Ever since the federal government regulator, The Office of the Superintendent of Financial Institutions (or OSFI) brought in the Mortgage Stress Test, there has plenty of blame heaped upon it for slowing home sales and new home starts. Even though it has slightly reduced how much of a mortgage I can approve my clients for, the initial logic is sound. The stress test attempts to protect Canadians from taking on more mortgage debt than they will be able to afford when their mortgage renews down the road.

What it doesn’t do is curb additional debt and other financial factors after the mortgage starts. Many clients do not consider long-term changes like, child care expenses, new vehicle loans, ongoing credit card and line of credit debt payments.

I work with many first and second-time homebuyers with wide-ranging financial details. The stress test is a limiting factor, but in no way is it the largest culprit in preventing my clients from getting mortgage they are requesting. credit cards, lines of credit and vehicle loans have a much larger impact on reducing the mortgage borrowing ability for most of my clients.

Here are some real-world numbers on two hypothetical first-time homebuyer scenarios that help to illustrate what consumer debts can have on a mortgage application.

1. Individual or couple – scenario 1
Buyer(s) with household gross income of $80,000 that have $17,000 as down payment.
There is a student loan with a payment of $200 per month and a vehicle loan of $300 biweekly.
This application would be approved for the purchase of a $250,000 detached home.
An additional monthly credit or loan payment of only $300 per month will prevent mortgage approval for this application.

2. Individual or couple – scenario 2
Buyer(s) with household gross income of $125,000 that have $33,000 as down payment.
There is a student loan with a payment of $200 per month and a vehicle loan of $300 biweekly.
This application would be approved for the purchase of a $500,000 detached home.
An additional monthly credit or loan payment of only $500 per month will prevent mortgage approval for this application.

Credit cards, lines of credit and vehicle loans are exceedingly easy to obtain but could stand in your way when you are looking to buy your first or next home. Please consider carefully before financing anything. If you have any questions, contact a Dominion Lending Centres mortgage professional near you.

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

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Recently I was finishing up a mortgage with a young couple who had just had a beautiful baby girl. I brought up the topic of mortgage and life insurance as well as getting a will written up. The response from the husband was that it was such a morbid topic and a real downer when they were excited about their new home.

The fact is that people, even young people die from car accidents, cancer, and even accidental drownings while on vacation. It’s a topic everyone avoids but it needs to be addressed, particularly when you are taking a major financial step like buying a home. What would happen to your spouse if you died suddenly with your mortgage not paid off?

I spoke to a major Canadian mortgage company about this topic.
I asked if the surviving spouse would be kicked out of the house. “ When someone dies who was on our mortgage we want to know right away . We ask for a copy of the death certificate so that we can take them off title. We will let the mortgage run it’s term if payments are being made on time. Many surviving spouses receive a life insurance policy and can pay off the mortgage or at least keep up the payments. We will renew the mortgage if payments are up to date. However, should the surviving spouse want to refinance the mortgage they would have to re-qualify for it.”

So what can you do to make life easier for your family should you die with a mortgage on your home? The easiest option is to have sufficient life insurance to ensure that they can keep up payments or to pay off the mortgage. Dominion Lending Centres mortgage professionals all offer MPP (Mortgage Protection Plan), a life insurance policy that pays off the mortgage in full in case of the death of the policy holder. The payments never go up because the mortgage balance is going down as the insured person gets older.

Another option is term insurance or whole life insurance. Speak to your favourite insurance broker about this.
Finally, if the surviving spouse is 55 or older, and they can’t afford to maintain the mortgage, a reverse mortgage may be the solution. No payments are made on the principal unless you decide you want to. When the widow(er) moves out the sale of the home pays off the mortgage and interest.

While it can be a “downer” to talk about death and disability, a responsible home purchaser needs to have the conversation with their Dominion Lending Centres mortgage professional at the time of their purchase, refinance or renewal. The sudden death of a family member causes enough grief for the survivors, why add to their misery. As the old commercial used to say “Why wait for spring, do it now”.

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

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Buying a home is usually the biggest purchase most people make and there are a lot of factors to consider. Our job is to provide you with a much information (as you can handle!!) so you make the best decision based your particular situation.

The 3 “rules of lending” focus on determining the maximum size of mortgage that can be supported by your provable (what you paid taxes on) income.

You need to consider two affordability ratios:

Rule #1 – GROSS DEBT SERVICE (GDS) Your monthly housing costs are generally not supposed to exceed 36-39% of your gross monthly income. Housing costs include – your monthly mortgage payment, property taxes and heating. If you are buying a condo/townhouse, the GDS will also include ½ of your strata fees. The total of these monthly payments divided by your “provable” gross monthly income will give you your Gross Debt Service.
Mortgage payments + Property taxes + Heating Costs + 50% of condo fees / Annual Income

Rule #2 – TOTAL DEBT SERVICE (TDS) Your entire monthly debt payments should not exceed 42-44% of your gross monthly income This includes your housing costs (GDS above) PLUS all other monthly payments (car payments, credit cards, Line of Credit, additional financing, etc.). The total of all your monthly debts divided by your “provable” gross monthly income will give you your Total Debt Service.
Housing expenses (see GDS) + Credit card interest + Car payments + Loan expenses / Annual Income

What about the other 56% of your income?? This is considered to be used up by ‘normal’ monthly expenses including: taxes, food, medical, transportation, entertainment etc.)

Rule #3 – CREDIT RATING Everyone who will be on title to the property will need to have their credit run. Your credit bureau is important because it shows the lenders how well (or not) you have handled credit in the past. This gives them an indication of how you will handle credit in the future, and will you be a good risk and make your mortgage payments as promised. If you handle credit well, you will have a high Credit Score and get the best interest rates from the banks/lenders. If you have not handled credit well, and have a poor credit score, you will either be charged a higher interest rate or your application will be declined.

If you have any questions, contact a Dominion Lending Centres mortgage professional near you.

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

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With the mortgage rule changes in recent years, lenders have had to make some adjustments to their rate offerings.

There are different tiers and rate pricing based on the following 3 categories:
1) Insured – a mortgage that is insured with mortgage default insurance through one of Canada’s mortgage insurers, CMHC, Genworth or Canada Guaranty. A mortgage insurance premium based on a percentage of the loan amount is added to and paid along with the mortgage
2) Insurable – a mortgage that may not need mortgage insurance (20% or more down payment) but would qualify under the mortgage insurers rules. The client doesn’t have to pay an insurance premium but the lender has the option to if they choose.
3) Uninsurable – a mortgage that does not meet mortgage insurer rules such as refinances or mortgages with an amortization longer than 25-years. No insurance premium required.

Insured mortgages are the safest type of mortgage loan for the banks and the most cost-effective way of lending mortgage money, so clients seeking or in need of an insured mortgage will get the best rate offering on the market.
Insured as well as Insurable mortgages can be bundled and sold as Mortgage Backed Securities (MBS) meaning banks can get that money back quickly so they can lend more out. While Insured mortgages get the best rates, Insurable mortgages are typically a close second.

If a mortgage is Uninsurable that means the banks have to lend their own money and have to commit to that loan for the full term at least. This makes it a more expensive loan for the bank, so they pass the cost on to the consumer as a premium on the rate – typically 10-20 basis-points.

While there are rumours that the Government may start to allow refinances and 30-year amortizations to be insured again, no formal announcements are expected in the next few months.
In the meantime, consumers looking to tap into the equity they’ve built (consolidation, investment, home renovations) or wanting to keep their payments as low as they can (30-year amortization) are paying the price.
If either a refinance or a longer amortization is something you are considering, it’s wise to have a free analysis of your mortgage done so you can make an informed decision. If you have any questions, contact a Dominion Lending Centres broker near you.

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

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Amanda Moss and her husband Robert have had a mortgage on various properties for almost 10 years. The Chilliwack B.C. couple was a few years into their mortgage term, but looking to pay off some extra bills and clear up some financing. They hadn’t considered the option of refinancing until Amanda got some advice of a friend. The friend recommended a mortgage broker to help them through the refinancing process. The couple is now back on sold financial footing thanks to the help of their Dominion Lending Centres mortgage broker.

Why did you choose a mortgage broker?

I happened to be on a girl’s trip to Seattle and I mentioned to a friend, because my husband and I both make decent income, we wanted to refinance. She said she had the perfect broker for me. When I got back to Seattle I called him right away.

How was your experience working with a mortgage broker?

I had a really great experience with Dominion Lending Centres and with my mortgage broker. He was very professional and went out of his way to reassure us through the process. Refinancing can be stressful, with so much paperwork and questions along the way, but our broker was always willing to provide advice and even dropped by our house to pick up documents. Overall it was a great experience!

What advice would you give someone in your situation?

Managing your finances can be very stressful. Our mortgage broker was able to lower our monthly payments which has allowed us to focus on our family and worry less about money. My husband and I found that dealing with a mortgage broker was easy, and also and provided us with multiple lending options, so that we could get the best rate possible. This was a nice change from just dealing with one bank. My advice to you is to be open to using a mortgage broker as they fight for you and your best interest.

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

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In my post entitled Personal Guarantee Required? 6 Tips You Should Follow, I set forth that there are significant implications to consider, when providing a guarantee.

Similar concerns and strategies are raised in a recent article by Scott Anderson of Lawson Lundell LLP, entitled Buckle Up: How Guarantors of Real Estate Loans Can Limit Their Exposure. He sets forth several suggestions, including that the guarantee be limited in amount if possible. Similarly, where there are more than one guarantor, that the guarantee be joint, and not joint and several. In other words, that individual guarantors provide a proportionate guarantee, and no one guarantor be liable for the entire indebtedness.

Commitment Terms are Negotiable
The important point to remember is that you should proceed with your lender discussions with the mindset that all items in your commitment letter are negotiable. You’ll have a much greater chance of modifying terms within your commitment letter. As Scott Anderson points out in his article,
“No matter how small the amount of bargaining leverage a borrower may have on a specific loan negotiation, there will be far less once the commitment letter is signed by the parties”.

Personal Guarantee Required? 6 Tips to Remember

1. Limit your personal guarantee obligations to a lesser amount. Typically a lender will seek to have you personally guarantee the entire amount of the indebtedness. Frankly, the “at risk” portion of the loan is the top piece. Seek to limit your exposure to an amount less than the entire amount of indebtedness. Even an empty building will have some value to the lender!
2. Limit your personal guarantee to a percentage of the amount of indebtedness, so that it falls away (reduces) as the debt is paid down.
3. Negotiate a release of your personal guarantee once the loan to value (LTV) reduces to a specific point, or a specific amount of the loan has been repaid.
4. Negotiate a release of your personal guarantee in the event that the property is sold and the current financing is assumed by a new purchaser. This is a fairly common oversight of property vendors. They assume that since they no longer own the property, they’ve wiped their hands of it. Not so, if the purchaser has assumed the debt you originally guaranteed.
5. Discuss the need for the personal guarantee with your lender. Consider borrowing a lesser amount, (lower LTV) or perhaps consider paying a higher rate, or taking a shorter term, if this alleviates specific lender concerns.
6. If the guarantee is required so as to mitigate risk associated with a particular property issue (e.g. impending lease maturity), consider an alternate way to provide your lender with comfort. Perhaps a Letter of Credit (L/C) which the lender could cash (and reduce their indebtedness) in the event that the tenant fails to renew their Lease. Keep in mind this L/C, if cashed, becomes an ongoing credit obligation.

Final Thought
Personal guarantees are a recognized real estate lender requirement. Unless your covenant is undoubted, and you have several significant sized loans with the specific lender, your personal guarantee will likely be required. Speak with your lender and understand why this is being requested, and negotiate a more favorable guarantee provision. Sleep better at night!

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

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Did you know that you can buy a home with ZERO down payment?? If a home purchase is your goal this year but you aren’t able to save up enough of a down payment, you may qualify for a low or zero down payment mortgage. One of our Lenders is offering a great zero down program.

What is a Flex-Down Mortgage?
A Flex-Down Mortgage is a mortgage product that has a flexible down payment amount. There is still a down-payment required, but it will vary based on the property value.

• For a property valued under than or equal to $500,000, 5% down payment is required (sources available below)
• For a property valued at greater than $500,000 and less than $1 million –5% down payment is required up to $500,000 with an additional 10% down payment on the portion of the home value above $500,000.

Flex-down mortgages can only be on first mortgages, not second or third or used in refinance situations. As noted above, the total property value has to be less than $1 million. This type of mortgage will also have insurance included with it—the premium will be lesser of the premium as a % of the total new loan amount or the premium as a % of the top-up portion additional loan based on the rates at that time.

Those that choose to go with this type of mortgage product will have to meet requirements, just like any other mortgage. There are a few specifications with this product:

• You must show that you have standard income and employment verification papers
• A credit score of 650 or higher is highly recommended
• You must have no previous bankruptcies
• Some lenders may still require you to have some of the down payment from your own resources

Those considering this type of mortgage are recommended to have very little debt and be able to accommodate the additional cost of higher mortgage insurance (due to the higher risk to the lender on this type of mortgage). Typically, the insurance premium would be 0.2% higher on a flex down mortgage.

How it Works
You can borrow your 5% payment from a Line of Credit or even a credit card. This can then be used for your down payment. You have to disclose this to the Insurer and it will be on the application that goes to the Lender.

This is perfect for someone just getting into a new high paying job or for someone who is renting and can afford higher monthly payments but would take forever to save up the 5% down payment. This type of mortgage product can be an excellent option if you don’t quite have enough for the down payment. Are you interested in learning more about this mortgage product? Contact a Dominion Lending Centres mortgage professional who can show you how a Flex mortgage can make the home of your dreams happen sooner than you think!

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

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While many people will go to their bank to obtain a mortgage or line of credit, they often feel betrayed by their favourite bank if their application is rejected. One big advantage that we have over banks is that we can send underwriter notes along with the application. Our questions and speaking at length with the borrower give us insight that the underwriter will never get from the facts and figures on the application.
A while ago, I had an application at a lender for a young man who wanted to buy his first home.

He worked in the construction trades and his income history was up and down over the past 3 years. He needed overtime to support his application and the two year average wasn’t there.

I went back with 3 years of Notices of Assessments, his recent pay stubs and pleaded the case for my client. The underwriter finally asked for an exception based on my confidence in the client. She trusted my judgement and the mortgage was approved.
This leads me to the idea that underwriter notes are very important and can mean the difference between an approval and a decline. If you have a chance, ask your underwriter how they like their notes; in point form or in paragraphs. Do they prefer emails or phone calls?

When a successful mortgage broker writes notes they start by stating what product they are asking for and giving their contact information. I put my contact info at the top of the notes and at the bottom so they don’t have to go searching for it if they have a question or need clarification. I then state what my client is trying to do; purchase their first home, refinance, a renewal or if it’s’ a switch, that they want to benefit from lower interest rates.
I then list the areas I want to highlight: Income, credit, property, down payment and start with their weakest link first and explain their situation. I had a client who had her down payment in a joint account with her father in Japan. I started with that knowing that a paper trail would be important. If the credit score is low, is it due to a past illness, divorce or job loss? I tell the underwriter right away. As a result, underwriters trust me and have given my clients a second look or asked for an exception. Finally, I finish up by summarizing the strong points in the file and thanking them for their consideration of my file.

I never yell or give my underwriters a blast if they decline a file. I will, however, ask why the file was declined so that I can better prepare my client for the disappointment and plan on how we can remedy the situation. Just as a FYI, a manager at a major bank told me that at one bank he worked for after hitting the send key he received a simple message back – either APPROVED or DECLINED with no explanation. Now who do you think mortgage clients should deal with? A bank or a broker?

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

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Many of my clients and friends regularly ask me when or if they should consider a refinance. Here are 4 quick questions that I ask of them. The answer they give me, will very quickly tell me if we should be taking a deeper look at the mortgage refinance options available to them.

What do you believe the current value of your home is and what is the outstanding balance on your mortgage?
Have you ever heard your mortgage broker or banker talk about “loan to value”(LTV)? They are looking to determine what your outstanding balance of your mortgage is as a percentage of your property value. The reason we look at your LTV is because there are limits in Canada with respect to how large your mortgage can be based on the current value of your home. This gives your mortgage broker insight into how much equity or money you have access in the event that you were to refinance your mortgage.

What is the maturity date of your mortgage and your current rate/term length?
Understanding who your current lender is, what your maturity date is, and what your rate/term details are, will help your mortgage broker determine what type of penalty you might have for breaking your current mortgage contract. Knowing your rate will also give them the details they require to calculate the interest savings that you would receive from a refinance. When looking to refinance, your mortgage broker should be factoring these potential costs and overall interest savings into their overall benefits analysis when trying to determine if refinancing is the right option for you.

How is your household monthly cash flow impacting your short and long term financial goals?
Budget, budget, budget… this is one of those tools that we all know we should do, but it often gets very little of our attention each month. By understanding how much net income you have coming in each month and where that cash is going (cash flow) we can look at how a restructured mortgage could help. If you are finding that all of your money is disappearing each month and you’re having trouble getting by, a new mortgage can help restructure your monthly debt payments giving you some added breathing room. It is important to note that sometimes it is not about debt payments and it can be about high household expenses. Taking the time to assess your spending and cutting it back if necessary, might be enough to get you back on track. Check out our blog post on basic budgeting tips and tricks.

Looking at your outstanding debt, what are the current interest rates that you are paying and are you only making the minimum payments each month?
A quick snap shot of your current debt load, respective interest rates and monthly payments can give us some insight into how a refinance can save you interest. By understanding what your financial picture looks like and the amount of interest that you are currently paying to service that current debt, we can very quickly estimate how much interest you could save with a refinance. If you take a number of those high interest rate credit cards and roll them into a new, low interest rate mortgage, the savings can very quickly become quite substantial.

In closing, a refinance is a financial tool that can make a significant difference in your current financial picture. If you have reviewed the questions above and would like to take a closer look at your situation, there is never a better time than the present to make a change that will have a positive impact on your future.

Take the time to have a conversation with a Dominion Lending Centres mortgage broker who can give you some insight into how a new mortgage could help you with a brighter financial future.

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

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