We know – more changes?! How can that be! With this ever-changing landscape, mortgages continue to get more complicated. This next round of changes is predicted to take affect this coming October 2017 (date not yet available). These new rules contain three possible changes, the most prominent being the implementation of a stress test for all uninsured mortgages (those with a down payment of more than 20%). Under current banking rules, only insured mortgages, variable rates and fixed mortgages less than five years must be qualified at a higher rate. That rate, of course, is the Bank of Canada’s posted rate (currently 4.84%, higher than typical contract rates). Going forward, it will be replaced by a 200-basis-point buffer above the borrower’s contract rate. (source)

The other proposed changes include:
• Requiring that loan-to-value measurements remain dynamic and adjust for local conditions when used to qualify borrowers; and
• Prohibiting bundled mortgages that are meant to circumvent regulatory requirements. The practice of bundling a second mortgage with a regulated lender’s first mortgage is often used to get around the 80%+ loan-to-value limit on uninsured mortgages.
These two proposed changes are minor, and would only affect less than 1% of all mortgages in Canada. The main one, the stress testing, will have a far greater impact.

Why is this happening?

You may recall that the stress test requirements were announced by OSFI in October of 2016. This rule followed a long string of new rules that occurred in 2016. At the time, they primarily affected First Time Home Buyers and those who had less than 20% down to put towards a home. Now, those who are coming up to their renewal date or wishing to refinance may find that this will have an impact on them. They may not qualify to borrow as much as they once would have due to the stress testing implication. For example:

A dual-income family with a combined annual income of $85,000.00. The current value of their home is $610,000.00.

Take off the existing mortgage amount owing and you are left with $145,000.00 that is available in the equity of the home provided you qualify to borrow it.

Current Lending Requirements

Qualifying at a rate of 2.94% with a 25-year amortization and with a combined annual income of 85K you would be able to borrow $490,000.00. Reduce your existing mortgage amount of 343K and this means that you could qualify to access the full 145K available in the equity in your home.

Proposed Lending Requirements

Qualify at a rate of 4.94% with a 25-year amortization and with a combined annual income of 85K you would be able to borrow $400,000.00. Reduce your existing mortgage amount of 343K and this means that of the 145K available in the equity in your home you would only qualify to access 57K of it. This is a reduced borrowing amount of 88K.

They have a mortgage balance of $343,000.00. Lenders will refinance to a maximum of 80% LTV (loan to value). The maximum amount available here is $488,000.00

As you can see, the amount this couple would qualify for is significantly impacted by these new changes. Their borrowing power was reduced by $88,000-a large sum of money!

With the dates of these changes coming into effect not yet known, we are advising that clients who are considering a renewal this fall do so sooner rather than later. Qualifying under the current requirements can potentially increase the amount you qualify for—and who wouldn’t want that?

For more information on how these changes affect you specifically, or to refinance your mortgage, get in touch with your local Dominion Lending Centres Mortgage Professional-they are well-versed in these changes and are ready to help you navigate through the complexities!

Written by Geoff Lee

The interest rate you pay on loans for every major purchase you make throughout your lifetime depends on various factors, and is dependent on your creditworthiness – everything from the mortgage on your home to your car loan or line of credit.

And, given today’s ever-changing mortgage requirements and rising interest rate environment, your credit score has become even more important.

Your first step towards credit awareness and well being is to know where you stand. Request a free copy of your credit report online from the two Canadian credit-reporting agencies – Equifax Canada and TransUnion Canada – at least once a year.

This will also help verify that your personal information is up to date and ensure you haven’t been the victim of identity fraud.

Newly established credit

If you’re new to credit, you may wonder why your credit score pales in comparison to your friend’s.

Payment history is a key factor for both Equifax and TransUnion. As well, if you don’t talk to your friends about money, you may not realize that their financial situations are different from yours. Your friend with the better credit score may carry less debt than you, for instance.

Using credit properly helps keep your credit score healthy, as well as comes in handy when you don’t have the cash immediately on hand to pay for an expense. Planning for expenses helps alleviate reliance on credit – and the payment of interest.

If you use credit cards and lines of credit to your full advantage, you’ll never have to pay interest on these revolving credit products. In fact, you can use the borrowed money for free if the full amounts are paid on time.

Forgot to pay a credit card bill?

Your credit generally only takes a hit after you miss two consecutive payments.

You’ll likely see a drop of 60-100 points on your credit score instantly, and your credit card provider may end up increasing your interest rate.

Every point counts, however, so you obviously don’t want your credit score to take a hit, particularly if you plan on applying for a major loan – such as a mortgage or car loan.

Know your creditworthiness

Following are some key components that help determine your credit score.

• Credit card debt. Aside from paying bills on time, the number one way to increase your credit score is to pay down your credit cards so they’re below 70% of your limits. Credit card usage has a more significant impact on credit scores than car loans, lines of credit and so on.
• Credit history. More established credit is better quality If you’re no longer using your older credit cards, the issuers may stop updating your accounts. If this happens, the cards can lose their weight in the credit formula and, therefore, may not be as valuable. Use these cards periodically and pay them off.
• Credit reporting errors. Always dispute any mistakes or situations that may harm your credit score. If, for instance, a cell phone bill is incorrect and the company will not amend it, you can dispute this by making the credit bureau(s) aware of the situation.

Do you have questions about your credit score or creditworthiness? Contact your local Dominion Lending Centres mortgage specialist.

Written by Tracy Valko

You’ve been squirreling away your bonus cheques, savings and reducing the amount of times you visit Starbucks so you can finally get into your own home to build solid equity for your future. Now that you know what you want and what you can afford, it’s time to visit your local Dominion Lending Centres mortgage specialist to get yourself pre-approved for a mortgage.

Note, we did not say go to your bank to get pre-approved!

A mortgage broker works with banks (including yours), credit unions and other lending institutions to help find you the best rate on your mortgage. Since they work with so many different lending institutions across the country, they are in the best position to approach banks and ask for the best rates – sometimes better than what the same bank would have been able to offer you had you gone in on your own. Best of all, you do not pay a dime for their services – the lending institution does!

To work with a broker for your pre-approved mortgage, you will need the same documentation you would have to provide your bank so be sure to have your documents in order. You will need the following documents:

For a Salaried Employee

• an employment letter/verification of employment
• current/most recent pay stub

For an Hourly Employee

• current/most recent pay stub
• an employment letter/verification of employment
• Two (2) years of your T4 tax slips

For Someone Who is Self Employed

• last two (2) income tax returns
• proof of self-employment

Once you have submitted these details, you are on your way to getting pre-approved for your mortgage and providing yourself with a clear budget on the home you would like to buy!

Written by Max Omar

As a mortgage professional there are things I wish more people were aware of which is why we are going to take a look into the paperwork we all need to hold onto to avoid frustration or even a decline when applying for a mortgage. Each of the following is taken from real life observations of everyday folks just like you and I.

1. Separation Agreement – When you apply for a mortgage one of the first questions we ask is marital status. If your answer is separated or divorced then the banks are going to want to see the official document. They are seeking to ensure that you do not have any alimony or child support payments which will make it difficult to pay the mortgage. The legal system only keeps these documents for 7 years after which you will not be able to get a copy. Your marital status is reported on your tax return which can trigger the request for this documentation long after it seems relevant.

2. Proof of Debts paid– Keep all records of debts you have paid! Here are three real world examples.
a) Client A has paid off her mortgage, receives verification from the bank and promptly destroys the paperwork at a mortgage burning party just like on the commercial. Due to a clerical error the debt as paid is not reported to land titles so the mortgage remains vested against the property adding additional steps when she goes to get a new loan.
b) Client B pays out his truck loan in full and receives a letter stating this. Due to a clerical error the interest accrued shows a small outstanding balance. The client believes all is well while the small debt quickly hits a written off status on the credit bureau and he is declined for a mortgage three years later.
c) Client C settles with a collection agency on a debt gone bad – The debt is not reported as paid to the credit agencies and the ‘ongoing’ bad debt causes a large drop to her score and she pays higher rates than she should. The collection agency has since gone out of business and there is no record of the payment to be found.

3. Bankruptcy/Orderly Payment of Debts – As with the separation agreement, the trustee will only keep a copy for 7 years. When you apply for a mortgage, the bank will want to ensure they were not affected by the bankruptcy and also to determine if there was a foreclosure. Even though this information is supposed to fall off the credit report that is not always the case.

4. Child Maintenance – whether paying or receiving child support, you will want to keep all correspondence in regards to this to ensure you are receiving the appropriate credit for monies paid or have been given all the money you were supposed to have received.

Emotionally you have valid reason to want each of these documents so far away from you but realistically you are likely to need them at some point. There are a number of online services such as Dropbox or Google Drive where you could scan these to yourself and save them digitally. Alternatively, you could spend a small amount of money on an accordion style file folder and go old school with actual paper copies of all of the above applicable to your situation.

If you have any questions, please contact your local Dominion Lending Centres mortgage specialist.

Written by Pam Pikkert

A lot of people get into hot water when they assume that because they’ve qualified for a mortgage in the past, they will qualify for a mortgage in the future.

This article has one point to make and it’s this:

Don’t assume anything when dealing with mortgage financing!

And if that’s all you take away, that’s enough!

Just because you’ve qualified for a mortgage in the past, doesn’t mean you will qualify for a mortgage in the future, even if your financial situation has remained the same or gotten better. The truth is, things have changed over the last year, and securing mortgage financing is more difficult now than it has been in recent memory.
The latest changes to mortgage qualification by the federal government has left Canadians qualifying for about 20-25% less. On top of that, a lot of the “common sense” guidelines that lenders would use in determining your suitability have been replaced with non-negotiable hard and fast rules.
As a mortgage professional who arranges financing for clients everyday, I keep up to date with the latest changes in the mortgage world, understand lender products, and have my fingers on the pulse of what is going on.
From experience, I can tell you that having a plan is crucial to a successful mortgage application. Making assumptions about your qualification, or just “winging it” is a recipe for disaster.
If you are thinking about buying a property, contact a Dominion Lending Centres mortgage specialist who would love to talk with you about all your options, and help you put together a plan.

Written by Michael Hallett

In part one of this two-part series, we will look at the types of insurances you will hear about during the mortgage process. Sometimes it is a good idea to revisit the basics when looking at a complex thing like a mortgage. There can be misunderstandings which crop up. The mortgage process can be very stressful as you wait for some anonymous entity to decide whether or not you are able to buy the home of your dreams. It is no wonder that things can get missed. Fear not! We will take a look at some of the basics so you can avoid things best avoided.

1. Mortgage Default Insurance – There are three mortgage default insurance providers in Canada. CMHC, Genworth and Canada Guaranty. If you are purchasing a home with less than 20% down you will have to be approved by both the lender and the default insurance provider for the loan. They are looking at your credit, employment stability and the property itself to make their decision. If you default on the mortgage, the bank or mortgage provider is made whole on any shortfall. The cost is a set amount based on how much you are putting down and will be added to your mortgage so you do not have to worry that you need to come up with extra funds for it. As of today based on a standard borrower the premiums are shown in the following table though it is an important note that the premiums are higher in certain cases.
LTV Ratio Premium Rate
Up to 65% 0.60%
65.01% – 75% 1.70%
75.01% – 80% 2.40%
80.01% – 85% 2.80%
85.01% – 90% 3.10%
90.01% – 95% 4.00%

2. Title Insurance – This is required on most mortgages these days. The cost is around $250 and will be collected from you at the lawyer’s office. Title insurance is often used instead of a Real Property Report as it is quicker and less expensive. If for example, the garage on your new home had been constructed offside of where it should be, it is the responsibility of the title insurance to make it right. This could happen by getting the city to allow it or in the worst case, to cover the cost to move the garage.

3. Home Insurance – You have a legal responsibility to make sure you have property insurance. This protects you against things like fire, flood or theft. You will be required to provide verification of the insurance when you meet with the lawyer. You will probably want to do a bit of research before choosing your company. Not all insurance policies are equal and a truly awful time to find that out is after a horrible event.

4. Life Insurance – You will be offered life and disability insurance with your mortgage. Most of us assume that we have sufficient coverage through work but the protection of your family and their home should be given serious consideration. You are not obligated to accept the insurance provided to you but please factor the cost of sufficient coverage into your budget when you are thinking of buying your home. A few things to consider:

– The younger you are when you get insurance the cheaper it is.
– If you leave your current employer or get laid off and have developed a health concern it can be problematic to find affordable if any coverage.
– If you choose the insurance from the mortgage lender or bank you may find yourself tied to them indefinitely if you experience a change in your health. This could mean higher rates at renewal.
– Disability is the number one reason for foreclosure in Cana which goes to show that it can and does happen too many of us.
And there you have the four types of insurance which will be discussed around your mortgage. If you have any questions, please contact your local Dominion Lending Centres mortgage specialist.

Written by Pam Pikkert

Congratulations – you are moving into your new home! Whether you are starting with a plain new build or an older resale home, there’s no better way to make it yours than by putting your stamp on it. Invest a weekend or two into warming up a featureless space or refreshing someone else’s old homestead. It’s easy with our 10 steps to home sweet home.

Step 1: Change the locks
Secure your home by changing the locks as soon as you take possession.
Even DIY beginners can change a deadbolt lock. A replacement deadbolt set can be installed in place of the current lock – no drilling required.

Another alternative is to rekey the lock. Purchase a rekeying set from the same manufacturer as the existing door lock, and reset it for a new key.

Step 2: Get a professional deep cleaning
Hire professional cleaners to deep-clean and detail your home before you move your possessions in. Without any furniture to work around, they’ll have access to every nook and cranny. Yes, you’ll have to clean again after moving day, but the heavy lifting (scouring, scrubbing and scraping) will have already been done!

Step 3: Clean the guts of your home
Years of dust, pet dander and detritus collect in the mechanicals of any home. One of the most effective ways to refresh a resale home is to get right into the guts of it: the mechanicals. Have your ducts, furnace and air conditioning unit professionally cleaned. Change the filters as required to maintain that clean, fresh air.

Step 4: Apply a fresh coat of paint
Painting provides the most bang for your home improvement buck. Whether the walls of your home are dingy or you’re simply not feeling the magic of “beige,” it takes just hours to repaint your space with a colour that makes your heart sing.

Step 5: Freshen up the floors
Worn out floors can put a damper on that new-home buzz.
If your hardwood has seen better days, hire pros to refinish it, or tackle the project yourself by renting a floor sander and varnishing over a weekend.

Steam-clean wall-to-wall carpet and clean laminate flooring with special laminate floor cleaners, although if either is too far gone, you may want to replace it.
Personalize your space while protecting your floors by adding area rugs and runners throughout your new home.

Step 6: Neutralize any odours
Resale homes, particularly fixer-uppers, can come with lingering smells. Steps 2, 3, 4 and 5 will dramatically reduce any unpleasant odours. Stubborn odours require spot treatments, such as the following:

• Put dishes of activated charcoal, also called activated carbon (available from aquarium stores), in musty, damp basements. Run a dehumidifier during the spring and summer.
• Place a sock filled with dry coffee grounds or baking soda in closets, refrigerators or freezers to absorb stale odours.
• Pour white vinegar down a stinky drain.

Step 7: Give your windows a new view
Dirty windows and screens can make rooms feel dingy. A thorough cleaning will have your windows shining, and your indoors will feel brighter and fresher, too.

If your home came with the previous owner’s window coverings, be sure to clean or launder them (it’ll remove allergens as well as reduce any lingering odours). Or consider replacements more specific to your design tastes.

Step 8: Brighten your lights
A well-lit home feels inviting and warm. If your rooms feel dim, replace the existing bulbs with bright, energy-saving CFL bulbs. Dated lighting fixtures can foil your redecorating efforts, so consider replacing them. You can donate them to a Habitat for Humanity ReStore shop – after all, your taste may be urban-contemporary, but someone else may be looking for the perfect retro pendant!

Step 9: Replace the switch plates
A screwdriver is all it takes to swap out lighting switch plates. This easy change gives an instant lift to any room. With a little DIY expertise, screwdrivers, pliers and a voltage tester, you can install energy-saving dimmer switches, instead.

Step 10: Display your art
Finally, dress up your walls with your favourite artwork and family photos. Get your kids’ kindergarten masterpieces onto the fridge, and deck out your mantel with family photos.

There’s a reason why we remove personal photos and mementos when selling a house: it’s so potential buyers see a clean slate. Now that you’re in your own home, go wild and make it yours! And if you have any questions, please contact your local Dominion Lending Centres mortgage specialist.s

Written by Marc Shendale

Sometimes it is a good idea to revisit the basics when looking at a complex thing like a mortgage.  There can be misunderstandings which crop up.   The mortgage process can be very stressful as you wait for some anonymous entity to decide whether or not you are able to buy the home of your dreams.  It is no wonder that things can get missed.  Fear not!  We will take a look at some of the basics so you can avoid things best avoided.

Property Taxes – There are 3 ways to pay the property taxes.

1. Have your mortgage company collect them with your mortgage payment. This can be a nice way to keep the withdrawals from your account to a minimum.  The taxes are collected at the same time as your mortgage payment and remitted to the municipality on your behalf.  Your property tax bill will still be sent to you but it will clearly show that the taxes have been paid by the mortgage company.  Things to make note of: some banks charge a fee for this service which could be avoided if you chose a different option.
2. TIPPS or the Tax Installment Program Payment System – Most municipalities allow you to sign up for free for the program. Generally an amount of 1/12 of the tax amount is withdrawn from your bank account on the last business day of the month.  Your property tax bill will come to you showing that you have opted in to the TIPPS program.  Depending what time of year you took possession of the home the amount can reflect a balance owing or a tax credit but you can rest assured that you are OK and will not have to come up with a large amount at the end of the year.
3. Lump Sum – You can make a once a year payment to the municipality. This is not ideal for everyone as it requires you to come up with a large amount of funds. Your tax bill will show clearly that the funds are outstanding.

What else should you know about property taxes?

1. Tax Adjustment – Depending on the time of year that you are purchasing your home, you may have to reimburse the seller if they have pre-paid the taxes for the year. This is why you are required to have an extra 1.5% of the purchase price available for closing costs.   Your lawyer will be the one to determine this and if you opt for the TIPPS program you can avoid the extra lump sum all together.
2. You have to pay your taxes. We all know that but you should know what happens if you do not.  First of all you will begin to incur penalties and extra fees.  Then they can put a tax lien on the title and finally they can seize the property and sell it.   Mortgage lenders have the legal right to ask for verification that your property taxes are being paid.  Should they discover you have not done so, they will charge you a fee and take over the payment of the property taxes.  At that time they will collect a monthly amount from you to cover the past due and the amount owing going forward.  Taxes trump mortgages and the bank could lose out if the property was siezed.   It can be very hard to get a mortgage if you have a tax lien.  Lenders tend to shy away from this scenario.
3. It is not always up to you. Given the issues raised in the previous point, many banks will not allow to you to choose the yearly option.  They require verification that you are on the TIPPS program or have the taxes included in the mortgage

I strongly recommend that after your mortgage funds you contact the mortgage company and confirm that you are set up the way you wanted.  I have witnessed a few cases where things went sideways and all of a sudden people had to pay double property taxes for a year until they were caught up.

And now you know how to navigate property taxes like a pro. If you have any questions, please contact your local Dominion Lending Centres mortgage specialist.

For many people, saving enough for a down payment on a house is not an easy task. (You can’t rely on finding One-Eyed Willy’s treasure like they did in the Goonies movie, either!) Once you have an idea as to how much you can afford on your home, relative to your salary and monthly costs, it’s time to get that down payment! For a starter home, a 5% down payment is often enough.

Your down payment can come from several sources, including your Tax-Free Savings Account (TFSA), Registered Retirement Savings Plan (RRSP) or a gift from immediate family, such as parents or grandparents.

TFSA

The TFSA lets you save your extra cash for just about anything — including a new house— without paying any tax on the growth within the account or on withdrawals. Since the TFSA was introduced in 2009, it’s estimated that only around half of Canadians have opened one, so be sure to start yours today. Should you use your TFSA for your down payment, you pay no taxes on the withdrawal.

There are many clever ways to make the TFSA and RRSP work together to improve your wealth. Generally, RRSPs are a good choice for longer-term goals such as retirement, while TFSAs work better for more immediate objectives, such as a house down payment.

RRSP

With the federal government’s Home Buyers’ Plan (HBP), you can use up to $25,000 of your RRSP savings ($50,000 for a couple) to help finance your down payment on a home. To qualify, the RRSP funds you’re using must be on deposit for at least 90 days. For first-time home buyers, taxes are not paid on withdrawals of your RRSP and the repayment period starts the second year after the year you withdrew funds.

Gifted Down Payment

A Gifted Down Payment is very common for first time buyers. Often this is done because their son or daughter doesn’t quite have enough funds saved up for the full 5% down payment. Or, because they want to make sure their child has enough money to make up 20% for a down payment to avoid Canada Mortgage and Housing Corporation (CMHC) premiums.

If you put down 20% or more on your down payment, it can all be from a gift. If you put down less than 20%, part of the money can be a gift, but part must come from your own funds. This minimum contribution varies by loan type. You can only use gift money on primary residences and second homes.

All that is required for documentation is a signed Gift Letter from the parents, which states that the money does not have to be repaid, and a snapshot of the son or daughter’s bank account showing that the gifted funds have actually been transferred.

A gifted down payment is viewed as an acceptable form of down payment by almost all lenders. Talk to a Dominion Lending Centres mortgage specialist to make sure that your lender accepts “gifts” as an acceptable down payment.

Most people know their weight. Their height. Their age. Their birth date. Their address. Their SIN. Even their income. Could you imagine if you always had to say to someone, “Can I get you that information when I get home? It’s written down in my planner… ”
Knowing your everyday numbers is important. It allows you to make quick and informed decisions.
Therefore I, as a Mortgage Broker, have made it my goal to know my numbers — to memorize certain things so that when called upon I can provide concise and detailed information in the simplest format. I am going to arm you with some quick mortgage number facts and mortgage industry calculations that I use daily.

1: Payments are $400/month/every $100,000 mortgage amount with 20% down or more. Example: $400,000 mortgage = $1,600 monthly mortgage payment.

2: Payments are $450/month/every $100,000 mortgage amount, 19.99% down or less. Example: $400,000 mortgage = $1,800 monthly mortgage payment.

3: For every $10,000 mortgage amount increase, payment increases by $40/month with 20% down or more. Example: $420,000 mortgage = $1,680 monthly mortgage payment.

4: For every $10,000 mortgage amount increase, payment increase $45 per month, 19.9% down or <. Example: $420,000 mortgage = $1,890 monthly mortgage payment.

5: If rate increases by 0.25%, monthly payment increases by $13 per month per $100,000.

6: If rate increases by 100% the monthly payment only increases by 33%.

7: A $13,000 credit-card debt cancels out $100,000 mortgage money.

8: A $400 per month vehicle payment cancels out $100,000 mortgage money.

9: A $20,000 gross income services a mortgage of $100,000. Example: Household income of $120,000, qualifies for a $600,000 mortgage.

10: A $400,000 mortgage balance (FIXED rate term) holds a penalty of approx $3,200 with a monoline lender. With a traditional bank, it’s closer to $16,000. This term paid out with 24 months remaining.

Knowing your numbers is likely going to change this fall. There are changes coming and they are not small ones. The federal government is going to make yet another amendment to the lending policy. Nothing specific or concrete yet. Coming this fall (2017) you are likely going to see your borrowing power reduced by as much as 25%. If today you qualify for a $500,000, that amount could drop to approximately $400,000 is as little as 3 – 4 months.
The bottom line is simple. Borrowers need to focus on what they can control:

• Coming up with larger down payments, saved and gifted.
• Earning more income. If you are self-employed, then you may want to re-structure your reported income to CRA. Verified income will be essential. This is LINE 150 of our tax documents.
• Good, strong, clean credit, both credit score and credit history.

Be sure that you know the power of your own numbers. Don’t be concerned with the past. Every day we move forward. Changes happen all the time; we need to adapt or be left behind. Asking WHY is sometimes not the best reaction but rather HOW. How do I adapt? How do I become current?
Overall, Canada has a very strong, dependable and stable financing and real estate market. The changes that are handed down by the federal government are mandatory, right or wrong… they need to be followed. And if you have any questions, please contact your local Dominion Lending Centres mortgage specialist.

Written by Michael Hallett