Category: Mortgage Features

Mortgage Pre-Approvals for Presale Condos…be careful.

Posted on by markogel@gmail.com

(April 30, 2024)

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Securing a mortgage for a pre-sale condo can be your gateway to homeownership, but it also unveils a slew of potential risks that eager buyers often overlook. The allure of purchasing a property still in construction, with a completion date extending months or even years ahead, can mask the complexities of mortgage qualification. The stakes are high, demanding your meticulous attention to financial readiness and a deeper-than-usual understanding of mortgage qualification criteria. By arming yourself with essential knowledge, you can transform this seemingly daunting journey into a well-informed and successful venture. Here are the key points you need to consider when qualifying for a mortgage for presale condos:

Get pre-approved BEFORE you begin your presale condo tour: 

Before you set foot into a presale condo sales presentation center, ensure you know your mortgage qualifying destiny. Once you’re enveloped in the glossy allure of that brand new condo unit, something profound happens to the human psyche. Suddenly, common sense dissipates, and emotions reign supreme. Unbeknownst to you, hours later, having succumbed to intense showroom counseling and the intoxicating allure of presale condo euphoria, you find yourself contractually bound to a significant purchase, often with a mere deposit, sometimes as little as $1,000. Little do you anticipate the challenges ahead. My point? Prior to being captivated by the idea of owning that brand new condo unit, secure mortgage pre-qualification. So when you do find yourself enamored with a particular floor plan, you can rest assured knowing you’re financially equipped to make the purchase or have a well-conceived strategy to attain qualification.

Align with a mortgage broker for your pre-approval: 

Access to multiple lenders not only ensures that you’ll secure the most competitive interest rate but also maximizes your chances of qualification by providing access to various qualifying guidelines. Homebuyers often fixate on interest rate quotes and guarantees, losing sight of the essential qualification criteria. Prioritize understanding the mortgage qualification requirements over obsessing about an interest rate, which may become irrelevant by the time the project completes outside the rate-guarantee period. Builder-aligned mortgage specialists may issue vague “pre-approval letters” to fulfill the builder’s objective of meeting project financing milestones. Once a set number of pre-approvals is attained, the builder’s financier disburses funds for construction. Hence, a simple confirmation from a lender on the homebuyer’s pre-approval, often without formal pre-qualification, suffices for the builder’s needs. Remember, once the builder secures enough purchase contracts and pre-approval letters, they receive funds to commence construction, irrespective of the certainty of your mortgage pre-approval. Your deposit and signed commitment to the contract are what they value most. Therefore, ensure your mortgage pre-approval is legitimate and verified.

Qualifying for a mortgage isn’t easy. It entails meeting numerous lender requirements, as well as adhering to various provincial tax and property zoning/title regulations. Partner with an experienced mortgage broker who is well-versed in the latest lending criteria and governmental real estate regulations at municipal, provincial, and federal levels. Top-tier mortgage brokers typically engage in knowledge-based marketing channels such as regular blogging, podcasting, YouTubing, newsletters, or social media campaigns. These channels ensure that the brokers themselves stay updated and possess a higher level of knowledge compared to those who don’t utilize such strategies.

Get a verified mortgage pre-approval:

The term “pre-approval” is thrown around loosely these days, but you need a proper one. That means full income confirmation, down payment verification, up-to-date credit reports, and a comprehensive analysis of current qualification criteria. Ensure your pre-approval covers all these aspects for a reliable assessment of your mortgage eligibility.

Projected Qualification Riders (PQRs):

Presale condo mortgage pre-approvals are different; they include PQRs. These riders account for future unknown variables that could affect mortgage qualification. They introduce additional parameters to ensure your qualification status remains intact, considering scenarios like higher interest rates or lower appraised values. By incorporating PQRs into your pre-approval, you add an extra layer of protection and foresight to your mortgage qualification.

Need a mortgage preapproval with PQR’s? Call or text Marko Gelo right now at 604-800-9593, or Click Here to schedule a free, no-obligation phone call with Marko. You can also call Marko on WhatsApp.

Download my amazing Mortgage App…it’s loaded with calculators and tonnes of useful information!

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Contact Marko, he’s a Mortgage Broker!

604-800-9593 cell/text | Vancouver (Click Here to schedule a call with Marko!)

403-606-3751 cell only | Calgary (Click Here to schedule a call with Marko!)

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Email: gelo.m@mortgagecentre.com

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Rate forecast pointing to variable rate mortgages and weak Canadian dollar

Posted on by markogel@gmail.com

(April 17, 2024)

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On April 11, the Bank of Canada opted to stay put, leaving their benchmark policy rate steady at 5% (which, by the way, translates to a hefty 7.2% for Canada’s consumer-grade Prime Rate). But guess what? The consensus is growing that their sideline-sitting days are numbered. After the April 11 BOC announcement, the odds of a rate cut at the next scheduled BOC meeting in June were sitting at a solid 50%. But hold on to your hats, folks! After April 16’s Stats Canada CPI release, those rate cut odds spiked up to a whopping 68%. So you can pretty much bet on a quarter-point drop in June, nudging that 7.20% prime rate down to a slightly less suffocating 6.95%. Cue the collective sigh of relief from households across Canada burdened by mortgages and other debts linked to prime rate. And also let’s not forget about the provincial governments, corporations, and millions of small businesses, all of whom are also struggling with interest costs tied to the overnight lending rate.

Now, let’s talk about that rate drop. Sure, a 25-point rate cut might offer some respite, but let’s not kid ourselves—it’s hardly a gesture. Rates are still hanging out in the stratosphere when you compare them to the rock-bottom lows we recently departed from. Remember that swift ascent from 2.45% to 7.20% over the past three short years? Yeah, we’re inching back down, but we’re hardly hitting the reset button with that anticipated dip to 6.95%. The goal here is to get cozy with this new normal and adjust our financial expectations to a more, shall we say, moderate range of interest rates, somewhere between 4% and 6%. And while some folks are shrugging off this adjustment like it’s no big deal, there are plenty who are still struggling to find their footing.

But we can’t forget, there’s a downside to cutting rates, and it’s a bitter pill to swallow. Brace yourselves for the blow to our (already limp) dollar. If you’ve ventured beyond Canadian borders lately, you’ve probably felt the sting of our weak currency compared to the almighty USD and EURO. Trust me, I felt it firsthand while breaking bread with some Americans and Germans in Croatia a couple of weeks ago. They were astonished by the sorry state of our currency, assuming that being part of the G7 club meant we were rolling in dough like the rest of the big shots. Spoiler alert: we’re not. My dinner bill, converted from CDN to EURO, ended up a whopping 40% higher than theirs. Ouch. This got me thinking about our energy sector again, and our stubborn refusal to cash in on it. Just imagine all that powerful foreign currency flowing into our economy if we’d just loosen the purse strings on our resources (i.e. selling to other countries who will actually pay us market value for it). Not only would it cushion our economy from hardship, but it’d also give our dollar a much-needed boost and foot the bill for our ever-growing demands for infrastructure and social services (due to an aging population and explosive immigration). But hey, who needs all that when we can pat ourselves on the back for cutting greenhouse gas emissions by a fraction of a fraction, right? Meanwhile, the rest of the world is snickering behind our backs and snatching up opportunities we’ve casually tossed aside. Take, for instance, when the Germans came knocking, looking to strike a fuel supply deal amidst the Ukraine crisis, and we shrugged them off with our eco-warrior stance. Nice one, Canada. But I digress. Let’s circle back to our limp dollar. Brace yourselves, folks, because when the BOC starts its rate descent (likely in June), our dollar’s taking a nosedive right along with it. Lower rates mean a weaker position in the currency market, especially if we beat the Americans to the punch. Sure, it might give a little boost to our exporting sectors, but it’s going to hit us where it hurts when we’re importing goods from the US and Europe. And you know what that means? Prepare for an extended stay in this elevated-cost era. Now, I’m not saying we’re hurtling toward another inflation apocalypse, but let’s just say it’s not going to be a walk in the park.

So, what’s the bottom line here?  If we want to minimize the pain and set a precedent for a real and meaningful recovery, we’ve got some tough choices ahead. We can either dial back on our green crusade and throw our weight behind the energy sector, or we can roll out the red carpet for Canadian entrepreneurs and give them a fighting chance to build international empires (I think we should do both). Because let’s face it, we’re not going to strike it rich peddling Tim Hortons coffee franchises to each other. It’s time for Canada to grab the wheel and take charge, LFG!

I can’t end without any mention of mortgages, so here’s a little something to chew on until next time: variable rate mortgages are making a comeback among Canadians. These days, everyone’s on edge when it comes to locking in their mortgage terms, whether it’s for a new purchase, a refinance, or a renewal. Fixed rates are on the decline, but mark my words—the way down will not be immediate and predictable, but rather bumpy and gradual. Same goes for variable-rate mortgages. So here’s the play: consider a variable rate mortgage with an aggressive discount and ride out the current environment for the next year or so as fixed rates gradually decline (along with prime rate). And when the time’s right, convert your variable rate to a fixed term without incurring any fees or break penalties. A fixed-rate mortgage doesn’t allow for this conversion/swap without incurring substantial break fees. The cost-effectiveness, flexibility, and revolving rate option of a variable rate mortgage place the reins in the mortgage holders’ hands allowing them the freedom to adjust their position in the future.

Want to discuss further? Call or text Marko Gelo right now at 604-800-9593, or Click Here to schedule a free, no-obligation phone call with Marko. You can also call Marko on WhatsApp.

Download my amazing Mortgage App…it’s loaded with calculators and tonnes of useful information!

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Contact Marko, he’s a Mortgage Broker!

604-800-9593 cell/text | Vancouver (Click Here to schedule a call with Marko!)

403-606-3751 cell only | Calgary (Click Here to schedule a call with Marko!)

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Email: gelo.m@mortgagecentre.com

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Maternity Leave, Child Support, and Canada Child Benefits – can you use them to qualify for a mortgage?

Posted on by markogel@gmail.com

(February 11, 2024)

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If you’re navigating the journey towards homeownership and have the unique joy of raising a family, this is a must-read. The path to securing a mortgage takes a distinctive turn when you have little ones in the picture. Discover the built-in child-related qualification boosters designed to tackle and diminish the financial challenges associated with the broader expense load of families. From harnessing government support like Canada Child Benefits to collecting child support payments, navigating maternity leave intricacies, and considering the impact of youth employment – this blog is your indispensable guide to not just a home but a stable and thriving future for your family.

From early childhood to the age of majority, here are the key child-related mortgage qualification boosters:

MATERNAL/PARENTAL LEAVE:

In Canada, the maternity leave guidelines offer flexibility and support for new parents. Both women and men are entitled to take time off from work to care for their newborn child, a provision commonly referred to as maternity or paternity leave. During this time, the government provides financial assistance through Employment Insurance, granting a portion of the individual’s average weekly earnings. There are two primary options available to parents: a standard 12-month maternity leave, offering 55% of average weekly earnings, or an extended 18-month leave, providing 33% of average weekly earnings. Additionally, some employers offer a top-up, supplementing the government’s contribution up to 100% of the individual’s salary.

When it comes to mortgage qualification during maternity or paternity leave, lenders will allow up to 100% of your workplace income, provided you can obtain a letter of employment from your employer indicating the expected return to work date. However, if the return is projected to be greater than 12 months, lenders will scale back the qualifying income to 60% of the base salary as stated on the return to work letter.

CHILD SUPPORT PAYMENTS:

Child support payments are considered eligible qualifying income and can often be a game-changer when it comes to mortgage qualification. For applicants receiving child support, verification documents are required and may include the most recent Notice of Assessment or T1 General/Tax Return, supported by a separation agreement or court order. Alternatively, a two-month history of bank statements illustrating regular support payments, along with a copy of the formal separation agreement or court order, may also suffice. These documents are essential for demonstrating the stability and reliability of the income stream, but also for verifying that the child support payment is expected to continue for the foreseeable future. Additionally, there’s a stipulation that the child-support payment cannot exceed 50% of the overall eligible employment income of the application (of all applicants). Conversely, for applicants who are obligated to pay child support rather than receiving it, the entire payment is factored in as part of their liabilities. Consequently, the total mortgage qualification amount decreases proportionately.  

CANADA CHILD BENEFIT PAYMENTS:

The Canada Child Benefit (CCB) is a financial support program provided by the Government of Canada to assist families with the cost of raising children. It is designed to provide monthly payments to eligible families to help with child-rearing expenses.

In terms of mortgage qualification, lenders account for the CCB in determining eligible income subject to the following conditions:

Age Limit: While the CCB payments are available for children until the age of 17, for mortgage qualification purposes, lenders only recognize payments for children up to the age of 15 at the time the mortgage transaction completes.

Full Eligibility: One hundred percent of the CCB payment is typically eligible for mortgage qualification purposes. This means that lenders consider the entire amount of the benefit when assessing the borrower’s income level.

Income Limit: Similar to child support payments, there is a cap on the total eligible CCB benefit that can be included in mortgage qualification calculations. The total eligible benefit cannot exceed 50% of the total application income.

WHEN CAN MY CHILD QUALIFY FOR A MORTGAGE?

The minimum age requirement to become an eligible applicant for mortgage qualification purposes is determined by each province’s age of majority laws. The age of majority is 18 in the following six provinces: Alberta, Manitoba, Ontario, Prince Edward Island, Quebec, and Saskatchewan. The age of majority is 19 in the remaining four provinces and the three territories: British Columbia, New Brunswick, Newfoundland, Northwest Territories, Nova Scotia, Nunavut, and Yukon.

Any questions on any of the above? Call or text Marko Gelo right now at 604-800-9593, or Click Here to schedule a free, no-obligation phone call with Marko. You can also call Marko on WhatsApp.

Don’t want to miss out on the next blog post?  Click Here to have future issues emailed directly to your inbox!

Contact Marko, he’s a Mortgage Broker!

604-800-9593 cell/text | Vancouver (Click Here to schedule a call with Marko!)

403-606-3751 cell only | Calgary (Click Here to schedule a call with Marko!)

Call Marko via WhatsApp!

Email: gelo.m@mortgagecentre.com

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Is your Mortgage Pre-Approval optimized for Maximum Purchasing Power?

Posted on by markogel@gmail.com

(Jan 29, 2024)

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In the unforgiving terrain of Canada’s contemporary mortgage qualification landscape, prospective homeowners face an uphill battle. On top of stress-tested high-interest rates, a persistent affordability crisis, and intricate newcomer policies, there is the ongoing challenge of participating in a real estate market characterized by what seems to be a constantly rejuvenating demand. In a hyper-competitive market where every cent of income matters, the question lingers: Is your mortgage pre-approval truly maximizing your purchasing power? As you grapple with the complexities of the current environment, untapped methods may exist to extract more from your financial arsenal. Could your mortgage qualification be underestimated or underqualified, leaving potential untapped? The answers lie within the following paragraphs—explore seldom-used income qualification gems that have the potential to be game-changers in your relentless pursuit of optimal mortgage qualification in what is perhaps the most challenging real estate market on the planet.

Following are 5 key qualification tips that are often overlooked, and if utilized, could be the ultimate difference-maker in securing your real estate purchase (or refinance):

(1) Application Process: Expect a hefty amount of document and information requests

I personally never encounter resistance when requesting documents from customers during the application process. However, new clients who have had to switch mortgage advisors due to late-stage qualification failures often attribute the failure to a poorly drafted mortgage pre-approval. Concluding a mortgage pre-approval with a brief phone call explaining your maximum qualification amount is irresponsible, especially given what’s at stake—likely the largest investment you will ever make. Mortgage pre-approvals should be in document form, including scenarios, interest rates, calculations, and, importantly, conditions. If your current mortgage pre-approval doesn’t fit this description, then you are not pre-approved.

Examples of pre-approval conditions (to be disclosed in your pre-approval document):

  • If you increase your current debt load, your mortgage approval amount will decrease disproportionately
  • If your credit score decreases below 680, your mortgage pre-approval amount will likely be reduced
  • You must not be in arrears with the Canada Revenue Agency upon completion of your property purchase
  • The interest rates quoted within a pre-approval are subject to specific conditions (be aware of them!)
  • These are just a few examples; countless others exist

Steer clear of unsupervised rookie mortgage advisors. Ask them if they have a supervisor and request their contact information in case your qualification takes an unexpectedly restrictive turn.

(2) Income: Ask how much of your income is eligible for qualification

You’re probably asking yourself, why wouldn’t my income be eligible? Consider a scenario where an applicant earns a salary of $70,000/year and has also recently started a part-time job earning about $6,000/year. Full-time salaried incomes without probationary periods are simple to verify and often result in seamless approval. However, part-time employment/income is a different story. If the part-time employment is classified as casual, a 2-year average of employment with that particular employer is required. But, if the part-time employment is classified as permanent and/or guaranteed hours, then the applicant can qualify as per the current hourly rate. This could be a major boost, especially if the mortgage advisor defaulted to a two-year average where the prior year was a lower income.

Here are some other seldom-used income qualification methods:

  • Capturing a 2-year overtime or bonus average and combining it with current earnings. This method packs way more punch than doing the default overall 2-year average based on the prior year where the applicant likely was at a lower pay rate
  • When it comes to self-employed applicants, there are a million and one ways to qualify! Click Here to be redirected to my recent blog, “Mortgage Qualification Hacks for Self-Employed Applicants”

(3) Rental Income: There are at least 20 different methods of calculating eligible rental income

In places like Vancouver and Toronto with high real estate prices, rental income in the form of mortgage helpers (rental income from a basement suite within the property you intend to purchase) is often a decisive factor. Lenders have varying policies when it comes to how much of the rental income from a rental suite can be used as eligible qualifying income. The plain-jane standard in the industry is 50%, where 50% of the rental income is added to your overall qualification income. This often comes as a shock to many, as the common perception is that 100% of the rental income is eligible, but that isn’t the case (in actuality there are no lenders that accept 100% of the rental income).

When it comes to rental income, lenders vary drastically with their eligibility criteria. For instance, Lender A will allow you to use 50% of the rental income that is generated from your rental property and apply it as qualifying income. But Lender B is offering something different. Rather than applying the eligible rental income to your overall application income, they allow you to use it as an offset to your existing debt load and they further increase the allowance to 80%. As a result, you end up qualifying for significantly more!

(4) Networth: If you hold at least $250,000 in liquid assets, you enter another arena of qualifying

In many instances, applicants and their mortgage providers are completely unaware of this qualification gem. The qualification essentially allows you to boost your mortgage qualification dollar for dollar with your assets. For example, if you qualify for a $500,000 mortgage based on your verified income, but hold $300,000 in investments (or cash), the lender will boost your mortgage qualification to $800,000. For more detailed information about the High Networth Mortgage Program Click Here to read my past blog that reveals the key qualification criteria.

(5) 1-year band-aid mortgages: If all else fails…

Probably the most underrated and overlooked, this pathway has increasingly become prevalent in the past couple of years with the rapid escalation of interest rates. Within a span of 12 months, many homebuyers found themselves in precarious situations where they were blindsided by the fierce impact of generational high-interest rates. Mortgage approvals that were previously approved suddenly found their status severely downgraded, and in many cases, outright declined from their respective lender.

Thankfully, there was a solution. The Band-Aid mortgage providers, as I like to refer to them, stepped up and provided the relief that was needed to save home buyers from defaulting on their purchases. Not only did they salvage many transactions, but they arguably stabilized the entire real estate sector as a result. The value proposition from these lenders (formally known as “B” or “Alternative” lenders) is as straightforward as it gets: interest rates are generally 1.5% to 2.5% higher than traditional banks, qualification guidelines are loosened considerably, a fee of 1% to 2% is skimmed off the mortgage proceeds (therefore your down payment is proportionately increased), and lastly, the available terms generally range from 1 to 3 years. The objective of a Band-Aid mortgage is to secure your purchase (or refinance) with the intention to later refinance the same mortgage with a traditional lender (preferably after 1 year, or longer if required). Prior to committing to a Band-Aid mortgage, your mortgage broker should have a legitimate game plan that details your exit strategy (refinancing to a traditional lender upon the maturity date of the Band-Aid mortgage). If a 1 year timeframe is not realistic, then a 2 or 3 year term should be explored. This is a product that was traditionally geared towards applicants with bruised credit histories and income verification challenges, but lately, it’s broadened its reach to include applicants of all classes. Whether you are a high-earning medical professional awaiting your permanent residence status, or a self-employed plumber who declares a lower income for income tax purposes, this segment of lending is worthy of forming part of the mortgage broker arsenal of products and solutions.

Wondering if your mortgage pre-approval is optimized for maximum output? Call or text Marko Gelo right now at 604-800-9593, or Click Here to schedule a free, no-obligation phone call with Marko. You can also call Marko on WhatsApp.

Don’t want to miss out on the next blog post?  Click Here to have future issues emailed directly to your inbox!

Contact Marko, he’s a Mortgage Broker!

604-800-9593 cell/text | Vancouver (Click Here to schedule a call with Marko!)

403-606-3751 cell only | Calgary (Click Here to schedule a call with Marko!)

Call Marko via WhatsApp!

Email: gelo.m@mortgagecentre.com

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@markogelo (Twitter)

The Truth Behind Mortgage Pre-Approvals and Rate Guarantees

Posted on by markogel@gmail.com

(Jan 12, 2024)

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The doors to homeownership often begin within the elusive world of mortgage pre-approvals. It’s a crucial step in the home-buying journey, offering the promise of a verified mortgage pre-approval, but also a secured interest rate that shields you from the unpredictable fluctuations of the market. However, there’s a hidden secret within this seemingly straightforward process that many homebuyers are unaware of – the interest rates in mortgage pre-approvals are not always as steadfast as they appear. Imagine securing an interest rate at 5.19% for the next four months, only to discover in the third month that market rates have dropped further to 4.99%. The surprising revelation? Your rate may not automatically adjust, leaving you stuck with the initially agreed-upon 5.19%. This isn’t a result of financial schemes or a ploy to maximize profits (although lenders do earn more on the higher interest rate); it’s more a consequence of file management intricacies within mortgage brokerages and banks. The complexity lies in whether your mortgage provider has the systems and processes in place to proactively manage rate adjustments. In this blog, we delve into the intricacies of why these adjustments are often overlooked, uncovering the surprising truth behind why your pre-approved interest rate may not reflect the current market reality.

Rate Hold Policies

Banks offer interest rate holds on all their terms, but for variable-rate mortgages, they reserve the discount rather than the rate. For instance, if your variable rate is Prime minus 0.90%, only the ‘minus 0.90%’ would be held, not the ‘Prime Rate’. Moreover, most banks restrict ‘blanket reserving’ the entire rate product table; you are allowed only one term/rate at a time, unless you’re utilizing a mortgage broker, who can secure multiple rate holds with various lenders. Rate hold periods can range from 30 to 120 days. It’s also important to note that a formal credit check is typically required for a rate hold. Here, the advantage lies with a mortgage broker, as opposed to a banker, because they can repeatedly submit applications to various lenders using the same, singular application. One application, one credit report, and access to endless lenders.

Float-Down Policies

Now, here’s where things get interesting. The key to rate adjustments lies within a built-in policy that lenders incorporate into their products, known as the rate float-down policy. This policy allows lenders to discontinue a current rate hold and reset it to the lower prevailing market rate if applicable. However, there’s a kicker. The mortgage provider, be it a broker or banker, needs to formally request it. That sounds easy enough, right? The task seems reasonable and simple, but the reality is that many bankers and brokers often lose track of their mortgage approval files and simply forget. Therefore, a better rate could slip by if your mortgage provider isn’t on the ball to recognize and act upon it! There’s one more thing to be aware of when it comes to interest rate float-down policies. While I’ve never heard of a lender that doesn’t allow for it, the diversity among lenders lies in the frequency of adjustments they permit. For instance, lender A could allow unlimited requests for float-down adjustments, whereas lender B might only allow one singular request. This is a critical guideline for your mortgage broker to be aware of to prevent them from using it up too early in the rate hold tenure, jeopardizing the opportunity to capitalize on further rate drops throughout your rate hold period.

Seek a Mortgage Broker Rather Than a Single-Brand Bank

If your mortgage pre-approval is with a bank, you’re missing out on all the possibilities the market has to offer! What if market rates fall, but the single-brand bank you’re currently tied up with maintains its rate? This type of circumstance is an easy fix with a mortgage broker as they would simply pivot and re-submit to the better lender. However, with a bank, there are no other options. Bank representatives are not brokers; they cannot tender your application to the market. All they have to offer you is what’s in their shareholders’ best interest! Optimize your experience and partner with a mortgage broker right from the beginning. Not only will you have access to a larger pool of lenders, but you’ll also be able to access them all at once without having to set foot in their branches!

Is Your Mortgage Broker Legit?

And lastly, ensure you choose a broker that truthfully works with multiple lenders – you might be surprised at how many don’t. In addition to working with multiple lenders, inquire about the type of file management system they utilize to stay on top of changing interest rates. Will your rate hold be monitored throughout its entire tenure, or will it be forgotten until its completion date?

At this point, you might be curious about my internal file management. My production team relies on an internal system called the RateWatch Dashboard. After completing a pre-approval, the applicant’s details are entered into the RateWatch Dashboard, essentially a calendar-style tracker equipped with rate float-down reminders and alarms. We check it countless times every day; it’s like a video game that you never want to stop playing. This system is a critical component of my operation, eliminating human error from what would otherwise be a task prone to such errors. Alongside the RateWatch Dashboard, we receive daily rate updates from our pool of 23 lenders. While one might assume that all applications are paired with lenders offering the best rates and terms, lately, an increasing number of applications are matching up with lenders that adjudicate for higher mortgage approval amounts rather than lower interest rates. The difference in rate is insignificant in many cases, but the variation does exist nonetheless.

DISCLAIMER: The interest rates cited in this article are accurate as of January 11, 2024. Rates are subject to change, and by the time you read this article, they may have increased or decreased. For the most current rate quotes, please contact Marko Gelo directly via email or text at 604-800-9593.

Want to discuss your rate hold? Call or text Marko Gelo right now at 604-800-9593, or Click Here to schedule a free, no-obligation phone call with Marko. You can also call Marko on WhatsApp.

Don’t want to miss out on the next blog post?  Click Here to have future issues emailed directly to your inbox!

Contact Marko, he’s a Mortgage Broker!

604-800-9593 cell/text | Vancouver (Click Here to schedule a call with Marko!)

403-606-3751 cell only | Calgary (Click Here to schedule a call with Marko!)

Call Marko via WhatsApp!

Email: gelo.m@mortgagecentre.com

Facebook

@markogelo (Twitter)

Co-Signers, Guarantors, Joint Tenants, and Tenants in Common

Posted on by markogel@gmail.com

(February 25, 2022)

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 lendersand 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, Co-Signer and Guarantor.  The only difference between the two essentially being the requirement to register on title or not.  Another thing to be aware of is that all lenders allow for a Co-Signer on a mortgage application, but not all lenders allow for Guarantor applicants, or applicants that request it do not fulfill the eligibility criteria to become a Guarantor.

So what then?  What if a Co-Signer does not meet the eligibility criteria to sign on the mortgage as a Guarantor?  There is an alternative, but it comes with a compromise.  Rather than being withheld from the land title as one would expect with a Guarantor status, the Co-Signer would continue to register on the land title, but rather than eliminating their stake in ownership, they would simply exercise their right to minimize it by registering as Tenants in Common. 

Tenants in Common registration

When adding a non-occupying applicant to a mortgage, most lenders default with a land title registration known as ‘joint tenants’, but there is another type to be aware of as well – ‘tenants in common’.  Tenants in common is becoming a very popular title registration across Canada, and for various reasons.  Before we get in to the applications of why one would opt for a Tenants in Common registration, let’s first identify the difference between the two registrations:

JOINT TENANTS REGISTRATION: when all title holders are entitled to an even split in property rights and right of survivorship.  In the event a tenant dies, their share of the property automatically transfers to the surviving tenant.

TENANTS IN COMMON REGISTRATION: allows title holders to allocate specific shares of ownership.  Also, in the event a tenant in common dies, they are able to pass on their property share as per their will instructions (otherwise, they would be subject to the rules that apply to property owners who die without having a will)

The following are examples of applications for Tenants in Common registration :

  • VANCOUVER & TORONTO: when one of the purchasers are Temporary Residents and have not yet received their Permanent Residency.  For example, the applicants might be married and one of the spouses are still in the process of getting their Permanent Residence or Canadian citizenship.  In Vancouver and Toronto (and various other regions in Canada where Foreign Buyer Tax is applicable), many opt for a Tenants in Common registration with a 1% share allocated to the temporary resident spouse, thereby significantly reducing their foreign buyer tax payable.
  • in second marriage relationships where there are existing children from the previous marriage, Tenants in Common could provide clarity and certainty between the couple’s ratio of ownership.  Furthermore, it allows them the ability to pass on their share of the property to designated beneficiaries as per their will.
  • well-suited to couples that are not legally married as it provides an opportunity to formally determine scale of ownership and ability to pass on their share of ownership in the event of death
  • also well suited to joint venture and co-ownership purchasers where ownership stakes and survivorship rights can be maintained independent of all title holders

**The information in this article is intended as general information and is not intended to replace or serve as a substitute for any advisory, tax, estate planning, business succession or any other consultation service.  Do not solely act on the information in this article.  Consult further with your legal representative and/or professional advisor concerning any of the content contained herein.

OTHER RELATED ARTICLES: 

Purchasing a Property inside of a corporation payment?

Divorces, Family Buyouts, and mortgages

Credit Reports and mortgage qualification

Contact Marko, he’s a Mortgage Broker!

604-800-9593 direct Vancouver (Click Here to schedule a call with Marko!)

403-606-3751 direct Calgary (Click Here to schedule a call with Marko!)

markogelo.com

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MarkoMusic (SoundCloud Account)…all podcast music tracks are performed and produced by Marko

Qualifying for a mortgage when relocating to another province

Posted on by markogel@gmail.com

(February 12, 2022)

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):

Employment Status

Employment is the biggest mortgage qualification barrier when relocating.  Here are some acceptable employment scenarios that would make one eligible for a mortgage approval immediately upon arrival to your new destination province/city:

  • Scenario #1: you have maintained your employment with your current employer and can provide an employment letter that acknowledges your relocation and confirms your current role and income
  • Scenario #2: you are self employed (and have been so for at least 2 years) and are able to explain and demonstrate how the transition to a new province/city is seamless to your business
  • Scenario#3: you have recently gained new employment in your new destination province/city upon or prior to your arrival.  Verification of at least one complete pay cycle will be required (in the form of a pay stub and employment letter)

Regardless of the employment scenarios I just mentioned, you must also be aware of Probationary periods and their overall impact on your mortgage approval.  In some cases, lenders will overlook probationary periods for new employment, but definitely not for all cases.  In most instances, exceptions are granted for probationary periods if you have maintained the same role from your previous employer.

Another thing that pops up when relocating to another province or city, is whether or not one can keep their existing property while purchasing another.

You can definitely do so, here are two common scenarios of keeping your existing property and purchasing another:

Scenario #1: Keep your existing property and rent it out

-additional application details will be required pertaining to the market rent valuation of your outgoing property (an appraisal will likely be required to determine the market rent which will be used as an additional income source in your mortgage application)

-once the market rent is determined, the offset factor is calculated and applied to your overall application.  The end result is either a surplus or shortfall income scenario.  This figure is then applied to your application and either helps or hinders the overall adjudication.  

Scenario #2: Keep your existing property, refinance it to fund your down payment for your new property, and rent it out

-in addition to the rental surplus/shortfall income, the resulting mortgage payment increase from the refinance is also factored into your overall mortgage application for the new destination property.  The end result is either a declining debt service ratio (deeming you ineligible for this strategy), or a passing debt service ratio that falls within the overall acceptable ratio of your entire application.

Other mortgage qualification tips & strategies to be aware of when relocating:

You will require cash on hand to present a competitive offer, then likely more cash to secure the down payment requirement for the mortgage.  The following are acceptable sources of down payment:

  • cash from own sources and document verification displaying 90 day history (i.e. savings, investments).  For funds being sourced from crypto currencies, be aware that the 90 day history starts when the funds have been withdrawn from your Crypto investment account and deposited into a bank account (and I mean a non-crypto bank account…a bank account as we know one today).  This is a critical distinction to be aware of.
  • gifted cash from a parent (or direct family member) is an acceptable form of down payment
  • If your down payment proceeds are coming from the sale of your outgoing property, a copy of the sales agreement and recent mortgage statement is required (for the purposes of verifying the net proceeds from the sale)
  • If your down payment proceeds are coming from the refinance of your existing property, a copy of the mortgage statement is required to capture the balance and monthly payment obligation of the mortgage.  If you are considering this approach, request a maximum amortization to achieve minimum payment obligations.  This will minimize the impact on your overall qualifying debt service ratio and potentially allow for more purchasing power on your new property.

If moving to BC, be aware of the Property Transfer Tax when purchasing a property (no such thing in Alberta…yee haw!).  In addition to your down payment for the mortgage, the Property Transfer Tax is due on the closing date of your purchase.  Be aware…the Property Transfer Tax is quite substantial and CANNOT be included in your mortgage.  It is an out-of-pocket expense.

OTHER RELATED ARTICLES: 

 Can I purchase another home with 5% down payment?

Are employment probationary periods deal killers?

Don’t forget about the Closing Costs!

Contact Marko, he’s a Mortgage Broker!

604-800-9593 direct Vancouver (Click Here to schedule a call with Marko!)

403-606-3751 direct Calgary (Click Here to schedule a call with Marko!)

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Financing a property on leased land?

Posted on by markogel@gmail.com

(February 1, 2022)

Intro (pre-amble): up to 14:01 mark of podcast (Your mortgage pre-approval doesn’t include leased land | 100,000’s of foreign nationals became Permanent Residents in Canada…see ya later foreign buyer tax! | wtf…rate’s didn’t go up?! | are variable rate mortgages a bad play right now?)

Here’s what you need to know..

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:

  • There are various forms of property leaseholds, the most common are: City, Corporations, University and First Nations Reserves
  • the most challenging leaseholds: First Nations Reserves and Private Corporations
  • more lenders decline leasehold properties than those that are willing to lend against them.  This alone could potentially reduce demand for the property with prospective buyers that require a mortgage for completion.  And those that are willing to finance on leaseholds will not approve a mortgage for a term or an amortization that is longer than the lease itself.  As a result, leasehold properties are typically less expensive than regular properties and in some cases, significantly less
  • there could be additional fees associated with leasehold properties just as there are with traditional properties such as Home Ownership Association and Lease Payment costs.
  • Here are some key leasehold terms that lenders look for when reviewing the leasehold agreements:
  • must be in favor of the borrower,
  • must be signed by the landlord and assignable to the bank,
  • cannot be subject to renegotiation at the landlords discretion prior to the expiry of the original term,
  • lease must be prepaid for the entire term of the lease,
  • no restrictions or limitations on the re-sale of the property

Conclusion – two MASSIVE takeaways:

1) Submit a copy of the lease to your mortgage broker and lawyer BEFORE proceeding with an accepted offer,

2) Ask for an extension or collapse the offer if your lawyer and broker haven’t reviewed the leasehold agreement and given you their blessing to proceed

OTHER RELATED ARTICLES: 

 Massive Mortgage Penalty?

Rent-to-Own Real Estate

Purchasing & Mortgaging a Property via an Assignment

Contact Marko, he’s a Mortgage Broker!

604-800-9593 direct Vancouver (Click Here to schedule a call with Marko!)

403-606-3751 direct Calgary (Click Here to schedule a call with Marko!)

markogelo.com

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Property Disclosure Statements…silent mortgage killers?

Posted on by markogel@gmail.com

(January 19, 2022)

Intro (pre-amble): up to 14:44 mark of podcast (Property Disclosure Statements | 10 random buyer profiles in Calgary & Vancouver real estate market | I think Prime Rate is going up on Jan 26 | Rate predictions for 2022)

PROPERTY DISCLOSURE STATEMENT (PDS): definition

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.  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.  If you have a period of financing conditions in your offer you should have plenty of time to review and deal with any problematic disclosures, but IF YOU ARE submitting a subject free offer, do the following:

  1. Make sure you have thoroughly reviewed your mortgage pre-approval with your mortgage broker and be sure to Indicate that you plan on submitting an offer with no subjects, otherwise your mortgage broker will expect to have financing conditions.  Click Here to  read my past blog on how to qualify for a bullet proof mortgage pre-approval.
  2. Once your mortgage pre-approval has been upgraded to a subject-free mortgage pre-approval, cautiously proceed with making offers.  But BEFORE you actually submit a subject free offer, provide a MLS Sheet and PDS of the property to your mortgage broker for review.  Remember, a mortgage pre-approval accounts for mostly everything regarding your personal financial credentials, but what it doesn’t account for is the actual property itself (as the property was still unknown and undetermined at the time of the pre-approval process).  MAKE SURE that any problematic disclosures are identified and brought to the attention of your mortgage broker PRIOR to submitting your subject-free offer.  This is a very critical step and could potentially prevent you from a worst case scenario of going subject free on a property that no lender in Canada will approve!  It happens more often than you think and there is absolutely nothing that a co-signer can do about it, regardless of how strong they are. 

Here are some problematic (or potentially deal breaking) property disclosures to look out for, heads up!

  • properties that were formerly marijuana grow ops or any other history of drug manufacturing
  • properties that are classified as mobile homes
  • any existing or pending litigations on a property.  Lenders will require that they be resolved prior to advancing funds
  • properties that are in the process of being remediated will not be approved by lenders until the process has been fully completed
  • water sources other than city/municipal.  Lender will request details and determine whether or not the source is acceptable according to their qualifying parameters
  • anything pertaining to leaks and/or membrane issues
  • self managed strata for complexes over 10 units
  • poorly funded strata (contingency fund)
  • properties that are situated on a flood plain
  • any mention of asbestos and/or vermiculite
  • in ground oil tanks
  • foundation issues

Other points to be aware of:

  • PDS’s are required for all purchase transactions in BC and if seller or buyer do not provide one, lenders will become suspicious and/or curious if there are issues with the property.  In most instances they will simply decline and collapse the application.
  • in cases were owners have never occupied the property because they have been renting it out for investment purposes, they will typically present a scratched out blank PDS to signify that they are unaware of any defects as they have not been residing in it.  In this event, lenders will typically require the buyer to purchase title insurance to protect against many (but not all) potential defects.

OTHER RELATED ARTICLES: 

 11th hour mortgage qualification collapses…how to avoid them

Purchasing a Property with No Financing Conditions…OMG!

Is your mortgage pre-approval legit?

Contact Marko, he’s a Mortgage Broker!

604-800-9593 direct Vancouver (Click Here to schedule a call with Marko!)

403-606-3751 direct Calgary (Click Here to schedule a call with Marko!)

markogelo.com

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MarkoMusic (SoundCloud Account)…all podcast music tracks are performed and produced by Marko

Mortgage up for renewal?

Posted on by markogel@gmail.com

(January 9, 2022)

Intro (pre-amble): up to 17:58 mark of podcast (Politics & Onion Peeling | Whats worse? Rising interest rates or rising inflation? | Time to move to Calgary? | Interest Rate wrap up)

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.

Other related blogs: The Secret to Renewing your Mortgage

Contact Marko, he’s a Mortgage Broker!

604-800-9593 direct Vancouver (Click Here to schedule a call with Marko!)

403-606-3751 direct Calgary (Click Here to schedule a call with Marko!)

markogelo.com

Facebook

@markogelo (Twitter)

MarkoMusic (SoundCloud Account)…all podcast music tracks are performed and produced by Marko

Marko Gelo

Mortgage Broker
Vancouver direct: 604-800-9593
Calgary direct: 403-606-3751
E-mail: teamgelo@mortgagecentre.com

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