Your payment schedule is the frequency that you make mortgage payments and ranges from monthly to bi-monthly, bi-weekly, accelerated bi-weekly or even weekly payments. Below is a quick overview of what each of these payment frequencies mean:

Monthly Payments: A monthly payment is simply a single large payment, paid once per month; this is the default that sets your amortization. A 25-year mortgage, paid monthly, will take 25 years to pay off but includes the added burden of one larger payment coming from one employment pay period. With this payment frequency, you make 12 payments per year.

Example: $750k mortgage, 3-year fixed rate, 5.34%, 30-year amortization you would have a monthly payment of $4,156.19. No term savings; no amortization savings.

Bi-Weekly Payments: A bi-weekly mortgage payment is a total of 26 payments per year, calculated by multiplying your monthly mortgage payment by 12 months and divided by the 26 pay periods.

Example: $750k mortgage, 3-year fixed rate, 5.34%, 30-year amortization you would have a bi-weekly payment of $1,915.98 with term savings of $177 and total amortization savings of $1,769.

Accelerated Bi-Weekly Payments: An accelerated bi-weekly mortgage payment is also 26 payments per year, but the payment amount is higher than a regular bi-weekly payment frequency. Opting for an accelerated bi-weekly payment will not only pay your mortgage off quicker, but it’s guaranteed to save you a significant amount of money over the term of your mortgage. This frequency also allows the mortgage payment to be split up into smaller payments vs a single, larger payment per month. This is especially ideal for households who get paid every two weeks as the reduction in cash flow is more on track with incoming income.

Example: $750k mortgage, 3-year fixed rate, 5.34%, 30-year amortization you would have accelerated bi-weekly payments of $2,078.10 with term savings of $1,217 and total amortization savings of $145,184. Plus, you would save 4 years, 12 months of payments by reducing scheduled amortization.

Weekly Payments: Similar to monthly payments, your weekly mortgage payment frequency is calculated by multiplying your monthly mortgage payment by 12 months and dividing by 52 weeks in a year. In this case, you would make 52 payments a year on your mortgage.

Example: $750k mortgage, 3-year fixed rate, 5.34%, 30-year amortization you would have weekly payments of $957.50 with term savings of $253 and total amortization savings of $2,526. You can move to accelerated weekly payments to save even more!

Prepayment Privileges: In addition to fine-tuning your payment schedule, most mortgage products include prepayment privileges that enable you to pay up to 20% of the principal (the true value of your mortgage minus the interest payments) per calendar year. This can help reduce your amortization period (the length of your mortgage).

By exercising your prepayment privileges, you can take time off your mortgage. For instance:

• Extra $50 bi-weekly is $32,883 total savings and an additional 1 year, 2 months time saved
• Extra $100 bi-weekly is $62,100 in total savings and an additional 2 years, 3 months time saved on your mortgage
• Extra $200 bi-weekly is $111,850 in total savings and an additional 4 years, 1 month of time saved on your mortgage.

Understanding the different payment frequencies can be key in managing your monthly cash flow. If you’re struggling to meet a large payment, breaking it up can be effective; while the same can be true of the opposite. Individuals struggling to make a weekly or bi-weekly payment, may benefit from one monthly sum where they have time to collect the funds.

Contact me or download our My Mortgage Toolbox app from Google Play or the Apple Store and check out the different payment calculators!

Written by DLC Marketing Team

When it comes to purchasing a home, most offers include conditions or subjects, which are requirements or criteria to be met before the sale can be finalized and the property is transferred. Some of the most common subjects include:

• Financing approval
• Home inspection
• Fire/home insurance protection
• Strata document review if appliable

The purpose of these subjects is to protect the buyer from making a poor investment and ensure that there are no hidden surprises when it comes to financing, insurance, or the state of the property.

These conditions are written up in the purchase offer with a date of removal. This is agreed to by the seller before the sale is finalized. Assuming the subjects are lifted by the date of removal, the sale can go through. If the subjects are not lifted (perhaps financing falls through or something is revealed during the home inspection), the buyer can waive the offer and the purchase becomes void.

However recently, especially in heightened housing markets, there has been an emergence of subject-free (or condition-free) offers. These are purchase offers that are submitted without any criteria required! Essentially, what you see is what you get.

Below we have outlined the impact of subject-free offers on both buyers and sellers to help you better understand the risks and outcomes:

Pros of Subject-Free Offers

• Buyers: The main benefit of a subject-free offer for a buyer is the ability to “beat the competition” in a heated market. However, it is not without risks.
• Sellers: Typically, a subject-free offer will include a competitive price, willingness to work with the dates the seller prefers, and evidence that the buyer has already done as much research as possible. If time is sensitive for the seller because they are trying to purchase another home or want to move as soon as possible, they may also choose your offer over subject offers to expedite the process.

Cons of Subject-Free Offers

• Buyers: As a buyer submitting a subject-free offer, you are assuming a great deal of risk in several areas including financing, inspection, and insurance:
  • Financing: While buyers may feel that they have a pre-approval and so they don’t require a subject to financing, it is important to recognize that a pre-approval is not a guarantee of financing. If you are submitting a subject-free purchase based on a pre-approval, buyer beware. The financing is subject to the lender approving the property and the sale; from the price and location to type of property or other variables the lender deems important. By submitting a subject-free offer without a financing guarantee (or an inspection, title check, etc.), there is a risk that the deal can fall through. Even when you do not include subjects on the offer, you still are required to finance your purchase. In addition, as deals are submitted typically with a deposit, there is a risk that if the subject-free offer falls through the buyer will lose their deposit. This amount can range vary in the thousands and is typically a percentage of the purchase price or down payment.
  • Inspection & Insurance: If a buyer is also opting to skip the home inspection and home insurance protection subjects to have the offer accepted, then they assume huge risk as they do not know what they are getting and whether or not the property is up to code for insurance.
  • Due Diligence: With subject-free offers, there is no opportunity for due diligence after the offer has been made. This requires the buyer to do all their research before their initial bid. Because it is firm and binding, a buyer who decides to back out will likely be met with serious legal ramifications. Submitting an offer without subjects is not due diligence and it is at the buyer’s behest.
• For Sellers: When it comes to the individual selling the property, there is less risk with subject-free offers but not zero. While the benefit is essentially there is no wait to accept the offer on the seller’s side, they do not know for sure if financing will come through.

Financing Around Subject-Free Offers

When submitting a subject-free offer, it is essentially up to the buyer to do as much due diligence as possible before submitting. They will need to identify what the lender is looking for to make sure they walk away with a mortgage. Though approval is never certain, prospective buyers placing a subject-free offer should do their very best to secure financing beforehand.

Contractual Obligations

Be mindful when it comes to purchasing offers versus purchase agreements. While your purchase offer is a written proposal to purchase, the purchase agreement is a full contract between the buyer and seller. The purchase offer acts as a letter of intent, setting the terms you propose to buy the home. If financing falls through, for example, then the contract is breached and this is where the buyer may lose the deposit.

It is also important to be aware of a breach of contract in the event that a seller chooses to take action. For example, if you submit a subject-free offer of $500,000 and cannot secure financing for that offer and the seller turns around and is only able to get a $400,000 deal with another buyer, they could potentially sue the initial buyer for the difference due to breach of contract.

Preparing a Subject-Free Offer

If you have decided to go ahead with a subject-free offer, regardless of the risks, there are some things you can do to mitigate potential issues, including:

• Get Pre-Approved: Again, this is not a guarantee of financing when you do make an offer, but it can help you determine whether you would be approved or not.
• Financing Review: Identify what the lender is looking for to make sure they walk away with a mortgage. Though approval is never certain, prospective buyers placing a subject-free offer should do their very best to secure financing beforehand.
• Do Your Due Diligence: Look into the property and determine if there have been major renovations or a history of damage. This could come in the form of a Property Disclosure Statement. While this statement cannot substitute a proper inspection, it can help identify potential issues or areas of concern. If possible, conduct an inspection before submitting your bid/offer.
• Get Legal Advice: This can help you determine your potential risk and ramifications of the offer should it be accepted, or otherwise.
• Title Review: Be sure to review the title of the property.
• Insurance: Confirm that you are able to purchase insurance for the home. Keep in mind, an inspection may be required for this but in some cases, you can substitute for a depreciation report if it is recent.
• Strata Documents (if applicable): Thoroughly review strata meeting minutes and any related documents to determine areas of concern.

While there are things that can be done to help with subject-free offers, it is still risky. Ultimately submitting an offer with subjects gives you the time and ability to gather information on the above, as well as access to the property or home for inspections.

If you are intent on submitting a subject-free offer, be sure to discuss it with your real estate agent as they can determine if a subject-free offer is necessary, or if perhaps a short closing window would suffice to seal the deal. A good realtor will keep you informed of potential interest and other bids during the process as well. Their goal should be to maximize your opportunity and minimize your risk. In addition, before making any offers, contact me to discuss your mortgage and financing so you can make the best decision.

Written by DLC Marketing Team

Watching home renovation shows is inspiring, often providing us with ideas for our own spaces. However, there is a bit of a downside when it comes to these shows – they can be misleading when it comes to the renovation process.

While we may want to recreate something from one of these shows, without knowing all of the ins and outs, you could be starting a project you’re not ready for! In order to sort out what is real and what is television magic, we have broken down some of the components that go along with a renovation.

Budget & Financing

When it comes to most home renovation shows, there is little to no discussion regarding finances. In reality, if you’re looking to renovate your home you would want to discuss with your mortgage broker or a mortgage expert from Dominion Lending Centres to determine your options.

Some of the ways that you can finance a renovation include:

1. Mortgage Refinancing: This option will allow you to borrow up to 80% of your home’s appraised value (less any outstanding mortgage balance). Refinancing your mortgage (if approved) will provide you to access funds immediately and tends to have lower interest rates than a standard credit card or personal loan. This is best suited to large-scale renovations or remodels. You will want to refinance at the end of the mortgage term whenever possible to avoid breaking your mortgage and owing penalties.
2. Purchase Plus Improvements Mortgage: This is a great option if you haven’t yet bought that home and will allow you to finance your renovation at the time of purchase. This type of mortgage is available to assist buyers with making simple upgrades, not conducting major renovations where structural modifications are made. Simple renovations include paint, flooring, windows, a hot-water tank, a new furnace, kitchen updates, bathroom updates, a new roof, basement finishing, and more. Depending on your mortgage, the Purchase Plus Improvements (PPI) product can allow you to borrow between 10% and 20% of the initial value for renovations.
3. Financing Improvements Upon Purchase: Similarly to Purchase Plus Improvements, this option allows you to finance your renovation project at the time of a new purchase by adding the estimated costs to your mortgage with CMHC Mortgage Loan Insurance. You can obtain financing with only a 5% down payment for both the purchase of your home and the renovations for up to 95% of the value after renovations! Plus, there are no additional fees or premiums and you can earn added rebates for energy-saving renos.
4. Line of Credit or Home Equity Loans: Lastly, you always have the option of utilizing a secured line of credit or home equity loan to pay for your renovation. Securing your renovation loan against the equity in your home can typically be up to 80% of the property value; accessible at any time. This will typically provide lower interest than non-secured financing and allows you to access funds at any time.

Once you have your source of renovation financing, you need to create a budget. On television, it is very hard to determine whether a renovation budget that is listed is accurate. In fact, in some cases the network or show itself even adds to the budget behind the scenes! As viewers, we are simply not aware of what has been factored into those numbers by the television producers such as design fees, permits, labour, material costs, promotional giveaways, etc.

Fortunately, when it comes to reality, you can easily create a realistic budget for your renovation by simply doing some research and requesting quotes. Working with a professional contractor in these cases is crucial to ensure all the work done is to code and to avoid any surprises down the line. A professional can also help you create a detailed budget and timeline for your project so you know what to expect. During all stages of the renovation from picking out paint and new tile to labour costs, be sure to consult your budget. You don’t want to be partway through your renovation only to find out that you’ve run out of money due to making changes or selecting more expensive materials!

Renovation Timeline

Perhaps one of the least realistic aspects of home renovation shows is the timeline. It can seem like just a few short weeks to re-do your entire kitchen, but in reality, that timeline is often stretched.

Working with your contractor to create a realistic timeline based on your goals will help make the process less stressful and ensure you know what you’re getting into BEFORE you start.

Keep in mind, just because you’re ready to renovate, that doesn’t mean a contractor will be available. You may also run into snags such as material shortages or other issues so keep that in mind when you are planning out your timeline.

Planning & Design

When it comes to home renovation television, there is often an interior designer who comes in and makes decisions without the clients; in reality, that is not the case. When it comes to a real-life renovation, all the changes would be well-documented and planned out in advance with the clients (or by the client). In addition, unlike television shows that don’t show certain aspects, you will need to ensure you get building permits and inspections done throughout your renovation. While it can be time-consuming, this is extra important to ensure that your renovation is legal and therefore covered by insurance should anything happen.

While doing a home renovation in real life is different from television, with the right planning and support team for financing and contracting, you can bring your vision to life! Contact your Dominion Lending Centres mortgage expert to get started.

Written by DLC Marketing Team

Strata insurance has been steadily rising across Canada, but many homeowners are unaware of changes to their policies. In some areas, deductibles are doubling (or even tripling!), which can result in extremely high costs if you are not updating your individual policy.

To ensure that you remain up-to-date with your strata insurance policies, it is vital that homeowners living within a strata building check with their strata management for a copy of the most recent insurance policy. While it is good to check over the entire policy, a few key areas to review are your deductibles and comparing your coverage with your individual homeowner policy to ensure all gaps are filled.

Unfortunately, many homeowners within strata buildings do not realize the importance of having individual coverage. Typically, strata insurance covers the building itself. This means that, in the event of an accident, such as a fire or flood, the building can be re-established. Unfortunately many homeowners think this is enough coverage, but it is equally important to ensure that you have your own individual homeowners insurance policy.

The purpose of an individual policy is to help to protect the contents of your apartment, townhouse or condo in the event of an accident. This means that any upgrades you made to your unit would be covered, as well as your belongings. More importantly, however, is these policies also serve to fill in the cost gap relating to the strata building deductible.

Historically, deductibles in strata managed buildings averaged $25,000. This means that, in the event of an accident (flooding, fire, etc.), you would need to pay $25,000 upfront to have the repairs made. However, as the costs of strata insurance increases across the country, these deductibles are changing.

For many homeowners, there has been no change to the insurance cost or strata fees, leaving them unaware of any adjustments to their policy. Instead, the changes are being made directly to the deductible to cover the increased costs. In fact, in some cases the deductibles are doubling or even tripling, leaving homeowners with a hefty bill in the case of insurance coverage. Instead of having a $25,000 deductible, many homeowners are seeing this increase up to $250,000.

With so many increases to various fees and changes to policies within strata organizations, it has become even more important to maintain vigilance and be aware of any changes to your strata policies. Typically, these are shared with homeowners via meeting minutes and e-mails which every homeowner in a strata building should have access to.

If you receive any updates from your strata management, you must be sure to review them. Always take your strata and individual policy to an insurance agent to ensure you are aware of your coverage and that your individual homeowner’s policy is working in your favor. Investment property owners especially need to check their existing deductible against the updated deductible and insurance policies to avoid any future issues.

Written by DLC Marketing Team