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The-Mortgage-Gal

When applying for a mortgage be prepared

Mortgage paperwork

“Why do they need that? It wasn’t like this the last time I bought a house”.

One of the common frustrations shared by mortgage applicants is the amount of paperwork required to get a mortgage.

With interest rates higher now I’m finding lenders are even more particular about what they require to approve mortgage applications. While it may seem like a tremendous amount of documentation is required, we need to step back and think about the fact we are asking a lender for hundreds of thousands of dollars.

Would you lend this amount of money to someone you barely know?

Lenders don’t ask for additional paperwork to make your life difficult. They are doing their due diligence to ensure you will be able to repay your mortgage. Under Canada’s anti-money laundering legislation and anti-terrorist financing laws, potential lenders are required to document large or suspicious deposits.

How can you make this a little more straightforward on your end? If you are getting ready to buy a home, make sure your paperwork is organized.

Process-wise, I send my clients a list up front of the documentation they will most likely need for their mortgage approval. It may seem like overkill in some cases but by being organized upfront, I am often able to have an approval within a few days or sometimes, even the same day.

Regardless of how prepared you are upfront, lenders will sometimes ask for additional information, so don’t be surprised if you are asked for even more documentation. Many lenders require verification of two years consistent employment so it is helpful to dig out T4s and Notices of Assessment from Canada Revenue Agency for the last two years.

You will need to ask your employer for a letter that outlines your salary, position and start date. You will also be asked for a current pay stub. You will need to demonstrate where your down payment is coming from. Lenders need a 90-day history, so that means you will need to provide bank statements for the last three months. It is key that the statements you provide clearly show your name and account number. D0 not scratch out the transaction list as lenders will not accept that.

If you have any large deposits during the last three months (generally over $2,000), you will also have to show a 90-day history for those funds.

If you are self-employed, you will likely require additional information. Depending on the mortgage product you are using, expect to be asked for your Notices of Assessment and complete T1 Generals for the previous two years. If you are incorporated, you will likely be asked for confirmation of that.

A mortgage broker recently used an analogy with one of his clients. The client was a tradesperson. The broker explained that, if the client didn’t have all of the materials and supplies needed he would not be able to complete his construction project. For a mortgage broker, your paperwork is the equivalent of those materials and supplies. Without the proper paperwork, we cannot get your mortgage approved.

If you are thinking about buying a home, or already out looking, the more prepared you are with your paperwork the smoother your approval will go. And your mortgage professional will be very grateful.

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





When renewing your mortgage, know your options

Mortgage renewals

It feels like I’m harping on the subject of mortgage renewals, and that may well be the case.

Many of my conversations with clients right now are deep dives into renewal options.

One of my calls this week really struck me. I was talking to a new client whose mortgage is currently with one of the big banks. After we worked through the initial questions I start with, he shared that the renewal department of his current bank started calling him in December. His mother just had a stroke and he was at the hospital with her.

He tried to tell the renewal officer that it was a bad time. The person calling kept pushing him to commit to locking into a five-year fixed term for his renewal and told him this ”great rate” would not be available if he didn’t commit that day. He hung up. The renewal officer called repeatedly, sometimes up to three times per day.

Once I had a better idea of my client’s situation and plans for the future, we chatted about options. As it turns out, he is on the home stretch towards having his mortgage paid out. More important is his plan to retire in three years, sell this home and move to a smaller home he already owns in the Oliver area.

He had no idea he could even choose a three-year term. He has always gone with a five-year term, thinking that was his only option.

We played with some figures to see how he could pay his mortgage off within his three-year plan. In his case, he will stay with his current lender because that makes the most sense given his timeframe to retire and sell his home.

The eye-opening takeaway for me was the high-pressure sales tactic used by the renewal officer. Not all banks nor renewal officers operate the same way, but they often don’t take the time to get to know the clients they are working with, never mind offer them options and solutions with the clients’ needs in mind.

If you have a mortgage renewal coming up over the next few months, I encourage you to reach out to a mortgage professional to look into your options. Your renewal is the best time to make changes to your mortgage, so it is important to invest some time to make sure you make the decision that is best for you, not your bank.

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



Finding the right lender to fit your mortgage needs

Matching a mortgage lender

Choosing the right lender is more important than ever.

Last week, I had a client ask why I chose a particular lender for them. It was a great question, so I spent some time breaking down for them why we went the route we did.

When I work with clients, I look at their overall picture before deciding which lender to place their mortgage with. Rate, although an important consideration, is not always the deciding factor.Each lender has slightly different guidelines, policies, and processes.

Each client’s situation is slightly different.

The type of property you are looking to purchase can rule out certain lenders. As an example, if you are looking to purchase an acreage or rural property, some lenders are more receptive to those applications.

Your time frame may direct us to one lender over another. There are a few we work with who can process an application from start to finish really quickly.

If you own one or more rental properties, the way lenders calculate the rental income and expenses can make a significant difference in the amount you qualify to borrow. Some lenders have a cap on the number of properties their clients own, whereas others do not.

If you write an offer with a closing date way down the road, some lenders will only issue an approval if you are within 90 days of the closing date, while others will issue an approval up to 120 days out.

One of the most important things I look at is how the lender calculates any prepayment penalties. Some will use what they call their “posted” rate as opposed to their best rate, which can make a huge difference in the penalty levied if you pay your mortgage out early.

Another key item I consider, particularly if we are in a declining rate environment and your closing date is a ways away, is a lenders policy on rate float downs. Some lenders will allow only one change, some will do a look-back for the lowest rate and others will only allow one change.

Finally, if clients are currently in the middle of a term with one lender and are looking to make a move, it’s best to explore options with the current lender first. I would far rather we try to save any penalty by porting their current mortgage, or if the closing dates don’t quite line up going back to the same lender for a replacement mortgage.

Just because one lender has said no does not necessarily mean you don’t have any options.

Sometimes trying to find the right product for clients feels a bit like working on a Rubik’s cube. Getting all of the pieces to line up can be a bit of a puzzle, but mortgage clients today are fortunate to have access to many different lenders and many different options.

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





Time to review your mortgage

New year, new mortgage

During the week between Christmas and New Year’s Day, I spent time reflecting on my past year and did my planning for the upcoming year.

That included a review of my financial situation, as well as a look back over the fun things I did, what I feel went well and what I would like to do differently for the coming year, as well as setting new goals for 2024.

One of the things I took a look at was my mortgage. I have stayed with my variable rate over the last year (ouch) but I did make a dent in the principal which was satisfying to see.

There are a significant number of Canadian mortgages coming up for renewal in 2024 and 2025. For my clients who I’ve chatted with, there is a bit of sticker shock with where interest rates are now.

Interestingly, when I compare the stress-test rate we used to qualify clients originally, it is not far off the interest rates available now.

Mortgage renewals are not just about getting the best rate.

I had a great conversation with a friend of mine the week before Christmas. We did a quick review of her current finances and talked about her plans for the next few years. Her mortgage comes up for renewal mid-March. Her first question was with respect to the best rate I could get for her.

I reviewed several lenders and went over the rates they were offering for a fixed-rate five-year term. Her mortgage was originally insured (default insurance with CMHC) so several of the options were very appealing.

When we dove into her finances and her plans for the next few years, we ended up looking at several other options.

In her case she is carrying significant balances on her credit line and credit card. She has been renovating her home and has more work to do. She also needs to replace her furnace and hot water tank. Her goal is to sell her home over the next few years then move somewhere very warm for her retirement.

Based on that information, we looked at other lenders that offer hybrid mortgages. Hybrid mortgages offer both an amortizing portion and a credit line.

We are going to refinance to pay off her credit line and credit card and pull some funds for the work she has left to do. More importantly, we are going to move forward with a three-year term instead of a five-year term. She wants the stability of a fixed-rate but the flexibility of a shorter term so she doesn’t have a significant penalty to pay if she sells her home shortly before the three-year term is up.

We are not moving forward with the lowest rate I could find but rather with the package that best fits her financial goals.

If your mortgage is coming up for renewal (or even if it isn’t) my recommendation is you connect with a mortgage professional to review your options rather than just signing the renewal offer that your current lender sends out.

Wishing you all a wonderful 2024.

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



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About the Author

Tracy Head helps busy families get a head start on home ownership.

With today’s increasingly complicated mortgage rules, Tracy spends time getting to know her clients and helps them to better understand the mortgage process. She supports her clients before, during, and after their mortgage is in place.

Tracy works closely with her clients, offering advice and options. With access to more than 40 different lenders. She is able to assist with residential, commercial, and reverse mortgages in order to match the needs of her clients with the right mortgage package.

Tracy works hard to find the right fit for her clients and provide support for years down the road.

Call Tracy at 250-826-5857 or reach out by email [email protected]

Visit her website at www.headstartmortgages.com

Download her app: Headstart Mortgage Architects

 

 



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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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