What's New!

BOC Rate Update

Even when the Bank of Canada says nothing it still speaks loud and clear.

The central bank has gone quiet since its first rate hike in seven years, last month.  In the run-up to that announcement, and in the days following it, there was a lot of chatter.  The Bank did not want the increase to come as a surprise, as some of its previous rate-cut announcements did.

For now the deafening silence is being interpreted by analysts as a sign that the Bank of Canada is OK with expectations that there will not be any change in rates until October.  The Bank’s next opportunity for a change is September 6th but the general view is there will not be any action until the October 25th setting.  The Bank’s Monetary Policy Report will also be published on that date.

No one from the Bank has a public address scheduled until after the September setting.  Deputy Governor Tim Lane will talk on September 18th and Governor Stephen Poloz has a speech and news conference on the 27th.

Governor Poloz has said the Bank is basing its rate decisions on “the data” and he would prefer to have markets pay attention to that, rather than “hanging on the Bank’s every word.”  The markets have responded by saying they need to hear the Bank’s interpretation of the data, so you can count on everyone listening quite intently to Poloz next month, on the 27th.

Market watchers are looking at a 70% chance of a rate increase in October, which will likely be the last move for 2017.

If you would like to review your current mortgage and discuss possible options, feel free to call us direct Donna 613-612-2111, Mike 613-203-2030

 

Important Things to Consider Before You List Your Home

There are several things to consider before you take the plunge and put your home up for sale. This might sound obvious, but the first step is to call your mortgage broker, not your lender directly or your realtor.
You don’t have to look long for an unfortunate story of someone who didn’t understand their portability, penalty or transfer costs. Here’s how you avoid this scenario.

1. The anniversary date of your mortgage will depend on your penalty. If you are in a variable rate there usually (unless you took some kind of no frills product with an additional penalty for the appearance of a lower rate) will pay 3 months interest (so a monthly payment and a half) in a fixed rate it can be up to 1-4.5% of the outstanding mortgage balance. Remember we can estimate things, the only guarantee you will have of your penalty is when the lawyer requests the payout statement.

2. Just because a mortgage says its portable doesn’t mean you don’t have to completely re-qualify. Changing properties means complete requalification of everything; credit, income and property. Less than one per cent of mortgages actually get ported due to the changes in the market, or your circumstances.

3. If you have accumulated outside debt, you may not even qualify to purchase for more due to recent rule changes. You’ll need clarity on what the approximate net will be after anything that is required to be paid out to improve qualification.

4. If you list your property and want to buy first or need money for a deposit, you may need to change your mortgage first which you won’t qualify for if your property is already listed. This happens frequently when downsizers are selling.

5. Making a purchase requires a deposit that later forms part of the down payment, so understanding this before you go out shopping helps you plan for it

A little preparation helps the process go more smoothly, and we are here to help!

   

Top 8 Questions about Reverse Mortgages

Having completed many reverse mortgage deals, there are some questions that we find we get over and over again.
So today we thought a piece on the 8 most common reverse mortgage questions that people in Canada have regarding reverse mortgages would be beneficial information for anyone considering a CHIP as an option.

1- If I have an existing mortgage on the property, can I get a reverse mortgage?
Not only is this the most common question regarding reverse mortgages, it is actually one of the most common uses for a reverse mortgage – to pay off the current mortgage and eliminate that payment and help with monthly cash flow.
However, it is important to realize that you would need to qualify for enough to pay that existing mortgage in full.
For example: If you have $70,000 remaining on the mortgage, you would need to qualify for at least $70,000 to be eligible for a reverse mortgage.
If you owe $70,000 and qualify for $100,000 in reverse mortgage funds, the $70,000 would be paid first and you would be left with the remaining $30,000.
The good news is that the reverse mortgage funds can also be used to pay any penalties or charges for paying out your mortgage as well.
However, the existing mortgage must always be paid off using the reverse mortgage funds and you get to keep whatever is left. Essentially, you are swapping your mortgage with a reverse mortgage and keeping the excess cash.

2 – Can I pay the interest or make payments on the amount I receive?
Yes, you can make monthly interest payment if you choose and you can also pay up to 10% of the amount borrowed (1 payment per year) if you wish.
However, you also have the option to pay nothing at all until you sell the property or until you pass away. Most people choose this option but it is nice to know that you can pay the interest every month (essentially turn the reverse mortgage into the same thing as a Home Equity Line Of Credit).

3 – How do you determine how much I qualify for? I thought I could get 55% of my home value?
This is a common question that we get. It is important to note that you can qualify for up to 55% of the value of the property and not everyone will get this amount. The words ‘up to’ are very important in this statement.
To determine how much you qualify for, four different factors are used: The ages of all applicants, the property value, the property location (postal code) and the property type.
Here is a quick example for all 4 factors: Someone aged 80 will qualify for more than someone aged 60; someone in a city will qualify for more than someone in the countryside; someone with a property value of $500,000 will qualify for more than someone whose value is $200,000 and someone who lives in a detached house will usually qualify for more than someone who lives in a Condo.

4 – I’m 60 but my wife is 53, can we still qualify?
Unfortunately, no. Both applicants need to be 55 or over to qualify. Even if just one of you is on the title, because it is deemed a ‘matrimonial home’ (meaning that the husband and wife both have a legal right to the home, by nature of being married) both of you need to be 55 or over.

5 – What is involved in the application?
Reverse mortgages aren’t as difficult a process to go through as a traditional mortgage. However, you aren’t going to simply be given the money either – remember you are still talking about large amounts of money here and the lender is a Schedule A bank.
Your credit score and income are not usually significant factors in the application – but the lender will still check these. In addition to this, proof of identity and other such paperwork is required.
An appraisal is always required and is the first step – so the lender can identify the market value of your home and therefore how much they can lend. However, it is possible to get a ‘quote’ before this.

6 – What if I want to sell my home?
You can sell your house at any time if you have a reverse mortgage. The mortgage amount (plus any accrued interest and prepayment penalties, if any) would then be paid from the proceeds of the sale. The process would be exactly the same as if you had any other kind of mortgage or HELOC on the property.

7 – Will I still own my home? Yes, you will remain on the title for as long as you or your spouse live in the property and you can never be forced out of your home because of a reverse mortgage.
In fact, from this point of view a reverse mortgage is ‘safer’ than a traditional mortgage. Under a traditional mortgage, you could lose your home for not paying your monthly mortgage payments. Since no such payments exist for a reverse mortgage, there is no such risk.

8 – If I sell my house, can I re-apply for another reverse mortgage on my new property? Absolutely! As long as the property is your primary residence – but just remember that you would need to qualify for enough to pay any mortgage on the new property.
Reverse mortgages can be used for purchases in this way.

If you would like to explore the reverse mortgage option further or have questions, feel free to contact us, and we would be pleased to help.

   

EMOTIONAL HOMEBUYERS CAN LOSE OUT ON THE BEST DEALS

Emotional Homebuyers Can Lose Out On the Best DealsBuying a home is financial decision, but also an emotional experience.

Before we’ve explored every room, we often start imagining our new lives there. Where our furniture will go. The parties we’ll host in the open-concept living-dining space. The mornings we’ll spend at the breakfast bar overlooking the garden or skyline… When a home speaks to us emotionally, the fear of missing out on it can set in fast.

That’s especially true in a real estate market where multiple offers and bidding wars are common, where a financing condition can put you at a disadvantage, and where prices are at all-time highs.

According to the 2017 Genworth Canada Home Ownership Study, 60% of first-time buyers were worried they might miss out on the “perfect” house. That can lead emotional home buyers to act against their own best interests by, for example, forgoing important conditions, or paying more than they had budgeted.

There’s no need to lose the dream — you will host those parties — but you’ve got to take emotion out of the deal, and these strategies will help.

Assemble your entire team before looking at any property.

That means: interview experienced real estate agents with expertise on your desired neighborhoods; consult a financial adviser to help determine how home ownership fits into your other goals (a wedding, saving for a child’s education, retirement planning, etc.) and establish a budget including “what-if” scenarios, such as a layoff or maternity leave; find a mortgage broker to help you secure a pre-approval, explain your options, and answer your questions here. You may be able to achieve home ownership sooner than you think. Find out how

Get the names of 3 home inspectors. Call and introduce yourself now.

Many emotional home buyers forego the inspection process in an effort to make their bid more competitive. That’s a risk. With 3 recommended inspectors on speed dial, you should be able to get a qualified professional to visit a property the day you want to make an offer. Your real estate agent is one source of referrals, or check with the Canadian Association of Home and Property Inspectors.

Don’t visit properties outside your price range.

Best-case scenario, you’ll walk away deflated. Worst-case scenario? You’ll bid on something you can’t comfortably afford. Stick to your homeowner budget (likely to be higher than renting, since it includes property taxes/maintenance fees, utilities, etc.) and practice living on it for a few months before you decide to make a purchase.

Focus on the things you can’t see.

The efficiency of the heating and cooling systems, the age of the roof, the state of the electrical… these matter most when it comes to deciding if a home is a good financial deal. Hardwood floors, quartz counter tops, and stainless steel appliances can be seductive, but they shouldn’t be a priority.

Surprise repairs and upgrades to fundamentals — like a furnace on its last legs, plumbing that isn’t to code, or uninsurable knob-and-tube wiring — could sink your budget. And if problems have been covered up, you might just have to rip out those magazine-worthy finishes and details.

There is no disputing that buying a home is a massive financial decision as well as an emotional experience. But minimizing emotions throughout your home buying experience is a heads-up move that will ultimately benefit you.

For more tips on what you should know before you purchase a home visit www.homeownership.ca.

   

What does it mean to co-sign for a mortgage?

What Does It Actually Mean To Co-sign For a Mortgage?There seems to be some confusion about what it actually means to co-sign on a mortgage and you know that where there is confusion, your trusted mortgage professional seeks to offer clarity. Let’s take a quick look at why you may be asked to co-sign and what you need to know before, during, and after the co-signing process.

So why are you being asked? Last year there were two sets of changes made to the mortgage world which can likely explain why you are receiving this request in the first place.

The first occurred early in 2016 whereby the overall lending standards were increased in regards to an individual’s management of their credit and the resulting responsibility of Canada’s financial institutions to ensure they are lending prudently. We have seen an increase in requests for co-borrowers to help strengthen applications when credit or job stability is an issue.

The second happened just in October. A new ‘stress test’ rate applies which has especially impacted borrowers with less than 20% down. They must qualify at a rate of 4.64% though their actual interest rate is much lower. This has decreased affordability for many which means they could be looking for a co-borrower to increase how much home they can qualify for.

If it was me, I would ask questions as to exactly why the applicant needs a co-borrower. If it is a credit issue then you need to assess if that an acceptable risk. If it is a matter of not enough income, you need to assess that instead. What is the exit strategy for you all from this joint mortgage?

What can you expect? You will be required to complete an application and have your credit pulled. As you are now a borrower the banks will ask you for all the documentation that the main applicant has already provided. This can include but will not be limited to:

  • Letter of employment
  • Paystubs
  • 2 years Notice of Assessments, Financial Statements and complete T1 Generals
  • Mortgage statements on all properties you own
  • Bank statements if helping with the down payment
  • Property tax bills
  • Lease agreements
  • Divorce/separation agreement

So you get the idea. You are now a full applicant and will be asked for a whole bunch of paperwork. It is not just a matter of saying yes. Once the application is complete and all conditions have been met with the mortgage, you will have to meet with the lawyer as well.

What do you need to be aware of?

  1. This is now a monthly liability according to the world. You will have to disclose this debt on all your own applications going forward. It can affect your ability to borrow in the future
  2. Each lender is different in their policy as to how soon you can come off the mortgage. Familiarize yourself with this. Are you committing to this indefinitely or only for a couple of years?
  3. Mortgages report on the credit bureaus so you could be adversely affected if there are late payments
  4. If the main applicant cannot make the payment for whatever reason, you are saying that you will. Make sure your budget can handle that for a few months.

A few things you may want to consider if you do agree to co-sign:

  • Ask for an annual statement to be sent to you as well on both the mortgage and the property taxes.
  • Consider a joint account for mortgage payments so that you can check in every so often to ensure all payments are being made on time
  • Talk about life insurance! If the worst occurs, then at least have enough of a policy in effect, with yourself as the beneficiary, to cover a year of mortgage, taxes and bills so that you are not hit with an unexpected series of expenses until the property sells.

So though you just want to help your loved one into their dream home, you are all better served if you know exactly what you are getting into and are prepared for the contingencies. We here at Dominion Lending Centres are ready to help!

   

Page 12 of 14