Posted by James Wynters

When in the process of buying a home, there is nothing worse than having your mortgage broker or lawyer call and say “there is a problem”.

If you have found your dream home and negotiated a fair price, which was accepted, and you have supplied all the documentation to your broker, you probably assume everything is fine. The reality is that your financing approval is based on the information the lender was provided at the time of the application. If there have been any changes to your financial situation, the lender is within their rights to cancel your mortgage approval.

To ensure that you don’t encounter any last-minute issues on your home buying journey, there are five major approval roadblocks to be aware of and avoid for a smooth transaction:

EMPLOYMENT

When submitting a request for financing, whether a mortgage or car loan or to handle personal debt, one of the most important aspects the lender looks at is employment. If you were working at Company X for five years at $50,000 a year and – just before your deal is finalized – you change jobs, the lender will now require proof from the new job. This can include proof that probation for this new job is waived, or new job letters and pay stubs at the very least. If you change industries, they will want to see more proof that you are capable of keeping this job. For any employment involving overtime or bonuses, the lender often requests a two-year average, which you would not be able to provide at a new position. Another employment change that could hurt your financing approval would be if you decide to change from an employee to a self-employed contractor.

When it comes to financing, it is best to wait to make any major employment or life changes until after the deal has gone through.

DOWN PAYMENT SOURCE

As mortgage financing is based on the initial information provided, you will most likely need to do a final verification of the down payment source. If it is different than what the lender has approved, it could spell trouble for your financing approval. Even if you said that your down payment was coming from savings and, at the last minute, mom and dad offer  you the funds as a gift, it could affect your approval. This is an acceptable source of down payment, but only if the lender knows about it in advance and has included this in their risk assessment, but it can end a deal.

DEBT

A week or two before your possession date, the lender will obtain a copy of your credit report and look for any changes to your debt load. Since mortgage approval is based on how much you owed on that particular date, it is important not to increase your debt before the deal is finalized. Buying a new car or items for the new home must be postponed until after possession; even if they are “do not pay for 12 months” campaigns because you will need to fulfil those payments, regardless of when they start.

BAD CREDIT

One of the biggest roadblocks to mortgage approvals is credit card payments. When you enter the financing process, it is important that your credit score remains positive. If your credit score falls due to late payments, this can cause major issues with your financing. Even if you have a high-ratio mortgage in place which requires CMHC insurance, a lower credit score could mean a withdrawal of the insurance and removal of any financing approval.

MISSING IDENTITY DOCUMENTS

Before a deal is finalized, the lawyer must verify your identity documents and see that they match the mortgage documents. You may not think it needs to be said, but it is important to use your legal name when you apply for a mortgage. Even if you go by your middle name or a nickname, all legal documents should match.

Keep in touch with your Dominion Lending Centres mortgage professional right up to possession day. Make this a happy experience rather than a heartbreaking one.

Written by my Marketing Dept

More and more Canadians are choosing to buy a second property in retirement. Reasons for doing this vary. Some want to reap the rewards of a lifetime of saving and treat themselves to a vacation home. Others, on the other hand, view their second property as an investment, intending to rent it out and use the rent to bolster their income.

Whatever your reasons for wanting to buy a second property, there are various ways you might choose to pay for it – let’s have a look at what those are.

PAYING THE DOWN PAYMENT

Just like your first property, you’ll need a down payment for your second property. This can be as little as 5% but ideally should be higher – try aiming for 20%.

CASHING IN INVESTMENTS

One way that you may choose to make the down payment is by cashing in on investments. When considering this, however, caution should be exercised. Cashing in on investments in a taxable account can trigger taxes and OAS clawback, as well as potentially pushing you into a higher tax bracket. Taking large sums from your investments will also reduce the size of your portfolio, which can have a knock-on affect on your retirement income. Outliving savings is something all retirees should be conscious of, so think carefully before making large withdrawals that may deplete your pension pot too quickly.

TAKING OUT A HELOC

A Home Equity Line of Credit (HELOC) is a revolving line of credit secured against your primary residence which allows you to access up to 65% of your home’s value. Taking out a HELOC to pay for the down payment can be a good option to avoid cashing in on investments, but they’re not without their limitations. It’s recently become more difficult to get approval for a HELOC, and many retired Canadians without a fixed monthly income have seen their applications denied. If you manage to get approved for the loan, be aware that you need to service it each month, which will have an affect on your monthly cashflow.

USING THE CHIP REVERSE MORTGAGE

Another way to afford the down payment on your second property is with the CHIP Reverse Mortgage. The CHIP Reverse Mortgage allows you to access up to 55% of your home’s value in tax-free cash, meaning it won’t trigger taxes or OAS clawback, or push you into a higher tax bracket. Unlike a HELOC, with a reverse mortgage you don’t repay what you owe until you move out of your home or pass away, so there are no monthly repayments eating into your cashflow. What’s more, depending on how much equity you have built up in your home and how much your home is worth, you may be able to pay off a significant amount of your second property – perhaps even paying for it outright!

PAYING OFF THE MORTGAGE

Unless you were able to pay for your second property outright, chances are you’ll have a monthly mortgage to pay.

If your second home is an investment property, you likely intend to rent it out. In this case, the rent you charge should be enough to cover your mortgage payments (and hopefully a little extra for you each month).

On the other hand, if your second property is a vacation home, you’ll need to factor mortgage repayments into your monthly budget. One way to get the best of both worlds is by renting your vacation property out for short-term holiday lets. This will help you cover some, if not all, of the mortgage payments, while also giving you the flexibility to enjoy your vacation home whenever you want. Want to know more about how the CHIP Reverse Mortgage could help you afford a second property? Contact your DLC Mortgage Professional to learn more!

Written By: Agostino Tuzi

To most consumers outside of the mortgage space, the terms “mortgage broker” and “mortgage specialist” would seem interchangeable – but they aren’t. As a potential homeowner, the differences are more important than you might think.

First and foremost, it is important to understand the definition of these groups before looking at the major differences. Mortgage brokers belong to an independent firm. This allows them unique access to rates and offers from various lenders’ (banks, credit unions, private lenders and alternative options). Conversely, a mortgage specialist is employed by a single lender and works to sell that particular institution’s products.

BENEFITS OF WORKING WITH A MORTGAGE BROKER:

1. MORTGAGE BROKERS WORK FOR YOU!

Unlike a mortgage specialist, who is paid by the bank to sell their products, a broker works for YOU! A broker works as a link between you and the lender; they filter through the offerings to find you the best rate and product. The best part? A mortgage broker’s services are FREE! Brokers are paid by the lender of choice once the ideal mortgage product has been found. This means you get to utilize their expert advice and lender access at no cost!

2. MORTGAGE BROKERS CARE FOR THEIR CLIENTS

Similarly to the above, Mortgage Brokers care for their clients. Not only because they work for YOU but also because most brokers are self-employed and rely on referrals. As a majority of their business is done through word-of-mouth, this results in the best experience for clients. Every DLC Mortgage Broker is motivated to help you achieve your dream of home ownership!

3. MORTGAGE BROKERS ARE LICENSED PROFESSIONALS!

It might surprise you to know that mortgage and bank specialists are not required to have any formal training. While some lenders do provide in-house training, this varies from the provincially regulated course that mortgage brokers are required to pass. Mortgage brokers also continue to maintain their education through license renewals and educational courses. As a result, a mortgage broker provides expert advice you can trust!

4. MORTGAGE BROKERS HAVE GREATER ACCESS TO RATES

A mortgage broker is employed by an independent firm and has access to 90+ lenders, while a mortgage specialist can only access their particular lenders’ products. This can mean a big difference in rates and mortgage terms for homeowners! If you are looking at getting a mortgage with your bank (say Bank X), then your mortgage specialist can tell you exactly what Bank X offers. But, by seeking the advice of a mortgage broker, they can tell you what Bank X offers… as well as your options with Bank Y, Bank Z, Bank A, etc. When you are looking for the best mortgage product to fit your unique needs, more options to choose from just makes sense!

5. MORTGAGE BROKERS FOCUS ON MORTGAGES

When it comes to mortgage brokers, all they do is mortgages; they live and breath home ownership! Mortgage specialists and bank staff are often trained with a focus on cross-selling. While you may have booked an appointment to discuss a mortgage, many times they will focus on other bank products. This might include offering credit cards, insurance, RRSP, lines of credit, etc. This can sometimes be helpful, but many potential homeowners may find it overwhelming or pushy; especially when they are specifically looking for a single product – a mortgage.

6. MORTGAGE BROKERS OFFER FLEXIBLE HOURS

Most banks don’t offer great business hours, which can make it hard to book an appointment with a specialist. As many mortgage brokers are self-employed, they are motivated to assist clients. This means they are often available for appointments outside of business hours such as evenings or weekends. This can be especially comforting to individuals who are new to the mortgage process and may have questions or concerns that they would prefer to have answered right away.

Written by my Marketing Dept