22 Jul

Top 8 Benefits of Using a Mortgage Broker

General

Posted by: Gurcharan Singh

When shopping for a mortgage, many home buyers enlist the services of a Mortgage Professional. There are several benefits to using a Mortgage Broker and I have compiled a list of the top 8:

1. Saves you time – Mortgage Brokers have access to multiple lenders (over 50!). They work with lenders you have heard of and lenders you probably haven’t heard of. Because their relationship with lenders is ongoing, Mortgage Brokers know what is available in mortgage financing and will be able to advise you on what your lending options are without all the leg work that you would have to do in order to find a small percentage of information that a Mortgage Broker already has in hand.

2. Saves you money – Mortgage Brokers, if they are successful, have access to discounted rates. Because of the high volume that they do, lenders make available discounted rates that are not available directly through the branch of the lender that you go to.

3. Saves you from becoming stressed out! – It can be very daunting to find a mortgage. A Mortgage Broker takes on that stress for you. Your Mortgage Broker will make sure all the paperwork is in place. They will keep in good communication with you so that you know what is going on with your mortgage and will keep you up to date with any complications so that there are no surprises.

4. Gives you access to lenders that are otherwise not available to you – Some lenders work exclusively with Mortgage Brokers. In these circumstances, the layman does not have access to these lenders and, therefore, does not have the option to use discounted rates and mortgage products that these lenders offer.

5. Services are free – Mortgage Professionals are paid by the lender and not by you. This is not a disadvantage to you. A good Mortgage Broker will ALWAYS have the best interest of the client in mind because if you, as a client, are happy, you will go tell your friends about the service you’ve received from the Mortgage Professional you work with. Mortgage Professionals rely on referrals, which means that if you are a happy customer, and you got the best deal available, you will tell your friends and family about them which will result in referrals and potential future business.

6. Take on every challenge – As Mortgage Professionals, we see every scenario out there and work to make sure that every client knows what is available to them for financing options for a mortgage. Damaged credit and low household income might be a deterrent for the bank, but a Mortgage Professional knows how to approach the lender and has the relationship to make sure every client has a plan and strategy in place to make sure there is a mortgage in their future.

7. The Mortgage Brokerage industry is monitored by governing bodies – Nowadays, as Mortgage Brokers, it is extremely important to have principles and values that are based on the best interest of the client. In fact, in order to become licensed, the Mortgage Professionals need to be well versed in the ethical and upstanding values that are outlined through the Financial Institutes Commission, a provincial governing body that is a watchman for this industry. FICOM’s mandate is to make sure every Mortgage Broker walks in integrity and in the best interest of their client.

8. The Mortgage Broker has a better understanding of what mortgage products are available than your bank – Interestingly, a Mortgage Broker has to be licensed and cannot discuss mortgages with you unless they are licensed. This is unlike the bank who can “internally train” their staff to sell the specific products available from their bank. The staff at your bank do not have to be licensed Mortgage Professionals.

While this is not an exhaustive list on the benefits of using a Mortgage Professional, it is compelling to see the benefits of using a Mortgage Professional rather than putting a mortgage together on your own.

At Dominion Lending Centres, we have an excellent rapport with the lenders we introduce our clients to. Our customer service is reflective of our relationship with our lenders. We are always professional and we always make sure our clients know every viable option they have for mortgage financing. By:Geoff

29 Jun

RENT TO OWN

General

Posted by: Gurcharan Singh

Rent-to-Own, Lease to Own, R2O. They may seem like good options, but watch out for these pitfalls. They are a good program as long as you have a mortgage planner ensuring you are following a plan to succeed.

Rent to Own…what you NEED to know. My guess is you might check this option out if you:
1. Have NO credit.
2. Have credit challenges such as a bankruptcy or debt repayment plan.
3. You’re self-employed or on disability with little income to “declare”.
All valid reasons and you’re not alone. There are lots of people each year that contact me with these exact issues.

Rent-to-own or Lease-to-own is a great program for SOME people! The program allows you to buy a home today without having to meet the typical qualifications required by your banks. There is nothing cheap about these programs either.

The Pitfalls

There is NO guarantee that you will qualify for a mortgage at the end of your term; hence you may lose your deposit.

– You are buying a home based on an estimated future value, so you could be paying an over-inflated price. What happens if your house de-values over the term of your R20 contract.

– There can be (if the mortgage becomes “private”) hefty fees involved.

– You DO need an initial deposit (usually 5-10% of the value of the home.

– Terms are usually 1-3 years, so if you’re credit challenged, you may not qualify for a mortgage at the end of your contract.

– If certain documents are NOT completed up front (for lender’s future use), you won’t get the mortgage. Certain items such as an appraisal up-front, option purchase agreement, market rent reports and such must be completed and dated in the beginning.

Only a handful of lenders will mortgage these

 Remember Dominion Lending Centres have over 200 different mortgage programs that are likely BETTER, SAFER and give MORE OPTIONS than a Rent-to-Own. Banks are not your one-stop-shop for answering your questions.

Buyer Beware!

You will see many websites out there with Realtors advertising they have this program, or “middlemen” that also have these sites saying how easy it is. Remember “middlemen” and Real Estate people are sales people. They may NOT be licensed mortgage experts that specialize in credit repair or mortgage alternatives. They are there to SELL you a house. Without proper and continual guidance from an experienced, licensed mortgage professional you risk losing your deal at the end.

By: Kiki Berg

29 Apr

First Time Home Buyers: Planning and Negotiations Will Save You Time and Money

General

Posted by: Gurcharan Singh

First Time Home Buyers – Planning and Negotiations Will Save You Time and MoneyEvery mortgage is unique. Would the advertised/online RATE work for everybody? It’s hard to say, until your documents fulfill all the conditions for that rate. Sometimes there are challenges to getting the approval of the mortgage. Dominion Lending Centres mortgage professionals try their best to find solutions to those challenges because they have a business relationship with more than ONE lender, they WORK FOR YOU, and they try their best to earn your business.

I want to share my experience when I bought my first existing home two decades ago and how a Real Estate agent helped me at that time. We decided to have a newly built home and at one “show home”, a Real Estate agent gave me his business card. After a couple of days, I phoned that Real Estate agent to get more guidance to sign a contract with a builder.

We met with him and discussed our priorities. He provided us the price and compared features of “show homes” in different neighbourhoods in the city. Also, he mentioned about the future growth of the particular vicinity in our area. After our first meeting with him, we were so impressed that he would negotiate on behalf of us, and he assured us that he would bring the price down as much as he could.

We started going with him to see more “show homes” and we liked one that was within our price range. He started “negotiating” with the representative of a builder. He went back and forth, and finally, our offer got accepted, and that Real Estate agent saved us $3,500.

If that Realtor  did not meet us at the “show home” we wouldn’t have had the chance to negotiate or signed the contract with a builder at the asking price and saved $3,500 at that time.

I had to pay a 10% down payment at that time since I did not PLAN my mortgage and did not realize that my income would be an issue. Always check with a mortgage professional to receive unbiased advice for your mortgage financing needs. If you are a “First Time Home Buyer” and thinking of buying a home in the very near future, START PLANNING your mortgage with a Dominion Lending Centres mortgage professional. By doing this, you will have knowledge of allowable income and down payment for the mortgage financing. You will also realize what credit is and why it is so important in this process.

At Dominion Lending Centres, we will plan your mortgage by focussing your short and long term goals and also show you how to pay off your mortgage faster than you think. You will have access to the very best products and rates available across Canada. I look forward to hearing from you soon!

6 Apr

That Discounted Rate May Not Be So Discounted, After All

General

Posted by: Gurcharan Singh

That “Discounted Rate” May Not be so Discounted, After All

Not long ago, someone contacted us wishing to refinance their mortgage. They presently held a mortgage from one of the big banks. When this homeowner originally obtained her mortgage, the bank offered her a discounted rate of 2.99%. It matured in July of 2016, however, when they contacted us at Dominion Lending Centres, they wanted to refinance to improve their cash flow because of recent major renovations. The mortgage was over $600,000.

At first thought, an Interest Rate Differential (IRD) penalty might seem to be so small because of the effective rate of 2.99%, that only a 3 month penalty would apply to break their existing mortgage. Wrong. Because the rate for the original mortgage was discounted from 4.64%, 4.64% was used when calculating the IRD penalty. So, instead of paying $5,157 dollars, the client was told they had to pay over $23,000 in order to break their mortgage with the bank.

A mortgage broker-channel lender, and there are many, uses the contract, or effective rate, when they calculate the IRD penalty on fixed rate mortgages, unlike the banks. Because they use the actual contract rate, the penalty would have been the lower one in the example above. An amortization scenario would determine if breaking the existing mortgage would be worth it by seeing the crossover point in time for making up the difference in savings. In the case above, it was not worth breaking, and the client had to wait until their mortgage matured.

The banks have, in recent years, implemented a new way of registering mortgages to assist in these situations. They often now register the loan as a collateral charge loan rather than a mortgage. This allows the bank to refinance the home loan on a house without a penalty if the client needs extra cash in the future. The disadvantage to this is that in order to break the loan agreement, even at maturity, the client either has to pay a lawyer or title insurance company to help break the loan agreement, costing approximately $600-$1000. Aware of this, at renewal, the bank can price the renewal rate accordingly, as they are aware that the client must pay this fee in order to leave the bank.

When purchasing a home or renewing or refinancing, it pays to ask details about pre-payment privileges and the costs associated with discharging your mortgage before the maturity date, as well as how the loan is going to be registered, ie. as a regular mortgage or a collateral charge loan. By: Daniel Lewczuk

4 Apr

Do You Really Need a Ferrari Level Mortgage?

General

Posted by: Gurcharan Singh

15 Mar

Top 5 Questions To Ask Your Mortgage Lender Before Signing On the Dotted Line

General

Posted by: Gurcharan Singh

22 Feb

Online Mortgage Rates and Products – Do They Apply To You?

General

Posted by: Gurcharan Singh

Online access to information is fantastic! The ability to understand a glossary of terms and products out there is amazing when compared to even a decade ago. I love “Googling” and finding how to fix my car, or how to engage in my do-it-yourself home projects. I feel more informed and gain confidence embarking on new tasks.

Increasingly common is clients searching rates online or receiving rate updates via email and concluding that these are the rates they can get. The reality is that every person’s situation is unique and the property, or their scenario, may not allow for such a rate or product to be truly on the table.

The most common is that a better rate will be offered to a client with 5% down payment than one with a 20% down payment, which seems absurd on the surface, yet you have to understand that the mortgage with only 5% down payment is insured by CMHC, Genworth or Canada Guarantee. This mortgage insurance protects the lender against default, lowering lender risk and exposure, which is why a 5% down client can obtain a rate 0.05 – 0.10% better than the conventional client with more equity or skin in the game!

Other examples of factors impacting rate include lender perceived risk such as rental properties, self-employed clients, pre-approvals and credit issues. These examples can see a 0.10% to 0.50%+ surplus in posted rates.

Not to discourage folks from looking online at rate sites at all – it is important for clients to know that there are different business models out there within the Mortgage industry. There are many reputable online Brokerages that offer some low rates based on high volume alone. Volume and buying power are great and there are some clients and files that work really well in this space. One should also realize the importance of personalized professional service, future planning and that not all mortgages are created equally, nor is the service level.

There are cases where lower rate products come with restrictions or an online model fails to include your three to five year planning. Some low rate options are accompanied by high interest penalties such as 3% mortgage penalty – EVEN on a variable! I rescued a client from a mortgage they obtained online, hamstrung just like this with a contract rate over 3%; the penalty was over $20,000. I was able to get the penalty reduced, restructure all of their finances, refinance that mortgage and they were able to obtain their second home. Something that would not have been possible given the “deal” they thought they received originally.

Some offers have a cash back component with much higher contract rates than the discounted rate and are applying the cash back as a mortgage prepayment to arrive at a lower “effective” interest rate. Other lenders are offering a lower rate on the surface but the payment is based on a higher rate with higher payments. Most Cash Back mortgage rates are higher than that of a Line of Credit. With a Cash Back mortgage, you have to pay the penalty if you break the mortgage and in addition, you may have to repay the cash back advanced portion! This is still often true when used to prepay the mortgage down from the outset. I have seen set ups like this potentially cost way more in the end and prevent friends or clients from making a life change.

For Example:

Exposure to Penalties/Repayments – using a $300,000 mortgage

Low Rate Product at 2.10% with a Penalty of 3%; $9,000

Regular Variable product at 2.20% with 3 months interest Penalty; $1,500 approx.

The payment difference is approximately $28.00/month or $1,730 in five years, which looks great at first, yet the exposure to the penalty risk should not be overlooked.

Here is one example of the fine print on one offer a client recently brought to my attention:

“LESS than 20% Down Payment Purchases Mortgages OVER $500K ONLY. This is an effective rate which incorporates cash back. A higher contract rate applies, upon which the actual payment is based. You will receive a lump sum of cash back upon closing, equal to the interest savings of the advertised rate. No Pre-approvals. No Rentals.”

Reading above, definitely some considerations that may or may not apply to your situation! Once noted, it clearly was not an option for my client.

Anyone can work on a mortgage alone, however, I prefer to drill down to feasible future planning and ensure that you are able to accomplish what you intend to beyond one mortgage. I am a full service broker who will have your best interests in mind prior to pushing any file!

Unlike unlicensed bank mortgage specialists, my job as a Mortgage Broker with Dominion Lending Centres is not to sell you a mortgage; it is to advise you on your options and to help you understand the implications of your choice. I truly hope this helps you in seeing both the differences and potential pitfalls of the rate game.

Ultimately, it is your home and your mortgage. I advise – you instruct! By: Kris Grasty

12 Feb

Accelerated Bi-Weekly vs. Bi-Weekly Payments

General

Posted by: Gurcharan Singh

When signing your commitment letter you will have to choose your payment frequency. If your goal is to re-pay your mortgage as quickly as possible, then you need to understand how different payment options will affect your repayment schedule.

So what are your options?

In general, most lenders will offer the borrower the option to decide which repayment schedule fits best with their lifestyle. The options include monthly, semi-monthly, bi-weekly, accelerated bi-weekly, weekly and accelerated weekly payments. Let’s use some simple math to determine which payment frequency will assist you in paying back your mortgage in the shortest time possible.

For the purposes of this exercise and to keep things simple, let’s use $100,000 as our mortgage amount. We’ll use a 5 year fixed rate at 2.54% with a 25 year amortization period and interest being compounded semi-annually.

8 Jun

Will a ‘Credit Inquiry’ Lower my score?

General

Posted by: Gurcharan Singh

 Your ‘beacon score’ is an indicator for a lender as to whether a client is likely to make payments on time and in full. Beacon (credit) scores are sometimes referred to as FICO scores, and both names are derived from the credit bureaus that developed the scoring system. Keeping track of this important number is vital. Inquiries to your score are recorded and tracked on the credit report as well. However not all inquiries are created equal. If your score is at or near 600 or 680 then one must be more cautious with inquires as this affects certain mortgage product availability.

Credit Inquiries

Each time a creditor (potential lender) checks your credit report, a record is created of this event. There are two types of inquiries, soft and hard. A soft inquiry occurs when you pull your own credit report. (Worth doing on an annual basis and FREE via mail at either Equifax or TransUnion.)

A hard inquiry occurs when submitting loan or credit applications with your written authorisation to inquire. A lender cannot process a hard inquiry without your written permission. There is a process to have non-authorized credit inquiries removed from your report.

Working with an independent Mortgage Broker typically results in one inquiry on your bureau for the use of multiple lender partners of that Broker. Thus more than one rate-hold can be placed with more than one lender without negative credit consequences via a Broker. Yet another great reason to work with a Dominion Lending mortgage professional!

22 Jul

CREDIT: IMPORTANT FOR YOUR MORTGAGE

General

Posted by: Gurcharan Singh

Good credit is an important factor in determining whether or not you will be approved for a mortgage. It’s important to begin building a credit history as early as possible.  There are few things that may help you to boost your credit score.

1. Pay your credit card bill in full. Try your best to pay your credit card bill 2-3 days before the due date.  

2. Don’t use the full limit on your credit card. Try to limit the spending to between 60%-70% of your credit limit per month. In other words, spend $600-$700 per month from the limit of $1000.

3. Don’t apply for too many credit cards.  Too many enquires in a short period of time can reduce your credit score.

4. Don’t close your old credit card account. If you were using one credit card for 6 months and after 6 months you closed that account and started using a new credit card, then by doing this, it will show your new credit card history with a short period of time.

Please call me at any time to receive FREE Credit Review and Consultation.

204-667-1300