Before you cancel or walk away from a deal
Before you cancel or walk away from a deal
I will highlight some situations and times when hopefully I may be able to help you with your mortgage financing when you are not getting the answer you would like with your current path. You may be getting told that “they” are having “issues” approving you for the financing you are requesting. However, it may not be clear or transparent to you:
- Where is the problem specifically
- Who is having it (bank or insurance company)
- Can it be fixed
- Would I receive a different answer were I to approach a different bank and/or insurance company
It is important to know the answer to all of the above questions so that a plan of attack can be made and hopefully financing obtained for the situation you would like. It is important to note that every situation and request cannot be approved, however, it is possible that with a different approach and possibly working with a different bank and/or insurance company, the deal you would like to have approved may be able to be.
Working with an independent, Accredited Mortgage Professional (AMP), is always what I recommend as independent mortgage brokers have access to the most number of lenders as well as all of the insurance companies, giving us the most options and best chance at getting a client approved for the financing they need.
It should also be noted that although a client, their situation, and their history cannot be changed, there is a range with how it can be presented to both the banks and the insurance companies. The difference between a well organized, detailed, and professionally structured deal, with all else being equal, can make the difference between an approval or a decline.
So, there are a few situations when I may be able to get a deal approved after it has experienced challenges elsewhere:
- Client working with their bank which may have a very conservative or restrictive underwriting policy
- Client”s bank may only work with one (1) of the mortgage insurers who is declining the deal (there are three mortgage insurers and I can work with all three)
- Individual or bank the client is working with may not have presented their file for approval in the most “favourable” way
Below is a list of some of the more common situations that I know can present clients with challenges to financing, however, they may be able to be overcome:
- Un-authorized basement suite rental income (being told cannot use rental income to qualify for mortgage)
- Rental or investment property purchase
- Self employed income verification
- Minimum down payment requirement
- Previous grow-opp (purchase or sale of)
- Past credit challenges
Early Renewal or Refinance – Now may be a good time
Early Mortgage Renewal or Mortgage Refinance – Now may be a good time to consider
With mortgage rates where they are right now and where they will be headed (i.e. up), now may be a good time to look into if renewing your mortgage early or if refinancing your mortgage now vs. later, could save you money in the long run.
Mortgage Renewal (Early)
Mortgage Refinance
- Taking out equity to invest or do renovations
- Consolidate debt to save
- To get a lower rate in the event rates have come down a lot since you arranged your mortgage
- Remove a person from the mortgage and title of the property following a divorce or separation
- Extend the amortization to reduce monthly payments
- Etc.
Refinancing always has some costs associated with it as it is a new mortgage being arranged with the changes you requested. Costs are made up of a penalty for canceling the current mortgage early and then the legal fees to remove the old mortgage and put in place the new mortgage. All costs can sometimes be included in the new mortgage so that there is no immediate out of pocket expense, however, this will depend on the situation.
Reasons An Early Renewal Or Refinance MAY Be Appropriate At This Time
Reasons An Early Renewal Or Refinance MAY NOT Be Appropriate At This Time
- The interest rate you have is lower than what is currently available
- Everything about your mortgage is OK, you are just curious to see if there are lower interest rates available. If current rates are very close to what you already have the cost to renew early or refinance may not be able to be recovered as the new rate is very close to your current rate.
- If it is unlikely that the cost to refinance (i.e. penalty) will be able to made up in the new mortgage
Bank Prime Rate Up – Savings Tip
Bank Prime Rate Up (variable rate mortgages) – Savings Tip
Bank of Canada
This morning the Bank of Canada met and decided to raise the overnight lending rate by 0.25%, which was expected. Banks are expected to follow and adjust their prime rate to 2.75% over the next day or so and some have already made this adjustment today. The prime rate is still extremely low from a historical perspective and further increases are undoubtedly ahead. However, at what rate and the exact timing has mixed forecasts even amongst the experts given current market conditions and varied global factors.
The next scheduled meeting for the Bank of Canada is September 8th, 2010.
Savings Tip:
Your variable rate mortgage payment is much less than it would be at today’s 5 year fixed rate (a good, conservative, comparative benchmark). I recommend to set aside this difference (i.e. savings that you are having with your current variable rate mortgage vs. if you were on today’s 5 year fixed rate mortgage) each month and let that accumulate in a savings account (e.g. transfer your savings each month from your chequing account to your savings account via online banking). Then, either after 6 month’s or at the end of the year take that money and lump it against your mortgage (just call your bank and tell them how much to take in addition to your regular payment, out of your account on the next payment date). This is an example of making use of your pre-payment privileges, the best way to take years off of your mortgage and save tens of thousands in interest over the life of your mortgage.
- The monthly payment on a $100,000 mortgage amortized over 30 years at today’s 5 year fixed rate is about $500
- To know your exact savings each month feel free to contact me any time
Full press release from the Bank of Canada.
Further questions on this or a related topic, please contact me at any time.
604-603-2520 / maury@maurylum.com
Basement Suites & Mortgage helpers – What you need to know
Unauthorized basement Suites & Mortgage helpers – What you need to know
In Vancouver it is quite common to find homes that have been adapted to have a self contained unit, usually on the lower half of the home, which can be rented out for additional income. The portion of the home that is rented out is commonly referred to as a basement suite, mortgage helper, or in-law suite.
Many prospective home buyers are specifically interested in these types of homes as the additional income can be helpful to offset the cost of the mortgage. Furthermore, some applicants may be relying on being able to “claim” the rental income in order to be approved for the mortgage needed to buy the property (i.e. count the rental income in addition to their employment income, in order to qualify for the mortgage).
Most basement suites throughout the lower mainland are NOT “authorized” suites (i.e. they have not been registered with the city and the property taxes have not been adjusted accordingly). This may pose a problem for those who need to be able to use the rental income to qualify for the mortgage. The reason is that some banks as well as some insurance companies will NOT allow the use of rental income from unauthorized suites to qualify for a mortgage.
“Some banks and insurance companies will NOT allow you to count the rental income coming from an unauthorized suite when trying to qualify for a mortgage”
There is good news however; some banks and some insurance companies WILL allow rental income to be counted even if the suite is NOT authorized.
The list of lenders an independent mortgage broker has access to is endless. This is in contrast to if an individual walks into a bank or works with representative from a financial institution. In both of these instances the applicant will only have access to the one lender’s products, only their rates, and will be restricted to their policies and guidelines, which may prevent them from being able to be approved for their desired situation.
In terms of mortgage insurance companies, whenever the down payment is less than 20% of the purchase price the mortgage has to be insured in Canada. There are three (3) insurance companies in Canada for mortgages, however, banks usually on work with one, and sometimes two (2) of the insurers. Also, one of the insurers (the main one) does NOT allow the use of rental income from unauthorized suites when qualifying for a mortgage at all.
“By working with an independent mortgage broker you have access to the most number of lenders and ALL of the insurance companies, giving you the most and best options available”
In summary, unauthorized basement suites provide a good example of one of the many benefits of working with an independent, Accredited, Mortgage Professional (AMP). Working with me you have access to the widest range of lenders and ALL of the insurance companies, giving you peace of mind to know that your best interests will always be looked after.
For more information on this topic and to discuss your specific situation and plans, please contact me at any time.
604-603-2520 or maury@maurylum.com
Buying new construction? GST / HST calculation tool
Buying Brand New Construction? GST and HST Calculation and Comparison Tool
If you are planning to buy a brand new property you are probably aware of HST and that it will apply to purchases that close after June 2010. However, if you are buying a brand new property and you can close before July 2010, you will only have to pay GST.
From here things may get a bit confusing for you as you may be hearing various pieces of information depending on who you talk to. Examples of things that you may have heard could include:
- You can get a rebate back on a portion of the GST or HST you pay
- If your home is mostly complete but not totally complete by July 2010 you will not have to pay the full HST amount
- The percentage of GST or HST you can get back in rebates is dependent upon the purchase price of your property
- Your end purchase price will be the same regardless of GST or HST
I have prepared two (2) different spreadsheets where you can input the purchase price of the property you are looking at and the spreadsheets will automatically calculate the final net purchase price for you, taking into account the GST or HST (depending on your closing date), as well as show you the value of the rebates that are available from the government.
GST Worksheet HST Worksheet
(I suggest using Firefox of Chrome to get the spreadsheet as IE is not transferring the file properly)
*These worksheets should be used as a reference only and consult with your solicitor for final amounts.
Feel free to contact me at any time to discuss how of if the GST/HST applies to your plans as well how it impacts your financing requirements.
604-603-2520 or maury@maurylum.com
Your Vancouver Mortgage Broker