24 Apr

DETERMINING THE BEST MORTGAGE…FOR YOU!

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DETERMINING THE BEST MORTGAGE…FOR YOU!

Determining the Best Mortgage…For YOU!So you have saved, and saved and you are finally ready to start house hunting…but before you do, there are a few things that you should be looking into BEFORE you start buying. Namely, your mortgage options. Did you know that there are various mortgage products? Or that each mortgage product has it own personality? They all do, and there is a mortgage product that is just right for you…we just have to find it first!

1. Understand your Expenses.

a. Do you know what you spend in a month? Do you have a monthly budget? With buying your new home, there are several associated costs that you should consider. These include the down payment, closing expenses, ongoing maintenance, taxes and utilities. If you have a budget, revamp it to maximize your saving. If you don’t have one, it is a simple thing to do! Track your spending by listing your household income and your expenses. This will give you what you spend in a month, how much you can save, and a guideline to follow.

2. Knowing your Job Stability

a. This is key to understanding and finding the right mortgage. You need to if you are in an in-demand occupation, or if your position maybe obsolete in a few years. You should also consider the length and term of your position—how long have you been there and how long are you planning to be there?

3. Consider your Limits

a. You and your Dominion Lending Centres broker need to understand what your payment and price limits are. This will determine if a fixed or variable rate mortgage is better for you.

b. You also need to know your amortization. This is the length of time that it will take for you to pay off your mortgage, based on the factors we previously discussed.

4. Know what you want in your home

a. To ensure that your home will grow with you consider these 4 questions:

i. Location: Are you close to the amenities you desire?

ii. Size: Can you comfortably accommodate your family and daily activities?

iii. Special Features: What do you want for added comfort & convenience in your home

iv. Lifestyle: Are you planning on adding to your family, or moving away soon?

Finally, and this is CRITICAL! Get PRE-APPROVED before you begin shopping for your new home. Know your financing, and what is available for you—this way you can shop stress free and you can negotiate for the home of your dreams!

GEOFF LEE
Dominion Lending Centres – Accredited Mortgage Professional

19 Apr

THE ROLE OF A MORTGAGE BROKER

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The Role of a Mortgage BrokerBuying a home is a big step – a big, very exciting, potentially stressful step! How can you take the hassle out of the equation and keep your buying experience super positive? Easy… Surround yourself with a team of experienced professionals!

Many experienced realtors insist on starting your financing first, that’s where your Mortgage Broker comes in.

What is a Mortgage Broker? A Mortgage Broker is an expert in real estate loans that acts as a match-maker between home buyers looking for money and lenders with funds available to borrow. A broker will collect information from you about your employment, income, assets, loans and other financial obligations as well discuss your current budget, spending patterns and goals in order to get a thorough understanding of where you’re at and where you’d like to be. From here they assess the strengths and any weaknesses in your application and can advise on potential suitable financing options and any next steps you might need to take in preparing yourself for loan approval.

Talking with a Mortgage Broker before you start shopping is helpful for a number of reasons:

You’ll develop a well-founded expectation of the price range and payments that you can afford.
You’ll have a chance to address any potential gaps in your application for financing BEFORE you’re in a time crunch to meet deadlines for closing.
Sellers may take your offer more seriously when you tell them you’ve been pre-approved for your financing putting you in a better position to negotiate (price, possession date, inclusions, other terms, etc).
You and your Mortgage Broker will begin to compile your documentation so that your application is ready to go when you find the perfect home, leaving your mind free to start arranging furniture in your new place.
So why use a Mortgage Broker rather than your bank?

A Mortgage Broker has access to loans from a wide range of lenders. That means that you have more potential places to get approved, AND can take advantage of best products, top programs and lowest pricing!

A Mortgage Broker must complete a series of courses and pass the corresponding exams prior to obtaining a license to sell mortgages. In order to maintain that license a Broker must uphold the highest standards of moral, ethical, and professional conduct – including ongoing education and training.

A Mortgage Broker working with multiple lender options means that they truly SHOP for the best programs and rates for you based on comparisons and choices and don’t simply sell you the limited products they have to offer through a single bank source.

Mortgage Brokers work EXCLUSIVELY in mortgages so they are mortgage product specialists rather than banking generalists. Brokers deal with real estate transactions involving deadlines and conditions everyday as part of their job. They understand the urgency of meeting these commitments to ensure a successful transaction for everyone involved.

Learn more by contacting your Dominion Lending Centres mortgage professional today!

MANDY REINHARDT
Dominion Lending Centres – Accredited Mortgage Professional

18 Apr

INDEPENDENT LEGAL ADVICE – DO YOU KNOW WHO CAN GIVE IT TO YOU?

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Independent Legal Advice – Do You Know Who Can Give It To You?First off, I’m sure some are saying what is Independent Legal Advice? ILA is just as it sounds – the need to seek independent legal advice. At Dominion Lending Centres, we always suggest that clients get ILA.

Many times especially, in private deals and builder mortgages, you will see that there is only one lawyer working for both parties. This means that the lawyer at some point must say to one of them, please be advised that should there be an issue with this file that I represent client A. Client B should then be aware that if he wants to make sure that he is being protected that he talk to another lawyer.

What is the difference between a Lawyer a Paralegal and a Notary Public?

First let’s look at the difference, first off, a lawyer is able to deal in all things pertaining to the laws of Canada in the province in which they are licensed. In real estate, they can do all the necessary steps including assisting a client in writing a real estate contract to representing them in court.

Paralegals do independent legal work under the general supervision of lawyers and that is the key difference, they can assist in just about every process that a lawyer might find themselves involved with but they are there to assist and not give legal advice.

BC Notaries are governed by the Notaries Act of BC and the discipline of their professional society. Today, the position of Notary as a member of one of the branches of the legal profession is sanctioned and safeguarded by law. BC Notaries are unique in North America, providing non-contentious legal services to the public. The definition of non-contentious is that it is legal work that relates to transactions occurring between one or more parties ie real estate. They are insured as we have learned lately from the case in BC but they cannot represent you in court as a lawyer would.

As you can see while there are several people who look like they can give Independent Legal Advice in the end only a lawyer can actually do that for you.

LEN LANE
Dominion Lending Centres – Accredited Mortgage Professional

17 Apr

THE TWO TYPES OF MORTGAGE PENALTY CALCULATIONS

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The Two Types of Mortgage Penalty CalculationsWe have all heard the horror stories about huge mortgage penalties. Like the time your friend wanted to refinance her home so that she could open a small business only to find out that it was going to cost her a $13,000 penalty to break her mortgage. This should not come as a surprise. It would have been in the initial paperwork from the mortgage lender and seen again at the lawyer’s office. A mortgage is a contract and when it is broken there is a penalty assessed and charged. You will have agreed to this. The institution that lent the money did so with the expectation that they would see a return on that investment so when the contract is broken there is a penalty to protect their interests. If you think about it, there is even a penalty to break a cell phone contract so the provider can recoup the costs they incurred so it stands to follow that of course there would be a penalty on a mortgage.

The terms of the penalty are clearly outlined in the mortgage approval which you will sign. The onus is on you to ask questions and to make sure you are comfortable with the terms of the mortgage offer. With so many mortgage lenders in Canada, you can very easily seek out other options if needed.

There are two ways the mortgage penalty can be calculated.

1. Three months interest – This is a very simple one to figure out. You take the interest portion of the mortgage payment and multiply it by three.

For instance: Mortgage balance of $300,000 at 2.79% = $693.48/month interest x 3 months or $2080.44 penalty.

OR

2. The IRD or Interest Rate Differential – This is where things get trickier. The IRD is based on:

The amount you are pre-paying; and,
An interest rate that equals the difference between your original mortgage interest rate and the interest rate that the lender can charge today when re-lending the funds for the remaining term of the mortgage.
In Canada there is no one size fits all in how the IRD is calculated and it can vary greatly from lender to lender. There can be a very big difference depending on the comparison rate that is used. I have seen this vary from $2,850 to $12,345 when all else was equal but the lender.

Things to note:

You will be assessed the GREATER of the 2 penalties.
You should always call your lender directly to get the penalty amount and do not rely on online calculators
You can avoid the penalty by porting the current mortgage if you are moving or waiting until the end of the term
A variable rate mortgage is usually accompanied by only the 3 month interest penalty
Given that 6/10 mortgages in Canada are broken around the 36 month mark, wouldn’t it be better to find out before you sign how your mortgage lender calculates their penalty just in case??…and the best way to get more information is to contact you local Dominion Lending Centres mortgage professional.

PAM PIKKERT
Dominion Lending Centres – Accredited Mortgage Professional

12 Apr

WHY YOU SHOULD SPEAK TO YOUR MORTGAGE BROKER BEFORE YOU SELL YOUR HOME

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Why You Should Speak To Your Mortgage Broker Before You Sell Your HomeWhile many people will speak to a mortgage broker before buying a home, few people call a mortgage broker before selling a home. Calling could save you thousands of dollars and many sleepless nights.

Why? Brokers understand mortgages and ask the right questions. How long do you have remaining in your present mortgage? Do you know if it’s portable to a new property? Have you heard of increase and blend? A mortgage broker can help you to anticipate a penalty to break your present mortgage and see if porting or taking your mortgage to your new property is a good idea. Need more money? Blend and Increase will allow you to increase your mortgage amount and blend the old rate with the present day rate and save you thousands in penalties.

If you are at the stage in life where you have children leaving for university and you are down-sizing, perhaps a line of credit might be useful for helping to pay tuition and dorm fees.

While you may like your home it may need a new roof. Most home buyers do not want a fixer-upper and will discount your selling price to account for this. It may be easier to get the price you want and sell faster if you replace the roof, furnace or whatever is old yourself. The problem is that you are saving money for a down payment. Your mortgage broker can come to the rescue with a line of credit, either secured or unsecured which can be paid out with the home sale. In short, “we’ve got a mortgage for that!”.

Remember, calling your Dominion Lending Centres mortgage broker before buying is a no-brainer but why not call them before you sell.

DAVID COOKE
Dominion Lending Centres – Accredited Mortgage Professional

5 Apr

YOUR MORTGAGE IS MORE THAN A RATE

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The mortgage process can seem huge and overwhelming. It can be an emotional process because a mortgage is the loan you are taking to buy a home for yourself and your family which makes it infinitely more than just a loan. Or it may represent the loan you are taking to refinance your home to invest in business dreams or to clean up some debts after life has thrown you sideways.

Likely you will head out to get your loan and, if you are human, are probably nervous about the whole process and whether you will even be approved. The new guidelines brought into place by the federal government have made it harder and you may even feel that you deserve a medal by the end of the process after jumping through all the hoops. The other part of the process is that we are inundated with information and we want to make sure that we are choosing the best mortgage that will protect us now and in the future. The easiest measure of mortgage ‘victory ‘seems to be the interest rate we are offered. What rate did you get is a hot topic after a home is purchased and it seems a no brainer that the one with the lowest rate is the clear cut winner in that conversation, but it is time to challenge that assumption and to do so we are going to look at just two normal situations. The fact of the matter is that you need to look beyond rate. Of course it is important as the lower the rate, the lower your payment but at the end of the day there is more to it than rate.

The Case of the Mortgage Penalty

Client is a regular person. Good credit, saved up the down payment and is ready to purchase a home. Receives two offers for the mortgage both at the best rate of the day. Chooses option A through her home bank as she likes the ‘security’ of bricks and mortar locations. Fast forward to down the road and sadly the client is separating and needs to payout the mortgage. Had she thought to ask she would have known that the penalty is calculated very differently from lender to lender and she would have saved herself thousands; this information is readily available online and asking questions before signing is the way to go.

The Case of the Self Employed

Client is a hard working tradesman guy who has saved 15% to put down on a home but needs to state his income given that he cannot verify it traditionally. Option A takes him to a mainstream lender who has to go through the mortgage insurer. Option B takes him to a B lender who will not through the insurer but charges a higher rate and a fee.

Let’s assume a mortgage amount of $250,000

Lender A – Rate is 2.79% for a 2 year term and the mortgage insurance fee is 3.75%

Lender B- Rate is 4.89% and the lender fee is 1%

It seems simple until you realize that the difference between the two fees is $7,235 and even though he will pay a higher amount monthly, he will actually owe $3,000.57 less at the end of the term as he borrowed less overall. So there was no so called victory in achieving the lowest rate but the client did in fact save himself a lot of money.

The point is that your mortgage is made up of far more than a rate and the onus is on you to make sure you are getting the best mortgage overall even if you lose the water cooler bragging rights. As you can see in just two examples, there is a lot of money that can be saved. Be sure to contact your local Dominion Lending Centres mortgage professional who can help you find the right mortgage for you.

PAM PIKKERT
Dominion Lending Centres – Accredited Mortgage Professional

4 Apr

ADVICE FOR SINGLE HOMEBUYERS

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More than a third of first-time homebuyers in Canada are single. If you’re thinking of joining this group, here’s what you need to do and know before jumping into homeownership.

Study the market.

Identify neighbourhoods you want to live in and check to see how much properties in that area are selling for.

Next, figure out how much you can afford. Remember to include estimates for property tax, utilities, insurance and any other expenses you don’t pay as a renter (condo fees, for example). Start with this calculator.

Assemble your team.

A home purchase should involve financial, legal and real estate professionals. Before first-time homebuyers start exploring properties, they should get a copy of their credit report (www.equifax.ca) and examine it closely.

If there is a history of missed or late payments, both of which can bring your number down, start a plan to change your standing by making regular payments on time. (Caution: there is no quick fix for a credit report; beware of companies that offer to change or “fix” yours for a fee.)

If you don’t already work with a financial advisor, consider booking a meeting with one. Reviewing your entire financial picture—debts and assets, insurance and investments, as well as budgets—is something that a professional can help you understand and offer strategies to improve.

Ramp-up savings.

Pare back expenses before making a home purchase. Why? Finalizing the deal on homeownership will include one-time expenses (closing costs and land transfer taxes, for starters) that need to be paid before move-in day. Homeownership will also bring new on-going expenses (such as property tax and utilities).

Subtract what you currently pay for housing from the estimated cost of living in the new home. Put the difference in a high-interest savings account. Here is a test: if you can make that payment every month, then you likely can afford the home you have your eye on. For tips on creative ways to save for a down payment go to read:

Consider help from family.

According to a recent Genworth Canada First-Time Homeownership Survey, first-time homebuyers in Toronto and Vancouver tend to have higher down payments than buyers in other parts of the country. That is due partly to larger savings of buyers in those areas, but also to larger gifts and loans from family.

A gift or loan from family can be a great help, but this is an arrangement that shouldn’t depend only on a hug and a handshake. Consider drawing up a contract spelling out the specifics of the deal.

How much money is being provided? Does it need to be paid back and, if so, when? If your family member will be sharing the home with you, how much will each of you be putting towards regular expenses, the down payment, or the closing costs? In whose names will the utility bills be set up, and whose name will be on the property title?

Hire a lawyer to do this paper work. That doesn’t have to involve many billable hours, especially if, before meeting the lawyer, you have an open conversation with your family and agree on answers to the above.

Another avenue worth exploring is the Genworth Canada Family Plan, which is meant to help another family member get into a home for a variety of reasons, including a parent who wishes to help an adult entrepreneurial child buy a home, or a parent helping to buy a home for an adult child at a post-secondary educational facility. With the Family Plan it’s important to note that the individual occupying the home must be on title to the property along with the co-applicant. This is not intended for use as a secondary dwelling. The down payment must be from their own resources, so gifts are ineligible.

Protect yourself

Although 35% of first-time homebuyers are buying on their own, many will partner up later.

If you start a relationship and allow another person to move into your home, that person may eventually have legal rights in relation to your home. How does that happen? If you live together long enough, you and your partner may become common-law spouses and that may trigger rights and responsibilities for you both.

When do you and your partner go from couple to common-law? The amount of time you spend living together is the main determining factor and varies from province to province.

How can first-time homeowners protect themselves? With an honest conversation about expectations and specific responsibilities. The main question is what will happen to the home if you split up? Consider a cohabitation agreement (again, with the help of a lawyer) to cover everything you agree to verbally.

Make sure to also outline the nitty-gritty details of day-to-day finances: how will you split the regular bills and when will they be paid? Which one of you will be responsible for making sure those payments are made on time? If there is a major expense, such as a roof repair or furnace replacement, will you both contribute?

For more tips on creative ways to save for a down payment go to www.homeownership.ca and speak with your Dominion Lending Centres mortgage professional.

MARC SHENDALE
Genworth Canada – Vice President Business Development

3 Apr

BANKS & CREDIT UNIONS VS MONOLINE LENDERS

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We are all familiar with the banks and local credit unions, but what are monoline lenders and why are they in the market?

Mono, meaning alone, single or one, these lenders simply provide a single yet refined service: to fulfill mortgage financing as requested. Banks and credit unions, on the other hand, offer an array of other products and services as well as mortgages.

The monoline lenders do not cross-sell you on chequing/savings account, RRSPs, RESPs, GICs or anything else. They don’t even have these products and services available.

Monolines are very reputable, and many have been around for decades. In fact, Canada’s second-largest mortgage lender through the broker channel is a monoline lender. Many of the monoline lenders source their funds from the big banks in Canada, as these banks are looking to diversify their portfolios and they ultimately seek to make money for their shareholders through alternative channels.

Monolines are sometimes referred to as security-backed investment lenders. All monolines secure their mortgages with back-end mortgage insurance provided by one of the three insurers in Canada.

Monoline lenders can only be accessed by mortgage brokers at the time of origination, refinance or renewal. Upon servicing the mortgage, you cannot by find them next to the gas station or at the local strip mall near your favorite coffee shop. Again, the mortgage can only be secured through a licensed mortgage broker, but once the loan completes you simply picking up your smartphone to call or send them an email with any servicing questions. There are no locations to walk into. This saves on overhead which in turn saves you money.

The major difference between a bank and monoline is the exit penalty structure for fixed mortgages. With a monoline lender the exit penalty is far lower. That is because the banks and monoline lenders calculate the Interest Rate Differential (IRD) penalty differently. The banks utilize a calculation called the posted-rate IRD and the monolines use an IRD calculation called unpublished rate.

In Canada, 60% (or 6 out of every 10) households break their existing 5-year fixed term at the 38 months. This leaves an average 22 months’ penalty against the outstanding balance. With the average mortgage in BC being $300,000, the penalty would amount to approximately $14,000 from a bank. The very same mortgage with a monoline lender would be $2,600. So, in this case the monoline exit penalty is $11,400 less.

Once clients hear about this difference, many are happy to get a mortgage from a company they have never heard of. But some clients want to stick with their existing bank or credit union to exercise their established relationship or to start fostering a new one. Some borrowers just elect to go with a different lender for diversification purposes. (This brings up a whole other topic of collateral charge mortgages, one that I will venture into with another blog post.)

There is a time and a place for banks, credit unions and monoline lenders. I am a prime example. I have recently switched from a large national monoline to a bank, simply for access to a different mortgage product for long-term planning purposes.

An independent mortgage broker can educate you about the many options offered by banks and credit unions vs monolines.

MICHAEL HALLETT
Dominion Lending Centres – Accredited Mortgage Professional