27 Nov

Are you a first time homebbuyer??? You need to read this!

General

Posted by: Jeannie Stace-Smith

Great article for first time home buyers!  I have a rate of 2.44% if you are funding before December 31!!  Call me!!!

5 MISTAKES FIRST TIME HOME BUYERS MAKE

Buying a home might just be the biggest purchase of your life—it’s important to do your homework before jumping in! We have outlined the 5 mistakes First Time Home Buyers commonly make, and how you can avoid them and look like a Home Buying Champ.

1. Shopping Outside Your Budget
It’s always an excellent idea to get pre-approved prior to starting your house hunting. This can give you a clear idea of exactly what your finances are and what you can comfortably afford. Your Mortgage Broker will give you the maximum amount that you can spend on a house but that does not mean that you should spend that full amount. There are additional costs that you need to consider (Property Transfer Tax, Strata Fees, Legal Fees, Moving Costs) and leave room for in your budget. Stretching yourself too thin can lead to you being “House Rich and Cash Poor” something you will want to avoid. Instead, buying a home within your home-buying limit will allow you to be ready for any potential curve balls and to keep your savings on track.

 

2. Forgetting to Budget for Closing Costs
Most first-time buyers know about the down payment, but fail to realize that there are a number of costs associated with closing on a home. These can be substantial and should not be overlooked. They include:

  • Legal and Notary Fees
  • Property Transfer Tax (though, as a First Time Home Buyer, you might be exempt from this cost).
  • Home Inspection fees

There can also be other costs included depending on the type of mortgage and lender you work with (ex. Insurance premiums, broker/lender fees). Check with your broker and get an estimate of what the cost will be once you have your pre-approval completed.

3. Buying a Home on Looks Alone
It can be easy to fall in love with a home the minute you walk into it. Updated kitchen + bathrooms, beautifully redone flooring, new appliances…what’s not to like? But before putting in an offer on the home, be sure to look past the cosmetic upgrades. Ask questions such as:

  1. When was the roof last done?
  2. How old is the furnace?
  3. How old is the water heater?
  4. How old is the house itself? And what upgrades have been done to electrical, plumbing, etc.
  5. When were the windows last updated?

All of these things are necessary pieces to a home and are quite expensive to finance, especially as a first- time buyer. Look for a home that has solid, good bones. Cosmetic upgrades can be made later and are far less of a headache than these bigger upgrades.

4. Skipping the Home Inspection
In a red-hot housing market a new trend is for homebuyers to skip the home inspection. This is one thing we recommend you do not skip! A home inspection can turn up so many unforeseen problems such as water damage, foundational cracks and other potential problems that would be expensive to have to repair down the road. The inspection report will provide you a handy checklist of all the things you should do to make sure your home is in great shape.

5. Not Using a Broker
We compare prices for everything: Cars, TV’s, Clothing… even groceries. So, it makes sense to shop around for your mortgage too! If you are relying solely on your bank to provide you with the best rate you may be missing out on great opportunities that a Dominion Lending Centres mortgage broker can offer you. They can work with you to and multiple lenders to find the sharpest rate and the best product for your lifestyle.

GEOFF LEE
Dominion Lending Centres – Accredited Mortgage Professional
Geoff is part of DLC GLM Mortgage Group based in Vancouver, BC.
20 Nov

Do you have principal and interest questions?

General

Posted by: Jeannie Stace-Smith

Take advantage of lower rates as it pays your principal down faster!!!  Call me!!

PRINCIPAL & INTEREST

Principal and interest are the two components that make up a mortgage payment. Principal is the portion of your payment that goes towards paying down the outstanding balance of your mortgage. Interest is the other portion of your payment which goes directly into the pockets of your lender and does not contribute to paying down your mortgage balance.

What some people may not realize is that a compounding interest rate (what the majority of all mortgages are) is weighted differently depending on how many years you have left on your mortgage.

If a young couple were to purchase their very first home, lets say $500,000 for example, and they had a $100,000 down payment, their mortgage would be $400,000. If they had today’s interest rates, their mortgage would be around 3%, compounded semi-annually, over 25 years with their interest rate re-negotiable every 5-years if they keep the same term. Assuming they were able to get 3% for the entire 25-years, their monthly payments would be $1,892.98 a month for the life of their mortgage.

Their first payment however is not $1,892.98, with 97% of it going to paying down the $400,000 balance and 3% going towards interest. The very first payment would actually be broken down as $993.81 of interest and $899.17 going towards paying down the principal balance of $400,000.

Now, it wont stay like this forever, the very last payment before the first 5-year term is up would be broken down as $854.62 going towards interest and $1,038.36 of the $1,892.98 going towards paying down the principal. It wouldn’t be until year 10 where the interest portion dips below $500.

If you can, any pre-payments you make each month will directly pay down the principal balance outstanding. This will also in turn, allow for less interest to be charged as interest is always calculated based on the current balance outstanding. In the later years, it may not be as advantageous, but in the first 5-10 years, it can be extremely beneficial.

If you want to see the break down of principal and interest portions inside your own mortgage, feel free to reach out to a Dominion Lending Centres mortgage professional near you.

RYAN OAKE
Dominion Lending Centres – Accredited Mortgage Professional
Ryan is part of DLC Producers West Financial based in Langley, BC.
18 Nov

Good news on housing rebound!

General

Posted by: Jeannie Stace-Smith

Still struggling a little in the west!  Looking for a mortgage or some advice!  Call me!!!

OCTOBER DATA CONFIRM THAT HOUSING IS IN FULL REBOUND

Statistics released today by the Canadian Real Estate Association (CREA) show that national home sales rose for the eighth consecutive month. Activity held steady in October at the relatively robust September pace following a string of monthly increases that began in March. Existing home sales are now almost 20% above the six-year low reached in February 2019, but remain 7% below the heights reached in 2016 and 2017 when many fretted over a housing bubble (see chart below).

Housing activity in roughly half of the local markets rose offset by the other half that fell. Higher sales in Greater Vancouver (GVA), the neighbouring Fraser Valley and Ottawa offset a monthly decline in activity in the Greater Toronto Area (GTA), particularly in Central Toronto, and Hamilton-Burlington.

Actual (not seasonally adjusted) activity rose 12.9% year-over-year. Transactions were up from year-ago levels in 80% of all local markets in October, including all of Canada’s largest urban markets.

All was not rosy, however. “It’s a full-blown buyer’s market or on the cusp of one in a number of housing markets across the Prairies and in Newfoundland,” said Gregory Klump, CREA’s Chief Economist. “Homebuyers there have the upper hand in purchase negotiations and the mortgage stress-test has contributed to that by reducing the number of competing buyers who can qualify for mortgage financing while market conditions are in their favour.”

New Listings

The number of newly listed homes fell by 1.8% in October, with the GTA and Ottawa posting the most significant declines. Almost a third of all housing markets posted a monthly decrease of at least 5%, while about a fifth of all markets posted a monthly increase of at least 5%.

Steady sales and fewer new listings further tightened the national sales-to-new listings ratio to 63.7%. This measure has been increasingly rising above its long-term average of 53.6%. Its current reading suggests that sales negotiations are becoming more and more tilted in favour of sellers; however, the national measure continues to mask significant regional variations.
Based on a comparison of the sales-to-new listings ratio with the long-term average, just over two-thirds of all local markets were in balanced market territory in October 2019, including the GTA and Lower Mainland of British Columbia. Nonetheless, sales negotiations remain tilted in favour of buyers in housing markets located in Alberta, Saskatchewan and Newfoundland & Labrador.

The number of months of inventory is another important measure of the balance between sales and the supply of listings. It represents how long it would take to liquidate current inventories at the current rate of sales activity.

There were 4.4 months of inventory on a national basis at the end of October 2019—the lowest level recorded since April 2017. This measure of market balance has been retreating further below its long-term average of 5.3 months. While still within balanced market territory, its current reading suggests that sales negotiations are becoming more tilted in favour of sellers.

National measures of market balance continue to mask significant regional variations. The number of months of inventory has swollen far beyond long-term averages in the Prairie provinces and Newfoundland & Labrador, giving homebuyers an ample choice in these regions. By contrast, the measure is running well below long-term averages in Ontario, Quebec and Maritime provinces, resulting in increased competition among buyers for listings and providing fertile ground for price gains. The measure is still well centred within balanced market territory in the Lower Mainland of British Columbia.

Home Prices

The Aggregate Composite MLS® Home Price Index (MLS® HPI) rose 0.6%, marking its fifth consecutive monthly gain. Seasonally adjusted MLS® HPI readings in October were up from the previous month in 14 of the 18 markets tracked by the index. (Table below)

Recently, home price trends have generally been stabilizing in the Lower Mainland and the Prairies. While that remains the case in Calgary and Saskatoon, home prices in Edmonton and Regina continue to decline. By contrast, home price trends have started to recover in the GVA and the neighbouring Fraser Valley.

Meanwhile, price growth continues to rebound in the Greater Golden Horseshoe (GGH). In markets further east, price growth has been trending higher for the last three or four years.

Comparing home prices to year-ago levels yields considerable variations across the country, with mostly declines in western Canada and mostly price gains in eastern Canada.

The actual (not seasonally adjusted) Aggregate Composite MLS® (HPI) was up 1.8% y-o-y in October 2019, the biggest year-over-year gain since November 2018.

Home prices in the GVA (-6.4%) and the Fraser Valley (-4.2%) are still below year-ago levels, although declines are becoming smaller.

Elsewhere in British Columbia, home prices logged y-o-y increases on Vancouver Island and in the Okanagan Valley (3.1% and 2%, respectively) while having edged marginally higher in Victoria (0.5% y-o-y).

Calgary, Edmonton and Saskatoon posted price declines in the range of -1.5% to -2.5% on a y-o-y basis in October, while the gap between this year and last year widened sharply to -6.8% in Regina.

In Ontario, price growth has re-accelerated well ahead of overall consumer price inflation across most of the GGH. Meanwhile, price growth in recent years has continued uninterrupted in Ottawa, Montreal and Moncton.

Bottom Line

This report is in line with other recent indicators that suggest housing has recovered from a slump earlier, helped by low mortgage rates. The run of robust housing data gave the Bank of Canada another reason– along with healthy job gains and higher wage rates — to hold interest rates steady. However, the central bank has become more cautious in its outlook. Bank of Canada Governor Stephen Poloz, one of the few central bankers to resist the global push toward easier monetary policy, acknowledged he’s begun to consider the merits of joining other countries in lowering borrowing costs.

At a press conference after the Bank of Canada’s decision to keep the current 1.75% policy interest rate unchanged for an eighth straight meeting, Poloz said his governing council discussed the possibility of implementing an “insurance” cut to counter the global economic headwinds. But, the council decided against it because of the potential costs to such a move. These include driving up inflation already at the central bank’s 2% target and fueling household debt levels that are among the highest in the world.

“Governing Council considered whether the downside risks to the Canadian economy were sufficient at this time to warrant a more accommodative monetary policy as a form of insurance against those risks, and we concluded that they were not,” Poloz said. The Bank of Canada “is mindful that the resilience of Canada’s economy will be increasingly tested as trade conflicts and uncertainty persist.”

DR. SHERRY COOPER

Chief Economist, Dominion Lending Centres

15 Nov

Interesting information on payout penalties!

General

Posted by: Jeannie Stace-Smith

 ROBERT MCLISTER

And when it comes to such charges – the penalties you pay come when you back out of your mortgage early – some lenders take a greater toll on your bank balance than others.

Big banks are usually the worst. Mortgage finance companies are often the best.

And these bank competitors want you to know it. More and more, smaller lenders are using their preferential penalty calculations as a selling point, as well they should.

This year I’ve seen lenders such as Equitable Bank, Manulife Bank of Canada, XMC Mortgage Corp., Merix Financial, CMLS Financial Ltd., RFA Mortgage Corp., First National Financial LP, and MCAP all go out of their way to step up marketing and educate consumers on how bad penalties from major banks can be. (Mind you, a few of these lenders also have “no-frills” mortgages with high penalties – for example, 3 per cent of principal. So watch out for those.)

WHAT IS A ‘FAIR-PENALTY LENDER?’

A fair-penalty lender calculates its standard prepayment charges, for lack of a better word, “fairly.”

It does so by comparing your actual mortgage rate to a rate equal to (or close to) what it charges new customers for a time frame similar to your remaining term.

Unlike Big Six banks, fair-penalty lenders don’t use arbitrarily inflated rates (“posted rates”) in their calculations. That only serves to drive up penalties.

So why doesn’t everyone get a mortgage with a fair penalty lender?

Well, because most people are conditioned to pay more for big bank financing. Among other things, they trust the brand, like the convenience or like knowing they can walk into a branch to talk to someone if there’s ever a problem (although, for most people, mortgage problems after closing aren’t too common). And the cost of that convenience is steep.

A SIMPLE EXAMPLE

Suppose you’re a major bank customer with a regular 3.19 per cent $300,000 five-year fixed mortgage that you got one year ago.

Now imagine you:

  • Need to consolidate debt into your mortgage;
  • Just found a new job in a different city and must sell and rent;
  • Want to break and renegotiate to a lower rate;
  • Have to break the loan early for some other reason – maybe because of a loss of income, divorce, inability to get a fair rate from your bank on a “port and increase” (that’s where you move your mortgage to a new property and increase the loan size), or inability to qualify for a port.

In these scenarios, one popular bank would charge you an interest rate differential (IRD) penalty of roughly $16,800 to exit your existing mortgage.

Compare that with just three months’ interest (about $2,400) at a “fair penalty lender.”

To put that another way, the extra $14,400 you’d fork over to the “less fair” lender would be like paying an 8.19-per-cent interest rate versus the 3.19 per cent. That’s astronomical. These days, determined mortgage shoppers do backflips to save even a 10th of a percentage point off their rate, let alone five whole points.

WAYS AROUND PENALTIES

Some big banks are kinder than others when it comes to helping you avoid prepayment pain. The better ones let you add money to your mortgage without penalty, offer early renewal options and have flexible portability rules.

But more often than not, you can find a similar mortgage from a fair-penalty lender for a comparable price or better – without the penalty shackles.

If you’re dead-set on a big-bank mortgage and want to lower your exposure to heinous fixed-rate penalties, consider a short-term fixed or variable rate instead – if it’s suitable for you. By suitable, I mean you have a tolerance for potentially higher rates sooner than five years and you have no problems getting approved for a mortgage.

These days, with so many people taking fixed rates because they’re cheaper than variable rates, banks stand to make a killing on prepayment charges. That’ll be especially true if recession hits and rates fall further. We come across people almost every week who’d love to refinance at today’s lower rates, but they can’t because their bank penalty is too harsh.

The time has come to heed this lesson as borrowers. Big-bank IRD penalties clearly overcompensate banks for the legitimate expenses they incur when a customer backs out of a mortgage early. The more that people demand fair penalties, the more pressure it’ll put on Canada’s six biggest lenders to change their methods.

7 Nov

Currently renting??? Want to own???

General

Posted by: Jeannie Stace-Smith

Are you currently renting?  This is another alternative to homebuying!  Call, text or email if you have questions!

5 REASONS YOU MAY WANT TO CONSIDER A RENT TO OWN PROPERTY

With the real estate market continuing to hold steady, many young families are looking for other options to afford a home. Many millennial families still are holding onto the dream of owning a detached home or their own townhouse/condo one day…but the task of moving on from a rental can seem daunting and impossible. This is where a Rent To Own (RTO) property can offer a solution. Here are 5 reasons you may decide to look for an RTO property.

1. RTO allows you to have a set savings plan to put towards one day owning the property you are currently living in. How this works is by setting up a contract with your Landlord (seller) and agreeing to pay an amount each month that is above what your rent is currently for a set amount of time. For example, if the property you are currently renting rents for $1.000 you would agree to pay the landlord $1400. The additional $400 would go into an account the landlord has set up for you and towards your future down-payment.

2. RTO will allow you to make lump-sum payments during the course of the RTO contract. It’s common with most RTO contracts to have the option to pay a lump sum payment to the down payment by giving the landlord a larger rent cheque. Keep in mind that the down payment is non-refundable which is why it is crucial to involve a mortgage professional and lawyer in the process.

3. RTO’s will require you to be pre-approved prior to the contract going through. This is an ideal situation as being pre-approved allows you to fully understand the other factors that contribute to you getting a mortgage. For example:
• Your current income level
• Your current credit score
• Your current debt owing
• How much you are pre-qualified for

Knowing these numbers can highlight other areas that you may need to work on or improve during the time you are saving up for the down payment and set you on the right course for when you are ready to purchase.

4. You can pre-establish a great team of professionals working with you. As with any mortgage product, a RTO will require you to work with a team of professionals including a mortgage broker. Building this relationship early can help you alleviate any further speed bumps you might have down the road. They can work with you for the entire process and make it run smoother and help you stay on track.

5. The setup is simple and offers a unique solution. Setting up a Rent to Own starts with a contract. The lawyer or solicitor will write this for you and should work closely with your mortgage professional to accommodate lender policies and guidelines. Here are some of the important elements that need to be included in the RTO contract are:
• The Purchase Price
• Purchase Price negotiations formulated based on the market trends of the area in which you are buying
• The term and length of the RTO agreement
• Exit and/or assignment clauses

The RTO must be registered on the title of the subject property and RTO down payments collected thru the contract must have a clear and full banking history that is supported with bank statements. These down payments must not be spent by the seller at any time.

Once you agree on the RTO you can agree on the future purchase price and timelines as well. This will give a target and allows one to know that once they’ve hit x amount of years over RTO payments, they will have enough of a down payment to purchase the property at the originally agreed upon purchase price.

Now, what happens if things change and a party wants out of the contract? For the Landlord, they are required to honour it until the term is over. For the tenants, they are able to “sell” their contract to another buyer who will assume the contract to recoup your down payment. The price is usually the down payment amount that you’ve already paid to the Landlord.

The contract can also include the fact that the tenant (buyer) can purchase in certain intervals at a certain price but does not have the right to recoup your down payment.

One final thought on Rent To Own properties; There are many RTO companies and solicitors out there. Choose wisely who you opt to work with. Many do not fully understand the setup of an RTO contract and the contracts that need to be followed by Lender guidelines. It is always best to have the solicitor work hand in hand with your Dominion Lending Centres Mortgage Broker to ensure that the contract lines up and nothing is missed during the set-up process.

This unique solution could be the answer for someone who is renting currently but is having a hard time getting their down payment together. RTO’s are becoming more and more popular due to the high housing prices.

GEOFF LEE
Dominion Lending Centres – Accredited Mortgage Professional
Geoff is part of DLC GLM Mortgage Group based in Vancouver, BC.