Policies are always changing, and when you port a mortgage, a FULL application must be approved and completely underwritten with full, credit, income, property and policy review.
It’s a mistake to believe that just because you already had a mortgage, you will easily get a new one. Policies and rates are changing rapidly and you need a strategy to stay informed. SO BEFORE you consider a move, understand the worst case scenario of what you qualify for without porting your mortgage so you avoid disappointment of falling into the 70% of people that don’t end up porting. Mortgages can be made simple, when you are empowered with relevant information relating to the current market and your life stage. Depending on those factors, you might be happy to get rid of your old mortgage and get in with the new! We have a mortgage for that, and can help. On average less than 3% of mortgages are portable.
Let me list a few of the reasons why
1. Dates– most lenders have a different policy on the dates that will allow to port the mortgage; it can be weeks or months. Your closing date will determine that.
2. Amortization– porting a mortgage means you port the same amortization, so if you are moving up the property ladder, that may mean your payments are significantly increased making it less affordable or meaning you can’t qualify with your income.
3. Amounts– some have a 10% variance limit up or down, where the penalty will trigger or it’s no longer a fit within the policy.
4. Change in credit– depending on the credit score and outside debts you have will determine if you still fit the credit profile your previous mortgage had.
5. Income– if there has been a change in your income type or amount this will also impact the options.
6. Property type– some lenders only lend on single-family homes, or a particular zoning, or don’t do private sales- even if they did when you originally got your mortgage with them.
7. Rate– maybe the change in rates either way of the product type you took doesn’t allow for a port due to one or a few of the combined factors. For example, going from insured to uninsured comes with different policies.
8. Product– maybe the product you had no longer exists for your particular profile.
9. Inspections – maybe the lender approved it initially but after your inspection just as you wanted a reduction in price, they decide they are no longer going to lend on it or decide it doesn’t fit the profile or they wont do it under that program ( instead you need a purchase plus improvements or a hold back they may or may not participate in and maybe want a different fix that you or a strata council agree on.
10. Bridge – if you want to buy before you sell, all the above factors come into play. Maybe the original lender doesn’t allow the length of time you need, there cost to bridge is much higher, or maybe they don’t approve that portion of the loan, which puts you back at square one.

Purchasing a home is complex, with many moving parts and needs to be understood as such. When you have an experienced Dominion Lending Centres mortgage broker by your side while lots of things ca home up, we can guide you through what is best for your family, which is why we encourage you to be educated, and empowered so you are ready for your next part of your ownership journey.

Courtesy of Angela Calla – AMP – DLC Angela Calla Mortgage Team based in Port Coquitlam, BC

You may have already seen the more technical BANK OF CANADA RATE ANNOUNCEMENT on October 24th, or you may not have. The Coles Notes (the simplest version) are as such:

Global economy remains strong, the USMCA will reduce trading uncertainty
Canadian economy is balanced for the foreseeable 2 years
Household spending will increase, but backed by income growth
Housing activity across Canada is stabilizing

On October 24th the Bank of Canada did what we all expected, they increased the Overnight lending rate by 0.25% to 1.75%. This equated to a PRIME being increased by 0.25% to 3.95%. All variable rate mortgages and lines of credit utilize PRIME to calculate the current interest rate.

Now the BIG QUESTION, how do we as mortgage consumers respond? First, ask your Dominion Lending Centres mortgage broker how they plan to react in accordance to his own financing.

No need to ask me, I will tell you. Variable, with no hesitation. I will stay the course by not pushing the panic button.

WHY?

Because if I decide to move, re-finance, consolidate, leverage equity or to simply break the mortgage for any reason my penalty will only be 3 months interest. I also need to consider how much money I have saved over the term by utilizing a variable rate mortgage rather than a fixed. During my current mortgage the spread between variable and fixed is approximately 1%.

Please excuse the following ‘tongue & cheek…’To go with a fixed mortgage tells me that you can predict the future with absolute certainty.

I know I can’t, so I rely on statistics. 65% of all fixed mortgage consumers will break their mortgage in 33 months, the penalty that follows is unavoidable. For the average B.C. mortgage of $350,000 the penalty is approximately $14,000. By opting for a fixed rate mortgage, you have declared to the universe that there is a zero percent chance you will need to access equity, amend the current mortgage or consider applying for a secured line of credit.

Real estate wealth is a long game, building net worth doesn’t happen overnight. Gains are not made in the short term. Just like other markets (stocks, bonds, mutuals, GICs RRSPs), there will be highs and lows.

What does this increase mean?

Dollarize it for your own personal consumption. For an increase of 0.25% the payment will go up $13 per every $100,000 borrowed. For some variable rate borrowers, the payment hasn’t even changed as the lender only adjusts the principal and interest allocation.

Now the question becomes, what do you do? Remain with variable or lock into a fixed. I recommend staying the course.

Courtesy of MICHAEL HALLETT – AMP – DLC Producers West Financial based in Coquitlam, BC.

Start at the beginning…
Registered Retirement Savings Plan = one of the best ways to save for retirement and your down payment and continuing your education. With an RRSP, your contributions reduce your taxable income. This is different from your TFSA (Tax Free Savings Account) which does not reduce your taxable income, but it does give you the added benefit of tax-free withdrawals. What does that mean? Well, with the RRSP you get a tax deduction meaning money back to you!
This is different from your TFSA, Tax Free Savings Account which does not reduce your taxable income, but it does give you the added benefit of tax-free withdrawals. But, reality is the RRSP will have a lower tax rate in retirement.
Everyone can save for their RRSP with as little as $50 per paycheque or more, depending on your budget. You can also go to your bank, sometimes your broker and see about a line of credit, that would be essentially secured by the RRSP, so that you contribute as much as you can qualify for. With this option when you get your refund, put those funds toward the RRSP loan, DON’T use it for the get away we all deserve!
An RRSP line of credit based on a 5-year term at prime rate +/- would equate to about $10,000 in a refund, based on 40% tax margin. If you retire in 25 years you would have approximately $107,296 in your RRSP and that is based on an estimated 6% annual rate of return.
Did you know that you can use up to $25,000 from your Registered Retirement Savings Plan, for each applicant, towards your down payment and closing costs this is the Home Buyers’ Plan (HBP)?
Do you meet the RRSP withdrawal conditions?
• Resident of Canada at the time of withdrawal

• You cannot withdraw more than $25,000

• Only the person who is entitled to receive payments from the RRSP can withdraw funds from an RRSP. You can withdraw funds from more than one RRSP as long as you are the owner of each RRSP. Your RRSP issuer will not withhold tax on withdraw amounts of $25,000 or less.

• Normally, you will not be allowed to withdraw funds from a locked-in RRSP or a group RRSP.

• Your RRSP contributions must stay in the RRSP for at least 90 days before you can withdraw them under the HBP. If this is not the case, the contributions may not be deductible for any year.

• Neither you nor your spouse or common-law partner or the related person with a disability that you buy or build the qualifying home for can own the qualifying home more than 30 days before the withdrawal is made.

• You have to buy or build a qualifying home for yourself, for a related person with a disability, or to help a related person with a disability buy or build a qualifying home before October 1st of the year after the year of the withdrawal.

• You have to fill out Form T1036, Home Buyers’ Plan (HBP) Request to Withdraw Funds from an RRSP for each eligible withdrawal.

Under the HBP, the home must better fit the needs of the disabled person than his or her current home. You can withdraw funds from your RRSPs under the HBP to buy or build a home, if:

• you are a person with a disability;

• you are buying or building a home for a related person with a disability;

• you are helping a related person with a disability to buy or build a home.

Regardless of the situation, you are responsible for making sure that all applicable HBP conditions are met. If, at any time during your participation period, a condition is not met, your withdrawal will not be considered eligible and it will have to be included as income on your income tax and benefit return for the year it is received. Valuable information at your fingertips and from your broker.

Courtesy – KAREN PENNER – AMP – DLC Jencor Mortgage Corporation based in Calgary, AB.

Being fully pre-approved means that the lender has agreed to have you as a client (you have a pre-approval certificate) and the mortgage broker has reviewed and approved ALL your income and down payment documents (as listed below) prior to you going house hunting. Many bankers will say you’re approved; you go out shopping and then they say ‘sorry you not approved’ due to some factor. Get a pre-approval in writing!
Excited! Of course. You are venturing into your first or possibly your next biggest loan application and investment of your life.

What documents are required to APPROVE your mortgage?
Being prepared with the RIGHT DOCUMENTS when you want to qualify for your mortgage is HUGE; just like applying for a job or going for a job interview. Come prepared or don’t get hired (or in this case, declined).
I assist all my clients along the way to ensure any questions are asked and YOU are prepared UPFRONT and fully PRE-APPROVED before you go house hunting.
No stress, no running around, no surprises.

Why is this important?
You can have a leg up against the competition when buying your dream home as you can have a very short timeline (ie: 1 day to confirm vs 5-7 days) for “financing subjects”.
Think? You’re the seller and you know the buyer doesn’t have to run around finding financing and the deal may fall apart. This is the #1 reason deals DO fall apart. You will likely get the home over someone who isn’t fully approved and has to have financing subjects. The home is yours and nobody’s time is wasted.
If you just walked into the bank, filled an application and gave little or no documents, and got a rate – you have a RATEHOLD. This is NOT a pre-approval. This guarantees nothing and you will be super stressed out when you put an offer in, have 5-7 days to remove financing subjects and you need to get any or all of the below documents. That’s not fun is it? Use a Dominion Lending Centres mortgage broker ALWAYS. We don’t cost you anything!
When you get a full pre-approval, you as a person(s) are approved; ie: the broker did their work of reviewing (takes a few days) to call your employer, review your documents, etc. All we have to do is get the property approved, which takes a day or two. Much less stress, fastest approval…faster into your home!

Here is exactly the documents you need MUST have (there is NO negotiation on these) to get your mortgage approved with ease. Keyword here is EASE. Banks/Lenders have to adhere to rules, audit files and if you don’t have any of these or haven’t been requested to supply them…a big FLAG that your mortgage approval might be in jeopardy and you will be running around like a crazy person two days before your financing subject removal.
Read carefully and note the details of each requirement to prevent you from pulling your hair out later.
Here is the list for the “average” T4 full-time working person with 5-15% as their down payment (there is more for self-employed, and part-time noted below):

Are you a Full-time Employee?
Last 2 paystubs: must show all tax deductions, name of company and have your name on it.
Any other income? Child Support, Long Term Disability, EI, Foster Care, part-time income? Bring anything that supports it. NOTE: if you are divorced/separated and paying support, bring your finalized separation/divorce agreement. With some lenders, we can request a statutory declaration from lawyer.
Notice of Assessment from Canada Revenue for the previous tax filed year. Can’t find it? you can request it from Rev Can to send it to you by mail (give 4-6 weeks for it though) or get it online from your CRA online Account.
T4’s for your previous 2 years.
90 day history of bank statement showing the money you are using to put down on your purchase.
Why 90 days? Unless you can prove you got the money either a sale of a house, car or other immediate forms of money (receipt required)…saved money takes time and the rules from the banks/government is 90 days. They just want to make sure you aren’t a drug dealer, borrowed the money and put it in your account or other fraud issues. OWN SOURCES = 90 days. BORROWED is fine, but must be disclosed. GIFT is when mom/dad give you money. Once you have an approval for “own sources” you can’t decide to change your mind and do gifted or borrowed. That’s a whole new approval.
Down Payments
Own Sources: For example “own sources” include if you are a first time buyer and your money is in RRSP’s then, have your last quarterly statement for the RRSP money. If your money is in three different savings account, you need to print off three months history with the beginning balance and end balance as of current. The account statements MUST have your NAME ON IT or it could be anyone’s account. I see this all the time. If it doesn’t print out with your name, print the summary page of your accounts. This usually has your name on it, list of your accounts and balances. Just think, the bank needs to see YOU have X$ in your (not your mom’s or grandparents) account.

GIFT: If mom/dad/grandparents are giving you money…then the bank needs to know this as the mortgage is submitted differently (this is called a GIFT).

If you are PART-TIME employee? All of the above, except you will need to bring three years of Notice of Assessments. You need to be working for two years in the same job to use part-time income. You can have your Full-time job and have another part-time gig… you can use that income too (as long as it’s been two years).

If you are Self Employed?

two years of your T1 Generals with Statement of Business Activities
Statement of Business Activities.
3 years of CRA Notice of Assessments
If incorporated: your incorporation license, articles of incorporation
90 day history of bank statement showing the money you are using to put down on your purchase.

Courtesy of Kiki Berg – AMP – DLC Hilltop Financial based in Langley, BC.

What’s the difference between a Demand Loan and a Term Loan? A recent commercial mortgage refinancing I was involved with resulted in a discussion around Demand Loans. What are they exactly, and how they might typically differ from a term loan?

A demand loan is a loan that a lender can require to be repaid in full at any time. This condition is understood by the lender and the borrower (or should be) from the outset. A term loan on the other hand is a loan which has a specific length of term. It has a set repayment schedule.

Normal loan default remedies are provided to the Lender in typical term loan documentation. Unless and until there is a default, the borrower generally continues making regular (often monthly) payments. Apart from having to typically report annually with updated rent rolls or financial statements, has little contact with the lender until loan maturity.

Robert D. Betteridge, a lawyer with Burnet, Duckworth & Palmer LLP, in a May 2008 article entitled Does Demand Always Mean Demand? indicated that in simple terms a Demand loan often has all its required terms in a few paragraphs. “The debt is acknowledged, an interest rate and payment mechanism is specified and a clear statement that the loan is payable on demand is included.” He goes on to state that “term loan documentation is necessarily more complex”. Of necessity the lender will typically need to cause repayment of the debt if certain elements of default occur, often a monetary (i.e. non-payment) event.

Increasingly however, Lenders are using hybrid loan documentation which seems to include both elements of Demand and Term loans. These hybrid loans may in fact be Demand loans in the sense that they provide the Lender “a right to demand repayment upon the occurrence of a specified event of default”.

Do Lenders really call loans?
A relatively sophisticated borrower I represented last year, secured an attractive rate from a Bank lender. However, the product was only offered as a Demand Loan. This borrower successfully negotiated a further provision. The lender’s security documentation was amended, to require the lender to specifically identify the item of default, and to set out a 10 day Notice period to cure the default, prior to being able to call the loan (i.e. Demand payment).

Was it necessary for this borrower to amend the loan security? This borrower, out of an abundance of caution, felt that it was. I have often thought it prudent to consider a commercial mortgage as a loan with a demand element. The practical reality is that many/most commercial mortgages include a borrower covenant to pay as well as security for the debt. The covenant to pay typically includes language which sets out that if default occurs, all mortgage money then owing to the lender will, if the lender so chooses, become due and payable.

My experience has been that Demand is a lever that Banks or other lenders could use if they feel that there overall investment is at risk. Its more likely to happen if the borrower’s financial situation is precarious, or if the loan security is in jeopardy. A well leased commercial real estate project provides excellent security for a lender. Lenders in these situations most often supplement their security with an Assignment of Rents to further protect themselves. This allows them to step into the shoes of the borrower/landlord, during a mortgage enforcement action, to secure rents directly from property tenants, to continue to service the mortgage payments.

What’s the take-away here?
In practical terms, if you make your monthly mortgage payments as agreed, your loan will likely not be “demanded” or “called”. It is important to understand that it’s the lender’s prerogative. Other factors come in to play of course. Consider the rate of interest. If your loan carries a rate of 6%, and market rates have fallen to 4%, your lender is not likely to call your loan anytime soon, unless they perceive undue risk. They cannot readily replace the loan they call, with a new investment opportunity paying the same rate.

Bear in mind your loan documentation may reflect a Demand/Term hybrid loan.

Courtesy of Allan Jensen – AMP – The Mortgage Source based in Ottawa, ON.

As a licensed Mortgage Broker, I am often asked “what do I need to know when buying my first home?”
Everyone has their own aims and objects when buying their first home. As a Mortgage Broker, I specialize in making sure your financing is in order to facilitate your dreams of owning a home.

Buying your first home is very exciting, but it can easily be overwhelming. Being prepared is the first step. The decision to purchase your first home can be a huge, life-changing event and you need to know exactly what you are getting into.

To get you prepared with the knowledge you need, here are my 7 tips to consider when you buy your first home: (Some of these may only relate to B.C.)

1. Strengthen your credit rating.

It’s pretty simple: the higher your credit score, the lower your mortgage rate will be.

Spend the time now to improve your credit. Check your credit report. Many credit reports have errors, so you need to ensure that your credit bureau is current and correct.

ALWAYS pay every single one of your bills on time. Set up automatic payments if you have had any late payments over the last couple of years.

Stop applying for any new credit a year before you are considering buying and continue until you sign the closing papers on your home. Spend only 30% of credit limits on credit cards.

2. Find a Mortgage Broker and figure out how much you can afford to spend.

The home buyer’s mantra: Get a home that’s financially comfortable.

Contact a Dominion Lending Centres Mortgage Professional. We work with you up to a year in advance to analyze your situation, and tell you how much mortgage and monthly payments you can afford.

Lenders like to see that you spend a maximum:

32-39% of your Gross income on mortgage payments, maintenance fees (if applicable), heat & property taxes
38-44% of your Gross Income on all debts
Including #1 above PLUS loans, credit cards, additional financing etc.
1 year+ prior to going home shopping, calculate the mortgage payment for the home in your intended price range, along with the increased expenses (such as taxes, insurance and utilities). Then bank the difference between the home payments and what you’re paying now. Not only will that simulate ownership, it also helps you save for your down payment!

When you are ready to start shopping for your home, as your Mortgage Broker, I gather all your financial documentation that the lender requires, in order to figure out much you can afford to spend. Then I work with you to get a pre-approval and lock in a low interest rate to protect you in case rates rise between now and the time you by your new home.

3. How long will you live in your new home?

The transaction costs of buying and selling a house are substantial including: real estate fees, legal fees, Property Transfer Tax, selling in a down market, moving, etc.

If you don’t plan to live in your new home for at least 3-5 years, you may not gain enough equity to make selling worthwhile.

Short-term home ownership can be a pretty expensive proposition. If that is the case, holding off on purchasing could be your best option.

4. How much house you need?

Buying a cheaper, smaller home might sound like a good place to start, but could end up costing you more if you need to move due to changes in your lifestyle, including a growing family. Then again, buying more house than you currently need will cost you more with higher mortgage payments, higher maintenance, energy and tax costs.

Prioritize your housing wish list. They say that the 3 most important things to think about when buying are home are location, location, location. In Greater Vancouver your first choice for location i.e. Kitsilano or Yaletown may not be within your means. You also need to think about how the new home space will be used and whether it will fit your lifestyle now and in the future.

5. Build a savings account.

Start now to build a healthy savings account. To avoid paying CMHC Mortgage Default Insurance you need to prove you have a 20% down payment.

Building your savings account, over and above the money you will require for the down payment and closing costs. Lenders want to see that you’re not living paycheck to paycheck. If you have three to five months’ worth of mortgage payments in your savings, that makes you a much better loan candidate.

6. Remember closing costs.

While you’re saving your down payment, you need to save for closing costs too. They’re typically 1% to 3% of the purchase price and due on the completion date.

In B.C. you need to also pay Property Transfer Tax (PPT). The amount of tax you pay is based on the fair market value of the land and improvements (e.g. buildings) on the date of registration unless you purchase a pre-sold strata unit. The tax is charged at a rate of 1% for the first $200,000 and 2% for the portion of the fair market value that is greater than $200,000. 3% on the portion over $2,000,000 and if the property is residential, a further 2% on the portion greater than $3,000,000

7. Shop for a Realtor that has your best interests in mind.

Interview at least three Realtors. Get referrals from people you trust who have recently bought or sold, including me, your mortgage broker. I work with a lot of realtors, some of whom are outstanding in their field. Once you’ve decided which Realtor is the best fit for you, they can help you focus your search to find your perfect home. There is no cost for the Realtor for the home buyer since the home seller pays the commission.

Besides the 7 tips I’ve listed above, there are many other things you should need to be aware of prior to buying your first home.

Courtesy of KELLY HUDSON – AMP – Richmond, BC.

With the Bank of Canada in a mood to raise rates, it’s a similar feeling for the bond market, which impacts fixed rates. In every interest-rate market there are many factors leading to an increase and we are hoping to provide a little bit of clarity on what is happening and what it means to you and your loved ones. We tell you this in advance to be proactive to take care of you, as our mortgage family, so as you hear the news about the changes you have comfort we are here to lead with clarity.

At this time, we see fixed rates increasing as the bond market increases.

Why do we note this information and how does it relate to you?

If you are in a variable rate, you will want to:

Review your lock-in options by contacting us or your lender directly (every lender has different policies in allowing us to help or not). Knowing it’s unlikely the prime rate will reduce and fixed rates are on the rise, there could be a sweet spot to review your options now.
If you decide not to lock in, it’s time to review your discount to see if a higher one can be obtained elsewhere.
Locking in won’t be for everyone, especially if you are making higher payments and your mortgage is below $300,000, which most people fit and will continue on that path. Also if your discount is more than .6 below prime you may want to wait and watch the market. Locking in will be around a 1% higher rate than you are likely presently paying. If knowing you can likely lock in around 4% now is most attractive to you, this may be your time.

If you are in a fixed rate:

If you obtained your mortgage in the last year, stay put.
If you are looking to move up the property ladder or consolidate debt, get your application in to us ASAP so we can hold options for up to 120 days.
If you are up for renewal this year or know someone who is, secure your options now with us to weight out the savings prior to renewal with us keeping a watchful eye on the market.
Keep in mind that if you or someone you care about has an average mortgage of $350,000 and got it a few years ago at 2.49% now a qualified applicant can expect about 3.89% which is a payment increase of $254 dollars a month, so increasing your payment now will protect your equity, and you from future payment shock.

Courtesy of Angela Calla – AMP – Port Coquitlam, BC.

Nothing weighs heavy on one’s shoulders than owning a home and getting behind on your Canada Revenue taxes. Most banks will not be able to help you refinance your home to pay them off as CRA has first dibs on your house and assets. We have clients owing anywhere from $5,000- $300,000 in back taxes and have threatening letters from CRA that would keep anyone up at night.

There are options and strategies we can assist with financing your CRA debts:

1: We use alternative lenders that charge higher fees/rates for a 1-year term

2: Short term 2nd mortgage to pay off your CRA debts and then refinance back with your lender.

Find out who we can help with a no-obligation application. Let a Dominion Lending Centres mortgage professional get you back on track!

Some CRA notes on penalties for filing late:

The first time you file late you’ll pay:

a late-filing penalty –5% of the amount of tax you owe, plus 1% for every month that your return is late, for up to 12 months. That adds up to a maximum of 17% of the tax you owe.
interest – at the prescribed interest rate on the amount you owe, beginning on May 1. You’ll also be charged interest on any late-filing penalties. Interest is compounded daily, not monthly or annually. The prescribed interest rate can change every 3 months.
If you miss the deadline again, the late-filing penalties are doubled. For example, if the CRA charged you late-filing penalties for any of the 3 previous years, you would pay a penalty of up to 50% made up of 10% of the taxes you owe, plus 2% of the taxes you owe for each full month that your return is late, to a maximum of 20 months.

Courtesy of KIKI BERG – AMP – Financial based in Langley, BC.

Self-employed individuals are quickly becoming one of the most common clients that we handle. Daily we have successful business owners come into our offices who enjoy the perks of being an entrepreneur. One of these includes fantastic write-offs that allow them to bring their income down to a low tax bracket.

However, this benefit can also mean that the same business owner may have a hard time qualifying for a mortgage all because their income is significantly reduced on paper… how frustrating ‘eh? But these savvy business owners know that there is advanced planning that is involved in being able to qualify for conventional financing. Back in 2015, Statistics Canada reported that there were about 2.7 million people self-employed in Canada… which is an astounding 14% of the total population of Canada! What does that stat mean? Two things:

1. That being self-employed is a more than viable way of earning income in today’s world.
2. That 14% may not fit into the conventional lending “box”

The Conventional Lending Box
To fit into this box, self-employed individuals must meet certain qualifications. For example, they must be able to provide:
>Two most recent years of personal tax returns
>Two most current years Notice of Assessments
>Two most current years financial statements
>Statement of Bank Account Activity
>Investment Income Statement
>Photo ID

Now, the one area that raises a red flag in the above is the tax returns. As we previously mentioned, their income claimed on the return itself might be significantly different than their actual income. Tax deductions related to business often reflect meals, rental spaces, credit card interest etc. The result is that the income the self-employed business owner shows on their tax return is a significantly lower figure than what their actual take home pay is. However, the conventional lending box requires income to justify the mortgage. So how do we pull this off?

The Unconventional Lending Box
Now please keep in mind that “unconventional” in this box just means that as a self-employed individua,l you are going to work with a Mortgage Broker to find an alternative to allow you to show that you can justify the mortgage. There are several well-known and consistently used pieces of advice that we would like to pass along to you:

1. If you are organized and planning (think 2 years out) you can plan to write off fewer expenses in the two years leading up to the property purchase. Yes, you will pay more personal taxes. However, your income will be higher, and it will be easier to qualify you for the mortgage amount you are seeking.
2. Set up your finances through a certified accountant. Many lenders want to see self-employed income submitted through a professional rather than doing it yourself. The truth is that the time you spend doing your own taxes will not be nearly as efficient both financially and time-wise as a professional. Make sure that you discuss with them what your goals are so that they can set up your taxes properly for you!
3. Choose your timing carefully. If you are leaving for an extended holiday within the two years before purchasing, your two-year average income may fluctuate. Plan your vacations and extended trips away with income in mind.
4. Consider using Stated Income. You have the option to state your income. This is based on you being in the same profession for 2+ years before being self-employed. The lender looks at the industry and researches the mean income of someone in that profession and with your experience. You will be required to provide additional documents such as bank statements, showing consistent deposits and other documentation may be asked of you to show your income.
5. Avoid Bankruptcy at all cost…. or if you do declare bankruptcy have all your discharge papers on hand to present to the lender and ensure you have two years of re-established your credit.
6. Mortgage Brokers can state income with lenders at the best discounted rates. But if you do not qualify with A lenders using stated income, then a broker will work with you to utilize a B Lender who are more lenient but may come with higher interest rates and applicable lending and broker fees.
7. Last but not least, if A or B lenders don’t fit, private financing can be looked at as an alternative option in order to get you into the market and offer a short-term solution to improve credit or top up your reporting income. Then you and your broker can refinance into an A or B lender at that time. Just keep in mind that private lending will have a higher rate associated with it , with lender and broker fees added on as well, if you choose to go with this option.

So, to all of our self-employed, hard-working, determined individuals, take heart! You can qualify for the mortgage you want, it just takes a little more planning to get everything in order. Keep in mind to that every lender has different guidelines as to how they view self-employment.

Courtesy of – Geoff Lee – AMP- DLC GLM Mortgage Group based in Vancouver, BC.

Mortgages are like vehicles. A bank is similar to the brand, Ford or Toyota for example. How long you have a mortgage before it’s time to renew is like the model, a Fusion or Camry. The rate is similar to the car’s paint color, and the mortgage benefits such as prepayment privileges and portability are like the car’s benefits; 4-wheel drive, hatchback, four doors instead of two, etc.

A bank is like a sales person at a Ford or Toyota dealership. He or she is an expert, they know everything about every car on their lot; engine size, warranty, all available colours, and their fuel ratings. He or she can match any car to your needs and lifestyle, as long as it’s sold at their lot.

But what if they don’t have the most fuel efficient car? What if you don’t like the design or you need four doors and a trunk and all they have is two doors and a hatchback? Are you still going to buy from that dealership just because you went there first? No, you’re going down the street to check out the Chevrolet, maybe even BMW, Mazda, or the new Chrysler dealership. That sales person doesn’t want you to go buy from another lot down the street, but you are buying to satisfy your needs, not the dealership’s needs of selling their own cars.

Now imagine a dealership that sold every single make and model of vehicle. Imagine you could choose one of their sales people, and have them work only for you. They know just as much or even more about every make and model, they do all the research for you and tell you what you need to look for, they ask you the important questions; they have your best interest. That is a mortgage broker, your own personal expert.

Now, you may not need a personal expert to buy a car. But what about mortgages? Is a 0.10% lower interest rate a lot? Or will a 20% prepayment privilege instead of 10% be more advantageous? Can you switch lenders and move your mortgage? $15,000 or $5,000 penalty? How is it calculated? Fixed or variable? Is a collateral charge good or bad? 2-year term or 5-year? Big bank or monoline lender? How about credit unions? The list goes on.

So, a bank or mortgage broker? Put it this way; would you buy from the first dealership you visit or hire an expert?

Courtesy of RYAN OAKE – AMP – DLC Producers West Financial based in Langley, BC.