Your credit score is a big factor when you apply for a mortgage. It can dictate how good your interest rate will be and the type of mortgage you qualify for.

Mortgage Professionals are experienced helping clients with a wide range of credit scores so we can find you a mortgage product even if your credit is far from perfect.

The good news about your credit score is that it can be improved:

• Stop looking for more credit. If you’re frequently seeking credit that can affect your score as can the size of the balances you carry. Every time you apply for credit there is a hard credit check. It is particularly important that you not apply for a credit card in the six months leading up to your mortgage application. These credit checks may stay on your file for up to three years.
• If your credit card is maxed out all the time, that’s going to hurt your credit score. Make some small monthly regular payments to reduce your balance and start using your debit card more. It’s important that you try to keep your balance under 30% or even 20% of your credit limit.
• It’s also important to make your credit payments on time. People are often surprised that not paying their cell phone bill can hurt their credit score in the same way as not making their mortgage payment.
• You should use your credit cards at least every few months. That’s so its use is reported to credit reporting agencies. As long as you pay the balance off quickly you won’t pay any interest.
• You may wish to consider special credit cards used to rebuild credit. You simply make a deposit on the card and you get a credit limit for the value of that deposit. They are easy to get because the credit card company isn’t taking any risks.

Contact a Dominion Lending Centres Mortgage Professional if you have any questions.

It’s the time of year when many homeowners are getting their property assessments.

The real estate market is the single biggest influence on market values. Market forces vary from year to year and from property to property. The market value on an assessment notice may differ from that shown on a bank mortgage appraisal or a real estate appraisal because an assessment’s appraisal reflects the value at a different time of the year, while a private appraisal can be done at any time.

Use your Assessment as a starting point for the value of the property your planning your home purchase… Do not rely on a provincial assessment for the exact value of the property you’re considering purchasing. Markets can change quickly both increasing and decreasing in value depending on the area.

What is a Home Appraisal?
An appraisal is a document that gives an estimate of a property’s current fair market value.

Often there is no connection between a provincial assessment and appraised value. This is why lenders want an appraisal – an independent evaluation of the properties value at this moment in time.

Primarily home appraisals are completed at the request of a lender. Lenders want to know the value of a property in the current market before they are willing to lend against the home.

The appraisal is performed by an “appraiser” who is typically an educated, licensed, and heavily regulated third party offering an unbiased valuation of the property in question, trained to render expert opinions concerning property values.

When an appraisal is done, consideration is given to the property, the home, its location, amenities, as well as its physical condition.

Appraisals may also be required when an owner has less than 20% down payment and needs mortgage default insurance.

Who pays for the Home Appraisal?
Typically, the borrower pays the cost of the appraisal, and upon completion, the appraisal goes directly to the lender (does not go into the home buyer’s hands).

I know it sounds odd, but brokerages, lenders and appraisers cannot just show the buyer the appraisal on a property, even though the borrower paid for it.

Think of an appraisal as an administrative fee for finding today’s current value of the property
You need a Home Appraisal since the lender doesn’t want to lend on a poor investment and the appraisal helps the buyer decide if the property is worth what they offered (especially in hot markets like Vancouver & Toronto).

Why don’t you get a copy of the appraisal? The appraiser considers their client to be the lender (the reason the appraisal was ordered). The lender has guidelines for the appraisal, and the appraiser prepares his report according to those parameters.

The lender is free to share the appraisal with the borrower, but the appraiser cannot share it. This is because the lender is the client… NOT the borrower!! It doesn’t matter who pays for the appraisal.

Sometimes an appraisal can come in lower than the purchase price, causing angry calls to the Appraisal Institute of Canada (AIC), and the answer they give is: the Brokerage or Lender is the client of the appraiser, and as such has ownership of the report.

One of the main reasons the buyer pays for the appraisal, is that if the mortgage doesn’t go through, the lender does not want to be on the hook for paying for the appraisal and not getting the business.

Lenders are also aware that home buyers could take the appraisal and shop it around with other Lenders to try and get a better deal.

It is rare for Lenders to share the report. With most appraisal companies, the appraisal is only provided after the closing of the mortgage transaction and must have the lender’s approval.

After the funding of your mortgage, some mortgage brokers will refund the appraisal fee or sometimes the lender may agree to reimburse the cost of the appraisal.

While a lender does not have to release the entire appraisal, there are some pieces of information that remain the personal property of the buyer, and PIPEDA legislation guarantees them access to that. However, any information on the report that does not relate to the property itself (such as the neighboring properties or other data about the community) would come off the report before the lender provided it.

Some other reasons for getting an Appraisal:

• to establish a reasonable price when selling real estate
• to establish the replacement cost (insurance purposes).
• to contest high property taxes.
• to settle a divorce.
• to settle an estate.
• to use as a negotiation tool (in real estate transactions).
• because a government agency requires it.
• lawsuit

Getting your home ready for an Appraisal:
The appraiser report involves a report including pictures of the home and property with the appraiser’s value of the property, along with a short summary of how that information was derived.

9 tips for high value home appraisals

Most lenders have an approved appraiser list which requires appraisers to have the appropriate designation. Lenders tend to reject appraisals that are ordered directly by property owners. Lenders want the appraisal to be ordered by the broker or the lender, primarily to avoid potential interference from the property owner.

Home Appraisal Costs
Appraisal costs do vary. Most home appraisals start around $350 (plus tax) but they can go much higher depending on how expensive the home is, complexity of the appraisal and how easily the appraiser can access comparable data.

Are you thinking of buying a home? As you can tell there is lots to discuss, call a Dominion Lending Centres mortgage professional to have a chat!

Fixed Interest Rates

This is usually the more popular choice for clients when it comes to deciding on which type of interest rate they want. There are many reasons why, but the most unsurprising answer is always safety. With a fixed interest rate, you know exactly what you are paying every month and you know that the amount of interest being charged for the term of your mortgage will not increase and it will not decrease. Fixed interest rates can be taken on 1-year, 2-year, 3-year, 5-year, as well as 7 and 10-year terms. Please note, term is not meant to be confused with amortization. When you have a 5-year term but a 25-year amortization- the term is when your mortgage is up for renewal, but it will still take you the 25 years to pay off the entire debt. The biggest knock on fixed interest rates when it comes to mortgages, especially 5-year terms, is the potential penalty. If you want to break your mortgage and pay it out, switch lenders, take advantage of a lower rate, or anything like this and your term is not over, there will be a penalty. With a 5-year term, a fixed rate penalty can be anywhere from $1,000- $20,000 or more. It all depends on the lender’s current rates, what yours currently is, the length of time remaining on your term, and the balance outstanding. The formula used is called an IRD (interest rate differential) and the penalty owed will either be the amount this formula produces or three month’s interest- which ever is greater. Fixed interest rates, especially 5-year terms can be the most favourable. They are safe, competitive interest rates that you will not need to worry about changing for the term of your mortgage. However, if you do not have your mortgage for the entire term, it could hurt you.

Variable Rate Interest

The Bank of Canada sets what they call a target overnight rate and that interest rate influences the prime rate a lender offers consumers. A variable rate, is either the lender’s prime lending rate plus or minus another number. For example, let us say someone has a variable interest rate of prime minus 0.70. If their lender’s prime lending rate is 5.00% in this example, they have an effective interest rate of 4.30%. However, if for example the prime rate changed to 6.00%, the same person’s interest rate would now be 5.30%. Written on a mortgage, these interest rates would look like P-0.7. Variable interest rates are usually only available on 5-year terms with some lenders offering the possibility of taking a 3-year variable interest rate. When it comes to penalties, variable interest rates are almost always calculated using 3-months interest, NOT the IRD formula used to calculate the penalty on a fixed term mortgage. This ends up being significantly less expensive as breaking a 5-year term mortgage at a fixed rate of 3.49% with a balance of $500,000 will cost approximately $15,000. That is if you use the current progression of interest rates and broke it at the beginning of year 3. A variable interest rate of Prime Minus 0.5% with prime rate at 3.45% will only cost $3,800. That is a difference of $11,200. You can expect to pay this kind of amount for the safety of a fixed rate mortgage over 5-years if you break it early.

Which one is best?

It completely depends on the person. Your loan’s term (length of time before it either expires or is up for renewal) can be anywhere from a year to 5 years, or longer. A first-time home buyer typically has a mortgage term of 5 years. Within those 5 years, the prime rate could move up or down, but you won’t know by how much or when until it happens. Recently, variable rates have been lower than fixed rates, however, they run the risk of changing. With fixed interest rates, you know exactly what your payments will be and what it will cost you every month regardless of a lender’s prime rate changing. If you go to the site www.tradingeconomics.com/canada/bank-lending-rate you can see the 10-year history of lender’s prime lending rate. Because lenders usually change their prime lending rate together to match one another (except for TD), this graph is a good representation. As you can see, from 2008 to 2018, the interest rate has dropped from 5.75% to 2.25% all the way back up to 3.45%.  Canada has had this prime lending rate since 1960, and in that time it has seen an all-time high of 22.75% (1981) and all-time low of 2.25% (2010). Whether you want the risk of variable or the stability of a fixed rate is up to you, but allow this information to be the basis of your decision based on your own personal needs. If you have any questions, contact a Dominion Lending Centres mortgage professional near you.

Do you know what kind of prepayment privileges you currently have with your mortgage? Does your current lender allow you to make a 10% prepayment or a 20% prepayment on your principle amount? Can you double your monthly payment? Or can you even increase the amount you are paying monthly?

This is important information, and the following break down is going to show you why making a prepayment on your mortgage may just be the best holiday gift you can get yourself this season!

Mortgage Structure

Mortgage Amount: $400,000

Term: 60 months (5 years)

Interest rate: 3.19%

Payment: $1,932.19/month

After 5 years of monthly payments…

Interest paid: $59,068.97

Principal paid: $56,862.43

Balance outstanding: $343,137.57

Amortization remaining: 20 years

After 5 years of monthly payments with double-up payments twice yearly…

Interest paid: $57,621.44

Principal paid: $77,631.86

Balance outstanding: 322,368.14

Amortization remaining: 20 years

Effective amortization: 15 years 1 month

Interest saved over term: $1,447.53

Let us break this down. If you double your monthly payment of $1,932.19 twice a year, for the term of your mortgage (5 years in this case), you will save $1,447.53 in interest over those 5 years. Not too bad. But there is more…

If you did these double-ups twice a year for 5 years, and refinanced your mortgage after the 5 years but continued paying the higher payment of $1,932.19 instead of what the new monthly payments would be ($1,557.19), that extra $375 a month goes directly to the principal amount owing and takes 4 years and 11 months off of your amortization…

If that doesn’t excite you and you decided instead to continue making double-up payments for the remainder of the amortization, you would save $38,550.70 in interest…

So this holiday season, when you get your year-end bonus or are deciding how much to spend on loved ones, maybe first consider allowing yourself a mortgage prepayment or two because it could save you years of payments and potentially thousands of dollars in interest! If you have any questions, contact a Dominion Lending Centres mortgage professional near you.

It is a reoccurring but common misconception that you will qualify for a mortgage in the future because you have qualified for a mortgage in the past.

This is not accurate!

Do. Not. Assume. Anything.

Even if your financial situation has remained the same or has improved, securing mortgage financing is more difficult now than it has in recent years.
The latest changes to mortgage qualification by the federal government has left Canadians qualifying 20-25% less. On top of that, guidelines that lenders would use in determining your suitability have been replaced with non-negotiable rules and declarations.

As mortgage professionals, we keep up to date with the latest trends going on in the mortgage world by understanding lender products and staying attentive to evolving changes.

From experience, we can tell you that having a plan is crucial to a successful mortgage application. Making assumptions about your qualification or just “winging it” is a recipe for disaster. Here are a few points on why a mortgage broker is a must for the first time home-buyer.

1. They have access to over 40 different lenders, not just one
2. They work for you, not for the lender
3. They will guide you through the application process
4. They save you valuable time by shopping for you
5. They pull your credit once — if you go to multiple banks, you will have multiple credit pulls

If you are thinking about buying a property, please feel free to contact a Dominion Lending Centres mortgage professional where we can help you devise a full-proof plan!

This post applies if you are taking a new mortgage, whether it’s for a purchase, refinance, or renewal. The variable remains the main contender.

But what about all the economists saying if you are currently in a variable rate mortgage then you should rush to ‘lock in’?

You mean the economists that are employed by profit driven shareholder owned institutions that directly benefit from your locking-in (banks) via instantly increased profit margins and massively higher (up to 900% higher) prepayment penalties that 2/3 mortgage holders will trigger?

A bit biased, that crowd.
Also they are generalists, they’re not specialists.

But what about independent real estate experts?

While these experts may have their finger on the pulse of many facets of the real estate market, many remain totally unaware of how exactly mortgage prepayment penalties are calculated, and just how likely you are to trigger them.

Also generalists, are unaware of many nuances of mortgage products.

So what’s my game?

I’ve never really had game, so to speak. And I don’t stand to profit from your locking in, or from your staying variable. In fact as I type this on a stunning day I’m wondering just what I’m doing in my office at all.

I’m just a Mortgage Broker offering an opinion. An opinion that reflects my personal policy, an opinion shaped through 25 years of experience with my own mortgages, an opinion based on 11 years of experience with 1,673 client’s mortgages.

I’ve seen a few things, mortgage specific things.

I’ve watched 2/3 of my clients break their mortgages and trigger penalties. Almost every single one of them a small and relatively painless penalty thanks to staying variable.

But what about these rising rates?

If you are currently in a Prime -.65% to Prime -1.00% variable then to lock-in would be to inflict an immediate rate hike on yourself that might take the government another 12-18 months to pull off… if they pull it off.

Stay variable.

If you are in a Prime -.35 or shallower mortgage, we should discuss restructuring that into a Prime -1.00% mortgage and reducing your rate by .65% or more.

Staying variable.

My crystal ball says yes, perhaps another two or three 0.25% hikes through 2019, but at that point the odds favour (heavily) an economic contraction that will in turn trigger a corresponding reduction in interest rates.

It is my theory, and that of others smarter than I, that the fed is pushing rates up aggressively to beat said economic contraction, because they want to have the tool of ‘reducing interest rates’ back in their toolbox when the rainy days come. And we are overdue for stormy economic times. And when those times arrive it will not be prudent to be locked-in.

In short, life is variable – your mortgage should be as well. If you have any questions, contact your local Dominion Lending Centres mortgage professional today.

HomeEquity Bank is the only bank in Canada that currently offers the CHIP Reverse Mortgage as well as a secondary product, Income Advantage. These two products are options for homeowners unlike anything else out there. Instead of borrowing money to purchase a house, they will lend you money if you already have purchased one (as long as you qualify).

Recently I finished a half-day seminar where I was educated on the different HomeEquity Bank offers through the CHIP Reverse mortgage and their Income Advantage products. Below I would like to share with you some of the key benefits and summarize the different ways you can potentially use these products.

CHIP Reverse Mortgage

• Loan-to-Value:

  • 55% maximum (dependent on property and applicant age)

• Mortgage Amount:

  • Min. $25,000 initial advance

  • Min. $10,000 for subsequent advance

• Terms:

  • 6 month fixed, 1-yr fixed, 3-yr fixed, 5-yr fixed

  • 5-yr variable rate

• Amortization:

  • None

• Payments:

  • No regular monthly payments required

• Debt Servicing:

  • None required (Just max. 55% LTV)

• Credit Bureau:

  • None

Now obviously there are other items such as appraisals, property taxes that need to be paid regularly, document requirements, and prepayment privileges as well as fess. However, the information listed shows you the vast differences between a traditional mortgage and a CHIP reverse mortgages.

If an applicant is over the age of 55, lives in their own home as well as owns it (at least the majority), and their property meets all the age and locations requirements, they can apply to have access to this product. Refinance, home improvements, in home medical care, gifting money to child or grand-child, supplemental income, all of these things can be achieved with a CHIP Reverse Mortgage.

Income Advantage

• Loan-to-Value:

  • 40% maximum (dependent on property and applicant age)

• Mortgage Amount:

  • Planned advances from $500/month or $1,500 a quarter

  • Min. $10,000 for subsequent advance

• Terms:

  • Planned advance: 5-yr variable rate

  • Lump-sum: 5-yr fixed, 3-yr fixed, 1-yr fixed, variable rate

• Amortization:

  • None

• Payments:

  • No regular monthly payments required

• Debt Servicing:

  • None required (Just max. 55% LTV)

• Credit Bureau:

  • None

The Income Advantage program is a lot like the CHIP Reverse Mortgage program, however, the Income Advantage is geared more towards people who want a stream of income they can rely upon every month. You can still do lump-sum advances but the main difference is it allows you to set-up planned advances.

Using HomeEquity bank can be extremely advantageous for a lot of people in Metro Vancouver. It allows people to access the cash in their home without being burdened by any lack of financial income and it can allow people to help their children or grandchildren by advancing the money and gifting it to them for their own home purchase.

When it comes down to it all, there are really two main things these two products do. One, is it allows for an income stream based on the home you live in and age, regardless of employment or credit history. Two, it allows parents or guardians to provide money from the equity in their home now, to the beneficiaries who would one day in the future be recipients if included in an estate will- an advance on an inheritance.

There are many things to consider with HomeEquity’s CHIP Reverse Mortgage and Income Advantage Program, if you or someone you know may benefit from secondary or primary income, support for medical expenses, home renovations, travel, or wanting to help family members with their financial needs, please do not hesitate to contact a Dominion Lending Centres Mortgage Broker.

So now that you’re a home owner, what are your next steps? Well first, you will have to figure out exactly how you are going to get RID of that mortgage. Yes, that’s right. Now that you got it, here are four ways you can pay it off and be done with it!

1. ACCELERATE YOUR PAYMENT FREQUENCY

Making the change from monthly payments to accelerated bi-weekly payments is one of the easiest ways you can make a huge difference to the bottom line of your mortgage. A traditional mortgage splits the amount owing into 12 equal monthly payments however, an accelerated biweekly payment is simply taking a regular monthly payment and dividing it in two. Instead of making 24 payments, you will make 26. The extra two payments really accelerate the repayment of your mortgage!
Here is an example of what I’m talking about.
Bob currently has a $300,000 mortgage at a 4% fixed rate with a 25 year amortization period. He will save $32,000 just by moving to biweekly accelerated payments from biweekly. Go Bob!

2. INCREASE YOUR MORTGAGE PAYMENT AMOUNT
Unless you opted for a “no-frills” mortgage, chances are you have the capability of increasing your regular mortgage payment by 10-25%. This is a great option if you have some extra cash to spend within your budget. This money will go directly towards paying down the principal amount owing on your mortgage. The more money you can pay down when you first get your mortgage, the better. At the end of the day, you will pay less interest over the lifespan of your mortgage. By voluntarily increasing your mortgage payment, it is metaphorically like you are signing up for a long term forced savings plan where equity builds in your house rather than your bank account.

3. MAKE A LUMP SUM PAYMENT

Again, unless you have a “no-frills” mortgage, you should be able to make bulk payments towards your mortgage. Depending on your lender and your mortgage product, you should be able to put down anywhere from 10-25% of the original mortgage balance. Some lenders may be particular about WHEN you can make these payments, however if you haven’t taken advantage of a lump sum payment yet this year, you will be eligible.

4. REVIEW YOUR OPTIONS REGULARLY

As your mortgage payments are withdrawn from your account, it is easy to put your mortgage payments on auto-pilot especially if you have opted for a 5-year fixed term. Despite the term of your mortgage, it is highly encouraged to give your mortgage an annual review. This review gives you a conscious look at the overall stance of your mortgage which could rise to opportunities of refinancing or lowering your interest rate!
If you have any questions about your mortgage, how to get a mortgage, or how to get rid of the mortgage you have, please don’t hesitate to contact a Dominion Lending Centres mortgage professional today!

Over the last month, as the big banks and many of our monolines mortgage lenders wind down their fiscal year, we are starting to see some very obvious changes in what your credit score can get you.

I heard a few months ago that 720 beacons were going to become the new 650. The 650 beacon credit score for many years was the mid-range norm for most mortgage lenders. Today on many of the sites we use, we are seeing that the primary borrower must have a credit score of 720 and the secondary beacon can’t be below 650. It’s a big change from what we have seen in the past.

There are more changes coming as the banks will need to set aside more balance sheet if your mortgage is conventional. The one report I read said that if your credit score is lower, then the banks will now need to set aside 1.5% or possibly more if the score is low enough. That of course will then mean that an investor will need to be compensated more for having that in their portfolio, aka higher rates for you on a conventional mortgage.

If you are in the market for a house and you don’t know where to start, at least contact Dominion Lending Centres mortgage broker who can guide you through the process and let you know where you start.  If you use a DLC broker, they can set you up with a CleverCredit account and you can work together to make sure your credit is strong enough to apply for a mortgage when the time comes.

Since we know that lenders can back-end insure our mortgages (please read our Mortgage Insurance Market and Wholesale Lenders article first), and that this specifically makes these mortgage investments more attractive to investors, what does it mean for borrowers (every day people like you and me)?

To recap, any mortgage that is inexpensive for a wholesale lender to get financing for allows the lender to pass on savings to their clients, meaning mortgages that are insured get the best rates! An insured mortgage is where a borrower pays the mortgage default insurance because they have less than 20% down payment and is required on all mortgages where the down payment is less than 20%.

But, lenders can also pay for insurance for their client! An “insurable” mortgage is one where the clients puts 20% down (or more), and their mortgage is approved as though a client is paying for insurance, but the actual insurance is paid for by the lender.

Rates for insurable mortgages are generally very similar to insured mortgages. An “uninsurable” mortgage is one where mortgage insurance is not available.

The graph below outlines what type of mortgages are insured, insurable or uninsurable.

So what does this all mean for you, the borrower?

If your mortgage is insurable, you may be able to get the best rates. What is interesting to note is that if you have a mortgage that was previously uninsured, your current lender cannot insure your mortgage but your mortgage may be insurable if you transfer to a new lender – this is where our opportunity lies!

As an aside, if your mortgage was previously “insured,” and you paid for mortgage insurance, you will also be offered the best rates upon transfer or renewal.

Please call your local Dominion Lending Centres mortgage professional if you have any questions.