Recently there were changes to the mortgage rules yet again, and one of the rule changes was regarding refinancing your home. At one point in the last 10 years you could refinance your home all the way back up to 95% of its current value, which in many cases has put that property what we call under water or upside down. Basically, real estate markets ebb and flow and if you refinanced to 95% when we were at the crest of a market wave then as markets rolled back you were underwater… clever huh.

Fast forward a few years and the government said ‘what a minute, that is dangerous’, and it was. Clients now had no options for that property except to keep it, hoping values came back or turn it into a rental and hope to break even. At this point the government now said you can only refinance your home to 80% of the value which of course meant you needed to have equity in the property of at least 20% to make a change. This was an insurable product for many of our monoline lenders at this point, so it was something that was competitive in the market.

Welcome to 2018 and today you can still refinance your home to 80% but the Office of the Superintendents of Financial Institutions (OSFI) and CMHC now say that as a lender you can no longer insure this product. What does that mean for the average consumer? First off, it means that lenders across the board are not offering the same rate for insured mortgages as they are for refinances. The point spread between insured and uninsured mortgages has grown to, on average, .30% higher for 5-year fixed rates and it is .55% higher for variable rates.

To add to this extra cost, the new rules of qualifying at 5.14% which is currently the benchmark rate, applies to all mortgages including refinancing. Overall, the changes make it tougher to refinance and forces Canadians to seek alternative options to take equity out of their homes. In many cases this will mean looking to the private sector at higher rates when they need that money. If you have any questions about refinancing, contact your local Dominion Lending Centres mortgage professional.

When: Saturday, April 28 at 9 AM

Location: Your Driveway

We advertise, provide signs, balloons, and maps for the event

Details or sign up contact: Kimberly Walker 778.828.6186 or kimberlywalker@dominionlending.ca

Final sign up date: April 20, 2018

Include your name, address, and any big ticket items

Please ensure you receive confirmation

地点：您的车道。

我们将提供广告、标牌、气球以及宣传单。

联系人：Iris Zhang 7788346660 或 iriszhang.home@gmail.com

请告知我们您的地址、电话以及大宗商品。

请您最后确认是否收到我们的确认邮件。

报名截止日期：2018年4月20日。

An accelerated payment is a mortgage payment that is increased slightly so that you can pay off your mortgage faster. There are two common types of accelerated payments: bi-weekly and weekly. Of the two, bi-weekly is the much more common choice because it matches with pay dates more often.

An accelerated payment works by increasing your weekly or bi-weekly payment by an amount that would have you pay one full month’s payment extra per year.

Accelerated payments are a great way to start paying off your mortgage, but they actually do not have much of an impact on the interest you will pay. Banks and mortgage professionals use this term to make borrowers think they are paying off their mortgage faster, but the amount of interest saved over the course of your term is minescule.

There’s nothing wrong with accelerated payments, but they are only part of the puzzle. Please contact a Dominion Lending Centres mortgage professional to learn more.

Illustration:
If your payment is $1,000 per month, you pay 12 months per year, which will equal $12,000 of payments that year.

Now, if you pay semi-monthly, or every half month, you pay $500 per payment, for a total of $12,000 per year at 24 payments.

Bi-weekly payments are 26 payments per year with $461.50 per payment.

However, accelerated bi-weekly payments use the semi-monthly payments of $500, 26 times. This means that you end up paying $13,000 over the course of the year, or one extra monthly payment.

The Bare Bones

If all you do is an accelerated payment, your mortgage payoff is stunted compared to what is available. Across Canada, due to the fact that mortgage sizes are now very high, paying off a mortgage should be more of a priority.

Is your mortgage coming up for renewal this year?

There is a good chance that you or someone know has a mortgage coming due. Some 47% of Canadians, almost one out of every two households, that currently have financing in place will mature within the next 12 months with a major lender in Canada.

Here are a couple simple rules to follow if you, a friend, a family member or colleague are renewing your mortgage this year.

• DO NOT just simply sign the renewal letter that comes in the mail.
• INVESTIGATE your options.

70% of all mortgagors simply sign the renewal letter that comes in the mail. You would think that because you have been with the current lender for so long that you would receive the BEST rate out there. NEWS FLASH, that is 100% false. Remember, lenders are in business of making money for their shareholders. Your current lender has done their homework, you should do yours. They know that most of the borrowers will sign and send back the form for ease and convenience. We are lazy by nature and we possess too much trust. As finance consumers, there are scenarios I’ve seen where we are leaving 20-40 (0.20% – 0.40%) basis points on the table.

I recently read an article online that indicated the average mortgage amount in the Metro Vancouver area was $438,716 for 2016. Let’s round that amount to $450,000 for ease of calculation. For every 0.25% difference the mortgage payment increases (or decreases) $13 per every $100,000 extended. If your current lender offered you a rate 0.25% higher than another lender then this scenario would yield an annual increase of $936. Are you able to invest 4-5 hours of your time to save that kind of money? Heck ya you can! That is $187.20 – $234 per hour.

Renewing with your existing lender may or may not be your only option. When 47% of you out there receive the renewal letter in the mail this year, I have 936 reasons why I would strongly advise you to reach out to a Dominion Lending Centres mortgage specialist to discuss ALL your options – switching lenders to save money and/or leveraging equity for financial planning purposes.
Here is an example of how I just re-financed my home to access my equity. We were able to obtain a HELOC (Home Equity Line of Credit) mortgage product from a major Canadian charter bank.

• Current residence appraised at $1.15MM.
• Current mortgage balance, $445,000.
• Maximum loan limit, $920,000 (80% of market value: 1,150,000 x 80%).
• Opted to secure the current balance into a variable rate mortgage
• The equity of $475,000 was set-up access from a line of credit
• These clients now have access to funds for any future needs: renos, emergency, investment opportunities, post-secondary education for their children.

But while a HELOC allows for product diversification and long-term planning, it is not for everyone. It can be a bad idea if it’s just used as access to easy cash. One needs to possess high self-discipline, as the funds are extremely accessible. A HELOC is also not available to all homeowners as there must be greater than 20% equity in the home before a lender will consider it.

With 13 modifications to the lending policies since 2006 the time to plan is now. If I were to attempt the same re-financing maneuver today to leverage equity I would qualify for 20% less ($95,000) or $380,000. This would be one less rental property added to the portfolio. Before anymore changes happen, you should consider accessing your money today.

Mortgage Insurance Premiums. Many people know what they are- an extra cost to you the borrower. But not many people realize how they are calculated. Understanding the premium charges and how they are calculated will help lead you to making smarter down payments.

• 5%- 9.99% down payment of a purchase price is a 4% premium
• 10%- 14.99% down payment of a purchase price is a 3.10% premium
• 15%- 19.99% down payment of a purchase price is a 2.8% premium

So, that means with a $300,000 purchase price and a $30,000 down payment (10%), you would have a 3.10% premium added to your mortgage, making your total mortgage amount $270,000 + $8,370 for $278,370 total. The $8,370 being 3.10% of your original $270,000 mortgage.

Now let’s say you have a down payment potential of $60,000 and have the income to afford a $350,000 purchase price but you found one for $325,000. Using your entire $60,000 down payment (18.46%), your new mortgage amount would be $272,420, where $7,420 of it represents the mortgage insurance premium.

But what if you change that $60,000 (18.46% down payment) to say $48,750 and have a down payment of exactly 15%? Well, your premium is still the exact same as it would be with an 18.46% down payment because your premium is still 2.8% of the mortgage amount. That means you will now save $11,250 (difference in down payments), while only paying $7,735 in premiums (an increase of $315).

I don’t know about you, but if someone told me I could put $11,250 less down and it would only change my insurance premium by $315, I am holding onto that money. You now have more cash for unexpected expenses, moving allowance, furniture, anything you want. You can even apply it to your first pre-payment against your mortgage and pay the interest down while taking time off your loan. Obviously if cash is not an issue, putting the full $60,000 would be better seeing as you are borrowing less and paying less interest. However, if cash is tight, why not hold onto it and pay that difference over the course of 25 years?

Consult with a Dominion Lending Centres mortgage professional when it comes to structuring your mortgage request with a bank. It is small little things like this that make all the difference.

If you’re an entrepreneur, business person or commercial investor then you probably have or need a commercial mortgage.

Where should you start?

Do you call your bank, or do you call a commercial mortgage broker?

I recommend you call your bank.

Yes, that’s right; I’m a commercial mortgage broker and I am telling you to start with your bank (unless you are already out of time).

Most business people have financial resources, a good credit rating and a relationship at a chartered bank or credit union.

Common sense says: start with a commercial account manager at your bank. Take your documents with you: financial statements, your mortgage request (written down), latest appraisal (if completed) and any lease agreements. Tell your account manager you want indicative rates and fees before moving forward with a mortgage application.

Spend thirty minutes in the manager’s office, no longer. Do this quickly; don’t waste time. After all, this is just one lender and you have no idea whether your bank is competitive or even if it wants to do the loan. Tell your banker you need an answer in two days. If the account manager cannot give you an indicative rate and fees in a short timeframe, you are speaking with someone who will ultimately cause you headaches down the road.

Once you have the bank’s rates and fees, it’s time to verify the information with a commercial mortgage broker who has access to multiple lenders. Now, you could call ten lenders yourself, but again, common sense says that would be a waste of time.

Call your friendly neighborhood Dominion Lending Centres commercial mortgage broker

Depending on who you call, the commercial mortgage broker will do one of three things:

• ask you to sign a representation agreement,

• give you a song and dance about the low rates they have achieved for clients, or

• tell you the truth.

Top commercial mortgage brokers cut to the truth.

Why? They are busy. They don’t waste time on deals they can’t close.

As a commercial mortgage broker, it makes no sense to sign a representation agreement until I know I can add value. Step one is simply to determine whether the mortgage is bankable. To do this, I need documents. Yes, top commercial mortgage brokers are like bankers. With the right information, transactions can be digested in 20 minutes and can be summarized in six pages or less.

Top commercial mortgage brokers say things like:

• Tell me about your deal in 5 minutes or less; nature of transaction, deal size, legal structure, cash flow, quality of financials and timeline.

• What documents can you send me? I’ll review them in 24 hours and call you back.

• Have you called your bank yet? What rate did they give you?

Tell your commercial broker the truth. If your bank offered 4.5% fixed for 5 years then say so. Why? Because no one wants to waste time. Your commercial mortgage broker doesn’t set the rates; the lenders do. Your commercial mortgage broker knows when a rate makes sense and whether lower rates are available. For example, if I can’t save you 25 basis points (that’s 0.25% per year), the reality is, by the time we pay to move the mortgage to another lender, you’re probably better off taking your bank’s initial offer.

Top commercial mortgage brokers understand this, and they will be truthful with you.

“Hey, if you have 4.5% fixed in this market for that building, in that area; take it, don’t hesitate; it’s a good deal.” I say this to entrepreneurs who call. It serves no one to enter an agreement that won’t add value. In fact, its our fiduciary duty to tell you.

Some entrepreneurs say they already have good rate (even when they don’t). “Oh, my bank offered me between 4.6 and 5.2%.” The thinking being, if they imply they have 4.6%, then the broker will work even harder to get a lower rate.

Beep. Wrong.

Brokers don’t set the rates; lenders do. This just muddies the water. If the broker thinks you already have a good rate (and best-in-market is 4.5%, only 10 basis points less), then the broker will move on right away.

About Commercial Mortgage Brokers

All a commercial mortgage broker wants, is serve you; and that means delivering the best rates and terms. There is no financial incentive for a broker to hold back information or low rates. Similarly, holding back your bank’s interest rate just wastes everyone’s time, including yours.

As a commercial mortgage broker, if I think I help you, I’ll tell you right away. I’ll review the deal quickly, determine if its bankable and touch base with a few lenders. If lenders express interest, I’ll call you to discuss what they told me.

Transparency and open communication are the keys to saving time and to getting the most from your commercial mortgage broker.

If you are getting a runaround and want the straight scoop, call me.

With changes to mortgage rules and interest rates on the rise here are some tips for your variable rate mortgage that could save you thousands.

Since 2009 the prime lending rate has shifted from a high of 6% down to 2% range remaining fairly level for the past few years before rising to a present day level of 3.45%. During that time, lenders have offered consumers high discount variable mortgage as low as 1.2% when rates were at their lowest, to current rates of 2.45 (depending on the lender and if the mortgage is insured or not).

Historically the choice of a variable rate mortgage over a fixed term has allowed borrowers to save in interest costs.

I always recommend if my clients can qualify and it makes sense for their specific situation to choose variable only if they will take full advantage of the lower rate. By setting their payment to the equivalent of the 5 year fixed rate at the time, the difference in payment goes directly to principal pay down.

Every 10% increase in payment shaves three years off the amortization of a five-year term so every bit extra matters and can make a difference.

If your mortgage is maturing in the next 90-180 days, it is time to talk to your Dominion Lending Centres mortgage professional for tips for your variable rate mortgage that could save you thousands.

You may feel the pressure to lock in to a fixed rate after the recent increases in the prime lending rate. For some this may be an option. However, I have the same advice every time someone asks me this question: It depends on your situation and we need to do a review. Take the extra time to review the current rate, remaining term of the mortgage, the new offer, how that will impact payments and your plans for staying in your home, moving and/or if this is an investment property.

For example Amy and Jake have a current balance of $300,000 on their mortgage with a variable rate at Prime minus .80% (2.65%). Current payments set at $703 bi-weekly. The mortgage matures in 24 months but they are considering to lock in for a new five-year term offered at 3.34%. New payments would be $739. They love their condo but not sure if they will stay or move in two years or not.

After a review of their mortgage we offer a second option. Keep the remaining variable rate mortgage in place for the remaining two years. Set payments at 3.34% or $739 bi-weekly.

They decide on this second option because:

• In 24 months the savings on interest is $4,000 and their outstanding balance is $4,000 less than by staying in the fixed rate
• They won’t be locked into a mortgage for another five years
• If they choose to sell before the maturity date, the penalty on a variable mortgage is only three months interest
• In two years they can either choose to stay with the same lender or move to another lender without penalty

With this strategy they don’t have to feel pressured into locking in today and they can continue to take advantage of the lower variable rate.

So if you are in a variable rate mortgage and not sure what to do. Remember my tips for your variable rate mortgage that could save you thousands.

While most people know the main things they need to buy a home, such as stable employment and enough money for a down payment, there are a few other factors that may help you realize you’re ready, perhaps even earlier than you thought!

As a mortgage broker, it is my job to ensure that each one of my clients is getting the best service I can provide. Part of this means educating as much as possible when it comes to buying a home, which is why I’ve put together a list of 4 signs that may tell you that you are ready to become a homeowner.

You should have more funds available than the minimum of a down payment
This one may seem obvious, but it’s something that people may not realize until they actually think about it. It’s very difficult to afford a home if you only have enough money for a down payment and then find yourself scrambling for day-to-day living after that.

If you have enough money saved up (more than the minimum needed for a down payment), you may be ready to start house-hunting.

Your credit score is good
This might seem obvious at first glance, however, if you don’t have a good credit score, chances increase that you could be declined altogether or stuck with a higher interest rate and thus end up paying higher mortgage payments. If you have a less-than-optimal credit score, working with a mortgage professional can help you get on the right track in the shortest time possible. Sometimes a few subtle changes can bump a credit score from “meh” to “yahoo” in a few short months.

Breaking the bank isn’t in your future plans
Do you plan on buying two new vehicles in the next two years? Are you thinking of starting a family? Are you considering going back to school?

Although you may think you can afford to purchase a home right now, it’s extremely important to think about one, two, and five years down the road. If you know that you aren’t planning on incurring big expenses that you need to factor into your budget anytime soon, then that’s something that may help you decide to buy a home.

You are disciplined
It’s easy to say, “it’s a home, I’m going to have it for a long time so I may as well go all-in!”. While that would be nice, that’s rarely the case!

You must have a limit that you’re willing to spend. Sitting down with a mortgage broker or real estate agent and analyzing your finances is crucial. It’s important that you know costs associated with buying a home and what the maximum amount is that you can afford without experiencing financial struggles. IMPORTANT: This is not the amount that you are told is your max!

This is the amount that you calculate as your max based on your current monthly budget and savings plan. It’s quite frequent where I have clients tell me that their max budget is, say, $1200 and then when I run the numbers they could actually be approved for much more. Low and behold suddenly these guys are looking at homes that are hundreds of dollars a month higher than their initial perceived budget. It is up to you (with my help or pleading, when necessary) to reel things back in and make sure that you aren’t getting into something that affects the long-term livelihood of a well thought out budget or savings plan.

Conclusion

These are just four signs that you may be ready to purchase a home. If you’re seriously considering buying or selling, talking with a Dominion Lending Centres mortgage broker, such as myself, can help put you on the right path to a successful real estate transaction.

Fixed Interest Rates

This is usually the more popular choice for clients when it comes to deciding on which type of interest rate they want. There are many reasons why, but the most unsurprising answer is always safety. With a fixed interest rate, you know exactly what you are paying every month and you know that the amount of interest being charged for the term of your mortgage will not increase and it will not decrease. Fixed interest rates can be taken on 1-year, 2-year, 3-year, 5-year, as well as 7 and 10-year terms. Please note, term is not meant to be confused with amortization. When you have a 5-year term but a 25-year amortization- the term is when your mortgage is up for renewal, but it will still take you the 25 years to pay off the entire debt. The biggest knock on fixed interest rates when it comes to mortgages, especially 5-year terms, is the potential penalty. If you want to break your mortgage and pay it out, switch lenders, take advantage of a lower rate, or anything like this and your term is not over, there will be a penalty. With a 5-year term, a fixed rate penalty can be anywhere from $1,000- $20,000 or more. It all depends on the lender’s current rates, what yours currently is, the length of time remaining on your term, and the balance outstanding. The formula used is called an IRD (interest rate differential) and the penalty owed will either be the amount this formula produces or three month’s interest- which ever is greater. Fixed interest rates, especially 5-year terms can be the most favourable. They are safe, competitive interest rates that you will not need to worry about changing for the term of your mortgage. However, if you do not have your mortgage for the entire term, it could hurt you.

Variable Rate Interest

The Bank of Canada sets what they call a target overnight rate and that interest rate influences the prime rate a lender offers consumers. A variable rate, is either the lender’s prime lending rate plus or minus another number. For example, let us say someone has a variable interest rate of prime minus 0.70. If their lender’s prime lending rate is 5.00% in this example, they have an effective interest rate of 4.30%. However, if for example the prime rate changed to 6.00%, the same person’s interest rate would now be 5.30%. Written on a mortgage, these interest rates would look like P-0.7. Variable interest rates are usually only available on 5-year terms with some lenders offering the possibility of taking a 3-year variable interest rate. When it comes to penalties, variable interest rates are almost always calculated using 3-months interest, NOT the IRD formula used to calculate the penalty on a fixed term mortgage. This ends up being significantly less expensive as breaking a 5-year term mortgage at a fixed rate of 3.49% with a balance of $500,000 will cost approximately $15,000. That is if you use the current progression of interest rates and broke it at the beginning of year 3. A variable interest rate of Prime Minus 0.5% with prime rate at 3.45% will only cost $3,800. That is a difference of $11,200. You can expect to pay this kind of amount for the safety of a fixed rate mortgage over 5-years if you break it early.

Which one is best?

It completely depends on the person. Your loan’s term (length of time before it either expires or is up for renewal) can be anywhere from a year to 5 years, or longer. A first-time home buyer typically has a mortgage term of 5 years. Within those 5 years, the prime rate could move up or down, but you won’t know by how much or when until it happens. Recently, variable rates have been lower than fixed rates, however, they run the risk of changing. With fixed interest rates, you know exactly what your payments will be and what it will cost you every month regardless of a lender’s prime rate changing. If you go to the site www.tradingeconomics.com/canada/bank-lending-rate you can see the 10-year history of lender’s prime lending rate. Because lenders usually change their prime lending rate together to match one another (except for TD), this graph is a good representation. As you can see, from 2008 to 2018, the interest rate has dropped from 5.75% to 2.25% all the way back up to 3.45%.  Canada has had this prime lending rate since 1960, and in that time it has seen an all-time high of 22.75% (1981) and all-time low of 2.25% (2010). Whether you want the risk of variable or the stability of a fixed rate is up to you, but allow this information to be the basis of your decision based on your own personal needs. If you have any questions, contact a Dominion Lending Centres mortgage professional near you.