The most important strategy that a home buyer could ever have is putting together a team of Real Estate professionals to help them make the wisest decisions in regard to the biggest purchase they will ever make; a property purchase. It is so very important to align yourself with a Realtor who has excellent property and market knowledge; an Accountant who understands the tax implications of buying a property, a House Inspector who knows what weaknesses to look for in the structure of a property, a Lawyer/Notary who has experience in property purchase contracts…

…and, of course, a Mortgage Broker who knows what products / offers are available and who can get you the best terms and sharpest rate available.

While one can simply go to their bank and get a mortgage (if they qualify), is it really the wisest decision to have that conversation with the financial officer at the bank without really knowing the ins and outs of what terms and conditions of a good mortgage should be?

Mortgage Brokers are meant to be professionals that reduce the stressful task of putting a mortgage application together and finding the best home for your mortgage. A good Mortgage Broker will explain all your loan options and suggest the programs that could be financially beneficial. When you go to the bank and speak with that same financial officer, they will only be able to provide you with information related to their bank. Simply put, they only know the products offered by the bank they work for and are not about to try and suggest other products offered by other banks, even if that is a better option for you.

Busy Mortgage Brokers that work for a successful mortgage arranging company have access to discounted rates that are not available anywhere else. Because of the sheer volume of mortgages that a busy company arranges, Mortgage Brokers are given better rates that you can’t find on your own. Since the Mortgage Broker is arranging mortgages every day, they know what products are available and they are aware of the sharpest rates being offered.

Reputable Mortgage Brokers have your best interest in mind FIRST! A good Mortgage Broker understands that if you are happy as a client under their direction, then you will likely refer your friends and family back because you have had a successful and satisfying outcome with your mortgage arranging experience. Mortgage Brokers rely on referrals and although they continue to market their services, referrals remain the bread and butter for a Mortgage Broker.

Mortgage Brokers are available and flexible with meetings and appointments. They are not confined to an immovable roster but work with you on your time. Generally, people are busy, and time is a valuable commodity. Mortgage Brokers will arrange a time to speak with you at your convenience, so that you don’t have to take time off work and loose wages, or wait two weeks for an appointment with your bank’s financial advisor and miss out on a time sensitive purchase.

Mortgage Brokers advise their clients on how to make their financial profile look favourable forto the lender. Financial coaching is part of the overall value that you will receive from a Mortgage Broker. Advising you on how to use your credit and what to avoid in the preapproval process is all part of what a good Mortgage Broker does for their clients.

Mortgage Broker services are FREE! The lender pays a commission to the Mortgage Broker and the client ends up with the best possible mortgage at no cost for the arrangement. The Mortgage Broker will pull your credit only once and will approach several lenders with that same “pulled” credit bureau…. yet another way a Mortgage Broker helps their client’s and protects their clients best interests.

GEOFF LEE
Dominion Lending Centres – Accredited Mortgage Professional
https://dominionlending.ca/news/how-do-mortgage-brokers-help/

1. How the penalties are calculated if I break my mortgage early? Specifically, ask what rate they use to calculate the “interest rate differential”. Typically, if the lender has “posted rates” they use these to calculate the penalty. If this is the case, the penalty can be 3, 4 or even 5 times higher than a mortgage lender that does not have posted rates and uses them in their early payout penalty calculation. This one question can save you thousands of dollars!

2. Is this a “collateral” mortgage? Some lenders have recently started putting all of their mortgages into what is called a “collateral” charge. In the right situation, given significant equity in the home, this product can be very useful and advantageous. The disadvantage to this product however, is that you cannot “switch” it to another lender at maturity. You have to actually discharge this type of mortgage and re-register a new one with a new lender which will cost on average $1000 for legal fees and appraisal costs. Beware of lenders who do this, especially if your mortgage is high ratio because it is only useful if you have more than 20% equity.

3. Can I “blend and extend” my mortgage if I buy another house? Most variable rate mortgages cannot be “blended” however, typically the penalty to break a variable is 3 months interest. Some lenders have changed their policies (very quietly) – instead of allowing you to add new money to a mortgage in the event of a new purchase, they require you to pay the full penalty. Some clients have been caught off guard by sneaky lenders who don’t tell them this until only a few days before close, at which time it’s too late to switch lenders.

4. What happens to my life insurance if I switch lenders at the end of my term? This is a very commonly overlooked detail by those who take the insurance offered by their bank or lender. The challenge is that if you want to “switch” your mortgage to another lender at the end of your term, you have to re-apply for insurance. The downside to this is that you’ll be five years older, and if you have developed any health issues, you may not qualify for the insurance at all. Getting insurance that mortgage brokers offer stays in place for the whole time you have your mortgage, no matter who your mortgage lender is.

5. What happens at the end of the term (typically five years)? Will they offer you the best rate they offer their new clients, or will you have to negotiate for best rates at that time. Most banks know that clients likely won’t make the effort to negotiate the best rates. Working with an independent specialist will provide you with the most competitive rates, not only when you buy your home, but when it comes up for renewal. A qualified professional will make sure you have the best options available each time your mortgage comes due.

BRIAN MILL
Dominion Lending Centres – Accredited Mortgage Professional
https://dominionlending.ca/news/top-5-questions-to-ask-your-mortgage-lender-before-signing-on-the-dotted-line/

When signing your mortgage commitment letter you will have to choose your payment frequency. If your goal is to re-pay your mortgage as quickly as possible, then you need to understand how different payment options will affect your repayment schedule.

So what are your options?

In general, most lenders will offer the borrower the option to decide which repayment schedule fits best with their lifestyle. The options include monthly, semi-monthly, bi-weekly, accelerated bi-weekly, weekly and accelerated weekly payments. Let’s use some simple math to determine which payment frequency will assist you in paying back your mortgage in the shortest time possible.

For the purposes of this exercise and to keep things simple, let’s use $100,000 as our mortgage amount. We’ll use a 5 year fixed rate at 2.54% with a 25 year amortization period and interest being compounded semi-annually.

Increasing your payment frequency doesn’t mean shortening your amortization.
As you can see from the table above, choosing to pay your mortgage more frequently doesn’t result in reducing your amortization schedule. The key to reducing your amortization is to make sure you choose an accelerated re-payment schedule.

We are going to focus on Accelerated bi-weekly vs. bi-weekly payments but the same principle can be applied to accelerated weekly payments as well.

By accelerating your repayment schedule, you reduce your amortization by 2.5 years.
Okay, we’ve just determined that accelerating your mortgage payments will reduce your amortization and the interest you pay. How does accelerated bi-weekly vs bi-weekly result in more principle being repaid?

It’s important to think of your payments as a stream of income for the mortgage lender. Mortgage payments are comprised of principal and interest payments. The interest is calculated based on your outstanding principal balance, meaning once the interest has been paid, the remainder of your payment is used towards paying down your principal balance.

By choosing an accelerated repayment schedule, the monthly payment is divided by 2 (bi-weekly) or by 4 (weekly). There are 52 weeks in a calendar year so if you make 26 bi-weekly payments, you are in effect paying your Lender the equivalent of 13 months of payments per year compared to 12 months payments with all non-accelerated repayment schedules.

This accelerated repayment of principal is what shortens your amortization.

13 monthly payments ÷ 26 = accelerated bi-weekly payment

Example: ($449.96 per month x 13 months) ÷ 26 = $224.98 accelerated bi-weekly payment

With a non-accelerated or regular payment plan, the Lender takes 12 months worth of payments and divides this by either 26 or 52 to come up with the bi-weekly (or weekly) payment. With this adjusted payment, the Lender still receives a stream of income of 12 monthly payments per year, so there is no additional principal available to accelerate the amortization.

12 monthly payments ÷ 26 = regular bi-weekly payment

Example: ($449.96 per month x 12 months) ÷ 26 = $207.67 regular bi-weekly payment

So now you know why choosing accelerated bi-weekly vs. bi-weekly payments results in 1 extra month of payments per year, which in turn shortens your amortization.

I always recommend this to anyone who can afford the increase in payment but I understand this option isn’t right for everyone. Another option to help shorten your amortization is to increase your payments, meaning more principal paid.

When you’re choosing your next mortgage, make sure you discuss payment options with your Dominion Lending Centres mortgage professional that align with your overall goals for repaying your mortgage.

BRENT SHEPHEARD
Dominion Lending Centres – Accredited Mortgage Professional
https://dominionlending.ca/news/accelerated-bi-weekly-vs-bi-weekly-payments/

Credit scores are like report cards for grown‐ups. The score you get ranges from 300 to 900. Your score indicates your creditworthiness to potential lenders, banks, landlords, insurance companies, and even to some employers. The higher your score the better.

1. GET A COPY OF YOUR CREDIT REPORT

Make an inquiry once a year, twice is much better. If you are planning on purchasing anything that requires a credit check, keep track of your credit. This is something that is 100% in your control. As a consumer you have ability to make a soft/consumer inquiry to Equifax as many times as you want without it affecting your score. Here is a link to Equifax. If something doesn’t look right, contact the creditor immediately. Don’t wait to report an incorrect or fraudulent transaction. Is there an outstanding collection? If so, deal with it immediately, and by that I mean pay it. Then argue to get your money back. Do not leave this on your credit report hoping that it will disappear. No matter what, the collection will not be removed until it’s paid unless taken to litigation. Once dealt with, it will still take months to recover the points lost and 6 years to fall off your credit report.

2. NEVER MISS A MINIMUM PAYMENT

Because this attributes to 35% of your overall score, delinquencies have the biggest negative effect on your credit score. If you have overdue bills, make the necessary arrangements with your creditors. They would much rather work with you than file collections against you. If you can’t pay it all back, it’s better to pay some.

3. DON’T CLOSE UNUSED CREDIT CARD ACCOUNTS

Got a credit card that you have had ten years and hardly use? Keep it. It takes 12 years of history with the same specific card in good standing to crack 800 and enter that top 2% tier of quality credit. Cancelling a card can actually lower your score. Keep the old cards and only use them occasionally so the issuer doesn’t stop reporting your information to the credit bureaus. Having a long credit history helps increase your score. Don’t jump around to credit providers. Most ‘large’ providers have several different products. There is likely one that will fit your needs.

4. NEVER MAX OUT YOUR CREDIT CARDS

A good rule of thumb when considering building your credit is to keep the balance at or below 30% of the limit. Furthermore, a balance of 50% of the limit will maintain existing levels and over 75% will start to decrease it. NEVER exceed the limit, by even a $1.

5. DON’T LOOK FOR MORE CREDIT

Don’t shop around for credit or open several credit accounts in a short period of time. It raises alarms at credit bureaus and financial institutions, especially when you don’t have a long‐established credit history. Work with your existing creditors, as there is more relevant history. They are more likely to work with you, especially if you are looking to resolve some credit hardship(s). Always ensure you give your permission before allowing a credit check.

6. RULE OF 2

Ideally, you want to have 2 sources of credit solely in your own name for a minimum of 2 years with at least a $2,500 credit limit. This would be either 2 credit cards or one credit card and a line of credit. Ensure this is in addition to any joint accounts. Joint credit is only reported to the primary credit holders credit bureau and will not have any positive effect on the co-account holder.

If you ever have questions about your financial situation or want to discuss your credit score, please contact Dominion Lending Centres.

MICHAEL HALLETT
Dominion Lending Centres – Accredited Mortgage Professional
https://dominionlending.ca/news/6-tips-on-how-to-repair-increase-and-maintain-your-credit/ 

Welcome to your free financial check-up, discussing 5 key factors to assist you in ensuring you are on the right track to a solid financial future.

Credit

Ensuring you are using credit wisely will pave the way to making sure you have options available to you if or when you need them. One thing we can all do is check our credit report on a regular basis – at least once each year – so you know where you stand and whether your credit score has been compromised in any way, especially through fraud. You can contact Equifax at 1-800-465-7166 or go to the website at www.equifax.ca for more information.

There are many people who believe that it is more responsible to not use credit at all but, in fact, if you don’t have any credit accounts reporting to the credit bureau, financial institutions have no way of knowing how responsible you are with credit and you will likely be turned down if you need a loan or credit card in the future.

Making payments on time is critical to maintaining a good credit score but also keeping your account balances below 75% of the maximum limit is another way of boosting your credit score. If you have multiple accounts, spreading the balances evenly among them using balance transfer methods can help to bring some accounts in line.

It’s wise to pay off your higher interest credit accounts first but that decision needs to be balanced with whether to pay down the higher-payment accounts.

Savings

The old adage, “10% of the money you earn should be tucked away into savings” is a good one. Although it may be difficult to be disciplined enough, if you “pay yourself” every month, the savings will start to build and you may find you don’t need to rely on credit to handle those unexpected expenses.

I personally have a monthly allotment that I transfer to my savings account the same day each month. I have a reminder in my phone to physically do the transfer and it is built into my budget as if it were another utility payment I have to make.

Taking advantage of a Tax Free Savings Account (TFSA) is a great way to earn higher interest on your savings as opposed to the low rate you are paid for a standard bank savings account. If your TFSA is managed by a Financial Planner you can see very good returns on your investments. Any money earned within your TFSA is tax-free and can be withdrawn at any time.

Retirement

Part of the savings picture is, of course, planning for retirement. If you can, work an RRSP contribution into your budget as soon as possible so you will be much further ahead when you want to put your feet up and enjoy.

I follow my Financial Planner’s recommendations when it comes to how much I contribute each year. As I am self-employed, the amount I contribute each year varies but I always make a contribution.

Contributing to an RRSP also gives you a tax break at the end of the year and you can use your tax return money to put towards paying down your mortgage or put it towards a vacation. Both of those are win-win scenarios.

Mortgage

Being the largest loan most Canadians will ever have, your mortgage deserves attention and regular check-ups. Choosing the right mortgage structure for you and taking advantage of today’s historically low rates, can put you on track to huge savings.

Take a look at your debt-structure. If you are making high monthly payments on high-interest loans and/or credit cards, you could easily restructure your circumstances by refinancing your credit accounts into your home. In most cases, this reduces the amount of interest you are paying overall and lowers your monthly payments. At the same time, if you take advantage of an accelerated payment structure (bi-weekly or weekly) and bump up your minimum required payment by the 15-25% that your institution allows, you can pay down your principal and be mortgage free much sooner!

In today’s mortgage climate, if you currently have a mortgage rate anywhere over 4% you should do yourself a favour and have me do a Free Mortgage Analysis for you so you can see apples to apples whether there are any financial advantages to breaking your existing mortgage for a better rate. When you can see the costs vs. benefits in black and white, the answer as to whether to refinance will be crystal clear.

Insurance

Making sure you have adequate insurance is essential in protecting yourself and your family in the event of a crisis or emergency. Whether it be home, health, life or disability insurance, it is always a good idea to review all of your insurance coverage at least once a year to make sure you are fully covered.

Mortgage insurance is a great idea but most clients benefit more from having independent mortgage insurance coverage as opposed to taking the insurance coverage offered by the institution that has your mortgage. The average Canadian makes a change to a mortgage every 38-42 months, you may have to re-apply for the same coverage at an older age and higher premiums. If your mortgage insurance is through a company that is independent of the bank, you would have the ability to keep the coverage and premium you initially had even if moving your mortgage to another institution at a better rate works better for you.

Another way to go is Term Life Insurance. Securing a policy that will cover all costs and pay out all obligations should anything happen to you will give your family peace of mind in the worst circumstance.

Critical Illness Insurance offers protection should you become affected by one of the approved conditions and is often paid in a lump sum amount once you have survived the specified waiting period. It gives you the assurance that the costs of a serious medical condition, as well as living expenses, will be covered.

Wrap Up

I recommend talking to your Dominion Lending Centres mortgage professional to make sure you make the best decision on all insurance needs.

I hope you have found some value in the information provided. As always, I recommend seeking out the experts and gaining knowledge before making any important decisions that will affect your future.

KRISTIN WOOLARD
Dominion Lending Centres – Accredited Mortgage Professional
https://dominionlending.ca/news/financial-check-up/

The great majority of us are in mortgage contracts that contain a prepayment privilege of some sort. “Privilege” being the key word here. Not all mortgage contracts contain such privileges, but that’s a story for another day.

The mortgages that do allow prepayment privileges, usually allow at least 15% of your mortgage to be paid down, interest and penalty free, each year. On a $300,000 mortgage, that is $45,000 that you’re able to put directly towards your principle balance. That’s more than enough for the average Canadian, based on our saving habits.

But how many of you are actually taking advantage of even a portion of your prepayment privilege? For those of you who didn’t raise your hand, what are you waiting for?!

Never before has there been such a great opportunity to get ahead on the largest debt most of us will ever take on. We are paying less interest with each payment than we ever have before (just ask someone who owned a home in the ’80s). There’s never been a better time to increase your payments and begin knocking years off your amortization.

By simply adding $100 to your monthly payment on a $300,000 mortgage, you effectively reduce your amortization by almost 2.5 years!

Imagine what it would feel like to have no mortgage payments for the next two and a half years… Think of the things you could do or the savings you could accumulate in that time!

Now is the time to really chip away at our principle balance so that we can be in a financially stronger position when rates finally do begin to normalize. Odds are, if you aren’t taking advantage of pre-paying your mortgage today, you likely won’t when interest costs are higher either.

Don’t wait any longer – make a lump sum payment today and enjoy the benefits tomorrow! Should you need any more advice, please contact us at Dominion Lending Centres.

JEFF INGRAM
Dominion Lending Centres – Accredited Mortgage Professional
https://dominionlending.ca/news/now-is-the-time-to-get-aggressive/

Congratulations you have made it through one of the toughest financial times in your life. It feels good to have this under control and know there is a light at the end of the tunnel. I too have been down this road in 1998 and now I educate the RIGHT way to have a plan.

There is no shame in going through either a consumer proposal or bankruptcy. Life throws wrenches into our well laid out plans. This is why we have these financial resources to get us back on our feet.  What is most important is that we don’t make the same mistakes again, really get to know how the mortgage and credit world works and use a mortgage planner along with your trustee or debt counsellor to have a plan of action!

There are no quick fixes or programs to get you back on track! Don’t get sold on some “swindler” taking advantage of your situation. There is a company out there that will loan you $2,500 that you pay back over 2 years and they report it to bureau for you. The cost – $900! That’s crazy and completely unnecessary.

Here are the Coles notes on what you need to know for those in consumer proposal. Remember, every situation is unique, so always have an experienced broker work with you:

You can refinance your home when in a consumer proposal and pay it out. You need more than 20% equity to do this. The sooner you pay it off, the faster it comes off your credit bureau.

If you are going with an INSURED mortgage (ie. 5-20% down) then you must be discharged from consumer proposal for two years and your credit has to be re-established.

Most lenders want the consumer proposal paid in full prior to mortgage approval. Very few will look your deal while in proposal.

Area dependent – Fort Mac or small rural communities are harder to get approvals.

We can use a bundled product strategy with a 1st mortgage to 80% LTV and 2nd mortgage to 90% to get your approval. Expensive, but works for many clients.

You want to plan to have some savings that are more than just your down payment if you are buying. Don’t be house rich and cash poor.

Sometimes we can use secondary credit like your car insurance, cell phone, or your rental payments to a landlord. If we can prove good repayment for the last couple years, we should be able to take it to a bank.

Also, you really need to ensure that, at the three year mark after you are done, that your consumer proposal is removed from credit bureau. I have seen someone refinance 2 years into their 5 year proposal and pay it out and forget to remove it from the bureau a  year later, so it keeps hurting your score and years of damage for no reason.

How long does a consumer proposal stay on a credit report?

Once you enter into a consumer proposal, it will start reporting on both Equifax and TransUnion credit reports within 30 days. Depending on your consumer proposal agreement with creditors, you will be making payments in a consumer proposal generally between three to five years.

Consumer Proposal will stay on your credit report for 3 years from the date you are discharged (made your last payment) regardless if you are looking at your Equifax or TransUnion report.

Where do I start in building my credit again?

You can start rebuilding your credit as soon as you file your proposal. Bankruptcy is a bit different. You need to aim for TWO credit cards, open for TWO years, with an eventual available credit of $2500 each.  Just get TWO that start reporting. Some places to start:

Apply for a secured credit card with HomeTrust Visa. You give them $500, they give you a credit card.

Affirm Financial will approve $1000 credit card UNSECURED to those that are in consumer proposal.

Scotia No Fee Credit Card

TD Secured Credit Card

Capital One Secured Credit Card

Peoples Trust Secured Credit Card

Your credit and what have you can do to make it better:

They are lending YOU money, so a good broker will need to explain your situation, who you are, why you had issues and what you have done to improve your situation. This is called the 5 C’s of credit. This is a method used by lenders to determine the credit worthiness of potential borrowers. The system weighs five characteristics of the borrower, attempting to gauge the chance of default or you being a chronic mismanager of debts.

Character – When lenders evaluate character, they look at stability — for example, how long you’ve lived at your current address, how long you’ve been in your current job, and whether you have a good record of paying your bills on time and in full. If you want a loan for your business, the lender may consider your experience and track record in your business and industry to evaluate how trustworthy you are to repay.

Capacity – refers to considering your other debts and expenses when determining your ability to repay the loan. Creditors evaluate your debt-to-income ratio, that is, how much you owe compared to how much you earn. The lower your ratio, the more confident creditors will be in your capacity to repay the money you borrow.

Capital – refers to your net worth — the value of your assets minus your liabilities. In simple terms, how much you own (for example, car, real estate, cash, and investments) minus how much you owe.

Collateral – refers to any asset of a borrower (for example, a home) that a lender has a right to take ownership of and use to pay the debt if the borrower is unable to make the loan payments as agreed. Some lenders may require a guarantee in addition to collateral. A guarantee means that another person signs a document promising to repay the loan if you can’t.

Conditions – Lenders consider a number of outside circumstances that may affect the borrower’s financial situation and ability to repay, for example what’s happening in the local economy. If the borrower is a business, the lender may evaluate the financial health of the borrower’s industry, their local market, and competition.

It all starts with the planning the day you decide to file for a consumer proposal. If you are finding you are starting to fall behind in payments or considering a consumer proposal call us at Dominion Lending Centres – we may be able to help.

KIKI BERG
Dominion Lending Centres – Accredited Mortgage Professional
https://dominionlending.ca/news/how-to-qualify-for-a-mortgage-post-consumer-proposal/