SHOULD YOU BE CONCERNED ABOUT CANADIAN HOUSEHOLD DEBT LEVELS?

Despite what you may see on TV, hear on the radio, or read online, there is strong evidence that although Canadian household debt is at an all-time record high, Canadians are doing just fine financially.

How can that be? Canadians are a whopping 1.8 TRILLION DOLLARS in debt – and that is exactly what the media focuses on. What they fail to disclose is that according to a recent report published by the Fraser Institute, Canadians also have $10 TRILLION DOLLARS in assets.

SO FOR EVERY $10.00 THAT CANADIANS HAVE… THEY OWE JUST $1.80. NOW THAT DOESN’T SOUND ALL THAT BAD… IT’S REALLY A MATTER OF PERSPECTIVE AND HAVING ALL THE FACTS.

So the next time you hear some doomsday report indicating that our economy is ready to implode in the next 38 minutes, remember that media outlets are more concerned about getting your attention than anything else. It’s not about the facts, it’s about the spin on the story. And seeing as though debt levels have hit new record highs every year since 1961, how can this still be news? Of course there is more debt… there are more people. Those people are buying houses!

Actually, right now, borrowing money in Canada has never been cheaper. We are experiencing all-time lows on some fixed rate mortgage terms and variable rate mortgages. So to answer the question, “Should you be concerned about Canadian household debt levels”… no, you should be concerned about your own personal debt level. Because that is what matters.

What is your financial situation like? Just as the economy changes, and life changes… your financial situation changes as well. It is good to periodically review your mortgage or financial situation to make sure that you are paying as little interest as possible.  That’s where Dominion Lending Centres comes in. If you currently have a mortgage and want to know if it is the best fit for you, or if you are working towards buying your first home, we would love to assist you.

Please contact us anytime!

As far as the report from the Fraser Institute goes, it is filled with great points and interesting stats! It is very well done and is certainly worth a look if you are interested in stuff like this!

I have included the report in its entirety for you below!

JOE TOMKINS

Dominion Lending Centres - Accredited Mortgage Professional
Joe is part of DLC Canadian Mortgage Experts based in Nanaimo, BC

YOU CAN PAY YOUR MORTGAGE FASTER WITH “THE JAVA FACTOR”

When you are searching for a mortgage, you shouldn’t only base your decision on rate. It is important to search for the “best mortgage”. A mortgage that not only provides the best interest rate, but also the one with the best terms and conditions. By understanding mortgage terms and what they mean in dollars and sense, you can save the most money and choose the term that is best suited to your specific needs.

With a closed term mortgage, you can’t pay off your mortgage before the end of the term without having to pay a penalty.

The pre-payments without penalty clause is one of the conditions that can save you a considerable amount of money in the long run. This clause allows you to make payments on the principal of your loan, or increase the amount of your periodic payments (monthly, bi-monthly, etc.) without a penalty. Each lender has different programs for pre-payments, they usually vary from 10% to 20%, i.e., you can pay any amount within the approved percentage of the original value of your mortgage or increase your periodic payments once a year without paying a penalty.

Many people don’t take advantage of this clause because it is generally difficult to save the extra money to make additional payments.

Here is an easy way to take advantage of this benefit – “The Java Factor”. This is something that is very easy to follow and can save you thousands of dollars by paying down your mortgage.

Usually everyone buys a cup of jo (coffee) or two during their work day. When you see the cost of a cup of coffee at Starbucks or any other establishment, you realize that maintaining this habit can be very costly.

Suppose that you spend at least $5 per day, 5 days a week in “coffee, donuts, chocolates, snacks, etc.”, this would amount to approximately $108 per month; if you apply them to your monthly mortgage payments, the savings can be considerable.

For example:

In a $100,000 mortgage at a rate of 3.39% and 25 years amortization, you would reduce the total payment of your mortgage by 5 years and 4 months with savings of $13,185 in interest. For this calculation, we considered that the interest rate did not change during the life of the mortgage.

This calculation would vary case by case but depending whether you have a pre-payment clause with your mortgage or not, it is important to emphasize that by making a small sacrifice you can have significant long-term savings.

So remember “The Java Factor” next time you are thinking of stopping by for a coffee on your way to work and take a cup of coffee brewed at home.

JORGE ARAGON

Dominion Lending Centres - Accredited Mortgage Professional
Jorge is part of DLC Mountain View based in Maple Ridge, BC.

REVERSE MORTGAGE VS. HOME EQUITY LOAN

More and more Canadians are going into their retirement years without a lot of money saved in the bank. It is suggested that in order to live a financially comfortable retirement, couples should have saved 50-60% of their peak pre-retirement income, which equates to roughly $42,000 to $72,000 a year or $275,000 to $1,025,000. Singles should have saved 60-70% of their peak pre-retirement income, roughly $30,000 to $50,000 per year or $350,000 to $850,000. (Assuming mortgage is paid off and children are financially independent. All amounts based on 2014 dollars).

In a 2013 survey of 1,500 Canadians over the age of 50, only 2 out of ten households said they would have more than $250,000 saved for retirement. 50% of the households surveyed felt that they would consume their retirement savings within the first 10 years of retirement.

Because of these financial woes, many Canadian homeowners in their later years have considered taking out a home-equity loan or the option of a reverse mortgage to access the equity in their home.

Home-Equity Loan

Like a primary mortgage, a home equity loan lets you convert your home equity into cash. In fact, many refer to a home equity loan as a second mortgage, where you would receive the loan as a single lump-sum payment, and then you would make regular payments to pay off the principal and interest.

Another form of home-equity loan is the home equity line of credit (HELOC). A HELOC gives you the option to borrow up to a pre-approved credit limit, on an as needed basis. Therefore, with a home-equity loan, you would pay interest on the entire loan amount, whereas with a HELOC, you pay interest only on the money you withdraw. Since a HELOC is an adjustable loan, the payment changes as the interest rates fluctuate.

It is important to keep in mind that your home acts as collateral in a home-equity loan. So if you default on the loan, you risk losing your home to foreclosure.

Reverse Mortgage

With a reverse mortgage, instead of making payments to a lender, the lender will pay you, based on a percentage of the appraised value of the home, as well as factors such as your age and the age and the condition of the house.

You will continue to hold title to your home, but as soon as you become delinquent on the property taxes and/or insurance, the condition of the home is in disrepair, you move/sell the home or you pass away, the loan is then due for repayment.

Home Equity Loans, HELOCs and Reverse Mortgages are all options, which allow you to convert the home equity into cash, however, they differ in terms of credit, income, repayment, disbursement, age and equity requirements. Before you make any decisions, find out how to tailor your needs and requirements with the best product for your situation.

For more information on a reverse mortgage loan, contact a mortgage professional at Dominion Lending Centres.

 https://dominionlending.ca/news

YVONNE ZIOMECKI

HomEquity Bank - Senior Vice President, Marketing and Sales

Why I believe in Reverse Mortgages

There was a 62-year-old husband and his 61-year-old wife living in Kelowna, BC.  One day the husband had a massive heart attack and died instantly.  Insurance paid off all the debts.  The husband had always looked after the financial affairs.  The widow knew nothing about financial matters and couldn’t even balance a cheque book. She started receiving credit offers in the mail and responded to them.  A son, living elsewhere, visited his mother one day and found out that she had accumulated new debt in the amount of $40,000.  The widow could not keep up with all the payments with the reduced pension income so the son took her to her local financial institution that the couple had dealt with for many years. They met with the branch manager and arranged a term mortgage to pay off the debts and give the mother a $5,000 limit credit card.  The son again visited the mother one winter day two years later and found that her gas had been turned off due to nonpayment.  She was using a space heater to keep warm.  He couldn’t understand why there was a problem. He did some investigating and discovered that the branch manager had given his mother a secured line of credit with a limit of $90,000 and a $15,000 credit card.  The widow had maxed out the line of credit and the credit card.  Because of a poor market and deferred maintenance of the property, the home could not be sold even after it was listed for six months. The son arranged for his mother to live with her daughter in Alberta.  He cleaned out the home and took the keys and gave them to the branch manager telling her that he didn’t know what else to do.  Maybe the widow would have been best served if she had been presented with either the option of a term mortgage or a reverse mortgage; and then the widow might have been able to stay in her home for the rest of her life.  Unfortunately, she wasn’t presented with the option. Why is this story important?  Because the widow was my mother. Bob Urbanovich BDM for HomEquity Bank

THE REAL VALUE OF TITLE INSURANCE

I am often asked by clients about the real value of title insurance, why they need to have and pay for it.  Whether you are a home buyer or a home owner simply refinancing the mortgage on your home, you will need title insurance.  Once I explain the reason and need for title insurance, the majority of home owners accept the cost and see the real value of title insurance.

Title insurance includes a lender portion policy and the homeowner has the option to add a Homeowner Policy portion.

Lenders request the insurance to protect against title fraud and the high costs associated with this growing crime. However, there are more benefits to this insurance for the homeowner.

1. The policy transfers risks related to title of the property from the home buyer to title insurance provider. So if any delays or issues occur on title during the purchase, the insurance provider will resolve it and the associated costs.

2. The Homeowner Policy also covers losses associated with survey issues and title defects that existed prior to the home purchase as well as title fraud occurring after the policy is issued. Coverage continues after the purchase for as long as the owners own the home. Title insurance covers losses resulting from many risks not directly related to title, such as: structures or renovations previously completed without required permits, unknown work orders, encroachments, liens, zoning and by-law violations.

3. The policy protects the homeowner against any future title fraud on the property. For properties that are clear title with no mortgage, there is a risk that a criminal can assign a mortgage against that property without the owner’s knowledge. They take the money and run leaving the homeowner with a mortgage and payments.

Who is at risk?

The easiest target is the homeowner with no existing mortgage. However, even a property owner with a mortgage can become a victim. In both cases, mortgage funds are usually sent to a third party and are often unrecoverable. For this reason, lenders want homeowners to acquire title insurance to transfer the cost to fight the case and cover the costs to the title insurance provider.

What can the homeowner expect if they are a victim of title fraud?

The immediate issue for homeowners in a real estate title fraud situation is the homeowner is responsible to prove the crime occurred. During that time they could be responsible for a mortgage and the payments. If unpaid, this can result in foreclosure by the lender and a record of the late payments on the owner’s credit report.

If you become a victim in a real estate title fraud, it can take considerable time and money such as:

* Costs for legal fees to show proof you are the victim
* Lost opportunities to sell or buy another property
* Mental distress
* Possibility of losing your home to foreclosure by the lender
Title insurance covers the legal expenses and many other costs related to restoring title in cases of real estate title fraud.

For homeowners who did not obtain title insurance when they bought their home, the protection title insurance can be purchased any time.

If you are buying a home, your Dominion Lending Centres mortgage professional and your lawyer will discuss title insurance with you. If you are a current homeowner who wishes to obtain title insurance, contact your lawyer or a title insurance company. I have provided some links below for your reference. Fees range depending on the value of the property.

The first link below outlines costs.
http://www.bcrealestatelawyers.com/real-estate-fraud-and-title-insurance/
www.fct.ca

Have a great day!

For more DLC blog posts click here 

By: Pauline Tonkin Dominion Lending Centres - Accredited Mortgage Professional Pauline is part of DLC Innovative Mortgage Solutions based in Coquitlam, BC

ARE YOUR CLIENTS REALLY, TRULY PRE-APPROVED FOR A MORTGAGE?

Beware of the term PRE-APPROVAL!

Here are some facts:

• Pre-approvals mean something different to every mortgage professional and lending institution
• For mortgage approvals both the applicants AND the property they are buying need to be adjudicated and approved before funds are advanced…detailed borrower information and documents are typically required for a full pre-approval, however property info is seldom available. For this reason a full blown adjudicated pre-approval is very difficult to obtain
• Many lending institutions will not adjudicate pre-approvals, and many others charge rate premiums to do so
• Applicants’ assets, liabilities, and income need to be verified in writing before a mortgage can be approved…many mortgage agents don’t even pull credit or verify employment and down payment before issuing a pre-approval
• For a high ratio mortgage (less than 20% down), both the lending institution AND the default insurer must approve the lender and the property….default insurers will only adjudicate live applications
• Rate holds and pre-approvals are different everywhere….rate holds seldom include any form of verification or viewed documents
• In a rising interest rate environment, a previous pre-approval may no longer be acceptable due to excessive debt service ratios based on the current higher rate
• For very long closings over 90-120 days, assets, liabilities, and income may need to be fully verified again prior to closing
• Approved mortgage amount is always based on the lesser of the purchase price OR the appraised value…any shortfall from an appraisal needs to be made up by client

We here are Dominion Lending Centres can help sort through this mine field, and provide you with meaningful feedback and information for your mortgage needs.

TOM NEEB

Dominion Lending Centres - Accredited Mortgage Professional
Tom is part of DLC Home Capital Solutions based in Hamilton, ON.

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What is a Mortgage Broker?

One thing Canadians have in common is that most of us are paying off a mortgage.

The mortgage market can sometimes be confusing. There are a vast array of choices – open, closed flex down, equity take-out, cash back, and of course the rates themselves. While we would not attempt to try to muddle through the intricacies of insurance or investments without expert help, we will often go it alone when it’s time to get a mortgage.

We will call a variety of banks and other lenders in an attempt to get the best rate. After numerous phone calls you get back to your original lender, and they agree to meet your best rate. Why should you have to spend so much of your time finding the best rate? If you are not quick enough the rate may change before you lock it in.

There is a solution to this problem – use the services of a mortgage broker. 85% of Americans use mortgage brokers today but only 33% of Canadians do; mainly because they do not know what a mortgage broker is and what they do.

What is a mortgage broker? A mortgage broker is an individual who represents a mortgage brokerage firm. The brokerage has access to over two dozen banks, trust companies, insurance companies and other lenders at their fingertips. By dealing with these lenders on a day-to-day basis, we have access to wholesale lending rates which can save you thousands of dollars. It should also be noted that the majority of mortgage brokerages are not owned by the lenders they represent. Brokers work for the borrower, not the lenders. Mortgage software allows us to scan all the lenders for the best rate for the term you are looking for in seconds. In addition we will advise you on the best options for your own personal situation. Newlyweds with no cash can purchase a house with 0% down under certain conditions. Some lenders will even give you 1-5% cash back. Wouldn’t that come in handy for buying curtains and furniture for your new home?

Now this sounds great! Everyone could use an expert to save them money, but how much does it cost? The majority of mortgages are arranged at no cost to the consumer. The lenders pay a finders fee to the brokerage firm for finding and arranging the mortgage. If you have an unusual credit history which involves more work, a set fee would be agreed upon before we start on the application.

Why would you choose to use a mortgage broker instead of your bank?

Lower Interest Rates

Wholesale mortgage rates are discounted an average of 1.20% over what the bank will offer you. A 1% interest discount on a $150,000 mortgage can save you more than $7900 in interest costs over a 5 year term.

Best Mortgage Options

By shopping the lenders’ market we can find you the best options for your particular situation. Banks are limited to the products carried by their institution.

Bank Loan Officers are employees of the bank

Mortgage agents work for you, the borrower.

Fast Service

A mortgage broker can often get your mortgage approved in a day. In addition we can meet you at your home, office, or wherever it is convenient for you.

As you can see, mortgage brokers offer convenience, service and great rates. It’s no wonder more and more Canadians are choosing to call a mortgage broker when it is time to renew their mortgages. As the #1 mortgage brokerage company in Canada, we here at Dominion Lending Centres are ready to help you!

DAVID COOKE

Dominion Lending Centres - Accredited Mortgage Professional
David is part of DLC Westcor based in Calgary, AB.