19 Feb

Using equity to buy another house.

Mortgage Tips

Posted by: Leeah Holle

You might think of home equity and see Kurt Browning, the Canadian Olympic figure skater from the CHIP reverse mortgage commercials. You may also think that it’s something retired folks use to top up their living expenses. But did you know you can use your existing home equity to invest in another property to buy a house?

A home equity loan is a type of second mortgage and allows you to use your equity now rather than waiting until after you sell. A second mortgage can also be useful if you choose to use invest your equity in a second property.

Basically, home equity is the money your home makes for you. So if you bought a house for $200,000 and now it’s worth $600,000, that $400,000 increase is due to the increasing value of your home over the years and that is your home equity. The appraised value of your home can impact the amount you receive as a lender and affect the lump sum you get.

“It’s really dead money,” said Matt Elkind, Managing Director and partner at Connect. “If you put it into real estate, you’re dealing with a much different situation where you can now make that $400,000 grow into another million.”

As interest rates climb, your purchase price becomes a smaller fraction of what your home is actually worth. If your home’s value climbs by as much as 80%, you’re in a great situation to consider using home equity as a down payment to purchase a second home as an investment property. All-in-all, home equity loans can be useful if you want to make an investment that you’ll be able to cash in on later.

A vacation home or rental properties?

Buying a second home can open a few different doors in terms of what you’re looking to do with your investment. You could purchase a log-cabin in cottage country and turn it into a family getaway for generations, or you could buy a home or condo and turn it into a rental opportunity in order to make money to pay back your home equity or mortgage loan.

Each option has its perks, but it’s important to consider what type of investment you want to make before looking into using your home equity to buy a new home. The question is, which type of loan will be best for you to make more profit, and which housing option do you want to invest in? For example, investing in condos in Canada is ideal for people looking to invest in a rental property that has value.

“For the most part, the price of a freehold home is what makes it challenging,” Elkind said. “In most areas like Toronto, if you pay a million and a half dollars for a home on the rental market, you will not have positive cash flow whereas in a condo in a normal rental market, you have that opportunity [to make more.]”

Written by Taylor Pipe

16 Feb

Rate Holds Explained.

Mortgage Tips

Posted by: Leeah Holle

If you shopping for a home, or have worked with a mortgage professional in the past, you’ve most likely heard of rate holds before. If not, it is something that every potential homeowner should be aware of. This is especially true for the application process as it has some great benefits for active shoppers.

If you are not familiar with the term, a ‘rate hold’ refers to locking in a specific mortgage rate for a limited period of time. This is offered through most lenders, assuming you are a potential client looking to purchase a home and need a mortgage. They are not eligible for individuals that are refinancing their mortgage, or looking to transfer it to another lender.

If you qualify for a rate hold, there are a few things you should know – from restrictions to benefits! The first and most important is that rate holds are typically only offered for a period of 90-120 days. So, once you have created your mortgage application with a broker and submitted it at the interest rate that best suits you, that rate will be protected for 90-120 days while you shop.

A rate hold is not a commitment. It does not force you to work with that lender, or the mortgage broker who submitted it. It also does not affect your future chances of receiving approval down the road. Instead, it simply guarantees that rate for you, if you find a home you want to purchase and sign the mortgage agreement before the rate hold is up.

This can be truly beneficial in volatile markets or those with high competition. If you submit your application to a lender for a fixed rate of 2.49% on a five year term, but while you are searching for your perfect home that rate moves up to 2.99%, the rate hold will protect you and allow you to still sign at 2.49%. This can mean huge savings!

For instance, if you are looking for a standard $500,000 mortgage (25 years amortization, fixed-rate, 5-year term), your monthly payments would be $2,237.35 at 2.49% interest. This would jump up to $2,363.67 per month at 2.99 percent. This is a difference of $126.32 per month or $1,515.84 annually; which can really add up on a 25-year mortgage!

Another benefit is that, if the rates go down, it does not stop you from taking advantage of the lower offer. Instead, it protects you from rate increases after you’ve determined your budget and are in the process of purchasing a home.

It is also important to note that, once the rate hold expires after 90-120 days, there is nothing stopping you from submitting another rate hold. It will just be subject to the interest rates as they stand on the day of submission.

Reaching out to a mortgage professional can help you better understand the current rates and benefits of a rate hold. In addition, they can help you find the best option to suit your needs thanks to their connections with hundreds of lenders! Why wait? Contact a DLC Mortgage Professional today.

Written by My DLC Marketing Team

11 Feb

Why all the talk around rising interest rates in Canada?

Mortgage Tips

Posted by: Leeah Holle

Over the past few days, Canadian media has been crackling with speculation over the future of interest rates in Canada. With the Bank of Canada holding its overnight interest rate at the effective lower bound of 0.25% as recently as January 20, the sudden explosion of rate-rise paranoia comes as somewhat of a surprise.

Just yesterday, the Huffington Post shared a story detailing how the historic amount of money saved by Canadians during the COVID-19 crisis could lead to a tidal wave of spending that sends the Canadian economy soaring past the 2% inflation target established by the BoC as a benchmark for increasing rates.

Quoted in the story was Scotiabank’s Derek Holt, who warned that the slack currently being seen in Canada’s economy could disappear sooner than most experts are expecting.

“The prudent thing to advise heavily indebted Canadians is to plan their finances around rate hikes commencing considerably sooner than the Bank of Canada has guided even up to last week’s announcements,” Holt wrote last Friday.

The Financial Post ran with Holt’s take on February 01, bolstering it with comments from experts at RBC and CIBC who see Canada’s recent economic performance – output up by approximately 8% annualized in the fourth quarter, 0.7% GDP growth in November; both results almost double what economists were expecting – as a sign of brighter days ahead for the economy.

“If the starting point is better, then an earlier elimination of slack is a natural conclusion,” RBC’s Simon Deeley told the FP.

Comments from a report from CIBC’s Avery Sheffield said that if the Canadian economy experiences “enough demand” in 2021, it “might be closing in on full employment, with additional government spending being offset by an earlier need to hike interest rates to contain inflation.”

Dissenting voices

With COVID-19 still a reliable source of economic tumult, projecting an increase in interest rates based on one or two pieces of positive data so early into 2021 feels like somewhat of a stretch. Dominion Lending Centre’s chief economist Dr. Sherry Cooper says some economists may want to take into consideration one of the glaring weaknesses in Canada’s battle against COVID-19 before getting too ahead of themselves.

“One of the biggest reasons [the Bank of Canada] can’t raise rates this year is the vaccine rollout debacle,” Cooper said. “There is no way everyone who wants a vaccine will get one by September, as the Prime Minister has promised.”

RateSpy founder Robert McLister shares Cooper’s scepticism regarding a rate hike.

“BoC rate hikes in 2021 are as likely as snow in July,” McLister said.

Both McLister and Cooper told MBN that for the Bank of Canada to justify rate increases, its 2% inflation target would not only need to be reached, but sustained.

“If the Bank’s messaging is to be believed, and usually it should be, it wants to see core inflation materially exceed 2% for multiple months before it pulls the trigger on a hike,” McLister said.

Recent homeowners at risk?

2020 was a historic year for real estate sales in Canada, one in which low interest rates played no small part. According to the Canadian Real Estate Association, over 714,000 homes were sold last year, providing critical breathing room for the country’s asphyxiating economy.

With real estate being such an important component of Canada’s fiscal wellbeing, and thousands of Canadians relying on adjustable-rate mortgages to fund their home purchases, could there be pressure on the Bank of Canada to leave rates where they are as a means of both maintaining the housing market’s momentum and avoiding a predicament in which countless homeowners are unable to afford higher mortgage payments?

Cooper and McLister say ‘no’.

“The Bank’s mandate is inflation control, not borrower protection,” McLister said. “People are stress tested at ridiculously high rates these days – 4.79% vs. five-year fixed rates below 1.75%. A one-point run-up in rates would have virtually no effect on defaults for over 99 out of 100 prime borrowers.”

And that’s only if rates increase, a move the Bank of Canada has yet to indicate any appetite for. The BoC, Cooper said, has made it “very clear” that it will “not raise rates before 2023.”

Written By Clayton Jarvis

9 Feb

About Dominion Lending Centres

Mortgage Tips

Posted by: Leeah Holle

With access to more than 230 lending institutions, including big banks, credit unions and trust companies, our licensed team of mortgage professionals is familiar with a vast array of available mortgage products – ranging from first-time homebuyer programs to financing for the self-employed to financing for those with credit blemishes.

And, best of all, Dominion Lending Centres’ mortgage professionals work for you – not the lenders – to ensure you receive the best rates and products available in today’s marketplace. Whether you’re looking to purchase your very first home or upgrade to a new home, renew your existing mortgage, refinance your mortgage to free up some equity, purchase investment properties or vacation homes, or lease business-related equipment, Dominion Lending Centres has a variety of products available to meet your unique needs. Our mortgage professionals are experts in their field and many are ranked among the best nationally. Launched in January 2006, we were named Best Newcomer (Mortgage Brokerage Firm) at the prestigious CMP Canadian Mortgage Awards 2008 – the Oscars of the mortgage brokering industry. At the 2009 CMAs, we received the Best Branding Award, and again in 2010, with the addition of the prestigious title of Mortgage Brokerage of the Year and Best Advertising. At the 2011 Awards, we again walked award with Best Advertising, and in 2012 we were honoured with: National Broker Network of the Year; Best Advertising; and Best Branding. Dominion Lending Centres is also honoured to be ranked 32nd on the 2012 annual PROFIT 200 ranking of Canada’s Fastest-Growing Companies by PROFIT Magazine. Ranking Canada’s Fastest-Growing Companies by five-year revenue growth, the PROFIT 200 profiles the country’s most successful growth companies. PROFIT 200 is Canada’s largest annual celebration of entrepreneurial achievement. In both 2009 and 2010, Dominion Lending Centres also earned spots on the PROFIT HOT 50 List of Canadian Emerging Growth Companies. The PROFIT HOT 50 ranks the top 50 young businesses in Canada by two-year revenue growth. Dominion Lending Centres’ mortgage professionals are available anytime, anywhere, evenings and weekends – and we’ll even come to you!

Written by My DLC Marketing Team

9 Feb

The Top 7 Misconceptions About Reverse Mortgages.

Mortgage Tips

Posted by: Leeah Holle

The Top 7 Misconceptions About Reverse Mortgages.

How much do you really know about reverse mortgages? Maybe you know that reverse mortgages can help Canadians 55+ access the equity in their home, tax-free. Maybe you know that tens of thousands of Canadians are using a reverse mortgage as part of their financial plan. But did you know that there are 7 common misconceptions when it comes to understanding reverse mortgages in Canada. As Canada’s leading provider of reverse mortgages, HomeEquity Bank can help set the record straight.

common misconceptions about reverse mortgages

1. If you have a reverse mortgage, you no longer own your home

Nothing could be further from the truth. You always maintain title, ownership and control of your home – HomeEquity Bank simply has a first mortgage on the title.

2. You will owe more than the value of your home in the end

Also, untrue. Every CHIP Reverse Mortgage from HomeEquity Bank comes with a No Negative Equity Guarantee(1) which states that as long as you – the homeowner – have met your obligations, the amount you will have to pay on the due date will not exceed the fair market value of your home. In fact, over 99% of HomeEquity Bank’s customers retain equity in their home when they decide to sell, with over 50% of the home’s value remaining after the loan is paid back (on average).

3. Only people younger than 62 can apply for a reverse mortgage

In Canada, the CHIP Reverse Mortgage is available to Canadian homeowners aged 55 and older. In fact, as you age you are more likely to qualify for a higher amount on your loan. A reverse mortgage is a lifetime product and as long as the property taxes and insurance are in good standing, the property remains in good condition, and the homeowner is living in the home full-time, the loan won’t be called even if the house decreases in value.

4. Failure to make payments can result in eviction

This myth is one of the most common when it comes to reverse mortgages. The CHIP Reverse Mortgage does not require any monthly payments, meaning you can’t miss payments in the first place.

5. Arranging a reverse mortgage is very expensive

This is also untrue. Much like a conventional mortgage, an appraisal of your property and independent legal advice is required, and your responsibility to pay for. The only remaining cost is a one-off closing and administration fee. When you compare this to the costs of “rightsizing” to another home, you will find a much more affordable option in a reverse mortgage.

6. Reverse mortgages have much higher interest rates than conventional mortgages

While it’s generally true that interest rates are a bit higher than a traditional mortgage, the difference is not excessive. Plus, making monthly mortgage payments is simply not a viable option for many retired Canadians, and – even if it were – many would struggle to qualify for a traditional mortgage in the first place. For these reasons, many retired Canadians are choosing reverse mortgages over conventional solutions.

7. You won’t be able to pass on your home to your children

The idea that your children won’t be able to inherit your home is a complete myth. Your heirs will always have the option of keeping the property by paying off your reverse mortgage after you pass away. Plus, HomeEquity Bank’s No Negative Equity Guarantee, (1) states that if the home depreciates in value and the mortgage amount due is more than the gross proceeds from the sale of the property, HomeEquity Bank covers the difference between the sale price and the loan amount. Therefore, you will never owe more than the fair market value of the home.

To find out how much you could qualify for, try our reverse mortgage calculator, or contact your DLC Mortgage Professional.

[1] The guarantee excludes administrative expenses and interest that has accumulated after the due date.

Written By: Agostino Tuzi
Post Sponsored by HomeEquity Bank

7 Feb

Renewing your Mortgage.

Mortgage Tips

Posted by: Leeah Holle

Renewing Your Mortgage.

Let a DLC Mortgage Professional help you find the best renewal rate!

When it comes time to renew your mortgage, most lenders will send you a renewal letter when there is around 3 months remaining on your term. While nearly 60 percent of borrowers simply sign and send back their renewal without ever shopping around for a more favourable interest rate, this is actually the best time to check out your options.

Since your term is ending, this is a great time to shop the market or redo your mortgage WITHOUT PENALTY! If you have been wanting to switch your mortgage from fixed to variable-rate (or vice-versa), or want to move to a different lender or try for a lower rate, your DLC Mortgage Professional can help!

A Dominion Lending Centres Mortgage Professional can help answer all your refinancing questions – and more – as well as shop the market to find you a better rate! With access to over 90 lenders, they are able to quickly compare mortgage rates and products and help you make the switch!

Written by My DLC Marketing Team

5 Feb

Mortgage Refinancing

Mortgage Tips

Posted by: Leeah Holle

 

Mortgage refinancing can result in a host of great benefits, such as reducing financial stress and helping get you back on track for your financial future! Some of the larger benefits include:

ACCESS A LOWER INTEREST RATE

As mentioned above, one reason to refinance your mortgage is to get a better rate – this is especially true when done through a mortgage professional. On average, a DLC mortgage professional has access to over 90 lenders! This allows them to find the best mortgage product for your unique needs, versus traditional banks that only have access to their own mortgage offerings. Plus, using a mortgage expert allows you to benefit from their advice at typically zero cost to you.

CONSOLIDATING YOUR DEBT

There are many different types of debt from credit cards and lines of credit to school loans and mortgages. But, did you know that most types of consumer debt have much higher interest rates than those you would pay on a mortgage? Refinancing can free up cash to help you pay out these debts. While it may increase your mortgage, your overall payments could be far lower and would be a single payment versus multiple sources. Keep in mind, you need at least 20 percent equity in your home to qualify.

MODIFYING YOUR MORTGAGE

Life is that it is ever-changing and sometimes you need to pay off your mortgage faster or change your mortgage type. Maybe you came into some extra money and want to put it towards your mortgage or maybe you are weary of the market and want to lock in at a fixed-rate for security. Always be sure to talk to your mortgage professional about potential penalties.

UTILIZING YOUR HOME EQUITY

One of the biggest reasons to buy in the first place is to build up equity in your home. Consider your home equity as the difference between your property’s market value and the balance of your mortgage. If you need funds, you can refinance your mortgage to access up to 80% of your home’s appraised value!

Written by My DLC Marketing Team

4 Feb

Mortgage Broker vs Mortgage Specialist.

Mortgage Tips

Posted by: Leeah Holle

Mortgage Broker vs Mortgage Specialist.

Broker vs Specialist: What’s the Difference?

To most consumers outside of the mortgage space, the terms “mortgage broker” and “mortgage specialist” would seem interchangeable – but they aren’t. As a potential homeowner, the differences are more important than you might think.

First and foremost, it is important to understand the definition of these groups before looking at the major differences. Mortgage brokers belong to an independent firm. This allows them unique access to rates and offers from various lenders’ (banks, credit unions, private lenders and alternative options). Conversely, a mortgage specialist is employed by a single lender and works to sell that particular institution’s products.

BENEFITS OF WORKING WITH A MORTGAGE BROKER:
1. MORTGAGE BROKERS WORK FOR YOU!
Mortgage Broker vs Specialist

Unlike a mortgage specialist, who is paid by the bank to sell their products, a broker works for YOU! A broker works as a link between you and the lender; they filter through the offerings to find you the best rate and product. The best part? A mortgage broker’s services are FREE! Brokers are paid by the lender of choice once the ideal mortgage product has been found. This means you get to utilize their expert advice and lender access at no cost!

2. MORTGAGE BROKERS CARE FOR THEIR CLIENTS

Similarly to the above, Mortgage Brokers care for their clients. Not only because they work for YOU but also because most brokers are self-employed and rely on referrals. As a majority of their business is done through word-of-mouth, this results in the best experience for clients. Every DLC Mortgage Broker is motivated to help you achieve your dream of home ownership!

3. MORTGAGE BROKERS ARE LICENSED PROFESSIONALS!

It might surprise you to know that mortgage and bank specialists are not required to have any formal training. While some lenders do provide in-house training, this varies from the provincially regulated course that mortgage brokers are required to pass. Mortgage brokers also continue to maintain their education through license renewals and educational courses. As a result, a mortgage broker provides expert advice you can trust!

4. MORTGAGE BROKERS HAVE GREATER ACCESS TO RATES

A mortgage broker is employed by an independent firm and has access to 90+ lenders, while a mortgage specialist can only access their particular lenders’ products. This can mean a big difference in rates and mortgage terms for homeowners! If you are looking at getting a mortgage with your bank (say Bank X), then your mortgage specialist can tell you exactly what Bank X offers. But, by seeking the advice of a mortgage broker, they can tell you what Bank X offers… as well as your options with Bank Y, Bank Z, Bank A, etc. When you are looking for the best mortgage product to fit your unique needs, more options to choose from just makes sense!

5. MORTGAGE BROKERS FOCUS ON MORTGAGES

When it comes to mortgage brokers, all they do is mortgages; they live and breath home ownership! Mortgage specialists and bank staff are often trained with a focus on cross-selling. While you may have booked an appointment to discuss a mortgage, many times they will focus on other bank products. This might include offering credit cards, insurance, RRSP, lines of credit, etc. This can sometimes be helpful, but many potential homeowners may find it overwhelming or pushy; especially when they are specifically looking for a single product – a mortgage.

6. MORTGAGE BROKERS OFFER FLEXIBLE HOURS

Most banks don’t offer great business hours, which can make it hard to book an appointment with a specialist. As many mortgage brokers are self-employed, they are motivated to assist clients. This means they are often available for appointments outside of business hours such as evenings or weekends. This can be especially comforting to individuals who are new to the mortgage process and may have questions or concerns that they would prefer to have answered right away.

Written by My DLC Marketing Team