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What is a Collateral Mortgage?

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 the 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.

Eitan Pinsky

Eitan Pinsky

Dominion Lending Centres – Accredited Mortgage Professional
Eitan is part of DLC Origin Mortgages based in Vancouver, BC.

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6 Reasons to Get a Home Inspection Before You Buy

In an active housing market sometimes buyers are urged by their realtors to make an offer with no conditions. As a mortgage broker this always makes my heart skip a beat. I know from experience that financing can go sideways and you need to be sure it’s in place before removing conditions.
Another item that should not be forgotten is a house inspection. You may have a good eye for décor but house inspections are not for amateurs. We have all heard, “Never judge a book by its cover” so why would you make the most important purchase in your life without checking it out? This may be the best $300-$500 you ever spent. Here’s why.

#1 – It provides an out for the home buyer.
Sometimes hidden structural issues like a cracked foundation or saggy beams can mean expensive repairs. If the price can’t be re-negotiated then you have a way to walk away from an expensive mistake.
A few years ago I had a client who I preapproved for a mortgage. He found the perfect house in south east Calgary and made an offer which was accepted. He then ordered a house inspection while I arranged the mortgage. The inspector came back and told my client that there were 10 things he could see in the house that indicated that it had been used as a grow op. My client used this to break the contract and went on to buy another home without any problems.

#2 – Revealing illegal additions or improper renovations
If the DIY seller wired the house improperly or used sub-standard materials your home insurance could be null and void if you had something happen in the future. The home inspector for my first home noticed that the indoor outdoor carpet in the master bedroom had been glued to the hardwood, something that resulted in a multi-day project we were not counting on.

#3 Safety and Structural issues
Inspectors go up into the attic , and down into the farthest reaches of the basement and can spot things like mold, holes in the chimney, improper wiring or improperly vented fans.

#4 – Aiding in the planning for future maintenance expenses
Unless the home is brand new you will need to replace a number of things; water heaters last 6-10 years, roofs about 20 years , furnaces about 25 years. . The report will include an estimate on the remaining life for each of these expensive items which will give you time to save for their eventual replacement.

#5 Bargaining power
If you find something that will cost a considerable amount to replace or repair you can go back to the seller’s agent and ask for a reduction in the price. A leaky roof may cost $3000 to replace. Perhaps the seller would split the cost with you? It’s worth asking.

#6 Peace of Mind
Finally, for your own peace of mind. When you have spent all your hard earned cash on a home and will be paying it off for 20+ years, it’s easier to sleep at night knowing that the house won’t come tumbling down on you or that you paid too much .
While an inspection cuts into your budget at a time when you need all the cash you can get, you will find it is money well spent. NOTE: If you live in an area where housing prices are rising quickly your appraisal may come in low as the property is appraised based on sales in the previous 90 days. Ask your Dominion Lending Centres mortgage broker and your realtor if this is the case for your area.

David Cooke

DAVID COOKE

Dominion Lending Centres – Accredited Mortgage Professional
David is part of DLC Clarity Mortgages in Calgary, AB.

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Improve Your Credit Score

Your credit score is a big factor when you apply for a mortgage. Believe it or not, it can play a big part on how good your interest rate will be and the type of mortgage you can qualify for.

Mortgage Professionals are experienced helping clients with a wide range of credit scores so we can find you a mortgage product even if your credit is far from perfect.

Good news! Your credit score is that it can be improved simply by doing the following:

  • Stop looking for credit. If you’re frequently seeking credit that can affect your score as can the size of the balances you carry. Every time you apply for credit there is a hard credit check. It is particularly important that you not apply for a credit card in the six months leading up to your mortgage application. These credit checks may stay on your file for up to three years.
  • If your credit card is maxed out all the time, that’s going to hurt your credit score. Make some small monthly regular payments to reduce your balance and start using your debit card more. It’s important that you try to keep your balance under 30% or even 20% of your credit limit.
  • It’s also important to make your credit payments on time. People are often surprised that not paying their cell phone bill can hurt their credit score in the same way as not making their mortgage payment.
  • You should use your credit cards at least every few months. That’s so its use is reported to credit reporting agencies. As long as you pay the balance off quickly you won’t pay any interest.
  • You may wish to consider special credit cards used to rebuild credit. You simply make a deposit on the card and you get a credit limit for the value of that deposit. They are easy to get because the credit card company isn’t taking any risks.
  • Create an account at BORROWELL by clicking here and get your credit report for FREE every month.

And most importantly, contact a Dominion Lending Centres Mortgage Professional if you have any questions.