Mortgage Tips

20 Jul

WHAT IS “PORTING” A MORTGAGE?

Mortgage Tips

Posted by: MANJIT SINGH BHONDHI

Porting a mortgage is something similar to transferring a mortgage. Transfers are when you move your current mortgage to a different lender in order to take advantage of different interest rates or mortgage products.

Porting a mortgage is when you keep your lender, but move your mortgage to a different property. Now, not every lender allows you to port a mortgage, and not every property can qualify for a port.

One of the other things to keep in mind with porting a mortgage, you are generally only porting the balance remaining on your mortgage. If you need more money, you will need to re-qualify to blend your mortgage. If you do not want to blend and extend your mortgage term, you will need to come up with the additional funds on your own.

The ability to port a mortgage is really important, especially if you are in a fixed mortgage with a big bank, as it can be used to avoid paying a pre-payment penalty to break your mortgage early.

If you are curious to hear more about portability options and whether or not you could qualify, please reach out to a Dominion Lending Centres mortgage professional today!

6 Jul

Mortgage Specialist vs. Mortgage Broker: what’s the difference?

Mortgage Tips

Posted by: MANJIT SINGH BHONDHI

With the significance of land in Canada, it is crucial to see how the different experts work when purchasing a home and more importantly, how the importance of mortgages have evolved over the years.

Sooooooo… what is the distinction between a Mortgage Specialist and a Mortgage Broker? At the surface they sound the same

• They both mastermind contracts

• They both can offer exhortation and help you select a home loan, isn’t that so?

Wrong!!! There are numerous distinctions… Let’s look at some of them!

• A Mortgage Broker works for you! Their part is to go about as a connection amongst you and the moneylenders with the goal that you don’t need to invest your profitable energy finding out about home loans and looking for the ideal home loan. Home loan specialists do the legwork and consult for your sake for banks. They are your purpose of contact for everything identified with your financing your home.

o Bank authorities are utilized and paid by the bank and work for the bank’s sake.

• A Mortgage Broker can work with a wide range of loan specialists crosswise over Canada, as opposed to working for one budgetary establishment. In this manner, Mortgage Brokers can offer you more decisions with focused rates and terms including: Big banks, Credit Unions, Trust Companies, Monoline Lenders (merchant just banks) and private loan specialists.

o Usually Mortgage Specialists just approach their loan specialist’s items. In a common circumstance, mortgage holders could wind up with a higher loan fee than different organizations. This happens in light of the fact that the property holder must consult for themselves and Mortgage Specialists are generally paid by the rate they offer you.

• A Broker should effectively total a Provincially managed Mortgage Broker course and exam. (In BC, Mortgage Brokers must be authorized by FICOM) They keep on maintaining their great status to keep that permit by taking proficient improvement instruction courses.

o Bank experts are not authorized and require no formal preparing. There are no benchmarks for instructive prerequisites (albeit most Lenders do give some in-house preparing).

• Because Mortgage Brokers don’t work for a particular moneylender, you get unprejudiced counsel about an assortment of banks

o A bank expert can just offer their own particular establishments items, great or awful.

o Specialists don’t approach different banks, so they won’t suggest another moneylender’s item contributions.

• Mortgage Brokers utilize their insight and experience to arrange the most ideal terms and rates for you from an assortment of loan specialists, in light of the best fit for your circumstance.

o When you see a bank authority, the home loan arranging is regularly surrendered over to you.

o Will the bank authority consult for your benefit or the banks?

• For customary financing, the administrations of a home loan intermediary are by and large FREE to you. On the off chance that there is a cost, you will be educated with respect to those expenses in advance. Dealers get a discoverer’s expense from the bank once they put your home loan. Along these lines, intermediaries are roused to get the best terms and rates for their customers.

o Bank pros are paid by the bank

o Some banks offer rewards if pro gets their customer to pay higher financing costs or agree to accept other bank administrations.

• Mortgage Brokers chip away at a referral premise and are independently employed. A large portion of their business is done through informal referrals, along these lines a Dominion Lending Centers Mortgage Broker is persuaded to guarantee their customers are to a great degree cheerful and fulfilled to keep their business developing.

o A bank master is by and large a worker of the bank, creating business through the bank’s current clients.

• Most Mortgage Brokers are accessible for arrangements outside keeping money hours (evenings, ends of the week) at their customer’s comfort.

o Bank masters are by and large just accessible amid consistent keeping money hours.

• Mortgage Brokers are centered around your home loan

o Specialists are prepared and compensated on strategically pitching. Some will push you to merge all your saving money administrations with them while getting a home loan (charge cards, protection, RRSP, credit extensions, and so forth.)

Would you ask Tim Hortons who makes the best espresso and anticipate that them will state Starbucks? Not likely… So for what reason would you approach a Mortgage Specialist who works for a bank, to disclose to you which Lender has the best home loan item for your circumstance.

4 Jul

MORTGAGE PROTECTION

Mortgage Tips

Posted by: MANJIT SINGH BHONDHI

Mortgage and insurance coverage is something that everybody is “pitched” sooner or later in their life. Lamentably, a ton of us have a negative state of mind towards protection or guarantee as it is seen similar to a cash grab. Indeed, in the event that you are acquiring a level screen T.V., that additional 2-year guarantee for $100 may be somewhat over the top. Be that as it may, with regards to covering month to month contract installments or the extraordinary adjust of your home loan upon death or damage, truly, it is imperative to have.

Each and every individual is offered life and inability protection while applying for another home loan. As a home loan intermediary, it is our commitment to offer you Manulife’s Mortgage Protection Plan. Regardless of whether it is something you don’t need or don’t have a requirement for despite everything we require a mark affirming it was advertised. Reason being, is when John Smith separates his foot two years the street and can’t work to cover his home loan installments, Manulife needs to affirm that the customer passed on the chance to have their installments secured.

Presently, is Manulife’s home loan Protection Plan, or, MPP as it is known, the most extensive scope out there? No.

Is MPP superior to anything any scope you are regularly going to get from a bank straightforwardly? Indeed.

Manulife’s MPP is a 60-day unconditional promise, with scope that tails you bank to loan specialist. It will cover incapacity wounds keeping you from work, and is endorsed before your scope starts, not when a claim is made.

Most banks don’t enable you to take their home loan protection to another moneylender. Along these lines, if following 10-long stretches of paying your premiums you choose to leave your bank and go to a credit association, your scope is never again in influence and all that cash you spent on your month to month premiums is currently worth nothing. Scariest part about bank scope, is the wellbeing assessment is done when a claim is made, not when you join. Would you be able to envision not making a claim for a long time and after that being declined on scope since you have created medical problems not important when you joined in your 20’s?

On the off chance that Manulife Mortgage Protection Plan isn’t for you, there are protection agents out there we approach who can offer elective arrangements. The greatest thing however is to ensure you have SOME scope, since you won’t know you require it until the point that you do. On the off chance that you have any inquiries, contact a Dominion Lending Centers contract proficient for help.

20 Dec

MUCH ADO ABOUT ALMOST NOTHING–NON-RESIDENT OWNERSHIP OF HOUSING

Mortgage Tips

Posted by: MANJIT SINGH BHONDHI

Statistics Canada in conjunction with Canada Mortgage and Housing Corporation (CMHC) released their first report this morning from the Canadian Housing Statistics Program (CHSP), providing data regarding the non-resident ownership of Canadian housing. This program was mandated by the last federal budget, filling in a significant data gap in housing statistics. For years, many have speculated that foreigners were the major culprits driving housing prices into nosebleed regions in Vancouver and Toronto. Today’s release shows that non-residents own less than five percent of housing in both cities.
Immigration remains a significant driver of housing activity in Canada. Canada has the most robust population growth in the G7, three-quarters of which is attributable to immigration and foreigners moving to Canada will be of growing importance in the future. But the report showed that non-residents – defined as both foreigners and Canadians whose principal residences are outside of Canada, irrespective of citizenship – are not the primary cause of the housing affordability problem in Canada’s two largest cities.
Many have blamed foreigners– mainly the Chinese–for the sky-high prices that have surged in the past three years–pricing many Millennials out of the housing market. A voter backlash spurred provincial governments to introduce a 15% tax on non-resident buyers in Vancouver (August 2016) and Toronto (April 2017), though earlier available data showed that foreign purchases were only between 5 and 10 percent of all home sales. In both regions, the tax slowed housing activity mainly by changing psychology. New listings surged, and buyers became more cautious as their options improved with more supply and lower prices. Other measures to slow housing activity by government and financial institution regulators have led many to assert that “boomers have priced millennials out of the housing market.”

Data revealed that non-residents (individuals whose principal dwelling is outside of Canada) owned 3.4% of all residential properties in the Toronto census metropolitan area (CMA), while the value of these homes accounted for 3.0% of the total residential property value in that metro area. In the Vancouver CMA, non-residents owned 4.8% of residential properties, accounting for 5.1% of total residential property value.
Estimates of non-resident ownership varied by property type. In both metropolitan areas, non-resident ownership was more prevalent for condominium-apartments. Non-residents owned 7.2% of condominium-apartments in the Toronto CMA and 7.9% of these units in the Vancouver CMA. By comparison, non-residents held 2.1% of single-detached houses in the Toronto CMA and 3.2% of single-detached homes in the Vancouver.
Over the past decade, home prices have accelerated markedly in Canada’s largest urban areas, particularly in Vancouver and Toronto. Data from the Canadian Real Estate Association Home Price Index show prices increased 173.7% in Vancouver from January 2005 to November 2017, while they rose 145.0% in Toronto over the same period. The last three years have been particularly telling, with house prices in Vancouver increasing by more than 60% and in Toronto by more than 40%, triggering great concern about housing affordability.
Below are two infographics produced by Statistics Canada giving more regional detail on non-resident ownership in Vancouver and Toronto. Breaking down the metro regions by municipalities, across the Vancouver CMA, non-resident ownership was most concentrated in the City of Vancouver (7.6%), followed by Richmond (7.5%) and West Vancouver (6.2%). In the Toronto CMA, the shares of non-resident owned properties were most substantial in the municipalities of Toronto (4.9%), followed by Richmond Hill (3.6%) and Markham (3.3%).

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Largest Share of Non-Resident Ownership Is High-Price Condos
The most significant share of non-resident ownership in both CMAs was for condominiums, at 7.9% in the Vancouver and 7.2% in the Toronto. (See table below).
In Vancouver, almost two-thirds of non-resident owned properties were condominiums, while in Toronto, this share was close to half. Although the majority of condos were apartments, some were also single-detached houses, semi-detached houses and row houses.
Across the Vancouver CMA, 50.1% of condominium-apartments owned by non-residents were in the City of Vancouver, while 14.9% were in Richmond. In the Toronto CMA, non-resident owned condominium-apartments were primarily located in the City of Toronto (82.8%) and Mississauga (8.6%).
In the Vancouver CMA, the average value of a condominium-apartment owned by non-residents was 30.4% higher than that of a resident held condo-apartment. The City of Vancouver had the highest rate of non-resident ownership of condo-apartments within the CMA. The average value of these apartments was approximately $930,600, which was 25.6% higher than resident-owned.
The relative disparity between non-resident condo prices and resident condo prices in Toronto was much smaller than in Vancouver. In the Toronto CMA, non-resident owned condominium-apartments were on average 8.7% more expensive than resident owned. The City of Toronto had the highest concentration of non-resident owned condo-apartments in the CMA, which were on average valued at $439,000, or 7.6% more expensive than resident-owned.

22518f7b-b6c5-4b52-8f7b-435128333767[1]

30646683-0026-44c1-b307-4588effb8193[1]Same is true for Non-Resident Owned Single-Family Homes–More Expensive Than Resident-Owned
For the Vancouver CMA, the average value of a single-detached house owned by non-residents was approximately $2.3 million compared with $1.6 million for resident held. These differences were most pronounced in the Greater Vancouver A subdivision, the City of Vancouver and West Vancouver. In Greater Vancouver A, single-detached houses owned by non-residents had an average value of nearly $8 million, while those owned by residents had an average value of $5.3 million. The average size of a single-detached house held by non-residents in this district was close to 4,800 square feet, 32.2% larger than the average size of single-detached dwellings owned by residents.
In the Toronto CMA, single-detached houses owned by non-residents were on average 12.3% or $103,500 more expensive than homes owned by residents. Differences in average values for single-detached dwellings were most marked in the municipalities of Markham, Richmond Hill and Toronto. In Markham, the average value of single-detached houses owned by non-residents was close to $1.1 million compared with $997,500 for resident owners. In Richmond Hill, non-resident held single-detached homes were, on average, valued at $1.2 million compared with $1.1 million for resident owned houses. In the City of Toronto, a non-resident owned single-detached house was, on average, valued at just over $1 million compared with $965,800 for a resident owned home. These differences, once again, are much smaller in the GTA than in the GVA.

Bottom Line: Non-residents represent a significantly more important factor in the Vancouver region than in the Toronto CMA, as expected. Moreover, non-residents purchase markedly more expensive properties compared to residents in Vancouver than in Toronto.
Wealthy Chinese nationals are a more significant factor in Vancouver than in Toronto, which has been the case for many years–not surprising given the geography. Moreover, many Chinese nationals began buying properties in the Vancouver CMA well in advance of the July 1997 handover of Hong Kong from the United Kingdom to China. Chinese have continued to find the Vancouver region an attractive haven for capital despite the imposition of capital controls in China.
Many are non-residents and have not rented their properties. In consequence, there are relatively more vacant properties in Vancouver than in Toronto. The Vancouver city council approved a tax on empty homes, the first of its kind in Canada, in early 2017, with the first payments due in 2018. Self-reporting owners will be assessed a one percent tax on homes that are not principal residences or aren’t rented for at least six months of the year. Though a similar tax has been discussed by the Toronto city council, to date, it has not had legs.

DR. SHERRY COOPER

Chief Economist, Dominion Lending Centres

12 Dec

WHAT IS A CASH BACK MORTGAGE?

Mortgage Tips

Posted by: MANJIT SINGH BHONDHI

Every once in a while, a bank will advertise a cash back mortgage. It sounds great but there are a few things to consider.
When you purchase a home, you may find that you need some extra cash. You may want to renovate, purchase some furniture, or start on building a fence or landscaping.. Fortunately, some Canadian lenders offer mortgages that give you a cash back rebate when you take out your mortgage.
With a cash back mortgage, your lender advances you a cash lump sum when your mortgage closes. The most common sum you receive is 5% of your mortgage amount, but it’s possible to get between 1% and 5% depending on the lender you choose. Note that you receive these funds when the mortgage closes. The funds cannot be used for your down payment, however if you borrowed your down payment you could use the funds to pay back the loan.
This sounds like a great idea but there are some down sides to this type of mortgage. First- you will pay about 1.5% higher interest rate for the duration of the mortgage term. Usually this is a five-year term and if you take a look at how much extra interest you are paying you will find that it takes you five years to pay this sum back to the lender.
Another point to consider is that Canadians move on average every three years. What if you have to break the mortgage? In that case, you owe the lender the usual three months interest or Interest Rate Differential (IRD) as well as the balance of the cash back balance. This could be a very pricey move. If your lender allows it , it’s best to port your mortgage to your new home to avoid the double hit of the penalty and paying the cash back.
A cash back mortgage is a great option but it’s not for everyone. Be sure to tell your mortgage broker if it’s at all possible that you will have to move before your mortgage term is over so that he or she can advise you on what your penalties would be. If you have any questions, contact your local Dominion Lending Centres mortgage specialist.

DAVID COOKE

Dominion Lending Centres – Accredited Mortgage Professional

11 Dec

IS IT TIME TO LOCK IN A VARIABLE RATE MORTGAGE?

Mortgage Tips

Posted by: MANJIT SINGH BHONDHI

Approximately 32 per cent of Canadians are in a variable rate mortgage, which with rates effectively declining steadily for the better part of the last ten years has worked well.

Recent increases triggers questions and concerns, and these questions and concerns are best expressed verbally with a direct call to your independent mortgage expert – not directly with the lender. There are nuances you may not think to consider before you lock in, and that almost certainly will not be primary topics for your lender.

Over the last several years there have been headlines warning us of impending doom with both house price implosion, and interest rate explosion, very little of which has come to fruition other than in a very few localised spots and for short periods of time thus far.

Before accepting what a lender may offer as a lock in rate, especially if you are considering freeing up cash for such things as renovations, travel or putting towards your children’s education, it is best to have your mortgage agent review all your options.

And even if you simply wanted to lock in the existing balance, again the conversation is crucial to have with the right person, as one of the key topics should be prepayment penalties.

In many fixed rate mortgage, the penalty can be quite substantial even when you aren’t very far into your mortgage term. People often assume the penalty for breaking a mortgage amounts to three months’ interest payments, which in the case of 90% of variable rate mortgages is correct. However, in a fixed rate mortgage, the penalty is the greater of three months’ interest or the interest rate differential (IRD).

The ‘IRD’ calculation is a byzantine formula. One designed by people working specifically in the best interests of shareholders, not the best interests of the client (you). The difference in penalties from a variable to a fixed rate product can be as much as a 900 per cent increase.

The massive penalties are designed for banks to recuperate any losses incurred by clients (you) breaking and renegotiating the mortgage at a lower rate. And so locking into a fixed rate product without careful planning can mean significant downside.

Keep in mind that penalties vary from lender to lender and there are different penalties for different types of mortgages. In addition, things like opting for a “cash back” mortgage can influence penalties even more to the negative, with a claw-back of that cash received way back when.

Another consideration is that certain lenders, and thus certain clients, have ‘fixed payment’ variable rate mortgages. Which means that the payment may at this point be artificially low, and locking into a fixed rate may trigger a more significant increase in the payment than expected.

There is no generally ‘correct’ answer to the question of locking in, the type of variable rate mortgage you hold and the potential changes coming up in your life are all important considerations. There is only a ‘specific-to-you’ answer, and even then – it is a decision made with the best information at hand at the time that it is made. Having a detailed conversation with the right people is crucial.

It should also be said that a poll of 33 economists just before the recent Bank of Canada rate increase had 27 advising against another increase. This would suggest that things may have moved too fast too soon as it is, and we may see another period of zero movement. The last time the Bank of Canada pushed the rate to the current level it sat at this level for nearly five full years.

Life is variable, perhaps your mortgage should be too.

As always, if you have questions about locking in your variable mortgage, or breaking your mortgage to secure a lower rate, or any general mortgage questions. contact a Dominion Lending Centres mortgage specialist.

DUSTAN WOODHOUSE

Dominion Lending Centres – Accredited Mortgage Professional

9 Dec

RETURNING TO THE ‘A-SIDE’

Mortgage Tips

Posted by: MANJIT SINGH BHONDHI

Every year Canadian families are caught in unexpected bad circumstances only to find out that in most cases the banks and the credit unions are there (to lend you money) only in the good times, not so much during the bad times.

This is where thousands of families have benefited over the years from the services of a skilled mortgage broker that has access to dozens of different lending solutions including trust companies and private lending corporations. These short-term solutions can help a family bridge the gap through business challenges, employment challenges, health challenges, etc.

The key to taking on these sorts of mortgages is always in having a clear exit strategy, which in some cases may be a simple as a sale deferred to the Spring market. Most times the exit strategy involves cleaning up credit challenges, getting consistent income back in place and moving the mortgage debt back to a mainstream lender. Or as we would say in the business an ‘A-lender’.

The challenge for our clients, and for us as mortgage brokers, over the past few years, arguably over the past nine years, has been the constant tinkering with lending guidelines by the federal government. And the upcoming changes of Jan. 1, 2018 represent far more than just ‘tinkering’.

This next set of changes are significant, and will effectively move the goal posts well out of reach for many clients currently in ‘B’ or private mortgages. Clients who have made strides in improving their credit or increasing their income will find that the new standards taking effect will put that A-lender mortgage just a little bit out of reach as of the New Year.

There is concern that the new rules will create far more problems than they solve, especially when it seems quite clear to all involved that there are no current problems with mortgage repayment to be solved.

Yet these changes are coming our way fast.

Are you expecting to make a move to the A-Side in 2018?

It just might be worth your time to pick up the phone and give your Dominion Lending Centres mortgage specialist a call today.

We’re here and ready to help.

DUSTAN WOODHOUSE

Dominion Lending Centres – Accredited Mortgage Professional

1 Dec

GETTING ON THE PROPERTY LADDER

Mortgage Tips

Posted by: MANJIT SINGH BHONDHI

As property prices continue to rise across Canada, the conversation around “how to climb the property ladder” has made a subtle shift to “how to get on the property ladder in the first place.” Especially if you’re single.

Whereas before it was assumed anyone would qualify to buy a starter home (or condo), nowadays with increased housing prices and the government making it tougher to qualify for a mortgage through a financial stress test, becoming a homeowner isn’t a walk in the park. Qualifying for a mortgage on a single income is becoming increasingly difficult.

Unfortunately, just because you have a proven ability to pay rent on time doesn’t mean you will qualify to make mortgage payments in the same amount. So if you are looking to get into the housing market, but don’t qualify on your own, maybe you should consider co-ownership as an option!

So what is co-ownership anyway? Well, co-ownership is when more than one applicant takes on the financial responsibility of owning a property together. Co-ownership can take on many forms. Obviously owning a home with your spouse or life partner is the most common form of co-ownership, while having your parents co-sign on a mortgage is another. But for the sake of this article, let’s think past these arrangements.

Did you know that there are really no limitations with whom you can purchase a property? This is assuming they meet the lending criteria.
Maybe a brother, sister, cousin, neighbour, co-worker, friend, your mechanic, financial advisor, or some distant relative just happens to be looking to get into the housing market as well? There is a good chance that by combining your incomes together, you will qualify for a mortgage that neither of you would qualify on your own. Bringing someone else into the picture, or even a group of people, can significantly increase the amount you qualify to borrow on a mortgage. Most lenders will accept up to four applicants on a mortgage, while some lenders have even gone as far as launching products designed to make buying with friends and family easier. Buying a property with someone(s) in a co-ownership arrangement is becoming way more commonplace.

However, before making the decision to buy a house with someone, there is no doubt going to be a list of things you are going to want to work through. You will want to get everything out in the open and ask yourself questions like…

  • Do I trust this person?
  • Can I live with this person?
  • Am I comfortable making decisions about the home with this person?
  • How will conflict be managed when it arises?
  • What happens if either party runs into financial trouble?
  • What is the exit plan?

The more you work through ahead of time, the better chance you have at successfully co-owning a house with someone. A lot of people who purchase a property in a co-ownership agreement treat it like a business arrangement.
If you’d like to talk more about what this would look like for you personally, please don’t hesitate to contact a Dominion Lending Centres mortgage specialist. They can walk you through the process step by step and get you (and your partner in real estate) the best mortgage available to you!

KRIS GRASTY

Dominion Lending Centres – Accredited Mortgage Professional

29 Nov

MORTGAGE PRE-APPROVAL IS NOT WHAT YOU EXPECT

Mortgage Tips

Posted by: MANJIT SINGH BHONDHI

Although going through the pre-approval process is more important than ever, the actual term ‘pre-approval’ is often misleading. It really addresses just a few variables that may arise once in the middle of an actual offer.

The pressure in many markets has never been greater to write a condition-free offer, yet due to recent changes to lending guidelines by the federal government, the importance of a clause in the contract along the lines of ‘subject to receiving and approving satisfactory financing’ has also never been greater. (There are variations to be discussed with your Realtor around the specific wording of such clauses.)

Often clients are reluctant to write the initial offer on a property without feeling like they are 100 per cent pre-approved, an understandable desire. The risk being that many clients then falsely believe they have a 100 per cent guarantee of financing, and this is not at all what a pre-approval is.

A lender must review all related documents, not just the clients personal documents, but also those from the appraiser and the realtor as the propety itself must meet certain standards and guidelines.

The pre-approval process should be considered a pre-screening process. It does involve review and analysis of the clients current credit report, it should also include a list for the client of all documents that will be required in the event that an offer is written and accepted. Ideally your Mortgage Broker will review all required documents in advance, but few lenders will review documents until there is an accepted offer in place.

Clients should come away from the initial process with a clear understanding of the maximum mortgage amount they qualify for along with the various related costs involved in their specific real estate transaction. Equally as important; a completed application allows the Mortgage Broker to lock in rates for up to 120 days.

Why won’t a lender fully review and underwrite a pre-approval?

  • Lenders do not have the staff resources to review ‘maybe’ applications – they have a hard enough time keeping up with ‘live’ transactions.
  • The job you have today may well not be the job you have by the time you write your offer. (ideally you do not want to change jobs while house-shopping)
  • If more than four weeks pass then most of the documents are out of date by lender standards, and a fresh batch needs to be ordered and reviewed with the accepted offer.
  • The conversion rate of pre-approvals to ‘live transactions’ is less than 10 per cent, and this alone prevents lenders from allocating resources to reviewing pre-approvals.

It is this last point in particular that makes it so difficult to get an underwriter to completely review a pre-approval application as a special exception. Nine out of ten times that underwriter is spending their time on something that will never actually happen.

The bottom line is that a clients best bet for confidence before writing an offer is the educated and experienced opinion of the front-line individual with whom they are directly speaking, Dominion Lending Centres Mortgage Broker. Although this individual will not be the same person that underwrites and formally approves the live transaction when the time comes, they likely have hundreds of files worth of experience behind them. That experience is valuable.

It is due to the disconnect between intake of application and actual lender underwriting a live file that having a ‘subject to receiving and approving satisfactory financing’ clause in the purchase sale agreement is so very important.

Without a doubt the most significant factor in recent years which has undermined clients preapprovals is the relentless pace of government changes in lending guidelines and policies. Change implemented not only by the Government also by the lenders themselves. It is very easy to have a pre-approval for a certain mortgage amount rendered meaningless just a few days later through changes to internal underwriting guidelines. Often these changes arrive with no warning and existing pre-approvals are not grandfathered.

So, while it is absolutely worthwhile going through the pre-approval process before writing offers, and in particular before listing your current property for sale it is most important to stay in constant contact with your Mortgage Broker during the shopping process.

Be aware that aside from the key advantage of catching small issues early and securing rates a pre-approval is NOT a 100 per cent guarantee of financing.

If more than four weeks pass then most of the documents are out of date by lender standards, and a fresh batch needs to be ordered and reviewed with the accepted offer. The conversion rate of pre-approvals to ‘live transactions’ is less than 10 per cent, and this alone prevents lenders from allocating resources to reviewing pre-approvals.

TRACY VALKO

Dominion Lending Centres – Accredited Mortgage Professional

27 Nov

BUT THEY SAID IT WAS PORTABLE…

Mortgage Tips

Posted by: MANJIT SINGH BHONDHI

The question most often asked: ‘Is my mortgage portable?’

The answer most often given: ‘Yes.’

This answer is increasingly wrong.

In reality you qualify to move ~80% of the balance… maybe.

If you are thinking of:

  • Moving (upsizing or downsizing)
  • Locking a variable-rate mortgage into a fixed-rate product

… you would be well served to keep reading.

The above question is incomplete. To be fair, you would have no way of knowing this. The person answering it should know better than to give you a one-word answer.

The proper question: ‘Do I need to re-qualify for my current mortgage to move to a new home?’

The proper answer: ‘Yes, your mortgage is portable, but only if you re-qualify under today’s new and more stringent guidelines.’

The person answering the portability question should only be your Dominion Lending Centres mortgage specialist. They alone can answer the question accurately, and only with a complete and updated application, along with all supporting documents to confirm the maximum mortgage amount under current guidelines.

Too many clients learn this lesson the hard way. They sell their existing property before speaking with their Mortgage Broker, and in some cases they also enter binding purchase agreements under the mistaken assumption they can just port their mortgage.

Key Point – Do not ask if your mortgage is portable (99% of them are). Ask if you currently qualify to move your mortgage to a new property.

Key Point – The federal government has created a dynamic in which there are two different qualifying rates for mortgage approvals. And the one used yesterday to get you into a five-year fixed rate mortgage is not always the same one that is used if you want to move that same mortgage to a new home down the street, even just one day later.

Key Point – One day into your five-year fixed mortgage, you are now subject to the stress test. In a nutshell, the stress test applies the higher qualifying rate and effectively reduces your maximum mortgage approval by ~20%.

Meaning that you may only be able to port 80% of the current balance to another property… just one day later.

So, what’s the fix?

The best fix – The government could add a simple sentence to their lending guidelines along the lines of ‘If a borrower qualified for their mortgage at the five-year contract rate at inception, then the borrower shall be allowed to re-qualify at that original rate when moving their mortgage to a new home.’

Currently this fix does not exist.

The current fix – Well it’s no big deal at all. You simply pay a penalty to break your current five-year fixed mortgage and then apply for a new five-year fixed mortgage. Said penalty amount? Typically, around 4.5% of the mortgage balance – i.e., a $14,000 penalty on a $300,000 mortgage balance.

Seems reasonable, right?

It’s entirely unreasonable. This is a horrible ‘fix’, because it is not a fix at all. If you bought with 5% down, and then a few months later were transferred to another province and had no choice but to move, this represents your entire down payment vanishing due to an oversight by the federal regulators.

If you have been personally caught in this ‘portability trap,’ it felt more like total devastation than it did ‘anecdotal’. And by all means you should make your voice heard. Share your story with via www.tellyourmp.ca

DUSTAN WOODHOUSE

Dominion Lending Centres – Accredited Mortgage Professional