29 Nov

5 THINGS NOT TO DO BEFORE CLOSING ON YOUR NEW HOME

General

Posted by: Derek Vandall

1. Change your job.  You were qualified for your mortgage financing based on your income, how long you’ve been there, and the understanding that you will remain there for a while. Changing jobs should be put off until after possession day.
2 – Changing your name. Make sure that your identification and your name match. Do not change from John Smith to J. Michael Smith during this critical time.
3- Make any large purchases. Put off buying new furniture for your future home or a new car. Your approval was calculated based on your present debt obligations. It can also be bad to pay off any existing accounts. Some lenders want you to have some cash in the bank for a rainy day. They may have given you approval with this in mind.

4- Switch banks or move money to a different institution. This may not sound like much but a paper trail to show your down payment source and the automatic withdrawal forms for your mortgage payments are all set up. You can change them after the house sale closes.
5 – Don’t miss any payments on credit cards or loans you already have. Lenders often pull another credit report a few days before closing. If you’ve missed a payment on your Visa card, it could mess up your home purchase big time.
Finally, check with your Dominion Lending Centres mortgage professional if you are unclear about anything between the time when you receive your approval and possession day.

DAVID COOKE

Dominion Lending Centres – Accredited Mortgage Professional

22 Nov

CORPORATIONS AND MORTGAGES

General

Posted by: Derek Vandall

For self-employed clients, incorporation is a popular business structure we tend to encounter. Having a corporate structure to your business allows for effective separation between the individual and the business.

If you own your business and have it set up as a corporation, that corporation is essentially its own person. They have their own income through business revenue and have their own expenses required to carry out that business – marketing costs, material costs, office space, etc.

When a corporation files taxes, they pay a lower tax rate than the personal income tax rate and only pay taxes on the net business income. The reason an individual might do this is that they do not need every dollar they earn to maintain their lifestyle. For example, if a corporation earns $150,000 and has expenses of $50,000 they pay taxes on $100,000 at the small business tax rate. If they only need to pay themselves $50,000 to maintain their lifestyle, they only pay personal income tax on the $50,000, the other $50,000 remains inside the corporation as retained earnings. If a sole proprietor earns $150,000 and has expenses of $50,000, they pay the personal income tax rate on $100,000, regardless of how much of that $100,000 they actually need.

When it comes to qualifying for a mortgage, a lender can look at the business income or the personal income they pay themselves. Adding the net business income or the personal income from year 1 and year 2 and dividing it by two is the income a lender will associate with that borrower. Keep in mind though this will also be affected if there is more than one shareholder. To find out how your income would be viewed by a lender if you have your business set up as a corporation, contact a Dominion Lending Centres mortgage professional near you.

RYAN OAKE

Dominion Lending Centres – Accredited Mortgage Professional

15 Nov

WHAT’S YOUR BEST RATE?

General

Posted by: Derek Vandall

You know, there used to be a time when I could give you a quote over the phone and I wouldn’t have to worry about being too far out. Today is a totally different story. Here are some of the variables that come into play:

1. What’s your credit score? A 700 FICO score is the new 650 for many lenders as their investors demand better quality borrowers.
2. Where is the property located? Rural areas are getting harder to finance.
3. Is it an insured file, are you putting less than 20% down payment?
4. Is it insurable? Are you putting down more than 20% on the purchase while being able to qualify under the stress test?
5. Is the loan to value going to be 65% or less? You get the same rate as the guy with 5% down and have to qualify with the same criteria.
6. Are you looking to refinance or buy a rental? Sorry, but both are uninsurable. You would have to qualify under the stress test and you would have to pay a slightly higher interest rate.
7. So, how about your employment; have you been on your job or at least in the same industry for the last 2 or more years?
8. Down payment requires a 90-day statement of where it has been kept, please be sure that it was in a bank as anything else seems to be picked to death. Lately, larger gifts have required that the giftor confirm that the money was in their account. God forbid they should have won it at a casino as they will want the print out from the cage boss, especially in B.C.
9. How fast is your file closing? There are usually “quick close” rates for insured files.

As you can see, there are a lot of things that come into play when determining what your best rate could be. Hopefully, anyone who gives you a rate over the phone has asked you at least some of these questions. The best rate today is more about what fits your situation but the old adage of who, what, where and how still apply. Once we have asked the questions, we have to audit the answers to make sure it’s the best fit for your situation. If you have any questions, contact a Dominion Lending Centres mortgage professional near you.

LEN LANE

Dominion Lending Centres – Mortgage Professional

8 Nov

ACCESSING YOUR HOME’S EQUITY TO INVEST

General

Posted by: Derek Vandall

To tap into your home’s equity, it all starts with refinancing your mortgage. If you own a home, the equity you have built up in it is one of the most valuable assets available to you. It is also much more accessible than taking out a large loan. In many cases, home equity loans and lines of credit can offer you a lower interest rate as compared to other types of loans while providing you with access to credit for investment purposes. You can view an excellent comparison of loans here.

Often times we see clients who refinance in order to:
• Renovate their home
• Purchase a secondary property for investment purposes
• Debt consolidation
• Business Development
• Assisting their children’s post-secondary education
• Financing thru a “life event” such as illness

In this particular article, we are going to highlight the value of utilizing your home’s equity to reinvest in other investments such as:
• rental properties
• stocks
• bonds
• mutual funds
• RRSP’s
• RESP’s
The first question that people ask is how much can I borrow? Generally speaking, you can borrow up to 80% of the appraised value of your house. For example, if your home value of $650,000 assuming one qualifies, they can access up to 80% of $650,000 which would be $520,000, if their current mortgage is $450,000 they may be able to get a home equity line of credit for $70,000 (totalling $520,000)

Working with your mortgage broker, you can go through the refinance and approval process if this is something you are interested in accessing. It is always a good idea to consult with your broker and understand the personality of your mortgage—there may be limitations of how much equity you can access and the conditions relating to the refinancing. There are also potential costs associated with this type of refinance including:
• Penalties to break your mortgage
• appraisal fees
• title search
• title insurance
• legal costs
Keep in mind that these potential costs can be rolled within your new loan amount and will not be “out of pocket.”
Now, if you have been approved and are utilizing your home equity for one of the above investments (after speaking to your financial planner/advisor first) and can expect to see a higher rate of return than the interest you are paying to borrow the money, then it is worth considering. We emphasize that you should always proceed with caution and get advice from sound professionals before choosing to invest your hard-earned money.

We have found that this type of investing works extremely well for many and is a safer and less risky way to access funds for further investment purposes. We recognize that this option may not be suitable or comfortable for some, but it is a viable way to capitalize on the equity sitting in your home and make it work for you! If you have questions or are interested in learning more, please do not hesitate to contact a Dominion Lending Centres mortgage professional near you.

GEOFF LEE

Dominion Lending Centres – Accredited Mortgage Professional

1 Nov

PRE-APPROVALS & PRE-QUALIFICATIONS

General

Posted by: Derek Vandall

Throughout the mortgage and home buying process, there are many steps a buyer will need to complete in a very specific order. A buyer will not be able to close on a purchase if they do not have a lawyer. Financing conditions need to be lifted after confirmation from a mortgage broker that a file is broker complete. A buyer should never write an offer on a home until they have a realtor working for them. Most importantly, a buyer should never be looking at a property they are considering buying until they have been pre-qualified and pre-approved.

Now, one thing we need to make clear: pre-qualified and pre-approved are two different things. Pre-qualified is when someone completes a mortgage application with a mortgage broker or a bank representative and is told how much they can afford. Pre-approved is when someone has written confirmation from a lender stating they are willing to lend based on what is stated in an application and the applicant’s current credit history.

The difference?

Pre-qualifications are based solely on the knowledge and experience (sometimes even opinion) of a broker or bank rep. A pre-approval, on the other hand, is backed by the lender actually willing to give you the money. When someone says they are pre-qualified, that means they have taken an application with a mortgage broker or bank and in broker or bank rep’s opinion, they can afford “X” amount on a home. A pre-approval is a written letter from a lender based on the applicants’ current credit history, declared income on the application and current assets, we will lend “X” amount pending confirmation everything stated in the application is verifiable and the property meets all lender requirements.

As you can probably tell, one can be more reliable than the other, especially if you are working with a mortgage broker or bank rep that is inexperienced in the industry. Pre-approvals also usually come with a rate hold. What a rate hold does is guarantee you the interest rates that lender is offering today for a certain amount of time (usually 120 days), and if you put an offer on a place within that time period, they will give you that previous rate even if they went up. If rates go down, they will allow you to access the lower interest rate as well.

You must always get yourself pre-qualified before you begin looking at homes so you know what you can afford. Once you are actively looking, it is very important you try and get a pre-approval before you write an offer. It will give you that extra confirmation your application is acceptable and protect you against interest rate increases while you look.

If you require a pre-qualification, pre-approval, or want to speak with someone about your current situation, please give a Dominion Lending Centres mortgage professional a call.

RYAN OAKE

Dominion Lending Centres – Accredited Mortgage Professional