2 May

Why You Should Use a Mortgage Broker


Posted by: Garry Grewal

Bank representatives typically have only a few mortgage products available. Independent mortgage brokers have access to many lenders (various banks, credit unions, trust companies and private lenders) to help you put together the mortgage that works best for you!

Although almost everyone wants a mortgage with the best rates, terms and conditions possible, yet many people still take the mortgage product offered by their bank without shopping around. However, when dealing with a bank, you are only negotiating with one lender and only for their limited line-up of products. Even if you have been a long time customer of a bank, it does not mean you will be offered the best rate or product possible.

Long-held beliefs sometimes include the idea that mortgage brokers are only for people who have bad credit or were turned down by a bank. Unfortunately, anyone with this kind of outdated thinking could be losing thousands of dollars! All homebuyers and homeowners can save time and money by enlisting the services of a broker.

I have years of experience in the financial industry and know how to keep my clients happy. It starts with listening to them so as to better understand their situation and their needs. Not every borrower is the same and many face challenges. My financial background allows me to examine all available mortgage options to determine which one best suits a particular need. I

have access to many competing lending institutions, including banks, trust companies and even private individuals. Widespread access to lenders guarantees a completely unbiased recommendation every time with only the best interest of the client in mind. There are other potential cost savings. For example, a particular lender may have a special rate offer for a specific mortgage term. If you are rate-shopping on your own and don’t know who is sponsoring the offer, you can’t take advantage of the special pricing.

At mortgage renewal, many homeowners take the renewal quote and choose a term and rate offered by the lender without realizing that a mortgage broker may be able to save them up to one percentage point off the posted rate. This can translate into thousands of dollars in savings over a five-year term. To ensure you get the best rate, just call me at 416-674-5626 four months before you renew an existing mortgage or consider a new home purchase. Starting early can be a money saver because a broker can usually guarantee an interest rate for 90-120 days. Should rates drop in the meantime, you would of course get the lower rate.

If your credit rating is important to you, then you also need to consider that when you take it upon yourself to shop from lender to lender, there is an accumulation of inquires on your credit bureau report, affecting your credit rating and ultimately the rate and terms of your mortgage. This is not the case with me, since with a single inquiry I can obtain many competing lenders to quote on your business.

Finally, fees payable are an important misconception that should be clarified. Some people think that using a broker will be costly and that there will be an upfront fee. In most cases, there is no fee at all because the lender that provides the mortgage pays the broker’s fee for obtaining the business. As you would expect, a fee may be charged to clients with impaired credit or when private money is used, although this compensates for the time and effort required to negotiate the mortgage.

1 Mar

25 Tips To Help Pay Off Your Debt Faster


Posted by: Garry Grewal

1. Make a double mortgage payment whenever you can. Doing this once a year can help pay off the mortgage 4 years sooner! If your payment is $2,000 a month, four years of no payments is $96,000!!

2. Increase the frequency of payment. Going from monthly to accelerated bi-weekly can reduce your mortgage by over three years! For a mortgage with $2,000 monthly payment, three years of no payments is $72,000!!

3. Increase your payment. For example a one-time 10% increase can shave 4 years off the mortgage. That’s $96,000! Imagine if you bumped the payment 10% every year from the get go!!! You would be mortgage free in 13 years! Start to finish! Can’t do it? How about 5% every year? You would be mortgage free in 18 years! Or how about increasing the payment by the amount of your annual raise?

4. Lump sum payments … same idea … mortgage is gone way faster! Even just one payment a year equivalent to 1 monthly payment will give you similar results as #2 above! How about using your annual work bonus?

5. Renegotiate whenever rates drop to save interest and pay mortgage faster! Generally a good idea, however, get independent professional advice (a cost benefit analysis) to make sure it makes sense for you at that time: I can help! A 1% reduction on a $300,000 mortgage will save $250 a month … times 5 years … that’s $15,000!!

6. Keep your credit rating high to obtain the best rate. Always pay on time. Never let payments slip past their due date. Always keep balances low in relation to credit limits on credit cards, lines of credit, etc. 50% or less is best even if you pay the balances in full every month. What generally reports to the credit bureau is the statement balance each month. So if your credit limit is $3,000 and you are running $3,000 a month through the card each month (to collect all those points you never spend or can’t use in blackout periods) and paying in full, it will look like you are maxing out your credit limit and your credit score will drop accordingly.

7. Increase your mortgage! It may sound counterproductive! Do it to roll in your credit cards, line of credit, car loan, etc., for a better rate and a set payment plan. Do you have a low or promo rate credit card? Those seldom end well. Keep the total payment amount the same but pay it in one neat monthly payment to the increased mortgage.

8. Make an RRSP contribution and use the refund to pay down your mortgage.

9. Go variable rate with your mortgage but keep payments as if fixed (higher) rate. Variable rates usually win out over fixed rates in the long run. By paying a higher payment you will pay off the mortgage faster. It’s also a buffer in case the rate rises above the fixed rate for short periods of time. Remember that variable rates are not for everyone. Get independent professional advice to find out what is best for you. I can help again!

10. Take your mortgage with you when you change properties to avoid penalty or higher rate on a new mortgage. This is called “porting”. Make sure that your mortgage has this feature. It is not widely known and could save you a ton of dough.

11. Set up auto savings every pay cheque, even $10, when it reaches the amount of one mortgage payment, apply it to the mortgage. This concept goes nicely with #4 above.

12. Unhook from the money drip … stop paying with your fancy points credit or debit card. Way too easy to overspend! Go old school, go off the grid … pay cash, it works!

13. Don’t ever buy on layaway, you know, six months don’t pay schemes. You think … No problem I’ll just pay it in six months, it will be okay. Think again! If you don’t have it, don’t spend it.

14. Downsize your house. Two good friends and clients of mine, having followed many of the tips here, are in great shape except they have a six bedroom house! Two people, six bed house – go figure! They are nearly debt free so no worries, but can you say the same? Circumstances change, make the adjustments along the way!

15. Don’t want to move? Convert the basement/rooms to rental and use the income to pay down debt.

16. Convert your mortgage to tax deductible. If you are self-employed, own rental property or have investments, this is likely possible. I won’t go into details here, just ask me how.

17. Have a payment priority. Pay ‘on time.’

18. Pay off the highest interest rate first.

19. If you have tax deductible loans, pay them off last, slowest. Pay the non-tax deductible loans first and fastest.

20. Pay off ugly debt first. Stuff like credit card purchases.

21. Payoff bad debt next. Stuff like car loans, boat loans. Things that depreciate in value.

22. Pay off good debt (or shall I say “not so bad debt”) last. Stuff like mortgages, investment loans. Things that hopefully appreciate in value.

23. Buying a car? Finance it if you have to, don’t lease! Check with a professional first – if you are self-employed it might make sense.

24. You have $20,000 in a secret bank account for a rainy day fund and $20,000 owing on a line of credit. Seriously? The bank account is paying you next to nothing (which is taxable income to boot) and the line of credit rate is way higher (and not tax deductible.) You know what to do! You can keep the line of credit open and on standby for rainy day funds. Make it the secret line of credit that you have but never use.

25. Give your Banker more money. No really. Keep enough in your chequing account to meet the minimum requirement to waive your service charges. “My bank charges $10 a month for 25 transactions and nothing, zero, zilch, zip if I keep $2,500 in the account.” Let’s see $10 x 12 is $120 a year to pay off debt. I’d have to earn 5% with the $2,500 in my savings account to come out ahead. No brainer here. Oh yeah, if you need more than 25 transactions a month…see #12 above.

26. #26? BONUS TIP and MOST IMPORTANT. Let’s face it, you’re not the Government and you’re not a Bank, you can’t run deficits forever and you won’t get a bailout … stop procrastinating already! See 1 through 25 above and take action now!

A Word of Caution: Beware of some too-good-to-be-true ultra-low-rate mortgages. These “no frills” mortgages are often loaded with restrictions like pre-payment limitations, fully-closed terms, stripped-out features, or unusual penalties. You really need to compare product to product. If you’re not looking at what you’re giving up, you may regret it in the future. This alone could prevent you from taking advantage of tips #1, 2, 3, 4, 5, 7, 8, 9, 10, 14, 16 and 22!

Call me any time at 416-674-5626 for a confidential conversation and an objective review of your debt situation.

1 Feb

The Differences Between Mortgages and HELOCs


Posted by: Garry Grewal

Homeowners should know the differences between a conventional mortgage and a Home Equity Line Of Credit (HELOC).

A conventional mortgage is a registered charge against your home. There is a set term – 6 months to 10 years with a fixed or variable interest rate. Payments include principal and interest. Many homeowners choose a fixed rate as it is easier to set budgets knowing the interest rate won’t change during the chosen term. Variable interest rates will change as Prime rate changes. You can purchase a home with as little as 5% down payment. If you have less than a 20% down payment (equity) the maximum amortization is 25 years. With more than 20% down, a 30 or 35 year amortization is available.

A HELOC is a secured line of credit also registered as a charge against your home. This charge can be in first position but generally is added behind a conventional mortgage. Some lenders will not permit another charge on title. Like any line of credit, a HELOC is fully open and you can borrow, re-pay and re-borrow. The interest rate is tied to the Prime rate and may fluctuate. Canadian Government regulations stipulate that a HELOC cannot exceed 65% of the value of your home, unless in second position when combined with a mortgage, in which case you can borrow to 80% of the value and qualifying must be done on a 25 year amortization using the government regulated benchmark rate. Payments can be as low as interest only but that should truly be the never-never plan for repayment. Any spikes in interest rates can throw off the most dedicated budgeters!

If used responsibly and with a sound strategy, a HELOC can have many advantages. Purchasing investments with a HELOC creates a tax deduction for interest paid. Renovating your home with a HELOC allows you to draw from it when you need it, only paying interest on the money used. Your children’s education, buying a boat or the down payment for a recreation property can all be facilitated with a HELOC. A HELOC can be a great tool for investments, renovations and short term financing needs. For anything longer term, however, it is often cheaper to choose a conventional mortgage with a variable rate. The difference in the lower interest rate outweighs the flexibility of the HELOC.

When buying a home, most people take a conventional mortgage with a fixed term and rate. The astute homeowner understands the power of a conventional mortgage combined with a HELOC. Understanding your needs together with a strong financial strategy can quickly turn your largest debt into your greatest asset!

1 Jan

New Year’s Resolutions for Mortgagors


Posted by: Garry Grewal

You’ve probably made a few new resolutions for 2016. Have you also resolved to reduce the cost of your mortgage and keep more of your hard-earned dollars in your own pocket? Here’s the often-repeated simple formula to minimize your interest cost and pay off your mortgage sooner:

1. Make your payments as frequently as possible.

2. Make sure your more-frequent-payment-plan is an accelerated or rapid pay-down option, which helps decrease the interest you pay.

3. Make a larger payment if possible, i.e., review your budget and, if possible, increase the amount you normally pay.

4. Make lump sum payments to reduce the principal whenever you can.

Remember that the above strategy works only if you do not carry credit card or other high interest debt. If you do, please call me at 416-674-5626 – I’ll be glad to review your finances and suggest a suitable debt management strategy.

20 Aug

Your Credit Bureau Record


Posted by: Garry Grewal

Your income (capacity to repay) usually indicates how much money you can borrow, but your credit report (repayment history) will usually determine whether you can borrow additional money. Past credit behaviours are categorized into five predictive characteristics used by the credit bureau to determine your credit score.

Past Payment Performance (35%): Fewer late payments, judgments, liens or collections, are better. Recent late payments weigh more than those two years past.

Credit Utilization (30%): Low balances (at or below 30% of available credit limit) on a few cards are better than high balances on one or two cards. Several cards can be a detriment.

Credit History (15%): The longer accounts have been open and in good standing, the better. Avoid “credit surfing” – opening new accounts and closing established ones will negatively impact on a credit score.

Types of Credit in Use (10%): Traditional banking or retail accounts score higher than finance company accounts especially those that offer deferred payment options.

Previous Inquiries (10%): Seeking new credit over a short period of time can be associated with higher risk. Administrative inquiries by credit grantors do not affect the credit score.

How do you fare? Individuals may obtain a copy of their personal credit report from Equifax Canada Inc. or TransUnion Canada directly. Call me at 416-674-5626 to find out how to obtain a copy of your record.

20 Jul

Six Reasons to Use a Mortgage Broker


Posted by: Garry Grewal

Mortgage brokers keep up-to-date with the latest product offerings from lenders and have intimate knowledge of various features and options. Here are six key reasons for using mortgage brokers.

1. Choice: If you go directly to your bank, you will only be offered products from that financial institution. Mortgage brokers have relationships with several different lenders and are knowledgeable across each lender’s range of products.

2. Works For You: As small business owners, word-of-mouth makes or breaks mortgage brokers. Hence they are motivated to act in the clients’ best interests.

3. Skilled Negotiator: Mortgage brokers’ skill and experience, combined with their relationships with lenders, help them negotiate rates that are often better than what borrowers could achieve on their own. That remains true even in this competitive environment.

4. Goal Orientated: Are you looking for the cheapest rate? Are you interested in paying off your loan sooner? Are you planning on buying another investment property? A mortgage broker will interview you to find out what you want out of your home loan and work to find the best product to suit your needs and home ownership goals.

5. Paperwork: Mortgage brokers help their clients complete and submit the mortgage application, as well as gather the documentation required by the lender.

6. Read the Fine Print: After you’ve received your loan approval, the mortgage broker can help you understand the document and conditions of the contract. Also, the broker can walk you through the next steps leading up to the closing of the mortgage transaction.

To start a confidential conversation, please call me at 416-674-5626 or get started right away with a swift pre-approval from here: http://tinyurl.com/kwhe7kc

22 Jun

Fixed vs. Variable Rates


Posted by: Garry Grewal

The decision to choose a fixed or variable rate is not always an easy one. It should depend on your tolerance for risk as well as your ability to withstand increases in mortgage payments. You can sometimes expect a financial reward for going with the variable rate, although the precise magnitude will ebb and flow depending on the economic environment.

Fixed rate mortgages often appeal to clients who want stability in their payments, manage a tight monthly budget, or are generally more conservative. For example, young couples with large mortgages relative to their income might be better off opting for the peace of mind that a fixed-rate brings.

A variable rate mortgage often allows the borrower to take advantage of lower rates – the interest rate is calculated on an ongoing basis at a lenders’ prime rate minus a pre-determined percentage. For example, if the prime mortgage rate is 5.5 percent, the holder of a prime minus 0.5 percent mortgage would pay a 5.0 percent variable interest rate.

As a consumer, the best option is to have a candid discussion with your mortgage professional to ensure you have a full understanding of the risks and rewards of each type of mortgage. Call me today at 416-674-5626 and let’s get started.

20 May

How a Mortgage Pre-Approval Works to Your Advantage


Posted by: Garry Grewal

The advantages for home buyers to obtain a mortgage pre-approval.

Obtaining a Pre-approval

A mortgage pre-approval from a mortgage lender says you are approved for a mortgage before you have selected a specific property. You simply fill out a mortgage application and provide the lender with income documentation and consent to pull your credit report and evaluate your finances for credit worthiness. The lender will process your application like a traditional mortgage request and will advise you the amount of money that you can borrow.

Knowing Your Budget

One of the big advantages of going through this pre-approval process is that you now know your borrowing limit. You know exactly how much money you can borrow for your home purchase. You also know how much your mortgage payment will be. People often spend time looking at properties that they could never afford or be approved for but when you have a pre-approval in hand you know exactly which properties you should search.

Negotiating With Strength

Having a mortgage pre-approval will give you increased negotiating power. When you look at properties as a pre-approved buyer, real estate agents and sellers will treat you as a preferred customer. Buyers who are not pre-approved represent a degree of uncertainty for the seller so when you make an offer to purchase a property it will be treated as a priority because the seller knows that your offer will essentially result in a sure deal. This means that the seller can agree to your offer and get a guaranteed amount of money instead of wasting time on a potential offer associated with uncertainty of mortgage approval. If a buyer without a pre-approval is chosen, that buyer may not qualify for a loan in the amount that is needed so the sale would fall through and the seller would be right back where he started. Being pre-approved will automatically give your offer a lot more weight when it comes to negotiating with sellers and your odds of getting the house that you want will dramatically improve.

To get pre-approved, call me today at 416-674-5626 and let’s get started, or send me a quick email: garry.grewal@dominionlending.ca

20 Apr

Buying the Best Home for You


Posted by: Garry Grewal

Before you begin searching for a home, it’s always helpful to think about your needs, both now and in the future.

The following are some things to consider when you’re deciding which type of home to buy:

Location. Do you want to live in a city, town or in the countryside? How long will your work commute be? Where will your children attend school and how will they get there? Are you close to amenities?

Size Requirements. Do you need several bedrooms, more than one bathroom, space for a home office, a two-car garage?

Special Features. Do you want air conditioning, storage or hobby space, a fireplace, a swimming pool? Do you want special features to save energy, enhance indoor air quality and reduce environmental impact? Do you have family members with special needs?

Lifestyles and Stages. Do you have or plan to have children? Do you have teenagers who will be moving away soon? Are you close to retirement? Will you need a home that can accommodate different stages of life?

New Versus Resale Homes

When thinking about your ideal home, the first thing you should consider is whether you want a previously owned home (often called a resale) or a new home. Here are some characteristics that may help you decide:

New Home

Modern Design. A new home has an up-to-date design that takes into account the latest trends, materials and features.

Personalized Choices. You may be able to upgrade or choose certain items such as siding, flooring, cabinets, plumbing and electrical fixtures.

Up-to-Date With the Latest Codes/Standards. The latest building codes, electrical and energy-efficiency standards will be applied.

Maintenance Costs. Maintenance costs will be lower because everything is new and many items are covered by a warranty. You should still set aside money every year for future maintenance costs.

Builder Warranty. This is a warranty that may be provided by the builder of the home. Be sure to check all the conditions of the warranty. A homebuilder’s warranty can be important if a major system such as plumbing or heating breaks down.

Neighbourhood Amenities. Schools, shopping malls and other services in the neighbourhood may not be complete for years.

Extra Costs. You may have to pay extra if you want to add a fireplace, plant trees and sod or pave your driveway. Make sure you know exactly what’s included in the price of your home.

Resale Home

You Can See What You Are Buying. Easy access to services. Probably established in a neighbourhood with schools, shopping malls and other services.

Landscaping is Usually Complete and Fencing Already Installed. Previously owned homes may have extras like fireplaces, finished basements or swimming pools.

No GST. You don’t have to pay the GST unless the house has been substantially renovated, and then the taxes are applied as if it were a new house.

Possible Redecorating and Renovations. You may need to redecorate, renovate or do major repairs such as replacing the roof, windows and doors.

Deciding Which Type of Home to Buy

There are many types of homes to choose from and each has its advantages and disadvantages. Think about your needs before making a decision, and don’t forget to look beyond the interior walls. The environment surrounding your home can be as important as the environment within.

The following are some different types of homes from which to choose:

Single-Family Detached – A home containing one dwelling unit that stands alone and sits on its own lot, thereby offering a greater degree of privacy.

Semi-Detached – A single-family home that is joined to another one by a common wall. It can offer many of the advantages of a single-family detached home and is usually less expensive to buy and maintain.

Row House or Townhouse – Many similar single-family homes, side-by-side, separated by common walls. They can be freehold, condominiums or rental units. They offer less privacy than a single-family detached home but still provide a separate outdoor space. These homes can cost less to buy and maintain – but they can also be large, luxury units.

Link or Carriage Home – Houses joined by garages or carports, which provide access to the front and back yards. Builders sometimes join basement walls so that link houses appear to be single-family homes on small lots. These houses can be less expensive than single-family detached homes.

Condominiums or Stratas – A condo or strata is a form of ownership, not a type of construction. They can be high-rise residential buildings, townhouse complexes, individual houses and low-rise residential buildings.

If you have any questions about the home-buying process or different types of real estate, simply give me a call at 416-674-5626.

20 Mar

Buying vs. Renting


Posted by: Garry Grewal

Purchasing a home is one of the biggest decisions most people ever make. At some point in their lives, most Canadians have probably asked themselves whether it is better to buy or rent a home. Ultimately, the decision is a personal choice, but it helps to look at the pros and cons of buying to determine whether home ownership is right for you.

Some Advantages of Buying a Home

Owning a home is generally considered to be a sound, long-term investment that can provide satisfaction and security for you and your family.

Each month when you make your mortgage payment, you are building equity in your home. Equity is the portion of the property that you actually own through your monthly payment versus the portion that you still owe the lender.

At the beginning of your mortgage, more of your payments go toward paying off the interest and less toward paying off the principal. But the longer you stay in your home and the more mortgage payments you make, the more principal you pay off and the more equity you accumulate.

Most mortgages also offer you the option of making additional monthly or annual payments to reduce your principal faster. Some prepayment privileges, for instance, enable you to pay up to 20% of the principal per calendar year. This will also help reduce your amortization period (the length of your mortgage) which, in turn, saves you money.

There is also a tax advantage. If your home is your principal residence, any profit you make when you sell it is tax-free. A home can appreciate – or increase in value – as time passes, building more equity for you. As you build equity and your family grows, it’s usually easier to upgrade to a larger home in the future thanks to the profit you’ll make when selling your current home.

As an owner, you can also modify and improve your home any way you like. Ownership tends to give you a sense of pride and can offer you and your family stronger ties to the community.

If you do decide that home ownership is right for you, it’s important to choose a home you can afford. If you can’t afford to buy your dream home, purchasing a more modest home can be a great place to start building equity which may allow you to buy the home of your dreams one day.

Since interest rates are low, now may be an ideal time to enter into home ownership for the first time.

Some Disadvantages of Buying a Home

Although it’s easy to get caught up in the excitement of buying a home, it’s important to remember that home ownership has some additional responsibilities as well.

For one thing, a home can be expensive. Chances are, your monthly payments will be more than what you are currently paying in rent when you factor in such things as your mortgage, property taxes, utility bills, repairs and general maintenance.

Owning a home ties up some of your cash flow and is likely to reduce your flexibility to move to a new location or change jobs.

While your home might increase in value as time goes by, don’t expect to get a big return quickly. There are no guarantees that your home will increase in value, particularly during the first few years. In the beginning, you could actually lose money if you sell because your home may not have appreciated enough to cover the real estate fees, legal expenses and moving, renovation and other selling costs.

Real estate is, however, usually considered a good investment over the long term.

When making the decision about whether to buy or rent, it’s important to carefully choose a home you can afford and then weigh the pros and cons. Millions of people enjoy the rewards of home ownership but ultimately it’s a personal decision based on your own priorities.

If you’re thinking of buying your first home, I’ll be glad to answer all of your mortgage-related questions. To get started, simply give me a call at 416-674-5626 or send me a quick email: garry.grewal@dominionlending.ca