Mortgage Articles

48% of Canadian homeowners are 55+ and many find that their homes represent a significant portion of their net worth. For retirees looking to access their home equity without selling or moving, a Canadian reverse mortgage offers an ideal solution. However, this financial product isn’t without its complexities.

On September 24, 2024, the federal government announced expanded parameters for lenders and mortgage default insurers to begin offering insured mortgages as of December 15, 2024. The expanded parameters include: expanding the eligibility for 30-year amortizations and increasing the $1 million purchase cap to $1.5 million. Eligibility for 30-year amortizations for insured mortgages To qualify for the 30-year amortization: the loan to value must be 80% or higher; and the borrower must be a first-time homebuyer OR purchaser of a new build. There is a premium of 0.20% on the 30-year amortization

There seems to be some confusion about what it means to co-sign on a mortgage… and any time there is confusion about mortgages, it’s time to chat with Kelly Hudson, your trusted mortgage expert!! Thanks to tighter mortgage qualification rules and higher-priced real estate - particularly in the greater Vancouver and Toronto areas - it is not easy to qualify for a mortgage on your own merits. Let’s look at why you would want to have someone co-sign your mortgage and what you need to know before, during, and after the co-signing process. The ‘stress test’ has been especially “stressful” for borrowers. As of Jan. 1, 2018, all homebuyers need to qualify at the rate negotiated for their mortgage contract PLUS 2% OR the government posted rate which varies (as of Oct. 2024 5.25%), which ever is higher . If you have less than 20% down payment, you must purchase Mortgage Default Insurance and qualify at 5.25%. If you must qualify at a rate higher than what you are paying… then your money doesn’t go as far… and you qualify for a smaller mortgage. In the wise words of Mom’s & Dad’s of Canada… “if you can’t afford to buy a home now, then WAIT until you can!!” BUT wait… in some housing markets (especially Vancouver & Toronto), waiting it out could easily mean missing out, depending on how quickly property values are appreciating in the area you want to purchase. If you can’t income qualify for a mortgage with your current provable income along with GREAT credit, your lender’s going to ask for a co-signer. In order to give borrowers, the best mortgage rates, Lenders want the best borrowers!! They want someone who will pay their mortgage on time as promised with no hassles. Co-sign vs Guarantor Short version: The main difference between a guarantor and a co-signer is that the co-signer is a title holder and a guarantor is not. However, both individuals are responsible for mortgage payments being made to the lender. Someone can co-sign your mortgage and become a co-borrower , the same as a spouse or anyone else who you are buying the home with. It’s basically adding the support of another person’s income and credit history to those initially on the application. The co-signer will be put on the title of the home and lenders will consider them equally responsible for the debt should the mortgage go into default. Another option is a guarantor . If a co-signer decides to become a guarantor, then they’re backing the loan and essentially vouching for the person getting the loan that they’re going to be good for it. The guarantor is going to be responsible for the loan should the borrower go into default. Most lenders prefer a co-signer going on title. More than one person can co-sign a mortgage although it’s typically the parent(s) or a close relative of a borrower who steps up and is willing to put their neck, income, and credit bureau on the line. Ultimately, if the lender is satisfied that all parties meet the qualification requirements and can lessen the risk of their investment, they’re likely to approve your mortgage. Before signing on the dotted line Short Version: A co-signer, in essence, co-owns the home with the individual living in it and paying the mortgage. A co-signer must sign all the mortgage documents and their name will appear on the title of the property. When you co-sign on a mortgage, you become just as responsible for the mortgage loan as the primary borrower — and you can suffer serious consequences if they make late payments or default. Anyone that is willing to co-sign a mortgage must be fully vetted, just like the primary applicant(s). They will have to provide all the same documentation as the primary applicant(s). Being a co-signer makes you legally responsible for the mortgage, exactly the same as the primary applicant(s). Please note as a Co-signer your future borrowing plans will be affected Since the mortgage will also appear on your credit report, this additional debt could make it tougher for you to qualify for additional credit down the road. For example: if you dreamed of one day owning a vacation home, just know that a lender will have to consider 100% of your co-signed mortgage as part of your overall debt-to-income ratio . You are allowing your name and all your information to be used in the process of a mortgage, which is going to affect your ability to borrow anything in the future. If the Co-signer already owns a home, then they could be charged capital gains on the property they co-signed for IF the property sells for more than the purchase price (contact your accountant for tax advice). In Canada, capital gains tax is charged on the profit made from selling real estate, including homes, for more than their purchase price. However, there is an exemption for primary residences. If the home was your primary residence for the entire period of ownership, you are generally exempt from paying capital gains tax on the sale. A primary residence is where you or your family lived most of the time, and only one property per family can be designated as such per year. This gets complicated for co-signers – since they rarely live in the home they are co-signing for. For non-primary residences, (rental, investment properties, co-signed properties) capital gains tax applies to the profit made from the sale. In Canada, the CRA taxes 50% of gains up to $250,000, and 66.7% of gains over $250,000. For example, selling a rental property that you purchased for $300K and sold for $400K would result in a $100K capital gain. Typically, we’ll put the co-signer(s) on title for the home/mortgage at 1% of home ownership... then IF there were a capital gain, they would pay 1% of their share of the capital gain (contact your accountant for tax advice). If someone is a guarantor , then things can become even trickier as the guarantor isn’t on title to the home. That means that even though they are on the mortgage, they have no legal right to the home itself. If anything happens to the original borrower, where they die, or something happens, they’re not on the title of that property but they’ve signed up for the mortgage. The Guarantor doesn’t have a lot of control which can be a scary thing. In my opinion, it’s much better for a co-signer to be a co-borrower on the property, where you can be on title to the property and enjoy all the legal rights afforded to you. The Responsibilities of Being a Co-signer Co-signing can really help someone out, but it’s also a big responsibility. When you co-sign for someone, you’re putting your name and credit on the line as security for the loan/mortgage. If the person you co-sign for misses a payment, the lender or other creditor can come after you to get their money. Any late mortgage payments would also show up on your credit report, which could impact your own loan/mortgage qualification in the future. Because co-signing a loan has the potential to affect both your credit and finances, it’s extremely important to make sure you’re comfortable with the person you’re co-signing for. You both need to know what you’re getting into. I recommend Independent Legal Advice between all co-borrowers. Co-signing is NOT a life sentence. Just because you need a co-signer to get a mortgage does not mean that you will always need a co-signer. In fact, as soon as you can credit & income qualify for the mortgage on your own (without your co-signer) – you can ask your lender to remove the co-signer from title. It is a legal procedure so there will be a cost associated with the process, but doing so will remove the co-signer from your mortgage loan and release them from the responsibility of your mortgage. Removing a co-signer technically counts as changing the mortgage, so you need to ensure that the lender you chose doesn’t consider removing a co-signer (changing the covenant) as breaking your mortgage. There could be large penalties associated with doing so. For more information, check out my BLOG Mortgage Penalties – Ouch… How Much??

Imagine you're about to apply for a mortgage to buy a house, and suddenly, you realize the mortgage lender is asking for a lot of paperwork. If you've never applied for a mortgage before, it can feel overwhelming. But the good news is, this isn't because lenders or mortgage brokers want to make your life difficult! It's because buying a home is one of the biggest purchases most people will ever make, and the Canadian mortgage system is carefully regulated by the government to make sure everything goes smoothly and fairly.

Do you dream of buying your first home but worry that your credit history might stop you? Well, here’s some good news: you don’t need a perfect credit score to own a home! Let’s explore how you can still achieve your dream of homeownership, even if your credit isn’t perfect.

Understanding Mortgage Fraud Mortgage fraud is when people lie or cheat to get a mortgage loan or better loan terms than they should. This means giving false information on purpose. Different people can commit mortgage fraud, from individuals looking for loopholes to people within the mortgage industry itself. They might do this to own a home, take advantage of rising interest rates, or make a lot of money quickly. In 2023, the Canadian Anti-Fraud Centre processed more than 63,000 reports of fraud, resulting in staggering losses totalling $569 million. These figures likely underestimate the true extent of fraud, as the Anti-Fraud Centre estimates that only 5-10% of incidents are reported. While fraud can impact anyone, older Canadians are particularly vulnerable. Types of Mortgage Fraud Here are the different types of mortgage fraud, as explained by the Canada Mortgage and Housing Corporation (CHMC): Fraud for Profit: This happens when someone sells a property at a price much higher than it’s worth, tricking mortgage lenders or buyers about its true value. Fraud for Commission: Using false information to get more mortgages, increasing their commissions. Fraud for Shelter: People use fake documents or lie about their income or credit history to get bigger loans. Straw Buyer Schemes: Someone pretends to be a legitimate buyer to get a mortgage on a home they don’t plan to pay for. Real Estate Title Fraud: Thieves steal a homeowner’s identity to refinance or sell their home without them knowing, using fake IDs or forged documents. Protecting Yourself from Mortgage Fraud Here’s how to help avoid mortgage fraud: Encourage honesty in loan applications. Don’t add your name to someone else’s mortgage without a clear plan for payments. Seek independent legal advice. Conduct thorough property assessments/appraisal Check the credentials of your real estate professionals. What Mortgage Fraud Looks Like Both homebuyers and the professionals they work with can commit mortgage fraud. Common cheats include: Faking or altering paperwork. Not communicating or disclosing important information. Making verbal agreements or accepting cash fees. Lying about job status, making fake pay stubs, or lying about a property’s purpose.

Living in the country has a lot of appeal for many people. Imagine waking up to the sound of birds instead of traffic, having a big yard to play in, and enjoying the peace and quiet that city life often lacks. A country home offers ample space, a place to raise your family, and the beauty of nature right at your doorstep. However, buying a rural home can be quite different from purchasing a home in the city, especially when it comes to getting a mortgage. Let’s explore some important things to consider before making the move to the countryside. Understanding Mortgage Risks When lenders look at your mortgage application, they are primarily concerned about managing risk. Higher risk means higher interest rates. The main risk for lenders is whether you'll repay the loan as agreed. If you don’t, they might have to take your home and sell it to get their money back. Foreclosure Hassles : Lenders do not want to own your property. Foreclosing on a home is a long and complicated process that involves evicting the current owners, listing the property for sale, and waiting for it to sell. This process can take months & months, especially in rural areas. Rural Property Challenges : Selling a rural home can be more difficult compared to an urban one. The demand for homes in the country is usually lower, meaning it could take longer to find a buyer. To reduce their risk, lenders have special rules for rural properties. What Counts as a Rural Property? In Canada, a rural property is typically defined as land located outside urban areas, characterized by low population density, primarily used for agriculture, forestry, or natural resource activities, and often lacking extensive infrastructure. 7 Key Considerations Before Buying a Country Home: 1. Zoning Matters Many lenders are hesitant to mortgage properties zoned as agricultural. Why? It’s all about risk again. Foreclosure on Farms : Foreclosing on a farm means taking away a farmer's livelihood, which involves complex legal hurdles designed to protect farmers. Non-Farming Uses : If you’re not planning to farm, financing a rural home can be similar to financing an urban home. 2. Water and Septic Systems In the country, you need to manage your own water and sewer systems. Water Tests : If your water comes from a well, lenders might require a potability and flow test to ensure the water is drinkable. Septic Systems : Check the septic system with a qualified inspector. Make sure the seller guarantees that the system is in good working order until closing. Repairs can be costly, so include these checks in your buying conditions. 3. Land and Appraisal Lenders when looking at the value of your property typically consider the house, one garage (outbuilding), and up to 10 acres of land. Appraisal Costs : Rural property appraisals can be more expensive because the appraiser has to travel further. The appraised value might also be lower than expected since rural properties don’t sell as quickly as city homes. Covering the Difference : If you love the property, be prepared to pay the difference between the selling price and the appraised value. 4. Wood Energy Technology Transfer (WETT) If the house has a wood stove or fireplace, consider making your offer conditional on a satisfactory WETT inspection. This ensures the wood-burning unit is safe and properly installed. 5. Title Insurance Rural lands, especially larger or remote ones, may have been used for dumping toxic chemicals. Check the Title : Investigate the property’s title for any history of hazardous waste. Title insurance can protect you from potential issues. Insurance Requirements : Your insurance company might require title insurance before issuing a policy. 6. House Insurance and Fire Safety Lenders require insurance to protect their investment. Getting home insurance in the country can be tricky and expensive due to the distance from fire hydrants and stations. If you can't get insurance, it might delay or prevent your mortgage from closing. 7. Work with a Realtor Who Knows about Rural Properties Hire a real estate agent knowledgeable about rural properties and local zoning laws. Zones and the related details are determined by each local government so there may be variation between communities throughout each province.

Approximately 20% of Canadians are self-employed - choosing to pave their own path, rather than working for someone else. If you’re self-employed, getting approved for a mortgage can be challenging, however with my guidance, it doesn't have to be that way. Why, why, why it is so challenging for entrepreneurs to obtain a mortgage in Canada? In 2021 there were 2.7 million Canadians who are self-employed. Regrettably, self-employed income is not as easy to document as someone who’s traditionally employed. Most people that are self-employed are motivated to decrease their earnings to avoid paying tax through legitimate expenses and personal deductions. As a result, much of one’s self-employed income may not show up on paper. Work with Professionals. To navigate the complexities of getting a mortgage as a self-employed individual, you need to hire a qualified bookkeeper and a Chartered Professional Accountant (CPA). Their job is to know the ins and outs of taxes so that you can focus on growing your business. Here’s what you need to do: Keep your financial affairs up to date. Ensure your CPA prepares your financials. Pay your taxes. Government always gets first dibs on any money and Lenders won’t be interested in you if you haven’t paid your taxes. Document income for 2-3 years. Being able to document income for the past 2-3 years gives you more lending options. Self-employed home buyers, who can document proof of income, can generally access the same mortgage products and rates as traditional borrowers. Tips for Self-Employed Applying for a Mortgage. To ensure the mortgage application process goes smoothly, follow these tips: Get Your Finances In Order and Pay Down Your Debt!! Every $500/month in loan payments lowers your mortgage eligibility by about $100,000. Similarly, every $12,000 in credit card debt lowers your mortgage eligibility by about $100,000 Do you see a theme here?? Pay down your debt! Resist buying or leasing a new vehicle OR taking on any additional debt prior to buying your home. 2. Have Two to Three Years’ Worth of Your Documentation. Gather all your self-employed supporting documentation for your mortgage broker. This typically includes tax returns, business financial statements, and bank statements. 3. Show Stability & Consistency Lenders prefer self-employed borrowers who work in a business that’s established and have expertise in that field. Demonstrating stability and consistency in your business can significantly boost your chances of getting approved. Specialized Mortgage Programs for Self-Employed Individuals As a mortgage professional with access to many lenders, I specialize in helping self-employed individuals acquire the mortgage they need. Everyone’s situation is as unique as their business. We will look at the whole picture to determine which lender best suits your needs and which program will give you the best options to increase your mortgage capacity. Here are some available options: Addbacks or Gross Up The easiest route is to use your last two years' NET income to get you qualified. We can either gross up your net income by 10-20% (lender specific) or 'Add Back' eligible business expenses to increase your net income. If we can make this work, it gives you access to all the lenders. 2. Stated Income Program This allows us to “state” your income. Lenders will look at your gross and net income, and we can state a reasonable income somewhere between the two. 3. Net-worth Program If the first two options don’t work and you have a high “liquid” net worth, we can use lenders who will use your verifiable “liquid” assets to boost your income for qualification. 4. Net Income After Tax Program Have a moderate personal income and some income in your operating company? This program allows us to use your NIAT (Net Income After Taxes) to help you qualify. 5 . Bank Statements Program This program allows you to qualify by annualizing your deposits for the last six months and backing out minor expenses. We then can use that income to qualify you.