Mortgagenomics Canada

If you're about to secure a mortgage, here's something you might want to consider regardless of whether it's a purchase, refinance or renewal.  Make the mortgage readvanceable.What does readvanceable mean?Firstly, a readvanceable mortgage starts out as a typical mortgage where a specific portion of your payment goes towards the interest charge and the rest gets directly applied towards the mortgage principle gradually paying it down over time, thereby, building equity in your home.  But this is where the similarities stop and the readvanceable mortgage begins to impose its leading characteristics.Firstly, readvanceable mortgages include at least two components; a regular principal-interest mortgage and a Home Equity Line of Credit.  The supplementary Home Equity Line of Credit acts as the primary component that allows the mortgage to become readvanceable.  A mortgage becomes readvanceable when the first mortgage payment is made and it continues on until the mortgage is eventually paid off.

Why are personal income tax documents required when qualifying for a mortgage?In most cases, personal income tax documents are required particularly when qualifying self employed applicants. But over the past few years, the Canadian mortgage underwriting standards have increasingly expanded upon its qualification criteria. As a result, the request for personal income tax documents from mortgage qualification applicants has quickly become the norm for all employment types, rather than the exception.Let's first identify the key personal income tax documents that lenders typically request:T-SLIPS (generated by your employer)The T4 is the most common of all T-slips and is also referred to as a "Statement of Remuneration". It is a tax form produced by a singular employer, you will receive a separate T4 from every employer that you were employed with in the calendar year. The T4 is useful for mortgage qualification purposes in that it confirms your total income

If the banks say no, what is your Plan B? (and yes, there is also a Plan C)For most Canadians the end game to qualifying for a mortgage is landing with one of Canada's Prime lenders (also known as the Big 5 or 6). And along with that comes the satisfaction of defeating/fulfilling the sometimes (or more like, everytime) extraneous qualification guidelines and eligibility criteria. But at the end of the day, it's totally worth it as you can boast about the great interest rate you were awarded and the exclusive membership to Canada's growing homeowner club.But what if the pathway to the Prime lenders is not successful for you, what then?Well, if all else fails, there is always a Plan B (and there is a Plan C too). But let's talk about Plan B first...I like to refer to Plan B as "BandAid" mortgages. They are typically 1 year terms (and also available as high as 3 year terms). They are fully renewable and feature most, if not all of the typical features and terms you would expect to see in a Prime m

With over 300,000 new residents arriving to Canada (and about 400,000 expected on an annual basis for the next 2-4 years), Canada's banks have been continuously altering and modifying their lending guidelines to accommodate for immigrant-friendly mortgage qualification programs. Today, I want to talk about mortgage qualification for temporary residents, particularly for work permit holders.What is a Temporary Resident?Directly from the Government of Canada's website:"A temporary resident is a foreign national who is legally authorized to enter Canada for temporary purposes. A foreign national has temporary resident status when they have been found to meet the requirements of the legislation to enter and/or remain in Canada as a visitor, student, worker or temporary resident permit holder. Only foreign nationals physically in Canada hold temporary resident status."So basically, a Temporary Resident is the first step to becoming a Canadian Citizen...but also, it could simply just b

A mortgage refinance is often a momentous and rejuvenating experience. For most homeowners it's an opportunity to reset and forge a new pathway to a more promising outcome (i.e. paying off high interest debt with low interest mortgage funds), and in the process of doing so, perhaps establishing or creating a more pronounced awareness of spending and more importantly, recognizing the consequences - of overspending. It's a second chance...and rather than calling on a family member or close friend to bail you out, you call on your home to do so. And then there are the refinancers coming from an entirely different angle...the ones that are looking to tap into their equity to further improve their net worth by borrowing from their home equity to invest. These are the refinancers who are set on leveraging good debt to create wealth and ultimately increase their net worth.Regardless of what it is that motivates one to refinance their mortgage, another outcome arises that is often not accounted fo

I often get asked what the minimum down payment requirement is to purchase another home. And by another, I mean residing in your current home as you are and purchasing another home that you or any one of your family members will frequent at one point throughout the year...like a home away from home. For example, it may be a vacation property a couple of hours from where you currently live, or perhaps a downtown condo across the country where your child is attending university.  Regardless of the location, as long as the property is intended for family occupancy at one point throughout the year, the minimum down payment requirement is 5%! Yep, that's it, 5% down payment to purchase another home! The formal name of the mortgage guideline is known as the Second Home Mortgage.Let me be clear though...notice that I am not referencing the other home as a rental property, but rather another home. Not only does the property have to be intended for family use only, but as i

11th hour mortgage qualification collapses...how to avoid themThere is no better feeling than closing a real estate transaction, especially if the journey to get there was rocky and filled with intense drama all the way to the bitter end. And if you’ve ever purchased a property before, you’ll know what I’m talking about...Regardless of the severity of these unexpected stressful deals, in most cases the real estate Gods (eventually) step in and somehow, magically, allow the deal to close out. But in some cases they do not appear (the real estate Gods) and you are left to fend for yourself without any spiritual or outer universe assistance. So listen on if you’ve been in a similar situation, or better yet, especially stick around if you haven't been in a stress-pot-real-estate-thriller transaction..as you never know what awaits you on that next offer!Today, I want to share my real life 11th hour experiences with you (and some are also borrowed from fellow brokers I've known over the years). Rathe

Is there such a thing as tax deductible mortgages?If you are a resident of the United States, the answer to this question is - yes.  For decades Americans have been able to apply the interest portion of their mortgage as a tax deduction against their personal income.  Regardless of whether it was an investment property or a principal residence - the interest was an eligible tax deduction.How about Canada, can we deduct the interest portion of our mortgage payments?Absolutely, but only if the mortgaged property is generating an income.  Here are some examples:Among other home expenses such as utilities and internet services, if you run a small business from your home a portion of your mortgage interest is eligible for a tax deduction against your personal incomeIf your principle residence includes a self-contained rental suite, a portion of your mortgage interest is eligible for a tax deductionIf you own a separate property that exclusively generates an income from short or long term rent/leases

A couple of weeks ago I talked about intergenerational wealth transfer and how reverse mortgages have propelled into the market place as a vehicle to access valuable equity with absolutely no monthly payment obligation.  The homeowner (who must be at least 55 years of age) can apply to access up to 55% of their home equity and use the proceeds for anything they desire.   Another intergenerational transfer scenario came across my desk this past week, but this time it involved selling off a family home to another family member with the use of a mortgage.  So nothing unusual here as far as the transaction is concerned - the purchase price was determined based on the fair market value and the qualifying mortgage was the means to close out the deal. But the unique part of the transaction was that the down payment was gifted from the selling family member to the purchasing family member in the form of equity.  So in other words, the purchasing family member essentially qualified f

Today I'm gonna talk about one of my favourite qualification guidelines - the High Net Worth mortgage.  This is truly one of those money-talks type of products...money talks as in, the more liquid assets you hold, the more mortgage you can qualify for. This mortgage really comes in handy for those applicants that are short on qualifying income, but instead are flush with liquid assets (i.e. non-registered investments, RRSPs, and cash savings).  Here are some common applicant profiles that are well suited for this program:business owners that declare low incomes but have substantial liquid assets (they do qualify, but not for the amount they desire)average income earners who ALSO cannot qualify for the amount they desire due to insufficient qualification income, but have substantial liquid assetsHere are the main qualification criteria:minimum down payment of 20%-35% (varies with lender)in addition to the down payment, the applicant must possess at least $250,000 in liquid assets:Eligible Assets

Wouldn't it be great if there was a mortgage that didn't require an income to qualify for it? And better yet, absolutely no obligation to make a single payment on the principal debt throughout the life of the mortgage?  Well there is! It's called a Reverse Mortgage.  Whether you're a fan of them or not, these mortgages are becoming increasingly popular every year and its likely to continue on the same trajectory as the baby boomer generation (1946-1965) continues to gracefully age.What is a Reverse Mortgage?A reverse mortgage is specifically designed for those that are 55 and above and the main feature of product is that the main qualification criteria is your age (rather than your income). And the other main feature is that there is absolutely no obligation to make a payment on the mortgage.Here are the key qualification criteria for Reverse Mortgages:must be at least 55 years of agemust remain in Canada for at least 6 months plus a day, each yearthe property that

When it comes to income verification for a mortgage a recent paystub and an employment letter will typically do the trick, even if you're a new hire and just have one full pay cycle under your belt.  However, things could get a little dicey if you are currently in a period of probation with your new employer.  The most common workaround for an applicant who is in the midst of a probationary period is to coordinate the completion date of your purchase with the expiry date of the probationary period.  A lender will proceed with the approval and condition for an updated employment letter and/or recent paystub to verify that the probationary period is no longer in effect. Lender guidelines generally dictate that probationary periods must pass (in their entirety) prior to the completion of the mortgage.  But in many instances a lender will overlook a probationary period provided that a good case can be made.  Here are some real life exceptions I've been granted on several files o

On Thursday April 8 (yesterday), The Office of the Superintendent of Financial Institutions, OSFI (the Canadian Bank watchdog) announced that they are proposing changes to the current stress test rule. So basically, consider this the last-call bell to qualify under the current stress test until June 1, 2021. It’s not 100% official as of yet, but the chances of OSFI not proceeding with their new recommendation is slim to none.Before I get into the proposed recommendation, here’s a quick recap on the current stress test:Rather than qualifying based upon the actual mortgage contract rate, all mortgage applicants are required to qualify at a rate that is 2% higher, or 4.79% - whichever is higher (4.79% is the predetermined 5 year benchmark as imposed by the Bank of Canada...since 2018, this benchmark rate has varied between what it is today, 4.79%, to as high as 5.44%). So throughout COVID (essentially all of 2020), applicants have been qualifying at 4.79% which has at some time

If you're self employed and qualifying for a mortgage right now (April), you are either gleaming with optimism or white knuckling your way to the finish line. And here's why...When qualifying as a self employed applicant, your qualifying income is determined from your most recent 2 year average (of your Notice of Assessments). Notice of Assessments are the end confirmation of your tax process...it's like a receipt, or final bill of sale. Lenders request it because it is the most firm verification document for self employed applicants. It also verifies whether the qualifying mortgage applicant has taxes owing...and if so, the lender will require that the balance outstanding is paid in full. On the other hand with non-self employed applicants (who receive income that is already deducted at source from their employers), Notice of Assessments are less often required when qualifying for a mortgage unless the applicant is relying on some type of additional variable component to their income

Today I want to talk about how one could incorporate gifted equity when purchasing a home (with the proceeds of a mortgage) from a direct family member. So, in other words a transaction between two direct family members (mainly child and parent) can occur by the selling family member simultaneously gifting a portion of their equity to the buying family member while formally selling/transferring the property to them. The gifted equity portion is used to fulfill the minimum down payment requirement of the buyers mortgage. Here's how it works:STEP 1: The Buyer must qualify for the mortgage as per standard qualification criteria with the exception of the unique source of the down payment being gifted equity (rather than from own sources).STEP 2: Determine the amount of the Gifted Equity. Depending on the amount of gifted equity, the mortgage will be either high ratio, or conventional. If the down payment (gifted equity) is less than 20%, the mortgage is classified as high ratio and w

 When it comes to mortgages for newcomers to Canada, the qualification criteria remains similar to what Canadians can expect but with the following exceptions:Minimum down payment thresholds vary anywhere from 5% to 35% depending on ones residence status:Permanent Resident with standard income confirmation: 5-10% minimum down paymentPermanent Resident with no income, but high net worth: 35% minimum down paymentTemporary resident (work permit, students): 10% minimum down paymentNon-Resident (Canadian Citizens, Permanent Residents and Foreign Residents that do not reside in Canada): 35% minimum down paymentNewcomers must also have arrived in Canada within the following timeframes to be eligible for newcomer mortgage qualification, otherwise, they will be subject to standard Canadian qualification guidelines:Permanent Resident / Landed Immigrant: eligible within a 5 year period since arrival in CanadaTemporary Resident: eligible within a 2 year period since arrival in Canada and at least 3 month job tenureA

In Vancouver, purchasing a property these days has become somewhat comparable to a Black Friday event.  A property gets listed, an offer date is set, several buyers line up to view the property (actually some don’t even bother to view as they go straight to the offer stage), and finally offers are placed.  This is where things get diceyIn normal times, upon submitting an offer a buyer negotiates conditions and a period of time to satisfy the conditions (i.e. mortgage financing, review of property disclosure statement, home inspection, strata/condo documents, appraisal, etc.).  Not these days though.  Buyers are instead submitting offers with very limited conditions, and in a growing number of instances, none at all!  Hence the term, “subject free offer”.Does a pre-approval mean that you can go subject free?My short answer to this question is NO.  The term pre-approval is a loosely used term in the mortgage industry and the validity of one varies significantly from broker to

The most common types of income when qualifying for a mortgage are variations of salaried, hourly, and self employed income. But what about other sources of income? There are plenty more to be aware of!Here is a list of some other less talked about forms of qualifying income:Part-Time Income: as long as the income is guaranteed, you could use 100% of the income as stated in the employment letter and/or recent paystub. A minimum tenure is not required as long as the probationary period has been fulfilled (if applicable)Fluctuating/Irregular Income (non guaranteed part-time, seasonal income): qualifying income is determined by calculating a 2 year average from any one or combination of the following; Notice of Assessments, Year End Paystub, or T4. In addition, one or a combination of the following will also be required; Employment Letter, Direct Deposit history, or recent paystub. If there is a variation from year to year which is greater than 20%, then the lower of the last two years i

Today I wanna talk about mortgage penalties and how and when they come into play within a mortgage.  The when part of the question is quite simple, so let's begin there.  Every mortgage has a maturity date (with the exception of home equity lines of credit), and if you sell your property or refinance your mortgage ahead of the maturity date, you are subject to a penalty from your mortgage provider (except for HELOCs and open variable/fixed mortgages).  And whether you like it or not, the concept of paying a penalty should not be surprising.  After all, a mortgage is a contract between you and the bank and if you’ve ever owned a cell phone you understand that there are consequences when you break your contract.  Same thing with mortgages, but at a much larger scale.  But, here’s the thing with the mortgage penalty...the convenient and commonly understood definition of it is that it equates to simply 3 months worth of interest payments, but there is clearly more to it than that.&nb

I think it's safe to say that every single detached home in Vancouver is priced over $1M. In fact as of Feb 2021, the average priced single family home in Greater Vancouver shot up to $1.83M (the third highest monthly figure, ever!). And here is the major disconnect of the entire real estate equation (for Metro Vancouver)...the median total income of households sits at only $72,662 - you don’t have to be a mortgage broker to know that this income will not qualify for a $1.83M purchase, in fact, a $72,000 income will net you a mortgage of just under $400,000.So where do we go from here?  Knowing that the minimum down payment required to purchase a property over $1M is 20%, the entry barrier to owning a single family home in Vancouver is sky high. For many, unachievable...impossible. More people actually qualify for a $1.83M purchase, than those that actually have the required down payment to fulfill the qualification (this is the bigger problem). For example, the annual income req