Mortgage Strategies: Take Me Out to the Ball Game!

Mortgage Tips DAZADA DIAMOND 29 Aug

Mortgage Strategies: Take Me Out to the Ball Game!

While most people start off their mortgage search by going after the lowest rate, what they are really after is the mortgage with the lowest cost. Then again, the majority of borrowers in Canada end up with a mortgage that is not the lowest rate nor the lowest cost. Strike 1!

Whether borrowers realize it or not, what is often more important to them is a mortgage with the lowest risk. So they end up with 5-year fixed mortgage that has a constant payment, which is usually not the lowest risk mortgage at all. Strike 2! Time to bring in a mortgage broker like myself or your local Dominion Lending broker to be the pinch hitter and go to bat for you.

There are 4 and only 4 mortgage strategies, and everything fits within these 4 strategies: Lowest Cost, Lowest Risk, Maximum Flexibility, and Lowest Payment. Expert investors think about financial transactions in these terms, and you should think about your mortgage in these terms too. Consider them like the 4 bases of a baseball diamond, you need to touch on every one of them to complete a home run. A mortgage broker like me or your local Dominion Lending Centres broker can help you prioritize your mortgage strategy based on your current financial goals, life situation, and risk tolerance, and the potential for various scenarios that could affect you over the term of the mortgage. You can’t achieve all 4 mortgage strategies together, there are trade-offs, but through strategic mortgage planning we can help guide you through the strategic options, help you determine the best strategy for you, and find the best mortgage products that fit your strategy.

So next time you are planning your mortgage, make sure to cover all 4 bases by thinking about The 4 Mortgage Strategies: Lowest Cost, Lowest Risk, Maximum Flexibility, and Lowest Payment, and get a mortgage broker like myself or your local Dominion Lending Centres broker to help you. Now that’s a Grand Slam!


First-time homebuyers can apply for incentive program in 5 days

Down Payment & Buying DAZADA DIAMOND 28 Aug

First-time homebuyers can apply for incentive program in 5 days

First-time homebuyers can apply for incentive program in 5 days

The Federal government’s incentive scheme for first-time homebuyers is about to go live with applications open from next Monday.

The First-Home Buyer Incentive enables eligible buyers with incomes of up to $120K to reduce mortgage payments without increasing the amount needed for a down payment.

The incentive is available to buyers of new or existing homes and new or resale manufactured/mobile homes. The incentive is 5%, with a 10% option for new constructions.

A participant’s insured mortgage and the incentive amount cannot be greater than four times the participant’s qualified annual household income.

Homebuyers should be aware that using the incentive means that the government will share in both upside and downside changes in the property’s value.

The incentive must be repaid when the home is sold or after 25 years, whichever is sooner.

How much can be saved?


Need an Appraisal – 7½ Tips for Success

Mortgage Tips DAZADA DIAMOND 27 Aug

Need an Appraisal – 7½ Tips for Success

Do you need to get a current value of your property? Then you are going to need an appraisal.

Banks and other lending institutions want to know the “current” market value of your home before they consider loaning money on the property. An appraiser checks the general condition of your home and compares your home to other similar homes which have recently sold in order to define a comparable market value for your home.

Here are 7½ tips that can help you get top current market value.

Short version – Prepare your home as if it was going to be sold!!

Long version… If a picture is worth a thousand words, think what kind of story the pictures from your home are telling?

In the world of mortgages, lenders seldom set foot on the property before making a loan decision.

Instead, they rely on their trusted list of approved appraisers. All a lender usually gets is the appraiser’s pictures of your property and their comments about how your home was appraised.

Tip #1 – Clean up. The appraiser is basing the value of your property on how good it looks. Before the appraisal, prepare your home as if you’re selling it. Clean and declutter every room, vacuum, and scrub. Do whatever you can to make your home as presentable as possible.
Tip #2 – Pay attention to curb appeal. An appraisal is all about first impressions. And the very first one the appraiser gets is when they walk up to your property. Spend an hour or two making sure the outside of your house, townhouse or condo is warm and welcoming.

Tip #3 – The appraiser must be able to see every room of the home, no exceptions. Refusal to allow an appraiser to see any room will be noted in the appraisal can be a game stopper. There are times when it is not appropriate for the appraiser to take pictures of certain things and appraisers and lenders understand this, but refusal to grant access could kill your deal.

Tip #4 – Make a list of upgrades and features. It’s important that the appraiser is made aware of any updates you’ve made, especially those which are hidden, like new plumbing and electrical. If possible, give the appraiser this list. That way they have a reference as to what has been updated and how recent or professional that work was done.

Tip #5 – If you need to spend to update, be prudent. Many people think “bathrooms and kitchens” are the answer for getting high prices on home value. They aren’t. First, consider that kitchen and bathroom remodels can be some of the priciest reno costs. For that reason, it may be more prudent to spend a bit of money, for just a bit of updating. Paint, new flooring, new light or plumbing fixtures don’t break the bank, but can provide a dramatic impact and improve your home’s value.

Tip #6 – You know your neighbourhood better than your appraiser does. Find out what similar homes in your neighbourhood have sold for. Your property might look like one down the street, but if you believe the value of your property is worth more, let them know why.

Tip #7 – Lock up your pets. I’m sure most appraisers like pets, but some may be put off by your cat rubbing against their leg or the dog barking or following them around.

Tip #7½ – One last tip – don’t annoy the appraiser with questions and comments and follow them around. Instead, simply be prepared to answer any of their questions and, if you do have concerns or queries, wait until they’ve completed their viewing of the property, then ask.

Mortgages are complicated, but they don’t have to be… Engage a Dominion Lending Centres mortgage expert!


Economic shift leading to higher delinquency in Alberta’s major cities

Latest News & Economy DAZADA DIAMOND 26 Aug

Economic shift leading to higher delinquency in Alberta’s major cities

Calgary and Edmonton are seeing higher delinquency levels due to a disruptive economic trend: a shift away from employment in oil and gas, and towards the service sector.

The latest edition of the CMHC Mortgage and Consumer Credit Trends Report indicated that mortgage delinquencies have had an overall upward trend in the Prairies during this quarter.

In particular, the situation in the two major Alberta cities significantly upended household incomes. Edmonton also suffered drops in full-time work.

Calgary’s mortgage delinquency rates were hovering around an average of 0.35%, across all origination amounts. The rate was above 0.40% among those who borrowed less than $100,000.

Meanwhile, mortgages in the $100,000 – $200,000 range had the highest incidence of delinquency in Edmonton, at 0.65%.

Elsewhere in the Prairie region, Regina and Saskatoon saw delinquencies fall as loan amounts increase. Mortgages less than $100,000 had a 0.79% rate in these cities, and loans valued at $400,000 or more posted a 0.4% rate on average.

Holding a mortgage also seems to have had an effect on ensuring that other loans are paid on time.

“In the Prairie region, the delinquency rates for credit cards, lines of credit and auto loans for mortgage holders tend to be lower than non-mortgage holders. Mortgage holders normally have higher credit scores and lower credit delinquency rates than consumers without a mortgage,” CMHC stated.

Currently, the Prairies boast of strong average credit scores, ranging from 759 to 765. Mortgage payments are also robust, with Calgary having the highest level in the region at $1,533.

“The decrease in average weekly earnings of Albertans, the downward pressure on house prices in Saskatchewan and higher mortgage rates all contributed to increased delinquency rates in Prairie CMAs. However, average credit scores remained excellent despite the increases in delinquency rates and higher average monthly obligations,” CMHC senior economics analyst Christian Arkilley said.

Stress Test Rate & Recent Decrease

Down Payment & Buying DAZADA DIAMOND 22 Aug

Stress Test Rate & Recent Decrease

Currently, all borrowers in Canada need to qualify for a new mortgage at the current Bank of Canada Benchmark Qualifying Rate or at their approved mortgage interest rate plus 2.0%, whichever is higher.

For more than a year, this Bank of Canada Benchmark Qualifying Rate has been 5.34%. Now, for the first time in 3-years, the Bank of Canada has decreased that Qualifying Rate to 5.19%, a 0.15% decrease.

What does this mean?

Well, this Bank of Canada Qualifying Rate is essentially a bank’s Stress Test Rate. If a borrower has an annual gross income of $60,000, they can qualify for a $265,000 purchase price with a 10% down payment at a 5.34% qualifying rate.

Change that qualifying rate to 5.19%, that same borrower qualifies for a $269,000 purchase price at 10% down payment. This is a $3,700 increase in borrowing ability.

A borrower with $80,000 of gross annual income and a 20% down payment qualifies for a $455,000 purchase price at a 5.34% Bank of Canada Qualifying Rate. Change it to 5.19%, it increases to $462,000. A $5,600 increase in borrowing ability.

1.5%. That is the increase borrowers now have in their borrowing ability.

Ironic part of all these calculations, the stress test was implemented to protect consumers against rising interest rates. Their concern was that borrowers would not be able to cover their monthly payments when they came up for renewal.

Highest 5-year interest rate since January 2010? 3.79%.

Highest 5-year fixed interest rate in the past 5-years? 3.24%.

Last time someone had to pay an interest rate above 5%? For one month in 2009 and before that, summer of 2008.

Food for thought! If you have any other questions regarding the Bank of Canada and mortgage Stress Test rules, please reach out to Dominion Lending Centres mortgage professional today.


Mortgage Stress Test Sidelining Young Buyers

Mortgage Tips DAZADA DIAMOND 21 Aug

New data shows the country’s youngest buyers are being affected most by the government’s mortgage stress tests.

Mortgage originations were down 8.9% overall in Q2, while those among buyers between the ages of 18 and 25 were down 13.4% compared to last year, according to TransUnion’s latest Industry Insights Report.

This marks the fourth consecutive quarter that mortgage originations and balances were down on an annualized basis.

“The new mortgage regulations seem to be having the intended effect in cooling the overheated housing market and broadly preventing consumers from overextending themselves with mortgage debt,” said Matt Fabian, TransUnion’s director of financial services research and consulting in the release.

“However, there are signs of some potentially unintended consequences. We have started to see an uptick in co-borrowing as the means of getting a foothold on the property ladder, where multiple consumers make an application together—in effect combining the power of their salaries,” he added. “Although this is nothing new, it is now often with the help of a parent, other relative or a friend rather than just a partner or a spouse.”

Stress Test Harder on Younger Buyers

falling behind bills and taxesThe youngest demographic of buyers is most affected by the new mortgage rules due to being at the early stages of their careers and, typically, receiving lower salaries compared to the other cohorts, making it harder to pass the stress tests.

Those with a down payment of 20% or more must qualify at the greater of the contract rate or the Bank of Canada’s benchmark rate (currently 5.19%), while uninsured mortgages are stress-tested at the greater of the benchmark rate or the contract rate plus 200 basis points.

“This limits both their ability to qualify under the mortgage stress test rules, as well as the size of mortgages they can obtain,” the report notes. “In many of the major Canadian housing markets, many younger consumers have now been effectively priced out of buying.”

Debt Levels Increasing

While mortgage debt is trending downward, overall debt held by Canadians rose 4.3% year-over-year to $1.88 trillion.

Again, millennials led the trend with their debt levels jumping 12.3% to $515.9 billion, reaching parity for the first time with the total debt held by Baby Boomers.

“This trend represents a fundamental shift in generational lending, as banks and other institutions continue to adapt and evolve their business models to provide more options and more tailored customer experience for Millennials and Gen Z,” the report noted.

Lenders Tightening Lending Limits

The report also revealed that lenders may be taking a cautious approach to new lending, given a decline in the size of new credit limits in the quarter.

The data shows a 3.6% decline in the average mortgage size (to $276,579) and a 19.7% drop in the average line of credit limit (to $42,004).

However, limits for auto loans and credit cards were higher, up 1.9% and 0.8%, respectively.



Raise your credit score in 3 months

Credit & Debt DAZADA DIAMOND 20 Aug

Raise your credit score in 3 months

While people often think of mortgage brokers when they are first time home buyers, we can help people in a variety of different ways.
Recently Garrett LaBarre of Calvert Home Mortgages in Calgary shared a success story with brokers. He had a client referred to him by a mortgage broker who had a conundrum. She was paying her credit card balances on time month after month, but couldn’t get them paid down due to the high interest rates. As a result, she had a 567 credit beacon score. Her bank would not refinance her mortgage or offer her a debt consolidation loan. She was stuck.
The solution was to use some of the equity in her home to pay off the credit card debt and lower the payments to a more manageable monthly. Even though her mortgage interest rate was higher than a regular lender, it was a lot lower than a credit card rate and it was amortized over 30 years.
The result was that within three months this client had her credit score jump from 567 to 769!
What an amazing result. Now there’s one more person who knows that mortgage brokers can do things that the banks can’t do.
If you have a challenging story, be sure to contact your local Dominion Lending Centres mortgage professional for help.


Canadian home sales gain as lower rates help offset stress test

Banks & Bank of Canada DAZADA DIAMOND 16 Aug

Canadian home sales gain as lower rates help offset stress test

Canadian home sales gain as lower rates help offset stress test

There was a 3.5% rise in Canadian home sales in July compared to June and unadjusted activity was up 12.6% year-over-year.

But despite gains – which took sales to around 15% above the 6-year low recorded back in February, sales are still lagging the highs of 2016 and 2017 by around 10%.

The Canadian Real Estate Association says that prices increased too with its National Home Price Index gaining 0.6% month-over-month and 0.2% year-over-year.

The average national sales price (unadjusted) was up 3.9% year-over-year to just under $499,000. However, this is heavily influenced by prices in the Greater Toronto Area and Greater Vancouver Area and without these two markets the average is more than $105K lower at less than $393,000.

“Sales are starting to rebound in places where they dropped when the mortgage stress test took effect at the beginning of 2018, but activity there remains well below levels recorded prior to its introduction,” said Gregory Klump, CREA’s Chief Economist “By the same token, sales continue to rise in housing markets where the mortgage stress test had little impact due to upbeat local economic conditions and a supply of affordably priced homes. Meanwhile, the mortgage stress test is doing no favours for homebuyers and sellers alike in places facing challenging local economic prospects and subdued consumer sentiment.”

Activity led by GVA, GTA

Activity advanced in about 60% of all local markets but while the monthly increase was led by Greater Vancouver and Greater Toronto, sales there remain well below levels recorded prior to the mortgage stress test that came into effect in 2018.

Sales were up from year-ago levels in most of Canada’s largest markets, including the Lower Mainland of British Columbia, Calgary, Edmonton, the GTA and Hamilton-Burlington, Ottawa and Montreal.

Balanced markets

New listings declined 0.4% in July with increases in Calgary, the GTA and Edmonton offsetting a decline in the Lower Mainland of British Columbia and Montreal.

With higher sales and lower listings, around three-quarters of markets were balanced in July 2019. There were 4.7 months of supply.

The national sales-to-new listings ratio tightening to 59.8% in July from 57.6% recorded in June. This marks its tightest reading and the biggest deviation above its long-term average (of 53.6%) in the past year.


3 things you may not know about cash-back mortgages

Down Payment & Buying DAZADA DIAMOND 15 Aug

3 things you may not know about cash-back mortgages

About twice a year, one of the big Canadian banks likes to run an advertising campaign for their cash back mortgages. These are mortgages usually with 5 year terms where you receive a certain percentage back in cash. The percentage varies from 1% to 5% in most cases. You can use these funds to build a fence, landscape, buy window coverings etc. The idea is to be able to pay for some things that you would not be able to as you put all your money into the down payment and closing costs and need some help to get started.

1- There are multiple lenders who have cash back mortgages. Don’t jump at the first one you see. They all have different terms and conditions.
2. You are really getting a loan on top of your mortgage. The interest rate is calculated so that by the end of the term you will have paid the lender back the money they gave you and a little bit extra. Sometimes this little bit extra may be twice as much as you got in cash back.
3 – The average cash back mortgage is a 5 year term. Most Canadians move every 30 months. Therefore when you break a cash back mortgage you have to pay a penalty as per usual but you also have to pay back a portion of the loan that they gave you. If you are 36 months into a 60 month mortgage, you have to pay them back 2 years’ worth or 40% of the cash back. Combined with the penalty this can be a hefty sum. In addition, there are some lenders who require you to pay back 100% of the cash back if you want to break the term.

Before signing for a cash back mortgage it’s better to discuss your needs with your local Dominion Lending Centres mortgage professional. They can advise you on cash backs, line of credit, Purchase plus Improvements or Flex Down mortgages which may be better for your situation.


What is a mortgage broker?


What is a mortgage broker?

You may have noticed that there are many different terms for those of us who work in the mortgage industry besides “broker”.
Mortgage: specialist, expert, advisor, associate, officer, etc. I just want to clear up some potential confusion with all these monikers.
There are 2 main categories that these fall in to. Those that work for a bank to sell mortgage products available from that bank.
The other is for those like myself that work within a mortgage brokerage that has no direct affiliation with any one bank.
Each mortgage brokerage has agreements in place with multiple banks and mortgage lenders to be able to submit mortgage applications for consideration.
There are of course obvious differences between these but some may not be quite so apparent.

Mortgage Brokerage
All those working in the mortgage brokerage industry must be licensed by a provincial government agency, in Saskatchewan it’s called the Financial & Consumer Affairs Authority (FCAA).
While every province has their own set of guidelines, there are 3 different types of licenses offered by FCAA: mortgage associate, mortgage broker & principal broker.
The mortgage associate and broker are very similar as both advertise themselves to obtain clientele, work directly with the clients, mortgage lenders, mortgage insurers, realtors and lawyers in the service of their clients. The key difference is that an associate must work under a supervising mortgage broker to ensure they remain in compliance with FCAA regulations.
Each mortgage brokerage will have a principal broker (aka: broker of record) that oversees the operations of the brokerage as well as all the associates and brokers within the brokerage.
Most all those working in the mortgage broker industry are commission based. Our income is derived from the mortgage lenders that we submit mortgage applications to.

In order to apply for a license as a mortgage associate, applicants must complete an approved mortgage associate education course and provide a current criminal record check along with the required application documents.

Application for a license as a mortgage broker are the same as for an associate with the addition of a previous experience requirement.
The applicant must have been licensed as a mortgage associate for at least 24 of the previous 36 months.

In addition to annual applications for renewal, licensees must also:

  • Purchase and remain in good standing with professional errors and omissions insurance
  • Complete FCAA approved annual continuing education courses
  • Provide FCAA auditors access to mortgage files for review whenever requested
  • Advise FCAA of any changes to brokerage or contact information
  • Immediately advise FCAA of any offences under the criminal code (other that traffic offenses)

Bank Branch Mortgage
Those that work in mortgage lending for a bank are normally paid by the hour or are salaried and may have a performance bonus structure.
Entry level positions do not require any education beyond high school. Training is provided on the job by the employer with supervision by the branch manager and more experienced staff.
There are no licensing requirements by any provincial or federal governing body and errors and omissions insurance is not required.
Many banks have mobile mortgage staff that may or may not conduct business within the branch and are often paid on a commission basis rather than hourly or salary.

If you have any questions, contact your Dominion Lending Centres Mortgage Broker near you.