Why Does My Lender Hate Me?

General Pam Pikkert 25 Aug

 

If It seems like it is harder to get a mortgage that’s is only because it is.  Scallywags and scoundrels have committed fraud on a massive scale and so the lenders all have to ask for a pile of paperwork to prevent fraud.  The government is looking to make sure that we don’t get in over our heads and so they have implemented changes to all things mortgage.  And finally, the whole dang global economy seems unable to get its bearings so everyone has to be even more diligent about everything so that don’t get stuck with a pile of foreclosures. 

Now that you know the reasons, let’s take a look at just how you may be affected personally. 

  1. Paperwork 

The sad truth of the matter is this.  Mortgage fraud happens all the time.  People present false letters of employment, bank statements and all matter of things.  You should know that lenders check companies online, cross check documents, assess viability of income and call employers.  Here are the most common documents a lender is looking for:

  • Letter of Employment on company letterhead.  It will outline the basics of your employment including income, if you are on probation, how long you have been with them and a contact person to verify the whole thing.
  • Recent paystub where the numbers match what the letter says.
  • Notice of Assessment for the last 2 years from the CRA to confirm income sustainability and that you do not owe any taxes.
  • If you are self-employed or own rental properties –Last 2 year’s complete T1 Generals (accountant prepared is best) and likely your business financials as well.
  • 90 day history on ALL accounts making up any part of the down payment.  This is not us trying to be intrusive, it is actually part of the anti-terrorism initiative to make sure all funds are legally sourced.  I swear we do not care how much you spend at Starbucks.
  • They will ask for your property tax bill, mortgage statement, T4’s, lease agreements and anything else they need to ensure they have met all of the documentation requirements of their investors and the mortgage insurers.

 

  1. Affordability ratios

There have been some government imposed changes over the last few years as to how we have to calculate things.  Let’s look at the ones which will likely affect you the most.

  • 3% rule – If you have a line of credit with a balance of $20,000, you are likely only required to repay 1% or $200 a month. That is not the way of the mortgage universe.  In our world, we are required to use a payment of 3% of the balance of all lines of credit and credit cards when qualifying a mortgage.  The same $20,000 now has a minimum payment of $600 a month which can greatly decrease your overall affordability.
  • Maximum amortization – If you have less than 20% to put down, your maximum amortization just became 25 years.  If you have more, you can still opt for a 30 or 35 year amortization.
  • 80% Refinance – You are only able to refinance your home to 80% of its appraised value. 
  • Allowable Income – Not all income is created equal.  A non-taxable truck allowance, tips, cash under the table will not be used to help you qualify.  Lenders want a 2 year average if you are commissioned, receive hefty bonuses, or self-employed.  If you are trying to avoid taxes by claiming little income then you may be in for a shock come mortgage time.  The lenders need to see you can afford the home you are asking for.  And I will tell you that anyone in the oilfield and its related industries are being scrutinized very carefully as far as income sustainability.
  • Qualifying Rate – If you are choosing any term but a 5 year fixed, then you have to qualify for the mortgage based on the bank of Canada posted rate.  This is to ensure you can survive a rate increase when your mortgage is up for renewal.

So now you know that getting a mortgage is considerably much harder than it used to be.  Please don’t take this personally!  The truth of the matter is that if I were lending someone $300,000 to purchase a home I will be honest and say I sure as heck would want to make sure I was going to be paid back.  Wouldn’t you?   Have a great week!

The Devil is in 5 of the Details

General Pam Pikkert 14 Aug

The Devil is in 5 of the Details

                I have something shocking to tell you.  Mortgage brokers are human.  Gasp!!  But wait, so are lawyers, lenders, legal assistants and everyone else who is involved with your mortgage transaction.  Why do I choose to draw attention to this and ruin your day you ask?  It is so you will have a checklist of the things to confirm after the mortgage transaction closes so you are not gobsmacked down the road by a nasty surprise.

  1. Property taxes- Even if you are certain that you indicated your preference to the mortgage specialist and the lawyer and anyone else who would listen, you really should take a minute to confirm just who is paying them.   If you have changed from the TIPPS program to the having the lender collect them on your behalf then you may be facing a tax shortfall at the end of the year which will now require you to double on the tax portion of the payment to make up the difference.
  2. Payment Frequency – There is a misconception that choosing the biweekly or weekly frequency will pay your mortgage down faster and this very untrue.  If your goal is to pay your mortgage down quickly you must choose the accelerated option for either to get the benefit.

Let’s go over the numbers real quick.  Based on a $300,000 mortgage with a 25 year am and a rate of 2.49%.

Monthly                      $1342.41       25 years to repay

Biweekly                       $619.23        25 years

Biweekly accelerated $671.20        22.4 years

Weekly                          $309.54       25 years

Weekly accelerated    $335.60       22.4 years

As you can see the accelerated payments are higher which means more money goes directly to the balance of the mortgage.  The benefit of the weekly or biweekly non-accelerated is mainly that it would line up with your pay schedule for the payments.

  1. Mailing Address – If you live in one of the smaller areas and your mailing address is different than your home address you should make sure your lender knows so that you will receive your annual statement and other communication.
  2. Phone number – Again, make sure the lender has your new number if you have moved to a new community.
  3. Online Mortgage Systems – most lenders now have an online system where you can opt to make extra payments or just check your balance.  Something kind of nice about managing your mortgage on a Saturday in your pj’s while sipping your coffee.

All of the above can be handled in 1 phone call.  That’s right.  1!  Call your lender a week or 2 after your mortgage closes to allow their system to register your new mortgage.  Some lenders send a nice welcome letter after funding which will outline all of the above in which case all you have to do is take a minute to review.   Have a great week my friends.

Porting Your Mortgage

General Pam Pikkert 4 Aug

The Ins and Outs of Porting.

                So remember when you bought your home?  It was everything you wanted and so much more.  But then…some something happened and you now need to move.  Maybe 1 baby turned into 3, or you got a promotion which requires a move or your dream home just went on the market.  Whatever it is, you are going to be moving so let’s see what we can learn about saving some money.

                Porting is the term used by mortgage lenders to move the mortgage from one property to another.   Porting eliminates the penalties which accompany breaking your mortgage.    Here are some common terms in regards to porting.

  1. Port and Increase – This is when you take your current mortgage and add the additional funds you need to purchase the new home
  2. Port and Decrease – If you are downsizing then you may actually need less mortgage.
  3. Blend and extend – This applies when you take the mortgage rate you currently have and blend that rate into the rate currently offered by your lender  for the additional funds you will need to come up somewhere in the middle.  You will likely not be able to get the crazy low rates being offered today but you will avoid the penalty.

So a few things you should know about porting because each lender has a different set of guidelines.

  1. You have a time limit on how long you can port. Check with your lender.
  2. Some lenders will have a part A and a Part B to the new mortgage which mean you will in theory have 2 maturity dates and 2 parts to your mortgage payment
  3. If your current home sells before you take possession of the new one then you will have to pay the penalty which will then be reimbursed to you when the new mortgage closes.

Some extra things your well qualified mortgage professional wants you to know.

So the first thing you should do if a move seems to be in your future is to call your current lender and find out exactly how much you penalty is to break your mortgage contract.  The second is to work with said qualified mortgage professional to determine if it makes more sense to incur the penalty.   In what situation would that make sense?  Let’s look. 

  • Old mortgage $253,000 at 3.79% with 27 years left and a $4700 penalty.
  • Need new mortgage of $325,000 for the new home.
  • Offer from the bank is to blend and extend at a rate of 3.59% into a 5 year term with 27 years left. Monthly $1563.23 and the balance after 5 years is $285,779.
  • Moving to a new lender could look like this. New mortgage of $330,000(to allow for the penalty) rate of 2.59% for a 5 year term with a 25 year mortgage.  Monthly $1493.12 and the balance is $279,809.

Breaking the mortgage will save you 2 years, $70.11/month or $4206.60 in payments AND you will owe $5970 less on the balance.  That makes you think twice.

The other reason you NEED to talk to your mortgage professional is that if you took a high ratio mortgage, where you put less than 20% down, within the last 24 months then you are also able to port your mortgage insurance premium.  Within the first 6 months you will get a 100% credit, 6-12 months 50% and 12-24 months is 25%.  Your mortgage professional can make sure the lender is aware of your ability to save more money.

So there you have it, how to port your mortgage and keep the most of your money.

Are Your Ready for Sharknado?

General Pam Pikkert 4 Aug

 



By now you have all heard of this splendidly silly series of made for TV movies about man eating shark infested tornados hitting the city of Los Angeles.  I am certainly not going to debate the merits of the films but all the chaos and mayhem  did start me thinking.  Who is going to pay for all that damage caused by the whirly gigging sharks?  Can that poor guy who just got partially eaten afford the time off to recover?  This week we are going to look at the types of insurance  you want to have to protect yourself in case of a sharknado or other life event.


  1. Life Insurance – There are 2 things guaranteed in life namely death and taxes.  The truth of the matter is that death takes us all and on its own schedule.  The greatest final gift you can give to your family is to ensure they are taken care of in the event of yours.  Here are a few things to consider though I can not stress enough that you really should seek out the services of a great insurance agent.  This is what they do and they will make sure you have the proper insurance

  • Do you have significant coverage?   

  • Is your beneficiary correct?

  • If your coverage is through your employer, what happens if you leave?  If you have developed a health issue then you may not qualify for a new policy.  Consider   third party coverage so that this won’t affect you..

  1. Disability – Do you know that the number one reason for mortgage default is disability?  Well now you do so its time to make sure you have the right coverage.  Most employers cover you while you are on the job but do you know if that coverage extends to a fall off the roof while putting up Christmas lights?  You need to know and again, third party coverage means you and your family are protected no matter where you work.

  2. Critical Illness – This coverage will pay for expenses not covered by your regular health plan should you become critically ill.  Even in Canada there are a multitude of things not covered and the last thing you need to be worried about at such a time is how you are going to pay for them.

  3. Home Insurance – I am pretty sure that there is no coverage for an actual Sharknado but you can prepare for as many other events as possible.  Again, talk to your qualified insurance broker to make sure you have the correct coverage.  Consider asking how best to document your possessions in case of a fire?  Just think.  If you had a video walk through of your home, with a complete list of possessions including receipts for large purchases which you had kept in a fire proof safe, how much easier would it be for you and your insurance company to get you back on track?  I recommend reading the policy, asking the questions and ensuring your coverage is what you need it to be.


OK so let’s face it, if you stop for 1 moment and think I bet you will be able to recall family and friends who have gone through life issues which would have been made easier by having sufficient insurance coverage.  Don’t let a sharknado get you my friends.  Take a couple of hours and make sure you have the coverage you need and if you do not then get it. Have a great week!