27 Jan

Upgrading Your Home: Refinance Plus Improvements Mortgage Option

General

Posted by: Jeff Dickson

When it comes to mortgages and renovations it is important that you have your financing in place before you take the sledge hammer out of the garage! Lenders do not like coming into play half way through a renovation. Planning is essential to ensure you will have enough funds to cover the renovation costs.

Did you know there are mortgage products available that may help you with the costs of renovations above the 80% loan-to-value refinancing rule. The Refinance Plus Improvements Mortgage is a great way to incorporate the costs of improvements into your mortgage.

Here’s a list of typical Refinance Plus Improvements Guidelines:

1. The improvement funds above the 80% loan-to-value mark for the current as-is market value of your home will be held back by the lender until your renovations are complete.

2. Lending value is based on an Appraisal that states the As-Is Complete Value

3. You will need quotes upfront for the proposed improvements

4. You may need additional funds to pay deposits to contractors

5. Do not start demolitions before an Appraisal is done

6. Funds available are typically limited to 20% of the current appraised value up to $40,000 (ask a mortgage broker about other mortgage options if you require more funds)

7. Renovations typically will need to be complete within 90 days from the date the mortgage completes

8. You must meet the lenders credit and debt servicing requirements

Stay on Budget and on Time by Following these 5 Simple Steps:

1. Finalize the design before you start!

2. Contact Suppliers to make sure that they have the materials you have chosen in stock or that they can be delivered quickly

3. Obtain quotes from 2 or more reputable contractors

4. Apply and secure any permits that are required before your mortgage completion date

5. Give your contractor a deadline to ensure you don’t go over the allotted time to complete the improvements

Start the renovation planning by contacting your Dominion Lending Centres mortgage professional first!

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Kathleen Dediluke

KATHLEEN DEDILUKE

Dominion Lending Centres – Accredited Mortgage Professional
Kathleen is part of DLC Integrity Mortgage BC based in Nanaimo, BC.

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4 Aug

Fixed vs Variable Rate Mortgage – What’s the Better Choice and Why?

General

Posted by: Jeff Dickson

In today’s market, variable and fixed rates are not too far apart. This makes most people think that the fixed rate is the way to go as it’s often viewed as the safest option.

Many believe that variable rate mortgages are for the daring and at any time your rate could double leaving you high and dry in the cash flow department. Many don’t realize that isn’t the truth at all.

 

21 Jun

Collateral Mortgages – What you should know before entering one

General

Posted by: Jeff Dickson

Most people are unaware that there are two different types of mortgages available to Canadians, the

more common “Standard Charge” mortgage and a “Collateral Charge” mortgage. Both types of

mortgages have their advantages but it is important to understand the difference between them.

The difference between the two mortgages is how the lender registers the charge with the land registry

office.

With a standard charge mortgage the lender will register your specific mortgage details (principal

amount, interest rate, term, etc) and the standard charge is registered for the actual amount of the

mortgage. At maturity this registered charge is transferable to another lender with minimal expense.

With a collateral charge mortgage the lender will register a charge for a greater amount than your

original mortgage loan. This amount can be up to 125% of the value of the mortgaged property. What

this does is gives the lender and borrower the ability to secure future loans with the property without

having to register new charges. This collateral Charge is not transferable to another lender at the

maturity of the mortgage term.

The Good – The benefit of a collateral charge mortgage is that you may be able to refinance your

mortgage or borrow additional secured loans (line of credit or credit cards) in the future without having

to register a new charge against the property. This will save time and expense for the borrower. It is

important to note that the lender will still need to approve any additional loan based on the borrower’s

financial situation at the time.

The Bad – The main negative of a collateral charge mortgage is that it is not transferable to another

lending institution at maturity. If a borrower wants to change lenders at maturity for a better rate or

better mortgage features they will incur legal fees to discharge the maturing mortgage and register a

new mortgage with the new lender. These fees can range from $500 to $1000. For borrowers who

want to keep their options at maturity and maintain negotiating power this is not the best mortgage.

The Ugly - There are other potential disadvantages related to collateral charge mortgages due to their

structure that are important to understand.

As a homeowner you lose control of the equity in your home. Regardless of how much equity you have

in the house the charge registered against the property can be up to 125% of the value of the home. No

other lender will be willing to give you a 2 nd mortgage or a secured line of credit using your house as

collateral because the first lender controls all the equity. As long as the collateral mortgage is in place

all secured lending will have to be done with the first lender. And if that lender declines a request for

more money, which they have the right to do, you will have very few options.

All loans made under a collateral mortgage are interconnected and as a result may reduce your ability to

shop your mortgage around at maturity. If you have a mortgage, a line of credit and possibly a secured

credit card under one collateral charge mortgage, in order to move the mortgage portion you would

need to pay off all debts in order to move the original mortgage to a new lender.

Collateral charge mortgages do have advantages, but unfortunately most are for the lending institution.

It is important to be aware that a couple of the major banks now only offer collateral change mortgages.

As with any financial product make sure you understand the pros and cons of a collateral charge

mortgage before entering into one. And if you have questions seek the advice of a professional who is

looking out for your best interests.