Mortgagenomics Canada

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

The term “First Time Home Buyer” is thrown around often these days and is tagged in countless incentive based programs and policies. In the future I will dedicate an entire newsletter to the various First Time Home Buyer privileges and programs, but today I will talk about one in particular, the RRSP Homebuyer Plan.What is the RRSP Home Buyer Plan?The RRSP Home Buyer Plan (HBP) is a program that allows you to withdraw funds from your Registered Retirement Savings Plans (RRSPs) to buy or build a home for yourself or for a related person with a disability. Here are the 3 major features of the RRSP Home Buyer Plan:Access up to $35,000 of RRSP funds for the purchase of a homeTake as long as 15 years to pay it backIf you don’t repay the loan within the 15 year period, the full amount of the loan will be declared as income and you will be subject to tax at your marginal rateEligibility criteria for the RRSP Home Buyer Plan:You must be considered a first-time home bu

Key Characteristics of fixed rate mortgages…Current Rate Range (as of Feb 5, 2021): 1.49% to 1.79%Distinguishing Characteristics:mortgage break penalties are the greater of 3 months interest or interest rate differential (IRD).  And with that being said, your mortgage penalty figure can deviate back and forth throughout the life of your term depending on the prevailing market conditions.Fixed mortgages can be ported/transferred to another property so as to avoid a break penalty, or to preserve your interest rate (CAUTION: porting your mortgage does not always add up.  In fact, in most cases mortgage holders opt out of it due to all the caveats associated with it.  But nonetheless, it is certainly an option.  Click Here to be redirected to my previous blog on Porting a Mortgage)fixed rate mortgages are available for various terms (1, 2, 3, 4, 5, 7, 10 year terms)Can be amortized up to 30 yearsMaximum Loan To Value allowance: 95%interest rate changes can occur at any time without any notice

Imagine running a marathon and you are 50 strides away from completing the race.  But suddenly, a race official appears out of nowhere and moves the finish line another 500 meters ahead.  This is what closing costs verification feels like...the applicant has just recently (painstakingly) satisfied the down payment verification and is now presented with another task of proving that they have enough cash to pay for the legal fees, property transfer taxes, moving truck and other peripheral costs associated with the purchase of a home.  At the end of the day, it's not that big of a deal, but it is definitely worth addressing and making the buyer aware very early on in the buying process so as to avoid any unnecessary drama and tension. 3 key points about Closing Cost Verification:lenders typically calculate the Closing Cost as 1.5% of the purchase price and in provinces like BC and Ontario where Property Transfer Taxes are significant, the request for it during the mortgage process simply reiterate

The dream to build your own home is alive and well, especially in Vancouver!  Take a drive down any street in one of (metro) Vancouver's neighbourhoods and you'll see several projects on the go.  This week I want to write about the mortgages that finance these incredible projects and what it takes to qualify for them.  The mortgages are commonly referred to as Construction Draw Mortgages or Self Build Mortgages.  If you or anyone you know are considering taking this route, read on and learn about the main qualification criteria.The 3 Most Important Factors:Building your own property is capital intensive. Be aware that you will need a substantial amount of front money to begin your project (even though you qualify for a construction draw mortgage).  Front money is non-mortgage money and it will be required for pre-construction soft costs and the beginning stages of your build.  Front money can be from any source; own sources, sale of previous home, equity proceeds from a home refi

Over the last decade the process of qualifying for a mortgage has increasingly become more cumbersome and frustrating. In fact, some claim it is easier to attain citizenship to another country than it is to secure basic financing for a 1 bedroom condo in Calgary. So why is this? Why all the questions, the excessive document requests and the never ending due diligence? The answer is multi-dimensional and a topic for another newsletter all together (in the meantime refer to Twitter for endless threads on real estate and finance theories). But regardless of the reasoning behind today's challenging mortgage qualification landscape, I've noticed a commonality for all successful approvals that have run across my desk over the years, and I've narrowed it down to three key principles that lead to an optimal mortgage experience. Follow these principles and I promise you that your next mortgage qualification experience will be a walk in the park. And not only will it be stress free, b

What is a real estate assignment contract?Before I get in to the process of how to qualify for a mortgage when assigning a real estate contract, let's first unravel what a real estate assignment is.A real estate assignment is a transaction similar to that of a standard real estate transaction, except rather than being referred to as a buyer and a seller, in an assignment they are referred to as an Assignor and Assignee, the assignor being the seller and the Assignee, the buyer.The main distinction of an assignment contract is the subject item of the assignment. Rather than being the property itself, the transactional item in an assignment contract is the RIGHT to PURCHASE - the property. Hence, the original terms and conditions of the original purchase contract remain intact. The only changes are in ownership and negotiable price.Why would someone want to purchase a property via an assignment?its a way to get into a new property without waiting for a long period of time (typically, assignments

Since the launch of the program in Sept 2019, only 13% of the programs allocated reserve actually made it to the hands of first time home buyers. Will the upcoming enhancement spur more interested applicants, or is this program simply a dud?Three words that best describe Trudeau's First Time Home Buyer Incentive (FTHBI) program that was launched back in Sept 2019 - OVERRATED, UNDERUSED, and CONFUSING.But that could change as early as this coming spring as the programs maximum thresholds have been increased to capture a more broad range of buyers in Canada’s two highest priced markets; Vancouver and Toronto. In 2019, the FTHBI program was available for properties up to a maximum purchase price of $507,000. However, in 2021, the program will be enhanced to accommodate for a maximum purchase price of ~$722,000.First, let’s talk about what it's NOT:It’s not free money (has to be paid back in 25 years or when you sell, whichever comes first), It doesn’t help you&n

One of the consequences of selling a home is the unexpected penalty that arises as a result of breaking your mortgage contract ahead of its maturity date. The penalty is determined by the greater of 3 months interest, or the dreaded interest rate differential (IRD). And the scary part is the your penalty can radically change from the day you list your property for sale to the day you sell it, especially in a whacky environment like we are currently in with the recent free fall in interest rates.  One way to avoid a break penalty is by porting your mortgage to your new home purchase.HERE's HOW A MORTGAGE PORT/TRANSFER WORKS:There are three (3) Porting options:Straight Port (when you transfer precisely the same mortgage balance to the new property)Port and Increase (when you transfer the mortgage and increase the principle balance) Port and Decrease (when you transfer the mortgage and reduce the principle balance)**depending on the lender, applicants have 30 to 180 d

Mortgages are classified as one of the following three; Insured, Insurable, or Uninsured/Conventional.The way a mortgage is priced and qualified depends on how its funds were purchased, acquired or allocated.Mortgages are either insured by the borrower, bulk insured (securitized) by the lender, or simply uninsured all together.Once they are given their insurability classification, they are then priced and underwritten, accordingly:(1) INSURED MORTGAGESOnly available for purchases of owner-occupied properties under $1M with 25 year amortizationsminimum down payments of 5%, but cannot exceed 20%the premium is commonly paid for by the applicant via an equity stake on the property (rather than out of pocket). For example, let's say you are purchasing a $400,000 property with a 5% down payment. Your mortgage would be $380,000 PLUS an insurance premium of 4% of the mortgage amount. Therefore, your total mortgage would be bumped up to $395,000 ($380,000 + $15,200)mortgage

When I first became a mortgage broker (in 2004), the hardest thing for me to understand at the time was how business owners got away with qualifying for hefty mortgages with such low declared incomes. Like how does a contracted engineer who declared $65,000 on their T1 General end up qualifying for a $650,000 mortgage (which requires an annual qualifying income of $100,000)?? I did quite a few deals that year and many of them in Calgary's oil and gas sector which consisted of many self employed applicants. And it wasn't until about my third year that I started to comprehend how someone who earned $65,000 could use $100,000 as qualifying income.This type of scenario is prevalent with self employed applicants because their declared income could often be conceivably lower than what it really is. This is mainly the result of the various expenses that business owners claim to reduce their taxes payable. Other factors such as personal i

The following is discussed in this episode:Throughout our lives we will likely be moving from one property to another, and in the process, we use the equity accumulated from the previous property to either buy the new property outright, or use whatever is remaining (once the existing mortgage is paid out) as a down payment for the new property.But sometimes your new property’s closing date doesn’t quite line upwith the closing date of your current property…so in other words, you may find yourself in a situation where the closing date of your new property is BEFORE the completion date of the sale on your current property. <-This is where Bridge Financing can be used.Or, some sellers simply are not aware that they can conveniently schedule the closing date of their current property to lag the completion date of the new property to accommodate for a smooth and stress free moving process from the old home to the new one. <- This is also a good applicati

Everyone assumes that verification of down payment proceeds for a mortgage is a swift and miscellaneous part of the mortgage qualification process. When you think about it, why would it be difficult? If the applicant does, in fact, have the funds in their bank account, why then does it matter where it came from and how long it's been there?One would argue that the biggest qualification hurdle in qualifying for a mortgage is income verification. However, if you ask a mortgage broker, they would likely reply that it is down payment verification. And the main reason being is that it is very much often overlooked and taken lightly by applicants…until your days away from your closing date and the lender is holding back your advance because they have discovered a stray $5,000 deposit into your bank account from which the origin hasn’t been confirmed or disclosed. Be aware, the unique thing about down payment verification is that its verification criteria is not so much a policy of the lender, bu

The following is discussed in this episode:Purchasing a property inside of a corporation: OPERATING COMPANY or HOLDING COMPANY?*this a decision you will want to discuss with your accountant as there are reasons to do so in both cases. However, as far as mortgages are concerned most lenders require that the property be held in a holding company. There are a select few that allow one to do so in an operating company, but the interest rates are typically higher. I have reached out to lenders and asked why this is the case…they mostly replied that the exit strategy of the property could become difficult or problematic in the event the corporation (the operating company) is sold, or confronted with some type of creditor challenge, thereby coupling the property with the corporations resulting outcome*when it comes to mortgages, not all lenders allow for purchasing within a corporation…but enough of them do. It is important to disclose your intent

The following is discussed:>for the 6th consecutive week 5 year fixed rates are available for as low as 1.79%. Even lower rates are available for no-frills products (I've seen rates as low as 1.64%). One other rate promo to be aware of -> 1.89% for a 5 year fixed, but no interest for the first three months (and it’s not tacked on to the mortgage either! This is the real deal, no smoke in mirrors). Enjoy the savings and the reduced mortgage payment, or lump sum the difference directly into your principle to accelerate your amortization!>More on interest rates and promotions: Last week I wrote that the Bank of Canada (BOC) will be discontinuing its purchase of bonds, but they have since renewed their commitment and simply scaled back their commitment from $5 Billion in bond purchasing per week to $4 Billion…this means continued low fixed rates! Also, this week, BOC announced they will be keeping prime rate at 0.25% for the unforeseeable future…some are speculating as long as 20

Key points:New approach/format to podcast...expect weekly episodes based on Marko's weekly newsletterTwo upcoming events that could potentially cause interest rates to increase (Bank of Canada's announcement to stop purchasing bonds AND the US Election)a reminder of the 3 golden credit boostersMarko Gelo Garage Band Sessions: (produced and performed my Marko)"Cheap Money" ...intro song (0:41)"mujeres en rojo" ...outro song (1:42)all instrument and vocal tracks performed by Marko Gelomusic tracks arranged and produced by Marko GeloContact Marko, he's a Mortgage Broker:604-800-9593 direct Vancouver403-606-3751 direct Calgarymarkogelo.comhomefinancingsolutions.caApply for a MortgageFacebook@markogelo (Twitter)MarkoMusic (SoundCloud Account)...all podcast music tracks are performed and produced by MarkoClick Here to download Marko's Mortgage App (information, rates, calculators, etc) See acast.com/privacy for privacy and opt-out information.

Key points:Consumer Credit Reports (Borrowell, Credit Karma, etc)...why can't brokers accept your free reports?When it comes to mortgages, credit reports are reviewed from a very broad perspective - way more to it then just the actual scoreAvoid deferring your broker/banker from checking your credit score...do it sooner rather than laterlearn about the 3 golden tips that are sure to increase your credit score within a short period of time (avoid exceeding 60% of your approved credit limit, pay on time and avoid problematic disputes with creditors)Marko Gelo Garage Band Sessions: (produced and performed my Marko)"Cheap Money" ...intro song (0:41)"CSharp" ...full version (1:34)all instrument and vocal tracks performed by Marko Gelomusic tracks arranged and produced by Marko GeloContact Marko, he's a Mortgage Broker:604-800-9593 direct Vancouver403-606-3751 direct Calgarymarkogelo.comhomefinancingsolutions.caApply for a MortgageFacebook@markogelo (Twitter)MarkoMusic (SoundCloud Account).