Here are some short answers to some of the most common questions that come up about the mortgage process. Should I have missed any question you may have, please don’t hesitate to ask me directly.
Q. I’ve been at my bank for years, why shouldn’t I use them for my mortgage too?
A. While your bank may have been great for your chequing account and unsecured credit needs, at the end of the day they are a business. Every percentage point they overcharge you is pure profit to them, so you need an unbiased option. I will know whether or not your bank has the policies and rates that favour your particular application and will be able to better place your mortgage if they don’t. I will leverage my large mortgage volume to get the best rates for you, the client.
Q. The basement suite will pay a large part of my mortgage, but my bank still won’t grant me a large enough mortgage?
A. The way each lender treats property rental income vary greatly. I have lenders who will take a real world look at the income from a rental suite, and deduct a large portion from the estimated mortgage payment. This goes much farther than the Chartered Banks, who will usually only add a percentage of the rent to the gross income. As a broker I have access to National and Local lenders and the differences in their rental policy can make or break your application. Also, on purchases these lenders will allow an appraiser to estimate the suite’s rent for this purpose.
Q. Do I have to pay you upfront for your services?
A. No, in fact on all qualifying deals with an A Lender (best rates) I will never charge a fee. On B deals (difficult due to credit or income issues) I may charge a small fee, and I will discuss this with you well ahead of applying to the lenders. The fee will be collected on closing, so should the deal not go through the fee will not be charged.
Q. What is subject removal and what does it mean?
A. Subject Removal is contract clause which sets a date, usually a couple weeks after a purchase contract is signed. It contains subjects (conditions) that protect you as the purchaser and allows you to pull out of the contract at that date should you wish. Common subjects are: subject to financing, subject to property inspection or subject to the review of strata documentation. You will have this subject removal period to look more deeply into the transaction and I as your broker will have this subject period to arrange a mortgage approval that the lender can no longer back out of. Since time is of the essence, my services are essential to get that approval that is guaranteed to be there on the closing day. Even after this date I will continue monitor the rates in the market, and make sure you lender honors all rate drops.
Q. Can I make a subject free offer to purchase, since I am already pre approved by my bank?
A. No. I have seen many clients put way to much importance in their bank’s pre approval. Basically a bank pre approval only looks at your credit and does not verify your income or even know what the property will be. Because the bank could pass on the property, or have issues documentation and approving your income you cannot put much weight in a pre approval. Once you have a contract in place, you can let me go to work for a Firm Mortgage Approval, one where the lender has signed off on all the important conditions so you can proceed to remove subjects.
Q. I have poor credit, can I still qualify for a mortgage?
A. Absolutely, while your credit may disqualify you from the very best rates, I still have a large variety of options for you. We can discuss your situation, and decide whether it’s better to hold off purchasing until your credit improves or there may be B lending options right now, with a timeline that should allow you to renew into an A lender at the end of the term. I have access to many B lenders, private lenders, and some hybrid B and private options as well.
Q. I have bought a pre sale condo, how do I get a mortgage as it’s not yet built?
A. I can get you a mortgage on a pre sale condo the same as I can on an existing condo. As long as the estimated completion date is within six months I can get some lenders to issue a mortgage commitment. They will need an appraisal and some additional legal documents, but it closes the same as any other transaction. If you have bought a pre sale, please contact me now, and I’ll get back in touch with you when time has come to shop for the best mortgage.
Q. I am refinancing now, but will probably need to move in a couple years. What should I do?
A. You came to me at the right time. If we can discuss your housing plans ahead of time, I can customize a mortgage strategy for you. This may include opening a secured line of credit that can be used for a deposit in the future, taking a short term mortgage and definitely sourcing only those lenders with favourable penalty calculations for you. I can customize your mortgage with the flexibility that you may need in the upcoming years instead of looking at a high penalty or shortfall of down payment funds. I can save you tens of thousands of dollars if your mortgage situation lets you sell your current home for its maximum value, and not sell due to pressure of your upcoming purchase.
Q. I am self employed and my income on paper is much lower than reality, can I still get a mortgage?
Absolutely, many A and B lenders that I deal with have both insured and conventional stated income programs for self employed individuals. Alternatively, I also have options to equity based lending solutions which will sidestep the income weakness and instead rely more on credit and property value. Mortgages for self employed people have become more and more difficult to approve over the last few years, so I invite you to rely on my experience in this area for your need. To see which options work best for you, please contact me directly.
Q. I am recently retired, and have seen CHIP reverse mortgages advertised on TV. Are these a good idea?
A. Many retired homeowners think that since they have stopped working, they will no longer qualify for a mortgage. I have access to several lenders who offer lines of credits and mortgages that qualify on property equity and client credit and not necessarily income. The rates and fees for a CHIP reverse mortgage are quite high. So instead, we can set up a lower rate line of credit to supplement income while also making the interest only payments from the drawn amounts. This will lead to significant interest savings, and will preserve your equity much longer.