28 Feb

BUYING YOUR FIRST HOME IN 2017?-7 STEPS TO MAXIMIZE YOUR RRSP DOWN PAYMENT

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RRSP’s For Your Down Payment??Are you thinking of buying your first home in 2017? If yes, contributing to your RRSP before the March 1 contribution deadline can help you increase your funds available for your purchase. Follow the 7 steps below so you can maximize your available funds to purchase your first home.

Step 1: Check to see if you fit all the Home Buyers’ Plan (HBP) requirements at www.cra-arc.gc.ca/hbp/. If you do continue to the next step.

Step 2: Consult with your Dominion Lending Centres Mortgage Broker to review your credit and plan ahead so you are mortgage ready. Your broker will help you figure out what you qualify for as well as help you navigate all the first-time home buyer programs such as the new BC Home Owners Mortgage and Equity Program.

Step 3: Contribute to your RRSP to top it up to $25,000 (check your contribution room to confirm the maximum you can contribute) for each buyer. Contribute to the highest income earners RRSP first to maximize your tax refund. If you don’t have the cash to contribute, then it may be beneficial to borrow funds to contribute to your RRSP but talk to your mortgage broker first to ensure your credit is in line to do so.

Step 4: Do your taxes as soon as possible so you can get your tax refund in your bank account.

Step 5: If you didn’t maximize your RRSP to $25,000 put your tax refund into your RRSP (highest income earner first) to help reduce your taxes next year.

Step 6: Now that your funds are in your accounts review your options with your mortgage broker and let your RRSP contributions stay in your account for 90 days for the withdrawal to qualify under the HBP.

Step 7: Begin searching for your first home. Be sure to plan the closing date to be after the minimum 90 days required for the funds to be in your RRSP and allow time for funds to transfer out of your account.

Important 2017 Dates:

March 1 – the 2016 RRSP Contribution Deadline

February 20 – the first day you can file your 2016 income taxes

May 1 – the deadline to file your taxes if you are not self-employed

April 30 – all income taxes must be paid to CRA by all tax payers

June 15 – the deadline to file if you are self-employed

Good to Knows about the Home Buyers’ Plan:

Funds withdrawn from your RRSP before they have been in your account for 90 days are not eligible under the HBP and income tax will be withheld from the withdrawal
You can use your RRSP withdrawal for anything from you down payment, paying off debts, moving costs and more as long as you’re in a contract to purchase your first home
You must repay the withdrawal amount over 15 years starting the year following your withdrawal or pay tax on 1/15th of the amount withdrawn in tax years you do not pay it back.
Your Dominion Lending Centres Mortgage Professional will help you plan to buy your first home. It’s never too early to start your mortgage application. Contact us today to get started!

KATHLEEN DEDILUKE
Dominion Lending Centres – Accredited Mortgage Professional

27 Feb

35% DOWN… THE NEW CONVENTIONAL MORTGAGE?

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Posted by: Tracy ValkoDominion Lending Centres – Accredited Mortgage Professional

35% Down… The New Conventional Mortgage?If you’re looking to buy a new home, one of the most difficult things can be putting together a down payment for the mortgage. So how much do you really need to put together before you can get into the home of your dreams? Let’s take a look at some of the different options, with their various pros and cons.

0% Down – A Thing of the Past?

If you’ve been in the housing market before, you might remember a time when banks offered extremely inexpensive mortgage options, including the “zero down payment” mortgage. Although these types of mortgages were extremely attractive for obvious reasons, you may remember a something called the Great Recession of 2008. The unfortunate downside to these mortgages was that far too many unqualified buyers were opting into mortgages they could not realistically afford. When these people defaulted en masse, it led, in part, to the collapse of the housing market. As a result, Canadian legislators moved to implement safety measures preventing such high-risk mortgages from being so freely available.

As a result, if you’re looking to buy a home through a federally-regulated lender, you will be required to make a minimum 5% down payment. On the other hand, most major credit unions do still offer zero down mortgages, primarily aimed at lower income families getting into the housing market for the first time. The benefits of this are obvious, requiring less money up front, but what are the downsides? The biggest drawback to this kind of mortgage is the high interest rate. Most of these plans carry an interest rate up to 150% higher than mortgages with 20% or more down. This interest can add up very quickly, in addition to mandatory insurance required for any mortgage with below 20% down. The cost over time of both these high interest rates and insurance can become daunting expenditures, dramatically reducing the attractiveness of these mortgages.

Mid-Range Down Payments – 20% Down

In the Canadian housing market, 20% down is a bit of a milestone. If you put together less than 20% for a down payment, you will be required to also purchase default insurance, a pricy addition your regular mortgage payments. However, if you have 20% or more, you will be exempt from this burden. Common wisdom dictates that, in the long run, you will save a substantial sum of money if you can put together at least 20% for a down payment, as it will reduce your monthly payments substantially.

If you fall somewhere between 0% and 20% in terms of your ability to put together a down payment, you might want to look into the climate of your housing market. For example, when moving into a very popular housing market, where prices are increasing at a fast pace, it could be more expensive to wait until you have a larger down payment, as the prices will increase at a rate which negates the benefits you’d receive by not having to pay insurance. In a mellower housing market, you may be better off saving up and avoiding the higher interest and insurance premiums of a lower down payment mortgage, since the cost of housing will not be likely to climb so quickly.

Whatever your specific situation, it helps to have professionals look into it with you and crunch the numbers to make sure that you’re making the best decision for you!

35% Down Payment – The Ideal Mortgage?

Further conventional wisdom dictates that if a 20% down payment is good, 35% must be even better. The importance of 20% is, of course, that the CMHC insurance is no longer required, but what if you’re situated so that you can afford an even larger down payment? Simply put, the more money you’re able to commit up front to a home, the less expensive it will be in the long run. Not only will you have less to pay off, but you will qualify for even more appealing interest rates. With lower interest rates and no insurance to worry about, the overall cost of your home will be substantially lower and you will be finished paying off your home far more quickly than if you were to put down the minimum.

Of course, not everyone is so situated that they can afford to put down 20-35% on a home. It’s important to note that, although there are benefits, a princely down payment is not required to get into the housing market. If you are a first-time buyer or belong to the low-to-mid income class, there are options available for you as well.

What’s truly important is to be able to take a frank, honest look at your finances, be clear about what you can and can’t afford, get professional assistance when needed, and do the math on what you’re getting yourself into. Buying a home should be an exciting experience, and it can be, provided you put in the necessary footwork! The mortgage professionals at Dominion Lending Centres are happy to help.

24 Feb

OVERCOMING THE CHALLENGE OF INCOME QUALIFYING

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Posted by: Geoff LeeDominion Lending Centres – Accredited Mortgage Professional

Overcoming the Challenge of Income QualifyingWhen it comes time to get your mortgage, or perhaps look at investing in an investment property, income qualifying is one of the first steps you will have to take. This first step though can also be the most challenging. Let’s walk through the steps you should take:

1. What is your Employment?

Are you employed by a company and receive a consistent paycheck with a T4 slip? OR

Are you self-employed—a sole proprietor, incorporation, or a limited company (same as incorporation)?

If you are employed, you may need the following documents to provide to your broker/lender:

2 most current years T4’s

2 most current Notices of Assessment

Most recent pay stub

Letter of employment

Up to 90 days of bank history to show you have the down payment and closing cost (usually 1.5%)

If you are a proprietorship, you may need the following documents to provide to your broker/lender:

T1 Generals for the most recent last 2 years – all pages

2 most current Notices of Assessment (proof that no personal taxes are owing)

Verification of Business for Self

Business Licences

Registration of your proprietorship

Last 2 years GST/HST remittance forms

Etc

Up to 90 days of bank history to show you have the down payment and closing costs necessary

If you are incorporate/a corporation, you may need the following documents to provide to your broker/lender:

2 most current Notices of Assessment-You need to show you HAVE AN INCOME!

Up to 90 days of bank history to show you have the down payment and closing costs

Verification of Business for Self:

Last 2 years business licences

Articles of incorporation

Last 2 years GST/HST remittance forms

Last 2 years of Financial Statements

Business Registration Form

Etc

2. Work with a good Accountant or use Stated Income

Make sure you are working with a good accountant who knows what you plan to accomplish in the future and sets up your business accordingly so that you can show at least an average income on your notice of assessment (NOA).

You can also use “Stated Income” which is simply stating your income to be REASONABLE and to reflect the time you have been working within that industry instead of what you are personally reporting to Revenue Canada and paying taxes on.

For stated income be aware that you can only use this on refinancing, or purchasing primary residence, purchase plus improvements of primary residence, Second Homes, and investment properties.

3. Insurance considerations

For stated incomes, there are insurance guidelines that you need to be aware of.

Genworth and Canada Guaranty:

GDS (Gross Debt Service) and TDS (Total Debt Service) Ratio:

Credit Score of >680 and GDS/TDS ratios of 39/44

Credit score of <680 and GDS/TDS ratios of 35/42 Also, make sure that there are no personal taxes owing Finally you will need to ensure that you are following the 2-2-2 rule. Check out our article for more information on this. Plese note that CMHC does not have a STATED INCOME program. Insurers give the following rate premiums for Business For Self (BFS): As always we are here at Dominion Lending Centres to help. Contact us today!

23 Feb

SO YOU WANT TO PORT YOUR MORTGAGE?

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LEN LANE
Dominion Lending Centres – Accredited Mortgage Professional

So You Want To Port Your Mortgage?Recently a video appeared on Linkedin and a few other places singing the praises of porting your mortgage and making it seem like a walk in the park. If you have ever done one, then you would know that it is anything but that scenario.

Porting is not much different than qualifying for a new mortgage, the video talks about the client moving to a new town and just porting their mortgage along with them. Truth is if that you are moving to a new town and a new job you may be on probation and not qualify for the mortgage. The lenders also have to approve the new property as well so a lot more factors that need to be considered.

If you are porting the mortgage and don’t need any more money as in the new house is the same value, then there isn’t much issue. What if the new home is more money and you need to increase the mortgage then the lender has an opportunity to blend the two rates and your mortgage payment could go up. If you need to reduce the mortgage amount, then you may also face a penalty on the amount reduced.

Another factor not talked about is that you still need a down payment for the new home it’s not just going to be a simple move over and continue on with your mortgage. The other thing that happens is that your lender will usually take the full penalty out of the sales proceeds and refund it to you after the sale has completed. In some cases, this process could take up to a month meaning you need to cover the short fall at closing and wait for it to come back to you.

And last but not least how long of a period do you have to port your mortgage, did you know they range from 1 day to 120 day’s maximums? In the case of one day that mean the lawyer has to close both sales in that time frame.

Overall its prudent to get professional advice from your Dominion Lending Centres mortgage professional.

22 Feb

GETTING STRICT ON DOCUMENTATION

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PAULINE TONKIN
Dominion Lending Centres – Accredited Mortgage Professional

Getting Strict On Documentation With an increase in concern about fraud, lending institutions are getting strict on documentation for mortgage approval.

As part of the mortgage approval process, your mortgage broker will ask for documents to show proof of your income, down payment and possibly other items such as proof of permanent residency and other identification. Since most of that paperwork is in your home in hard copy many people simply take a photo on their phone and send it over by email. As lenders are getting strict on documentation they are not accepting photograph copies and some lenders are not accepting a JPEG file or other formats. They will want a PDF copy of the document.

So I suggest to clients –keep it simple—and make a digital file of all of your important documents stored in a safe — place such as an external hard drive or offsite server location.

1. Your passport or other important forms of identification

2. PDF copies of your T1 General tax returns and Notice of Assessment from CRA.

3. If you need to make a copy of a bank statement get it scanned and copied to a PDF

DO NOT take a photo of your documents and keep them on your phone OR consider those as good forms for lender financing purposes.

When in doubt ask your Dominion Lending Centres mortgage professional.

Remember – these extra steps may be frustrating but this level of security are in place to protect all of us from fraudulent practices by criminals.

21 Feb

READING THIS COULD SAVE YOU THOUSANDS OF DOLLARS!! (AKA HOW TO RENEW YOUR MORTGAGE IN 5 EASY STEPS)

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PAM PIKKERT
Dominion Lending Centres – Accredited Mortgage Professional

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:

Sign and send back as is.
Check the market to make sure you are getting the best rate and renegotiate with your current lender
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.

Receive the offer from the mortgage lender and actually look at ASAP so that you have enough time to make an informed decision.
Research via the internet and phone calls to find out what the best rate even is.
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.
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.
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.

17 Feb

FINANCING SOLUTION -HOME EQUITY LINE OF CREDIT

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FINANCING SOLUTION – HOME EQUITY LINE OF CREDIT

MICHAEL HALLETT

Dominion Lending Centres – Accredited Mortgage Professional

 

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.

16 Feb

NEW MORTGAGE REGULATIONS WEIGH ON HOME SALES

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NEW MORTGAGE REGULATIONS WEIGH ON HOME SALES

DR. SHERRY COOPER

Chief Economist, Dominion Lending Centres

New Mortgage Regulations Weigh On Home SalesThis morning, the Canadian Real Estate Association (CREA) released its January national real estate statistics showing home sales declined 1.3% month-over-month in the first month of this year. This down draft put resales at their second lowest monthly level since the fall of 2015 and only  a bit above levels recorded last November when new tighter mortgage regulations were first put in place.

Activity was down in about 50% of all local markets, led by the three largest urban markets–The Greater Toronto Area (GTA), Greater Vancouver and Montreal.

For the year as a whole, the number of homes changing hands was up 1.9%. Sales slowed in the second half of 2016 and the newly released data show that the slowdown continues. Notably, year-over-year sales were down significantly in the Lower Mainland of British Columbia (BC). This slowdown was exacerbated by the August introduction of the 15% land transfer tax on foreign nonresident purchasers. The October tightening of mortgage regulations dampened activity further.

Housing activity will not provide the boost to overall economic growth in 2017 that it did in 2015 and the first half of 2016. as first-time homebuyers will find it more difficult to qualify for a mortgage and credit availability is diminished by the disproportionate impact of the new regulations on nonbank lenders.

Sales activity was down from the previous month in about half of all local markets, led by three of Canada’s largest urban centres: the Greater Toronto Area (GTA), Greater Vancouver and Montreal.

Supply shortages are a major issue depressing sales activity and raising prices, especially in and around Toronto and parts of BC. Price pressures will continue in these markets unless demand declines significantly.

New Listings Continue To Decline

The number of newly listed homes fell 6.7% in January, the second consecutive monthly decline. New listings were down in about two-thirds of all local markets, led by the GTA and environs across Vancouver Island.

The monthly decline in new listings dwarfed the decline in sales so the national sales-to-new listings ratio jumped to 67.7% last month compared to 64.0% in December and 60.2% in November. The ratio in the range of 40%-to-60% is considered generally consistent with balanced housing market conditions. Above 60% is considered a sellers’ market and below 40%, a buyers’ market. 

The sales-to-new-listings ratio was above 60% in half of all local housing markets again last month–the vast majority of which continued to be in British Columbia, in and around the Greater Toronto Area and across Southwestern Ontario. There were sellers markets already in these regions.

Number of Months of Inventory

The number of months of inventory is another important measure of the balance between housing supply and demand. It represents the number of months it would take to completely liquidate current inventories at the current rate of sales activity.

There were 4.6 months of inventory on a national basis at the end of January–unchanged from December and a six-year low for this measure. Clearly government efforts to increase supply is warranted.

The imbalance between limited housing supply and relatively strong demand in Ontario’s Greater Golden Horseshoe region is without precedent (the region includes the GTA, Hamilton-Burlington, Oakville-Milton, Guelph, Kitchener-Waterloo, Cambridge, Brantford, the Niagara Region, Barrie and nearby cottage country). The number of months of inventory in January is now at or below one month of sales in the GTA, Hamilton-Burlington, Oakville-Milton, Kitchener-Waterloo, Cambridge, Brantford and Guelph.

Prices Continue to Rise

The Aggregate Composite MLS House Price Index (HPI) rose 15.0% y-o-y last month. This was up a bit from December’s gain, reflecting an acceleration in condo and townhouse unit price increases.

This price index, unlike those provided by local real estate boards and other data sources, provides the best gauge of price trends because it corrects for changes in the mix of sales activity (between types and sizes of housing) from one month to the next.

Prices for two-storey single family homes posted the strongest year-over-year gains (+16.8%), followed closely by townhouse/row units (+15.8%), one-storey single family homes (+14.4%) and apartment units (+13.3%). In many of these regions, the supply of new single-family homes is so limited, you practically need to knock down a house to build a new one.

Price trends continued to vary widely by location. In the Fraser Valley and Greater Vancouver, prices continued to recede from their peaks reached in August 2016 but remained above year-ago levels (+24.9% y-o-y and +15.6% y-o-y respectively). Meanwhile, benchmark prices climbed to new heights in Victoria and elsewhere on Vancouver Island as well as in the Oakville-Milton, Guelph, and the GTA. Year-over-year price gains in these five markets ranged from about 18% to 26% in January. By comparison, home prices were down 2.9% y-o-y in Calgary and edged lower by 1.0% y-o-y in Saskatoon, continuing their retreat from peaks reached in 2015. Prices in these two markets are down 5.9% in Calgary and 4.3% in Saskatoon relative to their 2015 peak levels.

Home prices were up modestly from year-ago levels in Regina (+3.8%), Ottawa (+3.7%), Greater Montreal (+3.1%). In Greater Moncton, prices held steady. Monthly trends suggest that prices have continued to stabilize in these markets.

The actual (not seasonally adjusted) national average price for homes sold in January 2017 was $470,253 about in line with where it stood one year earlier. This marks the smallest y-o-y increase in nearly two years.

The national average price continues to be pulled upward by sales activity in Greater Vancouver and the GTA, which remain two of Canada’s tightest, most active and expensive housing markets. That said, Greater Vancouver’s share of national sales activity has diminished considerably over the last year, giving it less upward influence on the national average price. The average price is reduced by almost $120,000 to $351,998 if Greater Vancouver and GTA sales are excluded from calculations.

New Mortgage Regulations Weigh On Home Sales

13 Feb

CHINA’S GLOBAL HOMEBUYERS COULD BE SUDDENLY CASH POOR

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CHINA’S GLOBAL HOMEBUYERS COULD BE SUDDENLY CASH POOR

DR. SHERRY COOPER

Chief Economist, Dominion Lending Centres
Sherry is an award-winning authority on finance and economics with over 30 years of bringing economic insights and clarity to Canadians.

 

China's Global Homebuyers Could Be Suddenly Cash PoorProperty prices around the world have benefited from the demand of foreign buyers, a.k.a. China’s capital outflows. China has issued unexpected rules on exchanging yuan for international currency. This could impact real estate around the world. Some argue it already has.

China’s Clamp Down on Outflows

As capital flight intensified, China’s reserves have plunged, causing the country to sell US treasury bonds. In response, China has introduced new rules, which now require disclosure of the intended use of the yuan being converted. In addition, they must pledge the money won’t be used for the purchase of property, securities, or insurance products. Borrowing or lending on behalf of others is now prohibited, and requires a legal declaration saying you have not done so. Anyone caught breaking the rules will be denied the conversion and lose exchange rights for two years. They can also be subject to an anti-money laundering investigation.

China’s currency is not freely convertible on the open market. In order for yuan to be used internationally, the People’s Bank of China purchases foreign currency and provides liquidity for yuan holders. The government restrictions already exist–each Chinese citizen can trade up to US$50,000 per year, and only that much can leave the country. This rule has not forestalled huge outflows.

Despite the rule, one measure of capital outflow from the State Administration of Foreign Exchange (SAFE) shows approximately US$1 trillion dollars worth of yuan were removed from the foreign exchange reserves from the 2014 peak to November 2016. To put that in perspective, this outflow is larger than the entire gross national product of Canada in 2016.

Much of this money found its way into global real estate markets causing prices to boom. Property prices surged in some parts of Canada, the US, the UK, New Zealand and Australia, all countries that had relatively low barriers to importing large volumes of capital and liquid currencies.

Some analysts believe that the party might be over. However, China has a massive underground banking market that operates in the shadows. In August 2016, the Chinese government shut down one operation in Shenzhen, but no one knows just how many more such shadow banks there are.

Also, some Chinese people purchased homes via a process called smurfing–where large amounts of money are broken down into small undetectable amounts. Homes are an easy way to reassemble the money into a single house-shaped bank account. However, you need to sell the home to retrieve the money.

Many people that do this are just looking for a way to hedge against any devaluation their hard-earned money might experience as a result of a major currency change. It does present a problem for domestic investors though. If a large number of people smurfing require their money soon, they’ll have to sell. This will provide downward pressure on house prices.

There is anecdotal evidence that tighter restrictions on capital outflows from China is having an impact. According to Bloomberg News, “China’s escalating crackdown on capital outflows is sending shudders through property markets around the world. … In Silicon Valley, Keller Williams Realty says inquiries from China have slumped since the start of the year. And in Sydney, developers are facing “big problems” as Chinese buyers pull back, according to consultancy firm Basis Point.”

“Everything changed’’ as it became more difficult to send money offshore,” said Coco Tan, a broker associate at Keller Williams in Cupertino, California. Bloomberg further reports that “In London, Chinese citizens who clamored to purchase flats at the city’s tallest apartment tower three months ago are now struggling to transfer their down payments.”

We have seen a slowdown in high-end purchases in Vancouver since the August imposition of a 15% land transfer tax on nonresident foreigners. While home sales were slowing even before the tax, it might just be that some of that slowdown was the result of China’s efforts to stem the outflow of capital.

“While no one expects Chinese demand to disappear anytime soon, the clampdown is deterring first-time buyers who lack offshore assets and the expertise to skirt tighter capital controls.”
Dr. Sherry Cooper

3 Feb

WHAT DOES IT ACTUALLY MEAN TO CO-SIGN FOR A MORTGAGE?

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WHAT DOES IT ACTUALLY MEAN TO CO-SIGN FOR A MORTGAGE?

PAM PIKKERT

Dominion Lending Centres – Accredited Mortgage Professional

What Does It Actually Mean To Co-sign For a Mortgage?There seems to be some confusion about what it actually means to co-sign on a mortgage and you know that where there is confusion, your trusted mortgage professional seeks to offer clarity. Let’s take a quick look at why you may be asked to co-sign and what you need to know before, during, and after the co-signing process.

So why are you being asked? Last year there were two sets of changes made to the mortgage world which can likely explain why you are receiving this request in the first place.

The first occurred early in 2016 whereby the overall lending standards were increased in regards to an individual’s management of their credit and the resulting responsibility of Canada’s financial institutions to ensure they are lending prudently. We have seen an increase in requests for co-borrowers to help strengthen applications when credit or job stability is an issue.

The second happened just in October. A new ‘stress test’ rate applies which has especially impacted borrowers with less than 20% down. They must qualify at a rate of 4.64% though their actual interest rate is much lower. This has decreased affordability for many which means they could be looking for a co-borrower to increase how much home they can qualify for.

If it was me, I would ask questions as to exactly why the applicant needs a co-borrower. If it is a credit issue then you need to assess if that an acceptable risk. If it is a matter of not enough income, you need to assess that instead. What is the exit strategy for you all from this joint mortgage?

What can you expect? You will be required to complete an application and have your credit pulled. As you are now a borrower the banks will ask you for all the documentation that the main applicant has already provided. This can include but will not be limited to:

  • Letter of employment
  • Paystubs
  • 2 years Notice of Assessments, Financial Statements and complete T1 Generals
  • Mortgage statements on all properties you own
  • Bank statements if helping with the down payment
  • Property tax bills
  • Lease agreements
  • Divorce/separation agreement

So you get the idea. You are now a full applicant and will be asked for a whole bunch of paperwork. It is not just a matter of saying yes. Once the application is complete and all conditions have been met with the mortgage, you will have to meet with the lawyer as well.

What do you need to be aware of?

  1. This is now a monthly liability according to the world. You will have to disclose this debt on all your own applications going forward. It can affect your ability to borrow in the future
  2. Each lender is different in their policy as to how soon you can come off the mortgage. Familiarize yourself with this. Are you committing to this indefinitely or only for a couple of years?
  3. Mortgages report on the credit bureaus so you could be adversely affected if there are late payments
  4. If the main applicant cannot make the payment for whatever reason, you are saying that you will. Make sure your budget can handle that for a few months.

A few things you may want to consider if you do agree to co-sign:

  • Ask for an annual statement to be sent to you as well on both the mortgage and the property taxes.
  • Consider a joint account for mortgage payments so that you can check in every so often to ensure all payments are being made on time
  • Talk about life insurance! If the worst occurs, then at least have enough of a policy in effect, with yourself as the beneficiary, to cover a year of mortgage, taxes and bills so that you are not hit with an unexpected series of expenses until the property sells.

So though you just want to help your loved one into their dream home, you are all better served if you know exactly what you are getting into and are prepared for the contingencies. We here at Dominion Lending Centres are ready to help!