A Guarantor, when it comes to mortgages, is exactly what it sounds like—they “Guarantee” the mortgage for another person if they are unable to pay back the loan.

Guarantor’s or co-signers are often used if someone has:

• Damaged or poor credit
• Insufficient income

In most cases, someone with poor credit and/or insufficient income has a more challenging time securing a mortgage. Adding a guarantor can help get the file approved as the lender is assured that he or she will be paid, should the mortgage holder default.

Many people will assume that a co-signer and a guarantor are the same thing. This is not the case though…there are key differences that you should know before becoming a guarantor on a mortgage.

1. Whose name is on the loan?
This may seem like a small detail, but when it comes to loans, whose name is on it matters!
With a guarantor, their name will not be on the title of the property, but it will be on the mortgage. With a co-signor, this changes in that their name will be on the mortgage and on the title of the property. In addition to this, for a guarantor mortgage the guarantor must be a spouse. With a co-signer this is not the case, and you can utilize whomever agrees and meets the qualifications.

2. What’s the Risk?
For the people seeking a guarantor, a portion of risk is alleviated because they have the guarantee of the guarantor. However, for the guarantor, there is a heightened risk. They are responsible for the entire amount of the loan if the borrower defaults at any time. With this in mind, lenders require the guarantor(s), in addition to the borrower(s), to qualify for the loan they are looking to borrow. They must meet the following lending requirements which include:
. Credit Check
. Disclosure of income
. Disclosure of Liabilities
. Disclosure of Assets

It is also highly advisable that a potential guarantor seek legal advice before signing for the loan—and this should be a separate attorney from the one that is involved in the mortgage transaction. Seeking out proper legal advice can allow the potential guarantor to ensure they fully understand the contract, the loan, and any other details.

One final note that should be evaluated by any potential guarantors, is the relationship with the person you will be signing for. You are taking a risk and taking on a lot of responsibility for this person and it is advisable that you know the person well and trust them.

3. What other Variables are there to Consider for Guarantors?
There are a few other things that a guarantor will want to consider before finalizing anything. One of these is the fact that if you are a guarantor, you may not be able to qualify for a large loan or mortgage on your own. Look at your goals and future (or current) expenses before taking on this additional responsibility. As a final note to guarantors, they may want to consider creditor insurance (amount varies based on the loan) to protect themselves and their assets.

4. Can your relationship with your bank dictate if I need a Guarantor?
In some cases, yes! If you have a long-standing relationship with your current bank and they have seen your ability to responsibly handle debt-repayment, they may consider not requiring you to have a guarantor. This is not always the case, but it is an option that your mortgage broker may review with you.

These 4 facts along with your mortgage broker’s advice, can help you decide if you want to be a guarantor, or if you truly require a guarantor mortgage after all! If you have any other questions about guarantors or co-signers, we encourage you to reach out to your Dominion Lending Centres Mortgage Broker—we know they will be happy to help!

Contact me for your best mortgage options 705.669.7798 or trina@ndlc.ca

Over the last month, as the big banks and many of our monolines mortgage lenders wind down their fiscal year, we are starting to see some very obvious changes in what your credit score can get you.

I heard a few months ago that 720 beacons were going to become the new 650. The 650 beacon credit score for many years was the mid-range norm for most mortgage lenders. Today on many of the sites we use, we are seeing that the primary borrower must have a credit score of 720 and the secondary beacon can’t be below 650. It’s a big change from what we have seen in the past.

There are more changes coming as the banks will need to set aside more balance sheet if your mortgage is conventional. The one report I read said that if your credit score is lower, then the banks will now need to set aside 1.5% or possibly more if the score is low enough. That of course will then mean that an investor will need to be compensated more for having that in their portfolio, aka higher rates for you on a conventional mortgage.

If you are in the market for a house and you don’t know where to start, at least contact Dominion Lending Centres mortgage broker who can guide you through the process and let you know where you start.  If you use a DLC broker, they can set you up with a CleverCredit account and you can work together to make sure your credit is strong enough to apply for a mortgage when the time comes.

The reverse mortgage market in Canada has been increasing at a phenomenal rate over the last few years.

In fact, for HomeEquity Bank, the provider of the CHIP Reverse Mortgage, growth was well over 40% in August, bringing Canada’s outstanding reverse mortgage balance to $3.03 billion.

Compare this to the latest growth in lending for new and renewal mortgages at just 4.1% – this is the lowest since May 2001. Much of this slow-down in mortgage growth is a result of the introduction of the new mortgage stress test, which has made it harder for borrowers to qualify for the mortgage they need, as well as a significant jump in mortgage interest rates.

So, how is it that reverse mortgages are growing so much faster than conventional mortgages? And who is driving this growth?

The reverse mortgage solution and why it matters to you

The CHIP Reverse Mortgages allows you to tap into the equity of your home is available to Canadians aged 55 and over. The key difference from a regular mortgage is that borrowers don’t have to make any regular repayments. This means they can have a considerable injection of cash without having to pay off what they owe until they sell or move out of their home.

The number of Canadians over 65 has jumped by 20% since 2011, so the potential market for reverse mortgages has grown enormously in just a few years.

Life expectancy is now at almost 83 and more people are living into their 90s and beyond 100 than ever before. Retirement can now easily last 20 years or more, which can put a big strain on retirement savings. Many retirees are therefore having to look at ways to supplement their retirement income.

There are many reasons for taking out a reverse mortgage. These include paying off high interest debt, maintaining a good standard of living, improving or retrofitting their home and helping family out financially.

Canadians prefer to stay in their homes during retirement

A recent Ipsos/HomeEquity Bank survey revealed that a staggering 93% of Canadians aged 65+ are determined to stay in their homes during retirement, rather than downsize or move in with relatives or into a care home.

Almost 70% said that maintaining their independence was the most important reason for staying at home. Others also want to stay close to their family, friends and community.

Downsizing is an increasingly unpopular option

While downsizing has often been seen as a key strategy for accessing some home equity, its popularity is declining. Another Ipsos survey revealed that 48% of homeowners don’t plan on downsizing and that 39% are skeptical that downsizing would actually save them any money. People who regretted downsizing said the key reasons were missing their old neighbourhood, family and friends, which can play a big role in emotional well-being in your later years.

Nevertheless, 31% of retirees say they need to cash in on their home’s equity to live comfortably in retirement. So, if they don’t want to downsize, what are their options?

How the reverse mortgage helps out retirees

The introduction of the mortgage stress test has made it even harder for retirees to qualify for the kind of mortgage they need to effectively improve their finances.

Even those that do qualify often struggle to make the monthly payments required from a conventional mortgage or line of credit. A reverse mortgage provides them with tax-free cash that enable retirees to live the retirement they want, with no negative impact on their monthly income. For many retirees, a reverse mortgage is the only option available to them that provides them with the finances they need without regular required payments.

If you would like to find out more about the CHIP Reverse Mortgage and how it could help improve your retirement finances, contact your Dominion Lending Centre mortgage professional.

Do you know what kind of prepayment privileges you currently have with your mortgage? Does your current lender allow you to make a 10% prepayment or a 20% prepayment on your principle amount? Can you double your monthly payment? Or can you even increase the amount you are paying monthly?

This is important information, and the following break down is going to show you why making a prepayment on your mortgage may just be the best holiday gift you can get yourself this season!

Mortgage Structure

Mortgage Amount: $400,000

Term: 60 months (5 years)

Interest rate: 3.19%

Payment: $1,932.19/month

After 5 years of monthly payments…

Interest paid: $59,068.97

Principal paid: $56,862.43

Balance outstanding: $343,137.57

Amortization remaining: 20 years

After 5 years of monthly payments with double-up payments twice yearly…

Interest paid: $57,621.44

Principal paid: $77,631.86

Balance outstanding: 322,368.14

Amortization remaining: 20 years

Effective amortization: 15 years 1 month

Interest saved over term: $1,447.53

Let us break this down. If you double your monthly payment of $1,932.19 twice a year, for the term of your mortgage (5 years in this case), you will save $1,447.53 in interest over those 5 years. Not too bad. But there is more…

If you did these double-ups twice a year for 5 years, and refinanced your mortgage after the 5 years but continued paying the higher payment of $1,932.19 instead of what the new monthly payments would be ($1,557.19), that extra $375 a month goes directly to the principal amount owing and takes 4 years and 11 months off of your amortization…

If that doesn’t excite you and you decided instead to continue making double-up payments for the remainder of the amortization, you would save $38,550.70 in interest…

So this holiday season, when you get your year-end bonus or are deciding how much to spend on loved ones, maybe first consider allowing yourself a mortgage prepayment or two because it could save you years of payments and potentially thousands of dollars in interest! If you have any questions, contact a Dominion Lending Centres mortgage professional near you.

It is a reoccurring but common misconception that you will qualify for a mortgage in the future because you have qualified for a mortgage in the past.

This is not accurate!

Do. Not. Assume. Anything.

Even if your financial situation has remained the same or has improved, securing mortgage financing is more difficult now than it has in recent years.
The latest changes to mortgage qualification by the federal government has left Canadians qualifying 20-25% less. On top of that, guidelines that lenders would use in determining your suitability have been replaced with non-negotiable rules and declarations.

As mortgage professionals, we keep up to date with the latest trends going on in the mortgage world by understanding lender products and staying attentive to evolving changes.

From experience, we can tell you that having a plan is crucial to a successful mortgage application. Making assumptions about your qualification or just “winging it” is a recipe for disaster. Here are a few points on why a mortgage broker is a must for the first time home-buyer.

1. They have access to over 40 different lenders, not just one
2. They work for you, not for the lender
3. They will guide you through the application process
4. They save you valuable time by shopping for you
5. They pull your credit once — if you go to multiple banks, you will have multiple credit pulls

If you are thinking about buying a property, please feel free to contact a Dominion Lending Centres mortgage professional where we can help you devise a full-proof plan!