The Big Short – An American film about American finance.

Many Canadians, particularly those in Vancouver and Toronto where real estate is spoken of like a sport, will gravitate to the film The Big Short over the coming weeks. It is an adaptation of an excellent book written in 2010 by Michael Lewis. As a Canadian Mortgage Broker who read the book when it came out to better understand the differences between the two countries’ mortgage markets, I was into a theatre within the first few days of its release.

Short version:

Ryan Gosling is the only significant Canadian content in this film.

Long Version:

This is an American tale about an American debacle that takes place due to American finance policies. A tale, a debacle, and policies vastly different from anything we have happening in Canada. As with most things Canadian, our finance system is in fact far more conservative and quite sedate. It is as solidly built, resilient, and popular as Mr. Gosling himself.

Five key differences between the US and Canadian housing markets

One.

In the USA in 2006 ‘subprime’ mortgages accounted for more than one in three new mortgage applications. Over half required little to no documentation of income at all, and little to no down payment. In the movie there is a case, likely not far from reality, of a property financed in the name of a man’s dog. A system so lax that even your pet could qualify for a mortgage.

In Canada, even in 2006, subprime loans accounted for less than 1 in 20 applications, still fewer today. Even in cases of limited documentation, the Canadian system typically required 35% down payment. Equity = security.

Two.

The US system had Mortgage Brokers packaging up loans with little to no oversight or review on a Friday, and selling them the following Monday to an investor on Wall Street who was in turn re-selling the debt to yet another investor in another country. All the while, credit rating agencies focused on maintaining their initial (heavily biased) ratings of mortgage bonds, even as the mortgages inside the bonds were sliding into default, because if they did not maintain the ratings then ‘some other ratings agency’ down the block would get paid to assign a stable rating. It was (and remains) a system designed to offload risk as if all the players involved are playing a protracted game of musical chairs. They all know the music might stop at some point, but are willfully blind to it.

And hey, last time the music stopped the people turning a blind eye got little more than a slap on the wrist, and most kept their jobs and were paid their annual bonuses anyways.

In Canada, the lender, often a Credit Union or Chartered Bank, has rigorous approval standards that leave most applicants’ heads spinning, with some wondering if a hair sample will also be required. Mortgage Brokers in Canada are licensed and regulated. More important still, few Canadian mortgage applicants ever pay any kind of fees or higher-than-market rates. Nor have I had any clients simply sign documents without spending the time to understand exactly what they are signing on for.

Three.

The US system created A.R.M.’s, an unbelievably good deal on paper… at first. Recall the subprime mortgages from point 1 above. Well, about 90% of those mortgages (the ones written for people with no income) were written as A.R.M.’s.

Mr. & Mrs. American, please sign here for your A.R.M.

What’s an A.R.M.?

This was a question that millions seemed either not to ask, or did not dwell long on the answer to.

A.R.M. = Adjustable Rate Mortgage:

The pitch in 2004: “Today and today only, we can give you a 1.00% rate with interest-only payments for the first three years (Yes it gets better still: interest-only payments). That’s right, your payments will be just $415.80 per month on a $500,000 mortgage. In three years the interest rate will reset (keyword there:reset) to 4% over a 30-year amortization, but no need to worry about that as we will just refinance you at that time or flip out of the house since it will be worth so much more; just look how much it has risen in price since I started speaking a few minutes ago…”

“What’s that? How much is the payment at 4%? Why, you’re the first one to ask me that in months. I am not even sure. Let me figure it out ”(Leaves to find office manager, who in turn finds a guy that was in the business a few years earlier when math was still important. Returns.) – “It would be $2,377.59 per month. Yes, that is much higher, but hey it’s only $415.80 for now, and three years is an awful long ways away”.

In Canada it is rare to see a ‘teaser rate’ mortgage as we call them, as the optics are not great around such products since 2007. However, when you do see a mortgage product such as this in Canada, the qualifying rate used is not the artificially low teaser rate as with the US system, it is the higher (inevitable) interest rate that is used to ensure that the borrowers will have stability.

In Canada we have variable-rate mortgages which are significantly different products and again use a qualifying rate much higher than the effective rate. At the time of this writing a variable rate mortgage is at a net rate of 2.20%, but the qualifying rate used is 4.64%. In other words, the Canadian system goes the opposite path of the US system. We ensure an applicant is well overqualified for the mortgage they are applying for.

Four.

Many US residential home builders are publicly traded companies, and as another by-product of the bubbly finance system at the time, vast sums of money were thrown at them to build, build, build, and build. In 2004 it was estimated that 40% of US real estate purchases were investment or vacation homes.

In 2006 there were already vast numbers of partially constructed homes that were no longer selling, there were no buyers for them. The overbuilding was significant, and as the economy slowed it was one more layer on a rapidly rolling snowball that became an avalanche.

Meanwhile in Canada… more than 90% of real estate purchases are for owner-occupied properties, with less than 4% of mortgages being written for investment properties. Supply in most markets remains tight. Markets like the city of Vancouver, have seen the last single-family home site created. In fact, single-family homes are dwindling in many urban centres as consolidations occur to create new multi-family sites. With geographical constraints such as mountains, coastlines, borders and agricultural lands among the myriad of limitations to growth (a.k.a. ‘sprawl’), the supply side of the equation in cities like Toronto and Vancouver will not be easily remedied anytime soon.

Five.

Mortgages in many states are ‘non-recourse’ loans, meaning that the lender cannot go after the borrower for any monies owed over and above the final sale price of the asset pledged. In states such as California and Arizona, this led to many ‘strategic defaults’ by borrowers. Essentially these were an exit plan for home owners with otherwise good credit and stable incomes who found themselves saddled with a mortgage balance more than double the market value of the home. Looking at how long it would take to pay the debt, and whether the home would ever recover its value, many people chose to throw the keys to their homes — or at least their second, third and fourth homes — on the desk of the bank and walk away.

This played a role in foreclosures rising to 14.4% of all mortgages in the USAby September 2009.

Meanwhile in Canada, all mortgages are full recourse, which means that the lender can (and will) chase the homeowner to the ends of the earth for repayment of any loss, garnisheeing wages if need be to collect monies owed.

In 2009 Canada also hit a record high foreclosure level… of 0.41%. This is just slightly above the twenty year average.

Conclusion

As the movie ends it is a scene of massive government bailouts, another thing that no Canadian bank required through that period of time (in fact Canadian Banks were the only lenders in the G7 that did NOT require Government assistance). It was also a scene, unchanged to this day, of little fault being found with those who built a system doomed to failure. There were no jail sentences for those involved in perpetrating what became a massive global economic meltdown. It was as if this were something that just happened on its own. A force of nature.

In the USA there was clear evidence of fraud at all levels in a broken system that rewarded multiple layers and players to look the other way and ‘go along to get along’.

In Canada we are conservative by nature. As a Mortgage Broker myself, I am on the front lines dealing daily with fiscally prudent clients who opt to borrow, in most cases, significantly less than they (painstakingly) qualify for. I then get on the phone to fiscally prudent underwriters at fiscally prudent lenders and work through a hurricane of paperwork for an approval.

Also, I have not met a Canadian Mortgage Broker with a lounge sized fully stocked bar in their offices serving Caesars at noon as if work is just one big party (see the movie). Alas, we are a far more boring bunch here with actual work in our workdays.

As much as many would like to draw comparisons to the Canadian and USA real estate markets, there are few commonalities to be found that are any more logical than the following theory:

‘Ryan Gosling starred in a film about the US mortgage meltdown, Ryan Gosling is Canadian, Ryan Gosling is mortgage meltdown, mortgage meltdown is Canadian’…um ya – Illuminati confirmed!

Great flick though, an excellent adaptation of a great authors work.

DUSTAN WOODHOUSE
Dominion Lending Centres – Accredited Mortgage Professional
https://dominionlending.ca/news/the-big-short-not-a-canadian-story/ 

Sometimes “life happens”, and when it does, your home can be your savior if you have accrued some equity in it. Maybe you’ve been out of work, run up your credit cards and driven your credit rating into the ground. Perhaps, you’ve decided to leave the job you hate and venture out into the world of owning your own business. Whatever it may be, the equity in your home can help.

I recently helped a client who had maxed out her high interest credit cards due to not being able to work for a couple of years, and the credit card debt had lowered her credit score substantially. She was now back to work as a self employed consultant earning a good income, but the $1,000 monthly interest payments she was paying was seriously eating at her cash flow and not reducing the principal she owed. Dead money!!

Luckily for her, she had great equity in her condo, so I was able to provide her with an Equity Take Out Mortgage. The mortgage lender I chose was able to loan her money based on the strength of her property and the low loan to value of the mortgage based on her equity, NOT her income or credit score.

Here are the numbers:

Mortgage Amount $75,000
Rate: 4.75% (due to low credit score and equity take out)
Monthly Payments: $425.59
Savings per month: $574.41

In this case, my client was able to pay off her credit card debt and had a fair amount of money left over to invest in her business and her future.

In the end, she was very happy to be able to get her finances and business back on track, and start her life anew!

By working with me, a licensed mortgage broker who has access to a variety of lenders and products, we were easily able to find a great solution to a “life happens” scenario.

If you would like to learn more about how the equity in your home can help you, contact your nearest Dominion Lending Centres mortgage professional.

Lawyers, doctors, business owners and other self-employed Canadians…you know the type. Well educated, hard-working and driven. They are dedicated to their profession, their business, their staff and helping people. They don’t have much personal time since work is their life, but when they do, they like spending time with their friends and family, they have hobbies and they like to travel and enjoy life. They are in their late 50’s to early 60’s and usually own big homes and vacation properties. They seem to have it all.

So why when it comes to financial matters, especially tax matters, are they so disorganized or naïve? It may be that they are too busy, or have more important things to focus on, or are just big procrastinators, but many accountants across the country are finding out that remitting HST to CRA is not a top priority for some of these professionals.

It usually starts small, they forget, or they put it lower on their priority list. Then over time, the amount they owe becomes bigger and they no longer have the money, but not to worry, they say they will have it soon and then it spirals out of control. Next, they are sheepishly sitting in their accountant’s office waiting for the ‘sentence’. You owe…gasp…$500,000!

This was a familiar scenario for Michael B. (68) of Vancouver, BC. Michael was a family doctor working in his own practice for over 35 years. Married with children, Michael was the sole income provider for his wife of over 45 years and his 2 sons until they married and had families of their own. As a family doctor, Michael’s clinic was always busy and he and his family never had to worry about money. Michael only visited his accountant once a year during tax season and never worried much about income since he was planning to work for at least another 7-8 years.

His retirement came suddenly when his wife was diagnosed with Alzheimer’s and Michael needed to spend more time at home to care for his wife as she was deteriorating faster than usual. At first, his spending habits remained the same as when he was working and when tax season came around, he was too busy to remember to file. The habit of cutting expenses was difficult since he never had to watch his spending. In addition, he was no longer occupied at work and with his wife sick, Michael was spending more money on ordering food and dining out. After many years of putting his taxes on the backburner, his accountant gave him the bad news that he owed more than $250,000 to the CRA. Additionally, his spending money was now beyond depleted and he was paying excess amounts in credit card interest. Michael was suddenly faced with the decision to sell his home in order to pay off his debts and to clear his taxes. Both he and his wife loved their home and it was the one thing that he would not be ready to sacrifice.

Michael’s accountant introduced him to a simple solution called a CHIP Reverse Mortgage from HomEquity Bank. Equity taken out via a reverse mortgage is taken tax-free, keeps investments intact and because there are no monthly payments, won’t have an impact on day-to-day cash flow. It can be arranged quickly without CRA tax liens or payment schedules. A reverse mortgage can be a great solution for your 55+ clients. Contact your Dominion Lending mortgage professional for more information.
 

There was a 62 year old male and his 61 year old female wife living in Kelowna. One day the male had a massive heart attack and died instantly. Insurance paid off all the debts.

The husband had always looked after the financial affairs. The widow knew nothing about financial matters and couldn’t even balance a cheque book. She started receiving credit offers in the mail and responded to them.

A son, living elsewhere, visited his mother one day and found out that she had accumulated new debt in the amount of $40,000. The widow could not keep up with all the payments with the reduced pension income so the son took her to her local financial institution that the couple had dealt with for many years.

They met with the branch manager and arranged a term mortgage to pay off the debts and gave the mother a $5,000 limit credit card.

The son again visited the mother one winter day 2 years later and found that her gas had been turned off due to nonpayment. She was using a space heater to keep warm. He couldn’t understand why there was a problem. He did some investigating and discovered that the branch manager had given his mother a secured line of credit with a limit of $90,000 and a $15,000 credit card.

The widow had maxed out the line of credit and the credit card. Because of a poor market and deferred maintenance of the property, the home could not be sold even after it was listed for 6 months. The son arranged for his mother to live with her daughter in Alberta. He cleaned out the home and took the keys and gave them to the branch manager telling her that he didn’t know what else to do.

Maybe the widow would have been best served if she had been presented with either the option of a term mortgage or a reverse mortgage; and then the widow might have been able to stay in her home for the rest of her life. Unfortunately, she wasn’t presented with the option. Why is this story important? Because the widow was my mother.

If you know someone who can benefit from a CHIP Reverse Mortgage, please contact a mortgage professional at Dominion Lending Centres.

BOB URBANOVITCH
Bob is a Business Development Manager with HomEquity Bank.
https://dominionlending.ca/news/why-i-believe-in-reverse-mortgages/

Okay, so here we are… we have worked together to secure financing for your mortgage. You are getting a great rate, favourable terms that meet your mortgage goals, the lender is satisfied with all the supporting documents, we are broker complete, and the only thing left to do is wait for the day the lawyers advance the funds for the mortgage.

Here is a list of things you should NEVER do in the time between your financing complete date (when everything is setup and looks good) and your closing date (the day the lender actually advances funds).

NEVER MAKE CHANGES TO YOUR FINANCIAL SITUATION WITHOUT FIRST CONSULTING ME. CHANGES TO YOUR FINANCIAL SITUATION BEFORE YOUR MORTGAGE CLOSES COULD ACTUALLY CAUSE YOUR MORTGAGE TO BE DECLINED.

So without delay, here are the 10 Don’ts of Mortgage Closing… inspired by real life situations.

1. Don’t quit your job.

This might sound obvious, but if you quit your job we will have to report this change in employment status to the lender. From there you will be required to support your mortgage application with your new employment details. Even if you have taken on a new job that pays twice as much in the same industry, there still might be a probationary period and the lender might not feel comfortable with proceeding.

If you are thinking of making changes to your employment status… contact me first, it might be alright to proceed, but then again it might just be best to wait until your mortgage closes! Let’s talk it out.

2. Don’t do anything that would reduce your income.

Kind of like point one, don’t change your status at your existing employer. Getting a raise is fine, but dropping from Full Time to Part Time status is not a good idea. The reduced income will change your debt service ratios on your application and you might not qualify.

3. Don’t apply for new credit.

I realize that you are excited to get your new house, especially if this is your first house, however now is not the time to go shopping on credit or take out new credit cards. So if you find yourself at the Brick, shopping for new furniture and they want you to finance your purchase right now… don’t. By applying for new credit and taking out new credit, you can jeopardize your mortgage.

4. Don’t get rid of existing credit.

Okay, in the same way that it’s not a good idea to take on new credit, it’s best not to close any existing credit either. The lender has agreed to lend you the money for a mortgage based on your current financial situation and this includes the strength of your credit profile. Mortgage lenders and insurers have a minimum credit profile required to lend you money. If you close active accounts, you could fall into an unacceptable credit situation.

5. Don’t co-sign for a loan or mortgage for someone else.

You may have the best intentions in the world, but if you co-sign for any type of debt for someone else, you are 100% responsible for the full payments incurred on that loan. This extra debt is added to your expenses and may throw your ratios out of line.

6. Don’t stop paying your bills.

Although this is still good advice for people purchasing homes, it is more often an issue in a refinance situation. If we are just waiting on the proceeds of a refinance in order to consolidate some of your debts, you must continue making your payments as scheduled. If you choose not to make your payments, it will reflect on your credit bureau and it could impact your ability to get your mortgage. Best advice is to continue making all your payments until the refinance has gone through and your balances have been brought to zero.

7. Don’t spend your closing costs.

Typically the lender wants to see you with 1.5% saved up to cover closing costs… this money is used to cover the expense of closing your mortgage, like paying your lawyer for their services. You might think that because you shouldn’t take out new credit to buy furniture, you can use this money instead. Bad idea. If you don’t pay the lawyer… you aren’t getting your house, and the furniture will have to be delivered curb side. And it’s cold in Canada!

8. Don’t change your real estate purchase contract.

Often times when you are purchasing a property there will be things that show up after the fact on an inspection and you might want to make changes to the contract. Although not a huge deal, it can make a difference for financing. So if financing is complete, it is best practice to check with me before you go and make any changes to the purchase contract.

9. Don’t list your property for sale.

If we have set up a refinance for your property and your goal is to eventually sell it… wait until the funds have been advanced before listing it. Why would a lender want to lend you money on a mortgage when you are clearly going to sell right away (even if we arranged a short term)?

10. Don’t accept unsolicited mortgage advice from unlicensed or unqualified individuals.

Although this point is least likely to impact the approval of your mortgage status, it is frustrating when people, who don’t have the first clue about your unique situation, give you unsolicited advice about what you should do with your mortgage, making you second guess yourself.

Now, if you have any questions at all, I am more than happy to discuss them with you. I am a mortgage professional and I help my Dominion Lending Centres clients finance property every day. I know the unique in’s and out’s, do’s and don’ts of mortgages. Placing a lot of value on unsolicited mortgage advice from a non-licensed person doesn’t make a lot of sense and might lead you to make some of the mistakes as listed in the 9 previous points!

SO IN SUMMARY, THE ONLY THING YOU SHOULD DO WHILE YOU ARE WAITING FOR THE ADVANCE OF YOUR MORTGAGE FUNDS IS TO CONTINUE LIVING YOUR LIFE LIKE YOU HAVE BEEN LIVING IT! KEEP GOING TO WORK AND PAYING YOUR BILLS ON TIME!

Now… what about after your mortgage has funded?

You are now free to do whatever you like! Go ahead… quit your job, go to part time status, apply for new credit to buy a couch and 78″ TV, close your credit cards, co-sign for a mortgage, sell your place, or soak in as much unsolicited advice as you want! It’s up to you!

But just make sure your mortgage has funded first.

Also it is good to note, if you do quit your job, make sure you have enough cash on hand to continue making your mortgage payments! The funny thing about mortgages is, if you don’t make your payments, the lender will take your property and sell it to someone else and you will be left on that curbside couch.

Obviously, if you have any questions, please get in touch with us here at Dominion Lending Centres!

MICHAEL HALLEYY
Dominion Lending Centres – Accredited Mortgage Professional
https://dominionlending.ca/news/the-10-donts-of-mortgage-closing/

Interest rates are only one of many features that should be looked at when you are applying for a mortgage. But all things being equal, the interest rate may be more important than you think.

I was reviewing mortgage options with a client and the only thing they were interested in was the mortgage rate. There was no concern about all the other conditions that could end up being quite costly and since I could only offer him what he considered a small reduction, the client said “the bank’s rate was only a little higher and I feel more comfortable leaving everything I have with my bank for such a small difference.” What was the difference? I will get to that in a minute.

The mortgage renewal form you get in the mail is another cautionary note. I have had clients send me a copy of their renewal form. So far, in every case the renewal rate was higher than what I was currently able to get them. The last one I saw was .25% higher than what I could offer.

ACCORDING TO A RECENT MARITZ/CAAMP SURVEY, CLIENTS WHO USED THE SERVICES OF A MORTGAGE BROKER BENEFITED WITH AN INTEREST RATE .045% LOWER THAN THOSE THAT DEALT DIRECTLY WITH THEIR LENDERS.

So what does this fraction of a percentage mean for you? Let’s look at a $500,000 mortgage at 2.64% compared to 2.84%. That is only .2% or, to look at it a different way, it is about $50 a month or $600 a year savings by taking the 2.64% mortgage.

Here are a few options to increase net worth.

1. You take the 2.64% rate and you invest the $600 a year into a growth mutual fund that averages 10%. Even though over the years, as your mortgage goes down, the savings may not be as great, you make up the difference and keep investing that $600 a year for the next 30 years. That is a small difference, but in 30 years it has added up to over $100,000 in your tax free savings account.

2. You take out the 2.84% and say I like my bank and I am comfortable with the bank making the extra money and increasing their bottom line off my mortgage.

3. With interest rates being so low, you could look at increasing your cash flow by stretching out your amortization and lowering your payment. Then you take the extra cash flow and invest it with your financial adviser in your tax free savings account.

4. If you have extra equity in your home and have not contributed to your Tax Free Savings Account, consider refinancing and topping up your TFSA. As of 2016, the accumulative amount you can contribute is $51,000 per person 19 years or old in BC. So that would be $102,000 per couple. Invest that $102,000 and get an 8% return, you end up with $698,544 tax free money after 25 years and you paid back the mortgage and interest payments. If rates stayed the same throughout the 25 years at 2.69%, the whole $139,906 would be paid back. So you make a tax free profit of $558,638 by freeing up some capital to invest. Your total cost is $37,906 in interest.

There are many details to a mortgage and the rate is just one of them. Any of us here at Dominion Lending Centres would be happy to review your future mortgage needs to make sure you are maximizing your mortgage to your benefit.

KEVIN BAY
Dominion Lending Centres – Accredited Mortgage Professional
https://dominionlending.ca/news/how-to-maximize-your-cash-flow-while-increasing-your-net-worth-by-having-a-mortgage-plan/

When you are new to Canada and establishing credit, deciding on the best way to create a good credit history can be difficult.

You need a good credit rating in Canada if you are planning to rent or buy a home, buy a car or borrow money. By taking some important first steps to get your financial matters in order, you can establish a solid foundation for future credit worthiness.

The first steps when you are new to Canada and establishing credit are:

• Open a chequing and savings account with a local bank or credit union
• Get a cell phone through one of the local providers. Your payments on that account will report to the credit bureau.
• Apply for a secured credit card. Even if you start off with a limit of $500 you can always increase it at a later date. Pay some of your regular monthly bills (such as your cell phone or cable bill) through this credit card so you can start to show consistent repayment behaviour.
• Aim to establish a minimum of $2,000 credit limit with two credit cards or a loan and credit card. Lenders and the credit bureau consider two years of active credit use as a good foundation for credit worthiness.

I recommend you check your own credit report on an annual basis or within six months of making any major purchase. Visit www.Equifax.ca for more information.

For more information on establishing credit and managing your money visit www.mymoneycoach.ca.

Buyer Beware

There are many options available to people needing credit and some of them will get you into financial trouble if you are not careful. There are companies offering alternatives to credit cards. They often advertise online, by phone or flyers through the mail. They offer to provide loans that will help borrowers establish good credit. These programs all sound good until you look closely at the numbers. For more details, contact your local Dominion Lending Centres mortgage professional.

PAULINE TONKIN
Dominion Lending Centres – Accredited Mortgage Professional
https://dominionlending.ca/news/new-to-canada-and-establishing-credit/ 

Savings, market value and government guidelines are obvious obstacles but in my opinion, one topic that doesn’t get discussed in enough detail is consumer debt payments.

First a quick definition: Disposable income, is described as total personal income minus current income taxes. Essentially, your take-home-pay.

Here’s a “live” case study.

This consumer has $62,601 in non-mortgage debt or $0.86 for every dollar of disposable income. A model citizen by Canadian standards given StatCan’s most recent report reflected Canadians have $1.64 in debt for every dollar of disposable income.

The minimum payments currently required on this $62,000 debt is $1,878.03 per month. If this consumer chose to pay only the minimum payment requested on each monthly statement toward the repayment of this debt, it would take between 73 and 98 years to pay it all off. What will AMAZE you is by keeping unchanged the exact minimum payments required today, these debts could be totally paid in full between 39 and 50 months from now. Therefore, keeping the same payment every month from this point forward rather than paying the declining payment being requested on each statement is the key to paying the debt off faster. It’s remarkable to think you could pay it off this quickly given the average annual cost of borrowing of 16.794% which is actually even worse when annual credit card fees are added, making the effective annual cost of borrowing 21.054%. By the way, anybody getting this kind of return on your market investments at the moment? Hmmmm?

Now, watch this and take a deep breath. This same $1,878 per month would carry a mortgage principal of $410,513. Amazing buying capacity eh?…all tied up in a mere $62,600 in debt.

That’s right. If this consumer were debt free, it would be possible to save for a down payment with some simple strategies and a starter home (or condo more likely) is well within reach.

Now here’s a comparison for you.

Annual interest cost on this consumer’s debt is estimated at $8,975. Meanwhile the annual interest cost in the first year on a mortgage principal of $410,513 is $10,839. The difference is a mere $1,864 for the entire year. Wouldn’t you rather be a home owner paying interest on an appreciating asset?

Here’s my formula for eliminating the debt in this case study. My recommendations:

Stop using all cards, switch to cash only. Close all credit card accounts except two primary credit cards like a Visa or MasterCard. Write letters to all the other creditors requesting the accounts be closed and be sure to follow it up. Call the two credit card companies whose cards you are keeping and get them to give you their lowest rate available with no annual fee and no loyalty points. Nothing is for free! Use any savings remaining at the end of each month and apply it to the smallest debt owing until the debt is paid in full then use the freed up payment and apply it to the next smallest debt and so on.

There are a multitude of strategies that you can take here including paying highest interest debt off first, but I often find the former approach is usually more successful and you see the results faster. Every debt reduction plan should be designed specifically for the finances of the household and this is a good place to start.

The bottom line: don’t get distracted by the destructive effect of non-mortgage debt, get help to establish a plan with your mortgage broker and, as always…experience a strategy…not just a mortgage. We here at Dominion Lending Centres can help!

Mark Alltree
Dominion Lending Centres – Accredited Mortgage Professional
https://dominionlending.ca/news/the-shocking-impact-of-consumer-debt-payments-and-how-to-overcome-this-significant-home-ownership-barrier/ 

We’ve all heard the terms Mortgage Broker and Mortgage Specialist flung around, but what on earth is the difference? Though they sound similar, there are major differences that all home buyers and owners should be aware of. Let’s start off with some simple definitions.

A Mortgage Specialist is a person employed by a lending institution to sell that lender’s mortgage products. A Mortgage Broker belongs to an independent firm that has access to multiple lenders’ mortgage rates and offers. So which one should you choose?

Mortgage Specialists can help if you already have services set-up at a lending institution, such as a bank, in order to consolidate all your finances. This can minimize paperwork as the bank is already familiar with your credit history. If you don’t have all your existing services set-up at one institution, you may choose a lending institution and Mortgage Specialist for the security of using a well-known bank. These are indeed valid reasons to enlist a Mortgage Specialist for your mortgage needs, but they also have some major disadvantages.

Mortgage Specialists only have access to their lender’s products. In a typical situation, homeowners end up with a higher interest rate than other institutions. This occurs because the homeowner must negotiate for themselves and Mortgage Specialists are usually paid according to the rate they sell you. This is where Mortgage Brokers come in handy. Mortgage Brokers have access to most lending institution’s products in the market place and can shop around to negotiate the best rate for you. They are also paid a flat rate for their services by the lender, so they don’t benefit from selling you a higher rate. Sounds great, but what else can a broker do?

Mortgage Brokers work for you rather than a single institution, which means they work in your best interest. A Mortgage Broker will handle all the paper work for you and only require a single credit check for all applications. Some people worry about using Mortgage Brokers because they usually belong to unknown, smaller companies, but this should really be viewed as an advantage. Mortgage Brokers are required to have formal training and must complete ongoing accreditation tests and courses to maintain their licences. Mortgage Specialists do not require any formal training and are simply educated by the institution they work for. These specialists are also limited to certain hours set forth by their employers, whereas Mortgage Brokers are typically available 24/7.

Both avenues of mortgage lending have valid functions. If you are willing to do research and feel comfortable negotiating for yourself then a Mortgage Specialist can be a sound investment option. If, however, you are stressed about the process and don’t feel comfortable taking on the responsibility of researching everything for yourself then a Mortgage Broker is a better option for you. It’s always best to take the time and discover which option fits your needs before jumping into one of the biggest purchases of your life.

So get out there and start researching!
 

ALIM CHARANIA
Dominion Lending Centres – Accredited Mortgage Professional
https://dominionlending.ca/news/mortgage-brokers-vs-mortgage-specialists/