Strong Mortgage

A mortgage designed to support and grow your investment.

In the industry, a mortgage is commonly referred to as a puzzle.  A number of pieces have to fit in place for financing to come together.  With the Strong Mortgage Promise, the mortgage is only one element to an even bigger puzzle, your Investment Plan.

The Strong Mortgage Promise provides thorough mortgage advice, resources and planning tools for a confident mortgage decision.  It considers short and long-term financial goals, your strategic team and annual reviews to improve investment returns.

 

Investment Plan: Putting the Pieces together


Mortgage Assessment

Important information is gathered to assess the borrowers purchasing power, financial objectives and lender fit.

  • Mortgage Application: provides contact details, employment/income history, list of assets and liabilities.
  • Client Snapshot: further inquiry on applicant(s) current financial position and real estate investment plans.
  • Client Consultation: discuss the results, objectives and set a mortgage plan into action.

Team

Building your real estate strategic team will streamline and simplify the purchase process.  These key partners work for you to protect your investment:

Realtor

One of the most important investments you can make in real estate.  An all-star realtor can be the difference of investing well and building equity or investing poorly and loosing all your hard earned money.

Taking the time to find the right Realtor is important.  Finding someone trustworthy and knowledgeable of the local area will make a difference on your bottom line.  For example, a downtown Vancouver Realtor will know the ins and outs, pros and cons, of all the various condo buildings and developers.  A Realtor from Maple Ridge, although familiar with their housing market, may not be as educated on downtown Vancouver.  Unfamiliarity could come with some future surprising assessments, not only costing money, but a great deal of stress.

For a list of vetted Realtors I have personally interviewed, visit my Realtor Profile blog.  I recommend connecting with 2-4 Realtors to get a feel for their style of business before finalizing your decision.

Mortgage Broker

Mortgage brokers have access and knowledge of the mortgage market. With access to over 50 lenders, mortgage brokers will be able to negotiate and find great rates as well as have access to lender specials that may not be available on the open market.

They are able to advise on the best lenders for each client based on individual circumstances.  In particular, self-employed, investors, adverse credit and clients with unique property purchases would find it advantageous to use a mortgage broker.

Solicitor (Lawyer or Notary)

A lawyer and notary provide the same services in a purchase or sale transaction:

  • Conduct a title search to confirm property is purchased from the rightful owner and is free of all charges and liens
  • Obtain tax information
  • Prepare the Statement of Adjustments detailing how much money needs to be transferred between the Buyer and the Seller
  • Prepare closing documents including the title transfer, mortgage, property transfer tax forms and forward them to the seller’s lawyer/notary for execution

Difference between a Lawyer and Notary Public

Lawyer

  • Can represent you in disputes and in court
  • Can provide legal advice
  • Carry professional liability insurance
  • Education: Law Degree and Law Society of BC admission program

Notary

  • Cannot represent you in disputes or in court
  • Focus only on non-contentious issues such as real estate, estate planning, and other documentation.  They only have the legal power to register and sign off on documents.
  • Carry professional liability insurance
  • Education: Undergraduate Degree and BC Notaries Course through University of British Columbia

Insurance Broker/Financial Planner

Purchasing a home will likely impact your financial position, and thus the coverage you need to protect you and your loved ones.

You will be presented with a few options for insurance coverage during the mortgage process:

1. Xeva Mortgage Insurance provider, Manulife Insurance

  • Mortgage Protection Plan includes two vital insurance products for mortgage protection: Life Insurance and Total Disability Insurance.
  • Mortgage is protected not just in the event of death, but also if a serious accident or illness leaves you unable to work.
  • Insurance pays off your mortgage balance in full if the insured borrower passes away.
  • Insurance is portable to any future mortgage.
  • Maximum coverage $1 Million.
  • No waiting period. Upon a completed claim, insurer takes over mortgage payments.
  • 60 ‘free look’ to review your coverage.

2. Lender Insurance 

  • Each lender will offer their own branded mortgage insurance option.
  • Many will note the cost on the mortgage commitment while others, such as the banks and credit unions, will present these options to you at your branch signing.
  • Terms, costs and maximum coverage will vary between lenders.
  • Insurance is not portable if the mortgage were to switch/transfer to a new lender.

3. Insurance Broker/Financial Planner.

Through an Insurance Broker, much like working with a Mortgage Broker, you would have access to a choice of plans from a number of different insurance companies. These plans could provide lump sum benefits that would not be tied specifically to paying off your mortgage.

Investigating insurance options early on is important. Many insurance plans can take 1-2 months to complete and for coverage to be initiated. In addition, by reviewing your financial picture, you may also find other investment opportunities to help you prepare for retirement or post secondary education savings.

Inspector

Inspectors preform detailed evaluations of all the building’s interior and exterior components and systems. They identify areas of deficiencies that represent a substantial investment or a danger to the dwelling’s occupants. They will note the probability of problems based on the current design and point out issues that will be difficult to maintain on an ongoing basis. Inspectors are trained to look for secondary signs indicating any issues, even if no visible signs are present.

Home Inspector Standards of Practice & Code of Ethics

 

Home Fire Insurance Contact

As part of your mortgage conditions, you will be required to have fire insurance arranged by the time your property closes. XEVA has a special partnership program with Schill Insurance should you wish to get a no obligation quote once a mortgage has been approved.  Other referrals are also available on the Real Estate Team Referrals list.

REAL ESTATE TEAM REFERRALS


Mortgage

The important information collected to determine your mortgage approval:

Credit Worthiness of the Borrower

One of the main concerns for lenders is the credit worthiness of the borrower(s).  The Equifax and TransUnion credit score gives lenders an insight as to how the borrower manages and pays off debt.  This is especially important when it comes to a mortgage, one of the largest debts one can obtain.

On one end, too much debt and poor repayment history reflects poorly on the borrower, however, on the opposite end, having little or no credit history produces the same or worse effect.  If the lender is not confident in the borrowers ability to pay the debt in full each month, they will decline an application.

 

 

 

Income Approval

Verifying your income with the lender is important to finalizing how much you can afford, but as you can see by this list, it’s not the only thing that is factored in the equation.  Lenders and mortgage insurers base their maximum lending/insuring on two debt ratios.

Gross Debt Service Ratio (GDS): The percentage of the borrower’s income that is needed to pay all required monthly housing costs (mortgage payments, property taxes, heat and 50% of condo fees).

Total Debt Service Ratio (TDS): The percentage of the borrower’s income that is needed to cover housing costs (GDS) plus any other monthly obligations that an individual has, such as credit card payments and car payments.

The standard max lending ratios are 32-35% GDS/40% TDS


For credit scores over 680, lenders and insurers will consider up to 39% GDS/44% TDS

In order to confirm your income and your most accurate mortgage affordability range, verification documents are best sent in with your mortgage application.


REQUIRED DOCUMENTATION
Salaried/Hourly Employed

Most recent T4

If commissioned, part-time, overtime pay, bonused or additional benefits such as car allowance, lenders will require most recent 2-years T4’s

Two Most recent Pay Stubs

Most recent Notice of Assessment (NOA)

Need to show no taxes owing. If taxes owed, must provide proof of outstanding taxes paid.

Letter of Employment

Written on letterhead with contact details of Owner, Manager or HR representative. Must include title, tenure, salary, any overtime/bonus. Lender will call for verbal confirmation of employment.

REQUIRED DOCUMENTATION
Business Owner

2 most recent T1 Generals
including statement of business activities 

2 Most recent Notice of Assessments 
No taxes owing 

Need to show no taxes owing. If taxes owed, must provide proof of outstanding taxes paid.

Business License, if applicable

Articles of Incorporation, if applicable

NOTE:
Depending on the application results, it may be recommended to have some debts paid out to increase your mortgage affordability or to simplify and decrease monthly payments. Should debts need to be paid, lenders will want to see statement(s) of debts paid or the accounts showing a zero balance.

Down Payment Approval

Down payment can be provided from a number of different sources,  however, depending on the property use or type of mortgage request, lenders may have some restrictions on how much or where the funds are allowed to come from.


REQUIRED DOCUMENTATION
Down Payment

If Existing Equity &/or Property Sale:
Mortgage Statement

If Property Sale:
Contact of Purchase & Sale

If Property Sale:
Statement of Adjustments

If Property Sale:
Order to Pay

If Savings/Investments/RRSPs:
90 day Account Statement Records

If Gifted Funds:
Gift Letter

Property Valuation & Approval

 The borrower(s) and their credit score, income and down payment funds accounts for 1/2 the picture to the lender.  The other 1/2 is  the property.  Zoning, quality, location, accessibility, restrictions, etc. all play a role in the interest a lender will have on a property.  They are investing their money, in most cases more than the borrower themselves, so they want to make sure that the investment is sound and worthwhile.  The property documents and valuation help to verify the properties value and economic life.


 
REQUIRED DOCUMENTATION
Property

Contract of Purchase and Sale

MLS Listing

Property Disclosure Statement
(PDS)

Strata Form B
(if strata property)

Additional documents may be requested by the lender for clarification.  Other documents requests can include AGM and strata meeting minutes, depreciation reports, other building reports, etc.

If the down payment is less than 20% of the purchase price, the property will have to be approval by one of the mortgage insurance companies (CMHC, Genworth or Canada Guaranty) and a premium will be applied to your mortgage. They may require an appraisal on the property to verify the value, but typically they are able to complete an auto-valuation.

If the down payment is greater than 20%, the property may not be insured and therefore  the lender will usually require a full appraisal unless the loan-to-value is high enough to support their in-house valuation.

Use of Property

How the property will be used is important to the lender. Owner-occupied, second home/cottage, rental/investment property, etc. are treated differently by each lender. Some have minimum requirements to meet, while others have higher interest rates or limited options in the type of mortgage or length of amortization you can apply for. The limitations and requirements may not be clear until further analysis on the property and borrower’s qualifications.

Annual Review

Each mortgage anniversary a quick check up will be complete.  We also stay connected year round to provide important updates that impact your mortgage and your property investment.  You may hear from Irene with the following updates:

Annual Review

You would be amazed what could happen in a year. I know, I’ve worked with many clients that have had big changes, expected and unexpected, and it’s changed how they managed their current mortgage.  Taking 10 minutes to check up on your mortgage each year is as valuable as visiting your doctor or dentist. It’s important, worthwhile and will have a positive impact on your future financial health.

Overnight Rate Announcements

For those who have a variable interest rate, your rate will depend on your lenders listed Prime Rate.  Their Prime Rate is largely based on the Bank of Canada’s (BOC) overnight rate, which is reviewed/announced eight times a year.  I want to make sure you are in the know and are prepared for any future changes that could impact your monthly budget, for the good…and the bad.

Property Tax Reminder

Every year property taxes are due in each municipality, sometimes twice a year.  When your mortgage is initially arranged, you may have selected to have the lender collect a monthly portion to pay taxes on your behalf, or you may have decided to pay them on your own.  Either way, we want to make sure you don’t miss the deadline for claiming your homeowners grant or tax payment date.

Regulation Changes

If you have followed the mortgage industry at all over the past few years, you would have noticed that we underwent a number of regulation changes.  Government was attempting to cool the housing market, Mortgage Insurance Companies, such as CMHC, were restructuring their programs, adding new rules and increasing premiums.  As a homeowner holding a mortgage, it’s important to be aware of the changes in the industry as it could change the dynamics of a future mortgage approval.

Other

There will be other relevant updates that may be important to share or send as a reminder.  I promise to keep relevant and important to your mortgage, financial health or home protection.

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