29 Jul

Ten Things In A Real Estate Transaction That Can Affect Your Mortgage


Posted by: Peter Puzzo


Ten Things In a Real Estate Transaction That Can Affect Your Mortgage
1. Cash back at closing, while not illegal they lender will usually reduce the mortgage by that amount.

2. Furniture included in the contract, lenders consider this to have a value and if it is zero then it needs to state that in writing. Better yet have the seller and buyer write it in a separate agreement.

3. Changes after the inspection will need to be addressed after the fact and any rebate will adjust the mortgage down usually.

4. Handy Man Special, this one sets off all kinds of alarms and usually means a full appraisal to see what shape the house is actually in at that time.

5. Anything that sounds like illegal activity has taken place on the property, grow op, meth den and lately we had one that had been the scene of a murder. All of these are considered to have an effect on the potential value.

6. The size of a property can affect the sale, houses under 700 sq ft have only a few lenders who will consider them.

7. The appraisal itself can set off a lot of red flags, signs of water damage or the house in disarray can lead lenders to back away. Especially in times when there are downturns in the market.

8. Change in employment during the process is never a good thing, this can actually cause the deal to stop.

9. Change in debt, better to not have any new debt show up, as a lender can check your credit again right up until the day of possession.

10. And last but not least the down payment needs to be in place at least ten days before possession and proven to the lender by ways of proof of savings.

At Dominion Lending Centres, we give you the advice you need to secure the right mortgage for your unique needs.

Len Lane


Dominion Lending Centres – Accredited Mortgage Professional
Len is part of DLC Brokers For Life based in Edmonton, AB.

25 Jul

How To Get A Mortgage While Being Self Employed In Canada


Posted by: Peter Puzzo


How to Get a Mortgage While Being Self Employed in CanadaThere are great advantages to having business for self. There are many extremely successful business owners that live great lifestyles but don’t have to pay for medical, all because they have great tax write-offs that bring their income down to a low tax bracket. The other side of this is that these great benefits actually make these same business owners work hard to qualify for a mortgage, all because their income is significantly reduced on paper. These business owners know that there is advanced planning involved in being able to qualify for conventional financing.

According to Statistics Canada, in 2015 there were about 2.7 million people self-employed in Canada which is about 14% of the total population of the country. These statistics reflect people that are continuing on in maintaining a significant lifestyle financed by self-employment and being able to be counted as such. In other words, being self-employed is a viable way of making income. It just doesn’t fit very well in the conventional lending “box”.

In order to fit in the conventional lending “box”, there is a measure that lenders require that each mortgagee(s) (the person(s) applying for the mortgage) must meet. Some of the documents that self-employed have to provide for the lender are two most recent years of tax returns that don’t always accurately reflect the actual take-home that a self-employed person has. Tax deductions related to business often reflect meals to rental space to credit card interest, etc. The result is that the income the self-employed business owner shows on their tax return is a significantly lower figure than what they actually take home. However, the “box” requires that tax returns show the required income to justify the mortgage.

So, how does one show enough income when they are self-employed? The following points are suggestions on strategies on how to plan ahead and be prepared when you, as someone who is self-employed, are ready to move forward in arranging a mortgage for property purchase.

  • The easiest way to plan is to write off fewer expenses in the two years leading up to the property purchase. Yes, this means you will pay more personal taxes. However, your income will be higher which will easily qualify you for the mortgage amount that you are looking for.
  • Set your finances up through a certified accountant. Many lenders want to see self-employed income submitted through a professional rather than doing it yourself. The truth is that the time that you spend doing your own taxes will not be as efficient both financially and time wise as a professional. A certified accountant knows what to look for and has enough experience to understand the tax implications. Make sure you discuss with them what your goals are so that they can set up your taxes appropriately.
  • Choose your timing carefully. If you are leaving on an extended holiday or sabbatical within the two years previous to purchasing, your two-year average income is not going to be great. Take all the time off that you want AFTER your purchase. Plan your timeline with INCOME in mind.
  • Ask your Mortgage Broker about STATED INCOME. There are options with some lenders to State your income. This is based on you being in the same profession for at least two years previous to being self-employed. The lender looks at the industry and researches the mean income of someone in that same profession within a reasonable amount of time. STATED INCOME is a complicated approach to showing income. However, your Dominion Lending Centres Mortgage Professional will know what questions to ask and how to negotiate this kind of proof of income. Documents such as bank statements, showing consistent deposits, will be requested by the lender.
  • BANKRUPTCY. Although some business people see bankruptcy as a viable option to get out of a bad deal and regroup, lenders generally do not like bankruptcy. Having said that, some lenders will overlook this if there has been consistent and excellent credit since the time of bankruptcy and you have been fully discharged from the bankruptcy for a specific time period. Make sure you keep ALL Bankruptcy papers easily available along with your discharge papers.
  • Be prepared for higher interest rates. Lenders offer discounted rates to those that fit in the “box”. Those that are not conventional are seen as a risk and, therefore, are applied to a higher interest rate. There also could be lender fees attached to the mortgage.
  • Offer a larger down payment. Lenders are somewhat handcuffed to the insurer when there is less than 20% down payment on a property purchase. But if you offer more than 20% down payment, depending on the lender, their flexibility increases and it is up to the lender or even the branch if they want to take you on as a client.
  • As a last resort, you can do private financing. Even though it is an expensive option, it could result in the mortgage you are looking for. Rates are higher and there will be lender/brokerage fees. However, you could be in a private mortgage for 12 months or even less, whereby giving yourself time to improve your credit (if need be) or topping off a two-year self-employed period to set yourself up to show STATED INCOME to the lender. The whole point of private financing is to use it as a short term solution for a long term plan.

Being self-employed does not mean that you have to show enough income on your T1 General in order to qualify for a mortgage. There are many factors involved in showing income when you are self-employed. And every lender has different guidelines as to how they view self-employment. If you are self-employed, plan accordingly and make sure you are well set up to show that the lender that you are a desirable candidate for a mortgage.

Geoff Lee


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

More Posts – Website

22 Jul

Things To Consider When Buying In A New Development


Posted by: Peter Puzzo


Things to Consider When Buying In a New DevelopmentWith plenty of activity in the real estate market and more new building slated over the next few years, here is my list of “Things to Consider When Buying in a New Development”.


Some buyers attend the display suite and consider a purchase directly with the developer sales person or the developers Realtor. Regardless of which kind of property you choose to purchase – new or existing – I always suggest you have a Realtor represent you. I have seen contracts where the buyer has not reviewed the details properly and they are not fully informed before they sign. The developer’s agent or Realtor is acting on behalf of their client – the seller. You should also have your own representation.

Interest Rates

If you are buying a home more than a year or more before completion, you may not know your actual fixed costs for the mortgage until well after you have signed your purchase agreement and paid your deposits. Depending on the lender and timeline, your costs may be unclear for several months. Even if you have a rate hold – things can change along the way with financing rules or the market. I always keep in touch with my clients and within a few months of completion we revisit the overall plan and make some decisions. Your down payment may need to change, the property value may shift or you may have experienced a life-changing event (please don’t quit your job). Remember: Keep your mortgage broker in the loop.

Goods and Services Tax (GST)

When you buy a newly built home pay special attention to the contract price. In Canada Goods and Services Tax (GST) of 5% is payable on the purchase of a new home. In many cases, the purchase price is set excluding GST so you need to add that tax amount to determine the total purchase price. If the home price is under $450,000 and will be your primary residence, you are eligible to receive a rebate equivalent to 36% of the GST. The rebate will be deducted and the new purchase price will be set Net of GST. There are many online calculators to determine this number and it should also be clear on the purchase agreement. Your mortgage broker will also calculate to confirm. For example, a $400,000 purchase price excluding GST will result in an actual purchase price of $416,850. ($20,000 in GST minus the rebate of $3150). A purchase price of $500,000 excluding GST will result in an actual purchase price of $525,000 ($25,000 GST and no rebate).

Allowances and Discounts

In some cases, you will have the option to upgrade the home with higher quality items such as flooring or a basement. These items can be included in the purchase price with no additional cost. The agreement will clearly outline the details and no cost will be associated with these items. However, if the contract states there was an allowance as a credit with a cost associated this will be considered a buyer credit and the amount of the contract will be deducted from the purchase price by the financial institution. There will be no financing on these items and the buyer will be responsible for the additional cost. This is common when buyers want to include furnishings such as in a display home. This can be a surprise to buyers as they are not fully clear on the purchase price and what is really included. It is important to review the contract closely with your own buying agent (Realtor) and if any financing questions arise – with your mortgage broker – to ensure you know your options.

Property Taxes

When a developer applies to the local city for a building permit the city will set the municipal taxes for the entire development. Once the developer is near completion and applies to the city for occupancy permits or submits the strata plan (for condo developments) it can still take some time for the city to determine the property tax for each home or condo unit. More and more lenders are using a percentage of the purchase price to determine the property taxes at the time of application unless confirmation of taxes can be provided by the city. In some cases, this can be .5%-1.75% of the purchase price which can make a difference to qualify for financing. Your Dominion Lending Centres mortgage broker can review options you to select the best overall financing solution for your purchase and avoid delays in securing an approval.

Strata fees – start low and grow

Since the strata plan on a new condo development isn’t in place when you make an offer to purchase a new home the strata fees on the purchase agreement will be set low. I recently had a client purchase a condo for $750K and the strata fees were under $170 per month. My clients understood this strata fee will increase to a higher level once the operating budget is set by the strata council and they should set their personal budget accordingly to expect an increase. For more details on the process and to understand the responsibilities of the developer, the strata corporation and the new buyer, click here.


When a developer sells their houses or condo units well in advance of completion some original buyers may decide not to complete for the purchase and choose to assign the property to a new buyer. In this case, there may be a lower or higher new purchase price. If there is a lower price the GST on the original price will apply. If the price is higher the GST on the original purchase price will apply. The property purchase transfer tax will apply to the new purchase price. The final property purchase transfer tax will be determined depending on the details of the transfer and the value of the property within limits for exemption is typically set by the provincial government. For financing purposes, not all lenders will consider an assignment as the new purchase contract is between the original buyer and the new buyer and not with the developer. Some lenders will only consider the original price and the new buyer will have to pay the difference between the two amounts as the down payment to complete the purchase. Lenders who consider the new price will require a full appraisal to confirm the current value of the property. They will also need the original contract in addition to the new purchase contract and want to know details on the relationship between the seller and the buyer. There are many things to consider when you purchase a new home. Always consult your professional advisers, including your Realtor, Mortgage Broker, Financial Planner, Accountant and Lawyer to ensure the purchase helps to meet your lifestyle and financial goals.


Pauline Tonkin


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

More Posts – Website

18 Jul

What Is A Reverse Mortgage And How Can It Help You?


Posted by: Peter Puzzo

CHIP Reverse Mortgage: Resources to Help You Make the Right Decision

Smiling senior Canadian couple walking in a park and discussing what is a reverse mortgage.

What Is A Reverse Mortgage And How Can It Help You?

NOVEMBER 9, 2015

For most Canadians, your home is your single largest asset. Tapping into this reservoir of accumulated wealth is a good solution for cash-strapped seniors facing increasingly high living expenses. Fortunately, homeowners who own their home outright or who have a low mortgage balance can access some of the value they’ve amassed in their home without having to sell their property. A reverse mortgage, the financial vehicle that makes this possible, is a good solution for many cash-strapped, older Canadians.

What Is A Reverse Mortgage?

Maybe you’ve been wondering “what is a reverse mortgage?” A reverse mortgage is a type of home equity loan available to Canadians age 55 and older who have built up equity in their homes. This financial vehicle allows such homeowners to access a portion of that home equity to use as they see fit, for paying off debt, medical expenses, day-to-day living expenses and even vacations or trips. The amount of money you qualify for depends on the value of your home, home type and location, your age (and that of your spouse). The maximum you can receive is 55 percent of the equity value.

Unlike other mortgages and loans, you’re also not required to make interest payments or payments towards the principal. You just need to keep current on your property taxes, your home maintenance, and insurance. The loan becomes due when you no longer reside in the home, either after your death, when you move or when you sell the property. At your death, your heirs have the choice of either paying off the loan and keeping the house or using the sale of the property for payment of the loan.

You, as the homeowner, remain on Title of the property. There’s no mandate to move out of your home at any time. You can stay as long as you stay current on your taxes, maintenance, and insurance. That’s true whether you take out your reserve mortgage at age 55 or later.

How To Get A Reverse Mortgage Loan

What is a reverse mortgage and how can you get one? In order to qualify for a reverse mortgage, you must meet a few criteria…

  • You and your spouse must be at least 55 years of age.
  • The property must be your primary residence.
  • Your property must be of a certain type and in a location that HomEquity Bank lends to.

CHIP Reserve Mortgage

So what exactly what is a reverse mortgage in Canada? Reverse mortgages in Canada are somewhat different from reverse mortgage products sold in the United States. All reserve mortgages in Canada are provided by HomEquity Bank, the most popular of which is the CHIP Reverse Mortgage. This program has been helping older Canadian homeowners for more than 25 years. Homeowners can opt to get their money in a lump sum or as periodic advances.

How Is A Reserve Mortgage Better Than A Traditional Mortgage?

For older Canadians on a fixed income or with a limited amount of money coming in each month, a reverse mortgage can give you the funds you need to continue living comfortably without having to move or downsize. What’s more, you aren’t expected to make monthly mortgage payments to the bank.

A reverse mortgage is not the right choice for every Canadian homeowner age 55 or older looking for an extra source of monthly income. However, if you are a Canadian homeowner age 55 or over this financial product might be a good way for you to augment your monthly income.

So, if you’re wondering just what is a reverse mortgage and whether you meet the necessary requirements, perhaps it’s time to request a free guide.

18 Jul

What Is Mortgage Default Insurance?


Posted by: Peter Puzzo


What Is Mortgage Default Insurance?One cost that can be overlooked by home buyers is mortgage default insurance.

So, what exactly is mortgage default insurance and why do you need it?

If you’re buying an owner-occupied home with less than 20% down payment, you are required to purchase mortgage default insurance in order to arrange your financing.  When buying a rental property, some lenders require you to purchase this insurance if you put down less than 35% towards your purchase.

As real estate values in Metro Vancouver continue to soar, many home buyers, especially first-time home buyers, often have less than 20% of the purchase price available as a down payment.  The average price of a new home is now well above $500,000 meaning a 20% down payment can easily exceed $100,000.  This is a lot of money for most people and it’s understandable why many fall short of this 20% down payment.

Conventional vs. High-Ratio Mortgage

Borrowers who have a payment of 20% qualify for conventional mortgage financing.  For your lender this means the property has sufficient equity to protect the lender from any shortfall should you, the borrower, default on your mortgage.  Having a higher down payment also means you have more “skin in the game”, making it less likely you’d default and walk away.

A high-ratio mortgage means the borrower has anywhere from 5% – 19.99% towards their down payment.  Financing can still be obtained but in this case, you will be required to purchase mortgage default insurance.  The higher loan-to-value (LTV) percentage of a high-ratio mortgage means you have less equity at stake and thus a higher potential of default.

The lender wants to protect their investment and they do this through mortgage default insurance.  This is an additional cost to the borrower but it also makes it possible for those with limited savings, particularly first time homebuyers, to get into the market sooner.

Mortgage Default Insurance Providers

There are three major insurers in Canada.  The Canadian Mortgage & Housing Corporation (CMHC) is a Crown Corporation and the largest provider of mortgage default insurance in Canada.Genworth Canada and Canada Guaranty also provide this type of insurance to the lenders.

Your lender or financial institution will arrange and pay for your insurance, but this cost is typically passed on to the borrower and is incorporated directly into your mortgage payments.   Insurance premiums are tiered and based on the amount borrowed and the size of your down payment.

To see a detailed list of premiums visit CMHC’s site to see how much it costs.

Thanks for reading and feel free to contact Dominion Lending Centres with any questions.

Brent Shepheard


Dominion Lending Centres – Accredited Mortgage Professional
Brent is part of DLC Canadian Mortgage Evolution West based in North Vancouver, BC.

More Posts – Website

15 Jul

Difference Between Fixed And Variable Rates


Posted by: Peter Puzzo


Difference Between Fixed and Variable RatesThe two most frequently asked questions I get are:

1. What are your best rates?

2. What is the difference between fixed and variable rates?

Question #1 is actually more complicated than question #2. Why? Because rates are not the only thing you should be looking at when deciding what mortgage product to contract to. Recently, a client brought us a product that had a 1.99% fixed rate for a 5 year fixed term. This was extraordinary, and we did our due diligence to see what the product was all about. We found out that the term was 5 years and the interest rate was fixed at 1.99%…..for the first 6 months. Then it went up to the posted fixed rate of 3.15% for the remainder of the term. Not nearly as stellar as it appeared. Rule of thumb: If it is too good to be true, it is too good to be true! Make sure you know what your mortgage product entails. It is in your best interest to find out all the hidden costs behind the mortgage product that you don’t see up front.

Which leads us to question #2, What is the difference between fixed and variable rates?

Fixed Rates For the bank, this is a lower risk. It is usually higher than a variable rate. It remains constant or fixed for the term of the mortgage which means that your payments remain constant for the term of the mortgage. This rate is based on typical rates that are being offered by banks at the time the client enters into the mortgage contract. It’s a lot like “gas wars”. When you see gas stations that are in close proximity lower and raise their prices based on what the gas station across the street is doing, you see that these gas stations are competing with one another. It’s the same with banks. They watch each other’s prices and react to what’s going on “across the street”.

Variable Rates This is a higher risk rate for the bank. It is harder to qualify for this rate, which means the bank allows less debt in your financial profile compared to qualifying for a fixed rate. A variable rate can change during the term of the mortgage which means your actual mortgage payment can either increase or decrease during the term of the mortgage.

A variable rate is also a higher risk for the client as rates can go up which directly affects your payment amount. The last 15 years has seen rates generally decrease and clients that have taken advantage of the variable rate have not seen an increase in mortgage payments. But that’s not to say that it can turn at any time. Historically, we are at the lowest rates that we’ve seen but no one has a crystal ball.

Variable rates are quoted as Prime minus a certain amount or Prime plus a certain amount. What does this mean? Variable rates are based on the Bank of Canada, a governing institution for all Canadian banks. The Bank of Canada sets the benchmark for interest rates, based on inflation. Generally speaking, if the economy needs to be stimulated and is in a state of deflation, interest rates along with the Canadian dollar are lower. If the economy needs to be slowed down and is in a state of inflation, interest rates are higher along with the Canadian dollar. Currently, the benchmark rate for the bank of Canada is 2.5%. But most banks have adopted 2.7% as its Prime rate, basically because 2.5% is just too low for the bank. Thus, a bank might offer you Prime minus 0.2% (2.7% – 0.2% = 2.5%). Remember, the Bank of Canada reviews its benchmark rate about 8 times a year. Depending on the state of the economy, they may raise or decrease the benchmark rate which will affect your variable rate.

An example:

You enter into a contract rate of Prime – 0.2% (2.5%). 18 months later, there is a surge in foreign investment into the country which stimulates the economy. The Bank of Canada reviews its benchmark rate and decides to raise the benchmark rate to 2.75%. Your bank follows suit and raises its Prime rate from 2.7% to 3%. Your contracted rate for your mortgage is still Prime – 0.2%. But instead of 2.5% you are now paying 2.7%. Your mortgage payment will also go up to reflect the new rate.

For more information about fixed and variable rates please a mortgage professional at Dominion Lending Centres. We’d be pleased to answer any questions you have.

Geoff Lee


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

More Posts – Website

12 Jul

Your First Mortgage Renewal


Posted by: Peter Puzzo


Why banks want you to sign the renewal agreement that they mail out to youA lot can change in a year when it comes to mortgages. These changes can provide great opportunities for mortgagees to refinance their mortgage at the time of renewal in order to save money.

Unfortunately, most people are under the impression that once they sign on the dotted line they are locked into their mortgage agreement for the specified term. One study found that a staggering 70% of people simply renew their mortgage every year without even looking into other options! Refinancing can give you the leverage to make your mortgage more affordable.

Here are 5 tips to help you prepare for your first mortgage renewal and save thousands of dollars!

1. Plan in Advance

Mortgage renewals are mailed out months before the renewal date. This gives you plenty of time to shop around for the best rate. Many mortgage professionals recommend a 4-6 month window to negotiate because that’s how long a lender may guarantee a discounted rate. By planning ahead you could find yourself a rate significantly lower with another lender or have a nicely discounted rate to fall back on.

2. Do Your Research

Mortgage research isn’t a one-time process you perform when buying you first home, it’s a topic you should revisit each year. The reason for ongoing research relates to the changes that occur in the marketplace. It is important to keep up-to-date with mortgage trends so you don’t get swindled into a higher rate than you deserve. The key thing to avoid when shopping for a new rate is signing with a bank’s posted rate. These rates are usually the highest the bank charges and all that extra interest will accumulate quickly, adding thousands to your mortgage total. Take the time and know what trends are doing so you can recognize a good rate when it comes along.

3. Don’t Avoid the Switch

Some mortgagees are scared to switch lenders because of hidden fees and the paperwork that may be involved in the process. If you do your research and start early enough there is no reason to avoid switching your mortgage lender. When you make a switch at renewal time there is usually no monetary penalty. Switching allows you to take advantage of lower rates and save you money, so take the plunge if you find a better deal with a different lender!

4. Negotiate on Everything

Most people only negotiate the interest rate when they’re applying for or renewing a mortgage, but all variables are open to discussion! Make sure you know the importance of the amortization period, fixed versus variable rates, and payment schedule flexibility so your negotiation power is up to its full potential. All these variables can help reduce your payments, interest rate, and overall payment period.

5. Work with a Professional

Some mortgagees find all this information rather overwhelming and some simply don’t have the time to do the necessary research. If you find yourself fitting into one of these two categories then work with a Dominion Lending Centres mortgage professional. These brokers work for you and will handle all the shopping and negotiations required to make your mortgage more manageable.

Whether you decide to work with a professional or not make sure to do some research for yourself. It’s always a good idea to have the basic knowledge fully understood before jumping into one of the biggest purchases of your life.

If you are ever unsure of any specifics, call Dominion Lending Centres to clarify. We are always happy to help guide you through the process!



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

6 Jul

What Are Canadians Doing About Mortgage Debt?


Posted by: Peter Puzzo

In December, Mortgage Professionals Canada released its annual state of the housing market report and found that in 2015, 36% of homeowners took actions to reduce their mortgage debt.

While many homeowners think in terms of lump-sum payments, which are a great option, there are other ways to save money and pay down that debt including the following:

* Refinancing for a lower interest rate

* Renegotiating for a lower interest rate

* Switching to accelerated bi-weekly payments

* Increasing amount of regular payments

* Lump-sum payments

According to the report about 950,000 mortgage holders voluntarily increased their regular payments during the past year. The average amount of increase was about $340 per month, for a total of almost $4 billion per year. In addition, voluntary increases that were made in prior years continue to contribute to accelerated repayment of mortgages. Increasing your payment by just $20 a month can have a positive impact simply because the extra money is applied directly against the mortgage principal. This decreases the amount of interest you will pay over the life of the loan

Also in 2015, seven per cent of mortgage holders (about 400,000) increased the frequency of their payments. Just over one million made lump sum payments during the past year. The average amount was about $15,300, for combined repayment estimated at $15.5 billion.

Other highlights from the report:

* About 660,000 households lived in homes that they purchased during the past year (newly-constructed or resale). The average price is $408,800, for a total value of $270 billion.

* Among these recent homebuyers, there had been an estimated total of $35 billion in mortgages on existing homes that they sold (which would have been discharged or transferred at the time). The combination of $188 billion in financing on purchased homes minus $35 billion on prior dwellings means that home purchases in 2015 have resulted in a net credit growth of $153 billion.

* About 100,000 Canadian homeowners fully repaid their mortgages during 2015 (up to the date of the fall survey). A further 40,000 expect to fully repay their mortgage before the end of the year. In combination, about 140,000 mortgages will have been fully repaid during the year.

It’s good to see that these stats show that Canadians are paying attention to the great information that is available to them on mortgages. If you need more ideas on how to save on your mortgage, contact the professionals at Dominion Lending Centres.

Len Lane


Dominion Lending Centres – Accredited Mortgage Professional
Len is part of DLC Brokers For Life based in Edmonton, AB.

4 Jul

Paying Off Your Mortgage Faster


Posted by: Peter Puzzo


Paying Off Your Mortgage FasterMost of us that have a mortgage would like nothing more than to have our mortgage paid off. Being mortgage-free is an achievable goal. But it is important to think through the process so that you utilize your money the best way possible. You may be surprised what conclusions you draw if you thoroughly think through your options.

Think about this!

1. Right now interest rates are the lowest they’ve ever been. Paying off your mortgage may not give you the same return as you’d get by investing in a higher interest investment return. Make sure you’ve talked with your financial advisor on money investment opportunities. It may be more beneficial to invest in other opportunities.

2. On the same note, there may be an opportunity to match retirement contributions through your employment. There are some fantastic opportunities with RRSPs which may give you a higher return for your money rather than paying off your mortgage.

3. Taking advantage of prepayment privileges with bonus money such as bonuses, inheritance, may not be as fruitful in returns as paying into higher interest return investments. Make sure you ask your lender how much it will cost to pay off your mortgage early. And make sure your ask your lender how much per year can be paid off. Some lenders say 15% and some lenders say 20%. Some lenders say 0%! Make sure you find out their guidelines.

Having said all that, there are great ways to pay your mortgage off faster. But before the suggestions, let’s define some of the terms you need to know in order to understand your mortgage fully.


Amortization – paying off mortgage debt with a fixed repayment schedule in regular installment over a period of time. Most amortization periods are 25 or 30 years long.

Term – contracted period of time for a mortgage. Terms are usually 5 years long but can be any amount of time that you contract with your lender. 6-month terms, 1-year terms, 2-year terms, 3-year terms, 4-year terms, etc are all available through your lender. However, interest rates will vary with different term lengths.

Principle – the actual amount of the mortgage loan.

Interest – the interest incurred on the loan

Principle plus Interest (PI) – This is typically the payment that is taken monthly from your account. The actual principle amount and interest amount varies from payment to payment. However, the payment that is coming from your account will remain consistent from month to month.

If paying off the mortgage is your goal, consider the following:

1. Increase your scheduled payments to bi-weekly or even weekly payments. You will not pay as much interest by increasing your payment schedule. Note that your payment amount will NOT increase. Your payments are merely applied sooner which does not allow interest to compound as quickly, thereby lessening the amount of interest you are paying and, therefore, decreasing the time to pay off your mortgage. Take a look at http://itools-ioutils.fcac-acfc.gc.ca/MC-CH/MortgageCalculator.aspx?lang=eng and consider the tax savings.

2. Amortize your loan over a lesser amount of time. When your term renewal time comes up, you can negotiate with your lender a shorter amortization period. There is less flexibility with this option as your monthly payments will be higher. With this option, it is important to keep your eyes on the goal so you don’t get discouraged with the bigger payments. Your mortgage will absolutely be paid off faster.

3. Increase your scheduled payment by $25 or $50 per payment. Surprisingly, you might not even feel it as much as you might think. We are creatures of habit and once changes are implemented and become the norm, the higher payments are just expected and our mortgage pays down faster and faster.

4. Take advantage of prepayment privilege. Whether your lender allows 10%, 15%, or 20%, make it a goal to put something extra toward your mortgage every year. Make sure you ask your lender how to make a higher payment as they will have guidelines to follow.

5. If you receive a tax return, use it toward your mortgage. Making an extra payment every year will literally take years off the amortized time of your mortgage.

6. Any bonuses this year? Apply it toward your mortgage. Even a few hundred dollars down on your principal can make a significant difference in the amount of time to pay off your mortgage.

7. If you are a double income family, consider dedicating one of your incomes toward mortgage payments.

8. Purchase BELOW your means. That way, the extra the would be in a higher mortgage amount can be put to good use by increasing your mortgage payment amount by the difference.

The sense in paying off your mortgage faster…

1. Making a plan – a well-structured plan will stop you from overspending. Putting together a plan forces you to think through your goals. Budgets cause us to narrow down our goals and stick with them. If a new adventure or unnecessary expenditure comes up, you can align it with your goals and consider if it fits. If it doesn’t, throw it. If it does, then it is time to sit down and revamp or consider your goals. Having a plan chases away thoughtless impulses and keeps you on the right track.

2. Peace of mind in owning your own home. When you sign your mortgage papers, the lender discloses to you that you will pay more than twice the purchase price of your home. Your amortization schedule will clearly show the amount of interest and the amount of principle that you pay with every payment. You can google amortization schedule and several calculators will come up. Just punch in your numbers and you will see how much interest versus principle that you actually pay.

3. Paying off your mortgage provides a reliable return on your investment. Typically, and most likely, your property purchase will result in an increase in value as the years go on. It has been argued that using the “extra” money that comes in toward investments will result in a higher return. However, most of us don’t have a plan in place and so that extra money gets quickly spent. A sure investment is increasing your monthly payments (even by a few dollars) resulting in a mortgage that is more quickly paid off.

4. Saving up for the 20% is much more economical than going into a property purchase too early (using 5%) down. You will literally save tens of thousands by NOT having to purchase the mortgage insurance that is not for your benefit but for the banks! On a $400,000 purchase price with 5% down, you will pay a 3.6% premium which amounts to just over $12,000.00 dollars (added to your mortgage).

5. When it comes time to refinance, make sure you know your options. Don’t assume that your lender has your best in mind and will give you the lowest rate available. Make sure you have a Dominion Lending Centres Mortgage Specialist look at your situation to see if there is a better option out there for you. This service is free so take advantage of it!

Geoff Lee


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