Baffled by some of the phrases realtors and bankers throw at you? Here are some commonly used—but not always understood—words to describe mortgages:

Amortization Period

This is the number of years it will take to repay the entire mortgage in full and is determined when you are approved. A longer amortization period will result in lower payments but more interest overall as it will take longer to pay off. The typical amortization range is 15 to 30 years.

Closed Mortgage

This is any mortgage where you have agreed to pay the lender for a specified period of time. This means that you cannot pay it off, refinance or renegotiate before the mortgage term ends without incurring a penalty. Depending on the lender, there may be options for accelerated payments but it depends on your particular mortgage contract. While these mortgages tend to be a lot stricter, they can often provide lower interest rates.

Conventional Mortgage

In the case of a conventional mortgage, the loan covers no more than 80% of the purchase price on the property. This means, the buyer has put 20% (or more) down on the property. These mortgages do not require default insurance due to the amount down.

Default

Failure to pay your mortgage on time will result in defaulting on the loan.

Derogs

Short for ‘derogatory’, derogs refers to an overdue account or late payments on your credit report.

Down

Short for down payment. In Canada, the minimum down payment is 5% on any home purchase.

Fixed

A fixed-rate mortgage means you are locked in at the interest rate agreed for a longer length of time.

Flex Down

This refers to a borrowed down payment program, which allows homeowners to “borrow” money for the down payment from a credit card, line of credit or other loan. In this case, the repayment of the loan is included in the debt calculations.

Foreclosure

This refers to the possession of a mortgaged property by the bank or lender if a borrower fails to keep up their mortgage payments.

High-Ratio Mortgage

A high-ratio mortgage is where the buyer has provided a down payment of less than 20% of the purchase price and needs to pay Canada Mortgage and Housing Corp. (CMHC) to insure the mortgage against default.

MIC

Short for a Mortgage Investment Corporation, this is a group of investors who will lend you the money for a mortgage if a traditional lender will not due to unusual circumstances.

Open Mortgage

An open mortgage means you can pay out the balance at any time, without incurring a penalty.

PIT

Principal, interest and taxes— a calculation representing the amount you can afford to pay monthly on your home. Heating costs are often included in this calculation (PITH).

Pull

Also known as a ‘credit check’ or ‘credit inquiry’ a ‘credit pull’ refers to the act of checking a credit report to determine if the borrower is a viable investment prior to approval of the mortgage.

Term

Term is the length of time that a mortgage agreement exists between you and the lender. Rates and payments vary with the length of the term. The most common term is a 5-year, but they can be anywhere from 1 to 10 years. Generally a longer term will come at a higher rate due to the added security.

Trade Lines

This refers to any credit cards, loans, wireless phone accounts, or mortgages that appear on your credit report.

Underwriting

This refers to the process of determining any risks relating to a particular loan and establishing suitable terms and conditions for that loan.

Variable

A variable-rate refers to an interest rate that is adjusted periodically to reflect market conditions.

20/20

A condition that refers to repaying 20% of the mortgage balance OR increasing your payment by 20%, without incurring a penalty.

If you are looking into getting a mortgage don’t be afraid to ask questions! At the end of the day, the mortgage contract has your signature on it and it is important to understand any contract you are signing. Contact a DLC Mortgage Broker today and they would be happy to discuss your situation and answer any questions surrounding mortgage conditions or jargon to ensure the best result for YOU!

Published by DLC Marketing team

As a new homeowner, I’m in the process of discovering all that it takes to maintain the up-keep on my house.  Every step of the way is a learning experience, from re-mounting old light fixtures to finding out that the leaky tap requires more than just a new washer. Some problems you can anticipate–like knowing that the old air conditioner might not work when you fire it up in the summer. But some problems you simply can’t foresee–like when I was sitting in my home office and discovered water leaking in from the top of the window frame.

This was not a good sign, and was an indication that the money I had been setting aside for a kitchen reno would have to be used to replace the windows.

So what’s involved in replacing the windows of a home? And what are the indications that you might need to replace yours?  Let’s take a look at some questions you might have.

New home, old windows

When you purchase a home, you receive a seller’s declaration. This is a document that contains all the information about your home that the previous owners are aware of. Hopefully, it will tell you when the windows were last replaced.

In my case, the declaration did not.

We knew going into the home that the windows would need to be changed sometime in the future, as they are outdated (probably from the 80s) and not very energy efficient.  We didn’t anticipate that they could possibly leak, as there was no indication from the previous owner that they had leaked.

It’s a good idea to pay specific attention to the windows of the home when you make an offer to buy.  It’s one of those things that you usually take as-is, but can be a costly expense to change.

According to moving.com, new windows can increase the sale value of a home, but in order for a return on investment to be made, you need to really upgrade the type of windows and frames you have. This can be a costly and time-consuming endeavour, as with the current COVID situation, there are significant manufacturing delays in the production of windows. While we’ll be putting in more energy-efficient windows at my home, the return on investment will be minimal, as it’s definitely a more functional renovation.

If we had known that the windows had needed replacing before purchasing the house, there’s a good chance we could have negotiated the price down slightly.

Signs your windows might need replacing

There are a number of signs that indicate it’s time to replace your windows.  Let’s take a look at some of them, as highlighted by Mike Holmes:

1. Your windows are weeping: Not that they’re sad, mind you. Rather there’s a buildup of moisture on the inside brought about by poor sealing. This results in air from the inside of your home mixing with air from the outside, and moisture manifesting itself.
2. Your frames are rotten: Older window frames might not have the proper insulation, and they might have rotted as a result. This can lead to air and moisture leaking into your home, which leads to the costly repair of having your windows replaced.
3. Air drafts: Does it feel colder around your windows? Do you get a cool breeze coming in when you don’t want one? These are signs of air drafts, and could indicate your windows need replacing. While you might be able to re-caulk your windows and add weather stripping, this might only be a temporary solution.
4. Single panes: If your windows are older, they might only have single pane glass. These aren’t energy efficient, and also let in a lot of unwanted sound. Replacing your windows will make heating your home cheaper, and give you more peace and quiet.

The cost of replacing windows

 As with most renovations, the cost of replacing your windows can vary greatly.  Factors like the type of window you’re looking to replace, the materials you want your new windows to be made of, and how many layers of panes you want to have all affect the total cost.

In Ontario, the average cost of replacing a window is somewhere between $800-1200, and about $2,500-4,000 for bay or bow windows, plus tax. So for an average house of about 10 regular windows, you’re looking at around $8,000-12,000.

Is there siding on your house where the windows have been leaking? If so, there’s a chance there could be mould or other damage behind it. If this is the case, you’ll want to replace the siding as well. While significantly less than the cost of windows, it’s still an added expense.

You’ll definitely want to get a few quotes from different companies when you’re looking at replacing your windows, as the experience each company has can also affect the price and quality of installation. If you pay top dollar for high quality windows, and have a company install them that doesn’t have a lot of experience, you can end up having an even more expensive problem to deal with in the future, or find that for all the money you spent, the problems persist.

When you’re looking at replacing your windows, really consider all the factors.  While you might love to have a fancy aluminum or beautiful wood frame, these fixtures cost more than your basic white PVC frame. And a well-installed PVC frame can provide just as much protection from the elements as these other options.

Saving money with window replacement

 As mentioned above, if you have old windows, changing them to more energy efficient ones can end up saving you on your monthly bills. By converting old windows, you can potentially save up to 25% on your heating bills.

And while the cost of installing energy efficient windows may seem prohibitive at the start, the good news is that there may be incentives available. It’s worth digging around to see what the active rebates are before starting renovations, and if you have any questions, talk to your renovator to see if they are aware of any incentives you might not be.

Home inspectors can’t see everything

In a competitive housing market, you won’t always have the opportunity to get a home inspection done before you buy a home. This is unfortunate, as a good home inspector can help point out potentially problematic areas in your home-to-be, elements that might help you get a reduction in price. If you are unable to get an inspector in before buying your home, it’s a worthwhile investment to have one come in after the fact, as they can still help identify areas that might be problematic.

But even if you get a home inspector to check out your place, they may not be able to catch everything, and unfortunately, potentially leaky windows are something that can be missed.

If you are able to get a home inspector into your space, request that they check the seals around the windows and ensure that there are the appropriate sills at the base of the frames outside of the house. They can also check for various signs of water damage around the windows of your house.

Similarly, if you’ve had renovations done on your home, or if you’ve had the whole place painted, ask the people who’ve done the work if they noticed any indications of water damage. Damage can be anything from watermarks, rippled paint, or mould growing in the insulation. If signs have been present, you should be prepared to tackle the potentially costly affair of having your windows replaced.

Anticipate the seasons

With the delays in supply chains and manufacturing, it’s important to think ahead. With spring just around the corner, now is the time to take action if you want to change your windows.  Seeing as the delay can be two to three months, it’s going to be summer before they’re installed, which is a perfect time of year to get them replaced.  If you wait, you could find yourself dealing with cold-winds drafting through your windows and possibly moisture creeping in.

Remember to get a few quotes, and take the time to really consider what your window needs are. While you’ll save some money on heating, the price you pay to replace your windows won’t have a profound impact on the resale value of your home.

Published by FCT

Published by DLC Marketing team

Building a new home is an exciting adventure but requires very different considerations. To help you have the best experience building a home, we have put together the 5 most important considerations.

1. it’s all in the numbers

Regardless of whether you are shopping for a pre-built home, or are looking to create your own from the ground up, it is vital to know what you can afford and stay within it. This is the key to building a home that you will be able to enjoy for the next 20 or 30 years, while still maintaining your financial stability.

When calculating the cost of building your home, there are many components from construction materials and contracts to tax benefits, funds for the down payment and slush account and other related expenses. In Vancouver B.C., the typical cost to build a house is between $200 and $350+ per square foot. In some cases, it could cost as much as $500 or more per square foot.

Overall, the average cost to build a house can range $300,000 to $350,000 for 1,000 square feet to double or triple that amount. For example, an average 2,500 square foot home could cost between $500,000 and $875,000 to build depending on materials, design, etc.

2. choose a reputable builder

This one seems pretty straight forward, but when you start looking it can quickly become overwhelming when you realize how many options there are. When it comes to determining the head contractor for your project, careful research is needed. Another option is to consult friends and family members who have gone through the process, or ask your mortgage broker and/or realtor! They often have many qualified contacts in the industry or can help point you in the right direction.

3. build a home for tomorrow

As tempting as it can be to personalize your home to the tenth degree and include every cool little feature you can think of, it is important to always keep resale value and practicality in the back of your mind. Life can often throw a few curve balls that, for one reason or another, may result in your having to sell your home in the future. If that time should ever come, you will want to be able to appeal to all buyers easily and not have to hold the house longer than necessary. Ask yourself if the features you are putting into your home will appeal to others, and also if the design suits the neighborhood you are building in as well.

4. go green!

Now more than ever before energy efficient upgrades are easy to add to your home. To make your home as efficient as possible, it is important to incorporate these options into your design BEFORE you start building. Options such as energy efficient appliances, windows, HVAC systems, and more can save you money in the long run and may also make you eligible for certain grants and discounts. For instance, the Canadian Mortgage and Housing Corporation (CMHC) green building program rewards those who select energy efficient and environment friendly options.

5. understand the loan

Aside from the costs of building a new home, what does a mortgage look like for an unbuilt home? In many cases, this is where a “construction mortgage” might come into play. In order to properly qualify for financing on an unbuilt home, you need to give your broker a budget that includes both hard and soft costs, as well as the reserve of money you plan to have set aside in case you run into unexpected events.

For example, based on the lender loaning up to 75% of the total cost (with 25% down):

• Land purchase price: $200,000
• Total soft and hard costs (as complete): $400,000
• $600,000 x 75% = $450,000 available to finance

It is also important to note that the lender will also consider the appraised value of the finished product. This value is determined before the project begins. In this example, the completed appraised value of the home would have to be at least $600,000 to qualify. In addition, the client will have to come up with the initial $150,000 to be able to finance the total cost of $600,000.

Depending on the lender, you may have a time frame within which you need to complete construction (typically between 6 and 12 months).

When it comes to construction loans, there are a few other key points to remember with regards to repayment:

• Construction loans are usually fully opened and can be repaid at any time.
• Interest is charged only on amounts drawn; there are no “unused funds”
• Once construction is complete and project completion has been verified by the lender, the construction mortgage is “moved over” to a normal mortgage

In addition, a lender will always consider the marketability of a property. This includes not only demographic aspects, but also looking at the geography. For instance, a lot that in a secluded area with minimal market demand, may not be a property that they are willing to lend on.

There are a lot of things to consider when you build a home but a few things that can keep you on track and on budget are to have a solid plan in place, work with a builder you trust, build a strong team around you that can be there from start to finish – and to do your research. Once you have decided to build, call your Dominion Lending Centres Mortgage Professional. They can help you get the ball rolling and can guide you to the first step of breaking ground on your new home.

What a loaded question?  Strictly looking at the numbers. The current rates are in favour of a variable rate product, with an average of about 1.8% difference between the two rate types. (at the time of writing)  However, is that enough incentive for those already in a variable, to remain in a variable?  Is it enough of a difference to entice people into a variable rate mortgage?

It is well known that on average, people save more money in a variable rate mortgage.  Unfortunately , in times of uncertainty that re-assuring prediction doesn’t bring people much comfort.  So let’s look at the basics as well as some points for both.

FIXED: PRO’S

• Predictable payment amounts – Your payment stays the same. Whether rates rise or fall, there is no changes in your monthly payment amount.

Cost certainty is really the only benefit to a fixed mortgage.

FIXED: CON’S

• Higher discharge fees – If you need to discharge the mortgage before the end of the term.
• Higher rates – Fixed interest rates are almost always higher than variable.
• Sell your house – Some fixed products have no refinancing options, leaving you in the position of having to sell your house if you need to get out of the mortgage.

The discharge fees in a fixed mortgage can vary substantially between lenders.  You need to make sure your lender doesn’t calculate payout penalties based on an IRD (interest rate differential) This is where your mortgage professional comes in.

VARIABLE: PRO’S

• Lower interest rate – Variable interest rates are generally referenced as Prime +/- a percentage.  Because of the uncertainty they are generally priced more competitive.
• Flexibility – Should you want to change mortgage providers for any reason, you simply have to pay a 3 months interest penalty. (among other costs eg. lawyer etc, but these fees apply to a fixed discharge as well)
• Rates go down, payment goes down – If the interest rate drops then your payment will also drop.

Variable products have a lot of upside.  However, that also includes the rates.   The question comes down to timing.

VARIABLE: CON’S

• Fluctuating payment – If the interest rate goes up your payment will as well.  There are products to combat this, however for simplicity we will save that for your call with a mortgage agent.

Variables have only one negative and that is the uncertainty.  However, generally this can be overcome with planning and fiscal responsibility.

For example, if your finances are predictable, and you can withstand an increase in interest rates you could take the variable and save the difference between the fixed and variable rate.

So, if you have a $600,000 mortgage and your payments at the variable rate of prime – 1% (1.7%) are about $2400/month. And the fixed rate is posted at 3.5% and the payments roughly work out to $3000/month.  Take the extra $600/month and put it in a savings account in the event rates go up.   Then you can use the extra money you put away towards the increased payment.  Remember, the rates would have to go up by 1.8% just to be on par with the fixed rate.  If the rates don’t go up, or maybe they even drop. You would have a minimum surplus of $36,000 at the end of your 5 yr term.  What could you do with that?

Its part of our job as mortgage professionals to advise you on the right products for your situation.  When it comes to the fixed or variable conversation, it really does depend on the individual themselves.  This is why sitting down and asking the questions with a mortgage professional will help you better understand which product may be right for you.

Biggest question is, can you make accommodation’s if the rate does go higher?  If the answer is yes, then there is no question in my opinion a variable is for you.

Written by Derek Cole