Every once in a while you get to help people out and make a real difference in their lives. Recently a couple was referred to me who wanted to renew their mortgage. The bank that they had been dealing with for over 20 years had offered them a 5 year fixed rate that was more than 1% higher than the going rate.

First I told them to accept the lender’s option for a 6 month open mortgage. While it had an interest rate twice as high as they usually pay, it’s open and we could switch them as soon as everything was done. I have had other lenders who automatically put people into a fixed rate 6 month mortgage if they did not hear back from the clients before the mortgage expired.

I was able to beat this rate without any difficulty, but I was wondering why they were offered such a high rate. On closer examination of their credit reports, I saw that in the three years since they had purchased their home, they had built up their credit card and line of credit debt up over $50,000. As a result, the debt ratios didn’t work with any lenders. Their lender knew this and decided to take advantage of the client and charge them a premium to renew.

What the bank was not counting on was a mortgage broker who doesn’t give up. Over the years, our brokerage has developed relationships with a variety of lenders. One of those lenders, a credit union, arranges RRSP loans for us. They were running a loan special with an interest rate of 4.95% for loans up to $50,000. I sent a copy of our application over to the credit union with my clients’ permission and they were able to consolidate $50,000 of the debt and lower the monthly payments by $500. In addition, they would be paying off all this debt in 5 years. Under the old 19% rate, it would take them 10-plus years to pay their credit cards.

Now I was able to arrange a loan and lower their payments by over $200 a month. As this took time to arrange the consolidation loan and then the mortgage switch approval, rates dropped again by another .10 basis points. I was able to get the mortgage rate lowered again saving the clients another $1080 over 60 months which paid for the higher interest rate they had for 2 months.
Now I have saved my clients $43,000 over the next 5 years. That was a good day. If you want to look at options for lowering your mortgage and credit debts be sure to speak to your local Dominion Lending Centres mortgage professional.

By David Cooke

The new First Time Home Buyer Incentive program from CMHC (Canadian Mortgage and Housing Corporation) was officially released on September 2. This program was met with mixed reactions across the mortgage industry, but we wanted to take a minute to give you the facts regarding the program. Below are the key points you need to know, and as always if you do have any further questions please reach out to us.

What is it?
Eligible homeowners are able to apply for a 5% or 10% shared equity mortgage with the Government of Canada.  A shared equity mortgage is where the government shares in the upside and downside of the property value. The Incentive enables first-time homebuyers to reduce their monthly mortgage payment without increasing their down payment. The Incentive is not interest bearing and does not require ongoing repayments.
Through the First-Time Home Buyer Incentive, the Government of Canada will offer:
• 5% for a first-time buyer’s purchase of a re-sale home
• 5% or 10% for a first-time buyer’s purchase of a new construction

It’s important to understand that with this program, the government will then OWN 5-10% of the equity of your home (pending on how much was contributed to the down payment).

Who is eligible?
First, you must be a First Time Home Buyer. This incentive is only offered to those who are purchasing their first home. Second, you need to have the minimum down payment to be eligible. The minimum down payment is 5% of the purchase price of the property, and this must come from your own resources. The Federal Government will not give you 5% to put towards/cover the entire down payment. Third, your maximum qualifying income is no more than $120,000. Lastly, your total borrowing is limited to 4 times the qualifying income.

There are restrictions on the type of property you can purchase. The below are the eligible properties:
o New construction (5-10% incentive)
o Re-sale home (5% incentive)
o New and resale mobile/manufactured homes (5% incentive)

Residential properties include single family homes, semi-detached homes, duplexes, triplex, fourplex, townhouses, condominium units. The property must be located in Canada and must be suitable and available for full-time, year-round occupancy.

How Does Repayment Work?

You can repay back the incentive in full at any time without a pre-payment penalty or you can repay the incentive after 25 years or if the property is sold, whichever happens first. The repayment of the incentive is based on the property’s fair market value:
o You are given a 5% incentive of the home’s purchase price of $200,000 or $10,000. If your home value increases to $300,000 your payback would be 5% of the current value or %15,000
o You are given a 10% incentive of the home’s purchase price of $200,000 or $20,000 and your home value decreases to $150,000, your payback amount would be 10% of the current value or $15,000.

If you are interested in this program or have further questions, we encourage you to reach out to your Dominion Lending Centres mortgage broker. This is a brand-new program and more details are coming out each day. We also are working to better understand the implications of this type of shared equity mortgage and will keep you updated on any news or updates we receive.

By Geoff Lee

Mortgages are complicated—we get it! But there are steps that you as a homebuyer can take to make the process a much smoother one (plus let you walk away with the sharpest rate!)

1. Use a Broker
This should be the first step you take when getting a mortgage! Enlisting a trusted broker to work with you can help you secure the sharpest rate and the right mortgage product too! This is one of the biggest (if not the biggest) purchase you will make in your lifetime. Working with a professional will make all the difference.

2. Budget, Budget, and Budget Some More
Budgets aren’t the most glamorous element of homebuying but they are a necessity. Why? Because often you will have overlooked costs that can make or break you getting into your home. A few things to consider:
• Property transfer taxes
• Legal fees
• Home inspection/appraisal fees
• Down payment (this is kind of a big one)
• Mortgage insurance
And the costs don’t stop once you own the home.

3. Understand the Importance of the Down-Payment
Many home-buyers focus on just simply putting money aside for the down payment. While this is crucial, there are other considerations.
• How big of a down payment can you make? You must meet the federally mandated minimum down payment: 5% for all mortgages up to $500,000, and 10% on any portion above $500,000 up to $999,999.99 (CMHC-insured mortgage loans are only available on properties valued under $1 million). But the size of the down payment will also reduce the interest you pay out over the life of your mortgage and reduce the size of the CMHC mortgage premium too.
• Take advantage of the Home Buyer’s Plan to withdraw up to $25,000 tax free from their Registered Retirement Savings Plan (RRSP). This can help to supplement your down payment as long as you understand the rules for paying it back.
• Leave plenty of time to transfer the funds from whichever source you are pulling them from. You will also need to leave adequate time for a certified or cashier’s cheque to be produced before the closing

4. Don’t Become Hyper Focused On the Rate
Yes, the rate is important, but don’t be hasty and jump into a mortgage purely based on the rate. Consider other areas such as the terms, the penalty to break, the amortization, and all other factors before signing on the dotted line. Your broker can help you to understand the ins and outs of a mortgage.

Considering these four things can help you be more prepared when beginning the mortgage process. Remember, a Dominion Lending Centres mortgage broker will help you and guide you through each of these things to ensure you are getting the best mortgage possible and with minimal stress too!

By Geoff Lee