3 main types of insurance available!

For a first-time home buyer, the types of insurance surrounding a mortgage can be confusing, so it’s important to know what insurance covers what.

There are 3 main types of insurance to know about when buying a home.

Mortgage Default Insurance – If you put less than 20% down on a home you are buying, Government rules are you must pay for Mortgage Default Insurance which covers the lender should you default on your mortgage payments.

There are three mortgage default insurers in Canada – Canadian Mortgage & Housing Corp. (CMHC), Genworth or Canada Guaranty) The purchase of this insurance solely benefits the bank/lender.

Mortgage Insurance and/or Life Insurance

You’ve just made the biggest purchase of your life: a new home for you and your family.
• What’s the best way to protect your investment if you die?

Insurance is the answer. But what kind: mortgage insurance or life insurance?

There are important differences between the two that we’ll examine.

Please note: Mortgage/Life Insurance is not mandatory to qualify for a mortgage.

You have made the biggest purchase of your life… how do you protect yourself and your family? Many people say they have life insurance through their work, but is it enough?
• The question you should be asking is – do you currently have enough life insurance in place right now, equal to your mortgage amount?

Top Benefits of purchasing Mortgage/Life Insurance

1. Peace of Mind – creates a sense of security that your loved ones will be taken care of if you pass on.
2. Mortgage Can be Paid Off – whereby any other policies that are held will be able to assist with other needs.
3. Family can Stay in their Home – if there is the unfortunate life event that is the death of the Mortgage/Life Insurance policy holder, the mortgage can be paid off which will allow the family to stay in their home and not become displaced, causing additional anguish.
4. The Younger you are, the Less Expensive – Which means that insurance is extremely affordable for a young, and likely, first time home buyer.
5. Good Health = Coverage for Unexpected Illness Later on – After illness strikes, it is more difficult to acquire life insurance.

Mortgage/Life Insurance is an option that anyone with a mortgage should consider. Ask me about a referral for reputable and credible insurance.

While we’re discussing insurance, there are other types of insurance you need to consider as well…
• Fire insurance – most lenders will want to see that you have fire insurance in place, prior to funding your mortgage to “protect” their investment.

Additional insurance options:
• Disability insurance
• Personal content insurance

Mortgages are complicated… BUT they don’t have to be! You need to protect your investment by engaging an expert.

Contact a Dominion Lending Centres mortgage professional to discuss a mortgage that works for you (not the bank)!

Kelly Hudson

Are you needing a mortgage broker? Read on!

Are you on the hunt for a mortgage broker? Or you need a mortgage broker but just don’t know it yet! Either way, this article is for you!

First up, where do you find a Mortgage Broker?

The easiest (and one of the best places to start) is with referrals from a realtor, family, friends, or co-workers. But this is just the start! There are thousands of independent mortgage brokers out there for you to partner with. So, what should you look for? That’s part 2.

What to look for in a Mortgage Broker?

When you are looking for a mortgage broker AND looking to buy a home that can lead to a very stressful time in your life. To make it easy, here are a few things that a broker should be doing for you:

1. Rates Don’t Tell the Whole Story. Getting a mortgage, refinancing your home or consolidating debts should not be seen as a quick and effortless task. There are brokers that make borrowing all about the rate; and that is just not the case. Be wary about Brokers who guarantee you a mortgage without asking for any documentation. Over the years personal lending has changed and continues to. With stricter than ever documentation requirements, lending policies and tougher credit checks, it’s important to be working with a broker who is educated. It is also important to work with a broker who asks to see the FULL picture. That means a little more work on your end to get all the proper documentation, but it can make a world of difference when it comes to selecting the right mortgage product for you.

2. Experience Really Matters. Maybe you have bad credit—or a larger car loan—or maybe you are self-employed. Whatever your unique situation is, you want to work with a broker who knows how to help you navigate through it to get you the best mortgage product. Yes, someone who is new to the world of home and personal finance may be smart, fully versed in policy and products and able to offer a great rate, but that doesn’t necessarily mean they are prepared to handle your situation. Try to find someone who has worked on a wide variety of deals in a wide variety of situations. A few questions to ask:
Have they had to work through someone’s debt in order to make a deal viable?
Do they know what to do when a deal doesn’t go as planned? Are they experienced in handling your unique situation? (ex. Working with someone who is self-employed, etc.)

3. Think Big Picture. There are many different pieces to your personal finance picture. From credit cards to student loans, they all fit together to create a picture that is unique to you and only you. With that in mind, a good mortgage broker should take time to find out about your goals—both long term and short term. They should ask you if:

• This is a starter home or long-term home?
• Are you planning on expanding your family (ex. having kids soon)?
• Do you have kids who are heading off to university and may have tuition payments to make soon?
• Do you have a parent who may need long-term care in the future?

All of these things can directly impact your finances, and in turn give direction to the mortgage broker on what you will need in a mortgage product. Asking these questions and others gives the mortgage broker a broad financial picture which gives them the perspective and knowledge to make an informed recommendation.

4. More than a Number. It’s no secret—mortgage brokers often will have sales/volume goals that they want to meet to take advantage of incentives. However, a good broker will set you up with the right product, rate, term and conditions that work for YOU…not them. They should be able to see past their own targets and goals and work with you to not only reach your goals but surpass them.

A satisfied, happy customer can turn into a life-long customer (and they bring friends and family with them too!) This is what a good mortgage broker should be able to see and portray to you. You should never feel rushed or like you are “just another number”. If your mortgage broker is focused on only one product or simply puts you into a 5-year rate without asking about your goals, it may be time to ask some questions.. You should never be given a mortgage without full explanation, details, and understanding of why that product is right for you.

5. Save Time—don’t shop. Over the past few years the idea that you can “shop” your mortgage around to different brokers to get a better rate has been made quite popular. The reality? 95% of the time every broker will end up offering the same rate for the same product. That’s not to say that there are not special rate offers out there—but they do typically have a specific requirement such as quick closings, shorter amortizations, higher down payments, limited repayment options, and smaller lenders. These are sometimes used, but for the vast majority of the population do not fit their needs. A general rule of thumb is that if a mortgage offer appears too good to be true, then it is.

A Final Note

With all that said, we find that borrowers who:

• take the time to seek out an experienced broker
• give an in-depth picture of their financial goals to their broker
• look for a broker who has a background in handling cases similar to theirs
• keep themselves financially in a good situation through debt repayment and budgeting
• avoid “shopping” for rates

Are the ones who breeze through the mortgage process. It’s important to look at your mortgage as not just a singular deal all on its own; it’s a part of a much larger picture. A mortgage should allow for you to live your life comfortably but realistically—making sure that other needs and obligations (vacations, healthcare, emergency savings, education, etc) are all considered and balanced with their mortgage/loan requirements. Finding a broker who understands what BALANCE looks like is the key to making the home-buying process as simple as possible. If you have any questions, contact a Dominion Lending Centres mortgage broker near you.

Geoff Lee

Wishing you a wonderful Thanksgiving!

3 scenarios to consider!

There are generally three different situations you can find yourself in when it comes to living situations; living with parents, renting, or owning.

A lot of the times the first decision someone will need to make is whether they buy a home to live in, buy a home to rent to someone else, or buy a home to live in while also renting out a portion of it. There are lots of pro’s and con’s to both. Below are some of the numbers and things to consider when looking at each of them.

Buying with The Intention to Rent
Buying a property for the purposes of renting it out to someone else comes with different qualifying criteria and different mortgage product options. The following are some of the important points to consider:

• The minimum down payment required is 20% of the property price and this down payment must be from your own savings. It cannot be gifted from someone else.
• Only a portion of the rental income can be used for the qualifying of how much of a mortgage you can afford to borrow. Some lenders only use 50% of the income and add it to yours. Others may look at taking 80% of the rental income and subtracting your expenses which can have a much higher impact on how much you can afford.
• Interest rates usually have a premium on them when the mortgage is for a rental property compared to a mortgage being requested for a property someone plans on living in. This premium can be anywhere from 0.10% to 0.20% on a regular 5-year fixed rate.

The following is a typical scenario you can expect to qualify for in a rental situation:

$450,000 purchase price
$90,000 down payment (20%)
$360,000 mortgage
$1,665 monthly mortgage payment

$1,400 in monthly rental income
$66,500 a year in income
$0 month in consumer debt payments

Buying with The Intention to Own
Buying with the intention of living in the property as your primary residence is the most common and the guidelines are well known:

• 5% minimum down payment from own resources or from gifted funds coming from an immediate family member.
• Insurance premium for having less than 20% as a down payment
• Lowest interest rates available for high ration purchases of home becoming owner occupied (Loan-to-value of more than 80%)
• If first time home buyers, you may be able to utilize grants and avoid property transfer taxes which you will not receive on the purchase of a rental.

The following is a typical scenario you can expect to qualify for in an owner-occupied situation:

$450,000 purchase price
$22,500 down payment (5%)
$444,600 mortgage
$2,039.63 monthly mortgage payment

$97,000 a year in income
$300 in monthly debt payments

Buying with The Intention of Both

Owner-occupied properties with a rental are really the best of both worlds. Only issue is, it needs to be a self-contained suite. Therefore, second bedrooms in town-homes or condos do not qualify. It is typically only detached homes with rental suites that are allowed but the rate premiums and minimum down payments fall under the owner-occupied side. Below is a typical scenario you could expect with this kind of purchase:

$1,000,000 purchase price
$100,000 down payment (10%)
$927,900 mortgage
$4,256 monthly mortgage payment

$1,200 in monthly rental income
$175,000 a year in income
$750 month in consumer debt payments

Please reach out to a Dominion Lending Centres mortgage professional today if you would like to discuss the different options that are available to you and whether or not any one of these scenarios could potentially work for you.

Ryan Oake