Read on to learn more about a second mortgage!

Many homeowners are vaguely aware of the fact that you can take out a second loan on your home. You hear your friends mention it or perhaps a family member close to you has gone through the process—but do you truly know what it means to take out a second mortgage? We have taken all the questions we get asked about second mortgages and compiled it into four key points.

A SECOND MORTGAGE IS BASED ON THE EQUITY IN YOUR HOME
The total loan amount that the second mortgage lender will offer you will depend on the equity that has been built up in your home. Second mortgages allow you to access up to 95% of the equity you have in your property. For instance:

House Value $850,000
95% LTV (maximum mortgage amount) $807,500.00
First Mortgage $550,000.00
Amount Available Through Second $257,500.00

INTEREST RATES WILL VARY AND BE HIGHER THAN YOUR FIRST MORTGAGE
This is because when a lender agrees to a second mortgage, they are taking a higher risk as he gets second priority in case of default. With that being said, we have options and solutions such as working with private lenders that can help you obtain a reduced rate and the right product for your mortgage situation. Typically, you can expect an interest rate of 6.95%-19.95% with lender and broker fees included.

YOUR PAYMENT CAN BE AS LOW AS INTEREST ONLY PAYMENTS
One of the advantages of selecting to use a second mortgage is the fact that the payments are attractive. You can pay interest only payments or you can also select to pay the interest plus the principle loan amount. You can work with your mortgage broker to discuss options and what would work best with your situation.

THERE ARE ADDITIONAL FEES TO CONSIDER
Since we want to have you understand ALL the fees associated, it is important to know that setting up a second mortgage will require you to pay: *note dollar amounts are approximations

An appraisal fee to assess the value of your home: $300
Legal fees to set it up: $2,000
Lenders & Broker fees: 1-5%

Second mortgages are a great option for many and may be a better solution than a refinance or a Home Equity Loan (HELOC). If you are interested in learning more or want to find out if a second mortgage is right for you, talk to your Dominion Lending Centres mortgage broker. We can guarantee they can guide you the process from start to finish!

Geoff Lee

Educate yourself before purchasing a rural property!

Living in the country has extreme appeal for some people. Space, peace and quiet, big home, big yard, place to raise your family… the list goes on. If you are considering buying a rural home, there are a number of things to consider, not the least being how different it is to get a mortgage.

When lenders are considering your mortgage file it’s always about managing risk. Higher risk, higher rates. The risk that you’ll pay them back as agreed and they don’t have to seize the asset and sell it to recoup their investment.
• Mortgage lenders don’t really want to own your property, because foreclosing on your property means it will take time and effort to get the homeowner off the property, list it for sale, then actually get it sold where they can finally get (some of) their money back.
• With rural properties, depending on remoteness of location and condition of the property, it could take months to sell when compared to the quicker sale for a home in an city where there is much more demand.

Mortgage lenders don’t like waiting years to get their money back on a non-performing loan, so they have implemented special rules related to rural properties to reduce their risk.

A rural property, for most lenders and their home appraiser, includes only one house, the garage and 10 acres in the valuation, any additional buildings will not be considered. This policy applies to both conventional and insured mortgages.

Here are 6 things to think about before plunking down your hard-earned cash on a country home.

Hire a real estate agent knowledgeable about rural properties and local zoning laws. The names of the zones and the related details are determined by each local government so there may be variation between communities throughout each province.

Many lenders will not mortgage properties that are zoned agricultural.
• Why? Lenders are all about risk.
o If you buy a rural property and you default on your mortgage, the process of foreclosing on an agricultural property is very different and difficult for lenders. Taking a farm away from a farmer means taking their livelihood away, so the government has implemented many obstacles to prevent this.
• Provided you are not planning to grow crops or raise animals for sale, financing a home in the country can be similar to financing an urban home.

Water & Septic – In order to live in a house, you need to be able to drink the water and flush the toilet. In the country you need to take care of these yourself. When buying, if you are not on municipal water, your water will probably come from a well.
• Many lenders will ask for a potability and flow test for the well because a house without water is very hard to sell.
• Chances are your sewerage may be in a septic tank. You need to have the septic system inspected by a qualified septic inspector. At a minimum, ask the homeowner to agree to a warranty clause in the agreement that the system has been in good operating condition and it will remain that way until closing.
• Both the well equipment and septic system can be very expensive to repair or replace. Thus, when you buy in a rural location, be sure you include these with your conditions.

Land – most lenders will mortgage a house, one outbuilding and up to 10 acres of land, anything above this amount will not be considered in the mortgage.

Appraisal – Your lender will want to see an appraisal to ensure the value of your land. The appraised value may come in lower than expected, because rural properties do not turn over as quickly as city properties.
• Be prepared for the inspection to cost more than it cost you in the city, since the appraiser needs to travel farther to see the property.
• If you LOVE the place and have to have it, be ready to have to come up with the difference between the selling price and the appraised value of the property.

Wood Energy Technology Transfer (WETT) – If there’s a wood stove or wood-burning fireplace, you make want to make your offer conditional on receiving a satisfactory WETT inspection report, which confirms the safeness and correct installation of the wood-burning unit.

Buy (or Check Into) Title Insurance – Many buyers don’t realize that farmland, particularly larger, more remote tracts of land, may have been used as a dump-site for toxic chemicals.
• Buying title insurance, or checking the title for the specific property, will let you know if the property has been listed as a toxic dump-site, or a hazardous waste site.
• Your insurance company may insist on a copy of title insurance before they agree to issue a policy.

House/Content/Fire insurance – Lenders want to ensure you have insurance in place to protect their investment. If you can’t get insurance – it has the potential to be a serious problem, since your mortgage company may not advance the closing funds.
• Living in the country is nice, however you are also far from fire hydrants and fire stations, you will pay more for home insurance.

If you are considering buying a home in a rural area, you need to have a frank discussion with your realtor, Dominion Lending Centres mortgage broker and lawyer before submitting your offer.

Kelly Hudson

Call us to discuss what the best option is for you!

After you have purchased your new home, closed on your new mortgage, and are all moved in, what comes next?

Well, when it comes to your mortgage, the next step is to either refinance, renew, or transfer your mortgage. This decision can be made one month into your new mortgage or one month before your new mortgage is set to mature. Below is a break-down on what a refinance, renewal, and transfer mean.

Refinance
Refinances are when you decide to access the equity in your home. When your home rises in value, say $400,000 in 2016 to $500,000 in 2021, you can request your current lender, or a new lender, to pay you a portion of that increase in cash and they will in turn add that same portion to your mortgage for you to pay back- with interest.

There are many reasons to refinance; for home repairs, purchasing second properties, financial assistance with other outstanding loans or to have access to cash for larger purchases. It is only a refinance when you change the amount of your mortgage and borrow against the equity you have in your home.

Renewal
Renewals are quite straight forward. At the end of your mortgage term, your lender will offer you a renewal letter stating the remaining balance on your mortgage, what the remaining amortization is, and what interest rate options they can offer you.

The term can be 5-years for example, but most mortgages are on what’s called a 25-year amortization- the length of time it takes to pay off the entire mortgage. The 5-year term is just a length of time you are guaranteed a certain rate before you need to renew it. Renewals generally do not require any re-approval, documents, or applications as no new money is being added, the property is the same, and so is the lender. It is straight forward and allows you to continue paying your mortgage, just on a different interest rate.

Transfers
Transfers are a lot like renewals, the one difference is you are switching lenders. You are not adding more money, selling or buying a new home, everything is remaining the same except who you are paying interest to. One reason someone may want to transfer their mortgage from one lender to another is bad customer experience. Another could be to take advantage of a lower interest rate. Another reason could also be to take advantage of a lender’s product like a Home Equity Line of Credit or high pre-payment privileges.

Transfers are becoming more and more common as lenders are constantly looking to add clients and customers to their brand, being able to take advantage of interest payments as well as offer other products.

If your mortgage is up for renewal or you have been thinking about what kind of options may be available to you with your current mortgage, please reach out to a Dominion Lending Centres mortgage professional to discuss the different choices you have.

Ryan Oake

Are you self-employed? Read on!

As a self-employed person myself, I was happy to hear that CMHC is willing to make some changes that will make it easier for us to qualify for a mortgage.

In an announcement on July 19, 2018, the CMHC has said “Self-employed Canadians represent a significant part of the Canadian workforce. These policy changes respond to that reality by making it easier for self-employed borrowers to obtain CMHC mortgage loan insurance and benefit from competitive interest rates.” — Romy Bowers, Chief Commercial Officer, Canada Mortgage and Housing Corporation. These policy changes are to take effect Oct. 1, 2018.

Traditionally self-employed borrowers will write as many expenses as they can to minimize the income tax they pay each year. While this is a good tax-saving technique it means that often a realistic annual income can not be established high enough to meet mortgage qualification guidelines.

Plain speak, we don’t look good on paper.

Normally CMHC wants to see two years established business history to be able to determine an average income. But the agency said it will now make allowances for people who acquire existing businesses, can demonstrate sufficient cash reserves, who will be expecting predictable earnings and have previous training and education.

Take for example a borrower that has been an interior designer with a firm for the past eight years and in the same industry for the past 30 years, but just struck out on his own last year. His main work contract is with the firm he used to work for, but now he has the ability to pick up additional contracts from the industry in which he has vast connections.
Where previously he would have had to entertain a mortgage with an interest rate at least 1% higher than the best on the market and have to pay a fee, now he would be able to meet insurance requirements and get preferred rates.

The other change that CMHC has made is to allow for more flexible documentation of income and the ability to look at Statements of Business Professional Activity from a sole-proprietor’s income tax submission to support Add Backs of certain write-offs to support a grossing-up of income. Basically, recognizing that many write-offs are simply for tax-saving purposes and are not a reduction of actual income. This could mean a significant increase in income and buying power.

It is refreshing after years of government claw-backs and conservative policy changes to finally see the swing back in the other direction. Self-employed Canadians have taken on the burden of an often fluctuating income and responsible income tax management all for the ability to work for themselves. These measures will help them with the reward of being able to own their own home as well.

Kristin Woolard

Do you qualify to port your mortgage?

Porting a mortgage is something similar to transferring a mortgage. Transfers are when you move your current mortgage to a different lender in order to take advantage of different interest rates or mortgage products.

Porting a mortgage is when you keep your lender, but move your mortgage to a different property. Now, not every lender allows you to port a mortgage, and not every property can qualify for a port.

One of the other things to keep in mind with porting a mortgage, you are generally only porting the balance remaining on your mortgage. If you need more money, you will need to re-qualify to blend your mortgage. If you do not want to blend and extend your mortgage term, you will need to come up with the additional funds on your own.

The ability to port a mortgage is really important, especially if you are in a fixed mortgage with a big bank, as it can be used to avoid paying a pre-payment penalty to break your mortgage early.

If you are curious to hear more about portability options and whether or not you could qualify, please reach out to a Dominion Lending Centres mortgage professional today!

Ryan Oake

Looking to build? We can help!

In case you didn’t know, construction mortgages are available through mortgage brokers! Even though the options for lenders are slim, it can still be accomplished.

Unlike regular purchase mortgages where the funds are released on closing, the funds for construction mortgages are released in stages. With typically 15-month construction periods, here are the following advances:

1.) Optional First Advance Prior to Start (Uninsured Mortgages Only)- 65% of vacant land value.

2.) Optional First Advance at 15% Complete (Insured Mortgages Only)- Excavation and foundation complete.

3.) First Advance Received at 40% Complete- Roof on, building is weather protected, access secured.

4.) Second Advance Received at 65% Complete- Plumbing, drywall complete, furnace installed, etc.

5.) Third Advance Received at 85% Complete- Kitchen cupboards installed, bathroom completed, doors hung, etc.

6.) Fourth Advance Received at 100% complete.

Appraisals are done at every stage and the cost of each is deducted from each advance from the lender. If you have any other questions regarding construction mortgages, please feel free to reach out to a Dominion Lending Centres mortgage professional near you.

Ryan Oake

Let us help you with your pre-approval!

Are you in the market for a new home? That’s great – but if you’re not already pre-approved from your mortgage broker, be sure to read on.

Pre-approvals are very important for two reasons. 

They give you confidence in knowing that a specific amount of financing is available for you.
A pre-approval can put you in a positive negotiating position against other home buyers who aren’t pre-approved.
Not all pre-approvals are the same, though. There are essentially three different kinds.

• The first occurs when you meet with a mortgage professional and tell them how much you make. They’ll say something along the lines of “Great, you’re pre-approved.” The mortgage professional has only looked at your income. There is no real pre-approval.
• The second kind is when a mortgage professional asks you how much you make and then pulls your credit bureau. This allows a mortgage professional to lock in your mortgage rate for up to four months. This pre-approval still isn’t a sure thing.
• The third kind of pre-approval – and the one that we do – is a lot more encompassing. We get all of your papers prepared right off the bat, which allows us to eliminate any unforeseen issues with your approval. Sure, it’s more work up front – but we do this because it’s the right thing to do.

If you’d like to get a pre-approval, contact a Dominion Lending Centres mortgage professional! We’re here to help.

Eitan Pinsky

Managing debt in the following ways can help you obtain a mortgage!

Put yourself in a bank or lender’s shoes. Someone comes into your branch and asks you to politely loan them $300,000. You are a big bank, but $300,000 is still a lot of money. How do you ensure this person is going to pay back the money you loan them, on time, and in the right amount? Look at their record for borrowing other people’s money.

This is why taking on different kinds of debt when you are young is a good thing, but it must be within reason.

Credit Cards
Lenders want to see a minimum credit limit of $2,000 as well as the fact that you use your credit and pay it back on time. Don’t go overboard, even just purchasing your car’s monthly gasoline on your credit card and paying it off when your statement comes out should be enough, and the longer you do this, the better.

Car Loan
Banks love giving loans through car dealerships to first time borrowers. Why? Because if they treat you right, guess who you are going to go to when you are ready to ask for a mortgage loan. Getting an auto loan for a reasonable amount will truly help showcase your ability to a lender. Just try and make sure any car loans are completely paid off before applying for a mortgage!

Lines of Credit
Almost like leveling up from a credit card. You will get a much bigger credit limit, and have a much lower interest rate. Plus, the minimum payments are usually interest only, making it easier to manage. Using this to make a bigger purchase and making monthly payments can show your ability to manage debt.

I bet you’d feel a lot more comfortable loaning someone $300,000 if they have successfully managed debt on all three of these levels, rather than someone who came to you with only a chequing account to their name. If you have any questions, a Dominion Lending Centres mortgage professional near you.

Ryan Oake

Your credit may be reviewed again before your mortgage is finalized! 

As I’ve said many times, one of the single greatest determining factors in whether you can become qualified for a mortgage and the interest rate at which you do, is your credit history. Many people unfortunately don’t know this, and can be completely blind-sided when it comes time to qualifying.

However, the truly unsettling idea about credit scores and their relation to home financing is the fact that most people do not even know they are extremely important even after you have been approved…

Once your offer on a home is accepted and you remove financing conditions, it is your obligation to secure the money needed to close the sale. There are usually a list of conditions one must meet and satisfy in order to obtain the financing they need from a lender. Once that is done, the mortgage will be sent to a real estate lawyer where they will be instructed to finalize everything. This is where all closing costs will be paid and all corresponding money will be sent to the proper parties involved.

However, before any of this is done, one more thing must happen…

Your credit report can be reviewed once again in order to verify your credit history is the same as it was when you were first qualified for a mortgage, sometimes months earlier.

So what happens if you made an offer on a home, got approved for financing, lifted all conditions, and because you also met all the lenders conditions, went out and bought new furniture for your home on a credit card? Well, you may not be able to receive your loan anymore…

If you increase the amount of money you are borrowing through any credit card or bank, miss payments on existing debt, or for any reason alter your credit history from the day you are approved until the final closing day at the lawyer’s office, you run the risk of not being able to complete your purchase.

If you plan on spending any money that isn’t cash and isn’t in a separate account needed for your down payment or closing costs, you need to talk to your broker because it could end horribly for all parties involved and potentially result in legal disputes.

This is the most important purchase and decision you may ever make, why things like this have never been explained in schooling or anything like that is beyond me. That is why it is important to work with an experienced, knowledgeable Dominion Lending Centres mortgage broker and make sure you fully understand the process you are about to embark upon.

Ryan Oake

Start planning today!

To get out of debt, you need a plan and you need to execute that plan. That’s why I’ve created this simple, five-step, get-out-of-debt checklist that can help you leave that financial burden behind you.

As you work on your plan, you’ll need to make all necessary adjustments to your budget along the way so you don’t overspend and slide back into debt. Plus, if you don’t have an emergency fund, consider setting some money aside in savings beforehand.

Keep this checklist someplace where you’ll see it often (like your refrigerator door ), and make it your goal to check a task off the list each day (or each week), depending on how quickly you want to become debt-free.

1- Make a list
Take all your bills and put them in a chart that includes: the name of creditor, interest rate, balance, minimum monthly payment. Figure out how long it will take you to pay the balance down to zero. Many credit card statements now feature this.

2. Lower your rates
This is easier than you think. Call up each of your credit card companies starting with the ones with the highest interest rates and ASK them to lower your interest rate. You can tell them that other credit cards are offering lower rates and you wanted to let them keep your business. They won’t give you an answer on the phone but you should receive a letter with a new lower rate within a couple of weeks. Another possible solution is a balance transfer. Often a credit card company will allow you to transfer your balance from another card to theirs and they charge you 0% for 6 months. They assume that you will see zero being added and will spend more. Show them that you are disciplined and keep paying the balance down as if it was still at 19%. Consider getting a debt consolidation loan. If you have a home with equity you can often get a very good rate and clear up all your debts. Often you can get these loans at considerably less than your credit cards. Once again, keep your monthly payments up as if you were still paying a credit card of 19% interest and your balance will go down quickly.
Next contact your car loan company. If you have been paying your loan on time they may lower your rates. Now you are ready to tackle the utility companies. In Alberta the gas/electric companies really want your business. You can often get a better rate just by threatening to switch. This also works with cellphone companies. They often have better plans than the one you are on but will only offer it when you say you are going to leave.

3. Get your Number
What is the amount you need to pay off all your debts? Now that you have a number in mind you can set a goal. Can you pay this off in six months? 12 months? two years?
Get your credit score number. How much does it have to improve before you can qualify to buy a house? Check with your Dominion Lending Centres mortgage broker for help getting this.

4. Make a plan
What will be your target debt? Is it the credit card balance with the highest interest rate? The lowest balance? Set a short term goal to pay one card off in a manageable amount of time. One down and three to go sounds better than tackling all the debt at once. Pay each debt off one by one. Does your community library offer debt counselling financing planning courses? Consider signing up for one.

5 – Monitor your progress
How quickly are the debts coming down? Is your credit score going up? It should if the debts are coming down.
Do you have to adjust your plan to make your deadlines? Don’t be discouraged. Large companies make plans and set budgets and then adjust them quarterly based on how the previous three months performance was.
Stick with your plan and if you show some self-discipline you can achieve your goals in time. Finally, tell your local Dominion Lending Centres mortgage broker what your goal is and what your timeline is. They will be happy to help you along the way. Nothing makes them happier than to tell people like you that they are approved for home financing.

David Cooke