In some markets, it can take a long time to sell a property. An option available to some sellers is the Rent-to-Own sales method.

If you have someone interested in purchasing your property but they can’t obtain a mortgage either because they don’t have a down payment saved or their credit score is too low, this can be way to purchase a home. Usually the agreements run for 2 – 3 years.

A sales agreement is signed which states what the tenant and future owners are going to pay as rent while they save up a down payment and /or improve their credit score. The agreement has to state how much of their monthly payment is going towards the down payment. They also have to be paying market rents. In addition, the agreement must state that if the deal is cancelled the purchasers will get their down payment funds returned to them.

The reason that this must be stated in the agreement is that the mortgage insurers like Genworth and CMHC stipulate these terms must be in the agreement before they will approve a mortgage.
What are the pros and cons of this type of an agreement? The pros are that the tenants will maintain the property and not abuse it as they want to purchase it. The seller gets steady income while the buyer is saving for the purchase. The con is that as the price is determined in advance – radical changes to the local housing market may mean that the purchaser will get a great deal at the end of the agreement or walk away if the market drops significantly.

If you are considering this option, consult with a Dominion Lending Centres mortgage professional before you sign an agreement. They can determine if it will be valid with the mortgage companies and insurers before you’ve spent a cent.

Written by David Cooke

Do you need to get a current value of your property? Then you are going to need an appraisal.

Banks and other lending institutions want to know the “current” market value of your home before they consider loaning money on the property. An appraiser checks the general condition of your home and compares your home to other similar homes which have recently sold in order to define a comparable market value for your home.

Here are 7½ tips that can help you get top current market value.

Short version – Prepare your home as if it was going to be sold!!

Long version… If a picture is worth a thousand words, think what kind of story the pictures from your home are telling?

In the world of mortgages, lenders seldom set foot on the property before making a loan decision.

Instead, they rely on their trusted list of approved appraisers. All a lender usually gets is the appraiser’s pictures of your property and their comments about how your home was appraised.

Tip #1 – Clean up. The appraiser is basing the value of your property on how good it looks. Before the appraisal, prepare your home as if you’re selling it. Clean and declutter every room, vacuum, and scrub. Do whatever you can to make your home as presentable as possible.
Tip #2 – Pay attention to curb appeal. An appraisal is all about first impressions. And the very first one the appraiser gets is when they walk up to your property. Spend an hour or two making sure the outside of your house, townhouse or condo is warm and welcoming.

Tip #3 – The appraiser must be able to see every room of the home, no exceptions. Refusal to allow an appraiser to see any room will be noted in the appraisal can be a game stopper. There are times when it is not appropriate for the appraiser to take pictures of certain things and appraisers and lenders understand this, but refusal to grant access could kill your deal.

Tip #4 – Make a list of upgrades and features. It’s important that the appraiser is made aware of any updates you’ve made, especially those which are hidden, like new plumbing and electrical. If possible, give the appraiser this list. That way they have a reference as to what has been updated and how recent or professional that work was done.

Tip #5 – If you need to spend to update, be prudent. Many people think “bathrooms and kitchens” are the answer for getting high prices on home value. They aren’t. First, consider that kitchen and bathroom remodels can be some of the priciest reno costs. For that reason, it may be more prudent to spend a bit of money, for just a bit of updating. Paint, new flooring, new light or plumbing fixtures don’t break the bank, but can provide a dramatic impact and improve your home’s value.

Tip #6 – You know your neighbourhood better than your appraiser does. Find out what similar homes in your neighbourhood have sold for. Your property might look like one down the street, but if you believe the value of your property is worth more, let them know why.

Tip #7 – Lock up your pets. I’m sure most appraisers like pets, but some may be put off by your cat rubbing against their leg or the dog barking or following them around.

Tip #7½ – One last tip – don’t annoy the appraiser with questions and comments and follow them around. Instead, simply be prepared to answer any of their questions and, if you do have concerns or queries, wait until they’ve completed their viewing of the property, then ask.

Mortgages are complicated, but they don’t have to be… Engage a Dominion Lending Centres mortgage expert!

Written by Kelly Hudson

Currently, all borrowers in Canada need to qualify for a new mortgage at the current Bank of Canada Benchmark Qualifying Rate or at their approved mortgage interest rate plus 2.0%, whichever is higher.

For more than a year, this Bank of Canada Benchmark Qualifying Rate has been 5.34%. Now, for the first time in 3-years, the Bank of Canada has decreased that Qualifying Rate to 5.19%, a 0.15% decrease.

What does this mean?

Well, this Bank of Canada Qualifying Rate is essentially a bank’s Stress Test Rate. If a borrower has an annual gross income of $60,000, they can qualify for a $265,000 purchase price with a 10% down payment at a 5.34% qualifying rate.

Change that qualifying rate to 5.19%, that same borrower qualifies for a $269,000 purchase price at 10% down payment. This is a $3,700 increase in borrowing ability.

A borrower with $80,000 of gross annual income and a 20% down payment qualifies for a $455,000 purchase price at a 5.34% Bank of Canada Qualifying Rate. Change it to 5.19%, it increases to $462,000. A $5,600 increase in borrowing ability.

1.5%. That is the increase borrowers now have in their borrowing ability.

Ironic part of all these calculations, the stress test was implemented to protect consumers against rising interest rates. Their concern was that borrowers would not be able to cover their monthly payments when they came up for renewal.

Highest 5-year interest rate since January 2010? 3.79%.

Highest 5-year fixed interest rate in the past 5-years? 3.24%.

Last time someone had to pay an interest rate above 5%? For one month in 2009 and before that, summer of 2008.

Food for thought! If you have any other questions regarding the Bank of Canada and mortgage Stress Test rules, please reach out to Dominion Lending Centres mortgage professional today.

Written by Ryan Oake

You may have noticed that there are many different terms for those of us who work in the mortgage industry besides “broker”.
Mortgage: specialist, expert, advisor, associate, officer, etc. I just want to clear up some potential confusion with all these monikers.
There are 2 main categories that these fall in to. Those that work for a bank to sell mortgage products available from that bank.
The other is for those like myself that work within a mortgage brokerage that has no direct affiliation with any one bank.
Each mortgage brokerage has agreements in place with multiple banks and mortgage lenders to be able to submit mortgage applications for consideration.
There are of course obvious differences between these but some may not be quite so apparent.

Mortgage Brokerage
All those working in the mortgage brokerage industry must be licensed by a provincial government agency, in Saskatchewan it’s called the Financial & Consumer Affairs Authority (FCAA).
While every province has their own set of guidelines, there are 3 different types of licenses offered by FCAA: mortgage associate, mortgage broker & principal broker.
The mortgage associate and broker are very similar as both advertise themselves to obtain clientele, work directly with the clients, mortgage lenders, mortgage insurers, realtors and lawyers in the service of their clients. The key difference is that an associate must work under a supervising mortgage broker to ensure they remain in compliance with FCAA regulations.
Each mortgage brokerage will have a principal broker (aka: broker of record) that oversees the operations of the brokerage as well as all the associates and brokers within the brokerage.
Most all those working in the mortgage broker industry are commission based. Our income is derived from the mortgage lenders that we submit mortgage applications to.

In order to apply for a license as a mortgage associate, applicants must complete an approved mortgage associate education course and provide a current criminal record check along with the required application documents.

Application for a license as a mortgage broker are the same as for an associate with the addition of a previous experience requirement.
The applicant must have been licensed as a mortgage associate for at least 24 of the previous 36 months.

In addition to annual applications for renewal, licensees must also:

• Purchase and remain in good standing with professional errors and omissions insurance
• Complete FCAA approved annual continuing education courses
• Provide FCAA auditors access to mortgage files for review whenever requested
• Advise FCAA of any changes to brokerage or contact information
• Immediately advise FCAA of any offences under the criminal code (other that traffic offenses)

Bank Branch Mortgage
Those that work in mortgage lending for a bank are normally paid by the hour or are salaried and may have a performance bonus structure.
Entry level positions do not require any education beyond high school. Training is provided on the job by the employer with supervision by the branch manager and more experienced staff.
There are no licensing requirements by any provincial or federal governing body and errors and omissions insurance is not required.
Many banks have mobile mortgage staff that may or may not conduct business within the branch and are often paid on a commission basis rather than hourly or salary.

If you have any questions, contact your Dominion Lending Centres Mortgage Broker near you.

Written by Kevin Carlson

For most people, your personal credit score and how a credit score is calculated are complete mysteries. How can you be expected to play and be successful if you aren’t even told the rules of the game? There are things borrowers can do to improve their score so they can access better mortgage products and save thousands of dollars, or qualify for their wonderful home when they otherwise might have trouble. Let’s stick handle through just some of the key things you should know about managing your credit score.

Amount owed and utilization accounts for 30% of your score. There are a lot of people that end up with high balances on their credits cards and struggle to meet the payments each month. If they manage to pay off their credit cards without seeing a mortgage broker to consolidate their debts, often the immediate response is to close the accounts. A better response is to cut up the cards and delete the numbers from your computer and devices and keep the accounts open. You want any remaining outstanding balances to be less than 75% of your total combined credit available, and if they are less than 35%, even better, because this keeps your utilization of available credit low and increases your credit score. Types of credit and the number of different credit products accounts for 10% of the score, so this is another reason you want to keep those accounts open. Cell phone providers are now reporting to the agencies that publish credit scores as well.

In some parts of the world where credit products are not well established, a borrower’s credit is evaluated based solely on how they have managed payments on their cell phone bills. It’s important to pay your cell phone bills on time; we’re all busy, so setup automatic payments to ensure a payment is not missed. My last word of advice for today is to monitor your credit score by purchasing your own credit report each year for about $25 so you know your score and to ensure the report is accurate. This will help you stay within the boundaries of the game.

There is a lot more to managing a credit score than I can get into in this short blog. If you would like to know more, contact me or your local Dominion Lending mortgage broker. We can provide advice to help you manage your credit score and put you in a better position to qualify for a mortgage with better rates. Know the rules of the game, plan ahead for your home financing, and play SMART.

Written by:  Todd Skene

While a home purchase agreement may seem simple and straight forward, there are many differences that you can encounter that can be a big surprise to first-time homebuyers. While you expect the date of possession and the full purchase price to be outlined in the agreement, there are items that you may not be aware should be included.

New builds vs existing homes

If you are buying a newly constructed home, there are quite a few differences between what you get in an existing home.
Legal fees – often home builders will include the legal fees in the purchase price. You should be aware that the law firm that will provide the service is the builder’s lawyer. Should a legal dispute develop, they will take the side of the builder and you will have to find your own independent legal counsel. In fact, if you can afford it, you should consider getting your own lawyer. The $1,200 savings could end up costing you more in the long run.
You should be aware that the show home that you have visited usually has numerous upgrades. I know that when I purchased my first new home I assumed that the bathroom rough-ins in the basement were standard, only to find out later that this was an upgrade. Retro fitting plumbing pipes is a costly venture.
You should also be aware that landscaping, fences and window coverings are not usually not included in the purchase price. Double check to see if the triple-pane windows on the show home are standard or an upgrade. Hardwood floors and basement development are usually an upgrade as well.

Existing homes

When you are buying an existing home, you will find that the window coverings, fences and landscaping are included in most cases. The window coverings should be included in the offer to purchase contract.
Something that may look like it’s supposed to be there but the seller may want to take with them is the hot tub and storage shed. Don’t assume that these items are included. The legal fees are never covered in an existing home sale.

Finally, from a mortgage standpoint, you should be aware that if you are purchasing an acreage or a large property with several outbuildings, your mortgage lender will cover the cost of the home plus one out building and up to three acres of land. If there’s a garage , barn and workshop usually the garage will be included in what the mortgage company will cover but not the smaller out buildings. Check with your Dominion Lending Centres mortgage professional before you make an offer on a property like this.

Written by David Cooke

First thing I would like to say about home insurance- this is not what we specialize in. We are experts when it comes to brokering mortgages, not determining what type of home insurance would be best suited for you. That being said, there are 3 key topics we would like people to be aware of when it comes to home insurance on condos.

Building Coverage Versus Unit Coverage

First, the strata or condo insurance that your condo building has in place protects the building as a whole, not your individual unit. Any damage caused by your unit or a neighboring unit is most likely going to need to come through your own personal home insurance coverage and is not covered by the strata’s. Water leaks being a big one, as well as home damage by a guest or visitor, robbery or theft.

Deductibles

Second, your strata buildings insurance usually has a deductible. This deductible can sometimes be 10’s of thousands of dollars and you will need to pay that in order to have your portion of the strata insurance kick in. This usually happens when their is a catastrophic fire, earthquake, or massive damage to the strata building itself. Deductibles can be a big blow to any savings you may or may not have and a lot of personal home insurance polices will cover that entire deductible.

Injury and Renters

If you have tenants, frequent guest, or long term visitors, you need personal home insurance. If someone injures themselves inside of your condo unit and you are found to be negligent, they have the ability to sue you and the buildings strata insurance will not cover personal injury claims.

When we review documents with a client, we also recommend that our clients reach out to someone who can offer home insurance. It is a free conversation that helps clients fully understand any potential risks that may come from them owning their new home. Home insurance is an inexpensive way to help protect you and your home, to find out more information feel free to reach out to a Dominion Lending Centres mortgage professional near you.

Written by Ryan Oake

Buying a home is one of the most important financial decisions you will make.

It’s common for a first-time homebuyer to be overwhelmed when it comes to real estate industry jargon, so this BLOG is to help make some of the jargon understandable.

To help you understand the process and have confidence in your choices, check out the following common terms you will encounter during the homebuying process.

1. Amortization – “Life of the mortgage” The process of paying off a debt by making regular installment payments over a set period of time, at the end of which the loan balance is zero. Typical amortizations are 25 years or if you have over 20% down payment – 30 years.
2. Appraisal – An estimate of the current market value of a home. A property is appraised to know the amount of money that a lender is willing to lend for a buyer to buy a particular property. If the appraised amount is less than the asking price for the property, then that piece of real estate might be overpriced. In this case, the lender will refuse to finance the purchase. Appraisals are designed to protect both the lender and buyer. The lender will not get stuck with a property that is less than the money lent, and the buyer will avoid paying too much for the property.
3. Closing Costs – Costs you need to have available in addition to the purchase price of your home. Closing costs can include: legal fees, taxes (GST, HST, Property Transfer Tax (PTT) etc.), transfer fees, disbursements and are payable on closing day. They can range from 1.5% to 4% of a home’s selling price.
4. Co-Signer – A person that signs a credit application with another person, agreeing to be equally responsible for the repayment of the loan.
5. Down Payment – The portion of the home price that is NOT financed by the mortgage loan. The buying typically pays the down payment from their own resources (or other eligible sources) to secure a mortgage.
6. Equity – The difference between the price a home could be sold for and the total debts registered against it (i.e. mortgage). Equity usually increases as the mortgage is reduced by regular payments. Rising home prices and home improvements may also increase the equity in the property.
7. Fixed Interest Rate – a fixed mortgage interest rate is locked-in and will not increase for the term of the mortgage.
8. Gross Debt Service Ratio (GDS) and Total Debt Service Ratio (TDS)
   a) GDS – Typically mortgage lenders only want you spending a maximum 35-39% of your gross income on your mortgage (principle & interest), property taxes, heat and 50% of your strata fees.
   b) TDS – typically, lenders want you spending a maximum 39-44% of your gross income on your GDS – PLUS any other debt obligations you have (credit card debt, car payments, lines of credit & loans).
9. High-ratio mortgage / Conventional Mortgage – a high ratio mortgage is a mortgage loan higher than 80% of the lending value of the home. A conventional mortgage is when you have more than 20% down payment. In Canada, if you put less than 20% down payment, you must have Mortgage Default Insurance (see below) and your mortgage affordability (GDS & TDS) is “stress tested” with the Bank of Canada’s qualifying rate (currently 4.64%).
10. Interest Rate – This is the monthly principal and interest payment rate.
11. Mortgage – A legal document that pledges property to a lender as security for the repayment of the loan. The term is also used to refer to the loan itself.
12. Mortgage Broker – A professional who works with many different lenders to find a mortgage that best suits the needs of the borrower.
13. Mortgage Default Insurance – Is required for mortgage loans with less than a 20% down payment and is available from Canadian Mortgage & Housing Corp. (CMHC) or 2 other private companies. This insurance protects the lender in case you are unable to fulfill your financial obligations regarding the mortgage.
14. Open / Closed Mortgage
    a) An open mortgage is a flexible mortgage that allows you to pay off your mortgage in part or in full before the end of its term, because of the flexibility the interest rates are higher.
    b) Closed mortgages typically cannot be paid off in whole or in part before the end of its term. Some lenders allow for a partial prepayment of a closed mortgage by increasing the mortgage payment or a lump sum prepayment. If you try and “break your mortgage” or if any prepayments are made above the stipulated allowance the lender allows, a penalty will be charged.
15. Pre-Approval – A lender commits to lend to a potential borrower a fixed loan amount based on a completed loan application, credit reports, debt, savings and has been reviewed by an underwriter. The commitment remains as long as the borrower still meets the qualification requirements at the time of purchase. This does not guaranty a loan until the property has passed inspections underwriting guidelines.
16. Refinance – Refinancing is the process of replacing an existing mortgage with a new one by paying off the existing debt with a new, loan under different terms.
17. Term (Mortgage) – Length of time that the contract with your mortgage including interest rate is fixed (typically 5 years).
18. Title – The documented evidence that a person or organization has legal ownership of real property.
19. Title Insurance – Insurance against losses or damages that could occur because of anything that affects the title to a property. Insurance Title insurance is issued by a Title Company to insure the borrower against errors in the title to your property.
20. Variable Rate Mortgage or Adjustable Rate Mortgage (ARM) – A variable mortgage interest rate is based on the Bank of Canada rate and can fluctuate based on market conditions, the Canadian economy. A mortgage loan with an interest rate that is subject to change and is not fixed at the same level for the life of the loan. These types of loans usually start off with a lower interest rate but can subject the borrower to payment uncertainty.

Written by Kelly Hudson

There are several different ways a borrower can qualify for a mortgage when it comes to their income. One of the most common ways is known as income qualified. All of the following methods of employment income are under the income qualified umbrella:

1. Annual salary income employees
2. Full time employees working guaranteed weekly hours
3. Part time employees working guaranteed weekly hours
4. Auxiliary/On-call employees with 2-yr history at same employer
5. Commission Sales who have 2-yr history in same job/industry
6. Employees earning gratuities who have claimed over 2-yr history
7. Contract employees with 2-yr history at job/industry

There are a couple more types of employment that may fall into this category, but for the most part, these are the types of borrowers whose mortgage application is going to be done using income qualifying.

When it comes to the first 3, a borrower’s income is paid by a business in which they generally do not have any interest/ownership in. This means, an human resources representative or a supervisor can write a letter of employment stating the weekly guaranteed hours, the guaranteed hourly pay rate, the start date, and the employee’s position. The lender will then use this letter, a most recent pay stub, as well as verbally confirm the letter with the employer to verify a borrower’s income. This is how a borrower who works guaranteed hours or salary has their income verified and qualified on a mortgage application.

For numbers 4 to 7, lenders and mortgage brokers will verify and qualify a borrowers income a little differently. Because an employer does not guarantee hours or income, we need to see that there has been at least a 2-year history making the same amount. This 2-year history will usually need to be with the same employer and will need to be documented on your personal income tax returns to the Canadian Revenue Agency. The income amount on your line 150 of your T1 General Tax Returns for the past 2 years are added together and then divided by 2. The amount you get is the income you are allowed to use on your mortgage application and this is then verified by a letter of employment stating you have in fact been an employee there for more than 2 years, your are currently working there, your position, as well as a pay stub showing year-to-date income that is comparable to your 2-year average given the month you are in.

The same process would be used for those who earn over time or bonuses, claim tips, or work part time with two jobs. If you have any questions, contact a Dominion Lending Centres mortgage professional near you.

Written by Ryan Oake