Mortgage Renewal

You can view all my videos on You Tube at HamiltonBroker.

I have already made a post on the mortgage renewal letter but have decided to add to it, because I feel some important points were missed, also I added the video.  Some people don’t take this very seriously and it is a real shame because the amount of money they are losing out on.  When you think about it, what is a $50 or a $100 difference in a monthly mortgage payment if you just accept what the lender offers you?  Well it’s $600-$1200 a year or $6,000 over five years.  What does paying that extra money do for you?  Absolutely nothing except drain your pocket, your retirement, kids’ education or whatever.  Money down the toilet!

 

What is interest?  It is the cost of borrowing, that simple.  The cheaper it is to borrow money, the more money for other things.  It amazes me to see someone clip coupons to save 50 cents on a pound of butter, but yet when the renewal letter arrives from their lender they just sign it and send it back.  How many coupons do you have to clip to save $6,000? Even if it is just a small difference of $500, it is still worth it to consult with a broker.

What does it cost to switch lenders at renewal time?

About $250, especially if your mortgage was default insured by CMHC, Genworth or Canada Guaranty (formally AIG).  The $250 is a discharge fee that your current lender charges to remove the mortgage from the title of your home.  If it is not insured there may be an appraisal fee around $350.  Some of or all of these expenses may be covered by a new lender or your broker, depending on the amount of your mortgage.  If you are going to have to cover all these expenses and your savings are not going to be high enough, you may just want to stay where you are.  That does not mean you cannot negotiate with your lender.  It is ok to call a mortgage broker and explain that you want to know what the going discount rate is right now.  Then call your lender back and ask for that rate.

How do you get the best mortgage rate at renewal?

The best thing to do is actually contact a mortgage broker 4 to 5 months prior to your mortgage renewal date and ask them to keep an eye on rates for you.  Even fill in an application and authorize the broker to do a credit check when they are actually going to submit your mortgage application.  We will hold on to the application and wait for the right moment to submit it.  Occasionally lenders have sales on rates just as department stores have sales, which can turn into huge savings for you.  Basically you are hiring a broker to nail down the best possible deal for you over the course of four months.  Watch out for brokers who do not use multiple lenders, make sure you call a high volume broker that uses at least 8 to 10 major lenders.

A new ploy that some lenders are using to trap people into the any rate that they want is by waiting 2 to 3 weeks before your renewal date to send you your mortgage renewal lender.  This is in hopes that you are not paying attention and will not have enough time to find a better rate.  All we really need is one week, so don’t be concerned if you contact us a little late.  Be pro-active, it can save you a lot of money.

As always you are free to contact me anyway that works best for you.  On weekends and evenings there is better chance of contacting me by email.

Ron Miller
905-667-0699

1-855-684-8326
ron.miller@butlermortgages.com    

   

Mortgage Document Collection

You can view all my videos on You Tube at HamiltonBroker.

This is the process where you have to bring in documents to your mortgage broker or bank to back up what you told them at the time of your pre-approval. 

 

Down Payment

This is probably the hardest form of document collection for people to do properly.  But it must be done properly as it is the law set out by FINTRAC under Canada’s Anti-Money Laundering and Anti-Terrorist Act.  If we put on the application that your down payment is coming from your own resources, than that means cash in the bank and we have to show that it has been there for 90 days (not 89) or has accumulated over the last 90 days from means that can be explained, ex. pay deposits or gifts from family.  It can also be a quarterly statement from RRSP’s or another form of an investment.  So, if your money is sitting under your mattress it is not an acceptable down payment on a home, put it in the bank.

I once asked a client if the deposit is coming from their own resources.  They replied yes.  When document collection came and I asked them for 90 days of bank statements, they replied well we got the money from a line of credit.  Not good, we did save the deal under borrowed down payment.  Now my question to all clients is, “Where is the Money Now? Show Me the Money!”  If we put on your application that the money came from your own resources and then there is an additional deposit in your bank account for $5,000 dollars and you tell us it is from your parents, we then have to re-qualify you with gifted money and have your parents sign a gift letter.  If you tell us that the money was transferred from another account then we need a 90 day history from the day it was transferred.

If you are buying your children a home with existing equity in your current home under the secondary home program with as little as 5% down, that is fine as long as we know where the funds are coming from up front. 

It is ok to change your story after your pre-approval and decide your source of down payment is changing but once you have an accepted offer on a home then do your best to have your story straight. 

Income

I do ask for some documents up front, at least a recent pay stub or in the case of self-employed I would ask for two years NOA’s and T1’s. 

This process is why it is so important to be completely honest with your broker because there will come a time when what you told them will have to be backed up with paper.  This is also the time where the difference between a good broker and an ok broker is differentiated.  It is our job to ask you the right questions and base your approval on that.  You may not know the right things to say.  If I ask you how much money do you make a year, and you reply 50k, I have to make sure that is correct.  Is this including over time, or is it regular hours?  If it is including over time then the documents required will change.  In addition to asking for a job letter and pay stub, we will also need two years’ worth of T4’s from your employer to include the extra income.

Let’s say you are self-employed for less than two years and we approved you for a mortgage.  We may require your T4’s from your past employer to confirm you have been in the same industry that your new business is in.

Different types of income require different documents.  Also some lenders do not accept all types of income, so we have to make sure you are going to the right lender.  For example, your year-end bonus may not be an acceptable form of income to certain lenders, but if you need that to qualify then obviously we will have to find a lender who will accept it.

Additional Stuff

We will also require void cheques for where you want your mortgage payments to come out of.  We of course will need lawyer information, and government issued photo ID.  If you are renewing we will need current mortgage statements and property tax statements.  The list of documents changes for everyone's situation.

A good mortgage broker will ask you if the documents that may be required are available for when the time comes or even collect a lot of it up front.  There still may be surprises, but always ask your broker or bank what you will need to prove your income.  It takes three to six weeks to get a NOA from the governemnt, don't find out you need it 2 weeks before closing if it lost.  (There is a way to get it in one day.)  My point is paperwork must be in order all conditions met or funds will not be forwarded.

If you have any questions or concerns I am available to answer them.

Ron Miller
905-667-0699
ron.miller@butlermortgages.com 

What Does a Mortgage Broker Do?

A good mortgage broker basically takes your situation and finds a lender who will give you a mortgage at the best terms and rates. From one point of view you are basically hiring your own agent who will go to different lenders and sell your story. And 90% of the time you are not paying for this service.

Rate Shopping

You may have the perfect scenario with credit, income and down payment, so you are basically hiring us to find you the lowest possible rate with terms that meet your needs for a pre-approval on your home purchase. If you already have a mortgage it is a good idea to be signed up with a broker regarding your renewal date. Often banks will not send out your renewal letter untill a week or two before you need to renew which then puts you in a bad spot with not much time to negotiate. Yes you can negotiate with a bank. If you have your mortgage on a watch list with a broker who deals with many different lenders than basically over a 120 day period you are looking to secure a low rate that can save thousands over the course of five years. $40 or $50 a month in savings could go straight to other investments or a child's school fund.

Possibly you did get approved but have no idea if you recieved a competive rate. Find out.

Bank Turned you Down for a Mortgage

Your situation may be a little different with one of the three pillars (credit, income or down payment) a little damaged or insufficient and your banker or another broker has told you no, you cannot get a mortgage. At this point is when you contact a well established brokerage. If you use a brokerage that is filing 50 to 100 mortgages a month you know they have a very broad spectrum of lenders they are using which opens up opportunity for you. A brokerage has to meet a quota at most of the lenders they deal with, so if thier numbers are low, you know they are using a limited number of lenders.

Take for example if your credit was damaged due to a divorce, illness, a tough emotional time in your life or any number of reasons. We will actually look at your credit history over the last six years and go to lenders with a reason this happened and litterally do our best to talk them into giving you a mortgage. It may take some time or we may have to help you with some credit repair, but if you are pro-active you will enjoy home ownership.

Possibly you are on a salary but it is not high enough to purchase what you want, but you have a large amount of investments. Your net worth will get you a mortgage. Maybe you work part time and have had four different jobs over the last two years. Did you know you can still qualify? Maybe you are on a contract and your bank has turned you down. Did you know you can still qualify? Maybe you work at a temp agency? Yep still qualify. Your ex won't give you a seperation agreement? We don't care, you can still qualify. Self-employed? Many different options here.

Every single lender has their own little rules aside from the mortgage insures. Just because one lender does not like your situation do not give up. Someone will want your business.

Often when applying for a mortgage at a bank someone will take your application and send it away for approval at central underwriting. If it comes back declined, they may not even know why and you have no idea why. Find out why.

Get educated and get a game plan, we will help.

If you have any questions please do not hesitate to contact me.

Ron Miller
905-667-0699
ron.miller@butlermortgages.com