Check this out !!

FORECLOSURE, BANKRUPTCY, CONSUMER PROPOSAL & CREDIT COUNSELING

The Canadian Bankers Association’s latest report on mortgage delinquency shows that Saskatchewan has the highest per capita of all the provinces. The national average shows that .24% of homeowners are having difficulty paying their mortgage. Saskatchewan is more than triple that at .80% with next in line Atlantic Canada at .51% and then Alberta at .46%. At first glance, these numbers seem relatively small until you note the fine print that “delinquency” in this report only represents those homeowners that are more than 3 months behind.

I thought that I would take the time to go over the mortgage ramifications of a foreclosure, bankruptcy, consumer proposal, and credit counseling.

Foreclosure
This is when the mortgage has gone unpaid to the point that the bank is forced to take back the security for the mortgage which is the home. First of all, the bank doesn’t want to have to do this. Non-payment of the mortgage for an extended period of time forces their hand. The foreclosure process is different in every province. Saskatchewan has the most difficult foreclosure process for the bank and gives the homeowner many chances to catch up and stop it. This process can take months to work through for the bank to take possession of the home to be able to sell it to recover their losses. The long-term effect on a client that goes through a foreclosure is permanent. A record of the foreclosure is placed on each clients’ credit report. Unlike a bankruptcy or consumer proposal that are eventually removed, the foreclosure stays on their credit report for life. What that will mean is that when they want to eventually purchase a home again, they will more than likely require at least 20% down payment.

Bankruptcy & Consumer Proposal
Both bankruptcy and consumer proposal are administered through a licensed insolvency trustee. Typically, every creditor that you have debt with will participate in the process. This includes student loans and arrears with Canada Revenue Agency.
If you have gone through either of these insolvency actions, the mortgage industry sees them as the same thing. What is most important after either of those is to get back up on the credit horse and walk before you run. Canadians that swear off the debt of any kind after insolvency is better known as lifelong renters. Never having a credit card or loan again is certainly fine until you apply for a mortgage to buy a home. Banks and mortgage lenders want to see that you can walk with small amounts of credit before running with hundreds of thousands in a mortgage. Once discharged from either a bankruptcy or consumer proposal obtaining a credit card should be your very first step. The next thing to do is advise both Canadian credit reporting agencies that you were discharged. You may be required to send documents related to the insolvency. It is a good idea to keep all your paperwork from this process in a safe place for at least 10 years.

Credit Counseling
Credit counseling could be a viable option for those that are keeping up with their debt payments but need help in making a household budget to get out of debt faster. For those that have fallen behind on their debts and 1 or more have gone into collection status, credit counseling may not be the answer. There are 2 distinct differences between working with a credit counselor and a licensed insolvency trustee.
1. Student loans and debts to the Canada Revenue Agency cannot be addressed within credit counseling.
2. If credit counseling requires debt negotiations and/or payment arrangements, some of your creditors may decline to participate. This leaves debts outside of the credit counseling arrangement that you must address on your own. It’s a little like having 2 flat tires on your car and only 1 spare. The spare may work well to fix one flat but your car still isn’t roadworthy.

WHAT IS A MORTGAGE “REFINANCE” AND HOW DOES IT AFFECT ME?- Chk this out !!

Refinancing a Home is one of those things where people understand what it is but have trouble explaining How it works. To put it simply, refinancing your Home allows you to access the equity you have built up, by changing the mortgage amount.

Let’s say you bought a $300,000 condo and you paid 20% ($60,000) as your down payment and had a mortgage of $240,000. Over the next 4 years, you continue making payments to pay down the $240,000 you owed and now that amount is only $230,000. Your mortgage is up for renewal in one year however, you want to do some renovations and you need to access the equity in your home—this is where a refinance could come into play.

What this means is you will get an appraisal, or in simpler terms an evaluation, of your current Home and submit that information to a lender. Let’s say your $300,000 condo is now worth $350,000 and you owe $230,000. You have built up an additional $60,000 in equity ($350,000 – $230,000 owing – $60,000 initial down payment= $60,000). You have a mortgage of $230,000 on a Home worth $350,000, therefore your equity in the Home is $120,000.

To access that $120,000, you can refinance your mortgage. So let’s say you want to go back and take $50,000 from the $120,000 you have built up. Your new mortgage would go from $230,000 to $280,000, and that $50,000 will be transferred from the lender to you. You are essentially borrowing money from the lender while also adding money back on top of your mortgage.

This is why people will refinance their Home to make larger purchases. The bank will lend you the money now and get it back in the future, plus interest because it is being added to the mortgage.

This is just one-way people are able to use their Home to access cash. Other ways people can do this, especially if they are looking to complete renovations, is through home equity, lines of credit, collateral charges and purchase plus mortgages.

Knowing this information before you buy can be extremely beneficial. That is why it is important to work with a qualified HomeHow mortgage specialist. Contact a Dominion Lending Centres mortgage professional today for more questions about refinancing!

5 WAYS YOU COULD USE A CHIP REVERSE MORTGAGE – Chk this out !!

Reverse mortgages are continuing to grow as a retirement solution for Canadians 55+. Homeowners 55+ are unlocking their home equity for tax-free funds that improve their cash flow and pay-off higher interest loans. Consider your own financial needs. Do any of these 5 common scenarios sound familiar?

1) You have missed a payment/made a late payment.
Credit card payments can become a vicious cycle; you make monthly interest payments and elongate the process of chipping away at that debt. Alleviate the stress of credit card debt by consolidating smaller loans with a reverse mortgage at a much lower interest rate. By consolidating your debt with a reverse mortgage, you can eliminate the stress of having to make monthly payments towards your loan and in turn, free up your monthly income.

2) You have asked to skip a payment or are accessing your investments earlier than you’d like.
If your debt has led to missing payments or touching your RRIF or retirement accounts, consider using a reverse mortgage to unlock up to 55% of your home equity. This way you can pay off debts while your investments keep working for you.

3) You want to start crossing things off your bucket list, yet can’t afford to.
Maybe your dream is to purchase a second home like a cottage, take a vacation, or even just dine out or attend the theatre regularly. A reverse mortgage can improve your retirement lifestyle by supplementing your monthly income without affecting your OAS and pension.

4) You want to financially assist your aging parents/kids/grandkids.
As the sandwich generation, you’re caring both for kids and aging parents. That can place huge financial stress on a household. A reverse mortgage can give both you and your aging parents financial independence and the ability to help your kids/grandkids pay for their education or even assist with a down payment for their home.

5) You are facing unexpected expenses.
Maybe it’s a leaky roof or a flood in your basement. Or you might have to renovate your home, allowing you to stay in your home long term. A reverse mortgage gives you quick access funds to pay for unplanned expenses without worrying about making any payments until you move or decide to sell your home.

If any of the above examples resonate with you, the CHIP Reverse Mortgage from HomeEquity Bank could be a great solution. Choose to receive funds as a lump sum or a monthly advance, depending on your needs. Your DLC Mortgage Broker can tell you more!

Chk this out – DEBT: TO CONSOLIDATE OR NOT TO CONSOLIDATE? THAT IS THE QUESTION !!

If you are a Canadian living in debt, you are not alone. According to Statistics Canada, household debt grew faster than income last year, with Canadians owing $1.79 for every dollar of household disposable income to debt(1).

• Canadian households use almost 15% of income for debt re-payment(1).
• 7.3% of this re-payment goes towards interest charges (1)
• Interest charges are at their highest level in 9 years(1).
• The cost of living is projected to increase in 2020 (2)

So how can one ever get out of debt? Debt consolidation.

What is debt consolidation?
Debt consolidation means paying off smaller loans with a larger loan at a lower interest rate. For example, a credit card bill debt with interest of 19.99% can be paid off by a 5-year Reverse Mortgage with an interest rate of 5.74%* from HomeEquity Bank. (*rate as of May 2, 2019. For current rates, please contact your DLC Mortgage Broker).

A lot of confusion surrounds debt consolidation; many of us just don’t know enough about it. Consider the two sides:

The pros
• The lower the interest rate, the sooner you get out of debt. A lower monthly interest allows you to pay more towards your actual loan, getting you debt-free faster.
• You only have to make one monthly debt payment. This is more manageable than keeping track of multiple debt payments with different interest rates.
• Your credit score remains untarnished because your higher interest loans, such as a credit card, are paid off.

The cons
• Consolidating your debt doesn’t give you the green light to continue spending.
Consolidating helps you get out of debt; continuing to spend as you did before puts you even further into debt.
• A larger loan with a financial institution will require prompt payments. If you were struggling to pay your debts before, you may be still be challenged with payments. A CHIP Reverse Mortgage may be a better option; it doesn’t require any payments until you decide to move or sell your home.
• You may require a co-signer who will have to pay the loan if you’re unable. Note that a Reverse Mortgage does not require a co-signer, as long as you qualify for it and are on the property title.

So how do you know if debt consolidation is the option for you? Start by contacting your mortgage broker and asking if the CHIP Reverse Mortgage could be the right solution for you.

SOURCES:

1 https://www.cbc.ca/news/business/household-debt-income-1.5056159

2 https://www.statista.com/statistics/271247/inflation-rate-in-canada/

https://www.bankofcanada.ca/2019/03/spending-shifts-and-consumer-caution/

https://www.cbc.ca/news/business/consumer-spending-consumption-canada-1.5006343

HOW TO GET A 5% DOWN PAYMENT FOR A $500,000 PURCHASE- Check this out !!

We have seen a return of the buyers’ market and many people are asking, how long will this last? While some renters without a down payment might be asking, how can o put a plan in place to own?

With the cost of living so high, and student debts coming out of school, many consumers question how they’re going to come up with a down payment for a home.

Here are some ways you can get it done.

• Decide how much you can save and pick a plan that works for you:  a) A 36-month plan saving $700/month will get you $25,200 (you will need about $2,000 for closing costs if you qualify as a first-time homebuyer) b) A 24-month plan savings $600/month for $14,400
• Get a gift from a family member
• Borrow the down payment, or a portion (which may also help with credit building)
• A combination of all of the above

For those of you that want to partner with government for the down payment and profit of home ownership, a new government program can be a helpful tool provided it stays past the October election. https://www.cmhc-schl.gc.ca/en/nhs/shared-equity-mortgage-provider-fund

You might be reading this and thinking, ‘yeah right, that is not reality.’ Or for some people, you know it might just be exactly what will help them move forward.

Perhaps you have graduated from school and your parents don’t charge you rent. Imagine if you could put one of your paycheques every month aside and try living within those means and budgeting accordingly.

Or say you have a partner and one of you just started work in a specific trade and the other’s paycheque went towards the “home purchase plan.”

Also, if you are within the qualifications to buy, you will be earning a combined household income of $125,000-plus per year, so taking those funds right from your paycheque into your RRSP will have additional tax benefits too where you can use the refund for closing costs or amp up your down payment.

Here’s an example of how this worked for a lab technician and chef with a two-year-old daughter.

They did a combination plan as they moved up to Canada from the U.S. two years ago, both got stable jobs and had no outside debt. They were paying $1700 a month rent. They used a $10,000 line of credit they took to put into the investment to help establish Canadian credit. After getting the line of credit and placing it into a safe investment, they:

1. Set up an RRSP and placed $600 a month on the loan and $700 a month into their RRSP.
2. Now this family is used to having a cash outlay of $3,000 per month which will be the actual expectation they have for when they buy a home.
3. With this plan, they take a mortgage for a test drive, save money on taxes, establish a great credit score and worked away toward their goal.

Are there holes in the plan? Yes, home prices may go up, there was interest on the loan they paid and they may have to adjust or modify their plan. Their employment can change, however, this practice will only benefit them no matter what life brings their way and there is a sense of empowerment when you have a plan and can see how you can get there.

Do you or someone you care about want to know how they can be set up with a multifaceted plan to help them move forward with the goal of owning a home?

Check this out !!

REVERSE MORTGAGES – TRENDING NOW

With approximately 1,000 people retiring every day in Canada, it’s not surprising that there has been an increased demand for Reverse Mortgages.
A Reverse Mortgage can assist people aged 55+ to realize their dreams in retirement. Whether they want to travel, help their kids or grandkids or even just supplement their monthly income, a Reverse Mortgage can be an effective way to have their home assist them to meet those goals.
There is a lot of misinformation out there however, that could make people hesitant to get into a Reverse Mortgage.
Many people think that the Bank will own their home but this is completely untrue. A Reverse Mortgage is just that – a Mortgage registered on the home’s Title, just like any other bank mortgage. The client retains full ownership and control of their home. They have the freedom to decide if and when to move or sell.
Another misconception is that you could end up owing more than your house is worth. In fact, due to the Reverse Mortgage lender’s conservative lending practices, you can be confident that there will be equity left in the home when the loan is repaid. They will only issue a Reverse Mortgage up to 55% of your home’s value so there is lots of equity remaining to offset accrued interest charges even if you choose to make no payments at all.
In fact, over 99% of Reverse Mortgage clients have equity remaining in the home when the loan is repaid.
Many people view a Reverse Mortgage as a ‘last resort’. In fact, financial professionals recommend a reverse mortgage because it’s a great way to provide financial flexibility. Since it’s tax-free money, it allows retirement savings to last longer.
Some people think that you cannot get a reverse mortgage if you have an existing mortgage. But many Reverse Mortgage clients use the funds to pay off their existing mortgage and other debts, freeing up cash flow for to use as they wish – and be free of regular mortgage payments too.
I personally have parents over 70-years that could be looking at the expense of Assisted Living for my Mom in the near future. They own their home outright and once both of them are retired that added cost could be too much for their pensions and could force them to sell their home before they’re ready.
I have advised them of the Reverse Mortgage option and we have decided to look into that possibility when the time comes. It is my belief that nobody should feel forced to sell their home and they will explore any options available to them so they have choices.
If you’d like more information on how a Reverse Mortgage may work for you, I recommend speaking with a Dominion Lending Centres Mortgage Professional to get all the facts.

Ways to get a DOWN PAYMENT- Check this out !!

6 WAYS TO GET A DOWN PAYMENT

When is it time to think about saving for a down payment? I would say about a year before you think about buying a home. While that’s ideal in today’s world, we often do not have much time to save for a down payment. Sometimes your landlord is planning on retiring and wants to sell the property. How do you get a down payment?

Here’s a few ways to get a down payment for your home:

1. Save – it’s old fashioned but it works. Open a Tax Free Savings Account (TFSA) and put a set amount into it. If you don’t have the discipline arrange for automatic deposits from your bank account. How much can you save $50 a week? That’s $2,600 in a year. Not enough. How about $200 a week?
   Stay at the Mom & Dad Hotel – while your parents may not be able to help you with a down payment they often have a spare room that you can stay in. One year of not paying rent would make a good down payment even if you chip in for groceries.
2. Extra Income – get a second job and bank every cent from it. I know of many young people who have a day job and are servers on the weekends.
3. Home Buyer’s Plan – the federal government will allow you to pull up to $35,000 from your RRSP account. This goes for your partner. You could put down $70,000 between the two of you. These funds need to be returned to your RRSP over the next 15 years. This is a great quick source for a down payment.
4. Take out an RRSP Loan – borrow an amount that you need for a down payment as an RRSP. Hold the funds for 90 + 1 days and you can withdraw the funds. The cons are that you now have more debt and you have to wait for 90 days. Most sellers want a possession day sooner than that.
5. Sell an asset. I had a client sell his vintage Cadillac Fleetwood for a down payment. Be sure to get a receipt or to sign a bill of sale with the purchaser to show where the funds came from. Rare stamps or coins, another property or vehicle are all acceptable assets.
6. The Bank of Mom and Dad – This may be the easiest way to get a down payment or it may not. Most parents are nearing retirement and trying to save funds. There can be creative ways to get a down payment. They might set up a secured line of credit and use the equity in their home. You could make the payments over the next few years. Note: these payments must be included in your debt ratios. If they decide to gift you the funds and make the payments themselves a gift letter is all that’s needed. They could sell their home and move into a granny suite in the basement or over the garage.

Before you start it’s always a good idea to speak to your favorite Dominion Lending Centres mortgage professional.

Check this out- 3 THINGS YOU MAY NOT KNOW ABOUT CASH-BACK MORTGAGES!!

About twice a year, one of the big Canadian banks likes to run an advertising campaign for their cash back mortgages. These are mortgages usually with 5-year terms where you receive a certain percentage back in cash. The percentage varies from 1% to 5% in most cases. You can use these funds to build a fence, landscape, buy window coverings, etc. The idea is to be able to pay for some things that you would not be able to as you put all your money into the down payment and closing costs and need some help to get started.

1- There are multiple lenders who have cash back mortgages. Don’t jump at the first one you see. They all have different terms and conditions.
2. You are really getting a loan on top of your mortgage. The interest rate is calculated so that by the end of the term you will have paid the lender back the money they gave you and a little bit extra. Sometimes this little bit extra maybe twice as much as you got in cash back.
3 – The average cash back mortgage is a 5-year term. Most Canadians move every 30 months. Therefore when you break a cash back mortgage you have to pay a penalty as per usual but you also have to pay back a portion of the loan that they gave you. If you are 36 months into a 60-months mortgage, you have to pay them back 2 years’ worth or 40% of the cash back. Combined with the penalty this can be a hefty sum. In addition, there are some lenders who require you to pay back 100% of the cash back if you want to break the term.

Before signing for a cash back mortgage it’s better to discuss your needs with your local Dominion Lending Centres mortgage professional. They can advise you on cash backs, line of credit, Purchase plus Improvements or Flex Down mortgages which may be better for your situation.

What are the B-20 GUIDELINES? Chk this out !!

DO YOU UNDERSTAND THE B-20 GUIDELINES?

A new survey has emerged showing that out of 1,901 owners and would be homeowners, 43% (more than two out of five) Canadians are not confident in their knowledge of the mortgage stress tests—despite them being in place for more than a year now.

We wanted to give you a brief set of notes regarding the guidelines. This is something you can use and reference whether you are a first-time home buyer or looking to refinance underneath these new guidelines. It gives a clear picture of what/how you are impacted as a buyer or someone who is looking to refinance.

Here’s what you need to know about B-20:

The average Canadian’s home purchasing power for any given income bracket will see their borrowing power and/or buying power under these guidelines reduced 15-25%. Here is an example of the impact the rules have on buying a home and refinancing a home.

PURCHASING A NEW HOME

When purchasing a new home with these new guidelines, borrowing power is also restricted. Using the scenario of a dual income family making a combined annual income of $85,000 the borrowing amount would be:

REFINANCING A MORTGAGE

A dual-income family with a combined annual income of $85,000.00. The current value of their home is $700,000. They have a remaining mortgage balance of $415,000 and lenders will refinance to a maximum of 80% LTV. The maximum amount available is: $560,000 minus the existing mortgage gives you $145,000 available in the equity of the home, provided you qualify to borrow it.

Source (TD Canada Trust)

These guidelines have been in place since January 1, 2018, and we are starting to see the full impact of them for both buyers and those looking to refinance. Stats are showing that there is a slowdown in the real estate market, however, there is also a heightened struggle for many buyers to now obtain approval under these new guidelines. It’s a difficult situation as the cry for affordable housing is still ongoing as the new guidelines may slow down the market but appear to further decrease the borrowing/buying power of individuals.
Keep in mind, this is just a brief refresher course on the B-20 guidelines. As always, if you have more questions or are looking for more information, we suggest that you reach out to your Dominion Lending Centres mortgage broker to discuss and get a full and detailed look at how it will impact you personally.

WHAT’S YOUR BEST RATE- CHK this out !!

WHAT’S YOUR BEST RATE?

You know at one time I could give you a quote over the phone and not worry that I would be too far out. Today is a totally different story, here are some of the variables that come into play.

1. What’s your credit score? A 700 FICO score is the new 650 for many lenders as their investors demand better quality borrowers.
2. Where is the property located? Rural areas are getting harder to finance.
3. Is it an insured file, are you putting less than 20% down payment?
4. Is it insurable? Are you putting down more than 20% on the purchase but it can qualify under the stress test, currently 5.34%?
5. Is the loan to value going to be 65% or less? You get the same rate as the guy with 5% down and have to qualify with the same criteria.
6. Are you looking to refinance or buy a rental? Sorry, both are uninsurable and have to qualify at 5.34% but you have to pay a higher interest rate.
7. So how about your employment; have you been on your job or at least in the same industry for the last 2 or more years?
8. Down payment requires a 90-day statement of where it has been kept, please be sure that it was in a bank as anything else seems to be picked to death. Larger gifts lately have required the gift or to show the money was in their account. God forbid they should have won it at a casino as they will want the print out from the cage boss, especially in B.C.
9. How fast is your deal closing, as there are quick close rates usually for insured deals?
10. While supposedly everyone is to be able to qualify at 44%TDS and 39% GDS, it’s not always the case as CMHC is still in some instances lower than a 680 FICO score and is wanting the client to be qualified at the old standard of 42% and 35%, which again cuts back the qualifying amounts.

As you can see what’s your best rate has a lot of things come into play today and anyone who gives you a rate over the phone has hopefully asked you at least some of these questions. The best rate today is more about what fits your situation but the old adage of who, what, where and how still apply. Once we have asked the questions, we have to audit the answers to make sure it’s the best fit for your situation. If you have any questions, contact a Dominion Lending Centres mortgage professional near you.