10 Nov

ASIDE FROM BANKS, WHAT OTHER OPTIONS ARE THERE FOR MY MORTGAGE?

General

Posted by: Mike Hattim

When purchasing a property, it can be an overwhelming experience. Especially with the current real estate market when you need to make fast decisions and you need to get your questions answered quickly. Many think that their only option is talking to their bank where they do their daily banking to get their mortgage. The question is you’re your ever considered working with a Mortgage Expert? A Mortgage Broker?

There are many reasons why you can benefit from using a Mortgage Expert. A mortgage consumer survey conducted in 2015 by CMHC (http://www.cmhc-schl.gc.ca/en/hoficlincl/moloin/sure/fihosu/upload/2015-First-Time-Homebuyers-Survey.pdf) found in that 55% of first-time buyers reported arranging their mortgage through a mortgage broker.

The survey also reported that overall, recent buyers were satisfied with their experience using a broker (79%) and almost half (47%) “totally agreed” they were satisfied and 32% “somewhat agreed” they were satisfied.

The following are some reasons why you should consider working with a Mortgage Expert:

  • Mortgages are our area of expertise

When you need a mortgage or are refinancing your existing one you will have questions such as. Where do I start? Which lender is the best fit for my needs? Which lender can offer me the best value? What are the real differences between mortgages? Which terms and features are the best for my unique needs?

Mortgage Experts have the answers. They work and have experience working with up to 200 plus lenders including big banks, credit unions and other lenders that only work with brokers. They understand the benefits of the various rate options, are familiar with the different types of mortgages and find the best mortgage for your unique needs. In comparison, if you approach your bank for a mortgage, they can only offer you a limited choice of their own products.

  • Mortgage Experts find solutions that fit your unique needs

They will help you navigate the confusing and overwhelming road of the different rate types, mortgage options and terms while helping you find the best solution for your current circumstance and your long term plans. Mortgage Experts take the time to understand your financial needs and situation. In addition, to all of this, they help you avoid unnecessary risks and can save you money.

  • Help you save time and money

Buying a house is time, energy and emotionally consuming. Finding the right home and finding the best mortgage that is right for you can take hours, days and even weeks if you were to do it yourself. Mortgage Experts do most of the leg work for you. They will research mortgage options, process your application, obtain the required documentation requirements and negotiate on your behalf. This means less disruption to your daily life and more time to focus on your home research and enjoy the process of homeownership.

  • Multiple options for every client

Since each bank and lender have their unique guideline and programs. Mortgage Experts are able to assist clients with different situations. They are able to help if you don’t have sufficient funds for the down payment or/and closing costs. If you are self-employed or own your own business making it difficult to verify their income or if you have credit blemishes.

  • The services of a Mortgage Expert are free

Yes, Mortgage Experts are paid their fees by the lender, not by the person who is using the mortgage broker’s services. There is no cost for the client.

Before you start shopping for your home, contact a Dominion Lending Centres Mortgage Expert to assist you in your road to homeownership.

 
9 Nov

THINGS TO CONSIDER WHEN DECIDING TO BUY A FORECLOSURE

General

Posted by: Mike Hattim

When bad things happen to good people sometimes the reality is they just can’t keep up with their mortgage payments. While Canadian mortgage defaults are amongst the lowest in the world at just 0.31%, foreclosure still happens.

In BC, if a lender forecloses on a homeowner they are required to give the borrower a 6-month Redemption Period – time granted to bring their mortgage up to date or find another lender. If at the end of this period the borrower is unsuccessful the foreclosing lender can ask for a Court-Ordered Sale. Once granted the property will be appraised and then listed by a realtor for sale at a price that will get the bank their money back in a reasonable amount of time. This usually translates into a lower asking price than if the seller that could hold out for the best the market has to offer.

If you have found a property in foreclosure listed at a great price there are a few things to consider before submitting an offer.

First, as soon as an offer is made and accepted a court date is set for about two weeks after. At court other parties can attend and make their offers and it can turn into a bidding war with the Court approving what they feel is the best offer.

Another point to consider is that you have to come to court with basically a condition-free offer. This means if you need financing to buy it you can only have one condition left on the mortgage approval – the Court accepting the offer. If you have less than 20% down and need mortgage insurance (CMHC) some lenders won’t take it to the insurer before your offer is accepted so your options may be limited somewhat. You have a much stronger bid if you have more than 20% to put down.

The rest of the financing conditions are pretty much exactly what to expect but again, all conditions need to be satisfied before presenting an offer. This means the cost of an appraisal and house inspection are upfront costs that may be a waste of money if you don’t get the property in the end.

Once the Court approves your offer the completion date is set usually for two weeks after that so you had also better be prepared for a hasty move if that proves necessary.

The last thing to note is that once the sale completes at lower than true market value you have now effectively established a new value for your place. Over the next 6-months or more likely a year an appraisal on this property will have its own sale price factored into its appraised value so if flipping is your game you could have a longer than normal investment period before seeing it’s true market value reflected.

Buying a foreclosure is a step up in the complexity of buying real estate so always seek the professional advice of a Dominion Lending Centres agent before jumping in.

 
7 Nov

3 STEPS TO KEEP YOUR CREDIT IN CHECK

General

Posted by: Mike Hattim

If you have have overextended yourself with credit card debt, or have consolidated all of your consumer debt into your mortgage, or are at the point where you just want to cancel your credit cards, we have the 3 steps for you to follow to get your credit back in check.

  1. DO NOT CANCEL ALL YOUR CARDS

It may seem tempting, but money lenders want to see that you can handle your credit responsibly. Instead keep your 2 oldest credit cards (trade lines). The longer you have had your trade line, the better it is for your credit.

  1. FOLLOW THE 2/2/2 RULE

The 2/2/2 rule means that money lenders what to see 2 trade lines, for 2 years with a minimum of a $2,000 limit. These cards need to be paid on time each month, and they also need to stay within that $2,000 limit!

  1. USE WITH CARE-REGULARLY

The 2 trade lines you keep need to be actively in use. If you are concerned about consumer debt, then have a monthly bill such as your cell phone, cable, or even Netflix charge billed to your credit card. Then have that credit card paid automatically each month from your bank account.

Follow these steps to keep your credit in check and growing.  When it is time to renew or revamp your mortgage, or purchase a new home, your credit won’t hold you back—And you can bet Dominion Lending Centres is here to help you get the sharpest rate and the best product.

 
4 Nov

WHAT IS YOUR NUMBER? YOUR MAXIMUM MORTGAGE NUMBER

General

Posted by: Mike Hattim

What is the maximum mortgage amount one now qualifies for with the rules that came into effect on October 17th?

Short answer: LESS. A minimum of 20% less, in fact.

Before October 17th, the lenders calculated the maximum mortgage amount based on the contract rate of 2.49%, but now it is based on the Bank of Canada benchmark rate of 4.64%

Here are three random scenarios that I have created to outline borrowers’ qualifying power before and after the change. Note they are all based on  25-year amortization, the new qualifying interest rate (5-year Bank of Canada benchmark, currently 4.64%) as well as a GOOD credit score of 680 or greater. The first two are based on 5% down; the third is based on a 20% down payment, which does not require mortgage insurance.

Scenario #1 – young professional

Gross Household Income $75,000

Monthly Expenses $450 (car loan and  student loan)

Monthly Strata & Property Tax $484

Maximum Purchase Price Now $370,000 ($18,500 down payment)

Before Rule Change $435,000

Scenario #2 – young professional couple

Gross Household Income $140,000

Monthly Expenses $1,230 (car & personal loans, unsecured LOC, credit card)

Monthly Strata & Property Tax $584

Maximum Purchase Price Now $725,000 ($36,250 down payment)

Before Rule Change $840,000

Scenario #2 – established Gen-X with a family

Gross Household Income $180,000

Monthly Expenses $2,300 (car & personal loans, credit card)

Monthly Property Tax $417

Maximum Purchase Price $960,000 ($48,000 down payment required)

(Mortgage amounts over $999,999 are not eligible for default insurance. Therefore one would be required to apply a 20% down payment.)

This is just a quick and dirty summary of three simple scenarios. Now more than ever, we as mortgage consumers need to get pre-qualified before making any real estate-based decisions. The average cost to buy a single-family detached home in my area is $1,175,000, townhouses are approximately $535,000, followed by condos priced around $377,000.

My suggestion, and the first thing that one should do if you are looking to re-finance or purchase a new home, is to contact your trusted Dominion Lending Centres mortgage broker to find out exactly how much you qualify for.

Don’t get caught up in the emotional experience of buying a new home. Make sure you treat it like any other business decision: the numbers need to make sense first, then you need to figure which parts of your WANT and NEED list you can live with and live without.

For more details on changes to the mortgage rules, please read DLC’s “Chance of Space: New Mortgage Rules” guide by CLICKING HERE.

 
 
3 Nov

BANK OR MORTGAGE BROKER?

General

Posted by: Mike Hattim

Mortgages are like vehicles. A bank is similar to the brand, Ford or Toyota for example. How long you have a mortgage before it’s time to renew is like the model, a Fusion or Camry. The rate is similar to the car’s paint color, and the mortgage benefits such as prepayment privileges and portability are like the car’s benefits; 4-wheel drive, hatchback, four doors instead of two, etc.

A bank is like a sales person at a Ford or Toyota dealership. He or she know everything about every car on their lot; engine size, warranty, all available colors, and their fuel ratings. He or she can match any car to your needs and lifestyle, as long as it’s sold at their lot.

But what if they don’t have the most fuel efficient car? What if you don’t like the design or you need four doors and a trunk and all they have is two doors and a hatchback? Are you still going to buy from that dealership just because you went there first? No, you’re going down the street to check out the Chevrolet, maybe even BMW, Mazda, or the new Chrysler dealership. That sales person doesn’t want you to go buy from another lot down the street, but you are buying to satisfy your needs, not the dealership’s needs of selling their own cars.

Now imagine a dealership that sold every single make and model of vehicle. Imagine you could choose one of their sales people, and have them work only for you. They know just as much or even more about every make and model, they do all the research for you and tell you what you need to look for, they ask you the important questions; they have your best interest. That is a mortgage broker, your own personal expert.

Now, you may not need a personal expert to buy a car. But what about mortgages? Is a 0.10% lower interest rate a lot? Or will a 20% prepayment privilege instead of 10% be more advantageous? Can you switch lenders and move your mortgage? $15,000 or $5,000 penalty? How is it calculated? Fixed or variable? Is a collateral charge good or bad? 2-year term or 5-year? Big bank or monoline lender? How about credit unions? The list goes on.

So, a bank or Dominion Lending Centres mortgage broker? Put it this way; would you buy from the first dealership you visit or hire an expert?

 
2 Nov

IS BEING MORTGAGE FREE MY PLAN FOR RETIREMENT?

General

Posted by: Mike Hattim

Most people believe that being mortgage free is their plan for retirement. That means paying off your mortgage as fast as possible becomes the priority and having other forms of investments are considered only after your property is paid off.

It is important to decide what option will give you the balanced diversification and protect you from the real estate market and economic fluctuations.

One strategy to be mortgage free is that you will have minimal property expenses when you retire and have 100% of the value of your home in equity. You will then have extra funds when you decide to downsize to a smaller home. But by putting all of your eggs in one basket you could be limiting the ability to use other investment options that could give you a higher return on investment and would help you achieve your retirement goals faster.

By focusing on making extra payments towards your mortgage and making lump sum payments on your mortgage or increasing your payments regularly, you would shorten the life of your mortgage, yet you are not investing into your RRSP’s.

Here is the best of both worlds: By investing in your RRSP’s, you pay less tax and get a refund. With that money you could make a lump sum payment on your mortgage every year.

Another option would be to put the equity in your home to work for you by using a HELOC (a home equity line of credit). This will give you access to your equity whenever you need it and would be a perfect investment vehicle.

Having a HELOC separate from your actual mortgage gives you the flexibility to use it for investment purposes. This way the interest you pay on funds that are drawn from the home equity line of credit are tax deductible.

Here are some investment ideas: Use the funds from the HELOC to purchase an investment property and with the rental income you could cover the mortgage payments and property costs. The rental property would then pay for itself and you have vehicle to help with your retirement goal.

Another idea is doing the Smith Manoeuvre. This means using the HELOC for short and long term investments. If you do short-term, high return investments that when cashed, help you pay off the line of credit. Any extra money you have made will allow you to make a lump sum payment on your original mortgage.

Many Canadians think of retirement as time filled with traveling, spending more time on hobbies and interest. However, in order to be able to do that, there are a lot of factors that need to be taken into consideration when planning for your retirement. More Canadians are thinking of their current needs and not as much about retirement until the later years.

There has been an increase in life expectancy as health care technology is advancing. Canadians are more aware about their health and are taking better care of themselves, which means seniors are living longer. According to Statistics Canada, males have an average life expectancy of 79 and females of 83. On average, there is an increase of 2-3 years of life expectancy for males and females every decade.

As a result, 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. An additional 40% of seniors will still be in debt after the age of 65, according to The Vanier Institute of the Family.

The cost of long-term care is significant. Benefitscanada.com, reports that baby boomers currently account for 33% of the population and 14% are over the age of 65. Based on today’s trends and demographics, by 2036, 25% of the population will be over the age of 65. In 2036, Statistics Canada reported that one in ten Canadians will require long term care by the age of 55, three in ten by the age of 65 and five in ten by the age of 75.

Since life expectancy has increased, long term care costs need to be taken into consideration. Pensions are low and most people are not saving enough for retirement. It is important to have a retirement strategy that works for you by exploring different ways that work with your lifestyle and goals. A comprehensive strategy can be put in place by working with your Dominion Lending Centres Mortgage Professional, Financial Adviser and Accountant.