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First-Time Homebuyers: What you should know

2010-07-17 | 11:56:43

Make sure you’re prepared to pick the options that will work best for you.

www.msn.money.com  July 17, 2010

Buying a home is never easy. Do you go with the great house in the so-so neighbourhood or the fixer upper in the best neighbourhood in town? Do you accept a long commute or insist on something close to work? Condo or bungalow? New construction or resale? There are so many factors to juggle when choosing a house - and I haven't even mentioned price yet. Buying a home is even harder for a first timer. They do not have the benefit of equity in their existing home; they are likely several years away from their peak earning potential; and they haven't yet made — and learnt from — the mistakes that existing homeowners take for granted.

I'm happy to report that a recent study shows that 93 per cent of first-time home buyers do their homework, 91 per cent get pre-approved and 85 per cent estimate their utility costs. On the downside, almost half of new home buyers feel unprepared for transfer taxes, closing costs and legal fees.

Most buyers want the home of their dreams. We all do. But perhaps first-time buyers are biting off more than they can chew. Only 30 per cent plan to or have more than a 20 per cent down payment. The rest will require their mortgage to be insured by organizations like the Canada Mortgage and Housing Corporation (CMHC). It shouldn't come as a surprise that 60 per cent are worried about being able to afford their home if interest rates rise.

If you're thinking about buying your first home here are some considerations:

Ask yourself what type of home makes sense for you
New homes are often more energy-efficient and you may have the opportunity to customize many of the features such as tiles, flooring and fixtures. However, resale homes are often located in established communities giving you a chance to get a better feel for the neighbourhood and its amenities such as schools, transit, shopping and entertainment.

If you choose resale, do you want a home that's ready to move into or a fixer-upper? If you have the time and inclination to renovate, your home will certainly reflect your personal style, but it takes a considerable amount of planning and patience to see it through.

Work with your financial planner to figure out what you can afford. Home ownership should fit into your lifestyle, but it should not become your lifestyle. Many buyers take on more debt than they can manage and quickly find themselves house-poor. Step one is to get pre-approved for a mortgage. What kind of mortgage is right for you?

Conventional or high-ratio mortgage
You must have at least a 5 per cent down payment when you buy a home. With a conventional mortgage, you make a down payment of 20 per cent or more, making no more than 80 per cent of the price of the property borrowed.

If you have to borrow more than 80 per cent of the money you need, you'll be applying for what is called a high-ratio mortgage. It must be insured by the CMHC or Genworth Financial Canada. The insurer will charge a fee for this insurance. The fee will depend on the percentage of your own down payment. Typical fees range from one per cent to 3.25 per cent of the principal amount of your mortgage. This amount can be paid up front or added to the principal portion of your mortgage.

Fixed rate or variable rate
When you take out a fixed-rate mortgage, your interest rate will not change throughout the entire term of your mortgage. As a result, you'll know exactly how much your payments will be and how much of your mortgage will be paid off at the end of your term.

With a variable-rate mortgage, your rate will be set in relation to your financial institution's mortgage prime rate at the beginning of each month. In other words, it may vary from month to month. Historically, variable-rate mortgages have tended to cost less than fixed-rate mortgages when interest rates are fairly stable.

When rates change, your payment amount remains the same. However, the amount that is applied toward interest and principal will change. If interest rates drop, more of your mortgage payment is applied to the principal balance owing. This could help you pay off your mortgage faster.

Short term or long term
The term is the length of the current mortgage agreement. A mortgage typically has a term of six months to 10 years. Usually, the shorter the term, the lower the interest rate.

A short-term mortgage is usually for two years or less. A long-term mortgage is generally for three years or more. Short-term mortgages are appropriate for buyers who believe interest rates will drop at renewal time. Long-term mortgages are suitable when current rates are reasonable and borrowers want the security of budgeting for the future.

The key to choosing between short and long terms is to feel comfortable with your mortgage payments. After a term expires, the balance of the principal owing on the mortgage can be repaid, or a new mortgage agreement can be established at the then-current interest rates.

Open or closed
Open mortgages can be paid off at any time without penalty and are usually negotiated for very short terms. They are suited to homeowners who are planning to sell in the near future or those who want the flexibility to make large, lump-sum payments before maturity.

Closed mortgages are commitments for specific terms and cannot be prepaid, renegotiated or refinanced before maturity, except according to the terms set out in the contract.

Closing costs
There are other costs. Closing costs are the legal and administrative fees associated with buying your home. Understanding each one will help you budget more accurately and lead to a more comfortable home-buying experience.

Land transfer taxes
Most provinces levy a one-time tax when you buy a home. The tax is based on a percentage of the purchase price of the property, and varies from province to province. In Ontario, for example, the rate is ½ per cent on the first $55,000 of the purchase price, one per cent on the next $195,000, 1.5 per cent on the next $150,000 and two per cent on the remainder.

Legal/notary fees
You should be represented by a lawyer or notary during the purchase and mortgaging of the property, and you are responsible for paying the lawyer's or notary's fees and disbursements.

Fire insurance
You are required by the mortgage lender to have fire insurance effective at the time you legally take possession of your new home. Some insurance companies may demand proof of a home inspection or may not insure certain types of dwellings. Make sure that you enlist your insurance agent early.

You've no doubt dreamed about that perfect kitchen or deck, the vaulted ceilings or the backyard pool. You don't need me for that. But hopefully if you've also begun to factor in the right type of mortgage and the costs that you hadn't thought about, your new home-sweet-home, will be that much sweeter.

2010-06-01 | 10:25:00

The overnight benchmark rate has increased by 0.25% and it is expected that the banks Prime lending rates will also increase by 0.25% to sit at 2.50%.

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www.mortgagebrokernews.ca

| Tuesday, 1 June 2010

After more than a year at a record low level, Bank of Canada Governor Mark Carney raised the benchmark interest rate for the first time since 2007 by one-quarter percentage point to 0.5 per cent.  This is the first time since 2007 that that rate has increased and the Bank of Canada is the first in the Group of Seven to do so since the financial crisis and recession began in 2008.
In a statement Carney emphasized that the increase should not be interpreted as just the first of more to come.
"This decision still leaves considerable monetary stimulus in place, consistent with achieving the 2 per cent inflation target in light of the significant excess supply in Canada, the strength of domestic spending and the uneven global recovery,'' the central bank said. ``Given the considerable uncertainty surrounding the outlook, any further reduction of monetary stimulus would have to be weighed carefully against domestic and global economic developments.''

Canada's banking system healthiest in the world

2010-06-01 | 10:16:47

Something all Canadians should be proud of! We're not just a world leader in hockey...we're a world leader in the financial sector as well.

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Canada's banking system is a model for the United States and European countries struggling to cope with mountains of debt accumulated through a series of market crises, massive bailouts and recession according to a report in the Washington Post this morning.

The International Monetary Fund and World Economic Forum (IMF) is showcasing Canada for having the healthiest banking system in the world. . The IMF, in probing what made Canada's mortgage lending system so resilient during the crisis, concluded that it was "boring" compared with the complicated, sophisticated and expensive financing system in the U.S., but nevertheless effective and safe.

Canada and its banks were barely touched by the 2008 financial crisis that nearly brought down the U.S. banking system and led to the biggest recession since the Great Depression.
Canadian bank losses were so low, and their cushion of reserves so high, that the banks managed to post profits for months in the aftermath of the 2008 crisis while major U.S. banks were teetering on the brink of insolvency and getting $250 billion in Treasury bailouts to cover burgeoning losses on bad mortgage loans.

"The Canadian experience showed that more prudent lending and borrowing played a big part in preventing the housing bubble that proved the near-undoing of the American banking sector," said Robert Elliott, a Canadian banking lawyer at Fasken Martineau.
Though major U.S. banks have been recapitalized by the government and are posting profits again, "all the fresh capital in the world may not prevent another cycle of misery down the road" unless the U.S. also adopts more prudent lending practices, he said

Beware of Mortgage or Title Fraud

2010-05-07 | 09:27:50

As a homeowner, you need to be aware of crimes on the rise known as mortgage fraud and real estate title fraud.

Mortgage Fraud

The most common type of mortgage fraud involves a criminal obtaining a property, then increasing its value through a series of sales and resales involving the fraudster and someone working in cooperation with them. A mortgage is then secured for the property based on the inflated price.

Following are some red flags for mortgage fraud:

• Someone offers you money to use your name and credit information to obtain a mortgage
• You are encouraged to include false information on a mortgage application
• You are asked to leave signature lines or other important areas of your mortgage application blank
• The seller or investment advisor discourages you from seeing or inspecting the property you will be purchasing
• The seller or developer rebates you money on closing, and you don’t disclose this to your lending institution

“Straw Buyer” Scheme
Another term for mortgage fraud is the “straw” or “dummy” homebuyer scheme. For instance, a renter does not have a good credit rating or is self-employed and cannot get a mortgage, or doesn’t have a sufficient down payment, so he or she cannot purchase a home. He/she or an associate approaches someone else with solid credit. This person is offered a sum of money (can be as much as $10,000) to go through the motions of buying a property on the other person’s behalf – acting as a straw buyer. The person with good credit lends their name and credit rating to the person who cannot be approved for a mortgage for his or her purchase of a home.

Title Fraud
Sadly, the only red flag for title fraud occurs when your mortgage mysteriously goes into default and the lender begins foreclosure proceedings. Even worse, as the homeowner, you are the one hurt by title fraud, rather than the lender, as is the case with mortgage fraud.

Unlike with mortgage fraud, during title fraud, you haven’t been approached or offered anything – this is a form of identity theft.

Here’s what happens with title fraud: A criminal – using false identification to pose as you – registers forged documents transferring your property to his/her name, then registers a forced discharge of your existing mortgage and gets a new mortgage against your property. Then the fraudster makes off with the new home loan money without making mortgage payments. The bank thinks you are the one defaulting – and your economic downfall begins.

Following are ways you can protect yourself from title fraud:

• Always view the property you are purchasing in person
• Check listings in the community where the property is located – compare features, size and location to establish if the asking price seems reasonable
• Make sure your representative is a licensed real estate agent
• Beware of a real estate agent or mortgage broker who has a financial interest in the transaction
• Ask for a copy of the land title or go to a registry office and request a historical title search
• In the offer to purchase, include the option to have the property appraised by a designated or accredited appraiser
• Insist on a home inspection to guard against buying a home that has been cosmetically renovated or formerly used as a grow house or meth lab
• Ask to see receipts for recent renovations
• When you make a deposit, ensure your money is protected by being held “in trust”
• Consider the purchase of title insurance

It’s important to remember that if something doesn’t seem right, it usually isn’t – always follow your instincts when it comes to red flags during the home buying and mortgage processes.

DLC Wins BIG at 2010 CMP Canadian Mortgage Awards

2010-05-04 | 14:14:22

Dominion Lending Centres dominated the CMP Canadian Mortgage Awards on Friday, April 23^rd at Toronto's Liberty Grand – walking away with five prestigious national awards!

Dominion Lending Centres took home top prizes for Mortgage Brokerage of the Year, Best Branding and Best Advertising. Meanwhile, one of our veteran broker/owners, Gary Meger, Neighbourhood Dominion Lending Centres in Barrie, ON, won Mortgage Broker of the Year. Finally, the Business Development Manager for our extensive white label Dominion Mortgage line of products, Cynthia Kramer, won Lender BDM of the Year!

“We are absolutely honoured that our industry peers and partners, as well as an esteemed panel of judges recognized Dominion Lending Centres with these incredible awards,” says Gary Mauris, President of Dominion Lending Centres.

“We will continue to provide our more than 1,700 brokers and agents across the country with value-added tools and services to ensure we remain on top, and are the company of choice for Canadian mortgage consumers,” Mauris adds. 

This is the second consecutive year Dominion Lending Centres has captured the Best Branding award. Dominion Lending Centres is the only mortgage brokerage in Canada that has an advertising fund to ensure we gain access to households across the country via advertising – our main advertising vehicle being Television.

If you haven't yet noticed an upsurge in Dominion Lending Centres TV commercials, you soon will! This month and next, we have an increased presence across the country on News and Sports programming, culminating in an astounding 12.2 Million additional viewer impressions in the key demographic of consumers between the ages of 25 and 54! This is on top of the more than 240 Million viewer impressions we will make this year.

Earlier this month, six new Dominion Lending Centres commercials began airing across Canada. The key message follows a theme that interest rates are still near historic lows, and encourages viewers to contact a Dominion Lending Centres mortgage professional through our main website – www.DominionLending.ca – when purchasing a new home, or renewing or refinancing an existing mortgage.

Press Release

About the CMP Canadian Mortgage Awards

The CMP Canadian Mortgage Awards annual black-tie gala and awards evening celebrates the best of the best in the Canadian mortgage brokering industry. The evening is considered the Oscars of the mortgage brokering industry since no one knows who will walk away a winner in each of the 20 categories until their names are announced at the live ceremony. Awards details are available at: www.canadianmortgageawards.com

About Dominion Lending Centres

Dominion Lending Centres is Canada’s fastest-growing national mortgage brokerage and leasing company with more than 1,700 Mortgage Professionals spanning the country. Launched in January 2006, the company was named Best Newcomer (Mortgage Brokerage Firm) at the CMP Canadian Mortgage Awards 2008. And at the 2009 CMAs, the company received the Best Branding Award. Dominion Lending Centres was also ranked 23^rd on the PROFIT HOT 50 list of emerging growth companies that appeared in the October 2009 issue of Profit Magazine.

For more information, please contact:

Mike De Bokx

Mortgage & Leasing Professional

Dominion Lending Centres - House

Ph:  403-804-9804

E-mail:  mdebokx@dominionlending.ca

Website:   www.MikeDeBokx.ca

Economic optimism spurs Alberta homebuyers: poll

2010-04-12 | 11:00:26