22 Feb

5 Simple Steps To Owning Your Own Home

General

Posted by: Charla Adrian

5 SIMPLE STEPS TO OWNING YOUR OWN HOME

Often, the route to owning your own home can seem like a trip to the moon and back.

Really though, it comes down to five key steps:

1 – Manage your credit wisely.
If there is one thing that will gum up the purchase of that perfect home, it’s an unwise purchase or extra credit obtained. Keep your credit spending to a minimum at all times, make every payment on time and most of all pay more than the minimum payment. Remember that if you just make the minimum payment on your credit cards, chances are you will still be making payments 100 years from now.

2- Assemble a down payment.
At first glance, the challenge of finding a down payment can seem insurmountable. In fact, you just need to consider all the sources for down payment funds. yes, you will have saved some but remember you can also, in some situations, use RRSP funds, grants ( BC Home Equity Partnership for example ) and non traditional sources like insurance settlements, severance and of course, gifted funds from a family member. Don’t forget that you’ll need to demonstrate that you’ve had the funds on deposit for up to 90 days and also that you have an additional one and a half percent of the mortgage amount for closing costs.

3- Figure out how much you can afford.
It’s at this point that most people usually stop and scratch their heads. Some even try and tough it out, using the raft of online calculators to figure it out, but new mortgage rules can make even that a challenge.
If you talk to a Dominion Lending Centres mortgage specialist ( like me! ) though, they can help you figure it out and even go as far as getting you a “pre-approval” from a financial institution. This can give you the confidence you need to actually start looking around.

4- Figure out what you want.
You’ll want to make a list of things your new home has to have and what the neighbourhood has to have. Things you want to think about are the things that are important to you now; is there access to a dog park? Is there ensuite laundry? Divide the list into things you can’t live without and things you’d like to have. It’s way easier to look when you know what you want to look at.

5- Look with your head, buy with your heart.
The final step is, with the help of a realtor, look at properties that meet your requirements. Yes, the market is a little frenzied at the moment, but remember, if your perfect property is sold to someone else, the next perfect property will soon appear.

When you do finally buy, chances are, you’ll buy with your heart. My sister Noona moved to London some years back and after settling in, decided to buy. Her list was fairly lengthy, one of the key elements was being able to walk to work. In a market similar to what we face now, she found a property that met most of her requirements. In the end though, she bought with heart, mostly because of the view from the balcony.

The decision which home to buy is a tricky thing, it should be made with your head and heart. Deciding, while balancing what you think and feel, really is rocket science.

I know that this may seem to be an oversimplification but really, the thing that complicates the process is your own emotions – all of the stress that comes along with making a life change can make the process challenging.

Jonathan Barlow

JONATHAN BARLOW

Dominion Lending Centres – Mortgage Professional
Jonathan is part of DLC A Better Way based in Surrey, BC.

15 Feb

Improving Your Credit Score

General

Posted by: Charla Adrian

15 FEB 2018

IMPROVING YOUR CREDIT SCORE

Your credit score is a big factor when you apply for a mortgage. It can dictate how good your interest rate will be and the type of mortgage you qualify for.

Mortgage Professionals are experienced helping clients with a wide range of credit scores so we can find you a mortgage product even if your credit is far from perfect.

The good news about your credit score is that it can be improved:

  • Stop looking for more credit. If you’re frequently seeking credit that can affect your score as can the size of the balances you carry. Every time you apply for credit there is a hard credit check. It is particularly important that you not apply for a credit card in the six months leading up to your mortgage application. These credit checks may stay on your file for up to three years.
  • If your credit card is maxed out all the time, that’s going to hurt your credit score. Make some small monthly regular payments to reduce your balance and start using your debit card more. It’s important that you try to keep your balance under 30% or even 20% of your credit limit.
  • It’s also important to make your credit payments on time. People are often surprised that not paying their cell phone bill can hurt their credit score in the same way as not making their mortgage payment.
  • You should use your credit cards at least every few months. That’s so its use is reported to credit reporting agencies. As long as you pay the balance off quickly you won’t pay any interest.
  • You may wish to consider special credit cards used to rebuild credit. You simply make a deposit on the card and you get a credit limit for the value of that deposit. They are easy to get because the credit card company isn’t taking any risks.

Contact a Dominion Lending Centres Mortgage Professional if you have any questions.

Tracy Valko

TRACY VALKO

Dominion Lending Centres – Accredited Mortgage Professional
Tracy is part of DLC Forest City Funding based in London, ON.

13 Feb

WHAT’S AN ACCEPTABLE DOWN PAYMENT FOR A HOUSE?

General

Posted by: Charla Adrian

13 FEB 2018

WHAT’S AN ACCEPTABLE DOWN PAYMENT FOR A HOUSE?

Ask people this question and you will get a variety of answers.  Most home owners will say 10% is what you should put down. However, if you speak with your grandparents, they are likely to suggest that 20% is what you need for a down payment.

The truth is 5% is the minimum down payment that you can make on a home in Canada. If you are planning on buying a $200,000 home then you need $10,000.

It all can be explained by the creation of the Canadian Mortgage and Housing corporation (CMHC) by the Canadian government on January 1st, 1946. Before this time, you needed to have 20% down payment to purchase a home . This made home ownership difficult for many Canadians. CMHC  was created to ease home ownership. This was done by offering mortgage default insurance. Basically what CMHC does is it guarantees that you will not default on your mortgage payments. If you do, they will reimburse the lender who gave you the mortgage up to 100% of what the homeowner borrowed. In return lenders allow you to purchase a home with a smaller down payment and a lower interest rate.

CMHC charges an insurance premium for this service to cover any losses that may occur from defaulted mortgages. This program was so successful that CMHC lowered the minimum down payment to 5% in the 1980’s.

However, if you have little credit history or some late payments in the past they may ask you to provide 10% instead of the tradition 5% if they feel there is a risk that you may default at some time.

You should also be aware that the more money you put down, the lower your monthly mortgage payments will be. You also can save thousands in mortgage default insurance premiums by putting 20% down.  At this time,  home buyers who put 5% down have to pay a fee of 4% to CMHC or one of the other mortgage default insurers to obtain home financing. On a $400,000 home this is close to $16,000.

If you can provide a 10% down payment the insurance premium falls to 3.10% and if you can provide 20% it drops to zero.  While 20% can seem like an impossible amount to save, you can use a combination of savings, a gift from family and/or a portion of your RRSP savings to achieve this figure. The best recommendation that I can make is to speak with your Dominion Lending Centres mortgage professional to discuss your options and where to start on your home buying adventure.

David Cooke

DAVID COOKE

Dominion Lending Centres – Accredited Mortgage Professional
David is part of DLC Clarity Mortgages in Calgary, AB

9 Feb

Knowing When Less Is More

General

Posted by: Charla Adrian

10 OCT 2017

KNOWING WHEN LESS IS MORE

No one wants to be told that they are not allowed to have something. We live in Canada; as Canadians, our focus has always been to strive for better and for more. That said, there appears to be a growing trend around co-sharing which means people are increasingly moving away from owning their own cars, bikes, offices and, even, homes.

Don’t believe me? Watch this video about communal pod-shares, or this one about a car-sharing company in Edmonton. The trend is here and growing.

While this lifestyle is not for everyone, it speaks to an interesting trend about doing more with less.

In Edmonton, we have the luxury of living in a city that offers affordable housing in every corner of the city. Although we have the benefit of local properties that give us more bang for our buck, times are changing.

The federal government made some changes last year that greatly affected people’s ability to qualify for a mortgage. This month, more changes are expected which will make it even that much more difficult to qualify for a mortgage. New and existing homeowners are rushing in droves to secure five-year fixed mortgage rates ahead of future Bank of Canada rate hikes, and others regulation changes.

The government is essentially continuing its stress-test for all uninsured mortgages (those with a down payment of more than 20%), which will affect a small percentage of new homeowners.

For those looking to get into their first home, however, this might be a good opportunity to look at the growing trend of doing more with less. Qualifying for a mortgage on a home worth more than $500,000 will likely be unattainable on a single, or even double, income. Looking at homes that offer more bang for you buck, including smaller starter homes could get your real estate investment off on the right foot.

We’ve been able to enjoy low interest rates for many years now. Unfortunately, they are up and will likely continue to increase. As such, your $500,000 mortgage in five years could actually cost you more in monthly payments – even as you pay down your premium. It is simply a reality that many cannot afford and should be taken into account as you take the plunge into buying property.

To discuss your mortgage rates, and to secure a low rate for 120 days, do not hesitate to call a Dominion Lending Centres mortgage specialist. We can also look at your current finances to better understand what price range of home you can afford.

Max Omar

MAX OMAR

Dominion Lending Centres – Accredited Mortgage Professional
Max is part of DLC Capital Region based in Edmonton, AB.

6 Feb

What Is The Canadian Mortgage And Housing Corporation (CMHC)?

General

Posted by: Charla Adrian

6 FEB 2018

WHAT IS THE CANADIAN MORTGAGE AND HOUSING CORPORATION (CMHC)?

The Canadian Mortgage and Housing Corporation (CMHC) is a corporation that most are semi-familiar with, but do not know what CMHC actually does.

CMHC is Canada’s authority on housing. They contribute to the stability of the housing market and the financial system. They also provide support for Canadians in housing need and offer objective housing research and advice to Canadian Governments, Consumers and the Housing Industry.

CMHC offers a variety of different services, all pertaining to Canadian Housing. These services include:

1. Policy and Research
One of CMHC’s cornerstone services is the provision of market analysis information, housing-related data and information, and key housing sector data and information. They are one of Canada’s leading sources of reliable and objective housing market analysis and information. Their research and activities support informed business decisions, policy development for governing bodies and housing program design and delivery.

2. Affordable Housing Measures
CMHC (on behalf of the Government of Canada) also is the primary funder for affordable housing endeavors across Canada. Each year, CMHC invests approximately 2 billion on behalf of the Canadian government to help provide safe, affordable, stable housing opportunities for each province and territory. CMHC oversees approximately 80% of the existing social portfolio administered by provinces and territories, and manages the remaining 20% independently to fund federally housing units such as housing cooperatives. They also work under the IAH (Investment in Affordable Housing) Act, which allows for cost-matching the federal investment to allow for new construction, renovation, homeowner assistance, rent supplements, shelter allowances, and more.

3. Consumer Assistance
The final key services that CMHC offers to Canadians is providing relevant, timely information that can be accessed and used by the public. On their website you can access detailed information on topics such as the:

  • CMHC green building and renovation practices
  • Homeowners How-To Guides
  • Housing Related Research
  • Homeowner grants and opportunities

4. Mortgage Loan Insurance
In addition to the above, CMHC is also the #1 provider of Mortgage Loan Insurance to Canadians. Mortgage loan insurance is typically required by lenders when homebuyers make a down payment of less than 20% of the purchase price. Mortgage loan insurance helps protect lenders against mortgage default, and enables consumers to purchase homes with a minimum down payment starting at 5%* – with interest rates comparable to those with a 20% down payment. In addition to CMHC, there are also 2 other primary mortgage loan insurance providers, Genworth Canada and Canada Guaranty.

CMHC strives to promote mortgage literacy and provide home buyers with in depth knowledge and tools to help them prepare to purchase a home.

Essentially, CMHC is the Canadian Government’s organization that seeks to inform and educate Canadians on the housing and mortgage industry. It reports to the Parliament of Canada through a Minister, governed by the Board of Directors. CMHC makes recommendations based on it’s data and surveys to advise and assist the government of Canada in making decisions that directly impact the mortgage and housing industry. For instance, the date and information provided by CMHC provided information that led to:

February 2016:
Minimum down payment rules changed to:

  • Up to $500K – 5%
  • Up to $1MM – 5% for the first $500K and 10% up to $1MM
  • $1MM and greater requires 20% down (no mortgage insurance available)
    Exemption for BC Property Transfer Tax on NEW BUILDS regardless if one was a 1st time home buyer with a purchase price of 750K or less.

July 2016
Still fresh in our minds, the introduction of the foreign tax stating that an ADDITIONAL 15% Property Transfer Tax is applied for all non-residents or corporations that are not incorporated in Canada purchasing property in British Columbia.

October 17, 2016: STRESS TESTING
INSURED mortgages with less than 20% down Have to qualify at Bank of Canada 5 year posted rate.

January 1, 2018: B-20 GUIDELINE CHANGES
The new guidelines will require that all conventional mortgages (those with a down payment higher than 20%) will have to undergo stress testing. Stress testing means that the borrower would have to qualify at the greater of the five-year benchmark rate published by the Bank of Canada or the contractual mortgage rate +2%

While CMHC does not implement or guide the mortgage/housing changes, they play an integral part in them. They provide the cornerstone of data that the provincial and federal governments use to determine updates, rules, and changes to help to regulate the industry. So, well we may not always like what the data indicates and implicates, it does serve to regulate and make the process of owning a home easier for Canadians. If you have any questions, feel free to contact your local Dominion Lending Centres mortgage professional.

Geoff Lee

GEOFF LEE

Dominion Lending Centres – Accredited Mortgage Professional
Geoff is part of DLC GLM Mortgage Group based in Vancouver, BC

1 Feb

Are you in a Variable Rate Mortgage? Me Too.

General

Posted by: Charla Adrian

30 JAN 2018

ARE YOU IN A VARIABLE RATE MORTGAGE? ME TOO.

Are you in a Variable Rate Mortgage? Me too.

If you’re in a fixed rate mortgage, this news does not impact you. Mind you ‘impact’ is too strong a word to use for the subtle shift that occurred Jan 17, 2018.

Short Version

The math is as follows:

A payment increase of ~$13.10 per $100,000.00 of mortgage balance. (unless you are with TD or a specific Credit Union, in which case payments are fixed and change only at your specific request)

i.e. – A mortgage balance of $400,000.00 will see a payment increase of ~$54.40 per month

Personally, we are staying variable, for a variety of reasons…

Long Version

Qualification for variable rate mortgages has been at 4.64% or higher for some time. This required a household income of greater than $70,000.00 for said $400,000.00 mortgage .

Can 99% of said households handle a payment increase of $54.40 per month? Yes.

Will 99% of households be frustrated with this added expense? Yes.

Ability and annoyance are not the same thing.

Have these households enjoyed monthly payments up to $216.80 lower than those that chose a fixed rate mortgage originally? Yes.

Are 99% still saving money over having locked into a long term fixed from day one? Yes.

Should I lock in?

A more important question is ‘why did we choose variable to start with’? And this may lead to a critical question ‘Is there any chance I will break my mortgage before renewal’?

The penalty to prepay a variable mortgage is ~0.50% of the mortgage balance.

The penalty to prepay a 5-year fixed mortgage can increase by ~900% to ~4.5% of the mortgage balance. A massive increase in risk.

There are many considerations before locking in, many of which your lender is unlikely to discuss with you. It’s to the lenders advantage to have you locked into a fixed rate, rarely is it to your own benefit.

At the moment decisions are being made primarily out of fear. Fear of $13.10 per month per $100,000.00

What about locking into a shorter term?

Not a bad idea, although this depends on two things:

Which lender you are with as policies vary.
2. How many years into the mortgage term you are.

If your net rate is now 2.95%, and have the option of a 2-year or 3-year fixed ~3.00% – this may be a better move than full 5-year commitment.

Do not forget the difference in prepayment penalties, this is significant.

Bottom line – Know your numbers, know your product, stay cool, and ask your Dominion Lending Centres Broker.

These are small and manageable increases.

P.S.

It was a bit disappointing to see logic and fairness fail to enter the picture, after the last two Federal cuts to Prime in 2015 of 0.25% each the public received cuts of only 0.15% each time.

Every single lender moved in unison, not one dropped the full 0.25%.

Amazingly, not a single lender saw fit to increase rates by the exact same 0.15% on the way back up. Every lender has instead increased by 0.25% – a full 100% of the increase passed on to you, the borrower.

Not cool man, not cool at all.

We share all the pain of increases, and get only part of the pleasure of decreases.

I am disappointed by this, not surprised, but disappointed.

DUSTAN WOODHOUSE

Dominion Lending Centres – Accredited Mortgage Professional
Dustan is part of DLC Canadian Mortgage Experts based in Coquitlam, BC.