The best part of writing about mortgages is that I get the chance to educate people about a topic which I find endlessly interesting. Reverse mortgages are certainly a topic which deserves some consideration. Everyone seems to be quite polarized over this issue so it seems it is past time we took a closer look.

Imagine the following scenarios:
1. Bob receives a CPP and OAS and a small work pension. His fridge has died but all of Bob’s credit facilities are maxed and he has been declined for additional credit.
2. Sue needs to put her husband Joe into long term care but the cost is much higher than they anticipated and she knows their savings will not last long.
3. Mary and Bill want to purchase a property in Arizona so they can enjoy the warmer weather.
4. Steve wants to be able to use the equity in his home to purchase a rental property so he has additional cash flow.
5. Eveline recently saw an increase in her living expenses and cannot make the ends meet.
6. Cyrill and his wife would like to gift the inheritance to the kids while they are able to watch them enjoy it.

So you get the idea. There are many situations that a person may benefit from having a reverse mortgage. The extra funds could help them through a tough spot or allow the freedom extra funds can offer.

Here in a nutshell are the facts.
• There is only one provider of reverse mortgages in Canada and they are regulated by the Federal government like any other bank.
• They have been around for 30 years.
• You remain the owner of the home, not the bank.
• Unlike a regular mortgage, you do not need to qualify based on income.
• The goal is equity preservation. They want you to have the same equity in your home at the end as you do now.
• NO payments are required as long as you still live in the home though you can if you like.
• The rates are not horrible and the only fees you pay are $1495 for the closing costs, an appraisal and the fee for independent legal advice.
• The amount you can borrow is based on your age, location, property type and the value of the home.
• The money can be taken as a lump sum or month by month, whichever suits you better and it can be used for whatever you like though there is due diligence to protect you.
• If you are survived by your spouse they can remain in the home payment free.
• Tax arrears, OPD, bankruptcies can all be paid from the proceeds.
• Your family is welcome to ask their questions to protect your interests and the mortgage company knows that you want to have something to leave the kids, they will help you achieve that goal.

As always you should speak with a Dominion Lending Centres mortgage professional. My hope is that you may have seen that a reverse mortgage is not an evil entity designed to take your home but instead should be viewed as just another tool available to you.

Pam Pikkert

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

Mortgage rules have become stricter over the past few years. Assuming you have a down payment, good credit and a good job, what could prevent you from obtaining financing for a home purchase?
Below are five less obvious reasons a bank may turn you down:

It’s not you, it’s the building
Hate to be the bearer of bad news, but even if you’re the perfect candidate for a loan, you can still be rejected by a lender if the building you’re considering flunks a bank’s requirements. There are myriad reasons a building can be rejected, but one possible reason could be the building construction or condition.
In downtown Calgary we have some condos that were built in the 1970’s using a technique called Post Tension. It has been discovered that the steel rods in the walls can corrode over time and the buildings could collapse. Some lenders are okay with an engineer’s report but others won’t consider lending in this type of building. A few years ago a condo was found to have water seeping down between the inner and outer walls from the roof. This resulted in a $70,000 special assessment for each condo owner. Before the problem and the cost were assessed most lenders refused to lend on this property.
If a condominium building does not have a large enough a reserve fund for repairs a lender may want to avoid lending in that building as well.

Your credit doesn’t make the cut
If you have a credit score of 680+ this probably won’t be a problem for you but for first time home buyers with limited credit this can be a major stumbling block to home ownership. Check your credit score before you start your home search.
Not having enough credit can also be a problem. If you have a Visa card with a $300 limit, that won’t cut it. A minimum of 2 credit lines with limits of $2,000 is needed; one revolving credit line such as a credit card and an installment loan such as a car loan or a furniture store loan.
A long forgotten student loan or utility bill from your university days can also cause problems if its showing as a collection.
You’re lacking a paper trail
You have to be able to show where your money comes from. A cash gift of the down payment for your new property without a paper trail isn’t going to fly with the bank. If it is a gift, we need to see the account that the money came from, a gift letter from a family member, and the account the money was deposited into.

Your job
Being self-employed or a consultant comes with its own set of obstacles. But the solution here, too, is about documentation. And be prepared to offer up more documentation than someone with a more permanent income stream. Two years of Notices of Assessment from the CRA will show your average income over a two-year period. This could be a problem if your business had a slow start and then really picked up in year two. The two-year average would be a lot lower than your present income.
Another stumbling block may be how you are paid. Many people in the trucking industry get paid by the mile or the load. Once again a two year NOA average should help.
In Alberta, many people are paid northern allowances, overtime and a series of pay incentives not seen in other industries. This can be a problem if you do not have a two-year history.
When you apply for a mortgage you need to stay at your position at least until after your home purchase is complete. Making a job change with a 90 day probation means you will need to be past your probation before the mortgage closes. If you make a career change , you may need to be in your new industry for a least a year before a lender will consider giving you a loan.
The property’s appraisal value is too low
This often happens in a fast moving market. The appraisers base their value on previously sold homes on the market in the last 90 days. If prices have gone up quickly your home value may not be in line with the appraisers value. If the home you want to purchase is going for $500,000 and the appraised value is $480,000, you have to come up with $20,000 PLUS the 5% down payment in order to make the deal work.
Finally, with all the potential problems that can arise, it’s best to contact a Dominion Lending Centres mortgage broker before you start the home search to make sure that you have your ducks in a row.

David Cooke

Dominion Lending Centres – Accredited Mortgage Professional
David is part of DLC Westcor based in Calgary, AB.

Thinking about buying your first home?

The race to home ownership is more like a marathon than a sprint: diligent planning, pacing and strategy are the keys to success. Are you ready to approach the starting line? Here are five ways to shape up and boost your financial fitness so you’re set for success.

1. Check your credit score
First things first: order a copy of your credit report and credit score. Your credit score, which is calculated using the information in your credit report, is what lenders look at when considering you for a mortgage. Your score impacts whether or not you get approved and what interest rates you’re offered.

2. Reduce (or eliminate) credit card debt
Ideally, your credit card balance should be zero. But if, like 46% of Canadians, you carry a balance each month, make it your priority to chip away at it. You’ll boost your credit score while reducing the amount you’re paying in interest, freeing up more cash for saving and investing.

Use one – or, better yet, both – of the following strategies to make a dent in your debt:

• Make more money (i.e., take on a side gig, work overtime hours, pick up odd jobs)
• Save more money (i.e., sacrifice your satellite TV package, swap your gym membership for running outdoors, cut back on eating out)

3. Bulk up your savings

Now’s the time to save aggressively, stashing that cash in a registered retirement savings plan (RRSP) or tax-free savings account (TFSA). Use automated savings to ensure that money goes straight from your checking account to your savings, investment accounts or both.

Remember: As a first-time homebuyer, you can withdraw money from your RRSP to put toward a down payment. (Generally, you’ll have up to 15 years to pay it back into your RRSP.)

4. Stick to a budget

As points 2 and 3 illustrate, getting financially fit takes determination and commitment. It can feel less overwhelming when you’ve got a snapshot of goals and actions right at your fingertips. Sit down with your partner to create a monthly budget. And stick to it.

A smartphone app can be a game changer in keeping you organized, accountable and on track with your financial fitness plan.
5. Keep your eyes on the prize

Stay inspired, motivated and positive by remembering why you’re working so hard to boost your financial fitness: to buy your first home!
Crunch preliminary figures online to come up with ballpark estimates on how much home you can afford.
Raise your real estate IQ by watching HGTV shows, researching neighbourhoods, perusing listings and attending open houses.
That will make you a more educated shopper once you’re ready to enter the market qualified with a mortgage pre-approval. Do your research now, so you can hit the ground running when you’re ready to buy. And if you have any questions, please contact your local Dominion Lending Centres mortgage specialist.

Marc Shendale

Genworth Canada – Vice President Business Development

This is the fourth part of a series by Pam Pikkert of things the average mortgage professional wished people knew so that they would not be held back by inadvertent missteps.

Life can go sideways and that is a fact. Illness, divorce, death, longest recession in 30 years or whatever the cause is, before you know it you can find yourself with an awful credit rating and are unsure of what to do. These are the things we mortgage professionals wished you knew.
1. Even though a company has written off a debt, you still have to clear it up. You will be unable to get a mortgage in place until all outstanding debts show as settled with a balance of $0. That can happen through negotiations and payment directly with the company, through an orderly payment of debts or through bankruptcy. We would advise extreme caution when it comes to anyone promising they can rebuild your credit immediately for a price.

2. You need to re-establish your credit as soon as you can. The magical number in the mortgage universe is 2. You need to get two types of credit for two years with each a minimum balance of $2,000. The clock starts counting on the date of bankruptcy discharge or OPD settlement.

3. If there was a foreclosure in your past, you are going to have a very hard time getting a mortgage. No mainstream or near prime lenders will consider this type of an applicant anymore which would leave your only option a private lender where you will pay higher interest rates. If you think you are heading towards this, then call a mortgage professional ASAP. There are investors out there willing to buy you out and wait to turn a profit when the market turns. Alternately, you could work out a deficiency sale with your mortgage lender and/or mortgage insurer which will allow you to purchase in the future.

4. After a bankruptcy or OPD, you cannot have ANY late payments. Not a single one. The lenders will accept that you were hit with a life event but you have to prove it will not happen again. Even one late payment on your cell phone is reason for a decline. The onus is on you to show them it will never happen again.

5. You can purchase a home with 5% down after you have properly established your credit again. Make sure you have the two credit types reporting as above first of all. The next step is to save. You are going to need the 5% to put down plus be able to show you have 1.5% for the closing costs and then you should also have an additional 3.5% in savings to show you have a fallback position in case you are struck by life again. The lenders and mortgage insurers really like to see that.

So it will not be easy but it is possible and the sooner you start the sooner you can buy a new home. Call your Dominion Lending Centres mortgage professional today to get an action plan in place.

Pam Pikkert

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