22 Jun

THINGS MORTGAGE PROFESSIONALS WISHED THE SELF EMPLOYED KNEW

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THINGS MORTGAGE PROFESSIONALS WISHED THE SELF EMPLOYED KNEW

This is the third part of a series by Pam Pikkert of things the average mortgage professional wished people knew so that they would not be held back by inadvertent missteps.

The next installment in the things we wished people knew series is targeted at the self-employed. This intrepid group of risk takers are entrepreneurial and help keep the economy moving but all too often we meet with these people and have to give news we would rather not give. So let’s look at what we wish they knew.

1. Surround yourself with professionals. You are the expert in your field without a doubt, but that doesn’t translate to being able to do it all.
Having a knowledgeable book keeper and a well-qualified accountant can save you a fortune in tax deductions and time lost. They are in your corner come tax time and heaven forbid through an audit by the CRA. Their job is to know the ins and outs of taxes so that you can put your focus on growing your business.
A lawyer is also invaluable. They will protect you against loopholes you didn’t know to look for in contracts.
Mortgage professionals are also a must. A Dominion Lending Centres Mortgage professional can help you with your home, a rental portfolio if you plan to diversify and commercial lending when you are ready.

2. You can’t have your cake and eat it too. The lending landscape in Canada has totally shifted in the past few years. Long gone are the days of simply stating what you earn without any verification of such and being offered a mortgage with little money down and low rates. If you choose to write off as much of your income as possible to avoid as much taxes as possible, then you will pay a higher interest rate on your mortgage

3. You have to keep your affairs up to date. That means getting the accountant prepared financials, filing your annual returns and most importantly paying your taxes. If you have a large outstanding tax balance, you are going to find it nearly impossible to get a mortgage. Taxes trump mortgage in order of who gets paid first so there are no prime or near prime lenders out there who will lend to you until these are paid.

4. The magical number in the mortgage world is 2. You have to have a 2-year history of self-employment with accompanying documentation to be able to proceed with the mainstream lenders in most cases. You also need 2 types of credit each with at least a $2,000 limit to keep your credit strong. Be aware of how debt may affect your purchasing ability. A large credit balance and a high vehicle payment will dramatically affect your ability to purchase a home. That $13,000 line of credit or a $400 vehicle payment will each decrease your purchasing power by $100,000.

The bottom line is this, make sure that you use your whole team. If you are wanting to buy a home within a couple of years then before you go fully self-employed or purchase that new truck or write off all the income you can, talk to your mortgage professional to ensure you are not inadvertently putting your home ownership goals on hold.

PAM PIKKERT

Dominion Lending Centres – Accredited Mortgage Professional

19 Jun

ARE YOU LOOKING FOR A MORTGAGE AS IF IT WERE A COMMODITY?

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ARE YOU LOOKING FOR A MORTGAGE AS IF IT WERE A COMMODITY?

I’ve heard brokers say more than once that mortgages are a commodity, by definition a commodity is a basic good used in commerce that is interchangeable with other commodities of the same type. That doesn’t sound like mortgages to me.

While the core product is always the same, money lent that is secured by real estate, the nuances of a mortgage can vary a lot. When we look at what the client is looking to do with that property and what their life style is composed of, we have to be sure that we aren’t just placing them for the sake of placing them in a mortgage. We have a duty to the client to make sure that even though they are looking for that lowest rate that it doesn’t tie them into a mortgage they can’t get out of in a reasonable manner. I recently had a client whose parent had gotten a mortgage on a property that the kids were living in with the idea that down the road when the kids had some money they would buy the house from Mom and Dad. Problem was that when I read the original commitment the bank representative had not explained that the sale had to be arm’s length sale; sorry kids you need to move out.

By some standards the comparison for commodities that a barrel of oil is a barrel of oil, when as an Albertan I already know that the heavy crude from Fort McMurray sells for a discount because while it is needed to toughen up the Texas oils, they just don’t need as much of it. By mortgage standards the same applies, if the rate is lower than the market there has to be a reason. The reasons can range from as simple as the yearly buy down is only 10% instead of 20% and range up to the office doing it pays their staff a salary and they use the extra money to buy down the rate. Regardless of the reason we still need to make sure the product we recommend to our clients fits their needs and plans for the future. And if you have any questions, please contact you local Dominion Lending Centres mortgage specialist.

LEN LANE
Dominion Lending Centres – Accredited Mortgage Professional

13 Jun

A FRESH START-OUR HOUSE MAGAZINE SPRING 2017

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A FRESH START-OUR HOUSE MAGAZINE SPRING 2017

The following is from the Spring issue of Dominion Lending Centres’ Our House Magazine.

Cara Brookins built a new home for her family from the ground up

A house is often considered more than just a place to live. It’s a place of memories, stability and safety.
No one understands this sentiment more than Cara Brookins. The Arkansas mother of four has recently garnered a lot of international attention for her story. Brookins, who had no experience and little know-how, built her five-bedroom house with little more than a small loan and YouTube videos. It’s a considerable feat for sure, but it’s what got her to that point and what she’s learned since that makes her story even more intriguing. Brookins had been involved in a couple of bad relationships, including being terrorized one of her ex-husbands for a decade. Her last husband appeared to offer protection, but he too became physically violent and the pair divorced. It was 2007 and Brookins, who worked a good job as a computer programmer and analyst, admits that she and her family were destroyed emotionally and financially.

Building a foundation

Instead of buying a small home or an apartment in her town of Bryant, a suburb of Little Rock, she got the idea to build the home she wanted—herself.
“At the time, it seemed like obviously what anybody in my position, who had been through what I had, would do,” she told Our House magazine. “In retrospect, I don’t think that’s what everybody would do. I felt this desperation that I had to do something quick to make [my children] feel more powerful and in control of their lives and give them some courage before they went out into the world. This was an opportunity to do something that would give us the house we needed in the end, but that would also give us some sort of inner strength and family strength.”
Brookins researched the local building codes, drew up plans and headed straight to the bank for a loan. She got turned down numerous times until a bank finally gave her what she wanted. Brookins was approved for nine-month, $130,000 construction loan. So, in December of 2007, as the cold Midwest winter set in, she bought an acre plot of land and started to build. That meant laying down the concrete foundation, installing plumbing and getting electricity to the building. With her older teenaged children, aged 17 and 15, by her side to help, Brookins went to her day job in the mornings and worked on the house in the evenings.
“I knew we could build a house. I absolutely knew we could figure out a way to put this together,” says Brookins, noting her days were often 19 hours long. “Once we started, I doubted it many times.” But Brookins and her young family persevered, finishing the 3,500-square-foot house in the nine-month timeline, getting all the occupancy permits and moving in by 2009. She said she really had no choice. “I knew once I spent all that money, there was no way out, but it also felt good,” says Brookins, adding that when there is that much pressure, it’s amazing what people can do.
Moving in, however, wasn’t a cause for celebration. Instead, she described it as a feeling of absolute emotional and physical exhaustion. Adding to it, the day the family moved in, Brookins’ mother had a blood clot and tragically died. It ultimately took months to settle in to the home and appreciate what she and her family had actually accomplished.

Sharing her experience

It also took years before Brookins told her story. Rather than boast about her accomplishment, she said she hid it from people out of embarrassment. She explains she was ashamed of the decisions she had made, which put her family in a situation where she felt no choice but to build a house on her own. An avid writer in her spare time, a few years later Brookins opened up about her experiences to an author at a writer’s convention. She was encouraged to share her story with the world. So she did, writing her memoir, Rise: How a House Built a Family. The book was released in January 2017. When Brookins decided to put pen to paper, she wanted to include her entire story, warts and all. “To really own my history, it took six years and several different versions of this book to do that.” Brookins says she never imagined people would be interested in her story, but it turns out she was wrong. She has now parlayed her experience into motivational speaking, more book writing and even a potential television show.

Finding sanctuary

Now nearly 10 years since she hatched a plan to build a house with her own two hands, Brookins, 45, still lives in her home. Her favourite room is the library, which is her quiet sanctuary. Her eldest daughter and son have moved out and are embarking on careers of their own. Her daughter runs a successful business and helps mentor young entrepreneurs. Their success is something the proud mother never would have thought possible had she not brought them along in building a house. Brookins has no intention of building another house, except perhaps helping her own children if they ask. It was never her goal to be a contractor. When she shares her story with people, she said the point isn’t the house, but rather that anyone can follow their dreams.

JEREMY DEUTSCH

9 Jun

GO LONG OR SHORT WITH YOUR RATE

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GO LONG OR SHORT WITH YOUR RATE

With all the news about interest rates rising do you go long or short with your rate when you set up your mortgage?

After discussing your current life situation and answering some key questions with your Dominion Lending Centres mortgage broker you can make some decisions and set your mortgage rate and term to best fit your needs. There are many interest rate terms to choose from (1, 2, 3, 4, 5, 7, 10 year fixed and 3 and 5 year variable). If you are looking to lock in to a short or long term fixed rate, consider this:

A long-term mortgage makes sense if:

• If rates were on the rise and you could not take the hit. A long term rate gives you peace of mind.
• You don’t have a nest egg of savings or investments to fall back on
• You have little equity or net worth
• Your income could change based on a growing family or retirement for example

A short-term mortgage may be the way to go if:

• You expect to pay off large chunks of your mortgage or sell your home within the next three years
• You have a short remaining amortization (e.g. 5-6 years or less)
• Your credit is impaired and you need alternative lending till you repair your credit so you can qualify at a better rate in one year.
• You need to refinance in coming years to access your equity for education, investment purposes, etc
• You believe rates won’t rise soon and you have a short-term rate where you can make higher-than-required payments to maximize the reduction of your mortgage

With two year rates in the low two per cent, five-year fixed rates under three per cent and 10 year terms under four per cent there is enough of a spread that some borrowers can decide easily to go long or short with your rate. If you want flexibility go short. If you have little equity and want to play it safe maybe the long term rate for 5,7 or 10 years is for you. As rates shift upwards and the spread between the five and 10 year shortens you have to consider if a difference of .5 per cent in a rate may be so insignificant that locking in to a long term rate may make sense for some, while others will take the risk and continue to play the short game. We have seen the spread between the short and long term rates become slim which creates the opportunity for discussion. These are decisions you can only make once you run the numbers with your DLC mortgage broker.

Maybe it is time to add a call to your mortgage broker to review your mortgage plan.

PAULINE TONKIN
Dominion Lending Centres – Accredited Mortgage Professional