11 Dec

ARE CANADIANS SAVING ENOUGH FOR RETIREMENT?

General

Posted by: Mike Hattim

Many Canadians think of retirement as a time filled with vacations, getaways to the cottage and spending more time on hobbies and interests. However, there are many other factors to consider when thinking about retirement savings. More and more Canadians are forgetting about some key obstacles that may change their perspective on what they actually need to save in order to retire comfortably.

Life Expectancy

Canadians are underestimating their life expectancy. Along with many societal advancements, health care technology has been one of the most improved areas in recent years. As a result, people are more aware of their health conditions, taking better care of themselves and thus, seniors are living longer.

According to Statistics Canada, Canadian males have an average life expectancy of 79 and females an average of 83. In 2000, the average life expectancy for males was 77 and females 82. On average, there is an increase of about 2-3 years on the average life expectancy of Canadian male and female every decade.

Knowing this, seniors now have to save more for their retirement than their predecessors. 4 in 10 Canadians age 55+ say there is a serious risk that they will outlive their retirement savings. While an additional 40% will still be in debt after the age of 65, according to The Vanier Institute for the Family.

The Rise of Long Term Care Cost

According to benefitscanada.com, Baby Boomers currently account for 33% of the population and 14% of Canadians are over the age of 65. Based on today’s demographics and trends, by the year 2036, 25% of the population will be over the age of 65. And according to Statistics Canada, in 2036, one in ten Canadians will require long-term care by the age of 55, three in ten Canadians by the age of 65 and five in ten by the age of 75.

Seniors requiring long-term care will incline in the next couple decades, and with that, the cost of long-term care will also be on a steady climb. Based on inflation for health care services reported by Statistics Canada, the inflation rate of long-term care costs per year since 2010 is an average of 3% per annum.

Young Adults living in the Parental Home

Is your 20-29 year old still living at home? According to the 2011 Census Report, 42.3% of over 4 million young adults between the ages of 20-29 either never left the parental home or they returned home after living elsewhere. More and more young adults are still living with their parents as a source of emotional or financial support. Some of the reasons include cultural preferences, cost of housing, aspirations for higher education or the struggles of unemployment.

These and many other factors can help you determine how much you need to save in order to live a comfortable retirement life. It is also important to understand your options when it comes to financial security. Seniors who are at least 55 years of age, and who own a home, are eligible for a reverse mortgage.

With a reverse mortgage, you can access up to 55% of the value of your home, while maintaining the ownership, never having to move or sell. There are no payments required and you can receive your tax-free cash in monthly installments, in a lump sum or a combination of both. The best part is, the loan from the reverse mortgage does not have to be repaid until the borrower passes away or moves/sells their home. You can now live comfortably knowing that this is an option for you.

Contact Dominion Lending Centres to find out what you can access from your most secure investment, your home!

10 Dec

VENDOR TAKE-BACK MORTGAGE

General

Posted by: Mike Hattim

Growing in popularity over the past few years, the vendor take-back mortgage can help buyers to purchase and sellers to find qualified buyers – especially in a tough market.

What is a vendor take-back mortgage – or VTB?

When a seller offers to lend the buyer a portion of money towards the down payment – this is a vendor take-back mortgage. Essentially it is a second mortgage offered at lower than current market interest rates to the buyer from the seller to facilitate the sale. It is a legally binding secondary charge on title to the property. The seller then will collect payments from the buyer on that second mortgage and the mortgage is fully repaid by the buyer upon refinance of the property or sale of the property at a future date.

What are the benefits of a VTB?

To the seller, the VTB allows them to access buyers who don’t have sufficient down payment or, in some cases, a buyer who may have credit issues which impact their ability to get a mortgage through a traditional lender, such as a bank. This can also be a great marketing tool for sellers when property sales are slow, to help move the house more quickly. For sellers of investment properties, they may be able to defer capital gains on the sale if a portion of the proceeds are provided back to the buyer as a second mortgage. It is important to talk with your accountant before buying or selling an investment property to be clear on tax laws, etc.

For those buyers who may be struggling to buy, a VTB allows them to access more money for a down payment.

What do you need to qualify for a mortgage with a VTB?

If the buyer is able to qualify based on income and credit, the lenders (regardless if it is a bank, mortgage company or alternative “B” lender) will require a minimum of 10% down payment from the buyer in addition to the VTB funds. There are some private lenders, rent-to-own and others who will provide a VTB and first mortgage financing – but at higher interest rates. So do your homework and talk with your mortgage professional at Dominion Lending Centres, realtor and lawyer, to ensure you are clear on all your options before proceeding with this kind of purchase financing strategy.

 
9 Dec

OBSTACLES FOR FIRST TIME HOME BUYERS

General

Posted by: Mike Hattim

With mortgage interest rates at historical lows, it is a wonderful time for first time home buyers to take the leap into the market. But there are some considerations and preparations to be made before starting the process.

A higher level of bank scrutiny has come into play now that the governance of CMHC has been shifted to the Office of the Superintendent of Financial Institutions (OSFI). The banks have been jumping through hoops to meet stricter lending policies and so must potential mortgage borrowers.

Mortgage rule changes that came into effect in July 2012 shortened the maximum allowable amortization on mortgages from 30-years down to 25-years. This has made it more difficult for buyers to meet debt-servicing requirements of lenders due to the higher monthly payments of the shorter repayment structure.

These two components of the lending landscape have put First Time Buyers in the hot seat. Most young people are newer to both the employment game and the credit world and have had limited time to build up their own savings for the down payment.

Canadian mortgage insurers (CMHC and Genworth) have minimum credit requirements of two years’ history on at least two credit accounts with a good repayment record. While potential borrowers may think it responsible not to overextend themselves with credit, they can be negatively affected by “under extending”. Paying on time on at least two accounts, such as a credit card or loan, demonstrates credit responsibility because these types of accounts report to the credit bureaus, a third party, and demonstrate a borrower’s credit responsibility.

Avoiding credit means there is no third party record of how credit is handled, leaving financial institutions lacking the tools to assess how a potential borrower will handle repayment of such a large loan. While it’s not advisable for young people to apply for credit everywhere, it is a good idea to establish two different credit accounts as soon as possible to create a strong credit history.

Because many first time home buyers are young people with limited employment history, there is a very good chance they have not saved up the minimum 5% down payment yet. Direct relatives, such as parents, can “gift” the down payment to their adult child to help them buy the home. There must be no requirement for re-payment and they should have no vested interest in the property being bought.

Keep in mind though that if the first time home buyer has limited credit and their down payment is being gifted, they are really not bringing much to the equation as far as their own personal risk, so many lenders are requiring co-applicants to bring some strength to the deal. If there is the potential for a purchase in the near future, it may be a good idea for the parents to put the gifted funds into their child’s personal bank account. As long as the money is in their name for at least 90-days, those funds are now considered their own and no longer gifted.

We here at Dominion Lending Centres are always available to help you – contact us today!

 
9 Dec

OBSTACLES FOR FIRST TIME HOME BUYERS

General

Posted by: Mike Hattim

With mortgage interest rates at historical lows, it is a wonderful time for first time home buyers to take the leap into the market. But there are some considerations and preparations to be made before starting the process.

A higher level of bank scrutiny has come into play now that the governance of CMHC has been shifted to the Office of the Superintendent of Financial Institutions (OSFI). The banks have been jumping through hoops to meet stricter lending policies and so must potential mortgage borrowers.

Mortgage rule changes that came into effect in July 2012 shortened the maximum allowable amortization on mortgages from 30-years down to 25-years. This has made it more difficult for buyers to meet debt-servicing requirements of lenders due to the higher monthly payments of the shorter repayment structure.

These two components of the lending landscape have put First Time Buyers in the hot seat. Most young people are newer to both the employment game and the credit world and have had limited time to build up their own savings for the down payment.

Canadian mortgage insurers (CMHC and Genworth) have minimum credit requirements of two years’ history on at least two credit accounts with a good repayment record. While potential borrowers may think it responsible not to overextend themselves with credit, they can be negatively affected by “under extending”. Paying on time on at least two accounts, such as a credit card or loan, demonstrates credit responsibility because these types of accounts report to the credit bureaus, a third party, and demonstrate a borrower’s credit responsibility.

Avoiding credit means there is no third party record of how credit is handled, leaving financial institutions lacking the tools to assess how a potential borrower will handle repayment of such a large loan. While it’s not advisable for young people to apply for credit everywhere, it is a good idea to establish two different credit accounts as soon as possible to create a strong credit history.

Because many first time home buyers are young people with limited employment history, there is a very good chance they have not saved up the minimum 5% down payment yet. Direct relatives, such as parents, can “gift” the down payment to their adult child to help them buy the home. There must be no requirement for re-payment and they should have no vested interest in the property being bought.

Keep in mind though that if the first time home buyer has limited credit and their down payment is being gifted, they are really not bringing much to the equation as far as their own personal risk, so many lenders are requiring co-applicants to bring some strength to the deal. If there is the potential for a purchase in the near future, it may be a good idea for the parents to put the gifted funds into their child’s personal bank account. As long as the money is in their name for at least 90-days, those funds are now considered their own and no longer gifted.

We here at Dominion Lending Centres are always available to help you – contact us today!

 
3 Dec

A BROKER’S LIFE – WHAT YOU THINK I DO AND WHAT I REALLY DO!

General

Posted by: Mike Hattim

The primary purpose for producing this piece was to try and demystify the job of a Mortgage Broker. By now everybody that has a mortgage has heard about Mortgage Brokers. Whether they have decided to use the services of one is a completely different topic altogether. Having said that, the market share of borrowers ‘using their banks’ still swings in their favour at a staggering 70%. I’m excited to be part of the push for equal or greater market share…but let’s get back to the topic at hand.

This idea came to me while I was speaking to a colleague of mine about a recent file she was working on. It was a difficult one with multiple layers and barriers to mitigate before a lender would accept it. In the end, she got the ‘file complete’ status that we as Brokers all seek. At the end of the process the client was very grateful, but admittedly said that he was really unsure what she as a Mortgage Broker really does. This is where the idea was born.

WHAT DO YOU THINK I DO?

Here’s what a quick Facebook poll unveiled after posing this question: In my quest to write fun and sometimes ‘different’ mortgage content for my blog, I want to ask my NON-mortgage broker friends on Facebook a simple question. What do you think I do? Everybody has a different opinion of what Brokers really do. I knew there would be some fun jabs, but here is what was sourced.

  • You lay with your feet up on the couch watching sports all day…answering the phone when it rings.
  • You sit around, drink coffee, wait for the files to roll in then hit the pub for afternoon drinks…
  • Laundry, cleaning, cooking, napping
  • Match potential homebuyers with the mortgage product that best fits their needs. And you do this by knowing what your customer’s wants/needs are and being aware of what programs are available and which company offers them.
  • A fellow broker replied with an image, which I felt was very appropriate. It was the Dos Equis XXX actor with a caption that read “I don’t always make it rain, but when I do, it’s usually rolls of quarters.” Some friends think I sell cash.
  • Broker on Wall Street juggling multiple phones on-the-go!

Further to the crowd-based outsourcing, I also found another image online that made me chuckle and thought it was appropriate for this piece as well. I summarized the image into 4 points below. As individuals, we all have our own sphere, people that we look up to and depend on, whether it’s for advice or friendship. All of those individuals have opinions. And the more I thought about the graphic I found, the more it made sense as I’ve had these very conversations with these people in my life as to what I do.

  • My friends think all I do is go from one party to the next, trying to drum up business.
  • My mom still thinks I work on cases (no, I’m not a lawyer), sitting in a boardroom having cerebral conversations with other high level executives.
  • The general public thinks I am a slippery car salesman, wearing 70s clothes and a pinky ring while dangling a cigar from my month.
  • My clients (might) think that all I do each day is sit back and calculate my future commission cheques.

WHAT I REALLY DO!

Mortgage Brokering is the career path I chose six years ago. At the time I made the decision to pursue Brokering I thought it was a job. I know now that is an incorrect statement, it’s a lifestyle that I live. It’s not a regular 9AM-5PM-Monday-to-Friday-with-5-weeks-of-vacation-and-employer-double-up-RRSP-contributions-a-year-job. It’s much more complex than that. For starters, I have to be ‘on’ and engaging all the time. I don’t power down because the moment I do I could miss an opportunity and opportunities don’t always come around in the same shape. I have a duty to my next client to be:

  • up-to-date on all the current real estate market data,
  • changing lender interest rates (and why),
  • economic influencers that trigger the market,
  • constantly changing lender guidelines,
  • know how to structure a file when it lands on my desk, quickly and efficiently.

RIGHT NOW I’M FAIRLY CERTAIN THAT ALL MY BROKER FRIENDS ARE NODDING THEIR HEADS AGREEING WITH ME.

Creating an exceptional experience for that one client could mean one or more referrals from that very client in the future. A referral is the ultimate testimonial. Each client is treated like they are the only one I am working with at that present time.

As Mortgage Brokers, we all operate our businesses differently. I have chosen a business model where most of my business flows from professional referral sources; accountants, financial planners, lawyers, realtors, bank representatives, property managers, stock brokers, developers, professional recruiters, home insurance providers, commercial brokers and so on. These professionals are key to my success as I have positioned myself as a resource. One that can assist with every aspect of a mortgage transaction and beyond. I am able to connect people.  They are all people I share a common thread with – we KNOW, LIKE and TRUST one another. This is the basis for a natural flow of referrals. You’re likely asking yourself, “why am I bringing this up”? The answer is because this is what ‘I DO.’ I get to know the people I work with on a personal level to form a friendship. If there is no friendship, just personal monetary gain, then there will not be a long lasting business relationship. I have seen a couple of referral sources come and go over the years, where personal gain was the only thing top of mind for the other party. Needless to say, we are not working together anymore. The act of getting to know someone is quite simple, just ask questions then sit back and listen. Take that information and store it – I guarantee you it will become very handy in the future.

An exceptional Mortgage Broker is also an exceptional story teller. All my clients have their own unique individual story and it’s up to me to tell that story to the audience – the potential lender we are pursuing. The ultimate goal throughout the application process is simple, minimize the stress level of the borrower and complete the task quickly with comprehensive updates along the way. This is done by structuring the file accordingly, providing detail. I must admit I’ve got the process dialed. It’s so good that I have quite honestly surprised myself a few times on a few difficult files. I put a lot of pressure on myself to tell a seamless story.

Providing an abundance of detail helps to break down the barriers of entry, this being access to the lenders financing. My goal at the start of the application process is to receive an approval without receiving a call or an email from the lender’s underwriter. When I accomplish that, then I have done my job successfully. It’s quite simply the easiest part of the process. All I have to do is answer questions about the property, income source, down payment source and credit history – just 4 things!

All lenders have a different appetite for risk – knowing how to mitigate and answer those risk questions is all part of managing this business. Once this is all tabulated then the financing is guaranteed, right? One would assume (never assume…you know the saying) that ‘a mortgage is a mortgage,’ WRONG! Every mortgage file is different. In my short 6 year tenure, I’ve never seen one file that is exactly the same as a previous one. There are definitely elements of one that might be similar, but this business does not have a template. The round hole, square peg scenario happens a lot in this business. It’s up to me to shave down the edges of the square peg to squeeze it into the round hole. There are definitely ones that come together easier than others, but there are also files that consume my day, even multiple days. Again, I can sense my Broker friends nodding their heads.

The most important role ‘I do’ through the application process is to assume the position of an Educator. I entered this business knowing that I wanted to learn from my mistakes in the past. As a first time mortgage consumer, I had relied on my bank to advise me accordingly, to educate me and to help me make the right decision. Instead, I got what would work best for the bank’s shareholders. Knowing what I know now, I don’t think they did their job. I should have done my own research and asked the right questions. I learned the hard way. From day 1 (August 30, 2009), I vowed to provide as much information to my clients as needed to help them make an informed and educated decision. One that would benefit them and their family, not the lender. Knowing that my clients are advised correctly provides me the confidence in knowing they will instruct me on the path they would like to follow.

Processing mortgage files is just a half of what I do. Of course the other side is marketing. How does the saying go? – ‘you gotta spend money to make money.’ To generate business or potential clients, I have to get out and meet with as many people as possible and let them know what I do. I try to attend as many networking events as I possibly can. Heck, I even attend industry functions and conferences, as you never know when a Broker-to-Broker conversation will lead to placing the ‘next’ file or an unforeseen opportunity. The glamorous life of a broker also involves endless coffee meetings and luncheons, along with relentless periods of time spent on the phone with clients and lenders. I am constantly building the fortress around me. I have made a conscious effort to always utilize the same suppliers; lender(s), lawyer, appraiser. By maintaining focus on a select few it can sometimes pay in spades. At times this business presents strict or short timelines where having a solid relationship is key. If I need to place a rush on a file or ask for an exception or need some legal advice I know I have someone that I can rely on. If not, these calls usually end with ‘sorry I’m too busy..’ or ‘who is this..’ or a flat out ‘no.’ It’s not what you know, but who you know in this small world of Brokering. Building solid, reliable relationships is vital for survival in this business.

A Broker’s Life - What You Think I Do and What I Really Do!

SO, WHAT DO I DO AS A MORTGAGE BROKER?

I strive to build long lasting relationships with my referral partners, clients and providers. I structure intricate applications by telling detailed stories about one’s past, present and future. I am dedicated to providing the best options to fit one’s current lifestyle and future long term goals through education. I share ideas and experiences about my mortgage practice, what has worked and what has not. I am continuously planting seeds like a farmer, never knowing when I will be called on. I work for the client, not the lender. What do I really do?

I am a connector! I connect my clients with the correct financing as well as connecting them with other real estate related professionals…and I’m looking forward to working with you!

 
2 Dec

YOU’RE APPROVED, NOW WHAT? TOP 10 TIPS FOR A SMOOTH CLOSING

General

Posted by: Mike Hattim

While you may have a mortgage approval, your mortgage doesn’t actually fund until the day you close on your new home. During that period of time, keep the following tips in mind to ensure a smooth closing.

1. Be careful about taking on additional credit, i.e., new credit cards or “Don’t pay for one year” incentives.

2. Keep your bills up to date including any mortgages you may have.

3. Keep your down payment for your down payment and plan for your closing costs, such as land transfer tax, appraisal fees, legal fees, and property tax adjustments, so you won’t be caught by surprise.

4. Keep an eye on your investments, especially if you are using them as your down payment.

5. Try not to pack any important documents relating to your mortgage/home purchase.

6. If at all possible, just before funding is not a good time to quit your job, move to part time or reduce your income.

7. Tell your mortgage agent if there has been a decision to change the closing date.

8. Ensure all paperwork is in a minimum of 10 days prior to closing.

9. Get fire insurance in place and investigate life insurance options.

10. Respond promptly to all those involved in your home and mortgage transaction.

Happy Closing!

1 Dec

PURCHASE PLUS IMPROVEMENT PROGRAM

General

Posted by: Mike Hattim

THIS ONE TIME ADVANCE WILL ALLOW YOU TO MAKE THE CHANGES YOU NEED TO MAKE YOUR HOME PERFECT!

Have you been trying to find that almost perfect home? All homes have their flaws and imperfections. Some consumers can deal with these deficiencies in a home, but for others this can be a deal breaker.

Maybe the kitchen needs an update, the bathroom is in desperate need of a makeover or maybe the home just needs a fresh coat of paint with the enhancement of hardwood floors, the quickest, cost effective and most powerful impact on a home!

The purchase plus improvement product is for consumers looking to purchase a home that has great potential but needs a little TLC. With the purchase plus improvement program you can make those needed improvements on your home immediately after taking possession and you can have these improvement costs rolled into your home loan for one easy payment. All of these projects can increase functionality, beauty and potentially add value to your dream home.

As a rule with this home improvement financing option, your improvement maximum is 10% of the “as improved value” of the home to a maximum of $40,000 of improvements. With as little as 5% down payment, this product can work to get you into a home that is near perfect!

For example: if the purchase price of the home is $350,000 and the “as improved value” or post renovations of the home is valued at $390,000 you can qualify for 10% of the $390,000. Which means you can borrow $39,000 to cover your renovation expenses.

Once you have found a home, you will have to provide quotes from a licensed contractor including all costs associated with your renovations. Your mortgage planner will need to submit these quotes along with your purchase approval to the lender.

The lender may require an appraisal of the home with an as-is and as-complete value. However, if you are putting less than 20% down payment on the purchase, often only a final inspection is required to confirm the work on the quotes has, in fact, been done.

Once closing day has arrived, you will be required to pay your down payment, and at this point mortgage funds will be advanced. On the day you take possession of your home you can start working on the renovations. Make note that the renovations will have to be fully completed and inspected before the real estate lawyer can advance you the funds that the lender has been instructed to hold back. In other words, you will have to find some way to pay for the contractor to do the work, you will get reimbursed the funds once it has been inspected and confirmed that the work is completed. At no point will you be given the money prior to work being completed.

Depending on the lender, there are many variations to this mortgage product so it would be a good idea to speak with a mortgage professional at Dominion Lending Centres.

If you think that you can customize your home with this mortgage product, give me a call, I would love to help you through your home buying process and help you achieve your dream of homeownership.