Oh Canada; Our home and Native Land.
The land of opportunity.

You’ve arrived in a new country with hopes and dreams. If you’re an immigrant like me, one of these dreams is to own a home, and what better way to put down roots.
The first thing you want to do is open a bank account and start building credit as soon as possible with a credit card. Fortunately, there are also programs to help new Canadians purchase their first home and make it easier for your family to become established in Canada.
The new to Canada program will assist you with getting into home ownership sooner than you think.

Here is a list of documentation required:
• Valid work permit or verification of landed immigrant status
• Income Confirmation: You will need to provide proof that you have been working full time in Canada for at least three months. Proof of income through either an employment contract and pay stubs
• Proof of down payment: The total down payment will vary based on the final purchase price. The down payment can come from your own savings or it may be possible for your family to provide you with a gift. CMHC will insure newcomers with permanent resident status with as little as five per cent down, while non-permanent residents must have a 10 per cent down payment to purchase a home
• Purchase and Sale Agreement

A good credit history is important, however, as a newcomer, you may provide alternative credit supporting documentation.

Two (2) alternative sources of credit demonstrating timely payments (no arrears) for the past 12 months. The two alternative sources required are:
• Rental payment history confirmed via letter from landlord and bank statements
• One other alternative source (hydro/utilities, telephone, cable, cell phone and auto insurance) to be confirmed via letter from the service provider or 12 months billing statements

Buying a home in Canada is a big step. A Dominion Lending Centres mortgage broker can assist you with all the details.

Welcome to Canada, the great White North.

Alison Lopes

Dominion Lending Centres – Accredited Mortgage Professional
Alison is part of DLC Premier Mortgages based in Waterloo, ON.

Most working Canadians have an income range in the middle class.
This income class includes teachers, firefighters, plumbers, engineers, nurses, construction managers and chefs – workers from across the economic spectrum. They provide and consume the bulk of services that keep society afloat, driving economic growth and investment with every purchase.
The middle class also has great challenges. Wages have been stagnant and the cost of housing and everyday goods puts a squeeze on the average budget, leaving six out of 10 Canadians living paycheque-to-paycheque with most accumulating debt.
In part, this has to do with everyday life and the growing demands on our set of unique challenges. However, we need to “control the controllables” and be smart and strategic to get ahead.

Here are some tips to keep your economic future on the right path:
1. Spend within your means.
Most people keep a balance at months end on their credit cards and lines of credit – some out of necessity, but some by choice because they want to keep up with the Joneses or fill an emotional void. If you are trying to get ahead financially, ask yourself what your plan is to get rid of that debt? It should not be something that is with you to carry over a balance. It’s time to assess your lifestyle and how you are using your home equity and the market to your advantage if you own a home. Holding the debt is a costly mistake- most debts outside a mortgage range from more than five per cent to 19 per cent. Credit is an important part of life and you need it. The biggest life hack is to pay it in full every month with an auto setup payment – this one strategy saves costs, debt and stress.

2. Emergency fund is a must.
Ask yourself this, what would happen right now if your car broke down, your house need a new roof, or you lost your job? Most Canadians would have to go to credit cards or lines of credit.
You need six months of expenses put aside, period. If you don’t have this you will begin a cycle of debt. There are ways to do this automatic withdrawal into an account from your paycheque or when your mortgage renewal is up.

3. Giving your retirement a raise and start in high school.
Consider how long wages have felt stagnant while the cost of everything goes up. When you are young and your wages go up, increase your retirement contribution. Get compound interest working for you. Time is your friend. By saving a percentage automatically by paying yourself first, your investment grows your options. There are tax free savings accounts and RRSP’s that will begin the foundation of your financial future. It should start from the moment you get your first job, then when you fast forward through your 20s to 50s, your investment doesn’t have to be as large. Life will throw you enough challenges at that time to deal with, and you already have time and compound interest working for you, and you are in front of it, not chasing to catch up.

4. Relying on RRSP’s, OAS and CPP.
Contributing to tax advantaged products are one component of investing, but they have restrictions. Also, government future income plans are always going to be changing. Having a proactive mortgage and finance plan will allow you to get your assets working for you, so you can have multiple streams of income. Being self-sufficient is empowering, then if and when the other options are still available and advantageous, they are a bonus and you are in control based on your proactive abilities.
5. Spending too much on depreciating assets.
The average Canadian spends $570 a month on a new car payment. This can go up to as much as $1,400 per month- that’s just for the car, not insurance, gas, or maintenance. The problem is that it’s a depreciating asset. To put it into perspective, that range in payment takes away qualification for a whopping $150,000 to $400,000 in mortgage amount qualification. So for someone in the middle class who intends to buy a home, which is an appreciating asset, the car payment should be the absolute lowest priority, and should be avoided whenever possible. Think of the power you could have saving that kind of money or having it in an income-generating asset.

6. Having a will and keeping it current.
Your will should include your up-to-date investments, insurance policies, real estate and family gems. With life happening so quickly, it’s easy to have a few stages fly by, but then things can get messy. You don’t want your hard earned money in the hands of anyone but whom it’s intended for.

It’s never a bad idea to speak to a Dominion Lending Centres mortgage specialist if you have a question.

Angela Calla

Dominion Lending Centres – Accredited Mortgage Professional
Angela is part of DLC Angela Calla Mortgage Team based in Port Coquitlam, BC.

You’ve seen the real estate shows that dramatize the buying of a home and the star TV Realtor says “hey, let’s offer this price and have them pay you a $5,000 closing cost bonus”. Or, the real estate listing that offers a “decorating bonus of $3,500”. In both examples, the vendor (seller) is offering additional money as an incentive to buy their home.
While at first, the bonuses and offers seem great, you should know that unless you are paying cash for the house (ie: not getting a mortgage for the purchase), they are worth nothing in the end.
Let’s use the following example of a purchase price of $300,000 with a “decorating bonus” of $5,000. The seller accepts your offer and written into the purchase and sale agreement is the bonus of $5,000. When you get a mortgage, your lender also gets a copy of your agreement. When the lender reviews it, they will adjust your purchase price to $295,000. The reason for the adjustment makes sense when you are actually paying a net price of $295,000 for the property ($300,000 minus the value of the bonus of $5,000 = $295,000). The lender cannot use a purchase price of $300,000 since you are not paying the full $300,000 for the house after receiving the bonus from the seller.
Many buyers are surprised when this happens and are not often told of this by their Realtor, and unless explained by their lender or Mortgage Broker, will have a big surprise on closing when they must come up with an additional $5,000 out of their own pocket (since the lender has reduced the value of the property) then will receive the money back from the vender on closing, thus making it a net zero gain.
When paying cash, the above example doesn’t apply as there is no mortgage lender involved and you would pay $300,000 for the house and receive $5,000 on closing. Whether you were arranging a mortgage or not, the net outlay of cash is $295,000. The only difference with a mortgage is that you must pay the difference on closing up front to get the bonus.
It should also be noted, that with purchases of homes that include items of value that wouldn’t normally be included with a home such as a boat, large riding lawn mower, or even furniture, your lender can request that the purchase price of the home be reduced by the value of the item (since lenders won’t mortgage boats or furniture).
So, the next time you hear “closing cost bonus”, “decorating bonus”, “early closing incentive”, be aware that if you are mortgaging the property, your initial down payment will be increased by the amount of the bonus. My advice: just make the purchase price what you want to pay for the property. Don’t make it complicated with closing bonuses.

It’s always best to talk to a dedicated Dominion Lending Centres Mortgage Professional in your area.

Sean Binkley

Dominion Lending Centres – Accredited Mortgage Professional
Sean is part of DLC Key Mortgage Partners based in Kingston, ON.

With all the news about interest rates rising do you go long or short with your rate when you set up your mortgage?

After discussing your current life situation and answering some key questions with your Dominion Lending Centres mortgage broker you can make some decisions and set your mortgage rate and term to best fit your needs. There are many interest rate terms to choose from (1, 2, 3, 4, 5, 7, 10 year fixed and 3 and 5 year variable). If you are looking to lock in to a short or long term fixed rate, consider this:

A long-term mortgage makes sense if:

• If rates were on the rise and you could not take the hit. A long term rate gives you peace of mind.
• You don’t have a nest egg of savings or investments to fall back on
• You have little equity or net worth
• Your income could change based on a growing family or retirement for example

A short-term mortgage may be the way to go if:

• You expect to pay off large chunks of your mortgage or sell your home within the next three years
• You have a short remaining amortization (e.g. 5-6 years or less)
• Your credit is impaired and you need alternative lending till you repair your credit so you can qualify at a better rate in one year.
• You need to refinance in coming years to access your equity for education, investment purposes, etc
• You believe rates won’t rise soon and you have a short-term rate where you can make higher-than-required payments to maximize the reduction of your mortgage

With two year rates in the low two per cent, five-year fixed rates under three per cent and 10 year terms under four per cent there is enough of a spread that some borrowers can decide easily to go long or short with your rate. If you want flexibility go short. If you have little equity and want to play it safe maybe the long term rate for 5,7 or 10 years is for you. As rates shift upwards and the spread between the five and 10 year shortens you have to consider if a difference of .5 per cent in a rate may be so insignificant that locking in to a long term rate may make sense for some, while others will take the risk and continue to play the short game. We have seen the spread between the short and long term rates become slim which creates the opportunity for discussion. These are decisions you can only make once you run the numbers with your DLC mortgage broker.

Maybe it is time to add a call to your mortgage broker to review your mortgage plan.

Pauline Tonkin

Dominion Lending Centres – Accredited Mortgage Professional
Pauline is part of DLC Innovative Mortgage Solutions based in Coquitlam, BC.

So we are going to do a series over the next few weeks of things the average mortgage professional wished people knew so that they would not be held back by inadvertent missteps.

This week we will look at young adults just starting out. Let’s outline five things you really need to be aware of to set yourselves up for true financial dominance.

1. Credit is not evil, it is necessary. If you grew up in a home where only the dangers of credit were discussed then you need to hear the flip side as well. Credit itself is not dangerous. The misuse and over extension of it, is. You have to have established credit to do almost anything from buying a home to getting a cell phone, from getting utilities to renting an apartment. Proper management of your credit will save you money as you will have a proven history and will receive the best offers for credit cards and mortgages.

2. Everybody starts out being given the benefit of the doubt. There are 2 credit agencies in Canada which all lenders of all things report to monthly. You will be graded on your ability to make your payments on time, stay within your limits and as to how much overall credit you have. Everybody is given a strong score at the beginning. It is up to you to keep it. Even the cell phone providers report to the agencies so make sure you pay that on time too.

3. The magic number for the rest of your life is 2! You need to have 2 types of credit, reporting for at least 2 years with a minimum limit of $2000. If you pay off a car loan, make sure you still have 2 types of credit. If you decide to stay home with your future family, still make sure you have 2 types of credit reporting in your name. One of the credit facilities should be a credit card. The way you manage this revolving access to credit is looked at carefully by potential lenders.

4. The onus is on you. Nobody is going to call you to remind you that a payment is due. If you move to a new area you are the one responsible to let the companies know where to forward the bill to. If you are offered a $13,000 line of credit and a $54,000 car loan and you accept, you cannot later blame them for ‘letting’ you get yourself into trouble. If you accept a mortgage, it is up to you to ask questions before you sign. A large credit balance and a high vehicle payment will dramatically affect your ability to purchase a home. That $13,000 line of credit or a $400 vehicle payment will each decrease your purchasing power by $100,000.

5. To keep your score strong:
• Make your payments on time
• do not exceed 50% of the available credit limit
• Be cautious in how many credit inquiries you allow

There you have it. The things we wish young people knew so that when they are ready to move into the next phase of their life they will not be abruptly stopped and have to wait and wish someone had told them. There are so many amazing Dominion Lending Centres mortgage professionals who are more than happy to answer your questions so ask away before you get stung.

Next week: Things That Mortgage Professionals Wish Those with Damaged Credit Knew

Pam Pikkert

Dominion Lending Centres – Accredited Mortgage Professional
Pam is part of DLC Regional Mortgage Group based in Red Deer, AB.