(March 15, 2022)

Intro (pre-amble): up to 5:53 mark of podcast (weekly interest rate recap and projections)

One of the more common questions regarding pre-approvals is, “how long is my pre-approval good for?”.  Generally speaking, a pre-approval is good for as long as the maturity date of the rate hold (as specified within the pre-approval).  Rate holds are typically set for 90 to 120 days depending on the lender.  Although the rate hold is indeed a critical part of the pre-approval, it can also be a major distraction from other more important (or critical) conditions that if not maintained (or updated) will lead to a significantly downgraded level of assurance, or outright invalid pre-approval.  If any of the application details change from the date the application was completed, then the pre-approval could technically be deemed void and/or invalid.

Other than the rate hold guarantee in a pre-approval, here are some other conditions/circumstances to be aware of that could lead to your PA no longer being valid:

In summary, pre-approvals require ongoing updating from both the mortgage broker and the applicant.  It is important to be proactive and diligent with your pre-approval.  Be accountable and keep your mortgage broker informed of any changes to your overall application.  This could include simple things such as reporting incremental pay increases or revised plans for a slightly lower down payment, but can also include more revealing and detrimental updates like incurring more consumer debt or perhaps the update is positive and is an opportunity to increase your qualifying mortgage amount.  Regardless of the update, the pre-approval will ultimately need to be revised to account for the change.  Whatever you do, DO NOT leave it to chance that your mortgage broker will regularly follow up with you as pre-approval’s are generally a one-time issuance.  Keep in mind that live applications are naturally prioritized ahead of pre-approvals and as such it’s important to maintain full accountability for the validity of your pre-approval.  If you are indeed going to be moving forward with a purchase, maintain communication with your mortgage broker.  All it takes is a simple email or text to notify your mortgage broker that you are still engaged.  This will trigger your mortgage broker to review your file and react accordingly with any information or document requests to keep your pre-approval is up-to-date.
A proper pre-approval should include qualification scenarios as well as any conditions, restrictions, or limitations pertaining to it.  Pre-approval’s should be loaded with details, figures, conditions, and disclosures and should range in word count from at least 300 words to as high as 500-600 words.

Below are examples of a Rate Hold Pre Approval followed by a Fully Qualified Mortgage Pre Approval.

Example of a Rate Hold Pre Approval: (limited/miscellaneous details)

Here is a recently completed Fully Qualified Mortgage Pre Approval: (extensive details and scenarios)

OTHER RELATED ARTICLES: 

How to get a bullet-proof mortgage pre-approval

The key driver for all mortgage approvals

8 powertips for first time home buyers

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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(March 7, 2022)

Intro (pre-amble): up to 6:02 mark of podcast (weekly interest rate recap and projections)

With the prolonged surge of real estate markets across the country many Canadian homeowners are considering cashing in some of their home equity to purchase a rental property.  The transaction may seem daunting at first, but with a carefully laid out plan and a real estate action team in place, one will realize just how easy it can be.
Before reading through and internalizing the following step-by-step checklist, the first, and in my opinion, the most important task is to align your mindset to that of an investor rather than a homeowner.  Transform yourself to be shrewd in your property selection, decision making and overall analysis of the transaction.  Avoid being emotional.  Instead, maintain a sense of logic and due diligence.  Once you have entered this mindset, let your plan and the guidance of your real estate action team see you through the process:

STEP ONE: Make a Plan and stick with it.

The plan doesn’t have to be complex, it could simply be in point form outline:

• identify where you want to purchase
• identify the property type (condo, townhome, house, multi-family)
• establish a time horizon to hold your investment property
• declare your end goal(s) – short-term rental income, long-term rental income, medium/long term appreciation, plans for near to long term future development, etc

STEP TWO: Verify your Plan with your Mortgage Broker

Avoid putting the cart before the horse and rushing to view properties without first discussing the financial feasibility of your plan with a mortgage broker.  Remember, you have transformed your mindset to that of an investor.  An investor mindset is committed to the process of due diligence and minimizes temptations to allow their emotions to guide them.  Look for the following characteristics when selecting your mortgage broker:

• select a mortgage broker rather than a (one trick pony) banker.  This is critical as mortgage qualification guidelines for investment properties vary drastically from lender to lender.  A mortgage broker will have access to multiple lenders which will significantly increase your chances of successfully qualifying for the maximum amount and with the best possible terms.
• seek out a mortgage broker with at least 10 years experience as financing for investment properties is a niche qualification program.  Simply put, not all mortgage brokers (or bankers) are familiar with the qualification guidelines.  
• your mortgage preQualification should display as a blueprint.  It should include precise details and scenarios along with a complete disclosure of any possible restrictions and/or limitations.  Your preQualification should include precise statements, various calculations, easy to understand analytical tables, and scenarios.  Expect a detailed report/assessment and accept nothing less.
• at the completion of this step, you will either be verified to proceed with your plan, or you will have in the process revised your plan according to the mortgage preQualification

STEP THREE: Execute the Refinance

If you are satisfied and comfortable with the financial feasibility report in Step Two (the mortgage preQualification), then proceed with the refinance on your principal residence.  Remember, the sole purpose of your refinance is to free up the trapped equity of your home to use for a down payment on the investment property.  It is critical that the refinance is included and detailed in your mortgage preQualification.  It must be accounted for as it affects the overall mortgage qualification of your forthcoming investment property.  This could also be a good time to consolidate any lingering debt that you may have into the overall refinance mortgage amount.  Consider a hybrid type mortgage with a readvanceable component when refinancing your principal residence for the purpose of acquiring down payment proceeds for a rental property.  This particular mortgage allows you to separate your mortgage into specific components, this could especially be beneficial for potential tax deductions that could arise as a result of purchasing a rental property…Click Here to learn more about Hybrid and Readvanceable mortgages. Once again, this should be included and detailed in the mortgage preQualification in Step Two.Only proceed to the following Step Four once the refinance has been approved and most conditions have been satisfied.

STEP FOUR: Assemble Your Real Estate Action Team

With the heavy lifting complete (gameplan, financial feasibility, and refinance of principal residence for down payment proceeds), it is now time to select your Real Estate Action Team! To keep things real simple, your entire team could come about through the long established contacts of either your realtor or mortgage broker.  Through their networks you can efficiently assemble a team in short order, and also one that is familiar with each other.  Your team will include a realtor, mortgage broker, home inspector, an appraiser and a real estate lawyer.  Another member you might want to consider having close by is a property management representative which is absolutely recommended if you have more than one rental property.  At the very least, I would recommend inquiring with a property management firm to at least understand their process and how they can potentially be of value to you in terms of looking after your investment property.

STEP FIVE: Shop for a Property

And finally, the fun part…shopping for a property!  Depending on what part of the country you are looking to purchase a property, your experience will vary and in some cases, significantly.  At this stage of the process you will mostly be in close contact with your realtor, but continue to keep your mortgage broker in the loop as you come closer to placing an offer.  As will be disclosed in your mortgage preQualification, be aware that after 90 days particular items in your mortgage preQualification will expire and need to be refreshed (i.e. recent pay stubs and refreshed credit reports may be required).  Keep your entire Real Estate Action Team in the loop so as to avoid any unexpected surprises.  There’s not a whole lot of rocket science involved here, but there are definitely a lot of moving parts…stay focused, updated, and in touch with your team to ensure the smoothest and least stressful buying experience.

OTHER RELATED ARTICLES: 

Readvanceable Mortgages

Is your mortgage tax deductible?

Rental Property mortgages – how to qualify for them

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)