Many Canadians will spend their entire lives without proper financial education. With the help of Enriched Academy, an online financial education platform, Our House Magazine has collected some insight and tips from experts on financial literacy to help Canadians achieve their dreams, from homeownership to a comfy retirement.

Money. It’s virtually impossible to get by in life without it, and everyone wants more of it. But many people struggle to manage their money and make it work for them. And all the stats are going in the wrong direction. More and more Canadians are struggling with debt and get by living paycheque-to-paycheque with no idea or strategy on how to turn it around.

Luckily there are many resources out there to help guide you in the right direction. How you use the information to form a strategy will determine your financial future. Jay Seabrook is the co-founder of Enriched Academy, an educational program dedicated to providing financial literacy and awareness to teens and adults.

He explained that most people don’t even get started on a healthy financial journey because of some basic money myths like, you need money to make money, or it’s too complicated to understand.

Seabrook suggested there are two key metrics people need to be aware of: their net worth and how much is needed to save every month to reach financial freedom.

Net worth is a valuation of your assets minus your liabilities or what you own and subtracting what you owe. While a general rule of thumb is putting away 10 percent of your pre-tax income a month, Seabrook suggested the number may not be enough to meet your financial goal. You’ll need to create a proper budget to determine that number you really need to put away to reach your goals.

He added by getting a handle on those two aspects and tracking them on a regular basis, chances of getting to financial freedom are dramatically higher.

Financial literacy is something deeply personal to the 42-year-old entrepreneur.

Like most people, Seabrook grew up with very little financial education. That reality hit home after college when he moved to Whistler, B.C. for work. While he was surrounded by some of the wealthiest people in the world, he couldn’t scrounge enough money for a ski pass – the purpose of moving to the resort community in the first place.

Seabrook didn’t turn his fortunes around until he met a mentor who showed him a path forward.

“Life is a buffet table of the things you can do, but I was on the bread and water part of the buffet table, and I have no idea how to get access to the rest of it. It drove me crazy,” he told Our House Magazine. “I wanted this better life, but I didn’t know how to get it.”

By the mid-2000s, Seabrook got into the ground floor of an upstart mortgage company in Dominion Lending Centres. He eventually invested in the company and worked his way up to VP of operations. Along the way, he met his business partner and Enriched Co-founder Kevin Cochran, who was also finding success at DLC. The two entrepreneurs used their own personal experience and what they had learned over the years to create the educational platform. Enriched launched in 2011, and a short time later Seabrook and Cochran got a break with a winning pitch to the Dragons’ Den that eventually grew to its current online education platform.

Now the two entrepreneurs are busy teaching the techniques and tools they’ve learned to a mass audience. Seabrook was quick to point out financial freedom won’t happen overnight, but it doesn’t take a lifetime to get there either.

“It’s actually a lot easier than people think,” he said, adding the “biggest hurdle for most people is suppressing the instant gratification of spending at the moment”.

“People spend their entire lives trying to make money, why? They want a nice lifestyle and get to a point where they can enjoy the best things in life, but if you don’t have a plan, you probably won’t get there. If you’re really serious about getting to a place where you make more money from passive income than all the hours you put in, you have to start learning it. If you get clear on some of your goals, you’ll get there.”

Published by DLC Marketing Team

When it comes down to getting approved for a mortgage, there are a lot of factors and not everyone will qualify. So what are your options if the banks say “no”?

When conventional 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! That’s where alternative lenders come in.

what is an alternative lender?

While the big banks, monolines, and credit unions – or “A lenders” as they are sometimes referred to – are viewed as the gold standard in the mortgage industry, some people have no choice but to consider other options for financing.

If you’re seeking a mortgage, but your credit score is damaged in some way and big institutions won’t lend you the money, you’ll find yourself in what’s commonly referred to in the industry as the “Alternative-A” or “B” lending space.

Much like the A Lender space, there are various companies that operate in the B lending space. Some B lenders are known as Mortgage Investment Companies (or MICs). Like the big banks, they’re still regulated, have shareholders and a board of directors, and essentially act like a typical company. Equitable Bank and Home Capital are examples of other institutions that offer alternative options.

Alternative lenders cater to individuals which lack a strong credit history, or a guaranteed income (recent immigrants, or the self-employed, for instance). As a result, these lenders generally have lower entry qualifications, which are offset by higher interest rates.

WHY IS ALTERNATIVE LENDING NECESSARY?

• CRA arrears
• Income issues such as non-traditional income as with self-employed borrowers
• Credit issues such as low credit score, credit arrears, current mortgage or even bankruptcies
• Unexpected liens on title
• Foreclosure situations
• Unique financing needs/opportunities

private or unregulated lenders

Beyond B-lenders are another alternative, which are known as Private or Unregulated lenders. These could just be individuals with money who are looking to invest. They are not regulated by any agency, and their rates and fees could be quite high.

These lenders are not required to stress test mortgage applicants, but many will abide by lower qualification rates. As a result, getting approved for a loan through an alternative or uninsured lender can be much easier than going through a traditional bank or credit union.

However, the same with B Lenders, it is vital to pay close attention to the deal an unregulated lender offers. Lower qualification rates tend to come with baggage in the form of high-interest rates or penalties.

plan b mortgage services

Cole Hennig, president of Plan B Mortgage Services, explained his company typically deals with clients who are self-employed, have damaged credit, and a score somewhere below 650. Some have difficulties proving their income. They could be looking for a second mortgage or seeking a way to keep their current home. He also noted that his clients often experienced a “trigger event”, such as a job loss or workplace injury, which forced them to take on more debt than they and can’t manage.

The point of using an alternative lender, according to Hennig, is to get back into the good books of a conventional lender. Plan B will work with their clients, offering a full assessment of their situation, and providing tools to repair their credit. However, Hennig added it’s critical his clients have a path to getting out of the B lending space.

“Usually, we’re seeing people who have hit a rough spot, and our job here is to get them an immediate solution,” he said. “But, if it doesn’t lead anywhere, it’s no good to us. We’re not going to do a deal if we don’t see how it’s going to help them get back to the best place they can be.”

At that point, Hennig said a difficult conversation with the client needs to be had, which could include advising them to sell the home to avoid foreclosure.

considerations for alternative mortgages

Due to the “B” Lender space, it is important to take a good look at the conditions for these mortgage products to ensure that you won’t get trapped with rates you can’t afford.

Before considering an alternative mortgage, there are a few things you should ask yourself:

1. What issue is keeping me from qualifying for a mortgage today?
2. How long will it take me to correct this issue and qualify for a mortgage?
3. How much do I currently have available as a down payment?
4. 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?

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

1. How high is the interest rate?
2. What is the penalty for missed mortgage payments? How are they calculated? What is the cost to get out of the mortgage altogether?
3. 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?
4. What is the cost of each monthly mortgage payment?
5. What is the fine print?

When it comes to alternative lending, things can get a bit murky. Seeking the help of a mortgage professional will ensure that you are making the best decision for you! Reach out if you have questions about various alternative mortgage products and we will review the rates and terms to ensure it is the best fit.

Moving to a larger house is not the only time that things can change with your home and mortgage. Sometimes there comes a point when owning a home becomes a little too much to handle, or maybe you’re an empty-nester and no longer need three extra bedrooms. Whatever the reason, downsizing is a great option when you no longer need a full size home. Perhaps you want to swap your two-story family home for a rancher, or maybe a cute little apartment or townhouse! Just as there are many options for individuals expanding families, there are just as many options for people wanting to scale down.

For homeowners who are fortunate enough to now be mortgage-free and looking to scale down, you could be sitting on a gold mine!

If you do still owe on your current mortgage, it is important to remember that downsizing during your current mortgage cycle, will be breaking the mortgage. This means you will have to go through the entire qualification process again – including passing the stress test. The stress test is now required for all mortgages. Its purpose is to determine whether a homebuyer can afford their principal and interest payments, should interest rates increase. It is based on the 5-year benchmark rate from Bank of Canada or the customer’s mortgage interest rate plus 2% – whichever is higher.

Regardless of your current situation, there are some costs that go with selling your existing home and moving to something smaller or more affordable.

Some of the costs associated with downsizing are:

• Realtor commission fees, which range from 2.5 to 5 percent of the home selling price
• Closing costs and legal fees, which are 1 to 4% of the purchase price on the new home
• Miscellaneous costs such as moving expenses, upgrading appliances and/or buying new furniture
• If you are moving into a condominium or townhouse, there are strata fees to consider

WHY NOT CONSIDER A REVERSE MORTGAGE?

Most individuals looking to scale down are looking to do so for retirement or because they are now empty-nesters. However, if you are looking to downsize simply due to being unable to manage your mortgage or maintenance costs, there is an option called a “Reverse Mortgage”.

A reverse mortgage is a loan secured against the value of your home. It is exclusively for homeowners aged 55 years and older and enables the homeowners to convert up to 55% of the home’s value into tax-free cash!

With a reverse mortgage, you maintain ownership of your home and can use the loan to cover costs or pay out debts. The loan would need to be repaid in the event that you choose to move and sell the current home.

If you are looking to downsize your home, a Dominion Lending Centres mortgage professional can help! Contact one of our many experts today to help make your next move a successful one.

Article Published by DLC Marketing Team