Mortgage Broker Value.

General Peter Paley 21 Apr

Today’s blog comes from our colleague Allan Jenson. It’s hard to believe that 100% of home buyers are using a mortgage broker, or at least getting a 2nd opinion about their mortgage. We typically don’t charge for our time, we can almost always get a better rate and term than the bank and we can almost promise beyond a shadow of a doubt that our penalties to break a mortgage a much smaller than the bank’s. Enjoy the blog.

MORTGAGE BROKER VALUE
Not surprisingly, borrowers often default to their own Banker. And why not? It’s an established and comfortable relationship. Perhaps it’s viewed as the path of least resistance. But is it the right lender for the borrower’s current specific needs? Perhaps not.

More sophisticated borrowers may be of a size or scale that they have their own internal resources in finance, quite capable of securing the required financing. They are likely only in the market infrequently however, and almost certainly not fully knowledgeable as to all of the financing sources available.

Aren’t all Lenders pretty much the same?
Borrower’s may think that all institutional lenders are pretty much the same. Offering comparable rates, and standardized borrowing terms. This is rarely the case. Lender’s often prefer one asset class over another. They may have a particular need for one type of loan. A specific length of loan term may be desirable, for funds matching purposes. Real Estate risk is a fact for real estate lenders. How they mitigate this risk differs however. It may be stress testing interest rates during the approval process. Sophisticated risk pricing models may be used, having regard to previous loss experiences. The lender may rely significantly on collateral value, or guarantees. The conditions precedent to funding will often differ from lender to lender.

A real world example
I had the pleasure last year in advising a client who had 3 sizable real estate assets, in 3 quite distinct asset classes. The borrower’s loan amount requirements were significant, however they were flexible on loan structure. Accordingly, I sought out competitive, but differing deal structures. My goal was to provide a competitive array of options. A number of “A” class lenders were approached, several/most of whom this particular borrower had no previous experience with. I shortened the list to 5 lenders, and received Term Sheets from each.

Each Offer was competitive on a stand alone basis, but they differed quite substantially, in the following ways:

Loans were either stand alone, or blanket loans, or some combination.
Length of terms offered, differed by asset class.
There was as much as a 75 bps rate difference, from highest to lowest Offer.
The amortization period depending upon asset class, ranged from 15 to 25 years.
Loan amounts on individual assets differed as much as 20%.
Third party reporting requirements differed between lenders.
There were a combination of fixed vs. floating rate loan structures.
Recourse was limited by some lenders, on select assets, or waived entirely, upon a higher rate structure.
Leverage Your Knowledge
These variances are striking, yet each of the 5 lenders were considering the precise same asset, at the same time, with common supporting information from which to base their analysis. How was the borrower to know which Offer to exercise? As a Broker, I can add value by helping the borrower to consider both their immediate and longer term strategic requirements, in the context of their overall real estate portfolio needs. This was precisely how this borrower landed on the most appropriate Offer for their particular circumstances. In this particular case we presented different, yet competitive, and uniquely structured options for the borrower’s consideration.

Consider a Dominion Lending Centres Mortgage Broker when next in the market for financing. Leveraging a Broker’s knowledge is a tremendous value proposition.

Allan Jensen
ALLAN JENSEN
Dominion Lending Centres – Accredited Mortgage Professional

Closing Costs

General Peter Paley 18 Apr

CLOSING COSTS
Closing costs are a necessity when it comes to purchasing a home. They are not included in down payments, they are not included in monthly mortgage payments, nor are they included in the purchase price of a home, but you are still responsible for paying them, in full. Knowing they exist is half the battle, and correctly budgeting yourself to pay them when the time comes can be a huge weight off your shoulders, especially when the alternative is finding out a week before you close on the purchase of a home that you still owe thousands of dollars.

Lenders will require you to have 1.5% of a property’s purchase price available in cash to be able to cover closing costs. This amount is on top of the 5% minimum required for a down payment. Closing costs that you may be expected to pay, depending what province you live in, when purchasing a home in are as follows:

Appraisal- determining the value of a home.
Interest Adjustment- amount of interest due between your mortgage start date and the date the first mortgage payment is calculated from.
Property Transfer Tax- a tax paid to the provincial government when a property changes hands.
Legal Fees- costs associated with finalizing the sale or purchase of a property.
Prepaid Property Tax & Utility Adjustments- amount you will owe if the person selling you the home has prepaid any property taxes or utility bills.
Property Survey- legal description of the property you are purchasing including it’s location and dimension.
Sales Taxes- some properties are sales tax exempt (GST and/or PST), and some are not. Always ask before signing an offer.
As you can see, many factors go into determining the size of these costs. That is why it is also important to speak with a mortgage broker prior to making an offer on a home. Also, some costs may be exempt, such as the property transfer tax for first-time home buyers. Contact a Dominion Lending Centres mortgage professional to find out if you would qualify to have these costs covered.

Ryan Oake
RYAN OAKE
Dominion Lending Centres – Accredited Mortgage Professional

9 Reasons Why People Break Their Mortgages

General Peter Paley 16 Apr

Today’s blog discusses a really important topic. In fact, I think it is one of the most important things you will read when deterining who you want to help you with your next mortgage. 5 year fixed rate mortgages are the norm in Canada and at the time of signing your mortgage documents you never ever would think of making any changes in the first 5 years. Yet 60% of people do. Enjoy today’s blog 🙂

9 REASONS WHY PEOPLE BREAK THEIR MORTGAGES
Did you know that 60 per cent of people break their mortgage before their mortgage term matures?

Most homeowners are blissfully unaware that when you break your mortgage with your lender, you will incur penalties and those penalties can be painfully expensive.

Many homeowners are so focused on the rate that they are ignorant about the terms of their mortgage.

Is it sensible to save $15/month on a lower interest rate only to find out that, two years down the road you need to break your mortgage and that “safe” 5-year fixed rate could cost you over $20,000 in penalties?

There are a variety of different mortgage choices available. Knowing my 9 reasons for a possible break in your mortgage might help you avoid them (and those troublesome penalties)!

9 reasons why people break their mortgages:

1. Sale and purchase of a home
• If you are considering moving within the next 5 years you need to consider a portable mortgage.
• Not all of mortgages are portable. Some lenders avoid portable mortgages by giving a slightly lower interest rate.
• Please note: when you port a mortgage, you will need to requalify to ensure you can afford the “ported” mortgage based on your current income and any the current mortgage rules.

2. To take equity out
• In the last 3 years many home owners (especially in Vancouver & Toronto) have seen a huge increase in their home values. Some home owners will want to take out the available equity from their homes for investment purposes, such as buying a rental property.

3. To pay off debt
• Life happens, and you may have accumulated some debt. By rolling your debts into your mortgage, you can pay off the debts over a long period of time at a much lower interest rate than credit cards. Now that you are no longer paying the high interest rates on credit cards, it gives you the opportunity to get your finances in order.

4. Cohabitation & marriage & children
• You and your partner decide it’s time to live together… you both have a home and can’t afford to keep both homes, or you both have a no rental clause. The reality is that you have one home too many and may need to sell one of the homes.
• You’re bursting at the seams in your 1-bedroom condo with baby #2 on the way.

5. Relationship/marriage break up
• 43% of Canadian marriages are now expected to end in divorce. When a couple separates, typically the equity in the home will be split between both parties.
• If one partner wants to buy out the other partner, they will need to refinance the home

6. Health challenges & life circumstances
• Major life events such as illness, unemployment, death of a partner (or someone on title), etc. may require the home to be refinanced or even sold.

7. Remove a person from Title
• 20% of parents help their children purchase a home. Once the kids are financially secure and can qualify on their own, many parents want to be removed from Title.
o Some lenders allow parents to be removed from Title with an administration fee & legal fees.
o Other lenders say that changing the people on Title equates to breaking your mortgage – yup… there will be penalties.

8. To save money, with a lower interest rate
• Mortgage interest rates may be lower now than when you originally got your mortgage.
• Work with your mortgage broker to crunch the numbers to see if it’s worthwhile to break your mortgage for the lower interest rate.

9. Pay the mortgage off before the maturity date
• YIPEE – you’ve won the lottery, got an inheritance, scored the world’s best job or some other windfall of cash!! Some people will have the funds to pay off their mortgage early.
• With a good mortgage, you should be able to pay off your mortgage in 5 years, there by avoiding penalties.

Some of these 9 reasons are avoidable, others are not…

Mortgages are complicated… Therefore, you need a mortgage expert!

Give a Dominion Lending Centres mortgage specialist a call and let’s discuss the best mortgage for you, not your bank!

Kelly Hudson
KELLY HUDSON
Dominion Lending Centres – Accredited Mortgage Professional

The Flexible Down Payment Program

General Peter Paley 13 Apr

The best part about being a mortgage broker is having access to many programs that banks and credit union may not participate in. The Flex-down program is just such a program. It is a great way for home buyers who are having a hard time saving up for their down payments and closing costs. Closing costs alone can be so expensive with land transfer tax, legal fees, pst, home inspection, title insurance and sometimes even property tax adjustments. A small loan for $10,000 or $15,000 can make all the difference in qualifying your for a home that will suit you and your family.

Enjoy today’s blog below!

THE FLEXIBLE DOWN PAYMENT PROGRAM
One of the toughest challenges for homebuyers is being able to save money at the rate of property price increases.
We know many high-income renters would like to be homeowners, but they’re just unaware of how to make the transition and are unable to save fast enough.
There are several options which are great for a down payment if you can use a combination or one of the traditional methods
1. Savings
2. Gift from parents
3. RRSPs
4. Selling an asset
5. Inheritance

Kindly keep in mind this option won’t be for everyone as the following criteria must be met; it’s simply to illustrate the opportunity to go from renter to owner as soon as possible.
The Flexible Down Payment program allows homebuyers to use existing credit facilities as their down payment.

DETAILS:
Minimum household income required is $200,000 combined
• Minimum 650+ beacon score
• Minimum two years history reporting on Credit Bureau
• Sources of down payment: line of credit, credit card, personal Loan
• Include borrowed down payment in the debt servicing of the deal. Example: Unsecured LOC at 3%, Credit Card at 3%, store brand Credit Card at 5%, Personal Loan at actual payments.
• No late payments in the past 36 months
• High Ratio Deals only: 90.01-95% LTV
• 25 year amortization
• Strong Employment History
• No previous bankruptcy or consumer proposal

We can walk you through the details, contact a Dominion Lending Centres mortgage professional today!

Angela Calla
ANGELA CALLA
Dominion Lending Centres – Accredited Mortgage Professional

The Mortgage Insurance Market & Wholesale Lenders

General Peter Paley 11 Apr

THE MORTGAGE INSURANCE MARKET & WHOLESALE LENDERS
The Canadian mortgage market used to be very simple. We had the big banks, credit unions, and trust companies.

However, almost 20 years ago, the Canadian government made three major changes to the Canadian mortgage industry. First, the government and CMHC put their weight behind Canadian mortgages by guaranteeing an insurance payout to lenders in the event that a borrower does not pay. Yes, the Canadian taxpayers are on the hook if CMHC goes under.

Second, Canada also began to allow lenders to pay for mortgage insurance for their borrowers, even though the insurance was not required. Borrowers would not know that their mortgage is insured, rather the lender would pay for, and insure the mortgage on the “back end” in order to make the mortgage less risky. I.E: if the borrower did not pay, the insurer would pay the lender (just as they would pay if the borrower had less than 20% down payment and was charged for insurance themselves).

And third, Canada allowed its lenders to bundle up their mortgages and sell them to investors. The securitization of mortgages (the process of taking the mortgages and transforming them into a sellable asset) allowed investors to purchase many mortgages at once, knowing there would be a specific return. The return here would be just less than the interest rate on the various mortgages (less because the lender has to make a little bit of money for creating the mortgage bundle or security).

Now, mortgage investors are looking at two things: investment return and mortgage risk. The lower the risk of an investment, the lower the return an investor may be willing to see. Because Canadian lenders can insure their mortgages against default (non-payment), investors are very keen on purchasing these mortgages. Thus, investors provide lenders with a lot of inexpensive money to lend out, which in turn, provided for better interest rates for borrowers.

As an aside, an example of investors may be one of Canada’s large banks, an American bank, pension funds, and/or other financial institutions.

The result was the emergence and major growth of mortgage finance companies, called wholesale lenders or monoline lenders.

Monoline lenders, encouraged by access to cheap capital, set up efficient mortgage underwriting (approval) operations and were able to provide flexible mortgage products and better-than-the-banks interest rates for their clients.

The overwhelming majority of wholesale lender mortgages are back-end insured by the lender, packaged up, and sold to investors.

What is interesting here is that wholesale lenders will insure mortgages transferred from one institution to another – something that banks do not do. This allows for better interest rates when renewing with a wholesale lender than if renewing with your current bank lender.

If you have any questions related to mortgages, contact your Dominion Lending Centres mortgage professional today.

Eitan Pinsky
EITAN PINSKY
Dominion Lending Centres – Accredited Mortgage Professional

Which REALTOR Should You Use?

General Peter Paley 5 Apr

Having been in this industry for about 20 years, I can honestly say I don’t know what I would have done personally without all of the excellent REALTORs I have had in my life. Leigh Nanton patiently helped me with my first home in 1998, then Karen Machut with my condo purchase, duplex purchase, and home purchase and sale and my best friend Susan Joshi with the construction of our current home.

Realtors are a very hard working group of professionals. Countless hours of work, driving and counseling their clients. We refer about 40-60 clients each year to our REALTOR partners and absolutely love the service and level of professionalism we receive from them. Today’s blog will give you some information about choosing a REALTOR to help you.

Enjoy the blog…

WHICH REALTOR SHOULD YOU USE?

Finding the best realtor for you involves doing some leg work. It can be overwhelming, kind of like choosing which ice cream you want to try! You go to the ice cream store and they have over 50 flavours and after you have contemplated, you opt for vanilla, just because it was easy.

Finding the best realtor for you is not “vanilla.”

Here are five questions you should always ask your potential real estate agent:

1. How does your experience benefit my real estate transaction? Where the agent just completed a course on negotiation skills or sold a home in your neighbourhood, they should be able to bring a unique edge to the table.

2. If you were buying or selling your home, what would you look for in an agent?
This question is a great way of getting the inside scoop on the industry. What do industry professionals see as an essential asset? How does each agent vary in those priorities?

3. Tell me about a recent work success. Give the agent a chance to discuss their latest win, and you’ll learn what they’re passionate about and how they’ll turn your home search or sell into their newest achievement.

4. What are your most effective approaches to marketing a home? Rather than the standard ‘how will you market my home,’ ask which methods are delivering results. If your agent is particularly successful with new school social media or tired and true networking, you’ll have expectations on how they’ll tackle selling your home.

5. Give the rundown of the conditions, commission fees and agreements. These basics will play a major role in how you choose your real estate agent. Ask for the specifics at each interview, and you can see how each partnership measure up.

And if you have any questions, contact your local Dominion Lending Centres mortgage professional.

Karen Penner
KAREN PENNER
Dominion Lending Centres – Accredited Mortgage Professional

THE MOST IMPORTANT QUESTION THIS SPRING

General Peter Paley 28 Mar

THE MOST IMPORTANT QUESTION THIS SPRING
Short Version:

The most important question a home-seller must ask their Broker or their banker this Spring:

‘Do I QUALIFY to port my mortgage?’

You must re-qualify to port your mortgage to a new property, and you must re-qualify under stringent new rules.

How stringent?

Long Version:

Let’s say you have impeccable credit, a $100,000 income, and bought a house with a basement suite last year – you may have a mortgage of ~ $675,000…which you qualified for in 2017.

In 2018, you new maximum mortgage amount is closer to ~$530,000.

And if rates were to move up another 0.50% you’d be capped at ~$490,000.

If rates were to move up a full percentage point ~$455,000

Either way, even with no further upward movement, the family in this example, were they to enter into a binding sale agreement without confirming their qualifications would not be able to re-enter the market at the same price point.

Key Point – Do not ask if your mortgage is ‘portable’ (99% are). Ask if you currently qualify to move your mortgage to a new property. This will require an actual application and full review.

Key Point – The federal government has created a dynamic in which qualifying rates have shifted radically, and more precisely the ground has shifted under tens of thousands of middle class Canadians feet. You have been protected from yourself, and you don’t even know it.

Key Point – Since Jan. 1, 2018, you’re subject to the new stress test. Even though you have impeccable credit, have never missed a payment, and even got a 3% raise last year – too bad.

Conclusion

Don’t list your home for sale without having something in writing from your current lender confirming that you QUALIFY to move your existing mortgage to a new property. If you have any questions, contact your local Dominion Lending Centres mortgage professional.

And if you’ve personally been caught in this ‘portability trap’, by all means make your voice heard. Share your story with me directly and also here; www.tellyourmp.ca

DUSTAN WOODHOUSE
Dominion Lending Centres – Accredited Mortgage Professional

GETTING PRE-APPROVED FOR A MORTGAGE THIS SPRING

General Peter Paley 27 Mar

Apparently, as per the weather experts, March has a lot of snowfall and surprisingly so does April!
Hearing this on the radio gives you a wave of emotions: holy cow, oh great, I wonder how many vacation days I have left and when can I take down my Christmas lights.
Good news, those same weather experts are predicting a hot summer and you know what that means! Buy your fan(s) now before they run out and check out a pool, size and budget appropriate, for the backyard. So glad we have a compressor to blow that thing up every year; three rings take a lot of breath!
Normally by April you are thinking about moving because you need a bigger home, you need to down size, or its time to leave the basement of your family home.
Those weekends where you have little to do so you opt to go out, get a coffee and go to show homes and see how they decorate because the DIY on TV is all reruns. While you are there, you start to picture yourself living there and then begin to wonder, “can I do this?” Do I want to want to do all the landscaping, do I need a developed basement now or later, where are the schools? Maybe should I think about an already established community with lots of schools, trees, or place that my cat and I can live.
Working with your Dominion Lending Centres Mortgage Professional, we will review your options, your affordability, possible extra costs that you may have missed and finally, get you pre-approved!

Prequalified or rate hold, what is the difference?
Your broker has asked you for supporting documentation that will confirm your income, you do indeed have a down payment, and your debt is not more than you can handle along with possible new housing costs. This is so they can start the application to ensure the numbers are good and we can begin.

Rate Hold – it is just that, a rate that lender is offering and, based on the application submitted to them, it shows the numbers are in alignment for them to hold a rate for you. This rate can be held anywhere from 90 – 120 days. Remember, they have reviewed the application submitted only and no other supporting documentation.
Prequalified – it is just that, the lender has reviewed the supporting paperwork along with the application and is in happy to provide you with a prequalified letter stating they not only are they holding the rate for 90 – 120 days, depending on which lender, but you have met their criteria for lending.
o Although once you present you offer they may still have a few more items they want to check:
▪ You still working? – you will need a current paystub
▪ You still working at the same place?
▪ You didn’t buy a new car, right? Ugh!
▪ You didn’t get new furniture and finance it with the store, right? Ugh!

Ask your advisor about the DO’s and DON’Ts; this one single sheet of paper will make or break a deal!
Prequalified or rate hold, now you know the difference.

Karen Penner
KAREN PENNER
Dominion Lending Centres – Accredited Mortgage Professional

How To Be Competitive In A Hot Market

General Peter Paley 25 Mar

The Spring home buying frenzy is well underway. Many listings are starting to get multiple offers on the offer date. The questions we always get from REALTORs and Homebuyers is “How can we write an unconditional offer?”

The simple answer is you really can’t. I know, many REALTORs and many Homebuyers take huge and monumental risks by writing a clean or unconditional offer. A big risk it is too. If for some reason the application is not approved, the homebuyer faces losing their deposit and can also be sued by the vendor.

Before we talk about how to be more competitive and better prepared, I think it important to discuss what a lender and the mortgage insurer is looking for in a mortgage application.

The mortgage application is subject to many factors. The most important is the property itself. The home should be in good to great condition. It is important to review the property disclosure statement if available and to look for any questions where the vendors may have disclosed something detrimental to the application. Some examples of things that can red flag and application are; knob-and-tube wiring, aluminum wiring, foundation cracking, water seepage, wood heating and wood foundations just to name a few.

The next major factor in a mortgage application is the strength of the homebuyers. As mortgage professionals, we must check and analyze your credit, your income, and your down payment. It sounds simple, however, there are many moving parts. Let’s break this down further to give you a better understanding.

Credit: Typically we are looking for a credit score of 620 or higher. While exceptions can be made for lower credit scores, this is generally the lower limit. We are also looking for two active trade-lines. This means a borrower must have two open and active credit facilities such as a credit card, loan or line of credit. If your mortgage professional, bank, or credit union has not checked your credit, then your pre-approval is probably invalid.

Income: A borrower must be a permanent employee and off of probation. You can be Full-Time or Part-time but your hours must be guaranteed by the employer. If a borrower does not have guaranteed hours, then we must use a 2-year average for income at the same job. Lenders will now go the extra step and call your employer to verify your employment and guaranteed hours.

Down Payment: Generally, your down payment needs to be in a Canadian financial institution for 90 days. As mortgage professionals, it is imperative that we can see your banking/financial statements to verify the down payment. We must look for any large deposits in the last 90 days that are unusual. Any large deposits need to be verified. For example, a borrower has sold a car, received a gift, or deposited wedding gift monies. The funds need to be verified or the lender will not be able to fund your mortgage.

Now, how can you be more prepared and competitive in a hot market?

1). When your mortgage professional asks you for a lot of documentation. Provide it as soon as possible. Employment letters, recent pay stubs, 2 years T4s, 90-day confirmation of your down payment, void cheque and ID are standard.

2). Use a professional REALTOR and introduce them to your mortgage professional. I can speak from experience and if the REALTOR and the Mortgage Professional are on the same page, the process goes much faster and smoother for the homebuyer.

3). Found THE house and going to put in an offer? Let your mortgage professional know. Send them the MLS listing and PDS – property disclosure statement (if available) in advance so they can look for potential challenges.

4). Always keep your documentation up to date. Credit bureaus expire after 30 days, Employment letters and paystubs expire after 60 days, and most importantly a borrower must provide up-to-the minute bank and financial statements for down payment.

5). Please ensure that you offer an amount that you are actually qualified for. If you offer more than your pre-approval amount, chances are that you won’t be approved.

6). Have your deposit in your bank account and ready to go. Your REALTOR will want you to have $5,000 – $10,000.

Do not leave anything to chance. Be over-ready and confident in your offer.

I look forward to helping you with all of your home financing needs.

Peter Paley

WHAT IS A “MONOLINE” LENDER?

General Peter Paley 19 Mar

What usually follows once someone hears the term “Monoline Lender” for the first time is a feeling of suspicion and lack of trust. It’s understandable, I mean why is this “bank” you’ve never heard of willing to loan you money when you’ve never banked with them before?

In an effort to help you see the benefits of working with a Monoline Lender, here is some basic information that will help you understand why you’ve never heard of them, why you want to, and the reason they are referred to as lenders, not banks.

Monoline Lenders only operate in the mortgage space. They do not offer chequing or savings accounts, nor do they offer investments through RRSPs, GICs, or Tax-Free Savings Accounts. They are called Monoline because they have one line of business- mortgages.

This also plays into the reasons you never see their name or locations anywhere. There is no need for them to market on bus stop benches or billboards as they are only accessible through mortgage brokers, making their need to market to you unnecessary. The branch locations are also unnecessary because you do not have day-to-day banking, savings accounts, investment accounts, or credit cards through them. All your banking stays the exact same, with the only difference of a pre-authorized payments coming from your account for the monthly mortgage payment. Any questions or concerns, they have a phone number and communicate documents through e-mail.

Would it help Monoline Lenders to advertise and create brand awareness with the public? Absolutely. Is it necessary for them to remain in business? No.

Monoline Lenders also have some of the lowest interest rates on the market, the most attractive pre-payment privileges, and the lowest pre-payment penalties, especially when compared to a bigger bank like CIBC or RBC. If you don’t think these points are important, ask someone whose had a mortgage with one of these bigger banks and sold their property before their term was up and paid upwards of $12,000 in penalty fees. An equivalent amount with a Monoline Lender would be anywhere from $2,000-$4,000 in fees.

Monoline Lenders are not to be feared, they should be welcomed, as they are some of the most accommodating and client service-oriented lenders around! If you have any questions, don’t hesitate to call your local Dominion Lending Centres mortgage professional.

Ryan Oake
RYAN OAKE
Dominion Lending Centres – Accredited Mortgage Professional

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