13 Aug

Bank of Canada Reduces the Stress Test to 4.79%

General

Posted by: Adam Sale

The mortgage stress test lowered today from 4.94% to 4.79%.

After running a quick calculation using:

  • Income of 100k
  • 10% down payment
  • Applicable Vancouver Property taxes
  • Condo fees of $300
  • Heat $50

Maximum purchase price has increased from $537,000 to $552,000.

If this same client used a down-payment of 20% (138K), the maximum amount we could qualify them for using amortization 30 years is a property worth approximately $690,000.

If you would like to more information regarding a potential mortgage situation please give me a call at 778-215-4121.

Sincerely,

Adam Sale

24 Jul

Correct Steps to Take Following a Bankruptcy

General

Posted by: Adam Sale

Steps to take following a Bankruptcy

If you’ve had a previous bankruptcy or consumer proposal don’t worry!  There are still many lenders in the prime-space which will lend to you if you follow the correct steps.

Lenders will accept a mortgage application after you’ve been discharged from your bankruptcy for a minimum of 2 years, and they you have at least 1 trade-line in your personal name (not joint) for a minimum of 2-years.

A trade-line could be a pre-paid credit card, an auto loan/lease, or a line of credit.

If you’ve had a bankruptcy, the first steps to take you should take once you’ve your “discharged from bankruptcy” letter is to obtain a  secured prepaid credit card as soon as possible, and to start using it actively.

While using this secured credit card do not exceed a balance of 50%, and don’t miss any payments for the full 2-years. During this time, try to increase your card limit from the usual $500 limit to a $2000 limit. A higher limit will provide more lenders to choose from once your credit is re-established.

After they have a gone through this 2-year process your credit will be considered re-established so you are able to qualify for high-ratio and default insured mortgages at prime banks.

If you have any questions please contact me at 778-215-4121.

Thanks,

17 Jul

Rule-of-Thumb on Qualifying Limits

General

Posted by: Adam Sale

If you’re a salary or stable income employee with minimal debt payments, here’s a quick Rule of Thumb to help you figure out your qualifying limits.

Regular salary and hourly income employees with a down-payment of less than 20%, and have minimal debts, will qualify for a mortgage amount that’s approximately 5-times their annual salary.

80k Salary = Loan amount of approximately 400k

Regular salary and hourly income employees with a down-payment of 20% or more, and has minimal debts, will qualify for a mortgage amount that’s approximately 5.5-times their annual salary.

80k Salary = Loan amount of approximately 440k

Of course there are many factors which will either raise or lower your qualifying amounts such as: consistent income, yearly bonuses, differing condo fees, property tax amounts, credit score, etc.

If you would like to do a complete pre-approval to figure out your maximum qualifying limits please contact myself at 778-215-4121 or adamsale@dominionlending.ca.

 

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,

4 Jun

Foreign Buyers Tax Strategy & Exemption

General

Posted by: Adam Sale

Did you know many non-residents are actually exempt from the foreign buyers’ tax? That’s right!

Non-residents who’ve applied for their permanent residency through the BC Provincial Nominee Program and have received confirmation, are exempt from paying the foreign buyers tax.

This is a one-time exemption, and the property must be used as a principal residence.

The BC Provincial Nominee Program is a popular way for non-residents to receive their permanent residency. Under this program there are 3 different entry options: Express Entry BC, Skills Immigration and Entrepreneur Immigration.

Foreign Buyer’s Tax Minimization Strategy

Married/common-law couples in which only one partner has their Permanent Residency may be able to minimize the amount of foreign-buyers tax charged on their purchase based on how they decide to their names registered on the property’s title.

New home-owners can request to register 99% of the property’s title in the partners name who has their Permanent Residency, and the remaining 1% in the non-resident spouse’s name.

This will subject only 1% of the property’s purchase price to the foreign buyers’ tax, and could end up saving them thousands!!

If the non-resident spouse then gets their PR within 1-year of home ownership they may qualify for a full refund of the tax.

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

Warm regards,

16 Mar

Mortgage Industry Update, March 16th

General

Posted by: Adam Sale

Last week we saw several changes in the mortgage industry that will directly affect our Real Estate industry. Here are some need to knows:

Stress-Test

The stress-test changes slated for April 6th are suspended. The posted mortgage rate, published weekly by the Bank of Canada, will remain the qualifying mortgage rate. It is currently 5.19%, but it is expected to fall this week to around  4.95%.

Mortgage Repayment

CMHC is highlighting their Mortgage repayment options for those effected with making their mortgage payments. The best thing a homeowner can do if they fear they won’t be able to make their mortgage payment is get out in front of it as soon as possible and let their lender know. Many lenders have payment deferral options that will actually allow borrowers to skip a payment if they come into financial hardship. For more information on what CMHC suggests please view this website: Dealing With Mortgage Payment Difficulties

Rising Risk-Premiums

Bank’s are rising their risk premiums due to the expectant recession which is causing an increase in fixed mortgage rates and a tightening of the discount off the prime rate on variable-rate mortgage loans. This widening spread between mortgage rates and government yields is typical behaviour during a contracting economy, and took place during the financial crisis in 2008. During the crisis, rates continued to decline even with the widened spread.

Banks of Canada Rate Cut

The Bank of Canada is hopeful that its rate cuts will stabilize the housing market from what might have otherwise been a substantial shutdown. Expect the Bank to cut rates again to near-zero levels, following in the footsteps of the Fed. So far, as of this writing, the Canadian banks have not responded to Friday’s BoC rate cut. The prime rate went down a full 50 bps on March 5 after the Bank cut its key rate by that amount on March 4. But so far, the Big-Six banks have not responded to the 50bps cut three days ago. 

 

11 Mar

Variable Rate or Fixed Rate?

General

Posted by: Adam Sale

Fixed Rate or Variable Rate?

We are approaching interesting times. The world economy is slowing down due to heightened tensions with the coronavirus, oil prices, blockades etc etc, the list goes on.

One positive spin on this whole fiasco is cheaper mortgage rates, Yay!

When an economy is contracting like this the government steps in to lower the overnight interest rate to make borrowed money cheaper to ease expenses and “hope” new borrowed money will be put to a productive use.

On March 4th, the Bank of Canada did just that. They decreased the Overnight Interest Rate from 1.75% to 1.25%. This caused retail banks’ Prime Rate to drop from 3.95% to 3.45%.

The decrease in Prime Rate directly effects variable rate mortgages, and people saw their interest rate decrease by half a point overnight.

As it stands, variable rate mortgages are an extremely attractive product. If the economy continues on this contraction trajectory, it is likely we will see more rate cuts in the future, but don’t expect them to happen as quickly as you may think. Keep in mind we’ve been expecting Bank of Canada to decrease the interest rate for almost a full year and they’ve finally responded.

I suspect the Bank of Canada will follow their typical strategy of waiting 3-6 months and seeing how this rate cut effects the economy before adjusting the rate again.

The average variable rate mortgage product is Prime (3.45%) minus 0.75% to 1%; so 2.45-2.70%.

The beauty of a variable mortgage is in its flexibility. These mortgages offer excellent repayment features, and their penalties for breaking a contract are only 3-months interest – which is substantially lower than most lenders IRD penalty for fixed-rate mortgages.

For those homeowners looking for a stable mortgage payment, fixed rate mortgages are still a great buy. They are extremely cheap and getting cheaper daily!

Insured Mortgages are averaging: 2.39%

Insurable Mortgages (owner-occupied): 2.39-2.64%

Conventional Mortgages (over 1 mil, Rental properties, Non-owner occ): 2.64%

26 Feb

Mortgage Rates are dropping! Here’s why.

General

Posted by: Adam Sale

Mortgage rates are dropping!

In case you aren’t aware, there is an unprecedented amount of doom & gloom in the news, but amidst all this chaos is mortgage rates are getting cheaper.

As you may know, the stock market has been declining since Monday. While this may not be good for our investments (ugh!), this is excellent for cheap mortgage rates.

Over the last 3-weeks Canada’s 5-year bond rates dropped to similar levels seen in August 2019.

Since it usually takes 2-weeks of depressed bond prices before wholesale lenders decrease their mortgage rates, we are finally starting to see those rates adjust. The big banks typically wait a full month before they adjust their rates, so we are still waiting for those to come down.

In August 2019, 5-year fixed mortgages were priced as low as 2.49%, so be on the lookout for similar rates as long as these bond prices stay depressed.

If you have any clients that are thinking about purchasing, now is the time to beat everyone to the punch and jump on these abnormally low-interest rates.

I will keep you updated with how things transpire.

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!

3 Oct

How to Purchase Property in the U.S.

Mortgage Tips

Posted by: Adam Sale

Living the Goodlife

Have you ever wondered about purchasing property south of the border to get away from our wet winters? Most of us have! Recently I spoke with an accountant who asked “what is the best way to receive financing for purchasing a property in the U.S?”

There are a couple financing options for U.S non-residents, each with their pros and cons.

Disclaimer: Dominion Lending Centres is licensed to arrange mortgages in Canada only.

Option 1: Refinancing Canadian Property

The easiest way to receive financing for a property is to refinance one’s property in Canada and deposit the new money into a bank account. Of course, everyone’s situation for purchasing a property in the U.S. is different. This scenario best applies to persons who own property, or size-able investments, in Canada.

Key benefits of purchasing a U.S property in this fashion

a. Deal with the U.S/Canada exchange rate once – at time of purchase. This allows the buyer more control when taking advantage of exchange rates when they are favorable.

b. Best possible rates, refinancing your Canadian property with a Canadian lender is not considered risky, so lenders will give you their best rates and mortgage payments are in Canadian dollars.
Pro tip: Refinance your property 3 months prior to purchasing your property to satisfy U. S’s anti-money laundering laws. Keep the new funds in a separate bank account and wait until the exchange is favourable, then shop for the best possible exchange rates on large sums of money.

For preferred rate Inquiries, contact Taylor Swaffield at the Vancouver Bullion Exchange taylorswaffield@vbce.ca

Option 2: Get a U.S. Mortgage in Canada

There are options in Canada through TD, BMO and RBC to receive a U.S mortgage. These big banks have ties in the U.S. and each one will lend in specific States. The mortgage process is similar to obtaining a mortgage in Canada; however, it is significantly longer. Expect closing to take approximately 45-60 days. The typical income documents are required to qualify for the mortgage, as well as credit bureau report and a home appraisal.

One thing to note, monthly mortgage payments are in U.S. funds. This makes borrower’s vulnerable to exchange rate fluctuations. Receiving a U.S mortgage may be advantageous for Canadians working in the U.S receiving U.S funds for payment, or for vacation rentals.

When performing any large transaction south of the border, speak with an accountant specialized in Canada/U.S. Taxation to ensure you remain compliant with IRS and CRA rules.

Bank Websites:
Bank of Montreal
Royal Bank of Canada
Toronto Dominion Bank

For more information on mortgage options please contact me at 778-215-4121, or adamsale@dominionlending.ca

Adam Sale
www.adamsale.ca
Vancouver Mortgage Broker
First Pacific Mortgage DLC