Awesome read below from my DLC colleague, check it out

What should come first, the house or the car?

So you just got a shiny new car, and now you want a shiny new home to go with it. Will that new car payment affect your mortgage pre- approval? The short answer… absolutely it will.
Recently, I have encountered many people looking to pre-approve for a home purchase that do not qualify. While it may be in part because of the mortgage “Stress Test” rules, a good portion is due to large debt obligations such as car loans. I have witnessed applicants that have brand new car loans/leases with huge payments and not one gave thought as to whether it would affect their ability to qualify for a mortgage.
Unless you have already done your home work with your mortgage broker by getting a mortgage pre-approval that factors the new car payment into it and your budget, you may be in for disappointment.
However, it doesn’t necessarily have to be one or the other. Here are some tips to get set for mortgage approval success.

1. Get pre-approved. Seek the guidance of your mortgage broker to know exactly what you qualify for before you start the house hunting process. Knowing what your maximum purchase price is, helps you and your realtor.
2. Be realistic with what you can afford. Start by looking at what you pay in rent now. That’s a good starting place to figure out what you can pay on a mortgage. However, you also must consider what you can get approved for.
3. Remember to save and budget for more than the mortgage payment. When you own a home, your monthly payment consists of more than just the mortgage payment. You will also pay property taxes, home owner insurance, and utilities on top of your other monthly debt obligations. Having emergency savings can help alleviate the stress of taking on the financial responsibility of a owning a home.
4. Clean up your credit. Paying off credit balances can not only help improve your credit score, it can also increase your buying power.
5. Avoid making big financial changes. This is the big one. Most lenders want to see that you’re a stable applicant. Doing things like buying a new car before you buy a new house does not establish you as stable. Similarly, opening new credit cards, or making a drastic change to your employment can also be detrimental to getting approved for a mortgage.

When in doubt always seek the advice of your Dominion Lending Centres mortgage professional.

Lynn Nequest

Dominion Lending Centres – Accredited Mortgage Professional

Fixed-rate mortgage: What lenders you should do it with and why

25-year amortization or 30 years? Insured or Uninsured? With an A Lender or B Lender? These are just a few of the questions people have to decide on when they are pursuing a mortgage. But the biggest question of all: Fixed Rate or Variable Rate?

With the instability of the market, and the Bank of Canada’s continuous rate hikes, many people now are flocking towards a fixed rate mortgage over a variable rate. What this means is that they are choosing to essentially “lock in” at a rate for the term of their mortgage (5 years, 10 years, 1 year…you name it). Now there are benefits to this…but there are also disadvantages too.

For example, did you know that 60% of people will break their mortgage by 36 months into a 5 year term? Whether it’s due to career changes, deciding to have kids, wanting to refinance, or another reason entirely, 60% of mortgage holders will break it.

And just like any other contract out there, if you break it, there is a penalty associated with it. However, there is a way to avoid paying more than is necessary. This applies directly to a fixed rate mortgage and we can help you decide what lenders you should go with.

If you have a FIXED RATE MORTGAGE:
There are two ways your penalty will be calculated.

Method #1. If you are funded by one of the Big 6 Banks (ex. Scotia, TD, etc.) or some Credit Unions, your penalty will be based on the bank of Canada Posted Rate (Posted Rate Method) To give you an example:

With this method, the Bank of Canada 5 year posted rate is used to calculate the penalty. Under this method, let’s assume that they were given a 2% discount at their bank thus giving us these numbers:

Bank of Canada Posted Rate for 5-year term: 5.59%
Bank Discount given: 2% (estimated amount given*)
Contract Rate: 3.59%

Exiting at the 2-year mark leaves 3 years left. For a 3-year term, the lenders posted rate. 3 year posted rate=3.69% less your discount of 2% gives you 1.44%. From there, the interest rate differential is calculated.

Contract Rate: 3.59%
LESS 3-year term rate MINUS discount given: 1.69%
IRD Difference = 1.9%
MULTIPLE that by 3 years (term remaining)
5.07% of your mortgage balance remaining. = 5.7%

For that mortgage $300,000 mortgage, that gives a penalty of $17,100. YIKES!

Now let’s look at the other method (one used by most monoline lenders)

Method #2:
This method uses the lender published rates, which are much more in tune with what you will see on lender websites (and are * generally * much more reasonable). Here is the breakdown using this method:

Rate when you initially signed: 3.24%
Published Rate: 3.34%
Time left on contract: 3 years

To calculate the IRD on the remaining term left in the mortgage, the broker would do as follows:

Rate when you initially signed: 3.24%
LESS Published Rate: 3.54%
=0.30% IRD
MULTIPLY that by 3 years (term remaining)
0.90% of your mortgage balance

That would mean that you would have a penalty of $2,700 on a $300,000 mortgage.

That’s a HUGE difference in numbers, just by choosing to go with a different lender! Knowing what you know about fixed rate mortgages now, let a Dominion Lending Centres Mortgage Broker help you make the RIGHT choice for your lender. We are here to help and guide you through the mortgage process from pre-approval onward!

Geoff Lee

Dominion Lending Centres – Accredited Mortgage Professional