3 steps to your first home

General Brandon Gervais 12 Jun

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 and are at a place of financial stability. So, first of all, KUDOS TO YOU! Second…now what do you do? Here are the three 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 mortgage 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 out one online)
• Pull your credit
• Determine what your maximum purchase price will be.

Be aware that you will also be asked for additional information when you visit your broker to apply, including a letter of employment/pay stub, down payment verification, two years notice of assessment and/or 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 of 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 two.

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 but otherwise, it’s up to the 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 they confirm that it aligns with the guidelines they have laid out for your loan, then 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 three.

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
• Two forms of identification
• Balance of the down payment in the form of a bank draft

On the day of funding, the lender will send the funds to the lawyer who sends them to the seller’s lawyer who upon receiving the funds will give you the all clear.

All that’s left is 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!

Home Buyers’ Plan

General Brandon Gervais 5 Jun

The Home Buyers’ Plan is a Canada wide program that allows individuals to withdraw a certain amount from their Registered Retirement Savings Plans (RRSPs) for the purposes of qualifying for a home or if you are planning to help a related person who may have a disability.

Currently, the maximum amount an individual can withdraw from their RRSPs under the Home Buyers’ Plan is $25,000. The Liberal party of Canada has promised to increase this to $35,000 in late 2019. Now, this does not mean that the most a person can withdraw from their RRSPs is $25,000. It just means the most you can withdraw tax free is $25,000 for the purchase or construction of a home.

There are 2 main conditions you will need to meet if you plan on using the Home Buyers Plan for the purchase of your own home:

1.) First-Time Home Buyer

You are considered a first-time home buyer if, in the four-year period, you did not occupy a home that you or your current spouse or common-law partner owned.

The four-year period begins on January 1st of the fourth year before the year you withdraw funds.

Example- if you withdraw funds March 19, 2019, the four-year period begins on January 1, 2015 and ends on February 28, 2019.

2.) Are You Buying or Building a Qualifying Home

You are if you buy or build it, or are considered as buying or building it, before October 1st of the year after the year of the withdraw. Also, that you buy or build it, alone or with one or more individuals.

The RRSPs you withdraw will also need to be repaid. Repayment starts the second year after the year you withdrew funds for the Home Buyers Plan. You will have 15 years to completely repay the entire amount you withdrew and the amount is calculated by the Canadian Revenue Agency and posted to your CRA Account.

To find out more information on how to withdraw funds as well as determine whether or not you qualify, you can visit their site here.

8 Steps to Home Ownership

General Brandon Gervais 17 May

There’s nothing quite like stepping into your dream home for the very first time.

You have achieved your goal of homeownership! However, the journey from home seeker to home buyer can be challenging – unless you have a well-defined plan and guidance from the right professionals. As a mortgage agent, here’s how I will help you reach your objective:

STEP 1 GETTING TO KNOW YOU
In the discovery phase, we will discuss your situation, the essentials and “nice to haves” you’d like in your new home, and how long you plan to live there. Based on your desired move-in date, we’ll work out a timetable for your home-buying process.

STEP 2 BUILDING A BUDGET
I’ll help you create a monthly budget and then calculate a down payment and mortgage payments that fit into it. Together, we’ll also work through a financial check-up that considers how changes in income and expenses could affect your plan.

STEP 3 CUSTOMIZING THE SOLUTION
There are many different types of mortgages, and it’s important to select one that matches your current needs and preferences. I will ask you a series of questions that should help to reveal your priorities.

STEP 4 TESTING SCENARIOS
Together, we’ll try out different mortgage scenarios, and I’ll show you how changes in income, property taxes, condo fees, loans and other variables affect your maximum mortgage amount and mortgage payments. My goal is to make sure you can comfortably afford your mortgage.

STEP 5 ARRANGING PRE-APPROVAL
It’s a good idea to get pre-approval for a mortgage before you find your dream home and make an offer — that way, you can be confident that financing is available. I’ll walk you through the paperwork and guide
you towards the most suitable lender.

STEP 6 ANSWERING YOUR QUESTIONS
Now it’s time to get serious with a Realtor and view properties that fit your price range. If you have any questions along the way, be sure to give me a call.

STEP 7 SEALING THE DEAL
I’ll work closely with your Realtor & Notary to make sure everything is in place for the closing. That’s the day you pay your down payment and get the keys to your new home.

STEP 8 IT’S TIME TO MOVE IN!
From start to finish, the plan we develop together will see you through the home-buying process. Even after you’ve settled into your dream home, we’ll periodically review your current situation to determine if we need to make any alterations to your original mortgage plan

Who pays your mortgage broker? Not you!

General Brandon Gervais 13 May

If you’re looking to get a mortgage and considering a mortgage broker, there’s a good chance you’re wondering about how much the service costs.

Good news! Clients looking to get a standard residential mortgage pay no fees to the broker.

On standard residential mortgages, it’s 100% free for the clients. We’re paid by the bank or by the lending institution that we give the mortgage to.

But it’s not the only advantage a broker can bring you. When you’re shopping for a mortgage at a bank, they’re only able to offer you something from their stable of products. A broker, however, is able to shop at different banks to get you the best product for your needs.

If you don’t fit in the bank’s box of products, then you don’t get the mortgage. When you go to a mortgage broker, the mortgage broker has access to every lender on the market and is able to sell you basically everything to find a solution that makes the most amount of sense for you.

Because they’re able to shop around, in many cases the broker is able to find you a better rate on your mortgage.

In addition, mortgage brokers are licensed professionals covered by provincial governing bodies that looks out for you, the consumer. In many cases, the person you’re dealing with at the bank is just a salesperson, without any requirement they be licensed.

So, if you’re in the market for a new home, try a mortgage broker. It’s the safer, smarter choice for your mortgage. Get in touch with me for a no-obligation chat.

What is your best rate?

General Brandon Gervais 9 May

One of the most common questions asked in the mortgage industry is. What is your best rate? You would automatically think this is a pretty easy question to answer, but I can assure you it’s not quite that simple. Today is a totally different market, here are some of the variables that come into play when quoting your best rate.

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 but it can qualify under the stress test, currently 5.34%?

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, both are uninsurable and have to qualify at 5.34% but you have to pay a 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. Larger gifts lately have required the gifter to show 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.

9. How fast is your deal closing, as there are quick close rates usually for insured deals.

10. While supposedly everyone is to be able to qualify at 44%TDS and 39% GDS, it’s not always the case as CMHC is still in some instances lower than a 680 FICO score and is wanting the client to be qualified at the old standard of 42% and 35%, which again cuts back the qualifying amounts.

As you can see what’s your best rate has a lot of things come into play today and anyone who gives you a rate over the phone has hopefully 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 me at 289-682-7633 or by email at bgervais@dominionlending.ca.

5 THINGS NOT TO DO BEFORE CLOSING ON YOUR NEW HOME

General Brandon Gervais 8 May

1. Change your job. You were qualified for your mortgage financing based on your income, years at the job and the understanding that you were 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. The debt ratios were 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 an 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.

How to pick the best mortgage for YOUR situation

General Brandon Gervais 1 May

Most Canadians are conditioned to think that the lowest interest rate means the best mortgage product. Although sometimes that is true, a mortgage is much more than just an interest rate. You can save yourself a lot of money if you pay attention to the fine print for the total cost of your mortgage.

In order to pick the best mortgage, you need to understand your options. This comes with mortgage intelligence, understanding how mortgages work and the pros and cons of the various options.
Once you’ve selected the type of mortgage, then you’ll need to shop for the most competitive option available to you and that means making some decisions based on your specific situation including:

• Are you planning to move in the next 5 years
• Will your family be growing/shrinking?
• Will your employment change and if it does will you need to relocate?
• Would thousands of dollars in penalties impact you if you need to break your mortgage?
• What types of debts do you have? Credit cards? Car loan? Student loan? Line of Credit?

Why do all this work? Because it will have a direct impact on your bottom line. A mortgage is made up of two parts—the principal and interest—you need to pay attention to how and when these parts get paid down. Ideally, you want to minimize your interest payments and maximize the principal payments.

New Government Stress Test Jan. 1, 2018 – whichever is the highest is how you must qualify for a mortgage.
• Qualify at the Chartered Bank Benchmark Rate (Government Rate) which fluctuates (currently 5.34%)
• OR the contract rate your lender gives you PLUS 2% i.e. 3.69% + 2% = 5.69%
• Since 5.69% is the highest – that would be the stress tested rate.
What this means to you is… if you have to qualify for a mortgage at a rate about 2% higher than the lender is giving you, your buying power decreases by about 20%.
To pick the best formula for your situation, you’ll first need to understand some of the factors that impact how much interest you’ll pay for your mortgage loan.

Understanding these 6 mortgage terms will help you make the best decision for your situation

Amortization

Amortization is a fancy word that means the “life of your mortgage” OR how long it takes to pay off your mortgage if you paid your mortgage for “X” years. The amount of your mortgage loan repayment is calculated based on a length of time you agree to pay off that debt. In Canada, the standard amortization period is 25 years.

• For a 30-year amortization you need a 20% or higher down payment
Picking the best mortgage is not just about qualifying for the mortgage. The amortization period is integral in the best mortgage decision because it will decide how much or how little interest you will pay during the life of the mortgage loan.
• The longer the amortization period (25 years vs 30 years) the more interest you will pay.
• Therefore, a shorter amortization period will lower your overall cost of borrowing BUT you must be able to afford the higher payments.
Once you’ve decided on your amortization, you will need to decide how frequently you would like to make your mortgage payments. Every mortgage payment (consisting of both interest and principal) will help reduce your principal (the amount of money you borrowed) and eventually reduces the overall interest you pay on this loan.
• Monthly, bi-monthly, accelerated bi-weekly or weekly mortgage payments.

Term

In the 1980’s mortgage interest rates were as high as 22%. Interest rates can change over time therefore, lenders don’t want to negotiate a 25-year loan at 4% interest if the interest rates go up to 10% in 5 years. To avoid the risk, lenders break your mortgage amortization into smaller terms.

• The term is shorter than the amortization period and locks you into your pre-negotiated rates during that time.
• The length of term you choose (most Canadians choose 5 years) will depend partly on if you think interest rates will rise or fall. Typical terms are: 1, 2, 3, 4, 5, 7 & 10.

About 3-6 months before your current term matures, your current lender usually sends you a renewal notice with options on rates for the various terms they offer (typically 1 to 10 years).
Once you get your renewal notice, you need to contact your mortgage broker to ensure you’re choosing the best option for your situation.

Closed Mortgage

A closed mortgage usually offers the lowest interest rates available.
Closed mortgages cannot be paid off before the end of its term without triggering a penalty. Some lenders allow for a partial prepayment of a closed mortgage by increasing the mortgage payment or a lump sum prepayment.

• If you try and “break your mortgage” or if any prepayments are made above the stipulated allowance the lender allows, a penalty will be charged.

Open Mortgage
An open mortgage is a more flexible mortgage that allows you to pay off your mortgage in part or in full before the end of its term without penalty, because of the flexibility the interest rates are higher.

• The interest rates for an open mortgage are typically 3-4% higher than a closed rate mortgage.
• i.e. a home buyer could pay 6.99% for a 5-year open mortgage vs. 3.99% for a five-year closed mortgage.
If you plan to sell your home soon or expect a large sum of money, an open mortgage can be a great option. Most lenders will allow you to convert from an open to a closed mortgage at any time (and switch you to lower rates).
Fixed mortgage – you have the same payment for the term of the mortgage

Variable mortgage – the mortgage rate and your monthly payments will vary depending on the Bank of Canada rate (Prime)

Fixed rate:
• Pro – you would have the same mortgage payment for the entire term of the mortgage
• Your mortgage payments are not affected by Bank of Canada Rate or Canadian Bond Yield
• Think of fixed rate as an insurance policy – you pay a premium to guarantee “fixed” rates for the balance of the term

• Pro – can port a fixed mortgage
• Con – higher interest rates
• Con – MUCH higher penalties if you need to break your mortgage (can be 4-5% of outstanding balance with Banks/Credit Unions)
• 60% of home owners, break their mortgage before it matures!
• Conclusions: How much does it cost to break a mortgage?

Variable rate:
• Pro – lower rates than the Fixed Rate – you would pay less now that you would for a Fixed Rate mortgage
• Pro – Penalty for breaking is 3 months interest (about 0.5-1% of outstanding balance).
• Pro – you can lock into a fixed rate mortgage (assuming your mortgage is in good standing) at any time, based on the amount of time remaining on your mortgage and the current posted rates.
• i.e. If you have a 5-year variable mortgage and you want to move to Fixed after 2 years, you would lock into the lenders current 3 year fixed posted rate
• Con – Cannot port a variable mortgage
• Con – Mortgage payments will increase/decrease based on the Bank of Canada rate – currently 1.75% and the lenders prime rate = Prime is currently 3.95%
• Bank of Canada meets 8 times a year
• Every 0.25% increase with the lender Prime rate will cost you an extra $13/$100,000 borrowed. i.e. $300K mortgage = will be about $39/month more/less

The best way to decide on the best mortgage is to contact your friendly neighbourhood Dominion Lending Centres mortgage broker. Mortgages are complicated, but they don’t have to be… Engage an expert!

Accessing your home equity to invest

General Brandon Gervais 30 Apr

To tap into your home’s equity, it all starts with refinancing your home. If you own a home, the equity you have built up in it is one of the most valuable assets you have 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 (totaling $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.

Pre-approved VS. Pre-qualified

General Brandon Gervais 29 Apr

Throughout the mortgage and home buying process, there are many steps and many checkpoints a buyer will need to complete before they can move on to the next one. 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 the 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 the “x” amount on a home. A pre-approval is a written letter from a lender stating based on 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 have and 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 accepted, 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.

How to improve your credit score

General Brandon Gervais 26 Apr

When applying for any sort of loan, one of the most important metrics a lender is going to look at is your credit score.

But what really is a credit score, who keeps track of it, and most importantly, how can you improve yours?

There are a few simple ways to keep your credit score in good shape.

First off, prioritize paying your bills on time. Missing payments on your credit cards, lines of credit and so on, can have a very negative impact on your score.

You can spend an entire lifetime building up for good credit. All it takes is one mistake to negatively impact you.”
Second, try to keep your credit cards at no more than 65% of their limit. This is the sweet spot that credit scorers are looking for.

Thirdly, you should avoid the “free credit score” services out there because they’re just looking to sell you credit, or sell your information to someone who does.

When you’re looking for credit, what they’re going to ask you is, ‘What are you looking for credit for?’ And you’re going to say, ‘Well, I’m looking to get a mortgage, or I’m looking to get a car loan.’ And then what they’re going to do is they’re going to sell your information to banks and mortgage brokers and people out there who are able to supply you with credit.

Instead, what you should do is go directly to the credit scoring companies. They’re required by law to give you your credit information directly, without affecting your score. TransUnion offers an online form, found here. Equifax has multiple types of credit reports you can order here.

You also want to try to limit the number of credit inquiries by different lenders. When you’re shopping around at different banks, the number of inquiries can add up as each bank makes an inquiry to see what they can offer you.

But as a mortgage broker, we have access to multiple lenders all at once.

You could effectively come see a mortgage broker, get one inquiry done, and that inquiry is good for 20 financial institutions, As opposed to having to go directly to every bank. If you have any questions, contact your local Dominion Lending Centres mortgage professional near you.