In this day and age, every household runs at least one credit card on a regular basis.  A lot of us rack up bills on a card not even thinking that they are going to charge you up to 24% annually.  When and if you miss one payment on that current balance, the interest rate then gets jacked up to almost 30% annually.  Although this is an extremely compromising situation for many people, those who own their home have a large advantage especially if they possess a good portion of equity in their home.

Lending companies register that entire credit card debt and wrap it into a mortgage on their property.  Sometimes this is a second or even third mortgage.  First mortgage rates can start from 7% and go up to 11%.  Second and third mortgages start from 10% and go up to 18% depending on the borrower and the value/interest of the real estate for the lender.  Now these numbers look very large in comparison to conventional first mortgage rates of 3.25% but based on the circumstance, a reduction in interest from 30% to 7% is an extremely large reduction and could make the difference between someone going bankrupt or not.  To make it even better, The lending companies don’t take credit score/rating or income verification into consideration; so those who have had trouble in the past get a second chance.

In the lending business there are companies that specialize in this type of financing and a lot of the cases they are Mortgage Investment Corporations (MICs) like VWR Capital Corp out of Langley, BC.  They look at the real estate and lend on the property rather than the qualifying details of the borrower.  General servicing of the loan must be present or the deal will not get underwritten so be sure you can afford your home based off of your gross annual income.  The money gets registered as a standard mortgage but at a higher interest rate.  Because the risk is higher for the lender, the rates represent that risk.

Private mortgages are also good for self employed individuals who cannot prove their income or those who have dented credit to the point lenders like Home Trust won’t even lend them a mortgage.  Many individuals consider private mortgages just a cost of doing business (Specifically builders and developers).

If you are looking to withdraw equity contact me for a free/confidential mortgage consultation.  I have the best private lenders in Canada at my finger tips.

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We’re getting to that age where money seems to be more and more important.  Financial responsibility is now a key determinant in how we choose to live our lives.  Every year it seems we take on more bills and expenses with payments being withdrawn out of our accounts on different days during the month.  Things can get confusing and stressful; especially if your payments are scattered all over your calendar.

Being financially competent is one of the greatest assets you can have.  Without keeping a keen eye on your finances, payments can go in arrears and collection agencies can take over and completely destroy your credit rating.  Having dented credit could stop you from getting the best rate on a mortgage or even qualifying for a mortgage or line of credit.  It could also limit things like purchasing a car or signing up for media and communication services (I.E. Shaw Cable).

Credit cards tend to be a slippery slope, especially when they are randomly being mailed to your house multiple times a year.  If you have credit cards, this article is for you.  Credit cards are a convenient medium for making everyday purchases.  Almost every vendor/store you visit accepts Master Card, Visa, or American Express.  As a young adult this is a perfect time to learn the magic of leveraging your debt.  This essentially means using the available credit on your card to make a purchase rather than your debit card.  The difference is that your card will pay you back a percentage if you are signed up with a rewards program.  Leveraging in this sense is simply using your debt as a medium to gain financial reward.

A simple example of leveraging your debt is borrowing money from the bank in the form of an unsecured line of credit and then investing that borrowed money in to something that provides a higher return (i.e. Stocks, bonds, MIC shares).  Borrowing money from the bank is obviously tougher than approving for a credit card.  This is why I suggest getting comfortable with this Credit Card scenario before working with larger sums of money such as LOCs and Personal Loans.

There is a way that you can benefit from using your credit cards on a daily basis.  Reward programs have been around for a long time and offer several different options.  Some accumulate points towards travel, some pay you back a percentage in cash, and some accumulate points that can go towards the discounted purchase of everyday merchandise.  This method is foolproof if you are diligent on paying off your credit card every month.

I suggest marking one day a month in your day timer that is allocated for paying off your credit card.  This way you will not miss a payment and avoid paying any interest on your card.  Everyone has bills.  These can range from Hydro to Car Insurance so why not set up each of your payments as a pre-authorized payment on one single day each month.  It’s as simple as calling your creditors and asking them to move your payment date.  As long as they are all on one day, you’ll know exactly how much money is coming in and out of your bank and credit card account.

You spend money on bills anyway; why not collect reward points while doing it!

Happy Spending!

The top 5 factors that affect your credit score!

1.    Payment History – 35%
2.    Money owed – 30%
3.    Length of time having credit – 15%
4.    Inquiries or application for credit – 10%
5.    Different types of credit – 10%

It’s important to remember whenever you sign up for a new credit card, apply for a loan at the bank, or subscribe to communication services (I.e. Rogers, Shaw, Telus), there is a chance that your credit score will be checked.  By knowing which factors affect the over all score, you’ll be able to track what’s bringing your score down.

What is good credit?

680 and up:   Good to superior credit
600 – 679:     Average to good credit
570 – 600:     Below average credit
Below 570:     Poor credit

This figure determines which financing you qualify for.  Major Banks will give mortgage loans for individuals with good to superior credit; usually with minimum beacon scores of 620.  For those who have dented credit, not all hope is lost.  Alternate ‘A’ and B lenders will lend based on differing criteria.  These lenders are more interested in the equity of the property and the personal covenant of the borrower.  A dented beacon score doesn’t kill the deal but these lenders typically have higher fees and more expensive interest rates.

When shopping for a mortgage, be sure to avoid going from bank to bank.  Although inquiries or application for credit only amount to 10% of your credit score, it could be the difference between getting a better rate and product.

Happy spending!

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When applying for a mortgage, it is important to understand what all of it means.  If you know the different components of the mortgage product, you are able to make a better decision on which product is right for you.

The amortization is the length of the loan or how long the loan will take to be paid out fully in both interest and principal.  People tend to negotiate for a longer amortization when they can as it decreases the monthly payment.  By having a longer time to pay off the loan, it makes it more affordable.  The term of a mortgage represents the length of time a particular product interest rate applies.  This is the length of time the particular contract is written for.  Once the term has expired, the loan gets re-negotiated at a new rate and term depending on the market conditions.  By using a mortgage broker, you have access to all of the lending institutions so you know when you need to renew, it will be at the best rate available.

When shopping for a mortgage, make sure you’re informed.  An informed mortgage consumer typically turns in to a mortgage that gets paid off faster.

Richard Earles
604.533.3190

Credit card debt has become one of Canada’s top sources of consumer debt. Teenagers are now issued credit cards that are eligible for credit limit increases up to 400% within one year. Credit card companies are setting up booths at  university campuses pushing their cards on impressionable students. I myself fell for their sales pitch when attending university in Toronto. The salesmen selling the credit cards gave away promotional items such as soccer balls and coffee mugs which got an incredibly positive response. Everyone from my social circle signed up because of the free swag they were providing in exchange for signing up. This just goes to show that credit card companies are pushing for everyone and their mother to apply, even when it means exploiting young impressionable youth.

Many Canadians get coerced into using credit cards everyday because of the reward programs they offer. The majority of these people are unaware that they are giving up certain benefits on their card such as product purchase insurance. When signing up for a credit card, be sure to ask about this feature. This insurance covers the purchases of everyday items you may have made with your credit card. For instance, one of my friends mothers purchased a pair of top of the line skis with her credit card and they were eventually stolen. Due to her insurance coverage offered by the credit card company, she was re-imbursed for the purchase price of the skis.

Be Careful!

A good friend of mine applied for a cash-back rewards program on her credit card. In order to qualify for the rewards bonus, she would have needed to make a purchase above $2000.00. The only problem was that she had only a limit of $1500.00. Although she signed up for the program, her limit didn’t allow for her take advantage of this cards cash back feature. To make matters worse, they did not disclose this information to her during the sign up period. A word to the wise, always be sure to read the fine print when signing up for a credit card and always ask questions! You may be singing up for something that you’ll severely regret later on.

The majority of Canadians that have credit cards or had credit cards, have reached their credit limit at least once in their lifetime. One problem that results from maxing out a credit card is that it shows up on your credit bureau report. If you are interested in qualifying for a mortgage or even buying a car, the financial institutions from which you finance such purchases will check this information ultimately making the qualification process much more difficult.  Banks do not like to see large outstanding debt when applying for such loans.

Do your due diligence before embarking on the roller coaster ride that is credit card debt. For more information on how to consolidate your credit card debt, fill out a form HERE and send me an e-mail at rearles@dominionlending.ca

The Canadian finance minister Jim Flaherty announced this morning (Jan, 17, 2011) the new mortgage laws that will come in to effect on March 18, 2011.  These new laws are designed to support long-term stability in Canada’s housing market and support hard-working Canadian families saving through home ownership.  Are these changes good for the mortgage consumer?  You be the judge

New Mortgage Laws

• Amortizations are reduced from 35 years to 30 years on insured mortgages above 80% LTV.  This could mean larger mortgage payments.  The idea is to have Canadians pay off their principal mortgage faster while reducing the total amount of interest paid.  This may be advantageous to a great deal of people, but those who are looking to refinance or purchase a home with a limited down-payment will find larger monthly mortgage payments.
• The amount a mortgage consumer can refinance is changed from 90% LTV to 85% LTV.  If you were to borrow money on an equity basis and your home is worth $100,000.00, the most you’d be eligible to refinance at is $85,000.00.
• HELOCs (Home Equity Line of Credit) are no longer backed by government insurance.  Loans that are secured by the equity in consumers homes are no longer to be insured by the government.  This however will not come into effect until April 18, 2011.

What does this mean for you and me?
- Mortgage payments will be larger
- Principal on each mortgage will be paid down faster
- Less interest will be paid throughout the life of the loan
- Limited LTVs encourage the elimination of debt
- Mortgage consumers are forced to draw less equity from their houses in refinances.

In order to avoid these new laws, be sure to contact me ASAP regarding refinances, HELOCS, and mortgages with 35 year amortizations.  March 18, 2011 is the date to beat!

Click HERE of a full mortgage application.

To view the publication released by the Mortgage Broker Association of British Columbia regarding this change in law click here.

Richard Earles
604.533.3190

In B.C. there are a number of First Time Home Buyer grants that can be taken advantage of.

As they exist, they also are followed by certain conditions.

The first grant Im going to tell you about is called the First Time Home Exemption that eliminates the payment of property transfer tax.  In order to qualify for this exemption, the property must have a market value of less than $425,000.00.  Property transfer tax is calculated like the following:

1% of the first $200,000.00
2% on the remaining balance
(ex. Market Value of $400,000.00

(1%) 0.01 x $200,000.00 = $2000.00
(2%) 0.02 x $200,000.00 = $4000.00

$2000.00 + $4000.00 = $6000.00

Based on the numbers above, you can see that not having to pay the property transfer tax can save you a great deal of money when purchasing your home.  In my example its a savings of $6000.00.  Remember, this is only the case if the market value is below $425,000.00.

The second grant Im going to tell you guys about is only applicable if you are purchasing a new home that is subject to Harmonized Sales Tax HST.  This grant is designed to help individuals purchasing new homes as the HST can be a pricey expense.  This is designed as a federal and provincial rebate system.  The federal government provides you a rebate as well as the provincial government doing the same thing.

First of all, a new home with the market value of $325,000.00 is subject to 12% tax.
(12%) 0.12 x $325,000.00 = $39,000.00

Example:
Home Price: $325,000.00
-Federal GST New Housing Rebate: $6300.00
-Provincial New Housing Rebate: $17,500.00
-Total Rebates: $23,800.00

*Remember, for a house costing $325,000.00, HST will cost $39,000.00 as it constitutes a 12% tax.  By receiving a rebate of $23,800.00, your total charge on HST tax for a “New Home Purchase” would be $15,200.00.

The third type of grant I’m going to tell you about is called a cash back option and it is offered through several financial institutions.  This works by providing a rebate on your down payment after you register it.  When purchasing a house, the minimum down payment is 5%.  After you give the down payment, the bank will provide you the 5% back after everything is said an done.  Essentially what this does is provide 100% financing on your property.  The down side of doing this is that you end up paying more in interest rate as you aren’t eligible for the discounted rate.  A lot of the time you end up paying more in interest because of the cash back option.

Leave your questions about buying your first home below and I will find you exactly what you are looking for!

Click HERE for a mortgage application

Richard Earles
604.533.3190

There has been a lot of talk recently about hybrid mortgages, also known as 50-50 mortgages.  This type of mortgage combines the two most popular types of mortgages in the industry into one: 50% fixed rate, and 50% variable rate.  Having both options as one collateral charge gives you the security you need by covering the bases on two separate accounts.  If interest rates are to rise, you are locked in at a fixed rate for half of your principal amount.  If interest rates are to go down, your variable portion of the mortgage will result in a lower monthly payment on its respective half of the principal.

If you are interested in minimizing and diversifying risk with your mortgage, the DLC 50-50 Balance Mortgage is the way to go.

There is a great advantage to using the Dominion Lending Centres 50-50 Balance Mortgage as it gives you the option to lock in to your variable portion of the mortgage at any time.  This product allows for a 20% lump sum pre-payment as well as a 20% annual payment increase ability.  Dominion Lending Centres allows this product to be portable as well.  If you were ever a move, the mortgage could be transferred to that new property.

This type of product is perfect for the individual that cannot decide between the variable or fixed rate.  It suites those who don’t want to commit to a five year fixed schedule as well as those that would usually go fully variable but are concerned that prime is at a current low.  By having both options in one product, it covers all of the bases and provides a sense of security that other mortgage products cannot provide.

Contact me at 604.533.3190 to discuss this option further

Richard Earles
604.533.3190

With mortgage rates still hovering near historic lows, chances are you’ve considered breaking your current mortgage and renewing now before rates rise any further.

Perhaps you want to free up cash for such things as renovations, travel or putting towards your children’s education? Or maybe you want to pay down debt or pay your mortgage off faster?

If you’ve thought about breaking your mortgage and taking advantage of these historically low rates, feel free to give me a call to discuss your options.

In some cases, the penalty can be quite substantial if you aren’t very far into your mortgage term, but we can determine if breaking your mortgage now will benefit you long term.

People often assume the penalty for breaking a mortgage amounts to three months’ interest payments so, when they crunch the numbers, it doesn’t seem so bad. In most cases, however, the penalty is the greater of three months’ interest or the interest rate differential (IRD).

The IRD is the difference between the interest rate on your mortgage contract and today’s rate, which is the rate at which the lender can relend the money. And with rates so low these days, the IRD tends to be greater than three months’ interest. Because this is a way for banks to recuperate any losses, for some people, breaking and renegotiating at a lower rate without careful planning can mean they come out no further ahead.

Keep in mind, however, that penalties vary from lender to lender and there are different penalties for different types of mortgages. In addition, the size of your down payment and whether you opted for a “cash back” mortgage can influence penalties.

While breaking a mortgage and paying penalties based on the IRD can result in a break-even proposition in the short term, if you look at the big picture, you’ll see that the true savings are long term – as we know that rates will be higher in the years to come. Your current goal is to secure a long-term rate commitment before it is too late, and here lies the significant future savings.

As always, if you have questions about breaking your mortgage to secure a lower rate, or general mortgage questions, I’m here to help!

Richard Earles
604.533.3190

Mortgage professionals can protect their clients’ families and their homes through a mortgage life insurance policy.

Mortgage life insurance is simply a life insurance policy on the homeowner which will allow their family or dependents to pay off the mortgage on their home should something tragic happen to them. This is not to be confused with mortgage default insurance, which lenders require to cover their own assets if you have less than 20% equity in your home. Mortgage life insurance is meant to protect the family of a homeowner and not the mortgage lender itself.

While it is nice to think that if you were to pass away your mortgage would be paid off, is it really necessary for you to pay for this service? If you already have an adequate amount of life insurance then the answer might be no.
If you are the primary breadwinner in your home and your death would leave your family without the means to pay for the mortgage, then mortgage life insurance might be a good option.

When looking at mortgage life insurance policies, it’s important to know if the policy that you choose is portable, and if it’s backed by a large organization. A mortgage professional will take you through the ins-and-outs of mortgage life insurance. By evaluating what you really need, and the differences in coverage and costs, you can make the best decisions for you and your loved ones.