(October 1, 2021)

Intro (pre-amble): up to 7:05 mark of podcast (Rent vs Buy debate…is it even up for debate? | how much mortgage will $100,000 get you? | Interest rates went up last week | 15,000 Canadians relocated to BC | $250,000 over asking!? …wtf)

1. Be aware of the minimum down payment requirements

• 5% up to $500,000, then 10% on the balance thereafter up to $999,999
• 20% for $1M purchases up to $2.5M, then 40% on the balance thereafter

2. Be aware of closing costs

• Closing costs are ancillary expenses throughout the process of completing your real estate transaction.  In addition to your down payment funds, the lender will also request document verification for closing costs. All of the following costs are out-of-pocket and not included in overall mortgage:
  • Pre-Closing Date Costs: Home Inspection Fee ($200-$400), Home Appraisal ($300-$400) 
  • Closing Date Costs: Land Transfer Tax (this will vary depending on city/municipality).  In British Columbia, the property transfer amounts to 1% of the first $200,000, then 2% on the amount over $200,000 up to and including $2M, and 3% thereafter (i.e. for a $900,000 property purchase, your Land Transfer Tax would amount to $16,000).  If you are a Temporary Resident in Canada and want to purchase in Vancouver, you will also be subject to an additional Foreign Buyer Tax of up to 20% of the purchase price (the foreign buyer tax does not apply to all Canadian cities, it is primarily applied to Canada’s higher priced markets; Vancouver, Toronto and surrounding areas).  Legal Fees and disbursements (at least $1,200), Title Insurance ($100 to $300), and potential reimbursement of Property Taxes to the previous home owner if they have already paid in full for the prior year.

3. Be aware of all available First Time Homebuyer Programs and Rebates: (the following pertains only to BC First Time Homebuyers)

• Government of Canada First Time Homebuyers Program (helps reduce your overall monthly mortgage payment)
• First Time Home Buyers’ Tax Credit (take advantage of a $750 tax rebate)
• Home Buyers Plan (use up to $35,000 of your RRSP for downpayment without tax being withheld from your RRSP issuer)
• GST New Housing Rebate (receive GST rebates on newly constructed homes)
• BC First Time Home Buyers Program (partial or full exemptions on Land Transfer Tax up to $525,000 purchases)
• Home Owner Grant (tax relief on annual Property Taxes)
• Newly Built Home Exemption (reduces or eliminates the amount of property transfer tax for newly built homes up to $800,000)

4. Get pre-approved for a mortgage and make sure it is LEGIT!

• Do not confuse a rate hold with a pre-approval (rate holds simply reserve an interest rate and are not adjudicated)
• Your pre-approval is legit, if:
  • you have provided income documents (pay stub, employment letter, etc)
  • you have verified your source of down payment (bank statements, gift, etc)
  • you have provided consent to have your credit checked 

5. Use a Realtor!

• an offer on a property is considered to be a CONTRACT.  Realtors are certified, trained and specialized in reading and interpreting Purchase Agreement contracts.  Take advantage of their advice and guidance as they have a fiduciary duty to act in your best interests.  

6. Have your down payment proceeds sorted and ready when you place an offer

• upon removing conditions on your offer, prepare to expedite your deposit funds immediately thereafter to secure the deal (deal with all the administrative steps of withdrawing your money ahead of time, not on the day its required)

7. Request financing conditions in your offer (for at least 5 days)…even if you have a LEGIT pre-approval!

• submitting an offer on a property without financing conditions is never recommended (unless you are purchasing with cash, outright)
• pre-approved mortgages are not formally underwritten until an offer on a property is placed at which time your mortgage application (pre-approval) becomes, live.  Therefore, do not assume you are 100% bullet proof with a legit pre-approved mortgage.  Pre-approved mortgages are simply a strong precursor to the outcome of a formal and successful mortgage approval.  

8. Once your offer is accepted, the clock starts ticking…be ready, available, and cooperative.

• when an offer is presented and accepted with conditions (financing, home inspection, etc) it’s go-time!  Be responsive and react to document and information requests as promptly as possible – time is of the essence.

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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(September 17, 2021)

Intro (pre-amble): up to 11:00 mark of podcast (Modern Monetary Theory, Canada’s inflationary path, and my thoughts on how to position yourself on the right side of a volatile economic environment)

Down Payment Sliding Scales:

Over the years down payment guidelines have inserted a component within the qualification criteria known as “sliding scale”. Oftentimes it could catch a buyer off guard when budgeting for a purchase leaving them scrambling for the unexpected shortfall in funds. The first bullet point below is the industry standard adhered to by all lenders in Canada, but the second bullet category varies with lenders and is scaled as per locations/regions and the lenders specific risk tolerances. For contrast, I’ve included the most competitive scales for Vancouver and Calgary.

Minimum down payment thresholds for Vancouver:

• 5% down payment up to $500,000 Purchase Price, then 10% on the balance that exceeds $500,000 up to $1M Purchase Price
• EXAMPLE: for a $800,000 Purchase, the minimum down payment would be $55,000
• 20% down payment required for purchases between $1M and $2.5M, then 50% on the balance that exceeds $2.5M
• EXAMPLE: for a $3.2M Purchase, the minimum down payment would be $850,000

Minimum down payment thresholds for Calgary:

• 5% down payment up to $500,000 Purchase Price, then 10% on the balance that exceeds $500,000 up to $1M Purchase Price
• EXAMPLE: for a $800,000 Purchase, the minimum down payment would be $55,000
• 20% down payment required for purchases prices of $1M,  then 60% on the balance that exceeds $1M
• EXAMPLE: for a $3.2M Purchase, the minimum down payment would be $1.08M

Contact Marko, he’s a Mortgage Broker!

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

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

markogelo.com

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@markogelo (Twitter)

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

(August 12, 2021)

Intro (pre-amble): up to 15:23 mark of podcast

With real estate prices soaring across the country many applicants are seeking assistance when it comes to qualifying for a mortgage.  More commonly, the assistance comes in the form of gifted down payments from the Bank of Mom & Dad, but coming in a close second these days is the addition of applicants to help combat the rigid income qualification criteria.  You have likely heard of the term, Co-Signer.  This is the 11th hour addition to a mortgage application (usually mom or dad) that gives the qualification effort that extra little boost required to get the main applicants over the hump.  But what many people don’t know is that there are two types of co-applicants and various conditions and characteristics associated with each one; a Co-Signer and a Guarantor.  Here are the distinguishing factors of both:

Key Characteristics of a Guarantor:

• Guarantors are usually added to an application when the main applicants can sufficiently qualify based on their income, but instead have some problematic credit issues or a recent credit derogatory that has hindered their overall credit score
• a guarantor would be added to the application, but would not have the same property rights as the main applicants.  They would not be added to the land title and would therefore not be linked with the property in any way.
• It is unclear as to whether lenders report the mortgage on the Guarantor’s credit report…some lenders do, others don’t.  This could therefore become an issue if the Guarantor is planning on purchasing more real estate (with the assistance of a mortgage).  Always inquire with the lender regarding their policy on credit reporting for Guarantors.
• However, as they are added to the mortgage, they are therefore liable should the main applicants default on the payments.  In the event that the main applicants could no longer make the mortgage payments, the lender could very well come after the guarantor

Key Characteristics of a Co-Signer:

• Co-Signers are added to an application when the main applicants require additional income to qualify for the mortgage (as opposed to Guarantors who come on to an application to basically vouch for the main applicant due to a past credit issue, but are good on the their own income to qualify)
• as with Guarantors, Co-Signers assume liability in the event of mortgage payment defaults
• However, unlike Guarantors, Co-Signers inherit property rights along with the main applicants (they are required to be on land title)
• Co-Signers can definitely expect their name on the land title of the subject property and also a line item facility reporting in their credit report for the full mortgage amount liability

Other Key Points:

• Co-Signers are impacted from future mortgage qualifications by co-signing on a mortgage (their borrowing power will decrease as long as they are on the application…check with your mortgage provider to discuss the extent of your diminished borrowing power).  Guarantors could also be affected in the same manner (depending on whether the lender chooses to report to the Guarantors credit bureau)
• almost all lenders allow for Co-Signers, but fewer allow for Guarantors.  Don’t assume that the lender you are currently with allows for Guranators…find out ahead of time in case you are quickly required to pivot
• As Co-Signers are required to be on title of the mortgaged property, they could (however) set their percentage of overall ownership.  For example, let’s say a father co-signs for his son on a mortgage.  In British Columbia, they could allocate 1% ownership to the father and 99% to the son (or whatever ratio of ownership they decide on).  The ownership ratio could also be applied in order to salvage (or maximize) the main applicant’s first time home owner privileges and rebates.  Inquire with your provincial jurisdiction regarding the ability to modify the ratio of property ownership.
• Reasons to be a Guarantor: 
  • to avoid potential tax consequences (one may not want to be on title of the property so as to avoid a potential capital gains tax upon the sale of it)
  • Being on title can also result in potential estate planning issues (if a property holder dies, things could potentially get complicated).  
  • I’m just skimming the surface on these scenarios and am not a tax expert, so be sure to consult with your Lawyer or Accountant to fully understand all potential tax AND legal consequences.

How to remove a CO-SIGNER and GUARANTOR: both a Co-Signer and Guarantor can be removed from a mortgage (and land title) as soon as the main applicants can officially qualify on their own merit.  This could occur at any time throughout the life cycle of the mortgage and as early as 30 days after the mortgage is officially secured (completion date).  The main applicants would have to provide updated income documents (or updated credit pulls) to confirm that they can fulfill the qualification criteria on their own merit.  One this is confirmed with the lender, the lender re-instructs the mortgage to the solicitor to renew registration with the land titles office, thereby removing the Co-Signer from title.

Contact Marko, he’s a Mortgage Broker!

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

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

markogelo.com

Facebook

@markogelo (Twitter)

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