forever in discussion in the Lower Mainland – is a former grow-op home a good investment? Prices are often much lower than similar properties so at first glance it seems so. But the stigma will follow the property in perpetuity, unless it’s razed to the studs and rebuilt. If it’s been remediated that means it’s perfectly fine now, right? Not to the banks.

This is an era where lenders are being very conservative with the Office of the Superintendent of Financial Institutions (OSFI) clamping down on policies. Prior to the sweeping mortgage rule changes that came into effect in July 2012 there were at least a dozen lenders with products for remediated grow-ops. That list has now been whittled down to about 5 credit unions in BC and a handful of private lenders.

What you can expect from these offerings is that no matter how much you can put down or equity you have the credit unions are requiring mortgage insurance (CMHC or Genworth) so you will have the premium added to your mortgage and you can expect a 0.50-1.00% bonus added to the interest rate – not to mention an additional lender fee on top of all that in some cases.

While the price of that home may be much lower than comparable properties without the stigma it can cost you in other ways.

Lenders are being conservative with a view to the re-sale marketability factor. If the stigma will stay with that home forever, will there be many people willing to buy it if you decide to sell – or if that bank needs to foreclose and sell the house itself. Not to mention, with so few and costly financing options how many potential buyers will brave that process.

Buyers that acquired remediated grow-ops prior to July 2012 who are now coming up for renewal are finding themselves with very few options. A recent client was hoping to secure a better rate, consolidate some credit debt and lower their payments was forced to simply renew with their existing lender at a higher rate than the rest of the market and it was just too expensive to tap into his equity.

If you make the decision to buy a beautiful home with a dubious past remember to always ask one of the qualified mortgage professionals at Dominion Lending Centres to help you find the best financing for.

By: Kristin Woolard