Mortgagenomics Canada: Recent Episodes
Mortgagenomics Canada
A podcast hosted by mortgage broker, Marko Gelo. Born and raised in Calgary, then moved to Vancouver in 2011. Owner of dually licensed mortgage brokerage, Home Financing Solutions Inc. (a franchise of The Mortgage Centre). Mortgagenomics focuses on economics, real estate and feature segments on mortgage qualification strategies and policies. To make things a bit more interesting, Marko produces all the music tracks for the podcast. Songs are typically 1-3 minutes in duration, but may also feature tracks from past bands that Marko has played in. Good info, good music.
Listen to past music tracks by clicking here.
Marko Calgary Contact: 403-606-3751 direct
Marko Vancouver Contact: 604-800-9593 direct
gelo.m@mortgagecentre.com
http://www.markogelo.com/
https://www.homefinancingsolutions.ca/mortgagenomics-podcast/
Contact Marko Gelo, he's a Mortgage Broker!
604-800-9593 cell/text Vancouver
403-606-3751 cell/text Calgary
Call Marko via WhatsApp
homefinancingsolutions.ca
If a guarantor, a non-borrowing spouse, or anyone signing without directly benefiting from the funds is part of your mortgage, there's a legal step that gets triggered more often than people expect. A lot of clients are surprised to learn it's not optional once a lender flags it — and it can hold up closing if it's not booked early. In this episode, I break down exactly when it applies, what the appointment actually looks like, and how much it costs.
CLICK HERE to be redirected to the blog version of this episode.CLICK HERE to be redirected to Mortgagenomics Canada Podcast YouTube Channel
CLICK HERE to download Marko's award-winning Mobile Mortgage App!
Hosted on Acast. See acast.com/privacy for more information.
Contact Marko Gelo, he's a Mortgage Broker!
604-800-9593 cell/text Vancouver
403-606-3751 cell/text Calgary
Call Marko via WhatsApp
homefinancingsolutions.ca
If family is helping with your down payment, timing matters more than you'd think. Most people don't know that gifted funds sitting untouched in your account for 90 consecutive days are no longer treated as a gift at all — they become your own money in the eyes of your lender. That distinction can open up mortgage programs a fresh gift wouldn't qualify for, and it's just one of several rules worth knowing before you rely on family funds. In this episode, I broke down the full picture — who can gift you money, how much paperwork is really required, and what happens when funds come from abroad.
CLICK HERE to be redirected to the blog version of this episode.CLICK HERE to be redirected to Mortgagenomics Canada Podcast YouTube Channel
CLICK HERE to download Marko's award-winning Mobile Mortgage App!
Hosted on Acast. See acast.com/privacy for more information.
Contact Marko Gelo, he's a Mortgage Broker!
604-800-9593 cell/text Vancouver
403-606-3751 cell/text Calgary
Call Marko via WhatsApp
homefinancingsolutions.ca
With qualifying still tough for many first-time buyers, co-signing — and its often-overlooked counterpart, guarantoring — has become one of the most common ways families help each other into the market. What surprises most people is that a co-signor is on the hook for 100% of the mortgage and it lands on their own credit report, while even guarantors aren't always as protected as they think. In my latest episode, I break down the real difference between the two roles, why a strong income doesn't always mean a stronger application, the industry-wide shift toward registering co-signors (and guarantors) on title, and the exit strategy that means you're not on the hook forever. If you've been asked to co-sign or guarantee a mortgage — or you're thinking of asking someone — listen to this first.
CLICK HERE to be redirected to the blog version of this episode.CLICK HERE to be redirected to Mortgagenomics Canada Podcast YouTube Channel
CLICK HERE to download Marko's award-winning Mobile Mortgage App!
Hosted on Acast. See acast.com/privacy for more information.
Contact Marko Gelo, he's a Mortgage Broker!
604-800-9593 cell/text Vancouver
403-606-3751 cell/text Calgary
Call Marko via WhatsApp
homefinancingsolutions.ca
A growing number of Canadian homeowners are discovering that upgrading doesn't have to mean selling — and the difference between those who know this and those who don't can be worth hundreds of thousands of dollars over time. Most people don't realize there's a refinancing move that can turn a mortgage-heavy property into a cash-flowing rental almost overnight.
CLICK HERE to be redirected to the blog version of this episode.CLICK HERE to be redirected to Mortgagenomics Canada Podcast YouTube Channel
CLICK HERE to download Marko's award-winning Mobile Mortgage App!
Hosted on Acast. See acast.com/privacy for more information.
Contact Marko Gelo, he's a Mortgage Broker!
604-800-9593 cell/text Vancouver
403-606-3751 cell/text Calgary
Call Marko via WhatsApp
homefinancingsolutions.ca
Friday's blowout jobs report was the last big data release before next week's Bank of Canada decision — and it quietly flipped the market's expectations for where rates go next. Most people assume the next move is still a cut, but traders are now pricing a 53% chance of a hike by December. In this episode, I break down what triggered the shift and what it means if you're renewing in the next 12 months, holding a variable, or waiting to buy.
CLICK HERE to be redirected to the blog version of this episode.CLICK HERE to be redirected to Mortgagenomics Canada Podcast YouTube Channel
CLICK HERE to download Marko's award-winning Mobile Mortgage App!
Hosted on Acast. See acast.com/privacy for more information.
Contact Marko Gelo, he's a Mortgage Broker!
604-800-9593 cell/text Vancouver
403-606-3751 cell/text Calgary
Call Marko via WhatsApp
homefinancingsolutions.ca
There's a troubling pattern showing up across BC and Alberta right now — buyers shopping for condos with a pre-approval that was never built around the actual cost of condo ownership. Two variables that every condo qualification must include — the monthly maintenance fee and annual property tax — are routinely being left out, and buyers are only finding out when they're already in the middle of a deal. In today's environment, where condo fees have escalated sharply and property taxes have followed, these aren't minor omissions — combined, they can reduce your real purchasing power by $65,000 or more. This episode breaks down exactly how both variables affect your qualification math, with real numbers, and tells you what to ask your mortgage provider before you start shopping.
CLICK HERE to be redirected to the blog version of this episode.CLICK HERE to be redirected to Mortgagenomics Canada Podcast YouTube Channel
CLICK HERE to download Marko's award-winning Mobile Mortgage App!
Hosted on Acast. See acast.com/privacy for more information.
Contact Marko Gelo, he's a Mortgage Broker!
604-800-9593 cell/text Vancouver
403-606-3751 cell/text Calgary
Call Marko via WhatsApp
homefinancingsolutions.ca
Western Canada's housing markets — Vancouver, Calgary, Edmonton, the Interior, the Island — are each at a different point in their cycle right now, and many analysts are starting to signal that some regions may be approaching a turning point. But the more important conversation isn't about where the bottom is — it's about why trying to find the perfect entry point is almost always a more expensive strategy than simply buying when you're personally ready. In my latest article, I use the Andex chart to make this case in a way I think will genuinely reframe how you think about timing your real estate purchase. It's worth the read, regardless of which market you're watching.
CLICK HERE to be redirected to the blog version of this episode.CLICK HERE to be redirected to Mortgagenomics Canada Podcast YouTube Channel
CLICK HERE to download Marko's award-winning Mobile Mortgage App!
Hosted on Acast. See acast.com/privacy for more information.
Contact Marko Gelo, he's a Mortgage Broker!
604-800-9593 cell/text Vancouver
403-606-3751 cell/text Calgary
Call Marko via WhatsApp
homefinancingsolutions.ca
Canada is in the middle of the largest mortgage renewal wave in a generation, and right now millions of homeowners are deciding whether to stay with their current lender or make a move — and most of them don't know the one detail that determines whether switching lenders costs a few hundred dollars or several thousand. In this episode, I break down exactly what happens to your mortgage when it hits its maturity date, why a few days past maturity on the right product is almost free, and why some lenders handle this very differently than you'd expect. If your renewal is coming up in the next 12 months, this is the article to read before you sign anything.
CLICK HERE to be redirected to the blog version of this episode.CLICK HERE to be redirected to Mortgagenomics Canada Podcast YouTube Channel
CLICK HERE to download Marko's award-winning Mobile Mortgage App!
Hosted on Acast. See acast.com/privacy for more information.
Contact Marko Gelo, he's a Mortgage Broker!
604-800-9593 cell/text Vancouver
403-606-3751 cell/text Calgary
Call Marko via WhatsApp
homefinancingsolutions.ca
Most people assume that a smaller bankruptcy is easier to overcome when applying for a mortgage — but the opposite is often true, and the reason why reveals a lot about how lenders think. Most major lenders won't even consider a mortgage application from someone with a past bankruptcy unless the amount exceeded $50,000, and understanding the logic behind that rule is something every borrower with past credit challenges needs to know. This episode breaks down exactly why this threshold exists, what other conditions apply, and what your options are if your bankruptcy falls below it.
CLICK HERE to be redirected to the blog version of this episode.CLICK HERE to be redirected to Mortgagenomics Canada Podcast YouTube Channel
CLICK HERE to download Marko's award-winning Mobile Mortgage App!
Hosted on Acast. See acast.com/privacy for more information.
Contact Marko Gelo, he's a Mortgage Broker!
604-800-9593 cell/text Vancouver
403-606-3751 cell/text Calgary
Call Marko via WhatsApp
homefinancingsolutions.ca
The Bank of Canada held its policy rate at 2.25% this week for the fifth straight time, with Governor Macklem openly admitting that war, tariffs, and oil make 2026 anyone's guess. What most people missed is the fine print: the Bank described future hikes as "consecutive increases" while easing got a single "cut" — and central bankers choose those words deliberately. In the full episode, I break down why the bond market is pricing a hike by December, and why fixed-leaning terms now model out cheapest even if hikes don't arrive until 2028. If you're renewing or buying in the next year, this episode is definitely worth your time.
CLICK HERE to be redirected to the blog version of this episode.CLICK HERE to be redirected to Mortgagenomics Canada Podcast YouTube Channel
CLICK HERE to download Marko's award-winning Mobile Mortgage App!
Hosted on Acast. See acast.com/privacy for more information.
Contact Marko Gelo, he's a Mortgage Broker!
604-800-9593 cell/text Vancouver
403-606-3751 cell/text Calgary
Call Marko via WhatsApp
homefinancingsolutions.ca
Most borrowers don't realize that certain types of non-taxable income — like disability payments, workers' compensation, or self-employed write-offs — can be increased by up to 35% when calculating what you qualify for on a mortgage. This one adjustment can add $50,000 or more in borrowing power to a file, yet it gets overlooked all the time. In my latest blog, I break down exactly which income sources qualify for a gross-up, how the math works, and what the real-world dollar impact looks like. If you or someone you know is self-employed or receiving non-taxable income, this episode is worth a listen.
CLICK HERE to be redirected to the blog version of this episode.CLICK HERE to be redirected to Mortgagenomics Canada Podcast YouTube Channel
CLICK HERE to download Marko's award-winning Mobile Mortgage App!
Hosted on Acast. See acast.com/privacy for more information.
Contact Marko Gelo, he's a Mortgage Broker!
604-800-9593 cell/text Vancouver
403-606-3751 cell/text Calgary
Call Marko via WhatsApp
homefinancingsolutions.ca
CLICK HERE to be redirected to the blog version of this episode.CLICK HERE to be redirected to Mortgagenomics Canada Podcast YouTube Channel
CLICK HERE to download Marko's award-winning Mobile Mortgage App!
Hosted on Acast. See acast.com/privacy for more information.
Contact Marko Gelo, he's a Mortgage Broker!
604-800-9593 cell/text Vancouver
403-606-3751 cell/text Calgary
Call Marko via WhatsApp
homefinancingsolutions.ca
CLICK HERE to be redirected to Mortgagenomics Canada Podcast YouTube Channel
CLICK HERE to be redirected to the blog version of this episode.
CLICK HERE to download Marko's award-winning Mobile Mortgage App!
Hosted on Acast. See acast.com/privacy for more information.
Contact Marko Gelo, he's a Mortgage Broker!
604-800-9593 cell/text Vancouver
403-606-3751 cell/text Calgary
Call Marko via WhatsApp
homefinancingsolutions.ca
CLICK HERE to be redirected to Mortgagenomics Canada Podcast YouTube Channel
CLICK HERE to be redirected to the blog version of this episode.
CLICK HERE to download Marko's award-winning Mobile Mortgage App!
Hosted on Acast. See acast.com/privacy for more information.
Contact Marko Gelo, he's a Mortgage Broker!
604-800-9593 cell/text Vancouver
403-606-3751 cell/text Calgary
Call Marko via WhatsApp
homefinancingsolutions.ca
CLICK HERE to be redirected to Mortgagenomics Canada Podcast YouTube Channel
CLICK HERE to be redirected to the blog version of this episode.
CLICK HERE to download Marko's award-winning Mobile Mortgage App!
Hosted on Acast. See acast.com/privacy for more information.
Contact Marko Gelo, he's a Mortgage Broker!
604-800-9593 cell/text Vancouver
403-606-3751 cell/text Calgary
Call Marko via WhatsApp
homefinancingsolutions.ca
CLICK HERE to be redirected to Mortgagenomics Canada Podcast YouTube Channel
CLICK HERE to be redirected to the blog version of this episode.
CLICK HERE to download Marko's award-winning Mobile Mortgage App!
Hosted on Acast. See acast.com/privacy for more information.
Contact Marko Gelo, he's a Mortgage Broker!
604-800-9593 cell/text Vancouver
403-606-3751 cell/text Calgary
Call Marko via WhatsApp
homefinancingsolutions.ca
CLICK HERE to be redirected to Mortgagenomics Canada Podcast YouTube Channel
CLICK HERE to be redirected to the blog version of this episode.
CLICK HERE to download Marko's award-winning Mobile Mortgage App!
Hosted on Acast. See acast.com/privacy for more information.
Contact Marko Gelo, he's a Mortgage Broker!
604-800-9593 cell/text Vancouver
403-606-3751 cell/text Calgary
Call Marko via WhatsApp
homefinancingsolutions.ca
CLICK HERE to be redirected to Mortgagenomics Canada Podcast YouTube Channel
CLICK HERE to be redirected to the blog version of this episode.
CLICK HERE to download Marko's award-winning Mobile Mortgage App!
Hosted on Acast. See acast.com/privacy for more information.
Contact Marko Gelo, he's a Mortgage Broker!
604-800-9593 cell/text Vancouver
403-606-3751 cell/text Calgary
Call Marko via WhatsApp
homefinancingsolutions.ca
CLICK HERE to be redirected to Mortgagenomics Canada Podcast YouTube Channel
CLICK HERE to be redirected to the blog version of this episode.
CLICK HERE to download Marko's award-winning Mobile Mortgage App!
Hosted on Acast. See acast.com/privacy for more information.
Contact Marko Gelo, he's a Mortgage Broker!
604-800-9593 cell/text Vancouver
403-606-3751 cell/text Calgary
Call Marko via WhatsApp
homefinancingsolutions.ca
CLICK HERE to be redirected to Mortgagenomics Canada Podcast YouTube Channel
CLICK HERE to be redirected to the blog version of this episode.
CLICK HERE to download Marko's award-winning Mobile Mortgage App!
Hosted on Acast. See acast.com/privacy for more information.
Contact Marko Gelo, he's a Mortgage Broker!
604-800-9593 cell/text Vancouver
403-606-3751 cell/text Calgary
Call Marko via WhatsApp
homefinancingsolutions.ca
CLICK HERE to be redirected to Mortgagenomics Canada Podcast YouTube Channel
CLICK HERE to be redirected to the blog version of this episode.
CLICK HERE to download Marko's award-winning Mobile Mortgage App!
Hosted on Acast. See acast.com/privacy for more information.
Contact Marko Gelo, he's a Mortgage Broker!
604-800-9593 cell/text Vancouver
403-606-3751 cell/text Calgary
Call Marko via WhatsApp
homefinancingsolutions.ca
CLICK HERE to be redirected to Mortgagenomics Canada Podcast YouTube Channel
CLICK HERE to be redirected to the blog version of this episode.
CLICK HERE to download Marko's award-winning Mobile Mortgage App!
Hosted on Acast. See acast.com/privacy for more information.
Contact Marko Gelo, he's a Mortgage Broker!
604-800-9593 cell/text Vancouver
403-606-3751 cell/text Calgary
Call Marko via WhatsApp
homefinancingsolutions.ca
CLICK HERE to be redirected to Mortgagenomics Canada Podcast YouTube Channel
CLICK HERE to be redirected to the blog version of this episode.
CLICK HERE to download Marko's award-winning Mobile Mortgage App!
Hosted on Acast. See acast.com/privacy for more information.
Contact Marko Gelo, he's a Mortgage Broker!
604-800-9593 cell/text Vancouver
403-606-3751 cell/text Calgary
Call Marko via WhatsApp
homefinancingsolutions.ca
CLICK HERE to be redirected to Mortgagenomics Canada Podcast YouTube Channel
CLICK HERE to be redirected to the blog version of this episode.
CLICK HERE to download Marko's award-winning Mobile Mortgage App!
Hosted on Acast. See acast.com/privacy for more information.
Contact Marko Gelo, he's a Mortgage Broker!
604-800-9593 cell/text Vancouver
403-606-3751 cell/text Calgary
Call Marko via WhatsApp
homefinancingsolutions.ca
CLICK HERE to be redirected to Mortgagenomics Canada Podcast YouTube Channel
CLICK HERE to be redirected to the blog version of this episode.
CLICK HERE to download Marko's award-winning Mobile Mortgage App!
Hosted on Acast. See acast.com/privacy for more information.
Contact Marko Gelo, he's a Mortgage Broker!
604-800-9593 cell/text Vancouver
403-606-3751 cell/text Calgary
Call Marko via WhatsApp
homefinancingsolutions.ca
CLICK HERE to be redirected to Mortgagenomics Canada Podcast YouTube Channel
CLICK HERE to be redirected to the blog version of this episode.
CLICK HERE to download Marko's award-winning Mobile Mortgage App!
Hosted on Acast. See acast.com/privacy for more information.
Contact Marko Gelo, he's a Mortgage Broker!
604-800-9593 cell/text Vancouver
403-606-3751 cell/text Calgary
Call Marko via WhatsApp
homefinancingsolutions.ca
CLICK HERE to be redirected to Mortgagenomics Canada Podcast YouTube Channel
CLICK HERE to be redirected to the blog version of this episode.
CLICK HERE to download Marko's award-winning Mobile Mortgage App!
Hosted on Acast. See acast.com/privacy for more information.
Contact Marko Gelo, he's a Mortgage Broker!
604-800-9593 cell/text Vancouver
403-606-3751 cell/text Calgary
Call Marko via WhatsApp
homefinancingsolutions.ca
CLICK HERE to be redirected to Mortgagenomics Canada Podcast YouTube Channel
CLICK HERE to be redirected to the blog version of this episode.
CLICK HERE to download Marko's award-winning Mobile Mortgage App!
Hosted on Acast. See acast.com/privacy for more information.
Contact Marko Gelo, he's a Mortgage Broker!
604-800-9593 cell/text Vancouver
403-606-3751 cell/text Calgary
Call Marko via WhatsApp
homefinancingsolutions.ca
CLICK HERE to be redirected to Mortgagenomics Canada Podcast YouTube Channel
CLICK HERE to be redirected to the blog version of this episode.
CLICK HERE to download Marko's award-winning Mobile Mortgage App!
Hosted on Acast. See acast.com/privacy for more information.
Contact Marko Gelo, he's a Mortgage Broker!
604-800-9593 cell/text Vancouver
403-606-3751 cell/text Calgary
Call Marko via WhatsApp
homefinancingsolutions.ca
CLICK HERE to be redirected to Mortgagenomics Canada Podcast YouTube Channel
CLICK HERE to be redirected to the blog version of this episode.
CLICK HERE to download Marko's award-winning Mobile Mortgage App!
Hosted on Acast. See acast.com/privacy for more information.
Contact Marko Gelo, he's a Mortgage Broker!
604-800-9593 cell/text Vancouver
403-606-3751 cell/text Calgary
Call Marko via WhatsApp
homefinancingsolutions.ca
CLICK HERE to be redirected to Mortgagenomics Canada Podcast YouTube Channel
CLICK HERE to be redirected to the blog version of this episode.
CLICK HERE to download Marko's award-winning Mobile Mortgage App!
Hosted on Acast. See acast.com/privacy for more information.
Contact Marko Gelo, he's a Mortgage Broker!
604-800-9593 cell/text Vancouver
403-606-3751 cell/text Calgary
Call Marko via WhatsApp
homefinancingsolutions.ca
CLICK HERE to be redirected to Mortgagenomics Canada Podcast YouTube Channel
CLICK HERE to be redirected to the blog version of this episode.
CLICK HERE to download Marko's award-winning Mobile Mortgage App!
Hosted on Acast. See acast.com/privacy for more information.
Contact Marko Gelo, he's a Mortgage Broker!
604-800-9593 cell/text Vancouver
403-606-3751 cell/text Calgary
Call Marko via WhatsApp
homefinancingsolutions.ca
CLICK HERE to be redirected to Mortgagenomics Canada Podcast YouTube Channel
CLICK HERE to be redirected to the blog version of this episode.
CLICK HERE to download Marko's award-winning Mobile Mortgage App!
Hosted on Acast. See acast.com/privacy for more information.
Contact Marko Gelo, he's a Mortgage Broker!
604-800-9593 cell/text Vancouver
403-606-3751 cell/text Calgary
Call Marko via WhatsApp
homefinancingsolutions.ca
CLICK HERE to be redirected to Mortgagenomics Canada Podcast YouTube Channel
CLICK HERE to be redirected to the blog version of this episode.
CLICK HERE to download Marko's award-winning Mobile Mortgage App!
Hosted on Acast. See acast.com/privacy for more information.
Contact Marko Gelo, he's a Mortgage Broker!
604-800-9593 cell/text Vancouver
403-606-3751 cell/text Calgary
Call Marko via WhatsApp
homefinancingsolutions.ca
CLICK HERE to be redirected to Mortgagenomics Canada Podcast YouTube Channel
CLICK HERE to be redirected to the blog version of this episode.
CLICK HERE to download Marko's award-winning Mobile Mortgage App!
Hosted on Acast. See acast.com/privacy for more information.
Contact Marko Gelo, he's a Mortgage Broker!
604-800-9593 cell/text Vancouver
403-606-3751 cell/text Calgary
Call Marko via WhatsApp
homefinancingsolutions.ca
CLICK HERE to be redirected to Mortgagenomics Canada Podcast YouTube Channel
CLICK HERE to be redirected to the blog version of this episode.
CLICK HERE to download Marko's award-winning Mobile Mortgage App!
Hosted on Acast. See acast.com/privacy for more information.
Contact Marko Gelo, he's a Mortgage Broker!
604-800-9593 cell/text Vancouver
403-606-3751 cell/text Calgary
Call Marko via WhatsApp
homefinancingsolutions.ca
CLICK HERE to be redirected to Mortgagenomics Canada Podcast YouTube Channel
CLICK HERE to be redirected to the blog version of this episode.
CLICK HERE to download Marko's award-winning Mobile Mortgage App!
Hosted on Acast. See acast.com/privacy for more information.
Contact Marko Gelo, he's a Mortgage Broker!
604-800-9593 cell/text Vancouver
403-606-3751 cell/text Calgary
Call Marko via WhatsApp
homefinancingsolutions.ca
CLICK HERE to be redirected to Mortgagenomics Canada Podcast YouTube Channel
CLICK HERE to be redirected to the blog version of this episode.
CLICK HERE to download Marko's award-winning Mobile Mortgage App!
Hosted on Acast. See acast.com/privacy for more information.
Contact Marko Gelo, he's a Mortgage Broker!
604-800-9593 cell/text Vancouver
403-606-3751 cell/text Calgary
Call Marko via WhatsApp
homefinancingsolutions.ca
CLICK HERE to be redirected to Mortgagenomics Canada Podcast YouTube Channel
CLICK HERE to be redirected to the blog version of this episode.
CLICK HERE to download Marko's award-winning Mobile Mortgage App!
Hosted on Acast. See acast.com/privacy for more information.
Contact Marko Gelo, he's a Mortgage Broker!
604-800-9593 cell/text Vancouver
403-606-3751 cell/text Calgary
Call Marko via WhatsApp
homefinancingsolutions.ca
CLICK HERE to be redirected to Mortgagenomics Canada Podcast YouTube Channel
CLICK HERE to be redirected to the blog version of this episode.
CLICK HERE to download Marko's award-winning Mobile Mortgage App!
Hosted on Acast. See acast.com/privacy for more information.
Contact Marko Gelo, he's a Mortgage Broker!
604-800-9593 cell/text Vancouver
403-606-3751 cell/text Calgary
Call Marko via WhatsApp
homefinancingsolutions.ca
CLICK HERE to be redirected to Mortgagenomics Canada Podcast YouTube Channel
CLICK HERE to be redirected to the blog version of this episode.
CLICK HERE to download Marko's award-winning Mobile Mortgage App!
Hosted on Acast. See acast.com/privacy for more information.
Contact Marko Gelo, he's a Mortgage Broker!
604-800-9593 cell/text Vancouver
403-606-3751 cell/text Calgary
Call Marko via WhatsApp
homefinancingsolutions.ca
CLICK HERE to be redirected to Mortgagenomics Canada Podcast YouTube Channel
CLICK HERE to be redirected to the blog version of this episode.
CLICK HERE to download Marko's award-winning Mobile Mortgage App!
Hosted on Acast. See acast.com/privacy for more information.
Contact Marko Gelo, he's a Mortgage Broker!
604-800-9593 cell/text Vancouver
403-606-3751 cell/text Calgary
Call Marko via WhatsApp
homefinancingsolutions.ca
CLICK HERE to be redirected to Mortgagenomics Canada Podcast YouTube Channel
CLICK HERE to be redirected to the blog version of this episode.
CLICK HERE to download Marko's award-winning Mobile Mortgage App!
Hosted on Acast. See acast.com/privacy for more information.
Contact Marko Gelo, he's a Mortgage Broker!
604-800-9593 cell/text Vancouver
403-606-3751 cell/text Calgary
Call Marko via WhatsApp
homefinancingsolutions.ca
CLICK HERE to be redirected to Mortgagenomics Canada Podcast YouTube Channel
CLICK HERE to be redirected to the blog version of this episode.
CLICK HERE to download Marko's award-winning Mobile Mortgage App!
Hosted on Acast. See acast.com/privacy for more information.
Contact Marko Gelo, he's a Mortgage Broker!
604-800-9593 cell/text Vancouver
403-606-3751 cell/text Calgary
Call Marko via WhatsApp
homefinancingsolutions.ca
CLICK HERE to be redirected to Mortgagenomics Canada Podcast YouTube Channel
CLICK HERE to be redirected to the blog version of this episode.
CLICK HERE to download Marko's award-winning Mobile Mortgage App!
Hosted on Acast. See acast.com/privacy for more information.
Contact Marko Gelo, he's a Mortgage Broker!
604-800-9593 cell/text Vancouver
403-606-3751 cell/text Calgary
Call Marko via WhatsApp
homefinancingsolutions.ca
CLICK HERE to be redirected to the blog version of this episode.
CLICK HERE to download Marko's award-winning Mobile Mortgage App!
Hosted on Acast. See acast.com/privacy for more information.
Contact Marko Gelo, he's a Mortgage Broker!
604-800-9593 cell/text Vancouver
403-606-3751 cell/text Calgary
Call Marko via WhatsApp
homefinancingsolutions.ca
CLICK HERE to be redirected to the blog version of this episode.
CLICK HERE to download Marko's award-winning Mobile Mortgage App!
Hosted on Acast. See acast.com/privacy for more information.
Contact Marko Gelo, he's a Mortgage Broker!
604-800-9593 cell/text Vancouver
403-606-3751 cell/text Calgary
Call Marko via WhatsApp
homefinancingsolutions.ca
CLICK HERE to be redirected to the blog version of this episode.
CLICK HERE to download Marko's award-winning Mobile Mortgage App!
Hosted on Acast. See acast.com/privacy for more information.
Contact Marko Gelo, he's a Mortgage Broker!
604-800-9593 cell/text Vancouver
403-606-3751 cell/text Calgary
Call Marko via WhatsApp
homefinancingsolutions.ca
CLICK HERE to be redirected to the blog version of this episode.
CLICK HERE to download Marko's award-winning Mobile Mortgage App!
Hosted on Acast. See acast.com/privacy for more information.
Contact Marko Gelo, he's a Mortgage Broker!
604-800-9593 cell/text Vancouver
403-606-3751 cell/text Calgary
Call Marko via WhatsApp
homefinancingsolutions.ca
CLICK HERE to be redirected to the blog version of this episode.
CLICK HERE to download Marko's award-winning Mobile Mortgage App!
Hosted on Acast. See acast.com/privacy for more information.
Contact Marko Gelo, he's a Mortgage Broker!
604-800-9593 cell/text Vancouver
403-606-3751 cell/text Calgary
Call Marko via WhatsApp
homefinancingsolutions.ca
CLICK HERE to be redirected to the blog version of this episode.
CLICK HERE to download Marko's award-winning Mobile Mortgage App!
Hosted on Acast. See acast.com/privacy for more information.
Contact Marko Gelo, he's a Mortgage Broker!
604-800-9593 cell/text Vancouver
403-606-3751 cell/text Calgary
Call Marko via WhatsApp
homefinancingsolutions.ca
CLICK HERE to view the blog version of this podcast
CLICK HERE to download Marko's award-winning Mobile Mortgage App!
Contact Andrew Way, he's a Realtor!
604-802-2570 cell/text
andrewway.ca
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Connect with Uzair Muhammad!778-231-3592 ph
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Contact Joe Oulovsky, he's a TOP Realtor in Calgary!
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Attend the Multiplex Townhome Builder Showcase!Click Here to reserve your spot.
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Click Here to access the Government of Canada Budget 2024
Click Here for the definition of a First Time Home Buyer
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Click Here to learn more about the Government of Canada’s upcoming FINTRAC requirement.
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Episode Link #1: 30 Year Mortgage Amortizations for First Time Home Buyers (Government of Canada link)
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Episode Link #1: Co-signer Link
Episode Link #2: Amortization Link
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Episode Link #1: Second Home Mortgage
Episode Link #2: Bridge Financing
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Contact Marko, he's a Mortgage Broker!
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Episode Reference Link: Foreign Buyer Tax, Prohibition Ban
Episode Reference Link: the Chinook
Episode Reference Link: the Ring Road
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Outro Song: “FindTheTime” by SleepingLorry
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Outro Song: “Go” by SleepingLorry
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Outro Song: “FightTheDay” by SleepingLorry
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Outro Song: “TheFallSong” by SleepingLorry
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Outro Song: “23DaysInBerlin” by Marko Gelo
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Outro Song: “insanity” by Marko Gelo
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Outro Song: “family” by Marko Gelo
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Outro Song: “George-O” by Marko Gelo
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Outro Song: “EyesInTheSky” by Marko Gelo
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Outro Song: “Tazz” by Marko Gelo
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Outro Song: “DayOf” by Marko Gelo
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Outro Song: “Uptick” by Marko Gelo
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MortgagenomicsPodcast on YouTube
Outro Song: “SideHustle” by Marko Gelo
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Outro Song: “coners” by Marko Gelo
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Outro Song: “Pettyesque” by Marko Gelo
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Outro Song: “Explosions” by Marko Gelo
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Outro Song: “The Plan” by Marko Gelo
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Outro Song: “Economies By Scale” by Marko Gelo
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Outro Song: “MessyMondays” by Marko Gelo
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Outro Song: 'Vinter' by Marko Gelo
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Outro Song: 'NoApology' by Sleeping Lorry
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Outro Song: 'Renovation' by Marko Gelo
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Contact Marko, he's a Mortgage Broker!
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Contact Marko, he's a Mortgage Broker!
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Click Here to read the blog version of this episode.
Contact Marko, he's a Mortgage Broker!
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Click Here to read the blog version of this episode.
Contact Marko, he's a Mortgage Broker!
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Click Here to read the blog version of this episode.
Contact Marko, he's a Mortgage Broker!
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Click Here to read the blog version of this episode.
Contact Marko, he's a Mortgage Broker!
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Click Here to read the blog version of this episode.
Contact Marko, he's a Mortgage Broker!
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Click Here to read the blog version of this episode.
Contact Marko, he's a Mortgage Broker!
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@markogelo (Twitter)
Click Here to read the blog version of this episode.
Contact Marko, he's a Mortgage Broker!
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@markogelo (Twitter)
Click Here to read the blog version of this episode.
Contact Marko, he's a Mortgage Broker!
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Contact Marko, he's a Mortgage Broker!
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Contact Marko, he's a Mortgage Broker!
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Contact Marko, he's a Mortgage Broker!
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Contact Marko, he's a Mortgage Broker!
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Contact Marko, he's a Mortgage Broker!
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Contact Marko, he's a Mortgage Broker!
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Contact Marko, he's a Mortgage Broker!
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Contact Marko, he's a Mortgage Broker!
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Contact Marko, he's a Mortgage Broker!
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Contact Marko, he's a Mortgage Broker!
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Contact Marko, he's a Mortgage Broker!
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Contact Marko, he's a Mortgage Broker!
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Contact Marko, he's a Mortgage Broker!604-800-9593 direct Vancouver
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Contact Marko, he's a Mortgage Broker!604-800-9593 direct Vancouver
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Contact Marko, he's a Mortgage Broker!604-800-9593 direct Vancouver
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Contact Marko, he's a Mortgage Broker!604-800-9593 direct Vancouver
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Contact Marko, he's a Mortgage Broker!604-800-9593 direct Vancouver
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A chat about the trajectory of interest rates since March 2022 and the upcoming Bank of Canada policy and interest rate announcement (July 13). Also, a closer look at fixed-payment variable rate mortgages and income qualification tips.
- CLICK HERE to be redirected to the blog version of this episode
Contact Marko, he's a Mortgage Broker!604-800-9593 direct Vancouver
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@markogelo (Twitter)
A chat about the trajectory of interest rates since March 2022 and the upcoming Bank of Canada policy and interest rate announcement (July 13). Also, a closer look at fixed-payment variable rate mortgages and income qualification tips.
- CLICK HERE to be redirected to the blog version of this episode
Contact Marko, he's a Mortgage Broker!604-800-9593 direct Vancouver
403-606-3751 direct Calgary
homefinancingsolutions.ca
@markogelo (Twitter)
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Living in Canada as a Temporary Resident can be confusing when it comes to mortgage qualification. Here is a summary of the key eligibility criteria for temporary residents seeking a mortgage with less than 20% down payment:
KEY ELIGIBILITY CRITERIA:
- temporary resident applicants must provide a valid work permit
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One of the more common questions regarding pre-approvals is, "how long is my pre-approval good for?". Generally speaking, a pre-approval (PA) is good for as long as the maturity date of the rate hold (as specified within the pre-approval). Rate holds are typically set for 90 to 120 days depending on the lender. Although the rate hold is indeed a critical part of the PA, it can also be a major distraction from other more important (or critical) conditions that if not maintained (or updated) will lead to a significantly downgraded level of assurance, or outright invalid pre-approval. If any of the application details change from the date the application was completed, then the PA could technically be deemed void and/or invalid.
Other than the rate hold guarantee in a PA, here are some other conditions/circumstances to be aware of that could lead to your PA no longer being valid:...Click Here to be re-directed to the blog version of this episode
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With the prolonged surge of real estate markets across the country many Canadian homeowners are considering cashing in some of their home equity to purchase a rental property. The transaction may seem daunting at first, but with a carefully laid out plan and a real estate action team in place, one will realize just how easy it can be.
Before reading through and internalizing the following step-by-step checklist, the first, and in my opinion, the most important task is to align your mindset to that of an investor rather than a homeowner. Transform yourself to be shrewd in your property selection, decision making and overall analysis of the transaction. Avoid being emotional. Instead, maintain a sense of logic and due diligence. Once you have entered this mindset, let your plan and the guidance of your real estate action team see you through the process...Click Here to read the rest of the episode.
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Mortgage applications often reach that critical tipping point when the addition of a non-occupying applicant is required to push the application over the finish line for approval. The non-occupying applicant is often a parent or close family member and is referred to as either a Co-signer, or Guarantor. The difference between the two is as follows:
Co-Signer: the addition of a non-occupying applicant to a mortgage and land title registration.
Guarantor: the addition of a non-occupying applicant to a mortgage, without the requirement of registering on title. Only available with select lenders and with loan to value ratios that are less than 80%
As you are now aware, there are two distinct types of non-occupying mortgage applicants...CLICK HERE to be re-directed to the blog version of this episode
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Whether it’s due to employment, quality of life, or a multitude of other reasons, Canadians have demonstrated that they are comfortable in packing up and choosing another province to live in. In fact, in 2021 more than 200,000 Canadians switched provinces across Canada...and this is only the statistics released up until the first two quarters of the year, 2021 (Source: Statistics Canada).
Upon arriving to a new province, the more common pathway to homeownership is rent first (typically 1-2 years), then buy after.
But lately, the trend is to purchase immediately upon arrival. With real estate prices surging in Canada’s two most prominent intake provinces, Alberta and BC, newly arriving migrants are opting out of the 1-2 year honeymoon phase of renting and jumping right into home ownership.
Here’s what you need to know when it comes to qualifying for a mortgage when relocating to another province (or city):
...click here to read the rest of the article
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Every so often I receive a mortgage application for a property purchase that is situated on leased land. By definition, this means that if you purchase/own a leasehold property you own only the structure/property on the land, not the actual land beneath it. So…heads up (literally)! You only own what lies ON the land. It’s not your typical real estate transaction as you will always be attached to a lingering sense of uncertainty - what if the lease doesn’t renew? Or when it does renew, will there be new conditions? Can the leaseholder suddenly appear at my doorstep and rescind on the lease? These are excellent questions and all of which require your lawyer's involvement early on in the offer stage. DO NOT remove conditions on an offer without having your lawyer review the lease agreements (be sure to forward all documents and sub-sections associated with the lease - there could be many). And while your lawyer is reviewing the leasehold agreement, have your mortgage broker inquire to lenders to see which ones will finance the property (because most of them won’t!).
Here are some key points regarding leasehold properties: Click Here to be redirected to the blog version of this episode.
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Why don’t we start off with the definition of a Property Disclosure statement…and for the remainder of this talk I’ll refer to it in its abbreviated form, PDS:
So here it is, the definition of a PDS:
A document that is completed by the seller before listing their property on the MLS. The PDS was developed by the BC Real Estate Association and allows the seller to disclose details about their home to prospective purchasers (provinces across Canada have their own versions of this document, so look it up in your jurisdiction, or ask your realtor about it). Any latent (hidden/concealed) defect and/or patent (visible) defects should be disclosed in the document, particularly latent defects as prospective purchasers may not be aware of the potential defect just by viewing the property. The PDS is an ideal starting point when considering a purchase and is typically followed with a home inspection if the prospective buyer proceeds with an offer. The PDS is a critical document and should be taken seriously by the seller when filling it out as they could be held liable if a defect was knowingly concealed. The PDS should equally be taken seriously by the buyer, especially if a mortgage is being used for the purchase.
Property Disclosure Statements (as they are known in British Columbia) are increasingly becoming more critical especially with all the subject free offers in circulation across the country. They are often neglected or forgotten about as borrowers and brokers focus most of their attention on the more common mortgage conditions like income and down payment verification. Whatever you do, do not let disclosures on the PDS go unnoticed by either your mortgage broker or most importantly, your lender.
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When it comes time to renew your mortgage, most lenders will send you a renewal letter when there is 3 to 6 months remaining on your term. While nearly 60% of borrowers simply sign and send back their renewal without even shopping around for a more favourable interest rate, I would recommend you take a moment to check out your options.
Rather than rewarding loyal clients with fully discounted interest rates, lenders tend to provide higher rates to renewing clients versus offering fully discounted rate specials to newly acquired clients. Generally speaking, the path of least resistance (when renewing your mortgage) often leads to higher interest rates. Instead, seek options and second opinions before accepting your incumbent lender's renewal offer. The outcome in doing so can result in thousands of dollars in savings over the course of your next mortgage term.
It may turn out that your bank is offering a great rate, in which case you can accept the renewal and move on...but whatever you do, don't simply assume that you are being offered their very best rate at renewal time. Take the extra time to explore your options, you'll thank yourself you did! At the very least, by exploring your options you can be rest assured that you signed up for a competitive rate.
To make the exploration process simple, connect with a mortgage broker rather than a single channel bank as mortgage brokers have access to multiple lenders and can explore a broad range of offers with one single application and credit check. Give me a call or send me an email and within minutes I can provide you with today's best market rates. Call or text me right now for real time market rates at 604-800-9593.
Click Here to be redirected to the full blog version of this episode.
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How to get a bullet proof mortgage pre approval?
In a hot market like we are in right now, mortgage pre-approvals have become front and centre…particularly, the quality and legitimacy of them. Here in Vancouver (and I am certain in Toronto as well), buyers are placing offers with no financing conditions…and even though I strongly advise against it, I continuously keep on getting subject free offers, one after another. So at the very least, my goal with this blog post is to make sure that people realize that the more work you put into the pre-approval process, the smoother and less stressful your time-restricted purchase process will be.
Step 1 - Get your credit score where it needs to be and deal with any issues you currently have
Step 2 - Have your down payment funds confirmed and ready to go
Step 3 - Understanding and selecting the right mortgage product for YOUR particular circumstance
Step 4 - Accept the fact that you will have to provide a large amount of documents
Step 5 - Get it all on Paper
Step 6 - this is for people who are considering placing a subject free offer…HAVE A BACKUP PLAN IN PLACE
Step 7 - You are now ready to shop for a home!
Click Here to be redirected to the full blog version of this episode.
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Did you know? Approximately 15% of Canadians are self-employed, making this an important segment in the mortgage and financing space. When it comes to self-employed individuals seeking a mortgage, there are some key things to note as this process can differ from the standard mortgage.
For self-employed individuals with an established business seeking best rate financing, the business must have a minimum two years of history. This includes self-employed applicants who own a full or part-time business in the form of sole proprietorships, incorporations, and partnerships.
In order to obtain a mortgage when self-employed, most lenders require your most recent 2 years of Personal Income Tax documents; Notice of Assessments and T1 Generals. Typically, individuals who can provide these documents - with acceptable income levels – should have little issue obtaining a mortgage product and rates available to the traditional borrower.
One primary benefit of being self-employed is the privilege of writing your income down. You enjoy less tax because you get to write-off expenses, but you lose borrowing power. It is important to be aware of this because you can either pay less tax or have more borrowing power.
As a self-employed individual, you will fall into one of the following three categories:
- You can provide 2 years worth of personal income tax documents and will qualify based on the two year average of your declared income (as disclosed on Line 150 of your Notice of Assessment). Your minimum down payment is 5% and you will receive the same insurer premiums and interest rates as non self employed applicants.
- You can provide 2 years worth of personal income tax documents, but your declared income (Line 150 of your Notice of Assessment) is very low due to all the write-offs you declared. In this case, your application is further analyzed as the qualification criteria become more challenging. At this stage, Business Financial Statements or business related schedules from your T1 Generals will be examined to determine reasonability and validation pertaining to your qualifying income. Your minimum down payment increases to 10% and your insurance premiums increase, but your interest rate offerings remain competitive and uncompromised (when compared with non self-employed applicants).
- You are unable to provide 2 years worth of personal income tax documents and are therefore required to increase your down payment to 20% (or possibly higher). Not only does your down payment increase, but so does your interest rate.
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The criteria for mortgage qualification involves fairly deep analysis of your personal income generation, your history of handling mainly unsecured consumer credit sources (like credit cards, lines of credit, car loans) and lastly, the amount of skin you have in the game - the down payment, or if refinancing, the current equity stake in your property. But the main driver and gatekeeper to all of the qualification tiers is the loan-to-value ratio (aka LTV). Generally speaking, the higher your down payment (or equity position), the less rigid the qualification guideline.
Here is a brief outline summary of the key LTV thresholds:
- up to 95% LTV - the least skin in the game, you will rarely (if ever) get exceptions from lenders. You are an inside-the-box applicant and need to fully comply with the standard qualification criteria. Regardless of which lender you team up with, the outcome will generally be the same...the lenders will all qualify you for the same amount and approximately the same interest rate (within a negligible margin)
- Up to 90% LTV - a few more qualification programs become available in this qualification bin, but still rigid qualification criteria with very little exceptions
- greater than 80% LTV - substantially reduced insurer premiums and a more pragmatic approach to exceptions (i.e. proceeding with an approval despite a light credit history, or recently recovered credit mishap, or remaining probationary period with employer)
- 80% LTV and lower - the entry level conventional, uninsured lending zone. Ironically, an increase in rates (often the highest interest rates as it falls just outside the insured safe haven zone, but only at the doorstep of big down payment territory). Today's 20% down payment is like yesterday's 10% down payment...not as powerful and influential as you might think. Still an impressive milestone, but not the money-talks arena.
- 75% LTV and lower - even better than 80%, a few more unique and niche qualification guidelines open up to you. Rates get lower and more exceptions are granted.
- and finally, the mother queen of the LTV scale...65% LTV - this is the big leagues, this is where you get rewarded for all the hard work of either accumulating your prized 35% down payment or owning a property with a comforting equity ratio...just the right amount of equity to creep out of all the lenders risk-pricing parameters. Best possible interest rates and significant qualification flexibility from lenders.
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Rental Property Mortgages - how to qualify for them.Qualifying for a mortgage when purchasing or refinancing a rental property can get really confusing.
Here are the key qualification criteria when qualifying for a Rental Property Mortgage: the minimum down payment to qualify for a rental property mortgage ranges from 20% to 35% (refinances are limited to 65% of the appraised value) * rental income generated from the property does not necessarily translate into direct qualifying income. 50% to 95% of the rental income is eligible as qualification income (varies radically from lender to lender) * the rental income eligibility is classified as either one of the following (depending on the lender and type of income): 1. General Qualification Income (least preferred): the mortgage balance is maintained in the application and becomes part of the overall debt load that needs to be serviced for qualification purposes 2. Offset Income (most preferred, best bang for your buck): the mortgage balance is removed from the application and a positive or negative offset figure is added to the overall application depending on the lenders offset calculation * There are (3) types of rental property classifications and their income qualifying parameters are unique and independent of each other: 1. Basement Suite rental: when the mortgage holder resides in the property and rents out the basement suite 2. Subject Rental Property: the rental property mortgage that the mortgage holder is currently applying for (purchase or refinance), and 3. Existing (or Stand Alone) Rental Property: rental properties that the mortgage holder currently owns * All three of the property classifications can have unique eligibility criteria for qualifying income allowances. For example, a monthly rental income of $2,000 can either boost or weaken an overall application depending on their respective property and rental income eligibility* classifications. * All lenders have limitations when it comes to the amount of properties they deem acceptable for a single applicant. For example, one lender may allow for a limit of 3 properties per applicant (the one they currently reside in plus 2 additional rental properties) whereas another lender may allow for up to 14 accumulated properties under ownership.
Mortgage Brokers are a key resource for individuals who purchase rental properties as they have access to multiple lenders with varying qualification guidelines.
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The Mortgage Cash Back Ladder: (for a $500,000 mortgage)1.0% cash back ($5,000) = 2.89% 5 year Fixed Rate, or 1.45% Variable Rate
1.5% cash back ($7,500) = 3.04% 5 year Fixed Rate, or 1.50% Variable Rate
2.0% cash back ($10,000) = 3.19% 5 year Fixed Rate, or 1.60% Variable Rate
3.0% cash back ($15,000) = 3.49% 5 year Fixed Rate, or 1.85% Variable Rate
5.0% cash back ($25,000) = 3.94% 5 year Fixed Rate, or 2.35% Variable Rate
Here are some smart and useful ways to get the most bang from your Mortgage Cash Back proceeds:* pay all or a portion of your closing costs (property transfer tax, legal fees, home inspection, movers, etc) * use the proceeds to suit up your new place (furniture, new appliances, etc.) * begin work on any renovation or home improvement projects (new paint, kitchen, bathroom, etc.) * pay off high interest debt (credit cards, lines of credit, etc) * invest the cash back proceeds in investments (rrsp, tfsa, stocks, etc) * ...basically, you can do whatever you desire with the proceeds
But what's the catch?Here are the key fine print conditions to be aware of when signing up for a cash back mortgage:
- be aware that you are getting an interest rate that is higher than what you would have received on a mortgage without a cash back component. The difference in rate depends on how much cash back proceeds you are opting for (see "The Cash Back Ladder" above)
- be aware that all (or a scaled portion) of the cash back proceeds will be owed back to the lender if you discharge your mortgage ahead of its maturity. Not only would you be subject to the standard payout penalty of breaking a mortgage ahead of its maturity, but also the balance of the cash back proceeds, as well (heads up!). But if you ride out the term to its maturity, you are safe - no penalties! For example, let's say you secured a cash back mortgage for a 5 year fixed term of $500,000 with a 3% cash back of $15,000. If you broke the mortgage ahead of its maturity (let's say 2 years in to a 5 year term), you would be charged the standard penalty of ~$4,000 (this is just an estimate and best case break penalty scenario) and as much as the full $15,000 may need to be returned to the lender (this is the absolute worst case scenario as some lenders will rebate the portion you have maintained during your current term, and fewer will outright forgive the entire cash back proceeds all together!). So, you could potentially have a total penalty of ~$19,000. But if you ride it out for the entire term (5 year), you will not owe anything...you can then simply renew into another term or even switch to another lender without any fees or penalties.
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Here is a summary outline of the key qualification criteria for Alternative Lending mortgages in Canada (formerly known as subprime mortgages):
- minimum down payment of 20% is required
- debt servicing ratios are as much as 35% higher than triple-A lenders (this means applicants can qualify for more mortgage)
- income qualification criteria is far less demanding than triple-A lender qualification guidelines
- very flexible to applicants who have a weak/damaged credit history
- accommodating to newly established self employed applicants
- higher rates, shorter tems..."band-aid" or "transitory" mortgages
- expect a fee of 1-2% on the full mortgage balance
Here are some examples of common sense qualification:
- rather than requiring a recent pay stub and employment letter, an alternative lender may simply request 3 months worth of bank statements to verify income deposits into your bank account
- in triple-A lending, self employed applicants require a minimum tenure of 2 years, but an Alternative Lender will consider newly established self employed applicants with a history of only 3 months
- Alternative lenders are also more forgiving to applicants who have recently come out of bankruptcies. Triple-A lenders will decline applicants associated with a prior bankruptcy for up to two years after the bankruptcy has been discharged, whereas an Alternative Lender will consider applicants 1 day after their bankruptcy (or collection) has been discharged
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With virtually every economic indicator calling for rate hikes, Canadian mortgage holders are left wondering how to prepare and react to the already-in-progress wave of interest rate volatility. Regardless of the degree and timing of the pending increases, concerned mortgage holders in Canada have the opportunity to control their own destiny and minimize (or even eliminate) potential risks associated with rising interest rates (i.e. higher mortgage payments).
Click Here to be redirected to the blog version of this episode.
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Buying a home while selling your current one?
The transition from selling one property to purchase another sounds simple, but there are a few critical events throughout the timeline that you need to be aware of.
Here are 6 key points to know when scaling up from one property to another: CLICK HERE to read the entire transcript
(1) perhaps the biggest dilemma: SELL first, then BUY, or BUY first, then SELL? (2) Use a Bridge Loan so you can gracefully transition from one property to another! (3) Consider porting your mortgage, but ONLY if it makes sense!(4) secure a Home Equity Line of Credit on your current property BEFORE you list it for sale(5) call your existing lender and find out what your current mortgage balance and discharge fee will be(6) If you're planning to scale up at a specified time in the future, renew your current mortgage with the end in mindContact Marko, he's a Mortgage Broker!604-800-9593 direct Vancouver
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Can BC Provincial Nominees qualify for a mortgage?Yes! A BC Provincial Nominee is eligible to qualify for a mortgage in Canada. Here are the key mortgage qualification criteria to be aware of when qualifying for a mortgage as a BC Provincial Nominee:
- you can purchase a property with as little as 5% down payment, but only for purchases under $1M
- for purchases that are $1M or greater the down payment increases to 20% and potentially higher depending on how large your purchase price is (down payment can reach up to 35% for purchases that exceed $2.5M)
- must have relocated to Canada within the past 2 to 5 years
- must be employed for a minimum of 3 months
- full income confirmation is required (recent pay stub and employment letter)
- a 90 day history of your down payment funds are required (i.e. bank statements, investment statements, etc). If you are unable to provide a 90 day history, then prepare to explain where the funds were derived from along with applicable documentation to verify so (i.e. from sale of property, estate settlement, etc).
Have you recently moved to, or are planning to relocate to Canada? If so, Click Here to begin your mortgage pre-approval process or call Marko at 604-800-9593.
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How to get the lowest possible mortgage payment?Sometimes life presents you with some expensive curve balls and before you know it your monthly budget creeps up and you're suddenly in a pinch. This happens to Canadians more than you can think and oftentimes the mortgage payment is looked upon as the primary means to bring you back to that financial comfort zone.
Here are 4 ways to get the lowest possible mortgage payment:1. Request that your mortgage amortization be increased to its maximum. This can significantly decrease your mortgage payment, but it all depends on how your mortgage was underwritten with the lender it is currently with. For example, your amortization may currently be at 23 years and 8 months, but it possibly may have been underwritten at 30 years. If this is the case, your payment would be eligible for a drastic payment reduction. 2. Convert all, or a portion of your mortgage into a Home Equity Line of Credit (HELOC). A HELOC payment does not include the principal portion typically associated with a mortgage payment. Therefore, the monthly payment is significantly reduced as it is only the interest portion that is required for payment. For example, for a $500,000 mortgage, the monthly payment for a fixed rate mortgage at 2.19% would amount to a monthly payment of $2,165, whereas for a HELOC, the interest only payment would be $1,230...this is a decrease of about 40%! Although HELOCs only require interest only payments, it is important to point out that unlimited principal payments can be applied to the balance at any time, and without penalty. 3. Get a variable rate mortgage! It's not hard to understand that a lower interest rate will yield a lower monthly payment. Lately, the best bang for your buck has been deeply discounted variable rate mortgages. Currently, you can get a variable rate mortgage for as low as 0.99%! So, let's go back to that $500,000 mortgage and compare a 0.99% variable with a 2.19% 5 year fixed - the reduction in payment isn't as impactful as increasing your amortization or paying interest only payments with a HELOC, but it still clocks in with a respectable 15% lower payment 4. Get a Refinance! If you're looking for a major reset, consider a mortgage refinance. This is especially impactful as it virtually wipes out all of your existing debt payments and consolidates them into your mortgage. For many, a mortgage refinance is a rejuvenating and a life-altering experience. You can literally save thousands of dollars in interest costs and substantially reduce your overall monthly payment burden to a level you may not have even imagined possible.
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Here is a breakdown of the the two types of variable rate mortgages:
Capped Variable Rate Mortgage:
- the interest rate fluctuates when a lenders prime rate changes
- generally, your payment amount stays fixed for a determined period of time or up to a certain threshold of rate increases (as outlined by your specific lenders loan terms and conditions), however, the interest rate will fluctuate with any changes in Prime rate. If Prime Rate goes down, more of your payment will go towards paying off your principal; if the Prime Rate goes up, more of your payment will go towards interest costs rather than the principal pay down.
Adjustable Variable Rate Mortgage:
- the interest rate fluctuates when a lenders prime rate changes
- your payment amount adjusts automatically to reflect changes in the Annual Interest Rate and in the number of days in the month. This means your payments may change from payment date to payment date.
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8 First Time Homebuyer Tips1) Be aware of the minimum down payment requirements
- 5% up to $500,000, then 10% on the balance thereafter up to $999,999
- 20% for $1M purchases up to $2.5M, then 40% on the balance thereafter
2) Be aware of closing costs
- Closing costs are ancillary expenses throughout the process of completing your real estate transaction. In addition to your down payment funds, the lender will also request document verification for closing costs. All of the following costs are out-of-pocket and not included in overall mortgage:
- Pre-Closing Date Costs: Home Inspection Fee ($200-$400), Home Appraisal ($300-$400)
- Closing Date Costs: Land Transfer Tax (this will vary depending on city/municipality). In British Columbia, the property transfer amounts to 1% of the first $200,000, then 2% on the amount over $200,000 up to and including $2M, and 3% thereafter (i.e. for a $900,000 property purchase, your Land Transfer Tax would amount to $16,000). If you are a Temporary Resident in Canada and want to purchase in Vancouver, you will also be subject to an additional Foreign Buyer Tax of up to 20% of the purchase price (the foreign buyer tax does not apply to all Canadian cities, it is primarily applied to Canada's higher priced markets; Vancouver, Toronto and surrounding areas). Legal Fees and disbursements (at least $1,200), Title Insurance ($100 to $300), and potential reimbursement of Property Taxes to the previous home owner if they have already paid in full for the prior year.
3) Be aware of all available First Time Homebuyer Programs and Rebates: (the following pertains only to BC First Time Homebuyers)
- Government of Canada First Time Homebuyers Program (helps reduce your overall monthly mortgage payment)
- First Time Home Buyers' Tax Credit (take advantage of a $750 tax rebate)
- Home Buyers Plan (use up to $35,000 of your RRSP for downpayment without tax being withheld from your RRSP issuer)
- GST New Housing Rebate (receive GST rebates on newly constructed homes)
- BC First Time Home Buyers Program (partial or full exemptions on Land Transfer Tax up to $525,000 purchases)
- Home Owner Grant (tax relief on annual Property Taxes)
- Newly Built Home Exemption (reduces or eliminates the amount of property transfer tax for newly built homes up to $800,000)
4) Get pre-approved for a mortgage and make sure it is LEGIT!
- Do not confuse a rate hold with a pre-approval (rate holds simply reserve an interest rate and are not adjudicated)
- Your pre-approval is legit, if:
- you have provided income documents (pay stub, employment letter, etc)
- you have verified your source of down payment (bank statements, gift, etc)
- you have provided consent to have your credit checked
5) Use a Realtor!
- an offer on a property is considered to be a CONTRACT. Realtors are certified, trained and specialized in reading and interpreting Purchase Agreement contracts. Take advantage of their advice and guidance as they have a fiduciary duty to act in your best interests.
6) Have your down payment proceeds sorted and ready when you place an offer
- upon removing conditions on your offer, prepare to expedite your deposit funds immediately thereafter to secure the deal (deal with all the administrative steps of withdrawing your money ahead of time, not on the day its required)
7) Request financing conditions in your offer (for at least 5 days)...even if you have a LEGIT pre-approval!
- submitting an offer on a property without financing conditions is never recommended (unless you are purchasing with cash, outright)
- pre-approved mortgages are not formally underwritten until an offer on a property is placed at which time your mortgage application (pre-approval) becomes, live. Therefore, do not assume you are 100% bullet proof with a legit pre-approved mortgage. Pre-approved mortgages are simply a strong precursor to the outcome of a formal and successful mortgage approval.
8) Once your offer is accepted, the clock starts ticking...be ready, available, and cooperative.
- when an offer is presented and accepted with conditions (financing, home inspection, etc) it's go-time! Be responsive and react to document and information requests as promptly as possible - time is of the essence.
Contact Marko, he's a Mortgage Broker!604-800-9593 direct Vancouver
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Intro (pre-amble): up to 13:10 mark of podcast (Canada's post election promises; tax the flippers, ban the foreigners, eliminate blind bidding, and increase the minimum down payment cut-off to purchase a home | is China's Evergrande shrapnel Canada bound?)
Ok, so this isn’t necessarily the 100-step procedure on how to get a mortgage if you are new to Canada, but these are a summary of the most common pain points...so other stuff like income qualification I’ve left out because the criteria for income is pretty much standard and kinda common sense. So, here the the key qualification criteria to be aware of (if you are new to Canada and want to purchase a property):
Make sure your funds/cash are ready to be cashed. This is critical in two ways;
- (i) to ensure that the deposit to place a competitive offer is ready for swift movement during the offer stage, and
- (ii) equally important but often problematic is that the funds are fully verified by the lender (which leads to my next point)
Prepare to submit excessive verification documents for your down payment proceeds. You will need to provide a 90 day history and/or full verification of the source of your funds. Here are the key verification requests that Canadian banks require:
- (i) any deposit over $10,000 (either individually, or cumulatively) in a Canadian Bank account within the most recent 90 days will require an explanation and verification of its origin (this is a standard request of all lenders, anti-money laundering policy)
- (ii) wired money from abroad (if the wire transfer was made within your 90 day history period, you will be required to provide a complete paper trail of the money transfer from its origin to Canada)
- (iii) sale of a property from abroad. If the proceeds from the sale of your property were deposited within your 90 day history period, you will be required to provide full documentation of the sale and disbursement of the proceeds of the sale (legal documents from the solicitor who handled the sale and corresponding bank statements that display the deposit of the sales proceeds into your bank account). Lenders may even request an explanation and/or full verification if the proceeds from your sale have been deposited prior to your 90 day history period (of down payment proceeds)
And finally, my last point...
Provide absolute clarity regarding your residence status (Work Permit, Permanent Resident) as it determines the following:
- (i) the amount required for your mortgage down payment, and
- (ii) possible property tax consequences (foreign buyer tax). The foreign buyer tax varies from 15% to 20% depending on which city you intend to reside in. Not all Canadian cities have implemented the Foreign Buyer Tax. At this time it is only applicable in select regions in Ontario and BC.
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Pre-episode Talk (up to 11 minute mark): Modern Monetary Theory, Canada's inflationary path, and my thoughts on how to position yourself on the right side of a volatile economic environment.
Episode Notes:
Down Payment Sliding Scales:
Over the years down payment guidelines have inserted a component within the qualification criteria known as "sliding scale". Oftentimes it could catch a buyer off guard when budgeting for a purchase leaving them scrambling for the unexpected shortfall in funds. The first bullet point below is the industry standard adhered to by all lenders in Canada, but the second bullet category varies with lenders and is scaled as per locations/regions and the lenders specific risk tolerances. For contrast, I've included the most competitive scales for Vancouver and Calgary.
Minimum down payment thresholds for Vancouver:
- 5% down payment up to $500,000 Purchase Price, then 10% on the balance that exceeds $500,000 up to $1M Purchase Price
- EXAMPLE: for a $800,000 Purchase, the minimum down payment would be $55,000
- 20% down payment required for purchases between $1M and $2.5M, then 50% on the balance that exceeds $2.5M
- EXAMPLE: for a $3.2M Purchase, the minimum down payment would be $850,000
Minimum down payment thresholds for Calgary:
- 5% down payment up to $500,000 Purchase Price, then 10% on the balance that exceeds $500,000 up to $1M Purchase Price
- EXAMPLE: for a $800,000 Purchase, the minimum down payment would be $55,000
- 20% down payment required for purchases prices of $1M, then 60% on the balance that exceeds $1M
- EXAMPLE: for a $3.2M Purchase, the minimum down payment would be $1.08M
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With real estate prices soaring across the country many applicants are seeking assistance when it comes to qualifying for a mortgage. More commonly, the assistance comes in the form of gifted down payments from the Bank of Mom & Dad, but coming in a close second these days is the addition of applicants to help combat the rigid income qualification criteria. You have likely heard of the term, Co-Signer. This is the 11th hour addition to a mortgage application (usually mom or dad) that gives the qualification effort that extra little boost required to get the main applicants over the hump. But what many people don't know is that there are two types of co-applicants and various conditions and characteristics associated with each one; a Co-Signer and a Guarantor. Here are the distinguishing factors of both:
Key Characteristics of a Guarantor:
- Guarantors are usually added to an application when the main applicants can sufficiently qualify based on their income, but instead have some problematic credit issues or a recent credit derogatory that has hindered their overall credit score
- a guarantor would be added to the application, but would not have the same property rights as the main applicants. They would not be added to the land title and would therefore not be linked with the property in any way.
- It is unclear as to whether lenders report the mortgage on the Guarantor's credit report...some lenders do, others don't. This could therefore become an issue if the Guarantor is planning on purchasing more real estate (with the assistance of a mortgage). Always inquire with the lender regarding their policy on credit reporting for Guarantors.
- However, as they are added to the mortgage, they are therefore liable should the main applicants default on the payments. In the event that the main applicants could no longer make the mortgage payments, the lender could very well come after the guarantor
Key Characteristics of a Co-Signer:
- Co-Signers areadded to an application when the main applicants require additional income to qualify for the mortgage (as opposed to Guarantors who come on to an application to basically vouch for the main applicant due to a past credit issue, but are good on the their own income to qualify)
- as with Guarantors, Co-Signers assume liability in the event of mortgage payment defaults
- However, unlike Guarantors, Co-Signers inherit property rights along with the main applicants (they are required to be on land title)
- Co-Signers can definitely expect their name on the land title of the subject property and also a line item facility reporting in their credit report for the full mortgage amount liability
Other Key Points:
- Co-Signers are impacted from future mortgage qualifications by co-signing on a mortgage (their borrowing power will decrease as long as they are on the application...check with your mortgage provider to discuss the extent of your diminished borrowing power). Guarantors could also be affected in the same manner (depending on whether the lender chooses to report to the Guarantors credit bureau)
- almost all lenders allow for Co-Signers, but fewer allow for Guarantors. Don’t assume that the lender you are currently with allows for Guranators...find out ahead of time in case you are quickly required to pivot
- As Co-Signers are required to be on title of the mortgaged property, they could (however) set their percentage of overall ownership. For example, let's say a father co-signs for his son on a mortgage. In British Columbia, they could allocate 1% ownership to the father and 99% to the son (or whatever ratio of ownership they decide on). The ownership ratio could also be applied in order to salvage (or maximize) the main applicant's first time home owner privileges and rebates. Inquire with your provincial jurisdiction regarding the ability to modify the ratio of property ownership.
- Reasons to be a Guarantor:
- to avoid potential tax consequences (one may not want to be on title of the property so as to avoid a potential capital gains tax upon the sale of it)
- Being on title can also result in potential estate planning issues (if a property holder dies, things could potentially get complicated).
- I’m just skimming the surface on these scenarios and am not a tax expert, so be sure to consult with your Lawyer or Accountant to fully understand all potential tax AND legal consequences.
How to remove a CO-SIGNER and GUARANTOR: both a Co-Signer and Guarantor can be removed from a mortgage (and land title) as soon as the main applicants can officially qualify on their own merit. This could occur at any time throughout the life cycle of the mortgage and as early as 30 days after the mortgage is officially secured (completion date). The main applicants would have to provide updated income documents (or updated credit pulls) to confirm that they can fulfill the qualification criteria on their own merit. One this is confirmed with the lender, the lender re-instructs the mortgage to the solicitor to renew registration with the land titles office, thereby removing the Co-Signer from title.
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If you're about to secure a mortgage, here's something you might want to consider regardless of whether it's a purchase, refinance or renewal. Make the mortgage readvanceable.
What does readvanceable mean?
Firstly, a readvanceable mortgage starts out as a typical mortgage where a specific portion of your payment goes towards the interest charge and the rest gets directly applied towards the mortgage principle gradually paying it down over time, thereby, building equity in your home. But this is where the similarities stop and the readvanceable mortgage begins to impose its leading characteristics.
Firstly, readvanceable mortgages include at least two components; a regular principal-interest mortgage and a Home Equity Line of Credit. The supplementary Home Equity Line of Credit acts as the primary component that allows the mortgage to become readvanceable. A mortgage becomes readvanceable when the first mortgage payment is made and it continues on until the mortgage is eventually paid off. But here's where it gets really interesting. As the mortgage principal is getting paid down (with every mortgage payment), the corresponding Home Equity Line of Credit limit increases proportionately by the precise amount of the principal pay down.
So let's say you have a $500,000 mortgage with a monthly payment of $2,175 with $1,275 going towards principal and $900 towards interest. In a readvanceable mortgage, the $1,275 allocated towards the principal would instantly increase the Home Equity Line of Credit portion by the same precise amount. Furthermore, you can also access/withdraw the proceeds within days of your most recent mortgage payment, hence the term, readvanceable.
So after 5 years, the total principal pay down on the fixed portion of the mortgage would be $79,047. This figure would also directly translate to an increased Home Equity Line of Credit (HELOC) for precisely the same amount. And lastly, payments are only payable on the balance owing...unused funds will remain fully accessible into the future for as long as you own the home. Interest is typically calculated and determined based on a small premium on Prime Rate (currently 2.45%). As of today, the best Mortgage Line of Credit is at Prime + 0.50%. For every $100,000 of borrowed HELOC proceeds, $245.83 is charged on a monthly basis. In addition to making the interest only payment on HELOC proceeds, one could also arrange to increase the monthly payment as aggressively as they desire.
BENEFITS of a READVANCEABLE MORTGAGE:
- flexibility in payments (interest only payments, principal-interest payments, or combination of both)
- excellent interest rates and flexibility to allocate particular mortgage amounts to specific mortgage terms and amortizations
- divide your HELOC proceeds into as many as 14 unique sub-accounts and receive dedicated statements for each account (this is especially valuable when using HELOC proceeds for investment purposes as you can source and verify the precise tax deductible interest charges...your accountant will appreciate this!)
- excellent way to build an emergency supply of funds
- no need to ever re-apply for a refinance as home equity is automatically converted to a fully accessible HELOC. This also eliminates legal fees associated with refinancing a mortgage
- funds can quickly and conveniently be diverted to purchasing units in a mutual fund, thereby creating a tax deduction on the monthly interest payment (consult with your accountant and financial planner on investments and tax deductions)
DISADVANTAGES of a READVANCEABLE MORTGAGE:
- if you have less than 20% equity in your home, you are not eligible for a readvanceable mortgage (the precise equity is determined based on a lender-selected appraisal)
- if you find access to money or credit tempts you to spend more than you can afford, think twice before applying for a readvanceable mortgage. If you get one, you might find it "too easy" to spend money and avoid paying down debt
SUMMARY:
Readvanceable mortgages are excellent mortgage products for various reasons and are especially popular amongst self employed applicants as they often value the ability to have access to large amounts of cash at preferred terms. Readvanceable mortgages are also (somewhat) safeguarded against applicants who may tend to run up the balance unnecessarily as the barrier to qualify for them is quite high (above average credit scores are required to qualify for readvanceable mortgages). Refinances are limited to 80% of the appraised value of your home, but readvanceable mortgages are capped at 65% (the remaining 15% of refinance proceeds cannot be readvanceable).
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Why are personal income tax documents required when qualifying for a mortgage?
In most cases, personal income tax documents are required particularly when qualifying self employed applicants. But over the past few years, the Canadian mortgage underwriting standards have increasingly expanded upon its qualification criteria. As a result, the request for personal income tax documents from mortgage qualification applicants has quickly become the norm for all employment types, rather than the exception.
Let's first identify the key personal income tax documents that lenders typically request:
T-SLIPS (generated by your employer)
The T4 is the most common of all T-slips and is also referred to as a "Statement of Remuneration". It is a tax form produced by a singular employer, you will receive a separate T4 from every employer that you were employed with in the calendar year. The T4 is useful for mortgage qualification purposes in that it confirms your total income for the year, your employer, your legal name and SIN number. They are also useful for verification when you earn income in excess of your base salary or hourly rate as it captures the total income earned.
Other common T-Slips are T4A's and T5's. A T4A is typically generated for individuals who are 100% commissioned sales people, independent contractors, or self employed applicants (however, not all self employed individuals generate T4A slips...the way self employed applicants file/declare their income varies significantly), T4A's can also verify CPP or OAS. A T5 is generated for every investment you earn an income from...this could be anything from an annual RRSP or non-registered investment redemption/withdrawal to a withdrawal of funds from your corporation in the form of a dividend.
T1 GENERAL (generated by you or your accountant/bookkeeper)
Once you receive your T-slips, the next progression to completing your taxes is to file your T1 General. Depending on how complex your income is, you can either complete the T1 General yourself, or hire an accountant or bookkeeper to complete it for you. The T1 General Income Tax and Benefit Return is the tax return used by individuals to calculate their annual tax liability and get federal or provincial benefits such as the GST Credit. It summarizes the taxpayer's income, deductions and tax payable as computed on supporting forms and schedules and calculates the taxpayer's refund or balance due. There are five parts to your T1 form including identification, total income, net income, taxable income and a refund or balance owing. Your T1 form and any balances owing for each year are due by April 30 of the following year or June 15 for self-employed individuals or common-law partners. Basically, the T1 confirms how one declares an income...a lender can quickly determine how you earn your income by skimming through pages 1-4 of your T1 General. From here, the lender will typically request further documentation from additional schedules referenced within the T1 document (this could be anywhere from 4 to as high as ~40 pages).
NOTICE OF ASSESSMENT (generated by Canada Revenue Agency)
And lastly, once your T1 General has been filed-to and reviewed-by the CCRA, the heavy lifting has been completed. At this stage of the game, you simply wait for the review to be completed by the CCRA at which time you finally receive your Notice of Assessment. The Notice of Assessment is kind of like a receipt to confirm that you have filed your taxes for the prior year, it includes:
- the date your T1 General was reviewed,
- the details about how much you may owe, OR how much you may receive as a refund or credit, and
- an updated RRSP deduction limit for the current tax year
For self employed applicants, a lender may require the most recent Notice of Assessment to confirm that the applicant is not in arrears with CRA.
CONCLUSION
If your income cannot be captured/verified from a pay stub and employment letter, then prepare to provide the most recent two years of one or all of the above (and in some cases, 3 years). Think of tax documents to lenders as x-rays are to doctors...without the former, it is difficult to assess and diagnose the client.
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If the banks say no, what is your Plan B? (and yes, there is also a Plan C)
For most Canadians the end game to qualifying for a mortgage is landing with one of Canada's Prime lenders (also known as the Big 5 or 6). And along with that comes the satisfaction of defeating/fulfilling the sometimes (or more like, everytime) extraneous qualification guidelines and eligibility criteria. But at the end of the day, it's totally worth it as you can boast about the great interest rate you were awarded and the exclusive membership to Canada's growing homeowner club.
But what if the pathway to the Prime lenders is not successful for you, what then?
Well, if all else fails, there is always a Plan B (and there is a Plan C too). But let's talk about Plan B first...
I like to refer to Plan B as "BandAid" mortgages. They are typically 1 year terms (and also available as high as 3 year terms). They are fully renewable and feature most, if not all of the typical features and terms you would expect to see in a Prime mortgage. Everything except one thing, and that being the fully discounted mortgage interest rate. The interest rate could be anywhere from 0.50% to 3% higher than the rate offered from a Prime lender. But, the blow (from the higher interest rate) is loosened considerably when you factor in an effective countermeasure that helps reduce your monthly payments bringing them closer in line to payments you would realize with a Prime lender. For example, one could end up with a higher interest rate, but when you factor in the extended amortization period associated with a BandAid mortgage, the monthly payment reduces down to a value that is more easily manageable now that the monthly payments are stretched from a 25 year period to as high as a 30 year span.
Here are the key takeaways from BandAid mortgages:
- qualification criteria is loosened, considerably (less restrictive, intrusive documentation requests):
- standard debt servicing ratios are expanded enabling an applicants purchasing power to significantly increase by as high as 10-15% in some cases
- greater tolerance towards past credit blemishes and derogatory credit ratings (i.e. former bankruptcies, collections, consumer proposals, extraneous debts, etc)...Prime lenders would shut the door on these files, but not in the sub-prime space...they have a comfort level for these application profiles
- longer terms are available, but 1 year terms are encouraged so as the give the applicant an opportunity to refinance with a Prime lender as soon as possible
- probably the biggest takeaway is the possibility of entering the market sooner, than later, especially in strong & expanding markets where price reductions are not likely to occur in the foreseeable future (i.e. Vancouver, Toronto)
And lastly, what if Plan B doesn't work?
If all else fails, there is a Plan C...Private Financing:
- interest rates bump up further, but once again, a countermeasure is introduced that produces a more manageable monthly payment. Amortizations are available as high as 35 years, or the option to pay interest only payments is also available
- some private lenders will also allow you to tack on an entire years worth of payment on the mortgage principle, thereby, bypassing any commitment to make monthly payments for an entire year
- personally, I would avoid this pathway at all costs, but it does serve a purpose for many homeowners and potential homebuyers as it can strategically be used as a bridge for a limited period of time where a clear exit strategy has been planned to transition to a more desirable financing outcome
To end, here is a comparison of the three mortgage pathways based on a $500,000 mortgage principal:
PLAN A: Prime Lenders = $1,945/month to $2,120/month
PLAN B: Sub-Prime Lenders = $2,075/month to $2,600/month (that’s a $130 to $480 bump up)
PLAN C: Private Lenders = $2,500/month to $2,975/month (that’s another $300 to $475 increase on the monthly payment)
So...depending on where you fall within the pricing band, your Plan B could be as low as $100-$200 more per month to as high as $1,000/month (when compared to today's fully discounted prime interest rates). I’ll leave you with this...it's definitely worth having the discussion if it comes down to you securing a deal, or not.
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With over 300,000 new residents arriving to Canada (and about 400,000 expected on an annual basis for the next 2-4 years), Canada's banks have been continuously altering and modifying their lending guidelines to accommodate for immigrant-friendly mortgage qualification programs. Today, I want to talk about mortgage qualification for temporary residents, particularly for work permit holders.
What is a Temporary Resident?
Directly from the Government of Canada's website:
"A temporary resident is a foreign national who is legally authorized to enter Canada for temporary purposes. A foreign national has temporary resident status when they have been found to meet the requirements of the legislation to enter and/or remain in Canada as a visitor, student, worker or temporary resident permit holder. Only foreign nationals physically in Canada hold temporary resident status."
So basically, a Temporary Resident is the first step to becoming a Canadian Citizen...but also, it could simply just be a temporary stay in Canada with special privileges to either work, study or live for an extended and/or temporary amount of time. If you eventually intend to become a Canadian citizen, the next step is to apply for your Permanent Residence card, and then finally, after fulfilling a few game-show-like criteria you eventually become an official Canadian citizen! In a best case scenario it could take you 1,095 days (3 years) to become a Canadian citizen as they graduate from Temporary Resident to Permanent Resident, and finally Canadian citizenship.
However, when it comes to purchasing a property, Temporary Residence status is all you need...that means as long as you have a work permit, and have been employed for at least 3 months, you are eligible to qualify for a mortgage to purchase a home.
Here are the key requirements for the Temporary Resident Mortgage program:
- must have a valid Canadian Employment Authorization For (Work Permit) OR letter from the current Canadian employer confirming exemption from the requirement to obtain a work permit
- the work permit or exemption letter must have been issued for a minimum period of one year, and the time remaining as at the application date must be six months or longer
- may not own any other real estate in Canada; this also applies to additional applicants and/or spouses who are not on the application
- minimum down payment: 5% up to the first $500,000, then 10% on the remaining balance up to $999,999.99. For Purchase Prices that are $1M or greater, the minimum down payment requirement is 20%
- the window of opportunity to qualify as a Temporary Resident is only within a 5 year period of the applicants entry into Canada (to be confirmed with a copy of the passport showing the entry date to Canada)
- if applicant remains as a Temporary resident following the 5 year period, they are no longer eligible under the Temporary Resident mortgage program and must now wait until they have been granted Permanent Residence
- and finally, the most defining guideline of the Temporary Resident Mortgage program is the allowance of alternative sources/forms of credit verification. Up until this point, all the mortgage qualification criteria is pretty much identical to what a Canadian citizen would experience except for an exception granted to newcomers who may not yet have established the minimum credit requirement standard that all Canadian citizen applicants are held to (2 credit facilities with $2,000 limits for a minimum of 2 years). If the newcomer cannot comply with the minimum credit requirement standard, then the following alternative verifications are accepted:
- An international credit report demonstrating a strong credit profile, or
- TWO (2) alternative sources of credit demonstrating timely payments (no arrears) for the past 12 months. The two alternative sources required are:
- Rental payment history confirmed via letter from a landlord and bank statements to further confirm the payments being withdrawn from your bank account, and
- One other alternative source (hydro/utilities, telephone, TV cable, cell phone, auto insurance, etc) to be confirmed via letter from the service provider or 12 months billing statements
And that's it, the true essence of the Temporary Resident program is simply the exception granted to the newcomer when it comes to creditworthiness guidelines...the newcomer gets a bit of a break here in that other sources are looked upon to demonstrate credit worthiness rather than the typical credit cards, lines of credits and car loan type of verification documents. But as far as the rest of the mortgage qualifying criteria goes (debt servicing ratios, minimum down payment requirements, income confirmation and so on), the Temporary Resident is pretty much on the same playing field as a Canadian citizen is when it comes to qualifying for a mortgage. But, it is definitely in the newcomers best interest to acquire Canadian credit products as soon as possible because if the 5 year eligibility period passes (for the Temporary Resident mortgage program), lenders will be far more demanding and less likely to grant the applicant an exception as they would then deem the applicant on par with a standard Canadian citizen applicant, therefore, they would expect the minimum credit requirement standard that all Canadian citizen applicants are bound by (2 credit facilities with $2,000 limits for a minimum of 2 years)
**For more information, Click Here to be redirected to the Government of Canada's Immigration and Citizenship guidelines and procedures.
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A mortgage refinance is often a momentous and rejuvenating experience. For most homeowners it's an opportunity to reset and forge a new pathway to a more promising outcome (i.e. paying off high interest debt with low interest mortgage funds), and in the process of doing so, perhaps establishing or creating a more pronounced awareness of spending and more importantly, recognizing the consequences - of overspending. It's a second chance...and rather than calling on a family member or close friend to bail you out, you call on your home to do so.
And then there are the refinancers coming from an entirely different angle...the ones that are looking to tap into their equity to further improve their net worth by borrowing from their home equity to invest. These are the refinancers who are set on leveraging good debt to create wealth and ultimately increase their net worth.
Regardless of what it is that motivates one to refinance their mortgage, another outcome arises that is often not accounted for:
What happens if I add a title holder during my mortgage refinance?
The first thing one needs to recognize when refinancing a mortgage is that if you plan on adding another individual to the mortgage, you are also required to thereby add that individual to the land title. And if there is only one thing that you retain from this article, let it be this: THERE ARE IMPLICATIONS WHEN YOU ADD SOMEONE TO THE LAND TITLE.
Before we explore the implications of adding another individual to the title, let's first understand the two common ownership title registrations for properties with multiple title holders:
Joint Tenancy Ownership - this is the most common ownership registration for married or common law couples as the primary advantage of Joint Ownership is the right of survivorship. The right of survivorship means that if one owner passes away, their interest in the property automatically transfers to the other owner(s) on title as each owner owns 100% of the property as joint tenants.
Tenancy in Common Ownership - a form of ownership in which title owners are allocated separate shares of the property. The division of ownership can be whatever the title holders agree upon (50/50, 60/40, 99/1, 25/25/25/25, etc). Unlike Joint Tenancy Ownership, there is no right of survivorship. Tenancy in Common allows each owner to pass on their share in the property to their respective beneficiaries under their Will (if they choose to do so).
Here are some scenarios and outcomes to be aware of when deciding to register as Joint or Tenancy in Common ownership:
- single title home owners may consider adding a family member to their land title as a Joint Tenant for estate planning purposes. For instance, in the event that the home owner passes away, the property title will transfer directly to the surviving joint title holder, thereby, avoiding probate fees and taxes
- when adding a Joint Tenant title holder during a refinance, be aware that you may also trigger various forms of taxation. For example, in British Columbia the additional title holder will be subject to their share of a Property Transfer Tax. Also, depending on the relation to the original title holder and intent, the new title holder may also be subject to Capital Gains tax for the year they were added to the title
- Another thing to be aware of with Joint Ownership is that if the occupant owner were to go into arrears on their mortgage, the derogatory credit rating would extend to the other owner, as well
- In many instances, a parent co-signer is registered as a Tenancy in Common ownership with a 99% and 1% share distribution (child:parent) so as to minimize potential capital gains in the event of a sale. Joint Tenancy ownerships are also used for reasons other than capital gains.
My intent for today's topic was primarily to raise awareness that there are implications when adding someone to your title during a mortgage refinance. Do not rely on this content as official policy and regulation, but rather use it as a starter conversation with your accountant and/or lawyer to better assist you in communicating your particular scenario. If you do not know of a lawyer or accountant that specializes in real estate, please don't hesitate to reach out to me directly and I will gladly share with you my network of real estate lawyers and accountants (for Calgary and Vancouver).
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I often get asked what the minimum down payment requirement is to purchase another home. And by another, I mean residing in your current home as you are and purchasing another home that you or any one of your family members will frequent at one point throughout the year...like a home away from home. For example, it may be a vacation property a couple of hours from where you currently live, or perhaps a downtown condo across the country where your child is attending university. Regardless of the location, as long as the property is intended for family occupancy at one point throughout the year, the minimum down payment requirement is 5%! Yep, that's it, 5% down payment to purchase another home! The formal name of the mortgage guideline is known as the Second Home Mortgage.
Let me be clear though...notice that I am not referencing the other home as a rental property, but rather another home. Not only does the property have to be intended for family use only, but as it is not a rental property, you are not able to use a monthly rental income to qualify for the mortgage. This is an important distinction as it significantly escalates your debt servicing ratio to qualify for the mortgage. With a rental property you can offset the mortgage payment with the rental income, but not with a Second Home. So heads up, you have to debt service your current mortgage, as well as the mortgage of the Second Home. For some, this might be a deal breaker but for others it may not be an issue at all.
Here is a summary of the key points of a Second Home mortgage:
- Eligible Properties: single family homes, town houses, or condo units
- Non Eligible Properties: rental/investment, rental pool, or timeshare properties. Duplexes, triplexes and all other multi-unit properties are not eligible.
- minimum down payment of 5%
- Additional Qualification Features: you can also qualify for an immediate home improvement loan that can be used immediately to upgrade/improve the property (i.e. new kitchen, bathroom, flooring, etc). The amount of the home improvement loan simply gets tacked on to your mortgage upon completion of the home improvement
- Maximum Mortgage amount (if down payment is less than 20%): up to $700,000 for Toronto, Calgary and Vancouver
- Maximum Mortgage amount (if down payment is 20% or greater): $1.5 Million
- Maximum amortization: up to 30 years
- Not available for Permanent, Temporary or Non-Residents
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11th hour mortgage qualification collapses...how to avoid them
There is no better feeling than closing a real estate transaction, especially if the journey to get there was rocky and filled with intense drama all the way to the bitter end. And if you’ve ever purchased a property before, you’ll know what I’m talking about...Regardless of the severity of these unexpected stressful deals, in most cases the real estate Gods (eventually) step in and somehow, magically, allow the deal to close out. But in some cases they do not appear (the real estate Gods) and you are left to fend for yourself without any spiritual or outer universe assistance. So listen on if you’ve been in a similar situation, or better yet, especially stick around if you haven't been in a stress-pot-real-estate-thriller transaction..as you never know what awaits you on that next offer!
Today, I want to share my real life 11th hour experiences with you (and some are also borrowed from fellow brokers I've known over the years). Rather than prolonged details, I've summarized the close encounters I've had over my 17 years as a mortgage broker in Calgary's boom and bust market and more recently, Vancouver's stratospheric, unpredictable, bullpen-market. At the very least, I offer you these experiences to share with your family, friends, colleagues and your clients. The more we can prepare for the unexpected, the better the home buying experience will be...you can never be too careful (or too prepared)!
To start off, I’m gonna break it down to 2 classification groups when it comes to 11th hour mortgage qualification collapses:
the first one being...Property Related Issues that affect mortgage qualifications: (these are unforeseeable and unconfirmed in the mortgage pre-approval stage)...here are some real life scenarios that popped up in past deals:
- the appraisal comes in lower than the contract purchase price and as a result, the mortgage qualification criteria is escalated to a higher standard of adjudication (escalates from a less restrictive conventional qualification guideline to a more restrictive high ratio guideline). For example, if you qualified with a 20% down payment, but suddenly the lender has now reduced their loan-to-value ratio to reflect the lower appraised value, this could result in drastic qualification differences from what your original approval was based on. If your qualification was tight already, this will be even more challenging and potentially deal breaking
- Once again, the appraisal comes in lower than the contract purchase price and as a result, the applicant must now come up with the shortfall cash-to-close proceeds as the lender proceeds to only lend based on the appraised value, not the contract price. This is quite rare in strong markets, but can certainly surprise in a peak market environment (kinda like the one we are now experiencing in many regions across Canada)
- Here’s another one: Property deficiencies that may arise from an appraisal that could have serious consequences to the status of your mortgage qualification (i.e. degraded/compromised property features: cracked foundation, former grow op, general condition compared to other properties nearby, remaining economic life, etc.)...be very careful with removing conditions when the appraisal is still outstanding or pending. Even though your property passed the grade with your home inspector, don’t assume that it directly translates to a passing grade with the appraisal.
- Property Limitations/Restrictions: some properties have age restrictive rules within the strata rules, or rental restrictions
- Unique/Niche Property Characteristics that arise when land title is pulled: fractional ownership, recreational/agriculturally zoned properties, leased land properties (native leased land, crown corporate leased land, and other private leased lands)
- Strata/Condo Issues: outstanding/pending litigation, ongoing/pending special projects or levies, inadequate amount of fire insurance for strata especially in light of recent strata insurance price escalations. I don't understand why, but some lenders allow mortgage brokers the option to forego the condo/strata document review and defer it to the lawyer...avoid this, make sure the condo/strata documents are reviewed and signed off on during the conditionally accepted stage of the process
Ok, the 2nd classification group when it comes to 11th hour mortgage collapses...Mortgage Qualification Related Issues: (and this group is mostly preventable if the mortgage pre-approval is reliable)
Here are some mortgage qualification red flags to be aware of when you're in the process of getting pre-approved...these are critical and if not accounted for will lead to immense stress and disappointment when you're satisfying your mortgage conditions during the financing conditions period, or worse yet after the financing conditions have been released. The following stress points could have been avoided had all the verification documents been requested of the applicant PRIOR to submitting an offer rather than during the offer acceptance period or worst yet, AFTER the financing conditions have been removed
- disclosing that you own a business, but not revealing that you are one of a few owners of the business until after the subject removal date (this could affect how much income a lender will allow you to declare as income from your incorporation...always make your broker aware if you are one of several shareholders/owners of your company, don’t assume they will simply pick up on it)
- delaying on your down payment verification until after the subjects removal, then revealing that some of the proceeds are from borrowed sources. The borrowed proceeds are then deemed ineligible and the applicant is forced to seek alternative down payment proceeds
- delaying on employment letter until after subject removal to then discover that there unexpected conditions of employment (i.e. probationary period, status of employment, lower pay scale than expected, etc)
Even if the applicant and the broker were fully diligent with all verification documentation well ahead of an offer, the following stress points could still arise during the conditions period or even later in the process:
- unexpected and unexplainable drop in the credit score
- unannounced significant purchases after subjects have been removed (i.e. new car)
- unexpected change in employment status
- unannounced change in employment (new job)
- unannounced/unexpected mortgage qualification rule changes
So there you have it, just a few cautions and red flag pointers to be aware of when qualifying for a mortgage. The bottom line thing to remember is to make sure that your broker is interpreting your information correctly. DO NOT let a misinterpretation pass between you and your broker...don’t make the mistake of feeling you have gotten away with one because 9 times out of 10 it will be discovered and worse yet, it will be discovered at a time when you have removed the subjects on your offer. And regardless of whether you can fulfill the 11th hour qualification criteria, a lender will hold you to it 100%. Ok, so you don’t want to be in that spot...be transparent with your information and never assume things when it comes to mortgage qualifications. Ask lots of questions, AND answer questions truthfully and as accurately as you can, and don’t hold back on critical information. Follow THESE basic principles and your mortgage approval process should go without a hitch.
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Is there such a thing as tax deductible mortgages?
If you are a resident of the United States, the answer to this question is - yes. For decades Americans have been able to apply the interest portion of their mortgage as a tax deduction against their personal income. Regardless of whether it was an investment property or a principal residence - the interest was an eligible tax deduction.
How about Canada, can we deduct the interest portion of our mortgage payments?
Absolutely, but only if the mortgaged property is generating an income. Here are some examples:
- Among other home expenses such as utilities and internet services, if you run a small business from your home a portion of your mortgage interest is eligible for a tax deduction against your personal income
- If your principle residence includes a self-contained rental suite, a portion of your mortgage interest is eligible for a tax deduction
- If you own a separate property that exclusively generates an income from short or long term rent/leases, the interest portion of your mortgage is tax deductible
What if you reside in your property and do not generate any income from it (i.e. you don’t rent it out)?
This is where things get interesting. If you reside in the property and do not generate any sort of rental revenue from it, or do not operate a business out of your home, then the interest portion of your mortgage is not tax deductible (nor is the principle of course).
HOWEVER, there is a way to create a tax deduction by restructuring and repurposing the mortgage that is currently registered on your non-income generating property. The concept is very simple to understand:
Refinanced mortgage proceeds can be tax deductible if the proceeds are used for investment purposes.
For example, let’s say your home has an existing $300,000 mortgage and you decide to refinance it to $350,000 to invest in a non-RRSP mutual fund. The $50,000 that you invest in a non-registered mutual fund is now eligible for a tax deduction as you are borrowing to invest. Here are some other examples of how you can create a tax deduction from your mortgage:
- Using the refinance proceeds as a down payment to purchase a rental property
- Using the refinance proceeds to purchase stocks, mutual funds, and other types of financial products
- Using the refinance proceeds to invest in a business
- Using the refinance proceeds to invest in other vehicles that generate an income/revenue
As long as the mortgage proceeds are used to invest (or generate an income/revenue), the interest portion of your mortgage payment is eligible for a tax deduction. Furthermore, only the portion of the mortgage proceeds that is used to invest is eligible for the tax deduction, not the entire mortgage. So in the example above, only the interest payments on the $50,000 would be eligible for a tax deduction.
OTHER important points to know:
- Investing in RRSPs with the proceeds of a mortgage will not generate a tax deduction as RRSPs already create a tax deduction
- It is critical to segmentize your mortgage when employing a tax deductible mortgage strategy. There are specific mortgage products that give you the ability to re-structure and re-purpose your mortgage into tax deductible and non-tax deductible components (call me for more details)
DISCLAIMER:
This information is for conceptual/illustrative purposes only. If you are interested in employing any of the above, consult directly with a professional accountant and a financial planner.
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A couple of weeks ago I talked about intergenerational wealth transfer and how reverse mortgages have propelled into the market place as a vehicle to access valuable equity with absolutely no monthly payment obligation. The homeowner (who must be at least 55 years of age) can apply to access up to 55% of their home equity and use the proceeds for anything they desire.
Another intergenerational transfer scenario came across my desk this past week, but this time it involved selling off a family home to another family member with the use of a mortgage. So nothing unusual here as far as the transaction is concerned - the purchase price was determined based on the fair market value and the qualifying mortgage was the means to close out the deal.
But the unique part of the transaction was that the down payment was gifted from the selling family member to the purchasing family member in the form of equity. So in other words, the purchasing family member essentially qualified for a 0% down mortgage!
For example, let's say Walter owns a property that can fetch $800,000 in todays market, but is willing to sell it to his son Wayne for $700,000. Wayne can qualify for a $700,000 mortgage, but he doesn't have the required minimum down payment. Here's where the critical family blood line comes in to play. Lenders will allow the selling family member to gift the down payment via the equity of the property (as long as both parties are direct family members). So, in this case, Walter would gift $100,000 to Wayne in the form of equity. Walter was good enough to gift as much as he did, but if he wanted to he could gift far less and instead choose to be paid out with higher mortgage proceeds. And there you have it, the down payment to secure the mortgage is accounted for and complete! Wayne scores the property with no down payment, and Walter feels good about chipping in for the down payment!
To formalize the transaction further, a statement must be included in the Purchase Contract that references that the seller is gifting the down payment from the equity. The lender will also require that their standard Gift Letter form is completed by both parties.
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Today I'm gonna talk about one of my favourite qualification guidelines - the High Net Worth mortgage. This is truly one of those money-talks type of products...money talks as in, the more liquid assets you hold, the more mortgage you can qualify for.
This mortgage really comes in handy for those applicants that are short on qualifying income, but instead are flush with liquid assets (i.e. non-registered investments, RRSPs, and cash savings). Here are some common applicant profiles that are well suited for this program:
- business owners that declare low incomes but have substantial liquid assets (they do qualify, but not for the amount they desire)
- average income earners who ALSO cannot qualify for the amount they desire due to insufficient qualification income, but have substantial liquid assets
Here are the main qualification criteria: minimum down payment of 20%-35% (varies with lender) * in addition to the down payment, the applicant must possess at least $250,000 in liquid assets: * Eligible Assets: cash, stocks, bonds, RRSP, RRIF, TFSA, funds held inside a personal holding company * Ineligible Assets: Gifted money, RESPs, funds held inside a operating company, insurance, real estate equity,* assets jointly owned/shared with a person not on the application * 3-12 month history of assets prior to application date (varies with lender) * al account holders where assets are held must be on the mortgage * no foreign income or assets can be used * expect to offer a thorough explanation of how the funds were accumulated and a discussion about how the mortgage payments can be maintained...the lenders will want to know how you can maintain the mortgage payments, they will want to know your game plan
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Wouldn't it be great if there was a mortgage that didn't require an income to qualify for it? And better yet, absolutely no obligation to make a single payment on the principal debt throughout the life of the mortgage?
Well there is! It's called a Reverse Mortgage.
Whether you're a fan of them or not, these mortgages are becoming increasingly popular every year and its likely to continue on the same trajectory as the baby boomer generation (1946-1965) continues to gracefully age.
What is a Reverse Mortgage?A reverse mortgage is specifically designed for those that are 55 and above and the main feature of product is that the main qualification criteria is your age (rather than your income). And the other main feature is that there is absolutely no obligation to make a payment on the mortgage.
Here are the key qualification criteria for Reverse Mortgages:* must be at least 55 years of age * must remain in Canada for at least 6 months plus a day, each year * the property that the mortgage is registered on must be your principle residence
The obvious and more promoted application of a Reverse Mortgage revolves around the concept of funding the retirement of the home owner. Whether it's a top up to an existing retirement plan, or the primary funding vehicle, many Canadian boomers are hopping on the Reverse Mortgage train and living off the equity while still residing/owning the property.
But lately, it's also becoming a method of providing early inheritance packages to extended family members...especially in todays sky high real estate market where the children and grand children of the boomer generation are active participants. Some believe that Reverse Mortgages could become a significant driver of intergenerational wealth transfer. In Canada, 43% of households are 55 and over, and the portion of this demographic that carry a mortgage balance is ~14%.
On the other hand, the Reverse Mortgage also opens up another spectrum of possibilities that the Boomer otherwise thought would never be possible.
Here are some real life applications of the Reverse Mortgage:* can be used to purchase a new property * can be registered on a current property via refinance * can be set up to pay the home owner a monthly tax-free retirement income (or lump sum, or combination of both) * proceeds can also be used to purchase more real estate (Second Home, Vacation property, investment property, etc) * the proceeds of a Reverse Mortgage can essentially be used for anything that the home owner desires
Other characteristics of a Reverse Mortgage:* a financial illustration is provided for all applicants of a Reverse Mortgage that clearly explains how the carrying costs of the mortgage are offset with the appreciation trajectory of your property * Reverse Mortgages incorporate a "No Negative Equity Guarantee" * 100% ownership of the property is maintained by the homeowner * the overall closing costs to secure a Reverse Mortgage on a property are ~$2,000-$3,000 (depending on where you live) * Currently there are only 2 lenders in Canada that offer Reverse Mortgages * homeowners who have an existing mortgage are still eligible for a Reverse Mortgage * income from a Reverse Mortgage will not affect/impact any existing retirement benefit that is currently in place (or any that are forthcoming) * common qualification deterrents like low income and damaged credit are NOT factors when it comes to qualifying for a Reverse Mortgage
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When it comes to income verification for a mortgage a recent paystub and an employment letter will typically do the trick, even if you're a new hire and just have one full pay cycle under your belt. However, things could get a little dicey if you are currently in a period of probation with your new employer.
The most common workaround for an applicant who is in the midst of a probationary period is to coordinate the completion date of your purchase with the expiry date of the probationary period. A lender will proceed with the approval and condition for an updated employment letter and/or recent paystub to verify that the probationary period is no longer in effect.
Lender guidelines generally dictate that probationary periods must pass (in their entirety) prior to the completion of the mortgage. But in many instances a lender will overlook a probationary period provided that a good case can be made. Here are some real life exceptions I've been granted on several files over the years:
- PROBATIONARY PERIOD WAIVED when applicant has left one employer for another, but maintained the same job type. For example, say you worked with Company X for a couple of years as a Software Engineer, then left for Company Y in the same role (Software Engineer). Most lenders will overlook the probationary period in cases like this.
- PROBATIONARY PERIOD WAIVED when a previously self employed applicant switches over to become a full time employee. As long as the applicant switched over to an employer that is directly related to the work they were doing when they were self employed, lenders will generally overlook the probationary period. For example, an engineer that independently contracted their services out to a firm (self employed), but then transformed over to them (or another industry related firm) into a full time employee.
- PROBATIONARY PERIOD WAIVED if you are a teacher that transfers from one education board/jurisdiction to another. Registered Nurses would also fall into this category.
Probationary Periods are not the end of the world
I wish I could say this about all other mortgage qualification guidelines, but lenders are generally flexible when it comes to probationary periods. So, as long as your new employment is supported with reasonable tenure from a prior and related employment stint, you should (at the very least) be eligible for strong consideration to have a lender overlook or waive the probationary period condition of your income verification.
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On Thursday April 8 (yesterday), The Office of the Superintendent of Financial Institutions, OSFI (the Canadian Bank watchdog) announced that they are proposing changes to the current stress test rule. So basically, consider this the last-call bell to qualify under the current stress test until June 1, 2021. It’s not 100% official as of yet, but the chances of OSFI not proceeding with their new recommendation is slim to none.
Before I get into the proposed recommendation, here’s a quick recap on the current stress test:
Rather than qualifying based upon the actual mortgage contract rate, all mortgage applicants are required to qualify at a rate that is 2% higher, or 4.79% - whichever is higher (4.79% is the predetermined 5 year benchmark as imposed by the Bank of Canada...since 2018, this benchmark rate has varied between what it is today, 4.79%, to as high as 5.44%). So throughout COVID (essentially all of 2020), applicants have been qualifying at 4.79% which has at some times been 3% higher than the actual contract rate. But lately, it's equating to less than 3%, but still higher than 2%. So really, if anything, it should be known as the 3% stress test rather than 2%...I digress.
So right off the bat this should extinguish some of the theories that this market was set ablaze by low interest rates. YES, interest rates are at historical lows, but to get approved for these amazing rates mortgage holders have been qualifying for them at a rate that is similar to where rates were at back in 2008/09 (4-6%). Since 2018, Canadians have only been awarded these historical low rates (1.39% to 2.59%) only after they’ve proven that they can qualify for them at much higher rates (4.79% to 5.44%).
Ok so now let’s move on to the proposed change that OSFI will very likely implement this June:
As I mentioned earlier, this is not 100% official, but will very likely become official sometime in May, then the mad-rush countdown will begin all the way until the actual implementation date of June 1.
And here it is, the big news...the minimum qualifying rate will increase from 4.79% to 5.25%.
How will this impact someone qualifying for a mortgage?
Consider a qualifying income of $100,000 (individual or combined):
- At the current stress test qualifying rate of 4.79%, the maximum mortgage qualification would equate to $500,000 for an insured mortgage and $630,000 for a conventional mortgage
- At the proposed stress test (likely effective June 1) qualifying rate of 5.25%, the maximum mortgage qualification would equate to $470,000 for an insured mortgage and $605,000 for a conventional mortgage
Other interesting points:
- This will diminish the purchasing power of home buyers (who require mortgages) by 4-6%
- OSFI policy is not intended to influence the housing market, but rather to maintain and secure the overall integrity of Canada’s financial system. Even though its policies (obviously) impact the housing market to varying degrees, its intent and focus is on preserving the overall integrity of the financial system
- If you read between the lines, this could also be viewed as a forecast of where OSFI thinks the 5 year rate will be...in this case, they are indirectly pricing in a rate hike of about 50 bps (0.50%)...we’ll see how this plays out
- So far, this increased qualifying benchmark is only marked for uninsured mortgages. But, it is likely to blanket over to insured mortgages as well. The reason why insured mortgages aren’t in the conversation at this point is simply because insured mortgages (via CMHC) are not under OSFIs regulating umbrella. If/when this increased qualifying rate becomes applicable to insured mortgages, you could then expect a formal announcement by the Minister of Finance declaring so.
Here are my thoughts..
Don’t misinterpret this announcement as a housing market influencer (even though it will have an impact on the housing market, but to what degree remains to be seen). I believe that OSFI is genuine in its mandate of being the overseer of Canada’s overall financial system...take this policy like all other previously implemented OSFI policies. Regardless of which group will be most negatively impacted from this (first timers, middle income earners, etc), the outcome is simply to give assurance to our financial system that all the mortgage holders today will be able to make their payments 5 years from now when interest rates are higher. That’s it. This is OSFIs number one priority. If anything, the most negative thing about this announcement and eventual implementation is that it might give the real policy makers (municipal, provincial and federal governments) an out, allowing them to remain idle on the sidelines and continue to do nothing meaningful when it comes to addressing the supply side of the real estate crisis. I’ve said it before, the differentiator is at the municipal government level. Frustrated home shoppers/buyers should be directing their lobbying efforts towards City Halls rather than Parliament. The more people lobby the federal government to step in, the higher taxes go (this seems to be all that they answer with). It's time to demand more from our local politicians and municipalities as this is where policy can have a direct and meaningful impact on real estate in your own backyard. Asking Ottawa for advice on how to balance Vancouver’s real estate crisis is simply insane, yet we continue to call on them to do so.
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If you're self employed and qualifying for a mortgage right now (April), you are either gleaming with optimism or white knuckling your way to the finish line. And here's why...
When qualifying as a self employed applicant, your qualifying income is determined from your most recent 2 year average (of your Notice of Assessments). Notice of Assessments are the end confirmation of your tax process...it's like a receipt, or final bill of sale. Lenders request it because it is the most firm verification document for self employed applicants. It also verifies whether the qualifying mortgage applicant has taxes owing...and if so, the lender will require that the balance outstanding is paid in full. On the other hand with non-self employed applicants (who receive income that is already deducted at source from their employers), Notice of Assessments are less often required when qualifying for a mortgage unless the applicant is relying on some type of additional variable component to their income like overtime, bonuses, or commissions. But even in these rare instances, for a non-self employed applicant, the more likely request from a lender would be prior-year year-end pay stubs or T4s...and remember, this is only if the non-self employed applicant even needs the additional variable component income to qualify. So, let's say the applicant qualifies comfortably with a $60,000 salaried income (without commission, overtime or bonuses)...in this case, a recent pay stub and employment letter would suffice.
So up until now (April), self employed applicants have been qualifying based on a two year average based on 2019 and 2018 (because 2020 tax returns are still being filed - the deadline is April 30). This is a critical time if you are banking on your 2020 Notice of Assessments to prop up your two year average, or perhaps you are urging your qualification ahead to avoid the real-time two year average, of 2020 and 2019. Either way, the lender will ultimately make the decisive call...as we evolve further into 2021, the lenders will eventually reject the year 2018 and come to only expect 2019 and 2020 as the benchmark years.
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Today I want to talk about how one could incorporate gifted equity when purchasing a home (with the proceeds of a mortgage) from a direct family member. So, in other words a transaction between two direct family members (mainly child and parent) can occur by the selling family member simultaneously gifting a portion of their equity to the buying family member while formally selling/transferring the property to them. The gifted equity portion is used to fulfill the minimum down payment requirement of the buyers mortgage. Here's how it works:
- STEP 1: The Buyer must qualify for the mortgage as per standard qualification criteria with the exception of the unique source of the down payment being gifted equity (rather than from own sources).
- STEP 2: Determine the amount of the Gifted Equity. Depending on the amount of gifted equity, the mortgage will be either high ratio, or conventional. If the down payment (gifted equity) is less than 20%, the mortgage is classified as high ratio and will be subject to an insurer premium (of 2.40% to 4%) which gets tacked on to the registered mortgage amount. If the down payment (gifted equity) is 20% or greater, the mortgage is classified as conventional and there are no insurance premiums added.
- STEP 3: Draft a purchase and sale agreement with the negotiated purchase price and close out the transaction!
OTHER THINGS TO BE AWARE OF:
- inter family purchase transactions are mostly done privately (and without the involvement of a realtor). Therefore, the seller can forego the process of listing their property and furthermore eliminate REALTOR® fees
- as no verification is required for the down payment, the buyer must be aware that they may have to provide verification of closing costs (property transfer tax, legal fees, etc). The closing costs can also be included within the gifted equity (as long as its accounted for in the Gift Letter declaration)
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When it comes to mortgages for newcomers to Canada, the qualification criteria remains similar to what Canadians can expect but with the following exceptions:Minimum down payment thresholds vary anywhere from 5% to 35% depending on ones residence status: Permanent Resident with standard income confirmation: 5-10% minimum down payment * Permanent Resident with no income, but high net worth: 35% minimum down payment * Temporary resident (work permit, students): 10% minimum down payment * Non-Resident* (Canadian Citizens, Permanent Residents and Foreign Residents that do not reside in Canada): 35% minimum down payment
Newcomers must also have arrived in Canada within the following timeframes to be eligible for newcomer mortgage qualification, otherwise, they will be subject to standard Canadian qualification guidelines: Permanent Resident / Landed Immigrant: eligible within a 5 year period since arrival in Canada * Temporary Resident: eligible within a 2 year period since arrival in Canada and at least 3 month* job tenure
And lastly, the remaining newcomer-friendly qualification criteria, credit history. Many newcomers that arrive generally do not have any established credit in Canada. This would be a hard stop for any Canadian citizen application, but for a newcomer, the following alternate forms of credit worthiness are accepted (as long as they still maintain their current residence status within the time frames mentioned above): Preceding 12-month history of rent paid in Canada and 12 month history of 2 regular monthly obligations (i.e. utilities bill statement, car loan, cell phone, etc) * if unable to produce rent history and and 2 regular monthly obligations, then applicant will be subject to minimum 10% down payment* and the following requirements: (i) Letter of Reference from recognized Financial Institution outlining history and past credit experience (ii) 6 months of Bank Statements from a Primary Account (living expenses such as rent and food flowing through the account), with no evidence of financial difficulties (i.e. no NSF items)
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In Vancouver, purchasing a property these days has become somewhat comparable to a Black Friday event. A property gets listed, an offer date is set, several buyers line up to view the property (actually some don’t even bother to view as they go straight to the offer stage), and finally offers are placed.
This is where things get diceyIn normal times, upon submitting an offer a buyer negotiates conditions and a period of time to satisfy the conditions (i.e. mortgage financing, review of property disclosure statement, home inspection, strata/condo documents, appraisal, etc.). Not these days though. Buyers are instead submitting offers with very limited conditions, and in a growing number of instances, none at all! Hence the term, “subject free offer”.
Does a pre-approval mean that you can go subject free?My short answer to this question is NO. The term pre-approval is a loosely used term in the mortgage industry and the validity of one varies significantly from broker to broker (or banker to banker). In most cases, the only guarantee in the “pre-approval” is the interest rate (for a period of up to 4 months). Oftentimes, a first time home buyer completes a brisk interview with a lender and simultaneously gets suited up with a pre-approval certificate of some sort...and off they go, with a false sense of security, ready to pull the trigger on what will probably be the largest purchase of their lives. They may ultimately be impressed with the rate they have just secured, but later on in the formal qualification stage of the mortgage, the interest rate will be the last thing on their minds as all focus shifts to the actual adjudication and underwriting of the live deal. So to conclude, a mortgage pre-approval is not a pre-paid million dollar credit card, but rather a statement that approves your eligibility to qualify subject to various conditions which are likely not disclosed on the certificate initially provided to you. I’ll touch a bit more on pre-approvals below, but for a more complete explanation on mortgage pre-approvals and their validity, go back to an episode I did back in March 2019ish Season 2 Episode 4, “Is your mortgage pre-approval legit?”
If all else fails and you must go subject free, how can you best prepare in advance of your subject free offer?DISCLAIMER: I am not advising anyone to proceed with a subject free offer (especially when you are using mortgage proceeds to purchase the property). Instead, I will list some main points to ensure you account for as many qualification and eligibility criteria as possible (ahead of your subject free offer).
#1 Suit up with an experienced mortgage broker and complete their version of a pre-approval. #2 How do you know if you’ve completed a legitimate pre-approval? Your broker/banker should be requesting the following from you:* Complete application * Credit check * Complete income document verification (pay stubs, employment letter, income tax documents, bank statements). And if you’re self employed, an abundance of other documents you would never have imagined will be requested * Complete down payment verification (bank/investment statements that show 90-120 days history of down payment proceeds) * You will be asked for clarification of various details, then further clarification on details that you have already provided (income, down payment, past employment, specific details about the property, etc) * Sometimes you will be asked the same question, twice, but in a slightly different way (when this happens, simply answer the question) * Be patient and answer all the questions asked of you, honestly. If discrepancies or new information is unravelled throughout your adjudication that wasn’t disclosed earlier on in the application, this could tarnish your credibility with the lender and have a negative effect on your application. It could also lead to unexpected extraneous condition requests
#3 Back-up PlansAnd finally, the if-all-else-fails part of how to prepare for a subject-free-offer (especially if you are purchasing with a mortgage). Even after completing a formal pre-approval with an experienced mortgage broker, it is important to understand that the pre-approval is still not 100% guaranteed. And the reason why is simply because all lenders do not officially adjudicate an application until it is submitted with a live offer. So as is the case with a pre-approval, there is obviously no live deal linked with it - just a hypothetical scenario based on several variables. And that leads to the final, ultimate safeguard - the back-up plans (in the event things don’t go as expected):
- Back-up Plan #1: having a major financial backstop that can be called upon in the event things don’t go as expected (parents, other liquid assets). A difference maker could be going from a 10% down payment to 20%, or 20% to 35%. These are common guideline boost thresholds where guidelines become more favourable or considerably less restrictive
- Back-up Plan #2: having a strong co-signer on stand by if needed. Rather than a down payment boost, you might just need to borrow someones qualification credibility for a couple of years until you naturally grow in to your qualification down the road
- Back-up Plan #3: having alternative financing options where guidelines are loosened considerably in exchange for a higher interest rate (i.e. instead of today's fully discounted rate, an alternative lender might offer a rate that is 1 to 2% higher for a limited 1 or 2 year term). These mortgages are also referred to as band-aid mortgages as they are intended to bridge a gap of time in which improvement is expected in a relatively short period of time (1-2 years)
- Back-up Plan #4: a combination of all of the above
Executive Summary Avoid going subject free (especially if a mortgage is involved)...but if you must, proceed with extreme caution and be fully aware of the risks involved.
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The most common types of income when qualifying for a mortgage are variations of salaried, hourly, and self employed income. But what about other sources of income? There are plenty more to be aware of!
Here is a list of some other less talked about forms of qualifying income:Part-Time Income: as long as the income is guaranteed, you could use 100% of the income as stated in the employment letter and/or recent paystub. A minimum tenure is not required as long as the probationary period has been fulfilled (if applicable)
Fluctuating/Irregular Income (non guaranteed part-time, seasonal income): qualifying income is determined by calculating a 2 year average from any one or combination of the following; Notice of Assessments, Year End Paystub, or T4. In addition, one or a combination of the following will also be required; Employment Letter, Direct Deposit history, or recent paystub. If there is a variation from year to year which is greater than 20%, then the lower of the last two years is used as qualifying income (however, exceptions are always possible on a case-by-case basis)
Pension/Disability Income: almost all forms of Pension and Disability income can be used as qualifying income (public/government issued, insurance company, or previous employer). Refer to the Fluctuating/Irregular Income section for verification document requirements.
Spousal/Child Support: a two-month history of bank statements showing regular support payments and a copy of the formal separation agreement or court order
Maternity/Paternity/Adoption Leave: an Employment Letter is required to confirm that the applicant is currently employed and on leave. Up to 100% of the income can be used to qualify. Some lenders may require that the return to employment be within 12 months (and reduce the allowable qualifying income ratio to 50% rather than 100%)
Investment Income: a 2 year history of investment statements is required to show the customer has sufficient invested assets to support the indicated income
Government Child Care and Social Assistance Benefit (Canada Child Benefit CCB): amount used cannot be more than 15% of all the other income sources for all applicants, child cannot be older than 13 years of age. Child tax credits or refundable tax credits for childcare are not acceptable forms of qualifying income.
Non-Canadian Currency Income: Other than Canadians earning USD income, exception approval is required for other non-Canadian currencies
Non-Taxable Income: most common types are Workers Comp, Guaranteed Income Supplement, and some forms of disability income. If less than $30,000 annual, then 25% gross up is allowed for qualifying income. If greater than $30,000 annual, then up to 35% gross up is allowed. NOTE: Canada Pension Plan and Old Age Security are taxable income sources.
Northern Allowance Income: applicants that receive a Northern Allowance from their employer to assist with the high cost of living in northern or isolated areas
Multiple Sources of Income: totally acceptable as long as standard verification documents can be provided
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Today I wanna talk about mortgage penalties and how and when they come into play within a mortgage. The when part of the question is quite simple, so let's begin there. Every mortgage has a maturity date (with the exception of home equity lines of credit), and if you sell your property or refinance your mortgage ahead of the maturity date, you are subject to a penalty from your mortgage provider (except for HELOCs and open variable/fixed mortgages). And whether you like it or not, the concept of paying a penalty should not be surprising. After all, a mortgage is a contract between you and the bank and if you’ve ever owned a cell phone you understand that there are consequences when you break your contract. Same thing with mortgages, but at a much larger scale. But, here’s the thing with the mortgage penalty...the convenient and commonly understood definition of it is that it equates to simply 3 months worth of interest payments, but there is clearly more to it than that. For example, here’s one that I’ve recently encountered...on a $282,000 mortgage the three month interest penalty would equate to just under $2,500 if you broke the mortgage ahead of its maturity date. But, what people are painfully finding out is that a mortgage penalty is subject to EITHER 3 months interest payments or interest rate differential, whichever is greater. And this is where the shock value of a mortgage penalty lies. For the example I just explained (a $282,000 mortgage with a 3-month interest penalty of $2,500), the IRD penalty equates to ~$22,000. And lately, many of the fixed rate mortgages out there these days are racking up some huge IRD penalties.
So, let’s talk about Interest Rate Differentials...
When calculating your penalty based on an Interest Rate Differential, several other interest rates come into play (other than your actual contract rate) in the formula:
- The Contract Rate - this is the true interest/contract rate of your current mortgage
- The Comparable Rate - this is the prevailing market rate of the term that most closely matches your remaining term (in years)
- The Special Utility Rate - this is a rate factor that very often defies logic, but is built in to many big bank IRD formulas
These rates are then inputted into the interest rate differential formula along with a couple of more clear cut variables (such as the remaining term of your mortgage in years and the balance of your current mortgage) and from these combined variables, the interest rate differential penalty is calculated. Basically, the greater the spread between your current contract rate and the comparable rate, the bigger the IRD penalty.
The entire objective of this formula is to ensure that a lenders profit margin is preserved throughout the agreed upon term. So let's say you currently have a mortgage of 3.74% and have 2 years remaining on your 5 year fixed mortgage. If you decide to break your current term (by either selling your home or refinancing your mortgage), you are now breaking a contract that promised to make payments at 3.74% (for 60 months) in a current market environment (as of today) that can fetch returns of only ~1.79%. So, if you were a bank (or a business owner), think about that - the person you just lent money to, is surrendering their commitment to a contract you both mutually agreed to, thereby, forcing you to recoup your losses in a market that is far less valued than when the contract was signed. And this is how the interest rate differential was born.
The variance of IRD penalty calculations from one lender to another could be quite significant as the comparable and special utility rates are products of the incumbent lender and are set as per their liking. Generally speaking, big box brand name lenders have the highest yielding interest rate differential calculations, whereas the non-bank lenders tend to have more favourable formulas that yield a lesser spread.
How to counter a massive mortgage penalty:
- Consider porting your mortgage (check out my past episode/blog for more details, Season 3 Episode 17)
- Look for a cash back mortgage to offset the penalty (some lenders offer cash back promotions that can help offset the penalty). But proceed with caution and make sure you are aware of the terms and conditions associated with cash back mortgages.
Other IRD characteristics to be aware of:
- Open term mortgages (open variable rate terms, fixed open terms and HELOCs) are a safe haven from mortgage penalties. Higher interest rates, but absolutely no discharge penalties
- Closed variable rate mortgages (99% of them) enforce only a 3 months interest penalty (no IRD penalty)
- If there is a possibility that you will sell your property within a 5 year period of when you secure your mortgage, you should strongly consider a variable rate mortgage or a shorter fixed term rate (this may eliminate any possibility of an IRD penalty)
- Always get an up-to-date confirmation of your break penalty as it could swing from being a 3 month interest penalty to an interest rate differential penalty in a very short period of time. This is mainly a result of changing interest rates and the resulting spread
- Never rely on an online penalty calculator (or your own mathematical inclination) to determine your precise break penalty figure. ALWAYS call your lender and get it from the horse's mouth
- Be aware that in an interest rate changing environment your break penalty could sway from 3 months interest to IRD very quickly...and it can continue to change back and forth (as the prevailing interest rates, comparable rates and the utility rate are constantly changing)
- When shopping for your next mortgage, inquire about your lenders IRD Formula and compare with other lenders (or you could just call me and I can tell you all about them)
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I think it's safe to say that every single detached home in Vancouver is priced over $1M. In fact as of Feb 2021, the average priced single family home in Greater Vancouver shot up to $1.83M (the third highest monthly figure, ever!). And here is the major disconnect of the entire real estate equation (for Metro Vancouver)...the median total income of households sits at only $72,662 - you don’t have to be a mortgage broker to know that this income will not qualify for a $1.83M purchase, in fact, a $72,000 income will net you a mortgage of just under $400,000.
So where do we go from here? Knowing that the minimum down payment required to purchase a property over $1M is 20%, the entry barrier to owning a single family home in Vancouver is sky high. For many, unachievable...impossible. More people actually qualify for a $1.83M purchase, than those that actually have the required down payment to fulfill the qualification (this is the bigger problem). For example, the annual income required to qualify for a $1.83M Purchase (with a 20% down payment) is ~$220,000. But the qualification milestone is only realised upon your $366,000 buy in (the 20% down payment) - this is where many prospective homebuyers falter. So, unless you come from wealth or were fortunate enough to have stepped on to Vancouver’s property ladder in the early 2000’s, the outlook for home ownership for many in Vancouver is bleak...it’s a tough pill to swallow for many.
BUT, we must forge ahead. We must continue to explore and exhaust ALL avenues for solutions. What we cannot do is, stand still. People will continue to migrate to Vancouver and demand for housing will continue to increase...we need to explore new ideas and concepts on how we can purchase real estate, and in the same lens, we need to tweak lending guidelines, accordingly. And this leads to my topic for this week's newsletter - What about Rent-to-Own?
The Rent to Own concept has been around for awhile, but it has never been an off-the-shelf-main-stay type of product. In my 17 years as a mortgage broker I have only ever completed one and am currently working on another. The two successful ones that I have under my belt don’t make me an expert on the topic, but the several others that I’ve experienced and that were not successful is where I can share some valuable insight.
What is a Rent-to-Own (RTO) Contract?A RTO contract mimics a car lease structure in that it enables the buyer to occupy the subject property for a fixed period of time (typically 3-5 years) while making customized payments towards a specified down payment at the conclusion of the term (kinda like the balloon payment that’s outstanding at the end of your car lease). The monthly payment within a RTO is configured to account for the market rent obligation to the landlord/owner and simultaneously pieces off a specified amount that is set aside for the cumulative pre-agreed-upon downpayment at the completion of the contract. At the completion of the RTO contract, a mortgage is then secured to close out the transaction and secure ownership to the buyer.
Rent-to-Own Contracts are generally comprised of two agreements; a standard Lease Agreement, and an Option To Purchase agreement: The Lease or Rental Agreement: * Throughout the lease agreement, the title of the property remains with the landlord until the tenant exercises their option to purchase the property * The Option to Purchase:* * This agreement grants the tenant the option/right to purchase the subject property within a specified period of time. As all contracts are unique, it is important for a tenant to be aware of the consequences if they choose to not exercise their option to purchase. Do not assume that there is a built in refund clause in the agreement.
Some risks and hardships associated with RTO Contracts: Far less banks participate in RTO purchases than those that do * There is no guarantee that a RTO-participating bank today will remain a RTO-participating bank in 5 years * There is high potential for BUYER AND SELLER remorse as markets may evolve throughout the term of the contract in ways both the seller or buyer didn’t expect * Finding a willing seller to commit to a RTO can be challenging. Typically, RTOs are far more prevalent in depressed market segments and regions, but they are also present in stronger active markets*
Can both parties win in a Rent-To-Own transaction?Landlord Perspective
- As RTO contracts are typically 3-5 years, this could appeal to the owner/landlord as it solidifies the tenants commitment to be on time with payments and take extra care of the home (as they aspire to become owners of it). Worst case scenario...in the event the tenants do not qualify for a mortgage, the landlord has gained another 5 years in equity pay down and could potentially retain the entire sum that was held in trust for the down payment (depending on the terms and conditions of the contract)
- As most RTO transactions act independently (without the services of a real estate agent), sellers can avoid listing agent fees.
- Sellers can also benefit from the basic principle of supply and demand. In some markets and regions the demand for RTO properties can far outweigh the supply of willing landlords.
- A potential downside for the landlord could be the unilateral nature of the contract, itself. The landlord is contractually obligated to sell the house to the tenant, however, the tenant is not contractually obligated to purchase the house. Furthermore, the landlord is bound by the agreement to not sell the house to a third party during the tenancy and option period.
Tenants Perspective:
- A good option for a tenant who would like to purchase a property, but due to recent credit issues or lack of down payment resources cannot qualify for a mortgage at present time
- The option of not proceeding with the purchase could also be an appealing feature as the outcome will not result in foreclosure proceedings, nor would it impact the tenant’s credit history. However, the tenant could stand to lose the upfront deposit and likely all (or a portion) of the cumulative equity payments throughout the term (depending on the unique terms and conditions of the contract).
And finally, to bring closure to this long overdue transaction comes the qualification for the mortgage. Easy peasy, right? Not really. As RTO agreements are not a common method of buying or selling real estate, it never really cemented itself as an ongoing way of transacting real estate. It's always been a niche thing and lenders have always teetered on and off the RTO bandwagon in favourably adjudicating them. But, I can tell you although there are not many lenders that are open and willing to participate with RTO transactions, there are enough that will - you just gotta know who they are. There are two that I currently know of and whom I have successfully closed a few transactions with...here are the key guideline points to be aware of which ultimately must be worked into the RTO agreement:
- Make sure there is a clause in the contract that states you will receive a partial or full refund in the event you do not qualify for the mortgage...the few lenders that will consider these arrangements, will likely demand this clause
- Some lenders might also demand that the negotiated monthly rental fee be capped to match the accumulation for a minimum down payment (5 or 10%) so as to discourage unreasonable and unsustainable monthly rent payments.
- All participating lenders will require bank statements provided by the seller to confirm regular deposits of the down payment portion and balance.
So to conclude, I’ll leave you with these three very important points:1. Do not assume that all lenders will mortgage your RTO transaction...many will not. 2. When drafting the RTO Agreement, begin with the end in mind. Educate yourself on the lenders qualifying guidelines and be sure that your RTO Agreement complies with them. 3. Call around and look for a lawyer who has experience in RTO transactions to draft the agreement
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Contact Marko, he's a Mortgage Broker!604-800-9593 direct Vancouver
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The term “First Time Home Buyer” is thrown around often these days and is tagged in countless incentive based programs and policies. In the future I will dedicate an entire newsletter to the various First Time Home Buyer privileges and programs, but today I will talk about one in particular, the RRSP Homebuyer Plan.
What is the RRSP Home Buyer Plan?The RRSP Home Buyer Plan (HBP) is a program that allows you to withdraw funds from your Registered Retirement Savings Plans (RRSPs) to buy or build a home for yourself or for a related person with a disability.
Here are the 3 major features of the RRSP Home Buyer Plan: Access up to $35,000 of RRSP funds for the purchase of a home * Take as long as 15 years to pay it back * If you don’t repay the loan within the 15 year period, the full amount of the loan will be declared as income and you will be subject to tax* at your marginal rate
Eligibility criteria for the RRSP Home Buyer Plan: You must be considered a first-time home buyer * You must provide evidence of a written agreement that details the purchase of the home * You must be a resident of Canada. Click here to see the the residency status guidelines. * You must intend to occupy* the property as your principal residence within one year after buying or building it
Can I qualify for the RRSP Home Buyer Plan, TWICE?Yes! As long as you satisfy the following conditions:
- Your previous HBP loan must be paid in full and have a $0 balance on January 1 of the year of your new withdrawal
- You can (once again) be considered a first-time home buyer if, in the four year period, you did not occupy a home that you owned, or one that your current spouse or common-law partner owned. The four-year period means the four years prior to a home purchase. The period begins on January 1 of the fourth year before the year you withdraw funds from your RRSP, and ends 31 days before the date you withdraw funds.
MarkoMusic: (music produced and performed my Marko)
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Contact Marko, he's a Mortgage Broker!604-800-9593 direct Vancouver
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Key Characteristics of fixed rate mortgages…
- Current Rate Range (as of Feb 5, 2021): 1.49% to 1.79%
- Distinguishing Characteristics:
- mortgage break penalties are the greater of 3 months interest or interest rate differential (IRD). And with that being said, your mortgage penalty figure can deviate back and forth throughout the life of your term depending on the prevailing market conditions.
- Fixed mortgages can be ported/transferred to another property so as to avoid a break penalty, or to preserve your interest rate (CAUTION: porting your mortgage does not always add up. In fact, in most cases mortgage holders opt out of it due to all the caveats associated with it. But nonetheless, it is certainly an option. Click Here to be redirected to my previous blog on Porting a Mortgage)
- fixed rate mortgages are available for various terms (1, 2, 3, 4, 5, 7, 10 year terms)
- Can be amortized up to 30 years
- Maximum Loan To Value allowance: 95%
- interest rate changes can occur at any time without any notice (rate changes are directly correlated with the bond markets)
Key characteristics of variable rate mortgages…
- Current Rate Range (as of Feb 5, 2021): 1.45% to 1.65% (Prime - 0.80% to Prime -1%)
- Distinguishing Characteristics:
- mortgage break penalties are 3 months interest (only a rare few may incorporate the IRD calculation)
- most variable rate mortgage are not portable
- discounted variable rate mortgages are mostly available for 5 year terms (and sometimes 3 years)
- Open variable rate mortgages (no specified tenure/term, no break penalties) are available with most lenders but do not offer the exceptional discounts you would typically associate with closed variable rate mortgages
- Can be amortized up to 30 years
- Maximum Loan To Value allowance: 95%
- Interest rate changes can only occur on specified dates that correlate with the Bank of Canada's annual schedule for policy interest rate announcements. There are 8 regularly scheduled dates, every year. Here they are for 2021: Jan 20, March 10, April 21, June 9, July 14, Sept 8, Oct 27 and Dec 8. When they occur, interest rate changes have commonly occurred at 0.25% increments.
Key Characteristics of Home Equity Lines of Credit (HELOC)...
- Current Rate Range (as of Feb 5, 2021): 2.95% to 3.45% (Prime + 0.50% to Prime + 1%)
- Distinguishing Characteristics:
- do not have break penalties, you can break the mortgage at any time without any penalty
- are not portable
- no specified tenure/term, no break penalty
- will remain in force as long as you own the property (no expiry/maturity date, automatically renews, indefinitely)
- Unlike fixed and variable rate mortgages, HELOCs are interest only readvanceable mortgages. Therefore, they do not have amortizations. You can choose to make interest only payments forever, or can make unlimited lump sum contributions towards the principal without any penalties. Also, just like a personal line of credit, a HELOC is readvanceable and allows you to pay down or draw up the balance as often as you like
- Maximum Loan To Value allowance: 65%
- Interest rate changes can only occur on specified dates that correlate with the Bank of Canada's annual schedule for policy interest rate announcements. There are 8 regularly scheduled dates, every year. Here they are for 2021: Jan 20, March 10, April 21, June 9, July 14, Sept 8, Oct 27 and Dec 8. When they occur, interest rate changes have commonly occurred at 0.25% increments.
And finally, if you can’t decide on any one of the above…you can always opt for a Matrix Mortgage. A Matrix Mortgage allows you to customize your mortgage with up to 11 different mortgage products - you can literally have a portion of your mortgage as a 5 year fixed, a 5 year variable rate and a HELOC. A Matrix Mortgage also allows you the flexibility to set specific amortizations, terms and readvanceable principle features.
What are the main driving forces when choosing fixed or variable?
- Interest Rate - decide based on current rate environment and near term outlook
- Break Penalty Policy - this is often overlooked, but should be given extremely serious consideration. If there is the slightest possibility that you may break your mortgage ahead of its maturity, make sure you are completely aware and informed of how the break penalty is determined for your new mortgage
- Where do you see yourself in 5 years - career possibilities, children, marital status, new business venture, etc. Secure a mortgage term with your future plans in mind.
MarkoMusic: (music produced and performed my Marko)
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Contact Marko, he's a Mortgage Broker!604-800-9593 direct Vancouver
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Imagine running a marathon and you are 50 strides away from completing the race. But suddenly, a race official appears out of nowhere and moves the finish line another 500 meters ahead. This is what closing costs verification feels like...the applicant has just recently (painstakingly) satisfied the down payment verification and is now presented with another task of proving that they have enough cash to pay for the legal fees, property transfer taxes, moving truck and other peripheral costs associated with the purchase of a home. At the end of the day, it's not that big of a deal, but it is definitely worth addressing and making the buyer aware very early on in the buying process so as to avoid any unnecessary drama and tension.
3 key points about Closing Cost Verification:* lenders typically calculate the Closing Cost as 1.5% of the purchase price and in provinces like BC and Ontario where Property Transfer Taxes are significant, the request for it during the mortgage process simply reiterates the inevitability of it. In the past it was a cost that was conveniently forgotten about all the way until the closing date, but now it (mainly) lies with your mortgage provider to act as the informer/messenger * as purchase scenarios come in all sizes, lenders often modify or revise their closing cost calculation to reflect more realistic figures in relation to their respective regions and underlying taxation obligations. For example, BC has Property Transfer Tax, Alberta does not. Therefore, the closing cost requirement in BC will be higher than in Alberta. * when it comes to verifying closing costs, a 90 day history is not required. And provided you have ample room in your debt servicing ratios, you could also factor in the costs as credit card debt (CAUTION: some lenders do not allow for this)
There are 8 Closing Costs to be aware of:1. Property Appraisal ($300 and above) Often times your mortgage broker or lender may provide a partial or full reimbursement for this cost. Appraisals are typically required for applications that have down payments of 20% or greater (conventional/uninsured mortgages). 2. Home Inspection ($300 and above) Banks/lenders never require a Home Inspection as a condition of the mortgage itself, but they do factor the cost of one in their overall closing cost estimate. This is simply at the buyers discretion if they desire one, or not. 3. Title Insurance ($400 and above) typically included in the overall legal fee, but sometimes lenders pass on the cost to the buyer. More and more lenders are requiring that mortgages close with title insurance. 4. Mortgage Life Insurance ($10 and above) this is optional and premiums can vary significantly due to age and pre-existing conditions of the applicants. As is the case with a Home Inspection, Mortgage Life Insurance is not required from the lender, it is an option. 5. Property Insurance ($500 and above) fire insurance is the most common property insurance that is required by the lender. Some lenders may also require earthquake insurance. 6. Land Transfer Taxes (formula based) Click Here to be redirected to BC's Property Transfer Tax guidelines. In BC, this is by far the largest closing cost to be aware of (1% of the first $200,000 and 2% of the balance up to $2M...then it jacks up to 3%). 7. Legal Costs ($800 and above) BC allows for the services of a Solicitor/Lawyer or a Notary to close out a real estate purchase transaction. Generally speaking, you can expect a slightly lower fee with Notaries than with Lawyers. But be aware, that doesn't mean Notaries are authorized to perform the same tasks as a lawyer. 8. Moving Costs ($500 and above) This cost could vary depending on the scope of your move.
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Contact Marko, he's a Mortgage Broker!604-800-9593 direct Vancouver
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The dream to build your own home is alive and well, especially in Vancouver! Take a drive down any street in one of (metro) Vancouver's neighbourhoods and you'll see several projects on the go. This week I want to write about the mortgages that finance these incredible projects and what it takes to qualify for them. The mortgages are commonly referred to as Construction Draw Mortgages or Self Build Mortgages. If you or anyone you know are considering taking this route, read on and learn about the main qualification criteria.
The 3 Most Important Factors:1. Building your own property is capital intensive. Be aware that you will need a substantial amount of front money to begin your project (even though you qualify for a construction draw mortgage). Front money is non-mortgage money and it will be required for pre-construction soft costs and the beginning stages of your build. Front money can be from any source; own sources, sale of previous home, equity proceeds from a home refinance, parents, or a rich uncle! If you used a mortgage to purchase the land (or property that you will tear down), your required front money will be even larger as the first draw advance will be applied directly to the outstanding mortgage balance (rather than the accrued construction costs). Once the draw proceeds have been applied to the outstanding mortgage balance, then the remaining balance (if applicable) will be made available to the owner to dispersed amongst the trades for work already completed. This pattern continues until the outstanding mortgage is eventually paid out, thereby, advancing the draws in their entirety to the owner to be used at their sole discretion for construction costs. 2. Mortgage draws are paid in stages AFTER the completion of specified construction milestones. This is often a misunderstood guideline amongst construction mortgage applicants. Once the work has been completed to reach a specific construction milestone, the lender sends an inspector to verify that the work has been completed, then the funds are advanced. 3. Here are the common construction milestones and their respective draw payout ratios: * Stage 1: Excavation, Foundation, Waterproofing, and Weeping tile (15% of mortgage proceeds advanced) * Stage 2: Roof completed, Backfill, Framing (25% of mortgage proceeds advanced) * Stage 3: Rough Plumbing/Electrical, drywall, furnace, exterior wall cladding (25% of mortgage proceeds advanced) * Stage 4: Doors hung, Floors finished, electrical/plumbing completed, kitchen cupboards installed (20% of mortgage proceeds advanced) * Stage 5: Exterior work completed, site works, landscape (15% of mortgage proceeds advanced)
Heads up on this stuff:
- Many applicants underestimate the pre-construction "soft costs". Look in to these costs and plan for them in your budget:
- architectural fees
- legal fees
- re-zoning costs
- community contributions
- Government taxes
- financing costs
- Construction mortgage terms/conditions:
- the amount of draws vary with lender (typically 4 or 5 draw stages)
- interest begins to accrue as soon as the first draw is advanced and can be deducted from forthcoming advances
many lenders allow for only third party contractor builders (rather than self builds). Self builds are certainly allowed, but have to abide by BC Housing Regulation by getting a Owner Builder Authorization
MarkoMusic: (music produced and performed my Marko)
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Contact Marko, he's a Mortgage Broker:604-800-9593 direct Vancouver
403-606-3751 direct Calgary
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Over the last decade the process of qualifying for a mortgage has increasingly become more cumbersome and frustrating. In fact, some claim it is easier to attain citizenship to another country than it is to secure basic financing for a 1 bedroom condo in Calgary. So why is this? Why all the questions, the excessive document requests and the never ending due diligence? The answer is multi-dimensional and a topic for another newsletter all together (in the meantime refer to Twitter for endless threads on real estate and finance theories). But regardless of the reasoning behind today's challenging mortgage qualification landscape, I've noticed a commonality for all successful approvals that have run across my desk over the years, and I've narrowed it down to three key principles that lead to an optimal mortgage experience. Follow these principles and I promise you that your next mortgage qualification experience will be a walk in the park. And not only will it be stress free, but you will end up with the highest possible mortgage amount with the best possible terms.
The 3 Principles of Highly Successful Mortgage Qualifications:
1. Be forthcoming with information throughout the entire qualification processanswer all the application questions with as much detail as possible: this makes your application desirable to prospective lenders as it is complete and easy to adjudicate
- explain reasons for any recent hardships that you may have experienced that directly impacted your existing credit cards (or other credit products). Don't assume you are doomed and declined if you recently suffered a credit set back. Believe it or not, banks can actually be very understanding and compassionate, but only if they know what your situation is. Be open with your broker as though you are having a conversation with a friend. Disclose all details.
- correct and detailed information can also result in unexpected positive outcomes that you may never have imagined were possible from the onset of your application. What you might have perceived as a negative could have very well been the tipping point to sway your application in the right direction.
2. Provide quality verification documents:
Document Quality:
- send documents in their entirety
- if using your phone camera, make sure the resolution is adequate so the document is legible
- avoid extreme piecemeal document submissions whenever possible (this increases the chance that a document could get overlooked in long email and text threads).
Content Quality:
- whenever possible, make sure your identity and confirmation of ownership can be confirmed from the documents you provide (i.e. bank statements, investment statements, etc)
- be aware that the lender is requesting specific documents to verify specific information in your application. Be patient and understanding with document requests (income verification, self employment verification, etc)
3. Don't obsess entirely about the interest rateacknowledge the product, entirely, rather than focusing on one particular facet of it. For example, many applicants are fixated on the interest rate alone and fail to recognize other critical terms and conditions of the product. Here are some examples of fine print conditions & terms to be aware of in interest rate focused products:
- break penalties vary significantly with all lenders. Often times, deeply discounted interest rate offerings (no-frills mortgages) have higher break penalties than standard offering mortgages (make sure you are aware of your break penalty consequences)
- most mortgages are able to transfer to other properties in the event you re-sell your property ahead of your term, thereby allowing you to maintain your current mortgage rate and the ability to negotiate your penalty into your newly transferred mortgage (or in some cases, outright eliminating it). This feature could possibly be withdrawn in a no-frills type of mortgage product
- some lenders substantially reduce your opportunities to increase your mortgage payment and lump sum extra payments towards your principle
- another common condition is for the lender to instil a condition that you are required to set up your daily banking with them in exchange for the reduced interest rate
- On the flip side, here are some peripheral features worth inquiring about with your current lender choice that are often overlooked when choosing a mortgage:
- online customer portals (some lenders have amazing online servicing capabilities)
- readvanceable mortgage capability (this feature automatically grants you access to the principle you pay down in the form of a Home Equity Line of Credit).
- built-in no fee refinance options (in the event you need to refinance ahead of your mortgage maturity)
- extended amortization options without interest rate premiums (many lenders add a premium to the interest rate when extending to a 30 year amortization)
- substantially reduced break penalty conditions. The formula used by banks to calculate your break penalty varies significantly from lender to lender. Be aware of what your break penalty conditions are and compare it with other offerings.
- In summary, regardless of what your interest rate offering is, always explore the peripheral details - not only of the product terms, but also the extended offerings of the lender itself.
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What is a real estate assignment contract?Before I get in to the process of how to qualify for a mortgage when assigning a real estate contract, let's first unravel what a real estate assignment is.
A real estate assignment is a transaction similar to that of a standard real estate transaction, except rather than being referred to as a buyer and a seller, in an assignment they are referred to as an Assignor and Assignee, the assignor being the seller and the Assignee, the buyer.
The main distinction of an assignment contract is the subject item of the assignment. Rather than being the property itself, the transactional item in an assignment contract is the RIGHT to PURCHASE - the property. Hence, the original terms and conditions of the original purchase contract remain intact. The only changes are in ownership and negotiable price.
Why would someone want to purchase a property via an assignment?
- its a way to get into a new property without waiting for a long period of time (typically, assignments are permitted by the builders when the property is nearing completion)
- depending on how far along the process is, you could possibly be involved in choosing the finishes of the property (but consider this a bonus as most of the time, the finishes and customizations have already been chosen or decided upon earlier on)
- depending on your regions market, you can also potentially score a good deal on an assignable property and this could be for various reasons:
- Assignable properties are usually a bit tougher to find as they do not have the same marketing allowances as do standard properties. Therefore, less exposure to potential buyers (this could possibly result in lower pricing)
- There could be some current owners who are looking to get out of their purchase obligation (for whatever reason) and as a result have priced their property lower than comparable's nearby. This is even more pronounced today with the pandemic and its varying impact on pre-sale contract holders who may be in scenarios where they need to bail on their purchase obligations.
What should I expect when qualifying for a mortgage for an assignment purchase?
- first of all, not all lenders are on board with assignment purchases. But the ones that ARE have all the same features and conditions you would expect for a standard mortgage qualification. You will receive the same interest rate as though you were qualifying for a regular real estate transaction. Also, the income qualification and credit score requirements all remain the same.
- the main difference entirely has to do with the property and the actual assignment contract:
- there will likely be additional documentation that will be required pertaining to the purchase contract and the newly drafted assignment contract (i.e. amendments, addendums, builder disclosures that include their terms & conditions pertaining to the assignment, and so on)
- some lenders will finance only on the original purchase price (which may be a deal breaker for many), but most will finance on the newly negotiated assignment price
- And finally, depending on your loan to value ratio, appraisals will be required on a case by case scenario...and that's it!
Some other things to be aware of:
- Align yourself with a complete real estate team that is familiar with assignment contracts and purchases (realtor, solicitor, mortgage broker). A multi-member support team will enhance the due diligence, further protecting you from any unexpected twists that may arise after you release conditions on the deal
- Don't assume that all pre-sale condos are assignable...many are not. And even for those that are, be aware of any unique assignment terms or fees of the builder. An experienced realtor will be able to identify any challenges or issues early on, rather than later (when it's too late!)
- An assignment cannot proceed without the written consent and/or permission of the seller (for resale homes) or builder (for pre-sale condos)
- For resale home assignments the seller is entitled to 50% of the profit. For pre-sale assignments, builders charge a fee in the range of 1% and as high as 5%
MarkoMusic: (music produced and performed my Marko)
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Contact Marko, he's a Mortgage Broker:604-800-9593 direct Vancouver
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Since the launch of the program in Sept 2019, only 13% of the programs allocated reserve actually made it to the hands of first time home buyers. Will the upcoming enhancement spur more interested applicants, or is this program simply a dud?
Three words that best describe Trudeau's First Time Home Buyer Incentive (FTHBI) program that was launched back in Sept 2019 - OVERRATED, UNDERUSED, and CONFUSING.
But that could change as early as this coming spring as the programs maximum thresholds have been increased to capture a more broad range of buyers in Canada’s two highest priced markets; Vancouver and Toronto.
In 2019, the FTHBI program was available for properties up to a maximum purchase price of $507,000. However, in 2021, the program will be enhanced to accommodate for a maximum purchase price of ~$722,000.
First, let’s talk about what it's NOT:
- It’s not free money (has to be paid back in 25 years or when you sell, whichever comes first),
- It doesn’t help you buy more house (in fact, you would qualify for slightly more outside of the program),
- It’s not any easier to qualify for than a typical mortgage, and
- It’s not a zero down mortgage (you still need a minimum down payment of 5%)
If it’s none of the above, then what could possibly be so good about it??
Don’t get me wrong…it is good, but it’s not WOW-good…it’s just plain-good. What I mean is that the contribution that the government provides (they will match your down payment up to a maximum of 10%) cannot be used to buy more house (this would be WOW-good), but rather to pay down your mortgage (which is just plain-good). So, if you purchase a $500,000 home…you would still have to qualify for a mortgage on it with a minimum down payment of 5%. Under the program, the government would then match your 5%. So rather than having a mortgage of $475,000, it would be reduced by another $25,000 (the government’s matching contribution) down to $450,000 (with todays interest rates that would amount to a monthly savings of ~$100 per month). The main objective of the program is to reduce the monthly payment of your mortgage (which is just plain-good). It’s not the WOW-good that many had hoped for…that the matched contribution could be used on the buying side.
How do you qualify?
It hasn't yet hit the production press, but expect it to launch in early 2021 - just in time for the spring market.
Here is a summary of the main qualification points:
- the maximum eligible purchase price is determined by multiplying your income (or total household income) by 4.5, but you cannot exceed an annual (combined or individual) income of $150,000. Therefore, the maximum purchase price rounds out to about $722,000 (by the way, with the same $150,000 annual income and qualifying outside of this program, you could qualify for about 10% more (so instead of maxing out at a $722,000 purchase, you could expand your property search up to $800,000…just sayin')
- this is NOT a $0 down program…you still require a minimum down payment of 5%
- the portion that the program matches does not contribute to a bump up in the purchase price, but rather a direct reduction to your mortgage balance
- if/when you sell the property, the government will maintain its equity stake on your property and will be paid out according to its initial investment. For example, if you purchased your property for $500,000 and later sold it for $600,000, the government would be entitled to 5% of $600,000 (a $5,000 return on their initial $25,000 contribution).
Remember, the main objective of the program is to reduce your monthly mortgage payment as a result of the matching contribution from the government being allocated towards the mortgage principle, NOT to be used as a bump up to purchase more house.
For the rest of the miscellaneous fine print qualification details, visit the official FTHBI website at placetocallhome.ca
That’s all I got. Check in next week for more.
Marko Gelo Garage Band Sessions: (produced and performed my Marko)
- "Cheap Money" ...intro song (0:41) <-produced/performed by Marko Gelo
- "Glorious Day" ...outro song (2:27) <- produced/performed by Marko Gelo
- Sound Effects provided from Zapsplat.com and Apple Loops
Contact Marko, he's a Mortgage Broker:604-800-9593 direct Vancouver
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One of the consequences of selling a home is the unexpected penalty that arises as a result of breaking your mortgage contract ahead of its maturity date. The penalty is determined by the greater of 3 months interest, or the dreaded interest rate differential (IRD). And the scary part is the your penalty can radically change from the day you list your property for sale to the day you sell it, especially in a whacky environment like we are currently in with the recent free fall in interest rates.
One way to avoid a break penalty is by porting your mortgage to your new home purchase.
HERE's HOW A MORTGAGE PORT/TRANSFER WORKS:
There are three (3) Porting options:
- Straight Port (when you transfer precisely the same mortgage balance to the new property)
- Port and Increase (when you transfer the mortgage and increase the principle balance)
- Port and Decrease (when you transfer the mortgage and reduce the principle balance)
- **depending on the lender, applicants have 30 to 180 days from the sale of their current home to close on their new home
Porting a mortgage is subject to the following:
- porting fees: $75 to $400 depending on the lender
- a break penalty is actually charged as the initial mortgage needs to (technically) discharge itself off the current land title
- the break penalty (or part of it) is then reimbursed upon advance of the newly ported mortgage
- some lenders will waive break penalties (fully or partially) if the closing dates of both properties are the same day
Penalty Reimbursements are as follows:
- Straight Port - reimbursed in full
- Port & Increase - reimbursed in full
- Port & Decrease - partial reimbursement [(New Money/Old Money) * Penalty]
Impact On Rates:
- Straight Port - interest rate remains the same
- Port & Increase
- Fixed - weighted average blend
- Variable - greater of prevailing market rates or your current rate
- Port & Decrease - interest rate remains the same
Impact to Amortization & Term:
- in all cases the remaining amortization on the new ported mortgage will remain the same as the remaining amortization on the existing mortgage
- in all cases the term of the new ported mortgage must be equal to or longer than the remaining term on the existing mortgage
That’s all I got. Check in next week for more.
Marko Gelo Garage Band Sessions: (produced and performed my Marko)
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- "chronicles" ...outro song (1:53) <- Marko Gelo
- Sound Effects provided from Zapsplat.com and Apple Loops
Contact Marko, he's a Mortgage Broker:604-800-9593 direct Vancouver
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Mortgages are classified as one of the following three; Insured, Insurable, or Uninsured/Conventional.
The way a mortgage is priced and qualified depends on how its funds were purchased, acquired or allocated.
Mortgages are either insured by the borrower, bulk insured (securitized) by the lender, or simply uninsured all together.
Once they are given their insurability classification, they are then priced and underwritten, accordingly:
(1) INSURED MORTGAGES
- Only available for purchases of owner-occupied properties under $1M with 25 year amortizations
- minimum down payments of 5%, but cannot exceed 20%
- the premium is commonly paid for by the applicant via an equity stake on the property (rather than out of pocket). For example, let's say you are purchasing a $400,000 property with a 5% down payment. Your mortgage would be $380,000 PLUS an insurance premium of 4% of the mortgage amount. Therefore, your total mortgage would be bumped up to $395,000 ($380,000 + $15,200)
- mortgage premiums range from 2.4% to 4%. The lower your down payment, the higher your premium
- these mortgages feature the lowest interest rates as they are virtually risk-free to the lender that is issuing them. In the event the homeowner defaults on the mortgage the lender is reimbursed by the insurer against loss, furthermore backstopped by the Government of Canada in the event the insurer becomes insolvent.
- SUMMARY: low rates, but expensive when you factor in the massive equity hit as a result of the insurance premium...if possible, increase your down payment to fall in to a lower premium range
(2) INSURABLE MORTGAGES
- available for purchases under $1M and mortgage renewal transfers (mortgages that are simply switched from one lender to another at maturity, no new money), 25 year maximum amortization
- minimum down payment 20%
- these mortgages are "bulk" insured as opposed to "transactionally" insured. Bulk insured mortgages protect the lender against default, but not to the degree of a transactionally insured mortgage above. A big plus however, is that the lenders pay for the insurance premium, not the applicant!
- SUMMARY: highest interest rates are with 20% down payment mortgages, but they often drop all the way down to the insured rate range once you hit the 35% down payment threshold. These lenders are almost exclusively available through mortgage brokers as they are mainly non bricks and mortar type of lenders (First National, CMLS, Home Trust, Equitable Bank, etc). This is a critical space in Canada's mortgage industry as it is often regarded as the competitive force that keeps the Big 5 Banks accountable and competitively priced.
(3) UNINSURED MORTGAGES
- lenders in this group consist of large balance sheet lenders and big banks. Uninsured mortgages (aka conventional mortgages) are where exceptions on tough deals are made. The qualifying guidelines from lender to lender vary significantly. Mortgage Brokerages that are equipped with several Uninsured Mortgage providers are a cut above the rest as they have a massive advantage in approving a much broader range of mortgage applications than brokerages with fewer uninsured mortgage providers.
- minimum down payment 20%, up to 30 year amortizations
- purchases of $1M and greater are allowed
- refinances are allowed
- SUMMARY: often non-competitive posted rates, but can be negotiated lower. As with insurable mortgages, interest rates approach insured mortgage rate thresholds as the down payment increases to 35%. Qualification criteria is significantly loosened in this group when compared with the Insured and Insurable lenders
Marko Gelo Garage Band Sessions: (produced and performed my Marko)
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Contact Marko, he's a Mortgage Broker!604-800-9593 direct Vancouver
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When I first became a mortgage broker (in 2004), the hardest thing for me to understand at the time was how business owners got away with qualifying for hefty mortgages with such low declared incomes. Like how does a contracted engineer who declared $65,000 on their T1 General end up qualifying for a $650,000 mortgage (which requires an annual qualifying income of $100,000)?? I did quite a few deals that year and many of them in Calgary's oil and gas sector which consisted of many self employed applicants. And it wasn't until about my third year that I started to comprehend how someone who earned $65,000 could use $100,000 as qualifying income.
This type of scenario is prevalent with self employed applicants because their declared income could often be conceivably lower than what it really is. This is mainly the result of the various expenses that business owners claim to reduce their taxes payable. Other factors such as personal income tax reduction strategies and accumulated business retained earnings can also sway a lender to allow for a substantial bump in your qualifying income. The amount of the income bump varies with the particular lender and their program policy.
Here are the main policies in abbreviated and general terms:(1) The Gross Up Guideline: Gross up your 2 year average (declared income) by as much as 25%. For example, $73,000 declared income in 2018 + $75,000 declared income is 2019 = $92,500 Qualifying Income!
(2) The Stated Income Guideline: $65,000 declared income, but lender accepts $100,000 qualifying income!
(3) The 3 Month Annualized Bank Statement Guideline: Annualize a 3 month run of consistent bank deposits in your business to determine a projected annualized income. For example, lets say your business has received monthly deposits of $15,000 for at least 3 months...you would then be eligible to use a qualifying income of $150,000!
All of the above scenarios are subject to the following eligibility criteria:
- minimum down payment ranges from 5% to 20%
- you must have been self employed for a minimum of 2 years, but in some instances only 3 months of self employment is required
- must have at least 25% ownership interest in your business
Mortgage Rates:
Current 5 yr fixed rate range: 1.59% to 2.19%
Current Variable Rate Range: -0.80% to +0% discount off Prime (Prime Rate is 2.45%)
Comment: steady, no talk of increasing rates
Marko Gelo Garage Band Sessions: (produced and performed my Marko)
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- "disconnected" ...outro song (1:39) <- Marko Gelo
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Contact Marko, he's a Mortgage Broker!604-800-9593 direct Vancouver
403-606-3751 direct Calgary
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The following is discussed in this episode:Throughout our lives we will likely be moving from one property to another, and in the process, we use the equity accumulated from the previous property to either buy the new property outright, or use whatever is remaining (once the existing mortgage is paid out) as a down payment for the new property.
But sometimes your new property’s closing date doesn’t quite line upwith the closing date of your current property…so in other words, you may find yourself in a situation where the closing date of your new property is BEFORE the completion date of the sale on your current property. <-This is where Bridge Financing can be used.
Or, some sellers simply are not aware that they can conveniently schedule the closing date of their current property to lag the completion date of the new property to accommodate for a smooth and stress free moving process from the old home to the new one. <- This is also a good application of Bridge Financing.
The need for bridge financing arises when you require funds from the sale of your current property to complete the purchase for your new property. The critical component to Bridge Financing is that you require real estate collateral(your current property). It is only an option for those that are selling an existing property to purchase another…it is NOT an option for first time home buyers (as they are not upgrading from a recently owned property).
Other important factors to be aware of regarding Bridge Financing:
(i) your current property must be unconditionally sold (firm deal, no outstanding conditions)
(ii) the bridge financing is part of the overall mortgage offering of your new property
(iii) interest on the Bridge Loan is charged daily and can be anywhere between Prime +2% to Prime + 4%
(iv) in addition to the interest, you should also expect an administration fee between $200-$500
(v) most lenders allow for a bridge loan of up to $250,000 for a period of 120 days. Any amount beyond this amount and timeframe may require the lender to register a lien on your current property (as a result, you will incur additional legal fees)
Probably the most misunderstood thing about Bridge Financing is the amount that the applicant thinks they require. The actual amount of financing being bridged is the down payment figure that is required to secure the new mortgage, NOT the actual (new) mortgage amount.
So, let’s say your current property is closing on January 15, 2021, but your new property is set to close on December 26, 2020. The mortgage on your new property will require a 20% down payment (which will be coming from the proceeds of the sale of your current property) on a $800,000 purchase. So, a $160,000 down payment is required to secure a $640,000 mortgage on a $800,000 property purchase. Furthermore, let's say you also made a $40,000 deposit when you placed the offer. So how much would the bridge loan be? And what would the total interest charges add up to for the 20 days (assume an interest rate of Prime + 2%)?
Click Here to get redirected to Marko's blog post to view an illustrated calculation of the above example.
Now that you are aware of bridge financing, take advantage of it and use it as a tool to transition from one property to the other...not only is it cheap, but it will also reduce the stress level for the client and all the peripheral providers in the transaction (lawyers, lenders, opposing party, etc).
Mortgage Rates:
Current 5 yr fixed rate range: 1.59% to 2.19%
Current Variable Rate Range: -0.80% to +0% discount off Prime (Prime Rate is 2.45%)
Comment: the talk of rising interest rates has been just that - all talk, no action (good news!)
Marko Gelo Garage Band Sessions: (produced and performed my Marko)
- "Cheap Money" ...intro song (0:41) <-Marko Gelo
- "corners" ...outro song (1:40) <- Marko Gelo
- Sound Effects provided from Zapsplat.com and Apple Loops
Contact Marko, he's a Mortgage Broker!604-800-9593 direct Vancouver
403-606-3751 direct Calgary
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Everyone assumes that verification of down payment proceeds for a mortgage is a swift and miscellaneous part of the mortgage qualification process. When you think about it, why would it be difficult? If the applicant does, in fact, have the funds in their bank account, why then does it matter where it came from and how long it's been there?
One would argue that the biggest qualification hurdle in qualifying for a mortgage is income verification. However, if you ask a mortgage broker, they would likely reply that it is down payment verification. And the main reason being is that it is very much often overlooked and taken lightly by applicants…until your days away from your closing date and the lender is holding back your advance because they have discovered a stray $5,000 deposit into your bank account from which the origin hasn’t been confirmed or disclosed. Be aware, the unique thing about down payment verification is that its verification criteria is not so much a policy of the lender, but rather a policy of Canada’s Department of Finance (via the Financial Transactions & Reports Analysis Centre of Canada - aka FINTRAC). FINTRAC requires a 90 day history on any one deposit in to your bank account that exceeds $10,000 (individually, or cumulatively).
Here are some key points and verification criteria to be aware of when it comes to down payment:
REASONABILITY* - it needs to make sense. Other than when receiving a gifted down payment (from a directly related family member i.e. parents or spouse), expect the lender to request more details about the source of the funds. For example:** A customer states that their employment income is the source of funds for a down payment. However, the down payment amount does not seem reasonable when compared to the customer’s stated occupation and provided employment documentation.
TIMING of FUNDS in your BANK ACCOUNT* - if the funds have been in your account for less than 90 days and have not been gifted, expect to provide a full 90 day history on all deposits that are considered part of your overall down payment proceeds. Some lenders may also require a full 6 month history** for funds that originated overseas (foreign).
USING BORROWED MONEY* - this is allowed, BUT disclose it to your broker/banker at the time of the application as it absolutely needs to be accounted for in the mortgage qualification. You can certainly use money from your line of credit for a down payment, BUT your qualification amount will be scaled back, accordingly…and in most cases, significantly. Make your broker/banker aware right from the get-go to prevent a deal breaker situation on closing day. An experienced broker will address source of down payment during the pre-qualification phase of a mortgage application, but some won't and will leave it until later in the process - and this is when the massive ineligible-downpayment-reveal occurs. Imagine being told a couple of days before your closing date that your down payment funds are not eligible and that you have to come up with the same amount from another source! (i.e. mom, dad, cash out investments you were not planning to cash out, or maybe you just don’t have another source!!..yikes). Many applicants assume that using borrowed money for a down payment is fine and legit (which it is), but simply don’t realize the repercussions of it. Be aware, be forthcoming**.
QUALITY DOCUMENTATION* - simply remembering that your name and account number must be displayed on the verification documents** that you provide will answer any questions you may have if the documents you are about to submit are adequate. What if only your account number is on the statement but not your name? ANS: Provide a cross verification document that can link you to the account number (i.e. a void cheque, an older off-line statement, a screen capture of your account on a separate section of your online banking portal which portrays your name and account number, etc)
PIECEMEAL DEPOSITING* - this is probably the most tedious form of down payment verification and unleashes the highest level of frustration from all parties (lender, broker and applicant). AVOID small and excessive transfers of money between various bank accounts…this is a red flag for all lenders and is extremely confusing and frustrating for lenders to track. If moving money from one account to another is absolutely necessary, try to do so in one fell swoop once you have reached your target amount rather than frequent inter-branch transfer transactions. Just remember this, for every sum that you transfer into one account, you will have to provide a 90 day history of the account you transferred from (this will double your paper work and furthermore expose the details of the other account which could then, potentially, result in further unexpected requests from your lender**)…avoid complexity, try and keep things simple.
NOTABLE/UNIQUE SOURCES OF DOWNPAYMENT THAT ARE ACCEPTABLE* - wired funds are acceptable but varying levels of verification are required depending on the amount and country of origin | proceeds from the sale of virtually any investment | proceeds from a grant | non-repayable gift from an immediate family member, relative or employer** (the amount and source of the gift can vary with lender and loan to value ratio)
Rates:
Current 5 yr fixed rate range: 1.64% to 2.19%
Current Variable Rate Range: -0.80% to +0% discount off Prime (Prime Rate is 2.45%)
Comment: recent news about Pfizer’s COVID19 Vaccine in that it has yielded 90% effectiveness trials has poured optimism in to the bond markets. This bump in yields typically translates to an increase in mortgage rates. No hint from lenders if an increase in interest rates is pending, but heads up…this has been the the most significant burst of bond yield activity since June when rates aggressively began their decent to the 1% barrier. Brush up and check in with any lingering financing agreements you may have pending. Fixed or variable? My opinion…go with fixed.
Marko Gelo Garage Band Sessions: (produced and performed my Marko)
- "Cheap Money" ...intro song (0:41) <-Marko Gelo
- "Find The Time" ...outro song (4:05) <- Sleeping Lorry, ~1995 (Joe Vulic-vocals-guitar, Marko Gelo-guitar, back-vocals, Darko Kulas-bass-guitar, Rob Vulic-drums)
Contact Marko, he's a Mortgage Broker:604-800-9593 direct Vancouver
403-606-3751 direct Calgary
markogelo.com
@markogelo (Twitter)
MarkoMusic (SoundCloud Account)...all podcast music tracks are performed and produced by Marko
See acast.com/privacy for privacy and opt-out information.
The following is discussed in this episode:Purchasing a property inside of a corporation:
OPERATING COMPANY or HOLDING COMPANY?
*this a decision you will want to discuss with your accountant as there are reasons to do so in both cases. However, as far as mortgages are concerned most lenders require that the property be held in a holding company. There are a select few that allow one to do so in an operating company, but the interest rates are typically higher. I have reached out to lenders and asked why this is the case…they mostly replied that the exit strategy of the property could become difficult or problematic in the event the corporation (the operating company) is sold, or confronted with some type of creditor challenge, thereby coupling the property with the corporations resulting outcome
when it comes to mortgages, not all lenders allow for purchasing within a corporation…but enough of them do. It is important to disclose your intent to do so to your mortgage broker PRIOR* to placing an offer on a property. Failure to do so results in re-routing of your mortgage application to other lenders, which in turn could result in radically different terms, conditions and interest rates than what you had already been pre-qualified for. I cannot stress how important this is!
WHY PURCHASE A PROPERTY WITHIN A CORPORATION (holding company)?
(i) Protection from creditors - by holding the property within the holding company (rather than the operating company), it is essentially removed from any liability that the operating company may encounter.
(ii) Tax advantages - All I will say here is that tax advantages could potentially exist. Many people seem to think that taxes are unanimously lower within a corporation, then they are personally…but this is not always the case! Consult with your accountant regarding your specific tax advantages and explore if this approach is even worthwhile for you. Here are two amazing accountants that I personally deal with:
Michael Kovac (Vancouver and surrounding area) - 604-319-6044 direct
Rob Kubik (Calgary and surrounding area) - 403-238-1505
(ii) Estate Planning Strategies - As with tax policies, I have absolutely no expertise in this field. Consult further with an estate planning lawyer on this.
IS IT HARD TO QUALIFY FOR A MORTGAGE WHEN GOING THIS ROUTE?
it’s not that it’s hard -* it's just a bit more detail oriented and document intensive. Basically, you would qualify as though you are buying a property in your personal name…but the difference is simply the way your application is packaged to the lender...you would be qualifying as a corporation with a personal guarantee.
*technically, you can also purchase a property personally and transfer into a corporation after you’ve made the purchase and qualified for the mortgage, personally. Again, consult with an accountant on this strategy as it involves a sequence of actions and specific drafting of documents/agreements
WILL MY CORPORATE OWNED PROPERTY & MORTGAGE BE ON DISPLAY IN MY PERSONAL CREDIT REPORT?
*it shouldn’t be. But…sometimes it will (this depends on the lenders credit reporting policy)
IS IT EVEN WORTH PURCHASING A PROPERTY WITHIN A CORPORATION?
*this is definitely a question you have to explore further. Be honest and realistic with yourself - determine what your end-game is. Is this gonna be a one off, short term kind of experiment? If so, save yourself the costs and complexities that come with incorporating (both one time and ongoing fees) and purchase the property, personally.
Here are some popular scenarios where purchasing a property through a corporation might make sense:
(i) FLIPPING PROPERTIES: If your intent is to flip properties rather than hold them as rental revenue, it might make sense to consider holding it through a corporation
(ii) YOU OWN A BUSINESS AND YOU’VE ACCUMULATED SUBSTANTIAL SAVINGS: retained corporate profit can be used to buy a property without withdrawing money personally and incurring personal tax.
SOURCES:
Michael Kovac (Vancouver Chartered Professional Accountant), Rob Kubik (Calgary Senior Accountant), Madan Chartered Accountant (Toronto), Money Sense Article
Mortgage Interest rates and promos:
for the 7th consecutive week 5 year fixed rates are available for as low as 1.79%. Even lower rates are available for no-frills products (I've seen rates as low as 1.59%). One other rate promo to be aware of -> 1.89% for a 5 year fixed, but no interest for the first three months (and it’s not tacked on to the mortgage either! This is the real deal, no smoke in mirrors). Enjoy the savings and the reduced mortgage payment, or lump sum the difference directly into your principle to accelerate your amortization!
**Inquire for other promotional rates that may arise throughout the week
**be aware, interest rates are priced depending on the loan to value ratio of your mortgage. Most of the rate specials you see and hear about are for mortgages that are higher than 80% loan-to-value and less than 65% loan-to-value
That’s all I got. Check in next week for more.
Marko Gelo Garage Band Sessions: (produced and performed my Marko)
- "Cheap Money" ...intro song (0:41)
- "LankyBoy" ...outro song (2:18) <- re-make of a song Marko wrote in 1995
- all instrument and vocal tracks performed by Marko Gelo
- music tracks arranged and produced by Marko Gelo
Contact Marko, he's a Mortgage Broker:604-800-9593 direct Vancouver
403-606-3751 direct Calgary
markogelo.com
@markogelo (Twitter)
MarkoMusic (SoundCloud Account)...all podcast music tracks are performed and produced by Marko
See acast.com/privacy for privacy and opt-out information.
The following is discussed:
for the 6th consecutive week 5 year fixed rates are available for as low as 1.79%. Even lower rates are available for no-frills products (I've seen rates as low as 1.64%). One other rate promo to be aware of -> 1.89% for a 5 year fixed, but no interest for the first three months (and it’s not tacked on to the mortgage either! This is the real deal, no smoke in mirrors). Enjoy the savings and the reduced mortgage payment, or lump sum the difference directly into your principle to accelerate your amortization!
More on interest rates and promotions: Last week I wrote that the Bank of Canada (BOC) will be discontinuing its purchase of bonds, but they have since renewed their commitment and simply scaled back their commitment from $5 Billion in bond purchasing per week to $4 Billion…this means continued low fixed rates! Also, this week, BOC announced they will be keeping prime rate at 0.25% for the unforeseeable future…some are speculating as long as 2023. So, cheap money is here to stay for a while longer! Last time money was this cheap was…never.
How to remove a spouse (or family member) from your mortgage:With the divorce rate in Canada at 50%, this is a common inquiry that comes across my desk. Whether its a marital breakdown or a family member buyout this piece of mortgage surgery can be done with virtually every lender in Canada - there’s just a couple of key points to be aware of:
(i) Is there a substantial buyout involved to the other party? If not, the success rate is 100%…easy peezy. If there is a substantial buyout, proceed to points (ii), (iii), (iv) and (v) below
(ii) Loan to Value Ratio (LTV) - the LTV will determine whether you proceed as a refinance or a purchase. If you can refinance up to 80% LTV and extract the amount needed for your buyout, this will be the cheapest way to go (this will save you thousands of dollars in equity from the hit you would take by incurring a CMHC/GE premium if you had to go above 80% LTV).
(iii) Regardless of your LTV and whether or not an insurance fee is incurred, you also need to be aware of a break penalty if you will be doing this prior to the maturity date of the mortgage. Heads up.
(iv) Also worth considering if you have to go past 80% LTV is porting your mortgage. Porting a mortgage is a fair bit more complicated, but definitely worth considering as you can potentially save in break fees and insurance premiums (if applicable).
(v) If this is a result of a divorce/separation, the mortgage will definitely be subject to a formal separation/divorce agreement that will need to include the terms of the property buyout. The separation/divorce agreement must precede the mortgage approval as the funds will not be advanced without it.
My favourite economist is Benjamin Tal.I’ve always been a fan of Benjamin Tal as he was a regular speaker at all of my conferences when I was with CIBC back in the 90’s. Like all economists, he’s insightful and delivers complex information with tact…but, what made me a fan was the tone of conviction in his delivery. The guy is entertaining…and quite often, correct. Here are some quotes (dated September 2020) about his thoughts on why Canadian real estate has been able to withstand one of the most challenging economic conditions of our time:
“Eighty percent of jobs lost were in the service sector. Many of them were low-income and many of them were renters. So the impact was on rent as opposed to home ownership.”
"We’re seeing a situation where home ownership actually went up. Why? Because 25% of Canadians are telling us that they’re considering buying another unit during this recession. Why? Because their job is still there and the interest rates are in the basement. That’s an opportunity that they’ve been waiting for and that’s why we’re seeing some demand come from domestic homebuyers, not foreign”
“Canada receives 350,000 immigrants, annually…and in 2020, apparently 45% of them are already here <— their status is changing, but they’re already in the country consuming real estate and rental inventory”
“3.5 million Canadians are living abroad and pondering a return to Canada (most of which are in the United States)…also, 400,000 Canadians in Hong Kong are pondering a return, as well. This is more recently highlighted with evidence of Chinese money entering the Canadian market from Hong Kong.”
“About 100,000 Canadians leave Canada for the US on an annual basis…but not this year. This is yet another impact of the market”
So in summary, the demand for real estate in Canada kinda makes sense (when you factor in all of Ben Tal’s compelling thoughts), especially due to “the compensating factors of non-permanent residents, returning citizens and people who don’t move to the U.S.”
That’s all I got. Check in next week for more.
Marko Gelo Garage Band Sessions: (produced and performed my Marko)* "Glorious Day" ...intro song (2:27) * "Out in the Rain" ...outro song (3:59) <- Sleeping Lorry (90's band that Marko played in) * all instrument and vocal tracks performed by Marko Gelo * music tracks arranged and produced by Marko Gelo
Contact Marko, he's a Mortgage Broker:
604-800-9593 direct Vancouver
403-606-3751 direct Calgary
markogelo.com
homefinancingsolutions.ca
Apply for a Mortgage
@markogelo (Twitter)
MarkoMusic (SoundCloud Account)...all podcast music tracks are performed and produced by Marko
Click Here to download Marko's Mortgage App (information, rates, calculators, etc)
See acast.com/privacy for privacy and opt-out information.
Key points:
- New approach/format to podcast...expect weekly episodes based on Marko's weekly newsletter
- Two upcoming events that could potentially cause interest rates to increase (Bank of Canada's announcement to stop purchasing bonds AND the US Election)
- a reminder of the 3 golden credit boosters
Marko Gelo Garage Band Sessions: (produced and performed my Marko)
- "Cheap Money" ...intro song (0:41)
- "mujeres en rojo" ...outro song (1:42)
- all instrument and vocal tracks performed by Marko Gelo
- music tracks arranged and produced by Marko Gelo
Contact Marko, he's a Mortgage Broker:
604-800-9593 direct Vancouver
403-606-3751 direct Calgary
markogelo.com
homefinancingsolutions.ca
Apply for a Mortgage
@markogelo (Twitter)
MarkoMusic (SoundCloud Account)...all podcast music tracks are performed and produced by Marko
Click Here to download Marko's Mortgage App (information, rates, calculators, etc)
See acast.com/privacy for privacy and opt-out information.
Key points:
- Consumer Credit Reports (Borrowell, Credit Karma, etc)...why can't brokers accept your free reports?
- When it comes to mortgages, credit reports are reviewed from a very broad perspective - way more to it then just the actual score
- Avoid deferring your broker/banker from checking your credit score...do it sooner rather than later
- learn about the 3 golden tips that are sure to increase your credit score within a short period of time (avoid exceeding 60% of your approved credit limit, pay on time and avoid problematic disputes with creditors)
Marko Gelo Garage Band Sessions: (produced and performed my Marko)
- "Cheap Money" ...intro song (0:41)
- "CSharp" ...full version (1:34)
- all instrument and vocal tracks performed by Marko Gelo
- music tracks arranged and produced by Marko Gelo
Contact Marko, he's a Mortgage Broker:
604-800-9593 direct Vancouver
403-606-3751 direct Calgary
markogelo.com
homefinancingsolutions.ca
Apply for a Mortgage
@markogelo (Twitter)
MarkoMusic (SoundCloud Account)...all podcast music tracks are performed and produced by Marko
Click Here to download Marko's Mortgage App (information, rates, calculators, etc)
See acast.com/privacy for privacy and opt-out information.
An overview of key points when qualifying for a mortgage in Canada, and what to expect:
Key points:
- The Application Process: Old School and New School processes
- The Qualification Process: An overview of some key qualification guidelines
- Getting the best rates: there's more to it than you think
- ALSO INCLUDED: a Marko-Gelo-Garage-Band creation!
Marko Gelo Garage Band Sessions: (produced and performed my Marko)
- "Cheap Money" ...intro song (0:41)
- "Disconnected" ...full version (1:39)
- all instrument and vocal tracks performed by Marko Gelo
- music tracks arranged and produced by Marko Gelo
Contact Marko, he's a Mortgage Broker:
604-800-9593 direct Vancouver
403-606-3751 direct Calgary
markogelo.com
homefinancingsolutions.ca
Apply for a Mortgage
@markogelo (Twitter)
MarkoMusic (SoundCloud Account)...all podcast music tracks are performed and produced by Marko
Click Here to download Marko's Mortgage App (information, rates, calculators, etc)
See acast.com/privacy for privacy and opt-out information.
Why is it that banks differ in how much mortgage they approve you for? Even though all banks use the same qualification formulas, there are some banks that have additional boosters that can propel you to higher qualification amounts.
Key points:
- Mortgage Approval Pro Tip #1: Down Payment and Amortization affect your maximum mortgage amount
- Mortgage Approval Pro Tip #2: After income, debt is the next major mortgage qualification killer
- Mortgage Approval Pro Tip #3: Avoid using CMHC if you want to qualify for the absolute maximum mortgage
- Mortgage Approval Pro Tip #4: Be aware of non-income qualification boosters
- listen to the complete episode for more details!
- ALSO INCLUDED: an Marko-Gelo-Garage-Band creation
Marko Gelo Garage Band Sessions: (produced and performed my Marko)
- "Cheap Money" ...intro song (0:41)
- "GeorgeQ" ...outro song, full version (1:57)
- all instrument and vocal tracks performed by Marko Gelo
- music tracks arranged and produced by Marko Gelo
Contact Marko, he's a Mortgage Broker:
604-800-9593 direct Vancouver
403-606-3751 direct Calgary
markogelo.com
homefinancingsolutions.ca
Apply for a Mortgage
@markogelo (Twitter)
MarkoMusic (SoundCloud Account)...all podcast music tracks are performed and produced by Marko
Click Here to download Marko's Mortgage App (information, rates, calculators, etc)
See acast.com/privacy for privacy and opt-out information.
How mortgages will play a key role in how Canada's financial system rebounds in the post-COVID era.
Ready or not, here we go.
Key points:
- 8 weeks in isolation and the resulting impact on mortgage qualification and Canada's financial system
- Canada's life saver...our general conservative nature (move ahead with caution approach)
- yesterday's compromises will be today's tools
- everything is political...except mortgage qualification
- is the next industrial revolution upon us? ...one economist thinks so
- listen to the complete episode for more details!
- ALSO INCLUDED: an unfinished Marko-Gelo-Garage-Band creation (sneak-peak)
Marko Gelo Garage Band Sessions: (produced and performed my Marko)
- "Cheap Money" ...intro song (0:41)
- "GeorgeO" ...outro song, instrumental version (1:57)
- all instrument and vocal tracks performed by Marko Gelo
- music tracks arranged and produced by Marko Gelo
Contact Marko, he's a Mortgage Broker:
604-800-9593 direct Vancouver
403-606-3751 direct Calgary
markogelo.com
homefinancingsolutions.ca
Apply for a Mortgage
@markogelo (Twitter)
MarkoMusic (SoundCloud Account)...all podcast music tracks are performed and produced by Marko
Click Here to download Marko's Mortgage App (information, rates, calculators, etc)
See acast.com/privacy for privacy and opt-out information.
Key points:
- behind the scenes with (COVID19) appraisal procedures and value determination
- understanding the impact of loan-to-value ratios on your mortgage qualification
- preparation for your appraisal during COVID19
- real estate value trends since COVID outbreak
- act now, or later?
- listen to the episode for more details!
- ALSO INCLUDED: past Marko-Gelo-Garage-Band creations
Guest Contact: No Guests
Marko Gelo Garage Band Sessions: (produced and performed my Marko)
- "Cheap Money" ...intro song (0:41)
- "Economies of Scale" ...outro song (1:09)
- all vocal tracks performed by Marko Gelo
- music tracks arranged and produced by Marko Gelo
Contact Marko, he's a Mortgage Broker:
604-800-9593 direct Vancouver
403-606-3751 direct Calgary
markogelo.com
homefinancingsolutions.ca
Apply for a Mortgage
@markogelo (Twitter)
MarkoMusic (SoundCloud Account)...all podcast music tracks are performed and produced by Marko
Click Here to download Marko's Mortgage App (information, rates, calculators, etc)
See acast.com/privacy for privacy and opt-out information.
Key points:
- access to fully discounted interest rates - not POSTED RATES
- ability to move to another lender without penalty
- option to change the terms and features of your new mortgage
- option to pay off any lingering debt without incurring any break fees
- how to become fully optimized and prepared for your mortgage renewal with minimal effort
- listen to the episode for more details!
- ALSO INCLUDED: a brand new Marko-Gelo-Garage-Band song...check it out. "Sunday Nights"
Guest Contact: No Guests
Marko Gelo Garage Band Sessions: (produced and performed my Marko)
- "Sunday Nights" ...intro song (1:56)
- all vocal tracks performed by Marko Gelo
- music tracks arranged and produced by Marko Gelo
Contact Marko, he's a Mortgage Broker:
604-800-9593 direct Vancouver
403-606-3751 direct Calgary
markogelo.com
homefinancingsolutions.ca
Apply for a Mortgage
@markogelo (Twitter)
MarkoMusic (SoundCloud Account)...all podcast music tracks are performed and produced by Marko
Click Here to download Marko's Mortgage App (information, rates, calculators, etc)
See acast.com/privacy for privacy and opt-out information.
Key points:
- when bond yields go down, mortgage rates are supposed to follow...not these days
- if Prime Rate goes down, do fixed rates also go down?
- where are interest rates in Canada headed?
- What is the "Bank of Canada" and what is its purpose?
- how to capture the best interest rate for your upcoming mortgage renewal
- listen to the episode for more details!
Guest Contact: No Guests
Marko Gelo Garage Band Sessions: (produced and performed my Marko)
- "23 days in Berlin" ...intro song (1:17)
- all vocal tracks performed by Marko Gelo
- music tracks arranged and produced by Marko Gelo
Contact Marko, he's a Mortgage Broker:
604-800-9593 direct Vancouver
403-606-3751 direct Calgary
markogelo.com
homefinancingsolutions.ca
Apply for a Mortgage
@markogelo (Twitter)
MarkoMusic (SoundCloud Account)...all podcast music tracks are performed and produced by Marko
Click Here to download Marko's Mortgage App (information, rates, calculators, etc)
See acast.com/privacy for privacy and opt-out information.
Key points:
YES - most Canadian banks are making the ability to defer your mortgage payments available for eligible applicants
YES - the ability to defer for UP TO 6 months seems to be the generally promoted tenure of deferring your payments
YES - for those that are anticipating hardship, you need to inquire and apply with, or at the very least inform your lender that you may possibly be defaulting on your next payment. Whatever you do, don’t do ABSOLUTELY NOTHING. If you have already missed a mortgage payment and haven’t had the chance to be proactive about it, continue on the path and try to reach them to explain your situation and proceed to formally apply for the program
YES - lack of action from you PRIOR to your first missed mortgage payment will likely impact your credit score. The key is to be forthcoming and proactive - I can’t stress this enough.
YES - you will be on the phone or waiting for an online response for a very long time...this is normal
YES - you may possibly have to re-apply for the deferred payment every month
YES - most lenders will simply be tacking on your missed mortgage payment on to your existing mortgage principle. So YES, you will technically be paying interest on interest...but seriously, who really cares at this point. If this is a main arguing point for you...you can’t have your cake and eat it. Just get over it.
NO - the program is not and was never called TheMortgageFORGIVENESSProgram. It is known as the DEFERREDMortgagePaymentProgram...and as the name implies, the interest payments that are not being paid will most definitely be deferred in to the future (more on this later)
NO - not everyone will qualify for a mortgage deferral. it is possible that the lender will contest your degree of hardship and decline your application for it
NO - not every lender will allow as high as 6 months in deferred payments
NO - if you are NOT in immediate hardship and are just kind of hoping for extra insurance, just in case things get a little challenging, you want to pre-apply for the deferred mortgage program...no, don’t call and clog up the pathway of communication, you will be declined for it anyway
NO - you will NOT qualify for this if you are still employed
NO - you will likely NOT qualify for this if you have a good amount of cash in the bank or even other sources of unused credit that are available to tap in to (like existing home equity lines of credit & personal lines of credit)
***listen to the episode for more details!
Guest Contact: n/a
Marko Gelo Garage Band Sessions: (produced and performed my Marko)
- "Isolation" ...intro song (2:30)
Contact Marko, he's a Mortgage Broker:
604-800-9593 direct Vancouver
403-606-3751 direct Calgary
markogelo.com
homefinancingsolutions.ca
Apply for a Mortgage
@markogelo (Twitter)
MarkoMusic (SoundCloud Account)...all podcast music tracks are performed and produced by Marko
Click Here to download Marko's Mortgage App (information, rates, calculators, etc)
See acast.com/privacy for privacy and opt-out information.
Subtitle4 reasons to use a mortgage broker
SummaryKey points:
- the Big 5 Banks in Canada...how many other lenders are there?
- 4 reasons to use a mortgage broker: (i) there's always a Plan B (ii) engage lenders to compete for your business (iii) interpreting the fine print of all lenders (iv) you won't know what you don't know
- and much more..
Guest Contact: n/a
Marko Gelo Garage Band Sessions: (produced and performed my Marko)
- "ManicPanic" ...intro song
Contact Marko, he's a Mortgage Broker:
604-800-9593 direct Vancouver
403-606-3751 direct Calgary
markogelo.com
@markogelo (Twitter)
MarkoMusic (SoundCloud Account)...all podcast music tracks are performed and produced by Marko
Click Here to download Marko's Mortgage App (information, rates, calculators, etc)
See acast.com/privacy for privacy and opt-out information.
Key points:
- average Canadian owes $1.78 for every $1 earned
- what happens to your credit when: you are behind in payments, your credit card is max'd
- reach out for a consultation sooner than later - when it comes to credit, time is always of the essence
- applications and examples of consumer proposals
- you can still qualify for a mortgage if you had a consumer proposal or even if you've been bankrupt
- and much more..
Guest Contact: Michael Goldenberg (Debt Care Canada): 1-888-890-0888 phone, mgoldenberg@debtcare.ca
Marko Gelo Garage Band Sessions: (produced and performed my Marko)
- "and now for the guest of the show" ...guitar, vocals (lead and harmony), Apple Garage Band loops
- "sunny days"...outro track, acoustic guitar, bass guitar, drums, keyboard
Contact Marko, he's a Mortgage Broker:
604-800-9593 direct Vancouver
403-606-3751 direct Calgary
markogelo.com
@markogelo (Twitter)
MarkoMusic (SoundCloud Account)...all podcast music tracks are performed and produced by Marko
Click Here to download Marko's Mortgage App (information, rates, calculators, etc)
See acast.com/privacy for privacy and opt-out information.
Key points:
- what does "remediated grow op" mean?
- how do you know if you are buying a property that was once a marijuana grow op?
- will banks approve your mortgage if your property was previously a grow op?
- growing marijuana is legal, does that mean your tenant can do so?
- home insurance and legalized marijuana legislation...what to be aware of
- and much more..
Contact John Darel (Realtor, Maxwell Canyon Creek Realty): 403-861-2733 cell, jdarel@johndarelrealty.ca
Marko Gelo Garage Band Sessions: (produced and performed my Marko)
- "and now for the guest of the show" (guitar tracks and vocals by Marko Gelo, the rest of the tracks are Apple Garage Band loops)
- "fight the day"...an original song by Sleeping Lorry (a band Marko played in back in the early 90's); vocals & rhythm guitar by J. Vulic, background vocals and lead guitar by M. Gelo, Bass Guitar by D. Kulas, Drums by R. Vulic)
Contact Marko, he's a Mortgage Broker:
604-800-9593 direct Vancouver
403-606-3751 direct Calgary
markogelo.com
@markogelo (Twitter)
MarkoMusic (SoundCloud Account)...all podcast music tracks are performed and produced by Marko
Click Here to download Marko's Mortgage App (information, rates, calculators, etc)
See acast.com/privacy for privacy and opt-out information.
Key points:
- which party's housing affordability appeals to you most?
- verifying the source of your down payment - what do the banks expect?
- what if Bank of Mom & Dad contribute towards my down payment?
- how long must you have ownership of your down payment proceeds before you move in?
- money can be transferred into Canada from around the world (for mortgage down payment purposes) EXCEPT three countries
Marko Gelo Garage Band Sessions: (produced and performed my Marko)
- the opening track features a piece called "TheThingAboutMoney" (acoustic and electric guitars, 5 piece acoustic drum kit, Latino Percussion, HandClapping, Chanting, Fender Precision Bass, vocals). Laid down three vocal tracks for the chanting, another three for the main vocals (2 tracks harmonizing and the third was a low bass note sustained on the last lyric of every verse). Wanted to add synthesizer for some ambience, but the guitars were recorded out of tune...just kept it all guitar as a result.
Contact Marko, he's a Mortgage Broker:
604-800-9593 direct Vancouver
403-606-3751 direct Calgary
markogelo.com
@markogelo (Twitter)
MarkoMusic (SoundCloud Account)...all podcast music tracks are performed and produced by Marko
Click Here to download Marko's Mortgage App (information, rates, calculators, etc)
See acast.com/privacy for privacy and opt-out information.
A short talk about the newly launched First Time Home Buyer Incentive program in Canada.
Key points:
- how does it work?
- how do you qualify?
- where do you apply?
- Canada only program
- For more details about FTHBI: https://www.placetocallhome.ca/fthbi/first-time-homebuyer-incentive
Marko Gelo Garage Band Sessions: (produced and performed my Marko)
- the opening track features a piece called "KryptoKurrency" (acoustic and electric guitars, intro drum machine, 5 piece acoustic drum kit, hammond organ, vocals). Inspired by Deep Purple, one of my favourite bands.
Episode Cover Photo by Tia Gelo.
Contact Marko, he's a Mortgage Broker:
604-800-9593 direct Vancouver
403-606-3751 direct Calgary
markogelo.com
@markogelo (Twitter)
MarkoMusic (SoundCloud Account)...all podcast music tracks are performed and produced by Marko
Click Here to download Marko's Mortgage App (information, rates, calculators, etc)
See acast.com/privacy for privacy and opt-out information.
Key points:
- summary of economic and political factors that surround Calgary
- life after the provincial election (April 2019)
- impact of reduced big oil/gas private investment
- new legislation/bills directed at reviving the economy
- Calgary inventory stats...19% decrease in listings (year over year)
- Active buyers on the rise (buyers market)
- Popular Mortgage Product/Strategy in Calgary: the Purchase+Improvement Mortgage
- what can $500,000 buy you in Calgary?
MarkoMusic tracks: (produced and performed my Marko)
- the opening track features a piece called "BagOfCash" (acoustic guitars, 3-part progressive harmony, distorted electric guitars - simple melody runs, no bass guitar, heavy floor and bass drums, wind pipe organ, electric piano). Kinda has a Tragically Hip feel at the beginning, then it turns into a big shakedown of wildly blended arrangements. My longest track so far...2 minutes 58 seconds.
- the closing track is from a past episode (Episode 15)...song is called, "TheQualifier" (piano intro and SonicYouth kind of ending)
Contact John Darel, he's a Real Estate Agent in Calgary:
https://johndarelrealty.ca/
Contact Marko, he's a Mortgage Broker:
604-800-9593 direct Vancouver
403-606-3751 direct Calgary
markogelo.com
@markogelo (Twitter)
MarkoMusic (SoundCloud Account)...all podcast music tracks are performed and produced by Marko
Click Here to download Marko's Mortgage App (information, rates, calculators, etc)
See acast.com/privacy for privacy and opt-out information.
Key points:
- 3 main points lenders zone in on when adjudicating your income for a mortgage:
- Is your income taxed at source?
- Is your employment & Income guaranteed?
- Employment Tenure
MarkoMusic tracks: (produced and performed my Marko)
- the opening track features a piece called "BrokenRingFinger" (distorted guitars with Phaser effects, 4-part progressive harmony, upright studio bass, synthesizer effects, keyboard)
- the closing track is from a past episode (Episode 4, Squamish Real Estate)...song is called, "EconomiesOfScale" (clean guitars, Mr.Rogers kind of feel with rare vocals from Marko...2 part harmony)
Contact Marko, he's a Mortgage Broker:
604-800-9593 direct Vancouver
403-606-3751 direct Calgary
markogelo.com
@markogelo (Twitter)
MarkoMusic (SoundCloud Account)...all podcast music tracks are performed and produced by Marko
Click Here to download Marko's Mortgage App (information, rates, calculators, etc)
See acast.com/privacy for privacy and opt-out information.
When it comes to mortgages, there are two charges that a bank can apply to your land title. This episode explains the key differences between a standard and collateral charge mortgage.
Key points:
- standard charge mortgages are the most common charges
- collateral charges are re-advancable and non-transferrable
- be cautious about taking the path of least resistance when it comes time to renew your mortgage. It may be a little more work, but be sure to explore ALL of your options (with a Mortgage Broker!)
MarkoMusic tracks: (produced and performed my Marko)
- the opening track features a piece called "Collateralization" (distorted harmonizing guitars with a slow punk drum groove in a 1-4-5 chord progression)
- the closing track is a song from a band that Marko played in (1990-99ish), Sleeping Lorry. Song is called, "Go".
- Sleeping Lorry: Joseph Vulic (guitar-vocals), Marko Gelo (lead guitar-mandolin-back vocals), Darko Kulas (bass guitar), Robert Vulic (drums)
Contact Marko, he's a Mortgage Broker:
604-800-9593 direct Vancouver
403-606-3751 direct Calgary
markogelo.com
@markogelo (Twitter)
MarkoMusic (SoundCloud Account)...all podcast music tracks are performed and produced by Marko
Click Here to download Marko's Mortgage App (information, rates, calculators, etc)
See acast.com/privacy for privacy and opt-out information.
Lenders have absolutely no motivation or desire to explain how YOU can pay off THEIR mortgages sooner. This episode explains the key methods that you can implement right now and put yourself on a (much) quicker path towards mortgage freedom.
The following is discussed in this episode:
- lump sum payments and the impact they have on your mortgage principle
- increasing your mortgage payment, even by $20...does this really make a difference?
- choosing the most effective payment frequency...whats the difference between monthly payments and bi-weekly payments?
Contact Marko, he's a Mortgage Broker:
604-800-9593 direct Vancouver
403-606-3751 direct Calgary
markogelo.com
@markogelo (Twitter)
MarkoMusic (SoundCloud Account)...all podcast music tracks are performed and produced by Marko
Click Here to download Marko's Mortgage App (information, rates, calculators, etc)
See acast.com/privacy for privacy and opt-out information.
There are a lot of illegitimate (crappy) mortgage pre-approvals out there...make sure yours isn't one of them.
The following is discussed in this episode:
- the client interview (application process to qualify for a mortgage pre-approval)
- signs of a illegitimate mortgage pre-approval
- how to avoid getting a illegitimate pre-approval
- what should your mortgage pre-approval include
- the key points/items of a legitimate mortgage pre-approval
Contact Marko, he's a Mortgage Broker:
604-800-9593 direct Vancouver
403-606-3751 direct Calgary
markogelo.com
@markogelo (Twitter)
MarkoMusic (SoundCloud Account)...all podcast music tracks are performed and produced by Marko
Click Here to download Marko's Mortgage App (information, rates, calculators, etc)
See acast.com/privacy for privacy and opt-out information.
Discussion on the sequence of (critical) events leading up to the subjects removal date of your real estate contract.
See acast.com/privacy for privacy and opt-out information.
The following is discussed:
- Mortgage Programs for 1st time and repeat home buyers:
- Minimum Down Payment
- Purchase Plus Improvement Mortgage (apply for a renovation supplement to your mortgage the day you make an offer on a home)
- Self Employed Applicants...are they treated differently?
- New To Canada: mortgages for new Canadian Citizens, Permanent Residents, or Non-Permanent Residents
- Non-Mortgage Programs for 1st time and repeat home buyers:
- GST rebates
- tax free RRSP withdrawal rules
- GST rebates
- Property Transfer Tax rebates and exemptions
The feature song for this episode is "Insanity**" (Produced/Performed by Marko Gelo)
**For past episode music tracks, visit MarkoMusic (SoundCloud)
**For immediate Mortgage Advice text Marko at 604-800-9593 BC, or 403-606-3751 AB
Risk factors that influence mortgage qualification guidelines
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INTRO:
What really goes on when you pick up the phone, go online, or walk inside a bank and ask, "what's your best 5 year rate?" (or any other rate for that matter). If you haven't noticed by now, the answer to that question from your mortgage broker or banker has gotten very confusing and at times either misleading or simply mistakenly quoted. To be fair, there are many brokers and bankers who deliver the message correctly on their first go...but probably not without several disclaimers and underlying conditions. Now why is this? Why can't the answer be easy? How and why, could their possibly be 4 different quotes for the same 5 year fixed rate product WITH THE SAME LENDER? Why does the rate shopper have to provide several personal details so the broker or banker can determine the precise interest rate? The answer is simple, kinda. Todays lending environment and Canada's complex real estate market diversity from coast to coast has become a complicated web of risk management....and like never before seen, interest rate pricing has become the primary mitigator of risk. The mortgage industry has taken a few pages out of the insurance industry's risk management policy, particularly pertaining to premium pricing. The riskier the client profile, the higher the insurance premium...or in the case of mortgages, the higher the interest rate. Listen on and learn how your interest rate is determined and which customer profile fetches the best one.
Welcome to episode Twelve of Mortgagenomics, I’m your host, Marko Gelo.
Ok, let's slam through this...why are mortgage interest rates so broad and diverse these days. Let's start with the range of interest rates that are currently available in the market today for a 5 year fixed rate. Of course, be aware that the range that I am about to tell you may have changed since the recording of this episode...but the concept (or methodology) I'm talking about will certainly remain the same. So here it is, the range of 5 year rates currently available in the market today are between 3.19% to probably about 5.25% (on the high side). So 3.19 to 5.25%...now of coarse, everyone is going to opt for, or pick the 3.19%, naturally...but here's the thing that many Canadians are having a tough time with...and that is the rate pricing criteria. I'm just gonna state as many selection criteria that I can think of right now that are involved with determining which interest rate you get...k here we go:
•your credit score...basically your score determines which broad range of pricing you will be placed in; that could be either the prime rates, the sub-prime rates or the sub-sub prime rates
•your credit performance and history...way bigger deal than your credit score...as with the score, your current and past performance history determines which classification of rates you will be placed in
•self employed applicants...some lenders tack on a premium here but for various reasons and depending on a few things (really this is a topic for another episode)
•extended amortization periods over 25 years...in certain circumstances lenders tack on a rate premium (~0.1-0.15% increase in rate)
•rental property purchases...generally speaking, higher interest rates
•refinances...again, generally speaking, higher interest rates
•Purchase prices over $1M...typically higher interest rates
•For renewals and refinances...the status of your mortgage prior to October 17, 2016 and November 30, 2016 has a pretty significant bearing on your interest rate. Depending on various complicated status conditions of your existing mortgage, your interest rate will be determined, accordingly.
•whether you are an insured mortgage or not (and by insured I am referring to a mortgage which has a CMHS premium applied to it...in most cases, these are mortgages with less that 20% down payment)...this is a major effect on your interest rate offer, which leads to my final point...
•...the biggest and most influential selection criteria to determine how your 5 year fixed rate will be priced...the loan-to-value ratio.
Ok, so I'm gonna talk about the last couple of points in greater detail, for home purchase and refinance mortgages the driving force of interest rate pricing is the loan to value ratio and for mortgage renewals, it is the status of your mortgage prior to October 17, 2016 and November 30, 2016.
Let's start with home purchase and refinance mortgages. Among other variables that affect the pricing (as I mentioned earlier), the main driver of interest rate pricing is the loan to value ratio. The loan to value ratio is (as the wording implies) the percentage of a properties value that is mortgaged. For example, a Million dollar home with a $600,000 mortgage would have a loan to value ratio of 60%. So then, you would likely conclude, the higher the loan to value, the riskier the loan and therefore, the higher the interest rate. But that's not neccesarily the case. In fact, the best interest rates available in the market today are for high ratio, insured mortgages. That's right, the mortgage holder with the least amount of skin in the game fetches the best rates these days. But don't fret because to get these rates means that your down payment needs to be less than 20%, thereby making your mortgage eligible for mandatory regulated loan insurance (commonly known as CMHC Insurance)...and as a result, a significant premium is tacked on to your overall mortgage. For instance, for a 95% loan to value mortgage, the premium charge tacked on to your mortgage (which immediately diminishes your equity on impact by the way) is 4% of you mortgage principle...so if your mortgage is $500,000, an additional $20,000 would get tacked on to your mortgage before you even make the first payment on it (that's assuming you're at 95% loan to value)...now the premium decreases as the loan to value drops all the way to 80% where it is finally non-existent.
So, let's recall that interest rate range for a 5 year fixed term that I brought up earlier of 3.19% to 5.25%. The 3.19% would very likely be a rate only offered to mortgages with a loan to value greater than 80% and all the way up to 95%. You heard that right, the mortgage holder with a meagre 5% down payment can potentially get the best rate available in the market, today. So how does this make sense? What kind of strange-risky customer incentive is this? The reason has everything to do with the fact that the loan is insured...so long story short, the lender has absolutely nothing to lose for this band of loan to values (from 80.01% to 95%). If the mortgage holder defaults on the loan, no sweat for the lender as they receive full reimbursement of the mortgage principle from the insurer. And to top it off, it was the mortgage holder who paid for the insurance from the onset of their home purchase. Crazy hey?
So that covers interest rate pricing for loan to values that are greater than 80%. But what about loan to values that are 80% or less?
So the name given to mortgages with a loan to value greater than 80% is high ratio (or insured) mortgages. Conversely, mortgages with loan to values of 80% or less are known as conventional mortgages (or uninsured). Now this band of loan to values receives higher interest rates due to the fact that they are not insured against loss to the lender. You might think, with 20% down, what does the bank have to lose? If something happens, they can just sell the house and recoup their losses and probably have some cash left behind. Well, apparently that is not the case, nor the sentiment of the lenders...at the moment, their uninsured safe zone is in the loan to value band below 70% where you can expect bargains similar to what you might see in the high ratio band (loan to values greater than 80%). So basically, in the event you default on your mortgage payments and the lender begins foreclosure proceedings, they feel that they can dispose of your property in the market swiftly by selling it at 70% of its value...thereby recouping their losses and moving on. That marker used to be 80%...and this is where we are today...confidence in the Canadian real estate market is volatile and for the most part, paranoid. Paranoid of the impact Canada's most populated regions would have from a significant correction. So to conclude on loan to value pricing bands...the most expensive money is in the 70 to 80% loan to value band. But, at the end of the day...its all relative because don't forget about the significant insurance premium the mortgage holder pays when they have an insured mortgage...the 5% down payment customer gets the best rate, but they substantially compromise their equity when the insurance premium tops up the mortgage.
Ok, so that covers mortgage purchases and refinances...let's end off with mortgage renewals. Now I'm not going to get in to the high level details explaining this area, because it is ridiculously confusing, in fact, so confusing that many mortgage specialists can't even wrap their heads around it. But it focuses around two particular dates when specific mortgage rules where implemented in Canada. And these dates are October 17, 2016 and November 30, 2016. Basically, the most recent insurable status of your mortgage up to these dates determines the interest rate you will receive and of coarse depending on the loan to value ratio. So, if your 5 year fixed mortgage is coming up for renewal this October that would mean you signed up for it in 2013. THEREFORE, since your mortgage was initiated, activated or registered prior to October 17, 2016...you will then have access to many more interest rate offers, then you would if the mortgage closed after October 17, 2016. One of the unintended consequences here is that the mortgage broker has become the dominant choice over the bricks and mortar bank channel and the main reason why? The broker channel has become empowered with the ability to adjust pricing to very competitive price points as their slim operational costs have opened the door to more aggressive discretionary pricing offers.
...Substantially less costs to run their business...choice and options from multiple lenders...and solitary expertise in only mortgages...mortgage brokers are far more likely to get you to the end zone then a conventional bank. I am not at all attempting to discredit the non-broker channel, but I can tell you that the pendulum has swung and this is where its landed...for the time being.
Ok, hopefully this all made sense to you and really, the big take away here is to simply acknowledge the fact that interest rate offers are not SIMPLE or…logical. But hopefully with the information that I just uncovered, at the very least, you should now be able set your interest rate expectations as to where you sit on the criteria scale for interest rate pricing. More than ever before, I strongly encourage you to reach out to a mortgage broker for absolutely all of your home financing needs…and theirs absolutely no spin to this statement. Interest rate offers change like the wind from lender to lender…and mortgage brokers represent and do business with a large majority of them. More lenders to tender your application to…this results in them competing and fighting for YOUR business, and ultimately the end result is the very best interest rate to you.
And that concludes another episode of Mortgagenomics. If you liked this episode please be so kind and leave us a review in your Apple Podcast space or whichever podcast medium you are listening from…the reviews go a long way and help us grow and improve the podcast…thank you in advance, I really appreciate it! (To directly reach out to todays guest, simply refer back to the episode transcripts and details from whichever platform you have listened from…I’ve included all the contact points). And of course, feel free to reach out to me if you’d like to discuss anything we talked about in greater detail…or any other mortgage related matter, you can find me at homefinancingsolutions.ca or follow me on Facebook by searching Marko Gelo, Mortgage Broker in Vancouver or Calgary. AND I ALSO want to encourage any mortgage professionals that might be listening in, please don’t hesitate to reach out and discuss employment opportunities as we are always looking to take on more brokers, regardless of your level of experience…our training and support systems are second to none. And finally, please don’t hesitate to share and tell your friends about Mortgagenomics Canada…the more listeners the better.
Thanks again for your time, talk to you later.
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Podcast Notes:Interview with Tony Spagnuolo Spagnuolo and Company: BCs (and probably Western Canada’s) largest residential real estate and conveyancing law firm. Established in 1995, offices everywhere. * Terra Firma:* a service that has spawned from Spagnuolo and Companys’ countless land title experiences over the years. Terra Firma was formed 2 years ago with the primary intent of providing land title review service to partnering real estate professionals. * Terra Firma title review – a service designed primarily for real estate professionals. Currently over 500 realtors are registered and using the service in the lower mainland (Vancouver). * A title review is a key part of the due diligence process in the sales transaction of real estate. Often times, buyers are unaware of detrimental non-financial charges that are discovered on the land title AFTER releasing subject conditions on their real estate purchase. This is where Terra Firma comes in to play…if your realtor is registered with them, they can have access to unlimited title reviews. Along with a copy of the land title, a legal opinion on any charge on the title is also included with the service. * Covenants, easements, and rights of ways…terms associated with a land title * A covenant is a condition tied to the land. * An easement (or right of way) is a right given to another person or entity to trespass upon or use land owned by somebody else. Common easements on residential land titles include the right to permit utility companies to run their lines/pipes beneath the surface of your land. * It is (very) important to be aware and in full understanding of the covenants and easements associated with your property…It can significantly affect your plans for any additions or modifications you may want to do on your property * In the podcast, Tony talks about several examples of covenants and easements * Two main types of charges on a land title; financial and non-financial * Financial charges are less critical to a buyer because the seller is obligated to close any outstanding financial charges prior to closing on the purchase * It is the non-financial charges that pose a greater risk to the prospective buyer, especially if they are completely unaware of them and have released subject conditions on the purchase of the property * Strata complexes (condo/apartment) have extensive land title details that include countless non-financial charges. Terra Firm recently reviewed one that included 142 charges!? * Terra Firma Title Review is definitely a value add service that realtors are catching on to (in Vancouver/Fraser Valley) * Inquire with Spagnuolo and Company or Terra Firma and ask to be referred to one of their partner realtors
Tony Spagnuolo contact info: 604-777-7406 direct | tony@spagslaw.ca | Terra Firma Website | Spagnuolo and Company Website
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(May 20, 2018) In this episode we talk with John Darel of Maxwell Canyon Creek Calgary on the various factors involved in determining a homes list price. We also touch on importance of hosting open houses. To end off the segment we discuss home staging strategies and tips with Elysse Bulloch of Simply Stylish Staging.
Podcast Notes:SEGMENT 1: Interview with John Darel and Elysse BullochGuest #1: John DarelDETERMINING YOUR LIST PRICE
- historic property info, current market for comparable properties, sales history, features/conditions of property, sales and listing market, customer motivation
- good data analysis = accurate list price, optimum positioning of your property
- property tax assessments are not a reliable tool when determining your list price
OPEN HOUSES
- timing, presentation and delivery
- instantaneous feedback
- magnet for intel about your property and potential buyers
- encounter advocates for your property (neighbours, other realtors)
- the effect of being a tangible commodity
Guest #2: Elysse BullochSTAGING
- selling a lifestyle to a buyer
- staging is equally popular with empty or occupied homes
- budgets for staging can vary from $250 to $3,000
- staging focus is on "impact spaces" of your home (i.e. kitchens, living room, dining room, master bedroom)
- staging services are often included in realtor services and offerings (part of their overall package offering to clients)
- 3 musts for homeowners about to sell their homes: (i) updated paint (ii) updated flooring (iii) STORAGE
SEGMENT 2: Mortgage Minute | Rising Interest Rates and Diminishing Purchase Power* In recent months mortgage qualification has risen to a new standard that for the most part has had drastic repercussions to many existing home owners and a countless number of potential home buyers * But adding to the mix in recent weeks, we’ve quietly seen the rise of another standard…one that is occurring with little or no fanfare at all - rising interest rates * Existing home owners and potential home buyers are affected by rising interest rates, but each in a slightly different way: * If you are a home owner with an existing mortgage, be aware of your options to extend the term you currently have (assuming it is a favourable interest rate) by considering an early renewal. Alternatively, if your mortgage is up for renewal in the next 6 to 12 months, consult with a mortgage broker and discuss current market rates and the feasibility of restructuring your mortgage to position your self for stability in uncertain times. The window of opportunity to do so still exists, but be aware that (literally) thousands of dollars in potential savings disappear as every interest rate hike occurs * The second group affected by rising interest rates, the potential home buyers, are impacted slightly more than existing home owners. Not only are they faced with rising interest payments on their eventual mortgage, but with each and every rate hike, their purchasing power is diminishing thanks to the 2% stress test for mortgage pre-approvals * Regardless of whether you are an existing home owner, or a potential home buyer…the ruthless behaviour of interest rates have now entered the field of play * Whatever you do, don’t lose the initiative and let the opponent (in this case, rising interest rates) dictate your destiny. Be proactive and take full control of your financing, it’s in YOUR best interest
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Click Here for complete episode details.
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A closer look in to applications and features of the Reverse Mortgage strategy. If you or anyone you know are over the age of 55, you should listen in. Click here for complete podcast transcripts.
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Lisa Gordon of Macdonald Realty (in North Vancouver) discusses the real estate news and trends in North Vancouver. In Mortgage Minute, Marko talks about the key points on how to prepare yourself for a mortgage if you're self employed. For complete episode details, visit the episode blog.
(Opening/Closing Music Track: "the cut", performed and produced by Marko Gelo)
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New announcement from Nenshi and Calgary real estate outlook(March 22, 2018) Calgary council speeds up the process to get rental suite permits approved. Probably a good thing in the long run, but in the current state of things...pfft, whatever (rental vacancy currently at ~6.7% and still way too many unsold and soon to be converted rental condos).
Spring has arrived, is Calgary's market good to go? John Darel of Maxwell Canyon Creek Realty talks about the challenges and opportunities of Calgary's real estate environment. Particular focus on the $600,000 to $1M price band and how to overcome selling barriers when listing. John also provides some insight on strategically pricing your property in a challenging market. And finally, his top listing pick for the city of Calgary.
Mortgage Minute: a short tutorial on mortgage pre-payment options (direct payments towards your mortgage principle without any penalty or fees). How much can one over contribute towards their mortgage principle before getting penalized?
This episode of Mortgagenomics turns the spotlight on White Rock and South Surrey real estate. Ped Naimi of Vantage Real Estate provides insight on the current market and his thoughts on how it will evolve in years to come. On the mortgage front, Mortgage Minutes explains the down payment criteria when qualifying for a mortgage.
For complete episode details: https://www.homefinancingsolutions.ca/blog/
An in depth conversation with Meghan Zuvelek of Remax Sea to Sky Real Estate in Squamish, BC (https://movetosquamish.ca/). Is this place an alternative to Vancouverites seeking affordability? Listen in and discover what Squamish has in store for future development. Also, this episode unravels the wrath of the dreaded posted mortgage rate...besides the higher interest rate, what are the other serious implications of it. Find out in The Mortgage Minute.
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- Calgary real estate market update with John Darel (Realtor, Maxwell Canyon Creek Calgary)...buyer, seller or balanced market? + Mortgage Minute...explanation and example of bridge financing Intro Music Track: Cheap Money (Artist: MG) Outro Music Track: DJ Super Agent (Artist: Sleeping Lorry)
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Hosted by Marko Gelo: +2008...the year mortgage rules really started to change +is Vancouver going to be unaffordable, forever? +how much did real estate appreciate in Calgary from 2011 to 2018? We'll discuss a real life case study +the two biggest mortgage qualification killers +how/when to remove a co-signor from your mortgage **and some indy music from host, Marko Gelo
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Discussion about a recent CBC news article that supports an argument for renting a property rather than purchasing one (even though you can afford to). Three young Calgarians are featured in the article explaining their thoughts on their decision in Calgary's real estate market. John Darel (realtor with Maxwell Realty - Canyon Creek) also chimes in with his thoughts. Also, with all the recent mortgage changes...there's been little talk about the impact on qualifying for investment rental mortgages. If would-be buyers get squeezed out of the market, then perhaps this might open the door for some to consider purchasing a rental investment property in anticipation of affluent tenants.
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