Short Version:

The most important question a home-seller must ask their Broker or their banker this Spring:

‘Do I QUALIFY to port my mortgage?’

You must re-qualify to port your mortgage to a new property, and you must re-qualify under stringent new rules.

How stringent?

Long Version:

Let’s say you have impeccable credit, a $100,000 income, and bought a house with a basement suite last year – you may have a mortgage of ~ $675,000…which you qualified for in 2017.

In 2018, your new maximum mortgage amount is closer to ~$530,000.

And if rates were to move up another 0.50% you’d be capped at ~$490,000.

If rates were to move up a full percentage point ~$455,000

Either way, even with no further upward movement, the family in this example, were they to enter into a binding sale agreement without confirming their qualifications would not be able to re-enter the market at the same price point.

Key Point – Do not ask if your mortgage is ‘portable’ (99% are). Ask if you currently qualify to move your mortgage to a new property. This will require an actual application and full review.

Key Point – The federal government has created a dynamic in which qualifying rates have shifted radically, and more precisely the ground has shifted under tens of thousands of middle class Canadians feet. You have been protected from yourself, and you don’t even know it.

Key Point – Since Jan. 1, 2018, you’re subject to the new stress test. Even though you have impeccable credit, have never missed a payment, and even got a 3% raise last year – too bad.

Conclusion

Don’t list your home for sale without having something in writing from your current lender confirming that you QUALIFY to move your existing mortgage to a new property. If you have any questions, contact your local Dominion Lending Centres mortgage professional.

Written by Dustan Woodhouse

As property prices continue to rise across Canada, the conversation around “how to climb the property ladder” has made a subtle shift to “how to get on the property ladder in the first place.” Especially if you’re single.

Whereas before it was assumed anyone would qualify to buy a starter home (or condo), nowadays with increased housing prices and the government making it tougher to qualify for a mortgage through a financial stress test, becoming a homeowner isn’t a walk in the park. Qualifying for a mortgage on a single income is becoming increasingly difficult.

Unfortunately, just because you have a proven ability to pay rent on time doesn’t mean you will qualify to make mortgage payments in the same amount. So if you are looking to get into the housing market, but don’t qualify on your own, maybe you should consider co-ownership as an option!

So what is co-ownership anyway? Well, co-ownership is when more than one applicant takes on the financial responsibility of owning a property together. Co-ownership can take on many forms. Obviously owning a home with your spouse or life partner is the most common form of co-ownership, while having your parents co-sign on a mortgage is another. But for the sake of this article, let’s think past these arrangements.

Did you know that there are really no limitations with whom you can purchase a property? This is assuming they meet the lending criteria.
Maybe a brother, sister, cousin, neighbour, co-worker, friend, your mechanic, financial advisor, or some distant relative just happens to be looking to get into the housing market as well? There is a good chance that by combining your incomes together, you will qualify for a mortgage that neither of you would qualify on your own. Bringing someone else into the picture, or even a group of people, can significantly increase the amount you qualify to borrow on a mortgage. Most lenders will accept up to four applicants on a mortgage, while some lenders have even gone as far as launching products designed to make buying with friends and family easier. Buying a property with someone(s) in a co-ownership arrangement is becoming way more commonplace.

However, before making the decision to buy a house with someone, there is no doubt going to be a list of things you are going to want to work through. You will want to get everything out in the open and ask yourself questions like…

• Do I trust this person?
• Can I live with this person?
• Am I comfortable making decisions about the home with this person?
• How will conflict be managed when it arises?
• What happens if either party runs into financial trouble?
• What is the exit plan?

The more you work through ahead of time, the better chance you have at successfully co-owning a house with someone. A lot of people who purchase a property in a co-ownership agreement treat it like a business arrangement.
If you’d like to talk more about what this would look like for you personally, please don’t hesitate to contact a Dominion Lending Centres mortgage specialist. They can walk you through the process step by step and get you (and your partner in real estate) the best mortgage available to you!

Written by Kris Grasty

If you haven’t seen your credit score, you’re not alone.

Many of our clients don’t know about their credit score or even know what it is when we first meet with them. During our initial consultation, we go over your complete credit report with you. As an added bonus, we’ll even teach you how to read it.

So, how can you make sure you have a great credit score? Here are a few tips to get you started.

1. You need to have credit. It may be surprising – but your credit score goes up as more credit is available to you. We recommend at least two facilities: a credit card and a line of credit (or 2 credit cards).
2. You also have to pay your bills when they are due. That goes for your internet, cell phone and even parking tickets.
3. It also helps to start as soon as possible. The longer you have a clean record of paying your credit card, loans or other credit facilities, the better your credit becomes.
4. Finally, make sure to carry a low balance. One of the least known ways to hurt your credit is to have high utilization.

Don’t ever hesitate to contact a Dominion Lending Centres mortgage professional about your mortgage related needs when you’re buying a property anywhere in Canada.

Written by Eitan Pinsky

With changes to mortgage rules and interest rates on the rise here are some tips for your variable rate mortgage that could save you thousands.

Since 2009 the prime lending rate has shifted from a high of 6% down to 2% range remaining fairly level for the past few years before rising to a present day level of 3.45%. During that time, lenders have offered consumers high discount variable mortgage as low as 1.2% when rates were at their lowest, to current rates of 2.45 (depending on the lender and if the mortgage is insured or not).

Historically the choice of a variable rate mortgage over a fixed term has allowed borrowers to save in interest costs.

I always recommend if my clients can qualify and it makes sense for their specific situation to choose variable only if they will take full advantage of the lower rate. By setting their payment to the equivalent of the 5 year fixed rate at the time, the difference in payment goes directly to principal pay down.

Every 10% increase in payment shaves three years off the amortization of a five-year term so every bit extra matters and can make a difference.

If your mortgage is maturing in the next 90-180 days, it is time to talk to your Dominion Lending Centres mortgage professional for tips for your variable rate mortgage that could save you thousands.

You may feel the pressure to lock in to a fixed rate after the recent increases in the prime lending rate. For some this may be an option. However, I have the same advice every time someone asks me this question: It depends on your situation and we need to do a review. Take the extra time to review the current rate, remaining term of the mortgage, the new offer, how that will impact payments and your plans for staying in your home, moving and/or if this is an investment property.

For example Amy and Jake have a current balance of $300,000 on their mortgage with a variable rate at Prime minus .80% (2.65%). Current payments set at $703 bi-weekly. The mortgage matures in 24 months but they are considering to lock in for a new five-year term offered at 3.34%. New payments would be $739. They love their condo but not sure if they will stay or move in two years or not.

After a review of their mortgage we offer a second option. Keep the remaining variable rate mortgage in place for the remaining two years. Set payments at 3.34% or $739 bi-weekly.

They decide on this second option because:

• In 24 months the savings on interest is $4,000 and their outstanding balance is $4,000 less than by staying in the fixed rate
• They won’t be locked into a mortgage for another five years
• If they choose to sell before the maturity date, the penalty on a variable mortgage is only three months interest
• In two years they can either choose to stay with the same lender or move to another lender without penalty

With this strategy they don’t have to feel pressured into locking in today and they can continue to take advantage of the lower variable rate.

So if you are in a variable rate mortgage and not sure what to do. Remember my tips for your variable rate mortgage that could save you thousands.

Written by Pauline Tonkin

Mortgage Insurance Premiums. Many people know what they are- an extra cost to you the borrower. But not many people realize how they are calculated. Understanding the premium charges and how they are calculated will help lead you to making smarter down payments.

• 5%- 9.99% down payment of a purchase price is a 4% premium
• 10%- 14.99% down payment of a purchase price is a 3.10% premium
• 15%- 19.99% down payment of a purchase price is a 2.8% premium

So, that means with a $300,000 purchase price and a $30,000 down payment (10%), you would have a 3.10% premium added to your mortgage, making your total mortgage amount $270,000 + $8,370 for $278,370 total. The $8,370 being 3.10% of your original $270,000 mortgage.

Now let’s say you have a down payment potential of $60,000 and have the income to afford a $350,000 purchase price but you found one for $325,000. Using your entire $60,000 down payment (18.46%), your new mortgage amount would be $272,420, where $7,420 of it represents the mortgage insurance premium.

But what if you change that $60,000 (18.46% down payment) to say $48,750 and have a down payment of exactly 15%? Well, your premium is still the exact same as it would be with an 18.46% down payment because your premium is still 2.8% of the mortgage amount. That means you will now save $11,250 (difference in down payments), while only paying $7,735 in premiums (an increase of $315).

I don’t know about you, but if someone told me I could put $11,250 less down and it would only change my insurance premium by $315, I am holding onto that money. You now have more cash for unexpected expenses, moving allowance, furniture, anything you want. You can even apply it to your first pre-payment against your mortgage and pay the interest down while taking time off your loan. Obviously if cash is not an issue, putting the full $60,000 would be better seeing as you are borrowing less and paying less interest. However, if cash is tight, why not hold onto it and pay that difference over the course of 25 years?

Consult with a Dominion Lending Centres mortgage professional when it comes to structuring your mortgage request with a bank. It is small little things like this that make all the difference.

Written by Ryan Oake

What you need to know before you renew your mortgage could save you thousands of dollars. Is your mortgage on your home or other properties maturing in 2018?

Typically you will receive your mortgage renewal notice from your current lender 3-4 months in advance of the renewal date. Sometimes you may receive an offer for early renewal. Either way, always reach out to your Dominion Lending Centres mortgage broker to find out your options and what you need to know before your renew your mortgage.

With the new mortgage rules in effect in October/November 2016 and subsequent changes January 1st 2018 it is more important than ever to know your options before you sign a renewal.

Did you know…?

• If your current mortgage is funded before October 2016, regardless if you were a high ratio borrower or conventional borrower, the old rules for qualifying still apply
• If you want to renew your mortgage at best rates you can transfer that mortgage to another lender without qualifying under the new rules
• If you have any fees for transferring the mortgage they may be covered
• Lenders are currently offering high renewal rates as they know 65%+ of borrowers will simply sign without doing any homework
• Lenders are currently offering lower rates only after clients decline their first offer. Doesn’t seem fair does it?

Mortgage brokers have access to lots of great renewal programs from the banks, mortgage companies and credit unions.

Be informed before your mortgage renewal. Consult with an independent mortgage broker to review your financing needs for all of your properties and to set a plan well in advance of any mortgage renewal. If you are looking to make any large purchases such as investments, real estate, an automobile— know your options and the impact of these purchases on your financial situation.

Written by Pauline Tonkin

2017 was a year of change for the Canadian Mortgage Market. With the announcement of the B-20 guideline changes requiring all insured or uninsured mortgages to undergo stress testing. In addition, the removal of mortgage bundling and the continued rate rises from the Bank of Canada have led to significant changes in mortgage rates.

This raises the question: what does 2018 hold? While we cannot be 100% certain, based on predictions and summarizing stats from various corporations, we are able to put together a strong prediction of what 2018 will hold.

The Real Estate Market

As a whole, the Canadian real estate market is expected to see a 5.3% drop in national sales due in large part to the new OSFI guidelines (CREA). With this, there is an expectation of minimal growth for home prices at just 1.9% vs. the 8.5% gain seen in 2017. This is due again to the heightened stress testing procedures.

In addition, the sales of condos and townhomes are expected to increase with new developments of multifamily complexes reaching an all-time high, and the demand for smaller, more affordable houses increasing.

So, what does that mean for home prices? CMHC predicts that the average home price is to increase from a range of $493,900-$511,300 in 2017 to a range of $499,400-$524,500 by 2019.

Essentially, the market is going through a period of increased demand for condos and townhomes, leading to potential price increases. In relation to the detached home market, there will be slight price increases, but nothing compared to the growth that was seen in 2016-2017. There is an ongoing trend for homebuyers based in Vancouver and the Fraser Valley to contentedly sit by the sidelines as they save up for a larger down payment before purchasing-further increasing condo ownership and driving demand for rental properties as well.

The Economy

The Canadian Economy has been growing and surging forward through most of 2017. In the four quarters from the second half of 2016 to the first half of 2017, the Canadian Economy grew on average each quarter by 3.6%. Further, despite a slight slowdown in the second half of 2017, there was a rise in employment Canada wide, posting the annual real GDP growth over 3% in 2017. It was a substantial year for the Canadian economy in 2017 and this growth was directly seen in the real estate and housing market.

As many are aware, to stabilize the economy and ensure balance remains, the Bank of Canada began raising interest rates in 2017 and has plans to continue to do so in 2018. This rise in interest rates serves to steadily and slowly stunt the growth of the economy in Canada. Coupled with the ongoing trade disputes, the Canadian economy is forecasted to slow overall, but will still post an above-trend 2.2% of growth in 2018.

The Mortgage Market

So, what does all of the above mean for the mortgage industry and its rates? Well, with the predicted increase in rates from the Bank of Canada it is safe to say that the mortgage rates will follow.

CMHC summarized that the expected interest rate increase over the near-term horizon will bump the posted 5-year mortgage rate to lie within 4.9% and 5.7% in 2018. For 2019 that number increases to 5.2%-6.2% range*

In layman’s terms, the rates are likely to continue to rise alongside the Bank of Canada’s increases. It is important to keep in mind that with planning and budgeting these rates can easily be taken on by the average consumer. A key thing to keep in mind is that a 0.25% rate increase works out to only $13.00/100k increase in your payment. Another fact is that every lender is different in how they will calculate this change. Your mortgage product is unique and may be affected differently than another.

Since the new changes have rolled out there has been a slight decline in consumer demand. As the changes continue to take effect and the potential for more rate increases continues, it becomes more apparent we will continue to see a shift in the mortgage and real estate market.

However, by choosing to work with a Dominion Lending Centres mortgage broker you are guaranteed to work with someone who has an in-depth understanding of both the changes and the market. They will work alongside you to find the best possible solution to get you the sharpest rate.

Written by Geoff Lee

An accelerated payment is a mortgage payment that is increased slightly so that you can pay off your mortgage faster. There are two common types of accelerated payments: bi-weekly and weekly. Of the two, bi-weekly is the much more common choice because it matches with pay dates more often.

An accelerated payment works by increasing your weekly or bi-weekly payment by an amount that would have you pay one full month’s payment extra per year.

Accelerated payments are a great way to start paying off your mortgage, but they actually do not have much of an impact on the interest you will pay. Banks and mortgage professionals use this term to make borrowers think they are paying off their mortgage faster, but the amount of interest saved over the course of your term is minescule.

There’s nothing wrong with accelerated payments, but they are only part of the puzzle. Please contact a Dominion Lending Centres mortgage professional to learn more.

Illustration:
If your payment is $1,000 per month, you pay 12 months per year, which will equal $12,000 of payments that year.

Now, if you pay semi-monthly, or every half month, you pay $500 per payment, for a total of $12,000 per year at 24 payments.

Bi-weekly payments are 26 payments per year with $461.50 per payment.

However, accelerated bi-weekly payments use the semi-monthly payments of $500, 26 times. This means that you end up paying $13,000 over the course of the year, or one extra monthly payment.

The Bare Bones

If all you do is an accelerated payment, your mortgage payoff is stunted compared to what is available. Across Canada, due to the fact that mortgage sizes are now very high, paying off a mortgage should be more of a priority.

Written by Eitan Pinsky

Is your mortgage coming up for renewal this year?

There is a good chance that you or someone you know has a mortgage coming due. Some 47% of Canadians, almost one out of every two households, that currently have financing in place will mature within the next 12 months with a major lender in Canada.

Here are a couple simple rules to follow if you, a friend, a family member or colleague are renewing your mortgage this year.

• DO NOT just simply sign the renewal letter that comes in the mail.
• INVESTIGATE your options.

70% of all mortgagors simply sign the renewal letter that comes in the mail. You would think that because you have been with the current lender for so long that you would receive the BEST rate out there. NEWS FLASH, that is 100% false. Remember, lenders are in business of making money for their shareholders. Your current lender has done their homework, you should do yours. They know that most of the borrowers will sign and send back the form for ease and convenience. We are lazy by nature and we possess too much trust. As finance consumers, there are scenarios I’ve seen where we are leaving 20-40 (0.20% – 0.40%) basis points on the table.

I recently read an article online that indicated the average mortgage amount in the Metro Vancouver area was $438,716 for 2016. Let’s round that amount to $450,000 for ease of calculation. For every 0.25% difference the mortgage payment increases (or decreases) $13 per every $100,000 extended. If your current lender offered you a rate 0.25% higher than another lender then this scenario would yield an annual increase of $936. Are you able to invest 4-5 hours of your time to save that kind of money? Heck ya you can! That is $187.20 – $234 per hour.

Renewing with your existing lender may or may not be your only option. When 47% of you out there receive the renewal letter in the mail this year, I have 936 reasons why I would strongly advise you to reach out to a Dominion Lending Centres mortgage specialist to discuss ALL your options – switching lenders to save money and/or leveraging equity for financial planning purposes.
Here is an example of how I just re-financed my home to access my equity. We were able to obtain a HELOC (Home Equity Line of Credit) mortgage product from a major Canadian charter bank.

• Current residence appraised at $1.15MM.
• Current mortgage balance, $445,000.
• Maximum loan limit, $920,000 (80% of market value: 1,150,000 x 80%).
• Opted to secure the current balance into a variable rate mortgage
• The equity of $475,000 was set-up access from a line of credit
• These clients now have access to funds for any future needs: renos, emergency, investment opportunities, post-secondary education for their children.

But while a HELOC allows for product diversification and long-term planning, it is not for everyone. It can be a bad idea if it’s just used as access to easy cash. One needs to possess high self-discipline, as the funds are extremely accessible. A HELOC is also not available to all homeowners as there must be greater than 20% equity in the home before a lender will consider it.

With 13 modifications to the lending policies since 2006 the time to plan is now. If I were to attempt the same re-financing maneuver today to leverage equity I would qualify for 20% less ($95,000) or $380,000. This would be one less rental property added to the portfolio. Before anymore changes happen, you should consider accessing your money today.

Written by Michael Hallett