Friday, December 8, 2017

What is a Cash Back Mortgage?

What is a cash back mortgage?    
 Every once in a while a bank will advertise a cash back mortgage. It sounds great but there are a few things to consider.
When you purchase a home, you may find that you need some extra cash. You may  want to renovate, purchase some furniture, or start on building a fence or landscaping.. Fortunately, some Canadian lenders offer mortgages that give you a cash back rebate when you take out your mortgage.
With a cash back mortgage, your lender advances you a cash lump sum when your mortgage closes. The most common sum you receive is 5% of your mortgage amount but it’s possible to get between 1% and 5% depending on the lender you choose. Note that you receive these funds when the mortgage closes. The funds cannot be used for your down payment, however if you borrowed your down payment you could use the funds to pay back the loan.
    This sounds like a great idea but there are some down sides to this type of mortgage. First- you will pay about 1.5% higher interest rate for the duration of the mortgage term. Usually this is a 5 year term and if you take a look at how much extra interest you are paying you will find that it takes you 5 years to pay this sum back to the lender.
   Another point to consider is that Canadians move on average every 3 years. What if you have to break the mortgage?  In that case, you owe the lender the usual 3 months interest or Interest Rate Differential (IRD) as well as the balance of the cash back balance. This could be a very pricey move. If your lender allows it , it’s best to port your mortgage to your new home to avoid the double hit of the penalty and paying the cash back.
    A cash back mortgage is a great option but it’s not for everyone.  Be sure to tell your mortgage broker if it’s at all possible that you will have to move before your mortgage term is over so that he or she can advise you on what your penalties would be.
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Friday, August 18, 2017

Homeowners are going on ‘spending binges’ – study


Homeowners in Canada’s hottest housing markets are taking advantage of rising property values to go on spending binges, according to National Bank of Canada, the nation’s sixth largest bank.
“The sharp appreciation in home prices in Ontario and British Columbia, fueled by extremely accommodative monetary policy, have undoubtedly encouraged some homeowners to tap into their home equity in order to support a spending binge,” said Stéfane Marion, chief economist and strategist at National Bank of Canada.
In Canada, there are currently about three million active home equity lines of credit (HELOCs), according to National Bank, citing data from the Financial Consumer Agency of Canada.
On average, the outstanding balance on Canadian HELOCs is $70,000, and these types of loans account for about 45% of consumer credit.
Rather worryingly, there has been an increase in this type of consumer debt. “We estimate that HELOCs at Canadian chartered banks have surged by close to $20 billion in the past year, accounting for close to 60 per cent of the growth in total consumer credit,” Marion said.
Households taking advantage of HELOCs are fueling a broader borrowing frenzy, said National Bank. During the last quarter, consumer credit grew at its fastest rate since 2010.
While National Bank doesn’t examine what Canadians are spending their HELOCs on, earlier this year, one Toronto-based mortgage agent told BuzzBuzzNews that homeowners are increasingly using their HELOCs to help their children finance their own home purchases.
Overall, the racking up of consumer debt is extremely risky, National Bank warned. While it supports near-term GDP growth, increased debt, including HELOC debt, poses risks to the financial system’s stability and undermines the financial well-being of individuals.
“So, the resurgence in consumer credit may ring some alarm bells at the Bank of Canada which, as you may recall, continues to see household indebtedness and housing market imbalances as ‘the most important vulnerabilities for the Canadian financial system,’” Marion said.  

Are you looking to invest in property? If you like, we can get one of our mortgage experts to tell you exactly how much you can afford to borrow, which is the best mortgage for you or how much they could save you right now if you have an existing mortgage. Click here to get help choosing the best mortgage rate
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The Role of a Mortgage Broker

here's a great article written by my associate Mandy Reinhardt. 

The Role of a Mortgage Broker

The Role of a Mortgage BrokerBuying a home is a big step – a big, very exciting, potentially stressful step! How can you take the hassle out of the equation and keep your buying experience super positive? Easy… Surround yourself with a team of experienced professionals!
Many experienced realtors insist on starting your financing first, that’s where your Mortgage Broker comes in.
What is a Mortgage Broker? A Mortgage Broker is an expert in real estate loans that acts as a match-maker between home buyers looking for money and lenders with funds available to borrow. A broker will collect information from you about your employment, income, assets, loans and other financial obligations as well discuss your current budget, spending patterns and goals in order to get a thorough understanding of where you’re at and where you’d like to be. From here they assess the strengths and any weaknesses in your application and can advise on potential suitable financing options and any next steps you might need to take in preparing yourself for loan approval.
Talking with a Mortgage Broker before you start shopping is helpful for a number of reasons:
  • You’ll develop a well-founded expectation of the price range and payments that you can afford.
  • You’ll have a chance to address any potential gaps in your application for financing BEFORE you’re in a time crunch to meet deadlines for closing.
  • Sellers may take your offer more seriously when you tell them you’ve been pre-approved for your financing putting you in a better position to negotiate (price, possession date, inclusions, other terms, etc).
  • You and your Mortgage Broker will begin to compile your documentation so that your application is ready to go when you find the perfect home, leaving your mind free to start arranging furniture in your new place.
So why use a Mortgage Broker rather than your bank?
A Mortgage Broker has access to loans from a wide range of lenders. That means that you have more potential places to get approved, AND can take advantage of best products, top programs and lowest pricing!
A Mortgage Broker must complete a series of courses and pass the corresponding exams prior to obtaining a license to sell mortgages. In order to maintain that license a Broker must uphold the highest standards of moral, ethical, and professional conduct – including ongoing education and training.
A Mortgage Broker working with multiple lender options means that they truly SHOP for the best programs and rates for you based on comparisons and choices and don’t simply sell you the limited products they have to offer through a single bank source.
Mortgage Brokers work EXCLUSIVELY in mortgages so they are mortgage product specialists rather than banking generalists. Brokers deal with real estate transactions involving deadlines and conditions everyday as part of their job. They understand the urgency of meeting these commitments to ensure a successful transaction for everyone involved.
Learn more by contacting your Dominion Lending Centres mortgage professional today!
for more information contact me at or  on Facebook
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Thursday, July 20, 2017

Mortgage brokers are super heroes

Mortgage brokers have a reputation as superheroes. Although we cannot leap tall buildings in a single bound we can do extraordinary things.
Is the down payment money coming from outside of Canada? I had a client who had a joint account with her father in Japan. She showed me bank statements with the money in the account and leaving Japan. I had another bank statement showing the funds coming into her Canadian account. Finally I showed the foreign exchange rate for that day from Yen to CAD. The bank accepted this as a suitable paper trail.
An unusual down payment source? I had a client who sold his vintage Cadillac for his his down payment. A copy of the registration, the bill of sale and a bank statement showing the funds going into his account was deemed fine by the bank.
Is your down payment coming from multiple sources? I recently had two brothers purchasing a home together. They both had their money in RRSP’s and TFSAs. It took some explaining but we were able to show all the down payment and closing costs coming from four different sources.
Several years ago I had a client defaulting on two mortgages. Foreclosure was just days away.
I was able to consolidate the two mortgages, pay them out and get a reasonable payment schedule for one year. After the year , I moved him to a regular lender and arranged for a line of credit so that he could pay for some home renovations with a low interest rate secured against his home.
I had a couple who wanted to buy a home. The husband had had a business failure and it had affected his credit. I could only use the wife’s credit and her income for this purchase. She was a foster mother with six children. Her income was good but not high enough. I was able to get the lender to gross up her income by 25%, as her income was tax free. This was enough for them to buy a large home for the couple and their foster children.
Small towns can also pose unique problems. I had a client who wanted to refinance his home. I checked his credit report and found a credit card that he did not have. He told me that there were five people with his name in this small town. He also revealed that he had an account at Home Hardware that was not reporting on the credit bureau. The manager was a friend and thought that the loan would hurt his credit so they made an informal arrangement to pay it off.
Did I mention that he had three jobs? He worked as a tire installer, and invoiced the company from his firm. I was able to get a lender to accept this client his varied income and got the mortgage . Come to think of it , perhaps mortgage brokers are superheroes. If you have a difficult situation the best person to speak to is a Dominion Lending Centres mortgage professional, if it can be done legally, a broker can do it.  for further information visit my Facebook page or my website 

Thursday, June 1, 2017

I Don't Understand

Many of us will remember the television show, Mork and Mindy .
 Imagine that you have just moved to Canada and you overhear a conversation, “ I was watching NBC and they said that the FBI arrested a terrorist at IGA”
 You probably wouldn’t understand what they said because we all use acronyms used We often replace the long descriptions for many organizations, institutions and government bodies with the initials or short forms in conversations. The show was based on Mork, an alien, misunderstanding terms, expressions and common traditions that we have in our society. It made for a funny show but it’s not so funny if you are new to Canada or want to make the largest purchase in your life.
. Imagine this same person speaking to a realtor or a mortgage broker when they started using abbreviations for words used in their industry. As a public service to any of you who may have recently arrived from a foreign county or another planet, I am going to define a few expressions that we all take for granted.

AMORTIZATION – How long you have to pay off the mortgage on a home. Typically in Canada you have 25 years. In Japan it can be 99 years. Payments are spread out equally over the specified time period . If they were not you would have huge payments in the first few years and very small ones in the last6 months of your mortgage term.
DOWN -  short for down payment. A deposit of 5% minimum is required for a home purchase.
FLEX DOWN – a borrowed down payment program, where the repayment of the loan is included in the debt calculations.
PULL – “He pulled my credit before the loan approval “ – a pull is a credit bureau report inquiry.
TRADE LINES -  a trade line is a credit card or cellphone  account, a loan or mortgage that appears on your credit report.
DEROGS – short for derogatory , referring to late payments on your credit report.
20/20 – refer to your ability to repay 20% of the mortgage balance or increase your payment by 20% without incurring a penalty.
MIC – short for a Mortgage Investment Corporation – a group of investors who will lend you the money for a mortgage if a traditional lender will not due to unusual circumstances.
TERM – although mortgages have 25 year amortizations, Canadians traditionally take terms of 1- 5 years and then renegotiate their mortgages. 1-5 years is the TERM.
DEFAULT – failing to pay your mortgage on time puts your mortgage into DEFAULT
FORECLOSURE – If your mortgage is in default you can make your payments up or the lender will put your home in FORECLOSURE and you will lose your home.
OPEN MORTGAGE – a mortgage where you can pay out the mortgage at any time during the term.
CLOSED MORTGAGE –a mortgage where you have agreed to pay the lender for a specified period of time . If you wish to terminate the mortgage, a penalty will have to be paid.
PIT – principal, interest and taxes – an amount  used to calculate how much  you  can afford to pay monthly on your home .  Often  heat is also included in this calculation (PITH) .
High Ratio – a mortgage where the buyer has less than 20% for the down payment and needs to pay CMHC fees to insure it.
CONVENTIONAL – a mortgage where the buyer has 20% or more down payment or equity in their home.
While I have not covered all the terms you may encounter I hope that I have covered most of them.
If you find yourself talking to a mortgage broker who is using business expressions you should feel free to remind them that you are not in the industry and would like to the terms explained. Any broker worth their salt will be very happy to explain these terms to you.

Contact me if you have any questions  - my website    
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Friday, May 19, 2017

Thinking Outside of the Box - Blanket Mortgages

Thinking outside of the box – blanket mortgages
When someone calls me up out of the blue for a mortgage , I often ask them, “Why did you call me?”
 Often the reply is that a family member suggested it. I then ask, “Do you know what I do?”
 Once again , I will get a reply that they aren’t sure.  I will then explain to them that while banks do mortgages, they don’t specialize in them. They also do deposits, GIC’s, RRSP’s , insurance ,car loans etc.
 I only do mortgages, day after day. As I result I have more experience in unusual situations and we are getting more of them all the time. Sometimes you need to think outside of the box.
   Here’s an example,  Sally and Ted want to buy a home but they don’t have a down payment.  A recent HSBC Bank study found that 37% of young Canadians count on the Bank of Mom and Dad for their down payment.
Unfortunately in many cases, Mom and Dad would like to help them out but they don’t have the cash.
They own their home or have a low mortgage balance but their savings are tied up .  This is where thinking outside of the box comes in handy.  A blanket mortgage is a mortgage that covers the subject property and another property that has sufficient equity in it to carry both properties.

    If the parents are willing, a mortgage can put  placed on the parents ‘ home and the new home. If the property value for the 2 homes is more than 80% of the mortgage amount the new home can be purchased without the young couple having to save a down payment and pay expensive CMHC fees.
     What risks or down sides are there to this idea.?  If Mom and Dad want to sell their home and move to Arizona the children will have to get a new mortgage to cover their home .There may be penalties for breaking the mortgage which will have to be paid.  There’s also the risk that the children may fall behind on their mortgage due to layoffs  or maternity leaves and that could jeopardize the parent’s home.

 Is a blanket mortgage a good idea for everyone? No. Discuss your issues with your mortgage broker and they may find this to be the best solution for you or they may suggest something else .Email me  You can contact me here .