Picture this: You’ve finally been able to put away enough for a down-payment on your dream home. It’s taken you five years of diligent saving, but you did it! You have also been diligently working on improving your credit score and paying off debts to the point where you’re now at a place of financial stability. So, first of all, KUDOS TO YOU! Second… now, what do you do? Here are the 3 steps that will take you from browsing new homes to getting the keys to your new place.

STEP 1: PRE-APPROVAL

This should actually be the step BEFORE house-hunting. Visiting your broker to get pre-approved is the first step anyone looking to buy a home should do. When you meet with your broker for the first time they will:

• Have you fill out an application (or you might be able to fill one out online)
• Check your credit
• Determine what your maximum purchase price will be.

Be aware that you will also be asked for additional information and documents when you visit your broker to apply. This includes a letter of employment/pay stub, down payment verification, 2 years notice of assessment, T4’s, a void cheque, and a number of other potential documents.

Once you are pre-approved it’s house hunting time for you! The benefit to having this done BEFORE you start looking is that you can work with your realtor to find properties within that price range.

When you do find just the right home for you, it’s on to step 2…

STEP 2: APPROVAL

If you were able to provide the bulk of the paperwork for your pre-approval, then it will be smooth sailing from here! You may have to supply a few pieces of updated information (such as an updated paystub or bank statement) but otherwise, it’s up to your mortgage broker and lender to do the hard work at this point.

Your application will be re-assessed, and the lender will take a look at the property you are purchasing. Once the lender confirms that the property aligns with their guidelines it is sent off to the mortgage default insurer for approval. At this point, make sure that you do not remove the financing condition until all the lender conditions are met.

Now that you have final sign-off and are waiting for the final conditions to be met, it’s on to step #3.

STEP 3: FINAL STEPS

Your broker will notify you once the conditions have all been met, and the lender will send the paperwork over to the lawyer’s office. The lawyer will take a few days to go through the mortgage and prepare it for your final sign off. When you go, you will be asked to present:

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

On the day of funding (usually the possession date), the lender will send the funds to your lawyer who will then send them to the seller’s lawyer. Once the seller’s lawyer has officially received the funds, they will give the go-ahead to hand you the keys to your new home!

As one final step, keep asking questions at each stage of the mortgage process. You should check in with your Dominion Lending Centres mortgage broker if you have any questions along the way – they are happy to guide you through the process of not only getting a mortgage but also having a mortgage too!

This post applies if you are taking a new mortgage, whether it’s for a purchase, refinance, or renewal. The variable remains the main contender.

But what about all the economists saying if you are currently in a variable rate mortgage then you should rush to ‘lock-in’?

You mean the economists that are employed by profit-driven shareholder-owned institutions that directly benefit from your locking-in (banks) via instantly increased profit margins and massively higher (up to 900% higher) prepayment penalties that 2/3 mortgage holders will trigger?

A bit biased, that crowd.
Also, they are generalists, they’re not specialists.

But what about independent real estate experts?

While these experts may have their finger on the pulse of many facets of the real estate market, many remain totally unaware of how exactly mortgage prepayment penalties are calculated, and just how likely you are to trigger them.

Also, generalists are unaware of many nuances of mortgage products.

So what’s my game?

I’ve never really had any game, so to speak. And I don’t stand to profit from your locking in, or from your staying variable. In fact, as I type this on a stunning day I’m wondering just what I’m doing in my office at all.

I’m just a Mortgage Broker offering an opinion. An opinion that reflects my personal policy, an opinion shaped through 25 years of experience with my own mortgages, an opinion based on 11 years of experience with 1,673 client’s mortgages.

I’ve seen a few things, mortgage specific things.

I’ve watched 2/3 of my clients break their mortgages and trigger penalties. Almost every single one of them a small and relatively painless penalty thanks to staying variable.

But what about these rising rates?

If you are currently in a Prime -.65% to Prime -1.00% variable then to lock-in would be to inflict an immediate rate hike on yourself that might take the government another 12-18 months to pull off… if they pull it off.

Stay variable.

If you are in a Prime -.35 or shallower mortgage, we should discuss restructuring that into a Prime -1.00% mortgage and reducing your rate by .65% or more.

Staying variable.

My crystal ball says yes, perhaps another two or three 0.25% hikes through 2019, but at that point the odds favour (heavily) an economic contraction that will, in turn, trigger a corresponding reduction in interest rates.

It is my theory, and that of others smarter than I, that the fed is pushing rates up aggressively to beat said economic contraction because they want to have the tool of ‘reducing interest rates’ back in their toolbox when the rainy days come. And we are overdue for stormy economic times. And when those times arrive it will not be prudent to be locked-in.

In short, life is variable – your mortgage should be as well. If you have any questions, contact your local Dominion Lending Centres mortgage professional today.

Many homeowners are somewhat aware of the fact that you can take out a second loan on your home. You may have heard your friends mention it or perhaps a family member close to you has gone through the process—but do you truly know what it means to take out a second mortgage? We have taken all the questions we get asked about second mortgages and compiled it into four key points.

A SECOND MORTGAGE IS BASED ON THE EQUITY IN YOUR HOME
The total loan amount that the second mortgage lender will offer you will depend on the equity that has been built up in your home. Second mortgages allow you to access up to 95% of the equity you have in your property. For instance:

House Value $850,000
95% LTV (maximum mortgage amount) $807,500.00
First Mortgage $550,000.00
Amount Available Through Second $257,500.00

INTEREST RATES WILL VARY AND BE HIGHER THAN YOUR FIRST MORTGAGE
This is because when a lender agrees to a second mortgage, they are taking a higher risk as he gets second priority in case of default. With that being said, we have options and solutions such as working with private lenders that can help you obtain a reduced rate and the right product for your mortgage situation. Typically, you can expect an interest rate of 6.95%-19.95% with lender and broker fees included.

YOUR PAYMENT CAN BE AS LOW AS INTEREST ONLY PAYMENTS
One of the advantages of selecting to use a second mortgage is the fact that the payments are attractive. You can pay interest only payments or you can also select to pay the interest plus the principal loan amount. You can work with your mortgage broker to discuss options and what would work best with your situation.

THERE ARE ADDITIONAL FEES TO CONSIDER
Since we want to have you understand ALL the fees associated, it is important to know that setting up a second mortgage will require you to pay: *note dollar amounts are approximations

An appraisal fee to assess the value of your home: $300
Legal fees to set it up: $2,000
Lenders & Broker fees: 1-5%

Second mortgages are a great option for many and may be a better solution than a refinance or a Home Equity Loan (HELOC). If you are interested in learning more or want to find out if a second mortgage is right for you, talk to your Dominion Lending Centres mortgage broker. We can guarantee they can guide you the process from start to finish!

One of the greatest milestones in the process of purchasing a home is when your offer to purchase is accepted! Unfortunately, that moment is quickly followed by stress – securing financing. 99% of the time a realtor will ask you if you have been pre-approved by a bank or a mortgage broker before they write an offer on your behalf. Regardless, your realtor and your mortgage broker should advise that you need to have a subject to financing condition in your offer.

In order for someone to receive a mortgage from a lender, they need to meet the lender’s (and sometimes the insurer’s) conditions. Usually, these all revolve around a borrower’s nature of employment, income, down payment, as well as the property itself. It is important to know that if your offer to purchase a specific home is accepted, the lender may still decline your mortgage if they don’t like the property regardless of your pre-approval. For example, the lender may like your employment, income, and down payment but if they don’t like the property because the condo board doesn’t have enough money in their contingency fund to fix the leaking roof in the next 12 months, they could turn down your application leaving you high and dry.

If you don’t have the money, you don’t get the home. That is why you should have a condition for financing in your offer. This way, if suddenly you can’t meet the lender’s requirements, you can still cancel your offer without any hassle or loss of deposit.

What happens if you make an offer without a condition for financing? Once this type of offer is accepted, that house is now legally yours. This means that the deposit is no longer yours and you have to come up with the remaining amount owing on the purchase price. If you cannot do so and are unable to complete the purchase, the seller will keep your deposit and may file a lawsuit against you for damages as they have now taken their home off the market. Taking the home off the market means potentially losing out on the ability to sell their home to someone else while they waited for you to get financing.

Always, always, always have a condition in your offer that states ‘subject to financing’ within at least 3 to 5 business days. If you go in without that fail-safe and it turns out you really need it, you may find yourself where nobody really wants to be – in the middle of a lawsuit. ‘Subject to financing’ is a must! If you have any questions, contact a Dominion Lending Centres mortgage professional.

You may have already seen the more technical BANK OF CANADA RATE ANNOUNCEMENT on October 24th, or you may not have. The Coles Notes (the simplest version) are as such:

• The global economy remains strong, the USMCA will reduce trading uncertainty
• The Canadian economy is balanced for the foreseeable 2 years
• Household spending will increase, but backed by income growth
• Housing activity across Canada is stabilizing

On October 24th the Bank of Canada did what we all expected, they increased the Overnight lending rate by 0.25% to 1.75%. This equated to a PRIME being increased by 0.25% to 3.95%. All variable rate mortgages and lines of credit utilize PRIME to calculate the current interest rate.

Now the BIG QUESTION, how do we as mortgage consumers respond? First, ask your Dominion Lending Centres mortgage broker how they plan to react in accordance to his own financing.

No need to ask me, I will tell you. Variable, with no hesitation. I will stay the course by not pushing the panic button.

WHY?

Because if I decide to move, refinance, consolidate, leverage equity or to simply break the mortgage for any reason my penalty will only be 3 months interest. I also need to consider how much money I have saved over the term by utilizing a variable rate mortgage rather than a fixed. During my current mortgage, the spread between variable and fixed is approximately 1%.

Please excuse the following ‘tongue & cheek…’To go with a fixed mortgage tells me that you can predict the future with absolute certainty.

I know I can’t, so I rely on statistics. 65% of all fixed mortgage consumers will break their mortgage in 33 months, the penalty that follows is unavoidable. For the average B.C. mortgage of $350,000, the penalty is approximately $14,000. By opting for a fixed rate mortgage, you have declared to the universe that there is a zero per cent chance you will need to access equity, amend the current mortgage or consider applying for a secured line of credit.

Real estate wealth is a long game, building net worth doesn’t happen overnight. Gains are not made in the short term. Just like other markets (stocks, bonds, mutuals, GICs RRSPs), there will be highs and lows.

What does this increase mean?

Dollarize it for your own personal consumption. For an increase of 0.25%, the payment will go up by $13 for every $100,000 borrowed. For some variable rate borrowers, the payment hasn’t even changed as the lender only adjusts the principal and interest allocation.

Now the question becomes, what do you do? Remain with variable or lock into a fixed. I recommend staying the course.

Porting a mortgage is kind of like transferring a mortgage. When you transfer, you are moving your current mortgage to a different lender in order to take advantage of different interest rates or mortgage products.

When you port your mortgage, you keep your lender but move the mortgage to a different property. Now, not every lender allows you to port a mortgage, and not every property can qualify for a port. You should ask your lender if your mortgage is portable.

One of the other things to keep in mind with porting a mortgage, you are generally only porting the balance remaining on your mortgage. If you need more money, you will need to re-qualify to blend your mortgage. If you do not want to blend and extend your mortgage term, you will need to come up with the additional funds on your own.

The ability to port a mortgage is really important, especially if you are in a fixed mortgage with a big bank, as it can be used to avoid paying a pre-payment penalty to break your mortgage early.

If you are curious to hear more about portability options and whether or not you could qualify, please reach out to a Dominion Lending Centres mortgage professional today!