You may have seen advertisements warning you to be aware of phishing schemes and other scams. In the past week, I have received fraudulent emails claiming to be Shaw Cable, RBC and even the FBI. These are easy to spot because of mistakes in the letterhead, spelling mistakes and formal language that would fit in well in the 19th century. What is not as well-known is mortgage fraud. Fraudulent mortgages cost lenders every year. These losses result in higher costs and interest rates for consumers – so fraud ends up costing all of us money. What types of fraud should you be aware of?

Fraud for Shelter  – this is when an applicant gives false information concerning their income or job status in order to obtain a mortgage to buy a home. While they may plan on paying off the mortgage in full this is still fraud. Another form of fraud is when you sign a declaration at the lawyer’s office saying that you will be living in the property when you have no intention of living there.
Fraud for Profit – a friend says they know someone who needs to buy a house now but their credit won’t be satisfactory for another 3 or 4 months. They ask you to say you are the buyer and provide your credit history in exchange for $5,000 for your trouble. The problem for you the “straw buyer” is when they flip the home and run off with the profits leaving you on the hook for a mortgage and having to deal with legal authorities as well.
Foreclosure Fraud – a fraudster approaches a homeowner who is in financial trouble with a debt-consolidation scheme that involves the owner paying an upfront fee and signing over title to the home to the fraudster.
• the home owner receives cash from the fraudster to address immediate bills and remains in the home paying “rent” or “consolidated debt payments” to the fraudster
• the fraudster pockets all of the owner’s payments and ignores bills and taxes, which leads to debt-collection procedures against the owner
• the fraudster may re-mortgage or sell the property to an accomplice, leaving the owner without the property title, homeless and still in debt

Title Fraud – This is when someone forges your identity and either sells your property or takes out a mortgage on the property. Buying title insurance for a home under $500,000 can cost you between $50 and $175 and covers any legal fees you have to pay to regain your property.

If you have any questions, contact a Dominion Lending Centres mortgage broker near you.

Written by David Cooke

Recently I was finishing up a mortgage with a young couple who had just had a beautiful baby girl. I brought up the topic of mortgage and life insurance as well as getting a will written up. The response from the husband was that it was such a morbid topic and a real downer when they were excited about their new home.

The fact is that people, even young people die from car accidents, cancer, and even accidental drownings while on vacation. It’s a topic everyone avoids but it needs to be addressed, particularly when you are taking a major financial step like buying a home. What would happen to your spouse if you died suddenly with your mortgage not paid off?

I spoke to a major Canadian mortgage company about this topic.
I asked if the surviving spouse would be kicked out of the house. “ When someone dies who was on our mortgage we want to know right away . We ask for a copy of the death certificate so that we can take them off title. We will let the mortgage run it’s term if payments are being made on time. Many surviving spouses receive a life insurance policy and can pay off the mortgage or at least keep up the payments. We will renew the mortgage if payments are up to date. However, should the surviving spouse want to refinance the mortgage they would have to re-qualify for it.”

So what can you do to make life easier for your family should you die with a mortgage on your home? The easiest option is to have sufficient life insurance to ensure that they can keep up payments or to pay off the mortgage. Dominion Lending Centres mortgage professionals all offer MPP (Mortgage Protection Plan), a life insurance policy that pays off the mortgage in full in case of the death of the policy holder. The payments never go up because the mortgage balance is going down as the insured person gets older.

Another option is term insurance or whole life insurance. Speak to your favourite insurance broker about this.
Finally, if the surviving spouse is 55 or older, and they can’t afford to maintain the mortgage, a reverse mortgage may be the solution. No payments are made on the principal unless you decide you want to. When the widow(er) moves out the sale of the home pays off the mortgage and interest.

While it can be a “downer” to talk about death and disability, a responsible home purchaser needs to have the conversation with their Dominion Lending Centres mortgage professional at the time of their purchase, refinance or renewal. The sudden death of a family member causes enough grief for the survivors, why add to their misery. As the old commercial used to say “Why wait for spring, do it now”.

Written by David Cooke

The reverse mortgage market in Canada has been increasing at a phenomenal rate over the last few years.

In fact, for HomeEquity Bank, the provider of the CHIP Reverse Mortgage, growth was well over 40% in August, bringing Canada’s outstanding reverse mortgage balance to $3.03 billion.

Compare this to the latest growth in lending for new and renewal mortgages at just 4.1% – this is the lowest since May 2001. Much of this slow-down in mortgage growth is a result of the introduction of the new mortgage stress test, which has made it harder for borrowers to qualify for the mortgage they need, as well as a significant jump in mortgage interest rates.

So, how is it that reverse mortgages are growing so much faster than conventional mortgages? And who is driving this growth?

The reverse mortgage solution and why it matters to you

The CHIP Reverse Mortgages allows you to tap into the equity of your home is available to Canadians aged 55 and over. The key difference from a regular mortgage is that borrowers don’t have to make any regular repayments. This means they can have a considerable injection of cash without having to pay off what they owe until they sell or move out of their home.

The number of Canadians over 65 has jumped by 20% since 2011, so the potential market for reverse mortgages has grown enormously in just a few years.

Life expectancy is now at almost 83 and more people are living into their 90s and beyond 100 than ever before. Retirement can now easily last 20 years or more, which can put a big strain on retirement savings. Many retirees are therefore having to look at ways to supplement their retirement income.

There are many reasons for taking out a reverse mortgage. These include paying off high interest debt, maintaining a good standard of living, improving or retrofitting their home and helping family out financially.

Canadians prefer to stay in their homes during retirement

A recent Ipsos/HomeEquity Bank survey revealed that a staggering 93% of Canadians aged 65+ are determined to stay in their homes during retirement, rather than downsize or move in with relatives or into a care home.

Almost 70% said that maintaining their independence was the most important reason for staying at home. Others also want to stay close to their family, friends and community.

Downsizing is an increasingly unpopular option

While downsizing has often been seen as a key strategy for accessing some home equity, its popularity is declining. Another Ipsos survey revealed that 48% of homeowners don’t plan on downsizing and that 39% are skeptical that downsizing would actually save them any money. People who regretted downsizing said the key reasons were missing their old neighbourhood, family and friends, which can play a big role in emotional well-being in your later years.

Nevertheless, 31% of retirees say they need to cash in on their home’s equity to live comfortably in retirement. So, if they don’t want to downsize, what are their options?

How the reverse mortgage helps out retirees

The introduction of the mortgage stress test has made it even harder for retirees to qualify for the kind of mortgage they need to effectively improve their finances.

Even those that do qualify often struggle to make the monthly payments required from a conventional mortgage or line of credit. A reverse mortgage provides them with tax-free cash that enable retirees to live the retirement they want, with no negative impact on their monthly income. For many retirees, a reverse mortgage is the only option available to them that provides them with the finances they need without regular required payments.

If you would like to find out more about the CHIP Reverse Mortgage and how it could help improve your retirement finances, contact your Dominion Lending Centre mortgage professional.

Written by: Rebecca Burgum

Buying a home is usually the biggest purchase most people make and there are a lot of factors to consider. Our job is to provide you with a much information (as you can handle!!) so you make the best decision based your particular situation.

The 3 “rules of lending” focus on determining the maximum size of mortgage that can be supported by your provable (what you paid taxes on) income.

You need to consider two affordability ratios:

Rule #1 – GROSS DEBT SERVICE (GDS) Your monthly housing costs are generally not supposed to exceed 36-39% of your gross monthly income. Housing costs include – your monthly mortgage payment, property taxes and heating. If you are buying a condo/townhouse, the GDS will also include ½ of your strata fees. The total of these monthly payments divided by your “provable” gross monthly income will give you your Gross Debt Service.
Mortgage payments + Property taxes + Heating Costs + 50% of condo fees / Annual Income

Rule #2 – TOTAL DEBT SERVICE (TDS) Your entire monthly debt payments should not exceed 42-44% of your gross monthly income This includes your housing costs (GDS above) PLUS all other monthly payments (car payments, credit cards, Line of Credit, additional financing, etc.). The total of all your monthly debts divided by your “provable” gross monthly income will give you your Total Debt Service.
Housing expenses (see GDS) + Credit card interest + Car payments + Loan expenses / Annual Income

What about the other 56% of your income?? This is considered to be used up by ‘normal’ monthly expenses including: taxes, food, medical, transportation, entertainment etc.)

Rule #3 – CREDIT RATING Everyone who will be on title to the property will need to have their credit run. Your credit bureau is important because it shows the lenders how well (or not) you have handled credit in the past. This gives them an indication of how you will handle credit in the future, and will you be a good risk and make your mortgage payments as promised. If you handle credit well, you will have a high Credit Score and get the best interest rates from the banks/lenders. If you have not handled credit well, and have a poor credit score, you will either be charged a higher interest rate or your application will be declined.

If you have any questions, contact a Dominion Lending Centres mortgage professional near you.

Written by Kelly Hudson

This post applies if you are taking a new mortgage, whether it’s for a purchase, refinance, or renewal. The variable remains the main contender.

But what about all the economists saying if you are currently in a variable rate mortgage then you should rush to ‘lock in’?

You mean the economists that are employed by profit driven shareholder owned institutions that directly benefit from your locking-in (banks) via instantly increased profit margins and massively higher (up to 900% higher) prepayment penalties that 2/3 mortgage holders will trigger?

A bit biased, that crowd.
Also they are generalists, they’re not specialists.

But what about independent real estate experts?

While these experts may have their finger on the pulse of many facets of the real estate market, many remain totally unaware of how exactly mortgage prepayment penalties are calculated, and just how likely you are to trigger them.

Also generalists, are unaware of many nuances of mortgage products.

So what’s my game?

I’ve never really had game, so to speak. And I don’t stand to profit from your locking in, or from your staying variable. In fact as I type this on a stunning day I’m wondering just what I’m doing in my office at all.

I’m just a Mortgage Broker offering an opinion. An opinion that reflects my personal policy, an opinion shaped through 25 years of experience with my own mortgages, an opinion based on 11 years of experience with 1,673 client’s mortgages.

I’ve seen a few things, mortgage specific things.

I’ve watched 2/3 of my clients break their mortgages and trigger penalties. Almost every single one of them a small and relatively painless penalty thanks to staying variable.

But what about these rising rates?

If you are currently in a Prime -.65% to Prime -1.00% variable then to lock-in would be to inflict an immediate rate hike on yourself that might take the government another 12-18 months to pull off… if they pull it off.

Stay variable.

If you are in a Prime -.35 or shallower mortgage, we should discuss restructuring that into a Prime -1.00% mortgage and reducing your rate by .65% or more.

Staying variable.

My crystal ball says yes, perhaps another two or three 0.25% hikes through 2019, but at that point the odds favour (heavily) an economic contraction that will in turn trigger a corresponding reduction in interest rates.

It is my theory, and that of others smarter than I, that the fed is pushing rates up aggressively to beat said economic contraction, because they want to have the tool of ‘reducing interest rates’ back in their toolbox when the rainy days come. And we are overdue for stormy economic times. And when those times arrive it will not be prudent to be locked-in.

In short, life is variable – your mortgage should be as well. If you have any questions, contact your local Dominion Lending Centres mortgage professional today.

Written by Dustan Woodhouse