The decision by British voters to leave the European Union (EU) has shocked markets and will no doubt lead to continued uncertainty for an extended period. Stock markets around the world are reeling, the British pound has taken an unprecedented nosedive, commodity prices with the exception of gold are plunging and interest rates are falling sharply. Central banks, particularly the Bank of England, are vowing to do whatever it takes to provide liquidity and stem financial chaos. Mark Carney, Governor of the Bank of England and a vocal opponent to Brexit, has assured markets that the Bank will be there as a lender of last resort to cushion the blow to financial institutions. Banks and insurance companies are hardest hit, but businesses worldwide that do business in the UK or in Europe are faced with disturbing questions that could take months or years to answer. Moreover, hedge funds and other investors around the world that have been caught on the wrong side of this trade are scrambling, which likely portends a sell off in risky assets for at least a couple of days.

Even with all of this, investors should not panic sell this environment. It is a buying opportunity for longer term investors. At the same time, do not try to time markets. No one can pick the bottom and market timing never works. Canadians who have some dry powder should consider buying their favourite stocks as they are sideswiped by the British vote.

Politically, the vote and the subsequent resignation of the British Prime Minister, David Cameron, is a vivid indication of the global move to nationalism, isolationism and xenophobia. Populist demagogues around the world are finding a welcoming audience as the top 1 percent who have benefited from globalization and free trade have failed to share the wealth. The broad middle class in all countries have been squeezed by forces that have pushed production to cheap-labour emerging economies or have replaced their jobs by technology. In all advanced economies, income growth has stagnated for all but the richest among us, which has led to a very nasty blame game. Scapegoating immigrants, minorities, free trade and the powers that be is evident from the US to France. Donald Trump, the most vivid example of such populist demagoguery, who happens to be in Scotland today, supported Brexit and has lauded the British people for taking their country back.

Elites who make light of this growing sentiment do so at their own peril. It helps to explain the populist movement in the US election campaign on both the left (Bernie Sanders) and the right (Donald Trump). Mainline economists support free trade and globalization. But mounting income inequality creates a tinder keg that is ripe for exploitation. Promises of “bringing the jobs back” and “America (Britain) First” set fire to this furor and, as we have just seen, these forces can win at the peril of financial and economic losses.

For now, the most immediate impact will be lower interest rates. Not only will the Bank of England and the European Central Bank ease further, so will central banks in Switzerland and Japan. The Fed, which was widely expected to hike interest rates once again in September, will likely remain on the sidelines.

The Bank of Canada will wait and see what happens. The Canadian dollar is actually holding up quite well right now, although Canadian bank stocks are taking a hit, down just over 2 percent as of this writing. Only about 4 percent of Canadian trade is with Europe and only roughly 3 percent with Britain. Investors are fleeing to the safe haven of the US dollar, US Treasuries and, to some extent, Canadian assets are safe havens too. If anything, continued very low interest rates could further boost already hot Toronto and Vancouver housing markets.

Bottom Line: while this is not good for our economy, the negative impact will be relatively muted. Nevertheless, financial turmoil and uncertainty will continue for some time, which is never good for confidence and therefore, risk-taking and spending.

DR. SHERRY COOPER

Chief Economist, Dominion Lending Centres
Sherry is an award-winning authority on finance and economics with over 30 years of bringing economic insights and clarity to Canadians.

Everybody wants to save money on their mortgage!

A new home buyer is especially diligent when shopping for the best mortgage.

They make the effort to:

find out the options

compare rates and costs

compare flexibility

This home buyer then moves into their new home and their mortgage can easily become something they don’t think about often. They might have a growing family and an ambitious career. In the meantime, the mortgage payments are happening on automatic pilot.

Eventually their lender sends them a letter to let them know that their mortgage is coming up for term renewal. That borrower is faced with some decisions to sort out.

1. Should they do things the “easy” way and sign the offer from their current lender?

2. Should they ask their lender for a better rate?

3. Should they move their mortgage to another lender?

The answer? You guessed it! Don’t Renew! Renegotiate!

1. Call your lender and ask them for their best offer and ask them to send it to you in writing.

2. Work with a broker who has access to many different lenders so you can better assess your options. Even if that broker has not worked with you before, they can still help you sort out your renewal.

3. Have the broker compare options for you including the option from your current lender. This analysis will include any possible costs for moving the mortgage and list possible advantages to moving to another lender.

4. Then decide. It will cost you nothing to ask and it could save you thousands of dollars.

Remember the effort when you first bought your home? Well, you only need a small fraction of that effort to ensure you get the best mortgage when renewing your mortgage term.

It is not unheard of to have a mortgage renewal offer of a whopping 1% higher than competitive rates. On a mortgage of $400 000 that would cost approximately $4000 extra per year! I have also seen decent renewal offers where it was clear that the client was fine to stay where they were.

No matter what your final decision, it pays to consult with a Dominion Lending Centres mortgage broker before you sign the “easy “offer from your current lender. Go ahead and make that call.

CHRISTINA HORVATH

Dominion Lending Centres – Accredited Mortgage Professional
Christina is part of DLC Primex Mortgages based in Coquitlam, BC

When tough times put stress on families sometimes the end result is divorce. While no one ever wants to see this happen sometimes it is inevitable. Recently, CMHC changed the rules about how much a house can be refinanced for, they have set the limit at 80% of the property value so that refinances would no longer fall under the insured mortgages. What they also did was set some guidelines for couples who are divorcing.

When a partnership in a home is being dissolved, that partnership can be a marriage, common law relationship or simply two owners of a property, it is now considered a sale. This means that the existing mortgage will most likely be paid out or in some cases one of the spouses can assume that mortgage and possibly increase the amount. Most likely it will mean that one spouse will purchase the home from the other. Here’s the difference when we are in this situation, the home can be purchased with just 5% down payment again as it doesn’t fall under the refinance rule.

One other thing to consider under the divorce rules is child support. As many parents have learned lately, child support and section 7 spousal support are liabilities for many lenders. So if you do have a $2,000 a month support payment, then that is the same as having a $2,000 dollar car payment. Not all lenders are looking at that the same, some have allowed us to reduce the yearly incomes buy the amount of child support. The biggest difference here is of course that the reduction allows you to qualify for more mortgage, it’s just a matter of knowing which lenders work the system which way and a skilled mortgage broker will know the difference.

Ideally, of course, the divorce never happens but one way around child support being paid is joint custody where it is shared 50/50 and no liability is forced upon either spouse allowing them to maximize their purchasing power as the start their new lives.

What also needs to be considered is that this needs to be done in writing, separation agreements are legal binding documents that tell the lenders what your responsibility is to the other partner in the divorce. We have also had situations where a statutory declaration saying that you have no responsibility to the other partner has been sufficient especially in cases of common law separations.

So many in’s and out’s to be considered when embarking on dividing your households and of course we here at Dominion Lending Centres would always advise legal counsel first and then talk to your mortgage brokers about what is required for the mortgage process.

LEN LANE

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

1. Create yourself a Budget and stick to it, so you can keep your finances on track. Planning a budget will help you identify uneconomical expenditures and help you achieve your financial goals. Having a budget can also decrease your stress levels, prepare you for unexpected costs and help you plan for your future of home ownership.

Some of the things you should consider in a budget are all your sources of income, mortgage payment, all loans, condo fees, utilities, cable, internet, phone bills, credit card debts, entertainment expenses, clothing, food, transportation expenses, Insurance (auto, house, life), personal grooming, pet care, donations, child care and an emergency fund which can assist in those unexpected costs like an exterior leak, plumbing issues or just those unforeseen repairs and maintenance issues that could arise.

2. Before you start looking at homes, meet with your Mortgage Broker so they can assist you in figuring out how much home you can afford, get you pre-approved for a mortgage loan and give you the information you need for planning and preparing to save for your down payment. It can be very disappointing to find your dream home only to find out you don’t qualify.

During your qualification period and before you purchase a home, avoid making any big purchases like a new car or buying furniture as these expenses will have to be factored into your debt servicing ratios and could seriously jeopardize your loan approval.

3. Part of your budget plan is to know and consider the additional costs before the purchase of your home. Legal fees, mortgage insurance premiums, life and disability Insurance, Fire Insurance, house insurance, strata fees, appraisal, home inspection, property survey, moving costs, appliances, home maintenance equipment, purchase deposit, down payment, GST if it’s a new construction, property tax, and possibly property transfer taxes. The amount of this property transfer tax will depend on your province and the amount of your home purchase price.

4. Your realtor should be someone you can trust, who understands your needs and will take the time to educate you through the home buying process and the current real estate market conditions in your chosen area.

Your realtor will provide a variety of services to make the complexity of purchasing a home seamless. For example, they will arrange appointments of potential homes, assist in the Contract Of Purchase And Sale agreements, obtain and review the strata minutes, negotiate the home offer on your behalf, inform you of facilities and public services that are available in your neighborhood and current future zoning regulations. Simply, they will streamline the biggest investment purchase that you will ever make.

5. Have your home or strata property inspected. This is one of the most important steps to consider when buying a home, to make sure your home is a sound investment and a safe place to live. If significant defects are revealed by a home inspection, you can back out of your offer, free of penalty, within a certain time frame. Condominium buyers will tend to focus on the Form B certificate that will identify any major issues and costs by the condominium corporation.

6. If there is anything unclear to you while you are preparing the Contract Of Purchase And Sale have the Purchase And Sale Agreement reviewed by your real estate attorney before signing this legal document.

7. Subject Clauses on your Offer To Purchase is highly recommended, especially for first time home buyers. For example a

• subject to a satisfactory home inspection
• subject to arranging your mortgage financing

It is of great significance to know that “subject clauses” do not “elude” you to avoid your legal responsibilities in the contract and you must make every attempt to fulfill the conditions that you have set. During this time, it is the seller’s discretion to continue to accept other offers even after the seller has accepted your offer with subjects.

8. On Closing Day, all parties will sign the papers at the lawyer’s office, officially sealing the deal. This is the day that ownership of the property will be transferred to you. On this day it is your job to provide your mortgage broker with your lawyer’s information, as they will be the ones to forward a copy of the Purchase And Sale Agreement to your lawyer as well as inform your lender of your lawyer’s information.

Proof of insurance will need to be obtained, so arrange your Home Insurance before closing and bring the policy with you to your appointment, have your certified cheque or bank draft with closing balance payable to the lawyer’s firm’s trust account, a VOID cheque or a pre-authorized payment form and bring two pieces of valid identification with you like a valid driver’s license or passport. The second piece of identification can be your social insurance card, birth certificate or credit card from a major bank.

Closing funds will be arranged by your lawyer to the seller’s lawyer, the transfer and mortgage will be registered and you will be given the keys to your new home! Finally you take possession.

There are many aspects to consider with your mortgage and home purchase so it would be wise to contact your trusted Dominion Lending Centres Mortgage Professional who can navigate you through the home buying process and give you the resources you need for a successful first home! Give us a call today so we can help you through these steps of home ownership!

JOSEE PICCO

Dominion Lending Centres – Accredited Mortgage Professional
Josee is part of DLC City Wide Mortgage Services based in Vancouver, BC.

Well folks I just do not get it. I do not understand why smart person after smart person continues to sign on the dotted line for the first offer they are given upon mortgage renewal. Case in point that has brought this to a head for me was just a couple weeks ago. The mortgage was with one of the beloved big 5 banks whom we Canadians seem to hold in great awe and respect. Here is what it looked like:

Mortgage amount $259,997 in a new 5 year fixed rate term with a 20-year amortization at 4.10% making the monthly payment $1584.51 and the balance after 5 years $213,266.26.

I know for a fact that the SAME bank and many others were offering 2.59% for the exact same term. This is how that would have shaken out:

Mortgage amount with a rate of 2.59% in a 20-year amortization would have had a monthly payment of $1,387.40 and the balance at the end would have been $206,956.55.

That means that the client could have saved $197.11/month or $11,826.60 over the 5 years. On top of that is the crazy fact that they would have also owed $6,309.71 LESS at term maturity. $18,136.31 is the amount that this one person could have saved. That is one person out of a very large number of people doing the exact same thing so I must loudly repeat – Stop it!!

Let us examine the facts for a moment shall we?

1. Banks are a business and they are mandated to generate a profit for their shareholders and investors. Though success seems to have become a dirty word, this is actually a good thing for our economy. Our banks are strong and continue to report profits. A secret of the banking world that you need to be aware of is that the person you are sitting down with may receive a commission or a bonus based on how many mortgages they sign at the higher rates. I repeat that I do not have any problem with profit. I myself am commissioned based. What does concern me is the fact that the average consumer does not know this may be occurring on their transaction which may lead a them to make a choice without questioning their options.

2. The average consumer will shop 3 stores and visit many websites to save on big ticket purchase such as a TV or a car. Once they get to the dealership they will negotiate and play the game to get the best price so why do we not when it comes to our largest asset? Why are we not ensuring that we are not overspending $18,136.31?

3. There are a large number of lenders and banks in our country to choose from. They are solid institutions offering great mortgages to consumers. Research them and make an informed decision before dismissing them as unreliable. They too are watched over by the powers that be who work diligently to protect your rights as consumers.

4. There are so many well qualified mortgage professionals from Dominion Lending Centres who live and work in your community. Find one you like and have them find your best option if the whole thing seems like too much work.

Did you know that to switch your mortgage to a new lender at renewal, you will not incur a penalty, or pay legal fees or appraisal fees? It will probably take about 4 hours all together, which in the examples I used, works out to $4,534.08/hour. That is pretty substantial hourly wage and certainly worth your time.

So stop it and save your money.

PAM PIKKERT

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

Just a few years ago, a federally imposed limit on how much equity you could access via refinancing your home was tightened to 80% of value. The requirement to maintain a minimum 20% equity in your property has made refinancing for many people difficult. Those who only put 5% or 10% down must wait years to build up to the 20% minimum as it is.

Over the last two years, I have seen many clients with more than 20% home equity yet carrying higher consumer debt load seek a refinance to access equity, pay off or consolidate all of their consumer debt. Many clients just did not have enough equity to make this possible.

Fast forward to spring 2016 and we are seeing a sellers’ market leading to bidding wars and increased home valuations. This recent surge may be of benefit to similar existing homeowners that do not wish to sell.

A refinance does not make what we owe disappear. We are looking to move debt from bad (unsecured) debt to good debt where it is secured against an appreciating asset. We are looking to wipe the slate clean and get a fresh start! Having high usage of your credit limits is likely eroding your credit score, adding needless stress to your life and costing you more over time than is necessary.

The major benefits of a refinance are roping all expenses into one low interest debt, reducing your overall monthly interest cost yet most important for families is the monthly cash flow improvement! I often recommend that some of the monthly savings be added to the mortgage prepayments to accelerate the debt reduction while keeping some cash left in pocket for lifestyle enjoyment!

Many people with fantastic jobs and incomes simply get a bit too deep into multiple lines of credit, new car payments and credit cards. It happens all too quickly where people overestimate what they can comfortably afford. The focus of debt cost unfortunately has shifted where folks are not concerned about the total debt amount or payoff schedule, the determining factor seems to have evolved to whether they can handle the monthly payment; cars, toys, vacations all start to add up.

These groups of clients had been able to make all payments, yet the debt did not seem to be reducing year over year. Their options were second mortgages, private mortgages or refinance to the 80% max and still keep a pile of monthly consumer debt repayments. Ultimately, I had recommended that a few clients opt to sell their home to pay off the entire debt load, and put 5-10% down on a newer home. This was the only way to access more of their equity to pay everything off. The average monthly savings that I have seen for these groups of clients was between $1,000 – $1,600/month!

This is a prime time to reassess your current financial situation. If you owe significant amounts on credit cards, lines of credit or other consumer debts, there may be enough headroom in your equity to allow you to refinance. Another prime reason to consider a refi would be property improvements and renovations, where you may be accessing equity yet the added debt may be directly offset by the potential increase in property value.

Ultimately, it is best to consult with a Dominion Lending Centres mortgage professional first. Let the math and numbers show you whether it makes sense to make a change. Our job is not to sell you a mortgage. We offer solutions or strategies through showing the numbers in a way that may have not occurred to you before!

KRIS GRASTY

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

More Posts – Website

First on the U.S. Jobs Front

The May employment report was released this morning in the US and it was shockingly weak–indeed, the weakest number in almost 6 years. Nonfarm payroll employment was up only 38,000, well below the market expectation of 160,000. Not only was May incredibly weak, but the March and April job gains were revised down sharply, by 59,000. This represents a dramatic slowdown from last year’s average monthly growth of 229,000.

Economists had expected the May job gain to be depressed by the Verizon strike and information and telecommunications jobs were down by 34,000, but employment declines were also posted in manufacturing, construction and mining.

The average workweek was unchanged for all workers and was up slight in manufacturing. A bright spot in the report was worker pay. Average hourly earnings rose by 0.2 per cent in May after a 0.4 percent gain in April that was a bit stronger than initially reported. Worker pay increased 2.5 percent over the 12 months ended in May.

In addition, 458,000 people left the workforce last month, taking the labour force participation rate down to 62.6 per cent. In consequence, the unemployment rate fell by 0.3 percentage points to 4.7 per cent, the lowest level since November 2007. The drop in the jobless rate is nothing to cheer about since it was caused by Americans leaving the labour force.

Dismal employment gains reduce the chances of a pronounced upturn in household spending and economic growth from the disappointing first quarter pace. This takes a Federal Reserve rate hike off the table for June. Job growth has slowed in concert with weaker corporate profits and a weak global economy.

The Canadian dollar rose in the wake of this report as the US dollar plunged. Clearly, the weakness in the US is not good news for Canada as 77 per cent of Canadian exports go to the US. The Bank of Canada is counting on the export sector to pick up the slack from the hammered oil sector.

Red-Hot Housing Continues in May in Toronto and Vancouver

The release of the May data from the Real Estate Boards in Vancouver and Toronto show a continued record surge in sales and house prices. Both markets and their surrounding regions have posted enormously frothy gains, which appear to be accelerating. How much of the activity is attributable to foreign buying is unknown, but there is evidence that capital inflows to housing markets from China have risen in the past year.

Housing affordability is plunging in both regions and there has been a rising number of voices calling for government action of some sort. Some have suggest an increase in the minimum downpayment, tightening credit conditions or a rise in the cost of CMHC mortgage insurance–all of which would hurt first-time home buyers the most, exacerbating affordability. As well, the idea of action to slow foreign buying–such as, for example, a luxury tax–has also been floated.

This is a very tricky issue. The strength in housing (in these two regions) has been a key underpinning to economic growth this cycle. As well, 70 per cent of Canadian households own their own homes and home equity is for most people the largest component of household wealth, so the government is leery about triggering a collapse in housing. Nonetheless, housing growth this strong does not usually end well.

In Vancouver, the Multiple Listing Service reported unprecedented growth in home sales and prices. Last month’s sales were 35.3 percent above the 10-year sales average for May and ranks as the highest sales total on record for that month. While demand is very hot, the total number of listings in Metro Vancouver has declined 37.3 per cent from a year ago, helping to explain some of the upward pressure on price. Home prices in Greater Vancouver are up a stunning 48.3 per cent in the past three years and the one-year change has been close to 30 per cent. The numbers are similar for the Lower Mainland as a whole. The price gains are even larger for single family detached homes as supply is very limited.

In Toronto, the story is much the same, although the activity and price increases are slightly less frenzied, which isn’t saying much as multiple offers and paid prices well over asking has become increasingly common. The Toronto Real Estate Board reported a new record month for May sales, up 10.6 per cent from a year ago as the number of new listings was down 6.4 per cent. The excess demand in the Greater Toronto Area (GTA) continues to push prices higher and, in some cases, to create panic buying.

The MLS Home Price Index was up 15 per cent year-over-year, with the surge even stronger for detached homes. Gains in the 905 area (the suburbs and exurbs of Toronto) outpaced those in the 416 area (Toronto proper), likely reflecting the supply and affordability issue. The average price of a detached home in the 416 area is now $1.3 million compared to $892,000 in 905. Condo prices are considerably cheaper at an average price of $443,000 in Toronto and $347,000 in the burbs–still beyond the reach of many first-time homebuyers. Even move-up buyers are choosing to renovate their existing homes because they cannot afford to pay the prices for larger properties. Downsizers have an incentive to wait, thinking that price increase will only continue.

This is certainly top-of-the-market thinking, but as we have seen, it can last for a considerable period. Most everyone is predicting a slowdown in the housing markets next year. We better hope so. A soft landing is what we all want as prices cannot go up forever, especially at this pace.

DR. SHERRY COOPER

Chief Economist, Dominion Lending Centres
Sherry is an award-winning authority on finance and economics with over 30 years of bringing economic insights and clarity to Canadians.

It is well known that when you are a First Time Home Buyer you can use up to $25,000 from your RRSP without paying any personal taxes. However, you will have to repay any amount withdrawn from your RRSP for down payment of a home purchase.

Who is a First Time Home Buyer?

Normally, you have to be a first-home buyer to withdraw funds from your RRSPs to buy or build a qualifying home.

You are considered a first-time home buyer if, in the four year period, you did not live in a home that you or your current spouse or common-law partner owned. This condition is particularly important because even if the house where you live is not in your name but your spouse or common law partner, you don’t qualify for this benefit.

Even if you or your spouse or common-law partner has previously owned a home, you may still be considered a first-time home buyer.

The four-year period:

Begins on January 1 of the fourth year before the year you withdraw funds; and

Ends 31 days before the date you withdraw the funds.

Example:

If you withdraw funds on March 31, 2016, the four-year period begins on January 1, 2012 and ends on February 28, 2016.

If you have a spouse or common-law partner, it is possible that only one of you is a first-time home buyer.

RRSP withdrawal conditions

* You have to be a resident of Canada at the time of the withdrawal.

* You have to receive or be considered to have received, all withdrawals in the same calendar year.

* You cannot withdraw more than $25,000.

* Only the person who is entitled to receive payments from the RRSP can withdraw funds from an RRSP. You can withdraw funds from more than one RRSP as long as you are the owner of each RRSP. Your RRSP issuer will not withhold tax on withdraw amounts of $25,000 or less.

* Normally, you will not be allowed to withdraw funds from a locked-in RRSP or a group RRSP.

* Your RRSP contributions must stay in the RRSP for at least 90 days before you can withdraw them under the HBP. If this is not the case, the contributions may not be deductible for any year.

When do you I have to repay the amount withdrawn?

Generally, you have up to 15 years to repay to your RRSP(s) the amount you withdrew from them for you down payment. However, you can repay the full amount into your RRSP at any time.

Example:

If you withdrew $15,000 from your RRSPs for the down payment of your house you will have to repay to your RRSPs $1,000 per year for the next 15 years.

For more information please contact Peter Puzzo at peter@mrmortgage.ca  or visit www.cra-arg.gc.ca.

There are 9 million Millennials in Canada, representing more than 25 percent of the population. Born between 1980 and 1999, the eldest are in the early stages of their careers, forming households and buying their first homes. Buying a home is a daunting process for anyone, but especially so for the first-time home buyer. This is the largest and most important financial decision you will ever make and it should be done with the appropriate investment in time and energy. Making the effort to be financially literate will save you thousands of dollars and assure you make the right decisions for your longer-term financial security.

1. Don’t rush into the housing market–do your homework: learn the basics of savings, credit and budgeting.

Lifelong savings is a crucial ingredient to financial prosperity. You must spend less than you earn, ideally saving at least 10 percent of your gross income. Put your savings on automatic pilot, having at least 10 percent of every paycheck automatically deducted. Money you don’t see you won’t spend. Contributing to an RRSP, at least enough to gain any matching funds your employer will provide, is essential. The Tax Free Savings Account (TFSA) is an ideal vehicle for saving for a down payment and now you can contribute as much as $10,000 a year.

You also need to establish a good credit record. Lenders want to see a record of your ability to pay your bills. As early as possible, get a credit card and put your name on cable, phone or other utility bills. Pay your bills and your rent in full and on time. Do not run up credit card lines of credit. The interest rates are exorbitant and the only one who benefits is your bank. Keep your credit card balances well below their credit limit.

Do a free credit check with Equifax every six months to learn your credit score and to see if there are any problems. Equifax tracks all of your credit history, which includes school loans, car loans, credit cards and computer loans.  Equifax grades you based on your responsible usage and payments.

Budgeting is also essential and it is easier than ever with online apps. You need to know how you spend your money to discover where there is waste and opportunity for savings. The CMHC Household Budget Calculator helps you take a realistic look at your current monthly expenses.

2. Make a realistic projectory of your future household income and lifestyle and understand its implications for choosing the right property for you.

Millennials are likely relatively new to the working world. Lenders want to see stability in employment and you generally need to show at least two years of steady income before you can be considered for a mortgage.  This also applies if you have been working for a few years in one career and then decide to change careers to something completely different. Lenders want to see continuous employment in the same field. If you are self-employed, it is more challenging, and you need professional advice on taking the proper steps to qualify for a mortgage.

Assess the stability of your job and the likely trajectory of your income. Millennials will not follow in the footsteps of their parents, working for one employer for forty years. In today’s world, no one has guaranteed job security. Take a realistic view of your future. Will your household income be rising? Will there be one income or two? Are there children in your future? Will you remain in the same city? The answers to these questions help to determine how much space you need, the appropriate type of residence, its location and the best mortgage for you.

Financial planning is key and it is dependent on your goals and expectations.

3. This is not a Do-It-Yourself project: build a team of trusted professionals to guide you along.

You need expert advice. The first person you should talk to is an accredited mortgage professional. There is no out-of-pocket cost for their services. Indeed, they will save you money.

These people are trained financial planners and understand the ever-changing mortgage market. Take some time with them to understand the process before you jump in and find your head spinning with all the decisions you will ultimately have to make. They will give you a realistic idea of your borrowing potential. Before you fall in love with a house or condo, make sure you understand where you stand on the mortgage front. Mortgages are complex and one size does not fit all. You need an expert who will shop for the right mortgage for you. There are more than 200 mortgage lenders in Canada and they will compete for your business.

It is a very good idea to get a pre-approved mortgage amount before you start shopping. This is a more detailed process than just a rate hold (where a particular mortgage rate is guaranteed for a specified period of time). For a pre-approval, the lender will review all of your documentation except for the actual property.

There is far more to the correct mortgage decision than the interest rate you will pay. While getting the lowest rate is usually the first thing on every buyer’s mind, it shouldn’t be the most important. Six out of ten buyers break a five-year term mortgage by the third year, paying enormous penalties. These penalties vary between lenders. The fine print of your mortgage is key and that’s where an expert can save you money. How the penalty for breaking a mortgage is calculated is key and many monoline lenders have significantly more consumer-friendly calculations than the major banks.[2] A mortgage broker will help you find a mortgage with good prepayment privileges.

The next step is to engage a real estate agent. The seller pays the fee and a qualified realtor with good references will understand the housing market in your location. Make sure the property has lasting value. Once you find the right home, you will need a real estate lawyer, a home inspector, an insurance agent and possibly an appraiser. Make any offer contingent on a home inspection and remediation of significant deficiencies.

4. Down payments, closing costs, moving expenses and basic upgrades need to be understood to avoid nasty surprises.

The size of your down payment is key and, obviously, the bigger the better. You need a minimum of 5 percent of the purchase price and anything less than 20 percent will require you to pay a hefty CMHC mortgage loan insurance premium, which is frequently added to the mortgage principal and amortized over the life of the mortgage as part of the regular monthly payment.

Your lender will want to know the source of your down payment. Many Millennials will depend on the largesse of their parents to top up their down payment.

The down payment, however, is only part of the upfront cost. You can expect to pay from 1.5-to-4 percent of the purchase price of your home in closing costs. These costs include legal fees, appraisals, property transfer tax, HST (where applicable) on new properties, home and title insurance, mortgage life insurance and prepaid property tax and utility adjustments. These amount to thousands of dollars.

Don’t forget moving costs and essential upgrades to the property such as draperies or blinds in the bedroom.