This page is set up for you to be able to learn about a wide variety of mortgage related topics so that you are fully ready to conquer your mortgage like a champ!
Around the end of May 2014, the market started to experience a declining trend in mortgage rates. Though the housing market was already superb, professional in the industry began gearing up for an influx in home buying. Their predictions were correct and we’ve seen more and more houses of higher value being sold into the summer months.
When an area experiences a mortgage rate decline many renters make the hasty decision to purchase a dwelling before the rates jump up again. Though you could get a great deal you need to ask yourself if you’re truly ready for everything that home ownership entails.
Here are 6 key ways to decide if it’s the right time for you to buy.
If you’ve said yes to everything on this list then you could begin seeing mortgage and real estate professionals to begin the home buying process! If however, you weren’t confident in one or more area on this list then you need to take some time to resolve any barrier that may be in your way. You could also make appointments with mortgage and real estate professionals to discuss what your options are and what you can do to prepare for home ownership. It’s always best to take a little extra time to make sure that your investment is something you actually want, at the right time, and for a price you can afford. Happy house hunting!
The level of documentation which is required for the average mortgage these days can be very frustrating. It can seem endless and very nitpicky and annoying because we are able to purchase a vehicle with just a paystub. There are a few reasons for the increased documentation requirements.
The first is that the banks are mandated by the Anti-terrorism Act to make sure all funds are legally sourced. Criminal organizations do exist even here in Central Alberta and they are clever and will launder their funds however they can. I had the opportunity to attend an anti-fraud session led by the Edmonton police and he told a story of how a routine bylaw infraction led to the discovery of a criminal enterprise which involved more than 32 million dollars in mortgage fraud. Police resources, insurance proceeds, court time and on and on mean there was a genuine cost to the greater community. Increased due diligence prior to funding can help catch such things ahead of time.
The second is that your banks and mortgage lenders are accountable to the mortgage default insurers and their company’s investors and shareholders and to OSFI which oversees them all. If you default on your mortgage they have to be able to prove that they took every step possible to ensure you were in fact a solid borrower qualified for the mortgage.
Honestly it boils down to this. If you were lending someone $350,000 wouldn’t you want to make sure they could afford to repay you?
So back to down payment sources. When you are providing documentation for your mortgage it is going to have to be pretty clear. It will have to show your name, financial institution holding said asset, account number and all transactions into the account for the past 90 days. Any deposits over $500 will have to be properly accounted for as per the above rationale. A quick reminder that you will have to have at least 5% to put down and an additional 1.5% for the closing costs so 6.5% all together though these days the banks and the mortgage insurers really like to see additional savings just in case you experience a job loss or illness.
Here are the most common and acceptable down payment sources and how each is to be verified. Keep in mind that you can use a combination of them but you will have to provide verification of each.
Sometimes I get questions about rare occurrences such as a lotto win. Even in this case, which I have actually seen, there is a paper trail.
So called mattress money is no longer acceptable unless you can show you have held it in a traditional account for the 90 days.
Banks and mortgage lenders are stuck abiding by the rules which mean that so are we all. Until next time, have a great week.
After diligently saving your pennies and carefully managing your credit to be as strong as possible you are finally ready to start house hunting for that perfect dream home. Between you and your new life lies the seemingly terrifying mortgage process so let’s go over what you can expect so there are no surprises along the way.
Make sure to ask questions at each stage of the mortgage process. The onus is on you as the person signing the contract to understand the loan you are being offered and the terms it comes with. There are so many resources available to you as a home buyer that it is easy to learn a bit about mortgages before you sign.
It can seem a bit daunting but we broke it down into bite size pieces so you will be ready to navigate it like a boss and before you know it the realtor will be handing your keys and your new life can begin.
Once upon a time there was a lovely young couple who saved and saved and saved all of their pennies for the down payment on a home. They met with a friendly mortgage professional to get a pre-approval and quickly provided all the required documentation. Their bright eyed Real Estate professional helped them to navigate the home buying process when they had discovered their dream home. The I’s were dotted and the t’s were crossed on all of the forms the lawyer set before them and so at long last they sat back to gleefully await the day to keys to their castle would be handed to them. The end right? Alas it is not. This story which should have the happiest of ending does not. Our heroes made a choice after the approval was granted but before the possession of the home which has killed their mortgage and put their dreams on hold.
Unfortunately all too often we see people make this mistake and so this week we are going to look at the things you must never do during the mortgage process. Or at least you should never do any of them without first asking your mortgage professional how it will affect your approval.
So please, do not put yourself at risk and make sure that you keep your financial picture consistent throughout the mortgage process to ensure that your mortgage story ends happy. Until next time!!
The Mortgage Process
Obtaining mortgage financing can be very confusing especially since the rules are constantly changing. Knowing the basics and what to expect along the way can take away some of the pain so this week we are going to do a quick rundown of the whole thing.
The application – At this point you are going to answer all sorts of questions about yourself. Lenders are looking to find out just who you are before they loan you a whole bunch of money.
So you have completed the application and now it’s time to verify all of the information. A few bad eggs have wrecked it for the rest of us so you are going to be asked for a lot of paperwork. Mortgage fraud is huge and the lenders are accountable to the mortgage insurers, OFSI, and to their investors so you better bet they are going to verify until they are satisfied. Here are some of the things you will have to provide:
So your mortgage lender has approved the documentation you have provided and you are having a look at the paperwork in front of you before you sign on the dotted line. A few great questions to ask are:
And now that you have asked your questions and met all the conditions you are off to the lawyer for the final signing. There are a few costs you need to anticipate:
And there you have it. The mortgage process as succinctly as possible. Have a great week.
Mortgages seem to have been in the news a lot in the last few weeks. The federal government came in and made some more changes to the mortgage rules. The reason for these changes is basically this: They guarantee, through their backing of the mortgage default insurers, that in the case of default the mortgage lenders have 100% assurance they will not lose any money. That’s why the government keep a very close eye on the housing industry. Taxpayers will have to cover the losses should they occur. The last round of changes saw the implementation of a stress test. Borrowers have to qualify at a higher rate than the one they are actually getting to ensure they can afford their mortgage payments when the rates go up. It looks like there will be additional changes coming soon but we will have to wait and see what those entail. Thankfully for the government we Canadians are a good bet on the whole and arrears are still very low. Approximately 1/10th of those in the United States.
So they keep referring to mortgage lenders which seems to me to leave some room for clarification. Given how rarely we go through the mortgage process and how quickly things seem to change, a quick recap of the types of mortgage lenders in Canada seems to be in order and the pros and cons of each.
Banks – This one is pretty clear. We have the Big 5 in Canada who have branches on every corner. In addition to them you have the Credit Union and the Treasury branches. There are also a few lesser known banks who do not have as many branches but operate and are regulated in exactly the same way.
Pro – You have the ability to walk into the branch and have all of your borrowing neatly in one place. There is a peace of mind knowing that you are dealing with a company you drive by.
Con – Banks historically have higher penalties if you break the mortgage. Their porting policies can be cumbersome and most use what is called a collateral mortgage. This can make it easier to borrow additional funds down the road but it also allows other borrowing to be tied to your mortgage which can make it hard to move your mortgage later on.
Monoline Lenders – This is the term used for mortgage lenders who operate through mortgage brokers as compared to having branches and attempting to market to you directly. This is the term used for mortgage lenders who operate through mortgage brokers as compared to having branches and attempting to market to you directly. The insurance companies market to the insurance broker who then chooses the best one for you. It is just like this. They market directly to mortgage brokers who can offer these companies to you as a consumer. Saves the lenders a huge amount of advertising costs really.
Pro – Payout penalties are usually lower and you are less likely to get put into a collateral mortgage.
Con – There is no branch for you to go to. Your dealings with your lender is limited to phone, email and online portals.
Alternative Lenders – This is the term for a mortgage lender who will consider you when you cannot quite meet the qualification guidelines of the banks or the monoline lenders. An example of who may be looking at this type of a lender would be someone who is self-employed but chooses not to pay themselves a large income in order to avoid taxes. These lenders can be banks, divisions of banks or companies who have found a lending niche for an undeserved group of borrowers.
Pro – Mortgage approvals for people who do not qualify through the mainstream channels. These lenders do not go through the mortgage insurers so you can avoid the mortgage default insurer premiums.
Con – Often these lenders have higher rates and in some cases a lender fee which you will see either added onto your mortgage or you will pay out of pocket.
Private Lenders – I use this term to encompass a group of lenders who will lend to those people who cannot meet the guidelines of any of the above. No established credit, no verifiable income, damaged credit, previously bankrupt with no re-established credit, tax arrears or even those about to go into foreclosure are people who may consider these lenders. Once a foreclosure shows on your credit bureau it is almost impossible to get a mortgage in which case choosing one of these lenders ahead of time can be in your best interest.
Pro – They will lend to many people who will not be considered by the other groups allowing them to keep their homes, free up funds to restructure debts or become home owners years before they would otherwise be able to.
Con – These lenders charge higher interest rates and generally a fee. You also need to have a sizeable amount of equity and be located in a major centre to be considered by these lenders.
So there you have a brief summary of the types of mortgage lenders in Canada. They all have an important role to play and enable many Canadians to achieve and retain their status as homeowners. And hey, let’s face it, we are Canadians. We are historically a group who sees the benefit in owning our own homes so isn’t it great that we have so many lenders to help both us and our neighbours.
A lot can change in a year when it comes to mortgages. These changes can provide great opportunities for mortgagees to refinance their mortgage at the time of renewal in order to save money. Unfortunately, most people are under the impression that once they sign on the dotted line they are locked into their mortgage agreement for the specified term. One study found that a staggering 70% of people simply renew their mortgage every year without even looking into other options! Refinancing can give you the leverage to make your mortgage more affordable. Here are 5 tips to help you prepare for your first mortgage renewal and save thousands of dollars!
Whether you decide to work with a professional or not make sure to do some research for yourself. It’s always a good idea to have the basic knowledge fully understood before jumping into one of the biggest purchases of your life. If you are ever unsure of any specifics, call your mortgage broker or professional to clarify. We are always happy to help guide you through the process!
Buying a Home with Your RRSPs
The Home Buyers’ Plan (HBP) allows first-time home buyers to withdraw amounts from a Registered Retirement Savings Plan (RRSP) to purchase or build a home without having to pay tax on the withdrawal. Budget 2009 increased the HBP withdrawal limit to $25,000 from $20,000.
For HBP purposes, an individual is generally considered to be a first-time home buyer if neither the individual nor the individual’s spouse or common-law partner owned and lived in another home in the calendar year in which the HBP withdrawal is made or in any of the four preceding calendar years.
Special rules apply to facilitate the acquisition of a home that is more accessible or better suited for the personal needs and care of an individual who is eligible for the disability tax credit, even if the first-time home-buyer requirement is not met. These rules have also been modified to provide the same $25,000 withdrawal limit.
Notes on the Program
For a First Time Home Buyer:
For Our Self-Employed Clients
If You’re Selling and Buying a New Home:
If You’re Switching to a New Lender:
On Top of the Above, You May Be Asked for Additional Items Such As:
Browse Our Educational Videos to Learn More about Mortgages:
How to Determine the Best Mortgage Term
DLC Mortgage Life Insurance Explained
DLC - Tips for Paying Your Mortgage Faster
DLC - Self Employed Mortgage Solution
Why Use a Mortgage Professional
Understanding Your Credit Report
Fixed vs. Variable Rate
Canada Guaranty, CMHC and Genworth
High Ratio Fees
If you are looking to purchase a property with less than 20% of the purchase price as a down payment, all banks require that the mortgage be insured through either The Canadian Mortgage and Housing Corporation (CMHC), or Genworth Financial Canada. These institutions provide mortgage insurance to homebuyers and have identical premiums of which are listed below.
|Current||New (Effective March 17, 2017)|
|LTV Ratio||Total Loan Amount||Top-Up Amount||Total Loan Amount||Top-Up Amount|
|Up to 65%||0.60%||0.60%||0.60%||0.60%|
|65.01% - 75%||0.75||2.60%||1.70%||5.90%|
|75.01% - 80%||1.25%||3.15%||2.40%||6.05%|
|80.01% - 85%||1.80%||4.00%||2.80%||6.20%|
|85.01% - 90%||2.40%||4.90%||3.10%||6.25%|
|90.01% - 95%||3.60%||5.65%||4.00%||6.30%|
|90.01% - 95% Borrowed Down Payment||3.85%||5.65%||4.50%||6.60%|
*Rates as of 2017-02-06
Mortgage loan insurance helps protects lenders against mortgage default, and enables consumers to purchase homes with as little as 5% down payment — with interest rates comparable to those with a 20% down payment!
To obtain mortgage loan insurance, lenders pay an insurance premium. Your lender will pass this cost on to you. The premium payable is based on a percentage of the home’s purchase price that is financed by a mortgage. The premium can be paid in a single lump sum or it can be added to your mortgage and included in your monthly payments.
For more information try visiting CMHC’s website at: http://www.cmhc-schl.gc.ca/en/co/buho/index.cfm
How Much Can I Afford?
How Much Home Can You Afford with a Benchmark Qualifying Rate of 4.64?
The information below is for illustrative purposes only and does not take into account property taxes, heat and household debt. Please contact your DLC Mortgage Broker for full details.
|Your Annual Gross Income||Monthly Payment||Mortgage Balance||Minimum DOWN||Maximum home||10% DOWN||Maximum Home||20% DOWN||Maximum Home|