STRESS TEST RATE & RECENT DECREASE

General George Macris 22 Aug

Currently, all borrowers in Canada need to qualify for a new mortgage at the current Bank of Canada Benchmark Qualifying Rate or at their approved mortgage interest rate plus 2.0%, whichever is higher.

For more than a year, this Bank of Canada Benchmark Qualifying Rate has been 5.34%. Now, for the first time in 3-years, the Bank of Canada has decreased that Qualifying Rate to 5.19%, a 0.15% decrease.

What does this mean?

Well, this Bank of Canada Qualifying Rate is essentially a bank’s Stress Test Rate. If a borrower has an annual gross income of $60,000, they can qualify for a $265,000 purchase price with a 10% down payment at a 5.34% qualifying rate.

Change that qualifying rate to 5.19%, that same borrower qualifies for a $269,000 purchase price at 10% down payment. This is a $3,700 increase in borrowing ability.

A borrower with $80,000 of gross annual income and a 20% down payment qualifies for a $455,000 purchase price at a 5.34% Bank of Canada Qualifying Rate. Change it to 5.19%, it increases to $462,000. A $5,600 increase in borrowing ability.

1.5%. That is the increase borrowers now have in their borrowing ability.

Ironic part of all these calculations, the stress test was implemented to protect consumers against rising interest rates. Their concern was that borrowers would not be able to cover their monthly payments when they came up for renewal.

Highest 5-year interest rate since January 2010? 3.79%.

Highest 5-year fixed interest rate in the past 5-years? 3.24%.

Last time someone had to pay an interest rate above 5%? For one month in 2009 and before that, summer of 2008.

Food for thought! If you have any other questions regarding the Bank of Canada and mortgage Stress Test rules, please reach out to me George Macris mortgage Broker at Dominion Lending Centres by phone at 514 651-2395 or by email at gmacris@dominionlending.ca

 

by Ryan Oake

WHAT IS A MORTGAGE “REFINANCE” AND HOW DOES IT AFFECT ME?

General George Macris 17 Jul

Refinancing a Home is one of those things where people understand what it is but have trouble explaining How it works. To put it simply, refinancing your Home allows you to access the equity you have built up, by changing the mortgage amount.

Let’s say you bought a $300,000 condo and you paid 20% ($60,000) as your down payment and had a mortgage of $240,000. Over the next 4 years, you continue making payments to pay down the $240,000 you owed and now that amount is only $230,000. Your mortgage is up for renewal in one year however, you want to do some renovations and you need to access the equity in your Home—this is where a refinance could come into play.

What this means is you will get an appraisal, or in simpler terms an evaluation, of your current Home and submit that information to a lender. Let’s say your $300,000 condo is now worth $350,000 and you owe $230,000. You have built up an additional $60,000 in equity ($350,000 – $230,000 owing – $60,000 initial down payment= $60,000). You have a mortgage of $230,000 on a Home worth $350,000, therefore your equity in the Home is $120,000.

To access that $120,000, you can refinance your mortgage. So let’s say you want to go back and take $50,000 from the $120,000 you have built up. Your new mortgage would go from $230,000 to $280,000, and that $50,000 will be transferred from the lender to you. You are essentially borrowing money from the lender while also adding money back on top of your mortgage.

This is why people will refinance their Home to make larger purchases. The bank will lend you the money now and get it back in the future, plus interest, because it is being added to the mortgage.

This is just one way people are able to use their Home to access cash. Other ways people can do this, especially if they are looking to complete renovations, is through home equity, lines of credit, collateral charges and purchase plus mortgages.

Knowing this information before you buy can be extremely beneficial. That is why it is important to work with a qualified mortgage Broker, Contact me George Macris Mortgage broker at Dominion Lending Centres today at 514 651-2395 or email me at gmacris@dominionlending.ca

 

by Chris Cabel

5 MORTGAGE TIPS TO HELP YOU AFFORD A HOME

General George Macris 9 Jul

Buying a home is more difficult now than ever—and this is not news to anyone! No matter where you live, the recent stress testing measures, increase in housing prices in major cities, and continued increase of the cost of living all combine to make home ownership a daunting task. But we do want to offer some help and solutions for young families looking to get into the market as we truly to believe it’s not impossible and have helped many families do just that!

1. Take a step outside of the downtown core. Typically, property right in the heart of the city is more expensive due to the location and the continued demand. Stepping out to one of the outlying suburban areas can offer more affordable options and can also lend you with an increased inventory of properties within your price point.
2. Consider finding a rent to own property. A Rent to Own (RTO) property can allow you to rent a property while subsequently saving up for a down payment.
3. Talk to a mortgage broker. Speaking with a broker and going through a pre-qualification process can help you by allowing you to see the areas in which you will need to improve to help make you more attractive to lenders. This can include things such as:
a. Increasing your credit score
b. Decreasing your overall debt or consolidating your current debt.
c. Looking at increasing your overall income options and the ways in which you can do that.
4. Consider using a co-signor(s) for your mortgage to start with. One solution we have found that works well for certain clients is having a co-signor(s) on the mortgage with a planned exit strategy to remove them once the client’s personal income increases or they are able to qualify for the mortgage on your own (ex. By paying down debts and/or improving their credit score). This solution is situation specific, so speak to your broker for more details.
5. Save, Save, and Save some more. We know this is common sense but speaking with a financial advisor can help show you ways in which you can save and make your money work for you. We can happily recommend a few as can your mortgage broker.

We know that the state of real estate can seem overwhelming and depressing at times. Keep in mind though that not all hope is lost, and you do have options available to you! Remember the “dream” of the white picket fence detached home is not for everyone…now more than ever multi-family properties such as townhouses and condos are offering more and more amenities and beautiful properties for less. The bottom line is considering all your options and work with a dedicated broker who can help you reach your goals—whatever they might be!

 

Contact me George Macris Mortgage broker today at 514 651-2395 or by email at gmacris@dominionlending.ca

by Geoff Lee

ZERO DOWN PAYMENT MORTGAGE–DOES IT EXIST?

General George Macris 29 May

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!

 

Call George Macris Mortgage Broker at 514 651-2395 or email me at gmacris@dominionlending.ca

 

 

by Geoff Lee

6 WAYS TO GET A DOWN PAYMENT

General George Macris 29 May

When is it time to think about saving for a down payment? I would say about a year before you think about buying a home. While that’s ideal in today’s world, we often do not have much time to save for a down payment. Sometimes your landlord is planning on retiring and wants to sell the property. How do you get a down payment?

Here’s a few ways to get a down payment for your home:

  1. Save – it’s old fashioned but it works. Open a Tax Free Savings Account (TFSA) and put a set amount into it. If you don’t have the discipline arrange for automatic deposits from your bank account. How much can you save $50 a week? That’s $2,600 in a year. Not enough. How about $200 a week?
    Stay at the Mom & Dad Hotel – while your parents may not be able to help you with a down payment they often have a spare room that you can stay in. One year of not paying rent would make a good down payment even if you chip in for groceries.
  2. Extra Income – get a second job and bank every cent from it. I know of many young people who have a day job and are servers on the weekends.
  3. Home Buyer’s Plan – the federal government will allow you to pull up to $35,000 from your RRSP account. This goes for your partner. You could put down $70,000 between the two of you. These funds need to be returned to your RRSP over the next 15 years. This is a great quick source for a down payment.
  4. Take out an RRSP Loan – borrow an amount that you need for a down payment as an RRSP. Hold the funds for 90 + 1 days and you can withdraw the funds. The cons are that you now have more debt and you have to wait for 90 days. Most sellers want a possession day sooner than that.
  5. Sell an asset. I had a client sell his vintage Cadillac Fleetwood for a down payment. Be sure to get a receipt or to sign a bill of sale with the purchaser to show where the funds came from. Rare stamps or coins, another property or vehicle are all acceptable assets.
  6. The Bank of Mom and Dad – This may be the easiest way to get a down payment or it may not. Most parents are nearing retirement and trying to save funds. There can be creative ways to get a down payment. They might set up a a secured line of credit and use the equity in their home. You could make the payments over the next few years. Note: these payments must be included in your debt ratios. If they decide to gift you the funds and make the payments themselves a gift letter is all that’s needed. They could sell their home and move into a granny suite in the basement or over the garage.

Before you start it’s always a good idea to speak to your favourite Dominion Lending Centres mortgage professional.

 

Call me George Macris Mortgage broker at 514 651-2395 or email me at gmacris@dominionlending.ca

 

by David Cooke

REVERSE MORTGAGES – TRENDING NOW

General George Macris 29 May

With approximately 1,000 people retiring every day in Canada, it’s not surprising that there has been an increased demand for Reverse Mortgages.
A Reverse Mortgage can assist people aged 55+ to realize their dreams in retirement. Whether they want to travel, help their kids or grand kids or even just supplement their monthly income, a Reverse Mortgage can be an effective way to have their home assist them to meet those goals.
There is a lot of misinformation out there however, that could make people hesitant to get into a Reverse Mortgage.
Many people think that the Bank will own their home but this is completely untrue. A Reverse Mortgage is just that – a Mortgage registered on the home’s Title, just like any other bank mortgage. The client retains full ownership and control of their home. They have the freedom to decide if and when to move or sell.
Another misconception is that you could end up owing more than your house is worth. In fact, due to the Reverse Mortgage lender’s conservative lending practices, you can be confident that there will be equity left in the home when the loan is repaid. They will only issue a Reverse Mortgage up to 55% of your home’s value so there is lots of equity remaining to offset accrued interest charges even if you choose to make no payments at all.
In fact, over 99% of Reverse Mortgage clients have equity remaining in the home when the loan is repaid.
Many people view a Reverse Mortgage as a ‘last resort’. In fact financial professionals recommend a reverse mortgage because it’s a great way to provide financial flexibility. Since it’s tax-free money, it allows retirement savings to last longer.
Some people think that you cannot get a reverse mortgage if you have an existing mortgage. But many Reverse Mortgage clients use the funds to pay off their existing mortgage and other debts, freeing up cash flow for to use as they wish – and be free of regular mortgage payments too.
I personally have parents over 70-years that could be looking at the expense of Assisted Living for my Mom in the near future. They own their home outright and once both of them are retired that added cost could be too much for their pensions and could force them to sell their home before they’re ready.
I have advised them of the Reverse Mortgage option and we have decided to look into that possibility when the time comes. It is my belief that nobody should feel forced to sell their home and they will explore any options available to them so they have choices.
If you’d like more information on how a Reverse Mortgage may work for you, I recommend speaking with a Dominion Lending Centres Mortgage Professional to get all the facts.

 

Call me today George Macris Mortgage Broker 514 651-2395 or email me at gmacris@dominionlending.ca

 

by Kristin Woolard

CORPORATIONS AND MORTGAGES

General George Macris 18 May

For self employed clients, incorporation is a popular business structure we tend to encounter. Having a corporate structure to your business allows for effective separation between the individual and the business.

If you own your business and have it set up as a corporation, that corporation is essentially its own person. They have their own income through business revenue and have their own expenses required to carry out that business- marketing costs, material costs, office space, things of that nature.

When a corporation files taxes, they pay a lower tax rate than the personal income tax rate and only pay taxes on the net business income. The reason an individual might do this is because they do not need every dollar they earn to maintain their lifestyle. For example, if a corporation earns $150,000 and has expenses of $50,000 they pay taxes on $100,000 at the small business tax rate. If they only need to pay themselves $50,000 to maintain their lifestyle, they only pay personal income tax on the $50,000, the other $50,000 remains inside the corporation as retained earnings. If a sole proprietor earns $150,000 and has expenses of $50,000, they pay the personal income tax rate on $100,000, regardless of how much of that $100,000 they actually need.

When it comes to qualifying for a mortgage, a lender can look at the business income or the personal income they pay themselves. Adding the net business income or the personal income from year 1 and year 2 and dividing it by two is the income a lender will associate with that borrower. Keep in mind though this will also be affected if there is more than one shareholder. To find out how your income would be viewed by a lender if you have your business set up as a corporation, contact me George Macris Dominion Lending Centres mortgage professional at

514 651-2395 or by email at gmacris@dominionlending.ca

 

by Ryan Oake

5 REASONS WHY YOU DON’T QUALIFY FOR A MORTGAGE

General George Macris 18 May

It’s not just because of finances.

As a mortgage broker I receive calls from people who want to know how to qualify for a mortgage. Most of the time it comes down to finances but there are other reasons as well.
Here are the 5 most common reasons why your home mortgage loan application could be denied:

1. Too Much Debt

When home buyers seek a mortgage, the words “debt-to-income ratio” quickly enters into the vocabulary, and it’s not without reason. Too much debt is a red flag to lenders, signifying you may not be able to handle credit responsibly.
Lenders will analyze how much debt you carry and what percentage of your income it takes to pay your debt. Debt ration is just as important as your credit score and payment history.
Two affordability ratios you need to be aware of:
• Rule #1 – GROSS DEBT SERVICE (GDS) Your monthly housing costs are generally not supposed to exceed 32% of your gross monthly income.
• Rule #2 – TOTAL DEBT SERVICE (TDS) Your entire monthly debt payments should not exceed 42% of your gross monthly income.

If you don’t have a good debt to income ratio, don’t give up hope. You have options available including lowering your current debt levels and working with your Dominion Lending Centres Mortgage Broker.

2. Poor Credit History

Some people don’t realize if they are late on their credit card/loan/mortgage payments the lender sends that information to the credit bureaus.
• Late/non payments on your credit report will make your score drop like a rock
• Exceeding your credit card limit, applying for more credit cards/loans will lower your score.
• Bankruptcy or Consumer Proposal will significantly impact your score, and stay on your credit report for up to 7 years.
Your credit history is a great way for a lender to tell whether you’re a risky investment or not. Lenders look not only at your minimum credit score, but also at whether you have a significant amount of late payments on your credit report.
Your Mortgage Broker will run your credit bureau to see if there are any challenges you need to be aware of.

3. Insufficient Income and Assets

With the high price of homes in the Vancouver & Toronto area, sometimes people simply don’t earn enough money to afford: mortgage payments, property taxes and strata fees along with their existing debt (credit cards, loans, lines of credit etc.).
You need to prove your previous 2 years’ income on your taxes with your Notice of Assessments (NOA). This is the summary form that the Federal Government sends back to you after you file your taxes, showing how much you filed for income and if you either owe money or received a refund.
If you can’t provide documentation to prove your income, then you will likely get denied for a home mortgage loan.
Some home buyers will need to provide more money for a down payment (perhaps a gift from their family) or try to purchase a home with suite income. In some cases, home buyers will need to add someone else on title of the home, in order to add their income to the mortgage application.

4. Down Payment is Too Small

A lender looks at the down payment as how much of an investment a buyer will be putting in their future home. Therefore, bigger is always better when it comes a down payment to satisfy your home mortgage loan application. Start saving now.
To qualify for a mortgage in Canada the minimum down payment is 5% for the purchase of an owner-occupied home and 20% for a rental property.
In Canada if you have less than 20% down payment, the federal government dictates that the home buyer must purchase CMHC Mortgage Default Insurance which is calculated as a percentage of the loan and is based on the size of your down payment. The more you borrow the higher percentage you will pay in insurance premiums.
For those with less than 20% down payment, the maximum amortization is 25 years, with more than 20% down payment 30-35 years (depending on the lender).

5. Inadequate Employment History

Most lenders will want to see a consistent employment history of 2 years when applying for a mortgage, because they want to know you’re able to hold down a job long enough to pay back the money they’ve loaned you.
To prove your employment, you will need to prove a Job Letter with salary details.

If you’ve been denied a mortgage, chances are it was because of one of the above five reasons. Don’t be deterred, with a little patience and some work on your end, you can put yourself in a position to get approved the next time you apply.

 

Call me today at 514 651-2395 or email me at gmacris@dominionlending.ca

by Kelly Hudson

ACCESSING YOUR HOME’S EQUITY TO INVEST

General George Macris 1 May

To tap into your home’s equity, it all starts with refinancing your home. If you own a home, the equity you have built up in it is one of the most valuable assets you have available to you. It is also much more accessible than taking out a large loan. In many cases, home equity loans and lines of credit can offer you a lower interest rate as compared to other types of loans while providing you with access to credit for investment purposes. You can view an excellent comparison of loans here.

Often times we see clients who refinance in order to:
• Renovate their home
• Purchase a secondary property for investment purposes
• Debt consolidation
• Business Development
• Assisting their children’s post secondary education
• Financing thru a “life event” such as illness

In this particular article, we are going to highlight the value of utilizing your home’s equity to reinvest in other investments such as:
• rental properties
• stocks
• bonds
• mutual funds
• RRSP’s
• RESP’s
The first question that people ask is how much can I borrow? Generally speaking, you can borrow up to 80% of the appraised value of your house. For example, if your home value of $650,000 assuming one qualifies, they can access up to 80% of $650,000 which would be $520,000, if their current mortgage is $450,000 they may be able to get a home equity line of credit for $70,000 (totaling $520,000)

Working with your mortgage broker, you can go through the refinance and approval process if this is something you are interested in accessing. It is always a good idea to consult with your broker and understand the personality of your mortgage—there may be limitations of how much equity you can access and the conditions relating to the refinancing. There are also potential costs associated with this type of refinance including:
• Penalties to break your mortgage
• appraisal fees
• title search
• title insurance
• legal costs
Keep in mind that these potential costs can be rolled within your new loan amount and will not be “out of pocket.”
Now, if you have been approved and are utilizing your home equity for one of the above investments (after speaking to your financial planner/advisor first) and can expect to see a higher rate of return than the interest you are paying to borrow the money, then it is worth considering. We emphasize that you should always proceed with caution and get advice from sound professionals before choosing to invest your hard-earned money.

We have found that this type of investing works extremely well for many and is a safer and less risky way to access funds for further investment purposes. We recognize that this option may not be suitable or comfortable for some, but it is a viable way to capitalize on the equity sitting in your home and make it work for you! If you have questions or are interested in learning more, please do not hesitate to contact me George Macris Dominion Lending Centres mortgage professional at 514 651-2395 or by email at gmacris@dominionlending.ca

by Geoff Lee

PRE-APPROVALS & PRE-QUALIFICATIONS

General George Macris 30 Apr

Throughout the mortgage and home buying process, there are many steps and many checkpoints a buyer will need to complete before they can move on to the next one. A buyer will not be able to close on a purchase if they do not have a lawyer. Financing conditions need to be lifted after confirmation from a mortgage broker that a file is broker complete. A buyer should never write an offer on a home until they have a realtor working for them. Most importantly, a buyer should never be looking at property they are considering buying until they have been pre-qualified and pre-approved.

Now, one thing we need to make clear- pre-qualified and pre-approved are two different things. Pre-qualified is when someone completes a mortgage application with a mortgage broker or a bank representative and is told how much they can afford. Pre-approved is when someone has written confirmation from a lender stating they are willing to lend based on what is stated in an application and the applicant’s current credit history.

The difference?

Pre-qualifications are based solely on the knowledge and experience (sometimes even opinion) of a broker or bank rep. A pre-approval on the other hand is backed by the lender actually willing to give you the money. When someone says they are pre-qualified, that means they have taken an application with a mortgage broker or bank and in broker or bank rep’s opinion, they can afford “x” amount on a home. A pre-approval is a written letter from a lender stating based on applicants current credit history, declared income on application and current assets, we will lend “x” amount pending confirmation everything stated in the application is verifiable and the property meets all lender requirements.

As you can probably tell, one can be more reliable than the other, especially if you are working with a mortgage broker or bank rep that is inexperienced in the industry. Pre-approvals also usually come with a rate hold. What a rate hold does is guarantee you the interest rates that lender is offering today for a certain amount of time (usually 120 days), and if you put an offer on a place within that time period, they will give you that previous rate even if they went up. If rates go down, they will allow you to access the lower interest rate as well.

You must always get yourself pre-qualified before you begin looking at homes so you know what you can afford. Once you have and you are actively looking, it is very important you try and get a pre-approval before you write an offer. It will give you that extra confirmation your application is acceptable, and protect you against interest rate increases while you look.

If you require a pre-qualification, pre-approval, or want to speak with someone about your current situation, please call me George Macris Dominion Lending Centres mortgage professional at 514 651-2395 or email me at gmacris@dominionlending.ca

 

by Ryan Take