Thursday, May 31, 2018

When Double Dipping is Okay

When double dipping is okay
Perhaps you remember the Seinfeld episode where George Costanza catches someone double dipping in the salsa. While this is considered unsanitary and bad manners some forms of double dipping are okay.
  Sometimes 2 levels of government want you to do something so they offer you an incentive. The idea is that over time people’s behavior over time changes and it becomes the norm to do this.
Several years ago when I was having my furnace cleaned and serviced the service man told me that the firebox had rusted and fumes could flow through my home. He turned the furnace off and told me that I needed a new one.
    At the time, the local natural gas company was offering discounts of furnaces for people who switched over to their company. The local electricity provider offered lower rates to people who bought a heat pump and the federal government had a program to encourage people to become more energy efficient. As  a result I was able to triple dip – I got a discounted more energy efficient furnace with air conditioning and a new lower rate for electricity.
    That program is gone now but there are others that you can benefit from. At this time Alberta residents are being bombarded with ads and flyers from window companies. They say that if you replace your windows now you can qualify for a $1500 rebate through the provincial government. What they are not telling you is that you can double dip. If you get an energy audit before the windows are replaced and you apply to your mortgage default insurance company , whether it’s CMHC, Genworth , or Canada Guaranty you may qualify for a 15% rebate on your premium !  On a $400,000 mortgage with 5% down you pay $16,000 in fees. How nice would it be to get $2400 back?

     The programs vary from province to province and cover windows, hot water tanks, appliances. You can check out what’s available here or ask your local mortgage broker for more information. .  Go ahead and double dip.Here's a link to help you find out what's available in your province.

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Tuesday, May 8, 2018

It’s not all about the rate: Amortization & Renewals

It’s not all about the rate: Amortization & Renewals
Have you spoken to a mortgage broker lately? When it’s time to renew your mortgage you have the freedom to do a number of things that are not possible at any other time without a financial penalty.  Renewal time is an opportunity.
Have you looked at your mortgage amortization lately?  Let’s say that you started your present mortgage 10 years ago and you had a 30 year amortization. You now have 20 years left on your mortgage but your situation has changed. Your children have grown up and one is ready to leave for college and another one will follow in a couple of years. An easy way to help the kids out would be to refinance your home.  However, the rules have changed and if the value of your home has not risen a lot and you have not paid down the balance you may not have the 20+% you need to withdraw the equity.
 Another possible solution would be to use the amortization on your mortgage to help you achiever your financial goals. 
You can extend the amortization and lower your monthly payments thus freeing up cash flow. 

Here’s an example. With a balance of $400,000 on your mortgage 

Interest Rate
Monthly Payment
20 years

25 years
30 years

By adding 5 years to your mortgage you can lower your payments by $320 a month. If that’s not enough and you have more than 20% equity , in other words, your mortgage is less than 80% of the value of the home, you can extend your mortgage to 30 years with most lenders. This will free up $520 a month. When your children graduate you or your mortgage broker can contact the lender and have your amortization lowered again.  Note that changing the amortization can result in costs. Check with your Dominion Lending Centres mortgage broker before you make any changes to your mortgage.  For more information visit

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Monday, May 7, 2018

5 Ways you can Kill your Mortgage Approval

So, you found your dream home, negotiated a fair price which was accepted. You supplied all the needed documentation to your mortgage broker and you are waiting for the day that you go to the lawyer’s to sign the final paperwork and pick up the keys.

 All of a sudden your  broker or the lawyer calls to say that there’s a problem. How could this be? Everything has been signed and conditions have been removed. What many home buyers do not realize is that your financing approval is based on the information the lender was provided with at the time of the application. If there have been any changes to your financial situation, the lender is within their rights to cancel your mortgage approval. There are 5 things that can make home financing go sideways.
1 Employment – You were working for ABC company as a clerk for 5 years making $50,000 a year and just before home possession you change jobs. The lender will now ask for proof that probation for this new job is waived and new job letters and pay stubs at the very least. If you change industries they will want to see more proof that you are capable of keeping this job.
  If your new job involves overtime or bonuses of any kind that vary over time, they will ask for a 2 year average which you will not be able to provide.
 Another item that could ruin your chances of getting the mortgage is if you decide to change from an employee to a self-employed contractor just before possession day. Even though you are in the same industry, your employment status has changed . This is a big deal killer. .
2. Debt – A week or two before your possession date, the lender will obtain a copy of your credit report and look for any changes to your debt load. Your approval was based on how much you owed on that particular date. Buying a new car or items for the new home need to be postponed until after possession of your new home.
Don’t be fooled by “Do not pay for 12 months”  sales campaigns. You now owe this money regardless of when the payments start. Don’t buy a new car and don’t buy furniture for the new home. This will increase your debt ratio and can nullify your financing.
3. Down payment source – And yet again I reiterate that the approval is based on the initial information you have provided. You will be asked at the lawyer’s office to verify the source of the down payment and if it is different than what the lender has approved, then you may be in trouble. For example, you said that you were going to save the funds and then at the last minute Mom and Dad offer you the funds as a gift. There’s no problem accepting the gift if the lender knows about it in advance and has included this in their risk assessment but it can end a deal. .
4. Credit – Don’t forget to make your regular credit card payments. If your credit score falls due to late payments, this can kill your financing. If you have a high ratio mortgage in place which required CMHC insurance, a lower credit score could mean a withdrawal of their insurance once again , killing the deal.
5-Identity Documents  - This can be a deal killer at the lawyer’s office. The lawyer is required to verify your identity documents and see that they match the mortgage documents. Many Canadians use their middle names if they have the same name as their parent.   Lots of new Canadians adopt a more Canadian sounding name for their day to day lives but their passports and other documents show another name.
 Be sure to use your  legal name when you apply for a mortgage to avoid this catastrophe . Finally, keep in touch with your Dominion Lending Centres mortgage professional right up to possession day. Make this a happy experience rather than a heartbreaking one.  

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Wednesday, March 28, 2018

What are Credit Unions ?

What are Credit Unions?

We’ve all seen credit unions or advertisements for them, but do you know what a credit union is? What’s the difference between banks and credit unions?  How did we end up with credit unions in Canada?
 What is a Credit Union? -  it is a  non for profit money cooperative. Members pool their money to lend to other members for car loans, consumer loans and mortgages. The profits are not paid out to stock holders but they are returned as dividends to the members.
 How did this cooperative system enter the Canadian financial system?
 In 1900 Alphonse Desjardins read about a man in Toronto who borrowed $150 and ended up having to pay $5000 in interest to pay is loan off.  At the time, banks were for well off people and your average working class individual had to borrow from loan sharks .  Desjardins studied the cooperative banks in Europe and opened his first branch in the Quebec City suburb of Levis that year. At the time of his death in 1920 there were 163 branches in Quebec and 18 in Ontario.
    The first credit union branch opened Alberta in Edmonton in 1938. Credit unions can now be found in all provinces and territories.
    Why do mortgage brokers use credit unions?  They do not fall under the rules of the Canada Bank Act and sometimes we can get better terms for a client that is not available from a bank or other lending institution.  Credit unions often  tend to follow the guidelines set out for banks but sometimes they can be more understanding as the lending decisions are made locally and not in an office in Toronto.
 Next time you need a mortgage or a line of credit speak to your favourite mortgage broker. A credit union might have the right product for your particular needs.
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