5 Sep

The Bank of Canada’s Monetary Policy Report and it’s Impact on You

General

Posted by: Marie Tean

Published by FCT

August 27, 2021

The Bank of Canada’s Monetary Policy Report and its Impact on You.

The Bank of Canada (BoC) released its latest Monetary Policy Report (MPR), and the outlook is optimistic. With the economy re-opening, vaccinations on the rise, and supply chains finding relief from the bottleneck they’ve experienced, the future looks promising.

What impact does the MPR have on you? What are the implications for mortgages? Let’s take a look at some areas of particular interest.

SOME GENERAL POINTS

While the economy may be starting to rebound, it hasn’t made a full recovery yet. To get back to pre-pandemic levels will take time, and the road may be winding. For that reason, the bank is maintaining its key policy rate at 0.25%. The historically low rate, which has been in place since the beginning of the pandemic, will only be raised when the economy can bear the weight of higher interest.

The BoC stresses that it takes time for monetary policy actions to affect the economy. They state that policy usually takes six to eight quarters for their full effects to be felt, so it’s always a question of playing the long game.

The MPR forecasts that the economy will grow by around 6% in 2021. This means that while the economy grew at a slow rate during the first half of the year, it’s anticipated that consumers are ready to start spending more, especially with COVID restrictions being lifted to various degrees nationwide.

While employment has been recovering, the rate has not yet returned to its pre-pandemic levels. That factor, coupled with the price of gasoline and the cost of services rising as business return, led the BoC to state that inflation will run at or above 3% through the year. The rate is projected to ease to the bank’s target of 2% in 2022, rising again then settling to the target rate by 2024.

Finally, the central bank currently purchases federal bonds at a rate of about $3 billion per week. These purchases are a means to help lower the rates on mortgages and businesses loans. Because these bonds have a guaranteed return on investment, they provide assurance for the federal government that they can balance their books with lower mortgage rates. That is, they will continue to see a return on investment, even if they aren’t recovering extra money from mortgages. The purchase of bonds will be reduced to $2 billion per week, as economic conditions have improved since the start of the pandemic.

WHAT THIS MEANS FOR MORTGAGES AND THE REAL ESTATE MARKET

The good news for homebuyers is that with the Bank of Canada’s rate remaining at 0.25%, mortgages will continue to be low for the next while. If you’re looking to get a new mortgage or to refinance your current one, now is a great time to do so. You’ll be able to take advantage of the incredibly low interest rate, securing it for your next term. This is assuming, of course, that you’re able to pass the stress test, if it applies to your purchase.

If you currently hold a variable rate mortgage, it could be time to think about locking in at a fixed rate. While the interest rates will stay low for the next while, they are destined to rise. While this may not happen until 2022, you don’t want to be caught unaware by rising interest.

When interest rates do rise, homeowners will feel the effects across the country. While cities like Toronto and Vancouver already have higher real estate prices, places like Montreal and Halifax are witnessing increasing prices as well. This, coupled with the high demand for real estate brought on by the pandemic, means that home buyers are taking out bigger loans to pay for their homes. When the mortgage rate increases, people who have more costly mortgages will have to pay more in monthly costs. In some cases, the increase in interest might make mortgage payments unendurable.

Be advised: The housing market remains competitive, and with the workforce returning, more individuals could be looking to purchase a home. If you are considering buying a home, take time to carefully calculate what you can afford for a down payment and how much of a mortgage you can handle. Knowing what you can safely afford when all your expenses are taken into account ensures that you only look at properties that are within your reach.

HOW TO PREPARE FOR HIGHER INTEREST RATES

As the rise in interest rates are inevitable, here are a few tips to help you ready yourself for the event.

  • If you are currently paying your mortgage on a monthly schedule, consider changing your payment plan to a bi-weekly one as soon as you can afford to do so. By doing this, you’ll be putting more money towards the principal of your mortgage and less to the interest.
  • Set up a dedicated account and start saving any extra money that you can. Most mortgage contracts allow for a lump-sum payment at certain times. When your time comes, apply any extra money that you have to the principal of your loan. This way, you’ll reduce the principal you have left to pay, in turn lowering the amount of interest you have to pay as well. When the mortgage rates inevitably rise, you won’t feel the effects as much as you would if you had a greater principal remaining.

Remember, the BoC states that policy actions take time, and that policies must be forward looking. When thinking about your mortgage and loans, you should be considering the future as well.

Think of ways to save money on your mortgage both in the present and in the future. Speak with your mortgage broker or lender, as they may have advice about how to lower the cost of your repayments. If you’re in the market for a new home, consider the inevitable rise in interest rates when calculating what you can afford to spend on a home. You don’t want to find yourself in a situation where you’re house poor, or even worse, having to foreclose on your mortgage.

Are you currently paying off a mortgage or looking at getting a new one? Let us know your experiences in the comments.

This is intended to be used as general information only and does not constitute financial advice. Please do your due diligence before making any financial decisions.

5 Sep

Are e-signatures in Real Estate Transactions Here to Stay?

General

Posted by: Marie Tean

Published by FCT
September 2, 2021

The pandemic has changed the way we do business. Between home offices and ZOOM meetings, our daily engagements have felt a seismic shift. While some of these changes are temporary fixes, others could prove to be the new normal.

If you’ve bought or sold a property in the last year, you’ll recognize some of these changes right away. From virtual open houses and appointment-only viewings to online meetings with banks and lawyers, you might question if you’ll ever personally meet any of the people you’ve been doing business with.

One of the biggest changes in the management of real estate transactions is that you don’t always have to provide a “wet,” or physical, signature. Instead, in a lot of cases, you can provide an e-signature to act as your legally binding agreement.

THE CHANGE IN BUSINESS
While e-signatures have been used in real estate transactions for years, since the start of the pandemic, their use has increased exponentially. “Prior to COVID, I would guess that I was using e-signatures 60-70% of the time” notes Ronald Francis, a real estate broker with 22 years of residential experience, “now it would be at least 90%, maybe 95%.”

A spokesperson from the Royal Bank of Canada (RBC), observes that the introduction of e-signatures to mortgage documents had been in the works, but was pushed to implementation with the pandemic. “At the onset of the pandemic,” he states, “we rapidly shifted our priorities and launched an e-signature solution that could be leveraged by our mortgage specialists. The use of e-signatures has accelerated steadily ever since.”

Mark Weisleder, a senior partner and notary public at Real Estate Lawyers.ca LLP, points out that while the pandemic resulted in a rapid shift in how business was handled, the change was almost inevitable. “Already, a year or two before the pandemic, things were moving in that [the e-signature] direction,” he comments.

EARLY ADOPTION
To see the real estate industry’s confidence in e-signatures, look no further than Canadian Real Estate Association (CREA)’s partnering with DocuSign, an electronic signature management program. While this partnership began before the pandemic, it demonstrates how the industry was prepared for the shift.

Adopting e-signatures into real estate transactions has had numerous advantages for the industry. Mark Weisleder observes, “I think [the government] did realize that the electronic signature in many ways is more secure, and there’s a record of it, even more so than a hand written signature”. With the digital footprint they leave behind, it’s much easier for e-signatures to be authenticated, and easier for witnesses to be verified.

During the pandemic, e-signatures have also allowed real estate agents, mortgage brokers and lawyers to stay at the forefront of health and safety. RBC notes “to help keep our clients and employees safe, we encourage our mortgage specialists to recommend the use of e-signatures, eliminating the need for in-person interactions as much as possible. Currently, the majority of our mortgage documents are signed using our e-signature capability.”

BUSINESS SIMPLIFIED
The use of e-signatures has made the process of buying and selling a property much smoother. In the past, individuals would have had to meet with a number of individuals to sign various formal documents, driving from meeting to meeting as they put ink to a seemingly endless stream of papers. “[The] advantages are obvious,” says Ronald Francis, “stay in [your] home office, send documents for signature and receive them in matter of minutes.”

It’s important to note that not all provinces have fully incorporated the practice. Jeff Kahane of Alberta’s Kahane Law Office comments that “[e-signatures are] not permitted in real estate documents that need registration at land titles. We need video signed documents to be sent back to us (originals) for land titles submission. In Ontario and BC things are different and contracts have been signed electronically for a while […] here a transfer needs wet ink.”

Ephraim Fung of British Columbia’s Alexander Holburn Beaudin + Lang LLP in B.C. similarly notes that “section 2(4) of the Electronic Transactions Act (British Columbia) provides that documents registered in the B.C. Land Title Office to create or transfer interests in land cannot be signed with e-signatures. These documents need to be signed with wet ink and witnessed by a lawyer or notary public.”

That’s not to say that a change to the industry isn’t coming in the near future. RBC notes “the recent shift may also expedite some regulatory changes regarding e-signatures on registration documents as some provinces still require a wet signature.”

Mark Weisleder echoes the sentiment that present circumstances have pushed technological adaptation forward in a way that might not otherwise have been possible. “This is where I’ve seen the pandemic actually move things along in a very positive way, which might have taken, frankly, years,” he observes.

THE FUTURE
With how easy e-signatures have made handling transactions, it’s not surprising that Ronald Francis and others feel that “e-signatures are here to stay”. With individuals able to sign documents on their own time and with minimal disruption, the adoption of the technology will continue once the pandemic is behind us.

The efficiency of e-signatures is not lost on Mark Weisleder. “The use of e-signatures has also enabled our law firm to complete an entire real estate closing without ever seeing a buyer or seller, and making sure everything is completely safe,” he notes.

Not only do e-signatures allow for a more streamlined flow of business, but they also help to reduce the possibility of errors in document signing. By clearly directing consumers to what lines of a document need signatures, there’s less chance of missed or incorrectly placed signatures. This allows transactions to be completed faster and with less confusion.

Beyond the benefits to consumers, RBC notes that e-signatures have additional advantages. “There is also an environmental benefit since we’re able to significantly reduce the amount of paper required to complete an application and eliminate the greenhouse gasses associated with travel relating to signatures.”

Ephraim Fung observes that in B.C., “In response to challenges presented by the COVID-19 pandemic, the B.C. courts and Land Title Survey Authority have released practice directives and policies that make remote/video witnessing of land title documents possible.”

This evolution is a positive step forward, while still maintaining strict security measures. Fung continues, “these policies require parties to B.C. real estate transactions to go through stringent checks and balances to ensure their identities are properly verified. Additionally, practitioners must submit sworn affidavit evidence concurrently with any remotely witnessed land title document for review by the Land Title Survey Authority, prior to the land title documents being accepted for registration.”

E-SIGNING ON THE DOTTED LINE
While the pandemic has presented the industry with many challenges, it has also driven real change. “We’re very pleased at the way that we’ve been able to use technology, as lawyers… it has helped to keep the industry going during difficult times,” says Mark Weisleder.

The relative ease with which the real estate industry has integrated e-signatures shows a significant shift in thinking. While the pandemic may have forced the industry to integrate the technology sooner than anticipated, it’s a welcome change that won’t be going away any time soon.

26 Jul

The Mortgage Financing Process.

General

Posted by: Marie Tean

Published by DLC Marketing Team

July 13, 2021

The Mortgage Financing Process.

The number one question for any potential homebuyer or someone new to the mortgage process is “what does this process entail?”. The following is a simple outline to give you an idea of the process and help you understand what to expect as you embark on your home buying journey!

STEP 1 – BE PREPARED

Having the following information on hand before meeting with your mortgage professional will help them determine what you qualify for and help them determine the best mortgage product for you:

  • Contact information for your employer and your employment history
  • Proof of address and your address history
  • Government-issued photo ID with your current address
  • Proof of income for your mortgage application
  • Down payment proof (amount and source)
  • Savings and investments proof
  • Details of current debts and other financial obligations

STEP 2 – GET PRE-APPROVED

One of the best things any potential homeowner can do when starting the home buying process is to get pre-approved. Mortgage pre-approval requires submission and verification of your financial history and can help you determine your price range, understand the monthly mortgage payment associated with that price range and provide the mortgage rate for your first term.

It is important to note that pre-approval does not mean that a lender has fully reviewed your documentation and you may still need the approval of a mortgage insurer. However, it does have a lot of benefits that can give you a “leg-up” in your search!

BENEFITS OF PRE-APPROVAL

Getting pre-approved not only makes the search easier by helping to determine your price range and budget, but pre-approval also guarantees the interest rate for 90-120 days while you search for that perfect home. Plus, the rate will automatically be adjusted down with any market reductions. Another benefit to pre-approval is that, when it comes time to purchase, pre-approval lets the seller know that securing financing should not be an issue. This is extremely beneficial in competitive markets where lots of offers may be coming in.

Quick Tip: Being entirely candid with your home-buying team throughout the process will be vital! Hidden debt or buying a big-ticket item during your 90-120 day pre-approval can change the amount you are able to borrow. It is best to refrain from any major purchases (such as a new car) or life changes (such as changing jobs) until after closing and you have the keys to your new home!

STEP 3 – HIRE A REALTOR

In today’s competitive real estate market, it can be very difficult to acquire property WITHOUT the help of a realtor. One of the reasons realtors are integral to the home buying process is that they can provide access to properties that never even make it to the MLS website. Realtors also gain access to information about homes that may come onto the market before a listing is even signed.

Most importantly though, a realtor understands the ins-and-outs of the home buying process and can tell you how to be successful in your endeavors to purchase a home by guiding you through the process from the first viewing to having your bid accepted.

STEP 4 – SHOP THE MARKET & MAKE AN OFFER

Once you have found the property that meets your needs, you’ll put in an offer that’ll be accepted or countered. This may go back and forth until you reach an acceptable price with the vendor. To start home shopping today, check out the listings on Rew.ca!

STEP 5 – OFFER IS ACCEPTED

Once your offer is accepted with the condition of financing, you will need to do a few things to finalize the sale:

  • Ask for a realtor intro between your mortgage professional and realtor.
  • An appraisal may be required, which will be determined and arranged by your mortgage professional.
  • Send in any remaining documents required for financing (income confirmation, down payment confirmation, etc).
  • Arrange a home inspection.
  • Receive the lender’s approval on property and final approval letter.

STEP 6 – REMOVE CONDITIONS

At this point, your financing is in place and you’re ready to proceed with the purchase of the property.

STEP 7 – LAWYER’S OFFICE

You’ll be asked to provide any money that’s to be used as your down payment, which is not already on deposit with your realtor. Typically, you’ll go in 1-2 days prior to the completion date.

Before you start on your home buying journey, be sure to take advantage of the expert advice that DLC Mortgage Professionals can offer. As experts in mortgages, brokers can help walk you through the process and find you the best mortgage product to suit your unique needs! The best part? It won’t cost you a penny! Mortgage professionals are paid out by the lender when they register a new contract. Therefore, all that matters is finding YOU, the client, the best possible mortgage.

21 Jun

5 Approval Roadblocks

General

Posted by: Marie Tean

June 8, 2021
Published by DLC Marketing Team

5 Approval Roadblocks.

When in the process of buying a home, there is nothing worse than having your mortgage broker or lawyer call and say “there is a problem”.

If you have found your dream home and negotiated a fair price, which was accepted, and you have supplied all the documentation to your broker, you probably assume everything is fine. The reality is that your financing approval is based on the information the lender was provided at the time of the application. If there have been any changes to your financial situation, the lender is within their rights to cancel your mortgage approval.

To ensure that you don’t encounter any last-minute issues on your home buying journey, there are five major approval roadblocks to be aware of and avoid for a smooth transaction:

EMPLOYMENT

When submitting a request for financing, whether a mortgage or car loan or to handle personal debt, one of the most important aspects the lender looks at is employment. If you were working at Company X for five years at $50,000 a year and – just before your deal is finalized – you change jobs, the lender will now require proof from the new job. This can include proof that probation for this new job is waived, or new job letters and pay stubs at the very least. If you change industries, they will want to see more proof that you are capable of keeping this job. For any employment involving overtime or bonuses, the lender often requests a two-year average, which you would not be able to provide at a new position. Another employment change that could hurt your financing approval would be if you decide to change from an employee to a self-employed contractor.

When it comes to financing, it is best to wait to make any major employment or life changes until after the deal has gone through.

DOWN PAYMENT SOURCE

As mortgage financing is based on the initial information provided, you will most likely need to do a final verification of the down payment source. If it is different than what the lender has approved, it could spell trouble for your financing approval. Even if you said that your down payment was coming from savings and, at the last minute, mom and dad offer  you the funds as a gift, it could affect your approval. This is an acceptable source of down payment, but only if the lender knows about it in advance and has included this in their risk assessment, but it can end a deal.

DEBT

A week or two before your possession date, the lender will obtain a copy of your credit report and look for any changes to your debt load. Since mortgage approval is based on how much you owed on that particular date, it is important not to increase your debt before the deal is finalized. Buying a new car or items for the new home must be postponed until after possession; even if they are “do not pay for 12 months” campaigns because you will need to fulfil those payments, regardless of when they start.

BAD CREDIT

One of the biggest roadblocks to mortgage approvals is credit card payments. When you enter the financing process, it is important that your credit score remains positive. If your credit score falls due to late payments, this can cause major issues with your financing. Even if you have a high-ratio mortgage in place which requires CMHC insurance, a lower credit score could mean a withdrawal of the insurance and removal of any financing approval.

MISSING IDENTITY DOCUMENTS

Before a deal is finalized, the lawyer must verify your identity documents and see that they match the mortgage documents. You may not think it needs to be said, but it is important to use your legal name when you apply for a mortgage. Even if you go by your middle name or a nickname, all legal documents should match.

Keep in touch with your Dominion Lending Centres mortgage professional right up to possession day. Make this a happy experience rather than a heartbreaking one.

14 Jun

10 First-Time Homebuyer Mistakes

General

Posted by: Marie Tean

Published by DLC Marketing Team  April 20, 2021

As a first-time buyer, there are some homebuyer mistakes you should avoid to ensure a smooth and successful experience:

THINKING YOU DON’T NEED A REAL ESTATE AGENT
You might be able to find a house on your own, but there are still many aspects of buying real estate that can confuse a first-time buyer. Rely on your agent to negotiate offers, inspections, financing and other details. The money you would have saved on commission can be quickly gobbled up by a botched offer or overlooked repairs.

GETTING YOUR HEART SET ON A HOME BEFORE YOU DO YOUR HOMEWORK
The house that’s love at first sight may not always be what it seems, so keep an open mind. Plus, if you jump in too fast you may be too quick to go over budget or you might overlook a potential pitfall.

CHOOSING A FIXER-UPPER BECAUSE THE LISTING PRICE IS CHEAPER
That old character home may have loads of potential, but be extra diligent during the inspection period. What will it really cost to get your home to where it needs to be? Negotiating a long due-diligence period will give you time to get estimates from contractors in case you need to back out.

COMMITTING TO MORE THAN YOU CAN AFFORD
Don’t sacrifice retirement savings or an emergency fund for mortgage payments. You need to stay nimble to life’s changes and overextending yourself could put your investments—including your house—on the line.

GOING WITH THE FIRST AGENT WHO FINDS YOU
Don’t get halfway into house hunting before you realize your real estate agent isn’t right for you. The best source: a referral from friends. Ask around and take the time to speak with your potential choices before you commit to a realtor.

DIVING INTO RENOVATIONS AS SOON AS YOU BUY
Renovations may increase the value of your home, but don’t rush. Overextending your credit to get upgrades done fast doesn’t always pay off. Take time to make a solid plan and the best financial decisions. Living in your home for a while before renovating will also help you plan the best functional changes to the layout.

CHOOSING A HOUSE WITHOUT RESEARCHING THE NEIGHBOURHOOD
It may be the house of your dreams, but annoying neighbours or a nearby industrial zone can be a rude awakening. Spend some time in the area before you make an offer and talk to local business owners and residents to determine the pros and cons of living there.

RESEARCHING YOUR BROKER AND AGENT, BUT NOT YOUR LAWYER
New buyers often put all their energy into learning about mortgage rates and offers. But don’t forget that the final word in any deal comes from your lawyer. Like finding a real estate agent, your best referral sources for a lawyer will be friends and business associates.

FIXATING ON THE LOWEST INTEREST RATE
A reasonable interest rate is important, but not at the expense of heavy restrictions and penalties. Make a solid long-term plan to pay off your mortgage and then find one that’s flexible enough to accommodate life changes, both planned and unexpected. Be sure to talk your Dominion Lending Centres mortgage professional to learn more.

OPTING OUT OF MORTGAGE INSURANCE
Your home is your largest investment, so be sure to protect it. Mortgage insurance not only buys you peace of mind, it also allows for more flexible financing options. Plus, it allows you to take advantage of available equity to pay down debts or make financial investments.

If you are ready to search for your first home, don’t hesitate to reach out to a Dominion Lending Centres mortgage professional today for expert advice you can count on.