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!

Have you ever heard of the term “rate-hold”? If you have ever worked with a mortgage broker then you probably have heard of a rate-hold!

Rate-holds are something that the majority of lenders offer to potential clients purchasing a new home who need a mortgage. Rate-holds are generally not given out for people refinancing their mortgage or looking to transfer it from one lender to another.

120 days is the longest rate-hold available with lenders. Once you have created an application with a mortgage broker, they can submit it to an available lender offering rate-holds on an interest rate you want to take advantage of – all without a property attached.

This rate-hold does not commit you to work with any lender or mortgage broker, nor does it hurt your chances of receiving an approval down the road (assuming you and your mortgage broker have not submitted multiple rate-holds and plan to use a third or fourth lender).

For example, day one you submit your application to a lender for a fixed interest rate of 3.24% for 5-years, and on day 60 that interest rate moves to 3.54%, as long as your mortgage closes in the next 60 days, you are protected and can keep your 3.24% rate. If rates go down, not up, you can also take advantage of the lower interest rate.

Once the 120 days expires, there is nothing stopping you from submitting another rate hold, it will just be subject to current interest rates the day of submission. If you have any questions, contact a Dominion Lending Centres Mortgage Professional who can help.

Many people go through challenging events in their life that affect their finances. Divorce, job loss and health issues top the most common reasons. I commend you on getting your finances sorted out and back on track. The moment you FILE that consumer proposal or bankruptcy is the time to start rebuilding your credit history. YES, there are companies that can help with that. Too often I see people waiting YEARS to pay off their debt program before getting credit again, which sets you back two years.

Mortgage Lenders/Banks view Bankruptcy, Consumer Proposal and Debt Programs all the same… bad credit management.

When will it come off my Credit Bureau?

Consumer Proposal Programs:
Transunion and Equifax state that it will take three years for a consumer proposal to fall off your credit score after it has been completed. So if your proposal takes you four years to pay, then your score will be damaged for seven years in total. If you are able to pay off your proposal quicker then your credit rating will get better a lot faster afterwards. The key is that it will stay on your credit bureau for three years from completion.

Bankruptcy

The first bankruptcy will affect your credit score for six years from the date of your discharge.
A second bankruptcy will take 15 years.

TEN SECRET “To-Do’s” you should absolutely adhere to:
A mortgage is something most people will have for a very long time. The rules for mortgages have tightened up in the past few years A LOT.
Once you have filed a debt program… you MUST adhere to these 10 rules to have a chance at qualifying for a traditional mortgage.
Excuses don’t fly with Lenders.
You need to prove to THEM you are financially capable.
They owe you nothing and they will do everything in their power to mitigate any negative risk when lending their money.

1. If you go bankrupt or file a consumer proposal while you have a mortgage, the Lender will see this when they review for your renewal and could deny your renewal and you will need to prepare to look for another lender/bank or they charge super high renewal rates. If you are considering either option or are currently in a proposal, please contact me to review your options far in advance of your renewal.
2. No NSF charges on your bank accounts. Get yourself an overdraft to protect yourself.
3. No missed mortgage payments – EVER.
4. No late payments on anything that reports to your Credit Bureau; credit cards, car loans, student loans or cell phone bills.
5. No collections for any reason. You feel as though you shouldn’t HAVE to pay for it? Pay that issue and sort it out later.
6. Double Bankruptcies or one Consumer Proposal and a Bankruptcy will make it difficult to get a mortgage. You can’t get around this anymore. It would be mortgage fraud. Lenders can look this up easily via the Bankruptcy Records Search.
7. If you have a Bankruptcy that has property included, it will be VERY difficult for you to get a mortgage without at least 25% down payment (for a purchase) or equity (refinance). On top, you will likely be in an Alternative mortgage for a very long time with higher rates and fees.
8. Get two tradelines. Credit Card, Car Loan or Line of Credit. You need to have two years of history and two of them with spending limits of at least $2,500.
9. Don’t spend to the limits. Only use a max 50% of available credit.
   Use a Mortgage Broker who specializes in Credit Repair; who can review your file with you on a semi-annual basis to keep you on track as mortgage rules change.
10. You need to look “squeaky clean” until your Bankruptcy or Consumer Proposal is removed from your credit bureau.

Contact a Dominion Lending Centres mortgage professional to be your partner once you have filed… or if you’re just in contemplation and the Banks have said NO to your debt consolidation, we will have solutions for you.

With the importance of real estate in Canada, it is vital to understand how the various professionals in this sector operate when buying a home.

Sooooooo… what is the difference between a Mortgage Specialist & a Mortgage Broker? At the surface, they sound the same;
• They both arrange mortgages
• They both can offer advice and help you select a mortgage, right?

WRONG!!! There are many differences… Let’s check some of them out!

• A Mortgage Broker works for you! Their role is to act as a link between you and the lenders so that you do not have to spend your valuable time learning about mortgages and shopping around for the perfect mortgage. Mortgage brokers do the legwork and negotiate on your behalf for lenders. They are your point of contact for everything related to you financing your home.
o Bank specialists are employed and paid by the bank and work on the bank’s behalf.

• A Mortgage Broker can work with many different lenders across Canada – Big banks, Credit Unions, Trust Companies, Monoline Lenders (broker only banks) and private lenders – rather than working for one financial institution. Therefore, Mortgage Brokers can offer you more choices with competitive rates and terms.
o Usually, Mortgage Specialists only have access to their lender’s products. In a typical situation, homeowners could end up with a higher interest rate than what they could have gotten at other institutions. This occurs because the homeowner must negotiate for themselves and Mortgage Specialists are usually paid according to the rate they sell you.

• A Broker must successfully complete a Provincially regulated Mortgage Broker course and exam.
o Bank specialists are not licensed and require no formal training. There are no standards for educational requirements (although most Lenders do provide some in-house training).

• Because Mortgage Brokers don’t work for a specific lender, you get unbiased third-party advice about a variety of lenders.
o A bank specialist can only offer their own institutions products, good or bad.
o Specialists don’t have access to other lenders, so they won’t recommend another lender’s product offerings.  They want your business whether it’s in your best interest or not.

• Mortgage Brokers use their knowledge and experience to negotiate the best possible terms and rates for you from a variety of lenders, based on the best fit for your situation.
o When you see a bank specialist, the mortgage negotiating is typically left up to you.
o Will the bank specialist negotiate on your behalf or on the bank’s behalf?

• For conventional financing, the services of a mortgage broker are generally FREE to you. If there is a cost, you will be advised of those costs up front. Brokers get a finder’s fee from the lender once they place your mortgage. Therefore, brokers are motivated to get the best terms and rates for their clients.
o Bank specialists are paid by their bank.
o Some banks offer bonuses if specialists get their clients to pay higher interest rates or sign up for other bank services.

• Mortgage Brokers work on a referral basis and are self-employed. Most of their business is done through word of mouth referrals, therefore a Dominion Lending Centres Mortgage Broker is motivated to ensure their clients are extremely happy and satisfied to keep their business growing.
o A bank specialist is generally an employee of the bank, generating business mostly through the bank’s existing customers.

• Most Mortgage Brokers are available for appointments or at least some sort of correspondence outside banking hours (nights, weekends, holidays) at their client’s convenience.
o Bank specialists are generally only available during regular banking hours.

• Mortgage Brokers are focused on your mortgage.
o Specialists are trained and rewarded on cross-selling. Some will push you to consolidate all your banking services with them when getting a mortgage (credit cards, insurance, RRSP, lines of credit, etc.)

Would you ask Tim Hortons, “What’s the best cup of coffee for me to drink today?” and expect them to name of some delicious latte from Starbucks? Not likely…  So why would you ask a Mortgage Specialist at a bank to tell you which mortgage product is best for your situation?

Are you in the market for a new home? If you are but you don’t already have a pre-approval from your mortgage broker, be sure to read on.

Pre-approvals are very important for two reasons.

They give you confidence in knowing that a specific amount of financing is available for you.
A pre-approval can put you in a positive negotiating position against other home buyers who aren’t pre-approved.
Not all pre-approvals are the same, though. There are essentially three different kinds.

• The first occurs when you meet with a mortgage professional and tell them how much you make. They’ll say something along the lines of “Great, you’re pre-approved.” The mortgage professional has only looked at your income. There is no real pre-approval.
• The second kind is when a mortgage professional asks you how much you make and then pulls your credit bureau. This allows a mortgage professional to lock in your mortgage rate for up to four months. This pre-approval still isn’t a sure thing.
• The third kind of pre-approval – and the one that we do – is a lot more encompassing. We get all of your papers prepared right off the bat, which allows us to eliminate any unforeseen issues with your approval. Sure, it’s more work up front – but we do this because it’s the right thing to do.  It’s going to have to be done before you get your final approval anyway so staying ahead of the game keeps the process as smooth and stress-free as possible for you.

If you’d like to get a pre-approval, contact a Dominion Lending Centres mortgage professional! We’re here to help.

Insurance coverage is something that everyone is “pitched” at some point or another in their life. Unfortunately, a lot of us have a negative attitude towards insurance or warranty as it is perceived as being a cash grab. Yes, if you are purchasing a flat screen T.V., that extra 2-year warranty for $100 might be a little excessive. However, when it comes to covering monthly mortgage payments or the outstanding balance of your mortgage upon death or injury, yes, it is important to have.

Every single person is offered life and disability insurance when applying for a new mortgage. As a mortgage broker, it is our obligation to offer you Manulife’s Mortgage Protection Plan. Even if it is something you do not want or do not have a need for- we still require a signature confirming it was offered. Reason being is when John Smith breaks his foot two years down the road and can’t work to cover his mortgage payments, Manulife needs to confirm that the client passed on the opportunity to have their payments covered.

Now, is Manulife’s mortgage Protection Plan, or, MPP as it is known, the most comprehensive coverage out there? No.

Is MPP better than any coverage you are ever going to receive from a bank directly? Yes.

Manulife’s MPP is a 60-day money back guarantee, with coverage that follows you lender to lender. It will cover disability injuries preventing you from work, and is underwritten before your coverage begins, not when a claim is made.

Most banks do not allow you to take their mortgage insurance to another lender. So, if after 10-years of paying your premiums you decide to leave your bank and go to a credit union, your coverage is no longer in effect and all that money you spent on your monthly premiums is now worth nothing. The scariest part about bank coverage is the health evaluation is done when a claim is made, not when you sign up. Can you imagine not making a claim for 20-years and then being declined on coverage because you have developed health issues not relevant when you signed up in your 20’s?

If Manulife Mortgage Protection Plan is not for you, there are insurance brokers out there we have access to who can offer alternative solutions. The biggest thing though is to make sure you have SOME coverage because you won’t know you need it until you do. If you have any questions, contact a Dominion Lending Centres mortgage professional for help.

A HELOC, or, Home Equity Line of Credit, can be one of the greatest gifts you give yourself. Borrowing money against your home as you accumulate equity through a shrinking mortgage or an increased property value is something that most people can take advantage of.

With all this increasing value and home appreciation, people are looking to cash in and utilize this new-found money. Unfortunately, one of the first things people think to do is sell! This can be counter-intuitive because you may have just sold your house for $150,000 more than what you bought it for last year, but you are now stuck buying a house that has gone up $100,000, $150,000, possibly $200,000 in the same amount of time.

So what can you do?

Open up a HELOC. You can do this separately through a second lender, move your mortgage over to one of the big banks like Scotia and enter a STEP, or utilize Manulife’s new Manulife One mortgage product. As you pay down your mortgage and accumulate equity in your home, you unlock the ability to spend money on a line of credit that is secured against that same equity you have built up in your home.

Let’s say you bought a pre-sale condo for $225,000. Two years later it is worth $375,000. If you have that mortgage set-up with a HELOC component, you could potentially have $100,000 available to you on a line of credit if you qualify. What could you do with $100,000 where you are making interest-only payments? Buy a rental property that breaks even or better yet has positive cash flow. You can build equity in a second home while someone else pays the mortgage through rent.

Don’t want to buy an investment property? Maybe you want to invest in stocks or funds where the expected return is more than the interest you are paying? Maybe you need to do renovations? Planning a wedding? Travelling? The list goes on.

Setting up a HELOC for yourself can open up many doors, all without having to give up your property and pigeonhole yourself into over-paying for someone else’s! Call a Dominion Lending Centres Mortgage Professional today to see if you qualify for a Home Equity Line of Credit.