When it comes to securing a mortgage, understanding every detail of your loan agreement is crucial. One important yet often overlooked component is the all-indebtedness clause. This clause can significantly impact your financial obligations and, if not understood properly, may lead to unforeseen complications. In this blog post, we’ll delve into what an all-indebtedness clause is and why you should be particularly diligent about it.

What is an All-Indebtedness Clause?

An all-indebtedness clause, also known as a cross-collateralization clause, is a provision in a mortgage agreement that stipulates that the property you are mortgaging is collateral not just for the specific loan you’re taking out, but for any debts you owe to the lender. This can include other loans, lines of credit, credit card debts, and even the overdraft protection you may have with the same financial institution.

How Does It Work?

When you sign a mortgage with an all-indebtedness clause, you essentially agree that the lender has the right to claim your mortgaged property as collateral for any of your debts with them. s.

Why Should You Be Extra Diligent?

1. Increased Risk of Foreclosure:
   • Even if you are diligently paying your mortgage, falling behind on other debts with the same lender can put your home at risk. This clause gives the lender the right to initiate foreclosure proceedings based on other unpaid debts.
2. Restricting your sale and purchasing options:
   • When you sell your home with an all-indebtedness clause, you may be surprised to find out that when you sell your home, your current lender will demand payment for all the debt you currently have with them.  Your car loan, your line of credit, and your credit cards.  This could seriously affect your pre-approval and may cause you to be declined by other lenders.
3. Impact on Refinancing Options:
   • If you decide to refinance your mortgage, the all-indebtedness clause can complicate the process.  If looking for a new lender, you may not have enough equity to pay and leave your current lender.
4. Transparency and Disclosure:
   • Lenders may not always clearly disclose the presence of an all-indebtedness clause. As a borrower, it’s essential to thoroughly review your mortgage documents and ask direct questions to ensure you fully understand the terms.

Tips for Homebuyers

1. Review Your Mortgage Documents Thoroughly:
   • Take the time to read through your mortgage agreement in detail. Look specifically for any mention of an all-indebtedness clause or similar terms.
2. Ask Questions:
   • Don’t hesitate to ask your lender or mortgage broker to explain any clauses you don’t understand. Clarify how the all-indebtedness clause could affect your financial situation.
3. Consider Alternative Lenders:
   • If an all-indebtedness clause seems too risky, consider looking for mortgage options with different lenders who may not include such clauses in their agreements.
4. Consult a Legal Advisor:
   • If you’re unsure about the implications of an all-indebtedness clause, consulting with a legal advisor can provide clarity and help you make an informed decision.

What Are The Pros & Cons?

This can be both a bad thing and a tool for some clients to use to their advantage.

Pros:
1. The lender will register a higher amount on the land title to allow you for future borrowing.  Please keep in mind standard qualification policies would still apply.
2. Loans and Lines of credit are usually at a lower rate.
3. Qualifying for loans, lines of credit and credit cards will be easier.

Cons:
1. This will limit your ability to shop for better rates at different lenders when refinancing.
2. Transferring the mortgage to a different lender will likely not be possible.
3. This clause is usually not explained very well at the time of mortgage signing and often the rate is slightly better than other lenders.
4. This clause would not be suitable for clients with shorter-term goals.
5.  Many of the lenders who have this clause are smaller and provincially regulated lenders, which usually means if you move out of the province all of the debt with the current lender will either need to be paid out or restructured which will cost you more money.

An all-indebtedness clause in a mortgage can have significant implications for your financial health and security. By understanding what this clause entails and why it’s important to be diligent, you can make more informed decisions and protect your investment. Always ensure you fully understand your mortgage agreement and seek professional advice if needed to navigate the complexities of mortgage terms and conditions.

We are here to answer all of your questions!

Thank you to Bruno Valko from RMG for his excellent analysis, as always! 🙂

Great news for the Canadian economy! Recent inflation data shows promising trends, positioning the Bank of Canada comfortably for a potential rate reduction on July 24th. Let’s dive into the details and see what this means for bond yields and the housing market.

Canadian Inflation Trends

Canadian inflation came in at 2.7%, down from 2.9%, with a Month-over-Month change of -0.1%. This is encouraging news and suggests that the Bank of Canada might consider another rate reduction at their next meeting. The 2.7% inflation rate was below market expectations, which had predicted it would remain at 2.9%. This surprise has led to a drop in bond yields this morning.

Key Data Points:

• Year-over-Year Inflation: 2.7% (down from 2.9%)
• Month-over-Month Inflation: -0.1% (previously 0.6%)

This data aligns with the Bank of Canada’s forecasts that CPI inflation would remain near the 3% mark for the first half of the year and resume the deflationary trend in Canadian consumer prices.

Impact on Bond Yields

The 5-Year Government of Canada bond yield is down 6.7 basis points early this morning (8:33 am EST) in response to the inflation news. Lower bond yields are a positive sign for borrowers, as they often lead to lower mortgage rates.

• Canada 5-Year Bond Yield: 3.302% (-0.067)

Housing Starts: Where Are the New Homes?

Despite the positive inflation news, housing starts in Canada have fallen below market expectations and previous levels. This raises concerns about the availability of new homes that were promised.

Housing Starts Data:

• Housing Starts for June 2024: 241.7K (previously 264.9K, consensus 260K)
• Monthly SAAR of Total Urban Housing Starts: Decreased by 9% to 223,234 units
• Multi-Unit Urban Starts: Decreased by 12% to 180,205 units
• Single-Detached Urban Starts: Increased by 2% to 43,029 units
• Rural Starts Monthly SAAR Estimate: 18,438 units

Among the most populated provinces, Ontario and British Columbia saw the largest declines in housing starts, while the Prairies experienced the most significant increase.

The easing of inflation to 2.7% and the drop in bond yields are encouraging signs for the Canadian economy. However, the decline in housing starts highlights ongoing challenges in the housing market. It’s crucial to stay informed and watch these trends, especially as the Bank of Canada’s July 24th announcement approaches.

Special thanks to Bruno Valko from RMG Mortgages for providing the valuable information that helped shape this analysis.

Contact us today for your next mortgage!

As mentioned, Fixed-rate mortgage rates in Canada are directly tied to the US Economy and their  10-year treasuries.

Recent economic data has shown a mixed picture of the Canadian economy. Inflation rates have been a primary concern, prompting the Bank of Canada to adjust its monetary policies. The central bank has implemented several interest rate hikes in response to rising inflation over the past years. These moves are aimed at cooling down the economy and bringing inflation back to its target range of 2%

The Bank of Canada has already reduced the rate once this year, and there is a good chance that on July 24, 2024 that there could be another.

This week the US is a frenzy of information:

1.  Inflation is down both YoY and Core
2. Jobless claims came in below expectation
3. US Fed Chair J. Powell has hinted/foreshadowed an interest cut.
4.  All eyes are on the US presidential election.  Is Joe Biden up for another term?  Is Project 2025 going to tank Republican support?

In Canada, the news is less promising.  We lost over 1000 jobs in June, the Toronto real estate market is mired in a slow period and news about allegations of fraud.

What does this all mean for your mortgage?  We believe that many people should review their options and try to buy as much time as possible before renewal.  Renewing into shorter-term mortgages is a strategy, however, it’s very difficult to make up the premiums that will be paid over 1yr, 2yr, and 3yr.   Variable rates and open mortgage rates are VERY HIGH.

The best thing to do is to call us today and let’s make a plan together.

When you receive your mortgage renewal agreement from your lender, stop! Before you sign anything, it’s crucial to get a second opinion from us at Mainstream Mortgages. Transferring your mortgage has never been easier, and it could save you a significant amount of money.

The Myth of the Best Rate from Your Financial Institution

Many Canadians assume their financial institution will offer them the best rate upon renewal. However, this is rarely the case. Almost 70% of borrowers simply sign and return the first mortgage renewal offer they receive from their lender without seeking a better deal.

It’s important to remember: NEVER, EVER accept the first mortgage renewal offer.

Your Current Financial Institution

Financial institutions, especially large banks, often send renewal offers that are 0.25% to 1.25% higher than the best rates available in the market. They count on the convenience of online renewals and the tendency of customers to avoid negotiation. By simply accepting the offered rate, homeowners end up paying thousands of dollars in unnecessary interest and reducing the amount paid towards the mortgage principal.

The Importance of Shopping Around

It’s wise to start shopping for a new mortgage term between four and seven months before your current term expires. At Mainstream Mortgages, we begin reminding our clients 210 days before their mortgage renewal date. This proactive approach is especially beneficial in a rising interest rate environment, where early renewal can save you from higher rates.

In contrast, during periods of falling interest rates, financial institutions might send renewal offers up to six months in advance, hoping to lock you into a higher rate before rates drop further. This tactic limits your time to find a better deal with another lender. Therefore, it’s essential to track your mortgage term timeframe and start exploring your options early.

Before you hear from your lender about renewing your mortgage, let Peter, Derek, and Colten at Mainstream Mortgages shop around for you. You’ll be amazed at the savings they can secure on your behalf.

Potential Savings: Thousands of Dollars

Your mortgage is one of your largest expenses, and the Mainstream Mortgage Team can help you save thousands of dollars in interest. Securing the best interest rates and terms is critical to minimizing your costs over the life of your mortgage. Don’t be part of the 70% who simply sign and return their renewal offer. Reach out to the Mainstream Mortgage Team instead.

What We Do

When we handle a mortgage renewal, we refer to it as either a switch or a transfer. It’s important to note that this involves a full mortgage application process that must be underwritten by the new lender. Fortunately, in almost all cases, the new lender covers the associated fees (legal, transfer, discharge, etc.). Additionally, if your existing lender charges a penalty or other fee, we can include up to $3,000 of these costs in the new mortgage.

P.S. If your current financial institution offers a better deal, we will be the first to let you know.

House hunting can be both an exciting and daunting experience for first-time homebuyers. Two key steps that can significantly enhance this journey are attending open houses and getting pre-approved for a mortgage. In this post, we’ll delve into the benefits of each and how they can set you on the path to finding your dream home.

The Benefits of Attending Open Houses

Open houses provide a unique opportunity to experience properties firsthand. Photos and descriptions online can only tell you so much. By visiting an open house, you can get a real sense of the space, layout, and overall feel of the home. This is invaluable when making such a significant decision.

Additionally, open houses allow you to assess the neighborhood. You can take note of the surrounding area, check out local amenities, and even chat with potential future neighbors. This can give you a better idea of whether the location suits your lifestyle.

Attending open houses also helps you get a feel for the current market. You can compare different properties, see what’s available within your budget, and understand the value of different features and upgrades. This knowledge can be crucial when you’re ready to make an offer.

Engaging with real estate agents at open houses can also be beneficial. They can provide additional insights about the property, the local market, and the buying process. Building relationships with agents can be helpful as you continue your search.

The Importance of Getting Pre-Approved for a Mortgage

Getting pre-approved for a mortgage is a critical step in the home buying process. First, it helps you understand your budget. A pre-approval gives you a clear picture of how much you can afford to borrow, which narrows down your search to homes within your price range.

Pre-approval also demonstrates to sellers that you are a serious buyer. In a competitive market, having a pre-approval letter can make your offer more attractive compared to those from buyers who have not taken this step.

Additionally, being pre-approved can speed up the buying process. Once you find a home you love, you’ll be ready to move forward quickly, reducing the risk of losing out to another buyer.

Finally, pre-approval can help you avoid disappointment. By knowing what you can afford upfront, you won’t waste time looking at homes that are out of your budget. This focus can make the home buying process more efficient and enjoyable.

Combining Open House Visits with Pre-Approval

Combining open house visits with mortgage pre-approval can streamline your house hunting process. With pre-approval, you can attend open houses with confidence, knowing exactly what you can afford. This allows you to make informed decisions on the spot if you find a property you love.

Being pre-approved also strengthens your negotiating position. Sellers are more likely to take your offer seriously, knowing that you have the financial backing to close the deal.

Conclusion

In summary, attending open houses and getting pre-approved for a mortgage are two essential steps that can greatly enhance your home buying journey. By experiencing properties firsthand and understanding your budget, you can make more informed decisions and find the perfect home for your needs. Start your journey today and take the first steps towards homeownership with confidence.

When it comes to choosing a mortgage, the lowest rate might seem like the obvious choice. However, this common misconception can lead borrowers into tricky situations. In this post, we’ll explore why the lowest mortgage rate isn’t always the best option and what Canadian borrowers should consider instead.

Understanding Mortgage Rates

Mortgage rates represent the interest you pay on your home loan. These rates are influenced by various factors, including the Bank of Canada’s policies, economic conditions, and your credit score. While a lower rate means lower monthly payments, it’s essential to look at the bigger picture.

The Hidden Costs of Low Mortgage Rates

Low mortgage rates often come with hidden costs. Lenders might offset these rates with higher fees, such as processing fees, and other not-so-obvious fees Additionally, low-rate mortgages may have significant penalties for early repayment or refinancing, making them less flexible if your circumstances change, or if you choose to break the mortgage contract early.

Furthermore, low-rate mortgages can come with restrictions. For example, they may not allow for prepayments, have limited portability or may not let you break the mortgage at all (Imagine you try to sell your home and the lender won’t discharge the mortgage). This lack of flexibility can hinder your financial plans if you decide to move or want to pay off your mortgage faster.

Crucial factors to consider:

Comparing variable and fixed rates.
Comparing land title charges – standard vs. collateral.
Comparing title registration amounts – Some lenders instead of registering the amount of your mortgage on the title e.g. ($300,000). Instead of registering $300,000 the lender will register up to $1,000,000.
Comparing features – portability, can the mortgage be assumed, pre-payment privileges
Comparing mortgage penalty calculations – Not all mortgage penalty formulae are the same – choosing the right mortgage can save you $1000s of dollars.

Flexibility and Features Matter

When choosing a mortgage, consider the flexibility and features offered. Prepayment options allow you to pay down your mortgage faster without penalties. Portability lets you transfer your mortgage to a new property without breaking the terms.

Additionally, some mortgages offer features like skip-a-payment options or access to a home equity line of credit. These features can provide valuable financial flexibility and peace of mind, even if they come with a slightly higher rate.

One of the most important factors is Life and disability insurance.  Most credit protection policies are not portable.  This means that if you wanted to transfer your mortgage to a new lender you may be surprised to find out that your insurance coverage may come to an end.  This is a very important consideration for borrowers who become uninsurable due to illness or disability.

Case Studies/Examples

Consider Sarah, who chose the lowest rate for her mortgage. She later faced hefty penalties when she wanted to refinance to take advantage of lower market rates ($18,000). On the other hand, John opted for a slightly higher rate with better prepayment options, allowing him to pay off his mortgage quicker and save on interest in the long run.

Expert Tips for Choosing the Right Mortgage

Consulting with mortgage professionals, like those at Dominion Lending Centres Mainstream Mortgages, can provide invaluable insights tailored to your financial situation and goals. It’s essential to consider your long-term plans and read the fine print before committing to a mortgage.

Remember, the lowest rate isn’t always the best rate. Look at the overall package, including fees, penalties, and features, to find a mortgage that truly suits your needs.   An ounce of prevention is worth more than a pound of the cure.

In summary, while the lowest mortgage rate may seem appealing, it’s crucial to consider the broader implications. By understanding the hidden costs and valuing flexibility, Canadian borrowers can make more informed decisions and secure a mortgage that best fits their needs.

DLC Mainstream Mortgages Homebuyers Guide

Welcome to DLC Mainstream’s New Home Buyer’s Guide

Embarking on the journey to homeownership is an exciting and significant milestone. At DLC Mainstream Mortgages, we understand that purchasing a home is one of the most important financial decisions you will make. Our New Home Buyer’s Guide is designed to provide you with the essential information and tools you need to navigate the home-buying process with confidence and ease.

Step 1: Assessing Your Financial Readiness

Before you start looking at homes, it’s crucial to assess your financial situation. Here are some key factors to consider:

• Credit Score: Your credit score plays a significant role in determining your eligibility for a mortgage and the interest rate you’ll receive. Check your credit report for any errors and take steps to improve your score if necessary.
• Budget: Determine how much you can afford to spend on a home. Consider your current income, expenses, and savings. Use our mortgage calculators to estimate your monthly payments and see how different loan amounts and interest rates will impact your budget.
• Savings: In addition to your down payment, you’ll need funds for closing costs, moving expenses, and an emergency fund. Aim to save at least 20% of the home’s purchase price to avoid private mortgage insurance (PMI).

Step 2: Getting Pre-Approved for a Mortgage

A mortgage pre-approval shows sellers that you are a serious buyer and gives you a clear understanding of how much you can borrow. At DLC Mainstream Mortgages, we make the pre-approval process simple and straightforward:

• Gather Documentation: Prepare necessary documents, including proof of income, employment history, bank statements, and identification.
• Submit Your Application: Our experienced mortgage brokers will guide you through the application process, ensuring all required information is accurately provided.
• Receive Your Pre-Approval: Once your application is reviewed, you’ll receive a pre-approval letter stating the loan amount you qualify for. This letter can be a powerful tool when making offers on homes.

Step 3: Finding Your Dream Home

With your pre-approval in hand, you can start searching for your ideal home. Consider the following tips to streamline your search:

• Work with a Realtor: A knowledgeable realtor can help you navigate the local market, identify properties that meet your criteria, and negotiate the best deal on your behalf.
• Prioritize Your Needs and Wants: Make a list of must-have features and desirable extras. Consider factors such as location, size, number of bedrooms and bathrooms, and proximity to schools and amenities.
• Attend Open Houses and Viewings: Take the time to visit multiple properties to get a sense of what’s available within your budget. Don’t hesitate to ask questions and take notes during viewings.

Step 4: Making an Offer

Once you’ve found the perfect home, it’s time to make an offer. Here’s how to proceed:

• Consult with Your Realtor: Your realtor will help you determine a fair offer price based on comparable properties and current market conditions.
• Submit Your Offer: Your offer will include the proposed purchase price, any contingencies (such as a home inspection), and your desired closing date.
• Negotiate: Be prepared for the possibility of counteroffers. Your realtor will assist you in negotiating terms that are favorable to you.

Step 5: Closing the Deal

After your offer is accepted, there are several final steps to complete before you can move into your new home:

• Home Inspection: Schedule a professional inspection to identify any potential issues with the property. This step is crucial for ensuring the home is in good condition.
• Finalize Your Mortgage: Work with your DLC Mainstream mortgage broker to finalize your loan. This will involve a detailed review of your financial situation and the property.
• Closing Day: On closing day, you’ll sign the final paperwork, pay closing costs, and receive the keys to your new home. Congratulations, you’re now a homeowner!

Conclusion

Buying a home is a complex process, but with the right guidance and preparation, it can be a smooth and rewarding experience. At DLC Mainstream Mortgages, we are dedicated to helping you every step of the way. Our team of experienced mortgage brokers is here to provide personalized advice and support, ensuring you find the best mortgage solution for your needs. Contact us today to start your journey to homeownership with confidence.

Everything has a cost.

I was part of a conversation recently.  I was listening to different points of view.   One person had recently purchased a home and started paying their mortgage, the other stated that interest rates were too high and that they were waiting for either the prices of houses to come down, or for interest rates to come down.   I was sitting there sipping my coffee and listening intently to these two perspectives.  Suddenly,  I heard a deafening silence, as all heads slowly turned in my direction and all eyes were on me.   I think waiting will ultimately prove to be incorrect.   Home values are starting to increase again, interest rates are slowly coming down, the housing supply is dropping and rents are increasing.  Not to mention the amount of money that will be spent on rent that doesn’t build any equity.

I’m not sure who is right and who is wrong in this scenario.   Everyone’s situation is slightly different.  I bowed out gracefully and I asked both parties to watch our socials this week.  This conversation made me ask myself  “What interest rate are you paying on your apartment lease/rent?”

Later on, I pulled out my mortgage calculator and decided to do an interest-only calculation that is compounded monthly.  I googled for the average rents in Winnipeg and assigned a reasonable mortgage amount to the rent being paid and came up with the following chart.

The interest rates ranged from 5.83% – 6.90% and the amount of interest paid after 5 years left me gobsmacked!

If you are currently renting, living with your family, or planning to rent soon, I hope you read this post.  We would be happy