If you’re on the hunt for your first home and want to have a smooth and successful home purchasing experience avoid these common first-time homebuying mistakes.

1. Thinking you don’t need a real estate agent

You might be able to find a house on your own but there are still many aspects of buying real estate that can confuse a first-time buyer. Rely on your agent to negotiate offers, inspections, financing and other details. The money you save on commission can be quickly gobbled up by a botched offer or overlooked repairs

2. Getting your heart set on a home before you do your homework

The house that’s love at first sight may not always be what it seems, so keep an open mind. Plus, you may be too quick to go over budget or may overlook a potential pitfall if you jump in too fast.

3. Picking a fixer-upper because the listing price is cheaper

That old classic may have loads of potential, but be extra diligent in the inspection period. What will it really cost to get your home where it needs to be? Negotiating a long due-diligence period will give you time to get estimates from contractors in case you need to back out.

4. Committing to more than you can afford

Don’t sacrifice retirement savings or an emergency fund for mortgage payments. You need to stay nimble to life’s changes, and overextending yourself could put your investments – including your house – on the line.

5. Going with the first agent who finds you

Don’t get halfway into house hunting before you realize your agent isn’t right for you. The best source: a referral from friends. Ask around and take the time to speak with your potential choices before you commit.

6. Diving into renovations as soon as you buy

Yes, renos may increase the value of your home, but don’t rush. Overextending your credit to get it all done fast doesn’t always pay off. Take time to make a solid plan and the best financial decisions. Living in your home for a while will also help you plan the best functional changes to the layout.

7. Choosing a house without researching the neighbourhood

It may be the house of your dreams, but annoying neighbours or a nearby industrial zone can be a rude awakening. Spend time in the area before you make an offer – talk to local business owners and residents to determine the pros and cons of living there.

8. Researching your broker and agent, but not your lawyer

New buyers often put all their energy into learning about mortgage rates and offers, but don’t forget that the final word in any deal comes from your lawyer. As with finding agents, your best source for referrals will be friends and business associates.

9. Fixating on the lowest interest rate

Yes, a reasonable rate is important, but not at the expense of heavy restrictions and penalties. Make a solid long-term plan to pay off your mortgage and then find one that’s flexible enough to accommodate life changes, both planned and unexpected. Be sure to talk your your Dominion Lending Centres mortgage professional to learn more.

10. Opting out of mortgage insurance

Your home is your largest investment so be sure to protect it. Mortgage insurance not only buys you peace of mind, it also allows for more flexible financing options. Plus, it allows you to take advantage of available equity to pay down debts or make financial investments.

While it’s certainly easy to be intimidated by the prices that you might see as you browse MLS into the wee hours of the night, mortgage interest rates are still at a historical low.  If you’re looking at purchasing for the first time, you’re thinking, “What does that mean?!”

With rates as low as they are, the cost of borrowing associated with your mortgage is lower than ever before.  You also need to look at other fees that can be tied to different mortgage products.  For example, some mortgages don’t allow for additional or increased payments, while others allow you to pay down your principal mortgage amount by up to an additional 20% per year, saving you money over the lifetime of your mortgage. It’s important to recognize and understand these options and fees, and that is where a Dominion Lending Centres Mortgage Broker comes in.  Brokers and their agents are experts in the products that they offer and will work to save you the most money.

Don’t worry!  A Broker can also help you take advantage of low interest rates as a homeowner, too!  It could be the right time to look at your other financials and consider consolidating other outside debts to take advantage of the savings that could be available to you.  It isn’t hard to see the savings between a balance owed on a credit card at 19% or the balance owing on your car at 6.25% and consolidating one (or both!) with your mortgage balance at much lower interest rate.  A broker can look at your current mortgage terms and timelines and can help you save a considerable amount of money each year!

A Mortgage Broker’s service doesn’t stop there.  Since the demand for new homes is so high right now, a Mortgage Broker will also help both first-timers and home-owners peeking around the markets with a pre-approval before you start considering making an offer on a new home. This means that you can confidently make an offer on the home that you love without making a condition on financing.  In a busy market, where purchases often end in bidding wars, having your financing in line could make your offer stand out against the rest.

Since properties are being scooped up like hotcakes, homeowners can also take advantage of selling their homes to downsize and save for retirement, or vacations, or spoiling their grandkids!

Now if you’d rather “love it” than “list it”, you can benefit from today’s high demand, too!  If you have been thinking about adding that basement bathroom, or are in need of upgrading your furnace and air conditioning units, a Broker can help you take advantage of the equity that you have gained in your home since you bought it.  In the last year, the demand for homes has soared, which means that your home could be worth a good chunk more than you might think.  Regardless of if your mortgage is up for renewal or not, a Mortgage Broker can help you make sense of the mortgage that you’re in, and look at payout options that could work in your favour.  And a mortgage evaluation will always be free with a licensed Broker.

Today’s market has a lot of characteristics that can work in your favour, but can also throw a little wrench in your plans.  Always make sure to sit down with a licensed, local Dominion Lending Centres’ Broker to make sure you’re armed with the knowledge that you need to get the most for your money!

Premier Kathleen Wynne surprised the market yesterday by announcing sweeping measures aimed at cooling the red-hot housing market a full week before Ontario Budget Day. The sixteen-measure package is largely intended to do three things: Cool demand; boost supply; and limit the increases in rents. 

No one doubts that something needed to be done to dampen speculative fervour and increase the supply of both rental properties and non-rental housing in the GTA and surrounding areas. While home prices have been rising in the GTA for more than a decade, the price gains hit an inflection point 2016 with hyperbolic price gains, exaggerated well beyond reasonable levels took hold, spiraling to a sellers’ strike, rampant speculation and frenzied demand.

In most of the region, the inventory-to-sales ratio fell to less than one-month’s supply as speculators compete with first-time and other buyers, driving prices to the stratosphere. Potential sellers held back, expecting prices to continue to rise at a 30% annual rate. Many of these potential sellers feared they wouldn’t find a suitable place to live as speculators increasingly are willing to buy properties with negative carry as capitalization rates fell, expecting to make a fast buck in a year or two. This has been compounded by non-resident foreign purchases, much of which could well lie vacant, further reducing supply and often damaging existing neighborhoods. Moreover, the market is further inflated by nefarious activities on the part of unethical market participant–activities that include “paper flipping”, rigged bidding, double-dealing and falsified income and asset statements–not to mention reselling properties pre-construction, which is technically legal but sometimes reportedly involves kick-backs to developers.

Clearly, this frenzy is unsustainable and something needed to be done to avert a crash landing–a result that is in no one’s interest as it would dramatically slow economic activity and job growth in the province and beyond. The question is: Will the Ontario Fair Housing Plan–comprised of 16 initiatives–generate a soft landing and do the job of balancing housing and rental supply and demand.

Risks and Uncertainties

The most troubling measure is the expansion of rent controls to all rental properties built after 1991–condo or purpose built. While it is good for existing tenants, the potential unintended consequences are concerning. Rent controls diminish the supply of rental stock and have adverse implications for existing home markets as investors (and speculators) dump their properties in response to heightened uncertainty and already compressed capitalization rates. This is especially negative for the condo market as investors have often provided the seed money for new developments. Toronto suffers from a dearth of purpose-built rental properties owing to the rent controls introduced many years ago. There has been a burgeoning rise in the development of such properties over the past year or so, but expanded rent controls might cause many lenders, investors and developers to reassess their plans.

Setting the rent-control cap at the rate of consumer inflation to a maximum of 2.5% while occupied by the same tenant would in no way provide a sufficient reward to offset the risk and capital necessary to build new supply. Any developer and investor would find the risk-reward trade-off insufficient. The cost of maintaining rental property is far greater than the 2% rate of inflation as utility costs, maintenance fees and property taxes have gone up by multiples of that rate, which is roughly equivalent to the return of risk-free government bonds.

Boost Rental Supply

The measures introduced to increase rental housing supply are welcome, but limited. Rebating a portion of development charges, lowering new property taxes on purpose-built rentals, unlocking available provincial land and streamlining the approval process will help to offset some of the negative effects of rent control, but they will no way offset them fully.

Already about 70% of Canadian households own their own home, which is probably close to long-run peak levels. Younger people and incoming residents are likely to need rental housing just as builders will need to set rents at sufficiently high levels to mitigate the effect of rent control on longer-term returns on investment, making housing less affordable for the very people the measures are intended to help. But, again, it is applauded by current tenants, particularly those living in relatively new housing.

Cooling Demand

The measures intended to cool demand by dampening speculation and discouraging vacant housing are welcome. The 15% non-resident speculation tax (NRST) in the Greater Golden Horseshoe (see map below) levied on non-citizen, non-permanent residents and foreign corporations (with some exclusions) makes sense, but we have inadequate data to judge the magnitude of its effect. If Vancouver’s experience is any guide, the NRST should reduce home price inflation by some measure.

A tax on vacant housing and land will likely increase the rental supply as most of these properties are owned by non-resident foreigners.

The prevention of paper flipping or reselling properties pre-construction is welcome.

Biggest Uncertainty: In my view, the biggest quandary is the impact of this sweeping package on market psychology as it ripples through the economy. The speculators will be the first to run for the hills, reducing demand and increasing supply–which, of course, is the intended consequence. But taking that a step further, boomers who have been holding off listing their homes will call their realtors to do so promptly if they perceive markets are softening, further increasing supply. And buyers could prudently suspend their home search, at least for a while, in the hopes that prices will fall, further diminishing demand. The real question then becomes, will there be a soft- or a hard-landing. Stay tuned, we will be watching these developments very closely.

Buying a home is a big step – a big, very exciting, potentially stressful step! How can you take the hassle out of the equation and keep your buying experience super positive? Easy… Surround yourself with a team of experienced professionals!

Many experienced realtors insist on starting your financing first, that’s where your Mortgage Broker comes in.

What is a Mortgage Broker? A Mortgage Broker is an expert in real estate loans that acts as a match-maker between home buyers looking for money and lenders with funds available to borrow. A broker will collect information from you about your employment, income, assets, loans and other financial obligations as well discuss your current budget, spending patterns and goals in order to get a thorough understanding of where you’re at and where you’d like to be. From here they assess the strengths and any weaknesses in your application and can advise on potential suitable financing options and any next steps you might need to take in preparing yourself for loan approval.

Talking with a Mortgage Broker before you start shopping is helpful for a number of reasons:

• You’ll develop a well-founded expectation of the price range and payments that you can afford.
• You’ll have a chance to address any potential gaps in your application for financing BEFORE you’re in a time crunch to meet deadlines for closing.
• Sellers may take your offer more seriously when you tell them you’ve been pre-approved for your financing putting you in a better position to negotiate (price, possession date, inclusions, other terms, etc).
• You and your Mortgage Broker will begin to compile your documentation so that your application is ready to go when you find the perfect home, leaving your mind free to start arranging furniture in your new place.

So why use a Mortgage Broker rather than your bank?

A Mortgage Broker has access to loans from a wide range of lenders. That means that you have more potential places to get approved, AND can take advantage of best products, top programs and lowest pricing!

A Mortgage Broker must complete a series of courses and pass the corresponding exams prior to obtaining a license to sell mortgages. In order to maintain that license a Broker must uphold the highest standards of moral, ethical, and professional conduct – including ongoing education and training.

A Mortgage Broker working with multiple lender options means that they truly SHOP for the best programs and rates for you based on comparisons and choices and don’t simply sell you the limited products they have to offer through a single bank source.

Mortgage Brokers work EXCLUSIVELY in mortgages so they are mortgage product specialists rather than banking generalists. Brokers deal with real estate transactions involving deadlines and conditions everyday as part of their job. They understand the urgency of meeting these commitments to ensure a successful transaction for everyone involved.

Learn more by contacting your Dominion Lending Centres mortgage professional today!

First off, I’m sure some are saying what is Independent Legal Advice? ILA is just as it sounds – the need to seek independent legal advice. At Dominion Lending Centres, we always suggest that clients get ILA.

Many times especially, in private deals and builder mortgages, you will see that there is only one lawyer working for both parties. This means that the lawyer at some point must say to one of them, please be advised that should there be an issue with this file that I represent client A. Client B should then be aware that if he wants to make sure that he is being protected that he talk to another lawyer.

What is the difference between a Lawyer a Paralegal and a Notary Public?

First let’s look at the difference, first off, a lawyer is able to deal in all things pertaining to the laws of Canada in the province in which they are licensed. In real estate, they can do all the necessary steps including assisting a client in writing a real estate contract to representing them in court.

Paralegals do independent legal work under the general supervision of lawyers and that is the key difference, they can assist in just about every process that a lawyer might find themselves involved with but they are there to assist and not give legal advice.

BC Notaries are governed by the Notaries Act of BC and the discipline of their professional society. Today, the position of Notary as a member of one of the branches of the legal profession is sanctioned and safeguarded by law. BC Notaries are unique in North America, providing non-contentious legal services to the public. The definition of non-contentious is that it is legal work that relates to transactions occurring between one or more parties ie real estate. They are insured as we have learned lately from the case in BC but they cannot represent you in court as a lawyer would.

As you can see while there are several people who look like they can give Independent Legal Advice in the end only a lawyer can actually do that for you.

We have all heard the horror stories about huge mortgage penalties. Like the time your friend wanted to refinance her home so that she could open a small business only to find out that it was going to cost her a $13,000 penalty to break her mortgage. This should not come as a surprise. It would have been in the initial paperwork from the mortgage lender and seen again at the lawyer’s office. A mortgage is a contract and when it is broken there is a penalty assessed and charged. You will have agreed to this. The institution that lent the money did so with the expectation that they would see a return on that investment so when the contract is broken there is a penalty to protect their interests. If you think about it, there is even a penalty to break a cell phone contract so the provider can recoup the costs they incurred so it stands to follow that of course there would be a penalty on a mortgage.

The terms of the penalty are clearly outlined in the mortgage approval which you will sign. The onus is on you to ask questions and to make sure you are comfortable with the terms of the mortgage offer. With so many mortgage lenders in Canada, you can very easily seek out other options if needed.

There are two ways the mortgage penalty can be calculated.

1. Three months interest – This is a very simple one to figure out. You take the interest portion of the mortgage payment and multiply it by three.

For instance: Mortgage balance of $300,000 at 2.79% = $693.48/month interest x 3 months or $2080.44 penalty.

OR

2. The IRD or Interest Rate Differential – This is where things get trickier. The IRD is based on:

• The amount you are pre-paying; and,
• An interest rate that equals the difference between your original mortgage interest rate and the interest rate that the lender can charge today when re-lending the funds for the remaining term of the mortgage.

In Canada there is no one size fits all in how the IRD is calculated and it can vary greatly from lender to lender. There can be a very big difference depending on the comparison rate that is used. I have seen this vary from $2,850 to $12,345 when all else was equal but the lender.

Things to note:

• You will be assessed the GREATER of the 2 penalties.
• You should always call your lender directly to get the penalty amount and do not rely on online calculators
• You can avoid the penalty by porting the current mortgage if you are moving or waiting until the end of the term
• A variable rate mortgage is usually accompanied by only the 3 month interest penalty

Given that 6/10 mortgages in Canada are broken around the 36 month mark, wouldn’t it be better to find out before you sign how your mortgage lender calculates their penalty just in case??…and the best way to get more information is to contact you local Dominion Lending Centres mortgage professional.

While many people will speak to a mortgage broker before buying a home, few people call a mortgage broker before selling a home. Calling could save you thousands of dollars and many sleepless nights.

Why? Brokers understand mortgages and ask the right questions. How long do you have remaining in your present mortgage? Do you know if it’s portable to a new property? Have you heard of increase and blend? A mortgage broker can help you to anticipate a penalty to break your present mortgage and see if porting or taking your mortgage to your new property is a good idea. Need more money? Blend and Increase will allow you to increase your mortgage amount and blend the old rate with the present day rate and save you thousands in penalties.

If you are at the stage in life where you have children leaving for university and you are down-sizing, perhaps a line of credit might be useful for helping to pay tuition and dorm fees.

While you may like your home it may need a new roof. Most home buyers do not want a fixer-upper and will discount your selling price to account for this. It may be easier to get the price you want and sell faster if you replace the roof, furnace or whatever is old yourself. The problem is that you are saving money for a down payment. Your mortgage broker can come to the rescue with a line of credit, either secured or unsecured which can be paid out with the home sale. In short, “we’ve got a mortgage for that!”.

Remember, calling your Dominion Lending Centres mortgage broker before buying is a no-brainer but why not call them before you sell.

You might think you would be rewarded for toiling away to save a down payment of 20% or greater. Well, forget it. Your only prize for all that self-sacrifice is paying a higher interest rate than people who didn’t bother.

Once upon a time we had high ratio vs conventional mortgages, now it’s changed to; insured, insurable and uninsurable.

High ratio mortgage – down payment less than 20%, insurance paid by the borrower.

Conventional mortgage – down payment of 20% or more, the lender had a choice whether to insure the mortgage or not.

vs

Insured –a mortgage transaction where the insurance premium is or has been paid by the client. Generally, 19.99% equity or less to apply towards a mortgage.

Insurable –a mortgage transaction that is portfolio-insured at the lender’s expense for a property valued at less than $1MM that fits insurer rules (qualified at the Bank of Canada benchmark rate over 25 years with a down payment of at least 20%).

Uninsurable – is defined as a mortgage transaction that is ineligible for insurance. Examples of uninsurable re-finance, purchase, transfers, 1-4 unit rentals (single unit Rentals—Rentals Between 2-4 units are insurable), properties greater than $1MM, (re-finances are not insurable) equity take-out greater than $200,000, amortization greater than 25 years.

The biggest difference where the mortgage consumers are feeling the effect is simply the interest rate. The INSURED mortgage products are seeing a lower interest rate than the INSURABLE and UNINSURABLE products, with the difference ranging from 20 to 40 basis points (0.20-0.40%). This is due in large part to the insurance premium increase that took effect March 17, 2017. As well, the rule changes on October 17, 2017 prevented lenders from purchasing insurance on conventional funded mortgages. By the Federal Government limiting the way lenders could insure their book-of-business meant the lenders need to increase the cost. We as consumers pay for that increase.

The insurance premiums are in place for few reasons; to protect the lenders against foreclosure, fraudulent activity and subject property value loss. The INSURED borrower’s mortgages have the insurance built in. With INSURABLE and UNINSURABLE it’s the borrower that pays a higher interest rate, this enables the lender to essential build in their own insurance premium. Lenders are in the business of lending money and minimize their exposure to risk. The insurance insulates them from potential future loss.

By the way, the 90-day arrears rate in Canada is extremely low. With a traditional lender’s in Canada it is 0.28% and non-traditional lenders it is 0.14%. So, somewhere between 99.72% and 99.86% of all Canadians pay their monthly mortgage every month.

In today’s lending landscape is there any reason to save the necessary down payment or do you buy now? Saving may avoid the premium, but is it worth it? You may end up with a higher interest rate.

By having to wait for as little as one year as you accumulate 20% down, are you then having to pay more for the same home? Are you missing out on the market?

When is the right time to buy? NOW.

Here’s a scenario is based on 2.59% interest with 19.99% or less down and 2.89% interest for a mortgage with 20% or greater down, 25-year amortization. In this scenario, it takes one year to save the funds required for the 20% down payment.

• First-time homebuyer
• Starting small, buying a condo
• 18.9% price increase this year over last

Purchase Price $300,000
5% Down Payment $15,000
Mtg Insurance Premium $11,400 (4% as of March 17, 2017)
Starting Mtg Balance $296,400
Mortgage Payment $1,341.09

Purchase Price $356,700 (1 year later)

20% Down Payment $71,340
Mtg Insurance Premium $0
Starting Mtg Balance $285,360
Mortgage Payment $1,334.40

The difference in the starting mortgage balance is $11,040, which is $360 less than the total insurance premium. As well, the overall monthly payment is only $6.69 higher by only having to save 5% and buying one year sooner. Note I have not even built in the equity that one has also accumulated in the year. The time to buy is NOW. Contact your local Dominion Lending Centres mortgage professional so we can help!

I remember the first time I learned about how compound interest can work for you. I was introduced by a friend to someone in the financial services industry and he explained a simple technique to easily calculate how compound interest can work for you – the Rule of 72. I was so excited and started running numbers. I was really amazed that I never once learned this in school. How could we miss such an important bit of information?

Canada’s economy continue to generate job growth in March, extending an employment rally that is the strongest in years, but with increasingly sluggish wage increases. Canadian employment grew by 19,400 in March–exceeding economists’ expectation for the fourth consecutive month–while the unemployment rate increased 0.1 percentage points to 6.7% as more people searched for work.

This brings job gains in the first quarter to 83,000 or 0.5%, which is comparable to the last quarter of 2016 and well above the first quarter of last year. This further flags a surge in Canadian economic activity in Q1, as real GDP growth is likely to come in at a 3.5% pace.

Another piece of very good news is that most of the employment gain was in full-time work. The net job gain in March reflected an increase of 18,400 full-time jobs and a gain of 1,000 part-time workers. The year-over-year increase in employment is posted at 276,400 (+1.5%), now mostly in full-time work, as the total number of hours worked rose by 0.7%. Canada has added 223,100 full-time jobs over the past year versus 53,300 part-time jobs.

Yet, the pace of annual wage rate increases fell to 1.1% in March, the lowest since the 1990s. The weakness in wage gains seems to be an Ontario phenomenon. The province, which has led employment increases over the past year, recorded an annual 0.1% increase in wages in March, also the lowest on record. On the brighter side, manufacturing looks like it came back in March, with a gain of 24,400 positions, the most since 2002. The rise in the number of hours worked helped to offset the weakness in wages.

Leading the way was strength in job growth in hard-hit Alberta, showing gains of 20,000, all in full-time work. More people sought jobs in the province last month, leaving the jobless rate unchanged at 8.4%–down from a peak of 9.0% in November. Job gains were also recorded in Nova Scotia and Manitoba. Employment in March fell in Saskatchewan, while it was relatively stable in the remaining provinces.

There were more people working in manufacturing; business, building and other support services; wholesale and retail trade; and information, culture and recreation. On the other hand, declines were recorded in educational services; transportation and warehousing; “other services”; and public administration. The rebound in manufacturing was the largest one-month increase since August 2002. This is on the heels of a downtrend in factory work throughout 2016.

The strength of today’s jobs report for March gives the Bank of Canada a lot to ponder when it meets next week. Real GDP is on track to beat the Bank’s forecasts for a third consecutive quarter and the unemployment rate at 6.7% remains below the 10-year pre-recession average, a time when the economy was considered to be at full-employment. The Bank has played down the recent upswing in economic data and this report will likely fuel their concerns even with the gain in employment. While economic growth has accelerated and employers are hiring, it’s tough to be sanguine about the expansion without a pick-up in wages. Wage rates are growing at only half the pace of the cost of living. The Bank of Canada will likely hold interest rates at today’s low levels despite the Federal Reserve’s rate hikes.