Condo Considerations

What you need to know when it comes to financing.

Condos are an affordable option considered by many first time home buyers. However, what many aren’t aware of is that they can be more complicated than a single family home when it comes to qualifying for a mortgage and securing financing.

When you purchase a condo, the investment involves not only your unit, but the condo corporation as a whole. The condo corp needs to be in good standing for a lender to be comfortable approving your mortgage.

What should I be looking for?

Are the financials up to date?

• Banks typically will not finance a property without up to date financial statements.

Are there any pending special assessments?

• Outstanding Special Assessments can be a big problem for lenders. For example:  If your condo requires a new roof right away and there isn’t enough money in the reserve fund to cover the costs of this expense – the condo will issue a special assessment. The bill will be divided between all of the units in the building accordingly and each owner will be responsible for coming up with their share of the costs.  Unfortunately, even if you are able to pay your share of this assessment, it doesn’t guarantee that all of the other unit owners will be able to pay their share. If not, the required maintenance may not happen. Often times you will not be able to secure financing until these assessments are fully collected, assuring the lender that the needed repairs to the building now can and will be done.

Is the condo board self-governed?

• For a self directed condo board, the lending options can be more limited. Not all lenders are comfortable with this, however there are still options. This can be fairly common place in smaller condos with only a few units.

Post Tension Cables?

• Post tension cables are sometimes used to reinforce concrete during a condominiums construction. If properly installed and maintained there are typically no issues,  however if not properly maintained they  can corrode and result in very expensive repairs. As such , not all lenders and insurers will finance these properties.  If your condo was built using post tension cables you may be limited in your lender and insurer options. You can also expect that recent engineer reports will be requested at the time of purchase to confirm that they are in good standing.

Age Restrictions?

• Certain properties can come with age restrictions. For example there are building catering to seniors / 55+. CMHC will not insure age restricted properties, and many lenders will also shy away. Not only is the lending option pool reduced, but also the pool of potential qualified buyers if and when the property needs to be sold. Resale value is a key component in mortgage approvals for lenders.

Flood Damage?

• If your condo was in a flood zone , you can expect the lender to do some detective work. They will want to ensure any and all water damage has been fully remediated and will likely request a recent engineers report to confirm the property is structurally sound.

High Percentage Of Rental Units In The Building?

• Without a stake in the property,  rental tenants do not have a vested interest in how the condo is run, kept clean and in good repair. This is also something the banks will look at when deciding to approve or decline a mortgage application. If the condo has a high percentage of rental units and minimal owner occupied suites – this can result in a decline.

If you have any questions or concerns, I would love to hear from you. Cory Lewis – Jencor Mortgage

1) You have missed a payment/made a late payment.
Credit card payments can become a vicious cycle; you make monthly interest payments and elongate the process of chipping away at that debt. Alleviate the stress of credit card debt by consolidating smaller loans with a reverse mortgage at a much lower interest rate. By consolidating your debt with a reverse mortgage, you can eliminate the stress of having to make monthly payments towards your loan and in turn, free up your monthly income.

2) You have asked to skip a payment or are accessing your investments earlier than you’d like.
If your debt has led to missing payments or touching your RRIF or retirement accounts, consider using a reverse mortgage to unlock up to 55% of your home equity. This way you can pay off debts while your investments keep working for you.

3) You want to start crossing things off your bucket list, yet can’t afford to.
Maybe your dream is to purchase a second home like a cottage, take a vacation, or even just dine out or attend the theatre regularly. A reverse mortgage can improve your retirement lifestyle by supplementing your monthly income without affecting your OAS and pension.

4) You want to financially assist your aging parents/kids/grandkids.
As the sandwich generation, you’re caring both for kids and aging parents. That can place huge financial stress on a household. A reverse mortgage can give both you and your aging parents financial independence and the ability to help your kids/grandkids pay for their education or even assist with a down payment for their home.

5) You are facing unexpected expenses.
Maybe it’s a leaky roof or a flood in your basement. Or you might have to renovate your home, allowing you to stay in your home long term. A reverse mortgage gives you quick access funds to pay for unplanned expenses without worrying about making any payments until you move or decide to sell your home.

If any of the above examples resonate with you, the CHIP Reverse Mortgage could be great solution!  I’m always available to help! Cory Lewis – Jencor Mortgage

Originally posted by: Eric Bisaillon   – HomeEquity Bank

When it comes to income qualifying for a mortgage, the lenders and insurers have different requirements for various income sources.

The majority of applicants with employment income fall under the following 6 categories:

1. Salaried Employees

2.Full Time Employees, Paid Hourly with Guaranteed Hours

3. Part Time Employees, Paid Hourly with Guaranteed Hours

For these 3 income types, a borrower’s income is paid through a business in which they do not have any interest / ownership. A lender will typically request the following paperwork as income confirmation for mortgage approval in these cases:

• A letter of Employment stating the applicants position, date of hire and salary or hourly rate and guaranteed hours.
•  A Recent Pay-stub
• Many lenders will also complete a verbal income confirmation, calling the employer  / HR to verify the details and tenure details outlined on the letter of employment.

4. Shift Workers, Seasonal Workers or On-Call Employees with a 2 year history at same employer 

5. Commission Sales Employees with a 2 year history in the same role/industry

6. Contract Employees with a 2 year history in the same role/industry  

With income sources 4-6,  income verification requirements are a little more complicated. As the employer cannot guarantee the employees annual income in writing, the lenders and insurers will require we supply a 2 year history on their employment income.  The lender will look at an average of the borrowers last 2 years income if it is increasing year over year, or the lowest of the last two years if the income has decreased. This 2 year average can also be used for employees who claim tips, earn overtime or receive significant bonus income.

Income verification requirements for these income sources could be any or all of the following:

-The last 2 years of T4s from the employer(s) and  / or Personal T1 General Tax Returns

– The last 2 years of Notice of Assessments from Revenue Canada as 3^rd party verification of the income claimed

-A letter of Employment or Copy of their contract stating their position, date of hire, pay rate and tenure

-A recent paystub confirming the year to date income is consistent with past years / income used on the application

As always, every lender is slightly different in their paperwork requirements and every income source is reviewed on a case by case basis. If you have a questions regarding a specific income type, please do not hesitate to call or email me anytime.

Cory Lewis

Jencor Mortgage

Sometimes in life, things don’t always go as planned. This could not be truer than in the world of Real Estate. For Instance, lets say that you have just sold your home and purchased a new home. The thought was to use the proceeds of the sale of your house as the down payment the the new purchase. However, your new purchase closes on June 30th and the sale of your home and the sale of the existing house doesn’t close until July 15th – Uh-oh! This is where bridge financing can be used to ‘bridge the gap’.

Bridge Financing is a short-term down payment that assists purchases to ‘bridge’ the gap between an old and a new mortgage. It helps to get you out of a sticky situation like the one above and has a few minimal fees associated with it.

The cost of a bridge loan is comprised of two parts. The first is the interest rate that you will be charged on the amount of funds that you are borrowing. This will be based on the Prime Rate and will vary from lender to lender. As a rule, you can expect to pay Prime plus 2.5%. The second cost to consider is an administrative fee. Again, this will vary depending on the lender and can range from $200-$695.

The amount that you are able to borrow is easily calculated. The calculation looks like this:

Sale Price

(less) estimated closing cost of 7%

(less) new mortgage of the purchase property

= Bridge Financing

*Note: The closing costs include the expense of realtor commissions, property transfer tax, title insurance, legal fees and appraisal costs if applicable.

So that’s the cost side of things, now the next question is: How long? The length of time that you can have Bridge Financing is going to vary again from lender to lender as well as what province you are in. For most, it is in the range of 30-90 days but there are some lenders that will go up 120 days in certain cases.

Before applying for Bridge Financing, you must also have certain documents and be ready to present them. The documents include the following:

1. A firm contract of purchase and sale with a copy of the signed and dated subject removal on the property that you are selling and the property that you are purchasing.
2. An MLS listing of the property being sold & purchased.
3. A copy of your current mortgage statement .
4. All other lender requested docs to satisfy the new mortgage and upcoming purchase.

Once you have those documents, you can work with a qualified mortgage broker to apply for bridge Financing, it is an important tool to understand and a great one to have in your back pocket for when life throws you one of those ‘curve balls’. You can have peace of mind knowing that if/when that situation arises, you are not without a strong option that can provide you with interim financing for minimal cost.

As always, if you have any questions about Bridge Financing, or any quotations about your mortgagee (be it new or old) contact me anytime.

Cory Lewis, Jencor Mortgage

Blog posted by Geoff Lee GLM Mortgage Group Vancouver, BC

A new survey has emerged showing that out of 1,901 owners and would be homeowners, 43% (more than two out of five) Canadians

are not confident in their knowledge of the mortgage stress tests—despite them being in place for more than a year now.

We wanted to give you a brief set of notes regarding the guidelines. This is something you can use and reference whether you are

a first-time home buyer or looking to refinance underneath these new guidelines. It gives a clear picture of what/how you are impacted

as a buyer or someone who is looking to refinance.

Here’s what you need to know about B-20:

The average Canadian’s home purchasing power for any given income bracket will see their borrowing power and/or buying power under

these guidelines reduced 15-25%. Here is an example of the impact the rules have on buying a home and refinancing a home.

PURCHASING A NEW HOME

When purchasing a new home with these new guidelines, borrowing power is also restricted. Using the scenario of a dual income family

making a combined annual income of $85,000 the borrowing amount would be:

REFINANCING A MORTGAGE

A dual-income family with a combined annual income of $85,000.00. The current value of their home is $700,000. They have a

remaining mortgage balance of $415,000 and lenders will refinance to a maximum of 80% LTV. The maximum amount

available is: $560,000 minus the existing mortgage gives you $145,000 available in the equity of the home, provided you qualify

to borrow it.

Source (TD Canada Trust)

These guidelines have been in place since January 1, 2018 and we are starting to see the full impact of them for both buyers and

those looking to refinance. Stats are showing that there is a slowdown in the real estate market, however there is also a heightened

struggle for many buyers to now obtain approval under these new guidelines. It’s a difficult situation as the cry for affordable housing

is still ongoing as the new guidelines may slow down the market but appear to further decrease the borrowing/buying power of individuals.
Keep in mind, this is just a brief refresher course on the B-20 guidelines. As always, if you have more questions or are looking for more

information, we suggest that you reach out to your Dominion Lending Centers mortgage broker to discuss and get a full and detailed look

at how it will impact you personally.  Blog Post by Geoff Lee – DLC Mortgage Group out of Vancouver B.C

Cory Lewis

Jencor Mortgage Corporation

THINGS YOU SHOULD NEVER TRUST:

1.Gas Station Sushi

2.Emails from Nigerian Princes

3.60 Second Online Mortgage Pre-Approvals

Not all mortgage pre-approvals are created equally.

Many lenders offer quick and easy pre-qualification numbers for their clients and others will issue written pre-approval letters without any documentation requirements. As we all know, this can lead to heartache down the road when a deal goes live and an offer to purchase is in place.

My clients are offered a fully underwritten Pre-Approval.

The Top 3 Questions clients have about Mortgage Pre-Approvals:

1. What is an Underwritten Pre-Approval?

A fully underwritten preapproval ensures that not only we take a full application, but we collect and review the client’s paperwork upfront. This is not standard practice in the industry unfortunately.  A client’s ability to qualify for a mortgage hinges on 4 main criteria– Their provable income, their down payment, AND their credit bureau showing their ratings and liabilities. Collecting and reviewing this information upfront helps us avoid any confusion or disappointment at the time of purchase. Through no fault of their own, clients often misrepresent their information on a mortgage application.

For example, with an online application a client may advise that their annual income is $120k, (understandably basing this on their tax return info from the previous year). However, every lender has their own rules and document requirements for proving and accepting various income sources. Unless this is 100% salaried income – we need to investigate further to determine the income that can be used – IE: Hourly rates, shift premiums, taxable benefits, support payments, child tax credits, and  self-employment income are all handled differently.

2. If I am Pre-Approved, Why do I need a Finance Condition in my Offer?

I will always advise any client who requires a mortgage, preapproved or not –make their offer conditional to financing. The reason for this is that the client themselves is only half of the equation. The lender also has to approve the property in question, and this cannot happen until a written offer to purchase is in place. A lender may approve a client but decline a property. This could be due to any number of reasons, for example, a lower appraised value or special assessments that are disclosed once reviewing the condo documents.

Clients also need to be aware that a preapproval is based on their information at the time of application. If there are any material changes to their information (new debts, income or employment changes etc.) this can also affect their approval at the time of purchase. I always advise my clients contact me before making any material changes or applying for any new loans or liabilities.

3. Does a Pre-Approval come with any Obligation?

The answer is NO.

Most Pre-Approvals are good for 120 days and come with a rate hold for that period. If you decide not to purchase or use this preapproval it simply expires after that 4 months. It can be cancelled at any time or renewed at expiry if desired. The main benefit to the rate hold is that it does protect the client from any rate increases over the 120 period.

Another great advantage to working with a Mortgage Advisor who has access to  many lender options is that we will always shop around again for our clients  at the time of purchase . If some time has passed since the pre-approval was issued, we may find a better rate or product on the market and opt not to proceed with the lender who pre-approved you.

THE LOWDOWN ON DOWN PAYMENTS : 

5 THINGS YOU NEED TO  KNOW

1. What is a Down Payment? 

When you buy a home, you must put a certain amount of money toward the purchase upfront. This is called a “down payment”. Your mortgage loan will cover the rest of the price. What is the minimum down payment required when buying a home, and where can it come from?  You can purchase a home with as little as 5% of the purchase price as a down payment. This down payment can be from your own savings /RRSPs or investments, it could be a gift from a family member OR with certain lenders it can even be borrowed from a loan or line of credit.

2. What is a High Ratio Mortgage?

A high-ratio mortgage applies to people that have less than a 20%  down payment to put towards the purchase of a home. In these cases, you must qualify for mortgage insurance through one of three insurers – Genworth, CHMC or Canada guaranty. A one time insurance premium will be added to your mortgage balance and is calculated based on the loan to value ratio:

Down Payment                                   Insurance premium

Up to and including 65%                  0.60%

Up to and including 75%                   1.70%

Up to and including 80%                  2.40%

Up to and including 85%                  2.80%

Up to and including 90%                  3.10%

Up to and including 95%                  4.00%  Traditional Down Payment

Non-Traditional Down Payment    4.50%

3. How to calculate your Minimum Down Payment?

Typically a minimum down payment is starting at 5%. For a purchase price of $500,000 or less, the minimum down payment is 5%. When the purchase price is above $500,000 and under $1,000,000, the minimum down payment is 5% for the first $500,000 and 10% for the remaining portion.

• Example: If your purchase price is $750,000, the minimum down payment is: 5% * $500,000 = $25,000; 10% * ($750,000 – $500,000) = $25,000; And the total down payment is $25,000 + $25,000 = $50,000.

4. What is a Conventional Mortgage?

Conventional mortgages are mortgages that do not require mortgage default insurance. 20% is the minimum down payment in order to avoid insurance premiums, however, there are some exceptions to this rule.  Mortgage default insurance or a larger down payment may be required for unique properties, purchase prices over 750k, mobile homes or higher risk clients.

5. What about Home Equity Credit Lines (HELOC’s)?

The majority of lenders will only lend up to 65% of the value of a home in a HELOC. This means if you only want a HELOC on your home you will need a minimum 35% down payment on the purchase price. However, there are a few lenders who will still consider HELOC’s right up to 80% of the value of the home, so purchasing with 20% down may be an option for a strong applicant.

You can also do a combination of mortgage and HELOC on your property up to 80% of the appraised value with the majority of lenders as long as the HELOC portion does not exceed 65%.

Contact me anytime for more information!

In the world of mortgage lending BIGGER is not always BETTER.

Mortgage default insurance (CMHC / Genworth / CG) is no longer available on  properties valued over one million dollars.  This means the minimum down payment for any home valued over 1 million is 20%, however more often than not a buyer will require additional funds.

All lenders employ “Sliding Scales” for maximum loan to value ratios on these properties. The sliding scale determines the maximum loan to value ratio or minimum down payment required on a home.  This is done to offset the perceived risk of marketability at this higher price point should the bank need to foreclose on the property at any point. Sliding scales vary from lender to lender, some lenders are more conservative with their down payment requirements and some more aggressive. When purchasing a home at a price point greater than 1 million dollars,  a knowledgeable mortgage advisor and multiple lender options will prove invaluable.

One Example of a Lender Sliding Scale Based on a 1.5 Million Dollar Home Purchase:

80% of the first $1,000,000 and 50% thereafter

$1,000,000 X 80% = $800,000 Mortgage

$500,000 X 50% = $250,000 Mortgage

1,050,000 Maximum Mortgage Amount

Based on this lenders ‘Sliding Scale’, the buyer requires a  minimum 30% down payment or $450,000 to complete this purchase

It is important to note that exceptions to these sliding scales are  made on a case-by-case basis.  We can see loans issued for the full 80% of the purchase price in this price range on exception. The lender will take into account various factors, including the property type and location as well as  the overall strength of the applicant. Question? Call Anytime.

READING THIS COULD SAVE YOU MONEY

(HOW TO RENEW YOUR MORTGAGE IN 5 EASY STEPS)

If you have a mortgage, chances are unless you win a lottery (cha-ching $$$) you’ll be doing a mortgage renewal when your current term has finished. While most Canadians spend a lot of time, and expend a lot of effort, in shopping for an initial mortgage, the same is generally not the case when looking at mortgage renewals.

So what is a mortgage renewal? Mortgages are amortized *over a set term* which can vary from 1-10 years.  About 6 months before the end of your term, your current lender will suddenly become your “Best Friend” showering you with attention and trying to entice you with early renewal offers… Please, please, please Mortgage borrower, sign here on the dotted line to renew… it’s sooo easy!!

You have 3 options

1. Sign and send back as is (don’t do it, really I mean it… don’t do it!!)
2. Check the market to make sure you are getting the best rate and renegotiate with your current lender
3. Talk to ME and together we can discuss the best options available for your situation.

Lenders know that 80% of people will sign their renewal forms, because it’s easy. Banks & Lenders are a business and as such they want to make the highest profits to keep their shareholders happy. As an educated consumer, you need to take the time to ensure you are being offered the best possible rate & terms you can get. Remember all those hours of research you did regarding lenders and mortgage rates when you were buying your first home?

Yes, signing the renewal document is easy, however, it’s in your best interest to take a more proactive approach. Money in the lenders pocket comes directly out of your pocket… so its time to get to work!

5 steps to save you money on your mortgage renewal

1. Receive the renewal offer from your current mortgage lender and examine immediately, which gives you enough time to make an informed decision.
2. Do your research via the internet and phone calls to find out about current rates.
3. Phone your current lender and negotiate!
4. If your lender will not offer you a better rate then it’s time to move your mortgage. YES, you will have to complete a mortgage application and gather documentation, just like you did for your original mortgage.
5. Take a look at your budget and see if you can increase the amount of your mortgage payments above the mandatory payments and save money by paying off your mortgage quicker.
   Your mortgage is one of your biggest expenses. For this reason, it is imperative to find the best interest rates and mortgage terms you possibly can.

As you can tell there is lots to discuss about mortgage renewals.  To save money, call me anytime to help you shop your mortgage around at renewal time.

Original Article posted by  KELLY HUDSON

Current mortgage rules dictate that home owners can purchase a property with as little as 5% down. Did you know that on top of this, they can also access additional funds for renovation costs at the time of purchase?

Once you own a home it can only be refinanced up to 80% of the market value in the future. This means that most likely first time home owners with 5% down payments will not be able to access low interest mortgage funds for many years after taking possession of their properties. Home values would have to increase  / or balances paid down significantly before refinancing to complete renovations or upgrades on the property will be possible.

Knowing this, as a buyer if you are considering an older property that may need some renovations in the next 5 years  – I strongly recommend considering the purchase plus improvements program. Not only will you build equity right away, customize the home to suit your needs and tastes but  you also have the option to roll it into your lower interest mortgage rate at an affordable amortized payment.  

How does it work?

At the time of purchase you will be required to provide quotes to the lender for the work that you plan on doing. The bank and insurer have to agree that the renovations you are completing will increase the value of the property by what you are paying.  The minimum 5% down payment will be based on the total of the purchase price and the renovation costs. Some examples of common improvements we see approved are kitchen & bathroom renos, basement development, new windows, new flooring, new roof or the addition of a garage to a property.

Once approved and you move in to the home, the funds for the renovation costs are held in trust at the lawyers office until the work is done. As soon as the renovations are complete, the receipts are brought to your lawyers and/or the bank may send an inspector out to confirm, and then the funds will be released to you or your contractor.

Break it down for me!

You have found a home with a purchase price of $400,000 that needs to have the following improvements to make it just perfect:  New Kitchen ($20,000), flooring ($5,000).  How much down payment do you need and what is the monthly payment based on today’s rates (5 year term at 3.49%)?

I can help you to finance the purchase of your home and also the upgrades needed to make your new home perfect!