When you apply for a loan, lenders assess your credit risk based on a number of factors. Your credit score, as well as the information on your credit report, are key ingredients in determining whether you’ll be able to get financing and the rate you’ll pay. To get approved for a loan and to pay a lower interest rate it’s important that your credit report reflects that you’re a responsible borrower who pays their debts on time with a low risk of defaulting.

Credit Report vs. Credit Score
To start with, it’s important to understand that your credit report and your credit score are two separate things.

Credit Report – Your credit report contains information detailing your credit history. Sources include lenders, utility companies and landlords. This information is compiled by one of two major credit-reporting agencies (Equifax and TransUnion) that try to create an accurate picture of your financial history. Credit files include information such as:
• Name, address and social insurance number
• Types of credit you use
• When you opened a loan or line of credit
• The balances and available credit on your credit cards and other lines of credit
• Information about whether you pay your bills on time
• Information about any accounts passed to a collection’s agency
• How much new credit you’ve opened recently
• Records related to bankruptcy, tax liens or court judgments
Errors on your credit report can reduce your score artificially. In fact, 1 in 4 consumers have damaging credit report errors. Therefore, it’s important to stay up-to-date on your credit report history. If there is an error, you should dispute it and get it removed as soon as possible. Last year, 4 out of 5 consumers who filed a dispute got their credit report modified, according to a U.S. study by the Federal Trade Commission.

Credit Score – Your credit score is the actual numeric value extrapolated from the information in your credit report. A credit-reporting bureau applies a complex mathematical algorithm to the information in your credit file to create your numerical credit score.
Beacon is the most widely known credit scoring formula in Canada and is used by many creditors. Your FICO score can range from 300 to 850, with under 400 being very low and 700+ putting you in the healthy range. Your credit score is meant to give potential lenders an idea of how big of a financial risk you are. The higher your score, the less likely you are to default or make late payments and the more likely you are to be approved for financing.
Your score is based most strongly on three factors: your payment history (35% of your score), the amounts owed on credit cards and other debt (30%) and how long you’ve had credit (15%).

What Are They Used For?
Lenders glance at your credit score to determine your credit risk. Most traditional lenders have pre-set standards. If your credit score is within a certain range, they’ll offer you certain credit terms. If you don’t fall within their approved range, then you may be denied. Most banking institutions will only approve a loan if the client has a credit score of at least 640. A score of 700, however, gives you a much better chance at gaining approval at most lending institutions and at reasonable rates.
As far as interest rates are concerned, banks use an array of factors to set them. The truth is they are looking to maximize profits for themselves and shareholders. On the other hand, consumers and businesses seek the lowest rate possible. A commonsense approach for getting a good rate would be having the highest credit score possible.
It’s important to note that if you apply for a loan, the lender will most likely pull your credit score through what is commonly called a “hard inquiry” on your credit, which slightly lowers your credit score. Therefore, it’s important to know your credit score ahead of time, fix any errors, and apply for loans which you have a good chance of being approved for.

Things You Can Do to Improve Your Credit Score

1. Check your credit report for errors – While the credit agencies do their best to keep your record free of errors, they can make mistakes. It’s important to check your credit report at least once a year — consumers are entitled to one free credit report every 12 months — to ensure all of the information is correct. Each agency may have slightly different information and, consequently, may have errors another credit report doesn’t.
2. Set up payment reminders – Making credit payments on time is one of the biggest contributing factors of your credit score. It may be helpful to set up automatic payments through credit card or loan providers so you don’t forget to pay when payment is due.
3. Reduce the amount of debt you owe – Stop using your credit cards. Use your credit report to make a list of all your accounts and check recent statements to determine how much you owe on each account and what interest rate they’re charging you. Then create a payment plan to lower or eliminate the debt you still owe.

How Dominion Lending Centres Can Help
Many businesses need financing to start or expand. Although your credit score is only one component of your lender’s decision, it’s an important one. If you have a low credit score and are unable to secure financing through a traditional bank, DLC Leasing will be able to get you approved with our team of lenders. When the bank says no, our team will still say yes with flexible terms and interest rates.

You have a family member that doesn’t qualify for a mortgage on their own and needs a co-signor. Since you’re a nice person, and of course would like to see your son/daughter/parent/sibling in a better position, you agree to co-sign for the mortgage.

If I had a dollar for anytime I’ve heard the phrase “but I’m only co-signing right, they can’t come after me for the money or touch my house?” I’d be rich!

There are many common myths around co-signing. Here’s only a few and the truths associated with each one…

• I’m only co-signing for my family member to get the mortgage and that I won’t have to ever make payments. False: You are equally responsible for making the payment on the mortgage. If the borrowers default, you will be required to pay.
• I can’t be sued for non-payment since it’s not my mortgage. False: The lender has all legal collection methods available to them to collect payment from you, including obtaining judgment in court and possible garnishment of wages and bank accounts.
• The bank can’t take my house if the borrower loses theirs. False: As per the second myth above, judgment action can also involve seizure and sale of any of your assets including and not limited to your own home.
• I’m only a co-signor or a guarantor so I’m protected from not having to pay. False: Whether you are the borrower, co-signor, or guarantor, you are fully responsible for the debt.
• Co-signing on this debt won’t affect my ability to obtain credit in the future. False: Not only will you legally have to declare the co-signed debt when you apply for credit, but also most lenders in Canada are now reporting to the credit bureau and it will appear when you apply. Either way, the mortgage payment must be factored into your debt service ratio.
• Since this is only a five-year term, I am automatically released from this mortgage in five years. False: Regardless of term, you remain on the mortgage until it is paid in full or released only with approval from the lender.

Here’s a few tips and questions to ask before agreeing to co-sign on a mortgage…

• Know the borrowers’ situation. What is there credit like? Are they drowning in debt? Why exactly is a co-signor required?
• Is there an exit strategy to have your name released and how long will that take?
• Add your name to title of the property so that the borrower cannot add a second mortgage to it. This is an asset that you have an interest in and therefore should protect it.
• Get independent legal advice about your obligations as a consignor.
• Be prepared to make the mortgage payments of the borrower doesn’t.
• Don’t be afraid to say no to co-signing if it doesn’t feel right.

Knowledge of the borrowers situation, your obligations, and potential ways to protect yourself (and of course setting emotions aside) is the best advice for anyone co-signing. And if you have any questions, please contact your local Dominion Lending Centres mortgage specialist.

SEAN BINKLEY
Dominion Lending Centres – Accredited Mortgage Professional
https://dominionlending.ca/news/im-co-signor/

“Tim was outstanding to deal with. He was always quick to respond to my many questions, and I felt secure in knowing they were working in my best interests.” – Jackie in Langley

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 (LVT)
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.

As we truck along in 2017, Mortgage Brokers and Lenders are adjusting to the new risk based mortgage rate pricing that came into play after the Finance Minister changed Government backed mortgage default insurance regulations in late 2016.

Lenders often choose to pay for mortgage default insurance on mortgages where the borrower was not required to pay it themselves. This method protects a lenders book of business against credit loss, helps them package more secured mortgages together to sell to investors and reduces the amount of capital they are required to maintain. This method in the mortgage industry is called back-end insuring.

The changes have limited the mortgage profiles that lenders are allowed to insure using Government backed insurers. Essentially the Government is intentionally passing on the risk to Lenders by implementing stricter insurance qualifying guidelines and limiting mortgages that can be insured to what they consider lower risk “inside the box” mortgages.

The onus is now on the lender to absorb more costs if a borrower defaults. In the end costs are passed on to borrowers by lenders applying higher rates to less secured mortgages.

If you’re looking for a mortgage in today’s market your circumstances may not fit “inside the Box” and be an insurable mortgage profile and your mortgage rate may be higher. The following is a short list of what insurers have limited their guidelines to:

• 25 year maximum amortizations
• Must qualify by using a rate stress test
• Maximum Gross Debt Service Ratio (GDS) of 39% (shelter expenses)
• Maximum Total Debt Service Ratio (TDS )of 44% (all liabilities)
• No refinances
• No single unit rentals
• Purchase price must be less than $1 Million

As you can see the insurer’s list is limited making Dominion Lending Centre’s lender connections and mortgage solutions more important than ever! Our Mortgage Brokers have a vast amount of mortgage options available to cover “outside the box” uninsurable mortgage profiles. Whether your refinancing, you need an amortization over 25 years, want to buy a single-unit rental or more we have a mortgage for that!

Contact a DLC Mortgage Broker to get started on your mortgage approval today!
KATHLEEN DEDILUKE
Dominion Lending Centres – Accredited Mortgage Professional
https://dominionlending.ca/news/inside-outside-box-mortgages-todays-market/

Life can definitely throw some challenging financial situations your way. As mortgage professionals, we can provide solutions and strategies during or after these challenging times in order to get you back on track. We have access to banks, trust companies and mortgage companies that specialize in this transitional period to help you move forward with the best mortgage plan for you. We protect your credit by negotiating with multiple lenders to find a solution for you.

If you have never owned a home and have had a consumer proposal, the good news is that you are already accustomed to the discipline of saving money every month. Should you choose to continue to grow your savings, those funds can then be put toward a down payment and re-establishing credit.

If you own a home already, there are lenders that will help you refinance and pay out your proposal earlier in order to accelerate your transition period.

After bankruptcy, different lenders will issue mortgages based on the amount of time since you were discharged, the amount of down payment on a purchase and/or the current equity in your home if your already own. Lenders then price their rates based on these aspects of your application.

At Dominion Lending Centres, we look forward to learning about your journey while protecting your credit and guiding you through the best strategy on a moving forward basis.

ANGELA CALLA
Dominion Lending Centres – Accredited Mortgage Professional
https://dominionlending.ca/news/getting-mortgage-consumer-proposal-bankruptcy/

If you’re on the hunt for your first home and want to have a smooth and successful home purchasing experience avoid these common first-time homebuying mistakes.

1. Thinking you don’t need a real estate agent

You might be able to find a house on your own but there are still many aspects of buying real estate that can confuse a first-time buyer. Rely on your agent to negotiate offers, inspections, financing and other details. The money you save on commission can be quickly gobbled up by a botched offer or overlooked repairs

2. Getting your heart set on a home before you do your homework

The house that’s love at first sight may not always be what it seems, so keep an open mind. Plus, you may be too quick to go over budget or may overlook a potential pitfall if you jump in too fast.

3. Picking a fixer-upper because the listing price is cheaper

That old classic may have loads of potential, but be extra diligent in the inspection period. What will it really cost to get your home where it needs to be? Negotiating a long due-diligence period will give you time to get estimates from contractors in case you need to back out.

4. Committing to more than you can afford

Don’t sacrifice retirement savings or an emergency fund for mortgage payments. You need to stay nimble to life’s changes, and overextending yourself could put your investments – including your house – on the line.

5. Going with the first agent who finds you

Don’t get halfway into house hunting before you realize your agent isn’t right for you. The best source: a referral from friends. Ask around and take the time to speak with your potential choices before you commit.

6. Diving into renovations as soon as you buy

Yes, renos may increase the value of your home, but don’t rush. Overextending your credit to get it all done fast doesn’t always pay off. Take time to make a solid plan and the best financial decisions. Living in your home for a while will also help you plan the best functional changes to the layout.

7. Choosing a house without researching the neighbourhood

It may be the house of your dreams, but annoying neighbours or a nearby industrial zone can be a rude awakening. Spend time in the area before you make an offer – talk to local business owners and residents to determine the pros and cons of living there.

8. Researching your broker and agent, but not your lawyer

New buyers often put all their energy into learning about mortgage rates and offers, but don’t forget that the final word in any deal comes from your lawyer. As with finding agents, your best source for referrals will be friends and business associates.

9. Fixating on the lowest interest rate

Yes, a reasonable rate is important, but not at the expense of heavy restrictions and penalties. Make a solid long-term plan to pay off your mortgage and then find one that’s flexible enough to accommodate life changes, both planned and unexpected. Be sure to talk your your Dominion Lending Centres mortgage professional to learn more.

10. Opting out of mortgage insurance

Your home is your largest investment so be sure to protect it. Mortgage insurance not only buys you peace of mind, it also allows for more flexible financing options. Plus, it allows you to take advantage of available equity to pay down debts or make financial investments.

Thinking of buying a property, but don’t know where to start? Well… that’s where a mortgage pre-approval comes in. Start here. Just like you wouldn’t go into a restaurant without having enough money to buy your meal, so you shouldn’t start shopping for a home without an understanding of how much you can afford. So let’s have a conversation about a mortgage pre-approvals so you can get this house hunting party started.

Although a pre-approval is the best way to get started, we have to be honest about what a pre-approval is and what it’s not.

NOT MAGIC. NOT BINDING.

Let’s start at the beginning and dissect the word pre-approval. Pre means before, in advance of, or prior to, and in this case means before the approval. A pre-approval is not an approval, let me say that again (in italics) for emphasis, a pre-approval is not the same as an approval. It’s not a guarantee of financing. it’s not magic, and unfortunately it’s not binding. There are a number of factors that come into play after the pre-approval is in place that can derail your dreams of homeownership.

• as a mortgage approval requires a property to be scrutinized, and a pre-approval doesn’t look at any property, it can’t be guaranteed.
• as your employment status can change after a pre-approval, all employment documents have to be verified as part of the approval process.
• a secondary credit report can be pulled by the lender or insurer after the pre-approval is in place, if there are discrepancies, they could decide not to proceed with financing
• mortgage rules can change and sometimes come into effect with no grandfathering.

SO WHAT GOOD IS A PRE-APPROVAL THEN…

A pre-approval is simply a formalized gathering of your ducks, and putting them in a row. It won’t guarantee you will get the mortgage, but it will certainly uncover any major obstacles that might be in your way. Consider a pre-approval a pre-screening, where we take a look at your employment, credit history, and your downpayment, and figure out the maximum mortgage amount you can qualify for. We will also have a look at all the mortgage options available to you on the market, so you can decide in advance what product meets your financing needs.

Obstacles, like what? Well, the truth is, you only know what you know, said in another way, you don’t know what you don’t know. Did you know that they figure about 10-20% of credit reports have some kind of error on them. By taking a look at your credit report as part of the pre-approval process (instead of when you have already found the house of your dreams), you have time to fix any errors before hand. This might not sound like that big of a deal, but it could be the difference between getting financing or not.

A pre-approval usually comes with a rate-hold, this is a good thing. Rates are like gas prices, they fluctuate and go up and down from time to time. As part of taking a preliminary look at your mortgage application, lenders will typically offer a rate hold for 90-120 days on a specific mortgage term. This means that if you find a property to buy in the allotted time, even if rates have gone up in the mean time, you will get the rate that was guaranteed. What happens if rates go down, well… you get the lower rate. It’s a win win.

IT’S A PROCESS

Buying a home is a process, a process that has a lot of steps that come into play. A pre-approval is one of the first steps you take. A pre-approval allows you to collect all your documentation ahead of time, handle any obstacles that may come up, have a look at your mortgage options, secure a rate hold, and will give you piece of mind as to the next steps in the process. Regardless if this is your first time buying a place or your twentieth, a pre-approval is the best place to start. Even if it doesn’t guarantee you will get the mortgage in the end.

So if you are thinking about buying a home, let’s get started, as we would love to help you secure a pre-approval. And if for some reason you are faced with some obstacles, we will help you get on track. Contact a Dominion Lending Centres mortgage professional today!

MICHAEL HALLETT
Dominion Lending Centres – Accredited Mortgage Professional
https://dominionlending.ca/news/conversation-mortgage-pre-approvals/

One of the essential aspects of every mortgage application is the discussion pertaining to your down payment. Home purchases in Canada require a minimum down payment of your own funds to be put towards the deal. Your stake in the purchase. It is important that during the discussions with your Mortgage Broker that all the cards are on the table pertaining to your down payment. Be upfront about your down payment and where it is coming from. Doing so can save you time and stress later on in the process.

Most home buyers are aware that they will require a certain amount of money for a down payment. What many do not realize is that lenders are required to verify the source of the funds to ensure that they are coming from an acceptable source. Here are a few facts to keep in mind:

1. Lenders require a 90-day bank account history for the bank account holding the down payment funds. The statements must include your name, account number and statement dates.

2. A common hesitation that we often hear from clients is that their bank statements include a lot of personal details. As professionals, we completely understand our clients concerns pertaining to your personal information and we always ensure that information is protected. Statements provided with blacked out names, account numbers or any other details are not acceptable. Unaltered documents are a requirement of confirming the down payment funds.

3. All large or unusual deposits need to be verified to ensure the source of those large deposits can be confirmed and can be used towards the down payment.

• Received a gift from an immediate family member? Easy, Gift Letter signed.
• Sold a vehicle? Easy, provide receipt of sale.
• CRA Tax Return? Easy, Notice of Assessment confirming the return amount.
• Transfer of funds from your TFSA? Easy provide the 90-day history for the TFSA showing the withdrawal.
• Friend lent you money for the house purchase…. Deal Breaker.
• A large deposit into your account that you cannot provide confirmation for…. Deal Breaker!

4. You were told that your minimum down payment was 5%, great! However, did you know that you are also required to show that you have an additional 1.5% of the purchase price saved to cover closing costs like legal fees?

5. Ensure that the funds for the down payment and closing costs stay in your bank account once you’ve provided confirmation. Those funds should only leave your account when they are provided to your lawyer to complete the purchase. Lenders have the right to request updated statements closer to closing to ensure that the down payment is still there. If money is moved around, spent or if there are more large deposits into your account, those will all have to be confirmed.

The last thing that anyone wants when purchasing a property is added stress or for something to go wrong late in the process. Be open with you Mortgage Broker, we are here to help and to guide you through the process. Not sure about something pertaining to your down payment funds? Ask us. We are here to work you through the buying process by making sure you know exactly what you need to do.

Thinking about buying a home, rental or vacation property? Talk to a dedicated Dominion Lending Centres Mortgage Professional in your area to find out about what your down payment requirements will be.

NATHAN LAWRENCE
Dominion Lending Centres – Accredited Mortgage Professional
https://dominionlending.ca/news/payment-verification-5-key-points/

Sorry Mr. Reaper, we’ve just figured out another way to delay your death grip! Research shows that giving an inheritance to another person while you’re alive – a concept known as “living gifting” – not only feels good, it can promote better physical and mental well-being and even help you live longer.

Health researcher and best-selling author, Stephen G. Post, summarizes it nicely:

“A remarkable fact is that giving, even in later years, can delay death. The impact of giving is just as significant as not smoking and avoiding obesity.”

Still not convinced? Here are 5 Powerful reasons to consider giving an early inheritance:

1. We Are Living Longer – According to Statistics Canada, for a 65-year old couple there is a one-in-two chance that one of them will reach the age of 92. Do your children really need an inheritance when they are in their mid-to-late 60’s?

2. Pay Down Their Mortgage – Let’s say mom & dad gave their son $200,000 to pay down his existing mortgage. A $200,000 gift, amortized over 25 years, is really worth over $340,000 when you factor in the interest he’ll be saving. And paying down the son’s mortgage will lower his monthly mortgage payments, providing extra cash-flow to start saving for his retirement or university education for his children. The mortgage professionals at Dominion Lending Centres can help with a variety of mortgage options.

3. Time Value of Money – Money that is available today, is worth more than the same amount in the future, due to its earning capacity. Of course, if the money doesn’t earn anything, then this principal does not hold true. Using the above example, let’s say the son invested the $200,000 gift with a conservative 5% target rate of return over 25 years. Using a 25% marginal tax rate, that $200,000 gift is really worth $502,033 – even after deducting income taxes!

4. Save on Probate – In Ontario, the value of the estate is reduced by an encumbrance against the property. In the above example, if the parents took out a mortgage, or a reverse mortgage, to give their son a $200,000 gift, then that debt reduces the value of the estate, which will result in the estate paying less in probate fees (the taxes you pay on the settling of an estate).

5. Create Lasting Memories – After you are gone, the actual dollar amount you leave to your children will soon be long forgotten. What your children will remember is the time they spent with you. So, the next time you suggest a family trip to Disneyland, or a weekend getaway, and they tell you “let’s do it next year when we’ll have enough saved”, if you have the means, consider booking the trip as part of an early inheritance. Create lasting memories while your health allows you to, because after all, “Procrastination is the thief of time” – Charles Dickens

Roland Mackintosh
Roland is a Business Development Manager with HomEquity Bank.
https://dominionlending.ca/news/grim-reaper-damned-living-gifting-keeps-grim-reaper-bay/