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

Posted on February 11, 2024February 11, 2024 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.

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

Posted on January 30, 2024January 30, 2024 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.

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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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Is now the right time to choose a variable rate mortgage?

Posted on October 14, 2023November 3, 2023 by markogel@gmail.com

(Oct 14, 2023)

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In a world where financial stability often hangs in the balance, making the right decisions regarding your mortgage can be a pivotal moment in securing your economic future. As of March 2022, we embarked on an unprecedented journey through a rate-hiking cycle, witnessing the prime rate surge from a modest 2.45% to its current towering 7.20% – a jaw-dropping 193% increase. The ripples of this upward trajectory have undeniably reached Canadian households, leaving many grappling with unforeseen financial hardships. However, history often reveals a silver lining in the cloud of uncertainty. In the 1980s, when interest rates skyrocketed by 82%, they subsequently plummeted by 27% within a brief five-month window, followed by another remarkable 33% decrease over the subsequent five months. So, as we stand where many believe to be at or near a peak in prime rate today, currently perched at 7.20%, a glimpse into the past suggests the possibility of a descent, and if mirrored to the trajectory of the 1980’s that could equate to a descent to approximately 5.25% in the next five months, and if history persists a subsequent drop to 3.5%. Skeptics may dub it “too good to be true,” but what if history continues to write a similar script? Whichever way you examine it, this scenario appears far more enticing than the prevailing fixed-rate offerings in the market today.

Let’s put the current mortgage market into perspective. At the time of publishing this blog post, a competitive 5-year fixed-rate mortgage, particularly for high-ratio borrowers, stands at 5.84%. This rate, while offering stability, leaves you contractually locked into your rate and payment, regardless of potential market shifts. In contrast, a competitive variable rate mortgage, set at Prime – 0.95% (based on the current Prime Rate of 7.20%), presents a compelling alternative. Now, consider the historical precedent we’ve explored, where interest rates in the 1980s saw a steep climb followed by a remarkable descent…today that same 27% drop from 7.20% would equate to about 5.25% and after that, another 33% drop to ~3.47%. If this historical trend holds any weight, the variable rate mortgage becomes a tantalizing prospect. In light of these comparisons, the variable rate mortgage demands your attention as a prudent choice in today’s ever-changing financial landscape. With history as our guide, this option is not just intriguing; it’s a serious contender worthy of your consideration.

Moreover, when considering a variable rate mortgage, it’s crucial to keep in mind a few key features that set it apart from fixed-rate counterparts. Firstly, variable rate mortgages offer the flexibility of allowing you to lock in at prevailing fixed rates at any point during the mortgage’s term, without incurring any penalties. This unique advantage enables you to adapt to changing market conditions or your personal financial situation with ease. Additionally, the break penalties associated with variable rate mortgages are typically fixed at a straightforward three months’ worth of interest. Unlike fixed-rate mortgages, where penalties may be calculated based on an interest rate differential, variable rates mitigate the complexity and potential financial risk associated with these penalties. These features not only enhance the appeal of variable rate mortgages but also underscore the importance of exploring this mortgage option.

Wondering if a variable rate mortgage makes sense for you? Call or text Marko Gelo right now to secure your discounted variable rate at 604-800-9593, or Click Here to schedule a free, no-obligation phone call with Marko. You can also call Marko on WhatsApp.

DISCLAIMER: The contents of this blog post are derived solely from my personal analysis and perspective. I must emphasize that I am not an economist, nor have I received this information from any external source. My analysis is based on historical Prime Rate data for Canada, and I’ve conducted manual calculations to develop the hypothesis presented here. While I sincerely hope that my conclusions, drawn from an examination of data charts and graphs, hold true, it is essential to clarify that these findings are not verified, confirmed, or endorsed by any authoritative source or expert in the field. The intention behind this blog post is purely to encourage individuals to explore their mortgage options fully. Rather than dismissing variable rate mortgages outright, I advocate for their consideration in the ever-evolving financial landscape. Making informed choices is of paramount importance when it comes to such significant financial decisions.

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Contact Marko, he’s a Mortgage Broker!

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Mortgage Programs in Canada for Dentists, Veterinarians, and Optometrists who are in the process of or completing residency/fellowship

Posted on September 30, 2023September 30, 2023 by markogel@gmail.com

(Sept 30, 2023)

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Embarking on a career in dentistry, veterinary medicine, or optometry is a commendable and intellectually rewarding path. Yet, for many aspiring professionals in these fields, the road to success often involves years of dedication and rigorous training in the form of residencies or fellowships. While these educational pursuits pave the way for expertise and specialization, they can also bring about financial challenges. Recognizing the unique needs of these dedicated individuals, Canada offers a range of specialized mortgage programs designed to ease the journey toward homeownership for dentists, veterinarians, and optometrists during (or after) their residency or fellowship phases. In this blog, we’ll explore the tailored mortgage solutions available to these healthcare professionals, ensuring that their dream of owning a home remains within reach, even as they focus on honing their skills and advancing their careers. Whether you’re just beginning your residency or have recently completed it, read on to discover how you can secure your future home in Canada.

The Key Qualification Feature:

For Dentists, Veterinarians and Optometrists who are either in the process of completing or have recently completed their residency/fellowship there exists a unique program that assesses borrower eligibility based on their future (projected) income. This program is unique in that it allows for the projection of future income.

Here is a summary of the qualification criteria:

BORROWER QUALIFICATIONS:

Dental/Veterinary/Optometry students who are in their final year of residency, fellowship, or recognized program of study in Canada, as applicable
Newly practicing doctors earning income in a related field who completed their program of study within the following:
- Newly practicing dentists within the last 24 months
- Newly practicing veterinarians within the last 12 months
- Newly practicing optometrists within the last 12 months
applicants are able to qualify based on projected income (inquire directly with Marko Gelo to determine your projected income)
although projected income is used, standard income verification is still required for employment verification purposes
Loan Purposes: Purchase or Refinance
only Owner Occupied Principal Residence properties are eligible up to 2-units (duplex)
minimum down payment required: 10% (up $999,999 purchase price). For properties that are $1M or greater, the minimum down payment is 20%.gifted down payments are allowed: (i) for down payments that are less than 20%, a minimum of 5% must be from applicants own sources (ii) for down payments that are 20% or greater, a minimum of 15% must be from applicants own sources
amortizations up to 30 years are available

DOWN PAYMENT REQUIREMENTS:

If in final year of residency/fellowship or study:
- confirmation of enrollment in residency/fellowship/program of study. The year of your tenure must be specified within the document (i.e. 2nd year of program)
If newly practising Dentists: confirmation of program completion of a Doctor of Dental Surgery program in Canada within the last 24 months is required. Confirmation must display the date of completion.
- Veterinarians: Confirmation of program completion of a Doctor of Veterinarian Medicine program in Canada within the last 12 months is required. Confirmation must display the date of completion.
- Optometrists: Confirmation of program completion of a Doctor of Optometry program from either University of Waterloo or University of Montreal within the last 12 months is required. Confirmation must display the date of completion.

EXCLUSIONS

This qualification program is not available for/to: mobile homes, construction draw mortgages, non-Canadian applicants (you must be a Canadian citizen)

Are you a Dentist, Veterinarian or Optometrist that is in the process of or who has recently completed your residency/fellowship and wondering if you can qualify for a mortgage? 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.

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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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The Second Home Mortgage

Posted on July 11, 2023July 11, 2023 by markogel@gmail.com

(July 10, 2023)

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This mortgage program allows people to purchase an additional home for immediate family members on a rent-free basis. It is a unique qualification program as it is the only product that allows you to purchase another property in which you do not intend to occupy, with a down payment as little as 5%. Typically, if you do not reside in the property that you purchase, the minimum down payment would be 20%.

Common applications of the Second Home Mortgage Program:

-purchasing a property for the purpose of providing accomodation for an adult child who is starting a business

-providing accomodation for an adult child who is attending a college/university (or any other post secondary educational institute).

-Ideal for elderly parents on fixed incomes who lack qualifying income for mortgage qualification

KEY QUALIFICATION GUIDELINES:

up to 2-unit properties (duplex) are allowed, a family member must occupy one of the units on a rent-free basis
remaining economic life of the property must be at least 25 years
property purchase price must be less than $1M
maximum amortization is 25 years
down payments must be derived from own sources, cannot be gifted, or from borrowed sources
immediate family member is defined as any one of the following: father/mother, child, brother, sister, grandparent, legal guardian, or legal dependant
all qualifying applicants including the resident family member will be required to register on the land title
ability to request additional mortgage funds for immediate renovations/improvements to the property are allowed (via the Purchase PLUS Improvement mortgage guideline)
self employed applicants are allowed provided they can qualify as per their declared incomes via Line 150 of their Notice of Assessments

The following criteria are not permitted under the Second Home Mortgage Program:

vacation properties are ineligible
down payment proceeds cannot come from borrowed sources
down payment proceeds cannot be gifted
must be a Canadian citizen (not available to Temporary residents)
property cannot be rented out to generate income, therefore, projected rental income cannot be used for qualification purposes. Applicant must be strong enough to debt-service the entire mortgage (in addition to any other existing mortgages they may hold)

Wondering if you are eligible to qualify for a Second Home mortgage? Call or text Marko Gelo right now at 604-800-9593, or Click Here to schedule a free, no-obligation phone call with Marko.

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Contact Marko, he’s a Mortgage Broker!

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

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

Email: gelo.m@mortgagecentre.com

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VARIABLE rate mortgages with FIXED payments

Posted on October 11, 2021October 13, 2021 by markogel@gmail.com

(October 11, 2021)

Intro (pre-amble): up to 11:37 mark of podcast (a VARIABLE rate mortgage with FIXED payments | will Canadian & US debt ceiling issues lead to a spike in interest rates? | climate change & rising sea levels…how and when will this impact Vancouver infrastructure and real estate?)

Did you know that there are variable rate mortgages that allow you to have fixed payments regardless if the rate changes? There is such a product and it’s referred to as a Capped Variable Rate mortgage.
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.

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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