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Real Questions from Real Clients
Property Questions
Q) I live in Vancouver and I am trying to buy a condo in a building that has been designated as a 'leaky condo' and my bank won't touch it. Are there any mortgage lenders out there that would do this?
A) Prior to the building being fixed with all the engineer reports to back up the work, the chances of finding any mortgage lender or bank would be slim. Although there are some deals to be had on these properties, they are a huge risk as you really don't know what you are getting into in terms of cost to fix until they start to get into the walls. My advice would be to treat this the same way the mortgage lenders do and wait until the work is done and you know what you are getting into.
Q) I am considering making an offer on a property with agricultural zoning. It is only a one acre parcel with no farming or agricultural activities on it but my realtor says that these can be tough to finance. Do you see any issues with this?
A) Agricultural properties are a definite issue for some mortgage lenders as they can be difficult to foreclose on should that issue ever arise. In a case like this with only one acre and no opportunity to make your living off the land, we would have some lenders who would have no issues with it.
Q) Do you give mortgages in Winnipeg for 4 plex's and would I need to have a large down payment?
A) We do mortgages on 4 plex's, and they can be purchased with as little as 10% down payment. We are able to do these as well at or near the best rate mortgages you see on our web-site.
Q) I live in BC and I want to buy a house with a suite in it. The only issue is the suite is not legal so my bank won't accept the income from the suite meaning I don't qualify. I thought this income was usable for mortgage qualification?
A) Your bank likely only uses CMHC to insure their mortgages; they require the suites to be legal. Genworth Financial, the other big default mortgage insurer here in Canada, will allow illegal suites (in BC only) used in the qualification. The ratios allowed depend on the mortgage lender or bank, but generally a 50-80% rental offset is allowed.
Q) Do you do mortgages on houses that were previous grow-ops?
A) As long as the house has a clean bill of health (certificates), we have some mortgage lenders who will lend on them. As you may or may not know, there are serious health concerns with these homes so not only for financing purposes but for your own best interests, make sure the house is up to code. We get a lot of requests from first time buyers looking at homes such as this which are being sold for less than market value however there are many issues to consider if you are thinking about buying one.
Q) There are properties in the Phoenix area that my wife and I are considering buying as a vacation home. Can you put a mortgage on these?
A) There are 2 options for these, one is to refinance your mortgage and take the equity out of your Canadian home and buy the house in Phoenix out right or try to get a mortgage in the US (which can be a real challenge from what we hear). We don't have any lenders that will put Canadian mortgages on US properties.
Q) I am in a real pickle. I just put an offer in on a property with no subject to financing clause thinking qualification wouldn't be a problem, only to find out there are age limitations in the complex and my bank won't lend in there because of it. Can you help, I am desperate!
A) We do have lenders that will let that slide assuming the rest of the deal is pretty straight forward. This may have been a case where your bank only uses CMHC to insure their loans; they won't do them as age limitations reduce the marketability of a property meaning in a foreclosure situation the property would likely take longer to sell.
Q) I am thinking about buying my parents house here in Mississauga. They are going to cut me a bit of a break on the price due to not having to sell through a realtor and for the obvious reason of me being family. What I want to know is if I can use this discount as down payment or if I have to come up with my own down payment.
A) This is what we refer to as gifted equity. We would have your parents fill out a gift letter indicating they are gifting you 'X' amount of equity and we would use that as your down payment (or partial if it is less than 5%). You would have to write up the offer as the house being sold at full price with the discount being written in as the down payment but we can certainly walk you through all that as the process moves along.
Q) Why am I having such a hard time finding a mortgage for a mobile home? The mobile I am looking at is the cheapest one I have found and I am worried if I don't get this one I will never find another property I can afford. It is 38 years old but still in decent shape. The park it is in is well kept and close to my work. I only have 2 days left before my offer expires and apparently there is a back up offer already in place so I can't get an extension. Is there anything you can do for me?
A) It doesn't sound as if anyone you have spoken with has explained this very well to you so let me try to start from beginning. Mobile homes that are in parks require a mortgage that is actually a collateral loan as there is no property involved, it is simply a loan on a trailer (which can be picked up and moved). These have a few different issues that a traditional mortgage doesn't have (the rates are higher, you require at least 5% down (no cash backs) etc). But in your case the issue is really the age of the mobile home. The maximum amortization for one of these loans is 40 years minus the age up to a max of 25 years. In this case that means the longest mortgage you could get on this property would be 2 years. That is why the mobile is so cheap, it can't be financed; only someone who has the cash to buy the trailer out right is going to purchase this unit. If you really have your heart set on a mobile, you would be better off looking at units 15 years and newer even if the price is a fair bit higher or look at more traditional properties such as condos or town homes. When you factor in the lower mortgage rates, longer amortizations and no lot rents, the condos are often lower payments than mobiles for significantly higher amounts of mortgage dollars.
Mortgage Questions
Q) I did a pre approval with my bank a while back on a zero down mortgage, and even though nothing has changed when I went to do a new pre approval the other day I qualified for way less, even though rates are lower? Now I know there were some changes to the zero down but does this sound right?
A) It may in fact be correct. Our no money down options have changed from a 'true zero down' to a '5% cash back' mortgage. The true zero downs were sold at the best wholesale rate whereas the 5% cash back mortgage is sold at or over posted rates (a difference of about 1.5% give or take). So even though mortgage rates have come down, they are probably not all that different when you consider the 2 different rates that are being used. At the end of the day, the deal is very similar between the zero down and cash back due to the 5% cash or equity you are being given but it doesn't work out as well on paper when calculating qualifying ratios. The other difference is the maximum amortization we have today is only 35 years compared to the 40 years we used to have. This all sounds very confusing but the point is that the federal government felt that there should be some equity in the properties they were insuring so they changed the amount they would insure from 100 to 95%.
Q) If I wanted to refinance my mortgage to consolidate some debts, would I be better off to get a second mortgage or a new first mortgage?
A) We would need a bit more info to answer this properly (ie what is your current interest rate today), but generally what we do on these loans is to consolidate your debt into a new first mortgage with your existing mortgage company or bank unless we can save enough money with another mortgage lender to cover the costs of the penalty. Second mortgages tend to have higher interest rates and are a bit harder to find.
Q) When I talked to my banker at BMO the other day and told them that I had a pre approval with a mortgage broker (you) through a mortgage company called MCap, she told me I had better be very careful dealing with small mortgage companies that may or may not be around in a couple of years. I know she was just trying to spook me a bit but should I be concerned about this?
A) Your banker should do a bit more research, MCap is partially owned by BMO... it's probably a pretty stable company. The truth of the matter is most mortgage companies do not market themselves directly to consumers only to mortgage brokers like Verico. This is why they are not household names, not because they are small companies that may or may not go out of business tomorrow.
Q) Even though I am glad I even have an option for a mortgage because of my lousy credit, I am bit concerned going with a sub prime lender after all the stuff I have read in the news about these mortgage companies. Am I panicking for nothing or are there some risks here I need to know about?
A) There has been plenty of news about sub prime mortgages over the past year or two. In the US these mortgages certainly bare part of the responsibility for the housing crisis and the recession that followed. Sub prime mortgages were over sold to people who should never have qualified for a mortgage; they were not explained properly to people so they understood exactly what they were getting and what was going to happen to the terms of the mortgage. These mortgages were then sold into the markets as sound insured mortgage investments when they were far from it... having said all this, in Canada none of these factors apply. The sub prime mortgage market is very small here (likely smaller than it should be). Many clients in the US got into the mortgage with a low manageable payment that ballooned up to an interest rate they couldn't afford at a predetermined date down the road; we don't have these types of mortgage products here in Canada. And lastly, these mortgage loans in Canada are not misrepresented or sold as investments that they are not.
Q) I have a house in south east Edmonton that has a fair amount of equity in it. Due to a stroke I suffered a few months back I am now finding myself very behind on my mortgage and most of my debts. I went to my bank but they said they wouldn't be able to help due to my poor credit score but recommended I talk to a mortgage broker. If my bank won't help I am not sure you will have any options either but I thought I would try. Am I going to be out of luck here?
A) Your banker was correct in sending you to a mortgage broker. We do have access to private mortgage loans which is likely what you need at this point. These loans have high interest rates and there are fees for these mortgages but they can be the band aid you need to get you through this rough patch. Equity is really the main factor in qualifying for a private mortgage so if you have lots of equity we shouldn't have a problem helping you out.
Q) I had a bankruptcy a few years ago and I have been discharged for about a year and a half now. I would like to know what I need to do now so that I may be able to get a mortgage when the time comes.
A) Great question and you are doing the right thing by contacting us now. The first step is to immediately go out and get yourself a secured visa (Capital One, Home Trust, etc). This will start re-establishing your credit which really is the key when qualifying for a new mortgage. Once you have had it for a while go get a small RRSP loan or some other type of secured loan. If you don't go the secured route you will get turned down a lot which can just make the process more painful. You will likely need 2 years of good reestablished credit and at least 5% down payment, so start saving today!
Q) I applied for a mortgage through my credit union the other day and they want me to pay for CMHC insurance on a property I want to buy when I have 25% down. They said it is because the property is too rural and not in their normal lending area. Will all mortgage lenders or banks hit me with this fee?
A) Some smaller lenders will, generally the bigger lenders or banks will not; of course it depends how rural we are talking about. Ideally you want a mortgage lender who will not insure or one who insures all their loans and they cover the insurance (all done behind the scenes without the client knowing). The insurance is not all that high at 75% loan to value so the interest rate is important as well. If you are getting a great deal on the rate, paying the default insurance may make sense. Lenders can sometimes charge a premium for conventional loans because they are harder to sell to their investors.
Q) My bank is saying they can't do any better on my renewal than the rate they have quoted; this rate is about 1/2% higher than your interest rate. The truth is I like my bank and I want to deal with them if at all possible, so if I went with you and they matched at the last second could I keep my mortgage there or do I sign something that locks me into you guys?
A) First off, no, unless we are at a point in the process whereby we have done an appraisal and incurred other costs you are not obligated to stay with us; you would have to pay for any expenses that were incurred such as the appraisal but that is all. Looking at the bigger picture however, we do have an issue with doing this. Banks play these games because they know that 9 times out of 10 their clients will either accept the higher rate or they will be able to match the rate at the last minute and keep the client. If more clients called their bluff and simply left when the banks threw out their so called last offer the banks would be less likely to play these games and less people would fall victim to paying more than they should be on their mortgage. We have no relationship with most of our clients but still get them the best mortgage rates in the market, shouldn't your bank do the same for you when they already make so much money off you on all your other credit and investment products?
Q) If I do a 5% cash back mortgage, will the bank give me the $5000 I need to put the initial deposit on the property?
A) No, you have to come up with this on your own. You will get it reimbursed at closing but it will have to be borrowed until that point. The lender has no guarantees they will get this money back until the mortgage is registered so no funds are disbursed by them till closing.
Q) I have some unusual forms of income, some declared some not. I don't make enough to qualify for a mortgage but I was told by a friend of mine that what I need is an equity mortgage. I am not really sure what these are but do you offer them and what are the details?
A) Equity mortgages are those that generally don't ask to see proof of income due to the amount of equity or down payment. Usually 35% is required amount of equity to qualify for an equity mortgage as long as the money is your own, your credit is good and the property is prime and marketable. We also have mortgages for self employed clients where income confirmation is not required (less than traditionally asked for) that you can get with as little as 10% down, however they have more stipulations than a straight equity mortgage.
Q) I understand different banks can have different policies but how is it CIBC turned me down and you got me approved with CIBC?
A) We actually got you approved with Firstline Mortgages, a mortgage company owned by CIBC. Although similar in most of their policies and what not they are separate entities and do have programs which are not common to both.
Mortgage broker Questions
Q) Why is it that I keep hearing that all mortgage brokers generally have access to the same lenders and banks, yet almost every broker in Toronto is advertising a different rate?
A) Well there could be a number of reasons for this. Firstly, not all the mortgage brokers may update their web-sites as often as they should (we do daily but we are in the minority here I think). Secondly, different mortgage brokers have different mortgage companies and banks they like to deal with because of service, document requirements or maybe even compensation; they don't want to advertise rates from banks who they don't like or don't plan to use. Thirdly, some lenders offer different brokerages better rates due to the large volume of business they receive from them, as a large firm Verico receives deals such as this. Lastly, the mortgages being advertised may not be the same. If one broker is advertising a quick close mortgage or a no frills mortgage they may not be available to everyone so some firms may choose not to advertise these specials so they don't need to explain to some clients why they don't qualify for the rates on the site.
Q) Do you negotiate the rates on your web-site? It says that you have the best wholesale rates in Canada, but I was offered a better rate through my bank. Thanks.
A) Occasionally if a client is considered to be a 'high value client' by their bank, they will make sure they keep them on the books. This is not a bad thing except for the fact that the other 95% of the clients have to pay for the extra discount offered to those 'high value clients'. So if you are a high end (top 5%) client with your bank, there's a good chance we won't be able to beat the rate.
Q) I am really upset with CMHC right now. How is it they said no when my bank applied to them with our mortgage but they said yes when the lender you used applied? If we had not been referred to you guys we would have lost the house we were buying because of them.
A) Actually it's really unlikely it was CMHC who turned you down. Banks have a tendency to blame the insurer when in actuality it was them who declined the file; it's an easy out for them. The mortgage company we used had your file auto approved which means it qualified without an underwriter at the insurer even reviewing it. Some banks simply have tougher guidelines than others so you can't be too upset with your banker for not being able to get you approved but they definitely shouldn't have told you it was CMHC who turned you down. It makes you believe that you are out of options when you aren't.
Q) I spoke with another broker the other day and was pre approved at the same rate as you have on your web site, but he told me that I had to pay a fee of $1500 to get the mortgage. I thought you guys didn't charge fees?
A) We at Verico Mortgage Options Ltd. do not charge fees, my guess is this other broker was simply trying to make more money on your deal for putting it together. We don't do that here.
Q) I was speaking to a mortgage broker from TD bank the other day and she told me that you could not use the 5% cash back mortgage for down payment as there were no more zero downs. First off, how can you use a 5% cash back mortgage for down payment when she couldn't and secondly she said it was CMHC's rules that didn't allow this and you are saying the mortgage would be CMHC insured. I am totally confused!
A) Okay first off, there is no such thing as a mortgage broker from TD bank. Mortgage brokers are independent and not tied to any financial institution; this person was an outside sales rep for TD bank, they only sell TD mortgage products. TD has stopped allowing 5% cash back mortgages to be used for down payment, CMHC hasn't; this should explain most of the confusion; we are simply planning on putting you with a lender who still offers this option. Again, not to beat a dead horse, but it is the reason using an actual independent mortgage broker over a bank employee is so important. We are able to offer expert, unbiased advice to our clients as we are not affiliated with any lending institution.
Mortgage Brokers
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