As a mortgage professional there are things I wish more people were aware of which is why we are going to take a look into the paperwork we all need to hold onto to avoid frustration or even a decline when applying for a mortgage. Each of the following is taken from real life observations of everyday folks just like you and I.

1. Separation Agreement – When you apply for a mortgage one of the first questions we ask is marital status. If your answer is separated or divorced then the banks are going to want to see the official document. They are seeking to ensure that you do not have any alimony or child support payments which will make it difficult to pay the mortgage. The legal system only keeps these documents for 7 years after which you will not be able to get a copy. Your marital status is reported on your tax return which can trigger the request for this documentation long after it seems relevant.

2. Proof of Debts paid– Keep all records of debts you have paid! Here are three real world examples.
a) Client A has paid off her mortgage, receives verification from the bank and promptly destroys the paperwork at a mortgage burning party just like on the commercial. Due to a clerical error the debt as paid is not reported to land titles so the mortgage remains vested against the property adding additional steps when she goes to get a new loan.
b) Client B pays out his truck loan in full and receives a letter stating this. Due to a clerical error the interest accrued shows a small outstanding balance. The client believes all is well while the small debt quickly hits a written off status on the credit bureau and he is declined for a mortgage three years later.
c) Client C settles with a collection agency on a debt gone bad – The debt is not reported as paid to the credit agencies and the ‘ongoing’ bad debt causes a large drop to her score and she pays higher rates than she should. The collection agency has since gone out of business and there is no record of the payment to be found.

3. Bankruptcy/Orderly Payment of Debts – As with the separation agreement, the trustee will only keep a copy for 7 years. When you apply for a mortgage, the bank will want to ensure they were not affected by the bankruptcy and also to determine if there was a foreclosure. Even though this information is supposed to fall off the credit report that is not always the case.

4. Child Maintenance – whether paying or receiving child support, you will want to keep all correspondence in regards to this to ensure you are receiving the appropriate credit for monies paid or have been given all the money you were supposed to have received.

Emotionally you have valid reason to want each of these documents so far away from you but realistically you are likely to need them at some point. There are a number of online services such as Dropbox or Google Drive where you could scan these to yourself and save them digitally. Alternatively, you could spend a small amount of money on an accordion style file folder and go old school with actual paper copies of all of the above applicable to your situation.

If you have any questions, please contact your local Dominion Lending Centres mortgage specialist.

Pam Pikkert

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

Rarely in life do things go as planned, especially in real estate.
In a perfect world, when buying a new home, most people want to take possession of their new house before having to move out of the old one. This makes moving a lot easier and allows you time for painting or renovations prior to moving into your new home.

Where it gets complicated; most people need the money from the sale of their existing house to come up with the down payment for the new house!!
This is where bridge financing comes in.

Bridge financing allows you to bridge the financial gap between the firm sale of your current home, and the firm commitment to purchase your new home.

Bridge financing allows you to access some of the equity in your existing property, which you can use towards the down payment on the new property you are buying.
Where many people get confused is that in order to secure bridge financing, you must have a firm sale on your existing house. That means all subjects have been removed!!
If you haven’t sold your home, you won’t get the bridge financing, because there is no concrete way for a lender to calculate how much equity you have available and if you can afford your new home.

For most people, unless you can qualify and pay for two mortgages, you should always sell your existing home before purchasing a new one. Why?
• With today’s property values constantly changing, you won’t know how much money you have until you sell your home. Your home is only worth what someone is willing to pay for it NOW! Past sales and future guesses don’t count!
• You need the proceeds from your existing home to help pay for your new home’s down payment, renovations, moving costs and (if required) how much mortgage you qualify for.

If you have sold your existing home but your closing date is after the closing date of the new property you just purchased, then bridge financing is your best option:
• Your new lender must allow for bridge financing (not all banks allow bridge financing as an option). Your mortgage broker can work with you to find a lender who offers bridge financing.
• Bridge financing costs more than your traditional mortgage (i.e. Prime + 2-4% plus an administration fee).
• Typically bridge loans are restricted to 90 days.
What happens if I don’t sell my home?
Banks will not provide you with a bridge loan if you don’t have a firm sale agreement for your home since the loan can’t be open-ended. If you don’t have a firm selling date you may need to consider a private lender for the bridge loan.

Private Financing

If you have purchased your home and it is closing and your existing home has not sold, then you may have to take out a private loan:
• This option is expensive and is based on you having enough equity in your current property to qualify.
• Typically, private financing comes with a high interest rate 7-15% plus an upfront lender fee + broker fee. These amounts will vary based on your specific situation, such as time required for loan, loan amount, loan to value, credit bureau, property location, etc.
• Private financing is expensive, but it could be cheaper than lowering the purchase price of your existing home by tens of thousands of dollars to sell your existing home quickly.

Your bank doesn’t do this type of financing. You must use a specialized mortgage broker who has access to individuals that lend money out privately.
Bridge financing & private financing are solutions when your buy and sell days don’t work.

Don’t waste your time trying to sort all this out on your own. Give a Dominion Lending Centres mortgage specialist a call and let’s figure out what your best option would be.

Kelly Hudson

Dominion Lending Centres – Accredited Mortgage Professional
Kelly is part of DLC Canadian Mortgage Experts based in Richmond, BC.

In part one of this two-part series, we will look at the types of insurances you will hear about during the mortgage process. Sometimes it is a good idea to revisit the basics when looking at a complex thing like a mortgage. There can be misunderstandings which crop up. The mortgage process can be very stressful as you wait for some anonymous entity to decide whether or not you are able to buy the home of your dreams. It is no wonder that things can get missed. Fear not! We will take a look at some of the basics so you can avoid things best avoided.

1. Mortgage Default Insurance – There are three mortgage default insurance providers in Canada. CMHC, Genworth and Canada Guaranty. If you are purchasing a home with less than 20% down you will have to be approved by both the lender and the default insurance provider for the loan. They are looking at your credit, employment stability and the property itself to make their decision. If you default on the mortgage, the bank or mortgage provider is made whole on any shortfall. The cost is a set amount based on how much you are putting down and will be added to your mortgage so you do not have to worry that you need to come up with extra funds for it. As of today based on a standard borrower the premiums are shown in the following table though it is an important note that the premiums are higher in certain cases.
LTV Ratio Premium Rate
Up to 65% 0.60%
65.01% – 75% 1.70%
75.01% – 80% 2.40%
80.01% – 85% 2.80%
85.01% – 90% 3.10%
90.01% – 95% 4.00%

2. Title Insurance – This is required on most mortgages these days. The cost is around $250 and will be collected from you at the lawyer’s office. Title insurance is often used instead of a Real Property Report as it is quicker and less expensive. If for example, the garage on your new home had been constructed offside of where it should be, it is the responsibility of the title insurance to make it right. This could happen by getting the city to allow it or in the worst case, to cover the cost to move the garage.

3. Home Insurance – You have a legal responsibility to make sure you have property insurance. This protects you against things like fire, flood or theft. You will be required to provide verification of the insurance when you meet with the lawyer. You will probably want to do a bit of research before choosing your company. Not all insurance policies are equal and a truly awful time to find that out is after a horrible event.

4. Life Insurance – You will be offered life and disability insurance with your mortgage. Most of us assume that we have sufficient coverage through work but the protection of your family and their home should be given serious consideration. You are not obligated to accept the insurance provided to you but please factor the cost of sufficient coverage into your budget when you are thinking of buying your home. A few things to consider:

– The younger you are when you get insurance the cheaper it is.
– If you leave your current employer or get laid off and have developed a health concern it can be problematic to find affordable if any coverage.
– If you choose the insurance from the mortgage lender or bank you may find yourself tied to them indefinitely if you experience a change in your health. This could mean higher rates at renewal.
– Disability is the number one reason for foreclosure in Cana which goes to show that it can and does happen too many of us.
And there you have the four types of insurance which will be discussed around your mortgage. If you have any questions, please contact your local Dominion Lending Centres mortgage specialist.

Pam Pikkert

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

For many people, saving enough for a down payment on a house is not an easy task. (You can’t rely on finding One-Eyed Willy’s treasure like they did in the Goonies movie, either!) Once you have an idea as to how much you can afford on your home, relative to your salary and monthly costs, it’s time to get that down payment! For a starter home, a 5% down payment is often enough.

Your down payment can come from several sources, including your Tax-Free Savings Account (TFSA), Registered Retirement Savings Plan (RRSP) or a gift from immediate family, such as parents or grandparents.

TFSA

The TFSA lets you save your extra cash for just about anything — including a new house— without paying any tax on the growth within the account or on withdrawals. Since the TFSA was introduced in 2009, it’s estimated that only around half of Canadians have opened one, so be sure to start yours today. Should you use your TFSA for your down payment, you pay no taxes on the withdrawal.

There are many clever ways to make the TFSA and RRSP work together to improve your wealth. Generally, RRSPs are a good choice for longer-term goals such as retirement, while TFSAs work better for more immediate objectives, such as a house down payment.

RRSP

With the federal government’s Home Buyers’ Plan (HBP), you can use up to $25,000 of your RRSP savings ($50,000 for a couple) to help finance your down payment on a home. To qualify, the RRSP funds you’re using must be on deposit for at least 90 days. For first-time home buyers, taxes are not paid on withdrawals of your RRSP and the repayment period starts the second year after the year you withdrew funds.

Gifted Down Payment

A Gifted Down Payment is very common for first time buyers. Often this is done because their son or daughter doesn’t quite have enough funds saved up for the full 5% down payment. Or, because they want to make sure their child has enough money to make up 20% for a down payment to avoid Canada Mortgage and Housing Corporation (CMHC) premiums.

If you put down 20% or more on your down payment, it can all be from a gift. If you put down less than 20%, part of the money can be a gift, but part must come from your own funds. This minimum contribution varies by loan type. You can only use gift money on primary residences and second homes.

All that is required for documentation is a signed Gift Letter from the parents, which states that the money does not have to be repaid, and a snapshot of the son or daughter’s bank account showing that the gifted funds have actually been transferred.

A gifted down payment is viewed as an acceptable form of down payment by almost all lenders. Talk to a Dominion Lending Centres mortgage specialist to make sure that your lender accepts “gifts” as an acceptable down payment.

Max Omar

Dominion Lending Centres – Accredited Mortgage Professional
Max is part of DLC Capital Region based in Edmonton, AB.

Ever wonder how your mortgage rate is determined? What factors make it jump from percentage to percentage? We are getting down to the nitty gritty today and giving you the facts on what impacts mortgage rates.

What affects a Mortgage Rate?

There are 10 factors that affect a mortgage rate:

1. Location
Depending on which province your home is located in, this will have an overall effect on your mortgage rate. Generally speaking, provinces with more competitive markets will have lower rates.

2. Rate Hold
A rate hold is a guarantee on a rate for 90-120 days. If your closing dates do not fall within this timeframe, then your hold will be re-assessed. If your rate hold is re-assessed and the lender’s rates at that time of re-assessment are higher than your initial rate, then your rates will go up accordingly. We always follow up with all of our clients on a regular basis to avoid this situation whenever possible!

3. Refinancing
Movement on your mortgage of any form can affect your rate typically when you are working with your existing lender. New buyers will have lower rates than refinances, but refinances will have lower rates than mortgage transfers. Mortgage Brokers can access multiple lenders to find the most suitable product for their client’s unique needs.

4. Home Type
Lender’s assess the risk associated with your home type. Some properties are viewed as higher risk than others. If the subject property is considered higher risk, the lender may require higher rates.

5. Income Property/ Vacation Home
As previously mentioned, lenders assess the risk on your property. If you are buying an income property or a vacation home than the lender can assess at a higher risk and a higher rate may apply. This is one of the major benefits to having a mortgage broker on your team! They have access to a variety of lenders that can offer you a rate lower than others as they can compare a large variety.

6. Credit Score
We have talked a lot about credit on our blog, and there is a reason for that. Your credit score is a large determining factor for your rate. Lenders want to see that you have a history of managing your credit well and that you will be able to pay back the lender overtime. For more information on fixing your credit, check out our free e-book, Credit Medic.

7. Insured or uninsured
With the changes that the federal government made back in October 2016 this has had a significant impact on mortgage rates if your mortgage is insured or not. Read our Change of Space guide to find out the full impact of these changes.

8. Fixed/Variable Rate
The type of rate you are wanting to get will also affect your rate. Fixed rates are based on the bond market and variable rates are based on the Bank of Canada (economy).

9. Loan to Value (LVT)
The higher the Loan to Value the higher the risk. You can have someone who has a $1 million mortgage but has $2 million in equity in that property and they would be viewed as a lower risk than someone who has a $200,000 mortgage and their property is only worth $220,000. To boot with the federal changes, the person with the higher risk mortgage (insured) is likely to get a more competitive interest rate than the client with $2 million in equity.

10. Income level
The final part in this rather large equation is your income level. Although this does not necessarily impact the rate itself, it does impact your purchasing power and the amount you are able to put down on a home. Essentially indirectly impacting the rate.

Each of these factors plays a factor in the rate you will be able to get through a lender. The easiest way to get the lowest rate is to work with a dedicated mortgage professional. They will put together a fail-proof plan to get you the sharpest rate. They also have access to a variety of lenders which saves you the time and trouble of shopping for your mortgage on your own. As a final point, mortgage brokers can also assess your unique situation and find the right mortgage for you. Their goal is to see you successfully find and afford the home of your dreams and set you up for future success.

Geoff Lee

Dominion Lending Centres – Accredited Mortgage Professional
Geoff is part of DLC GLM Mortgage Group based in Vancouver, BC.