April Mortgage Case Studies

Private Mortgage for Property Next to Gas Station

We all know that getting a mortgage on a property close to a gas station can be tough. How about one that’s right adjacent a gas station? That’s why you work with a skilled mortgage agent, because we give you access to multiple solutions for your need and increase your chances of getting approved.

One of my clients has invested in an older bungalow in Markham. The property is built on a large plot and is hence perfect for reconstruction. He purchased the property in 2017 and got himself a private mortgage as he couldn’t qualify with his NOA income and not many A lenders will lend on such a property. His lender didn’t offer any renewal at the end of the term and that’s when he approached me to help him refinance his mortgage.

I had to shop around with numerous lenders as not many of them were interested in investing in a property next to a gas station. After much effort, though, I got him an approval from one of my lenders. However, when I visited the property I realized that the property was in a bad shape. I connected the borrower with one of my known contractors to help my client get the property in livable condition. Once the renovation was completed, we ordered an appraisal. The property appraised at the desired amount, and my borrower not only managed to pay off his previous lender but also took out money to pay off some of his other high interest debts.

I take pride in being a full-service mortgage agent, offering a turnkey solution to my clients – from start to finish. This mortgage was just a case in point.

Self-employed Client with Cash Income

A mechanic in Markham needed my help to get a mortgage for an investment property that he had purchased in late 2018. The deal was to close in April 2019. Like any other self employed professional, the income that he declared in his tax returns didn’t fairly represent his actual income potential. It wasn’t sufficient to carry the mortgage on his two properties (primary residence and the investment property that he purchased), especially with the new stress test.

The simple solution to the aforementioned problem was to work with a B lender who will allow him to state his income. In this case, my client was required to produce 6 months of his business bank statements. The gross income, as derived from these bank statements, was then annualized. Finally, the client declared a fair percentage to be deducted from that income for business expenses.

Where this deal got more challenging was in the fact that the mechanic had extensive cash income. His bank statements would frequently show large cash deposits. This was the amount that the mechanic would deposit after he had collected a certain amount of cash. However, the underwriter needed proof. I worked with my client to look at all invoices for a couple of months where there were large cash deposits. We confirmed that the invoices for those months matched with the cash deposited in the bank account.

This explanation helped us get the deal done. The mortgage is closing next week.

Mortgage with Overseas Downpayment

One of my clients (and newcomer to Canada) was looking for a mortgage to help him purchase his first property in the country. He landed in Canada in June 2017 as a work permit holder after having received a transfer from the company where he worked. His work permit was converted into a Canadian Permanent Residence in 2018. My lenders’ New to Canada program was best suited for the client’s requirement.

There were a couple of obstacles that we had to tackle, though. Firstly, he had changed his job in February 2019 and had only been working at the new company for a month. I solved that problem by providing the lender with my client’s previous job letter and his 2018 T4. Plus, the Letter of Employment from the new company confirmed that this position was permanent (with no probation) and that further helped our case.

The second obstacle was that around 70% of the downpayment (over $100,000) was being transferred from overseas. My client had sold a property in his home country, and he was using those funds as downpayment for his Canadian property. I submitted his Sale agreement for the property that he sold and 3 months of his overseas bank statements to confirm that the downpayment amount was not borrowed. I also provided proof for the wire-transfer of the money to his Canadian bank account, and that sufficed in helping us get a commitment.

The deal is closing in early May and my client’s family can’t wait to get into their new home.

March Mortgage Case Studies

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.

Mortgage for House with Legal Basement (5% down-payment)

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.

2nd Mortgage at Prime + 1.0%

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.

Are Canadian Mortgage Rates Going Down?

We are a couple months past Christmas, but Canadian homeowners may be in for more treats in the form of a possible mortgage rate cut.

Since the summer of 2017, hard-working Canadian families have been burdened by the regularly escalating mortgage interest rates.  In total, there were 5 quarter-point rate hikes from July 2017 to October 2018.  The Bank of Canada, however, seemed keen to continue increasing its overnight rate till it reached its neutral range between 2.5% and 3.5% (current overnight rate is 1.75%).  This information made most experts believe that there was room for at least a couple of rate hikes in 2019.

No Rate Hikes Since October 2018

Things, however, seem to have changed a little since late 2018.  There were concerns being raised about more than anticipated slowdown of the housing market caused by the rate hikes and new mortgage regulations.  Moreover, business investment into Canada has been sluggish in early 2019 and the robust GDP growth has suddenly slowed down.  According to available stats, Canadian GDP in fact decreased in November and December.  These factors have created an opinion in the market that the rates may not go up immediately.  Moreover, mortgage lenders have started offering discounts on their fixed rate mortgage; which is an indication that they believe the rates are going to stay put in the short-term.

The Possibility of a Rate Cut

Capital Economics, a London based research consultancy, has now gone a step further and predicted a rate cut before the end of 2019.  This prediction is based on the recent tone from senior officials of the Bank of Canada.  Moreover, other economic factors are also suggesting that the Bank of Canada may be forced to consider a rate-cut by the end of 2019 to provide a boost to the housing market.

What does this mean for you?

These are still early days in 2019, and as we know things can change very fast.  If GDP strengthens again and inflation goes further up, opinions and predictions may change.  This news of a possible rate cut may, however, bolster the housing market just before the crucial spring season sets in.  In my opinion, housing prices will go up in 2019 and this may be a good year for you to get into the market and gain from the low real-estate prices.

On the other hand; if your mortgage is coming up for renewal, you can consider getting into a variable mortgage as that will help you avail the benefit of any rate cut that happens during your mortgage term.