The Bank of Canada has once again held the overnight rate steady at 0.50 per cent pointing to continued low inflation and subdued wage growth, which the Bank judges to be consistent with continuing excess capacity in the economy.

In a very terse press release, the Bank suggests that the U.S. and global economies will gradually strengthen. Weakness in the U.S. economy in the first quarter is seen to be due to temporary factors with a rebound likely in the second quarter.

The Bank’s assessment of the Canadian economy is cautious. Despite what is likely to be 3.8 per cent growth in the first quarter, the Bank only commented that growth was “very strong” in the first quarter and “will be followed by some moderation in the second quarter.” There was no hint of coming interest rate hikes or other forward-looking guidance.

Governor Poloz and his colleagues did assess recent economic indicators to be encouraging, including business investment, which has lagged this cycle. The economic expansion has been driven by consumer spending and the housing sector, “which is becoming more broadly based across regions.” The Bank expects housing to slow in response to measures taken by the provincial and federal governments. Ontario imposed a foreign buyers’ tax in late April and new listings in the Greater Toronto Area surged more than 30 per cent in April. Anecdotal evidence suggests that home sales have slowed thus far in May.

Similar to the response to the foreign buyer tax imposed in August in Vancouver, home price inflation in the GTA is likely to slow in coming months. But the data for Vancouver suggest that the housing market has bottomed, with home price inflation likely to remain at roughly 11 per cent year-over-year.

The Bank stated that “macroprudential and other policy measures have contributed to more sustainable debt profiles,” even though household debt-to-income levels have hit a record high (see chart).

Exports remain “subdued”, owing to competitive challenges. Uncertainties, of course, persist–particularly on the trade side as NAFTA will be renegotiated in fewer than 90 days. Export duties have already been imposed on softwood lumber and President Trump’s rhetoric remains hostile, although the newly appointed U.S. Trade Representative, Robert Lighthizer, appears to be more conciliatory.

The Federal Reserve is widely expected to hike overnight interest rates again later this summer, keeping the Canadian dollar under downward pressure.
Dr. Sherry Cooper
Chief Economist, Dominion Lending Centres
drcooper@dominionlending.ca

Every homebuyer eagerly anticipates closing day. With the home purchase process completed, ownership of the property transfers from the seller to the buyer – you!

Closing date is negotiated as a condition of sale. You’ll typically have several weeks between the date that your agreement to purchase (sales contract) is signed and your closing date.

During that time, you and your real estate team will work to ensure that all the conditions of the sale are met so you can take possession on the agreed-upon date.

But what happens if a home sale falls through and you are unable to close?

Reasons why a home sale could fall through

It’s worth noting that the vast majority of purchase agreements close as expected. But the most common reasons why a sale may fall through are the following:

• The homebuyer fails to qualify for a mortgage.
• The homebuyer makes an offer to purchase a home based on the condition that they can sell their existing property first – and fails to do so.
• The homebuyer’s lender appraises the property at a value significantly lower than the agreed-upon purchase price. If the buyer can’t make up the shortfall from savings or the seller won’t lower the price, the buyer can no longer afford the property.
• There are title insurance or home inspection surprises. If a title report shows claims against the property or if a home inspection reveals serious flaws, it will jeopardize the sale.
• The homebuyer gets cold feet, changing his or her mind for any reason.

TIP: The best way to reduce the odds of failing to close on a home you want is to get mortgage pre-approval from the mortgage professionals at Dominion Lending Centres before you start house hunting.

Avoid making an offer on a potential money pit by scheduling a pre-sale inspection.

Your home sale falls through. Now what?

If you ever experience a sobering “it’s just not gonna happen” moment, contact your REALTOR® immediately.

If appropriate, they will send the seller’s agent a mutual release form, which releases both parties from the purchase agreement. As the buyer, you will endeavor to get your sales deposit back, and the seller is free to sell the home to someone else.

Problems arise if the seller refuses to sign the mutual release form.

Who gets the deposit?

If the seller refuses to sign the mutual release form, your deposit, which is held in a trust account, remains in trust until it is released by court order.

A disgruntled seller may decide to sue for damages that result from the failed purchase agreement. For example, they may end up selling the property to another buyer for less, resulting in a financial loss.

Or let’s say they purchased a home conditional on the sale of their existing home, and because you backed out, they either fail to close on that home or they must take out bridge financing to save the sale. They’ll probably want compensation for the extra costs and hassle.

While failure to close is an uncommon occurrence, it causes headaches for both buyers and sellers. Try avoiding it by getting mortgage pre-approval before you start house hunting, and by booking a pre-sale home inspection.

Most important, hire a real estate team. These experts can use their experience and professionalism to guide you through your sale, managing any bumps along the way.

As we truck along in 2017, Mortgage Brokers and Lenders are adjusting to the new risk based mortgage rate pricing that came into play after the Finance Minister changed Government backed mortgage default insurance regulations in late 2016.

Lenders often choose to pay for mortgage default insurance on mortgages where the borrower was not required to pay it themselves. This method protects a lenders book of business against credit loss, helps them package more secured mortgages together to sell to investors and reduces the amount of capital they are required to maintain. This method in the mortgage industry is called back-end insuring.

The changes have limited the mortgage profiles that lenders are allowed to insure using Government backed insurers. Essentially the Government is intentionally passing on the risk to Lenders by implementing stricter insurance qualifying guidelines and limiting mortgages that can be insured to what they consider lower risk “inside the box” mortgages.

The onus is now on the lender to absorb more costs if a borrower defaults. In the end costs are passed on to borrowers by lenders applying higher rates to less secured mortgages.

If you’re looking for a mortgage in today’s market your circumstances may not fit “inside the Box” and be an insurable mortgage profile and your mortgage rate may be higher. The following is a short list of what insurers have limited their guidelines to:

• 25 year maximum amortizations
• Must qualify by using a rate stress test
• Maximum Gross Debt Service Ratio (GDS) of 39% (shelter expenses)
• Maximum Total Debt Service Ratio (TDS )of 44% (all liabilities)
• No refinances
• No single unit rentals
• Purchase price must be less than $1 Million

As you can see the insurer’s list is limited making Dominion Lending Centre’s lender connections and mortgage solutions more important than ever! Our Mortgage Brokers have a vast amount of mortgage options available to cover “outside the box” uninsurable mortgage profiles. Whether your refinancing, you need an amortization over 25 years, want to buy a single-unit rental or more we have a mortgage for that!

Contact a DLC Mortgage Broker to get started on your mortgage approval today!

If you’re looking to buy a new home, one of the most difficult things can be putting together a down payment for the mortgage. So how much do you really need to put together before you can get into the home of your dreams? Let’s take a look at some of the different options, with their various pros and cons.

0% Down – A Thing of the Past?

If you’ve been in the housing market before, you might remember a time when banks offered extremely inexpensive mortgage options, including the “zero down payment” mortgage. Although these types of mortgages were extremely attractive for obvious reasons, you may remember a something called the Great Recession of 2008. The unfortunate downside to these mortgages was that far too many unqualified buyers were opting into mortgages they could not realistically afford. When these people defaulted en masse, it led, in part, to the collapse of the housing market. As a result, Canadian legislators moved to implement safety measures preventing such high-risk mortgages from being so freely available.

As a result, if you’re looking to buy a home through a federally-regulated lender, you will be required to make a minimum 5% down payment. On the other hand, most major credit unions do still offer zero down mortgages, primarily aimed at lower income families getting into the housing market for the first time. The benefits of this are obvious, requiring less money up front, but what are the downsides? The biggest drawback to this kind of mortgage is the high interest rate. Most of these plans carry an interest rate up to 150% higher than mortgages with 20% or more down. This interest can add up very quickly, in addition to mandatory insurance required for any mortgage with below 20% down. The cost over time of both these high interest rates and insurance can become daunting expenditures, dramatically reducing the attractiveness of these mortgages.

Mid-Range Down Payments – 20% Down

In the Canadian housing market, 20% down is a bit of a milestone. If you put together less than 20% for a down payment, you will be required to also purchase default insurance, a pricy addition your regular mortgage payments. However, if you have 20% or more, you will be exempt from this burden. Common wisdom dictates that, in the long run, you will save a substantial sum of money if you can put together at least 20% for a down payment, as it will reduce your monthly payments substantially.

If you fall somewhere between 0% and 20% in terms of your ability to put together a down payment, you might want to look into the climate of your housing market. For example, when moving into a very popular housing market, where prices are increasing at a fast pace, it could be more expensive to wait until you have a larger down payment, as the prices will increase at a rate which negates the benefits you’d receive by not having to pay insurance. In a mellower housing market, you may be better off saving up and avoiding the higher interest and insurance premiums of a lower down payment mortgage, since the cost of housing will not be likely to climb so quickly.

Whatever your specific situation, it helps to have professionals look into it with you and crunch the numbers to make sure that you’re making the best decision for you!

35% Down Payment – The Ideal Mortgage?

Further conventional wisdom dictates that if a 20% down payment is good, 35% must be even better. The importance of 20% is, of course, that the CMHC insurance is no longer required, but what if you’re situated so that you can afford an even larger down payment? Simply put, the more money you’re able to commit up front to a home, the less expensive it will be in the long run. Not only will you have less to pay off, but you will qualify for even more appealing interest rates. With lower interest rates and no insurance to worry about, the overall cost of your home will be substantially lower and you will be finished paying off your home far more quickly than if you were to put down the minimum.

Of course, not everyone is so situated that they can afford to put down 20-35% on a home. It’s important to note that, although there are benefits, a princely down payment is not required to get into the housing market. If you are a first-time buyer or belong to the low-to-mid income class, there are options available for you as well.

What’s truly important is to be able to take a frank, honest look at your finances, be clear about what you can and can’t afford, get professional assistance when needed, and do the math on what you’re getting yourself into. Buying a home should be an exciting experience, and it can be, provided you put in the necessary footwork! The mortgage professionals at Dominion Lending Centres are happy to help.

Recently a video appeared on Linkedin and a few other places singing the praises of porting your mortgage and making it seem like a walk in the park. If you have ever done one, then you would know that it is anything but that scenario.

Porting is not much different than qualifying for a new mortgage, the video talks about the client moving to a new town and just porting their mortgage along with them. Truth is if that you are moving to a new town and a new job you may be on probation and not qualify for the mortgage. The lenders also have to approve the new property as well so a lot more factors that need to be considered.

If you are porting the mortgage and don’t need any more money as in the new house is the same value, then there isn’t much issue. What if the new home is more money and you need to increase the mortgage then the lender has an opportunity to blend the two rates and your mortgage payment could go up. If you need to reduce the mortgage amount, then you may also face a penalty on the amount reduced.

Another factor not talked about is that you still need a down payment for the new home it’s not just going to be a simple move over and continue on with your mortgage. The other thing that happens is that your lender will usually take the full penalty out of the sales proceeds and refund it to you after the sale has completed. In some cases, this process could take up to a month meaning you need to cover the short fall at closing and wait for it to come back to you.

And last but not least how long of a period do you have to port your mortgage, did you know they range from 1 day to 120 day’s maximums? In the case of one day that mean the lawyer has to close both sales in that time frame.

Overall its prudent to get professional advice from your Dominion Lending Centres mortgage professional.

With an increase in concern about fraud, lending institutions are getting strict on documentation for mortgage approval.

As part of the mortgage approval process, your mortgage broker will ask for documents to show proof of your income, down payment and possibly other items such as proof of permanent residency and other identification. Since most of that paperwork is in your home in hard copy many people simply take a photo on their phone and send it over by email. As lenders are getting strict on documentation they are not accepting photograph copies and some lenders are not accepting a JPEG file or other formats. They will want a PDF copy of the document.

So I suggest to clients –keep it simple—and make a digital file of all of your important documents stored in a safe — place such as an external hard drive or offsite server location.

1. Your passport or other important forms of identification

2. PDF copies of your T1 General tax returns and Notice of Assessment from CRA.

3. If you need to make a copy of a bank statement get it scanned and copied to a PDF

DO NOT take a photo of your documents and keep them on your phone OR consider those as good forms for lender financing purposes.

When in doubt ask your Dominion Lending Centres mortgage professional.

Remember – these extra steps may be frustrating but this level of security are in place to protect all of us from fraudulent practices by criminals.

What is a mortgage renewal you ask?

Each mortgage has a set term which can vary from 1-10 years. Just before the end of your term you will receive an offer from your current lender and you have 3 options:

1. Sign and send back as is.
2. Check the market to make sure you are getting the best rate and renegotiate with your current lender
3. Move the mortgage to a new lender.

Option 1 is not a very good idea in my opinion. The onus is on you to make sure you are being offered the best rate. Banks are a business like any other and they are seeking to make the highest profits they are able as to keep their shareholders happy. There is nothing wrong with that. That does mean however that you as a savvy consumer should take a few minutes to ensure you are being offered the best possible rate you can get.

Think of it as the sticker price on a vehicle at a dealership. The rate you are being offered is a starting point for discussion, not the final price. Let’s look at an example:

• Mortgage of $300,000 with an amortization of 25 years.
• Your offer is for 3.19% for a 5 year fixed = $1449.14/month and you will owe $257,353.34 at the end of the term
• Best rate is 2.59% for a 5 year fixed = $1357.38/month and you will owe $254,372.59 at the end of the term

You would pay $91.76 less each month or $5505.60 over all 60 months and still owe $2,980.75 less.

So you need to ask yourself if you are OK handing that money over to the mortgage provider or if you would prefer to keep it yourself and I am pretty sure I know what your answer will be.

So here are the steps I mentioned to save yourself all that money.

1. Receive the offer from the mortgage lender and actually look at ASAP so that you have enough time to make an informed decision.
2. Research via the internet and phone calls to find out what the best rate even is.
3. Phone your current lender and negotiate! OK, you are going to have to get downright assertive and that may be uncomfortable but when you compare your comfort to the thousands of dollars you could save, you will see that it’s worth it.
4. If said lender will not offer you the rate then move the mortgage. You will have to provide paperwork and complete the application but if you keep in mind the example from above then I repeat, it’s worth it.
5. Take a look at your budget and see if you can increase the payments to decrease the mortgage and save yourself even more as the overall interest costs decrease.

Keep in mind when that renewal notice arrives that you literally have the power to save yourself money and you are not obligated to accept the first offer which is presented to you and I truly hope you do not. If you need some more information, please do not hesitate to contact your Dominion Lending Centres mortgage professional.

Buying a home is financial decision, but also an emotional experience.

Before we’ve explored every room, we often start imagining our new lives there. Where our furniture will go. The parties we’ll host in the open-concept living-dining space. The mornings we’ll spend at the breakfast bar overlooking the garden or skyline… When a home speaks to us emotionally, the fear of missing out on it can set in fast.

That’s especially true in a real estate market where multiple offers and bidding wars are common, where a financing condition can put you at a disadvantage, and where prices are at all-time highs.

According to the 2017 Genworth Canada Homeownership Study, 60% of first-time buyers were worried they might miss out on the “perfect” house. That can lead emotional homebuyers to act against their own best interests by, for example, forgoing important conditions, or paying more than they had budgeted.

There’s no need to lose the dream — you will host those parties — but you’ve got to take emotion out of the deal, and these strategies will help.

Assemble your entire team before looking at any property.

That means: interview experienced real estate agents with expertise on your desired neighbourhoods; consult a financial advisor to help determine how homeownership fits into your other goals (a wedding, saving for a child’s education, retirement planning, etc.) and establish a budget including “what-if” scenarios, such as a layoff or maternity leave; find a DLC mortgage broker to help you secure a pre-approval, explain your options, and answer your questions here. You may be able to achieve homeownership sooner than you think. Find out how

Get the names of 3 home inspectors. Call and introduce yourself now.

Many emotional homebuyers forego the inspection process in an effort to make their bid more competitive. That’s a risk. With 3 recommended inspectors on speed dial, you should be able to get a qualified professional to visit a property the day you want to make an offer. Your real estate agent is one source of referrals, or check with the Canadian Association of Home and Property Inspectors.

Don’t visit properties outside your price range.

Best-case scenario, you’ll walk away deflated. Worst-case scenario? You’ll bid on something you can’t comfortably afford. Stick to your homeowner budget (likely to be higher than renting, since it includes property taxes/maintenance fees, utilities, etc.) and practice living on it for a few months before you decide to make a purchase.

Focus on the things you can’t see.

The efficiency of the heating and cooling systems, the age of the roof, the state of the electrical… these matter most when it comes to deciding if a home is a good financial deal. Hardwood floors, quartz counter tops, and stainless steel appliances can be seductive, but they shouldn’t be a priority.

Surprise repairs and upgrades to fundamentals — like a furnace on its last legs, plumbing that isn’t to code, or uninsurable knob-and-tube wiring — could sink your budget. And if problems have been covered up, you might just have to rip out those magazine-worthy finishes and details.

There is no disputing that buying a home is a massive financial decision as well as an emotional experience. But minimizing emotions throughout your homebuying experience is a heads-up move that will ultimately benefit you.

For more tips on what you should know before you purchase a home visit www.homeownership.ca.

If you have not yet found yourself skimming the news online today, you may not have heard yet about the Provincial Government’s announcement regarding the Ontario Housing and Rental Markets.

The Provincial Liberal Government, laid out for the Province their plan to address issues in key aspects of the Real Estate and Rental Property Markets in the Province. There were 16 steps in total, however for this post, we are going to focus solely on the announced changes that deal directly with Rental Properties and Landlords. These changes may directly impact our clients whom have or plan to acquire rental property. (Keep in mind that these were just announcements and many of them will have to be passed in the legislature before officially becoming law, although passing is highly likely).

1. Standardized Lease Agreements – The new plan stipulates that rental agreements/leases in Ontario for rental properties will be standardized. This helps the government ensure that lease agreements meet legislation requirements pertaining to landlord/tenant relationships and their respective rights.

2. Expansion of Rent Controls – Currently, any privately owned rental properties that are newer than 1991 are not impacted by Ontario’s rent control legislation. Meaning that a landlord has complete control on rent setting.

To gain control of skyrocketing rents (typically being experienced in Toronto and the Golden Horseshoe markets) the Province is expanding the Rent controls to all privately held rental properties regardless of the year they are/were build. The change would mean that rental rate increases would be capped at annual amount stipulated by the Landlord and Tenants Board. Those increases are typically in line with or around the rate of inflation. Even though this increase needs to come through approved legislation, the change will take effect today, April 20th.

3. Vacancy Taxes – Although a specific tax is not being created by the Province, they are creating new powers for Toronto and other municipalities to introduce a tax on vacant homes in their respective communities. The tax is designed to encourage owners of vacant properties to make these available to tenants or be forced to pay a tax to the municipality.

4. Creating a rebate program designed help with Development Cost Charges to incentivize the building or more rental housing.

5. Ensuring that Property Tax for new multi-residential apartment buildings is charged at a similar rate as other residential properties. Designed to encourage developers to build more new rental housing.

As we have become accustom to in the industry, change is always inevitable and many of the changes laid out today are not a surprise. Some of these have been rumored or discussed for some time. The most substantial of those changes impacting owners of rental properties is likely the changes proposed to the rent control rules, although this truly only impacts those owners who have properties that are newer than 1991.

Should you have any questions about any mortgages on properties that you own, please feel free to contact your local Dominion Lending Centres mortgage professional. We would be more than happy to complete a full review of your property portfolio and discuss what options might exists for either saving money on interest or accessing equity for another investment.

Reverse Mortgages have had their share of misconceptions. In fact, we are often approached with false assumptions and unfounded facts about the product that steer the public to think of the product in a negative light. This article will cover one of the most common myths and the real facts behind this myth that has long been misinterpreted.

Myth: One of most common misconceptions that we hear time and time again is that you will lose ownership of your home to us.

Fact: This statement is false. HomEquity Bank, the provider of the CHIP Reverse Mortgage has taken several measures that ensure the protection of your equity.

1) Retain ownership of your home: Just like with any other mortgage, your home is used to secure the loan, which means that HomEquity Bank is registered as a standard charge on title. You, as a customer DO NOT transfer ownership of your home to us. In fact, once it’s time to pay back the mortgage you or your heirs have the choice to settle the loan however you or they want. Selling the home is the most common option, but it is not mandatory.

2) Our conservative lending practices: In our ads and on our website, we remind the customers that they can get up to 55% of the value of their home in a reverse mortgage loan. Of course, this amount does depend on the borrower(s) age, their property type as well as the location of their home. But as a rule of thumb, the younger the borrower is, the less they will qualify for and the older the borrower is, the more they will qualify for. This is because we want to make sure that the borrowers reverse mortgage loan doesn’t exceed the value of their home.

3) The potential value appreciation of your home: Many people don’t realize that their home may appreciate in value, however the interest that accrues only accumulates on the small borrowed amount of the home. That is why we say in our marketing pieces that “99% of homeowners have money left over” when their loan is settled.

This graph illustrates how the interest is affected when a home appreciates in value. For illustration purposes, we have used 3%, a modest level of home appreciation, which allows for equity preservation after a borrower takes out a CHIP Reverse Mortgage for 15 years. This example illustrates the following:

• Home appraised at $500,000.
• Homeowner(s) qualify for $200,000 (40%) of the value of their home in a CHIP Reverse Mortgage.
• The homeowner(s) take the CHIP loan for 15 years before they move, sell or pass away.
• The home appreciates at 3% and the new home value after 15 years is $778,984.
• The principal plus interest total $457,288 and the estate still has $321,696 in equity (41% of the home value at time of sale).

Home Equity Preservation Graph – CHIP Reverse Mortgage
The following graph is for Illustration purposes only *

4) Negative equity guarantee – Many people ask, “what happens if the house doesn’t appreciate in value, and in fact depreciates?” Our negative equity guarantee ensures that if your home depreciates in value at the time the home is being sold, and the loan amount due is more than the sale amount of the property, the homeowner or the heirs will not be financially penalized for being on title of the home. In fact, HomEquity Bank, will pay the difference between the sale amount and the loan amount when the loan amount due is more than the sale amount of the property. However, just like all other home equity loans, the homeowner(s) must keep their property taxes up to date, and maintain the condition of their home. If these conditions are met, the borrowers will never owe more than the fair market value of their home, when the home is sold.

The above measures are all the reasons why a CHIP Reverse Mortgage customer will not lose their home to the lender. A CHIP Reverse Mortgage provides a great solution for a growing number of Canadian retirees. For more information on this solution for homeowners 55+, contact your local Dominion Lending Centres mortgage professional.

* The illustration uses conservative values:

• Example based on the national price of Canadian homes of $500,000 (Average home price in Canada is $519,521 according to the CREA, February 2017)
• Example based on CHIP Reverse Mortgage advance of 40%
• Home appreciation of 3.00%. Average home appreciation is 7.16% annually. (Source: CREA, Canadian Real Estate Association 15-year national house appreciation average, February 2017). HomEquity Bank makes no representations on future housing market performance.
• CHIP interest rate of 5.59%. The Annual Percentage Rate (APR) is 5.79%, which is the estimated cost of borrowing for 5 years expressed as an annual percentage. The APR includes interest and closing costs.