15 Jun

5 REASONS TO CONSIDER BUYING A CONDOMINIUM APARTMENT OR TOWN HOME

General

Posted by: Mike Hattim

If you are thinking about purchasing a home in the near future, here are some reasons you may consider buying a condo apartment or town home. You should also be aware there are some cons as well.

Pros

They are relatively inexpensive. As your footprint is small and you share exterior walls with others, the cost for a condo is often far lower than owning a single-family dwelling.
No shoveling or painting. Most maintenance costs are covered in your monthly condo fees as are large repairs such as roofing and hallway carpeting.
Amenities. Often condos have a pool or gym which is included in your condo fees.
Security. for seniors and single women this is a big concern. Living in a building which a locked front door in addition to your own unit door is a big plus.
A sense of community. Often condo boards have an annual picnic or event where you can meet your neighbours. This helps to develop a sense of community.
Cons

Restrictions on pets. How you can paint your front door or what you can do to your balcony can see like restrictions on your lifestyle . Be aware of these restrictions by reading the condo documents in advance.
Maintenance may not be done when you would like for it to be done. Major projects may be delayed if the condo board has not allowed for large expenses and this may result in a large special assessment payment. Be sure to read over the section of your documents that covers the reserve fund.
Condo fees may go up higher than you can afford over the years. This is a particular concern to owners on fixed incomes.
Be sure to speak to your favourite Dominion Lending Centres mortgage professional before you go house hunting to get expert advice on how to proceed.

By David Cooke

13 Jun

99 YEAR MORTGAGES AND THE POWER OF AMORTIZATION

General

Posted by: Mike Hattim

Back in the late 80’s, the Japanese housing market came to a grinding halt. Homes were no longer affordable for your average Japanese consumer. The government came to the rescue with a novel idea: 99 year mortgages. You could buy a house, pay lower more affordable payments, your son or daughter would take over and pay the mortgage down and finally your grandchild at some time close to retirement age would finally pay off your mortgage.

Who would want to do this? This was a short term solution. In 2007, we had 40-year amortized mortgages which allowed a great number of people to buy homes who normally would have continued to rent. This created a housing boom, but it made the banks nervous and terms were cut back to 35 years, then 30 and finally back to where they were in 2005 at 25 years. While longer amortizations mean lower monthly payments, the flip side is that you end up paying a lot more interest over time.

Mortgage professionals use amortization as a tool to help their clients at various stages in their lives. Often we use the maximum 25 years to help people get into their first homes. The idea is to get them into home ownership regardless of the cost. Later when they renew we often suggest a shorter amortization if it’s possible.
For example, after paying down a mortgage for 5 years, a couple with a $300,000 mortgage renewing today would be offered a 20-year amortized mortgage with monthly payments of $1659. In 5 years the couple will have paid $40,356 in interest $59,214 in principal and have a balance of $240,785 left on the mortgage.
If the amortization was shortened to 17 years the payment would go up to $1,874.95, an increase of $215.95. but at the end of 5 years they would have paid $39,365 in interest, $73,131 in principal and have a balance of $226,868.11. In addition, they would now only have 12 years instead of 13 years on their mortgage.

Now, if they are at a stage in life where their twins are going to be going to university or if they need to build a granny suite for aging parents, they may need to lower monthly payments in order to pay for renovations. If they have 20% equity in their home, they could extend their amortization to 30 or even 35 years with some lenders.
Now their monthly payment drops to $1,260 with a 30 year amortization.
And it drops to $1,149 with a 35 year amortization.

Amortization is only one tool that your Dominion Lending Centres mortgage professional can use to save you interest, help you to pay off your mortgage quicker or to lower your mortgage payments. Be sure to call and ask them for help.

By David Cooke

12 Jun

WHO REALLY SETS INTEREST RATES?

General

Posted by: Mike Hattim

A recent article in the Huffington Post addressed the pricing strategy for the Big Six Banks, BMO, CIBC, National Bank, RBC, Scotia and TD and who really sets interest rates. RBC announcing a rate drop in January and the other banks soon followed. For consumers the banks are seen as leaders of the pack and everyone waits to see what else they will do. The reality is the bank rates were higher than the market for some time.

The Huffington article states “Canadians pay attention to the big guys, however, because they’re either too comfortable to make a change or simply not aware they’re being taken for a ride. The banks have a 90-per-cent stranglehold on the Canadian mortgage market and we’ve been slow to start paying attention to the alternative — often cheaper — options out there.”

The drop in rates was a measure to bring bank rates in line with the non-bank lenders who have already been offering lower pricing. The only difference is the banks have high market share of the business and more profit each year so they can afford to spend money on media and other forms of advertising. The media attention helps them to capture more business with a rate drop after a lag time of passing on higher rates to consumers. The informed consumer working with an independent mortgage broker will already know the market and what mortgage product is best for their needs.

However, interest rates are not the only consideration when choosing a mortgage. Each time you make a purchase, renew your mortgage or take equity out to renovate, invest or other reasons, it is always best to consult with your mortgage broker for a review.

One of the big factors is the cost to exit that mortgage before maturity. Life happens. There are costs to breaking the contract early in the event of sale, marital break-up, death or need to consolidate other debts. Bank penalties for early payout are higher than non-bank penalties by a factor of 4 times. By reviewing your needs with your Dominion Lending Centres mortgage broker, we can discuss all of the options available from lenders including bank and non-bank, to ensure you are making an informed decision.

By Pauline Tonkin

11 Jun

3 STEPS TO TAKE YOU FROM PRE-APPROVAL TO GETTING THE KEYS

General

Posted by: Mike Hattim

Picture this: You’ve finally been able to put away enough for a down-payment on your dream home. It’s taken you five years of diligent saving, but you did it! You have also been diligently working on improving your credit score and paying off debts and are at a place of financial stability. So, first of all, KUDOS TO YOU! Second…now what do you do? Here are the three steps that will take you from browsing new homes to getting the keys to your new place.

STEP 1: PRE-APPROVAL
This should actually be the step BEFORE house hunting. Visiting your mortgage broker to get pre-approved is the first step anyone looking to buy a home should do. When you meet with your broker for the first time they will:
• Have you fill out an application (or you might be able to fill out one online)
• Pull your credit
• Determine what your maximum purchase price will be.

Be aware that you will also be asked for additional information when you visit your broker to apply, including a letter of employment/pay stub, down payment verification, two years notice of assessment and/or T4’s, a void cheque, and a number of other potential documents.
Once you are pre-approved it’s house hunting time for you! The benefit of having this done BEFORE you start looking is that you can work with your realtor to find properties within that price range.
When you do find just the right home for you, it’s on to step two.

STEP 2: APPROVAL
If you were able to provide the bulk of the paperwork for your pre-approval, then it will be smooth sailing from here. You may have to supply a few pieces of updated information but otherwise, it’s up to the lender to do the hard work at this point.
Your application will be re-assessed, and the lender will take a look at the property you are purchasing. Once they confirm that it aligns with the guidelines they have laid out for your loan, then it is sent off to the mortgage default insurer for approval. At this point, make sure that you do not remove the financing condition until all the lender conditions are met.
Now that you have final sign-off and are waiting for the final conditions to be met, it’s on to step three.

STEP 3: FINAL STEPS
Your broker will notify you once the conditions have all been met, and the lender will send the paperwork over to the Lawyer’s office. The lawyer will take a few days to go through the mortgage and prepare it for your final sign off. When you go, you will be asked to present:
• Void Cheque
• Two forms of identification
• Balance of the down payment in the form of a bank draft

On the day of funding, the lender will send the funds to the lawyer who sends them to the seller’s lawyer who upon receiving the funds will give you the all clear.
All that’s left is to hand you the keys to your new home!
As one final step, keep asking questions at each stage of the mortgage process. You should check in with your Dominion Lending Centres mortgage broker if you have any questions along the way. They are happy to guide you through the process of not only getting a mortgage but also having a mortgage too!

By Geoff Lee

10 Jun

WHAT IS AN UNINSURABLE MORTGAGE?

General

Posted by: Mike Hattim

With the mortgage rule changes in recent years, lenders have had to make some adjustments to their rate offerings.

There are different tiers and rate pricing based on the following 3 categories:
1) Insured – a mortgage that is insured with mortgage default insurance through one of Canada’s mortgage insurers, CMHC, Genworth or Canada Guaranty. A mortgage insurance premium based on a percentage of the loan amount is added to and paid along with the mortgage
2) Insurable – a mortgage that may not need mortgage insurance (20% or more down payment) but would qualify under the mortgage insurers rules. The client doesn’t have to pay an insurance premium but the lender has the option to if they choose.
3) Uninsurable – a mortgage that does not meet mortgage insurer rules such as refinances or mortgages with an amortization longer than 25-years. No insurance premium required.

Insured mortgages are the safest type of mortgage loan for the banks and the most cost-effective way of lending mortgage money, so clients seeking or in need of an insured mortgage will get the best rate offering on the market.
Insured as well as Insurable mortgages can be bundled and sold as Mortgage Backed Securities (MBS) meaning banks can get that money back quickly so they can lend more out. While Insured mortgages get the best rates, Insurable mortgages are typically a close second.

If a mortgage is Uninsurable that means the banks have to lend their own money and have to commit to that loan for the full term at least. This makes it a more expensive loan for the bank, so they pass the cost on to the consumer as a premium on the rate – typically 10-20 basis-points.

While there are rumours that the Government may start to allow refinances and 30-year amortizations to be insured again, no formal announcements are expected in the next few months.
In the meantime, consumers looking to tap into the equity they’ve built (consolidation, investment, home renovations) or wanting to keep their payments as low as they can (30-year amortization) are paying the price.
If either a refinance or a longer amortization is something you are considering, it’s wise to have a free analysis of your mortgage done so you can make an informed decision. If you have any questions, contact a Dominion Lending Centres broker near you.

By Kristin Woolard

7 Jun

HOME BUYER TAX CREDIT

General

Posted by: Mike Hattim

When you purchase a home as a first time home buyer, you have a third benefit on top of the First Time Home Buyers’ Program and the Home Buyers Program- the Home Buyer Tax Credit.

The Home Buyer Tax Credit allows you to claim $5,000 for the purchase of a qualifying home in the year if the following are true:

you or your spouse or common-law partner purchased a qualifying home that is owner-occupied.
you did not live in another home owned by you or your spouse or common-law partner in the year you bought the home you are claiming or in any of the previous four years.
If these two points are true, you can make the $5,000 claim on line 369 of the tax return for the year you made the home purchase in. This $5,000 claim can help save up to $750 in potential taxes owing to the government.

For more information, click the following link or reach out to a Dominion Lending Centres mortgage professional near you.

https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/deductions-credits-expenses/line-369-home-buyers-amount.html

By Ryan Oake

6 Jun

Homeowner Tips 5 Ways to Stay Cool Without Air Conditioning

General

Posted by: Mike Hattim

1. When it’s cooler outside than inside, open your windows instead of using air conditioning. Use a window fan, blowing toward the outside, to pull cool air in through other windows and to push hot air out. When it’s hotter outside than inside, close your windows and draw window coverings against direct sunlight.

2. On hot days, delay heat-producing tasks, such as dishwashing, baking or doing laundry, until the cooler evening or early morning hours.

3. Caulk around window and door frames, use weather stripping on exterior doors, and have a professional seal gaps where air can travel between the attic and your living space.

4. Use energy-efficient lighting in your home. CFL and LED light bulbs operate cooler and cost less to use because most of their energy produces light instead of heat. Incandescent light bulbs, on the other hand, lose 90% of their energy as heat.

5. Leafy shade trees planted on the east and west sides of your home can improve comfort and decrease cooling needs by blocking heat and sunlight. You’ll still have the benefit of heat from the sun in the winter, after the leaves fall. Check with your local garden centre for recommendations.

6 Jun

WHICH MORTGAGE LENDER IS BEST FOR YOU?

General

Posted by: Mike Hattim

The following is a summary of the choices available for clients when looking at the four different types of lending groups.

So what exactly is a lender? By simple definition, a mortgage lender provides financing for a real estate purchase hence the word lend.

Which lender is best for you will all depend on who you are as a borrower, what your current situation is and what your situation will look like in the future.

Big Banks

Currently, mortgage brokers have access to TD Canada Trust and Scotiabank. Big banks are especially appealing to first-time home buyers as it offers a sense of comfort knowing your mortgage is being dealt with a nationally recognized financial institution.

TD offers very fast review of documents with the ability for collateral charges, multiple branch locations and competitive privileges such as pre-payment abilities.

Scotiabank is also an advantageous option for homeowners as they have one of the most comprehensive and easy-to-use home equity lines of credit, referred to as their Scotia-Step.

Being able to access a Home Equity Line Of Credit (HELOC) and roll it into your mortgage offers simplicity and efficient methods of borrowing for homeowners. The drawback with both banks is that they are chartered banks. When a client decides to use them for fixed rate mortgages, specifically the 5-year terms, they can potentially be on the hook for penalties north of $10,000 due to breaking their mortgage early. Career changes, moving from different neighbourhoods or cities, upgrading or downgrading home sizes, marital issues – these are all reasons why someone may need to break their mortgage early. Being in a long term fixed rate mortgage with a chartered bank can be unpleasant.

Credit Unions

One of the biggest benefits of credit unions such as Westminster Savings or Coast Capital is that they are not federally regulated, they are provincially regulated. They are not required to adopt federal mortgage rule changes unless they want to. This can be an extreme benefit to those considering rental properties, those with unique income/employment situations or complex transactions that chartered banks do not or cannot work with.

Some of the negative attributes are, however, a reputation for slow review times of documents and mortgage applications, as well as portability. If you work for a company or in an industry that is known for relocation and re-assignment across provinces, you will pay a penalty to a credit union every time. This is something that is likely not to happen when working with charted banks or monoline lenders as they will have more flexibility in allowing you to port your mortgage to a new property in other provinces.

Monoline Lenders

Monoline Lenders are supported by mortgage brokers, and in turn, mortgage brokers are supported by monoline lenders. You cannot access mortgage products that a monoline lender offers without using a broker as they typically do not have physical branches or locations. They are funded by private investors dealing only in mortgage transactions, allowing their products to be more customized based on the investors’ risk tolerance. The benefits? – Extremely low-interest rates, very competitive privileges with pre-payment and portability, fast turnaround-times, and the best part, significantly lower penalties for breaking a mortgage.

With a big bank, a $10,000 penalty for breaking mortgage early may only cost you $3,000 with a monoline lender. This is highly advantageous to someone who wants the security of a long term fixed rate but isn’t 100% certain they will be carrying out their mortgage at that property for the full five years. The disadvantage is the almost blind trust a client must have. These monoline lenders do not have much brand recognition with the public, limited direct access with clients and usually do not have any physical locations to visit. This makes it hard for some people to feel comfortable using them as their mortgage provider.

Private Lenders

The benefit of a private lender is that anyone who has inconsistent income, unique properties, poor credit history or any type of severe risk in their application can get an approval. When a chartered bank says no, a credit union says no and a monoline lender says no, a private lender can say yes. The disadvantage? – your interest rate is going to be significantly higher and the privileges such as prepayment and portability are going to be significantly less. As well, with most lenders, they will pay the mortgage brokers commission themselves. In this case, you the borrower will be paying a fee to the broker.

This information is extremely powerful to you as a homebuyer and even as a current homeowner. As always, please contact a Dominion Lending Centres Mortgage Professional if you wish to discuss any of these options further!

By Chris Cabel

5 Jun

Is owning a home truly the best bet?

General

Posted by: Mike Hattim

If you’re reading this and just bought your fist home, or you’ve been a homeowner for years, there’s good news. You can feel confident you made the right decision for your long-term economic wellbeing. That’s according to the findings of a study by Mortgage Professionals Canada, the national association that represents the mortgage industry.

The organization decided to take a deep dive and compare owning versus renting in Canada, and conclude which one option would be the best financial decision in the long run.

As it turns out, the cost of ownership was lower than the cost of renting in more than three quarters of the 266 combinations or cases studied, which included locations and types of dwellings.

As of the second quarter of 2018, the monthly cost of owning was lower than the cost of renting for 72 (just 27% of the 266 cases).

But, the study noted, costs of homeownership include considerable amounts of repayment of mortgage principal. This is a form of saving. When this saving is considered, the “net” or “effective” cost of homeownership is correspondingly reduced.

On a net basis, the cost of ownership is lower than the cost of renting in 202 of the 266 cases (76%), according to the study.

On average across the 266 cases, the monthly cost of owning exceeds the cost of renting an equivalent dwelling by $541 per month. But, when the principal repayment is considered, the net cost of owning is $449 less than the cost of renting.

MPC’s study also found the largest element of the ownership cost (the mortgage payment) is fixed for some time. The result is that the cost of renting will increase more rapidly than the cost of homeownership. The analysis projects the costs of owning and renting for five years and 10 years, assuming that all of the cost components (apart from the mortgage payments) rise by 2.5% per year. The study concluded that homeownership becomes increasingly advantageous over time.

The study concluded by the time the mortgage is fully repaid in 25 years (or less) the cost of owning will be vastly lower than the cost of renting, in every one of the 266 cases. On average across the 266 cases, the cost of owning is projected at $1,549 per month versus $4,655 for renting equivalent dwellings.

5 Jun

HOME BUYERS’ PLAN

General

Posted by: Mike Hattim

The Home Buyers’ Plan is a Canada wide program that allows individuals to withdraw a certain amount from their Registered Retirement Savings Plans (RRSPs) for the purposes of qualifying for a home or if you are planning to help a related person who may have a disability.

Currently, the maximum amount an individual can withdraw from their RRSPs under the Home Buyers’ Plan is $25,000. The Liberal party of Canada has promised to increase this to $35,000 in late 2019. Now, this does not mean that the most a person can withdraw from their RRSPs is $25,000. It just means the most you can withdraw tax free is $25,000 for the purchase or construction of a home.

There are 2 main conditions you will need to meet if you plan on using the Home Buyers Plan for the purchase of your own home:

1.) First-Time Home Buyer

You are considered a first-time home buyer if, in the four-year period, you did not occupy a home that you or your current spouse or common-law partner owned.

The four-year period begins on January 1st of the fourth year before the year you withdraw funds.

Example- if you withdraw funds March 19, 2019, the four-year period begins on January 1, 2015 and ends on February 28, 2019.

2.) Are You Buying or Building a Qualifying Home

You are if you buy or build it, or are considered as buying or building it, before October 1st of the year after the year of the withdraw. Also, that you buy or build it, alone or with one or more individuals.

The RRSPs you withdraw will also need to be repaid. Repayment starts the second year after the year you withdrew funds for the Home Buyers Plan. You will have 15 years to completely repay the entire amount you withdrew and the amount is calculated by the Canadian Revenue Agency and posted to your CRA Account.

To find out more information on how to withdraw funds as well as determine whether or not you qualify, you can visit their site here: https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/rrsps-related-plans/what-home-buyers-plan.html

By Ryan Oake