19 May

Mortgage Strategies for a High-Rate Environment

General

Posted by: Adam Sale

Mortgage Strategies for a High-Rate Environment

Mortgage rates have risen sharply across all mortgage products and lenders. Identifying the correct strategy and opportunity between lenders will get you a fair mortgage rate without paying additional interest.

Banks Vs Credit Unions – Over the last 4 months of heavy rate increases I’ve noticed the Big Banks are increasing their mortgage rates much quicker than credit unions.

As of May 19, the big banks are advertising their insured 5-year fixed rates around 4.39%-4.45% while Credit Unions are still offering their 5-year fixed insured mortgage rates at 3.68% – 4.04%.  

Short-Term Strategy – Depending on the borrower’s risk tolerance, there are great fixed mortgage rates in the 1-year & 2-year terms when compared to 5-year terms. These shorter terms give the borrower the benefit of a lower fixed payment, but compels them to come to market and renew their mortgage much sooner.

For borrowers believing interest rates wont go much higher than what they are currently at, or they believe rates will smooth out by the time they need to renew, then these short-term mortgages are an excellent priced option.

Credit Unions are pricing the insured 1-year & 2-year fixed at 2.98% & 3.30%

Variable Rates – Over the last 4-months we’ve seen the discount on Variable rate mortgages decrease from Prime -1% to about Prime -0.70%, and as low as Prime -0.35%.

The Prime rate is currently at 3.20% and is expected to increase throughout this year and next year. If the borrower likes the idea of being able to exit their mortgage with minimal penalties this could be a suitable option for them.

Personal Opinion – If I were purchasing a property and expecting to live in it for the next 3-5 years I would strongly consider a credit union first and then look at either a 2-year or 3-year fixed term. In the past, rate cycles generally lasted 24 to 36 months.

Do you have a mortgage question? Let’s connect!

9 Jun

CMHC Lending Changes, Will the Other Insurers Follow?

General

Posted by: Adam Sale

As I’m sure you’ve heard, CMHC is changing their lending guidelines on high-ratio mortgages as of July 1st. These changes will have a significant impact on homebuyers wishing to use CMHC’s high-ratio mortgage product. Thankfully the other insurers stated they have no intentions on aligning their high-ratio mortgage products with CMHC’s guidelines.

Canada has 3 mortgage default insurers: CMHC, Canada Guaranty and Genworth. 

Genworth and Canada Guaranty released yesterday, June 8, they have no desire to follow CMHC’s stricter guidelines, and will continue providing mortgage insurance based on the current guidelines. This is excellent news for Canada’s real estate industry.

As of lately, CMHC is predicting doom & gloom of Canada’s Post-Covid real estate market, with extreme predictions of home prices decreasing up to 20%. These predictions coupled with CMHC’s lending guidelines creates a self-fulfilling prophecy.

Thankfully, this is the first time the other mortgage insurers are deciding to disregard CMHC’s changes. This is great news for potential homebuyers and sellers, and should bring some confidence back to the market.

If you have any financing questions you would like to discuss please reach out to me @ 778-215-4121 | adamsale@dominionlending.ca

Warm regards,

24 Apr

Mortgage Deferral Strategy

General

Posted by: Adam Sale

Mortgage Deferral Strategy

Deferring your mortgage is not an easy choice to make. The thought of pausing mortgage payments can feel like your finances are going in reverse. What does deferring your mortgage payments really mean? Does the interest stop accruing? 

No. 

Each lender has their own definition of what deferring a mortgage payment means. Most lenders adopt the following:

“The mortgage deferral offer is a pause on mortgage payments themselves, not a forgiveness of the overall mortgage obligation, which means that interest will continue to accumulate and be added to your debt. In some cases the interest will be compounded. There may also be options available to pause your mortgage credit protection insurance premiums.” – TD

As you can see, the interest will continue to accrue on your mortgage, and in some cases TD will be allowed to charge interest on the interest. 

If you wish to actually pause your mortgage and keep your principle amount owing from expanding, you need to pay the interest portion of your monthly mortgage payment. This will stop the amount you owe from growing. 

Your lender may not advertise an interest only option, but when speaking with them, ask them if they would consider an “interest only” payment. Most banks will gladly do an interest only deferral program. 

If you are interested in deferring your mortgage and the options available to you, please speak with your mortgage provider. Below is a list of lender contacts. 

LENDERS CONTACT

ATB 1-800-332-8383
B2B 1-800-263-8349
Bank of Montreal 1-877-895-3278
Bridgewater 1-866-243-4301
Chinook Financial 403-934-3358
CIBC 1-800-465-2422
CMLS Financial 1-888-995-2657
Connect First 403-520-8000
Equitable 1-866-407-0004
First Calgary Financial 403-736-4000
First National 1-888-488-0794
Haventree 1-855-727-0051
Home Trust 1-855-270-3630
HomeEquity Bank 1-866-331-2447
HSBC 1-888-310-4722
ICICI 1-888-424-2422
Manulife 1-800-268-6195
Marathon 1-855-503-6060
MCAP 1-866-809-5800
Merix 1-877-637-4911
National Bank 1-888-835-6281
Optimum 1-866-441-3775
RFA 1-877-416-7873
RMG 1-866-809-5800
Royal Bank 1-800-768-2511
Scotiabank 1-800-472-6842
Servus 1-877-378-8728
Street Capital 1-866-683-8090
TD 1-888-720-0075

2 Mar

Do You Want the Lowest Interest Rate or the Cheapest Mortgage?

General

Posted by: Adam Sale

Do you want the Lowest Interest Rate? Or the Cheapest Mortgage?

If you’re searching for the perfect mortgage, the questions you should be asking yourself are:

“Do I want the lowest interest rate? Or do I want the cheapest mortgage?”

Image result for teeter totter rate

You’re probably thinking, doesn’t the lowest interest rate mean I’m getting the cheapest mortgage?

Not necessarily. You see too many people are being sold the wrong mortgage product because they are after the lowest interest rate, and end up paying big fees when they have to break their mortgage contract.

Rather than starting the mortgage search by looking for the cheapest rate, we should begin our search by reviewing our financing plan and asking ourselves:

1) What major life changes might we expect in the near future? (are we getting married, having a baby, relocating for work?)

 2) What do we want to accomplish with our mortgage? (do we want to pay it down quickly and build up equity in our property, are we going to add a line of credit to it later?)

My point is this, start your mortgage search by reviewing your future goals and ensuring the mortgage product aligns with these goals.

I urge you, don’t fall prey to the belief that interest rates are like golf scores, where the lowest score wins. Rather, speak with a mortgage broker to find the best mortgage product suited for you! Happy hunting!

– Adam Sale

19 Feb

How to Benefit from the Changes to the Stress-Test

General

Posted by: Adam Sale

New changes to the Stress-Test!

Yesterday the Department of Finance unveiled they are changing the stress test rules April 6th.

The changes will affect “insured mortgages,” which are characterized by their low-downpayment requirements and under $1 million purchase price.

Currently, Bank of Canada restricts our qualifying mortgage rate to 5.19% or the contract rate + 2%, whichever is higher.

Under the new rules, the Bank of Canada is disposing of the 5.19% benchmark, and allowing our new qualifying rate to float based on the Median contract rate for a 5-year insured mortgage + 2%.

 

This is a huge step in the right direction!

Buyers will have more purchasing power, and the qualifying rate will better match our economic condition.

If we take a household making a $100K under today’s standards, they will qualify for a mortgage of roughly $500k.

After April 6th, if our 5-year fixed rates are at 2.79% our same household they would qualify for a mortgage of approximately $525k.

I understand this is not a massive difference in the qualifying amounts, but it is a step in the right direction!

How will this change benefit you?

The “floating” Benchmark Rate will be published on a Wednesday and come into effect the following Monday

Under the new “floating” qualifying interest,  you’ll be about to afford more house during periods of a low interest rates.

I suspect we will see an increase in activity in the summer as the typical “summer rate-specials” come out, but we may see a decrease in activity during the winter as rates tend to rise slightly.

12 Feb

5-Tips to Help You Qualify For A Large Mortgage

General

Posted by: Adam Sale

5 Tips To help You Qualify For A Larger Mortgage

Are you trying to qualify for a larger mortgage?

Here are 5 tips to help you increase the amount you’ll qualify for.

Tip 1: Decrease your Credit Card Debt/Revolving Debt

Credit Card debt and Line-of-credit debt is classified as “revolving debt.”

When you apply for a mortgage and you have a balance on your credit card or line of credit, we as loan officers are required to figure out what your “monthly” payments are.

We Calculate all Revolving Debt balances at 3%.

Let’s say you have $20,000 in credit card debt, or on a line of credit, that equals a $600 per-month payment! These theoretical payments can erode much of your mortgage qualifying amount.

(If your line-of-credit is over $50,000, you may get special treatment with how it is calculated. Speak with a mortgage broker)

Tip 2: Keep Your Credit Report Clean

Do you make payments on time? Do you keep your credit card balances low? If you have a great credit score, you will qualify for the maximum amount possible. A credit report is based on a number of variables, but the 2 categories that make up 80% of the calculation are: repayment history, outstanding debt utilization. For example, if you have never missed a payment, but all your credit cards are maxed out your credit score is going to be negatively impacted. The vice-versa is true as well.

The easiest way to ensure you never miss a payment is by setting minimum payments on all your bills. This way, if you end up going to Thailand for 2 months, you’ll never have to think about making that minimum 15$ payment

Tip 3: Lower your Student Loan Payment

Do you have a student loan? This payment may be hindering the amount you can qualify for. One option many first-time home buyers take advantage of is extending their loan amortization. The Government of Canada allows students to extend their amortization up from 10 years to a maximum of 14.5 years.

In the long run you will end up paying more interest, but the lower monthly payments may be what’s needed to get you into your dream home.

Tip 4: Sell your car? (Eeek)

Of course, this is easier said than done, but if you are financing a vehicle those monthly payments could be using up much of your mortgage qualifying room. If you are fortunate enough to live in a city with great public transportation (is it ever great? How about acceptable public transportation). Decreasing your vehicle financing will increase your qualifying amount. After you are comfortably in your new home, you can once again go vehicle shopping.

Tip 5: Guarantor or Co-signor

If you are fortunate to have a guarantor or co-signor to help with your purchase, their income is added to the mortgage application and could help you qualify for a larger mortgage. In some cases, if our signor has too much debt it will hinder our application and it will be better to leave them off.

There you have it! 5-tips to help you maximize your mortgage qualifying amount.

Pro-Tip: Before deciding to purchase the maximum amount of house possible, try living for 6-months with the proposed payments. At the end of 6-months if you are happy with your lifestyle, then I say go for it!

Thanks for reading, if you have any questions please send me a message: adamsale@dominionlending.ca

Cheers,

8 Jan

High Ratio, Insurable, and Conventional Mortgages. Whats The Difference?!?!

General

Posted by: Adam Sale

I’d like to briefly discuss the 3 categories of mortgages being offered by Prime-Lenders, which one offers the cheapest rates, and why.

High Ratio Mortgages

Down-Payment between 5%-20%; needs to have Canadian Mortgage Housing Corporation (CMHC) insurance. This means the insurance agency that dictates what the lending requirements are. So yes, you may be getting a mortgage through ScotiaBank or TD, but at the end of the day it is CMHC that sets the guidelines on what the lending requirements are. High Ratio Mortgages offer the best mortgage rates because the mortgage is insured. This insurance removes the bank’s risk of a client defaulting on their payments.

The CMHC requirements are standardized between all lenders, allowing very little flexibility between lenders. 

Insurable Mortgages

These mortgages have a minimum of 20% down-payment, are uninsured, but still follow CMHC’s lending guidelines. These guidelines include, and are not limited to, the same debt servicing ratios per-credit score, and must qualify with a maximum amortization of 25 years. Insurable rates are similar to High-Ratio mortgages; however, we begin noticing much more variance between these rates with each lender.

Conventional Mortgages

Mortgages that have a minimum of 20% down payment, and do not follow CMHC’s lending guidelines. Within this “Conventional Mortgage” category we start seeing banks being much more creative with their financing requirements. Rates for conventional mortgages are the highest between these groups and vary the most. A few key features of conventional mortgages worth mentioning are outlined below:

–         30 Year amortization: Most banks offering conventional mortgages will allow the client to qualify using a 30 year amortization to lower their monthly payments.

–         No stress test: Some credit unions offer mortgages that are not required to follow the governments stress-test rules.

–         Equity Financing: Several Prime Lending Banks/Credit Unions offer mortgage programs to clients that have a minimum of 35% down-payment. These programs do not follow the typical income requirements, relying heavily on a common-sense approach.

I hope this clarifies some confusion around the different mortgages, and the varying rates being offered.

For more information, please contact me at 778-215-4121 or by E-mail: adamsale@dominionlending.ca

Thanks for reading!

Adam Sale,

15 Nov

What happens after Subjects are Removed?

General

Posted by: Adam Sale

What happens after Subjects are Removed?

When subjects in the purchase contract are satisfied and you agree to the purchase your new home, you are required to place a deposit on the property to remove subjects on the purchase agreement. The deposit forms part of the down payment amount. Once subjects are removed, the purchase agreement is now a binding contract.

It is extremely important you understand the mortgage commitment letter offered by your lender is based on your information at the time of mortgage submission. Any changes to your credit report or employment between mortgage submission and completing the purchase of your new property could jeopardize your financing commitment, and should be discussed with your mortgage broker. DO NOT FINANCE A NEW CAR during this period of time.

From Subject Removal to Completion Day you need to:

  • Retain a lawyer or notary (if you haven’t already)
  • Arrange home insurance
  • Consolidate your down-payment
  • Prepare for Completion day

Retain a Lawyer or Notary

Once subjects have been removed it is time to notify your mortgage broker on the lawyer or notary you are planning on using to complete the transaction. Your lawyer or notary will facilitate the mortgage signing, transfer property title, register the mortgage and register title insurance. Retain a lawyer or notary as soon as possible to ensure the process flows smoothly and to avoid any additional “rush order” charges.

Arrange Home Insurance

Lenders require home insurance to be setup on your new property before they will provide you with the funds to complete the mortgage transaction. To setup home insurance you will need to speak with an insurance agency/broker and let them know you’ve recently purchased a home and inform them of the completion date. They may ask you for a copy of the purchase contract. Once the insurance is setup, retain a copy of your home insurance as you will be required to bring it to the lawyer/notary office when you sign the transfer documents.

Consolidate Your Down-Payment

To keep the process moving smoothly, begin consolidating your down-payment into one account as early as possible. If you plan on using your RRSPs in the Home Buyers Plan you will be required to fill out the government form “T1036 – Home Buyers Plan Request to Withdraw Funds from RRSP.” Bring this form, and a copy of your purchase agreement to the institution that issued your RRSP’s so they can arrange the withdraw of these funds. It often takes multiple days to transfer funds out of your RRSP/TFSA to your designated account. Consolidating your down-payment into a single account allows for easy withdrawal on completion day.

Preparing for Your Completion Day

Your lawyer will be in contact with you during this process and inform you on what to bring for completing the transaction. You will be instructed to bring a copy of your home insurance, and a cashier’s cheque that will include the following amounts for:

  • Down-payment (less the deposit amount)
  • Legal fees
  • Title insurance fee
  • Property transfer tax amount
  • Property tax / Utility bill adjustments

Completion Day

Finally, the day has come for you to complete your side of the transaction and take ownership of the property. On this day you will bring the requested cashier’s cheque to the lawyer or notary, and sign the required documents to finalize your side of the sale.

Under the guidance of your lawyer or notary you will be signing your mortgage documents, transferring the title of the property, registering the mortgage charge and registering the title insurance.

After all the required documents are signed and your fees are paid, your side of the transaction is complete!

Possession Day

This is the day you have worked so hard for. Today you pick up the keys to your new home!

24 Oct

3 Ways to Purchase a Rental Property

General

Posted by: Adam Sale

3 Ways to Purchase a Rental Property

In this write-up I’ll briefly discuss 3 different approaches for financing a rental property, and the biggest issue clients face

It is assumed if someone is purchasing a rental property, they already own their primary residence. This is a second property purchase. 

The biggest issue clients face when purchasing a rental property is ensuring their income will support the monthly payments required with operating two properties.

Yes, receiving rental income will help support the additional payments, but will it fully cover them? Every lender approaches rental income differently. Make sure you are working with a knowledgeable broker to maximize your rental income’s purchasing power.

Conventional Mortgage – 20%+ Down-Payment

Purchasing a rental property with a conventional mortgage (20% down-payments) will give you the greatest amount of flexibility in finding lenders with favorable rental programs. Conventional mortgages are not required by law to follow CMHC’s strict lending guidelines, thus creating opportunities for lenders to develop niches in the marketplace.

For example, some lenders aggressively target the condo market by removing monthly strata payments or property tax payments from the income-qualifying equation.

Slight variations between lenders, such as the one mentioned above, have a significant impact on your purchasing power. It is estimated for every $500 in monthly payments the stress test decreases your purchasing power by approximately $80,000.

Recently, some provincial lenders are aggressively growing their residential mortgage share by offering their own “relaxed” version of the stress-test.

Refinance Option

One of the easiest ways to purchase a rental property is by refinancing one’s primary residence to purchase the new property in an all-cash deal.

This option is straightforward, and can qualify the homeowner for their new mortgage by only adding their primary residence’s housing costs into the income-qualifying equation.

If adding rental income to the income-qualifying equation is necessary for the purchase, using the conventional mortgage option may be a better solution.

High-Ratio Mortgage – Less than 20% Down-Payment

Purchasing a property with less than a 20% down-payment is tricky, but do-able if you have solid income to support CMHC’s rigid lending guidelines.

High-ratio mortgages are designed for owner occupied properties. In order to perform this transaction requires you to move from your current property, and make the new property your principal residence.

So, what makes a high-ratio mortgage transaction involving a rental property more difficult to complete?

When income-qualifying a client for this type of transaction, we are required to follow CMHC’s “net-rental income” approach for adding rental income into the calculation. This equation is not favourable, and typically creates a negative net rental income which decreases the clients’ purchasing power.

“Net rental income = gross rents – operating expenses.”

To discuss any of these options in greater detail, please contact me at adamsale@dominionlending.ca, or by phone at 778-215-4121.

Thanks for reading!

16 Oct

Purchase Plus Mortgage Program

General

Posted by: Adam Sale

Purchase Your Home and get an Additional $60,000 for Renovations

Renovation

Below is a quick write-up I did on the Purchase Plus mortgage program, who it is designed for and how it operates

If you're interested in purchasing a property and then renovating it to increase its live-ability and value, then the Purchase Plus Mortgage program may be your ideal mortgage solution.

When applying for a mortgage, lenders typically lend based on the homes current appraised value. However, the Purchase Plus program allows lenders to lend on the future value of the home, after the necessary improvements are performed.

This mortgage program allows a maximum of $40,000 in additional funds to be put towards improvements on high-ratio mortgages.  On conventional mortgages some programs will grant a maximum of $60,000 for improvements.

How it works?

To take advantage of this program, borrowers will first need to qualify for the whole mortgage amount including the additional improvement portion. Once they’re qualified, the process of purchasing a home is relatively the same except for one additional step. Lenders require a satisfactory quote outlining the scope of the work and the cost estimates.

With a satisfactory quote, the home appraiser will generate a report with 2 values. The current value of the property, and the future value.

When it is time to purchase the property, the lender will advance the funds for the current property’s value to pay out the seller. The lender then retains the funds for the future value of the property until construction is completed.

During the renovation phase it is the home owners responsibility to pay for the completed work. Once the project is 100% complete, the appraiser will review the project and inform the lender of the new property value. With a satisfactory report the lender will then transfer the remaining funds to the borrower.

Speak with a Contractor

Are you unsure of what your potential project will cost, or where to find a reputable contractor? I highly recommend Greg Baarts of GreNor Homes. His years of experience and excellent reputation will ensure your project completes on time. 

Greg Baarts

GreNor Homes | www.grenorhomes.com

604-505-4574 | Greg@grenorhomes.com 

www.grenorhomes.com

Find out if this Program is right for You

If you are interested in more information on the Purchase Plus option, or would like to discuss possible mortgage scenarios please send me an email, or call me at 778-215-4121.