New To Canada Mortgage and Lending Options

Qualified homebuyers who have immigrated or relocated to Canada within the last 5 years are eligible to purchase a property with as little as a 5% down payment.

Eligible Properties for purchase include single family homes with up to 2 suites. (Note: clients are required to live in one of the suites).

Minimum Downpayment Required: 5% of purchase price. (Note: 5% needs to come from borrowers own resources, additional can be a gift)

Clients are required to provide the following:

• Proof of Employment: employment letter with an overview of your salary and employment status.
• Proof of down payment: bank or investment statements showing 90 days history on the down payment funds.
• Proof of Acceptable Credit can be provided by the following: Landlord reference letter and 12 months bank statements, Utility Bills, Telephone bills, Cable bills, Insurance payments
• A Firm Purchase Contract

5 Ways To Pay For Your Renovation

1. Use a Home Equity Line of Credit. Typically, you can access up to 80% of the equity in your home. This means that if you own a home worth approximately $400,000, you should be able to access $320,000 of the equity. If you currently still owe $200,000 on your home, you should be able to obtain a home equity line of credit for $120,000. The rate for a home equity line of credit it typically Prime (3.95%) + 0.50%. This can often be structured without touching your current mortgage.
   
   
2. Refinance your home. As with a Line of Credit, when you are refinancing you will be able to borrow up to 80% of the value of your home. The benefit of refinancing over a secondary loan like a Home Equity Line of Credit is that the interest rate is much lower (currently under 3%) your payments will be fixed for the mortgage term. If you are planning a major renovation, we can also structure a “Refinance plus Improvements” which allows us to refinance to 80% of the AFTER renovation price of the home!
   
   
3. Secure a second mortgage. Typically, this is the last option for a home renovation, but in certian circumstances it might be the best way to proceed. A second mortgage leaves your first mortgage in place, which may preserve your mortgage rate and terms. The second mortgage, like the Line of Credit and Refinance, is secured against the remaining equity in your home. Occasionally, second mortgages could go over 80% loan to value and help you secure those additional funds needed!
   
   
4. Use those muscles! Sweat Equity! One of the largest costs in your renovation will be the cost of labour! To decrease the price of your overall project, consider donating some Saturdays and Sundays to help the project along. Make sure that if any permits are needed, ie: building, plumbing, electrical that you hire a professional, but if you’re able, painting, changing fixtures and knobs could drastically improve the look at a small cost when done yourself!
   
   
5. Save Money. Yup – that’s right – just save and save and save. I’m talking myself out of a job here! You may have to cut back on discretionary purchases and find places to save money here and there for a few months. But when you do that, you will be able to pay for your home renovations in full without borrowing from a lender. The obvious downside to using cash is the fact that you may have to delay your project for several months.

Key Point: If you are refinancing your home to renovate with the intention to sell, it is essential that you speak to a mortgage broker. Refinancing your home into a 5 year, fixed rate mortgage product at a major bank could result in massive payout penalties when you sell your home in 6-12 months.

Purchase Plus Improvements Mortgage

A Purchase Plus Improvements Mortgage, allows qualified purchasers to buy a home or condo and include a Renovation Allowance, even with as little as 5% down.

STEP 1: Obtain a mortgage pre-approval from Spire Mortgage Team, to determine your maximum approval amount.

STEP 2: You must find a home and have a general idea of what renovations will be completed at what cost to you. The purchase price plus the renovation cost cannot exceed your maximum approval amount. You will be required to provide the lender with a written quote, outlining the work to be completed and the cost to do it. Pro tip: Do not include chattels, waste costs or demolition in the quote.

STEP 3: Once your offer is accepted we will have the lender approve the mortgage with the cost of the renovations included in the mortgage.

STEP 4: Once you take possession of your home, you can begin the renovations. The Lender will instruct the Solicitor to “hold” the Renovation funds in trust, until the lender confirms the work has been completed.

STEP 5: The lender will receive the inspection report from the appraiser and validate that the work has been completed. They will instruct the lawyer to release the funds to you, so that you are able to pay the contractor.

Why Would I Refinance?

We work what feels like our WHOLE lives to pay off our homes. Right? At least 25 or 30 years! Why in the world would we EVER consider taking the equity out of our home? Although refinancing sounds scary, there are so many advantages and opportunities if you have equity in your home. Here are a couple to consider:

Refinance for Renovations. As your home ages, work needs to be done to maintain your investment. A new roof, a new fence or even a furnace that needs updating. These are all necessary evils that come with homeownership. Many of us choose to add a bedroom for a growing family, finish our basements or redo our kitchens to upgrade the home. Again, these are all normal desires that surface over the years as a homeowner. Putting the cost of the renovations on to a line of credit is going to cost you interest between 7-9%.. A credit card? 13-18%. Every day, I meet with clients that feel like they’re running on a hamster wheel paying off excess credit card debt. If you consider refinancing your home instead of using credit cards, you’d be in the range of about 3.50% and the payments are MUCH smaller!

Refinance to pay off excess debt. Sometimes things just get tricky. We need cash quickly and we haven’t had time to research all of our options. This happens more often than you think! If you own a home with equity and you feel like you’ve got some payment piling up, refinancing could be the perfect solution to take some pressure off.

Refinance for investment. Did you know that if you pull equity out of your home and then use that money to invest, either in RRSP’s, Mutual funds, the stock market or even another property, you’re actually able to write off the mortgage interest you’re paying on your principal residence? True story! You can pull equity out (or refinance) your home, invest the money to get it working for you AND end up with a smaller tax bill at the end of the year! Triple win!

Refinance to purchase a Rental Property. In a challenging employment and mortgage environment, Calgarians are finding it harder and harder to purchase their own homes. This creates two opportunities: a buyer’s market, and a strong rental market. The combination makes for an excellent time to purchase investment Real Estate.

Children’s Education? Early Inheritance? FUN FUN FUN in retirement? Another reason you might want to refinance your property as a long-term property owner is to help your children to achieve their goals. Education is incredibly expensive and the barriers to entry with homeownership have never been higher. Refinancing your home as a way to provide early inheritance might be perfect for your family! (And the kids can pay the interest payments! At least that is what I’ll be making my kids do)!! And don’t forget enjoying your life in retirement. A refinance or equity release from your home might be the perfect way to add to your monthly income in retirement.

I know what you’re thinking now, “Okay, okay lady, so what is the process if we actually want to consider this refinance business?”

Step 1: We’ll have a quick call and figure out what your ultimate goals are.

Step 2: We’ll gather the documents. I’m going to need your property tax statement and your most current mortgage statement. I might need employment documents if you’re still working, or your most recent tax returns if you’re not working. It’s that simple!

Step 3: We’ll structure a transaction just for you. Do you want a mortgage payment? Do you want an interest only payment? Do you want NO payments? There are so many choices available with these transactions, we’ll be able to figure out exactly what works best for your specific situation!

Flip Program

Landlording is not for everyone. That, we can all definitely agree on.

Despite that, there are lots of ways to take advantage of the opportunities in real estate. Some examples are buy and long term holds (which Renee and I do), vacation properties, partnering as a silent investor, land developments, commercial retail, commercial residential, investing in Real Estate Investment Trusts, in Mortgage Investment Corps, Privately lending your own funds and flips. OHHHHH FLIPS. Everyone loves a good HGTV flip program – don’t we?

Flips are for those that see the value and vison of what a property COULD be. They want to change and renovate the property to be better used. Either as a investment property or as a home for new owners. Sometimes, renovations and be simple things, like paint, flooring and maybe some exterior TLC. Other times, adding a secondary suite, garage or really gutting a property is what’s necessary to reposition the asset and make it more usable for the next home owners or tenants.

Financing these types of projects is not always straight forward. Traditional financing not only requires fancy footwork through many hoops, but can have costly payout penalties when clients sell their renovation projects. Many new “flippers” focus on getting the lowest interest rate for their project and don’t realize that in doing so, they’re strapping the project with high back end costs and payout penalties.

We have access to an amazing flip program through one of our strategic partners. They share the vision of turning the dated homes into a masterpieces with a simple underwriting philosophy. It really comes down to one question – Will the project be profitable?

In the past clients needed to have an excess of cash for the renovations on-top of having 20% down to purchase the property. If they were buying a home worth $400,000, they would need $80,000 for the down payment, plus $100k-$200k for a quality renovation ($250/sqft).

The opportunity cost on these projects was massive! Client would have $200,000 tied up in a single project! This doesn’t allow them to move forward with future projects until the current project is sold. Our program is currently allowing clients to purchase properties with as little as $10,000 down payment.

Here is how the program works:

On all flip deals we require the following details related to the property:

• Purchase agreement
• Renovation budget and details
• a full net worth statement for applicants who are real estate investors.
• Portfolio details (addresses, mortgages, rental income etc.).
• For the first deal, application and credit is required, if you decide to do other deals in the same year, this is not required.

Underwriting Philosophy:

• Is a profitable deal? Profitability is our first underwriting filter, we want our borrower make money?
• We value the property as if completed with the renovations planned, which is why we require the budget and description of renovations.
• We ask for a minimum of $10,000 down. On a rare occasion where we think the profit margin is slim, we may ask for more money down, but we are more likely to discuss with the client why they think the profit is higher than we do, and ensure it is the right investment decision. We would prefer not to help investors do poor deals and risk them losing money as well as ourselves as no one wins and we both lose.
• Max LTV is 80% of the after-repaired value, and minimum down payment is $10,000.
• Clients cover the cost of renovations on their own. In cases where the renovations costs are high, we may consider a draw mortgage for part of the renovation. Usually this is secured by other real estate, or it may be structured more akin to a construction mortgage.
• Client must make monthly interest only payments.

Connect with us if you think that you have a property that will fit this program!

How to refinance your mortgage

Refinancing is a very similar process to obtaining a new home loan, and the procedure closely resembles applying for a mortgage. The first thing you should do is reach out to a mortgage broker and have a conversation about your homes’ value and the funds that you could potentially access (Reminder, you can only refinance 80% of your homes current value). Once you’ve confirmed that refinancing makes sense and that you will be able to access the equity you require, then you dive into the mortgage application.

You’ll likely need home appraisal to determine your property’s current value. Similar to your initial mortgage application, your income, debt service ratios, and credit history will undergo evaluation. Expect to provide documents, including:

• Personal identification.
• Verification of employment and income.
• Details concerning your assets, savings, and debts.
• Tax-related documentation.

Additionally, you’ll need to undergo another mortgage stress test to assess your ability to repay the refinanced mortgage, particularly if interest rates were to rise.

When deciding whether refinancing is your best option, it’s crucial to shop across lenders to secure the most favourable rate, terms, service, and conditions. That’s where your mortgage broker comes in. Remember, you’re not obligated to refinance with your current lender, so exploring multiple options is advisable before making a decision. Even if you decide to stay with your current lender for the refinance, don’t hesitate to negotiate for a more favourable mortgage contract.

How much can you borrow?

Typically, when refinancing, you can borrow up to 80% of your home’s appraised value. However, a portion of this borrowed amount must be used to settle any remaining balance on your current mortgage. The remainder can then be allocated according to your preferences.

For instance, if your home is valued at $600,000, you could potentially borrow up to $480,000 ($600,000 x 0.8) during the refinancing process. Yet, if your existing mortgage balance stands at $400,000, you would effectively only have access to $80,000 after clearing your mortgage ($480,000 – $400,000).

Why to refinance your mortgage?

**We work what feels like our WHOLE lives to pay off our homes. ** Right?  At least 25 or 30 years!  Why in the world would we EVER consider taking the equity out of our home? Although refinancing sounds scary, there are so many advantages and opportunities if you have equity in your home.  Here are a couple to consider:

**Refinance for Renovations. ** As your home ages, work needs to be done to maintain your investment.  A new roof, a new fence or even a furnace that needs updating.  These are all necessary evils that come with homeownership.  Many of us choose to add a bedroom for a growing family, finish our basements or redo our kitchens to upgrade the home.  Again, these are all normal desires that surface over the years as a homeowner.   Putting the cost of the renovations on to a line of credit is going to cost you interest between 7-9%..  A credit card?  13-18%.  Every day, I meet with clients that feel like they’re running on a hamster wheel paying off excess credit card debt.  If you consider refinancing your home instead of using credit cards, you’d be in the range of about 3.50% and the payments are MUCH smaller!

**Refinance to pay off excess debt.  **Sometimes things just get tricky.  We need cash quickly and we haven’t had time to research all of our options.  This happens more often than you think!  If you own a home with equity and you feel like you’ve got some payment piling up, refinancing could be the perfect solution to take some pressure off.

**Refinance for investment. ** Did you know that if you pull equity out of your home and then use that money to invest, either in RRSP’s, Mutual funds, the stock market or even another property, you’re actually able to write off the mortgage interest you’re paying on your principal residence?  True story!  You can pull equity out (or refinance) your home, invest the money to get it working for you AND end up with a smaller tax bill at the end of the year!  Triple win!

**Refinance to purchase a Rental Property. **In a challenging employment and mortgage environment, Calgarians are finding it harder and harder to purchase their own homes.  This creates two opportunities:  a buyer’s market, and a strong rental market.  The combination makes for an excellent time to purchase investment Real Estate.

**Children’s Education?  Early Inheritance? ** FUN FUN FUN in retirement?  Another reason you might want to refinance your property as a long-term property owner is to help your children to achieve their goals.  Education is incredibly expensive and the barriers to entry with homeownership have never been higher.  Refinancing your home as a way to provide early inheritance might be perfect for your family!  (And the kids can pay the interest payments! At least that is what I’ll be making my kids do)!!  And don’t forget enjoying your life in retirement.  A refinance or equity release from your home might be the perfect way to add to your monthly income in retirement.

*I know what you’re thinking now, “Okay, okay lady, so what is the process if we actually want to consider this refinance business?” *

**Step 1: ** We’ll have a quick call and figure out what your ultimate goals are.

**Step 2: **We’ll gather the documents.  I’m going to need your property tax statement and your most current mortgage statement.  I might need employment documents if you’re still working, or your most recent tax returns if you’re not working.  It’s that simple!

**Step 3: **We’ll structure a transaction just for you.  Do you want a mortgage payment?  Do you want an interest only payment?  Do you want NO payments?  There are so many choices available with these transactions, we’ll be able to figure out exactly what works best for your specific situation!

When to refinance your mortgage

If you decide to refinance your mortgage, its important to have a conversation with your mortgage professional and weigh the new terms you are receiving against the potential charges by your lender to terminate your mortgage contract before the end of the term. If you are consolidating high interest debt, or need the cash to complete a home renovation, it could be worth it to you, however, waiting until close to the end of your term will likely result in lower fees.

You can also choose to refinance your mortgage at renewal time. This would mean that there would be no prepayment penalty, however you may expect some additional costs depending on your situation.

What Happens to Mortgage Loan Insurance Premiums If You Switch Lenders?

If you switch lenders during the refinancing process, you may have to pay a new mortgage loan insurance premiums, if:

• the amount of your loan increases
• you extend the amortization period

Make sure to let your new lender know If you have mortgage loan insurance on your current mortgage. This can help prevent you from having to pay mortgage loan insurance premiums twice.

Alternatives to refinancing

1. Home equity line of credit

If you own a minimum of 20% equity in your home, you have the option to leverage it through a Home Equity Line of Credit (HELOC). The maximum credit limit available will be up to 65% of your home’s current market value.

You can acquire a HELOC alongside your current mortgage, eliminating the need to terminate your existing mortgage or incur prepayment penalties. However, it’s important to note that HELOC interest rates generally tend to be higher than those associated with mortgage refinancing.

2. Home equity loan

Another avenue for converting equity into cash is through a home equity loan. This type of loan is typically provided in addition to your primary mortgage, often by a non-chartered bank or private lender. While you can avoid prepayment penalties, you’ll be subject to any fees imposed by your new lender. It’s worth noting that interest rates on home equity loans can often exceed those associated with mortgage refinancing or HELOCs.

3. Blend and extend

Certain lenders offer a blend-and-extend option, enabling you to renegotiate your interest rate prior to the conclusion of your mortgage term. With this option, you can prolong your current mortgage term at a reduced rate by combining a new, lower interest rate with the existing one, all while steering clear of prepayment penalties.

Refinancing comes with different Pros and Cons depending on your circumstances. It’s important to discuss your options with a Mortgage Professional to ensure you are making the best financial decision.

Can a Bank Deny Your Mortgage Renewal?

When you renew your mortgage with your existing mortgage lender, there is typically no qualification process to spark any refusal to renew your mortgage. That said, missed mortgage payments may trigger an investigation into their willingness to renew. Further uncovering negative changes in your income or credit may indicate that you are at a higher risk of NOT paying your mortgage. It’s possible that these changes can result in your mortgage renewal being denied.

If your mortgage renewal is denied, it’s important to remember that you may have other options as a borrower. Understanding your options and the reasons why your mortgage renewal is being denied is essential to navigating this tricky situation.

Key Takeaways:

• Banks can technically deny your mortgage renewal in Canada under certain circumstances.

• As a borrower, you may have options even if your bank denies your mortgage renewal.

• To prevent a mortgage renewal denial, it is important to consult your mortgage broker the minute you start to experience financial hardship. Your mortgage broker can help you navigate the situation with the least risk to your mortgage renewal.

Reasons a Bank Might Deny a Mortgage Renewal:

1. Missed Payments If you’ve missed multiple mortgage payments, your lender might reject your mortgage renewal request. In fact, if you fail to make your mortgage payments, not only will you be denied a renewal, but you could be at risk of foreclosure.

2. Poor Credit Pulling credit is a common procedure at mortgage renewal. If you’ve experienced financial hardship that has resulted in excessive missed payments, consumer proposal or bankruptcy, there is a chance that your lender may be careful at mortgage renewal. That being said, if you’ve managed to pay your mortgage as agreed (despite financial hardship), then there is a strong likelihood your mortgage will be renewed at your current lender.

What Happens if Your Mortgage Renewal Is Denied?

It’s important to note that each lender has its own criteria for approving mortgage renewals. Therefore, it’s always a good idea to talk to your lender and broker about why your renewal request was denied and what you can do to improve your chances of approval.

As an aside, you should always be talking to your broker 120 days before your renewal to ensure you have many options at the time your mortgage renews. Renewing with your current lender means you’re a “price taker” but taking the deal to market means that you’re keeping your lender honest and seeking the best rates.

If renewing at a triple A lender isn’t an option for you, B lenders might be an option as they are often more flexible than A lenders like the big 5 banks. If B lending is also not an option, your final options may be a private lender or selling your home.

Legal Rights of Borrowers:

As a borrower, you have legal rights when it comes to your mortgage renewal. The lender cannot simply deny your mortgage renewal without providing a valid reason. In Canada, the law protects borrowers from unfair practices by lenders.

When applying for a mortgage renewal, the lender must provide you with all the information you need to make an informed decision. This includes the terms and conditions of the renewal, the interest rate, and any applicable fees or penalties. If the lender fails to provide this information, they may be in violation of the law.

If your mortgage renewal is denied, you have the right to appeal the decision. You can contact the lender and ask for an explanation of why your renewal was denied. If you are not satisfied with their response, you can file a complaint with the Financial Consumer Agency of Canada (FCAC).

The FCAC is a government agency that regulates financial institutions in Canada. They have the ability to investigate complaints of unfair practices by lenders and take action to protect consumers. If the FCAC finds that the lender has violated the law, they can impose penalties and require the lender to make changes to their practices.

In addition to the FCAC, you can also seek legal advice if your mortgage renewal has been denied. A lawyer can help you understand your rights and options, and can represent you in court if necessary.

Steps to Prevent Mortgage Renewal Denial:

When it comes to renewing your mortgage, there are a few things you can do to prevent being denied by your bank. Here are some steps you can take to ensure that your mortgage renewal goes smoothly:

1. Don’t miss your mortgage payments Not missing your mortgage payments will keep things simple and likely avoid any further investigation into your overall financial situation.

2. Communicate with Your Lender If you are having any financial difficulties, it’s important to communicate with your lender as soon as possible. They may be able to work with you to find a solution such as adjusting your payment schedule or offering a temporary payment deferral.

3. Shop Around for Better Rates Regardless of what your current mortgage lender is offering you, you should always be shopping with your mortgage broker when you’re within 120 days of your maturity. This will put you in the most secure position possible when your mortgage renews.

4. Be Prepared for higher payments With interest rate fluctuations, your mortgage payment can change drastically upon renewal. This is because your payment is heavily based on your interest rate. Your mortgage broker may have some solutions to help shrink that payment upon renewal to ease the effects of rising interest rates.

Get Help From a Mortgage Broker!

Always get a second onion from your mortgage broker. A mortgage broker can help you find a new lender or a new product that may be substantially more helpful than a simple renewal with your current bank.

Mortgage brokers have access to a variety of lenders and products to help you find a more tailored solution.. They can also help you navigate the application process and provide guidance on the documentation you need to provide.

If you’ve been denied of a mortgage renewal or you’re worried you might not be approved when your mortgage renews, contact the mortgage experts at Toni Mortgages. We can help you evaluate your mortgage options and navigate the process.