If there’s one thing I’ve seen in 20 years as Mortgage Broker its this:  BAD things happen to REALLY, REALLY GOOD people.  Divorce, health issues, accidents, failing parents, failure of business, pandemic….. there are a ton of reasons why someone’s credit score may have gone down the toilet.  My job is to listen, package it, and SELL IT.  No judgment – just empathy, understanding and a WAY OUT.

At least 50% of my business consist of these types of deals; where we have to use non traditional lenders for a year, maybe two,  in order to clean up credit blemishes, reduce debt load, fix up income taxes and then create an exit strategy to get these clients back into the prime market AS SOON AS POSSIBLE.

If you know someone who had equity in their home but is feeling pinched or overwhelmed and think they can’t possibly find a way out – please have them call me for a quick review.  I think I can help… and I LOVE doing it.

Have an amazing week 😊

Janette

PS: Speaking of helping – if you want to teach your kids/teenagers/young adults, or even yourself about financial literacy – PLEASE check out Enriched Academy – I can’t tell you how incredible this program is;  I know the co founders personally  (Jay Seabrook and Kevin Cohraine) and they are brilliant at what they do, making it easy and fun to learn for all ages.  It’s WORTH every penny.  Even Dragon’s Den is on board!

Today I am going to go over Document Requirements when getting a mortgage – Lenders today are SO incredibly picky about documents – it almost always takes people by surprise as to how much is required these days.  We do try to collect as much as we can at pre-approval stage, however many documents become stale dated within 30 days, so for the most part, we have to just prepare the client to have everything on their list readily available when the deal goes “LIVE” (Accepted offer)

ON A PURCHASE DEAL:

Requested from Realtor:

• Contract of Purchase
• MLS – FULL LISTING
• Property Disclosure Stmt
• All Addendums including Subject removal, and proof of Deposit Cheque

Requested from Client:

• Income verification

• • Self Employed Sole Prop – 2 year T1 Generals and Corresponding NOAs
  • Self Employed – Incorporated – same as above PLUS 1-2 year Financials
  • Salaried / Hourly – Job Letter + most recent paystub, Verbal phone call or proof of direct deposit for 3 months, some may require NOAs to confirm no taxes owing

• • Retired/Pension/Disability – 2 year T1 Generals and Corresponding NOAs, T4A Tax Slips, proof of direct deposit for 3 months AND Letter(s) from Pension or Disability confirming amount(s)

• • Use of Casual/Bonus Income or Overtime income  – will require 2 year T4s and NOAs
  • In the case of an ALTERNATIVE income or ALTERNATIVE credit, we may be asking for up to one year of bank statements.
• Down payment Verification
  • Sale of Property – Sale Contract + Mortgage Stmt; OR
  • Own resources – 90 day Bank Stmt; OR
  • Gift from immediate family member  – Gift Letter +proof of funds deposited
  • NOTE: Proof of Closing Costs = to approx. 1.5% Purchase price will also be requested and can be included in the documents above.

• Appraisal (sometimes) – Economic Rent may be requested if rental income is being used
• If other properties are owned  – RECENT Mortgage Statement/Property Tax Stmt/Tenancy Agreements, if applicable
• If Separated or Divorced, we will require a fully executed Separation agreement and any child support / spousal support is factored into the liabilities
• Child Tax Credit – Birth Certificates of any children under age of 12 ; CCB letter from the government confirming amount and some will require proof of deposit to bank account
• Void cheque
• Solicitor Info

 ON A REFINANCE OR RENEWAL/NO FEE TRANSFER:

Income verification, as above

• Property Tax Statement
• Most recent Mortgage Statement
• Appraisal (or internal valuation system)
• Use of funds (list of renovations/debts to be paid)
• If Separated or Divorced, we will require a fully executed Separation agreement and any child support / spousal support is factored into the liabilities
• Child Tax Credit – Birth Certificates of any children under age of 12
• Tenancy Agreements, if rental income is being used
• Proof of Fire Insurance
• Void cheque
• Solicitor Info

 As you can see, we definitely have our work cut out for us, that’s why those extra days on subject to financing clauses come in handy!  I am so grateful for my amazing assistant Nicole who is a “ROCH-STAR” at keeping the document flow going with our client, and ensuring timelines are always met with the lenders.

As we all know, Canada has seen a surge of international migration over the last few years so it’s a good time to review some of the details surrounding mortgages and how individuals new to Canada can qualify to be homeowners.
If you have a client who is already a Permanent Resident or has received confirmation of Permanent Resident Status, they are eligible for a typical mortgage with a 5% down payment – assuming the borrowers have good credit.
If they have limited credit, or have not yet qualified for Permanent Residency, there are still options! In fact, there are several ‘New to Canada’ mortgage programs through CMHC, Sagen™ and Canada Guaranty Mortgage Insurance. Please note, we will typically require a valid work permit that is valid up to 3 months post-purchase date.
To qualify for these New to Canada programs, the borrowers must have immigrated or relocated to Canada within the last 5 years and have had three months minimum full-time employment in Canada.
• For 90% credit, a letter of reference from a recognized financial institution OR six (6) months of bank statements from a primary account will be required.
• If they are seeking credit of 90.01% to 95% they need an international credit report (i.e: Equifax) demonstrating a strong credit profile OR two alternative sources of credit (i.e.: hydro/utilities, telephone, cable, cell phone or auto insurance) demonstrating timely payments (no arrears) for the past 12 months
As always, if they don’t fit into one box, I have other options available to consider! Depending on their residency status and credit history, there are many alternative or private lenders who may be able to fund their mortgage.
SO – if your New to Canada clients are unsure of their options or want to make sure they get the best mortgage product possible, please don’t hesitate to contact me. As a dedicated mortgage professional, I have access to dozens of lender options, which will allow me to find them the best options. I would love to set up a virtual appointment to discuss their financial history, goals and the mortgage process.

Let’s get right down to it – today I am going to chat about the Collateral Mortgage Charge. Collateral mortgages have had a bad rap when they first came out, but to the right client they do come in handy:

• if there is a good amount of equity in the property that you feel you could need access to at some point during your existing term, or
• if you would like to create various components to your mortgage (hybrid)

What are the pros of a collateral mortgage?

• In today’s uncertain market, a lot of clients are wanting to hedge their bets and diversify their risk products—i.e., hybrid (part fixed / part variable) mortgage.  A hybrid simultaneously protects against the risk rates may have to rise significantly, while offering the chance to overweight in a variable when appropriate (e.g., a 65/35 variable/fixed split) to potentially take advantage of cyclical peaks.
• The flexibility to borrow money from your home at any time, and
• The ability to avoid the legal costs associated with refinancing

What are the cons of a collateral mortgage?

The downsides include:

• The need to pay legal fees if you switch to another lender, even if your mortgage is up for renewal – IF you are put into a Collateral Mortgage without enough equity to take advantage of it’s “perks”, then this product is simply a TRAP, making it more difficult and expensive to shop the market on renewal.
• By having a larger amount registered, you may have a tough time securing financing for other things as it looks like you owe more than you do.
• If you need access to equity; but can not qualify for the increase, the ability to obtain a 2^nd mortgage with another lender is affected  – the 1^st mortgage lender must be willing to “cap” their lending amount, which in my experience has proven to be difficult with most banks, and impossible with others.

How is a collateral mortgage calculated?

If you choose to get a collateral mortgage, the lender may be able to register your mortgage for up to 125% of the value of your new home – let’s call it a “GLOBAL LIMIT”.

E.G. $800,000 home value x 125% max loan-to-value ratio = = Global limit: $1M  

When the time comes that you want to access your equity, you can now refinance / borrow up to 80% of whatever the new appraised value is – as long as it does not exceed the Global Limit – without incurring legal fees  

Which lenders offer collateral mortgages?

Most lenders offer collateral mortgages – or at least give you the option of taking one.  Anytime you see a lender who allows customers to divide their mortgage into multiple segments, such as a long term or short term, fixed rate or variable rate, and/or a line of credit, is registering as a collateral mortgage. E.g. RBC HomeLine, Scotia Step, Manulife ONE, TD Flex-line to name a few.

Like anything in life, we are always best served by dealing with an individual that is a FOCUSED EXPERT in the field in which we need information… call me anytime.

Have an amazing week!

Janette Roch, MBI

CELL: 250 588 1919

Maybe it doesn’t need to be said, but I’m going to say it anyway:  Teaming up with an EXPERIENCED Broker is EVERYTHING in this market.  You need and want a Broker who not only has access to the best rates (easy part) but it’s imperative they are experienced enough to see the big picture/long term plan.  The Broker needs to know the questions to ask upfront so unspoken “surprises” don’t pop up sending the deal spiraling sideways at the final hour (OH, you are divorced and paying $2000 in spousal support… great to know…. )  My moto:  Tell me everything, I will tell you how to package it.

I am 20 years into this amazing industry and it’s been a perfect fit for me.  What I love to do more than anything is HELP people – and sometimes that means I get to put together the tougher puzzles.  I do over 30M in Mortgages a year and my business is evenly spread between A and B deals.  I arrange a ton of private deals as well, and I am not afraid to give alternative options and provide exit strategy’s to ensure they aren’t on the forever/never plan. I will bring your Bank to the table on rate come renewal, without any fees or obligation.

Tough deals don’t scare me, deadlines don’t scare me – I have an amazing assistant Nicole, and together we are a well oiled machine. I can normally review a deal with a client and in 5-10 minutes have an answer as to whether or not it’s doable, and what rates they might be looking at.  And if I can’t find a solution, I have a whole Plan B Team willing to review it prior to issuing any declines.

So, yeah – I GOT THIS!  Send them over 😉

Have an amazing week!

Janette Roch, MBI

CELL: 250 588 1919

There are a variety of great reasons to go with a Variable Rate Mortgage, here are the ones I focus on:

1) More Borrowing Power – Today’s Stress test on a Variable Rate mortgage is still 5.25%, whereas a FIXED rate requires a stress test rate of 6.40%-6.80%. This can equate to thousands more in borrowing power! E.g. A client earning $100K takes a 5 year FIXED RATE today – they qualify for $450K Mortgage. If this same client takes a VARIABLE rate, they qualify for $510K Mortgage – that’s $60K more house!!!!

2) Historically less interest paid … see Prime Rate Chart and Historical Comparison Chart. Although Prime is moving quickly NOW, we are being told it will likely level and will likely not catch up to what the fixed rates are currently priced at. Even if it does catch up, it takes time to do so and in the meantime you are paying less interest.

3) Lower penalty should rates drop back down again – Variable rate mortgages come with a 3 month interest penalty and NEVER IRD.

4) Opportunity to float back DOWN, which it always does eventually! If we see a recession next year, which some economists are predicting, we could see rates come back down – you do NOT want to be locked down and paying large penalties in order to take advantage of it.

***Here is another spreadsheet I use often – it is designed to run hypothetical scenarios of multiple prime changes throughout the 60 months based on the client’s assumptions.

***Both amortization schedules are then compared to analyze the findings and make a recommendation into a dynamic sentence that changes based on the data:

Call me if you would like me to run any numbers thru this calculator!

This program is designed for PURPOSE BUILT RENTAL PROJECTS with 5 OR MORE UNITS. The Project must be focused on either Affordability, Climate Compatibility or Accessibility – or a sprinkling of all three. It can be applied to new builds as well as existing property purchases / refinances.

This product works on a Scoring System – the more you bring to the table, the more CMHC will offer in the way of lending incentives.

New Build Example:
–Developer agrees that 10% of the units will be priced at 30% of the Median renter income for 10 years (currently $50K as per Stats Can) = $1250/month in rent = 50 POINTS
–Developer agrees to building 20% above code (Energy Efficiency and GHGs Reductions over 2017 NECB / 2015 NBC) = 30 POINTS
–Developer agrees that 15% of units will be Accessible = 20 POINTS

Based on the above agreement, 100 POINTS can now be “spent” and the Project will receive ALL of the following incentives:
1) Reduced Down payment – up to 95% Financing available
2) Lower Premiums – only 1.5% Premium charged
3) Longer Amortizations – up to 50 year amortization
4) Recourse or Limited Recourse – Limited Recourse

What works in YOUR market? When you think of this program, think of the following types of properties:
• Affordable Housing
• Market Housing with lower affordability component (e.g. student or retirement)
• Supportive Housing
• Community Housing
• Homeless Shelter
• Emergency Shelter
• Transitional Shelter

CMHC Website for MLI Select Project Funding HERE
CMHC MLI Select FACT SHEET HERE
CMHC POWERPOINT Presentation available on my Dropbox HERE

What I love about this program is that it allows you to borrow the cost of renovations (up to a certain percentage) and add it to the home price, rolling it all into one easy-to-manage mortgage payment. Once you take possession of your new home, you can start the upgrades immediately. This type of mortgage comes with a few extra requirements before signing, and some strict rules to follow, but it runs very effectively if the client is properly guided thru the steps and does not deviate!
What does this mortgage allow?
• Competitive interest rates – The mortgage interest rate for which you qualify is not affected by this program.
• The cost of renovations are added to the home purchase price, with mortgages available up to 95% Loan-to-Value (LTV) or refinances up to 80% LTV
• Amortization for up to 30 years, depending on the Loan to Value and the Lender
What properties are eligible?
• Maximum four units, with at least one unit occupied as the principal residence (3 and 4 unit properties require min 10% down)
• New construction or existing properties
How it works (by example):
• Clients have an accepted offer of $800K – Min Down payment requirement would have been $55K
• Improvements that will be completed – upfront quotes required (see sample form) = $50K
• Improved Value of Home will be $850K. Min Down payment required is therefore INCREASED from $55K to $60K as it is based on the IMPROVED VALUE.
• Mortgage approval is based on improved value plus Insurance Fees e.g.: $850K less $60K down payment= $790K + $31,600 insurance = Must qualify for Mortgage of $821,600
• Clients take possession of the house, Seller receives their proceeds ($800K) and the additional $50K is held at the lawyers until the work is complete.
• Funds are released as soon as buyer can show the work they intended to do is done (inspection).
Important details to note:
• It is absolutely necessary to have firm price quotes prior to finalizing your mortgage— so if you only have one viewing of the property before funding …bring your camera and your contractor!
• You will not receive any funds for the renovations until after the work is completed and reviewed by the inspector/appraiser/bank rep. The improvements must be done on your OWN dime (or on credit that will be paid off with the renovation funds)
• You CAN NOT DEVIATE from the upfront quotes you provided the lender – don’t decide to do windows when you said doors – it won’t be covered.
• Tools or Sweat Equity will not be included (can’t pay yourself).
• Many Lenders require the work done by a licenced contractor
• The work you are doing must INCREASE the value of the home by the same amount in order to receive all renovation funds at the end of the day. Lending value is based on the lesser of the improved property value or the sum of the purchase price plus direct costs of the improvements.
• Single or multiple advance options (excluding initial purchase advance) are permitted and may be managed by Lenders. Improvements must be greater than $40,000 or 20% of the purchase price to be eligible for draws.

Assuming your client wants to buy a house PRIOR to selling their current home, this is how we would look at the deal:

Option 1: If there is down payment available from another source, we can convert the existing home into a rental and try to debt service BOTH houses, forgoing the need to sell prior to possession. If it does happen to sell, I just convert the deal to being sold.

Option 2: As long as there is an accepted offer without conditions on their existing house, MOST (but not all) lenders will Bridge the dates from 30-90 days (depending on the lender). Cost is Prime +4 with fees running from $300 – $2500. Broker Advantage – we know who does, and who doesn’t, offer bridge financing and where to save money.

Option 3: House is listed but no accepted offer has been obtained: Bridge Financing is therefore NOT available, we will instead look for enough equity in the current home to CARRY both properties. Have them call me as there is a formula we have to follow to determine if this scenario will work.

Unlike a standard mortgage, a collateral charge is re-advanceable. That means the lender can lend you more money after closing without you needing to refinance and pay a lawyer. You can keep re-using this charge, and a new charge will only be required if you want to borrow more than the amount that was originally registered. Most chartered banks offer both types of mortgages. A couple (TD Bank and Tangerine) only register their mortgages as collateral charges.
If you have a Home Equity Line of Credit, you have a collateral charge mortgage. A collateral charge can be used to secure multiple loans with your lender. This means credit cards, car loans, overdraft protection and personal lines of credit could also be included.
Pros and Cons of a Collateral Mortgage:

The PROS:
1) If you wish to borrow more money during the term of your mortgage, you can tap into your home equity without the expense of a mortgage refinance. You can save legal fees. (This is assuming of course, your personal credit and income are sufficient to qualify for more money.)
2) If you have a mortgage and a Home Equity Line of Credit (HELOC), it may be structured such that every time you make a mortgage payment, the amount you pay towards your principal balance is added to your HELOC limit. Large available credit, used wisely, is usually a good thing.
3) Collateral charges are often best suited to strong borrowers with lots of equity. They might readily access contingency funds at no cost down the road. This could be by increasing their mortgage loan amount or adding a home equity line of credit to the mix.
The CONS:
1) Some would argue you could be offered less competitive interest rates from your current lender at renewal than you will be from a new lender, as it can b more difficult to transfer the mortgage out as there are legal fees involved. This is slowly changing as the lenders are trying to fight for this business.
2) A collateral charge mortgage is not only a charge on your home, but can include other credit you have with that same lender. These lenders have a “right of offset,” meaning they can collect from the equity in your home on any financial products you have (or co-signed for) that are now in default.