Mortgage FAQs / Myths / General info

[TimLacroix]

There have been a lot of questions lately and wanted to list a few of them here.

1. Buying a home with 5% down - The 5% down payment guideline does not apply to just First Time Home Buyers. It is to anyone and everyone buying a Owner Occupied/ Principal Residence.

2. CMHC, Genworth, Canada Guarantee - to avoid these premiums being added to your mortgage, 20% down payment (equity) is required.

3. Maternity Income - Full salaried income for someone on maternity can be used for mortgage qualifying. Letter of employment is needed confirming annual salary amount and position is available for your return after maternity is over.

4. Amortization - note that currently 30 and 35 year amortizations are still available on conventional mortgages only. This means that there is 20% more equity or down payment in the property.

5. Self Employed - this is a big area but will highlight income and down payment.
Option 1 - Verified Income - Can purchase with 5% down payment. Income used is 2 years NOA average.
Option 2 - Stated Income - Can purchase with 10% down payment. Income is declared based on a reasonability test for the type of job etc... plus annual gross revenue information.

Typically lenders also would like to see 2 years self employment. Exceptions can be made if you have transitioned from employment to self employment in the same industry.

Please do not hesitate to PM me for more details on the above items OR do not hesitate to ask any other question.

There have been non stop rule changes and continues to be subtle changes that might affect you or help you in qualifying for a mortgage.

[revelations]

Question about the transition to self employment phase, do you need something in writing to prove that you were in the same industry previous or an employer reference?

[TimLacroix]

Originally posted by revelations
Question about the transition to self employment phase, do you need something in writing to prove that you were in the same industry previous or an employer reference?

Yes, what will be required is previous 1-2 years of T4's, ROE (record employment) are the typical docs required. Credit bureau usually assists as well by showing previous employer details.

If you have specific details, please let me know as there are always other ways to skin a cat.

[heavyfuel]

If you're self employed for 9 years, excellent credit and history, have 10% down, and owe the CRA just under 30k but they're not on you like hyenas cuz you're making solid regular payments, is the CRA gonna cockblock you?

[TimLacroix]

Originally posted by heavyfuel
If you're self employed, excellent credit and history, have 10% down, and owe the CRA just under 30k but they're not on you like hyenas cuz you're making solid regular payments, is the CRA gonna cockblock you?

Typically lenders want to see owing balances to CRA paid before funding a mortgage.

There are some options here depending on the full picture.

If you wish to discuss, please call me at 403-648-1541 or provide me with a number and I will call you.

[afrotl]

What are the guidelines when it comes to Assumptions.
For example you own a property and about to leave the country and you found someone who wants to assume it due to the good interest rate and low mortgage payments.

Your bank says yes they can assume your property so far as they qualify however the bank does not tell you if you are still on the hook in case they mess up.
A broker I know says so far as you get a lawyer to draft up a letter stating that so far they qualify, you are free of anything after that and ensure the banks agrees to it.

Any incite on that?

Thanks.

[TimLacroix]

Originally posted by afrotl
What are the guidelines when it comes to Assumptions.
For example you own a property and about to leave the country and you found someone who wants to assume it due to the good interest rate and low mortgage payments.

Your bank says yes they can assume your property so far as they qualify however the bank does not tell you if you are still on the hook in case they mess up.
A broker I know says so far as you get a lawyer to draft up a letter stating that so far they qualify, you are free of anything after that and ensure the banks agrees to it.

Any incite on that?

Thanks.

Yes, the persons wanting to assume your property and mortgage will be responsible for the mortgage (from the current lender).

The assumption process has changed over the years and an assumption is considered a sale, which means a transfer of ownership.

Question: Was the mortgage originally insured? Less than 20% down payment? Who is the current lender?

If insured, then you may still be on the hook from CMHC, Genworth or Canada Guarantee. To remove any responsibility in case the new owners default is you MUST request in writing to be released of responsibility from the insurer.

They may wait 12 months to see 12 consistent payments on the mortgage before releasing responsibility.

These again are guidelines and therefore would consult a Real Estate lawyer to be sure of pros and cons of having someone assume your mortgage.

[roopi]

Originally posted by heavyfuel
If you're self employed for 9 years, excellent credit and history, have 10% down, and owe the CRA just under 30k but they're not on you like hyenas cuz you're making solid regular payments, is the CRA gonna cockblock you?

Why don't you use the 10% down payment you have to pay off CRA so you aren't paying them interest. Then start saving for the down payment again.

[Xtrema]

Originally posted by roopi


Why don't you use the 10% down payment you have to pay off CRA so you aren't paying them interest. Then start saving for the down payment again.

Was wondering the same thing. Is interest owe to CRA tax deductible? lol.

10% on a $350K means you have $35K on hand which will definitely covers it. But I would have to assume that $35K is there for business operation to cover AR shortfalls.

[heavyfuel]

Originally posted by roopi


Why don't you use the 10% down payment you have to pay off CRA so you aren't paying them interest. Then start saving for the down payment again.

I don't have a 10% down payment at the moment lol CRA gets my money first for sure. I was just asking if owing taxes is a 100% cockblock.

[afrotl]

Originally posted by TimLacroix


Yes, the persons wanting to assume your property and mortgage will be responsible for the mortgage (from the current lender).

The assumption process has changed over the years and an assumption is considered a sale, which means a transfer of ownership.

Question: Was the mortgage originally insured? Less than 20% down payment? Who is the current lender?

If insured, then you may still be on the hook from CMHC, Genworth or Canada Guarantee. To remove any responsibility in case the new owners default is you MUST request in writing to be released of responsibility from the insurer.

They may wait 12 months to see 12 consistent payments on the mortgage before releasing responsibility.

These again are guidelines and therefore would consult a Real Estate lawyer to be sure of pros and cons of having someone assume your mortgage.

Thanks for the response.

Question:
Was the mortgage originally insured? Yes it was
Less than 20% down payment? Yes 5% down payment
Who is the current lender? TD Bank

[TimLacroix]

Originally posted by afrotl


Thanks for the response.

Question:
Was the mortgage originally insured? Yes it was
Less than 20% down payment? Yes 5% down payment
Who is the current lender? TD Bank

Since it is insured you will have a 2 step process to remove responsibility.
1. Have clients qualify to assume your mortgage... TD will make changes once approved.
2. Must request release to the insurer once the new applicants are approved.
OR wait the 12 months and request to be released.

[Sugarphreak]

....

[TimLacroix]

Originally posted by Sugarphreak
If I am selling my current home and going with a different lender, what are my obligations when it comes to closing out an existing mortgage or line of credit? Do I just show up at my branch with a briefcase full of money, or do I have to notify them somehow that my home is sold… or is this tasked to the real estate lawyer to handle?

The real estate lawyer will handle the funds on the sale and payout all charges registered on title (mortgage, heloc, etc...). Then the extra funds are provided to you.

[roopi]

Originally posted by Sugarphreak
If I am selling my current home and going with a different lender, what are my obligations when it comes to closing out an existing mortgage or line of credit? Do I just show up at my branch with a briefcase full of money, or do I have to notify them somehow that my home is sold… or is this tasked to the real estate lawyer to handle?

Rolling in with a briefcase is the baller way of doing it.

[lilmira]

They'll give you a deal if you have "cash in hand" of course lol.

[EG STyLeZ]

What are the pros and cons of taking out your RRSPs for down payment under the first time home owner plan? Especially if this additional contribution will allow you to make the 20% down.

[TimLacroix]

Originally posted by EG STyLeZ
What are the pros and cons of taking out your RRSPs for down payment under the first time home owner plan? Especially if this additional contribution will allow you to make the 20% down.

Pro is that you will avoid CMHC (insurer) premiums. You also take it out without paying taxes and have 15 years to pay it back, interest free.

Con is that your investment stops growing, if you do not contribute back the minimum per year it becomes taxable income.

[sabad66]

Another con is that you have to pay yourself back... So if you take out the max (25k), budget an extra 1666 extra to pay every year.

[Neil4Speed]

Originally posted by EG STyLeZ
What are the pros and cons of taking out your RRSPs for down payment under the first time home owner plan? Especially if this additional contribution will allow you to make the 20% down.

I had a similar question. Other Pros are that you will save on interest costs by contributing funds that otherwise you would not have.

It could be argued that your home is an investment vehicle.