The holidays are a season of giving and often times, households can often find themselves carrying some extra debt as we enter the New Year.

If you happen to be someone currently struggling with some post-holiday debt, that’s okay! Whether you’ve accumulated multiple points of debt from credit cards or are dealing with other loans (such as car loans, personal loans, etc.), you are likely looking for a way to simplify your payments – and reduce them. Rolling them into your mortgage could be the perfect solution.

Consolidating other forms of debt into your mortgage has multiple benefits. For starters, this process can help you to pay off your loans over a longer period of time with smaller payments per month, and often at a reduced interest rate when compared to a credit card.

By freeing yourself from these high interest rates and gouging interest payments, you will not only have more money each month but have a better chance of taking back your financial control and getting your loans completely paid off!

If you’re still not sure if this is the right solution for you, here is an example… if you have $30,000 of credit card debt, you are probably paying AT LEAST $600 per month and $500 per month of that is likely going directly to interest. If you let me help you to roll that debt into your home equity and monthly mortgage, your payment to this $30,000 portion would drop down around $175 per month, with interest charges closer to $140 per month. That is huge savings!

Not only does debt consolidation into your mortgage help with reducing interest charges and making your loan more manageable, but it is also much easier to keep track of and pay a single monthly instalment versus managing a dozen different loans or bills.

While debt consolidation through refinancing will increase your mortgage since you have to add the debt into your existing mortgage amount, the benefits to lowering your overall payments and management can be well worth it when it comes to cost savings, time and stress. Keep in mind, you need at least 20 percent equity in your home to qualify for this adjustment.

If you are looking for a way to simplify (or get out of) debt, reach out to a Dominion Lending Centres mortgage expert! They would be happy to take a look at your financial portfolio and current mortgage and help you come up with the best option to suit your needs.

– Written by my DLC marketing team

If you are in the market for a home or a new car, you are probably very familiar with your credit score. Lenders are one of the primary users of credit scores and it can have a huge impact on whether you get approved for a loan and just how much interest it is going to cost you. What isn’t well known about credit scores is where they come from, what makes them go up (or down!) and who else besides potential lenders uses them to make decisions? Your credit score is going to be with you for life, so why not take a couple of minutes to get the facts.

1. There are two credit-reporting agencies in Canada: Equifax and TransUnion. Your credit score may vary between the two. Lenders may check one or both agencies when you apply for credit.

2. Your credit score is actually derived from the data in your credit report — which can be had for free once per year from Equifax and TransUnion. Some banks, credit unions, and other financial services companies provide your credit score for free as part of their services.

3. Credit scores range between 300 and 900 with the Canadian average being 650.

4. Your credit score is used for a lot more than just borrowing money; insurance companies, mobile phone providers, car leasing companies, landlords and employers may all require your credit score to make decisions.

5. Five factors affect your credit score: length of credit history, credit utilization or how much of your limit you have used, the mix/types of credit you hold, the frequency you apply for credit, your payment history.

6. Mistakes and omissions are not uncommon and is a good idea to check the details of your credit report. Both agencies have a process to report errors and get them corrected.

7. Credit scores of 700+ are considered “good” and offer a higher chance of loan approval, greater borrowing limits, and lower or “preferred” interest rates and insurance premiums.

8. Credit scores are continuously evaluated and adjusted. If you have “errored” in your past, the damage is not permanent! Your score can be raised/rebuilt by using credit responsibly (see #10).

9. Checking your credit score regularly is a good idea and will help detect errors, monitor improvements, and identify fraud. This is a “soft” enquiry and will not affect your score.

10. To increase your credit score: make payments on time, pay the full amount owing, use 35% or less of your available credit, hold a variety of credit types, apply for new credit sparingly.

Don’t make the mistake of ignoring your credit score. Even if you aren’t looking to borrow money anytime soon, there are a lot of reasons to keep an eye on it.

For powerful personal finance education and training with immediate results, check out the complimentary livestreams each week from Enriched Academy. View the schedule and sign up for upcoming sessions on their events page. (https://www.enrichedacademy.com/events)

– Published by the 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.

– Written by my DLC Marketing Team

Building or renovating your own home is such an exciting time and allows you to create something tailored to you and your family! But when it comes to construction mortgages, there are a few different types of loans: new construction and even pre-construction. Let’s break it down so you can determine the best choices for you.

Construction Mortgage

Construction mortgages service both new builds and large home renovations. The purpose of a construction mortgage is to advance you the full funds for your mortgage in stages as outlined below.

These stages align with the construction process of your home (or through major renovations if you are doing an upgrade) and inspectors are required at each stage to confirm the current construction and allow for advancement of the next set of funds.

1st Draw
– 15% complete
– Excavation & foundation complete. You can also use this first draw to purchase land.
– 15% of total mortgage proceeds advanced

2nd Draw
– 40% complete
– Roof is on, the building is weather protected (i.e. airtight, access secured)
– Additional 25% of total mortgage proceeds advanced

3rd Draw
– 65% complete
– Plumbing & wiring is started, plaster/drywall complete, furnace installed, exterior wall cladding complete,etc.
– Additional 25% of total mortgage proceeds advanced

4th Draw
– 85% complete
– Kitchen cupboards installed, bathroom completed, doors have been hung, etc.
– Additional 20% of total mortgage proceeds advanced

5th Draw
– 100% complete
– Ready for occupancy with seasonal and exterior work completed
– Remaining 15% of total mortgage proceeds advanced

In addition to the difference in receiving funds from a construction mortgage versus a traditional mortgage, there are a few other key differences:

1.) Home construction loans are short-term agreements with generally one-year in length while mortgages have varying terms and range anywhere from 5 to 30 years in length.

2.) Most construction loans will not penalize you for early repayment of the balance, unlike traditional mortgages which can have pre-payment penalties if not part of your agreement.

3.) Monthly payments are interest-only until the end of construction.

4.) Construction loans only charge interest on the amount of the loan used during the construction. The borrower does not have to pay interest on any unused portions. Traditional mortgages require the borrower pays interest on the entire amount of the loan.

5.) Construction loans can provide upfront funds to purchase land for your build, while traditional mortgages typically do not service land-only purchases.

5.) Any remaining costs of construction can be paid down by acquiring a mortgage on the home once it’s completed.

Note: If you are choosing to do a self-build, you will need to prove that you have enough experience to properly handle the construction from start to finish.

Keep in mind that, similar to traditional mortgages, construction loans have varying rates and terms depending on the type of property you’re building, the amount of construction and length of the construction.

Pre-Construction Mortgage

Somewhat different from a construction mortgage is a “pre-construction” mortgage. These typically apply to condominiums, townhouses and other new builds. When it comes to pre-construction condo purchases, mortgage approval is required as this tells the developer that you have the ability to finalize on the unit later.

Typically, mortgage pre-approval is required within 30-90 days of purchase but you can get mortgages as early as 2-3 years from when the project is due to be completed. In these cases, you may not necessarily be able to get a rate guarantee due to the timeframe but it is worth asking for a commitment letter if you’re seeking a mortgage closer to the final build.

Similarly with traditional mortgages, your ability to get approval for a pre-construction mortgage is determined by your credit score, income-to-debt ratio and your employment history.

Closing happens once the building has been registered and when you receive the title to your unit. However, with a pre-construction mortgage, your payments will start with the builder occupancy fees from the time of occupancy to final closing, which can be a period of 3-6 months depending on the project.

If you are looking to purchase a new build or are interested in building your own home or renovating your current one, please be sure to reach out to your Dominion Lending Centres mortgage expert and discuss your options to ensure you’re getting the best construction loan for your project.

Written by my DLC Marketing Team