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.

No one wants to be told that they are not allowed to have something. We live in Canada; as Canadians, our focus has always been to strive for better and for more. That said, there appears to be a growing trend around co-sharing which means people are increasingly moving away from owning their own cars, bikes, offices and, even, homes.

Don’t believe me? Watch this video about communal pod-shares, or this one about a car-sharing company in Edmonton. The trend is here and growing.

While this lifestyle is not for everyone, it speaks to an interesting trend about doing more with less.

In Edmonton, we have the luxury of living in a city that offers affordable housing in every corner of the city. Although we have the benefit of local properties that give us more bang for our buck, times are changing.

The federal government made some changes last year that greatly affected people’s ability to qualify for a mortgage. This month, more changes are expected which will make it even that much more difficult to qualify for a mortgage. New and existing homeowners are rushing in droves to secure five-year fixed mortgage rates ahead of future Bank of Canada rate hikes, and others regulation changes.

The government is essentially continuing its stress-test for all uninsured mortgages (those with a down payment of more than 20%), which will affect a small percentage of new homeowners.

For those looking to get into their first home, however, this might be a good opportunity to look at the growing trend of doing more with less. Qualifying for a mortgage on a home worth more than $500,000 will likely be unattainable on a single, or even double, income. Looking at homes that offer more bang for you buck, including smaller starter homes could get your real estate investment off on the right foot.

We’ve been able to enjoy low interest rates for many years now. Unfortunately, they are up and will likely continue to increase. As such, your $500,000 mortgage in five years could actually cost you more in monthly payments – even as you pay down your premium. It is simply a reality that many cannot afford and should be taken into account as you take the plunge into buying property.

To discuss your mortgage rates, and to secure a low rate for 120 days, do not hesitate to call a Dominion Lending Centres mortgage specialist. We can also look at your current finances to better understand what price range of home you can afford.

Max Omar
Dominion Lending Centres – Accredited Mortgage Professional

A lot of people get into hot water when they assume that because they’ve qualified for a mortgage in the past, they will qualify for a mortgage in the future.

This article has one point to make and it’s this:

Don’t assume anything when dealing with mortgage financing!

And if that’s all you take away, that’s enough!

Just because you’ve qualified for a mortgage in the past, doesn’t mean you will qualify for a mortgage in the future, even if your financial situation has remained the same or gotten better. The truth is, things have changed over the last year, and securing mortgage financing is more difficult now than it has been in recent memory.

The latest changes to mortgage qualification by the federal government has left Canadians qualifying for about 20-25% less. On top of that, a lot of the “common sense” guidelines that lenders would use in determining your suitability have been replaced with non-negotiable hard and fast rules.

As a mortgage professional who arranges financing for clients everyday, I keep up to date with the latest changes in the mortgage world, understand lender products, and have my fingers on the pulse of what is going on.

From experience, I can tell you that having a plan is crucial to a successful mortgage application. Making assumptions about your qualification, or just “winging it” is a recipe for disaster.

If you are thinking about buying a property, contact a Dominion Lending Centres mortgage specialist who would love to talk with you about all your options, and help you put together a plan.

MICHAEL HALLETT
Dominion Lending Centres – Accredited Mortgage Professional

This story is from the Fall edition of Our House Magazine

Moving on up from condo to house, these young homeowners prove age is just a number

For Jordan Rothwell and Karissa Roed, the timing to find their forever home couldn’t be more perfect. The couple, who recently moved to Mission, B.C., are expecting their second child and are ready for the family to grow.

It’s quite the responsibility for Jordan and Karissa, aged 23 and 24, respectively. But it’s a challenge the young couple has been preparing for since they first resolved to get into the housing market a couple of years back. And the pair see their story as motivation for what other young people can achieve if they set their minds to it.

“If younger people would just set goals for themselves, especially when it comes to buying property, it’s such a blessing when you do it. You’re instantly further ahead as an adult when you do it,” Jordan says.

Their property story began when Jordan’s grandfather offered to match the couple’s savings for a down payment on a condominium. So Jordan and Karissa went about saving money wherever they could. That meant a lot of sacrifice—especially missing out on trips and events they might have attended.

“It basically became an addiction for a while, just saving up every penny to try and get to the point where we could go in and buy a condo,” Jordan notes.

It paid off. By 2014, they saved up $5,000 and, with matching funds, moved into a two-bedroom condo in Port Coquitlam, B.C.

Fast forward a couple of years, and Jordan and Karissa were looking to upsize. By then, they had some equity, in part because they bought their condo at the right time, taking advantage of the hot Metro Vancouver real estate market, and were ready to move into their forever home.

Once again they looked to family, partnering with Karissa’s mother and stepfather to purchase a 3,000-square-foot, six-bedroom house in Mission for $605,000. Jordan, Karissa and their young family will live upstairs, while her parents will take the ground floor.

The couple couldn’t be happier in their new home. “It’s definitely nice moving from a condo to a house,” Karissa says, adding they have nearly double the square footage as their old condo, along with a backyard for her children to play.

Dominion Lending Centres mortgage specialist Pauline Tonkin says she couldn’t be more impressed by the couple’s smart financial habits. Tonkin helped them secure a mortgage for their first condo and wasn’t surprised to see them make a jump to a house.

“I wasn’t concerned for them because they really do the right things. They really get it,” Tonkin says. “Age is not indicative of how people handle finances.”

She describes the couple, especially Karissa, as very diligent at considering all the costs involved in the purchase. The pair wanted all the details, something Tonkin says isn’t often the case with young buyers.

Besides securing the proper financing, Tonkin helped Jordan and Karissa through the process, giving them a “road map” to where they wanted to be. It was help the couple appreciated. “When you’re buying a condo or a house, it’s such a blur,” Karissa says, adding that their mortgage broker was someone they could trust and call at all hours if they needed to.

Jaclyn LaRose has enjoyed similar success as a homeowner. This spring, she sold her first condo to upsize to a bigger one in Surrey, B.C., close to her work as a schoolteacher.

LaRose was 26 when she and her sister decided to buy their first place with a little help from their parents. Her parents didn’t like seeing them throw away money on rent, she explains, so they helped out with a five per cent down payment for an apartment in nearby Coquitlam, B.C.

“I definitely considered at the time that I was young because I hadn’t been thinking about it for a few more years at least,” she says.

Not having even hit the age of 30, Larose is now on her second home. She said she has friends who believe it’s impossible to get into the market, especially in B.C.’s Lower Mainland. But she also points out those friends are looking in prime spots where the prices are highest. LaRose chose to look a little further afield to get into the market. She’s gone from a 500-square-foot, one-bedroom apartment to a two-bedroom with more than 800 square feet.

While Larose points out there is a sacrifice related to home ownership, she now feels lucky to be in her position. “It’s just about getting in when you can,” she said. There are places out there where you can get in.” And now that she has home ownership all sewed up, she’s able to focus on her career and personal goals.

“For the short term I feel settled,” LaRose says.

Back in Mission, Karissa and Jordan have settled into their new home. They are also way ahead of their peers and looking forward to the future. A lot of people his age look at owning a home as something they’re not supposed to do, or able to do at their age, Jordan says. But he doesn’t see it that way at all: “If you just stick to your guns and build a goal of what you want to accomplish… you’ll get there.”

JEREMY DEUTSCH

What prevents many potential homeowners from buying a home is the lack of a down payment.
Many first-time home buyers are receiving down payment gifts from family.

Unfortunately, many are not in this position and need to plan to save their own down payment.
When you can visualize the benefits of owning your own home and it becomes your number one desire, most of us can save that down payment.
Every time you feel like spending money that is not a need and takes away from you down payment, consider what you could be giving up, your home.

I recently did a mortgage for a couple buying their first home. During the process, they told me that 25 years ago they moved into a brand new rental home and they just finished paying off the landlords mortgage. The house had gone up about $800,000 in value over the 25 years. If the couple would have had their down payment and bought the home they would have a home worth over $1,000,000 paid for.

Here are some tips
Avoid borrowing money for a depreciating asset like a car or furniture. Did you know that most people who buy furniture interest free for a year do not pay it off and end up paying about 29% interest on that loan?

Open a Tax Free Savings Account (TFSA) and start contributing monthly. Try and maximize what you can put in the TFSA. Turn it into a game and see how fast you can make it grow. Remember the end game is your own home.
The Business Insider reports that 62% of your expenditure is spent on three areas: Housing, transportation and food. Focus on cutting down expenses in these areas and put the extra money in your TFSA. It may be tight living in a smaller place for a few years or even staying at home for a few years to save up that down payment, but if you could look down the road 25 years and have a choice of buying your first home or owning a million-dollar home with no mortgage, what would you choose? You need to keep that vision of owning you own home if front of you to make the sacrifices worth it. The longer you rent the more you are paying off someone else’s home.

I read a stat that 43% of the annual food cost are eating out. Then there are prepared meals that involve no cooking that when included add up to 60% of your food budget. I recently had a friend that stopped eating out and is now putting about an extra $350 a month in his investment account.
Create a budget, control your spending, and buy groceries on sale. Use the Flipp app and find the lowest price on main items and price match. You can save $100’s of dollars doing this.
All these savings can go into your TFSA. Ask friend for their money saving ideas. Stay focused and before you know it you will have your down payment.

If you have any questions, please contact your local Dominion Lending Centres mortgage specialist.

Kevin Bay
Dominion Lending Centres – Accredited Mortgage Professional

For many people, saving enough for a down payment on a house is not an easy task. (You can’t rely on finding One-Eyed Willy’s treasure like they did in the Goonies movie, either!) Once you have an idea as to how much you can afford on your home, relative to your salary and monthly costs, it’s time to get that down payment! For a starter home, a 5% down payment is often enough.

Your down payment can come from several sources, including your Tax-Free Savings Account (TFSA), Registered Retirement Savings Plan (RRSP) or a gift from immediate family, such as parents or grandparents.

TFSA

The TFSA lets you save your extra cash for just about anything — including a new house— without paying any tax on the growth within the account or on withdrawals. Since the TFSA was introduced in 2009, it’s estimated that only around half of Canadians have opened one, so be sure to start yours today. Should you use your TFSA for your down payment, you pay no taxes on the withdrawal.

There are many clever ways to make the TFSA and RRSP work together to improve your wealth. Generally, RRSPs are a good choice for longer-term goals such as retirement, while TFSAs work better for more immediate objectives, such as a house down payment.

RRSP

With the federal government’s Home Buyers’ Plan (HBP), you can use up to $25,000 of your RRSP savings ($50,000 for a couple) to help finance your down payment on a home. To qualify, the RRSP funds you’re using must be on deposit for at least 90 days. For first-time home buyers, taxes are not paid on withdrawals of your RRSP and the repayment period starts the second year after the year you withdrew funds.

Gifted Down Payment

A Gifted Down Payment is very common for first time buyers. Often this is done because their son or daughter doesn’t quite have enough funds saved up for the full 5% down payment. Or, because they want to make sure their child has enough money to make up 20% for a down payment to avoid Canada Mortgage and Housing Corporation (CMHC) premiums.

If you put down 20% or more on your down payment, it can all be from a gift. If you put down less than 20%, part of the money can be a gift, but part must come from your own funds. This minimum contribution varies by loan type. You can only use gift money on primary residences and second homes.

All that is required for documentation is a signed Gift Letter from the parents, which states that the money does not have to be repaid, and a snapshot of the son or daughter’s bank account showing that the gifted funds have actually been transferred.

A gifted down payment is viewed as an acceptable form of down payment by almost all lenders. Talk to a Dominion Lending Centres mortgage specialist to make sure that your lender accepts “gifts” as an acceptable down payment.

Max Omar
Dominion Lending Centres – Accredited Mortgage Professional

Do successful entrepreneurs just open their doors for business without a business plan? Does a chef open a restaurant without a menu? Do pilots depart the hanger without a flight plan? Can you build a house without architectural plans?…I could go on forever! The answer is NO to all the above.

I’m a planner. Whether it’s for personal or business purposes, I always have a plan. I operate best when I know what is happening and how I’m doing it. Planning is the key ingredient to crossing the finish line successfully.

Case in point…

When it comes to acquiring a mortgage, whether it’s your first, second, third…or tenth you need to establish a PLAN! You need to connect with your trusted Dominion Lending Centres mortgage broker to start the application process.

Am I suggesting you need to create a full blown SWOT analysis (Strengths Weaknesses Opportunities and Threats) to seek mortgage financing?

No… but it wouldn’t hurt.

All joking aside, you should have an action plan: PLAN A and possibly a PLAN B. If you need a PLAN C then there should have been more preparation put into PLANs A and B.

THERE ARE 4 PARTS TO EVERY MORTGAGE.

DOWN PAYMENT – How much skin-in-the-game are you putting in? Where is it coming from, saved or gifted? Where is it now?
CREDIT – How long have you had it? What are the limits and how do you utilize it? How many forms of credit do you have?
INCOME – How long have you been at the current job? Salary or hourly? Have you jumped around to different industries or stayed within? Self-employed or employee?
SUBJECT PROPERTY – Where is the property? What is the property? Condo, townhouse, detached, farm on acreage with coach house and out-buildings? Age? Materials used to build? Remaining economic life? Square footage? Past or present issues?
Before you find the subject property to purchase, the best course of action is to prepare. Why try to obtain financing in three to six days when you could have reduced the stress level by planning ahead of time. Mortgage Brokers call it the Pre-Qualifying Process. As a mortgage professional, I review the first three parts of the application and lock in a rate for up to 120 days.

Some people may ask WHY plan or WHEN to start planning. The main reason one should plan is to simply make sure there are no hidden surprises. If there are any negative aspects to the file, a plan would give us time to find a solution. When the decision has been made to purchase or re-finance (and mortgage funds are required), that is the exact time to connect with your Mortgage Broker. The time is now… immediately. A plan will double your success rate for obtaining approval for mortgage financing.

Michael Hallett
Dominion Lending Centres – Accredited Mortgage Professional
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In the midst of the booming real estate market in Canada (mainly in Vancouver and Toronto), many Canadians are entertaining the idea of downsizing in order to sell their homes at a high value and purchase a smaller home or condo at a lower price.

Is downsizing the way to go? What are the costs associated with downsizing? The truth is, there are many costs to downsizing, and not all of them are obvious.

Why Downsize?

Canadians have many reasons to downsize. They include:
• Less house to upkeep
• Move closer to loved ones
• Spending the winter in a warmer place, therefore they don’t live in their home year round
• Getting equity out of their home to help fund retirement

Costs to sell your home

But let’s break down the more obvious costs of downsizing so that you can weigh the financial pros and cons. Keep in mind that the example below is for illustration purposes only. There may be other expenses not mentioned, but the key expenses are highlighted.

Let’s use the example of a home that will sell for $1,000,000 which is the approximate average cost of a detached home in Toronto. The home still carries a $200,000 mortgage, which would equate to a net amount of $800,000. However, there are costs that you must deduct from the total sale that can eat into your lump sum.
• Realtor commission (between 1%-7% depending on where you live in the country and what you are able to negotiate). In Toronto, the standard realtor rate is 5%. In this example of a $1,000,000 home, you would need to pay the realtor $50,000.
• Closing costs and legal fees – Approximately $1,500
• Miscellaneous costs – $1000
• This leaves you with approximately $747,500
• And an approximate cost of selling your home at $52,500

In addition to these reasons, these are some other costs that are associated with downsizing:

• The cost to fix up your home for the sale – Fresh coat of paint, minor repairs, kitchen/bathroom renovations, roof repairs and maybe even the cost to stage the home.
• The cost to part with old furniture – When you downsize, you typically have to get rid of furniture, books and other items that take up space. You may even decide to keep the items in a storage unit, which can cost money monthly (a typical 50 square foot unit can range from $125-$200/month plus HST, a mandatory monthly insurance premium and a set-up fee or refundable deposit)

Costs to buy your downsized home

There are also costs associated with buying your new downsized home. If you intend to purchase a smaller home (semi-detached, townhouse or condo), most of the money you earn from the sale of your home will go towards the purchase of your new downsized home. Here is an example of the expenses you may incur when you purchase your downsized home:

Let’s use the example of a condo with a cost of $500,000 which is the average cost of a condo in Toronto.
• Land transfer tax in Ontario for a $500,000 property is $6,475. Find out the land transfer tax in your province by visiting your local government website on land transfer taxes. For Ontario, visit the Government of Ontario land transfer tax page.
• There may be a Municipal Land Transfer Tax (MLTT) in addition to the provincial land transfer tax. For instance, in Toronto, the MLTT for a $500,000 condo would be $5,725. Visit your local municipality website to find out the calculation for your MLTT.
• Title insurance and legal fees – Approximately $1,500
• Moving costs – Approximately $2,000
• There may be a property tax adjustment – This would depend on when the seller paid the property taxes and when the buyer takes possession of the condo. In most cases, the buyer will have to pay the seller the difference depending on when they took possession of the property. If the seller is behind on payments, then the municipality requires that the seller pays off the taxes from the proceeds of the sale.
• Purchase of new furniture to fit smaller condo – Approximately $10,000 – $15,000
• Monthly maintenance fee for condo living – Approximately $500/month or $6,000/year
• This leaves you with approximately $221,800 from the sale of your $1,000,000 home before you deduct the cost of condo maintenance fees at $6,000/year.
• And the additional cost to purchase your downsized home at $25,700
• The total cost of downsizing from a $1 million home to a $500,000 condo would cost approximately $84,200 in your first year alone.

Although you sold your $1,000,000 home and downsized to a $500,000 condo, with all of the added expenses, you would only take home just over $215,800 after your first-year maintenance fees. This is the reality of downsizing. It isn’t as clear cut as the selling value of your home minus the buying cost of your downsized home. Although there is a return, the process of buying and selling has the added costs that can make or break your decision to move.

If you are downsizing because you need extra cash to help you with your retirement, an alternative is the CHIP Reverse Mortgage. With a reverse mortgage, you can stay in your home and still have the extra cash to help you with your retirement. To find out how much money you can get with a reverse mortgage, talk to your Dominion Lending Centre mortgage specialist today or if you decide to downsize, talk to your mortgage broker or a lawyer to find out your true cost of downsizing before making the final decision.

YVONNE ZIOMECKI
HomEquity Bank – Senior Vice President, Marketing and Sales