I've Never Heard of That Lender Before?

Sabeena Bubber • Oct 27, 2017

One of the benefits of working with an independent mortgage professional; compared to getting your mortgage through a single institution, is choice. And as there are even more mortgage rules coming into place January 1st 2018, ( read about them here ) now more than ever, having access to a wide variety of mortgage products is going to ensure you get the mortgage that best suits your needs.

Working with an independent mortgage professional will give you access to varying products from many different lenders, some of these lender you may have never even heard of, but that's okay. Sure, RBC, BMO, and CIBC, are more household names compared to say, MCAP, RMG, or Merix Financial, but as each lender has a different appetite for risk (there is always a risk when lending money) how do you know which lender is going to have the products that are going to be the best fit for you?

Typically the conversation develops into something like this: "I've never heard of this lender before, are they safe, I mean... I have no idea who they are"? And although that is a valid question, there is a simple answer. Yes. Yes they are safe. All the lenders we work with are reputable and governed by the same regulator as the big banks. Ultimately, you have their money, they don't have yours!

But let's answer a few of the common questions often asked about these lenders accessed only through an independent mortgage professional.

Why haven't I heard of any of these lenders?

Instead of spending all their money on huge marketing campaigns (like the Canadian big banks) which drives up the cost of their product, broker channel lenders rely on competitive products and independent mortgage professionals to secure new clients.

What happens if my lender gets purchased by another lender?

This actually happens quite a bit, however, it's business as usual for you. Even if your mortgage contract gets sold, the terms of your mortgage stay intact and nothing changes for you.

What happens if my lender goes bankrupt or is no longer lending at the end of my term?

This would be the same as if the lender was purchased by another lender. The only difference is, at the end of your term, we would have to find another lender to place your next term. And as this is already good practice, it's business as usual. Again, you have their money, they don't have yours. The contract would stay in force.

Why don't these lenders have physical locations?

Much like why you haven't heard of these lenders, they save the money on advertising and infrastructure, and instead focus on creating unique products to give their clients more choice. These lenders rely on independent mortgage professionals for awareness and compete on product not public awareness.

Do they really have better products?

Yes. Well, I guess we have to define what is meant by better products. If by better products you mean a variety of products that suit different individuals differently, then yes. Across the board, each lender has a different appetite for a different kind of risk. For example, while one lender might not include child tax income as part of your regular income, another might. While one lender might look favourably on a certain condo development, another might not. Each lender sees things a little differently. Knowing the products and preferences at each lender is what we do!

When it comes to mortgage qualification, some broker channel lenders are more flexible than others (or the banks) and offer different programs that cater to self-employed, people who are retired, own multiple properties, or rely on disability income. While as it relates to the features of the mortgage, different lenders offer many different features. Some mortgages can be paid off at an accelerated pace with little to no penalty, some accomodate different payment structure, some products are set at lower rate, but sacrifice flexibility.

At the end of the day, the goal should be to qualify for a mortgage that has the features that suit your individual needs. Regardless of which lender that is. If you would like to talk about your financial situation, and see which lender best suits your needs, please don't hesitate to contact me anytime!

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Construction Assignments

By Sabeena Bubber • 08 May, 2024

One of the benefits of working with an independent mortgage professional is having lots of great financing options! Rather than dealing with a single lender with one set of products, independent mortgage professionals work with multiple lenders who offer a wide selection of mortgage financing options that provide more choice. Increased choice in mortgage products is beneficial when your situation isn’t “normal,” or you don’t quite fit the profile of a standard buyer. Purchasing a new construction home through an assignment contract would be a great example of this. Purchasing a new construction home through an assignment contract can be tricky as not every lender wants the added perceived risk of dealing with this type of transaction. Most of these lenders won’t come out and say it; instead, they add a significant list of qualifying conditions to make the process harder. The good news is, there are lenders available exclusively through the broker channel that have favourable policies for assignment purchases. Here are some of the highlights: All standard purchase qualifications apply, including applicable income verification, established credit, and required downpayment Assignments can be at the original purchase price or current market value Minimum 620 beacon score with no previous bankruptcies or consumer proposals The full downpayment must come from the purchaser and not include any incentives from the seller. As far as documentation goes, the lender will want to see the original purchase agreement signed by all parties, the MLS listing, the assignment agreement signed by the builder, the original purchaser, and the new buyer. The lender will also want to see the side agreement between the original purchaser and the new buyer, including the amended purchase price. The lender will want to substantiate the value through a full appraisal. Now, as every situation is different, this list of conditions is in no way exhaustive but meant to show that assigning a new construction purchase contract is doable while highlighting some of the terms necessary to secure financing. If you’re looking to purchase new construction through an assignment contract, or if you’d like to discuss purchasing a home through traditional means, please connect anytime! It would be a pleasure to outline the mortgage products on the market that won’t limit your financing options!

Understanding a Spousal Buyout Mortgage

By Sabeena Bubber • 01 May, 2024

If you’re going through or considering a divorce or separation, you might not be aware that there are mortgage products designed to allow you to refinance your property and buy out your ex-spouse. If you’re like most people, your property is your most significant asset and is where most of your equity is tied up. If this is the case, it’s possible to structure a new mortgage that allows you to purchase the property from your ex-spouse for up to 95% of the property’s value. Alternatively, if your ex-spouse wants to keep the property, they can buy you out using the same program. It’s called the spousal buyout program. Here are some of the common questions people have about the program. Is a finalized separation agreement required? Yes. To qualify, you’ll need to provide the lender with a copy of the signed separation agreement, which clearly outlines asset allocation. Can the net proceeds be used for home renovations or pay off loans? No. The net proceeds can only buy out the other owner’s share of equity and/or pay off joint debt as explicitly agreed upon in the finalized separation agreement. What is the maximum amount that you can access through the program? The maximum equity you can withdraw is the amount agreed upon in the separation agreement to buy out the other owner’s share of the property and/or retire joint debts (if any), not exceeding 95% loan to value. What is the maximum permitted loan to value? The maximum loan to value is the lesser of 95% or the remaining mortgage + the equity required to buy out other owner and/or pay off joint debt (which, in some cases, can total < 95% LTV. The property must be the primary owner-occupied residence. Do all parties have to be on title? Yes. All parties to the transaction have to be current registered owners on title. Your solicitor will be required to confirm this with a title search. Do the parties have to be a married or common-law couple? No. Not only will the spousal buyout program support married and common-law couples who are divorcing or separating, but it’s also designed for friends or siblings who need an exit from a mortgage. The lender can consider this on an exception basis with insurer approval. In this case, as there won’t be a separation agreement, a standard clause will need to be included in the purchase contract to outline the buyout. Is a full appraisal required? Yes. When considering this type of mortgage, a physical appraisal of the property is required as part of the necessary documents to finalize the transaction. While this is a good start to answering some of the questions you might have about getting a mortgage to help you through a marital breakdown, it’s certainly not comprehensive. When you work with an independent mortgage professional, not only do you get a choice between lenders and considerably more mortgage options, but you get the unbiased mortgage advice to ensure you understand all your options and get the right mortgage for you. Please connect anytime; it would be a pleasure to discuss your needs directly and provide you with options to help you secure the best mortgage financing available. Also, please be assured that all communication will be held in the strictest of confidence.

Why Downpayment Source Matters

By Sabeena Bubber • 24 Apr, 2024

If you’re looking to purchase a property, although you might not think it matters too much, the source of your downpayment means a great deal to the lender. Let’s discuss the lender requirements, what your downpayment tells the lender about your financial situation, a how downpayment helps establish the mortgage loan to value. Anti-money laundering Lenders care about your downpayment source because, legally, they have to. To prevent money laundering, lenders have to document the source of the downpayment on every home purchase. Acceptable forms of downpayment are money from your resources, borrowed funds through an insured program called the FlexDown, or money you receive as a gift from an immediate family member. To prove the funds are from your resources and not laundered money from the proceeds of crime, you’ll be required to provide bank statements showing the money has been in your account for at least 90 days or that you’ve accumulated the funds through payroll deposits or other acceptable means. Now, if you’re borrowing all or part of your downpayment, you’ll need to include the costs of carrying the payments on the borrowed downpayment in your debt service ratios. If you’re the recipient of a gift from a direct family member, you’ll need to provide a signed gift letter indicating that the funds are a true gift and have no schedule for repayment. From there, you’ll need to show the money deposit into your account. Financial suitability Lenders care about the source of the downpayment because it is an indicator that you are financially able to purchase the property. Showing the lender that your downpayment is coming from your resources is the best. This demonstrates that you have positive cash flow and that you’re able to save money and manage your finances in a way that indicates you’ll most likely make your mortgage payments on time. If your downpayment is borrowed or from a gift, there’s a chance that they’ll want to scrutinize the rest of your application more closely. The bigger your downpayment, the better, well, as far as the lender is concerned. The way they see it, there is a direct correlation between how much money you have as equity to the likelihood you will or won’t default on their mortgage. Essentially, the more equity you have, the less likely you will walk away from the mortgage, which lessens their risk. Downpayment establishes the loan to value (LTV) Thirdly, your downpayment establishes the loan to value ratio. The loan to value ratio or LTV is the percentage of the property’s value compared to the mortgage amount. In Canada, a lender cannot lend more than 95% of a property’s value. So, if you’re buying a home for $400k, the lender can lend $380k, and you’re responsible for coming up with 5%, $ 20k in this situation. But you might be asking yourself, how does the source of the downpayment impact LTV? Great question, and to answer this, we have to look at how to establish property value. Simply put, something is worth what someone is willing to pay for it and what someone is willing to sell it for. Of course, within reason, having no external factors coming into play. When dealing with real estate, an appraisal of the property will include comparisons of what other people have agreed to pay for similar properties in the past. You’ll often hear of situations where buyers and sellers try to inflate the sale price to help finalize the transaction artificially. Any scenario where the buyer isn’t coming up with all of the money for the downpayment, independent of the seller, impacts the LTV. All details of a real estate transaction purchase and sale have to be disclosed to the lender. If there’s any money transferring behind the scenes, this impacts the LTV, and the lender won’t proceed with financing. Non-disclosure to the lender is mortgage fraud. So there you have it; hopefully, this provides context to why lenders ask for documents to prove the source of your downpayment. If you’d like to talk about mortgage financing, please connect anytime; it would be a pleasure to work with you.