28 Nov

Why You Should Not Trust “What Can I Afford” Calculators

General

Posted by: Peter Puzzo

Why You Shouldn't Trust "What Can I Afford Calculators"Your maximum mortgage amount is determined by your credit profile, your usable income (which is determined by each lender), your down payment among other requirements. Not all applicants fit into one box and this is why you should never trust the “What do I Qualify for Mortgage Calculators”.

Let me tell you a story about Jack and Jill who want to buy a home with city water for their growing family (yes, I have been reading a lot of nursery rhymes lately with my toddlers and have always thought they were a couple).

Jack has a long-term $65,000 per year salaried job with guaranteed pay. Jill is just out of nursing school and has been working as a temporary part-time employee making $25 per hour. They have one child and earn Child Tax Benefit income of $350 per month. They figure because Jill typically works 20 hours a week that they should be able to use all their income of $7,933 per month to qualify.

They decide to check out their bank’s online mortgage qualifying calculator. They are excited as they have $25,000 saved to cover the down payment and closing costs and their bank’s calculator says their “income” is sufficient to buy a $375,000 home.

After getting an accepted offer on a home they head to their bank to get a mortgage. The banker checks their credit, runs some numbers and determines shelter costs (mortgage payment, property taxes and heat) at today’s rates will be $1,993 per month for the property.

It turns out that with Jack and Jill’s credit report results, both with a credit rating of 650 (an average rating but not excellent) that they cannot go over 35% of their usable gross income for shelter expenses. The key words here are “usable income”. The banker then explains that though Jill is now earning income that they would not consider this temporary positions income in calculations until she has at least 2 years from the same employer to show income stability. The bank also does not use Child Tax Benefit income. The 35% of their usable income (Jack’s salary only) works out to $1,895, which is not enough to cover the shelter expenses for the purchase . They do not qualify for the purchase with their bank.

Jack and Jill thought it would be no problem. They are upset and confused so they contact a Mortgage Broker recommended by The Old Woman who just moved out of the shoe. The broker reviews their application and reconfirms that their application doesn’t fit with their current bank (which the broker also works with).

However, the broker has a relationship with many lenders including one that helped the Old Woman move out of the shoe. This lender will uses the Child Tax Benefit income. This means with the brokers connections that their usable income will increase by $350 per month putting them at $2,018 of income allowed to be used towards shelter expenses and above the $1,993 required to buy the home. They have now been approved to buy their dream home and are looking forward to running water.

This is just one example of why the “What can I afford calculators” may give you false results which ultimately could result in disappointment.

Never trust the calculators and always place a subject to financing clause if you make an offer on a home. Please consult with a Dominion Lending Centres Mortgage Broker before you start your home search so you know your buying power.

Kathleen Dediluke

KATHLEEN DEDILUKE

Dominion Lending Centres – Accredited Mortgage Professional
Kathleen is part of DLC Integrity Mortgage BC based in Nanaimo, BC.

21 Nov

What Happened With Prime?

General

Posted by: Peter Puzzo

 

What Happened With Prime?Did Prime go up?

No.

Did my Variable rate mortgage rate change?

No, not unless your variable rate mortgage is with TD.

So the Bank of Canada did not raise rates?

No, in fact they are more likely to lower rates than increase them.

But TD raised rates?

Yes, but only by 0.15% and only for variable rate mortgage holders.

If you are a TDCT client in a variable rate mortgage at TD then read on…

Update RE TD Variable Rate mortgage rate changes

On Nov 1st, 2016 TD announced their own private rate increase affecting just one exclusive group of TD clients. Specifically those in a TD variable rate mortgage.

While the rate adjustment may be minor, at only 0.15%, it is still a change, and nobody likes change.

Does this mean immediate action should be taken?

No.

Does this mean that going variable was a mistake?

No.

Is this change going to stick?

At this point (Nov 11, 2016) no other lenders have followed suit, and TD is effectively all alone on this move. As such TD may back down and reverse the increase.

For those of you with a discount of Prime -0.60% or better, you are still laughing. Such a discount leaves you with a net rate of 2.25% which can only be matched by a two-year fixed rate product. And if you have such a discount the odds are you have been enjoying it for some time now as well. Racking up the savings!

For those whose net rate has risen above the 2.25%, keep in mind some of the key features of the TD variable rate product in particular that may make it worth the extra few dollars: You did not wind up in this product with this institution by accident.

  • The TD variable is a Fixed Payment product, which means your effective payments will remain the same. This is meaningful if the subject property is an investment property as well – no change to your monthly cash-flow.
  • The TD variable is nearly the only product that can be converted into a 3-year fixed from day one. (Currently ~ 2.29% – but this is just an example, not a suggestion for action) There are greater options with TD than with other lenders.
  • The pre-payment penalty to break this mortgage is only ~0.50% of the balance, about nine times less than the penalty to break out of their 5-year fixed product (which 60% of clients wind up doing). Keep this in mind before locking in, I am not locking my TD variable in anytime soon.
  • TD is the only lender that gives you 12 months to find a new home to move the mortgage over to and grants a full penalty refund…even if they give you a deeper discount on the new mortgage! That’s right, a full penalty refund up to a year later, and possibly and even deeper discount!

What is this increase costing me?

A 0.15% increase results in an interest-expense cost increase of $12.50 per $100,000 outstanding.

Got a $300,000.00 mortgage? Then your payment just went up by zero, but the interest component within your payment did go up by $37.50 per month.

Is the Bank of Canada going to raise Prime too?

Highly unlikely by all current estimates.  Said estimates being made by people far smarter than myself.

Will TD raise their own Prime rate further?

This also seems unlikely.

Will TD lower their Prime back to 2.70% to get in line with ALL of the other financial institutions?

Perhaps if TD gets enough pressure from clients they will – and this is where I suggest a call to your TD branch to express your displeasure with them being the only bank to do this to their clients. And only to their mortgage clients.

Do you have an unsecured credit line? Car loan, TD credit card? All good they left the interest rates the same on those. What’s that, you carry no high-interest debt? Yep, TD is sparing the folks with consumer debt and only coming after those with mortgage debt. A touch ironic for sure.

If you wish to call TD directly. Look up the local branch here, press ext ‘250’ and this will connect you to the branch manager directly.

This is a phone call that may result in some action – or you can always call your local Dominion Lending Centres mortgage professional for more information.

DUSTAN WOODHOUSE

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

3 Nov

Bank or Mortgage Broker?

General

Posted by: Peter Puzzo

 

Bank or Mortgage Broker?
Mortgages are like vehicles. A bank is similar to the brand, Ford or Toyota for example. How long you have a mortgage before it’s time to renew is like the model, a Fusion or Camry. The rate is similar to the car’s paint color, and the mortgage benefits such as prepayment privileges and portability are like the car’s benefits; 4-wheel drive, hatchback, four doors instead of two, etc.

A bank is like a sales person at a Ford or Toyota dealership. He or she know everything about every car on their lot; engine size, warranty, all available colors, and their fuel ratings. He or she can match any car to your needs and lifestyle, as long as it’s sold at their lot.

But what if they don’t have the most fuel efficient car? What if you don’t like the design or you need four doors and a trunk and all they have is two doors and a hatchback? Are you still going to buy from that dealership just because you went there first? No, you’re going down the street to check out the Chevrolet, maybe even BMW, Mazda, or the new Chrysler dealership. That sales person doesn’t want you to go buy from another lot down the street, but you are buying to satisfy your needs, not the dealership’s needs of selling their own cars.

Now imagine a dealership that sold every single make and model of vehicle. Imagine you could choose one of their sales people, and have them work only for you. They know just as much or even more about every make and model, they do all the research for you and tell you what you need to look for, they ask you the important questions; they have your best interest. That is a mortgage broker, your own personal expert.

Now, you may not need a personal expert to buy a car. But what about mortgages? Is a 0.10% lower interest rate a lot? Or will a 20% prepayment privilege instead of 10% be more advantageous? Can you switch lenders and move your mortgage? $15,000 or $5,000 penalty? How is it calculated? Fixed or variable? Is a collateral charge good or bad? 2-year term or 5-year? Big bank or monoline lender? How about credit unions? The list goes on.

So, a bank or Dominion Lending Centres mortgage broker? Put it this way; would you buy from the first dealership you visit or hire an expert?

Ryan Oake

RYAN OAKE

Dominion Lending Centres – Accredited Mortgage Professional
Ryan is part of DLC Producers West Financial based in Langley, BC

25 Oct

Bi-Weekly Payment Workaround

General

Posted by: Peter Puzzo

 

Bi-Weekly Payment WorkaroundMost of us know that changing your mortgage payment from monthly, or semi-monthly, to an accelerated bi-weekly payment instantly reduces your standard 25-year amortization by 2.58 years with today’s rates. (If you didn’t know that, you’re likely not working with the mortgage professionals at Dominion Lending Centres).

Sometimes, however, an accelerated bi-weekly payment option might not be available to you. Either the lender does not offer it as an option with that particular product, or they may not allow you to set it up if the accelerated payment knocks your qualifying ratios out of line. Although these situations are rare, they do come up from time to time. Here’s a workaround for those that might find themselves in this situation.

Open up a separate chequing account from which ONLY your mortgage payment will be withdrawn.

Then, from the account where your paychecks are deposited, set up an automatic transfer from this account, to your new chequing account. The automatic transfer will be every two weeks and for half of the amount of your monthly mortgage payment. This is the amount that your accelerated bi-weekly payment would equal out to.

Throughout the year you will continue to automatically transfer exactly half of your monthly payment into your new chequing account, every two weeks. Then, those two months each year where you receive your paycheck three times in one month, you will also transfer half of your mortgage payment into the new account three times this month. When your monthly payment is withdrawn by your lender, there will be a half monthly payment remaining in your new account. This will happen twice throughout the year, leaving you with one full monthly payment remaining in your new chequing account. This is the accelerated effect.

Once per year, take this remaining balance in your account and apply it as a lump sum towards your mortgage, which most mortgages allow you to do. This lump sum goes directly towards your principal balance, interest-free, thus reducing your amortization the same as an accelerated bi-weekly payment would have.

It may not seem like much, but imagine no mortgage payments for the next two and a half years. Feels good, doesn’t it?!

Jeff Ingram

JEFF INGRAM

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

21 Oct

Are You Stressed About The New Stress Test? There’s No Need To Be!

General

Posted by: Peter Puzzo

 

Are You Stressed About the New Stress Test? There’s No Need To Be!That’s right!

Sure the new mortgage rules from our Federal Government on October 17th can be a bit confusing, here are five tips to help you with your mortgage while at the same time, reducing your stress.

1. Review your Credit File:

Good credit is your ticket to informed borrowing and purchasing, great rates and, most important, approval.

Don’t be vulnerable. Understand how a good credit score happens, and how best to manage credit so that you can use it to your advantage.

Make sure all your information is true, complete and up-to-date. If there are discrepancies deal with them before you start the buying process.

2. Review your Debts:

Understand the difference between secured and unsecured debt:

Secured debt is money owed for the purchase of an asset, such as a car, boat, motorcycle or property. The asset is collateral, and if you don’t repay the loan as specified by the terms, your creditors can confiscate it.

Unsecured debt is largely due to credit cards. These typically have a higher interest rate, so you should always try to pay them off first.

Anyone can have credit difficulties if they don’t understand how and when to use it. On the other hand, credit can be a great advantage if you know how it works.

Make payments on time, and in the case of a credit cards clear the balance every month.

Establish and implement a debt repayment strategy.

3. Down Payment:

You may also need a down payment saving strategy. This will help you avoid extra fees, such as mortgage insurance premiums, and ensure that you stay within the guidelines of the percentage of debt allowed against your income.

So, save, save, SAVE!

4. Help from Mom, Dad or other Fans:

Though you may not be so sure, they actually do love you.

Suppose you have great credit, a downpayment and a good job. You want to start your family but are a little short of being approved for a loan. That could be the time to reach out to Mom, Dad or others. I usually suggest taking on debt singlehandedly, but there’s nothing wrong with asking for a little help now and then.

5. Patience:

Patience is key. To paraphrase an old adage: Patience and practice makes for a perfect outcome. So, practice patience, and make your purchase a perfect performance.

BONUS #6 – Contact your local mortgage professional at Dominion Lending Centres so we can help you navigate these new mortgage rules!

 

Sandra Tisiot

SANDRA TISIOT

Dominion Lending Centres – Accredited Mortgage Professional
Sandra is part of DLC Smart Debt based in Ottawa, ON.

17 Oct

Housing Slows In BC, But Red Hot In GTA

General

Posted by: Peter Puzzo

 

Housing Slows in BC, But Red Hot in GTAThis morning, The Canadian Real Estate Association (CREA) released its national real estate statistics for September, which showed a modest uptick in home sales nationally, as new listings ticked up and home prices increased once again. For Canada as a whole, the number of homes trading on the MLS Systems increased 0.8% month-over-month in September following a four-month downtrend. National home sales are 5.6% below the record level posted in April 2016.

Housing markets across Canada were pretty much evenly split between sales gains and losses.Continuing recent performance trends, sales increased again in the Greater Toronto Area (GTA) and fell further in and around the Lower Mainland of British Columbia. This marked the sixth consecutive monthly decline in sales in BC’s Lower Mainland, which began even before the August introduction of the new foreign buyers’ tax in Metro Vancouver.

Finance Minister Morneau announced measures to tighten qualifications for fixed rate mortgage loans and to restrict the insurability of these loans last week. In addition, foreign exemption from capital gains taxes on Canadian real estate will also be limited to primary residences. There is no doubt that these initiatives will slow mortgage lending and home sales and there is no way of knowing by how much.

According to CREA President Cliff Iverson, “The Finance Minister’s recent changes to regulations affecting mortgage lending has added to housing market uncertainty among buyers and sellers. For first-time home buyers, the stress test for those who need mortgage default insurance will cause them to rethink how much home they can afford to buy.”

“First-time home buyers, particularly in housing markets with a lack of affordable inventory of single family homes, may be priced out of the market by the new regulations that take effect on October 17th,” said Gregory Klump, CREA’s Chief Economist. “First-time home buyers support a cascade of other homes changing hands, making them the linchpin of the housing market. The federal government will no doubt want to monitor the effect of new regulations on the many varied housing markets across Canada and on the economy, particularly given the uncertain outlook for other private sector engines of economic growth.”

Housing Slows in BC, But Red Hot in GTA

NEW LISTINGS EDGE UPWARD

Housing inventory has been in acutely short supply in the GTA. The rise in new listings last month supported a rise in sales in the GTA and nationally. The national sales-to-new listings ratio at 62.1% was little changed from August (61.9%), which is down significantly from the peak reached in May (65.3%). A ratio in the range of 40%-to-60% is considered generally consistent with balanced housing market conditions. Above 60% is considered a sellers’ market and below 40%, a buyers’ market.

The sales-to-new-listings ratio was above 60% in almost half of all local housing markets again last month–virtually all of which continued to be in British Columbia, in and around the Greater Toronto Area and across Southwestern Ontario. Quite importantly, the ratio moved out of sellers’ market territory since August, down to the mid-50% range in Greater Vancouver and the Fraser Valley reflecting the outsized plunge in sales, after having begun the year at a whopping 90%.

NUMBER OF MONTHS OF INVENTORY

The number of months of inventory is another important measure of the balance between housing supply and demand. It represents the number of months it would take to completely liquidate current inventories at the current rate of sales activity.
There were 4.7 months of inventory on a national basis at the end of September 2016. The ratio has been quite stable since April, with the fall in sales in the Lower Mainland offset by a shrinking supply of listings in and around the GTA. The number of months of inventory had been trending lower since early 2015, reflecting increasingly tighter housing markets in Ontario – and, until recently, in B.C.

The number of months of inventory is at a record low in the Greater Golden Horseshoe of Ontario, ranging between one and two months Hamilton-Burlington, Oakville-Milton, Guelph, Kitchener-Waterloo, Cambridge, Brantford, the Niagara Region, Barrie and nearby cottage country.Major areas within the GTA have less than one month of inventory, a situation that has been evident for an extended period and is without precedent.

PRICES CONTINUE TO RISE

The Aggregate Composite MLS House Price Index (HPI) rose 14.4% y-o-y last month, down from 14.7% in August, which was the first deceleration since March 2015. This price index, unlike those provided by local real estate boards and other data sources, provides the best gauge of price trends because it corrects for changes in the mix of sales activity (between types and sizes of housing) from one month to the next.

Greater Vancouver (+28. 2%) and the Fraser Valley (+35.0%) posted the largest y-o-y gains by a wide margin. However, single-family home prices fell in September in Greater Vancouver and the Fraser Valley. This was the first significant decline in this region since late 2012–early evidence that the new foreign tax has had an impact. 

As reported by CREA, double-digit y-o-y percentage price gains were also registered in Greater Toronto (+18.0%), Victoria (+19.4%) and Vancouver Island (+13.9%).

By contrast, prices were down -4.1% y-o-y in Calgary. Although home prices there have held steady since May, they have remained below year-ago levels since August 2015 and are down 4.6% from the peak reached in January 2015.

Home prices also edged lower by 1.2% y-o-y in Saskatoon. Home prices in Saskatoon have also held below year-ago levels since August 2015.

Meanwhile, home prices posted additional y-o-y gains in Regina (+4.9%), Greater Moncton (+4.2%), Ottawa (+2.7%) and Greater Montreal (+2.7%).

Housing Slows in BC, But Red Hot in GTA

SHARE THIS ARTICLE: 

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.

5 Oct

Morneau Takes Out The Big Guns To Slow Housing

General

Posted by: Peter Puzzo

 

Canadian Home Sales Fell For Fourth Consecutive Month in AugustYesterday, Ottawa unveiled major initiatives to slow housing activity both by potentially discouraging foreign home purchases and, more importantly, by making it more difficult for Canadians to get mortgages. As well, the Finance Minister is limiting the degree to which mortgage lenders can buy portfolio insurance on mortgages with down payments of 20% or more. Ottawa has clearly taken out the big guns to slow housing activity, which is widely considered to be too strong in Vancouver and Toronto. Ironically, home sales have already slowed precipitously in Vancouver in recent months and the BC government introduced a new 15% land transfer tax on foreign purchases of homes effective August 6, the effects of which are yet to be fully determined.

The measures announced by Finance Minister Morneau are more far-reaching than anything considered to date and could well have quite a significant impact. Not only are these initiatives intended to close loopholes for foreign investors, which might help to make housing more affordable for domestic purchasers, but they will actually make homeownership less attainable for the marginal borrower, which is often younger Canadian first-time home buyers.

Officials at the Department of Finance have been studying the housing market and have led a working group with municipalities and provinces, as well as federal agencies such as the Office of the Superintendent of Financial Institutions (OSFI) and Canada Mortgage and Housing Corporation (CMHC). This in-depth analysis has informed today’s announcement.

 Measures Aimed At Foreign Homebuyers

  • The income tax system provides a significant income tax benefit to homeowners disposing of their principal residence, in the form of an exemption from capital gains taxation.
  • An individual who was not resident in Canada in the year the individual acquired a residence will not—on a disposition of the property after October 2, 2016—be able to claim the exemption for that year. This measure ensures that permanent non-residents are not eligible for the exemption on any part of a gain from the disposition of a residence.
  • The Canada Revenue Agency (CRA) will, for the first time, require all taxpayers to report the sale of a property for which the principal residence exemption is claimed.

Measures Affecting All Homebuyers

The Finance Department says in its press release that, “Protecting the long-term financial security of Canadians is a cornerstone of the Government of Canada’s efforts to help the middle class and those working hard to join it.” This is a “Nanny State” measure to protect people from themselves, as the Bank of Canada has long been concerned about the growing number of households with excessive debt-to-income ratios. It will make housing less attainable, at least in the short run. If it, therefore, substantially reduces housing demand, home prices could decline, ultimately improving affordability. This, of course, is not what the 70% of Canadian households that already own a home would like to see.

  • Broadened Mortgage Rate Stress Tests: To help ensure new homeowners can afford their mortgages even when interest rates begin to rise, mortgage insurance rules require in some cases that lenders “stress test” a borrower’s ability to make their mortgage payments at a higher interest rate. Currently, this requirement only applies to a subset of insured mortgages with variable interest rates (or fixed interest rates with terms less than five years). Effective October 17, 2016, this requirement will apply to all insured mortgages, including fixed-rate mortgages with terms of five years and more.
  • A buyer with less than 20% down will have to qualify at an interest rate the greater of their contract mortgage rate or the Bank of Canada’s conventional five-year fixed posted rate. The Bank of Canada’s posted rate is typically higher than the contract mortgage rate most buyers actually pay. As of September 28, 2016, the Bank of Canada posted rate was 4.64%, compared to roughly 2% or so on variable rate mortgages.

For borrowers to qualify for mortgage insurance, their debt-servicing ratios must be no higher than the maximum allowable levels when calculated using the greater of the contract rate and the Bank of Canada posted rate. Lenders and mortgage insurers assess two key debt-servicing ratios to determine if a homebuyer qualifies for an insured mortgage:

  • Gross Debt Service (GDS) ratio—the carrying costs of the home, including the mortgage payment and taxes and heating costs, relative to the homebuyer’s income;
  • Total Debt Service (TDS) ratio—the carrying costs of the home and all other debt payments relative to the homebuyer’s income.

To qualify for mortgage insurance, a homebuyer must have a GDS ratio no greater than 39% and a TDS ratio no greater than 44%. Qualifying for a mortgage by applying the typically higher Bank of Canada posted rate when calculating a borrower’s GDS and TDS ratios serves as a “stress test” for homebuyers, providing new homebuyers a buffer to be able to continue servicing their debts even in a higher interest rate environment, or if faced with a reduction in household income.

The announced measure will apply to new mortgage insurance applications received on October 17, 2016, or later.

  • Tighter Mortgage Insurance Rules

Lenders have the option to purchase mortgage insurance for homebuyers who make a down payment of at least 20% of the property purchase price, known as “low-ratio” insurance because the loan amounts are generally low in relation to the value of the home. There are two types of low-ratio mortgage insurance: transactional insurance on individual mortgages at the point of origination, typically paid for by the borrower, and portfolio (bulk pooled) insurance that is acquired after origination and typically paid for by the lender. The majority of low-ratio mortgage insurance is portfolio insurance.

Lender access to low-ratio insurance supports access to mortgage credit for some borrowers but primarily supports lender access to mortgage funding through government-sponsored securitization programs.

Effective November 30, 2016, mortgage loans that lenders insure using portfolio insurance and other discretionary low loan-to-value ratio mortgage insurance must meet the eligibility criteria that previously only applied to high-ratio insured mortgages. New criteria for low-ratio mortgages to be insured will include the following requirements:

  1. A loan whose purpose includes the purchase of a property or subsequent renewal of such a loan;
  2. A maximum amortization length of 25 years;
  3. maximum property purchase price below $1,000,000 at the time the loan is approved;
  4. For variable-rate loans that allow fluctuations in the amortization period, loan payments that are recalculated at least once every five years to conform to the original amortization schedule;
  5. A minimum credit score of 600 at the time the loan is approved;
  6. A maximum Gross Debt Service ratio of 39 per cent and a maximum Total Debt Service ratio of 44 per cent at the time the loan is approved, calculated by applying the greater of the mortgage contract rate or the Bank of Canada conventional five-year fixed posted rate; and,
  7. property that will be owner-occupied.

These tighter mortgage insurance regulations will reduce the supply of mortgages and/or increase their cost to the borrower.

Consultation on Lender Risk Sharing

The Government announced that it would launch a public consultation process this fall to seek information and feedback on how modifying the distribution of risk in the housing finance framework by introducing a modest level of lender risk sharing for government-backed insured mortgages could enhance the current system.

Canada’s system of 100% government-backed mortgage default insurance is unique compared to approaches in other countries. A lender risk sharing policy would aim to rebalance risk in the housing finance system so that lenders retain a meaningful, but manageable, level of exposure to mortgage default risk.

This proposal by CMHC has been floated for some time and, needless to say, the Canadian Bankers’ Association, is against it. The measure would certainly increase the risk associated with funding mortgages and therefore likely increase the capital required to be set aside against this additional risk. Therefore, in essence, it increases the cost to the lenders to finance mortgages. The lenders will undoubtedly attempt to pass off this increased cost to the borrower or reduce its supply of credit. Right now, the cost of mortgage insurance is borne by the taxpayer.

Bottom Line: These are very meaningful initiatives to slow housing demand, making it more difficult for Canadians to borrow. Finance Minister Morneau has taken out the big guns. I have no doubt that the pace of mortgage lending will slow from what it would otherwise be as a result of these government actions. However, these actions do nothing to address the shortage of housing supply in Vancouver and Toronto.

Housing has been a very important pillar for the Canadian economy, especially at a time when oil price declines have decimated the oil sector and manufacturing continues to struggle. This is a case of being very careful what we wish for– I’m concerned that we might see more of a slowdown in housing than the government was counting on, which will certainly affect jobs and growth and reduce tax revenues at a time when budget deficits are mounting and fiscal stimulus has yet to do its job.

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.

27 Sep

A Take Charge Woman’s Guide To Surviving Financial Ruin And Other Odds And Sods During A Divorce

General

Posted by: Peter Puzzo

A Take Charge Woman’s Guide To Surviving Financial Ruin And Other Odds And Sods During A Divorce

A Take Charge Woman's Guide to Surviving Financial Ruin and Other Odds and Sods During a DivorceIf you find yourself in the unfortunate position of getting divorced, have no fear, because help is here!

Divorce, while often times feels like a death, it is also the beginning of your new life.  And while it can be scary it can also be exhilarating and life changing.

As women, we often make the mistake of being too trusting or giving the proverbial “benefit of the doubt”.  But in a divorce that cannot happen.  In my career as a mortgage broker, I have seen too many women have their credit ruined because they trusted that the ex-spouse would pay the bills as agreed to.  BIG BOWL OF WRONG!!

If you have not done it before, then divorce is the time to take charge of your finances.  It’s vitally important to keep your credit intact and in good standing because bad credit haunts you and follows you for 7 years.

Here are a few tips to keep you on track and ensure your credit does not take a beating like your poor little heart has.

  1. Ensure that if you have joint debt (credit cards, lines of credit etc.) that you know who is paying what.  DO NOT trust your ex to pay the bills, because as soon as some other woman (or man) comes along and he wants to wine and dine her, those debts take a back seat.  Often the debts don’t get paid or are paid late, and because you are jointly responsible, your credit takes a hard hit as well.  So if you have agreed as to who is paying what debt, ensure that you have yourself removed from that joint debt as soon as you can.
  2. If you have a mortgage and you are both equally responsible for the payments until you either reach a settlement or sell the house, make sure that you continue to make the payments from an account you can monitor.  Have your ex-spouse pay their share of the mortgage to you and then you pay the full amount from an account that is in your name.  Recovering from a mortgage that shows late payments, NSF payments and missed payments, is a long hard process. Do not fall for the “I’m paying my share, don’t worry”
  3. Treat the divorce like a business.  Get everything that you can in writing.  The sooner that you hammer out an agreement the easier and quicker and most cost effective it will be. Even if you do not negotiate a separation agreement right away, ensure that you agree, who is responsible for what. It is crucial to keep your credit in good standing.  Divorce is already hard enough and emotionally draining without having to deal with creditor phone calls, and juggling missed payments.  And try getting your own credit card with a bad credit rating, you’d likely have more success getting a sitting with the Pope than a credit card!

Look, I am not trying to scare you, I am just reminding you to embrace your independence and take care of your financial well-being.  Take charge of your finances.  It is such an empowering feeling to be in control of your bills and your money!

If there are children involved, remember this, they are children!  Do not make them a pawn in your divorce.  Do not pit your children against one parent.  It causes anxiety and confusion as they feel that they have to choose a parent and that they can’t love them both.  Your children only have one childhood.  Do not take that away from them.  Lastly do not talk badly about the ex in front of the children.  Talk about what a “loser” or “cheat” he is over wine with your friends when the children are not around.  It is an unfair and stressful position to put the children in.  Remember they did not choose you as parents and they are a casualty of the divorce, so make sure you children know, that they are loved, that they do not have to choose between the parents, and that lastly, none of it is their fault.

Finally, know this, it does get better and in time, you will likely acknowledge that getting divorced was one of the best decisions that you made.  When you feel yourself faltering and feeling nostalgic and missing your ex, simply remind yourself what brought you to the position of getting divorced in the first place. Give your head a shake and snap out of it!!!

Trust me; I know what I am talking about.  I have lived through divorce, bankruptcy as a result of divorce, cheating, bad credit etc.  You name it and I experienced it.  My climb back out of financial ruin was a situation that I would not wish on my worst enemy….OK maybe one or two!!!  The climb out was hard.  It made me who I am today (a pretty awesome lady boss).

I hope that sharing this information will save you some grief in your own struggle.  There is life after divorce, there is love after divorce, there is money after divorce and there is mortgage help in just such a situation from Dominion Lending Centres.

SHARE THIS ARTICLE: 
Share on FacebookTweet about this on TwitterShare on Google+Share on LinkedInEmail this to someone
Maria Kyle

MARIA KYLE

Dominion Lending Centres – Accredited Mortgage Professional
Maria is part of DLC Vintage Financial based in Duncan, BC.

19 Sep

8 Things To Avoid Before Buying A Home

General

Posted by: Peter Puzzo

 

8 Things To Avoid Before Buying A HomeThe following is a list of things you’ll want to avoid if you plan on purchasing a new home in the near future.

1. Don’t apply for new credit: It may seem natural to apply for a credit card at a home improvement store or a furniture store when you are about to become a homeowner, but applying for credit can lower your credit score. Not only will you lose a few points because of a credit inquiry, and if you are approved for new credit, a lender may worry that you will spend up to your new credit limit and then default on your loan.

2. Don’t close any credit accounts: You may be feeling that this is a good time to get your financial house in order by closing unused credit accounts or transferring your debt to a new credit card with a zero-interest balance transfer offer. While that’s a smart move financially, it’s a bad one for your credit score because you lose points when you have a higher usage of debt compared to your limit on one credit card and to your overall credit availability. Wait until your closing is complete before you make these changes.

3. Don’t move your money around without a paper trail: Your lender will need the most recent bank statements before you go to settlement, so if you have any unusual deposits you will need to provide complete documentation of where the money came from. If possible, it’s best to move the cash you will need for your home purchase into one account before you apply for a mortgage. If not, make sure you have complete and accurate records readily available.

4. Don’t increase your debts: In addition to your credit score, your debt-to-income ratio is extremely important to your mortgage approval. If you take on more debt you could be in danger of going above the maximum acceptable debt-to-income ratio.

5. Don’t skip a payment or make a late payment: One of the most important elements of your credit score is your history of on-time, in full payments; so don’t get so caught up in your move that you forget to keep up with paying basic bills.

6. Don’t buy a car: You may be feeling that a new car would be a nice addition to the driveway of your new home. Resist that feeling. Even if you can easily afford a new car, the depletion of your savings or the addition of a new car loan could derail your mortgage application. Wait until after you have moved to switch to a new car.

7. Don’t change jobs if you can help it: While a job change could mean a raise or a path to a better future, it could also delay your settlement.Your lender needs to verify employment and will need pay stubs to prove your new income before your mortgage conditions are fully satisfied. 

8. Don’t spend your savings: You’ll need cash on hand at the acceptance for your down payment and closing costs and your lender may even verify your cash reserves one more time, so make sure the funds stay in place.

In other words, no matter how hard it is at this exciting time, it’s better to do nothing than to do anything.

If you have any other questions regarding this please call a mortgage professional at Dominion Lending Centres.

Brent Shepheard

BRENT SHEPHEARD

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

15 Sep

From Pre-Approval to Getting The Keys – Your Step By Step Guide

General

Posted by: Peter Puzzo

 

keys-to-houseAfter diligently saving your pennies and carefully managing your credit to be as strong as possible you are finally ready to start house hunting for that perfect dream home. Between you and your new life lies the seemingly terrifying mortgage process so let’s go over what you can expect so there are no surprises along the way.

1. Pre-approval

The first step should always be to choose a great mortgage professional (like the fine folks at Dominion Lending Centres!). Referrals from friends and family and your real estate agent can help with this. You are trusting the largest loan you are likely to take to this person so make sure they know what they are doing. They are going to take an application, pull your credit, and determine what your maximum purchase price will be. You will be asked to provide a whole bunch of paperwork to verify your information

  • Letter of employment and pay stub
  • Down Payment Verification
  • 2 Year’s Notice of Assessment and/or T4’s
  • Void Cheque

This list is the very least of what you may be asked for. If you are self-employed, separated, previously bankrupt, new to Canada, receive bonuses or many other scenarios then you will likely be asked for much more. Given the current state of the economy and the record levels of attempted mortgage fraud, the banks have to be very careful these days.

The other real benefit to the preapproval is that you can house hunt with confidence knowing that your entire situation has been assessed. You will not look at homes out of your price range either which can save you the heartache of falling for a home you cannot afford. It also makes your offer very strong if you find yourself in a competition with another buyer.

2. Approval

Hopefully, you provided the bulk of the paperwork for the preapproval but you may be asked for updated information such as a more recent paystub or bank statement.

At this point, your application is re-assessed by the lender. They will take a look at the property you are purchasing and make sure it fits their guidelines. Then it is sent off for mortgage default insurer approval and once then you will get the official approval to sign. Make sure that you do not remove the financing condition until all lender conditions are met. Your mortgage professional will tell you when that is.

3. Final steps

Once you have met all of the conditions, the lender will send the paperwork over to the lawyer’s office. It takes the lawyer a few days to get things ready for you to sign and when you go you will be asked for:

  • Balance of the down payment in the form of a bank draft
  • 2 forms of ID
  • Void Cheque

The day of funding, the lender sends the funds to the lawyer who sends them to the seller’s lawyer who upon receipt of the funds gives the all clear and you will be given the keys to your new home.

It is a great idea to call your lender a bit after the mortgage closes to make sure everything is set up the way you wanted.

Make sure to ask questions at each stage of the mortgage process. The onus is on you as the person signing the contract to understand the loan you are being offered and the terms it comes with. There are so many resources available to you as a home buyer that it is easy to learn a bit about mortgages before you sign.

It can seem a bit daunting but we broke it down into bite size pieces so you will be ready to navigate it like a boss and before you know it the realtor will be handing you your keys and your new life can begin.

If you are ready to start talking about your mortgage, call any of the mortgage professionals at Dominion Lending Centres today!

PAM PIKKERT

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