Lender Update December 22, 2016

Subject: BC HOME Partnership Program On December 15, 2016, the BC government announced a new initiative to assist eligible first-time homebuyers.

The BC Home Owner Mortgage and Equity (HOME) Partnership program provides repayable loans, to be secured by a second mortgage, up to a maximum 5% (capped at $37,500) of the purchase price.

The HOME Partnership program eligibility criteria and application process can be found on the BC Housing website: https://homeownerservices.bchousing.org/housing-assistance/bc-homepartnership.html

Genworth Canada will provide mortgage insurance for borrower(s) eligible under the HOME Partnership program, applications for mortgage insurance are to be submitted as follows:

Mortgages must be submitted as “Borrowed Down Payment” product. Product specific underwriting criteria can be found on the Genworth website: http://genworth.ca/en/products/borrowed-down-payment-program.aspx ï‚· The “Borrowed Down Payment” mortgage insurance premium rates are as follows:

LTV Premium Rate

90.01-95% 3.85%

85.01-90%* 3.60%

80.01-85%* 1.80%

* for 80.01-90% LTV, borrowed down payment must not exceed 5% of the property value. ï‚· For all applications received where a portion of the down payment is from the HOME Partnership program, repayment of the HOME Partnership loan must be included in the total debt service ratio by including the loan payment in the ‘other obligations’.

The Bank of Canada benchmark rate for the interest rate of the loan and a 20-year amortization period must be applied to determine the monthly loan payment. ï‚·

The Lender will be required to ensure the appropriate documentation is retained on file to confirm that the borrower(s) were approved under the HOME Partnership program. 

Questions on getting pre approved for a mortgage? Contact The Angela Calla Mortgage Team directly at 604-802-3983 or callateam@dominionlending.ca 

HOW TO GET A MORTGAGE WHILE BEING SELF EMPLOYED IN CANADA

There are great advantages to having business for self. There are many extremely successful business owners that live great lifestyles but don’t have to pay for medical, all because they have great tax write-offs that bring their income down to a low tax bracket. The other side of this is that these great benefits actually make these same business owners work hard to qualify for a mortgage, all because their income is significantly reduced on paper. These business owners know that there is advanced planning involved in being able to qualify for conventional financing.

According to Statistics Canada, in 2015 there were about 2.7 million people self-employed in Canada which is about 14% of the total population of the country. These statistics reflect people that are continuing on in maintaining a significant lifestyle financed by self-employment and being able to be counted as such. In other words, being self-employed is a viable way of making income. It just doesn’t fit very well in the conventional lending “box”.

In order to fit in the conventional lending “box”, there is a measure that lenders require that each mortgagee(s) (the person(s) applying for the mortgage) must meet. Some of the documents that self-employed have to provide for the lender are two most recent years of tax returns that don’t always accurately reflect the actual take-home that a self-employed person has. Tax deductions related to business often reflect meals to rental space to credit card interest, etc. The result is that the income the self-employed business owner shows on their tax return is a significantly lower figure than what they actually take home. However, the “box” requires that tax returns show the required income to justify the mortgage.

So, how does one show enough income when they are self-employed? The following points are suggestions on strategies on how to plan ahead and be prepared when you, as someone who is self-employed, are ready to move forward in arranging a mortgage for property purchase.

• The easiest way to plan is to write off fewer expenses in the two years leading up to the property purchase. Yes, this means you will pay more personal taxes. However, your income will be higher which will easily qualify you for the mortgage amount that you are looking for.
• Set your finances up through a certified accountant. Many lenders want to see self-employed income submitted through a professional rather than doing it yourself. The truth is that the time that you spend doing your own taxes will not be as efficient both financially and time wise as a professional. A certified accountant knows what to look for and has enough experience to understand the tax implications. Make sure you discuss with them what your goals are so that they can set up your taxes appropriately.
• Choose your timing carefully. If you are leaving on an extended holiday or sabbatical within the two years previous to purchasing, your two-year average income is not going to be great. Take all the time off that you want AFTER your purchase. Plan your timeline with INCOME in mind.
• Ask your Mortgage Broker about STATED INCOME. There are options with some lenders to State your income. This is based on you being in the same profession for at least two years previous to being self-employed. The lender looks at the industry and researches the mean income of someone in that same profession within a reasonable amount of time. STATED INCOME is a complicated approach to showing income. However, your Dominion Lending Centres Mortgage Professional will know what questions to ask and how to negotiate this kind of proof of income. Documents such as bank statements, showing consistent deposits, will be requested by the lender.
• BANKRUPTCY. Although some business people see bankruptcy as a viable option to get out of a bad deal and regroup, lenders generally do not like bankruptcy. Having said that, some lenders will overlook this if there has been consistent and excellent credit since the time of bankruptcy and you have been fully discharged from the bankruptcy for a specific time period. Make sure you keep ALL Bankruptcy papers easily available along with your discharge papers.
• Be prepared for higher interest rates. Lenders offer discounted rates to those that fit in the “box”. Those that are not conventional are seen as a risk and, therefore, are applied to a higher interest rate. There also could be lender fees attached to the mortgage.
• Offer a larger down payment. Lenders are somewhat handcuffed to the insurer when there is less than 20% down payment on a property purchase. But if you offer more than 20% down payment, depending on the lender, their flexibility increases and it is up to the lender or even the branch if they want to take you on as a client.
• As a last resort, you can do private financing. Even though it is an expensive option, it could result in the mortgage you are looking for. Rates are higher and there will be lender/brokerage fees. However, you could be in a private mortgage for 12 months or even less, whereby giving yourself time to improve your credit (if need be) or topping off a two year self-employed period to set yourself up to show STATED INCOME to the lender. The whole point of private financing is to use it as a short term solution for a long term plan.

Being self-employed does not mean that you have to show enough income on your T1 General in order to qualify for a mortgage. There are many factors involved in showing income when you are self-employed. And every lender has different guidelines as to how they view self-employment. If you are self-employed, plan accordingly and make sure you are well set up to show that the lender that you are a desirable candidate for a mortgage.

Premier Christy Clark and Minister Responsible for Housing, Rich Coleman announced on the 15th of December that the B.C. Home Owner Mortgage and Equity Partnership program will initiate a bold, innovative new program for helping first time home buyers afford the homes they desire.

We’ve reached out to our friend Angela Calla, expert mortgage broker and leader of the Angela Calla Mortgage Team, for an analysis of this new program, for an explanation of the requirements and for a prediction on the outcome. Her insights below are likely to bring clarity to the issue.

Full Article here: http://www.point2homes.com/news/canada-real-estate/new-opportunity-bc-first-time-home-buyers.html 

Angela Calla has been a licensed mortgage broker for 12 years – since she was 22 years old. She has been with Dominion Lending Centres since its inception in January 2006. Residing in Port Moody, British Columbia, Angela is a regular expert guest on several news stations, television shows, radio programs and local and national publications.

She was the AMP of the year in 2009, and has consistently been one of DLC and the industry’s top performers since 2006. She can be reached at callateam@dominionlending.ca 604-802-3983 

The Angela Calla Mortgage Team saved Margaret of Surrey and her husband $3000.00 per month by restructuring her mortgage at renewal. Her mortgage was up for renewal at the bank where they encouraged her just to renew directly, however it did not address her current life stage of her outside debt including credit cards and lines of credit that have been accumulated due to helping her adult children with school, and now there businesses.

Thank goodness she did not renew directly with the bank. That costly mistake would have costed her $36,000.00 per year where now she is saving that money by contacting The Angela Calla Mortgage Team. Feeling discouraged she happed to tune into The Mortgage Show one day while she was cleaning the house and decided to give us a call.

We were able to consolidate her outside debts not only saving her $3000.00 per month but helping her save money each month and pay down her mortgage at a highly accelerated rate. She had used a mortgage broker before but they had never reached out to her to help her with renewal. As a result of her contacting us we quickly helped her with the new mortgage and she will now be a part of our mortgage management program included with every mortgage we do so we will review her mortgage every year to ensure she has the best mortgage at all times. Hear her share her story live

Here is Margaret’s interview …

https://soundcloud.com/cknw/margaret-interview-121516-edit

Contact The Angela Calla Mortgage Team directly to help you with your mortgage or someone you care about at callateam@dominionlending.ca or 604-802-3983 

Announced today by Premier Christy Clark and Minister Responsible for Housing, Rich Coleman, ‘the B.C. Home Owner Mortgage and Equity Partnership program contributes to the amount first-time homebuyers have already saved for their down payment, providing up to $37,500, or up to 5% of the purchase price, with a 25-year loan that is interest-free and payment-free for the first five years. Through the program, the Province is investing about $703 million over the next three years to help an estimated 42,000 B.C. households enter the market for the first time.’

This program not only helps first-time home buyers enter the market, but it can also help them save on interest by providing buyers with a larger down payment than they already have. The Province will contribute towards the buyers’ contributions up to five per cent of the home purchase price, meaning first-time buyers can exceed the minimum down payment required by the Canada Mortgage and Housing Corporation.

For example, a home valued at $750,000 requires a minimum down payment of $50,000. With contributions from this program, a first-time homebuyer can put $90,000 down and, assuming a three per cent interest rate, will save approximately $5,200 in interest during the first five years.

In a move to help BC citizens and residents buy their first home, the BC government announced today that it is launching a new program to augment down payments for first-time buyers. The B.C. Home Owner Mortgage and Equity Partnership program contributes to the amount first-time homebuyers have already saved for their down payment, providing up to $37,500, or up to 5% of the purchase price, with a 25-year loan that is interest-free and payment-free for the first five years. Through the program, the Province is investing about $703 million over the next three years to help an estimated 42,000 B.C. households enter the market for the first time. For more examples view here: http://www.angelacalla.ca/blog_post?id=18426

During the first five years, no monthly interest or principal payments are required as long as the home remains the homebuyer’s principal residence. After the first five years, homebuyers begin making monthly payments at current interest rates. Homebuyers will repay the loan over the remaining 20 years, but may make extra payments or repay it in full at any time without penalty. The loan must be repaid in full when the home is sold or transferred to another owner.

To be eligible, buyers must be preapproved for an insured high-ratio first mortgage (mortgage down payment is less than 20% of the home price). On completion of the sale, program funds will be advanced and the loan will be registered as a second mortgage on the property’s title.1Íž

Applications will be accepted starting January 16, 2017. This will be a three-year program with loans advanced from February 15, 2017 until March 31, 2020. https://news.gov.bc.ca/files/Housing_Campaign_HOME.pdf (this is a PDF of the process)

Eligible homebuyers

All individuals with a registered interest on title must reside in the home and:

•             Be a first-time homebuyer

•             Have been a Canadian citizen or permanent resident for at least five years

•             Have resided in BC for at least 12 months

•             Have a combined gross income of $150,000 or less

•             Have saved at least half of the minimum down payment they will require

•             Must be pre-approved for the first mortgage before applying

The first mortgage must be high-ratio insured from an NHA approved lender for more than 80% of the purchase price.

Eligible Properties

Any legal, self-contained, mortgageable residence located in BC

•             Must be used as a principal residence for the first 5 years

•             Rental properties and seasonal or recreational properties are not eligible

•             The purchase price cannot exceed $750,000

Home Partnership Loans

•             Up to 25-year term, registered as a second mortgage

•             No interest or principal payments for the first 5 years

•             Monthly principal and interest payments begin in year 6, amortized over remaining 20 years

•             Interest rate for years 6 to 10 set near first mortgage rate at time mortgage is registered

•             Interest rate reset to near first mortgage rate at years 10, 15, and 20

•             Homeowner may repay in full or part at any time without penalty.

The loan is due and payable in full upon

•             The home ceasing to be the primary resident in the first 5 years

•             Default on the first mortgage

•             Sale of home or change of ownership

•             Any other default on the Home Partnership second mortgage

Bottom Line: This is a bold and innovative step to help potential new buyers to meet the greatest hurdle of first-time homeownership—the down payment. The Federal Government’s new mortgage regulations released in October hit first-time homebuyers hard, so this program will be welcome relief for B.C. residents. The B.C. government estimates that it will make more than 42,000 new loans over the three-year life of this program, amounting to $703 million in new funding available for qualified first-time homebuyers to come up with their down payments. This is particularly important for BC, which has the highest home prices in Canada.

Items of note:

Although this program is available, some homeowners may choose not to take it, as it is a loan that does have to be paid back, and we will not know what that rate of interest will be at the time of repayment.

With it being registered as a second mortgage no other loans can be registered against the property.

This does not address the supply issue and if anything will drive prices higher.

This is our taxpayers money that is being used to fund this.

The mortgage insurers (CMHC, Genworth and Canada Guarentee) have yet to comment on the program 

The Angela Calla Mortgage Team is here to help you personally with clarity on any mortgage related matter, contact us at callateam@dominionlending.ca 604-802-3983

Angela Calla, AMP

Dominion Lending Centres-Angela Calla Mortgage Team

Host of The Mortgage Show Saturdays at 7pm on CKNW AM980

Phone: 604-802-3983 Fax: 604-939-8795

“An introduction to someone you care about is a big responsibility…it’s also the biggest compliment a client can give us & it’s not taken lightly. We pledge to treat everyone that is referred to us with the utmost respect & professionalism”.

www.angelacalla.ca

Reach my Team Johnny Hsu & Dave Holmes at 604-939-8777 & callateam2@dominionlending.ca

Sean is self employed like so many people here in the lower mainland, and when it came to buying his 1st home for him and his new wife while they were expecting their first baby, they went to there bank which they learned was the biggest mistake they could have made. They happened to tune into The Mortgage Show on CKNW while he had dropped his wife off at home and was eating sushi in the car, and then with our assistance was able to buy his first hame & 8 years and 2 babies later we helped him optimize the mortgage market by restructuring his mortgage early to save an additional $800 per month and secure a better rate longer in this ever changing mortgage market. Had we not had the opportunity to help Sean and his family, they would not be homeowners or had the opportunity to future better there future financially with their growing family. We are grateful to help, and you can hear Sean’s interview directly which aired on a past episode.

https://soundcloud.com/cknw/tms-interview-sean-120117

Who do you know that you would want to get the best mortgage to help them have the best financial future? For any purchase and mortgage question, contact The Angela Calla Mortgage Team directly to help you as we have our existing clients at callateam@dominionlending.ca or 604-802-3893