Interest Rates, Affordability, Zoning, and 2026 FIFA World Cup!

Posted on February 4, 2024 by markogel@gmail.com

(February 4, 2024)

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The first month of 2024 is behind us!

Here’s a summary of how things are shaping up for the rest of the year.

Interest Rates and Market Trends:

If January is an indication of things to come, it’s fair to say that we’re headed in the right direction. Fixed rates have already dropped by a full percent, comfortably placing them in the 5% range over the last few months. However, variable rates are yet to follow suit. Currently, Canada’s Prime Rate has held steady at 7.20% for the past 7 months. After deducting the industry-standard discounts (-0.35% for conventional mortgages, -0.90% for high-ratio mortgages), you’re left with an effective rate of 6.30% – 6.85%. The question arises: why even bother with a variable rate mortgage then? Opting for a fixed rate might seem like a no-brainer, but hold on. Economists predict a Prime Rate drop of at least 1%, possibly more, before the end of 2024… and likely further drops into 2025. The pace of pre-approvals post-Christmas suggests a robust spring market is ahead of us. If this plays out like I think it will, the Bank of Canada (BOC) will sit idle throughout the spring market without any interest rate reductions. Even though inflationary pressures appear to be on the mend, the BOC will likely go the extra mile and allow higher interest rates to take one final bite out of the economy until it finally begins its descent. While some anticipate this drop earlier, my personal opinion is that a drop will not occur until the July 24 announcement, which will be the fifth interest rate announcement of eight for 2024. By July 2024, it will be 28 months since the rapid ascent of 2022 began when Prime Rate in Canada skyrocketed from 2.70% to 7.20% in 17 months.

Will we ever fix the affordability crisis? (Vancouver, Toronto…Calgary)

Is there genuinely a supply issue in Canada? The past decade has seen various government measures aimed at curbing demand, but affordability remains a pressing concern. Despite measures like the Foreign Buyer Tax, the Foreign Buyer Ban, the 2% stress test, and various other mortgage qualification and real estate purchase restrictions, Canada continues to grapple with an ongoing affordability crisis. Immigration is also a contributing factor, and until Canadians start reproducing en masse, importing talent globally remains essential. Canadian birth rates in the low 1s are not gonna cut it and won’t address our low productivity rates as a nation. Let’s face it; Canadians need to get busy and make strides to increase our population naturally, but until they do, expect strong flows of immigration for years to come. It’s going to take at least a decade and lots of shovels in the ground until we see at least a hint of a meaningful market correction. Vancouver will carry on being Vancouver, Toronto will continue to attract the most newcomers, and Calgary (and Edmonton) will increasingly become the affordability poster child until one day it isn’t anymore.

David Eby’s Zoning Initiative in BC: A Positive Step

Finally, something meaningful! This is the scale of magnitude required to get the pendulum swinging in the right direction. It’s about time someone body-checked the municipalities out of their comfort zones (well done, Eby!). In my opinion, this is where the affordability crisis was born. Ridiculous permitting processes, over-the-top studies, and distracting/strategic community town hall meetings. Like, come on, I get it, let people have their say, but we’ve been letting the minority (aka NIMBY’ers) have their way for far too long already. Too much time building bike lanes, charge stations, and other virtue-signalling construction ventures. Let’s build homes again, and lots of them! The more 700-square-foot condos we insert into our communities, the lower the birth rate will remain… time to ramp up construction and start building more of the bigger, family-oriented, missing middle homes (townhomes, row houses)! The province’s new housing legislation slated for 2026 will deliver more small-scale, multi-unit housing to the market. Homes currently zoned for single-family or duplex use will essentially be permitted for three to four units (depending on lot size), and up to 6-units for even larger lot sizes close to transit stops.

FIFA World Cup is just around the corner, will it kick Vancouver’s real estate market into a higher gear?

We’re about two and a half years away from co-hosting the largest sporting event in the universe, the FIFA World Cup. Vancouver will once again be featured on the world stage. With the Foreign Buyer ban set to expire in 2025, it will be interesting to see which anti-foreign-real-estate-demand policies remain in effect leading up to the World Cup. Following Expo 86 and the 2010 Winter Olympics, Vancouver’s real estate market experienced immediate and prolonged upswings. Will the same pattern happen post-World Cup? We’ll have to wait and see. Until then, be light on your feet and stay subscribed to this newsletter to keep at the pulse of everything real estate and financing!

Want to discuss your financing possibilities for 2024? 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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604-800-9593 cell/text | Vancouver (Click Here to schedule a call with Marko!)

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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.

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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Navigating Provincial Borders: Why Choosing a Local Mortgage Broker Matters

Posted on January 22, 2024January 22, 2024 by markogel@gmail.com

(Jan 21, 2024)

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Many Canadians find themselves relocating from one province to another, and with such mobility, a common question arises: If I buy property in another province—whether for rental, recreational, or residential purposes—should I consult a mortgage broker in the province I’m moving to, or can I stick with my current local banker or broker, even if I’m planning to leave?

In almost all cases, the answer is yes, you should consider working with a broker in the province where you plan to make the purchase. Here are two reasons why:

Varying Lender Policies:

Lenders across Canada have different policies regarding this matter. Some insist that a broker must be licensed in the province where they arrange financing, while others are more flexible. However, this flexibility can have implications, as some lenders explicitly reject applications from brokers outside their provincial jurisdiction. By limiting yourself to a local broker, you might miss out on better rates or a wider product selection from lenders you wouldn’t have access to otherwise. It’s worth noting that Credit Unions are gaining popularity among Canadians for mortgages. Though not the primary choice for all, those securing financing with a Credit Union face limitations tied to provincial borders. Credit unions in Canada operate on a provincial basis, so if you’re moving from Ontario to Alberta, only an Alberta mortgage broker can facilitate a mortgage with an Alberta credit union. Conversely, an Ontario mortgage broker cannot secure financing for your Alberta property with an Ontario credit union.

Errors and Omissions Coverage:

Like other service-oriented professions, such as realtors, accountants, and lawyers, Canadian mortgage brokers carry errors and omissions coverage. This insurance protects them in case of disputes or liabilities arising from a real estate transaction. However, most coverage providers consider any mortgage transactions completed outside the broker’s licensing jurisdiction as a breach of policy, resulting in no coverage in the event of a dispute or settlement.

How to proceed going forward?

Choose a Licensed Broker:

Work with a broker licensed in the province where you intend to purchase.

Co-Broker or Referral:

If dealing with a mortgage broker in your current province while purchasing in another, ensure they are co-brokering with a licensed broker in the target province. Co-brokering is an option available to all Canadian mortgage brokers. Instead of a formal arrangement, many brokers prefer direct referrals to the broker in the purchasing province, streamlining the process and enhancing the applicant’s experience. Often, the two brokers agree on a commission split within regulatory guidelines.

Purchasing in another province? 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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The Truth Behind Mortgage Pre-Approvals and Rate Guarantees

Posted on January 12, 2024January 12, 2024 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

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Mortgages, Real Estate, and Life in 2024

Posted on January 6, 2024January 6, 2024 by markogel@gmail.com

(Jan 6, 2024)

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With all the uncertainty these days, it’s easy to succumb to the negative energy amplified by various media outlets like television, social media, and news publications. The year ahead in real estate, mortgages, and life, in general, will be a rollercoaster ride of challenges and triumphs. However, the key to not only surviving but also thriving lies in recognizing the fine line between acknowledging what is out of our control and empowering ourselves to focus on what we can control and influence. Rather than dwelling on the broad spectrum of things we CANNOT control, let’s shift our focus to what we CAN control: our thoughts, finances, and health. These elements form the foundation upon which we can build resilience and drive positive change:

THOUGHTS: Our mindset shapes our reality. Choosing to focus on the positive aspects of life, personal growth, and the potential for improvement can pave the way for a more favourable outcome.
HEALTH: In the pursuit of a prosperous life, our physical and mental well-being must take center stage. Prioritizing health through exercise, a balanced diet, and mindfulness ensures we have the vitality to navigate challenges.
FINANCES: While global economic forces may sway, our financial decisions remain within OUR grasp. Smart financial planning, budgeting, and investing empower us to weather storms and capitalize on opportunities.

A particularly valuable resource in times of uncertainty is the Andex Chart. If you’re not familiar with it, today’s your lucky day! It’s long been described as the document-version symbol of resilience and growth. The Andex Chart is a visual representation of North America’s key financial metrics since 1934. Click here to be redirected to one of the many available online. The chart illustrates the upward trajectory of good fortune, showcasing how, despite valleys and setbacks, the overall trend is consistently upward. This factual analysis will normalize any pessimistic outlook you may currently be fixated on. Whenever you’re feeling down about your finances, net worth, or business, put your reader glasses on and locate an Andex Chart. Just stare at it. It’s a one-page illustrative diagram that includes virtually every relevant financial North American metric and charts it against global events. For example, since 2020, the average inflation rate is approximately 6.2%, but for the 30 years prior, the average never exceeded 2.1%. The last time we averaged 6.2% was the entire decade of the 80s. Despite challenging periods from 1970 to 1990, Canadian stocks rose by about 24%! And all this amid historic negative events (Arab Oil Embargo in the early ’70’s, 22.75% Prime Rate in the early ’80s, and and the infamous Black Monday of the late ’80’s). Pretty crazy, right? Fear not, and have faith in the sacred Andex Chart. It serves as a reminder that the key to success lies in perseverance and a long-term perspective.

Now, focusing on mortgage holders and their journey of survival, evolution, and thriving, we are approaching a period of transition. Some will transition from sub 2% interest rate mortgages to a more long-term average 5% interest rate environment, as a significant number of mortgages are set to expire in 2024 and continue throughout 2025. Others will enter a market intensely contested and surrounded by conditions and outcomes not seen or experienced in decades. So, if you’re faced with a mortgage renewal in the coming year, brace yourself for the shock of new terms. On the other hand, if you’re about to enter the market, you’re committing to today’s reality—higher interest rates, post-inflationary standards, and crisis-ridden real estate supply and affordability issues. A pessimist might say, “pick your poison.” Personally, I’ll be looking at things from an Andex Chart point of view. What is happening at this time is normal, and it will continue to occur in the future. It’s a time to regroup, to adjust, to pivot. It’s not the end; it’s a new beginning. And with new beginnings come new plans and fresh mindsets.

If you’re a mortgage holder renewing at a higher rate, accept that renewal periods are not always optimal times to lock in new rates and terms. However, maintain optimism. Mortgage renewal time is an opportunity to make changes in your financial situation, without penalties. For those anticipating a higher and unmanageable rate, a simple fix may be to increase your amortization. Or, by consolidating substantial credit card debt or lingering personal line of credit balance, you can achieve a drastic reduction in outgoing cash flow. What may seem demoralizing from a mortgaging perspective could be rejuvenating from a personal finance and mental health standpoint. Amortizations and balances can always be managed and improved over time as interest rates and personal income improve.

If you’re entering the market with your first purchase, accept that you may need to adjust your purchase expectations downward, scale back your current lifestyle, improve your employment prospects, or a combination of these. It’s not your fault that you live in an unaffordable market, but going forward, there won’t be any handouts. Commit to a plan to achieve your real estate goals; get pre-qualified for a mortgage and realize where your shortcomings are. Once again, as exemplified by the Andex Chart, your entrance into real estate may appear challenging at first, but with perseverance and a long-term perspective, the challenge will diminish over time.

For current homeowners looking to sell their homes, whether upgrading to a larger home or downsizing to a smaller one, there are crucial considerations in both mortgage qualification and the real estate market. Upgraders should be prepared for a thorough mortgage pre-qualification, accounting for criteria they likely were not aware of when they last purchased a property. This includes the 2% mortgage stress test, minimum down payment thresholds for various mortgage programs (20% minimum for properties exceeding $1M), the elevated interest rate environment, excessive mortgage break penalties, and non-eligible employment (newly self-employed, change in career path, etc.). Downgraders should also be aware that even though they are looking to purchase a property of lesser value, such as a condo, there are other property expenses that could exceed what they were previously accustomed to (strata fees, special levies, etc.).

As we stand on the brink of a new year filled with uncertainties, it’s essential to recognize the duality of our world—the uncontrollable external forces and the empowering elements within our reach. By focusing on what we can control—our thoughts, finances, and health—we not only weather the storms but also contribute to the upward trajectory of our personal and collective destinies. Embrace the chaos, compete passionately, and let the burning desire for improvement guide your journey. In the grand tapestry of life, the trend is, and always has been, onward and upward.

Want to discuss what 2024 holds for you? 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)

Mortgage Qualification Hacks for Self-Employed Applicants

Posted on December 27, 2023 by markogel@gmail.com

(Dec 27, 2023)

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Qualifying for a mortgage is generally a cumbersome task, and for self-employed applicants, the process is even more challenging. It presents difficulties for both the mortgage broker and the client. The mortgage broker must possess an exceptional understanding of qualification guidelines from multiple lenders and the ability to apply them to the specific needs of the applicant. Simultaneously, the applicant must provide copious amounts of documents and details for a proper and complete adjudication.

From both perspectives, the adage ‘you get what you put into it’ holds true. The key documents requested include T1 Generals, Business Financials (if available), and Notice of Assessments. This is the stage where the expertise of the mortgage broker becomes crucial. The reality is that not all mortgage brokers (or bank representatives) understand how to read these complex financial statements, let alone dissect, interpret, and draw conclusions from them.

Most brokers or bank representatives typically look for the most recent two years’ worth of Notice of Assessments and calculate the qualifying income based on a 2-year average. This method works fine if the declared income is sufficient to qualify for the desired purchase. However, what if the declared income falls short of qualifying the applicant for their desired mortgage?

An inexperienced broker or banker might conclude that the applicant doesn’t earn enough income and generate an understated pre-approval mortgage qualification amount. But what if the self-employed applicant intentionally declares a lower income for personal income tax purposes? Alternatively, what if they declare their income via dividends rather than T4s? Or what if they only withdraw a specific amount of income from the business for living expenses, leaving the remainder within the business where they pay far less tax?

Being self-employed offers the advantage of leveraging powerful tax-saving strategies. Therefore, qualifying based solely on the two most recent years’ Notice of Assessments isn’t a one-size-fits-all method for all self-employed applicants. There’s more to it than meets the eye.

Here are some lesser-known qualification boosters that can propel self-employed applicants to higher mortgage qualification amounts:

the Gross Up- while self-employed individuals might have a lower taxable income due to their deductions, their actual cash flow or ability to repay a mortgage may be higher. Grossing up provides a way to consider the true cash flow rather than just the reported taxable income. Participating lenders will allow self-employed applicants to gross up their declared income by as much as 30%.
Net Income After Taxes (within the business financials)- using net income after taxes reflects the financial stability and viability of the business. It further acknowledges that the business is generating profits after covering all operating expenses, tax obligations and dividends already paid out to the owner(s). Some lenders will consider up to 60% of the Net Income After Taxes as qualification income.
Stated Income- also known as “no-doc” or “low-doc” mortgages. Allows applicants to state their income without providing traditional income verification documentation such as tax returns and other self-employed financial documents (i.e. Business Financials). These mortgages often place a heavier emphasis on the borrower’s creditworthiness and credit score and offer additional assurance to the lender as they are typically backed by creditor default insurance in the event the borrower defaults on mortgage payments. This creditor insurance premium ranges from 3.30% to 5.85% and is multiplied against the mortgage principle, ultimately having an immediate impact on the property equity as its capitalized into the loan. For example, the premium on a 90% loan-to-value mortgage for a $500,000 purchase would be $26,325 (5.85% premium multiplied by the mortgage principle of $450,000). Click Here to be redirected to the Business For Self Guidelines and Premium Rate table of one of Canada’s leading mortgage default insurance providers.
Most Recent 12-Months Bank Statements- this is typically the qualification method used by sub-prime lenders where applicants have been turned down by traditional “AAA” mortgage providers such as household name big-bank brands. Allowing applicants to use the most recent 12-month bank statements also circumvents the requirement to verify that all personal taxes are up-to-date and paid in full. This qualification methodology often yields the highest interest rates as well as a 1-2% fee that is deducted from the advance (proportionately increasing the cash-to-close as a result).

It is important to note that the specific rules and guidelines for the above self-employed qualification boosters can vary among lenders and mortgage programs. The ability to take advantage of any of the above ultimately depends on the analysis of tax returns, income statements, balance sheets and other financial statements. Additionally, credit scores, property characteristics, and loan-to-value ratios also play a role.

Are you self-employed and looking to maximize your mortgage qualification? 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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Spouses with different residency statuses who want to purchase a home together

Posted on December 14, 2023December 14, 2023 by markogel@gmail.com

(Dec 14, 2023)

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As per the current legislation in British Columbia, if you plan to purchase a property and are not a Canadian citizen, Permanent Resident, or Provincial Nominee, you’ll be subject to a Foreign Buyer Tax of 20% of the purchase price due at the time of completion. For instance, if you, as a work permit holder, buy an $800,000 property in Vancouver, you’d need to pay $160,000 in Foreign Buyer Tax. However, becoming a Permanent Resident exempts you from this tax. But what if you’re in a marital or common-law relationship with one partner being a Permanent Resident and the other a work-permit holder (mixed-immigration-status couple)? If you both buy a home, would you still have to pay the Foreign Buyer Tax?

The answer is yes, but an opportunity exists to minimize the tax (potentially as low as 1%). The process involves registering you, your spouse (if applicable), and your bank (if financing the purchase) on the land title upon buying a home. You can then allocate a specific ownership proportion between you and your spouse. Let’s now return to the mixed-immigration-status couple, where one is a Permanent Resident and the other a work permit holder, the latter, being liable for the Foreign Buyer Tax, can minimize their tax payable by assigning a minimal ownership share. For instance, if the Work Permit holder is registered as 1%, they would only pay 1% of the tax on a $1M purchase, reducing it from $160,000 to $1,600!

Here’s the catch—the non-Canadian spouse must meet all of the following conditions: (i) they must be married or common-law for at least 2 years (with verification via documents such as a marriage certificate, lease agreement, utilities statement, or bank statement, etc), (ii) the Work Permit holder’s down payment cannot exceed their registered ownership share, and (iii) they must comply with the Prohibition on the Purchase of Residential Property by Non-Canadians Act, holding a valid work permit with 183 days or more of validity at the time of purchase.

What about mortgage qualification?

Regardless of whether you hold temporary or permanent residency status, there are numerous mortgage qualification programs tailored for newcomers to Canada within the Canadian market. The key challenge lies in identifying a lender whose eligibility criteria align with your specific application profile. These New-to-Canada mortgage programs vary widely from one lender to another, underscoring the importance of connecting with a multi-offering mortgage broker rather than relying on a single-offer bank representative. Submitting a single application through a mortgage broker grants access to multiple lenders, enhancing your approval prospects. Moreover, the competitive bidding process ensures favourable rates and diverse product offerings. Marko Gelo specializes in mortgages for new Canadians; call him right now to discuss your goals or Click Here to schedule a call that is convenient to you.

Disclaimer: The information above is intended to raise awareness of possibilities, provided all conditions are met. If you find that you meet the criteria discussed, the next steps should be to begin the mortgage preQualification process and verify further with your real estate lawyer regarding your immigration status as it pertains to the Foreign Buyer Tax and the Prohibition on the Purchase of Residential Property by Non-Canadians Act . For a complete reference to the BC Foreign Buyer Tax, Click Here to be redirected to the official webpage of the British Columbia Provincial Government.

Feel like a quick chat about 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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Foreign Buyer Tax, Prohibition Act, and Mortgage Qualification

Posted on December 2, 2023December 2, 2023 by markogel@gmail.com

(Dec 2, 2023)

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In the ever-evolving landscape of real estate in Canada, non-Canadian residents find themselves in a complex web of regulations that significantly impact their ability to purchase a property. At the forefront of these regulations are two pivotal legislative measures: the Foreign Buyer Tax in British Columbia and Ontario, and the nationwide Prohibition on the Purchase of Residential Property by Non-Canadians Act. While the Prohibition is poised to conclude on December 31, 2024, the foreign buyer tax (at the moment) has no set expiry date. These two key policies act as barriers, preventing many well-intentioned non-Canadians from realizing their dream of establishing roots in Canada through property ownership.

Here is a summary of the two key regulations:

The Prohibition on the Purchase of Residential Property by Non-Canadians Act: as of March 27, 2023, work permit holders are allowed to purchase residential property in Canada provided that they hold a work permit with at least 183 days of validity, or more, remaining on the permit, and have not purchased more than one residential property. 183 days must be remaining on the permit on the completion date of the property.
The Foreign Buyer Tax (BC) or Non-Resident Speculation Tax (Ontario): Unless you are a Canadian citizen, Permanent Resident or Provincial Nominee you are subject to an additional land transfer tax of 25% in Ontario, and 20% in British Columbia. Click on the following links to see if you are eligible for exemptions: Foreign Buyer Tax Exemptions in BC, and Non-Resident Speculation Tax Exemptions in Ontario. The province of Alberta (and all other remaining provinces and territories) has not mandated any foreign buyer tax.

Can non-Canadians qualify for mortgages in Canada?

Absolutely! Although non-Canadians are subject to the hefty foreign buyer tax in BC and Ontario, work permit holders and permanent residents can otherwise purchase in the rest of Canada and qualify for a mortgage with as little as 5% down. As qualification programs vary with lenders and insurers, it is best to proceed with a formal pre-qualification to determine your precise qualification scope. Click Here to begin your free preQualification with Marko Gelo.

In Summary

In the dynamic realm of Canadian real estate, non-Canadian residents continue to grapple with the multitude of regulations that impact property acquisition. The forefront of these rules includes the Foreign Buyer Tax in British Columbia and Ontario, and the nationwide Prohibition on the Purchase of Residential Property by Non-Canadians Act, with the latter set to conclude on December 31, 2024. Summarizing the key regulations, the Prohibition Act outlines conditions for work permit holders, while the Foreign Buyer Tax presents additional levies in Ontario and BC. Notably, non-Canadians can still qualify for mortgages in Canada, subject to region-specific tax implications.

Make sense? 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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What’s the difference between a mortgage renewal and a mortgage refinance?

Posted on November 29, 2023November 22, 2023 by markogel@gmail.com

(Nov 29, 2023)

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While the terms renewal and refinance may seem interchangeable, they represent distinct differences. “Mortgage renewal” is the classification given to a mortgage application that is simply renewing to a new interest rate and term. No new funds are requested at maturity; the mortgage principal maintains its balance and continues on the path of its existing amortization schedule. “Mortgage refinance” is when new funds are added to the existing mortgage principal, resulting in a larger mortgage amount and the option to alter the amortization schedule.

Determining whether it’s a renewal or a refinance mortgage is important for a couple of reasons. Firstly, when it comes to interest rates, you are likely to get a better rate when renewing your mortgage. There are opportunities to get similar rate offerings for refinances, but a few backend specifications of the existing mortgage have to line up (I’ll defer to these details in a future post). After the rate difference, the next significant consideration against refinances is the inclusion of administrative fees. As mentioned above, when completing a mortgage renewal, there is no cost to you (the applicant). However, for refinances, there are a couple of fees to be aware of: appraisal and legal. Depending on where you live in Canada, your legal fee will range from $600 to as high as $1,800, depending on the complexity of the refinance (the more items the lawyer is instructed to pay out, the higher the legal fees). The appraisal fee depends on the property’s size and its proximity to the nearest appraiser, usually around $250 to $400 per appraisal. In most instances, fees get worked into your equity and get tacked on to the new mortgage balance, sidestepping any potential for out-of-pocket expenses.

Mortgage Renewal Key Points

Although adding new funds to an existing mortgage balance at maturity would deem the mortgage a refinance, there is a small allowance for new funds to be added for mortgage renewals. Most lenders will allow for a one-time bump up of $3,000 to cover potential fees or payout penalties of the outgoing lender (when I say bump up, I mean the $3,000 getting tacked on to your new mortgage principal). This is a great loophole for those who prefer to renew ahead of their maturity date, rather than paying the break penalty; they could tack on the outgoing penalty fee to their renewed mortgage (provided their break penalty is less than $3,000). You could also increase your mortgage balance and still be deemed a mortgage renewal if your existing mortgage has an existing HELOC or collateral charge. This is comparable to a pre-approved mortgage principal booster that can be activated at any time in the future. If you are currently in a mortgage with an additional component like a HELOC, this applies to you. If any of your existing HELOC is unused prior to your new renewal, you can simply draw the unused portion and claim it as your renewed mortgage principal at the time of the renewal—a great little hack to classify your mortgage as a renewal, thereby qualifying for fully discounted rates and a fee-free transaction (no legal costs, no appraisal costs). Remember the two key points of mortgage renewals: (i) lower rates (most of the time), and (ii) no legal fees to complete the transaction.

Mortgage Refinance Key Points

The most common triggers that result in a mortgage refinance are increasing your mortgage balance and expanding your amortization. Increasing your amortization at renewal time is technically allowed, but it is limited. Essentially, you only have the option to revert back to the starting amortization since your last mortgage event. For example, if your mortgage is coming due next month, and the remaining amortization is at 20 years, you would have the option of renewing back to its starting amortization period since your last mortgage transaction event. So if your amortization was initially set at 25 years, you could technically reset the amortization accordingly. Conversely, for a mortgage refinance, you can reset the amortization as high as 35 years if you so desire. But heads up, for every 5-year increase of amortization that you seek after 25 years, some lenders will add a premium to the interest rate. The most common gateway to a mortgage refinance is the good old debt consolidation. This is when you pay off a bunch of high-interest debt like credit cards and other consumer loans, rolling them all into your new mortgage, which significantly reduces your monthly mortgage payment (thereby eliminating all your other monthly payments of the previous debts you just consolidated). Simply put, it’s the big reset or game-changer for many embroiled homeowners who were looking for a break and some extra breathing room. In summary, any change to an existing mortgage essentially deems the mortgage transaction a refinance. The following are some of the more common changes that lead to a mortgage refinance: removing or adding someone to the mortgage, increasing the mortgage amount, and expanding the amortization.

In Summary

It’s important to understand the distinction between mortgage renewal and mortgage refinance. While a renewal typically offers better interest rates and involves minimal costs, a refinance allows for adjustments in both the mortgage amount and amortization schedule. Key considerations include potential administrative fees associated with refinancing, as well as the flexibility of adding small funds during a renewal. Ultimately, whether it’s the pursuit of lower rates or the need for a financial reset through debt consolidation, recognizing the nuances between these two processes empowers homeowners to make informed decisions tailored to their unique circumstances.

Make sense? 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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My mortgage is coming due and I’m switching to another bank, is it gonna cost me anything?

Posted on November 22, 2023 by markogel@gmail.com

(Nov 22, 2023)

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The process of renewing your mortgage is a pivotal moment that ultimately influences your financial landscape for the coming years (in Canada, that’s typically a repeat frequency of 5-year terms). As your mortgage maturity date approaches, the question of whether to renew with your existing lender or explore options with a different bank often arises. Beyond the considerations of interest rates and terms, a more pressing question occupies the mind of a homeowner: Are there any fees if I choose to renew with another bank? The short answer to this question is, no, not for you. While there are costs associated with switching to a new lender, it’s the new lender that covers these expenses, considering them part of the “cost of doing business.”

Before deciding to switch, it’s essential to do a quick cost analysis. Reach out to a mortgage broker well before your maturity date, and discuss your current lender’s renewal offer. A competent broker should quickly assess whether they can match or surpass your current offer. If a better deal is on the table, the next step involves some math: calculate your new payment and the overall savings throughout the mortgage term. For instance, if a lower rate translates to a $100 reduction in your monthly interest charges, the accumulated savings over a 5-year fixed term could amount to $6,000. This financial gain becomes the deciding factor: is the monthly reduction and the long-term savings worth your time? If not, take the simpler plan and sign off with your current lender for the higher offer.

For those with the penny-saved-is-a-penny-earned mindset, the process of switching lenders and requalifying is always a worthwhile effort. However, others may find it less compelling.

What’s involved in this process, you ask? When switching to another lender, keep in mind that they don’t know you, so a complete application, income and property documents, and signing with a mobile agent are required. The good news? There’s no direct cost to you – only an investment of your time.

How long does the qualification process take, and what’s required?

The first step is completing the application. If you’re dealing with me, the online application takes about 5 minutes, with questions you can answer off the top of your head. After completing the application, a custom document request list is generated and sent separately. Once your documents are received, your application is adjudicated within 3 days. If approved, you sign the lender’s commitment, satisfying any remaining conditions. The lender then works behind the scenes, preparing formal documents and instructions for their legal signing agent. Your role? Waiting for a call from the signing agent for a doorstep signing wherever is convenient for you. The rest – handling funds, modifying title registration, and updating home insurance details – is managed by your mortgage broker, the lender, and its legal team.

In summary, switching to another lender for your mortgage renewal is a fee-less transaction. However, the primary hurdle preventing many from taking this step is the effort involved. Surprisingly, a significant number of homeowners renew at the first offer from their existing lender. Don’t fall into this trap. Make the call, crunch the numbers, and then decide – the figures will often speak for themselves and guide your decision-making process.

Mortgage coming due? 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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