Borrowed from LinkedIn and Kenneth Pazder

In our real estate law practice we have seen houses steadily rise over the past seven or eight years and jump drastically since January of this year.

For example, homes in Vancouver on Connaught Drive which were selling for $3-4,000,000 a few years ago are now on the block for $10-15,000,000 (a client of mine recently turned down an offer on her home in this area at $15.8M.  The home was purchased for $6M!)

Correspondingly, homes which were $1-2,000,000 are now $4-5,000,000.

Even condominiums which were valued at a half a million dollars a last summer are now worth $800K to $1M.

Prices are rising so fast, one has to buy a property BEFORE putting one’s own property up for sale, for fear of being priced out of the market!

Before the completion date occurred, another client of mine who bought a home in North Vancouver for $1.5M was offered $250,000 by the seller NOT to complete the purchase!

In my view, this lunacy is being fueled to a large extent by foreign money which is pouring into the Lower Mainland at an unprecedented rate and pulling the prices UPWARDS from the top end.

This inflow of money (Chinese principally, but there is also a lot of Iranian, Indian and American capital coming in, as there is still a very substantial discount on the Canadian dollar for those who deal in USD), is destabilizing the BC real estate market for everyone who lives and works here.

Tragically, the only people who can’t seem to see this are the provincial and federal politicians and the many pundits who make a living commenting on things they t know nothing about (newspaper columnists, economists, business school profs and other so-called experts).  

They remind me of the referees at a World Wrestling Entertainment match. Everyone in the stands is screaming that the bad guy has a concealed weapon and the only one in the building who can’t see it is the referee!

However in the WWE the refs are paid to look clueless.  

Our politicians are paid to govern in the interests of Canadian citizens, not foreign speculators -but looking at their behavior, one would never guess that.

While it is reported that foreign ownership may be as little as 3-5% of the housing stock that is more than enough to affect the entire market adversely -and it has done so in spades as few can now afford to own a house in Vancouver and even condominium ownership is becoming a stretch.

WHAT TO DO?

1. Make foreign buyers confirm the source of their funds

Right now any foreign buyers can wire any amount of money into  their lawyers’ or notaries’ trust accounts from any bank in the world to buy a property in BC with no questions asked.

Realtors and mortgage brokers are required to fill in a bunch of useless FINTRAC forms and obtain client identification documents, but NO ONE is asking where the money came from in the first place!

I have heard many stories from realtors of bidding wars where a property is listed at a certain price and then a half a dozen or more offers come in steadily bidding up the price by fifty or one hundred thousand dollar increments and then the final offer comes in at a half a million dollars over everybody else’s!

A lawyer in our office recently had the same experience in BC Supreme court on a foreclosure sale.  The offer the court was asked to approve was $1.5M and a six or seven other buyers showed up at the hearing.  As is the court’s practice, everyone  was advised of price of the original offer and given the opportunity to bid or re-bid in a sealed envelope.  The Master opened the sealed bids at $1,55M, $1.65M, $1.725M, $1.9M and the WINNER was $3.1M!

It would appear that the winner wanted to pay AS MUCH AS POSSIBLE. 

It has been our experience that much like locals, foreign buyers usually don’t want to pay a penny more than is necessary to purchase a property here (much less an extra million dollars on a foreclosure purchase).

As most foreign buyers have local realtors who are well aware of the market prices, the only explanation which seems to make any sense is that some foreign purchasers are using the Canadian real estate system to launder their money.

Once a house is purchased in BC the seller has effectively washed it and it can be moved anywhere in the world easily by selling the property (as the seller then has the contract of sale and all the documents necessary from the lawyer’s office to “prove” that his funds came from the legitimate sale of Canadian real estate). No foreign country will look past the most recent transaction to confirm the legitimacy of the funds.

In the criminal world, the fee to launder money can be 50% or more.  In Canada, it seems to be NIL.

I believe that many foreign buyers when confronted with a requirement to show where their funds came front would balk and refuse to complete the purchase.

Stemming the flow of dirty money into Canadian real estate would terminate a number of high end purchases, which may push down some of the prices at the $10M – $15M range which would in turn push down the medium high end prices and so on.

2. Increase taxes significantly on those who purchase property in Canada but do not live here or pay taxes here. 

It is commonplace for foreigner investors to park some of their money in Canada (as they do not trust their own governments).  They typically put the title of a property into the names of their wives or children (it is always interesting to look at the occupation listed on the titles to high end real estate like “worker,” “student” or “home maker”).  The wife and kids live in the property as their principal residence and pay no taxes as they have no income.

The father, who is a non-resident, continues to make money in a foreign state at a much lower tax rate.  Canada taxes income on the basis of RESIDENCY, so the father pays NO CANADIAN TAX.  The family enjoys the benefits of the Canadian health care system, school system etc. while paying nothing other than property taxes.

The misguided view of the premier of this province is that the above situation constitutes FOREIGN INVESTMENT IN BC, to be encouraged at every step.  

With all due respect, that is nonsense.  

As the BC government is perpetually short of money for every worthwhile endeavor (hospitals, schools, pubic housing, seniors, homeless shelters, transit, mental health, child poverty -the list is endless), it would seem obvious that one source of revenue which would be virtually unopposed by BC taxpayers would be to increase Property Transfer Tax and municipal property taxes on foreign buyers who are simply taking advantage of the laxity of the current legal and regulatory framework in BC.

An appropriate rate would be perhaps 20% Property Transfer Tax and triple current property taxes for those who choose to evade paying Canadian income tax (or pay only a token amount for appearance purposes) or simply leave their BC homes vacant.

A sale of a residence so occupied (or unoccupied as the case may be) should also attract income tax on any increase in value (not capital gains tax).  

A capital gains exemption for a principal residence should also be disallowed for such owners (these two changes would of course require an amendment to the Income Tax Act which is a federal statute).

These  even for so-called “legitimate” off-shore funds would also dampen foreign demand for Canadian real estate, however to the extent that it does not, then at least there is SOME benefit flowing back to the Canadian tax system.

Are these measures discriminatory?  Absolutely!  They discriminate against foreign buyers who are simply seeking to take advantage of the Canadian real estate system, while parking or washing their funds.

These changes should apply to ANY foreign buyer of any nationality (US, Europe, Britain and Australia included).

UBC already does this with foreign students who are required to pay much higher annual tuition than local students –and no one is complaining!

Will this “fix” the real estate affordability problem?  Maybe not, but you have to start somewhere and you might as well start with the most obvious cause.

Are either of these measures likely to come to come to pass?  I would not hold my breath.

Generally, by the time the government gets around to doing anything of consequence “the proverbial horses are already out of the barn and the farm has been sold off to a foreign syndicate.” 

SHOCKING US JOBS REPORT AND TORONTO AND VANCOUVER HOUSING TOO HOT

First on the U.S. Jobs Front

The May employment report was released this morning in the US and it was shockingly weak–indeed, the weakest number in almost 6 years. Nonfarm payroll employment was up only 38,000, well below the market expectation of 160,000. Not only was May incredibly weak, but the March and April job gains were revised down sharply, by 59,000. This represents a dramatic slowdown from last year’s average monthly growth of 229,000.

Economists had expected the May job gain to be depressed by the Verizon strike and information and telecommunications jobs were down by 34,000, but employment declines were also posted in manufacturing, construction and mining.

The average workweek was unchanged for all workers and was up slight in manufacturing. A bright spot in the report was worker pay. Average hourly earnings rose by 0.2 per cent in May after a 0.4 percent gain in April that was a bit stronger than initially reported. Worker pay increased 2.5 percent over the 12 months ended in May.

In addition, 458,000 people left the workforce last month, taking the labour force participation rate down to 62.6 per cent. In consequence, the unemployment rate fell by 0.3 percentage points to 4.7 per cent, the lowest level since November 2007. The drop in the jobless rate is nothing to cheer about since it was caused by Americans leaving the labour force.

Dismal employment gains reduce the chances of a pronounced upturn in household spending and economic growth from the disappointing first quarter pace. This takes a Federal Reserve rate hike off the table for June. Job growth has slowed in concert with weaker corporate profits and a weak global economy.

The Canadian dollar rose in the wake of this report as the US dollar plunged. Clearly, the weakness in the US is not good news for Canada as 77 per cent of Canadian exports go to the US. The Bank of Canada is counting on the export sector to pick up the slack from the hammered oil sector.

Red-Hot Housing Continues in May in Toronto and Vancouver

The release of the May data from the Real Estate Boards in Vancouver and Toronto show a continued record surge in sales and house prices. Both markets and their surrounding regions have posted enormously frothy gains, which appear to be accelerating. How much of the activity is attributable to foreign buying is unknown, but there is evidence that capital inflows to housing markets from China have risen in the past year.

Housing affordability is plunging in both regions and there has been a rising number of voices calling for government action of some sort. Some have suggest an increase in the minimum downpayment, tightening credit conditions or a rise in the cost of CMHC mortgage insurance–all of which would hurt first-time home buyers the most, exacerbating affordability. As well, the idea of action to slow foreign buying–such as, for example, a luxury tax–has also been floated.

This is a very tricky issue. The strength in housing (in these two regions) has been a key underpinning to economic growth this cycle. As well, 70 per cent of Canadian households own their own homes and home equity is for most people the largest component of household wealth, so the government is leery about triggering a collapse in housing. Nonetheless, housing growth this strong does not usually end well.

In Vancouver, the Multiple Listing Service reported unprecedented growth in home sales and prices. Last month’s sales were 35.3 percent above the 10-year sales average for May and ranks as the highest sales total on record for that month. While demand is very hot, the total number of listings in Metro Vancouver has declined 37.3 per cent from a year ago, helping to explain some of the upward pressure on price. Home prices in Greater Vancouver are up a stunning 48.3 per cent in the past three years and the one-year change has been close to 30 per cent. The numbers are similar for the Lower Mainland as a whole. The price gains are even larger for single family detached homes as supply is very limited.

In Toronto, the story is much the same, although the activity and price increases are slightly less frenzied, which isn’t saying much as multiple offers and paid prices well over asking has become increasingly common. The Toronto Real Estate Board reported a new record month for May sales, up 10.6 per cent from a year ago as the number of new listings was down 6.4 per cent. The excess demand in the Greater Toronto Area (GTA) continues to push prices higher and, in some cases, to create panic buying.

The MLS Home Price Index was up 15 per cent year-over-year, with the surge even stronger for detached homes. Gains in the 905 area (the suburbs and exurbs of Toronto) outpaced those in the 416 area (Toronto proper), likely reflecting the supply and affordability issue. The average price of a detached home in the 416 area is now $1.3 million compared to $892,000 in 905. Condo prices are considerably cheaper at an average price of $443,000 in Toronto and $347,000 in the burbs–still beyond the reach of many first-time homebuyers. Even move-up buyers are choosing to renovate their existing homes because they cannot afford to pay the prices for larger properties. Downsizers have an incentive to wait, thinking that price increase will only continue.

This is certainly top-of-the-market thinking, but as we have seen, it can last for a considerable period. Most everyone is predicting a slowdown in the housing markets next year. We better hope so. A soft landing is what we all want as prices cannot go up forever, especially at this pace.

Borrowed text from the Aragons of the DLC network…

Whether you are a first time buyer, looking at buying a bigger house or downsizing, if you are looking at buying an investment property it is important to be prepared. This spring a sellers’ market is in full swing, which is more noticeable in certain areas of the Lower Mainland. With historically low interest rates, buyers are making the jump into homeownership, because for many, their mortgage payments will be less than what they are paying in rent. It is certainly a great time to get into the market. However, in a sellers’ market, buyers find themselves in competition with other buyers to purchase a home.

Buying a home can be exciting but having to compete for a home can add a bit more stress. In this case, a property’s asking price and what the property will sell for is quite different, and in most cases the selling price will be well above and beyond the listed price.

When a homebuyer goes into a multiple offer situation, they are less in control. As a buyer, you need to prepare yourself in doing work upfront and with the understanding that you might not get the property in the end.

During multiple offer situations, the seller is not obligated to negotiate or accept any of the offers. The seller has the liberty to choose the best offer to negotiate and they will accept the offer that best reflects their needs. While price is important, that will not be the only factor they consider. They will also look at things such as subject conditions, completion and possession dates.

Here are some things you can consider which may help you feel more in control of the situation when going into multiple offer situations:

• Get pre-qualified by a Mortgage Expert – One of the most important aspects of buying a home is knowing how much you qualify for. You will know what you are comfortable paying on a monthly basis but also what is the highest amount you can offer. While you might have been qualified, the lender still has to approve the property you are buying.

• Prepare and have all your documentation ready – It is important that you provide your Mortgage Expert with all the documentation the lender is going to require upfront. Especially since time will be of essence, you don’t want the added stress of getting documentation when you are in the middle of negotiations and during the subject condition period.

• Having the right real estate agent – It is critical that you have an agent that has your best interest in mind. As a buyer, it is not your job to seal the deal, it’s your agent’s responsibility to know what your limit is and respect that. Don’t let your agent try to upsell you on the price and encourage you to go above your budget. It’s their job to research comparable properties in the area and advise you, but you are the one that makes the final decision. After all, it’s your money.

• Set your boundaries – Once you set your budget, stick to it. Determine exactly how much you can go over if you end up in multiple offers. Don’t get sucked in by emotion and peer pressure because in the end, it can cost you a lot more money.

• Consider doing a home inspection ahead of time – The buyer could consider your offer more readily if it doesn’t include a “subject to inspection” clause.

• Be flexible – Winning a multiple offer situation might be as easy as agreeing to the seller’s conditions such as closing dates, buying the property “as is” or even tightening the subject removal dates. This is important if the seller has already bought another property and is anxious to move on. Agreeing to make the transaction as easy as possible could mean winning over a more generous offer. Buying a property “as is” and limiting the subject conditions (such as requesting that a missing knob or floor tile be replaced) might work in your favour too. If your agent is aware of any information about the seller’s situation and if you can be flexible in any way, take advantage of this opportunity that might help you get your offer accepted.

• Write it down – Perhaps you might want to write a quick letter to the seller explaining who you are and why you want to buy their home so much. Buying and selling a home is an emotional time for everyone, especially if the seller has lived in that home for a long time and raised their family there. Sometimes, it’s not about the highest offer but it can certainly also be about an emotional connection. Even though your offer might be lower than the others, some sellers might feel a strong connection to your story and decide that it’s not about the money but about someone who will really appreciate a great home!

• Know when it is time to walk away – Multiple offer situations can be stressful and sometimes listing agents strategically set the price of the home below market value to start a multiple offer situation. Make sure you stand firm.

Buying your home is about a great investment and you have to be smart about it. In the end, it’s about being comfortable on what you are paying a month and happy with the decisions you make. After all, it’s about finding a home that will be a great place to start building equity and creating memories.

Borrowed from Pauline Tonkin – DLC.

New credit reporting and what it says about you and your spending habits may make all the difference between you buying a home now or later.

When home buyers contact me to apply for a mortgage, I always review their credit report with them along with the rest of their application, before they start looking at homes with a Realtor. If there are any issues with the credit history we can determine the reason, the next course of action and how it will impact financing a purchase.

There is a lot of valuable information in a credit report which provides an overview for lenders about your ability to borrow money. Consistent late payments, collections and bankruptcy have the biggest impact on lowering your score. Running a high balance or over your limit on your credit cards will also drive your credit score down. Scores range from 300-900 and a difference in score by as little as 50 points says a lot to a lender about you as the borrower. For example, a score of 550-599 represents 21% of delinquencies while a score of 600-649 only 11%. Delinquency rates are defined as those who have late payments beyond 90 days. If your score falls from one bracket to the lower bracket with late payments or collections, the difference can affect the interest rate you can receive or, worse yet, if you can qualify for the mortgage amount you need.

The most recent software update for the credit bureau reporting system has added some features which could have a significant impact on reporting. The new reports, which were released in early 2015, show three credit scores and one overall score.

The first score ranks based on open credit and balance to limit ratio. So if you have lots of open credit and your balances are low or reasonable the score is higher. High balances or over limit on all credit cards will drop your score.

The second score ranks based on late payments and collections over $250. If your late payments are beyond 90 days, your score will drop dramatically.

The third score ranks based on the number of third party collections in the last 3 years and the oldest revolving credit. So if you have outstanding parking tickets or an unpaid gym membership that you forgot about — they will come back to haunt you.

These individual scores were created to show specific behaviour by a borrower and if the credit score is trending up or down. This can give the lender an indication of a chronic issues with a potential borrower or if they are consistent with their credit usage.

With mortgage payments, lines of credit, auto loans, credit cards and even cell phone bills now reporting on the credit report,  consumers have to be diligent with spending and paying bills on time.

I recommend to all my clients to keep your credit report clean — after all, it is your identity.

Establish at least two trade lines of a minimum of $2,000. One credit card and one personal line of credit for example.

Maintain lower balances (< 65%) on all lines of credit or credit cards.

Make payments a few days before they are due to ensure you are always on time

If you get a parking ticket, fight it and lose – pay the bill and don’t let it go to collection.

Look at your credit report annually and certainly 3-6 months before making any major purchase such as a car or home. To view your own credit report visit www.equifax.ca.

Borrowed from Kristin Woolard DLC!

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.

Property Transfer Tax Changes

By now you should have heard about the changes in the latest budget regarding the PTT. Here is what we know.

1.            There are no changes to the first time home buyer exemption limits;

2.            All buyers (whether first time buyers or not) no longer pay PTT on purchases of NEW homes up to $750,000 in value; note the buyer must be a Canadian citizen or a permanent resident; there is a partial exemption for homes between $750,000.00 and $800,000.00;

3.            PTT has changed so that there is now a 3% tax on amounts over $2,000,000.00. The 3% tax is only paid on the amount over $2,000,000.00, not the full price.

Please let me know if I can help you understand any of the changes above! #mortgagelove

Michael James

DLC Corporate Blog – How Double Income Families help drive the RE market.

No doubt you have thought about the affordability of the current Canadian housing market and chances are you have even thought about where houses prices will go in the future! Maybe you have parents that tell you stories of a different time when they bought their first house for less than you paid for your first car. Inflation accounts for some of the increase in prices, but there has to be something else (most likely lots of something elses).

In a recent study completed by Statistics Canada called: Employment patterns of families with children, 1976 to 2014, the study noted that…

“In 2014, 69% of couple families with at least one child under 16 years of age had two working parents, up from 36% in 1976.”

Said in another way (as it relates to affordability of housing)

In 1976, 36% of couple families with at least one child under 16 years of age had two working parents contributing to household income (including the mortgage). In 2014, this number jumped to 69%.

With almost 7 out of every 10 families having the ability to qualify for their mortgages using two incomes, it is no wonder that over the last 30 years house prices have increased significantly. As income is the main driver in affordability, double income families have more income than most single income families, so they can afford to spend more on housing.

So what does all this mean to you?

Well… if you are a single person or one half of a double income family, housing prices continue to go up, making housing less affordable. If you are considering getting into the market, making sure you look at all the mortgage options available to you and having a plan to pay off your mortgage is essential.

We here at Dominion Lending Centres would love to discuss your specific financial situation in order to help you arrange financing to purchase a home that suits your personal and family needs.

Contact us anytime!

TOP 8 BENEFITS OF USING A MORTGAGE BROKER

When shopping for a mortgage, many home buyers enlist the services of a Mortgage Professional. There are several benefits to using a Mortgage Broker and I have compiled a list of the top 8:

1. Saves you time – Mortgage Brokers have access to multiple lenders (over 50!). They work with lenders you have heard of and lenders you probably haven’t heard of. Because their relationship with lenders is ongoing, Mortgage Brokers know what is available in mortgage financing and will be able to advise you on what your lending options are without all the leg work that you would have to do in order to find a small percentage of information that a Mortgage Broker already has in hand.

2. Saves you money – Mortgage Brokers, if they are successful, have access to discounted rates. Because of the high volume that they do, lenders make available discounted rates that are not available directly through the branch of the lender that you go to.

3. Saves you from becoming stressed out! – It can be very daunting to find a mortgage. A Mortgage Broker takes on that stress for you. Your Mortgage Broker will make sure all the paperwork is in place. They will keep in good communication with you so that you know what is going on with your mortgage and will keep you up to date with any complications so that there are no surprises.

4. Gives you access to lenders that are otherwise not available to you – Some lenders work exclusively with Mortgage Brokers. In these circumstances, the layman does not have access to these lenders and, therefore, does not have the option to use discounted rates and mortgage products that these lenders offer.

5. Services are free – Mortgage Professionals are paid by the lender and not by you. This is not a disadvantage to you. A good Mortgage Broker will ALWAYS have the best interest of the client in mind because if you, as a client, are happy, you will go tell your friends about the service you’ve received from the Mortgage Professional you work with. Mortgage Professionals rely on referrals, which means that if you are a happy customer, and you got the best deal available, you will tell your friends and family about them which will result in referrals and potential future business.

6. Take on every challenge – As Mortgage Professionals, we see every scenario out there and work to make sure that every client knows what is available to them for financing options for a mortgage. Damaged credit and low household income might be a deterrent for the bank, but a Mortgage Professional knows how to approach the lender and has the relationship to make sure every client has a plan and strategy in place to make sure there is a mortgage in their future.

7. The Mortgage Brokerage industry is monitored by governing bodies – Nowadays, as Mortgage Brokers, it is extremely important to have principles and values that are based on the best interest of the client. In fact, in order to become licensed, the Mortgage Professionals need to be well versed in the ethical and upstanding values that are outlined through the Financial Institutes Commission, a provincial governing body that is a watchman for this industry. FICOM’s mandate is to make sure every Mortgage Broker walks in integrity and in the best interest of their client.

8. The Mortgage Broker has a better understanding of what mortgage products are available than your bank – Interestingly, a Mortgage Broker has to be licensed and cannot discuss mortgages with you unless they are licensed. This is unlike the bank who can “internally train” their staff to sell the specific products available from their bank. The staff at your bank do not have to be licensed Mortgage Professionals.

While this is not an exhaustive list on the benefits of using a Mortgage Professional, it is compelling to see the benefits of using a Mortgage Professional rather than putting a mortgage together on your own.

At Dominion Lending Centres, we have an excellent rapport with the lenders we introduce our clients to. Our customer service is reflective of our relationship with our lenders. We are always professional and we always make sure our clients know every viable option they have for mortgage financing.

Courtesy of Geoff Lee of GLM Mortgages

Great borrowed material from the DLC Network –

Most banks boast a higher than 90% renewal rate on their mortgages (some even higher than 95%). Since it costs them a lot more money to acquire a new client vs. keeping an existing one, banks love the savings of a simple renewal. So you would think that they would offer you the best rate up front on your renewal as it’ll save them money in the long run? Well…not necessarily.

With renewal rates being as high as they are, there is not much incentive for banks to give their clients the best rates up front. They know that most people will stay as they know it’s easier to just sign a form as opposed to applying for a mortgage at another bank. Hence the dreaded renewal letter that gets mailed out automatically prior to your renewal date.

The banks would love nothing more than for you to just pick the term, sign the document, and send it back to them. It costs them relatively little to process it and they don’t have to follow up with you after that (other than sending you a new copy of the agreement).

Since the renewal documents are printed automatically (and yes they may include a “preferred rate” which makes it even more tempting to sign) they don’t factor in any rate specials that may occur after they’re printed.

Recently a client’s mortgage was coming up for renewal and they received the automatic renewal letter. Just calling the 1-800 number saved them an extra .10%, which on a $500,000 mortgage was an extra $500 per year in interest. Not bad for a 5 min phone call.

There are also some important questions to answer:

-are you planning on selling your home anytime over the next 5 years?

-do you need to access any equity from your home for renovations, children’s education, etc.

-what are your long term goals with the property?

These are important questions to ask as they help us suggest the right product for you.

So it’s important to treat your renewal as if you’re obtaining a new mortgage and spend some time researching your options. When I worked at the bank I was always shocked at the number of people that just signed the form and sent it back.

That’s why (in addition to the financial institution where your mortgage is now) you need to contact your Dominion Lending Centres Mortgage Broker and have them give you an unbiased view of which mortgage product is right for you, as they have access to hundreds of different financial institutions.