In the mortgage world, a “guarantor” is someone who guarantees the mortgage on behalf of the mortgage holder in the case that the mortgage holder cannot pay back the loan.

Typically, a guarantor is used in a situation where the buyer has damaged or poor credit history or they lack sufficient income to qualify for the value of the loan. Adding a guarantor can help get these types of files approved as this allows the lender to know they will be paid back should the mortgage holder default.

*It is important to  note that a guarantor is not the same as a co-signer.

Below are some key facts about guarantors and what makes them different from a co-signer:

1. The guarantor must be a spouse or immediate family member. This is not necessary for a co-signer who could be a friend or distant family member.
2. A guarantor typically does not have their name on the title of the property but it will be on a mortgage. In the case of a co-signer, the name is typically on both the title of the property AND the loan.
3. Guarantors cannot qualify for their own mortgage or large loans if they are responsible for guaranteeing a different loan.
4. There is heightened risk on the side of the guarantor as they are responsible for the entire amount of the loan should the borrower default. In order to qualify, they must meet the requirements for credit check, income, liabilities and assets. Any potential guarantor should seek legal advice before signing for the loan to ensure they understand the contract.

Whether you want to be a guarantor for someone else’s mortgage, or you need one for your own, be sure to talk to your DLC Mortgage Expert before making any decisions. Your mortgage professional can help you review your options and explain the terms of the agreement or simply answer any questions you may have.

Published by DLC Marketing Team

When it comes to getting a mortgage, there is a common misperception that a low rate is the most important factor. However, while your rate does matter for your mortgage, it is not the only component to consider.

If you’re looking to get a mortgage, these are some other important factors that you should look at beyond simply the interest rate:

Term: The length of time that the options and interest rate you choose are in effect. A shorter term (5 years) allows you to make changes to your mortgage sooner, without penalties.

Amortization: The length of time you agree to take to pay off your mortgage (usually 25 years). This determines how the interest is amortized over time.

Payment Schedule: How often you make your mortgage payments. It can be weekly, every two weeks or once a month and will affect your monthly cashflow differently depending on your choice.

Portability: An option that lets you transfer or switch your mortgage to another home with little or no penalty when you sell your existing home. Mortgage loan insurance can also be transferred to the new home.

Pre-Payment Options: The ability to make extra payments, increase your payments or pay off your mortgage early without incurring a penalty.

Penalty Calculations: Where variable rates typically charge three-months interest, a fixed rate mortgage uses an Interest Rate Differential (IRD) calculation. This can add up quite quickly! In fact, in some cases, penalties for breaking a fixed mortgage can sometimes be two or three times higher than that of a variable-rate.

Variable versus Fixed: For fixed-rate mortgages, the interest rate does not fluctuate over time. For variable-rate mortgages the interest rate fluctuates with market rates, which can be great when rates drop but not so great when rates are rising.

Open versus Closed: An open mortgage is similar to pre-payment options, allowing you to pay off your mortgage at any time with no penalties. A closed mortgage, on the other hand, offers limited to no options to pay off your interest in full despite often having lower interest rates.

When considering your mortgage, the above components all have a part to play in your overall mortgage as well as your homeownership experience.

It is easy to think that a low-interest rate is good enough, sign on the dotted line… but you may be overlooking important options such as portability, which allows you to switch your mortgage to another property should you choose to move. Or pre-payment options, which give you the choice to make additional payments to your mortgage. Without looking deeper at your mortgage, you may find yourself being forced to pay penalties in the future because you wanted to make a payment or a change to your mortgage structure. In some cases, agreeing to a higher rate to have more options and flexibility is better in the long run than the savings received from a lower rate.

Before agreeing to any mortgage, it is best to talk to your Dominion Lending Centres mortgage expert about the contract, as well as your future goals and any potential concerns you have to ensure that you get the best mortgage product for YOU.

Published by DLC Marketing Team

Reverse mortgages are now becoming a more mainstream financial solution for Canadians 55+ ; they are being used by thousands of Canadians for a variety of reasons. Homeowners 55+ are unlocking their home equity for tax-free funds that don’t have to be re-paid until they decide to sell their home. Consider your own financial needs. Do any of these 5 common scenarios sound familiar?

1. You have missed a payment/made a late payment.

Credit card, car and mortgage payments can become a vicious cycle; you make monthly interest payments and elongate the process of chipping away at that debt.  Alleviate the stress of debt by consolidating smaller loans with a reverse mortgage at a much lower interest rate. By consolidating your debt with a reverse mortgage, you can eliminate the stress of having to make monthly payments towards your loan and in turn, free up your monthly income. Better yet, a reverse mortgage doesn’t require any regular payments until you sell or no longer live in your home.

2. You have asked to skip a payment or are dipping into your investments.  

If your debt has led to missing payments or touching your RRIF or retirement accounts, consider using a reverse mortgage to unlock up to 55% of your home equity. This way you can pay off debts while your investments keep working for you.

3. You want to start crossing things off your bucket list yet can’t afford to.

Maybe your dream is to purchase a second home, take a vacation, or even just dine out or attend the theatre regularly. A reverse mortgage can improve your retirement lifestyle by supplementing your monthly income without affecting your OAS and pension.

4. You want to financially assist your aging parents/kids/grandkids.

As the sandwich generation, you’re caring both for kids and aging parents. That can place huge financial stress on a household. Your parents can use a reverse mortgage on their home to enjoy financial independence instead of relying on you. At the same time, since a reverse mortgage can be used for whatever, you like, you can “gift” family members and witness their enjoyment while you are still here.

5. You are facing unexpected expenses.

Maybe it’s a leaky roof or a flood in your basement. Or you might have to renovate your home for changing healthcare needs. A reverse mortgage gives you quick access funds to pay for unplanned expenses without worrying about making any payments until you move or decide to sell your home.

If any of the examples above resonate with you, contact your DLC mortgage expert to find out how the CHIP Reverse Mortgage by HomeEquity Bank can be a viable option to help you live your best retirement!

Published by DLC Marketing Team

When it comes to getting a mortgage, one of the more overlooked elements is the option to be able to port the loan down the line.

Porting your mortgage is an option within your mortgage agreement, which enables you to move to another property without having to lose your existing interest rate, mortgage balance and term. Thereby allowing you to move or ‘port’ your mortgage over to the new home. Plus, the ability to port also saves you money by avoiding early discharge penalties should you move partway through your term.

Typically, portability options are offered on fixed-rate mortgages. Lenders often use a “blended” system where your current mortgage rate stays the same on the mortgage amount ported over to the new property and the new balance is calculated using the current interest rate. When it comes to variable-rate mortgages, you may not have the same option. However, when breaking a variable-rate mortgage, you would only be faced with a three-month interest penalty charge. While this can range up to $4,000, it is much lower than the average penalty to break a fixed mortgage. In addition, there are cases where you can be reimbursed the fee with your new mortgage.

If you already have the existing option to port your mortgage, or are considering it for your next mortgage cycle, there are a few considerations to keep in mind:

1. Timeframe: Some portability options require the sale and purchase to occur on the same day. Other lenders offer a week to do this, some a month, and others up to three months.
2. Terms: Keep in mind, some lenders don’t allow a changed term or might force you into a longer term as part of agreeing to port you mortgage.
3. Penalty Reimbursements: Some lenders may reimburse your entire penalty, whether you are a fixed or variable borrower, if you simply get a new mortgage with the same lender – replacing the one being discharged. Additionally, some lenders will even allow you to move into a brand-new term of your choice and start fresh. Keep in mind, there can be cases where it’s better to pay a penalty at the time of selling and get into a new term at a brand-new rate that could save back your penalty over the course of the new term.

To get all the details about mortgage portability and find out if you have this option (or the potential penalties if you don’t), contact me today for expert advice and a helping hand throughout your mortgage journey!

Published by DLC Marketing Team