Tag: mortgage refinance

@markogelo (Twitter)

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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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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@markogelo (Twitter)

From the desk of a Mortgage Broker (August 28, 2023)

Posted on August 29, 2023August 29, 2023 by markogel@gmail.com

(August 28, 2023)

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The following is a podcast transcript, Click Here to be redirected to the podcast episode.

So anyway, here’s what’s on my mind this week…and I’ll kinda phrase it to more like heres-what’s-coming-across-my-desk these days...there’s quite a bit of activity. But here’s the takeaway, there’s absolutely no pattern or profile when it comes to describing the current transactions- the deal types are of all varieties. There’s first time homebuyers, there’s homeowners that are upgrading to larger homes, there’s people refinancing their existing mortgages, renewals, and so on…it’s not one big transaction driving the market, it’s pretty much every deal type, and it’s coming from different directions and angles…like I swear, it seems every application I’m working on is complicated, its crazy.

OK, so here’s a sampling of what’s coming across my desk these days

-> quite a few new construction condo completions. So these are people who have purchased 1, 2, or even 3 years ago and now their condo is coming up for completion. For the most part, these are proceeding smoothly and people are continuing to qualify despite the significant higher interest rate environment, but I’m still managing to qualify most applicants simply by stretching the amortizations out to 30 years…but there are a few files were I am going to have to explore alternative lending sources (and by that I mean higher priced interest rate lenders in exchange for easier qualification guidelines). So, so far, all of the deals that I’ve worked on have proceeded or are on the path to close out without any significant hurdles. But where I am anticipating some issues is with investor applications – where people have purchased a condo a few years ago and have used their HELOC for the down payment…I’m anticipating that a few of these files will reach the critical stage (like the outcome will not be like what the buyer expected, might get a bit stressful…totally doable at the end, but again…not what the applicant expected). The owner-occupied-principal-residence type of transactions are (for the most part) pretty safe (other than the current interest rate environment of course), but almost all of the applicants have successfully trended to higher income and credit score levels since they signed off on the purchase a few years back (and this is pretty much the standard…in the younger years of one’s life, you pretty much expect growth and improvement in income, its the most ambitious phase of life-stage…these new construction completion applicants pretty much grow into a comfort level with their mortgage from the day they signed the purchase contract a couple of years ago to the day they finally close a few years later). So, lotsa new construction closes going on right now.

-> the other transaction type I’m seeing lots of these days (and for the past year or so) is inter-provincial migration, and of course I mean the migration of people to Alberta from other provinces, mainly BC ad Ontario (and prior to last year, I’ve been doing tonnes of New to Canada transactions, but with all the anti-foreign buyer rules and taxes that rolled out in the past couple of years, things kinda dried up on that front). So this (the interprovincial movement to Alberta) is by far, my biggest deal-type these days. It’s insane actually…the inquiries I get for this are through the roof. And really, it’s probably the most gratifying (and/or) satisfying type of deal that I do…and its become more and more evident with New Housing activity on the rise in Alberta…and it really shouldn’t be a big surprise. And to add to it, expectations are that this population driven demand (for Alberta) will continue for the rest of the year and into next year (even despite labour shortages and high interest rates). It’s clearly no secret anymore, no more come-to-Alberta campaigns are required…Calgary and Edmonton are the go-to destinations for Canadians who aspire to own a home. It’s way cheaper than Vancouver and Toronto and you don’t significantly compromise your life-style. You still get to live in a large urban city with all the big-city amenities…not quite the Toronto or Vancouver offering, but still a large city setting and feel. Right now I’m doing several relocations of Canadians from BC and Ontario who are in the process of closing (or have recently) closed on their purchases in either Calgary or Edmonton and I have witnessed (first hand) their euphoria. It’s incredible…the transition for these people…is truly amazing. They go from barely being able to purchase an outdated, undersized and overpriced property in either (greater) Vancouver or Toronto, to purchasing a newer, larger and much cheaper property in Alberta. The property discount is so significant that they don’t even blink at today’s interest rates. This pattern, this movement, is in progress and is expected to continue for (I believe) several years more. Here’s one I’m wrapping up right now- young couple from Vancouver, they accepted that they will never own a home in Vancouver. (think about that, they actually accepted that they will never be home owners in Vancouver)..together, they earn about $160,000 a year, but they just don’t have enough for a down payment for what they want (they would at least like a townhome)…they contacted me, got them preQualified and within a few weeks they got their offer accepted for a townhome in Calgary for $435,000, 1300 sq ft, single attached garage in a desirable part of Calgary. And all this with a down payment of only $50,000. This same profile ($160,000 income and $50,000 down payment) will maybe get you one of those ridiculous 300 sq ft micro-units, but it definitely won’t get them that townhome they desire (because you’re basically looking at a price tag of at least over $1M, which then means your minimum down payment increases to $200,000…and then boom/bang, that’s the end of the dream). Nevermind the euphoria of acquiring a home, this young couple has enough home to now to start planning a family…I’m telling you, these outcomes are incredible. No one is writing about how the affordability crisis is affecting the birth rate in Canada. But don’t lose hope people, there is a solution (or option)…like seriously, some couples are getting their dreams crushed of becoming homeowners…that’s one thing, but how about that same couple now abolishing or surrendering the thought of starting a family? That’s insane and messed up that we arrived to this…not being able to own a home is one thing, but the very sad carry over effect of that is compromising your desire of even starting a family. And that’s the case with some of the files I’m working on right now…its young people who are choosing to pack up and relocate and move to a place where they can basically start dreaming again. So when I say euphoria, that’s what I mean…you can now end up in a pretty darn cool place (like Calgary) and you can buy a home (not a condo)…like a full-on home with multiple bedrooms, and even a basement and a garage…and of course, a yard too…and all for a fraction of the price you would pay in Vancouver or Toronto. If you’re thinking about it, especially if your young…give it some serious thought. I have been there and witnessed it with many of my clients…and the outcome is truly wholesome, genuine happiness. Lots of these on my desk right now.

-> and finally, the last type of deal transaction which I’m seeing tonnes of…renewals and refinances. This is naturally a massive part of the mortgage volume, but especially these days. Depending on which day or which lender you are dealing with, this has become one of the most disappointing service experiences in our industry right now. And the reason why is because lenders simply do not have enough (qualified) manpower to handle the complicated requests of its existing mortgage holders. Right now, lenders are all banking on their customers not asking any questions at renewal time…like never before, they sooo want you to take the path of least resistance and simply sign on the dotted line for their renewal offer. And in the past, many customers did so because it was all about the rate. But now, it’s different. It’s not just about the interest rate, it’s about so many other things right now: like helping people manage their monthly cash flow (where in order to do so, you have to make actual structural changes to the mortgage to get your monthly payment to a more manageable figure), or consolidating some of your high interest and payment debt into your renewed mortgage…formulating these solutions takes time, experience, and resources…and many banks simply cannot handle the load right now (to do these types of transactions may seem simple in theory, but the amount of work required is quite significant…you need to re-adjudicate, often time appraise the property, then prepare legal documents, then re-register with the land title department…there’s so much more to the process than just signing a couple of documents). And here’s the scarrier part, some banks have even hinted that they are looking to make some employment cuts in the coming months. So, if you’re in this bracket (your mortgage is up for renewal and you need some changes to it), you need to align with someone who knows what they’re doing. If you’re not getting a quality response from your lender, find someone else and move on…there’s too much at stake. And once you are aligned with someone good, be patient with them…respond to their questions and document requests…this is simply the process of underwriting, and if you are requiring alterations to your mortgage at renewal time, underwriting is required. This does not deviate from lender to lender, they all must re-qualify (re-underwrite) your application…it’s simply regulation within the Canadian mortgage industry, it needs to be done- it’s the law, you need to see it through.

And lastly, what you’ve all been waiting to hear about- interest rates…it’s been on my mind, of course it’s been on my mind. The interest rate environment has been extremely volatile and generally fast-moving. So the best way I can sum things up about interest rates is to offer simple perspective on it. Yes, rates have increased, and they have increased significantly. Here’s my advice on how to handle things these days…

#1, don’t be so resolute and conclusive about things. Gauge your comfort level by the amount of the payment rather than the actual interest rate. I’m not saying to simply ignore the interest rate, but don’t let it be the be all, end all. For example, $2,000 per month could be any one of the following scenarios: (i) it could be the cost to service $200,000 of new mortgage that you will easily qualify for because the interest rate is 12%, but what it allowed you to do was pay off some critical debt and bought you some valuable time to plan your next move, (ii) it could be the cost of a $325,000 mortgage (at 5.64%, and amortized over 25 years) on a property that you just purchased with the intent of residing in the property as your principal residence, or it could be the net cost of a $420,000 investment property after the offsetting rental income is factored in. …just these three examples alone cost $2,000 / month and I can go on, there’s countless other solutions you can purchase for $2,000/month. But that’s my point, take the sticker shock emotion out of it and focus in on the cashflow, or the why…this alone will shift your focus from a panic and stress to more of a take-action-I found-a solution type of perspective, in a way, more of a winning mindset
my #2 point on interest rates, whatever you do, remember that it won’t be forever! Don’t fret over the fact that you reset your amortization to 25 or 30 years…like seriously, people need to relax about this one. Right now, if you need relief, don’t hesitate if it means increasing your amortization to its maximum. You can easily revert back to your intended amortization at any time in the future by simply increasing your payment. Don’t be hard on yourself, stretch your mortgage out to its max so you can survive and when you’re back on your feet you can pull it back in….remember, today’s interest rate is not forever! But what is kinda forever is the life of your mortgage…you have the next 10, 15, 20, 25, 30 years to increase your income, capture a better interest rate environment, or wait for the market appreciation to work in your favour…whatever the case may be, do what you have to do now to give yourself relief…at the very worst case, you can buy yourself more time to plan or strategize your next move.

Want to discuss your mortgage needs? 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!)

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@markogelo (Twitter)

Mortgage Foreclosure Preventative Measures

Posted on March 19, 2023March 28, 2023 by markogel@gmail.com

(March 20, 2023)

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This post does not explain the process of mortgage foreclosure, but rather the timeframe that potentially leads up to it. In particular, the purpose of this article is to explore solutions to avoid foreclosing on your property.

What causes a foreclosure to happen?

If you guessed that missed mortgage payments cause foreclosures you are absolutely correct. However, what most people are not aware of is the lengths that most lenders will go to in order to avoid foreclosing on your property. They would much rather prefer to retain you as a mortgagee/client than to have to foreclose on your property (i.e. retaining it as a rental property, or selling it). Most lenders recognize the hardship that unexpected life events can bring and offer alternative solutions to assist you through difficult times. However, after a brief period of cooperation and assistance, a lender will expect you to get back on your feet and jump back into regular payment mode. If you are not able to reconvene with regular and consistent payments, lenders will likely then begin to execute the beginning stages of foreclosure proceedings.

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Are there any options to circumvent foreclosure proceedings?

Yes, there are several options available, and they all hinge on two things; EQUITY and REACTION TIME:

EQUITY: Lenders in Canada adhere to a maximum refinance threshold of 80% loan-to-value ratio. This means that your mortgage financing cannot exceed 80% of the (appraised) value of your property. There are options to secure financing for loan-to-values that exceed 80%, but they are very costly, and generally less available in the marketplace. In almost all cases, an appraisal is required to determine the value of your property.

REACTION TIME: It is critical to understand that hesitation to proceed with a mortgage refinance can lead to qualification ineligibility in the future (a declined mortgage application). If you are in the midst of financial hardship, you must be aware that your credit score is likely decreasing, and possibly at a rapid rate. The descent can be so significant and abrupt that by the time you formally apply for a refinance your application credentials will likely have degraded to the point where you can no longer qualify. With mortgage qualifications, time is always of the essence. The longer you wait it out, the more damaged your application profile can become. Stay ahead of the pending crisis and be proactive by seeking consultation with a mortgage broker, it is critical to know your options as soon as possible as the window of opportunity is likely closing in on you with every passing week or day.

Be proactive and explore options the instant you detect a financial crisis.

Depending on the severity and timing of your inquiry, your financing outcome will fall into one of the three following categories:

Top-Tier Refinance Solution:

*most likely pathway for highly proactive applicants who have inquired and applied for a refinance in anticipation of financial hardship

*standard qualification criteria (inside the box type of qualification)

*minimum beacon score requirements of at least 620 (personal credit score)

*maximum loan-to-value limits of 80%

*eligible for lowest market rates

*30-year maximum amortization

*1 to 10-year terms are available

Mid-Tier Refinance Solution:

*likely pathway for applicants who are currently experiencing hardship with personal unsecured credit (credit cards, etc), but are still maintaining their existing mortgage payments

*lenders with less restrictive qualification criteria (good for applicants with bruised credit or challenging income/employment disclosures)

*scalable solutions based on your credit score and income (no minimum beacon score requirement)

*maximum loan-to-value limits of 80%

*interest rates are typically 1-3% higher than Top-Tier lenders

*amortizations up to 35 years are available

*1-3-year terms are available

Bottom-Tier Refinance Solution:

*for applicants that require immediate action/intervention

*qualification criteria mainly based on your property equity and condition

*very little emphasis is placed on your credit score

*maximum loan-to-value limits are typically 75%, but can be as high as 80%

*interest rates are typically 3-6% higher than Mid-Tier lenders

*loan payments are typically interest-only, therefore no amortization is calculated

*terms generally do not exceed 1 year, however, they are mostly auto-renewable without re-qualification (provided you maintained good standing throughout your preceding term)

How does this all play out in the end?

If executed in a timely manner, a refinance can convert a crisis situation into a manageable and fixable outcome. Here are some tips to help keep you on the path of recovery once you have successfully completed the refinance:

To avoid a recurrence of financial hardship, it is critical to adopt new habits going forward. Identify your faults and shortcomings and make changes in your life to improve upon them, or eliminate them, outright.
Make a plan to transition to a higher-tier mortgage solution once your current one matures. You have likely come out of a crisis by signing on to a band-aid type of mortgage (short-term, high-interest rate) and as such, you must recognize that your new mortgage will also come due and require requalification to upgrade to a higher-tier mortgage. An experienced mortgage broker will offer valuable guidance on what you must do to prepare for your next mortgage once the current one reaches maturity…this is especially critical if you are coming from a crisis situation and have signed on with a private/2nd mortgage lender with high-interest rates.
Embrace your new mortgage and appreciate it for what it is, a reset. Avoid feeling shame or embarrassment, and instead, look onward and continue to focus on improving. Many crisis situations evolve into inspirational stories – let yours be one of them!

Want to explore your options? Call or text Marko right now at 604-800-9593, or Click Here to schedule a call to find out if any of the senior-focused solutions above are a fit for you.

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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!)

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@markogelo (Twitter)

When is the right time to consider a mortgage refinance?

Posted on February 25, 2023February 25, 2023 by markogel@gmail.com

(February 24, 2023)

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A growing number of Canadian mortgage holders are approaching that fork in the road moment contemplating whether they should pull the trigger on a mortgage refinance, or stay put and continue on the current path which for many has become unmanageable, and for some, even life-altering.

Here are some compelling reasons to move sooner with a mortgage refinance rather than later:

Consolidate your personal debts into a new refinanced mortgage and substantially reduce your overall monthly payment obligation. Chances are that most of your personal debt load carries significantly higher carrying costs (interest rates) than your proposed mortgage rate, even at today’s elevated interest rates. Call Marko and ask for a Before/After analysis to determine your monthly interest savings when consolidating your current debt load into your mortgage. An overwhelming majority of the outcomes end up on better financial footing than they were prior to the refinance.
Salvage your credit score by refinancing sooner than later. Making minimum payments to your debts may satisfy your creditor, but it won’t improve your debt-balance to credit-limit ratio. If your debt-balance to credit-limit ratio exceeds 80% for extended periods of time, your credit score may be at risk of significantly decreasing. Explore refinance scenarios in anticipation of hardship rather than standing by as your credit score slides dangerously lower, potentially deeming you ineligible for mortgage qualification.
Convert your home into a bank (not a bank machine!). You can structure your equity and design a matrix of products you are in charge of. Lend to family members and business partners, purchase big-ticket items, or even piece off a substantial portion of your home equity to yourself for investment purposes. Determine the rate, term and amortization for every sum of money lent out. Whatever the purpose, you set the terms, not the lender.
Reset, adjust and feel rejuvenated. Sometimes life throws you a curve ball or presents you with a once-in-a-lifetime opportunity. Regardless of what comes calling, home financing solutions can be the bridge that helps you cross the finish line. It’s your home and your hard-earned equity, don’t hesitate to explore your options.

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Wondering if a mortgage refinance is right for you? Call or text Marko right now at 604-800-9593, or Click Here to schedule a call at a time that is convenient for you.

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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!)

Can I use Part-Time income to qualify for a mortgage?

Upcoming mortgage renewal have you stressed about payment shock?

Posted on January 19, 2023January 20, 2023 by markogel@gmail.com

(January 19, 2023)

Mortgage renewal time is often a celebratory moment for a homeowner as it marks the end of another successful tenure of completed principal and interest payments. However, these days are a totally different story. With all the aggressive rate hikes in 2022, many mortgage holders are wondering how their next mortgage term will feel like. Will your payment remain the same, or will it skyrocket?

If your mortgage is approaching its maturity in the next 12 months and you’re wondering what things will look like for you, reach out now to begin strategizing – while time is on your side. Reply to this email right now, or Click Here to schedule a call with Marko Gelo.

Why start planning 12 months ahead of your maturity date?

Take time to prepare and plan. The actual renewal date is a limited window of opportunity that allows the mortgage holder to make changes to their mortgage (without incurring a fee/penalty). More importantly, it is critical to understand that this window of opportunity is only available for 24 hours. So whatever change you want to make to your mortgage (debt consolidation, equity take-out, extended amortization, etc), you need to ensure all your ducks are in line. For most mortgage holders, the renewal date sneaks up on them without warning and leaves them no time to consider other options or solutions. And in order to avoid late charges or auto-renewal to a much higher interest rate mortgage, the mortgage holder resorts to the path of least resistance and opts in for one of the default options bestowed upon them from the lender. At this stage of the game, you are not in a position of power. Prepare and plan AHEAD of your maturity date.
Gearing up ahead of your maturity date also allows you time to repair or improve any shortcomings in your application if you are planning a product change or departure from your existing lender at renewal. For example, starting the process at least 6 months ahead gives you time to identify, diagnose and repair a credit issue (6 months is a minimum, but 12 months is ideal). This is critical because had you not corrected the issue, you may not have qualified for what you had in mind. Just as an athlete performs stretches to prepare ahead of a crucial match, so does a mortgage applicant in anticipation of submitting for approval.
Prior to your maturity date, register for Marko’s Renewal-Rate Tracker which ensures your application is constantly being tendered to the market. The Renewal-Rate Tracker seeks out the best rates in the market and locks you in for 4 months – and it doesn’t stop there! Even though you may be locked in for a rate, the tracker continues to scour the market in the event rates drop further. To register for Marko’s Renewal-Rate Tracker, send an email to teamgelo@mortgagecentre.com and type, “Register Me for the Tracker!” in the subject field.
and lastly, some lenders allow for a reduced break penalty in the final year of their term. So depending on which lender you are currently with, it may make sense to break out of your term ahead of your maturity date to transfer to another product or lender.

If you or someone you know is within one year of your mortgage renewal, call Marko right now (or Click Here to schedule a call) to begin preparation for your next term.

RECENT ARTICLES:

How to reduce your mortgage payment in a rising interest rate environment?

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The Secret to Renewing your mortgage

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Undecided about how to proceed with your mortgage renewal?

Posted on August 31, 2022October 26, 2022 by markogel@gmail.com

(August 30, 2022)

Today’s interest rate environment brings new meaning to the term sticker shock. Not long ago, you were able to sign up for a mortgage in the low 2’s and before that, interest rates plummeted as low as 0.99% for some select variable rate mortgages. Well…those days are well behind us.
In a span of about 6 months, interest rates essentially doubled! Prime rate spiked up from 2.45% to today’s rate of 4.70%, and the 5 year fixed rate jumped pretty much the same interval from 2.39% to ~5.34%. And according to various other economists, brace yourself for more rises to round out the year.
So, where do we go from here? How is one to prepare for the payment shock that’s to come on fast approaching maturity dates in 2022? Or how about current variable rate holders who are experiencing the volatility in real time?
Whichever predicament you find yourself in, know this: THERE ARE OPTIONS and SOLUTIONS to HELP MINIMIZE the PAYMENT SHOCK…and in many instances, you will be surprised that renewing into to today’s higher interest rates may not be so bad after all…you may even end up with a lower payment than what you initially had with your lower rate! …more on this later. But first, let’s talk about product and term selection for your upcoming mortgage renewal.

Here are some outside the box approaches to consider when your mortgage comes due:

If you think that there is still some volatility ahead with interest rates and inflationary pressures, here is an approach to consider -> Renew into a 1 year discounted rate and at the same time, take the opportunity to consolidate any existing debt you may have (if need be). This allows you to rest easy with a fixed payment while analyzing the market trend in time for your next term selection. For example, rather than locking in to a 5yr fixed rate at 5.29% (today, August 2022), secure a 1 yr fixed at 4.09% with the hope that longer term interest rates will have stabilized and improved by the time your maturity rolls around in 12 months.
If you are of the mind set that the worst of inflation and rate hiking is behind us, then consider this approach -> secure a variable rate mortgage with a fixed payment feature. This will give you the flexibility to ride out any remaining rate increases without increases to your payment (unless rates unexpectedly continue to trend upwards in an aggressive manner which would thereby trigger the built-in payment reset for your mortgage…payments are fixed, but only to an extent). This strategy would also allow you to ride out the stabilization period with flexibility. As with all variable rate mortgages, you are able to convert to a fixed rate at any time without triggering a break penalty. In the event you need to sell your property, the variable rate mortgage calculates the smallest break penalty of all mortgage terms. Rather than having the potential of paying on the interest rate differential, variable rate mortgage break penalties are calculated based on a simple 3 months interest formula. This eliminates any possibility of a dreaded interest rate differential penalty which has the potential to be astonishingly substantial.
And finally, if you believe rate hikes still have a way to go then look to lock in to longer terms (2-4 year terms). Before deciding on the term length, consider the potential for any life events that may force you to consider a refinance or sell the property ahead of your maturity (change in marital status, change in employment status, having children, university tuition, etc). Disclose potential events that may occur in the future to your mortgage broker and engage in a conversation to discuss scenarios and outcomes before proceeding with a longer term mortgage.

And lastly, here is a direct measure that you can initiate with your next mortgage term that could provide immediate relief to your monthly payment in the event you required it:

Reset your mortgage to the maximum allowable amortization. For example, let’s say your current mortgage of $500,000 is coming due and your current rate is 2.69% with a monthly payment of $2,285. Rather than opting for the lender’s preferred renewal rate at 4.59%* which would initiate monthly payments over the remaining amortization period of 20 years, consider resetting the amortization to the maximum allowable limit of 30 years. Here is the difference:
Proceed with the lenders preferred rate of 4.59%* and maintain the current amortization of 20 years: $2,212/m, or
Request an amortization reset to 30 years and significantly reduce your payment to $1,820month**
*4.59% is a transfer rate. This means that you are simply transferring the mortgage to a new term and maintaining all original parameters of the existing mortgage (maintaining the same amortization, no debt consolidation, maintaining the same applicants, etc)
**5.19% is a refinance rate. This means you are making changes to the original mortgage parameters (changing the amortization, consolidating debt, etc). Therefore, this results in a rate increase.
Maintaining your current amortization is naturally the preferred pathway, but if you are at a time in your life where your monthly cash flow has reached a critical juncture, then take advantage of the extended amortization. Once things improve with your finances, simply increase your payments and get back on path to a lower amortization (lenders allow for annual payment increases and lump sum limits without incurring any penalty)

Implications of adding someone to your mortgage refinance

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Credit Issues, past and present

Posted on April 23, 2022August 22, 2022 by markogel@gmail.com

(April 14, 2022)

Part 3 of a multi-post series, Turning a Decline into an Approval, here is Decline Reason #3 – Credit Issues:

Decline Reason #1: Not enough income

Click Here to expand on Decline Reason #1

Decline Reason #2: Ineligible Qualifying Income

Click Here to expand on Decline Reason #2

Decline Reason #3: Credit Issues

ISSUE: Past Credit Blemishes

Late Payments– late on a payment? Not the end of the world…unless you are two full payment cycles behind. If this is the case, prepare to explain what happened, why it happened, and why it will never happen again. After that, it’s up to your mortgage broker and their writing and negotiating skills. With a detailed explanation and supplementary document verification, your chances for an exception are propelled (but not guaranteed).
Collections– we’ve all been here. Whether it was intentional or not, a lender will always (by default) conclude that the collection is a result of your neglect. The most negatively impactful collection is one that is a result of a credit card, line of credit, car loan, or any other debt that originates from a major lending institution. If a collection of this description and nature appear on your credit report, you’re basically screwed for a couple of years. However, there are instances just as with late payments where a lender might express a degree of compassion towards your situation if it was a result of a major life event (death in the family, divorce, etc). The declaration alone is not enough to nullify your derogatory collections status, but it might be enough to get you in the exceptions category, possibly granting you a forgiveness pass.
Current/past ratings on your current/past mortgage– in almost every case, this is a hard stop with any lender. Previous mortgage foreclosures, late mortgage payments, or unsettled disputes with your mortgage provider will ultimately place you in the do-not-lend-to bin. Oftentimes the only workaround here is to inquire with “B” lenders who operate with less stringent qualification guidelines, but higher interest rates and substantial set-up fees.

ISSUE: Too much debt

Buy more with less– Consider scaling back a portion of your down payment to pay off some debt (i.e. credit card, line of credit, remaining car loan). This approach could lower your overall debt service ratio and increase your overall purchasing power
Get a cash back mortgage– If there isn’t enough down payment proceeds to work with, consider a cash back mortgage that advances additional funds for the sole purpose of paying off existing debt loads. Interest rates for cash back mortgages are priced according to the amount of the cash back proceeds. The higher the cash back proceeds, the higher the interest rate. This approach can be ideal for certain customer profiles as it could simultaneously achieve two financing objectives with one single mortgage transaction; a purchase and a debt consolidation refinance. This is definitely a product strategy that should be given more consideration especially when the cash back proceeds are solely used to pay off high interest debt, thereby minimizing the impact of the overall higher mortgage rate. And perhaps more importantly, the debt paid down from the proceeds of the cash back result in lower debt servicing ratios thereby increasing your mortgage qualification amount.

ISSUE: Not enough credit experience

The 2-2-2 rule– the industry wide minimum credit standard for mortgage applicants is as follows: (i) TWO years of credit history (ii) a minimum of TWO credit products/facilities, and (iii) a minimum credit limit of $2,000. Exceptions to this rule are granted for New Canadians, younger applicants who have just entered the workforce, older applicants with declining spending habits, and applicants who subscribe to the “no credit is good credit” philosophy. If you do not comply with the 2-2-2 rule, ask your mortgage broker for alternative sources to present to the lender (i.e. provide document verification of other credit practising sources that do not appear in credit reports like rental agreements, utility bills, etc).

If all else fails, the next go-to remedies should prove to open up a few more qualifying vaults:

ADD A CO-SIGNER- piggyback on a co-applicants credentials until your score is rehabilitated. Once your credit improves, check back with the lenders and allow them to do a credit check on you. If your score and/or your current credit ratings have improved to the industry accepted level, then proceed further to have the co-signer removed from your mortgage. A good mortgage broker should be able to provide you with a roadmap on how to improve your score and remove your co-signer within a realistic time-frame.
INQUIRE WITH A ‘B-LENDER’- you’d be surprised how marginal the difference is with a higher interest rate mortgage. Rather than focusing on the higher interest rate alone, ask for monthly payment comparisons to a fully discounted inside the box mortgage rate – you will notice that the difference in the overall monthly payment isn’t as high as the interest rate implies. With that being said, the bigger shock to a “B Mortgage” is the fee that is tacked on to the mortgage principle…this could range anywhere from 0.50% of the mortgage principal to as high as 2-3%. “B mortgages” are also known as “Band Aid” mortgages in that they are 1 or 2 year terms. The objective with a “B mortgage” is to use the 1 to 2 year timeframe of the term to rehabilitate your way to renewing into a conventional “AAA” bank mortgage. Just as with planning the release of a co-signer, a good mortgage broker should be able to provide you with a roadmap on how to graduate from a “B” mortgage to a “AAA” bank mortgage.
Check in next week for Decline Reason #4: Not Enough Down Payment

Contact Marko, he’s a Mortgage Broker!

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

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