Mortgage Renewal

Michael Hallett • Mar 01, 2018
Is your mortgage coming up for renewal this year?

There is a good chance that you or someone know has a mortgage coming due. 47% of Canadians, almost 1 out of every 2 households, that currently have financing in place will mature within the next 12 months with a major lender in Canada.

Here are a couple simple rules to follow if you, a friend, a family member or colleague are renewing your mortgage this year.

  • DO NOT just simply sign the renewal letter that comes in the mail.
  • INVESTIGATE your options.

70% of all mortgagors simply sign the renewal letter that comes in the mail. You would think that because you have been with the current lender for so long that you would receive the BEST rate out there. NEWS FLASH, that is 100% false. Remember, lenders are in business of making money for their shareholders. Your current lender has done their homework, you should do yours. They know that most of the borrowers will sign and send back the form for ease and convenience. We are lazy by nature and we possess too much trust. As finance consumers, there are scenarios I’ve seem where we are leaving 20-40 (0.20% - 0.40%) basis points on the table.

I recently read an article online that indicated the average mortgage amount in the metro Vancouver area was $438,716 for 2016. Let’s round that amount to $450,000 for ease of calculation. For every 0.25% difference the mortgage payment increases (or decreases) $13 per every $100,000 extended. If your current lender offered you a rate 0.25% higher than another lender then this scenario would yield an annual increase of $936. Are you able to invest 4-5 hours of your time to save that kind of money? Heck ya you can! That is $187.20 - $234 per hour.

Renewing with your existing lender may or may not be your only option. When 47% of you out there receive the renewal letter in the mail this year, I have 936 reasons why I would strongly advise you to reach out to me to discuss ALL your options – switching lenders to save money and/or leveraging equity for financial planning purposes.
Here is an example of how I just re-financed my home to access my equity. We were able to obtain a HELOC (Home Equity Line of Credit) mortgage product from a major Canadian charter bank.

  • Current residence appraised at $1.15MM.
  • Current mortgage balance, $445,000.
  • Maximum loan limit, $920,000 (80% of market value: 1,150,000 x 80%).
  • Opted to secure the current balance into a variable rate mortgage
  • The equity of $475,000 was set-up access from a line of credit
  • These clients now have access to funds for any future needs: renos, emergency, investment opportunities, post-secondary education for their children.

But while a HELOC allows for product diversification and long-term planning, it is not for everyone. It can be a bad idea if it’s just used as access to easy cash. One needs to possess high self-discipline, as the funds are extremely accessible. A HELOC is also not available to all homeowners as there must be greater than 20% equity in the home before a lender will consider it.

With 13 modifications to the lending policies since 2006 (https://hallettmortgage.ca/the-new-normal/) the time to plan is now. If I were to attempt the same re-financing maneuver today to leverage equity I would qualify for 20% less ($95,000) or $380,000. This would be one less rental property added to the portfolio. Before anymore changes happen, you should consider accessing your money today.

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MICHAEL HALLETT
Mortgage Broker

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The Property Matters in Mortgage Financing

By Michael Hallett • 08 May, 2024
When looking to qualify for a mortgage, typically, a lender will want to review four areas of your mortgage application: income, credit, downpayment/equity and the property itself. Assuming you have a great job, excellent credit, and sufficient money in the bank to qualify for a mortgage, if the property you’re looking to purchase isn’t in good condition, if you don't have a plan, you might get some pushback from the lender. The property matters to the lender because they hold it as collateral if you default on your mortgage. As such, you can expect that a lender will make every effort to ensure that any property they finance is in good repair. Because in the rare case that you happen to default on your mortgage, they want to know that if they have to repossess, they can sell the property quickly and recoup their money. So when assessing the property as part of any mortgage transaction, an appraisal is always required to establish value. If your mortgage requires default mortgage insurance through CMHC, Sagen (formerly Genworth), or Canada Guaranty, they’ll likely use an automated system to appraise the property where the assessment happens online. A physical appraisal is required for conventional mortgage applications, which means an appraiser will assess the property on-site. So why is this important to know? Well, because even if you have a great job, excellent credit, and money in the bank, you shouldn’t assume that you’ll be guaranteed mortgage financing. A preapproval can only take you so far. Once the mortgage process has started, the lender will always assess the property you’re looking to purchase. Understanding this ahead of time prevents misunderstandings and will bring clarity to the mortgage process. Practically applied, if you’re attempting to buy a property in a hot housing market and you go in with an offer without a condition of financing, once the appraisal is complete, if the lender isn’t satisfied with the state or value of the property, you could lose your deposit. Now, what happens if you’d like to purchase a property that isn’t in the best condition? Being proactive includes knowing that there is a purchase plus improvements program that can allow you to buy a property and include some of the cost of the renovations in the mortgage. It’s not as simple as just increasing the mortgage amount and then getting the work done, there’s a process to follow, but it’s very doable. So if you have any questions about financing your next property or potentially using a purchase plus improvements to buy a property that needs a little work, please connect anytime. It would be a pleasure to walk you through the process.

Getting a Mortgage While on Parental Leave

By Michael Hallett • 01 May, 2024
Chances are if the title of this article piqued your interest enough to get you here, your family is probably growing. Congratulations! If you’ve thought now is the time to find a new property to accommodate your growing family, but you’re unsure how your parental leave will impact your ability to get a mortgage, you’ve come to the right place! Here’s how it works. When you work with an independent mortgage professional, it won’t be a problem to qualify your income on a mortgage application while on parental leave, as long as you have documentation proving that you have guaranteed employment when you return to work. A word of caution, if you walk into your local bank to look for a mortgage and you disclose that you’re currently collecting parental leave, there’s a chance they’ll only allow you to use that income to qualify. This reduction in income isn’t ideal because at 55% of your previous income up to $595/week, you won’t be eligible to borrow as much, limiting your options. The advantage of working with an independent mortgage professional is choice. You have a choice between lenders and mortgage products, including lenders who use 100% of your return-to-work income. To qualify, you’ll need an employment letter from your current employer that states the following: Your employer’s name preferably on the company letterhead Your position Your initial start date to ensure you’ve passed any probationary period Your scheduled return to work date Your guaranteed salary For a lender to feel confident about your ability to cover your mortgage payments, they want to see that you have a position waiting for you once your parental leave is over. You might also be required to provide a history of your income for the past couple of years, but that is typical of mortgage financing. Whether you intend to return to work after your parental leave is over or not, once the mortgage is in place, what you decide to do is entirely up to you. Mortgage qualification requires only that you have a position waiting for you. If you have any questions about this or anything else mortgage-related, please connect anytime. It would be a pleasure to work with you.
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