31 Jan



Posted by: Brad Lockey

Ask pretty much anybody about mortgages and the first thing, sometimes the only thing, they want to talk about is the interest rate. In my business as a Mortgage Professional, my job is to educate clients that the interest rate is definitely a cornerstone of your mortgage decision, it is not the only factor to consider when agreeing to sign a mortgage commitment. In many cases, the lowest interest rate does not represent an ideal fit, especially when the actual mortgage isn’t aligned with customer’s stage of life, priorities, or long-term outlook. Rental properties are a prime example of mortgage situations where basing a decision solely on the rate is often short-sighted and in some cases detrimental to the long-term viability of one’s investment.

Rental properties can be a lucrative way to diversify investments, build passive income and long-term net worth. They can also be costly, rigid and very problematic if you don’t choose the right property, area, tenants and MORTGAGE PRODUCT. Like any investment, you are going to do your research before buying – RIGHT? And you are going to take your time and screen potential tenants vs taking the first Kijiji reply from @fraudster.com offering a cash deposit higher than you have specified – RIGHT? I’ll leave that part up to you. Where I come in is ensuring that the mortgage product you are using allows you the most flexibility in your payments and overall investment. The best way to ensure that your rental investment does not become a sucking vampire on your personal bank account is to minimize the cash outlays you are obligated to make.

Enter the Home Equity Line of Credit (HELOC).
In my 10-plus years of doing mortgages and owning investment property, the HELOC is far and away my favourite product for investment properties.

First & foremost – CASH-FLOW. HELOC’s allow you the option of making interest-only payments monthly. The monthly payments on a standard $200K mortgage using current 5 yr fixed rate of 3.39%, for example, are $987. Interest only payments would be about $650. That’s a cash flow difference of $340. Think of a vacancy – they happen. That’s $340 of your own money that you don’t have to pull out of personal savings to cover while your investment income is stalled.

Having the ability to scale back or minimize your cash outlays can be the difference between good and bad when it comes to an extended vacancy, renovation or unforeseen expense such as a repair or insurance claim. This very feature has allowed me to take the time needed to properly screen potential tenants when I have a vacancy and not rush into leasing to the very first interested reply. I can tell you that one of the worst mistakes that can be made with a rental is to scramble to get tenants in so they can start paying rent only to find out you picked the wrong people.

HELOC’s also offer a number of additional features:

Fully open – imagine somebody comes along offering you top dollar for your investment property. A HELOC is fully open meaning it can be paid off immediately without restriction or early payout charges. You can accept the offer and cash out immediately without seeing profits eroded by penalty charges and fees. With a standard mortgage, you may have a payout penalty ranging from 3 months interest into the tens of thousands depending on mortgage type & institution (cringe if you have a fixed mortgage with one of the Big 5 Canadian banks).

Revolving – so you’re an investment property wizard and the cash you are making has allowed you to pay down the HELOC we set-up dramatically. You can use the available space on your current HELOC towards the purchase of another property. Keep your personal savings and investments intact and don’t have to ask permission to access the equity. That’s the beauty of revolving credit.

The main (only) drawback to a HELOC over a standard, amortizing mortgage is that the interest rate tends to be slightly higher (about .50%). To me, this argument rings hollow. Since your rental property is essentially a business, the interest that you pay on a mortgage is eligible to be written off for tax purposes. Given the strict criteria involved in qualifying for mortgages these days, I’m willing to bet most people with rental properties are already showing income that has them in an elevated tax bracket. That means that every extra dollar of profit reported on tax returns gets annihilated by CRA. Sometimes increasing an individual’s interest expense actually helps them bring their reported profits on rentals close to breaking even and honestly that’s why we have accountants (SIDE NOTE: please use an accountant if you are going to play in the investment game).

Finding lenders who offer HELOCs on rentals isn’t easy, especially if you are wanting only 20% downpayment (80% LTV). Most lenders these days want more meat on the bone (equity) for rental properties. There are definitely good lenders out there doing rental HELOCs at 80% LTV. That’s where a call to your trusted Dominion Lending Centres Mortgage Professional and the proper strategy can pay off in spades.

30 Jan

Are you in a Variable Rate Mortgage? Me too.


Posted by: Brad Lockey

Are you in a Variable Rate Mortgage? Me too.

If you’re in a fixed rate mortgage, this news does not impact you. Mind you ‘impact’ is too strong a word to use for the subtle shift that occurred Jan 17, 2018.

Short Version

The math is as follows:

A payment increase of ~$13.10 per $100,000.00 of mortgage balance. (unless you are with TD or a specific Credit Union, in which case payments are fixed and change only at your specific request)

i.e. – A mortgage balance of $400,000.00 will see a payment increase of ~$54.40 per month

Personally, we are staying variable, for a variety of reasons…

Long Version

Qualification for variable rate mortgages has been at 4.64% or higher for some time. This required a household income of greater than $70,000.00 for said $400,000.00 mortgage.

Can 99% of said households handle a payment increase of $54.40 per month? Yes.

Will 99% of households be frustrated with this added expense? Yes.

Ability and annoyance are not the same things.

Have these households enjoyed monthly payments up to $216.80 lower than those that chose a fixed rate mortgage originally? Yes.

Are 99% still saving money by having locked into a long-term fixed from day one? Yes.

Should I lock in?

A more important question is ‘why did we choose variable to start with’? And this may lead to a critical question ‘Is there any chance I will break my mortgage before renewal’?

The penalty to prepay a variable mortgage is ~0.50% of the mortgage balance.

The penalty to prepay a 5-year fixed mortgage can increase by ~900% to ~4.5% of the mortgage balance. A massive increase in risk.

There are many considerations before locking in, many of which your lender is unlikely to discuss with you. It’s to the lender’s advantage to have you locked into a fixed rate, rarely is it to your own benefit.

At the moment decisions are being made primarily out of fear. Fear of $13.10 per month per $100,000.00

What about locking into a shorter term?

Not a bad idea, although this depends on two things:

1. Which lender you are with as policies vary.
2. How many years into the mortgage term you are.

If your net rate is now 2.95%, and have the option of a 2-year or 3-year fixed ~3.00% – this may be a better move than full 5-year commitment.

Do not forget the difference in prepayment penalties, this is significant.

Bottom line – Know your numbers, know your product, stay cool, and ask your Dominion Lending Centres Broker.

These are small and manageable increases.


It was a bit disappointing to see logic and fairness fail to enter the picture, after the last two Federal cuts to Prime in 2015 of 0.25% each the public received cuts of only 0.15% each time.

Every single lender moved in unison, not one dropped the full 0.25%.

Amazingly, not a single lender saw fit to increase rates by the exact same 0.15% on the way back up. Every lender has instead increased by 0.25% – a full 100% of the increase passed on to you, the borrower.

Not cool man, not cool at all.

We share all the pain of increases and get only part of the pleasure of decreases.

I am disappointed by this, not surprised, but disappointed.

26 Jan



Posted by: Brad Lockey

Things to consider before you buy a heritage home

We’ve all walked by them at some point and marveled. It’s the character house that has to be at least 100 years old and is still standing. Your mind takes you to a different place. You start thinking about what life must have been like when it was built, the families that have lived there through the years. If the walls could talk, right? Most of us will just have to settle for our modern abodes. There are, however, a lucky few who, with a bit of patience and a love of the classics, call these heritage houses their homes.
Nestled in the older enclave of Queen’s Park in New Westminster, B.C., you’ll find Tony Sverdrup and his heritage beauty. The house, which spans 5,500 square feet, predates the First World War and has an interesting history. Built in 1911 by architects Gardner and Mercer, the craftsman-style home originally belonged to William B. Johnston. He owned Johnston’s Big Shoe House in New Westminster, a pioneer business in a city that at the time was still the bustling centre of the Lower Mainland region.
While the house at 212 Queens Avenue has a storied history, it was the architecture that really drew Sverdrup to the home. The building, which he bought in 2001, still boasts most of its original features, including the 10 foot-ceilings, oak floors, single-pane glass windows, wainscoting panels, wraparound staircase and a wood-burning fireplace. The kitchen is basically the only part of the house that’s not original.

“The thing about the heritage homes is each one is unique upon itself, in terms of quality of the build. You can’t replicate that in today’s buildings,” he tells Our House magazine. Whereas quick-built houses of the past 50 years can look dated quickly, hand-built homes tend to retain their grace and good bones. They’ve also seen it all and are therefore less likely to surprise you than a new build. Their foundations have settled. They’ve been through windstorms, floods, and even earthquakes.
While it may have all the cool features you’d expect in a century-old gem, however, Sverdrup’s house has a few less desirable aspects that you don’t find in a modern home. There’s no insulation in the walls, so in a cold winter, the heating bills can soar. Also, fixing or replacing even the simplest of hardware, like light switches, requires careful sourcing. As Sverdrup points out, you can’t just go to Home Depot to find these pieces.

“Basically it’s almost like a lifestyle; you’re constantly working on the house,” he says. “It will never be completed. Nothing is to code. Everything is the way they did back then.”
The home is not unique in either age or character. The street is lined with homes dating back to the late 1800s. While every city has its own way of dealing with its architectural legacy, in New Westminster, the city recently designated the entire neighbourhood a heritage conservation area. The policy means a heritage alteration permit is now required for changes to the front, sides or roofline of a house built before 1941, or any new residential construction in the neighbourhood. According to the city’s website, the purpose of the policy is to minimize the loss of historic houses and street character, while ensuring any new builds are appropriate to the existing character of the neighbourhood. If you are keen on owning a heritage home, in other words, you’d best to consult with your local municipality on the rules around such structures first.
Sverdrup sees both the pros and the cons of owning a heritage home under these restrictions. Homes that have been well cared for should provide more value, he says, but if the building’s dilapidated, tearing it down or even making major renovations can be problematic.
“Some people love it and some people wouldn’t love it. You have to be one who appreciates quality workmanship,” he says.
If you’re convinced that a century-old charmer is the right place to hang your hat, there are financial considerations too. Sharon Davis is a mortgage planner with Blue Tree Mortgages West in Coquitlam, B.C. She has some experience with heritage homes and used to think anything with a whiff of “heritage” was problematic, but not so much anymore.

There are generally three types of heritage designations to consider for financing, Davis notes:

• When a property is recognized as having some heritage/character/period significance but there are no restrictions on what the owner can do with it, there are typically no issues with financing and most lenders will entertain the mortgage.
• When the property must retain the outside exterior look, but the inside can be as modern as the owner chooses it to be, not all lenders will like this situation, but it shouldn’t be too troublesome to get financing.
• When the property and dwelling is on the city’s designated list, affecting both the inside and outside of the property, it can be tough to finance.
It’s always best to contact a Dominion Lending Centres mortgage specialist to help you through the process.
As for Sverdrup and his home, he has no intention to sell and buy something new. He would never be able to find anything else like it in the region for a price he could afford, he says. Instead, he sees the house like a classic car. It’s beautiful but needs a lot of upkeep.

25 Jan



Posted by: Brad Lockey

There have been a lot of discussions around the new mortgage rules and I have had a few clients ask about what that means for them. Since stress testing on mortgages began last year, the biggest change this January will be for people who are putting more than a 20% down payment on their new homes.

What do the new mortgage rules mean for them?
The impact of the new mortgage rules as of January 1, 2018, will require all uninsured mortgage borrowers to qualify for their mortgage using the Bank of Canada five-year benchmark rate, or at their current rate plus an addition 2%. (Uninsured mortgage borrowers are typically those who purchase a new home with more than 20% of its total value.)The government is stress testing our current finances as a way to help prevent any unnecessary financial risks from Canadians. This change was primarily intended to help curb the housing bubbles in Toronto and Vancouver but will affect homebuyers across the country, including those looking to qualify for a mortgage in Edmonton.

Why are new mortgage rules being introduced?
The revisions have been put in place to help ensure that uninsured borrowers can cope with higher interest rates. In the past, when there was a change in the market (increased interest rates, low employment, reduction in house values, etc.), Canadians were finding it difficult to keep up with their mortgage payments. In the past year, we have seen an increase in interest rates which has caused some concern with the government. The overnight rate – the interest rate set as the Bank’s policy interest rate, which influences mortgage rates, sat at a historically low 0.5% earlier in 2017  – has been raised 75 basis points by the Bank of Canada since July. A third rate hike took place this month. Although an unexpected surprise for many, the hike in interest rates is essentially providing Canadians with an opportunity to act more financially responsible. This new regulation will help make it more difficult for Canadians who were borrowing against the value of their homes to make new financial investments, thereby reducing the country’s financial risk.

Despite the changes to the new mortgage rules, people will still be looking to buy new homes with mortgages but will be shifting their outlook on what they need. In Edmonton, where housing prices are still very affordable, the shift may not be as difficult as in other markets. In a recent interview with BuzzBuzzNews, real estate broker and TalkCondo operator, Roy Bhandari said, “The new rules won’t slow sales. Instead, buyers will look at more affordable options on the market.”

If you have any questions, contact your trusted Dominion Lending Centres mortgage broker.

24 Jan



Posted by: Brad Lockey

A recent article featured on www.mortgagebrokernews.ca brings up some interesting points to consider for 2018.

With approximately 47% of mortgages in Canada coming up for renewal in 2018 and in a rising rate climate, it would be wise to consider the impact on our personal mortgage. What will these increases mean for you?
70% of Canadians are in 5-year fixed rate mortgages and the rates these people secured in 2013 are still similar to what is being offered in 2018, so a possible increase in payment that comes along with a slightly higher rate could be quite easy to handle.
However, in 2019 rates will likely be significantly higher than what consumers locked into in 2014. The payment shock could be substantial. Not to mention that increases in the Prime rate will also affect unsecured credit such as lines of credit and credit cards.
And the Bank of Canada is certainly on an upward trend with the Prime rate.

Translation… as rates go up for mortgages and other credit accounts, so do payments.

What can you do?
If your mortgage is maturing this year or in 2019, it is highly advisable to contact an experienced Dominion Lending Centres Mortgage Broker to evaluate your position. You will likely have seen a healthy appreciation in value in your home in the past few years, so perhaps it’s time to get ahead of the “rate train” and consider consolidating your unsecured credit with your mortgage and lock in at today’s still low rates before you start to feel the pinch.
The latest rule changes that came into effect January 1, 2018 could also have an impact on your ability to qualify for what you need, so getting a free evaluation will be more valuable than ever.

As always, feel free to contact me at your convenience by calling me at 416-518-7476 or emailing at mortgages@bradlockey.ca

22 Jan



Posted by: Brad Lockey

Not surprisingly, borrowers often default to their own Banker. And why not? It’s an established and comfortable relationship. Perhaps it’s viewed as the path of least resistance. But is it the right lender for the borrower’s current specific needs? Perhaps not.

More sophisticated borrowers may be of a size or scale that they have their own internal resources in finance, quite capable of securing the required financing. They are likely only in the market infrequently, however, and almost certainly not fully knowledgeable as to all of the financing sources available.

Aren’t all Lenders pretty much the same?
Borrowers may think that all institutional lenders are pretty much the same. Offering comparable rates, and standardized borrowing terms. This is rarely the case. Lender’s often prefer one asset class over another. They may have a particular need for one type of loan. A specific length of loan term may be desirable, for funds matching purposes. Real Estate risk is a fact for real estate lenders. How they mitigate this risk differs, however. It may be stress testing interest rates during the approval process. Sophisticated risk pricing models may be used, having regard to previous loss experiences. The lender may rely significantly on collateral value or guarantees. The conditions precedent to funding will often differ from lender to lender.

A real-world example
I had the pleasure last year in advising a client who had 3 sizable real estate assets, in 3 quite distinct asset classes. The borrower’s loan amount requirements were significant, however, they were flexible on loan structure. Accordingly, I sought out competitive, but differing deal structures. My goal was to provide a competitive array of options. A number of “A” class lenders were approached, several/most of whom this particular borrower had no previous experience with. I shortened the list to 5 lenders and received Term Sheets from each.

Each Offer was competitive on a stand-alone basis, but they differed quite substantially, in the following ways:

  • Loans were either stand-alone, or blanket loans, or some combination.
  • Length of terms offered, differed by asset class.
  • There was as much as a 75 bps rate difference, from highest to lowest Offer.
  • The amortization period depending upon asset class ranged from 15 to 25 years.
  • Loan amounts on individual assets differed as much as 20%.
  • Third party reporting requirements differed between lenders.
  • There was a combination of fixed vs. floating rate loan structures.
  • Recourse was limited by some lenders, on select assets, or waived entirely, upon a higher rate structure.

Leverage Your Knowledge
These variances are striking, yet each of the 5 lenders was considering the precise same asset, at the same time, with common supporting information from which to base their analysis. How was the borrower to know which Offer to exercise? As a Broker, I can add value by helping the borrower to consider both their immediate and longer-term strategic requirements, in the context of their overall real estate portfolio needs. This was precisely how this borrower landed on the most appropriate Offer for their particular circumstances. In this particular case, we presented different, yet competitive, and uniquely structured options for the borrower’s consideration.

Consider a Dominion Lending Centres Mortgage Broker when next in the market for financing. Leveraging a Broker’s knowledge is a tremendous value proposition.

19 Jan



Posted by: Brad Lockey

Every year, Canadian families are caught in unexpected bad circumstances only to find out that in most cases the banks and the credit unions are there to lend you money in the good times, not so much during the bad times.

This is where thousands of families have benefited over the years from the services of a skilled mortgage broker that has access, as I do, to dozens of different lending solutions including trust companies and private lending corporations. These short-term solutions can help a family bridge the gap through business challenges, employment challenges, health challenges, etc.

The key to taking on these sorts of mortgages is always in having a clear exit strategy, which in some cases may be as simple as a sale deferred to the spring market. Most times, the exit strategy involves cleaning up credit challenges, getting consistent income back in place and moving the mortgage debt back to a mainstream lender. Or as we would say in the business an ‘A-lender’.

The challenge for our clients over the last few years has been the constant tinkering with lending.

Guidelines by the federal government and the changes of Jan. 1, 2018 represent far more than just ‘tinkering’.

This next set of changes are significant, and will effectively move the goal posts well out of reach for many clients currently in ‘B’ or private mortgages. Clients who have made strides in improving their credit or increasing their income will find that the new standards taking effect will put that A-lender mortgage just a little bit out of reach as of the New Year.

There is concern that the new rules will create far more problems than they solve, especially when it seems quite clear to all involved that there are no current problems with mortgage repayment to be solved.

Yet these changes are coming our way fast.

Are you expecting to make a move to the A-Side in 2018?

It just might be worth your time to pick up the phone and give your Dominion Lending Centres Mortgage Specialist a call today.

I’m here and I’m ready to help.

18 Jan



Posted by: Brad Lockey

Did you know that 60 percent of people break their mortgage before their mortgage term matures?

Most homeowners are blissfully unaware that when you break your mortgage with your lender, you will incur penalties and those penalties can be painfully expensive.

Many homeowners are so focused on the rate that they are ignorant of the terms of their mortgage.

Is it sensible to save $15/month on a lower interest rate only to find out that, two years down the road you need to break your mortgage and that “safe” 5-year fixed rate could cost you over $20,000 in penalties?

There are a variety of different mortgage choices available. Knowing my 9 reasons for a possible break in your mortgage might help you avoid them (and those troublesome penalties)!

9 reasons why people break their mortgages:

1. Sale and purchase of a home
• If you are considering moving within the next 5 years you need to consider a portable mortgage.
• Not all of mortgages are portable. Some lenders avoid portable mortgages by giving a slightly lower interest rate.
• Please note: when you port a mortgage, you will need to requalify to ensure you can afford the “ported” mortgage based on your current income and any the current mortgage rules.

2. To take equity out
• In the last 3 years, many homeowners (especially in Vancouver & Toronto) have seen a huge increase in their home values. Some homeowners will want to take out the available equity from their homes for investment purposes, such as buying a rental property.

3. To pay off debt
• Life happens, and you may have accumulated some debt. By rolling your debts into your mortgage, you can pay off the debts over a long period of time at a much lower interest rate than credit cards. Now that you are no longer paying the high interest rates on credit cards, it gives you the opportunity to get your finances in order.

4. Cohabitation & marriage & children
• You and your partner decide it’s time to live together… you both have a home and can’t afford to keep both homes, or you both have a no rental clause. The reality is that you have one home too many and may need to sell one of the homes.
• You’re bursting at the seams in your 1-bedroom condo with baby #2 on the way.

5. Relationship/marriage break up
• 43% of Canadian marriages are now expected to end in divorce. When a couple separates, typically the equity in the home will be split between both parties.
• If one partner wants to buy out the other partner, they will need to refinance the home

6. Health challenges & life circumstances
• Major life events such as illness, unemployment, death of a partner (or someone on title), etc. may require the home to be refinanced or even sold.

7. Remove a person from Title
• 20% of parents help their children purchase a home. Once the kids are financially secure and can qualify on their own, many parents want to be removed from Title.
o Some lenders allow parents to be removed from Title with an administration fee & legal fees.
o Other lenders say that changing the people on Title equates to breaking your mortgage – yup… there will be penalties.

8. To save money, with a lower interest rate
• Mortgage interest rates may be lower now than when you originally got your mortgage.
• Work with your mortgage broker to crunch the numbers to see if it’s worthwhile to break your mortgage for the lower interest rate.

9. Pay the mortgage off before the maturity date
• YIPEE – you’ve won the lottery, got an inheritance, scored the world’s best job or some other windfall of cash!! Some people will have the funds to pay off their mortgage early.
• With a good mortgage, you should be able to pay off your mortgage in 5 years, thereby avoiding penalties.

Some of these 9 reasons are avoidable, others are not…

Mortgages are complicated… Therefore, you need a mortgage expert!

Give a Dominion Lending Centres mortgage specialist a call and let’s discuss the best mortgage for you, not your bank!

9 Jan

Mortgage brokers are superheroes


Posted by: Brad Lockey

Mortgage brokers have a reputation as superheroes. Although we cannot leap tall buildings in a single bound we can do extraordinary things.
Is the down payment money coming from outside of Canada? I had a client who had a joint account with her father in Japan. She showed me bank statements with the money in the account and leaving Japan. I had another bank statement showing the funds coming into her Canadian account. Finally, I showed the foreign exchange rate for that day from Yen to CAD. The bank accepted this as a suitable paper trail.
An unusual down payment source? I had a client who sold his vintage Cadillac for his down payment. A copy of the registration, the bill of sale and a bank statement showing the funds going into his account was deemed fine by the bank.
Is your down payment coming from multiple sources? I recently had two brothers purchasing a home together. They both had their money in RRSP’s and TFSAs. It took some explaining but we were able to show all the down payment and closing costs coming from four different sources.
Several years ago I had a client defaulting on two mortgages. Foreclosure was just days away.
I was able to consolidate the two mortgages, pay them out and get a reasonable payment schedule for one year. After the year, I moved him to a regular lender and arranged for a line of credit so that he could pay for some home renovations with a low-interest rate secured against his home.
I had a couple who wanted to buy a home. The husband had had a business failure and it had affected his credit. I could only use the wife’s credit and her income for this purchase. She was a foster mother with six children. Her income was good but not high enough. I was able to get the lender to gross up her income by 25%, as her income was tax-free. This was enough for them to buy a large home for the couple and their foster children.
Small towns can also pose unique problems. I had a client who wanted to refinance his home. I checked his credit report and found a credit card that he did not have. He told me that there were five people with his name in this small town. He also revealed that he had an account at Home Hardware that was not reporting on the credit bureau. The manager was a friend and thought that the loan would hurt his credit so they made an informal arrangement to pay it off.
Did I mention that he had three jobs? He worked as a tire installer and invoiced the company from his firm. I was able to get a lender to accept this client his varied income and got the mortgage. Come to think of it, perhaps mortgage brokers are superheroes. If you have a difficult situation the best person to speak to is a Dominion Lending Centres mortgage professional, if it can be done legally, a broker can do it.