The Home Equity Line of Credit (HELOC) lets you split up your mortgage debt and borrow against your equity at low rates.

The unique feature of this mortgage product is that you can slice the pie (the mortgage balance) into various segments. All of it is registered against the subject property title as just one charge. This gives you the ability to diversify your risk in the marketplace.

If you had a $480,000 outstanding mortgage against a property (with 20% equity or a value of $600,000) you could divide it up into different segments. For example, you might place $200,000 in a variable-rate mortgage, $200,000 as fixed term and $80,000 line of credit.

Spreading the risk across different markets helps you plan for the future, as there are different governing bodies controlling different aspects of the marketplace.

Variable-rate mortgages and lines of credit (LOCs) are based on the prime lending rate and controlled by the Bank of Canada. Fixed rates are based on bond yields and dictated by the lenders themselves. Most other lenders follow the trends of the major chartered banks in Canada.

There are two types of line of credit in Canada: secured (registered against real estate) and unsecured (guaranteed by one’s promise to repay). I can only assist with secured LOCs. The secured LOC means less risk for the lender as it is based on the market value of the home to a maximum of 80% loan-to-value. Therefor the rate is lower and the borrowing ceiling is higher.  On secured LOCs the rate is Prime (2.70%) +0.50% which is 3.20%.  This means that if you had a primary residence with a market value of $500,000 free and clear of any other type of mortgage then you could secure a $400,000 HELOC against it at 3.20%.

Unsecured LOC rates vary depending on lender, but a safe starting range is 5-7%. And on unsecured LOCs, lenders tend to forward much less than secured LOCs; they range from $5,000-$40,000.

Here is an example of a client I recently assisted. We were able to obtain a HELOC mortgage product from a Canadian charter bank.

• Current residence (located in the Greater Vancouver area) appraised at $1.15MM.
• Current mortgage balance, $445,000.
  Maximum loan limit, $920,000 (80% of market value: 1,150,000 x 80%).
  They opted to secure the current outstanding balance of $445,000 into a variable-rate mortgage at Prime-0.45% or 2.25%.
  The additional equity of $475,000 was set up for access across 3 different LOCs; one at $159,000 and two at $158,000.
  These clients now have access to $475,000 for any future needs: renos, emergency, investment opportunities, post-secondary education for their children.

But while a HELOC  allows for product diversification and long-term planning, it is not for everyone. It can be a bad idea if it’s just used as access to easy cash. One needs to possess high self-discipline, as the funds are extremely accessible. Using the home as a piggybank can backfire disastrously.

A HELOC is also not available to all homeowners. There must be enough equity in the home before a lender will consider it.

Please contact your Dominion Lending Centres mortgage professional to discuss the potential of structuring a HELOC mortgage product against your home.

Get pre-approved today!

Shari Letsos
Mortgage Professional
Cell: 604-723-7721
Sletsos@dominionlending.ca
Dominion Lending Centres Mountain View

The last quarter of 2016 brought considerable change to Canada’s residential mortgage business. In October, the Department of Finance Canada announced new mortgage rules that have had a tempering effect on the market. Then, in late December, the Office of the Superintendent of Financial Institutions (OSFI) mandated a new capital framework for our three mortgage insurers. In the space of three months, our government has changed the rules of lending and borrowing, further complicating the residential mortgage world for Canadian homeowners.

Now borrowers must have their borrowing capacity stress-tested, not against the lender’s current mortgage rate offerings, but against a new qualifying rate, currently posted at 4.64% for insured high-ratio mortgages. This has reduced every homebuyer’s buying power. Some homebuyers who may once have qualified for a mortgage will now not qualify at all.

In addition, traditional lender funding mechanisms have changed, and low-ratio portfolio insurance premiums have increased. These changes have driven up interest rates for Canadian mortgage borrowers, some more than others. Since October, mortgage rates have gone up around 30-60 basis points with many lenders. This has created a double-whammy for the borrower – their purchasing power has gone down while interest rates have gone up.

For consumers, the recent changes represent a major step back, due to the new and far more complex mortgage pricing structures, product surcharges, risk and LTV-based surcharges and new qualification methodology. With these additional layers of complexity, it is doubtful that web-based direct-to-consumer or self-serve residential mortgage sites will be growing any time soon.

But all of these changes work to the benefit of professional mortgage brokers. Why? Because the more complicated the mortgage market gets, the greater the need for homebuyers and homeowners alike to lean on the expert advice of a professional mortgage expert.

Full-service mortgage brokers – the people who live mortgages every day as a sole source of income and are on top of the latest regulatory changes — can help homeowners navigate these increasingly complex waters. They understand the ins and outs of all the regulations; the strengths and weaknesses of the different financial institutions, from bank to non-bank lenders, trust companies to credit unions; and they look for a mortgage to suit the homebuyer, not the other way around. Mortgage brokers don’t work for lenders; they work for the homebuyer. So their advice is informed, unbiased and honest.

That’s why mortgage brokers have been getting a bigger share of the action over the last few years. As revealed in the 2016 CMHC Mortgage Consumer survey, “mortgage broker share of the market is trending upwards for renewers and refinancers, increasing from 21% in 2015 to 26% in 2016 for renewers, and from 33% in 2015 to 38% in 2016 for refinancers…. Market share is even higher among first-time buyers at 51%.”

Homebuyers and homeowners can trust a pro to explain what the new mortgage regulations mean to them, and what their options are so that they can make the most informed decision. A home is typically the biggest purchase people will make in their life. To buy a home without the insight of a professional, full-time mortgage broker just doesn’t add up. I’m proud to say that at CMLS Financial, we originate our business exclusively through the mortgage broker channel and we expect to see this channel continue to grow as a result of these most recent changes.

There was a time when car owners with some mechanical aptitude could perform general maintenance on their cars and only needed to visit their mechanic as a last resort. Then car engines became more computerized, and car owners no longer had the specialized tools and skills. Mechanics became more sophisticated and knowledgeable, and demand for their skills increased.

Today, the inner-workings of a mortgage in Canada is much like the inner-workings of a car engine. Better off in the hands of an expert.

Get pre-approved today!

Shari Letsos
Mortgage Professional
Cell: 604-723-7721
Sletsos@dominionlending.ca
Dominion Lending Centres Mountain View

When bad things happen to good people sometimes the reality is they just can’t keep up with their mortgage payments. While Canadian mortgage defaults are amongst the lowest in the world at just 0.31%, foreclosure still happens.

In BC, if a lender forecloses on a homeowner they are required to give the borrower a 6-month Redemption Period – time granted to bring their mortgage up to date or find another lender. If at the end of this period the borrower is unsuccessful the foreclosing lender can ask for a Court-Ordered Sale. Once granted the property will be appraised and then listed by a realtor for sale at a price that will get the bank their money back in a reasonable amount of time. This usually translates into a lower asking price than if the seller that could hold out for the best the market has to offer.

If you have found a property in foreclosure listed at a great price there are a few things to consider before submitting an offer.

First, as soon as an offer is made and accepted a court date is set for about two weeks after. At court other parties can attend and make their offers and it can turn into a bidding war with the Court approving what they feel is the best offer.

Another point to consider is that you have to come to court with basically a condition-free offer. This means if you need financing to buy it you can only have one condition left on the mortgage approval – the Court accepting the offer. If you have less than 20% down and need mortgage insurance (CMHC) some lenders won’t take it to the insurer before your offer is accepted so your options may be limited somewhat. You have a much stronger bid if you have more than 20% to put down.

The rest of the financing conditions are pretty much exactly what to expect but again, all conditions need to be satisfied before presenting an offer. This means the cost of an appraisal and house inspection are upfront costs that may be a waste of money if you don’t get the property in the end.

Once the Court approves your offer the completion date is set usually for two weeks after that so you had also better be prepared for a hasty move if that proves necessary.

The last thing to note is that once the sale completes at lower than true market value you have now effectively established a new value for your place. Over the next 6-months or more likely a year an appraisal on this property will have its own sale price factored into its appraised value so if flipping is your game you could have a longer than normal investment period before seeing it’s true market value reflected.

Buying a foreclosure is a step up in the complexity of buying real estate so always seek the professional advice of a Dominion Lending Centres agent before jumping in.

Get pre-approved today!

Shari Letsos
Mortgage Professional
Cell: 604-723-7721
Sletsos@dominionlending.ca
Dominion Lending Centres Mountain View

There seems to be some confusion about what it actually means to co-sign on a mortgage and you know that where there is confusion, your trusted mortgage professional seeks to offer clarity. Let’s take a quick look at why you may be asked to co-sign and what you need to know before, during, and after the co-signing process.

So why are you being asked? Last year there were two sets of changes made to the mortgage world which can likely explain why you are receiving this request in the first place.

The first occurred early in 2016 whereby the overall lending standards were increased in regards to an individual’s management of their credit and the resulting responsibility of Canada’s financial institutions to ensure they are lending prudently. We have seen an increase in requests for co-borrowers to help strengthen applications when credit or job stability is an issue.

The second happened just in October. A new ‘stress test’ rate applies which has especially impacted borrowers with less than 20% down. They must qualify at a rate of 4.64% though their actual interest rate is much lower. This has decreased affordability for many which means they could be looking for a co-borrower to increase how much home they can qualify for.

If it was me, I would ask questions as to exactly why the applicant needs a co-borrower. If it is a credit issue then you need to assess if that an acceptable risk. If it is a matter of not enough income, you need to assess that instead. What is the exit strategy for you all from this joint mortgage?

What can you expect? You will be required to complete an application and have your credit pulled. As you are now a borrower the banks will ask you for all the documentation that the main applicant has already provided. This can include but will not be limited to:

• Letter of employment
• Paystubs
• 2 years Notice of Assessments, Financial Statements and complete T1 Generals
• Mortgage statements on all properties you own
• Bank statements if helping with the down payment
• Property tax bills
• Lease agreements
• Divorce/separation agreement

So you get the idea. You are now a full applicant and will be asked for a whole bunch of paperwork. It is not just a matter of saying yes. Once the application is complete and all conditions have been met with the mortgage, you will have to meet with the lawyer as well.

What do you need to be aware of?

1. This is now a monthly liability according to the world. You will have to disclose this debt on all your own applications going forward. It can affect your ability to borrow in the future
2. Each lender is different in their policy as to how soon you can come off the mortgage. Familiarize yourself with this. Are you committing to this indefinitely or only for a couple of years?
3. Mortgages report on the credit bureaus so you could be adversely affected if there are late payments
4. If the main applicant cannot make the payment for whatever reason, you are saying that you will. Make sure your budget can handle that for a few months.

A few things you may want to consider if you do agree to co-sign:

• Ask for an annual statement to be sent to you as well on both the mortgage and the property taxes.
• Consider a joint account for mortgage payments so that you can check in every so often to ensure all payments are being made on time
• Talk about life insurance! If the worst occurs, then at least have enough of a policy in effect, with yourself as the beneficiary, to cover a year of mortgage, taxes and bills so that you are not hit with an unexpected series of expenses until the property sells.

So though you just want to help your loved one into their dream home, you are all better served if you know exactly what you are getting into and are prepared for the contingencies. I’m here to help!

Get pre-approved today!

Shari Letsos
Mortgage Professional
Cell: 604-723-7721
Sletsos@dominionlending.ca
Dominion Lending Centres Mountain View
Website: www.ShariLetsos.ca

There seems to be some confusion about what it actually means to co-sign on a mortgage and you know that where there is confusion, your trusted mortgage professional seeks to offer clarity. Let’s take a quick look at why you may be asked to co-sign and what you need to know before, during, and after the co-signing process.

So why are you being asked? Last year there were two sets of changes made to the mortgage world which can likely explain why you are receiving this request in the first place.

The first occurred early in 2016 whereby the overall lending standards were increased in regards to an individual’s management of their credit and the resulting responsibility of Canada’s financial institutions to ensure they are lending prudently. We have seen an increase in requests for co-borrowers to help strengthen applications when credit or job stability is an issue.

The second happened just in October. A new ‘stress test’ rate applies which has especially impacted borrowers with less than 20% down. They must qualify at a rate of 4.64% though their actual interest rate is much lower. This has decreased affordability for many which means they could be looking for a co-borrower to increase how much home they can qualify for.

If it was me, I would ask questions as to exactly why the applicant needs a co-borrower. If it is a credit issue then you need to assess if that an acceptable risk. If it is a matter of not enough income, you need to assess that instead. What is the exit strategy for you all from this joint mortgage?

What can you expect? You will be required to complete an application and have your credit pulled. As you are now a borrower the banks will ask you for all the documentation that the main applicant has already provided. This can include but will not be limited to:

• Letter of employment
• Paystubs
• 2 years Notice of Assessments, Financial Statements and complete T1 Generals
• Mortgage statements on all properties you own
• Bank statements if helping with the down payment
• Property tax bills
• Lease agreements
• Divorce/separation agreement

So you get the idea. You are now a full applicant and will be asked for a whole bunch of paperwork. It is not just a matter of saying yes. Once the application is complete and all conditions have been met with the mortgage, you will have to meet with the lawyer as well.

What do you need to be aware of?

1. This is now a monthly liability according to the world. You will have to disclose this debt on all your own applications going forward. It can affect your ability to borrow in the future
2. Each lender is different in their policy as to how soon you can come off the mortgage. Familiarize yourself with this. Are you committing to this indefinitely or only for a couple of years?
3. Mortgages report on the credit bureaus so you could be adversely affected if there are late payments
4. If the main applicant cannot make the payment for whatever reason, you are saying that you will. Make sure your budget can handle that for a few months.

A few things you may want to consider if you do agree to co-sign:

• Ask for an annual statement to be sent to you as well on both the mortgage and the property taxes.
• Consider a joint account for mortgage payments so that you can check in every so often to ensure all payments are being made on time
• Talk about life insurance! If the worst occurs, then at least have enough of a policy in effect, with yourself as the beneficiary, to cover a year of mortgage, taxes and bills so that you are not hit with an unexpected series of expenses until the property sells.

So though you just want to help your loved one into their dream home, you are all better served if you know exactly what you are getting into and are prepared for the contingencies. I’m here to help!

Get pre-approved today!

Shari Letsos
Mortgage Professional
Cell: 604-723-7721
Sletsos@dominionlending.ca
Dominion Lending Centres Mountain View
Website: www.ShariLetsos.ca