Reasons your mortgage application may be turned down

Bank declined mortgages

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Applying for a mortgage can be extremely stressful and, if you aren’t familiar with the requirements to qualify for a mortgage, even more so.

It can be very disheartening if your bank denies your mortgage request and there can be consequences if you placed an offer on a home without including a condition for financing assuming you would qualify for a mortgage because you could previously. These days it’s not that simple.

Even if your bank said no however, there still may be options to get you into a home.

Here are some of the common reasons why you may have been declined.

• Even though today’s mortgage stress test rate is 5.25%, the contract rate on the mortgage may be 5.69% and you must qualify to make higher payments at the contract rate plus 2%, So that 7.69%. All federally regulated lenders (banks, etc.) have this requirement, as do most credit unions and other prime mortgage lenders.

• Poor credit history. Most mortgage lenders want to see a good credit score of 680 or over in order to qualify for best rates.

• Your income is too low to qualify for the amount of mortgage that you are requesting. You must have sufficient declared income to not only afford to pay your mortgage payment, but also property taxes, heating costs and all the other monthly expenses such food, transportation, etc.

• Your down payment is too low. For properties under $500,000, the required down payment is 5% of the purchase price. For properties over $1 million, the required down payment is 20% of the purchase price. The minimum down payment required for homes between $500,000 and $1 million is 5% of the first $500,000 and 10% of the value over $500,000.

• Employment history – Salaried employees with guaranteed income will have a much better chance of being approved than someone who is self-employed, particularly if the business has been recently established. If you aren’t currently working, an approval will be close to impossible.

• Issues with the property – Lenders are not only approving you but also the property. If issues such as structural damage, mold, etc. exist the repairs could be costly. This type of property will not meet the requirements of many lenders.

• The property value appraised too low and does not support your mortgage request. This could require a higher down payment to complete a purchase or in the case of a mortgage refinance there may not be sufficient equity in the property as the maximum amount available is 80% of the appraised value.

As a mortgage broker, I may be able to guide you so you are in a position to have a stronger mortgage application.

We can look at credit repair to improve your credit score or a plan to get some debts paid off, assess the type of property you are considering and establish a realistic budget so you can house hunt with confidence and come up with a savings plan to increase your down payment. There are also alternate lender options available for those who are newly self-employed or who may not fit within the lending guidelines of a traditional lender such as a bank or credit union.

A mortgage pre-approval in advance of house hunting can also prevent disappointment.

Please give me a call at 1-800-561-2679 to discuss possible options if your mortgage request has been declined and we can sort out a plan. You can also book a time for a call here on my calendar.

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.

Get a mortgage rate hold to avail of today's lower rate if rates increase

Lower mortgage rates

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It’s no secret the mortgage market is constantly fluctuating—rates go up and down and make it difficult to predict the best time to buy a house or secure the rate for your mortgage renewal or refinancing.

These past few weeks we have seen some lenders cut their fixed-term mortgage rates as the bond market declines, but they were not the big banks. Hopefully we will see some movement from them by the spring should rates keep declining.

The bond market has a direct effect on fixed-term mortgage rates in Canada along with a few other factors. When bond yields rise, it means investors are demanding a higher return on their investments, which in turn pushes up the cost of funds for lenders. As a result, lenders must increase their mortgage rates to cover the increased cost of borrowing. Similarly, when bond yields fall, the cost of funds for lenders declines, which allows them to offer lower mortgage rates to borrowers.

With the current market conditions, it is especially important to consider securing a mortgage rate hold when rates are declining, which they are doing right now.

A mortgage rate hold is essentially a guarantee from a lender that it will not raise the rate on your mortgage, regardless of what happens to interest rates in the market. That means even if interest rates go up, you can still get your mortgage at the same rate you were promised when you first applied. For those looking to buy a home, getting a mortgage rate hold during times of declining rates can be an extremely valuable tool. It can give you peace of mind, knowing you won’t be affected by any changes in the market with rising rates.

As mentioned in a previous column, many banks are contacting their mortgage clients well in advance of the renewal date to offer early renewals. No doubt you will be facing a much higher interest regardless, so an early renewal offer might be tempting to consider. You may no doubt have concerns that interest rates may be higher if you wait until your renewal date. However, renewing your mortgage early can actually be a costly decision.

Interest rates are constantly fluctuating, and if you renew your mortgage early and rates go down, you could end up paying more for your mortgage in the long run and lose the current lower rate you have on your mortgage immediately as the lender will not hold the new rate until your renewal date. As a mortgage broker, I can hold the new lower rate until your mortgage renewal date within a certain window.

If you are purchasing a new home or your mortgage is due for renewal between now and March next year, you should take advantage of today’s lower mortgage rates by securing a rate hold along with a mortgage “pre-approval.”

No one knows how long these lower rates will be available as, at some point, the bond market will settle back to its long-term average and rates will start to increase again. Right now there is a window of opportunity.

As a mortgage broker I can hold rates for up to 120 days and if rates go lower, we can adjust accordingly to ensure you receive the lowest rate available for your situation.

Please reach out if you would like to discuss your current mortgage renewal or if you are considering purchasing a home next year and need a pre-approval. You can also book a time for a chat here on my calendar.

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.

Put your home equity to use

Home equity opportunities

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Your home value may have increased significantly since you purchased your home, particularly if you bought prior to 2020.

Homes are worth more and therefore net worth has increased, meaning you now have more home equity available to possibly access.

What is home equity? It is the difference between the value of your home and how much you owe on the mortgage. If qualified, you can borrow up to 80% of your home’s appraised lending value.

What can you use home equity for? You can use your home equity really for whatever purpose you want but here are a few of the most common requests that I am seeing lately.

Investing in real estate

Many are now recognizing the opportunities that are available to invest in real estate to build wealth. Some are first time rental property buyers who are looking to build an investment property portfolio over the years but many are closer to retirement and are purchasing a property now to rent out while looking towards that becoming their primary residence down the road. Real estate can be a great investment to add to your portfolio for long term investment and to create income. Utilizing the existing equity in your primary residence could be the way to get started building your portfolio.

Home renovations

With the current lack of inventory many are now looking to renovate and upgrade their current homes rather than moving. Some are adding secondary suites in their homes as a mortgage helper. This can be accomplished by either setting up a home equity line of credit or a totally new mortgage. A full financial review with a mortgage broker is the first step to determine which option is best.

Buying a vacation property

Many dream of a family vacation property. By accessing your home equity you can obtain funds for the down payment on a vacation property.

Consolidating high interest debt

With rising interest rates and the high cost of living, now might be a great time to take a look at eliminating high interest credit card debt, unsecured lines of credit or auto loans. There are many benefits to a refinance for debt consolidation including the following:

• A much lower monthly interest rate for all of your debts

• Lower monthly payments by either securing a lower mortgage rate or by extending the mortgage term

• The comfort and convenience of making only one monthly payment instead of making multiple payments on your credit cards and other loans

• Improving your credit score by reducing the amount you owe and now being able to make all of your payments on time

Not sure if accessing home equity is right for you? The numbers don’t lie. Let’s run them together and then you’ll have an honest, unbiased recommendation and a plan of action.

Give me a call at 1-888-561-2679 for a pressure-free consultation to run the numbers or you can book an appointment on my calendar at calendly.com/april-dunn

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.

Reasons to consider a reverse mortgage

10 reverse mortgage signs

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A reverse mortgage can be a valuable financial tool for seniors seeking to tap into the equity of their homes without selling their homes.

This unique financial solution can provide a source of income, enabling Canadian homeowners who are 55 years of age and older to enjoy their retirement years more comfortably.

Here are 10 signs someone might be a potential reverse mortgage client:

1. Declined at their bank due to credit or income issues

You may have been declined by a traditional bank due to poor credit or a lack of regular income to support a financing request.

2. Facing tax consequences on investments

Seniors who need to cash out investments and are concerned about the tax implications might benefit from a reverse mortgage, which allows them to access funds without being charged any income tax.

3. Payment struggles, late payments or missed payments

Individuals who face challenges with making timely mortgage payments or have missed other payments may find relief through a reverse mortgage, as it doesn't require monthly payments and the funds can be used to pay off debts.

4. Early inheritance assistance for family

Some seniors wish to provide financial support to their family or heirs before they pass away. A reverse mortgage can help them access their home equity for that purpose.

5. Reduced income due to spousal loss

When a spouse passes away, the surviving partner's income may significantly decrease. A reverse mortgage can help bridge this income gap and maintain financial stability while allowing them to stay in the matrimonial home.

6. “Grey divorce” with one spouse buying out the other

Seniors experiencing a "grey divorce,” where one spouse wants to buy out the other's share of the home, can use a reverse mortgage to facilitate this financial transition which will allow them to stay in their home rather than having to sell.

7. Real estate investment or bridge financing

Individuals seeking to invest in real estate or bridge a financial gap might consider a reverse mortgage as a means to access their home's equity without selling it.

8. Children assisting elderly parents with home equity

Seniors with children who are providing financial assistance can use a reverse mortgage as an alternative to being supported by their kids, allowing them to maintain financial independence.

9. Home care or long-term care costs

Seniors in need of funds for home care or long-term care expenses for a spouse may be able to turn to a reverse mortgage to cover these costs without depleting their savings.

10. Need to increase monthly cash flow

Many seniors struggle to meet their daily expenses. A reverse mortgage can be an excellent solution for improving monthly cash flow and ensuring a more comfortable retirement.

As a mortgage broker, I can help you make an informed financial decision about a reverse mortgage. It's crucial to complete a thorough assessment and obtain personalized advice to ensure a reverse mortgage is the right choice for your individual unique circumstances.

If you would like to discuss whether a reverse mortgage might be a viable option for you, please email me at [email protected] or you can set a time for a chat here on my calendar at www.calendly.com/april-dunn

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.