With the Bank of Canada in a mood to raise rates, it’s a similar feeling for the bond market, which impacts fixed rates. In every interest-rate market there are many factors leading to an increase and we are hoping to provide a little bit of clarity on what is happening and what it means to you and your loved ones. We tell you this in advance to be proactive to take care of you, as our mortgage family, so as you hear the news about the changes you have comfort we are here to lead with clarity.

At this time, we see fixed rates increasing as the bond market increases.

Why do we note this information and how does it relate to you?

If you are in a variable rate, you will want to:

Review your lock-in options by contacting us or your lender directly (every lender has different policies in allowing us to help or not). Knowing it’s unlikely the prime rate will reduce and fixed rates are on the rise, there could be a sweet spot to review your options now.
If you decide not to lock in, it’s time to review your discount to see if a higher one can be obtained elsewhere.

Locking in won’t be for everyone, especially if you are making higher payments and your mortgage is below $300,000, which most people fit and will continue on that path. Also if your discount is more than .6 below prime you may want to wait and watch the market. Locking in will be around a 1% higher rate than you are likely presently paying. If knowing you can likely lock in around 4% now is most attractive to you, this may be your time.

If you are in a fixed rate:

If you obtained your mortgage in the last year, stay put.
If you are looking to move up the property ladder or consolidate debt, get your application in to us ASAP so we can hold options for up to 120 days.
If you are up for renewal this year or know someone who is, secure your options now with us to weight out the savings prior to renewal with us keeping a watchful eye on the market.

Keep in mind that if you or someone you care about has an average mortgage of $350,000 and got it a few years ago at 2.49% now a qualified applicant can expect about 3.89% which is a payment increase of $254 dollars a month, so increasing your payment now will protect your equity, and you from future payment shock.

Please reach out to a Dominion Lending Centres mortgage professional so we can help ensure you or a loved is on the right path in our ever changing market.

Canada is made up of hundreds of thousands of people, and while some did not start here, they have made it their home. Buying a home, especially when you are new to Canada can be mind boggling, BUT, we have a mortgage for you!

The New to Canada Program is designed to help new Canadians purchase their first home sooner and become established faster.
What are the qualifications for this program?

Firstly, you must have immigrated or relocated to Canada within the last 3 to 5 years to qualify for the New to Canada Program. You must have proof that you have been working full time in Canada for at least 3 months and that you are not on probation with your employer. The lender will require a letter of employment from your employer with your salary and employment status. Copies of your valid work permit or landed immigrant status card (front and back) will also be a requirement.

Down payment is a minimum of 5% and must come from your own savings and be verifiable with 3 months worth of bank statements from a Canadian Bank. Some lenders will allow the 5% to be a gift from an immediate family member and a gift letter from the lender will be required. Please speak to your broker in advance when a gift is being used. That way we can provide you with information for monies coming from other countries and ensuring you are following all the banking rules and regulations. With a minimum of 5% down payment you will need default insurance, and that can be provided by Canada Guaranty, Genworth or CMHC (Canada Mortgage and Housing). Each of these insurers offer programs that will work with the lender.

The lender will need to see your credit bureau and, as you are new to Canada, you may be just starting so we will require an international credit report from your country of origin. Just starting up your credit, we can assist you with that by providing valuable information to get you ready for the road to home ownership. You can obtain an International or U.S. Bureau by contacting Equifax and they will point you in the right direction. Your international credit report is taken into consideration by the lender as it will show that you are a responsible borrower and have kept your accounts in good standing. We would advise that a letter of recommendation from your current bank be done as that is also very helpful in the process. If you cannot provide an international credit bureau, the lender will ask you for to confirm your good standing by providing 12 months history of bills that must be paid on time (rent, utilities, cable or insurance premiums).

Working with your Dominion Lending Centres Mortgage Professional will provide you with options and answers to your questions. Our advice is always free, we are here to help you make home ownership a reality.

Remember, when looking for your home, use a professional to assist with not just financing but the search as well. Realtors are great negotiators and can also help you determine your requirements in a home, “needs vs wants”. Do you need to be close to schools, public transportation, etc?

This process can take some time but again, that is why you have a DLC broker at your fingertips!

By the way, welcome to Canada!

Karen Penner

Dominion Lending Centres – Accredited Mortgage Professional
Karen is part of DLC Jencor Mortgage Corporation based in Calgary, AB.

There are many challenges that come into play when you’re in the market to buy a home.

Buyers say the number one obstacle to home ownership is saving enough for a down payment, the amount that the buyer provides toward the purchase of their home.

Exactly how much do you need to put down? Assuming you can finance the debt with your current income you can get a mortgage for as little as 5% down PLUS pay for Mortgage Default insurance if you put less than 20% down.

A smart rule of thumb is always try to put a least 20% down. Although that may be a challenge in areas with higher home prices, but in Manitoba, we are lucky to have an average home price of around $280,000.  In the greater Vancouver area for example, the current Vancouver MLS stats indicate an average house price of $1,227,420.  Yikes!

1. Easier to service your debt. Putting 20% down reduces the size of your monthly mortgage payment, making you more likely to qualify for and afford, your mortgage. Lenders want to make sure you can service your debt with your current income using 2 rules:
o Rule #1 – GROSS DEBT SERVICE (GDS) Your monthly housing costs are generally not supposed to exceed 35-39% of your gross monthly income. Housing costs include – your monthly mortgage payment, property taxes and can include heating. If you are buying a condo/townhouse with strata property then the GDS will also include ½ of your strata fees.

Principle + Interest + Taxes (+ 50-100% Strata Fees if applicable) Gross Income

Rule #2 – TOTAL DEBT SERVICE (TDS) Your entire monthly debt payments should not exceed 40-44% of your gross monthly income. This includes your housing costs PLUS all other monthly payments (first mortgage, property taxes, maintenance fees, additional financing, car payments, charge accounts, etc.).
(Principle + Interest + Taxes) + Other Payments Gross Income

2. A Smaller Monthly Mortgage Payment! You pay LESS!! I’m all about making smaller mortgage payments and having money for the fun stuff in life. More money down means, you borrow less money, which means you will have a smaller mortgage, which means you have smaller, more affordable mortgage payments.

3. No private mortgage default insurance. Putting 20% down allows you to avoid paying for mortgage default insurance.

• In Canada, mortgage insurance is required federally on high-ratio mortgages (a down payment of less than 20%). This insurance, which protects the bank/lender in case the borrower defaults, gives lenders the flexibility to offer home buyers with low down payments the same low interest rates they would offer to home buyers with more equity.
• Mortgage insurance premiums are based on the amount of the mortgage. The higher the loan-to-value ratio, the higher the premium cost. In other words, the lower your down payment, the more expensive the insurance. This premium may be paid in cash in a lump sum upon closing, it is usually added to the mortgage amount and paid over the length of the mortgage.
• Canadian Mortgage & Housing Corp. (CMHC) and Genworth Canada provide mortgage default insurance. Click on CMHC or Genworth for the sliding scale, the bigger your down payment the less insurance you pay. Once you hit a 20% down payment, mortgage default insurance is no longer mandatory.

4. Pay Less Interest over the Life of the Loan. You pay less interest with 20% down payment, since you’re putting more money on the house compared to if you put 5% or 10% down.

5. Instant Equity Building. A significant down payment builds instant equity in your home. A 20% down payment immediately puts equity into a home when you purchase it. That down payment gives you some cushion, in case the market takes a downward turn.

If you have any questions contact a Dominion Lending Centres mortgage professional near you.

Kelly Hudson

Dominion Lending Centres – Accredited Mortgage Professional
Kelly is part of DLC Canadian Mortgage Experts based in Richmond, BC.

I shop for the best mortgage solutions from my list of partners – These include banks, credit unions, monoline lenders and trust companies.

My services are free. I am a mortgage match maker. I work with great clients and match their unique situation to the right mortgage solution. When I make a great match, the lender pays me a commission.

I give you options. Why get just one mortgage option from one lender. This is the most expensive purchase of your life. Let me shop the options for you, and get you access to options that are not available to the general public or banks.

The application process is simple and quick. All you have to do is complete a simple application (online or over the phone), sign a consent form, and send me some supporting documentation and then watch your email for daily updates on the status of your mortgage application.

Short on time? I am available daytime, evenings, and weekend. I know life is busy so my process has been engineered to allow the entire process happen without having to meet me.  The only requirement is that you are able to use a computer and phone well enough to send email with documents using a scanner or smart phone.

One credit pull – many options. Many people inadvertently disqualify themselves from getting the best rate when they are shopping for a mortgage. When multiple banks or credit unions access your credit bureau the score can drop, sometimes eliminating your chance for the best mortgage, or in extreme cases, any mortgage at all.

I have mortgage products that meet the unique needs of our clients. Self-employed, new to Canada, rebuilding your credit? When a person’s situation isn’t ideal, there’s usually a story about why; maybe they’ve changed jobs, or maybe they’ve been through a divorce or another life-altering event and their credit was affected. It is our job to tell your story to a lender that will qualify you.

I care. Your satisfaction is paramount to me.  I will always do my best to provide you a 5-Star service so that when the word mortgage comes up, you not only think of me, but mention my name as well.  In the unlikely event that you are not happy, please let me know and I’ll do whatever I can to make it right.

I am an expert. Bank employees are not licensed mortgage agents, and they can only sell their own bank’s products and services, therefore they cannot advise you when other lenders have a product that is a better fit for you.

I work for you, not a bank. My loyalty is with my clients and I always put their best interest first. There’s no brand bias with me.

Picture this: You’ve finally been able to put away enough for a down-payment on your dream home. It’s taken you five years of diligent saving, but you did it! You have also been diligently working on improving your credit score and paying off debts and are at a place of financial stability. So, first of all, KUDOS TO YOU! Second…now what do you do? Here are the 3 steps that will take you from browsing new homes to getting the keys to your new place.

STEP 1: PRE-APPROVAL

This should actually be the step BEFORE house-hunting. Visiting your broker to get pre-approved is the first step anyone looking to buy a home should do. When you meet with your broker for the first time they will:

• Have you fill out an application (or you might be able to fill out one online)
• Pull your credit
• Determine what your maximum purchase price will be.

Be aware that you will also be asked for additional information and documents including a letter of employment/pay stub, down payment verification, 2 years notice of assessment, T4’s, a void cheque, and a number of other potential documents.

Once you are pre-approved it’s house hunting time for you! The benefit to having this done BEFORE you start looking is that you can work with your realtor to find properties within that price range.

When you do find just the right home for you, it’s on to step 2…

STEP 2: APPROVAL

If you were able to provide the bulk of the paperwork for your pre-approval, then it will be smooth sailing from here! You may have to supply a few pieces of updated information (such as an updated paystub or bank statement) but otherwise it’s up to your mortgage broker and lender to do the hard work at this point.

Your application will be re-assessed, and the lender will take a look at the property you are purchasing. Once the lender confirms that the property aligns with their guidelines it is sent off to the mortgage default insurer for approval. At this point, make sure that you do not remove the financing condition until all the lender conditions are met.

Now that you have final sign-off and are waiting for the final conditions to be met, it’s on to step #3.

STEP 3: FINAL STEPS

Your broker will notify you once the conditions have all been met, and the lender will send the paperwork over to the lawyer’s office. The lawyer will take a few days to go through the mortgage and prepare it for your final sign off. When you go, you will be asked to present:

• Void Cheque
• 2 forms of ID
• Balance of the down payment in the form of a bank draft

On the day of funding, the lender will send the funds to the lawyer who sends them to the seller’s lawyer who upon receiving the funds will give you the all clear.

All that’s left is to hand you the keys to your new home!

As one final step, keep asking questions at each stage of the mortgage process. You should check in with your Dominion Lending Centres mortgage broker if you have any questions along the way-they are happy to guide you through the process of not only getting a mortgage but also having a mortgage too!

Geoff Lee

Dominion Lending Centres – Accredited Mortgage Professional
Geoff is part of DLC GLM Mortgage Group based in Vancouver, BC.

Rising Interest Rates and the Impact on Real Estate Values. Is there a direct connection? In a post entitled Interest Rates and Property Values. What’s the Connection?, I suggested that there was. An example was given which suggested that mortgage lenders would be directly impacted by a rise in rates, as their underwriting parameters, most notably debt service coverage requirements, are directly impacted. An inability for a buyer to secure the required financing amount, in an environment of increasing interest rates will, I argue, impact their willingness to offer as high a purchase price. Arguably a lower debt level will necessitate a greater amount of equity. This directly diminishes an investors cash-on-cash return. The inevitable result will be a softening of values, since buyers will want to offer less.

Are there Other Factors?
The above noted rationale, for establishing the link between interest rates and values, does however ignore other factors which may impact market sentiment.

A recent study by Manulife Asset Management raises some interesting observations. In their March 2018 report entitled Canadian Commercial Real Estate Outlook, Manulife’s study observed that in fact there was no consistent relationship between real estate values and interest rates. One of their important findings was that although interest rates have been rising since November 2016, largely as a result of economic growth and higher inflationary pressure, capitalization rates actually declined. Why? Well apart from the sentiments of an individual buyer and lender, which is what I referenced in my earlier post, Canadian investors enjoyed improving real estate fundamentals. Yields were seen to be attractive in comparison to other investments, and there was a rise in foreign investment. All contributed to a support for commercial real estate fundamentals and stable or enhanced values.

Capitalization Rate Refresher
You may recall that capitalization rates are comprised of a nominal “risk-free” rate (often associated with a Government of Canada benchmark bond yield), plus a risk premium attributed to a specific property type or asset. If, as it appears, overall capitalization rates have declined, could it be that the “risk-free” rate is falling as well? I will encourage you to take a look at the Manulife report and come to your own conclusions. From a lender’s perspective, I do not doubt that rising rates have a bearing on what a buyer will pay for a property. I suspect real estate appraisers will be like-minded. The Manulife study does however caution us that there are macro-factors at play as well, and a strong economy is supportive of longer term stability, and indeed growth, in the Canadian Commercial real estate market.

Allan Jensen

Dominion Lending Centres – Accredited Mortgage Professional
Allan is part of DLC The Mortgage Source based in Ottawa, ON.