With all the news about interest rates rising do you go long or short with your rate when you set up your mortgage?

After discussing your current life situation and answering some key questions with your Dominion Lending Centres mortgage broker you can make some decisions and set your mortgage rate and term to best fit your needs. There are many interest rate terms to choose from (1, 2, 3, 4, 5, 7, 10 year fixed and 3 and 5 year variable). If you are looking to lock in to a short or long term fixed rate, consider this:

A long-term mortgage makes sense if:

• If rates were on the rise and you could not take the hit. A long term rate gives you peace of mind.
• You don’t have a nest egg of savings or investments to fall back on
• You have little equity or net worth
• Your income could change based on a growing family or retirement for example

A short-term mortgage may be the way to go if:

• You expect to pay off large chunks of your mortgage or sell your home within the next three years
• You have a short remaining amortization (e.g. 5-6 years or less)
• Your credit is impaired and you need alternative lending till you repair your credit so you can qualify at a better rate in one year.
• You need to refinance in coming years to access your equity for education, investment purposes, etc
• You believe rates won’t rise soon and you have a short-term rate where you can make higher-than-required payments to maximize the reduction of your mortgage

With two year rates in the low two per cent, five-year fixed rates under three per cent and 10 year terms under four per cent there is enough of a spread that some borrowers can decide easily to go long or short with your rate. If you want flexibility go short. If you have little equity and want to play it safe maybe the long term rate for 5,7 or 10 years is for you. As rates shift upwards and the spread between the five and 10 year shortens you have to consider if a difference of .5 per cent in a rate may be so insignificant that locking in to a long term rate may make sense for some, while others will take the risk and continue to play the short game. We have seen the spread between the short and long term rates become slim which creates the opportunity for discussion. These are decisions you can only make once you run the numbers with your DLC mortgage broker.

Maybe it is time to add a call to your mortgage broker to review your mortgage plan.

Written by: PAULINE TONKIN
Dominion Lending Centres – Accredited Mortgage Professional

The need to refinance your mortgage can be for many reasons. Whichever the reason you are refinancing, there are a few things to consider. One of the top questions we are asked as a Mortgage Broker is “will refinancing hurt my credit?” The answer to this question brings cause for a closer look at the refinancing process in itself.

First, you need to know that when you refinance there will be consequences outside of affecting your credit. To refinance you are essentially restructuring terms of a contract and therefore a penalty will apply.

Every lender is different in how they calculate penalties, but in general:

• Breaking a fixed mortgage will result in you paying the interest associated determined by the current interest rate for the remainder of your term or three months’ interest. Whichever of the two are greater.
• Breaking a variable mortgage will result in you paying out three months’ interest.

There are also limitations on the amount you can borrow with refinancing against your mortgage or tapping into your home equity line of credit.

• For borrowing or securing a line of credit against your property you will borrow up to 80% of the appraised value of your home, less the mortgage you have.

• For a Home Equity Line of Credit, you can take out a line of credit up to 65 per cent of the value your home, with the total Home Equity Line of Credit and mortgage totaling 80 per cent.

Now that we have covered the penalty and borrowing limitations, we can tackle the true question—will refinancing change my credit?

The answer to that is yes. No matter how you look at it, debt is still debt. Whether you are looking to refinance to gain access to your home’s equity, gain a better rate, or utilize your home’s equity for investment purposes you are still borrowing money thus your credit is going to change.

No matter what your reason for refinancing, remember that debt is still debt and you credit may be impacted.

We advise that before you refinance consider the reasons you are doing so. Ensure they are justified. For example, if you are refinancing to do a much needed home renovation, purchase an investment property or pay for your child’s university tuition then those are all wonderful reasons for refinancing. On the flip side, refinancing to take a family vacation—maybe not a good reason. Look at what your reasons are and then decide if this option is the right one for you.
As always, Dominion Lending Centres is here to help! Give us a call and we can help you navigate your refinancing

Dominion Lending Centres – Accredited Mortgage Professional
Geoff is part of DLC GLM Mortgage Group based in Vancouver, BC.

Hey Landlords! You Need To Read This!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.

NATHAN LAWRENCE
Dominion Lending Centres – Accredited Mortgage Professional