26 Feb

What is a Collateral Mortgage?


Posted by: Jordan Thomson


A collateral mortgage is a way of registering your mortgage on title. This type of registration is sometimes used by banks and credit unions. Monoline lenders, on the other hand, rarely register your mortgage as a collateral charge – which is an all-indebtedness charge that allows you to access the equity in the home over and above your mortgage, up to the total charge registered.

What this means is that you may be able to get a home equity line of credit and/or a readvanceable mortgage, or increase your mortgage without having to re-register a mortgage. This is a real benefit to you in some cases because re-registering your mortgage can cost up to a thousand dollars.

However, there are some negatives to having a collateral mortgage.

First and most glaring – because it is an “all indebtedness” mortgage – it brings into account all other debts held by that lender into an umbrella registered against your home. This means that your credit cards, car loans, or any related debt at your mortgage’s institution can be held against your home, even if you’re up to date with your mortgage payments.
Secondly, if you want to switch your mortgage over to a different lender, they may not accept the transfer of your specific collateral mortgage. This means you’ll need to pay additional fees to discharge the mortgage and register a new one.
And lastly, collateral mortgages make it more difficult to have flexibility to get a second mortgage, obtain a home equity line of credit from a different institution, or use a different financial instrument on your home. This is because your collateral mortgage is often registered for the whole amount of your property.
To recap, collateral mortgages give you the flexibility to combine multiple mortgage products under one umbrella mortgage product while tying you up with that one lender. While this type of mortgage can be a great tool when used correctly, it does have its drawbacks. If you have any questions, a Dominion Lending Centres mortgage professional can help.

Thank you to DLC’s Eitan Pinksy for this article.

20 Feb

Details of the BC 2018 Budget- Housing and Real Estate

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Posted by: Jordan Thomson

Details of the B.C. 2018 budget

On Tuesday Feb. 20th, the NDP government released B.C.’s 2018 budget. Below are some of the highlights as it pertains to housing and real estate industry.

Creating a new speculation tax for vacant homes. The tax will be two per cent of the assessed value of properties in 2019.

Increasing the foreign buyers tax from 15 to 20 per cent, and expanding the tax to properties in the Fraser Valley, Kamloops, Kelowna and Greater Victoria.

Increasing the property transfer tax and the school tax on the wealthiest homeowners who buy or own homes valued higher than $3 million.

Strengthening tax administrators’ audit and enforcement powers to help close information gaps and ensure tax compliance
Moving to stop tax evasion in pre-sale condo reassignments.
Taking action to end hidden ownership.
Strengthen provincial auditing and enforcement powers.
Some other items in the budget include:

Introducing a new child care benefit that will reduce child care costs by up to $1,250 per month per child for 86,000 B.C. families per year by 2020/21.

Providing up to $350 per month directly to licenced child care providers to reduce fees for an estimated 50,000 families per year by 2020/21.

Helping to build 114,000 affordable rental, non-profit, co-op and owner-purchase housing units through partnerships.

Eliminating MSP premiums by Jan. 1, 2020, saving individuals up to $900 a year, and families up to $1,800 a year.

Freezing fares on all major BC Ferries routes, reducing fares on non-major routes and fully restoring the Monday to Thursday seniors passenger fare discount.

If you have any questions or comments feel free to contact me.

16 Feb

Pre-Sales…Safe of the New Mortgage Rules?

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Posted by: Jordan Thomson

The best part about pre-sales, especially for first time home buyers, is it allows you to reserve a unit for the cost of a deposit and have a significant amount of time to get everything in order. You can save money while renting or living at home, arrange a mortgage that best suits your needs, take advantage of higher income if your employer has scheduled raises, cash in on property appreciation without making a mortgage payment, a lot of good things.

The main drawback however, is of course, time itself. Anyone who has had a signed a pre-sale contract prior to January 1st, 2018, with a closing date sometime in the next year or two, will know what I am referring to.

Back in the fall of 2016 we had our first stress test introduced which lead to only 20% down payment applicants being able to qualify at a 5-year fixed contract rate. With people qualifying at a 5-year fixed rate, they were able to potentially borrow more money, leading to a lot of people saving up or getting gifted down payments for their pre-sale condos.

Well, fast forward from Fall of 2016 to Winter of 2017, and yet another stress test was introduced, this time, removing the ability for anyone to qualify at their 5-year contract term- regardless of down payment size. For several months, it was not made clear by the government how pre-sale contracts were going to be treated when they were signed before January 1st 2018 with a closing date after January 1st, 2018.

The good news is, lenders have the ability to grandfather in those contracts signed prior to the new stress test, which was enforced January 1st, 2018.

This was important for those who just barely qualified for their mortgage on a pre-sale with 20% down and a qualifying rate equal to their contract rate. The reason why is because if someone was qualified at 3.20% and was just barely approved but now had to qualify at an interest rate of 5.14% (current BoC Benchmark), they would have to sell their contract to buy because they no longer could afford to close.

It is relief for anyone, that pre-sale properties are being grandfathered in for these new changes and will allow those who have paid their deposit to hold on to their contract to purchase. Pre-sales are a way of the future and it is important for the experience to be a pleasant one! If you have any questions, contact me and I would be happy to have a no obligation discussion!

Thank you to DLC’s Ryan Oake for this article.