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Mortgage-Matters

Step 1 is pre-approval

The real estate market is on steroids right now so is a mortgage pre-approval important?

The short answer is yes and the long answer is yes.

It is definitely important, so you have the confidence to move forward with your house hunting. A pre-approval is for you and not the lender.

The 60-second mortgage app you used online is not a pre-approval and can loosely be called a
pre-qualification.

The term pre-approval is somewhat misleading as we cannot guarantee that you are 100% approved for your financing because there are many variables that will factor into your final mortgage approval including the lender reviewing the property you are purchasing.

(Please read that again if you are considered an unconditional offer on a property.)

A mortgage pre-approval can give you the confidence to know that you fit within the guidelines of a mortgage lender and also a mortgage insurer if you require an insured mortgage for your purchase. It will also establish a realistic budget for your new purchase.

We are going to review your income documents and confirm the source of your down payment funds. You will know if there are any areas of concerns and we will discuss a plan to move forward.

Here are the benefits of getting pre-approved.

  • You will know your price range before you start house hunting.
  • Your realtor will know exactly what type of property you should be looking at so that can save you both time and also narrow down your home search.
  • Being pre-approved can give you an edge over other buyers as you may be able to close quicker and that might be important to the seller.
  • There aren’t going to be any surprises as you will already know how much you require for a down payment, closing costs and how much your monthly mortgage payments are going to be.
  • A pre-approval also gives you the benefit of securing your interest rate for up to four months. This is a great benefit especially if interest rates are predicted to increase.

Here’s another tip – you don’t have to wait for an appointment at your bank to obtain a mortgage pre-approval. The first request I often receive is for a meeting and I am always happy to accommodate my clients, but an in-person meeting is not required for a mortgage pre-approval.

Most are happy to find out that we can complete the process via a secure online client portal, telephone and email including collecting the required documents.

This is generally more convenient for my clients and a great time-saver which can result in the pre-approval being completed in one day most times. It’s a simpler process than most think.

I can complete your pre-approval most likely before you even get to an appointment with your bank.

Once you have a pre-approval in hand you can then start your home hunting with confidence.

Mortgages are complicated these days and the last round of new mortgage qualification rules are making it more difficult for all to obtain financing so it’s better to go through the simple process of a mortgage pre-approval before moving forward with placing an offer on a new home.

It will save you time and stress.

A mortgage pre-approval is recommended not only for first time home buyers but also for current homeowners who may be considering selling and moving to a new property.

I’ve had many clients be surprised that it’s no longer as simple as it once was to obtain mortgage financing. If you are listing your property for sale please speak to a mortgage broker first.

Before you fall in love with a home you should know if it’s within the reach of your finances. The first person you should call before reaching out to your realtor is a professional mortgage broker, so please give me a call at 1-888-561-2679.



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Reverse mortgage FAQs

Reverse mortgages are quite often misunderstood and there are always lots of questions.

Here are some of the most frequently asked questions with the answers.

How does a reverse mortgage work?

A reverse mortgage is secured by the equity in your home. Unlike a traditional mortgage in which you make regular payments, no monthly payments are required.

The big advantage with a reverse mortgage is that you do not have to make any regular mortgage payments for as long as you or your spouse lives in your home.

Who is it for?

A reverse mortgage is designed exclusively for homeowners age 55 and older. This age qualification applies to both you and your spouse.

How much can I get and how is it calculated?

You can receive up to 55% of the value of your home. The specific amount is based on your age and that of your spouse, the location and type of home you have, and your home’s current appraised value.

You can contact me and I can quickly give you an estimate of how much you may be approved for.

How do I receive the money?

You can choose how you want to receive the money. A reverse mortgage gives you the option of receiving all the money you’re eligible for in one lump sum advance, or you can take some now and more later, or you can receive planned advances over a set period of time.

Will the homeowner owe more than the house is worth?

The homeowner keeps all the equity remaining in the home.

In my many years of experience, more than 99% of homeowners have money left over when their mortgage is repaid.

The equity remaining depends on the amount borrowed, the value of the home, and the amount of time that’s passed since the reverse mortgage was taken out.

Will the bank own the home?

No. The homeowner retains title and maintains ownership of the home. It’s required for the homeowner to live in the home, pay taxes on time, have property insurance, and maintain the property in good condition.

What if the homeowner has an existing mortgage?

Many of our clients use a reverse mortgage to pay off their existing mortgage and debts.

Should reverse mortgages only be considered as a last resort?

No. Many financial professionals recommend a reverse mortgage to supplement monthly income instead of selling and downsizing, or taking out a conventional mortgage or a line of credit.

What fees are associated with a reverse mortgage?

There are one-time fees to arrange a reverse mortgage such as an appraisal fee, fee for independent legal advice as well as a fee for administration, title insurance, and registration.

With the exception of the appraisal fee, these fees are paid for with the funding dollars.

What if the homeowner can’t afford payments?

There are no monthly payments required as long as the homeowner is living in the home.

If you are interested in more information about a reverse mortgage, please give me a call if you have any questions at 1-888-561-2679 or email [email protected]



Income tax owing?

Unlike last year, it appears that the CRA will not be extending filing and payment dates due to the pandemic.

For people who are self-employed, the filing date hasn’t changed and taxes must be filed by June 15.

Any payments for the current tax year are due by April 30, which applies to balances and instalments under Part 1 of the Income Tax Act.

For everyone else, the payment date and filing date is April 30.

When you are self-employed and do not have tax deductions coming off your paycheques and haven’t made other provisions to cover your tax debt at the end of the year, you could have a problem.

Tax debt is serious and should be dealt with immediately.

The Canada Revenue Agency has far reaching powers when you owe money to them. If you owe them, they will find a way to collect.

  • They charge penalties and interest on your overdue taxes.
  • They can withhold payment of your Child Tax Credit and GST rebate.
  • They can take money from your bank account or garnishee your wages.

If you own real estate, the CRA can register a lien against your property if what you owe to them has been outstanding for an extended period of time. This is done to guarantee that you pay your outstanding debt.

When a lien is registered against your property it can prohibit you from refinancing or selling your property until the outstanding debt is paid in full.

An important issue to consider is that if you are self-employed and your income tax is not current, you will not be able to secure mortgage financing to purchase a home, buy a vacation property, transfer your mortgage or access equity in your property.

Even our alternative and private lenders will not advance a mortgage unless any CRA tax arrears are paid in full.

Canadian banks and credit unions will not provide an unsecured loan for the payment of income tax debt and they generally cannot refinance an existing mortgage to cover the debt either.

The CRA will generally not accept any arrangement other than a full payment and this is due and payable at the time of your assessment or reassessment.

They cannot set a precedent that would allow them to accept less from everyone else. They have one of the highest rates of collection activity in Canada as our taxes fund public goods and services.

So what do you do if you can’t pay them in full?

Contact them immediately. You may be able to negotiate a payment schedule if you can’t pay the full amount, but they generally will not let it be outstanding for over a few months. Know that they will continue to charge the interest and penalties on the past due amount.

This is important to note — Filing for bankruptcy, or filing a consumer proposal, does not discharge a lien against your property.

If you go bankrupt on your CRA debt, the lien remains and — even worse — accrues interest over time. Even after your discharge from bankruptcy, the lien remains in force, until you eventually sell your home.

If you are a homeowner then having an experienced mortgage broker working for you can save you both time and money when seeking a solution to your CRA problem.

If you simply can’t pay the full amount of your back taxes, consider refinancing your mortgage and using the equity in your home, a consolidation loan is possible which can include tax arrears and other debts.

Mortgage brokers have access to lenders that will allow a refinance of your existing mortgage or second mortgage options to pay off outstanding CRA debt.

If you are a homeowner and are having issues paying off what is owed to the CRA this year, please give me a call to discuss at 1-888-561-2679 or email [email protected]





It’s a sellers’ market

The most recent stats from the Association of Interior Realtors confirm that there is low inventory available to choose from for those who are hoping to buy a home.

This will create more competition for the available properties and potentially multiple offer situations with homes selling for higher than the asking price.

If you are in the market for a home right now or are considering a purchase this spring, here is my tip to increase the odds of you being the successful bidder in a possible multiple offer situation. Take these steps and you might avoid some of the craziness that could happen this spring market.

This is my best tip and easiest tip.

  • Get pre-approved for your mortgage financing. Not pre-qualified but a full pre-approval.

Before looking for a home or placing an offer, work with your mortgage broker to complete a full mortgage pre-approval. This will include the collecting of all supporting documentation that a lender will require to provide a final approval for your financing.

I will advise you of your purchasing budget, review any potential challenges and ensure you are set to go other than finding a suitable property.

We can also review the types of properties you are interested in and advise whether there might be any potential financing challenges because of property issues.

If you do all the work upfront it could prevent your offer from falling apart because you were not able to secure financing for your purchase or possibly losing the property by needing to request an extension to finalize your financing which the seller may not be prepared to offer because there are backup offers on the property.

Being a pre-approved buyer could place you in a more favourable position in a multiple offer situation.

I am seeing more unconditional offers meaning the offer does not include a condition for financing.

I have to say this first:

  • Do not be tempted to place a subject-free offer.

Subject to satisfactory financing is a key clause that needs to be included in every offer. You could be the most well qualified purchaser in history. Stellar credit, great income and job stability with a significant down payment, but in the end a lender could still decline your request for financing.

It is impossible for any mortgage broker to say absolutely that no condition for financing is required, as there are factors regarding the property which may arise after the offer is made that can impact financing.

These can be location, appraisal value, the overall condition of the property etc. Some banks will not even allow unconditional offers at branch level.

My best advice to you would be to never place a subject-free offer regardless of what others are recommending and to think long and hard about it unless you have the cash in the bank to cover your purchase in the event that you can’t secure satisfactory financing.

But the reality right now is that to secure a property in this market you may need to make a subject free offer. Please understand that’s a decision between you and your realtor.

If you feel confident with their direction that the value of the property will be supported, you always have the option to remove conditions. As a mortgage broker, my licensing prevents me from advising you to do so.

In these situations, I have had clients send me the property listing prior to going in with any offers and I can let you know if I see any concerns up front.

You can make any decision you want regarding an unconditional offer. My job is to ensure that you understand the potential risks and I will always provide my recommendations and I would encourage you to have a detailed conversation with your mortgage broker well in advance of placing a subject-free offer.

There are some strategies to minimize your risk, but an individual conversation would be required. To minimize risk it’s prudent to have a mortgage professional guide you with your financing right now.

In a seller’s market you need to be prepared to be successful so please give me a call to review your options at 1-888-561-2679 or email [email protected]



More Mortgage Matters articles

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About the Author

April Dunn is the owner and a Mortgage Broker with The Red Door Mortgage Group – Mortgage Architects. She has been assisting clients to purchase, refinance or renew their mortgages for over 20 years.

April has experience as a Credit Union manager, a Residential Mortgage Manager with a large financial institution and as a licensed Mortgage Broker. By specializing in Strategic Mortgage Planning she has the tools available to build a customized mortgage plan, with the features and options that meet your needs.

April provides a full range of residential and commercial mortgage financing options for clients all over the province of British Columbia and across Canada through the Mortgage Architects network.

Contact e-mail address: [email protected] or by phone at: 888-561-2679.

Website:  www.reddoormortgage.com



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The views expressed are strictly those of the author and not necessarily those of Castanet. Castanet does not warrant the contents.

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