Bank Mortgage for Past Consumer Proposal Client
I was recently referred to a couple that was planning to purchase a new home in Pickering. Both of them worked a full-time job, making a total family income of over $153,000 per year. While the husband had fluctuating income because of him regularly working over-time hours, the wife had a steady annual salary. A day before approaching me, they had put an offer on a house in Pickering for $703,000. They could manage $50,000 down-payment, and we needed to arrange the remaining $653,000 in mortgage (over 92% Loan-to-value).
Their incomes were fine, but the catch was their credit situation. The couple had filed a consumer proposal a few years back and had been discharged about 3 years before the present date. In those 3 years, the couple had worked on rebuilding their credit but the score was still not over 680. I sent the deal to a bank. I emphasized on the couple’s strong credit repayment history after discharge, their long-term jobs with renowned companies, and the precarious situation that had dragged them into consumer proposal in the first place. We used the wife’s annual salary and the 2 year average of the husband’s income to qualify the mortgage. The deal was sent to an insurer that was more likely to work with clients with under 680 credit score.
With proper deal structuring and strategic selection of the default insurer, the deal was approved at a bank with an impressive fixed rate of 3.39% for a 5 year closed mortgage. The deal is closing next month, and my clients are excited to move into their new property.
A prospective borrower contacted me through my Facebook page in early 2019. He wanted to put an offer on a $500,000 property in Hamilton. He is new to Canada and had recently got a full-time with a fixed annual salary. His credit was close to 680, but he only had $25,000 (5%) down-payment.
With his income credentials, he could not qualify for a mortgage of $475,000 plus the default insurance fee. On delving further, I realized that the property had a legal basement which could be rented out for close to $1200/month. We added 50% of that amount (i.e. $600/month) into the income calculation and the qualifying ratios now worked fine. I sent the deal to a non-banking A lender and got him approved at a variable rate of Prime – 1% (2.95%).
The borrower seeked help from his realtor to rent the basement out. Given the prime location, there was a lot of interest and the basement was rented out with occupancy after closing. The lease agreement was used to confirm the rental income to the lender. The deal is closing in a couple of weeks, and my client can’t wait to move into his first home.
I had helped one of my old clients switch from a B lender to a non-banking A lender in October 2018. Their credit situation had improved and that helped us make the switch. They got a great fixed rate (mid 3’s) for a 5 year closed term. They contacted me again in February 2019, needing more money. The couple had assumed some high-interest debt between October 2018 and February 2019, and needed my assistance to pull that money from their home equity.
The first option was to refinance the mortgage. However, refinancing a mortgage this early in the term would have attracted a substantial penalty. So, that option was eliminated. This non-bank A lender doesn’t offer a Home Equity Line of Credit (HELOC) either. Therefore, we approached the lender to offer the clients a fully-open 2nd mortgage. On the basis of the property’s appraisal and the client’s income, the clients were approved for a 2nd mortgage of $50,000 at Prime + 1.0% (i.e. 4.95%).
The great part is that this mortgage is fully-open, and my clients can pay it in full or in part as and when they have surplus money.