At some point in their lives, most Canadians have probably asked themselves whether it is better to buy or rent a home. Purchasing a home is one of the biggest decisions most people ever make so the impacts of the decision can be HUGE.

Ultimately, the decision is a personal choice, but it helps to look at the pros and cons of buying to determine whether home ownership is right for you.

Some advantages of buying a home

Owning a home is generally considered to be a sound, long-term investment that can provide satisfaction and security for you and your family.

Each month when you make your mortgage payment, you are building equity in your home.

Equity is the portion of the property that you actually build through your monthly payment versus the portion that you still owe the lender.

At the beginning of your mortgage, more of your payments go toward paying off the interest and less toward paying off the principal. But the longer you stay in your home and the more mortgage payments you make, the more principal you pay off and the more equity you accumulate.

Most mortgages also offer you the option of making additional monthly or annual payments to reduce your principal faster. Some prepayment privileges, for instance, enable you to pay up to 20% of the principal per calendar year. This will also help reduce your amortization period (the length of your mortgage), which, in turn, saves you money.

There is also a tax advantage. If your home is your principal residence, any profit you make when you sell it is tax-free. A home can appreciate – or increase in value – as time passes, building more equity. As you build up equity, it’s usually easier to upgrade to a more expensive home in the future thanks to the profit you’ll make when selling your current home.

As an owner, you can also decorate and improve your home any way you like. Ownership tends to give you a sense of pride and can offer you and your family stronger ties to the community.

If you do decide that home ownership is right for you, it’s important to choose a home you can afford. If you can’t afford to buy your dream home, purchasing a more modest home can be a great place to start building equity that one day may allow you to buy the home of your dreams.

Since we’re currently in a buyer’s real estate market and interest rates have been dropping, now may be an ideal time to enter into home ownership for the first time.

Some disadvantages of buying a home

Since it’s easy to get caught up in the excitement of buying a home, it’s important to remember that home ownership has some additional responsibilities as well.

For one thing, a home can be expensive. Chances are, your monthly payments will be more than what you are currently paying in rent when you factor in such things as your mortgage, property taxes, repairs and general maintenance.

Owning a home ties up some of your cash flow and is likely to reduce your flexibility to move to a new location or change jobs.

While your home might increase in value as time goes by, don’t expect to get a big return quickly. There are no guarantees that your home will increase in value, particularly during the first few years. In the beginning, you could actually lose money if you sell because your home may not have appreciated enough to cover the real estate fees, moving, renovation and other selling costs.

Real estate is, however, usually considered a good investment over the long term.

When making the decision about whether to buy or rent, it’s important to carefully choose a home you can afford, and then weigh the pros and cons. Millions of people enjoy the rewards of home ownership but, ultimately, it’s a personal decision based on your own priorities.

If you’re thinking of buying your first home, Dominion Lending Centres mortgage professionals can answer all of your mortgage-related questions.

Alim Charania

Dominion Lending Centres – Accredited Mortgage Professional

We all know that marriage isn’t always forever. When a separation occurs, a home is often involved. Since most couples have a joint mortgage – one where both names are on the mortgage and title of the home – when separation or divorce proceedings occur, many wonder what will happen with the home.

When the marriage comes to an end, there are two obvious options concerning the home: 1) sell the property and split the proceeds according to your agreement and go your separate ways; or 2) one person buys the other party out of the mortgage and the title of the property.

The first option is a straight-forward transaction where you put the house up for sale, sell and split the proceeds. The second option, however, is slightly more complicated.

The decision between the options is a personal one borne out of the specific circumstances of the parties involved. I have helped many borrowers through the home ownership woes of separation and divorce. If you find yourself in this situation and need professional mortgage advice, give Dominion Lending Centres a call.

Marie-France Lavigne

Dominion Lending Centres – Accredited Mortgage Professional

Here are the steps you need to follow to ensure you get a mortgage that’s right for you!

Step One: Pre-Qualify & Strategize!

Step one is to get pre-qualified, which should not be confused with the term pre-approved. The big difference is that no approval is ever given by a lender until they have an opportunity to examine the property that you wish to purchase. Obviously that can’t happen before you actually go home shopping. Pre-qualifying will first focus on your credit, your debt load, your income, and what type of mortgage you are looking for. The best part is that an independent mortgage broker can do this in person at your house or our office, over the phone, or online through a secure mortgage application.

Once your mortgage broker has all the basic information, it’s time to find out what you’re financial and homeownership goals are. As mortgage brokers that ‘custom build’ mortgages to your specifications, this information is imperative in allowing them to seek out a lender and a mortgage product that will help you meet your goals. You’ll want to be sure you are getting a great rate, but just as important as rate are the other features of your mortgage such as pay down strategies, pre-payment privileges, and exit strategies. There’s a lot more to a mortgage than rate! Once you have selected the lender, product and strategies that meet your needs, you will know exactly what price range and quality of home you can look for!

Step Two: Find the Right Property

Once you have been pre-qualified, you can go house hunting! If you need a Realtor to help you with this, your mortgage broker can recommend a few for you to choose from.

Step Three: Approval

As soon as you have decided on the property you wish to buy, your mortgage broker will send your application and property information to the lender of your choice for approval. Once the lender has an opportunity to look at your application and the property you wish to buy, the lender will issue a “commitment” letter outlining the terms of the mortgage and any further documents they wish to see to verify your application information. Your mortgage broker will discuss the commitment from the lender with you and then forward any requested information to the lender for their review.

Step Four: The Lawyer’s Turn

At this point, the lender will have reviewed your supporting documents and notified your lawyer. Your lawyer will process all the necessary title changes and set up a time for you to meet with him to sign the mortgage documents and go over the fine print.

Step 5: Get the Keys!

By the day of your closing the mortgage lender will have sent the funds to your lawyer’s trust account. Your lawyer will communicate with the seller’s lawyer regarding an exchange of cash for keys and you are then the proud owner of your own home.

Understanding the mortgage process can help you see and understand how your entire team of professionals at Dominion Lending Centres work together to help you start your life in your new dream home!

Doug Cooper

Dominion Lending Centres – Accredited Mortgage Professional

When shopping for a mortgage, many home buyers enlist the services of a Mortgage Professional. There are several benefits to using a Mortgage Broker and I have compiled a list of the top 8:

1. Saves you time – Mortgage Brokers have access to multiple lenders (over 50!). They work with lenders you have heard of and lenders you probably haven’t heard of. Because their relationship with lenders is ongoing, Mortgage Brokers know what is available in mortgage financing and will be able to advise you on what your lending options are without all the leg work that you would have to do in order to find a small percentage of information that a Mortgage Broker already has in hand.

2. Saves you money – Mortgage Brokers, if they are successful, have access to discounted rates. Because of the high volume that they do, lenders make available discounted rates that are not available directly through the branch of the lender that you go to.

3. Saves you from becoming stressed out! – It can be very daunting to find a mortgage. A Mortgage Broker takes on that stress for you. Your Mortgage Broker will make sure all the paperwork is in place. They will keep in good communication with you so that you know what is going on with your mortgage and will keep you up to date with any complications so that there are no surprises.

4. Gives you access to lenders that are otherwise not available to you – Some lenders work exclusively with Mortgage Brokers. In these circumstances, the layman does not have access to these lenders and, therefore, does not have the option to use discounted rates and mortgage products that these lenders offer.

5. Services are free – Mortgage Professionals are paid by the lender and not by you. This is not a disadvantage to you. A good Mortgage Broker will ALWAYS have the best interest of the client in mind because if you, as a client, are happy, you will go tell your friends about the service you’ve received from the Mortgage Professional you work with. Mortgage Professionals rely on referrals, which means that if you are a happy customer, and you got the best deal available, you will tell your friends and family about them which will result in referrals and potential future business.

6. Take on every challenge – As Mortgage Professionals, we see every scenario out there and work to make sure that every client knows what is available to them for financing options for a mortgage. Damaged credit and low household income might be a deterrent for the bank, but a Mortgage Professional knows how to approach the lender and has the relationship to make sure every client has a plan and strategy in place to make sure there is a mortgage in their future.

7. The Mortgage Brokerage industry is monitored by governing bodies – Nowadays, as Mortgage Brokers, it is extremely important to have principles and values that are based on the best interest of the client. In fact, in order to become licensed, the Mortgage Professionals need to be well versed in the ethical and upstanding values that are outlined through the Financial Institutes Commission, a provincial governing body that is a watchman for this industry. FICOM’s mandate is to make sure every Mortgage Broker walks in integrity and in the best interest of their client.

8. The Mortgage Broker has a better understanding of what mortgage products are available than your bank – Interestingly, a Mortgage Broker has to be licensed and cannot discuss mortgages with you unless they are licensed. This is unlike the bank who can “internally train” their staff to sell the specific products available from their bank. The staff at your bank do not have to be licensed Mortgage Professionals.

While this is not an exhaustive list on the benefits of using a Mortgage Professional, it is compelling to see the benefits of using a Mortgage Professional rather than putting a mortgage together on your own.

At Dominion Lending Centres, we have an excellent rapport with the lenders we introduce our clients to. Our customer service is reflective of our relationship with our lenders. We are always professional and we always make sure our clients know every viable option they have for mortgage financing.

Geoff Lee

Dominion Lending Centres – Accredited Mortgage Professional

Any time you apply for credit in the form of a credit card, personal loan, auto loan, or cell phone, the company lending you money will want to access your credit report first. Your credit report is a snapshot of how you have repaid your financial obligations in your past. Lenders will use this information to verify details about you, see your borrowing activities, credit applications and repayment history. Part of this information is used to make up your credit score.

WHAT IS MY CREDIT SCORE?

Based on the information contained in your credit report, you will be assigned a credit score. What is my credit score, you ask? Your credit score is used by lenders to predict the probability that you will repay your future debt. Your credit score can change frequently based on multiple credit applications in a short time, missing payments and maxing out your available funds.

WHAT IS A GOOD SCORE?

Depending on which company is calculating your credit score, you can expect a range anywhere from 300 at the lowest end up to 900 at the highest end. The higher your score, the better the probability you will repay your loan.

As far as mortgages are concerned, each lender has their own criteria for what scores they deem acceptable. Generally speaking, anything over 680 is considered good in most lender’s eyes and will give you access to the most lenders and the best rates. A score between 600-679 will give you a limited number of options and might not be the best rates. Anything below 600 will leave you with very few lenders and higher interest rates to account for added risk.

5 KEY FACTORS CONTRIBUTING TO YOUR CREDIT SCORE

A number of different factors go into calculating your credit score. These factors are based on what someone does or doesn’t do with the credit they already have available. That is why the score changes frequently. Here are the 5 factors that determine your credit score:

1. PAYMENT HISTORY – 35%
The most important factor when calculating your credit score is your payment history. Creditors want to know if you will pay them back the money you are asking them to loan you.

Payment history reflects all the re-payments you make on your consumer debts. Your creditors will report (monthly) every time you make a payment to your credit cards, lines of credit, auto loans, personal loans, student loans, cell phone bills on contract and any other debts you may have. Interestingly enough, mortgage payments are not reflected on your credit report.

Your payment history shows information about whether or not you have re-paid your debts as agreed, have deferred or missed payments, any past due payments, a history of late payments and if you have any debts in collection as well as any bankruptcy, judgments, or liens, etc.

Your score also reflects how recent any late payments or collection activities are. The older the information gets, the less it will impact your score.

2. HOW MUCH IS OWED – 30%
When applying for new credit, how much you already owe is a big factor in determining your approved limit. Your current payments and debt obligations will help creditors access your level of debt and your ability to repay your debt obligations.

If you show multiple credit lines maxed out, say three credit cards and a line of credit, in the eyes of a lender the chances of you repaying new debt is low and thus you would be considered a high risk to default.

The amount of credit you use on an ongoing basis is considered as well. If you continually use 75% of your limit on your credit cards and lines of credit, this will affect your credit score negatively. Try to carry no more than 30% of your available credit on a month to month basis if practical.

3. LENGTH OF CREDIT HISTORY – 15%
If you’ve used credit for many years, your credit report should provide an accurate picture of how you use credit. For someone who has not used credit for a very long time, it is difficult to tell if they really know how to use credit responsibly.

Good or bad, most information will be automatically removed from someone’s credit report after 6 – 7 years, so the only way to keep a credit report active, is to use credit, at least very minimally, on an ongoing basis.

Time is needed to get a true picture of how responsible someone is with credit. This is why the length of your credit history is the third most important factor in your credit score calculation.

If you have recently obtained credit for the first time, your credit score will not be very strong. However, if you have been using credit responsibly for many years, this factor can work in your favour. If you need to apply for a low interest credit card to build your credit, apply online here.

4. NEW CREDIT APPLICATIONS – 10%
Applying for new credit in a short time span can signify financial stress. If you are a smart consumer, you should always shop around to get the best deal. You might walk into seven different banks and credit unions to shop your mortgage and hear what they can offer you. Smart move, right? – wrong!

Every bank will want to run your credit report to access your creditworthiness and having multiple “hits” to you credit report in a short period will reflect negatively. One of the benefits of using a Mortgage Broker is we use one credit report and shop your business to multiple lenders.

This part of your credit score takes into account the number of times your credit has been checked in the last 5 years, the number of credit accounts you have recently opened, how much time has passed since you opened any new accounts and the time since your most recent credit inquiries. This part of your credit score will also evaluate whether or not you are re-establishing your credit history following past payment problems.

5. TYPES OF CREDIT USED – 10%
Different types of credit shed light on how you manage your money overall. For example, deferred interest or payment plans can indicate that you aren’t able to save up for purchases ahead of time. Consolidation loans mean that you’ve had difficulty paying your debts in the past. A line of credit is a revolving form of credit, like a credit card, and it’s easier to get into trouble with a revolving form of credit than with an installment loan where you make payments for a set amount of years and then it’s paid in full.

If you focus on managing your finances wisely and only apply for credit as you need it, this part of your score should take care of itself.

WHERE DO YOU GET YOUR CREDIT REPORT?

You may contact Equifax and Trans Union to access your credit report. They may charge you a fee.

Brent Shepheard

Dominion Lending Centres – Accredited Mortgage Professional

The bigger the better, right? We dream about our castle having an indoor swimming pool, a three car garage and a fully stocked wine cellar.

The reality for most of us is something much more modest and there’s nothing wrong with that. Why have the castle if you’re worried about next month’s mortgage payment? All the space in the world won’t allow you to hide from your monthly financial commitments.

It’s easy to bite off a bigger home than planned. You have a price limit when shopping for a home, but the house you saw two nights ago with your realtor is just slightly over your budget. The one you saw last night is just slightly more expensive then the last house. And on it goes.

Thankfully, financial institutions have checks in place to measure how much of your income is being spent on such things as credit cards, car payments, utilities and mortgage payments. That formula will tell you how much of a house you can afford. But what it doesn’t consider is future maintenance costs, unforeseen expenses and your lifestyle.

Ask yourself, if you buy to your limit are you prepared if something goes wrong with your home? Do you have the financial resources to replace the roof in two years? How about if the bathtub overflows and ruins your finished basement? And what about that trip to Europe or Mexico you like taking every year? You don’t want to be mortgage poor. You want life balance.

When buying a home, it’s not as simple as saying you can afford it then everything is great. Financial Institutions will tell you how expensive the house can be but only you can decide if it’s the best for you.

If you decide your dream home is not in your budget now, then look at something smaller. Maybe you can use the equity you build up in that home to put towards a bigger home down the road. Plan to make your dreams come true – and at Dominion Lending Centres, we can help.

Having the home of your dreams is great, but so is enjoying your life. There will always be a castle out there waiting for you!

Kevin Babin

Dominion Lending Centres – Accredited Mortgage Professional