It’s All About The Property

When your mortgage application goes through the approval process, they are not only looking at you, but also the property in question. In fact, sometimes when an application is denied it has nothing to do with you, and everything to do with the property.

To improve your chances of success when it comes to financing, there are three main things to consider:

  1. The type of property
  2. The location of the property
  3. The usage of the property

Let’s take a look at some of the specifics for each of these considerations.

type of property

There are various types of properties when it comes to home ownership – detached houses, semi-detached, condos, townhouse, duplex, carriage or heritage home. Depending on the type of property you have chosen, there may be specific considerations.

CONDOMINIUMS

When it comes to condo properties, the lender (and potentially the insurer) will consider the age of the building. In addition, they will look at maintenance history (or lack thereof), as well as the location for marketability. Some lenders may have stipulations that limit themselves to buildings with a certain number of units, or past a certain age.

If the condo you wish to buy is lacking a depreciation report, has a low contingency fund or large special levies pending, these will be red flags for the lender. Any of these situations will require a more thorough review. These items should also serve as strong considerations for you as it indicates the management (or lack of) for that condo building.

ADDITIONAL UNITS

If you are looking at a property with additional units, it is important to consider that buildings with over four units, are considered a ‘commercial’ property and would be evaluated on that basis.

HERITAGE HOMES

Whether registered or designated, heritage homes require a more detailed review and often come with special considerations for financing.

LEASEHOLD OR CO-OP PROPERTIES

These properties also have specific requirements, particularly when it comes to the maximum loan-to-value which means they will require a larger down payment. These types of properties also typically call for additional documentation, and may have varying interest rates.

If you shift from a standard condo to a lease-hold property, your down payment amount will likely change. If you want to move to a small rural town or a small island, there will be fewer options. In addition, you may have to pay a higher rate as well as provide more documentation on the property.

All About The Property

location considerations

You’ve heard it before – location, location, location! Location matters just as much to the potential homeowner as it does the lender. Some things to keep in mind when it comes to location include:

POTENTIAL RESALE VALUE

If the location limits the potential resale value for the building, lenders may not provide financial approval on that property. This is due to the increased risk if the borrower defaults. In that case, the lender may not be able to foreclose the property and get enough funds back due to the low resale. That said, some lenders may allow these properties but they might reduce the loan amount if the building is located outside of a major market area, or they may add a premium to the interest rate.

RURAL CONSIDERATIONS

For properties with water access only, or with no access to municipal utilities (heat, water, electricity, sewage), there will be additional requirements to assess lender risk. These requirements might include: Insurance coverage, water testing, septic tank inspection, seasonal access and condition of the property.

TRANSFER TO ANOTHER PROVINCE

It is also important to note that if you purchase a home in one Province and are transferred or move to a different province, some lenders won’t be able to port the mortgage due to being provincially based.

usage considerations

The use of the property can include things such as personal, investment, recreational, agricultural and also consider previous activities. A few things to keep in mind are:

CONDOMINIUMS

If you are looking at purchasing a condo on a property that has either a commercial component in the building (such as shops on the first floor), or allowable space in the unit for businesses (live/work designation), you may have limited lender options. In some cases, lenders will avoid these types of properties at all costs, while others may require approval from the insurer (i.e. CMHC).

RENOVATION REQUIRED

If the property requires renovations, the extent of the upgrades, as well as the property value will be taken into consideration.

PREVIOUS GROW-OPS

Homes that previously existed as grow-ops, have special lending options. These typically come with higher interest rates and costs due to decreased value.

RENTAL SUITES

For owner-occupied homes that contain rental suites, it is important to consider potential rental income. If the house is purchased for investment, rental income is automatically considered. This can result in a different interest rate than simply an owner-occupied dwelling. In these cases, the rental income can also increase the resale value of the property. However, an appraisal of the property must be conducted and reviewed to ensure the condition. This will also uncover whether any renovations were completed to add value.

SECOND PROPERTIES

Purchasing a second home for recreational use will require a review to determine if it is seasonal or year-round access.

Before you begin your home search, it is best to discuss your future plans with a Dominion Lending Centres Mortgage Professional. This will ensure you receive accurate information to understand the specific requirements your potential property might require. Seeking expert advice early on will also give you ample time to find the right fit! This will also ensure you can submit a full financing review before subject removal on a purchase.

5 Expenses Most Canadians Don’t Expect in Retirement

According to a recent CIBC poll, nearly half (48%) of retired Canadians stopped working sooner than they expected. The result is that many retirees have saved less for retirement than they planned, making unexpected expenses all the more stressful once the income tap has run dry.

But you know what they say, preparation is the best protection against the unexpected. And with that in mind, here are some unexpected expenses that many retired Canadians experience that you might want to plan for.

Home maintenance and upgrades

Just like with our own bodies, homes require ongoing care and have unexpected breakdowns. That’s why it’s important to do regular check-ups and budget for the unexpected, as well as the expected.

Whether it’s replacing the roof, furnace, or appliances, or upgrading your home to be more accessible as you age, it’s important to plan ahead for how you will cover the costs of keeping the home you love safe, beautiful, and suited to your needs. Luckily, there are options like the CHIP Reverse Mortgage that can provide the funds to help you take care of your home without making monthly payments or affecting your OAS or CPP.

Personal and family emergencies

It’s sad to say, but most people at some point in their lives will have to deal with a sudden emergency. Whether it is needing to travel to see a family member who has had an accident or become ill, or people you love who may need some financial assistance during a trying time. The costs of dealing with such an emergency can be as draining on your finances as they are on your emotions.

Many financial institutions and advisors recommend setting up an emergency fund with 3-6 months salary. Of course, this means you would need to plan ahead and set up the fund before retiring and adding to it when possible in retirement. You can use the emergency fund calculator from Practical Money Skills Canada if you need to get started.

Frauds and scams

Between January 2014 and December 2017, Canadians lost more than $405 million to fraudsters. What’s more, these criminals largely target elderly citizens, with $94 million of that sum coming from Canadians aged 60 to 79. And with the growth of the digital age since then, there are now more opportunities for fraudsters than ever before.

No one expects to get scammed, but many retirees experience significant financial hardship due to fraudulent crimes. To help you avoid, detect, and report fraud, HomeEquity Bank has recently launched Catch the Scam, a series of online classes led by Frank Abagnale, the former conman whose life inspired the Leonardo DiCaprio film Catch Me If You Can. Frank now works as a consultant with organizations including the FBI to help tackle fraud, forgery, and embezzlement. Watch Frank’s Catch the Scam video series to see how you can avoid Canada’s most common scams.

Living longer than expected

While a long life is truly a blessing and something to celebrate, Canadians are living longer than they ever have. One result of this is that some of the financial advice being given today may not account for the realities of tomorrow. Of course, any retirement plan needs to begin with when you plan to retire, and end with how long you can realistically expect to stay retired.

Many Canadians are realizing that they will live longer and experience higher health costs toward the end of their lives. In order to be fully prepared, it’s important to over-plan to ensure you are fully covered for the (extra) long term.

Investment losses

While everyone understands that investments have a cycle with peaks and valleys, toward retirement most people tend to shift towards safer assets such as government bonds and Guaranteed Income Certificates (GICs) – but there is always a level of risk for any investment. Make sure your investments align with the risk you’re willing to tolerate, and that you have a way to get extra funds if needed. For instance, a reverse mortgage is an ideal option for many 55+ Canadians, since it’s tax-free, unlocks up to 55% of their home equity, and requires no monthly mortgage payments.

Contact your DLC Mortgage Broker to find out more about how the CHIP Reverse Mortgage can help you prepare for the unexpected in retirement.

How Banks are Working to Keep Your Data Safe

The breakneck pace of technological change has fundamentally affected the way industries operate and innovate, and banking is no exception. Accessing financial services online has been the norm for years now, with an overwhelming majority of the population using digital channels for most banking transactions. The infrastructure that makes all of this possible, routinely processes massive amounts of sensitive data and needs to constantly evolve to ensure it all remains secure.

To gain a better understanding of how banks protect themselves and their customers, I spoke with Ali Farouk Shaikh, a Unified Communications Solutions Architect at Cisco Systems Inc. who works with major international financial institutions. Ali is a specialist in Software Defined Networking (SDN), with a focus on routing, encryption, and security for large financial services, retail, and manufacturing enterprises.

Where we were

How was customer and banking data handled by banks in the past?

In the classic model, all software applications and data for a bank would reside on a central data centre. Branches communicated with this centre through physical infrastructure entirely separate from (and unconnected to) what you’d use at home to access the internet.

Because of this, security parameters were well-defined. Data and locations were well-defined. It was cumbersome for external threats to access a bank’s network; conversely, it was difficult for users within the network to access the internet.

What prompted a change from that model?

What really started to drive transformative change was a combination of mobile devices and the cloud. The first iPhone pretty much broke the old model. Users could now access data from anywhere, and there was a demand for additional services to be delivered in a mobile-friendly way.

Simultaneously, modern applications were increasingly based in the cloud, leveraging external services such as Google, Microsoft and Amazon. This changing model meant that bank data was now moving in ways that it hadn’t before, and needed new modes of security and building modern infrastructure. In the industry, this is called the digitization of services—essentially moving from classic networks to networks for digitization.

So, the way customers wanted to access banking changed how banks operated?

Pretty much. The end-user experience has changed. Customers can’t be expected to come to the branch for banking anymore—both customers and bank employees use remote devices to access and provide service (whether this is smartphones or mobile devices on the customer side, or employees with iPads and a VPN on the bank’s side).

As a result, the applications (e.g. mobile banking apps) that provide this changed end-user experience had to move away from the traditional model. Banks were slow to introduce their own apps, but this was always the direction they had to head in. However, they also had to account for privacy and security concerns while meeting strict regulations—more importantly, they had to adapt and meet the requirements of a new digital world.

Now, these applications don’t reside with banks, they reside on the cloud and have to interact with various services that external companies like Google, Amazon, Salesforce, etc. provide. They rely on them for analytics, telemetry, auditing data, marketing data, etc. Because of this, the centers of data were no longer data centres. What I mean is, data now lived everywhere, from mobile devices to cloud services like Amazon Web Services (AWS). This new model required stronger safeguards, security, and encryption, because data now had to be transmitted over the internet.

Where we are

In light of this new model, how do banks ensure their data and their customers’ data is protected?

As I mentioned before, banks and financial institutions already had privacy, security, and regulatory compliance in mind when modernizing their operations. Now, there are three principles that are fundamental to maintaining a secure banking environment that satisfies both pre-existing and new regulations imposed by the government: confidentiality, integrity, and application security.

Could you elaborate on those principles? What does satisfying the “confidentiality” principle entail?

In this context, “confidentiality” just means making sure no one except you and your bank can see your data. Naturally, when using your banking application, you want to be assured that no one can access your data while it’s in transit. Banks go to great lengths to make certain that their systems use the highest encryption standards to protect their data and their clients’ data. This means that when using a properly developed banking app, no one will be able to see anything you’re doing on the app even should they somehow manage to covertly intercept your data. Confidentiality is achieved using the latest encryption—Transport Layer Security (TLS) with Advanced Encryption Standard 256 (AES256).

Side note:if you’re wondering how secure AES256 encryption is—it would reportedly take 77,000,000,000,000,000,000,000,000 years and the dedication of the entirety of earth’s population to crack one encryption key. Not to mention, all of those people would need 10 computers each, capable of processing 1 billion key combinations per second. So, it’s safe to assume it’s pretty secure!

What about the “integrity” principle?

Integrity means ensuring data isn’t tampered with in any shape or form. The desire for this is pretty self-explanatory: you’d naturally want your data to be safeguarded from being tampered with. This is achieved in a number of ways. There are mechanisms to enforce data-integrity checks at the machine-level, to make sure data isn’t corrupted or altered in any way while in transit or when stored. There’s a lot of technology and processes that are used to achieve this, including packet duplication, parity, checksums, asynchronous data replication, etc. etc. In essence, even in cases of outages and system failure, data has to remain secure, untampered with, and stored on multiple systems to avoid total loss.

The “security” principle seems straightforward enough, but what exactly goes into achieving that?

So, “security” is the aspect that actually protects users from malicious threats from both “state” and “non-state” actors. From a security standpoint, “state” actors are individuals or groups sponsored by foreign governments that carry out malicious attacks. Banks are critical pieces of a country’s infrastructure and are thus natural targets. “Non-state” actors operate in a similar manner, but without the support or direction of a foreign government.

Banks and financial institutions safeguard against these threats by using firewalls to ensure only authorized applications can access data. This is where Intrusion Prevention Systems/Intrusion Detection Systems (IPS/IDS) are applied, both to only grant access to authorized users and to protect against malware. There are also measures taken to prevent Denial of Service (DoS) attacks so that a customer’s access to their banking services isn’t interrupted. A combination of these techniques is used in what’s called “stateful inspection”—that is to say, before data can move between a client and a server, the data is inspected in multiple ways to ensure that it’s clean and legitimate.

All of this is done by banks to provide their clients with the highest level of security while giving them a new, modern banking experience. Governments are, of course, very actively engaged in setting and implementing standards for security, which include things like PCI-DSS (the standard for the payment card industry), SOC2, ISO27001, ISO9001, ITIL, etc. all of which banks need to meet in order to operate.

Security is taken very seriously, to say the least.

Where we’re headed

What do you think the future holds for the banking industry? Does that future come with its own set of challenges?

Well, there are a couple of things: there’s an increasing evolution of machine-learning, the data it provides, as well the services that can be built on it. Not to mention the 5G revolution that will further accelerate the digitization of the world. I think we’ll begin to see new banking experiences including packages tailored for individuals based on their data, as well as new modes of banking like virtual tellers. Of course, this is all predicated on next-gen technology that has started to enter the marketplace.

The protection of individual data is of paramount importance. Things will have to be secure, untampered with and protected from malicious entities.

Innovation is always a challenge, but the industry will adapt. It always does!

The Ultimate Checklist for Selling Your Home

Selling your home can be an extremely stressful experience. Between thinking about moving logistics and financials, it’s easy to miss the small details in between the process.

With that in mind, we’ve built this checklist for selling your home to help you keep track of the things that will get a potential buyer interested. Turns out, it’s not as simple as just fluffing pillows or doing a light dusting. “Put your buyer’s hat on and walk through your home like it is the first time,” Marilou Young, an Accredited Staging Professional and an Associate Broker with Virtual Properties Realty in the metropolitan Atlanta area, told Forbes.

Below is the ultimate checklist for selling your home.

GET FAMILIAR WITH THE PAPERWORK

For home sellers interested in the history of the house, make sure you’ve got all the information handy; this can include paperwork on renovations, property tax receipts, deeds and transferable warranties.

GETTING THE PRICE RIGHT

According to HGTV, it can be helpful to do some market research on what homes in your area are selling for- then shave 15 to 20 percent off that. This way, you attract multiple buyers who can end up outbidding each other and bringing up the price. While that can seem like a risky move, it could work in the competitive markets of big Canadian cities.

DEPERSONALIZE AND DECLUTTER

You want potential buyers to see themselves in the space, which is hard to do if you have family photos on the wall or personal items around. This would be a good time to start putting items in storage or try to keep your personal items out of sight. At the same time, you’re also ensuring that you’re keeping your house tidy—a must if you want to make your home sellable. Check around the house for dirt, stains or small cracks you might be able to fix. And if you have pets, make sure their litter boxes and play areas are also clean and odour-free.

FIND A QUALIFIED REALTOR

Realtors can be helpful to take some of the processes off your plate, including marketing your home and arranging open houses. If you do go this route, none of this list will matter if you decide to work with a realtor that doesn’t know the market inside out. You can search their name on the Real Estate Institute of Canada to ensure that they’re qualified, and meet with them to see if you mesh and understand how they price your unit. At Proptalk, we also have this handy guide for more details.

DON’T SKIP THE HOME INSPECTION

While presenting an unconditional offer may win you the home of your dreams, it can also end up costing you more than you expected. If you’re mortgaged to the max, you can’t afford surprises like repairs or replacements that you haven’t already budgeted for. Consider a Home Protection Plan that includes an 18-month warranty and up to $20,000 in warranty coverage for major household features such as foundation, roof, heating and cooling.

6 Important Questions to Ask Before a Big Home Renovation

So you want to make a major home renovation. Congratulations! Now, you’ve got to find the right contractor for the job. While doing a thorough online search or asking family and friends is an important first step, once you find a potential contractor, it’s time to start treating the process like a job interview. Being prepared with the right questions protects you from future headaches, but also ensures that you’re happy with the end result.

Hiring a contractor for your big home reno? Ask these important questions to make sure you’re picking the right contractor.

1. What is your experience in home renovation?

This question can help you determine how long the contractor has been in the business, whether they’ve worked with similar challenges as those in your home and how they ensure that projects are completed on time. With this question, you get full insight into their methodology.

You can also find contractors in your area that might have positive Yelp reviews or other social media to see if others are happy with their work.

2. Do you have a contracting license?

Depending on where you live, there are different requirements for what type of license a contractor has to hold. Check the laws in your region to see what might apply, and ask potential contractors directly whether they hold those licenses.

3. Do you carry the appropriate insurance?

According to the Canadian Homeowner’s Association, hiring people without the proper insurance could put you at legal and financial risk should something happen in your home. Protect yourself (and the workers improving your home) by checking off this box in the beginning, and ensure they have both liability insurance and worker’s compensation.

4. Will we get a written contract?

This should be a given if you’re working with a contractor because if the answer is no, don’t even bother moving forward with the interview. The CHBA says contracts should cover the description of the work, the materials used and the price of the job. You should also take this as an opportunity to figure out your payment schedule, as the Better Business Bureau in the U.S. says that you should never pay the full price of the job upfront, and the specific timeline for completing your project.

Contractors should also always offer a warranty in writing that informs you of what is covered and for how long.

5. Can we get in touch with your past clients?

A contractor should be proud of their past work. Take this as an opportunity to figure out how contractors approach their work, whether they have effectively handled disputes and fact-check what contractors tell you about their working style.

6. Will you be responsible for building permits?

If there is a chance that your building requires permits, you want to make sure that your contractor is prepared in this area. Square One Insurance says you should try to be present for a contractor’s home inspection to ensure that you fully understand their feedback, and anticipate if any changes in your home need to happen.

What Does Canada’s Aging Population Mean for the Real Estate Market?

I’ve got good news and bad news. The bad news is: we’re not getting any younger. The good news is: we’re not going away anytime soon, either, as life expectancy for Canadians is higher than ever before! At least, I think that’s good news—check back with me in 2050 and let’s see how we all feel about it.

Globally, we’ve hit astoundingly high population numbers for people aged 65+, exceeding a threshold of 672 million people (about 8.9% of the total population) in 2019. That’s an increase of more than 500 million compared to 1960 when there were about 150 million people above 65+ globally (roughly 5% of the global population). Oh yes, that’s a whole lot of people.

In fact, it’s only going to get more crowded as the years go by, with the UN estimating that the number of older persons (above 60) is projected to reach 2.1 billion by 2050. And we think it’s crowded now!

This brings us to Canada’s own aging population: according to Statistics Canada, “seniors are expected to comprise around 23% to 25% of the population by 2036, and around 24% to 28% in 2061”. With a shrinking working population supporting that ~25% segment, the precise economic implications are too varied to be certain of any firm outcome. What is certain is that the older members of our population will need a place to live, which will have a significant effect on Canada’s real estate landscape.

EFFECTS ON THE SUPPLY OF REAL ESTATE

Our aging population affects the supply of property in the real estate market in several interesting ways. The expectation was that baby boomers would find themselves living in large homes with more space than they needed once they’d retired and their children moved out. At that point, they were supposed to sell their property and downsize to smaller (or less expensive) homes. This influx of property into the market (projected to be half a million homes) would help meet rental or purchase demand, in some cases allowing developers to re-purpose the property into larger, higher density structures (especially in cities).

However, changes to the real estate market may significantly affect how that scenario plays out in reality.

  • Small condos and detached or semi-detached townhouses used to be prime candidates for someone looking to downsize. Now, rising real estate prices (especially in cities like Toronto and Vancouver) can make this an incredibly difficult endeavor.
  • Millennials (and soon Gen Zs) have begun to move back in with their parents, as they struggle to contend with exorbitant rent prices, lack of steady work, and extremely high property prices. It’s proven economical for them to live at home rent-free (or at least, with a much lower rent) and save their money to put towards buying homes of their own later.

With more reasons to remain in their current homes (such as their kids moving back in with them), as well as high property prices and a lack of suitable options to downsize to, older homeowners are increasingly choosing to hang on to their property. This, of course, delays the timeframe in which their (usually larger) homes will be released into the housing market, which in turn will further exacerbate property shortages.

EFFECTS ON THE DEMAND FOR REAL ESTATE

Our aging population has implications for the demand side of the real estate market as well. Accessible property, for example, will increasingly grow in demand as people get older. Fierce competition in the housing market has made it difficult for older people to acquire suitable apartments or houses that cater to their needs (such as, ground floor units or accessibility-friendly rental housing).

Affordable, smaller housing with room for live-in or part-time caregivers, especially in close proximity to essential services and infrastructure (health services, public transit, malls/grocery stores, etc.) will become much more desirable as our population ages.

Some of this demand will likely be met by the government, as it works to fund the construction of homes for senior citizens through the Canada Mortgage and Housing Corporation (CMHC). This will prove vital in the years to come, as increasing numbers of modest to middle-income Canadians retire and start being priced out of the normal rental market. However, with Canada’s population projected to increase at a sharp rate until the middle of the century, we’ll need more than just government intervention to address the issue.

FINAL THOUGHTS

The effects of an aging population on Canada’s own future will be far-reaching, but impossible to predict definitively. That’s not to say we don’t have a good idea of what the likely outcomes are—we’ll need more housing, and we’ll need to be able to support older Canadians, to name two—but nothing about the upcoming decades is written in stone. The manner in which our government addresses social security issues, housing crises, and indeed, which government we even have in power will all play a role in securing stability or uncertainty.

Any speculation on the effects of projected population growth figures should be tempered with the understanding that they’re precisely that: projections. Not everyone agrees with the UN’s assessment of rampant increases, arguing that we might see a return to “normal” population levels towards the end of the century instead of endlessly spiraling into overpopulation. But whatever the outcome, it’s important that we’re paying attention.

Market Smarts: Home Buying Guide

The Canada Mortgage and Housing Corporation (CMHC) is one of Canada’s three mortgage insurers. Beyond insuring mortgage, CMHC also offers consumer guidance in the form of a unique step-by-step guide for home buying Canada, which the organization has dubbed the “roadmap” to home ownership.

The 27-page guide, Homebuying Step By Step is available on CMHC’s website. This guide is a manual for homeownership, breaking down the phases potential buyers will need to consider when looking to get into the housing market.
What Homebuyers Should Know

This guide focuses on preparation being the key to homeownership success, and touches on many things for homeowners to keep in mind. A few good guidelines when considering purchasing a home, including debt management, necessary documents, pre-approval, and more!
Debt-to-Income Ratio

CMHC also recommends that people get pre-approved for a mortgage before they start looking for a home. Getting pre-approved can prevent future roadblocks when you find your dream home, and ensures that subject-to-financing clauses won’t be an issue. It also guarantees the rate for up to 120 days, so that you can access the best mortgage once you’ve found the right home.

The underlying theme of the guide is to prevent Canadians from getting in over their heads in debt when buying a home. This guide also shows just how far mortgage brokers have come in Canada, with them mentioned alongside banks throughout.

Verifying Your Down Payment When Purchasing

 

Saving for a down payment is one of the biggest challenges facing people wanting to buy their first home. Verifying the down payment when purchasing a home via supporting documentation is required by alllenders. Doing so also protects against fraud and confirms that you are not borrowing your down payment, which could changes debt servicing ratios and your overall mortgage approval.

DOCUMENTATION REQUIRED BY THE LENDER TO VERIFY YOUR DOWN PAYMENT

There are STRICT Federal Government (AML) Anti-Money Laundering requirements and this also protects the lender against fraud.

1. Personal Savings/Investments: Your lender needs to see a minimum of 3 months’ history of where the money for your down payment is coming from including your: savings, Tax Free Savings Account (TFSA) or investment money.

Regularly deposit all your cash in the bank, don’t squirrel your money away at home. Lenders cannot verify the $10,000 cash that has been sitting under your mattress. Your bank statements will must be clear to show your name and your account number.
Any large deposits outside of “normal” will need to be explained (i.e. tax return, bonus from work, sale of a large ticket item). If you have transferred money from once account to another you will need to show a record of the money leaving one account and arriving in the other. Lenders want to see a paper trail of where your down payment is coming from and how it got into your account.

2. Gifted Down Payment: In some expensive real estate markets like Metro Vancouver & Toronto, the bank of Mom & Dad help 20% of first time home buyers. You can use these gifted funds for your down payment if you have a signed gift letter from your family member that states the down payment is a true gift and no repayment is required. The Gift Letter is a key piece in verifying your down payment when purchasing your home.

Gifted down payments are only acceptable from immediate family members: parents, grandparents & siblings.
We will need to show the gifted funds have been deposited in your account 15 days prior to closing. The lender may want to see a transaction record. i.e. $30,000 from Bank of Mom & Dad’s account transferred to yours and a record of the $30,000 landing in your account. We will provide the applicable Gift Letter template for your use at application time.

3. Using your RRSP: If you’re a First Time Home Buyer, you may qualify to use up to $35,000 from your Registered Retirement Savings Plan (RRSP) for your down payment.

Home Buyers Plan (HBP): Qualifying home buyers can withdraw up to $35,000 from their RRSPs to assist with the purchase of a home. The funds are not required to be used only for the down payment. These funds can be used for other purposes to assist in the purchase of a home.
If you buy a qualifying home together with your spouse or other individuals, each of you can withdraw up to $35,000.
You must repay all withdrawals to your RRSP’s 15 years. Generally, you will have to repay an amount to your RRSP each year until you have repaid the entire amount you withdrew. If you do not repay the amount due for a year (i.e. $35,000/15 years = $2,333.33 per year), it will be added to your income for that year.
Verifying your down payment from your RRSP, you will need to prove the funds show a 3-month RRSP history via your account statements which need to include your name and account number. Funds must be sitting in your account for 90 days to use them for HBP.

4. Proceeds from Selling Your Existing Home: If your down payment is coming from the proceeds of selling your currently home, then you will need to show your lender an accepted offer of Purchase and Sale (with all subjects removed) between you and the buyer of your current home.

If you have an existing mortgage on your current home, you will need to provide an up-to-date mortgage statement. This will also count towards verifying your down payment when purchasing the next home.

5. Money from Outside Canada: Using funds from outside of Canada is acceptable, but you need to have the money on deposit in a Canadian financial institution at least 30 days before your closing date. Most lenders will also want to see that you have enough funds to cover Property Transfer Tax (in BC) PLUS 1.5% of the purchase price available in your account to cover your closing costs (i.e. legal fees & taxes, etc.).

Property Transfer Tax (PTT) All buyers pay Property Transfer Tax (except first-time buyers purchasing under $500,000 and New Builds under $750,000). This is a cash expense, in addition to your down payment. The Property Transfer Tax (PTT) cannot be financed into the mortgage. Being prepared with the right documentation for your down payment and closing costs can make the process much easier. Courtesy of K.Hudson @DLC

Mortgage Insights – 2019 Mortgage Trends report

Here are some Mortgage Insights from CMHC’s latest national edition of the Mortgage and Consumer Credit Trends report covers the second quarter of 2019. Here are a few facts to consider. Contact us at https://primemortgageworks.com/contact/ for more information.

  • indebtedness is higher than one year ago, increasing the vulnerability of Canadians to financial difficulties
  • the average outstanding balance of newly originated mortgages declined, reversing a trend of growth
  • the new mortgages share of all loans moved higher into 2019. This mirrors the national trend in home sales, which fell in 2018, and has risen in 2019
  • only HELOCs and mortgages showed considerable growth in monthly obligations on average

Mortgage holders tend to have a higher credit score the non-mortgage holders – Mortgage Insights

Across the board since the beginning of 2019 to the second quarter, credit scores for consumers with and without a mortgage are rising. The credit scores were reported highest for consumers with a mortgage. Over the last 4 years, the average credit scores for consumers without a mortgage have worsened slightly, indicating that these consumers are having a harder time paying off debt than those with a mortgage.

Loan balances rise in Montreal and Toronto due to house price growth in those CMAs

In the second quarter of 2019, the average outstanding loan balance for new mortgages rose in Montreal and Toronto as a reflection of average price growth. It declined in Vancouver compared to last year. Non-mortgage debt has also been rising by region over the last four years, with slightly larger monthly obligations for Montreal.

Despite the large size of millennials entering the market, the share of mortgages held by people aged 55+ grew, as fewer young adult consumers were mortgage holders.

How Payment Frequency Can Save Money

One of the decisions you will need to make before your new mortgage is set up, is what kind of payment frequency you would like to have. For many, sticking to a monthly payment is the default, however, other payment frequency choices can save you money in interest costs over time.

Monthly Payments

Monthly payments are exactly as they sound, one payment every month until the maturity date of you mortgage at the end of your term. Took a 3-year term? You will make 36 payments (12 payments a year) and then you will need to renegotiate your interest rate. 5-year term? You will make 60 payments.

$500,000 mortgage

3% interest rate

5-year term

$2,366.23 monthly payment

 

$427,372.90 remaining over 20 years

$69,346.70 paid to interest

$72,627.01 paid to principal

 

Semi Monthly

Semi-monthly is not bi-weekly. Semi monthly is your monthly payment divided by two. That means, you are making 24 payments every year, but each payment is slightly less than half of what the monthly payment would of been.

$500,000 mortgage

3% interest rate

5-year term

$1,182.38 semi monthly payment

 

$427,372.99 remaining over 20 years

$69,258.59 paid to interest

$72,627.01 paid to principal

 

Bi-Weekly

Bi-weekly, you are not making 2 payments every month. With 52 weeks in a year, you are actually making 26 payments, 2 more than semi-monthly (2 months a year you make 3 bi-weekly payments). The interest paid and balance owing are slightly less than the others, but mere cents. You will still need to make payments for another 20 years.

$500,000 mortgage

3% interest rate

5-year term

$1,091.38 bi-weekly payment

 

$427,372.36 remaining over 20 years

$69,251.76 paid to interest

$72,627.64 paid to principal

 

Accelerated Bi-Weekly

Just like regular bi-weekly, you are not making 2 payments every month. With 52 weeks in a year, you are actually making 26 payments, 2 more than semi-monthly. However because this is accelerated, the payment amount is higher.

$500,000 mortgage

3% interest rate

5-year term

$1,183.11 accelerated bi-weekly payment

 

$414,521.40 remaining over 17 years 4 months

$68,325.70 paid to interest

Payment frequency date makes a difference with your mortgage savings.

Mortgage Payment Frequency Options

$85,478.60 paid to principal

 

You have increased your yearly payment amount by $2,384.98, $11,924.90 over 5-years. That extra $11,924.90 has decreased your outstanding balance at the end of your mortgage term by $12,850.96 because more of your payments went to principal and less went to interest. Also, you will now have your mortgage paid off more than 2.5 years earlier.

The same option is available for accelerated weekly payments which will shave another month off of time required to pay back the whole loan as well. If you can afford to go accelerated, your best option is to do so! Especially in the early years where a larger portion of your payments are going towards interest, not paying down your principal.

If you have any more questions on how choosing the right Payment Frequency can save money, please do not hesitate to reach out to us at Prime Mortgage Works. Information Courtesy of Ryan O. DLC