24 Apr

DETERMINING THE BEST MORTGAGE…FOR YOU!

Mortgage Tips

Posted by: MANJIT SINGH BHONDHI

DETERMINING THE BEST MORTGAGE…FOR YOU!

Determining the Best Mortgage…For YOU!So you have saved, and saved and you are finally ready to start house hunting…but before you do, there are a few things that you should be looking into BEFORE you start buying. Namely, your mortgage options. Did you know that there are various mortgage products? Or that each mortgage product has it own personality? They all do, and there is a mortgage product that is just right for you…we just have to find it first!

1. Understand your Expenses.

a. Do you know what you spend in a month? Do you have a monthly budget? With buying your new home, there are several associated costs that you should consider. These include the down payment, closing expenses, ongoing maintenance, taxes and utilities. If you have a budget, revamp it to maximize your saving. If you don’t have one, it is a simple thing to do! Track your spending by listing your household income and your expenses. This will give you what you spend in a month, how much you can save, and a guideline to follow.

2. Knowing your Job Stability

a. This is key to understanding and finding the right mortgage. You need to if you are in an in-demand occupation, or if your position maybe obsolete in a few years. You should also consider the length and term of your position—how long have you been there and how long are you planning to be there?

3. Consider your Limits

a. You and your Dominion Lending Centres broker need to understand what your payment and price limits are. This will determine if a fixed or variable rate mortgage is better for you.

b. You also need to know your amortization. This is the length of time that it will take for you to pay off your mortgage, based on the factors we previously discussed.

4. Know what you want in your home

a. To ensure that your home will grow with you consider these 4 questions:

i. Location: Are you close to the amenities you desire?

ii. Size: Can you comfortably accommodate your family and daily activities?

iii. Special Features: What do you want for added comfort & convenience in your home

iv. Lifestyle: Are you planning on adding to your family, or moving away soon?

Finally, and this is CRITICAL! Get PRE-APPROVED before you begin shopping for your new home. Know your financing, and what is available for you—this way you can shop stress free and you can negotiate for the home of your dreams!

Geoff Lee

GEOFF LEE

Dominion Lending Centres – Accredited Mortgage Professional

20 Apr

DOWN PAYMENT VERIFICATION – 5 KEY POINTS

Mortgage Tips

Posted by: MANJIT SINGH BHONDHI

DOWN PAYMENT VERIFICATION – 5 KEY POINTS

Down Payment Verification - 5 Key PointsOne 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

NATHAN LAWRENCE

Dominion Lending Centres – Accredited Mortgage Professional

19 Apr

THE ROLE OF A MORTGAGE BROKER

Mortgage Broker Industry

Posted by: MANJIT SINGH BHONDHI

The Role of a Mortgage BrokerBuying a home is a big step – a big, very exciting, potentially stressful step! How can you take the hassle out of the equation and keep your buying experience super positive? Easy… Surround yourself with a team of experienced professionals!

Many experienced realtors insist on starting your financing first, that’s where your Mortgage Broker comes in.

What is a Mortgage Broker? A Mortgage Broker is an expert in real estate loans that acts as a match-maker between home buyers looking for money and lenders with funds available to borrow. A broker will collect information from you about your employment, income, assets, loans and other financial obligations as well discuss your current budget, spending patterns and goals in order to get a thorough understanding of where you’re at and where you’d like to be. From here they assess the strengths and any weaknesses in your application and can advise on potential suitable financing options and any next steps you might need to take in preparing yourself for loan approval.

Talking with a Mortgage Broker before you start shopping is helpful for a number of reasons:

  • You’ll develop a well-founded expectation of the price range and payments that you can afford.
  • You’ll have a chance to address any potential gaps in your application for financing BEFORE you’re in a time crunch to meet deadlines for closing.
  • Sellers may take your offer more seriously when you tell them you’ve been pre-approved for your financing putting you in a better position to negotiate (price, possession date, inclusions, other terms, etc).
  • You and your Mortgage Broker will begin to compile your documentation so that your application is ready to go when you find the perfect home, leaving your mind free to start arranging furniture in your new place.

So why use a Mortgage Broker rather than your bank?

A Mortgage Broker has access to loans from a wide range of lenders. That means that you have more potential places to get approved, AND can take advantage of best products, top programs and lowest pricing!

A Mortgage Broker must complete a series of courses and pass the corresponding exams prior to obtaining a license to sell mortgages. In order to maintain that license a Broker must uphold the highest standards of moral, ethical, and professional conduct – including ongoing education and training.

A Mortgage Broker working with multiple lender options means that they truly SHOP for the best programs and rates for you based on comparisons and choices and don’t simply sell you the limited products they have to offer through a single bank source.

Mortgage Brokers work EXCLUSIVELY in mortgages so they are mortgage product specialists rather than banking generalists. Brokers deal with real estate transactions involving deadlines and conditions everyday as part of their job. They understand the urgency of meeting these commitments to ensure a successful transaction for everyone involved.

Learn more by contacting your Dominion Lending Centres mortgage professional today!

Mandy Reinhardt

MANDY REINHARDT

Dominion Lending Centres – Accredited Mortgage Professional

18 Apr

INDEPENDENT LEGAL ADVICE – DO YOU KNOW WHO CAN GIVE IT TO YOU?

General

Posted by: MANJIT SINGH BHONDHI

Independent Legal Advice - Do You Know Who Can Give It To You?First off, I’m sure some are saying what is Independent Legal Advice? ILA is just as it sounds – the need to seek independent legal advice. At Dominion Lending Centres, we always suggest that clients get ILA.

Many times especially, in private deals and builder mortgages, you will see that there is only one lawyer working for both parties. This means that the lawyer at some point must say to one of them, please be advised that should there be an issue with this file that I represent client A. Client B should then be aware that if he wants to make sure that he is being protected that he talk to another lawyer.

What is the difference between a Lawyer a Paralegal and a Notary Public?

First let’s look at the difference, first off, a lawyer is able to deal in all things pertaining to the laws of Canada in the province in which they are licensed. In real estate, they can do all the necessary steps including assisting a client in writing a real estate contract to representing them in court.

Paralegals do independent legal work under the general supervision of lawyers and that is the key difference, they can assist in just about every process that a lawyer might find themselves involved with but they are there to assist and not give legal advice.

BC Notaries are governed by the Notaries Act of BC and the discipline of their professional society. Today, the position of Notary as a member of one of the branches of the legal profession is sanctioned and safeguarded by law. BC Notaries are unique in North America, providing non-contentious legal services to the public. The definition of non-contentious is that it is legal work that relates to transactions occurring between one or more parties ie real estate. They are insured as we have learned lately from the case in BC but they cannot represent you in court as a lawyer would.

As you can see while there are several people who look like they can give Independent Legal Advice in the end only a lawyer can actually do that for you.

Len Lane

LEN LANE

Dominion Lending Centres – Accredited Mortgage Professional

17 Apr

THE TWO TYPES OF MORTGAGE PENALTY CALCULATIONS

General

Posted by: MANJIT SINGH BHONDHI

THE TWO TYPES OF MORTGAGE PENALTY CALCULATIONS

The Two Types of Mortgage Penalty CalculationsWe have all heard the horror stories about huge mortgage penalties. Like the time your friend wanted to refinance her home so that she could open a small business only to find out that it was going to cost her a $13,000 penalty to break her mortgage. This should not come as a surprise. It would have been in the initial paperwork from the mortgage lender and seen again at the lawyer’s office. A mortgage is a contract and when it is broken there is a penalty assessed and charged. You will have agreed to this. The institution that lent the money did so with the expectation that they would see a return on that investment so when the contract is broken there is a penalty to protect their interests. If you think about it, there is even a penalty to break a cell phone contract so the provider can recoup the costs they incurred so it stands to follow that of course there would be a penalty on a mortgage.

The terms of the penalty are clearly outlined in the mortgage approval which you will sign. The onus is on you to ask questions and to make sure you are comfortable with the terms of the mortgage offer. With so many mortgage lenders in Canada, you can very easily seek out other options if needed.

There are two ways the mortgage penalty can be calculated.

1. Three months interest – This is a very simple one to figure out. You take the interest portion of the mortgage payment and multiply it by three.

For instance: Mortgage balance of $300,000 at 2.79% = $693.48/month interest x 3 months or $2080.44 penalty.

OR

2. The IRD or Interest Rate Differential – This is where things get trickier. The IRD is based on:

  • The amount you are pre-paying; and,
  • An interest rate that equals the difference between your original mortgage interest rate and the interest rate that the lender can charge today when re-lending the funds for the remaining term of the mortgage.

In Canada there is no one size fits all in how the IRD is calculated and it can vary greatly from lender to lender. There can be a very big difference depending on the comparison rate that is used. I have seen this vary from $2,850 to $12,345 when all else was equal but the lender.

Things to note:

  • You will be assessed the GREATER of the 2 penalties.
  • You should always call your lender directly to get the penalty amount and do not rely on online calculators
  • You can avoid the penalty by porting the current mortgage if you are moving or waiting until the end of the term
  • A variable rate mortgage is usually accompanied by only the 3 month interest penalty

Given that 6/10 mortgages in Canada are broken around the 36 month mark, wouldn’t it be better to find out before you sign how your mortgage lender calculates their penalty just in case??…and the best way to get more information is to contact you local Dominion Lending Centres mortgage professional.

PAM PIKKERT

Dominion Lending Centres – Accredited Mortgage Professional

12 Apr

WHY YOU SHOULD SPEAK TO YOUR MORTGAGE BROKER BEFORE YOU SELL YOUR HOME

Mortgage Tips

Posted by: MANJIT SINGH BHONDHI

Why You Should Speak To Your Mortgage Broker Before You Sell Your HomeWhile many people will speak to a mortgage broker before buying a home, few people call a mortgage broker before selling a home. Calling could save you thousands of dollars and many sleepless nights.

Why? Brokers understand mortgages and ask the right questions. How long do you have remaining in your present mortgage? Do you know if it’s portable to a new property? Have you heard of increase and blend? A mortgage broker can help you to anticipate a penalty to break your present mortgage and see if porting or taking your mortgage to your new property is a good idea. Need more money? Blend and Increase will allow you to increase your mortgage amount and blend the old rate with the present day rate and save you thousands in penalties.

If you are at the stage in life where you have children leaving for university and you are down-sizing, perhaps a line of credit might be useful for helping to pay tuition and dorm fees.

While you may like your home it may need a new roof. Most home buyers do not want a fixer-upper and will discount your selling price to account for this. It may be easier to get the price you want and sell faster if you replace the roof, furnace or whatever is old yourself. The problem is that you are saving money for a down payment. Your mortgage broker can come to the rescue with a line of credit, either secured or unsecured which can be paid out with the home sale. In short, “we’ve got a mortgage for that!”.

Remember, calling your Dominion Lending Centres mortgage broker before buying is a no-brainer but why not call them before you sell.

DAVID COOKE

Dominion Lending Centres – Accredited Mortgage Professional

11 Apr

INSURED, INSURABLE & UNINSURABLE VS HIGH RATIO & CONVENTIONAL MORTGAGES

Mortgage Tips

Posted by: MANJIT SINGH BHONDHI

Insured, Insurable & Uninsurable ss High Ratio & Conventional Mortgages

You might think you would be rewarded for toiling away to save a down payment of 20% or greater. Well, forget it. Your only prize for all that self-sacrifice is paying a higher interest rate than people who didn’t bother.

Once upon a time we had high ratio vs conventional mortgages, now it’s changed to; insured, insurable and uninsurable.

High ratio mortgage – down payment less than 20%, insurance paid by the borrower.

Conventional mortgage – down payment of 20% or more, the lender had a choice whether to insure the mortgage or not.

vs

Insured –a mortgage transaction where the insurance premium is or has been paid by the client. Generally, 19.99% equity or less to apply towards a mortgage.

Insurable –a mortgage transaction that is portfolio-insured at the lender’s expense for a property valued at less than $1MM that fits insurer rules (qualified at the Bank of Canada benchmark rate over 25 years with a down payment of at least 20%).

Uninsurable – is defined as a mortgage transaction that is ineligible for insurance. Examples of uninsurable re-finance, purchase, transfers, 1-4 unit rentals (single unit Rentals—Rentals Between 2-4 units are insurable), properties greater than $1MM, (re-finances are not insurable) equity take-out greater than $200,000, amortization greater than 25 years.

The biggest difference where the mortgage consumers are feeling the effect is simply the interest rate. The INSURED mortgage products are seeing a lower interest rate than the INSURABLE and UNINSURABLE products, with the difference ranging from 20 to 40 basis points (0.20-0.40%). This is due in large part to the insurance premium increase that took effect March 17, 2017. As well, the rule changes on October 17, 2017 prevented lenders from purchasing insurance on conventional funded mortgages. By the Federal Government limiting the way lenders could insure their book-of-business meant the lenders need to increase the cost. We as consumers pay for that increase.

The insurance premiums are in place for few reasons; to protect the lenders against foreclosure, fraudulent activity and subject property value loss. The INSURED borrower’s mortgages have the insurance built in. With INSURABLE and UNINSURABLE it’s the borrower that pays a higher interest rate, this enables the lender to essential build in their own insurance premium. Lenders are in the business of lending money and minimize their exposure to risk. The insurance insulates them from potential future loss.

By the way, the 90-day arrears rate in Canada is extremely low. With a traditional lender’s in Canada it is 0.28% and non-traditional lenders it is 0.14%. So, somewhere between 99.72% and 99.86% of all Canadians pay their monthly mortgage every month.

In today’s lending landscape is there any reason to save the necessary down payment or do you buy now? Saving may avoid the premium, but is it worth it? You may end up with a higher interest rate.

By having to wait for as little as one year as you accumulate 20% down, are you then having to pay more for the same home? Are you missing out on the market?

When is the right time to buy? NOW.

Here’s a scenario is based on 2.59% interest with 19.99% or less down and 2.89% interest for a mortgage with 20% or greater down, 25-year amortization. In this scenario, it takes one year to save the funds required for the 20% down payment.

  • First-time homebuyer
  • Starting small, buying a condo
  • 18.9% price increase this year over last

Purchase Price $300,000
5% Down Payment $15,000
Mtg Insurance Premium $11,400 (4% as of March 17, 2017)
Starting Mtg Balance $296,400
Mortgage Payment $1,341.09

Purchase Price $356,700 (1 year later)

20% Down Payment $71,340
Mtg Insurance Premium $0
Starting Mtg Balance $285,360
Mortgage Payment $1,334.40

The difference in the starting mortgage balance is $11,040, which is $360 less than the total insurance premium. As well, the overall monthly payment is only $6.69 higher by only having to save 5% and buying one year sooner. Note I have not even built in the equity that one has also accumulated in the year. The time to buy is NOW. Contact your local Dominion Lending Centres mortgage professional so we can help!

Michael Hallett

MICHAEL HALLETT

Dominion Lending Centres – Accredited Mortgage Professional

 

10 Apr

HOW COMPOUND INTEREST CAN WORK FOR YOU

General

Posted by: MANJIT SINGH BHONDHI

How Compound Interest Can Work For YouI remember the first time I learned about how compound interest can work for you. I was introduced by a friend to someone in the financial services industry and he explained a simple technique to easily calculate how compound interest can work for you – the Rule of 72. I was so excited and started running numbers. I was really amazed that I never once learned this in school. How could we miss such an important bit of information?

Of all the things you can learn about money –the rule of 72 should be at the top of your list.

To estimate how long it takes for your money to double, simply divide 72 by the interest rate. The result is how many years it will take for your money to double at that rate. For example, let’s assume you can earn a 6% rate of return. How long will it take $1,000 to grow into $2,000?

72 / 6 percent = 12 years

In this example, if you invested $1,000 into an account that earned a flat 6% annual rate of return, after 12 years, your investment would be worth around $2,000. Conversely if you want your money to double in 6 years you would need to be earning 12% interest (net of taxes and fees).

So if you are saving to buy a home and want to save a certain amount in a certain amount of time you could use this simple rule to estimate how much interest you would have to earn to reach your goal.  If you want to pay off student debt or save to invest this is an easy way to do some calculations.

While I encourage people to lower their debt it is always good to make your money work for you as well.  I love the rule of 72 and think everyone should know about it as well.  Pass this on!

To save a little time, here are some interest rates and the corresponding amount of time to double:

1% – 72 years
2% – 36 years
3% – 24 years
4% – 18 years
5% – 14 years
6% – 12 years
7% – 10.3 years
8% – 9.0 years
9% – 8.0 years
10% – 7.2 years

Pauline Tonkin

PAULINE TONKIN

Dominion Lending Centres – Accredited Mortgage Professional