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.

PAM PIKKERT
Dominion Lending Centres – Accredited Mortgage Professional
https://dominionlending.ca/news/paperwork-must-keep/

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.

TRACY VALKO
Dominion Lending Centres – Accredited Mortgage Professional
https://dominionlending.ca/news/credit-scores-heres-need-know/

Rarely in life do things go as planned, especially in real estate.
In a perfect world, when buying a new home, most people want to take possession of their new house before having to move out of the old one. This makes moving a lot easier and allows you time for painting or renovations prior to moving into your new home.

Where it gets complicated; most people need the money from the sale of their existing house to come up with the down payment for the new house!!
This is where bridge financing comes in.

Bridge financing allows you to bridge the financial gap between the firm sale of your current home, and the firm commitment to purchase your new home.

Bridge financing allows you to access some of the equity in your existing property, which you can use towards the down payment on the new property you are buying.
Where many people get confused is that in order to secure bridge financing, you must have a firm sale on your existing house. That means all subjects have been removed!!
If you haven’t sold your home, you won’t get the bridge financing, because there is no concrete way for a lender to calculate how much equity you have available and if you can afford your new home.

For most people, unless you can qualify and pay for two mortgages, you should always sell your existing home before purchasing a new one. Why?
• With today’s property values constantly changing, you won’t know how much money you have until you sell your home. Your home is only worth what someone is willing to pay for it NOW! Past sales and future guesses don’t count!
• You need the proceeds from your existing home to help pay for your new home’s down payment, renovations, moving costs and (if required) how much mortgage you qualify for.

If you have sold your existing home but your closing date is after the closing date of the new property you just purchased, then bridge financing is your best option:
• Your new lender must allow for bridge financing (not all banks allow bridge financing as an option). Your mortgage broker can work with you to find a lender who offers bridge financing.
• Bridge financing costs more than your traditional mortgage (i.e. Prime + 2-4% plus an administration fee).
• Typically bridge loans are restricted to 90 days.
What happens if I don’t sell my home?
Banks will not provide you with a bridge loan if you don’t have a firm sale agreement for your home since the loan can’t be open-ended. If you don’t have a firm selling date you may need to consider a private lender for the bridge loan.

Private Financing

If you have purchased your home and it is closing and your existing home has not sold, then you may have to take out a private loan:
• This option is expensive and is based on you having enough equity in your current property to qualify.
• Typically, private financing comes with a high interest rate 7-15% plus an upfront lender fee + broker fee. These amounts will vary based on your specific situation, such as time required for loan, loan amount, loan to value, credit bureau, property location, etc.
• Private financing is expensive, but it could be cheaper than lowering the purchase price of your existing home by tens of thousands of dollars to sell your existing home quickly.

Your bank doesn’t do this type of financing. You must use a specialized mortgage broker who has access to individuals that lend money out privately.
Bridge financing & private financing are solutions when your buy and sell days don’t work.

Don’t waste your time trying to sort all this out on your own.  Give a Dominion Lending Centres mortgage specialist a call and let’s figure out what your best option would be.

KELLY HUDSON
Dominion Lending Centres – Accredited Mortgage Professional
https://dominionlending.ca/news/bridge-financing-work/

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!

GEOFF LEE
Dominion Lending Centres – Accredited Mortgage Professional
https://dominionlending.ca/news/mortgage-changes-coming-prepared/

This is part two of our mortgage basics series. 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 top 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.

There are three types of mortgages in Canada, so we will take a look at each in detail so you can decide which the best is for you and your situation.

1. Fixed Rate – You can choose anywhere from a six month through a 10-year term. The term is generally a piece of the larger amortization of your mortgage. The longer period is called the amortization and in most cases is a max of 25 years. Choosing the fixed rate gives you the peace of mind that you know exactly what your mortgage payments will be for that time. Most of people choose the 5 year, which is interesting as the average mortgage in Canada is broken at 38 months. The penalty for breaking a fixed rate mortgage is either 3 months interest or the Interest Rate Differential, whichever is greater.
Each bank and mortgage provider is required to inform you at the time you accept the mortgage of how they calculate their penalties. In my experience, there is a significant difference between them. It is your responsibility to acquaint yourself with your chosen mortgage provider as to what their policy is. I have long maintained that banks are a business with the mandate of making money and that is a good thing overall. The good thing is that you are often able to port this mortgage with you to a new property without penalty.

2. Variable or Adjustable Rate – The variable rate is where your interest rate is based on the prime lending rate with either an ongoing premium or discount. As of today the prime lending rate is 2.95% and the ongoing rate discount is averaging at -.40% which makes your interest rate 2.55%. The prime lending rate can and does fluctuate. It is set by the Bank of Canada who meet 4 times a year. Your mortgage payments can increase or decrease according to the decisions made. A common misconception with the variable rate is that it is open or without penalty if it is broken and that is not the case. Most of the time the penalty is 3 months interest. Another consideration for the variable is that it is generally not portable to take with you to another property. Many people prefer the stability of the fixed rate, though if you were to do a look back, you would see that variable rates have historically proven to be the best way to save money in the long term. You are fully able to change your variable rate into a fixed rate without penalty.

3. Home equity lines of credit – An interesting misconception I have run into is that a home equity line of credit is not in fact a mortgage. If a loan has been secured against your property, you my friend have a mortgage. The advantages of the HELOC is that you do not pay any interest unless you carry a balance, you can make interest only payments and that you can pay it out in full at any time without penalty. The downside is that if you are not careful and manage your finances well, you will owe the exact same amount in 25 years that you did at the beginning. The interest rate on the HELOC will depend on your overall credit and generally set at a prime plus a percentage. The government made some change a ways back and the maximum HELOC you can have is 65% of the appraised value of your home. You cannot port a HELOC from one property to another and this type of a mortgage allows you to change it to a fixed or variable or a combination of all 3 with some lenders.

And there you have mortgage types available to you here in the great white north.  If you have any questions, please contact your local Dominion Lending Centres mortgage specialist.

PAM PIKKERT
Dominion Lending Centres – Accredited Mortgage Professional
https://dominionlending.ca/news/mortgage-basics-mortgage-types-penalties/

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.

PAM PIKKERT
Dominion Lending Centres – Accredited Mortgage Professional
https://dominionlending.ca/news/mortgage-basics-types-insurance/

Just because you are a Canadian citizen living abroad doesn’t mean that you are exempt from the rules for foreigners buying real estate in Canada.
Foreign ownership applies if:
• You don’t reside in Canada for more than 6 months a year (even if you are Canadian)
• You don’t report your working income to CRA
So how does one go about gaining purchasing property in Canada when you are a foreign buyer?

1. Understand Your Employment Status

For your employment status, there are two categories you may fall into: Business for Self or not Business for Self (employed by someone else).

If you are Business for Self, you must meet the following requirements:
• Be in business for a minimum of 2 years
• Verify 2 years of business for self through something equivalent or similar to yearly financials.
• Verify current year’s financial history (personal & company if applicable)

On the other hand, if you are employed by someone else, you only need to show a letter of employment and your latest paystub.

2. Understanding Down Payment Requirements

Down payments for foreign investment in property have a few requirements as well. The down-payment typically will need to be 35% down. The exemption to this and when 25% down would be accepted, would be if you are a Canadian citizen living abroad or if you are a US citizen.

Another requirement, the money for a down payment and closing costs must be on Canadian soil 30 days prior to the completion date (with exception of 15 days depending on the lender and circumstances). Lenders may also require a deposit of 12 months’ principle and interest payments in a Canadian account.

The other and final requirement for a foreign real Estate investment is to have a Canadian bank account registered in your name.

3. Understanding Your Financial Profile

Your unique financial profile may need to feature a number of different things. This may include:
• International credit bureau to view your credit history
• A bank reference letter
• All current debts you have outstanding

Once we have compiled that information and any other that is required, it is on to the next set of requirements: Property requirements!

Property and Loan Requirements

For foreign real estate, there are a few conditions the property and the loan will have to meet. First is the type of property. The property can be owner occupied, a second home, or an investment property. Next, in terms of the loan, there are two things that need to be considered. These are the rates and the length of the loan. The rates will be the best discounted rates your mortgage broker can get at the time of purchase. As for the length of the loan, the term of the contract can be up to 10 years long, with an amortization of the loan of 25 years and up to 30 years on exception.

Final Take-Away

Purchasing foreign real estate does not need to be difficult. The best advice is to stay transparent, open and follow the requirements. As an extra piece of advice, here is a checklist to follow to make it go even easier:

• Proof of “out of Canada” permanent resident address
• Contact and use a Canadian solicitor/lawyer who is familiar with foreign investors
• Contact and use a Realtor familiar with foreign investment purchase.
• Be prepared to have to make a physical appearance in Canada to complete the purchase transaction
• Ensure you have the ability to transfer monies from your Canadian bank account to the TRUST account set up by your Canadian Solicitor/Lawyer’s firm.
• Be prepared for the purchasing process to take 30 days or longer

One last consideration. As of August 2, 2016, the Ministry of Finance of British Columbia has applied an additional 15% property transfer tax to certain BC residential property purchases to anyone who is a foreigner (or foreign entity such as a corporation).
a. This is applied only to the Greater Vancouver Regional District – please contact GLM Mortgage Group for an exhaustive list of the areas affected.
b. This affects anyone who are foreign nationals including foreign corporations or taxable trustees.
* Please note that the corporation can be incorporated in Canada. However, if the corporation is controlled in whole or in part by a foreign national or other foreign corporation the tax applies.
c. The additional tax applies in addition to the general property transfer tax.
d. The additional tax does not apply to non-resident property (commercial properties).
e. The additional tax will be paid with at the statement of adjustments when signing at the lawyer’s office.
f. There are heavy fines associated with avoidance of this tax (ie purchasing a property through a Canadian relative who holds the property in trust) and can even result to up to two years in prison.)

The only way that this foreign buyers tax is exempt for a nonresident when purchasing in the Greater Vancouver Regional District are borrowers that have a current work permit/visa and will maintain the property as their primary residence and reporting and paying taxes in Canada

In closing, if you follow the basic steps laid out in this article and work with a skilled broker you can get into your Canadian property faster, easier, and with minimal stress! If you have any questions, please contact your local Dominion Lending Centres mortgage specialist.

GEOFF LEE
Dominion Lending Centres – Accredited Mortgage Professional
https://dominionlending.ca/news/invest-canadian-real-estate-abroad/

In the midst of the booming real estate market in Canada (mainly in Vancouver and Toronto), many Canadians are entertaining the idea of downsizing in order to sell their homes at a high value and purchase a smaller home or condo at a lower price.

Is downsizing the way to go? What are the costs associated with downsizing? The truth is, there are many costs to downsizing, and not all of them are obvious.

Why Downsize?

Canadians have many reasons to downsize. They include:
• Less house to upkeep
• Move closer to loved ones
• Spending the winter in a warmer place, therefore they don’t live in their home year round
• Getting equity out of their home to help fund retirement

Costs to sell your home

But let’s break down the more obvious costs of downsizing so that you can weigh the financial pros and cons. Keep in mind that the example below is for illustration purposes only. There may be other expenses not mentioned, but the key expenses are highlighted.

Let’s use the example of a home that will sell for $1,000,000 which is the approximate average cost of a detached home in Toronto. The home still carries a $200,000 mortgage, which would equate to a net amount of $800,000. However, there are costs that you must deduct from the total sale that can eat into your lump sum.
• Realtor commission (between 1%-7% depending on where you live in the country and what you are able to negotiate). In Toronto, the standard realtor rate is 5%. In this example of a $1,000,000 home, you would need to pay the realtor $50,000.
• Closing costs and legal fees – Approximately $1,500
• Miscellaneous costs – $1000
• This leaves you with approximately $747,500
• And an approximate cost of selling your home at $52,500

In addition to these reasons, these are some other costs that are associated with downsizing:

• The cost to fix up your home for the sale – Fresh coat of paint, minor repairs, kitchen/bathroom renovations, roof repairs and maybe even the cost to stage the home.
• The cost to part with old furniture – When you downsize, you typically have to get rid of furniture, books and other items that take up space. You may even decide to keep the items in a storage unit, which can cost money monthly (a typical 50 square foot unit can range from $125-$200/month plus HST, a mandatory monthly insurance premium and a set-up fee or refundable deposit)

Costs to buy your downsized home

There are also costs associated with buying your new downsized home. If you intend to purchase a smaller home (semi-detached, townhouse or condo), most of the money you earn from the sale of your home will go towards the purchase of your new downsized home. Here is an example of the expenses you may incur when you purchase your downsized home:

Let’s use the example of a condo with a cost of $500,000 which is the average cost of a condo in Toronto.
• Land transfer tax in Ontario for a $500,000 property is $6,475. Find out the land transfer tax in your province by visiting your local government website on land transfer taxes. For Ontario, visit the Government of Ontario land transfer tax page.
• There may be a Municipal Land Transfer Tax (MLTT) in addition to the provincial land transfer tax. For instance, in Toronto, the MLTT for a $500,000 condo would be $5,725. Visit your local municipality website to find out the calculation for your MLTT.
• Title insurance and legal fees – Approximately $1,500
• Moving costs – Approximately $2,000
• There may be a property tax adjustment – This would depend on when the seller paid the property taxes and when the buyer takes possession of the condo. In most cases, the buyer will have to pay the seller the difference depending on when they took possession of the property. If the seller is behind on payments, then the municipality requires that the seller pays off the taxes from the proceeds of the sale.
• Purchase of new furniture to fit smaller condo – Approximately $10,000 – $15,000
• Monthly maintenance fee for condo living – Approximately $500/month or $6,000/year
• This leaves you with approximately $221,800 from the sale of your $1,000,000 home before you deduct the cost of condo maintenance fees at $6,000/year.
• And the additional cost to purchase your downsized home at $25,700
• The total cost of downsizing from a $1 million home to a $500,000 condo would cost approximately $84,200 in your first year alone.

Although you sold your $1,000,000 home and downsized to a $500,000 condo, with all of the added expenses, you would only take home just over $215,800 after your first-year maintenance fees. This is the reality of downsizing. It isn’t as clear cut as the selling value of your home minus the buying cost of your downsized home. Although there is a return, the process of buying and selling has the added costs that can make or break your decision to move.

If you are downsizing because you need extra cash to help you with your retirement, an alternative is the CHIP Reverse Mortgage. With a reverse mortgage, you can stay in your home and still have the extra cash to help you with your retirement. To find out how much money you can get with a reverse mortgage, talk to your Dominion Lending Centre mortgage specialist today or if you decide to downsize, talk to your mortgage broker or a lawyer to find out your true cost of downsizing before making the final decision.

YVONNE ZIOMECKI
HomEquity Bank – Senior Vice President, Marketing and Sales
https://dominionlending.ca/news/true-cost-downsizing/

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.

PAM PIKKERT
Dominion Lending Centres – Accredited Mortgage Professional
https://dominionlending.ca/news/mortgage-basics-keep-know-property-taxes/

Ever wonder how your mortgage rate is determined? What factors make it jump from percentage to percentage? We are getting down to the nitty gritty today and giving you the facts on what impacts mortgage rates.

What affects a Mortgage Rate?

There are 10 factors that affect a mortgage rate:

1. Location
Depending on which province your home is located in, this will have an overall effect on your mortgage rate. Generally speaking, provinces with more competitive markets will have lower rates.

2. Rate Hold
A rate hold is a guarantee on a rate for 90-120 days. If your closing dates do not fall within this timeframe, then your hold will be re-assessed. If your rate hold is re-assessed and the lender’s rates at that time of re-assessment are higher than your initial rate, then your rates will go up accordingly. We always follow up with all of our clients on a regular basis to avoid this situation whenever possible!

3. Refinancing
Movement on your mortgage of any form can affect your rate typically when you are working with your existing lender. New buyers will have lower rates than refinances, but refinances will have lower rates than mortgage transfers. Mortgage Brokers can access multiple lenders to find the most suitable product for their client’s unique needs.

4. Home Type
Lender’s assess the risk associated with your home type. Some properties are viewed as higher risk than others. If the subject property is considered higher risk, the lender may require higher rates.

5. Income Property/ Vacation Home
As previously mentioned, lenders assess the risk on your property. If you are buying an income property or a vacation home than the lender can assess at a higher risk and a higher rate may apply. This is one of the major benefits to having a mortgage broker on your team! They have access to a variety of lenders that can offer you a rate lower than others as they can compare a large variety.

6. Credit Score
We have talked a lot about credit on our blog, and there is a reason for that. Your credit score is a large determining factor for your rate. Lenders want to see that you have a history of managing your credit well and that you will be able to pay back the lender overtime. For more information on fixing your credit, check out our free e-book, Credit Medic.

7. Insured or uninsured
With the changes that the federal government made back in October 2016 this has had a significant impact on mortgage rates if your mortgage is insured or not. Read our Change of Space guide to find out the full impact of these changes.

8. Fixed/Variable Rate
The type of rate you are wanting to get will also affect your rate. Fixed rates are based on the bond market and variable rates are based on the Bank of Canada (economy).

9. Loan to Value (LTV)
The higher the Loan-to-Value the higher the risk. You can have someone who has a $1 million mortgage but has $2 million in equity in that property and they would be viewed as a lower risk than someone who has a $200,000 mortgage and their property is only worth $220,000. To boot with the federal changes, the person with the higher risk mortgage (insured) is likely to get a more competitive interest rate than the client with $2 million in equity.

10. Income level
The final part in this rather large equation is your income level. Although this does not necessarily impact the rate itself, it does impact your purchasing power and the amount you are able to put down on a home. Essentially indirectly impacting the rate.

Each of these factors plays a factor in the rate you will be able to get through a lender. The easiest way to get the lowest rate is to work with a dedicated mortgage professional. They will put together a fail-proof plan to get you the sharpest rate. They also have access to a variety of lenders which saves you the time and trouble of shopping for your mortgage on your own. As a final point, mortgage brokers can also assess your unique situation and find the right mortgage for you. Their goal is to see you successfully find and afford the home of your dreams and set you up for future success.

GEOFF LEE
Dominion Lending Centres – Accredited Mortgage Professional
https://dominionlending.ca/news/mortgage-rates-work/