Every year since October 2008 it’s become more and more difficult to obtain a mortgage. The government claims to be casting a safety net over the Canadian housing industry via stiffer mortgage regulations. What do you need to know to help prepare yourself for a home purchase, refinance, debt consolidation, or even a simple renewal? Well the biggest item I cover on a daily basis is preparation.

It can take a client weeks or months to find the confidence to connect with a Mortgage Professional once they feel confident that they ready to obtain that next mortgage. Any Mortgage Professional worth their salt will be able to guide their clientele to prepare them properly for the mortgage.

Typically most people think they need to prepare themselves most for their first purchase, however preparing for each mortgage these days is more critical today than ever before. When Canadians finally make that call, they want a step by step process to solve their solutions in an easy manner, but are seldom prepared to proceed.

During my regular daily routine, I follow up with my clients with gentle reminders to send me the requested documentation list. Having done this for ten years, the process is quite similar for almost each individual even though the main list of documentation remains the same.

We all want to take short cuts to get to the finished product, but in the end, the banks and lenders have become governed so much so that the short cuts are almost non-existent therefore, preparing the proper document package is essential to an essential mortgage. As Arnold Schwarzenegger said recently in an interview I watched on Facebook, we need to stop taking and thinking about short cuts. There aren’t any to success.

What I’m getting at here is that when your Dominion Lending Centres Mortgage Professional provides you with a mortgage document checklist, please don’t take it for granted, please follow each and every step carefully.

In general, the most common documents required are dependent on what you do for work. So if you are an employee, then the most recent paystub, and an updated employment letter along with the most recent two years of T-Slips (whether they are T4’s from employer’s, T5’s and pension slips), T1 Generals -the entire document (the documents your accountant prepares to submit to Canada Revenue Agency), Notice of Assessments (the form you receive back from CRA after your file is completed). Then there will be the verification of down payment via 90 days of bank statements, any mortgage statements, property tax assessments and the list can go one. The most common mistake is providing a mix and match of the above documents to try and piece together your income story. Depending on how your income is structured, we may be able to provide you with a near pre-qualification but lenders are being more adamant of having the documentation upfront, so that they are using their time, along with the mortgage insurer’s time. As a rule of thumb, the cleaner the file, the easier it is to underwrite and make a proper decision.

Common mistakes include, missing pages from tax documents, poorly written, unsigned, undated, missing info on employment letters (handwritten ones draw huge red flags), cut off pages from documents, out dated items(paystubs and employment letters over 30-60 days is pretty much null and void these days).

You may not know how to prepare yourself, but that’s also what we are for. We are essentially mortgage guidance counsellors to help prepare you for mortgage success, but if we are trying to obtain a mortgage via shortcuts, you’ll be upset with how the process goes.

We all used to have more leeway with mortgage documentation, but it’s clear the government is having banks and lenders scrutinize every mortgage more carefully now than ever before. And the banks and lenders have to oblige as they will be audited, if they don’t pass audits, then they lose out. And if they lose out, we lose competition. Yes this is the new normal, yes it’s tiring, no we don’t like it either, but it’s our new reality. And realistically, is gathering a few extra documents really that bad? Mortgages are not a given right and earned more so than ever before in our recent history.

Our job is to help you prepare for the mortgage, sometimes it will take one meeting, sometimes it’ll take weeks or months, even years depending on your own personal financial situation. But we can provide the recipe to help you prepare, but it’s up to you to do the cooking.

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

With low rate offerings over the past several years and a struggling economy, some homeowners chose to lock into a longer term mortgage even if the interest rate was a bit higher. If you are one of those people who feel stuck in a high rate 10 year fixed mortgage you may be wondering if you have options. The answer is YES.

Let’s consider the case of Dan and Anita who own a home and refinanced their mortgage 8 years ago into a 10 year term. They wanted to consolidate their high interest credit cards and their mortgage into one lower monthly payment and be secure with that monthly payment for as long as possible.

The news was painting a picture of doom and they wanted to take advantage of the “record low” rate of 5.25% for 10 years. Over the past few years they have watched the shorter term rates for 5 year term mortgages continue to drop to under 3% and they feel they may have made a poor decision. But since they feel they are stuck in a high rate 10 year fixed mortgage with the potential of a high penalty to get out of the mortgage they have chosen to stick it out. The monthly payments are $1,644 which they can afford but the potential of payments at under 3% for the remaining 5 years would be $1,304 (based on the remaining amortization) which is hard to pass on.

A friend told them to talk to her mortgage broker to see what real options they had. After talking to the broker they learned the penalty for terminating a 10 year mortgage after 5 years is only 3 months interest or $1,200 in their case (and legal fee of about $600). Dan and Anita were stunned they had missed this in the fine print of their mortgage agreement. And to top if off this policy is determined by law and not by the lender. This was great news for the happy couple. The broker also ran numbers to show them how they could further take advantage of the lower interest rate and increase their monthly payments to pay off their mortgage faster.

By increasing the payment by 20% – which was still lower than what they were paying before and paying bi-weekly instead of monthly, they lowered their interest costs by $20,000 over the next 5 years and reduced their amortization from 25 years to 12 years!

The morale of this story is, if you are stuck in a high rate 10 year fixed mortgage and you are close to the 5 year mark, you should talk with your Dominion Lending Centres mortgage broker (I and see what options you have to save yourself some money on your mortgage. What would you do with a savings of over $20,000?

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

Every homebuyer eagerly anticipates closing day. With the home purchase process completed, ownership of the property transfers from the seller to the buyer – you!

Closing date is negotiated as a condition of sale. You’ll typically have several weeks between the date that your agreement to purchase (sales contract) is signed and your closing date.

During that time, you and your real estate team will work to ensure that all the conditions of the sale are met so you can take possession on the agreed-upon date.

But what happens if a home sale falls through and you are unable to close?

Reasons why a home sale could fall through

It’s worth noting that the vast majority of purchase agreements close as expected. But the most common reasons why a sale may fall through are the following:

• The homebuyer fails to qualify for a mortgage.
• The homebuyer makes an offer to purchase a home based on the condition that they can sell their existing property first – and fails to do so.
• The homebuyer’s lender appraises the property at a value significantly lower than the agreed-upon purchase price. If the buyer can’t make up the shortfall from savings or the seller won’t lower the price, the buyer can no longer afford the property.
• There are title insurance or home inspection surprises. If a title report shows claims against the property or if a home inspection reveals serious flaws, it will jeopardize the sale.
• The homebuyer gets cold feet, changing his or her mind for any reason.

TIP: The best way to reduce the odds of failing to close on a home you want is to get mortgage pre-approval from the mortgage professionals at Dominion Lending Centres before you start house hunting.

Avoid making an offer on a potential money pit by scheduling a pre-sale inspection.

Your home sale falls through. Now what?

If you ever experience a sobering “it’s just not gonna happen” moment, contact your REALTOR® immediately.

If appropriate, they will send the seller’s agent a mutual release form, which releases both parties from the purchase agreement. As the buyer, you will endeavor to get your sales deposit back, and the seller is free to sell the home to someone else.

Problems arise if the seller refuses to sign the mutual release form.

Who gets the deposit?

If the seller refuses to sign the mutual release form, your deposit, which is held in a trust account, remains in trust until it is released by court order.

A disgruntled seller may decide to sue for damages that result from the failed purchase agreement. For example, they may end up selling the property to another buyer for less, resulting in a financial loss.

Or let’s say they purchased a home conditional on the sale of their existing home, and because you backed out, they either fail to close on that home or they must take out bridge financing to save the sale. They’ll probably want compensation for the extra costs and hassle.

While failure to close is an uncommon occurrence, it causes headaches for both buyers and sellers. Try avoiding it by getting mortgage pre-approval before you start house hunting, and by booking a pre-sale home inspection.

Most important, hire a real estate team. These experts can use their experience and professionalism to guide you through your sale, managing any bumps along the way.

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

HOW TO PAY OFF DEBT FASTER – 25 SECRET TIPS YOUR BANKER DOESN’T WANT YOU TO KNOW

1. Make a double mortgage payment whenever you can. Doing this once a year can shave over 4 years off the mortgage! Sometimes you can skip a payment later on too…if you really, really need to. Try not to. If your payment is $2,000 a month, four years of no payments is $96,000!!

2. Increase frequency of payment. For Example going from monthly to bi-weekly accelerated can shave over three years off your mortgage! $2,000, three years of no payments is $72,000!!

3. Increase your payment. For example a one-time 10% increase can shave 4 years off the mortgage. That’s $96,000! Imagine if you bumped the payment 10% every year from the get go!!! You would be mortgage free in 13 years! Start to finish! Can’t do it? How about 5% every year….you would be mortgage free in 18 years! How about increasing the payment by the amount of your annual raise?

4. Lump sum payments…same idea…mortgage is gone way faster! Even just one payment a year equivalent to 1 monthly payment will give you similar results as #2 above! How about using your annual work bonus?

5. Renegotiate whenever rates drop to save interest and pay mortgage faster! Generally a good idea however *Caution* get independent professional advice (a cost benefit analysis) to make sure it makes sense for you at that time. I can help. A 1% reduction on a $300,000 mortgage will save $250 a month…times 5 years…that’s $15,000!!

6. Keep your credit rating high for best rate. Always pay on time. Never let payments slip past their due date. Always keep balances low in relation to credit limits on credit cards, lines of credit, etc. 50% or less is best even if you pay the balances in full every month. What generally reports to the credit bureau is the statement balance each month. So if your credit limit is $3000 and you are running $3000 a month through the card each month (to collect all those points you never spend or can’t use in blackout periods) and paying in full, it will look like you are maxing out your credit limit and your credit score will drop accordingly.

7. Increase your mortgage! Yeah I know sounds backwards! Do it to roll in your credit cards, line of credit, car loan etc for a better rate and a set payment plan. Oh you say you don’t want to extend the repayment period of that stuff by rolling it into your mortgage or you have a low or promo rate credit card (those never end well) I agree! Then keep the total payment amount the same but pay it in one neat monthly payment to the increased mortgage.

8. Make an RRSP contribution and use the refund to pay down your mortgage.

9. Go variable rate with your mortgage but keep payments as if fixed rate. Variable rates usually win out over fixed rates. By paying a higher payment you will pay off the mortgage faster. It’s also a buffer in case the rate rises above the fixed rate for short periods of time. *Caution* variable rates are not for everyone. Get independent professional advice to find out what is best for you. I can help!

10. Take your mortgage with you when you change properties to avoid penalty or higher rate on a new mortgage. This is called “porting”. Make sure that your mortgage has this feature. It is not widely known and could save you a ton of dough.

11. Set up auto savings every paycheque, even $10, when it reaches the amount of one mortgage payment, apply it to the mortgage. This concept goes nicely with #4 above.

12. Unhook from the money drip…stop paying with your fancy points credit or debit card. Way too easy to overspend! Go old school, go off the grid…PAY CASH, it works!

13. Don’t ever buy on layaway, you know, six months don’t pay schemes. You think…No problem I’ll just pay it in six months, it will be okay. Yeah right!

14. Downsize your house. Two good friends and clients of mine, having followed many of the tips here, are in great shape except they have a six bedroom house! Two people, six bed house – go figure! They are nearly debt free so no biggy, but can you say the same? Circumstances change, make the adjustments along the way!

15. Don’t want to move? Convert the basement/rooms to rental and use the income to pay down debt.

16. Convert your mortgage to tax deductible. If you are self-employed, own rental property or have investments, this is likely possible. I won’t go into details here, just ask me how.

17. Have a payment priority.

18. Pay off the highest interest rate first.

19. If you have tax deductible loans, pay them off last, slowest. Pay the non-tax deductible loans first and fastest.

20. Pay off ugly debt first. Stuff like credit card purchases.

21. Payoff bad debt next. Stuff like car loans, boat loans. Things that depreciate in value.

22. Pay off good debt (or shall I say “not so bad debt”) last. Stuff like mortgages, investment loans. Things that hopefully appreciate in value.

23. Buying a car? Finance it if you have to, don’t lease! *Exception* If you are self-employed it might make sense.

24. You have $20,000 in a secret bank account for a rainy day fund and $20,000 owing on a line of credit. Seriously? The bank account is paying you next to nothing (which is taxable income to boot) and the line of credit rate is way higher (and not tax deductible). You know what to do. You can keep the line of credit open and on standby for rainy day funds. Make it the secret line of credit that you have but never use.

25. Give your Banker more money. No really. Keep enough in your chequing account to meet the minimum requirement to waive your service charges. My bank charges $10 a month for 25 transactions and nothing, zero, zilch, zip if I keep $2,500 in the account. Let’s see $10 x 12 is $120 a year to pay off debt. I’d have to earn 5% with the $2,500 in my savings account to come out ahead. No brainer here. Oh yeah, if you need more than 25 transactions a month…see #12 above.

26. #26? BONUS TIP and MOST IMPORTANT. Let’s face it, you’re not the Government and you’re not a Bank, you can’t run deficits forever and you won’t get a bailout….stop procrastinating already! See 1 through 24 above and take action now!
Sidenote: *Caution* beware of some too good to be true ultra-low rate mortgages. These “no frills” mortgages are often loaded with restrictions like pre-payment limitations, fully-closed terms, stripped-out features, or unusual penalties. You really need to compare product to product. If you’re not looking at what you’re giving up, you may regret it in the future. This alone could prevent you from taking advantage of tips #1, 2, 3, 4, 5, 7, 8, 9, 10, 14, 16 and 22!

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

WHAT DOES IT ACTUALLY MEAN TO CO-SIGN FOR A MORTGAGE?

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. We here at Dominion Lending Centres are ready to help!

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

Life can definitely throw some challenging financial situations your way. As mortgage professionals, we can provide solutions and strategies during or after these challenging times in order to get you back on track. We have access to banks, trust companies and mortgage companies that specialize in this transitional period to help you move forward with the best mortgage plan for you. We protect your credit by negotiating with multiple lenders to find a solution for you.

If you have never owned a home and have had a consumer proposal, the good news is that you are already accustomed to the discipline of saving money every month. Should you choose to continue to grow your savings, those funds can then be put toward a down payment and re-establishing credit.

If you own a home already, there are lenders that will help you refinance and pay out your proposal earlier in order to accelerate your transition period.

After bankruptcy, different lenders will issue mortgages based on the amount of time since you were discharged, the amount of down payment on a purchase and/or the current equity in your home if your already own. Lenders then price their rates based on these aspects of your application.

At Dominion Lending Centres, we look forward to learning about your journey while protecting your credit and guiding you through the best strategy on a moving forward basis.

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

REVERSE MORTGAGES – NO, WE DON’T WANT YOUR HOME!

Reverse Mortgages have had their share of misconceptions. In fact, we are often approached with false assumptions and unfounded facts about the product that steer the public to think of the product in a negative light. This article will cover one of the most common myths and the real facts behind this myth that has long been misinterpreted.

Myth: One of most common misconceptions that we hear time and time again is that you will lose ownership of your home to us.

Fact: This statement is false. HomEquity Bank, the provider of the CHIP Reverse Mortgage has taken several measures that ensure the protection of your equity.

1) Retain ownership of your home: Just like with any other mortgage, your home is used to secure the loan, which means that HomEquity Bank is registered as a standard charge on title. You, as a customer DO NOT transfer ownership of your home to us. In fact, once it’s time to pay back the mortgage you or your heirs have the choice to settle the loan however you or they want. Selling the home is the most common option, but it is not mandatory.

2) Our conservative lending practices: In our ads and on our website, we remind the customers that they can get up to 55% of the value of their home in a reverse mortgage loan. Of course, this amount does depend on the borrower(s) age, their property type as well as the location of their home. But as a rule of thumb, the younger the borrower is, the less they will qualify for and the older the borrower is, the more they will qualify for. This is because we want to make sure that the borrowers reverse mortgage loan doesn’t exceed the value of their home.

3) The potential value appreciation of your home: Many people don’t realize that their home may appreciate in value, however the interest that accrues only accumulates on the small borrowed amount of the home. That is why we say in our marketing pieces that “99% of homeowners have money left over” when their loan is settled.

This graph illustrates how the interest is affected when a home appreciates in value. For illustration purposes, we have used 3%, a modest level of home appreciation, which allows for equity preservation after a borrower takes out a CHIP Reverse Mortgage for 15 years. This example illustrates the following:

• Home appraised at $500,000.
• Homeowner(s) qualify for $200,000 (40%) of the value of their home in a CHIP Reverse Mortgage.
• The homeowner(s) take the CHIP loan for 15 years before they move, sell or pass away.
• The home appreciates at 3% and the new home value after 15 years is $778,984.
• The principal plus interest total $457,288 and the estate still has $321,696 in equity (41% of the home value at time of sale).

Home Equity Preservation Graph – CHIP Reverse Mortgage
The following graph is for Illustration purposes only *

4) Negative equity guarantee – Many people ask, “what happens if the house doesn’t appreciate in value, and in fact depreciates?” Our negative equity guarantee ensures that if your home depreciates in value at the time the home is being sold, and the loan amount due is more than the sale amount of the property, the homeowner or the heirs will not be financially penalized for being on title of the home. In fact, HomEquity Bank, will pay the difference between the sale amount and the loan amount when the loan amount due is more than the sale amount of the property. However, just like all other home equity loans, the homeowner(s) must keep their property taxes up to date, and maintain the condition of their home. If these conditions are met, the borrowers will never owe more than the fair market value of their home, when the home is sold.

The above measures are all the reasons why a CHIP Reverse Mortgage customer will not lose their home to the lender. A CHIP Reverse Mortgage provides a great solution for a growing number of Canadian retirees. For more information on this solution for homeowners 55+, contact your local Dominion Lending Centres mortgage professional.

* The illustration uses conservative values:

• Example based on the national price of Canadian homes of $500,000 (Average home price in Canada is $519,521 according to the CREA, February 2017)
• Example based on CHIP Reverse Mortgage advance of 40%
• Home appreciation of 3.00%. Average home appreciation is 7.16% annually. (Source: CREA, Canadian Real Estate Association 15-year national house appreciation average, February 2017). HomEquity Bank makes no representations on future housing market performance.
• CHIP interest rate of 5.59%. The Annual Percentage Rate (APR) is 5.79%, which is the estimated cost of borrowing for 5 years expressed as an annual percentage. The APR includes interest and closing costs.

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