Using the CHIP Reverse Mortgage to Supplement your RRIF

General Mitchell Goode 16 Oct

As you near retirement age, the years of diligently contributing to RRSPs are about to pay off. Understanding Registered Retirement Income Funds (RRIFs) becomes crucial, especially if you have registered retirement savings or pension plans.

What exactly is a RRIF?

Unlike a Registered Retirement Savings Plan (RRSP), which serves as a retirement savings account where you contribute money, a RRIF allows you to take out a certain amount each year once you reach a certain age.

Now, let’s explore how a RRIF works.

When you turn 71, the money you’ve saved and invested in your RRSP accounts must be moved into a RRIF, an annuity, or withdrawn as a lump sum. If your spouse is younger, you can delay this until their 71st birthday.

What’s the advantage to convert to a RRIF?

A RRIF acts as a tax-deferred retirement income fund, which means any interest or earnings generated within the account won’t be taxed until you withdraw them. However, when you take money out of your RRIF, it becomes taxable income. Each year, you must withdraw a minimum amount from the RRIF.

If you need funds before reaching 71, you can convert your RRSP into a RRIF and start withdrawing money immediately. However, there are some important tax considerations to be aware of:

Taxes on Withdrawals: The amounts you withdraw will be taxed, but the tax will be based on the minimum required withdrawal and any additional amount you take out.
Minimum Withdrawal: Once your RRSP is converted into a RRIF, you must withdraw a minimum amount each year, determined by the government and based on age. For instance, at 64 years old, you must withdraw 4% of your total investments; at 71, it increases to 5.28%, and at 85, it goes up to 8.51%.
Withholding Tax: A withholding tax will apply if you withdraw more than the minimum required amount. The withholding tax rates are 10% for amounts up to $5,000, 20% for between $5,000 and $15,000, and 30% for payments over $15,000.

What if I don’t have enough in my RRIF to generate sufficient retirement income or if I outlive my RRIF?: The CHIP Reverse Mortgage Option

The CHIP Reverse Mortgage allows you to access tax-free cash from the equity you’ve accumulated in your home. Using this money as retirement income allows you to preserve your investments for an extended period while enjoying an improved cash flow. Additionally, there are no monthly mortgage payments with the CHIP Reverse Mortgage, helping you increase your monthly cash flow even more.

Contact your Dominion Lending Centres mortgage expert today to discover how the CHIP Reverse Mortgage can help you enhance your retirement income.

Article From: https://dominionlending.ca/sponsored/using-the-chip-reverse-mortgage-to-supplement-your-rrif

What is Alternative Lending?

General Mitchell Goode 16 Oct

When traditional lenders (such as banks or credit unions) deny mortgage financing, it can be easy to feel discouraged. However, it is important to remember that there is always an alternative!

If you’re seeking a mortgage, but your application doesn’t fit into the box of the big traditional institutions, you’ll find yourself in what’s commonly referred to in the industry as the “Alternative-A” or “B” lending space. These lenders come in three classifications:

Alt A lenders consist of banks, trust companies and monoline lenders. These are large institutional lenders that are regulated both provincially and federally, but have products that may speak to consumers who require broader qualifying criteria to obtain a mortgage.
MICs (Mortgage Investment Companies) are much like Alt A lender but are organized in accordance with the Income Tax Act with an incorporated lending company consisting of a group of individual shareholder investors that pool money together to lend out on mortgages. These lenders follow individual qualifying lending criteria but tend to operate with an even broader qualifying regime.
Private Lenders are typically individual investors who lend their own personal funds but can sometimes also be a company formed specifically to lend money for mortgages that carry a higher risk of default relative to a borrower’s situation. These types of lenders are generally unregulated and tend to cater to those with a higher risk profile.

All classifications noted above price to risk when it comes to a mortgage. The more broad the guidelines are for a particular mortgage contract, the more risk the lender assumes. This in turn will yield a higher cost to the borrower typically in the form of a higher interest rate.

Before considering an alternative mortgage, here are some questions you should ask yourself:

What issue is keeping me from qualifying for a traditional “A” mortgage today?
How long will it take me to correct this issue and qualify for a traditional lender mortgage?
How much do I have to improve my credit situation or score?
How much do I currently have available as a down payment?
Am I willing to wait until I can qualify for a regular mortgage, or do I want/need to get into a certain home today?
Is this mortgage sustainable? Can I afford the larger interest rate?
Can I exit this lender down the road in the event the lender does not renew or I cannot afford this alternative option much longer?

If you are someone who is ready to go ahead with an alternative mortgage due to a weakercredit score, or you don’t want to wait until you’re able to qualify with a traditional lender, these are some additional questions to ask when reviewing an alternative mortgage product:

How high is the interest rate? What are the fees involved and are these fees paid from the proceeds, added to the balance or paid out of pocket
What is the penalty for missed mortgage payments? How are they calculated? What is the cost to get out of the mortgage altogether?
Is there a prepayment privilege? For example, are you able to avoid penalties if you give the lender a higher mortgage payment once a month?
What is the cost of each monthly mortgage payment?
What happens at the end of the term. Is a renewal an option and what are the costs to renew if applicable
What is the fine print?

When it comes to the alternative lending space, things can get complex. Contact a DLC mortgage expert today if you’re considering an alternative lender and we can help you source out various mortgage products, as well as review the rates and terms to ensure it is the best fit.

Article From: https://dominionlending.ca/products/what-is-alternative-lending

What insurance protection does your new home need?

General Mitchell Goode 16 Oct

With interest rate hikes on pause, more buyers are coming off the sidelines and looking to enter the market. Prices are high, so protecting your investment and your home is more important than ever.

What insurance will you need to protect your new home? A quick Google search will turn up entries for title insurance, as well as for home insurance. They each protect consumers, but from very different things. Here’s a quick breakdown on each type of insurance and why properly protecting yourself takes both:

title insurance

WHAT IS TITLE INSURANCE?

Title insurance protects your right to own your property. It deals with hidden issues your home may have, as well as future risks like fraud. This is just some of what title insurance covers:

Title defects that can keep you from selling,
Title fraud and home title theft,
Encroachment and access issues,
Tax arrears and unpermitted work from previous owners.

Want to know more about title insurance coverage?

HOW MUCH IS TITLE INSURANCE?

You only pay once for title insurance, usually between $150—$800, depending on where your home is and how much you bought it for. There are no monthly or annual payments, and your coverage lasts for as long as you or your heirs have an interest in the property.

home insurance

WHAT DOES HOME INSURANCE COVER?

Home insurance covers four main things:

Damage to your home or other structures on the property,
Lost, damaged or stolen valuables, depending on your policy,
Liability for accidents or injuries that happen on your property,
Losing use of your home because of an event covered by your home insurance (usually to do with damage to the home).

HOW MUCH IS HOME INSURANCE?

It varies, but the average cost for home insurance in Canada is currently a little less than $1,000 per year.¹ Your cost can change from year to year if you switch providers or update your coverage. Many home insurance policies also give you the option to purchase additional coverage, like flood protection, which increases your premiums.

which do you need, home insurance or title insurance?

They cover very different things, so you need both. It’s the only way to protect both your home itself and your ownership of it.

Title insurance doesn’t cover most property damage, lost or stolen items, or medical/injury liability.
Home insurance doesn’t cover fraud, back taxes, or the City forcing you to alter or remove structures on your property.

EXAMPLE OF A TITLE INSURANCE CLAIM

A north Ontario homeowner and her neighbour had discovered that her water and sewage lines didn’t connect to her street. Instead, they connected to the next street over via her neighbour’s property. They forced her to relocate her water and sewer lines at huge expense.

But fortunately, she had a title insurance policy in place with FCT. We stepped in to resolve the issue for her, and we were able to cover the full cost of moving her water and sewer lines.

Paid: $115,284.32

Without title insurance, where would the homeowner in that case have come up with $115,000? The risks title insurance protects you from are unpredictable and can be hugely expensive. If you don’t have title insurance and home insurance, the truth is that you’re at risk.

how can you get protected?

You can get title insurance coverage, even if you already own your home with an existing homeowner’s policy. But the best time to start protecting your new home is while you’re purchasing it. Talk to your lawyer or notary about title insurance from FCT, or learn more about residential title insurance here.

¹source: ratehub.ca

Insurance by FCT Insurance Company Ltd. Services by First Canadian Title Company Limited. The services company does not provide insurance products. This material is intended to provide general information only. For specific coverage and exclusions, refer to the applicable policy. Copies are available upon request. Some products/services may vary by province. Prices and products/services offered are subject to change without notice.

Article From: https://dominionlending.ca/sponsored/what-insurance-protection-does-your-new-home-need

Debt Reduction Key as Interest Rates Soar

General Mitchell Goode 16 Oct

There are lots of reasons people fall into debt but only one way out — and it requires a combination of planning, discipline, and persistence. With the rise in interest rates, there is no better time to map out an action plan to reduce your debt.

Start by gathering information about all of your debts — student loans, credit cards, lines of credit, car loans, overdue bills — everything. Make a list of all the debts with the details of the amounts owed, interest rate, and minimum monthly payments. This will help you set goals, create a timeline, and prioritize your repayments.

Your first goal is to make sure everyone gets paid the minimum amount required to avoid your debts going into arrears. Overdue bills and missed payments are going to play havoc on your credit score and it can take a lot of time and effort to rebuild.

The next step is to figure out how much more you can allocate from your current income for debt repayment. One common debt pitfall is to look at your situation and conclude that more income is the solution — and immediately start looking for ways to make extra money. While more income can obviously help you reduce debt, it shouldn’t be your first step.

The most important step is to create a realistic budget. Reducing the expense side of your monthly budget is going to free money to pay off debt much faster than pumping up your income on the top line. You need to identify areas where you can reduce expenses and channel those savings to your debt repayment fund. It’s critical to start accurately tracking your expenses and get the actual data on your spending, not just a guesstimate based on your feeling.

When it comes to who to pay first, there are two commonly used strategies for prioritizing debts: the debt avalanche method and the debt snowball method. With the avalanche method, you focus on paying off the debt with the highest interest rate first while making minimum payments on other debts. The snowball method involves paying off the smallest debts first, regardless of interest rates, and then moving on to larger debts.

From a financial perspective, the avalanche method is the best way to pay off debt, especially if the interest rate differential is large. The snowball method may improve your motivation, but it makes no sense to pay off a small home equity loan at 6% if you are carrying credit card debt at 20%!

Interest rates on credit card balances haven’t been affected by Bank of Canada rate changes (unlike other loans!), but they are already so high that in almost every case they should be the starting point for your debt reduction efforts. If you have been making payments and your credit rating is not too bad, you may be eligible for a credit card balance transfer offer with a promotional 0% interest rate for a specific period. Make sure you have a realistic plan and are disciplined before you sign up for any balance transfer options or credit card consolidation loans. They are a good option for managing credit card debt as they lower or defer the interest, but you need to stay on the payment schedule. If you have any investments (TFSA?), selling them to pay off credit card debts usually makes financial sense.

Paying off debt is a long-term commitment that requires discipline — there is no quick way out. Once you get started and see some progress, your mindset will begin to shift, and a huge weight will start to lift. Becoming debt-free or at least in a position where debt stress doesn’t consume your life will do as much for your mental health as it will for your financial health.

Article From: https://dominionlending.ca/enriched-tips/debt-reduction-key-as-interest-rates-soar

Understanding Mortgage Rates

General Mitchell Goode 16 Oct

While not the only factor to look at when choosing a mortgage, interest rates continue to be one of the more prominent decision criteria with any mortgage product. Understanding how mortgage rates are determined and the differences between your typical fixed-rate and variable-rate options can help you make the best decision to suit your needs.

HOW RATES ARE DETERMINED

The chartered banks set the prime-lending rate (the rate they offer their best customers). They base their decisions on the Bank of Canada’s overnight rate, because that’s the rate that influences their own borrowing. Approximately eight times per year, the Bank of Canada makes rate announcements that could affect your mortgage as variable mortgage rates and lines of credit move in conjunction with the prime-lending rate. When it comes to fixed-rate mortgages, banks use Government of Canada bonds. In the bond market, interest rates can fluctuate more often and can provide clues on where fixed mortgage rates will go next.

To put it simply: a variable-rate is based off of the current Prime Rate, and can fluctuate depending on the markets. A fixed-rate is typically tied to the world economy where the variable rate is linked to the Canadian economy. When the economy is stable, variable rates will remain low to stimulate buying.

FIXED-RATE VS. VARIABLE-RATE

Fixed-Rate Mortgage

First-time homebuyers and experienced homebuyers typically love the stability of a fixed rate when just entering the mortgage space.

The pros of this type of mortgage are that your payments don’t change throughout the life of the term. However, should the Prime Rate drop, you won’t be able to take advantage of potential interest savings.

Variable-Rate Mortgage

As mentioned, variable-rate mortgages are based on the Prime Rate in Canada. This means that the amount of interest you pay on your mortgage could go up or down, depending on the Prime. When considering a variable-rate mortgage, some individuals will set standard payments (based on the same mortgage at a fixed-rate). This means that, should Prime drop and interest rates lower, they would end up paying more to the principal as opposed to paying interest.

If the rates go up, they simply pay more interest instead of direct to the principal loan.

Other variable-rate mortgage holders will simply allow their payments to drop with Prime Rate decreases, or increase should the rate go up. Depending on your income and financial stability, this could be a great option to take advantage of market fluctuations.

Want to learn more about rates or need mortgage advice? Contact a DLC mortgage expert today!

Article From: https://dominionlending.ca/mortgage-tips/understanding-mortgage-rates

Empowering Aging in Place with the CHIP Reverse Mortgage

General Mitchell Goode 16 Oct

As we age, maintaining independence and staying in the home we love can be a challenge, especially when faced with reduced mobility and the need for costly home modifications and personal care services. However, with the CHIP Reverse Mortgage by HomeEquity Bank, aging in place becomes more feasible and attainable. Here are three ways in which this unique financial solution can support you:

Enhance your home for accessibility and enjoyment.

The CHIP Reverse Mortgage enables you to make essential home improvements that improve accessibility, safety, and overall livability. For example, you can adjust electrical switches and outlets to a more comfortable height, eliminating the need for reaching overhead. You can also plan for features like relocating the laundry room from the basement to the main floor to facilitate single-level living.

2. Afford the convenience of at-home care.

With funds from the CHIP Reverse Mortgage, you can access financial resources to help with various at-home care needs. From hiring a cleaning crew to maintain your house regularly to securing 24/7 in-home caregivers, the funds provide the means to ensure you receive the necessary assistance and support.

3. Support for transitioning into assisted living or long-term care.

If your spouse or a loved one needs to move into assisted living or long-term care, the CHIP Reverse Mortgage can alleviate the financial strain of the transition. The funds can be used to pay for accommodation and meals, known as co-payment fees, ensuring that your loved one receives the care they need.

Ease financial burdens with the CHIP Reverse Mortgage

The CHIP Reverse Mortgage by HomeEquity Bank allows Canadians aged 55 + to unlock up to 55% of their home’s equity as tax-free cash. This enables you to revitalize your living space, afford at-home care services, or support your spouse’s transition to assisted living or long-term care. What’s more, there are no required monthly mortgage payments until you decide to move or sell your home.

Contact your Dominion Lending Centres mortgage expert today to discover how the CHIP Reverse Mortgage can empower your journey of aging in place.

Article From: https://dominionlending.ca/sponsored/empowering-aging-in-place-with-the-chip-reverse-mortgage

Second Mortgages: What You Need to Know

General Mitchell Goode 16 Oct

One of the biggest benefits to purchasing your own home is the ability to build equity in your property. This equity can come in handy down the line for refinancing, renovations, or taking out additional loans – such as a second mortgage.

What is a second mortgage?

First things first, a second mortgage refers to an additional or secondary loan taken out on a property for which you already have a mortgage. This is not the same as purchasing a second home or property and taking out a separate mortgage for that. A second mortgage is a very different product from a traditional mortgage as you are using your existing home equity to qualify for the loan and put up in case of default. Similar to a traditional mortgage, a second mortgage will also come with its own interest rate, monthly payments, set terms, closing costs and more.

Second mortgages versus refinancing

As both refinancing your existing mortgage and taking out a second mortgage can take advantage of existing home equity, it is a good idea to look at the differences between them. Firstly, a refinance is typically only done when you’re at the end of your current mortgage term so as to avoid any penalties with refinancing the mortgage.

The purpose of refinancing is often to take advantage of a lower interest rate, change your mortgage terms or, in some cases, borrow against your home equity.

When you get a second mortgage, you are able to borrow a lump sum against the equity in your current home and can use that money for whatever purpose you see fit. You can even choose to borrow in installments through a credit line and refinance your second mortgage in the future.

What are the advantages of a second mortgage?

There are several advantages when it comes to taking out a second mortgage, including:

The ability to access a large loan sum (in some cases, up to 90% of your home equity) which is more than you can typically borrow on other traditional loans.
Better interest rate than a credit card as they are a ‘secured’ form of debt.
You can use the money however you see fit without any caveats.

What are the disadvantages of a second mortgage?

As always, when it comes to taking out an additional loan, there are a few things to consider:

Interest rates tend to be higher on a second mortgage than refinancing your mortgage.
Additional financial pressure from carrying a second loan and another set of monthly bills.

Before looking into any additional loans, such as a secondary mortgage (or even refinancing), be sure to speak to your DLC Mortgage Expert! Regardless of why you are considering a second mortgage, it is a good idea to get a review of your current financial situation and determine if this is the best solution before proceeding.

Article From: https://dominionlending.ca/mortgage-tips/second-mortgages-what-you-need-to-know-2

How Job Loss Affects Your Mortgage Application

General Mitchell Goode 16 Oct

Whether you’ve made an offer on a home already or are still in the process of looking, you already understand that buying a home is likely the largest investment you’ll ever make.

When it comes to your mortgage application, there are a few things that you should avoid doing while you’re waiting for approval – such as making large purchases (i.e. a new car), applying for new credit, pulling additional credit reports, etc. Another issue that can come up is the loss of your job.

What you can afford to qualify for in relation to your mortgage depends on your income. As a result, the sudden loss of employment can be quite detrimental to your efforts. So, what do you do?

Should You Continue With Your Mortgage Application?

If you’ve already qualified for a mortgage, but your employment circumstances have changed, your first step is to disclose this to your lender. They will move to verify your income prior to closing and, if they have not been told in advance, it may be considered fraud as your application income and closing income would not match.

In some cases, the loss of your job may not affect your mortgage. Some examples include:

You secure a new job right away in the same field as previously. Keep in mind, you will still need to requalify. However, if your new job requires a 3-month probationary period then you may not be approved.
If you have a co-signer on the mortgage who earns enough income to qualify for the value on their own. However, be sure your co-signer is aware of your employment situation.
If you have additional sources of income such as income from retirement, investments, rentals or even child support they may be considered, depending on the lender.

Can You Use Unemployment Income to Apply for a Mortgage?

Typically this is not a suitable source of income to qualify for a mortgage. In rare cases, individuals with seasonal or cyclical jobs who rely on unemployment income for a portion of the year may be considered. However, you would be asked to provide a two-year cycle of employment followed by Employment Insurance benefits.

What Happens During Furlough?

If you did not lose your job entirely but have instead been furloughed or temporarily laid off, your lender may take a wait-and-see approach to your mortgage application. You would be required to provide a letter from your employer with a return-to-work date on it in this situation. However, if you don’t return to work before the closing date, your lender may be required to cancel the application for now with resubmitting as an option in the future.

Have You Talked to Your Mortgage Professional?

Regardless of the reason for the change in your employment situation, one of the most important things you can do is contact a Dominion Lending Centres mortgage expert directly to discuss your situation. They can look at all the options for you and help with finding a solution that best suits you.

Article From: https://dominionlending.ca/mortgage-tips/how-job-loss-affects-your-mortgage-application

Unlocking Home Equity: The Benefits of a Reverse Mortgage vs a HELOC

General Mitchell Goode 16 Oct

Do you need help to meet your retirement income needs? With rising inflation, accessing sufficient cashflow for your desired lifestyle can be challenging. However, with over 70% of Canadians owning their homes, tapping into home equity can be the cashflow solution you need.

Tapping into Home Equity

If you want to remain in your current home, a home equity line of credit (HELOC) and a reverse mortgage are two of the most popular ways to access your home equity.

Take out a HELOC. HELOC lenders typically allow you to access up to 65% of the value of your home. You can borrow money as needed (based on an agreed-upon amount) and are only required to make minimum monthly interest payments on the amount taken out. Unlike traditional mortgages, there is no obligation to make scheduled payments towards the line of credit, and you have the freedom to repay the line of credit at your convenience.

Get a reverse mortgage. Another way to access the equity in your home is through a reverse mortgage. If you’re a Canadian aged 55 or better, the CHIP Reverse Mortgage by HomeEquity Bank allows you to access up to 55% of your home’s value and turn it into tax-free cash. There are no monthly mortgage payments while you live in the home; the full amount only becomes due when you move or sell your home. You can receive the funds as a lump sum or in regular monthly deposits. You can use the cash for any financial needs, including health care costs, home renos, debt consolidation or lifestyle expenses.

Advantages of a reverse mortgage

One of the biggest advantages of the CHIP Reverse Mortgage is that there are no monthly payments, but there are many more! Here are some of the other benefits of the CHIP Reverse Mortgage:

Simplified underwriting. The proceeds of the CHIP Reverse Mortgage are not based on income but on your age and the value of your residence.
No need to requalify. A regular HELOC from a bank may subject the borrower to continuous credit score checks over time, affecting the ability to access a HELOC when needed.
Spousal impact. The death of a spouse does not affect a reverse mortgage, unlike a HELOC, which may trigger the bank to review the credit score and income of the surviving spouse.
Rate stability. For fixed-rate terms, the reverse mortgage rate remains locked for the term, while HELOC rates fluctuate with the Bank of Canada’s prime rate, potentially increasing borrowing costs.

Contact your Dominion Lending Centres mortgage expert to learn how the CHIP Reverse Mortgage can help you boost your retirement income.

Article From: https://dominionlending.ca/sponsored/unlocking-home-equity-the-benefits-of-a-reverse-mortgage-vs-a-heloc

How to Pay Off Your Mortgage Faster

General Mitchell Goode 16 Oct

When it comes to homeownership, many of us dream of the day we will be mortgage-free. While most mortgages operate on a 25-year amortization schedule, there are some ways you can pay off your mortgage quicker!

1. Review Your Payment Schedule: Taking a look at your payment schedule can be an easy way to start paying down your mortgage faster, such as moving to an accelerated bi-weekly payment schedule. While this will lead to slightly higher monthly payments, the overall result is approximately one extra payment on your mortgage per calendar year. This can reduce the total amortization by multiple years, which is an effective way to whittle down your amortization faster.

2. Increase Your Mortgage Payments*: This is another fairly simple change you can execute today to start having more of an impact on your mortgage. Most lenders offer some sort of pre-payment privledge that allows you to increase your payment amount without penalty. This payment increase allowance can range from 10% to 20% payment increase from the original payment amount. If you earned a raise at work, or have come into some money, consider putting those funds right into your mortgage to help reduce your mortgage balance without you feeling like you are having to change your spending habits.

3. Make Extra Payments*: For those of you who have pre-payment privileges on your mortgage, this is a great option for paying it down faster. The extra payment option allows you to do an annual lump-sum payment of 15-20% of the original loan amount to help clear out some of your loan! Some mortgages will allow you to increase your payment by this pre-payment privilege percentage amount as well. This is another great way to utilize any extra money you may have earned, such as from a bonus at work or an inheritance.

4. Negotiate a Better Rate: Depending on whether you have a variable or a fixed mortgage, you may want to consider looking into getting a better rate to reduce your overall mortgage payments and money to interest. This is ideally done when your mortgage term is up for renewal and with rates starting to come back down, it could be a great opportunity to adjust your mortgage and save! This may be done with your existing lender OR moving to a new lender who is offering a lower rate (known as a switch and transfer).

5. Refinance to a Shorter Amortization Period: Lastly, consider the term of your mortgage. If you’re mortgage is coming up for renewal, this is a great time to look at refinancing to a shorter amortization period. While this will lead to higher monthly payments, you will be paying less interest over the life of the loan. Knowing what you can afford and how quickly you want to be mortgage-free can help you determine the best new amortization schedule.

*These options are only available for some mortgage products. Check your mortgage package or reach out to me to ensure these options are available to you and avoid any potential penalties.

If you’re looking to pay your mortgage off quicker, don’t hesitate to reach out a Dominion Lending Centres mortgage expert today! They can help review the above options and assist in choosing the most effective course of action for your situation.

Article From:https://dominionlending.ca/mortgage-tips/how-to-pay-off-your-mortgage-faster

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