It has been said that there are two certainties in life; death and taxes. Well, as it relates to your mortgage, the single certainty is that you will pay back what you borrowed, plus interest. However, how you make your mortgage payments, the payment frequency, is somewhat up to you! The following is a look at the different types of payment frequencies and how they will impact you and your bottom line.

Here are the six main payment frequency types:

1. Monthly payments – 12 payments per year
2. Semi-Monthly payments – 24 payments per year
3. Bi-weekly payments – 26 payments per year
4. Weekly payments – 52 payments per year
5. Accelerated bi-weekly payments – 26 payments per year
6. Accelerated weekly payments – 52 payments per year

Options one through four are designed to match your payment frequency with your employer. So if you get paid monthly, it makes sense to arrange your mortgage payments to come out a few days after payday. If you’re paid every second Friday, it might make sense to have your mortgage payments match your payday! These are lifestyle choices, and will of course pay down your mortgage as agreed in your mortgage contract, and will run the full length of your amortization.
However, options five and six have that word accelerated attached… and they do just that, they accelerate how fast you are able to pay down your mortgage. Here’s how that works.
With the accelerated bi-weekly payment frequency, you make 26 payments in the year, but instead of making the total annual payment divided by 26 payments, you divide the total annual payment by 24 payments (as if the payments were being set as semi-monthly) and you make 26 payments at the higher amount.

So let’s say your monthly payment is $2,000.
Bi-weekly payment : $2,000 x 12 / 26 = $923.07
Accelerated bi-weekly payment $2,000 x 12 / 24 = $1,000

You see, by making the accelerated bi-weekly payments, it’s like you’re actually making two extra payments each year. It’s these extra payments that add up and reduce your mortgage principal, which then saves you interest on the total life of your mortgage.

The payments for accelerated weekly work the same way, it’s just that you’d be making 52 payments a year instead of 26.

Essentially by choosing an accelerated option for your payment frequency, you are lowering the overall cost of borrowing, and making small extra payments as part of your regular cash flow.
Now, It’s hard to nail down exactly how much interest you would save over the course of a 25 year amortization, because your total mortgage is broken up into terms with different interest rates along the way. However, given todays rates, an accelerated bi-weekly payment schedule could reduce your amortization by up to three and a half years.

If you’d like to have a look at some of the mortgage numbers as they relate to you, please don’t hesitate to contact a Dominion Lending Centres mortgage specialist who would love to work with you and help you find the mortgage (and the mortgage payment frequency) that best suits your needs.

Although home prices in Toronto and Vancouver seem to have stabilized recently, they are still at historical levels.

The average home price in these two major Canadian cities are still well over $1 Million. Unsurprisingly, first-time homebuyers are finding it increasingly difficult to get onto the “property ladder”. It is now harder than ever for first-time homebuyers to own a home; so what are they to do? Studies have shown that more and more millennials are turning to the bank of mom and dad for help with their down payments.

According to the latest statistics from Mortgage Professionals Canada, down payment gifts from parents have increased significantly in the last 16 years, going from 7% in 2000 to 15% for homes purchased between 2014-2016. The average gift amount has skyrocketed as well. Industry experts have seen many down payments in the six-figure range – $100,000 to $200,000. The trend is expected to continue, as 2017 is predicted to be “the most difficult year for a first-time homebuyer in the last [decade]”, according to James Laird, co-founder of RateHub, a mortgage rate comparison website.

How can you help your children climb the property ladder?
With soaring property prices, you may be asking about your options to help your children break into the housing market. One way is by getting a reverse mortgage on your home. The CHIP Reverse Mortgage from HomEquity Bank has seen a growing number of senior Canadians over the years access their home equity in order to give a financial gift to their family members to help them with big purchases such as a down payment for a house. “We definitely see a growing trend of this at HomEquity Bank. We get a large number of clients who would take out $100,000-$200,000 in a reverse mortgage, they have the benefit of not having to make payments, and they give that lump sum of money to their kids to help them get started in the real estate market.” says Steve Ranson, President and CEO, HomEquity Bank.

How does it work?
A reverse mortgage is a loan secured against the value of your home. It allows you to unlock up to 55% of the value of your home without having to sell or move. The money you receive is tax-free and you are not required to make any regular mortgage payments until you move, sell or pass away.

Why should you give an early inheritance as a down payment now?
Life Expectancy – According to Statistics Canada, for a 65-year old couple there is a one-in-two chance that one of them will reach the age of 92. Do your children really need an inheritance when they are in their mid-to-late 60’s?
Create memories now – After you are gone, you will have missed out on seeing your children build a family in their new home. Giving a down payment now will enable you to create lasting memories while your health allows you to.

Find out more about this incredible opportunity to use a reverse mortgage to give the gift of a down payment to your loved ones today. If you’re 55 years or older and want to learn more about your financial options, including a reverse mortgage, talk to your Dominion Lending Centre mortgage specialist today.

Deciding to borrow money to launch your small business startup is a big decision. It’s the second biggest decision after deciding to start the business. Since it is a big decision, it requires much thought and research before taking the leap. There are multiple ways to fund a small business startup, and it’s important to know and understand all of them before making a final decision.
Not only can you borrow money to launch your small business startup, you can also invest your own personal savings or give up a percentage of ownership in the company to investors in return for funding. Before making the final decision to borrow money for your small business startup, here are a few things you should know:

Types of Financing

There are a number of different ways you can finance your small business startup. Depending on the amount of revenue the business is generating, how many years the company has been in business, and the business industry, you may or may not qualify for certain types of financing.

Pay Back & Defaulting

When you borrow money to launch your small business startup, you will be required to make monthly payments. You will also have a set “term” to pay back the financing. The term is the period of time you will have to make monthly payments toward the total financing amount you borrowed. This is important because you need to be comfortable making the monthly payments. It has to be something you can afford. I suggest developing a business plan with at least three years of financial projections to estimate what your expenses will be and the amount of revenue the business will generate. This will help you determine if there will be enough money to go around (to cover business expenses and paying back a business financing).
If you default on a financing for any reason it can ruin your personal and business credit. Having a good understanding of how much it will cost you to borrow money to build the business will enable you to plan better and avoid defaulting. It’s good practice to ask a lender what their average interest rates and terms are before you apply so you can estimate what your monthly payments will be. The bottom line is that paying back financing has to be something you are ready for and capable of handling.

Maximum Amount of Debt

Your debt to income ratio and the amount of outstanding debt you have on the business is important in the lender’s decision to give you a small business loan. If your company is a small business startup with no revenue, lenders will pay close attention to your debt to income ratio. As a rule of thumb, your outstanding debts should equal no more than 28% of your total income. (Depending on who you talk to, some people will say it should be no more than 32% to 36% of your total income however, 28% is playing it safe). If you have a high debt to income ratio, you may not be able to borrow money to launch your small business startup.
If your small business startup has some revenue, and you’ve already borrowed money for the business, if you apply for additional financing, the lender may also look at outstanding business debt. As a rule of thumb, you usually can’t borrow more than 15% of your total annual revenue. This all depends on the lender, but keep that in mind if you decide to take out multiple business loans from different lending sources for the business.

How You Will Spend the Money

Some types of financing are restricted to certain business expenses. For example, equipment financing must be spent only on equipment purchases. This includes computers, office furniture, etc. However, financing such as unsecured business lines of credit can be spent on any business expense. This is why it is important to develop a business plan and at least three years of financial projections. Financial projections outline what the money will be spent on. Knowing what the money will be spent on will help you determine what type of business financing will work best for you.

Need Expert Help? Let Us Assist You

If you still need helping figuring out if borrowing money will be right for your small business startup, Dominion Lending Centres Leasing can help. Our team can advise you and will help you analyze your situation to determine whether or not borrowing money to launch your small business startup makes sense. They will also help you figure out what type of financing will work best for you.