PENALTIES, PENALTIES, PENALTIES!!!  The terms of your mortgage matter.   You may have received the best rate, but you may have to pay $1000s to break your mortgage or be forced to wait until the end of the term or sell your property to break the mortgage.    The mortgage application process should be collaborative and educational.   The mortgage professional should take the time to understand the client’s situation, goals, and risk tolerance.   Typically, breaking your mortgage early can result in very high penalties.  Here are the top 9 reasons why people will break their mortgage early.

9 Reasons People Break Their Mortgage.

Did you know, that approximately 60 percent of people break their mortgage before their mortgage term matures? While this is not necessarily avoidable, most homeowners are blissfully unaware of the penalties that can be incurred when you break your mortgage contract – and sometimes, these penalties can be painfully expensive.

Below are some of the most common reasons that individuals break their mortgage. Being aware of these might help you avoid them (and those troublesome penalties), or at least help you plan ahead!

sale and purchase of a new home

If you already know that you will be looking at moving within the next 5 years, it is important to consider a portable mortgage. Not all mortgages are portable, so if this is a possibility in your near future, it is best to seek out a mortgage product that allows this. However, be aware that some lenders may purposefully provide lower interest rates on non-portable mortgages but don’t be fooled. Knowing your future plans will help you avoid expensive penalties from having to move your mortgage.

Important Note: Whenever a mortgage is ported, the borrower will need to re-qualify under current rules to ensure you can afford the “ported” mortgage based on your income and the necessary qualifications.

to utilize equity

Another reason to break your mortgage is to obtain the valuable equity you have built up over the years. In some areas, such as Toronto and Vancouver, homeowners have seen a huge increase in their home values. Taking out equity can help individuals with paying off debt, expand their investment portfolio, buy a second home, help out elderly parents or send their kids to college.

This is best done when your mortgage is at the end of its term, but if you cannot wait, be sure you are aware of the penalties associated with your mortgage contract.

to pay off debt

Life happens and so can debt. If you have accumulated multiple credit cards and other debt (car loan, personal loan, etc.), rolling these into your mortgage can help you pay them off over a longer period of time at a much lower interest rate than credit cards. In addition, it is much easier to manage a single monthly payment than half a dozen! When you are no longer paying the high-interest rates on credit cards, it can provide the opportunity to get your finances in order.

Again, be aware that if you do this during your mortgage term, the penalties could be steep and you won’t end up further ahead. It is best to plan to consolidate debt and organize your finances when your mortgage term is up and you are able to renew and renegotiate.

cohabitation, marriage, and/or children

As we grow up, our life changes. Perhaps you have a partner you have been with a long time, and now you’ve decided to move in together. If you both own a home and cannot afford to keep two, or if neither has a rental clause, then you will need to sell one of the homes which could break the mortgage.

divorce or separation

A large number of Canadian marriages are expected to end in divorce. Unfortunately, when couples separate it can mean breaking the mortgage to divide the equity in the home. In cases where one partner wants to buy the other out, they will need to refinance the home. Both of these break the mortgage, so be aware of the penalties which should be paid out of any sale profit before the funds are split.

major life events

There are some cases where things happen unexpectedly and out of our control, including illness, unemployment, death of a partner or someone on the title. These circumstances may result in the home having to be refinanced, or even sold, which could come with penalties for breaking the mortgage.

removing someone from the title

Did you know that roughly 20% of parents help their children purchase a home? Often in these situations, the parents remain on the title. Once their son or daughter is financially stable, secure, and can qualify on their own, then it is time to remove the parents from the title.

Some lenders will allow parents to be removed from the title with administration and legal fees. However, other lenders may say that changing the people on Title equates to breaking your mortgage resulting in penalties. If you are buying a home for your child and will be on the deed, it is a good idea to see what the mortgage terms state about removing someone from the title to help avoid future costs.

to get a lower interest rate

Another reason for breaking your mortgage could be to obtain a lower interest rate. Perhaps interest rates have plummeted since you bought your home and you want to be able to put more down on the principle, versus paying high-interest rates. The first step before proceeding, in this case, is to work with your DLC mortgage broker to crunch the numbers to see if it’s worthwhile to break your mortgage for the lower interest rate – especially if you might incur penalties along the way.

pay off the mortgage

Wahoo!!! You’ve won the lottery, got an inheritance, scored the world’s best job or had some other windfall of cash leaving you with the ability to pay off your mortgage early. While it may be tempting to use a windfall for an expensive trip, paying off your mortgage today will save you THOUSANDS in the long run – enough for 10 vacations! With a good mortgage, you should be able to pay it off in 5 years, thereby avoiding penalties but it is always good to confirm.

Some of these reasons are avoidable, others are not. Unfortunately, life happens. That’s why it is best to seek the advice of an expert. Dominion Lending Centres have mortgage professionals across Canada wanting to be part of your journey and help you get the best mortgage for YOU.

Did You Know? The average Canadian owes $23,000 in consumer debt and has at least 2 credit cards. Source: CBC.ca

If you live paycheque to paycheque, the idea of somehow having enough money to invest and eventually having financial freedom seems about the furthest thing possible.

But experts in financial education like to point out, that no matter your income and place in life, a few changes to the way you’re living life can make all the difference. It’s never too late to start learning and reverse course. If you’re still not convinced, here are a few simple ideas to get you started:

PRETEND YOU EARN LESS THAN YOU DO

Give yourself a cut in pay. The goal is to put 10% in savings from each paycheque into your savings account. The easiest way is to do an automatic direct transfer from your chequing account to your savings every payday.

CREATE A BUDGET

In order to stop living paycheck to paycheck, you need to know where that paycheck is going. Creating a budget is simple with Google docs, or look into other online tools and sites to get started.

BUILD AN EMERGENCY FUND

Once you have your budget in place, review it and break it down into non-discretionary expenses (rent, groceries, utilities, etc.) and discretionary expenses (eating out, entertainment, clothes, etc.). See where you could cut down on discretionary spending and put that money towards your emergency fund. Even starting with just a little amount is great and helps you build the habit of saving.

CONSIDER DOWNSIZING

It may be time to consider a lifestyle change. Consider moving to a smaller place. Get rid of the cost of going to that expensive gym with a trip to the local park. Think about if you really need that brand new car or if a used one would work just as well.

PAY DOWN DEBT

If you have a lot of credit card or unsecured debt, try paying the minimum on all but one of them and aggressively pay down that one card. Once it’s paid off, attack the next one. If you’re so deep in debt that you can’t fight your way out, consider consulting with a company that specializes in debt consolidation. They will help you negotiate your debt into smaller amounts that you can begin to pay off.

DON’T FORGET YOUR FUTURE

Putting at least 3% of your paycheck into a retirement fund is a great idea, or maybe when you get your first raise instead of thinking of it as free money, simply put it into a fund and forget about it. You’ll be glad it’s there when you need it in the future.

Understanding Your Mortgage Rate.

When it comes to mortgages, one of the most important influencers is interest rate but do you know how this rate is determined? It might surprise you to find out that there are 10 major factors that affect the interest you will pay on your home loan!

Knowing these factors will not only prepare you for the mortgage process, but will also help you to better understand the mortgage rates available to you.

credit score

Not surprisingly, your credit score is one of the most influential factors when it comes to your interest rate. In fact, your credit score determines if you are able to qualify for financing at all – as well as how much. In order to qualify, a minimum credit score of 680 is required for at least one borrower. Having higher credit will further showcase that you are a reliable borrower and may lead to better rates.

loan-to-value (ltv) ratio

This ratio refers to the value of the amount being borrowed as a percentage of the overall home value. The main factors that impact LTV ratios include the sales price, appraised value of the property and the amount of the down payment. Putting down more on a home, especially one with a lower purchase price, will result in a lower LTV and be more appealing to lenders. As an example, if you were to buy a home appraised at $500,000 and are able to make a down payment of $100,000 (20%), then you would be borrowing $400,000. For this transaction, the LTV is 80%.

insured vs. uninsured

Depending on how much you are able to save for a down payment, you will either have an insured or uninsured mortgage. Typically, if you put less than 20% down, you will require insurance on the property. Depending on the insurer, this can affect your borrowing power as well as the interest rates.

fixed vs. variable rate

The type of rate you are looking for will also affect how much interest you will pay. While there are benefits to both fixed and variable mortgages, it is more important to understand how they affect interest rates.  Fixed rates are based on the bond market, which depends on the amount that global investors demand to be paid for long-term lending. Variable rates, on the other hand, are based on the Bank of Canada’s overnight lending rate. This ties variable rates directly to the economic state at-home, versus fixed which are influenced on a global scale.

location

Location, location, location! This is not just true for where you want to LIVE, but it also can affect how much interest you will pay. Homes located in provinces with more competitive housing markets will typically see lower interest rates, simply due to supply and demand. On the other hand, with less movement and competition will most likely have higher rates.

rate hold

A rate hold is a guarantee offered by a lender to ‘hold’ the interest rate you were offered for up to 120 days (depending on the lender). The purpose of a rate hold is to protect you from any rate increases while you are house-hunting. It also gives you the opportunity to take advantage of any decreases to your benefit. This means that, if you were pre-approved for your mortgage and worked with a mortgage broker to obtain a ‘rate hold’, you may receive a different interest rate than someone just entering the market.

refinancing

The act of refinancing your mortgage basically means that you are restructuring your current mortgage (typically when the term is up). Whether you are changing from fixed to variable, refinancing to consolidate debt, or just seeking access to built up equity, any change to your mortgage can affect the interest rate you are offered. In most cases, new buyers will be offered lower rates than refinancing, but refinancing clients will receive better rates than mortgage transfers. Regardless of why you are refinancing, it is always best to discuss your options with a mortgage broker to ensure you are making the best choice for your unique situation.

home type

Among other things, lenders assess the risk associated with your home type. Some properties are viewed as higher risk than others. If the subject property is considered higher risk, the lender may require higher rates.

secondary property (income property/vacation home)

Any secondary properties or those bought for the purpose of being an income property or vacation home, will be assessed as such. The lender may deem these as high risk investments, and you may be required to pay higher interest rates than you would on a principal residence. This is another area where a mortgage broker can help. Since they have access to a variety of lenders and various rates, they can help you find the best option.

income level

The final factor is income level. While this does not have a direct affect on the interest rate you are able to obtain, it does dictate your purchasing power as well as how much you are able to put down on a home.

It is important to understand that obtaining financing for a mortgage is a complex process that looks at many factors to ensure the lender is not putting themselves at risk of default. To ensure that you – the borrower – is getting the best mortgage product for your needs, don’t hesitate to reach out to a DLC Mortgage Broker today! Mortgage brokers are licensed professionals that live and breathe mortgages, and who have access to a variety of lenders to ensure you are getting the best rates. Mortgage brokers can also assess your unique situation and find the right mortgage for you. Their goal is to see you successfully find and afford the home of your dreams and set you up for future success!

Investment Properties.

So, you are looking to purchase a second property! Congratulations! This is a great opportunity for you to expand your financial portfolio and ensure stability for the future. However, before you launch into this purchase there are a few things you should know, depending on which type of second property you are looking to purchase.

SECOND PROPERTY WITH INTENTION TO RENT

Buying a property for the purpose of renting it out to someone else comes with different qualifying criteria and mortgage product options than traditional home purchases. Before you look at purchasing a rental property, there are a few things to consider:

1. The minimum down payment required is 20% of the purchase price, and the funds must come from your own savings; you cannot use a gift from someone else.
2. Only a portion of the rental income can be used to qualify and determine how much you can afford to borrow. Some lenders will only allow you to use 50% of the income added to yours, while other lenders may allow up to 80% of the rental income and subtract your expenses.
3. Interest rates usually have a premium when the mortgage is for a rental property versus a mortgage for a home someone intends on living in. The premium can be anywhere from 0.10% to 0.20% on a regular 5-year fixed rate.

Rental income from the property can be used to debt service the mortgage application, but do bear in mind that some lenders will have a minimum liquid net worth requirement outside of the property. Also, if you do eventually want to sell this property it will be subject to capital gains tax. Your accountant will be able to help you with that aspect if you do decide to sell in the future.

VACATION PROPERTY

While vacation properties are not always the perfect investment, they are popular options for people who want to get away from it all and build memories in! If you’re motivated to head down that road, buying a vacation property is essentially like purchasing a second home.

If you are considering buying a unit within a hotel as a vacation spot (known as “fractional ownership”), it is important to note that if there is any mention of using your vacation home to provide rental income it will be treated like an investment property.

SECONDARY PROPERTY

Most people are trained to stay out of debt and don’t tend to consider using the equity in their home to buy an investment property, but they haven’t realized the art of leveraging. If you’re using equity from your primary residence to buy a secondary property, keep in mind that the interest you’re using is tax-deductible. Consider that you’re buying an appreciating asset, and if you put a real estate portfolio and a stock portfolio side-by-side, they don’t compare.

WHO IS A GOOD CANDIDATE?

You might be surprised to learn that you don’t need to make six figures to get in the game. Essentially, you just have to be someone who wants to be a little smarter with their down payment. Before taking on a secondary property remember that the minimum down payment is 5% of the purchase price – unless you are intending to rent, in which case it is 20% down.

When it comes to purchasing a secondary property, whether for investment or rental or vacation, it can be a great opportunity! As your mortgage broker, I can work to find the best solution for your unique needs.

AIR BNB ON YOUR MIND?

More and More Canadians are hopping on the short-term rental train as Air BnB’s popularity has sky-rocketed over the last few years. It’s not a bad way to earn extra money, but don’t forget there are a few things to consider:

• Check strata/city bylaws
• Contact your insurance provider to get the correct coverage
• Talk to your mortgage broker to see if a short-term income property can affect your approval
• Consider tax implications, and talk to an accountant.

The more services you provide as a host, the greater the chance that your rental operation will be considered a business.

As inventory in Winnipeg continues to be scarce and/or gobbled up by the voracious appetite of homebuyers and private & corporate investors has been dramatically increasing sales & price.  With no supply relief on the horizon due to arguably terrible government and CMHC policy for over a decade and historically low interest rates, 2022 should be another banner year!    Please enjoy the Winnipeg Market Update provided by Winnipeg REALTORS.

WINNIPEG REGIONAL REAL ESTATE BOARD FEBRUARY MLS® SALES SURGE 48% OVER 2020

WINNIPEG –   February continues to show significant increases over the same month last year with 1,240 sales, a 48% rise in early year market activity and 68% in comparison to the 5-year average. The $395 million in dollar volume transacted in February was more pronounced with a 67% jump over February 2020.

Rapid turnover of listings due to heightened market activity resulted in current supply at the end of February down 41% — 2,501 versus 4,266 in 2020. New listings coming on the market in February were 1,661, down less than 3% compared to the same month in 2020 and up 5% over the 5-year average.

“New listings entered on our MLS® in February are in keeping with previous years,” said Kourosh Doustshenas, president of the Winnipeg Regional Real Estate Board. “The difference in 2021, and much like the second half of 2020, is we are experiencing record-setting month over same month sales, so sellers remain in the driver’s seat.”

Evidence of the strength in turning new MLS® listings into sales is the remarkable 75% conversion of the equivalent number of listings to sales in February. This percentage is well above the previous four-year average of 48%.

Year-to- date MLS® sales of 2,174 are up 39% while dollar volume of $680 million has vaulted 53% over the same period in 2020.

February MLS® property type sales increases were impressive in more than just the two main property types of residential-detached and condominiums with 45% and 46% respectively. There were 105 vacant land sales, a 139% increase over February 2020, and 31 duplexes transacted in comparison to 13 in 2020.

“Momentum from 2020 continues uninterrupted in 2021,” said Doustshenas.  “I see no signs of it letting up as we head into March and in all likelihood will see a quick start to our spring market,” said Doustshenas.

Another indicator of buyers being more engaged in our region in February is the metric which shows almost one in two residential-detached sales went for above list price.

As for price range sales activity, a move to higher prices presented in the residential-detached price range activity with the $350,000 to $399,999 just edging out the normally most active price range of $250,000 to $299,999. In third place by a small margin was the $500,000 to $749,999 range.  All ranges each had over 100 sales in February.

In contrast, condominium sales remained most active in the $150,000 to $199,999 price range at 26% of total sales.  Nearly 65% of all condominiums in February sold for under $300,000.

Something to watch out for this year is price movement within Winnipeg and the outlying rural areas. This was a trend in February 2020, with Winnipeg’s average residential-detached sales price heading upward to $378,234 from $312,315. Rural had a similar average sales price of $312,708 in 2020 but its sale price increased less in 2021 to $325,787.

Backing up the sharp increase in above list price sales and the sales price increases in both Winnipeg and the rural region was the fact the overall sales price to list price ratio rose over the 100% equilibrium mark to 102.5%. In February 2020 it was 98.4%.

“This month is one of the best examples I can recall which shows how real estate markets can ebb and flow from year to year,” said Doustshenas. “This year it is on the rise and we would like to see listings come along with it.”

“You can say time is of the essence in a fast-paced market such as the one we have now,” said Marina R. James, CEO of the Winnipeg Regional Real Estate Board.  “Your REALTOR® will keep you informed on and help you navigate through it.”

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The Winnipeg Regional Real Estate Board (WRREB) is a not-for profit corporation founded in 1903 by a small group of real estate practitioners. Today, as one of Canada’s longest running real estate boards, WRREB serves more than 2,100 licenced real estate Brokers and Salespersons, along with other industry related professions in and around the Winnipeg Metropolitan Region providing them with essential resources to enhance professionalism, advance the industry’s development and enrich the communities they serve. WRREB is the collective voice for both its residential and commercial REALTOR® Members and operates under the direction of an elected voluntary Board of Directors.

The MLS® is a co-operative real estate selling system operated and promoted by the Winnipeg Regional Real Estate Board that includes an up to date inventory of listings from participating REALTORS®.

The trademarks MLS®, Multiple Listing Service® and the associated logos are owned by The Canadian Real Estate Association (CREA) and identify the quality of services provided by real estate professionals who are members of CREA. The trademarks REALTOR®, REALTORS® and the REALTOR® logo are controlled by CREA and identify real estate professionals who are members of CREA.

Media Inquiries:
Peter Squire
Vice President, External Relations & Market Intelligence
Winnipeg Regional Real Estate Board

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When the Future Becomes the Present.

Thinking about retirement before it happens is just common sense. But what questions should you be asking yourself? While seeking the advice of a professional like a retirement advisor can be helpful, there are a few questions to start thinking about as you begin to plan.

Deciding early what your wants and priorities will be in your golden years will determine the steps you need to take now. Will travel be more important to you than having a house big enough for the whole family to visit? Will you want to live simply and not have several cars and a large house? Of course, wants and desires will change over the years, but having a set plan to begin with is a good idea.

What are your liabilities, income, and expenses? These will be considered when planning your retirement. You need to identify how much money you will need and where it will have to come from.

It is important to identify all possible income sources that will be available to you on the day you retire. Those could include pensions, RRSPs, savings accounts, government benefits, investment property you own, and your home. Keep in mind you don’t want to rely on the Canadian Pension Plan (CPP). The average payout is $20,000 or around $1,300, and is taxable.

If you think you’ve done everything right, life can bring surprises.

DID YOU KNOW…

About 20% of retirees are found to be still paying for mortgages, while 66% are carrying credit card debt.

COMMON FINANCIAL WOES THAT CAN PREVENT RELAXING RETIREMENT

Had to retire early due to a health issue.

A heart attack or a bad back or hip can force people into early retirement. It doesn’t even have to happen to you…it could happen to a spouse and have the same devastating effect. There are a number of health reasons that could keep someone from continuing to work. Don’t rely on disability from the government to cover all your expenses. Make sure you are paying into a RRSP or other investment from an early age so that unexpected illnesses won’t keep you from the retirement you deserve.

Still had unsecured debt.

If you are not aware of your credit card balances, you just might carry that debt into your retirement where you weren’t counting on it still being an expense. It might not have even been a frivolous vacation or an out-of-control spending habit. It’s just the longer you have credit, the more the credit companies will throw at you, so it is best to pay off your balances every month as often as you can.

Still owed on a house and/or investment properties.

Again, retirement can sneak up on you or be forced upon you. When investing in property or managing the mortgage on your primary residence, keep this in mind. A 2nd mortgage might sound fine to pay for an elaborate vacation or to fund a grandkid’s wedding, but you will have to pay it back eventually.

Spent more money before retiring or after retiring than you should have.

People get excited at the prospect of not having to go to work anymore. They see a healthy sum of money in their retirement portfolio and decide they’ve earned a little fun. New cars, expensive vacations, purchasing vacation homes,

Winnipeg’s Market is HOT this year.  Inventory is very low and it is a seller’s market.   Many home buyers are having home inspections done before the offer date for their peace of mind.  One of the reason’s “it provides an out” probably is not going to apply in our current market.  However, if you can get a conditional offer accepted it can provide a way to exit a conditional offer.

5 Reasons to Invest in a Home Inspection.

While home inspections might not be the most exciting part of your home buying journey, they are extremely important and can save you money and a major headache in the long run.

In a competitive housing market, there can sometimes be pressure to make an offer right away without conditions. However, no matter how competitive a market may be, you should never skip out on things designed for buyer protection – such as a home inspection.

You may have a good eye for décor and love the layout of your potential new home, but what is under the surface is typically where headaches can lie. We have all heard the expression “don’t judge a book by its cover” so why would you make the most important purchase in your life without checking it out?

In fact, there are five reasons that a home inspection might just be the best $300-$500 you ever spend.

it provides an “out”

When buying a new house, it is always best to avoid taking chances. While a house may look great on the surface, hidden structural issues such as cracked foundation or roof damage can easily turn into expensive repairs. A home inspection can help reveal any large and/or hidden issues, which can often provide an ‘out’ for the buyer.

If you find something that will cost a considerable amount to replace or repair you can go back to the seller’s agent and ask for a reduction in the price. A leaky roof may cost a few thousand to replace. Perhaps the seller would split the cost with you? It’s worth asking. If the price cannot be re-negotiated if issues come to light, then it is best to just walk away on the basis that the home will cost you too much in the long run.

confirms safety and structural integrity

Another benefit of having a home inspection is not only to find issues, but also to confirm structural integrity. During an inspection, the inspector will review everything from the attic to the furthest reaches of the basement and will look for things like mold, holes in the chimney, saggy beams or improper wiring.

reveal illegal additions or installations

Similarly to determining any safety and structural issues, home inspections can also reveal hidden additions or DIY installations that may cause trouble down the road. If the seller wired the house improperly or used substandard materials, it not only could cost you big in the future but it could even null and void your home insurance should something happen!

forecast future costs

A home is an ongoing expense, much like a car. Unless it is brand new, there will be regular maintenance and updates required to replace things when they become old and inefficient. For instance, water heaters typically last for 6-10 years, the life of a good roof is around 20 years, while furnaces can last up to 25 years. The home inspection report will include an estimate on the remaining life for each of these big-ticket items, which will give you a heads up on future expected costs and provide you time to save for their eventual replacement.

peace of mind

Finally and perhaps most importantly, getting a home inspection is important for your own peace of mind. A home is a huge investment, and one that you will be paying off for 20 or 30 years. It is much easier to feel good about your investment after you have gone through a home inspection and you know that the house is safe and that you won’t run into any surprise problems down the road. While a home inspection isn’t free, peace of mind is priceless and a few hundred bucks is worth it!

Here are some of the top reasons why people refinance their mortgage.

1. To consolidate high interest rate debt.
2. To get a better mortgage rate and lower payment and interest costs
3. Increase their mortgage amortization to lower their payment.
4. Access home equity through a home equity line of credit.
5. For the down payment of a new rental property or vacation property.
6. To help with children’s university tuition.
7. Before you change careers or start a new business.
8. Home improvements.
9. To pay off any personal or business Income Tax Arrears.
10. To help elderly parents.

Reasons for refinancing are personal.   If you are looking to save money or make a major purchase we are here to help.

Contact us today.