Even if you’ve been pre-approved by your bank or a mortgage broker, you could unwittingly derail your mortgage financing. Here are some mortgage approval tips to prevent that from happening.
Here are four items that could go wrong. If you can avoid these types of issues, you’ll be more likely to receive a final approval and the green light from the mortgage lender.
You have insufficient documentation
Mortgage lenders request a variety of financial documents when approving borrowers for mortgages. You can reduce the chance of document-related problems by rounding up your documents in advance. This is why, as your mortgage broker, I always try to anticipate the documents a lender is going to request and work with you to gather them before you have found your dream home.
You don’t have enough funds for your closing costs
All mortgage lenders and the mortgage insurers require borrowers to have additional cash reserves in the bank, prior to closing to cover the closing costs.
Borrowers can be denied a mortgage after being pre-approved if they can’t provide documentation confirming they have these funds available.
Generally the rule is you must be able to prove you have 1.5% of the purchase price available for closing costs over and above your down payment funds.
You made a large purchase, or purchases, and took on additional debt since pre-approval
Being pre-approved for a mortgage, or even approved if you are at that stage, doesn’t mean you can go out and make large purchases.
Debt-to-income ratios are very important during the mortgage process. This ratio is basically a comparison between the amount of money you earn and the amount you spend to cover your monthly debts. Having too much debt can hurt your chances of getting mortgage financing.
To prevent these types of problems after pre-approval, avoid making major purchases or opening new lines of credit. Keep those credit cards in your wallet until you receive a final approval and until after you have moved into your new home.
Your income or employment situation has changed
As your mortgage broker, I will pre-approve you based on your current income and employment situation. However, if your status changes sometime during the underwriting process, it could cause you to be denied the mortgage.
Do everything within your power to keep your income and employment situation static until after you have found a home and moved in.
Many lenders will re-confirm your current employment status prior to funding your mortgage particularly right now as we are in the midst of the pandemic.
Here’s what you need to take away from this:
• A pre-approval can be a helpful step in the mortgage process. It allows you to narrow your search to homes that fit your budget and secure an interest rate. But it’s not a guarantee of financing.
• A pre-approval is not a mortgage commitment. Most lenders will not even review your application until a property has been found and you have an accepted offer. As your mortgage broker, I will confirm that a lender will likely give you a mortgage for a certain amount, as long as your financial situation doesn’t change prior to closing and the lender also likes the property you are purchasing.
• Even having a pre-approval letter does not mean you are home free. Things can still go wrong before the final closing causing the mortgage to be denied.
My role as your mortgage broker is to reduce the possibility of any of the above happening to you during the mortgage process and I will endeavour to make the process go as smoothly as possible.
It may seem like I’m asking many questions and requesting too many documents but that is what is required to ensure you are in the very best position to start your house hunting with confidence.
A mortgage pre-approval is the first step to home ownership.
If you would like to start your journey to home ownership, please visit here to get started or give me a call at 1-888-561-2679.
Is it time to lock-in your variable rate mortgage?
Amid soaring inflation, the Bank of Canada has hinted that the first interest rate hike could take place as soon as the April-to-June quarter of 2022. Analysts had previously expected rates to begin rising from record lows in the second half of 2022.
You may be wondering if you should lock-in your variable rate mortgage now. There is lots of chatter in the media about the rate increasing again over the next year—up to another four times, so you may have some concerns.
The first question you should ask yourself is why you chose a variable rate mortgage in the first place.
Was it because it had a lower rate than a fixed term mortgage or did you have a plan to take advantage of that lower interest rate?
Historically, a variable rate has been a better option by just comparing rates but those rates can change. Potentially and depending on whether you have a variable rate mortgage or an adjustable rate mortgage, more of your payment will be going toward interest rather than principal if your payment isn’t adjusting accordingly as rates increase.
Another important consideration with variable rate mortgages is that they have lower prepayment penalties generally than a fixed rate mortgage should you decide to break your mortgage early. Statistics support that this happens more often than not.
Instead of trying to guess where rates are headed, consumers would do better to think about their own situation. They should evaluate their personal balance sheets and risk tolerance. The decision of whether to go short (variable) or long (fixed) will depend on the consumers’ tolerance for risk as well as their ability to withstand increases in mortgage payments.
For some currently in a variable rate mortgage, it could take up to 10 rate increases of 0.25% to not save money with your variable rate mortgage as the rate generally only increase by 0.25% at a time.
You need a plan with a variable rate mortgage. The best thing is to do a review with a mortgage broker to determine your personal tolerance to rate increases and determine a strategy for managing your mortgage to reduce your overall cost of borrowing.
Something to consider about locking in your mortgage is that not all lenders are going to offer you the very best fixed rates. You are also hedging your bet that at some point your fixed rate is going to be lower than a variable rate mortgage.
No one can predict where rates are headed. Even the experts get it wrong. Your decision to lock-in to a fixed rate mortgage should not be based on what you read in the media.
If you are at your maximum purchasing power or you’re a worrywart, lock-in, forget about it, and enjoy life.
If you would like a no obligation review and financial analysis for your personal situation please let me know. We can compare your current variable rate mortgage to a fixed term option and even compare it to another variable rate mortgage that might have a deeper discount.
That way you can make an informed decision as to whether locking in is the best option for you.
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A reverse mortgage is a way for homeowners 55 or older to turn up to 55% of the value of their home into tax-free cash.
It’s a loan secured against the value of the home, but unlike a traditional home equity line of credit or a conventional mortgage it does not require monthly mortgage payments for as long as you live in your home.
What can you do with a reverse mortgage?
Pay off debts
Renovate or make your home more accessible
Handle unexpected expenses
Help your children or grandchildren
Improve your day-to-day standard of living
Make a special trip or purchase
Reverse mortgages have come a long way. They have evolved from a needs-based product to a solution that many financial planners recommend as an important component of a comprehensive retirement plan.
Unfortunately, there are still many misconceptions regarding reverse mortgages. Below, the myths are separated from the facts.
Myth: The bank owns the home.
Fact: You always maintain title ownership and control of your home, and you have the freedom to decide when and if you’d like to move or sell.
Myth: You will owe more than your home is worth.
Fact: Clients can qualify for up to 55% of the appraised value of the home, 33% on average. As the lender has conservative lending practices, you can be confident that there will be equity left in the home when the loan is repaid. In fact, over 99% of reverse mortgage clients have equity remaining in the home when the loan is repaid.
Myth: A reverse mortgage is a solution of last resort.
Fact: Many financial professionals recommend a reverse mortgage because it’s a great way to provide financial flexibility. Since it is tax-free money, it allows retirement savings to last longer.
Myth: You cannot get a reverse mortgage if you have an existing mortgage.
Fact: Many clients use a reverse mortgage to pay off their existing mortgage and other debts, freeing up cash flow for you to use as you wish. How great would it feel to be free of regular mortgage payments?
It is also important to know these two key points.
You will remain the owner of your home and will never be asked to move or sell your home provided you pay your property taxes and home insurance and keep your property well maintained. A reverse mortgage will not affect any government benefits you may receive such as OAS, CPP or GIS.
A no obligation assessment is available to determine if a reverse mortgage is a suitable option for you. As a mortgage broker my advice is impartial and I will assist you to review all of the mortgage options available to you.
I am a certified reverse mortgage expert, so I can confidentially review the pros and cons for your individual situation.
It only takes about 90 seconds for the assessment so please give me a call at 1-888-561-2679 or email april.dunn@mtgarc.ca
OSFI, Canada’s banking regulator, is ending the special regulatory treatment they gave banks so they could offer mortgage deferrals for up to six months.
The changes are effective immediately and, until the end of September, any mortgage deferrals granted will only be for three months rather than six months that was being granted previously for the special COVID-19 mortgage deferrals
Many mortgage deferrals offered by the banks will end between September and October and obtaining a mortgage deferral in the future could become much more difficult.
Those who have deferred their mortgage payments really need to review their financial circumstances.
Can you now start to make your mortgage payments or are you still in a difficult situation where you may not be able to pay your mortgage?
You may be able to negotiate a longer deferral period with your bank, but the reality is that some may have to consider selling their homes.
This is the time to have those difficult conversations.
The thought of losing your home can be one of the most stressful situations you can go through, but the reality is that some may have to sell.
Missing mortgage payments can seriously reflect on your credit as past due payments will show on your credit report for seven years. Missing one mortgage payment could prevent you from obtaining another mortgage for years.
It’s important to communicate with your lender sooner than later if you know you won’t be able to make your payments.
You may have some options to solve this problem, but speaking early to a mortgage broker is really your best course of action if you know you won’t be able to re-start your mortgage payments if your bank will not offer a further deferral of your payments.
Here are some ways that a mortgage broker can advise you:
Perhaps you can refinance to lower your monthly payments to keep you within your budget.
We can see if we can obtain a new mortgage with another lender and pay off your current lender.
If you fall behind on your mortgage, the interest and costs can accumulate quickly; it is critical to seek assistance early before things get out of your control.
Please call me at 1-888-561-2679 for a confidential conversation or email me at april.dunn@mtgarc.ca
Rather than COVID-19 slowing down the real estate market, due to pent-up demand or the desire to get away from crowds, the vacation property market is hot in many areas.
Retirees and baby-boomers are driving vacation property purchases but here in B.C. professional couples and families are also buying vacation homes.
Are you dreaming of a summer cottage on the water or a cabin the woods for weekend getaways or to get away from the crowded city during this pandemic?
Many are accessing equity in their primary residences to make these purchases but there is also a great insured mortgage program available to make your dream of owning a vacation property a reality with a little as a five per cent down payment required.
Here are the types of properties that can be covered under this program.
Type A Properties:
Must be owner-occupied or occupied by an immediate family member
Located in good marketable areas with evidence of re-sale demand.
The property value must be less than $1 million
The maximum mortgage amount allowed is $600,000 for most of Canada
Maximum of one unit
For properties valued up to $500,000 a minimum down payment of five per cent is required.
For properties valued over $500,000 and less than $1 million – five per cent down payment is required up to $500,000, with an additional 10% payment on the portion of the home value above $500,000
This program can also have other uses. Perhaps you are considering a place for your children to live while they attend university, a condo in the city to avoid the hectic commute or to help buy a home for your elderly parents who are on a fixed income.
This is possible as long as the family members are living there on a rent-free basis.
Up to 95% financing is available for owner occupied properties all across Canada. (These programs are not available to purchase investment properties, time-shares or similar properties that offer rental pools for the owners.)
Type B Properties:
The same details are required for these properties as above except for the following:
The property does not need to be winterized
Seasonal access is permitted (i.e. road not plowed during the winter)
A minimum of a 10% down payment is required for these types of properties.
Properties located on an island must have year-round bridge or ferry access.
The maximum mortgage amount is $350,000.
There are many financing options available through a wide range of lenders.
The requirements for mortgages on secondary and vacation home properties can vary greatly from lender to lender so you will want to make yourself aware of all of the choices available in the mortgage marketplace.
You’ll want the best possible financing options for your new real estate investment.
Instead of waiting many years to save enough to purchase a vacation home, you may be able to access the equity in your principal residence to finance the purchase.
This involves a cash-out refinance of your property and there again are many options available.
Other down payment options may include a second mortgage on your current property, personal savings or gifted funds (Type B property purchases do not allow for gifted down payments.)
With our current interest rates very low, now might be the time to get serious about your dream to own a vacation property.
If you would like to explore your options so you can enjoy a new vacation home this summer, please give me a call to discuss.
Purchasing and investing in real estate has always been attractive for those that are looking to generate additional income and benefit from the wealth created with increases in property values over time.
Have you wondered if investing in real estate right for you? Here are a few things to consider.
The Attraction
Diversification is key to anyone’s investment
portfolio whether you are talking about mutual funds, TFSA’s, stocks, bonds,
RESP’s, RRSP’s etc. Diversification helps balance risk and provides a level of
confidence that your investments are still going to be there when you are ready
to liquidate them, such as at retirement etc. Many investors add real estate,
other than their principal home, to their portfolio to ensure full
diversification.
A real estate investor can still use a
relatively small amount of down payment or capital to purchase a property, and
this can provide an attractive return on investment (or ROI). This return is
generated from a combination of monthly income and property value increases.
The monthly income is generated by taking the
rent collected from tenant and then deducting all the expenses. Analyzing a property to ensure that there is a
positive cash flow is important as is working with a mortgage professional who
is experienced in real estate investing.
Equity is built in the property by way of
appreciation of value over time as well as with each mortgage payment.
With mortgage interest rates still very low and
an abundance of potential tenants in many areas, there is a high demand for
real estate investors to take the plunge.
Here’s another way to look at it as well… real
estate investment is also beneficial for those who have a hard time saving
money, as it can act as a sort of forced savings account. Essentially, as you
pay down the principal of a mortgage, you’re reducing debt and building equity.
Then, when you go to sell the property, the money you receive back from the
sale is considered your “forced savings”.
So What is the Risk?
Like any investment, there is risk and it is
possible to lose money in real estate, albeit relatively low. Real estate has
shown to appreciate steadily over the long term, and has for the past 25 years,
so the chances of someone losing money on a purchase are pretty slim. However,
keep in mind that doing your due diligence before an actual purchase is key . .
. you must take into consideration certain factors when choosing a property,
such as desirability of location and stability of the market in that area.
One more attraction is the fact that it really
only requires part of your time, is flexible, and the skills can be learned.
Financing Options and
How do I get started?
Purchasing a rental property can
be a great investment to build wealth so get educated and enlist the assistance
of professionals. If you would like a complimentary Cash Flow Analysis of any
property you are considering or to discuss your financing options, please give
me a call me at 1-888-561-2679 or email april.dunn@mtgarc.ca and we can
run some numbers.
