Borrowed content from the DCL Network – great ideas to pay off debt! Thansk Len Anderson

Graciously borrowed from Pauline Tonkin of the DLC Network

If a buyer can’t obtain a mortgage due to poor credit, employment history, lack of down payment or income — most lenders will consider lending if there is someone to act as co-signor or guarantor for a mortgage. The two options provide different requirements.

Co-signer or guarantor for a mortgage, which is best? People often use the terms guarantor and co-signer interchangeably, but they have very different responsibilities and rights. A co-signor is basically a co-owner – he/she is registered on the title and is equally responsible for payments (although it’s often a given that the co-signor will not make the payments). A guarantor, on the other hand, personally guarantees payments will be made if the original applicant defaults, but he has no claim to the property because he/she is not on title.

Lenders require a co-signor or guarantor for a mortgage for different reasons. A co-signor is used when you need to support income. If the original applicant’s qualifying ratio doesn’t meet the lender’s standards, a co-signor is required to bridge the income gap. A co-signor, because their name is also on the title, must sign all of the mortgage documents and can expect to remain on title until the applicant qualifies for the mortgage on his or her own. Or, in the case of two spouses, the co-signor might remain on title indefinitely. Keep in mind that removing someone from the title involves legal fees.

A guarantor is usually called upon if the applicant qualifies by income, but has a slight credit blemish or has yet to establish credit. It’s also an option for couples where one spouse is an entrepreneur and they don’t want to risk losing the house should the business go bankrupt — they simply keep that person’s name off the mortgage.

Guidance for guarantors
A guarantor has to be stronger financially than a co-signor because they promise to carry the entire debt should the homeowner default. As a result, guarantors are carefully scrutinized, undergo a credit check and must also disclose assets, liabilities and income.

Therefore, it’s important for guarantors to know all of the circumstances of the person they’re acting for and be confident the applicant will make the payments. Before signing, all guarantors should seek advice from a lawyer who is independent of the real estate transaction.

It’s also smart to secure creditor insurance in case things go wrong. The applicant and guarantor should discuss collateral or come up with a repayment plan up front should the guarantor be called on to cover the debt.

What happens when you co-sign or become guarantor on a mortgage?

When a guarantor wants out
Some lenders offer early release policies that free the guarantor from obligation (usually after 12 months) if the borrower is up-to-date with payments and has established good credit. Sometimes a guarantor can remain under obligation for several years.

Before agreeing to act on behalf of an applicant, guarantors need to evaluate the time commitment they’re willing to make. If, for example, they want to buy their own home in a few years or take on any major debt, such as a car or boat, they may not qualify because of their guarantor status.

Regardless of whether you wish to be a co-signor or guarantor, for a mortgage you should always consult your mortgage professional at Dominion Lending Centres and a lawyer before acting.

Michael James

Learn to Love your Mortgage

Graciously provided by Mark Alltree of DLC Network

Finance Minister Bill Morneau announced changes to down payment requirements. Effective February 15, 2016, the minimum down payment for new insured mortgages will increase from five per cent to 10 per cent for the portion of the house price above $500,000. The five per cent minimum down payment for properties up to $500,000 remains unchanged.

Homes priced at more than $1 million by law require a minimum down payment of 20 per cent. This announcement therefore focuses on homes priced between $500,000 and $1 million.

In the Mortgage Professionals Canada (MPC) Fall Report, Chief Economist, Will Dunning discusses why raising the down payment could cause problems for the housing market, including this cautionary observation: “Rising prices have made it increasingly difficult for first-time home buyers to accumulate down payments. Increasing down payment requirements would, most likely, severely dampen housing demands from people who are financially well-qualified to make their monthly mortgage payments.”

MPC notes that the 10% requirement does represent a graduated approach while the Ministry of Finance commented that they believe this will only impact 1% of home purchasers.

In short, over 500k will involve more savings or gifted down payment purchase plus we need to have provisions for the Property Transfer Tax in BC.

I would love to have that conversation with you for your mortgage needs.

Michael James 

Learn to Love your Mortgage

CAN’T QUALIFY FOR A BANK MORTGAGE? HOW DO PRIVATE MORTGAGES WORK?

There is almost ALWAYS a mortgage solution. New to Canada? Self Employed? Maybe a few credit glitches in your past? You just need to ask the right mortgage consultant. Not everyone can qualify for bank mortgages today. It doesn’t make you a bad person, it makes you a business savvy person getting the best mortgage for your situation! With the mortgage rules constantly changing, private or alternative mortgages are becoming the only way some people can refinance or buy.

Did you know that according to a Globe and Mail report “self-employed now represent about 15.6 per cent of all working Canadians”?

There is a misconception that alternative or private mortgages are only for bad people. Some folks call it “subprime”. Don’t let the word “subprime” scare you as our lending practices here in Canada are very strict and all federally regulated.

What is Private Mortgage Financing and who uses it?

Private mortgage financing can be an excellent alternative for those that are either:
1. Self-Employed and declare little or no income
2. Micro-condos that are less than 600sqft (banks generally won’t finance these)
3. Foreign investors
4. Non-residents of Canada
5. Credit Challenged
6. Owe CRA back taxes
7. Property Taxes that are in arrears
8. People going through a foreclosure
9. Construction financing and commercial loans
10. Equity takeouts for starting a business
11. Short term financing that has is open and no penalties
12. Don’t want to refinance their 1st bank mortgage as the penalties are to high.
13. Requiring funds up to $20 million dollars

Banks and many mortgage brokers don’t specialize in private financing. It’s vital to ensure these types of mortgage files are submitted and packaged differently than a traditional bank type mortgage (Also known as A financing).

If it’s submitted without care and due diligence, you may pay a higher rate and HEFTY fees!

When you are applying for a traditional mortgage (meaning you are a typical T4 employed client, good credit and saved down payment) the CLIENT is qualified based on the PERSON first, then the property.

When you apply for private financing, the PROPERTY is qualified for the mortgage first and then a few details about the client.

The property and location, location, location is what the lender is lending on. A property in a marketable area such as Vancouver Westside, North Vancouver and West Vancouver are PRIME marketable properties that private lenders like. The risk is lower, so they can offer better rates. Certainly properties anywhere in Canada are all options for private financing, even in small communities as well. Mortgages are also available for remediated, non-remediated and legal grow op properties as well.

What about the Rates?

Valuable and marketable properties can get financing with 15-20% down, but you can expect to pay 2-3% higher rates than if you have 25% down, as there is more risk taken by the lender. The rates for a 1st mortgage today (2015) are as low as 5.75% for a strong mortgage file to 10% for a less desirable property. 2nd mortgages can range 12-15%. The bonus of course, it is you can opt to pay “interest only” and it can be fully open so you don’t have to pay the penalty to break the mortgage.

I hear there are fees?

There are almost always fees for private mortgages. This is how the broker is paid for working on your deal. A traditional bank mortgage doesn’t have fees as the bank pays the broker. Fees depend on your broker. I have seen as low as $500 to as high as 5% of the amount you’re borrowing; the average is 1% (for example: $400k mortgage would have a $4,000 fee), so good to ask this upfront and ask a few brokers that SPECIALIZE in private financing.

Having an EXIT strategy

If you get short term (1-2 year) private financing, as your mortgage broker, I want to ensure we have an “exit strategy” plan in place it have to moved to a traditional low rate mortgage soon. This is especially true if the reason for the private financing is credit, income or back taxes. We will work together to ensure this plan happens and is followed through.

What might this look like?
You want to purchase a $500,000 home in Vancouver

You’re paying fees to CHMC or another insurer with less than 20% down, so let’s look at fees in this hypothetical scenario:

With a traditional mortgage:
Purchase: $500,000 home
Down payment: 15% down – $75,000
CMHC fee: $7650.00 (built into the mortgage)
Payments per month: $1979.30 based on 2.69%, 5 year fixed, 25 year amortization
and LOTS of personal and property documents required! Here you would need excellent credit, proof of income, good job, saved down payment and weeks to close the deal.
OR
20% down or $100,000 down
$5,000 CMHC fee
Payments: $1852.81 per month.

Alternative mortgage, the simpler approach:
Purchase: $500,000 home
Down payment: 15% down – $75,000
Lender/broker fee: $8653.00 with 2% fee
Payments per month: $2271.51 per month, 6.5%, interest only, 25 year amortization.
OR
20% down – $8,000 fee
Payments: $2679.30 per month, Interest Only payments.
Next to no personal documents required to qualify

These are just estimates and ideas, but you get the idea. You’re paying a fee…one way or another.

This is just a sample…and certainly not a black-and-white scenario. Traditional mortgages qualify on strict matrix type qualifying rules, where private mortgages allow us to “think outside the box” to get your mortgage approved at the best rate for the property you are buying or refinancing. It is KEY to work with a mortgage expert that specializes in private financing and has connections and a good relationship to lenders.

There are many private lenders and their rates, fees and what they will fund vary. Contact us a Dominion Lending Centres so we can help you problem solve and find a reasonable solution that your bank can’t offer you. It’s quick and not as costly as it may seem, if it meets your immediate needs.

MOVING UP/DOWN OR ACROSS THE PROPERTY LADDER? 3 THINGS TO KNOW

Moving up the property ladder is an exciting time in your life – having clarity on how the process works is key to your success.

1. Understand the terms of your mortgage and be prepared – get a pre-approval.

Just because you already have a mortgage now, doesn’t mean you automatically qualify for a new one. Policies change all the time along with your credit score, income type/structure & current debt load, which all contribute to what your current options are.

2. Have a deposit ready

These will be the funds you will use to put a firm contract in place. These cannot come from your sale proceeds initially unless the completion date has already passed and you have received the sale proceeds. You will need to have access to this cash up front and you may not qualify to borrow it from a lender, so being pre-approved will help you plan for that.

3. Get your dates in order.

Not many people can qualify to own 2 properties at once. This means you cannot buy another home or qualify for a bridge loan until someone has REMOVED subjects on your sale. Bridge financing is required when the sale of your place completes after the completion date of your new purchase, so the sale proceeds (down payment) aren’t available until after you’ve purchased a new home. Bridge loans come at a price – one that needs to be carefully considered. They usually include an admin fee, a short term higher rate charged on the amount being bridged and additional legal fees.

At Dominion Lending Centres, we will provide you with transparent, unbiased advice with the power of choice so you can make a decision with clarity moving forward with your plans. The service is free from the initial consultation to ongoing management and optimization of your mortgage.

The math used is mind-blowing from the Big Banks when calculating pre-payment penalties on pay out before the end of term…

Proof Scotiabank is Using a Mortgage Loophole to Take Your Money

(borrowed from an industry colleague)

Have a read through and focus on the Big Bank comparisons for the same mortgage and note that a broker supplied mortgage would have a pre-payment penalty 4.5 – 6 times less!

Certainly worth a conversation don’t you think?

Let me save you $ 12,000!!!!

Yours in mortgages,

Michael

The math used is mind-blowing from the Big Banks when calculating pre-payment penalties on pay out before the end of term…

Proof Scotiabank is Using a Mortgage Loophole to Take Your Money

(borrowed from an industry colleague)

Have a read through and focus on the Big Bank comparisons for the same mortgage and note that a broker supplied mortgage would have a pre-payment penalty 4.5 – 6 times less!

Certainly worth a conversation don’t you think?

Let me save you $ 12,000!!!!

Yours in mortgages,

Michael

Borrowed from DLC Michael Hallett..

Versus (vs) – as compared to or as one of two choices; in contrast with.

At least once a day I get asked, what’s the difference between ‘this’ and ‘that’? With this in mind I put together some content that will hopefully provide some clarity in regards to  a few of the more commonly asked questions.

LAWYER VS NOTARY

Most real estate deals are fairly straightforward, both a lawyer and notary can and will prepare the documents for you. If you are buying a home, they will: conduct a title search, obtain tax information and any additional information to prepare the Statement of Adjustments. Then they will prepare closing documents, including a title transfer, mortgage, property transfer tax forms and forward them to the seller’s lawyer/notary for execution. After you sign your papers, the lawyer or notary will register the transfer, mortgage documents and transfer funds to the seller’s lawyer/notary. Sometimes there are more complicated transactions, at this point one would need to decide LAWYER or NOTARY?

If something were to go wrong with your transaction, a notary cannot represent you in court of law, unlike a lawyer. Nor can the notaries represent and guide you through a dispute process. Notary also cannot advise you on legal matters, for example, if you go to a notary to convey a real estate file and you were to ask a legal question, such as, “I think my neighbour’s fence is on my land, what should I do?” the notary cannot give you advice on what your recourse is.

With regard to the fee structure, there isn’t much of a different these days. If you are unsure of which one to use, it’s always a good idea to phone a notary and a lawyer to describe the services you need and then decide from there.

GUARANTOR VS CO-SIGNER

A co-signer is a co-owner that is registered on the title and is equally accountable for payments, while a guarantor personally guarantees the payments will be made if the original applicant defaults. However, the guarantor has no claim to the property as they’re not registered on the title. Typically a co-signer is added to a mortgage application to increase the income, which will assist with reducing the debt service ratios. Whereas a guarantor will be utilized if the applicant(s) has received past credit blemishes and needs to strengthen the file.

TITLE INSURANCE VS SURVEY CERTIFICATE

These two are slightly different but work in conjunction with one another. Title insurance is an assurance as to the state of title of any given property. In practical terms, it protects lenders and purchasers against loss or damage suffered due to survey problems, defects in title and other matters relating to title fraud. A survey certificate will typically show the lot boundaries, improvement locations and often the locations of any rights of ways or easements registered against the property. This will also assist a purchaser in determining whether any of the improvements on the property encroach on a neighbouring property or if there are improvements from an adjacent property that encroach on the subject property.

JOINT TENANT VS TENANT IN COMMON

When a property is held in joint tenancy, the situation is what I refer to as “the last man standing.” When one joint tenant dies, the entire property belongs to the remaining, surviving joint tenant(s). Only that last person can use his or her Will to give the property to someone else. Tenants in common is a different story. In this arrangement, each person owns a percentage that is registered in their name. They can then leave their share to someone in their Will or sell it (never mind the logistical problems of trying to sell one third of a house).

SWITCH/TRANSFER VS RE-FINANCE

To switch/transfer one’s mortgage, it involves moving your current mortgage from one lender to another without changing anything except for the term and interest rate, amortization remains the same. If switching lenders within the term, there will likely be a penalty for breaking the mortgage, though often the savings in moving to another lender with a better rate will substantially outweigh the penalty. Doing a switch at the end of your mortgage term will allow you to completely avoid the penalty.

In re-financing a mortgage, the borrower is also likely taking advantage of lower rates whilst at the same time accessing equity. The reasons for this could range from; debt consolidation, renovation, purchasing a vacation home, post-secondary education, investment planning and so on… Two other major differences are when one wants to re-finance, the maximum loan is 80% of the market value whereas a switch/transfer lender can surpass the 80% mark as the mortgage amount does not change. And finally, with re-financing the mortgage will need to be disbursed and re-registered with the lender (or new lender) therefore a fee will be charged. With a switch/transfer, there is a possibility that there will be no extra fees charged.

ACCELERATED BI-WEEKLY VS BI-WEEKLY PAYMENT FREQUENCY

Nobody wants a mortgage and everyone that has one wants to pay it off faster, or at least they should. Payments are income streams that lenders blend a principal and interest amount into one payment with the goal to pay more principal than interest. As one gets further through the term the inevitable shift happens from paying more interest to paying more principal (P&I).

The bi-weekly payment is basically 12 monthly payments spread out over 26 installments or every other week. For example, if your monthly payment is $2,000 your total yearly mortgage payment will be $24,000. The bi-weekly or 26 payment equivalent is $923.08 ($24,000.08), the net amount remaining unchanged. To speed up the inevitable P&I shift, one might want to opt for accelerated bi-weekly payment frequency. This is the key to shortening or reducing the life of the mortgage (amortization). The accelerated repayment plan takes a 24 payment cycle and adds on 2 more payments of the same size, for a total of 26 payments or 1 extra payment every 12 months to total 13 payments. So you are paying slightly more each year, thus reducing the life of the mortgage. Using the same example from above, if your monthly payment was $2,000, adding two extra payments to the grand total, one’s yearly mortgage payment would be $28,000, with each payment now being $1,076.92.

Obviously if you have questions, we here at Dominion Lending Centres would love to answer them for you.

Borrowed from industry source Rob McLister…

The Liberals’ new majority gives them all the power they need to influence Canada’s mortgage market. Interest rates, mortgage policy and affordable housing initiatives will all be affected.

Here’s some of what the mortgage market can expect from Mr. Trudeau’s new government:

1. Higher bond yields: Balancing the budget is not a priority for the Liberals until 2019. Trudeau is expected to go on a spending spree and bond traders aren’t keen about it. It suggests a greater supply of government debt and potentially higher long-term yields to come. That, of course, could mean at least slightly higher fixed mortgage rates than we’d otherwise see.
2. A More Hawkish Poloz: The odds just dropped for a cut in prime rate. More spending by Ottawa puts less pressure on governor Stephen Poloz to stimulate the economy with rate cuts. The implied probability of a rate hike by next October has almost doubled, from 8% yesterday to 15% as we speak.
3. Wider RRSP Access: The Liberals say they’ll open access to the RRSP Home Buyer’s Plan, particularly for homebuyers coping with significant life changes (divorce, death of a spouse, a sick or elderly family member, etc.). More access to down payment funds will prop up housing sales and home ownership slightly, and support home prices.
4. More “Affordability”: The Liberal platform includes a review of housing policy in high-priced markets. The new government will “consider all policy tools that could keep home ownership within reach.” What that means, we’ll have to wait and see. It could definitely be positive for renters and income property investors, given the Liberals have promised to “direct CMHC…to provide financing to support the construction” of new rental housing.
5. First-timer Support: Trudeau’s government will add more flexible programs for first-time homebuyers. This could mean any number of things, potentially even higher amortization limits for new buyers.
6. New Blood at the DoF: The Liberals will be installing a new Minister of Finance, who has enormous power over housing regulation. Will he or she be as hands-off on mortgage policy as the outgoing Joe Oliver? We’re guessing not. We’ll likely have an answer by the time the Liberals release their first budget next spring.

With the Bank of Canada announcement today, have you ever wondered who the Bank of Canada is and what is its role in our economy?

The Bank of Canada is the country’s central bank. Its role, as defined in the original Bank of Canada Act of 1934, is “to promote the economic and financial welfare of Canada. “

The Bank was founded in 1934 as a privately owned corporation. In 1938, the Bank became a Crown corporation belonging to the federal government. Since that time, the Minister of Finance has held the entire share capital issued by the Bank.

The Bank of Canada is not a department of the government but rather a special type of Crown Corporation. The Bank has considerable autonomy to carry out its responsibilities.

The Bank of Canada is responsible for:

• Monetary Policy – the goal of monetary policy is to contribute to solid economic performance and raising living standards for Canadians by keeping inflation low, stable, and predictable.
• Bank Notes – the Bank of Canada designs and issues bank notes that Canadians can use with the highest confidence.
• Financial System – the Bank of Canada actively promotes safe, sound, and efficient financial systems, both within Canada and internationally, and conducts transactions in financial markets in support of these objectives.
• Funds Management – the Bank of Canada provides high-quality, effective, and efficient funds-management and central banking services for the federal government, the Bank, and other clients.

The Bank of Canada was created to be the sole issuer of bank notes and to facilitate management of the country’s financial system.

By having an independent monetary institution it allows for the separation of the power to spend money from the power to create money.

Separating the central bank from the political process enables it to adopt the medium and long-term perspectives essential to conducting effective monetary policy.

The Bank carries out monetary policy by influencing short-term interest rates. It does this by raising and lowering the target for the overnight rate.

The overnight rate is the interest rate at which major financial institutions borrow and lend one-day (or “overnight”) funds among themselves; the Bank sets a target level for that rate. This target for the overnight rate is often referred to as the Bank’s key interest rate or key policy rate.

Changes in the target for the overnight rate influence other interest rates, such as those for consumer loans and mortgages. They can also affect the exchange rate of the Canadian dollar.

In November 2000, the Bank introduced a system of eight fixed dates each year on which it announces whether or not it will change the key policy rate.

The Bank of Canada does not set the prime rate; financial institutions set their own prime rates based on the cost of short-term funds, and on competitive pressures among them. The Bank of Canada influences the cost of short-term funds by setting the target for the overnight rate.

The Bank Rate is the rate at which the Bank of Canada lends funds to financial institutions. It is set at 0.25 per cent above the target for the overnight rate, which is the Bank’s key policy rate. As seen in the past, larger banks don’t always pass the discount along to their clients when the Bank of Canada lowers its bank rate.

All the information gathered here for you was gathered fromhttp://www.bankofcanada.ca/about/educational -resources/fgg/

I encourage you to go to the website or click on the highlighted links to expand your knowledge of our Canadian banking system.