Category: Mortgages

Before you start shopping for a new home, you’ll need to know exactly how much house you can afford. Otherwise, you could end up in a home that is way out of your budget. What you qualify for may not be what you can actually afford, based on your personal situation. Only you can decide how much you’re comfortable paying every month.

How Much Home Can You Afford?

While you may be tempted to spend the full amount of mortgage you’re approved for, you should take your total expenses into consideration. When deciding how much to spend on a home, remember: your decision should be based on:

Your current expenses – Even if your mortgage amount is under 40 percent of your total debt, you may have other expenses not taken into consideration by the lender or the bank. Take into account your down payment, closing costs, monthly debt payments, and other living costs – such as groceries, transportation, and dining out.

Your future expenses – If your financial situation changes in the future, will you still be able to afford your home? Your pre-approval is based on your current income and debt levels. Consider whether you’ll still be able to pay your monthly mortgage if you lose your job or take on more expenses.

Your lifestyle – Take a look at your current budget. Are you going to have to make cutbacks or changes to your current lifestyle in order to live comfortably with the mortgage amount? Decide what parts – if any – of your lifestyle you’re willing to sacrifice. You may decide giving up certain aspects of your lifestyle are worth getting into a ‘better’ home. On the other hand, you may feel happier spending less on a home if you can maintain other aspects of your lifestyle. Figure out your priorities, and go from there.

How is Your Mortgage Amount Determined By the Lender?

When you go to a bank or lender for a mortgage pre-approval, you’ll receive a quote for the maximum amount you can borrow. Banks and lenders use specific calculations – called mortgage ratios – to determine what you can afford based on your overall monthly debts, including housing costs. These ratios are:

Gross Debt Service (GDS) Ratio – Your mortgage expenses (principal, interest, utility costs, condominium maintenance fees, and property tax) should represent no more than 32 percent of your gross annual income.

Total Debt Service (TDS) Ratio – The gross annual income needed for all debt, including housing costs, personal and car loans, and credit cards. Your total debt should not exceed 40 percent of your gross annual income.

Don’t feel pressured to spend the full mortgage amount you’ve been approved for. Once you’ve considered the above factors, you’ll have a better idea of how much money you should spend on a home.

You’re FINALLY ready to buy a new home! You can hardly wait, but you need to get the perfect mortgage first. When acquiring a new mortgage make sure to always ask this question, among others of course: full frill or no frill?

What exactly does full frill or no frill mean? Well, exactly how it sounds. A no frills mortgage comes with absolutely NO frills. At the cost of a lower rate you get no, or extremely little, flexibility, no extras, no considerations. According to CanadianMortgageTrends.com “A No Frills mortgages are bare bones products designed for one type of person: someone who doesn’t want to pay for added flexibility.
In terms of pricing, no frills mortgages are usually 0.10% to 0.20% cheaper than fully-featured mortgages.”
On the other hand, a full frill (or sometimes called fully-featured) mortgage is exactly the opposite. It allows for flexibility, pre-payment privileges, portability and assumability.
RateSupermarket.ca outlines the advantages and disadvantages:

Advantages

Here are a few reasons why you might be tempted by this type of a mortgage:

Lower Rates

Actually, that’s pretty much it! Other than a lower rate, no frills mortgages offer few other benefits.

Disadvantages

Be aware of what you’re giving up in for a lower mortgage rate. These products typically come with:

Minimal pre-payment privileges
Minimal payment top-up options
Limited number of pre-payments in a year
Quick close deadlines
Longer turnaround times on approvals

(This list in not exhaustive and there may be even more drawbacks to a no-frills mortgage product, so be sure to check the fine print)

Is a No-Frills Mortgage Right for You?

Like all things related to your mortgage, the answer to this question depends on your personal situation. If you don’t think you’ll miss the additional features, now or over the course of your mortgage term, then maybe the lower rate is enticing enough for you. On the other hand, it’s really hard to say what life might be like a few years down the road. If you get a promotion, switch jobs, or need to sell your house, the lack of flexibility associated with a no-frills product could cause you a lot of heartache.

So the big question is: should you get a no frills mortgage?

When you think that 70% of borrowers break or re-negotiate their mortgages before maturity this is definitely something to consider!

To continue our mini-series on repairing and managing your credit, this week I am sharing with you 8 simple steps that you can take to start improving your credit score so that you can qualify for lower rates on your mortgage, home refinance, and other credit products.

By combining what you read in this article with what he learned in last week’s article, How is Your Credit Score Calculated?, and the post form the previous week, How Long Does Bad Credit Stay On Your Credit Report?, you will be empowered with the knowledge that can help you take control of your credit and ensure that you are positioned to get approved quickly and at the best possible rates and terms available to you when applying for a new purchase mortgage, a home refinance, and more.

Here Are 8 Things You Can Do To Help Increase Your Credit Score

1. Monitor Your Credit Report And Score

Based on research conducted by the Public Interest Advocacy Centre, almost 1 in 5 Canadians have errors listed on their credit reports. These errors can have severe impacts on their credit scores which can drastically reduce their chances of being able to refinance their home, qualify for a mortgage, or get approved for other credit products.

Although in the case of a mortgage or refinance, Maxium, will usually be able to help you get approved and qualify for a mortgage loan through either one of the alternative lending institutions he works with such as a trust company or credit union, or through a private mortgage lender provided that you have enough available equity in your property. The draw back with either of these sub-prime mortgage lenders is that the interest rates tend to be higher than if you were able to qualify at a more conventional lending institution or bank.

By monitoring both your Equifax and TransUnion credit reports and checking them regularly, you will be able to catch common errors such as inaccurate late payments that were actually made on time, incorrect or out dated personal information, old debts that have been fully paid, inaccurate balances, unauthorized hard inquiries, bankruptcies and collections information that should have been removed from your record. All of these errors that are made by the credit bureaus can have serious negative implications on your finances.

Checking your own credit counts as a “soft inquiry” and does not count again your credit score at all. If you find any errors on your credit report, you should dispute them with your credit bureau and they will investigate your claim and provide you with an answer within 30 days for the most part. Having an error corrected and removed from your credit report will usually have an immediate positive effect on your credit score

2. Pay Your Bills On Time

The single most important factor that has the greatest impact on your credit score is your payment history. Payment history account for approximately 35% of your credit score. By making at least your minimum payments on time, no matter how big or how small those payments might be, you will be making one of the best contributions that you can towards ensuring that your credit score remains strong.

Even the smallest late or missed payment will have a negative impact on your credit score and remain on your credit report for up to 6 years! Even a small $50 missed or late payment will hurt your score so be sure to set monthly reminders for yourself and budget accordingly to be able to make all of your payments before they are due.

3. Keep A Low Balance

Credit bureaus keep track of credit utilization ratio and use that to help calculate your credit score. Your credit utilization ratio measures what percentage of the total credit that is made available to you is being used by you. Both credit unions and lenders do not like to see high utilization ratios. In fact, you should always try to keep your balances on your credit cards and other debts below 30% of your credit limits.

For example, if you have two credit cards with a credit limit of $5,000 each and you are carrying a balance of $1,500 on each of them then your credit utilization ratio is calculated as follows:

Total credit limit: $5,000 (limit of credit card 1) + $5,000 (limit of credit card 2) = $10,000 total credit limit

Total debt (utilization): $1,500 (balance on credit card 1) + $1,500 (balance on credit card 2) = $3,000

Credit utilization ratio = $3,000 (total debt) divided by $10,000 (total credit limit) = 30%

If you have a total credit limit of $10,000 and were to keep carrying a balance of less than $3,000 (less than 30%), then your credit score would probably not be affected by your balance. If you were to carry a larger balance while maintaining the same total credit limit, then your credit score will likely be negatively affected as a result. Generally, the lower the credit utilization ratio, the better it is for your credit.

If your credit utilization ratio is higher than 30%, here are 2 things you can do to help lower it:

Apply for a credit limit increase. By increasing your credit limit, you lower your utilization ratio provided that you do not increase your debt balance. As an example, by keeping your balance the same and doubling your credit limit, you will instantly reduce your utilization ratio by half. The key is not to start spending more and to resist the urge of increasing your debt balance after having increased your credit limit.
Pay down your existing balance regularly. Credit card companies report their the balance that their customers carry on their credit cards on a monthly basis. If you pay off more of your credit balance before the monthly reporting date, this will help improve your credit score since a lower balance will be reported to the bureaus. Making this a habit will help keep the utilization ratios down on your credit report.

4. Keep Old Credit Accounts Open

Since the length of time that your credit history is active has a direct impact on your credit score, it is important to keep old credit cards and other credit accounts open provided they are in good standing. Even if you do not use them much anymore, having them open and even using them once in a while will positively contribute to the length of your credit history, which will have a positive impact on your credit score.

Keeping old credit accounts open while not carrying a balance on them will also help keep your credit utilization ratios lower. If you close old credit lines then you will be lowering your total credit limit and increase your utilization ratios which can negatively impact your credit.

5. Diversify Your Credit

By having a variety of different types of credit accounts open and in good standing, you demonstrate to lenders that you are capable of responsibly managing your credit across multiple credit channels. Keeping up to date and maintaining low utilization ratios on a combination of credit cards, of credit, a mortgage, installment loans, etc, will positively affect your credit score and help improve and keep it strong.

6. Be Strategic With Credit Applications

Frequent “hard inquiries” such as credit checks by lenders and creditors for the purpose of a credit application will negatively impact your credit score. Even if you are trying to get a mortgage and are shopping around from bank to bank, each time a new bank pulls your credit within a short period of time, it negatively affects your credit. After applying for a mortgage with 3 or more banks, your credit score might decrease so much that you might no longer qualify for a mortgage.

In order to help avoid this problem, when applying for a mortgage or home refinance, consider using a mortgage broker who can shop around with multiple lenders using only one single credit report from only one “hard inquiry” which will not have a significant impact on your credit score. Here are some other benefits to using a mortgage broker when searching for a mortgage of home refinance loan.

7. Consolidate Your Debt

If you are finding it hard to manage your current debt payments and bills, it might be a good idea to consider looking into a debt consolidation loan. By combining all of your higher interest debt payments into one single smaller monthly payment, it can help you get caught up and better manage your monthly expenses and obligations. With the extra money that you free up, you can put that towards paying down your consolidation loan faster, or free up cashflow for other purposes.

Here are a few common forms of debt consolidation loans:

Credit cards that offer low promotion interest rates for balance transfers from other credit cards
Taking out a personal or secured line of credit that carries a lower interest rate than your current debts
Taking out a home equity loan or 2nd mortgage on your property, or refinancing your whole existing mortgage at a lower interest and higher mortgage amount to cover your other debts

Here’s how a mortgage broker can help you get approved for a debt consolidation loan.

APPLY NOW

8. Get A Secured Credit Card

If you are unable to qualify for a credit card due to a bad credit score, bad credit history, or lack of credit history, you can go to a bank and get a secured credit card to help yourself start establishing or rebuilding your credit. In order to get a secured credit card, you will be required to provide a deposit to the bank or purchase an investment product such as a GIC in an amount that is equal to the credit limit that your credit card will have.

For example, if your secured credit card will have a limit of $5,000, then you will need to put $5,000 into a designated account in order to be able to get the card. Despite the deposit, you will still be required to make your monthly payments on time and pay the balance on the card as required. If you miss payments or make late payments on this card, your credit score will continue to be negatively impacted, even though you put a deposit for the card.

Even if your credit score is low, you can improve it as much as 100 to 200 points in a short period of time by consistently following the steps above. First start by checking both of your credit reports for errors and contacting the respective credit bureaus to fix any errors that you may find. Your next step should be to begin paying all of your bills before the due date as this will have the greatest effect on your credit score. Follow this with ensuring that your credit balances remain less than 30% of your total credit limit. Lastly, if you need help with cashflow and paying down your debts, consider looking into a debt consolidation loan.

Following these steps consistently can help you get on your way to improving your credit score and improving your overall financial situation while becoming debt-free!

Maxium can help you develop an effective and realistic plan to help you get out of debt and rebuild your credit.

Call or text Maxium today at 437-353-9977 or email us at info@maxiumdsouza.ca to speak about your situation.

Being a homeowner you may have the opportunity to access your home equity and consolidate some of your high interest debts. By tapping into one’s home equity, homeowners can cut down their monthly debt expenses and start paying down their debts even faster, despite

What Is Home Equity & How Can You Access It?

Home equity is the difference between the current value of your home and the unpaid balance of your mortgage. The longer you have owned your house, the more you have paid down your mortgage and the value of your property based on market activity all affect the amount of equity you have in your home. Once you have lived in your home for several years and have established a higher percentage of ownership, you will have the ability to use your home equity as leverage to take out extra money from your mortgage amount.

Homeowners interested in accessing their home equity often have two main options for financing: a Home Equity Loan and a Home Equity Line Of Credit (HELOC). A Home Equity Loan, also known as a second mortgage, allows a homeowner to tap into their available home equity (the portion of the home’s value that is not mortgaged) and withdraw a lump sum amount. The borrower will then need to make monthly interest-only payments while the interest rate remains set until the designated date of renewal. This is a great option for homeowners that need a larger sum of cash ranging as low as $20,000 to as high as $100,000, $200,000, and even over $1,000,000 depending on the value and available equity in the home. Homeowners looking to refinance their homes and take out additional equity can use the extra money for anything from debt consolidation, investments, home renovations, higher education or other life expenses.

Borrowers accessing the available equity they have built up in their home can also have the option to create a Home Equity Line Of Credit (HELOC) for themselves. A HELOC allows the homeowner to withdraw cash from the line of credit and repay it as they find necessary, as long as they make the minimum monthly interest payments. They do not need to withdraw all of the available money in a lump sum and can use the line of credit as if they were using a credit card, but at much lower interest rates. Similarly to a second mortgage or third mortgage, HELOC’s are often appealing to homeowners with a large sum of debts on multiple high interest credit cards and other high interest loans. This is because they allow the borrower to pay off high interest debts and consolidate them into a more manageable and lower interest-only monthly payment.

Advantages Of Consolidating Debt Through A Second Mortgage or Mortgage Refinance: Increased cash flow: Multiple high interest debts consolidated into one lower interest rate can increase your available monthly income and help you save money in the long run.

Customized financial plan: Working with a mortgage professional who can help you create a loan and debt repayment plan, spreading over a 2-5 year period, can help you in reaching and maintaining your financial goals.

Streamlined payments: Multiple larger monthly payments can be combined into one single lower monthly payment with a lower interest rate that can help you pay your debts off faster.

Credit score: Individuals with poor credit scores can qualify for a second mortgage which can help enable them to pay off their high interest debts and help them start rebuilding a better credit score. This is a factor that is very important when applying for a future mortgage or refinance.

Principal repayment: When individuals are forced to pay off high levels of credit card debt using only their incomes, they are often not able to pay the whole sum of their debt. Instead they are left paying the minimum payments which often pay solely for the interest itself and therefore keeping them stuck in the vicious debt cycle. This endless loop can leave someone in a great deal of debt, stress, and substantially limit their financial standing. A second mortgage can allow you to pay the total sum of your credit card debt and only worry about making the appropriate monthly payments on your home equity loan.

As you can see there are many advantages to tapping into your home equity and either getting a second private mortgage or refinancing your current mortgage. A private mortgage is also a great option for potential borrowers with bad credit that are worried about undergoing a rigorous loan approval process. Since homeowners are using the equity in their homes as collateral for the loan, they are not seen as “risky” borrows and the whole application process becomes much quicker and less tedious. Home equity loans can also be very beneficial for self-employed individuals who might have a harder time reporting their income in a traditional manner.

Borrowers are loving the current record low interest rates, and homeowners stand to benefit even more.

If you bought your home more than a few years ago, you could probably benefit from a refinance at today’s low interest rates. With interest rates this low, you owe it to yourself to at least give refinancing a look. If you can refinance your mortgage and get a rate at least half a percent lower than what you are paying, chances are refinancing makes sense.

Refinancing your mortgage to get a lower rate is one of the smartest things you can do. When you refinance your mortgage to a lower interest rate, you gain the instant benefit of a lower monthly payment, and those savings can really add up. Depending on the amount of your mortgage, even a small drop in interest rates could mean hundreds of extra dollars in your pocket every month.

While those instant savings are certainly compelling, a lower mortgage payment is not the only advantage of refinancing your mortgage. When you take the long view, the value of a mortgage refinance becomes even more apparent. Every dollar you save now is one less dollar you have to pay the bank – and one more dollar you have to invest. Over the life of the mortgage loan, the combined interest savings and extra investment income could mean tens of thousands of dollars in your portfolio.

Refinancing your mortgage at the current low interest rates is also a great way to pay for needed home repairs. If your home needs work but you lack the funds to pay for it, refinancing your mortgage could allow you to take money out and tap the equity you have built up through the years. And since interest rates on home equity loans are generally lower than other types of loans, you will pay less interest as you get your home back in shape.

There are many compelling reasons to take advantage of the current low interest rate environment. These low interest rates have already lasted longer than usual, and they will not last forever. At one point interest rates will be going up, and when they do everything from home repairs to monthly mortgage payments could be costing you more. At the moment, interest rates are still at historic lows, and now is the time to act.

Need A Bridge Loan? Get Approved Today!

A Bridge Loan is a short-term loan that helps homeowners bridge the gap between the time that they receive money from the sale of their current to the time that they require the money for the down payment for their new home. At Maxium, we specialize in providing bridge loans for new home or commercial property purchases to borrowers even if they have not yet sold their original property.

You as a homeowner will most likely buy more than one home and move at least a few times throughout your life. You might need to change locations for work or personal reasons, you may want to upgrade to a bigger or newer home, or you may decide to downsize to a smaller home. Whatever the reason, you will most likely want to use part of all of the money you earn when you sell a home towards the down payment of a new home. In some cases, people find themselves in a situation where their closing date for buying their new home falls before the closing date of selling their current home.

In other words their house has not sold in time to give them the funds to put a down payment on the new home they are purchasing. This is where a bridge loan can really help by using the equity in your current home as collateral for a loan to put towards the purchase of your new home. This type of loan is usually a short term solution that ranges from a few months all the way up to one year. Maxium can help you get this kind of loan using collateral like real estate or other assets.

How Much Money Can You Get With A Bridge Loan And For How Long?

Lenders will need to evaluate a borrower’s specific situation in order to give a borrower a maximum loan amount. Based on this information, the lender will also determine how much time the borrower will have to pay the loan back. In most cases lenders are comfortable lending up to $200,000 for as long as up to 1 year. If more time or money is needed, the lender will need to consider various factors in order to decide if you qualify. Keep in mind for larger and longer loans a lien may need to be registered on your property. A qualified mortgage agent can help you determine the best course of action to take, and find the right lender for your specific needs and situation.

How Is A Bridge Loan Calculated?

Here’s a simple example to help you better understand how a bridge loan is calculated. If you are looking to purchase a new home and the closing date is in 25 days, meanwhile the closing date for the house you are selling is in 75 days a bridge loan would cover the required for the 50-day period (75 days – 25 days = 50 days) after you close on the purchase.

To better understand the process lets use an example, you are purchasing a new home for $500,000 and you have put down a 5% deposit (in this case that would be $25,000), but you wish to use the remaining $240,000 of equity in your current home to put towards your new home. The problem is that there is a 50-day gap between the sale of your current home and the closing date for the purchase of your new home. This leaves you with insufficient funds to close on the purchase in time. In this scenario a bridge loan would be ideal choice to help “bridge” together the gap between the selling of your current home and the purchase of your new home. A bridge loan will give you the funds to pay the difference between your deposit and your total amount due while you wait for the sale of your original property to close.

Are There Any Additional Fees?

As with any loan, a bridge loan has interest, though it is generally similar to a rate you would expect from a personal line of credit. You can expect a bridge loan to be higher than your first mortgage rate, and it generally falls around the prime rate + 2% mark. In some case it can be up to 3% over prime, but that depends on a variety of factors. A bridge loan is issued over a short period of time, and will be repaid when the equity of your previous home is collected after the sale closes.

Typically in addition to the small interest applied to you loan there is a flat administration fee which is usually between $200-$500. If you need a loan that is more than $200,000, the lender might register a lien on your property. In this case you will also need to hire a real estate lawyer when you pay the loan back and want to remove the lien. Your mortgage agent can provide you with 3 or more different real estate lawyer recommendations if you don’t have one already.

How To Qualify For A Bridge Loan?

To apply and qualify for a bridge loan you will need to provide the lender with a copy of the original purchase agreement for your new home, and a copy of the sale agreement for your current property. However if your closing date is not firm, then you will need to turn to a private lender because most banks and traditional lenders will require a firm closing date in order to approve you for a bridge loan.

How Can Bridge Loans Be Used For Businesses?

If you are a business and find that you are waiting for long-term financing, but you need cash to manage expenses in the meantime, than a bridge loan might be a great temporary solution. A business bridge loan can help cover utilities, rent, payroll, inventory costs, and more while you wait for your long-term financing is ready.

How Do Bridge Loans Work In Real Estate?

A bridge loan can be an ideal tool to gain access to some funds using the equity of your current home to act as collateral for the loan to go towards the purchase of your new home. This is particularly effective when there is a delay between the sale of a property and the purchase of another, as the bridge loan can give them the funds they need immediately to help close the deal on their new home purchase. This type of loan is provided to borrowers with good credit score and a low debt to income ratio.

In essence a bridge loan bridges together 2 mortgages of your two homes, which gives you flexibility when waiting for your home to sell. Bridge loans d0 have some risks to consider, so for that reason lenders generally offer bridge loans for real estate at no more than 80% of the combined value of the two homes. This can leave the borrower needing to have a substantial amount of home equity, or a large amount of savings. Maxium is a specialists when it comes to providing bridge loans even in the trickiest situations. If credit, income, or loan to value is a problem, ask Maxium about your options.

If you need a bridge loan ASAP, Maxium Dsouza can help you get APPROVED and get your money in as little as 48 hours!

Call or text Maxium today at 437-353-9977 or email us at info@maxiumdsouza.ca to speak about your situation.

Was your mortgage denied last minute?

Did you receive the bad news of a last minute mortgage denial from your bank or mortgage broker? Maxium has the additional resources to help you get approved and funded for an Emergency Mortgage for you in as little as 48 hours. He prides himself on providing Canadians with the right service for your mortgage and financial needs and goal.

Housing in major Canadian cities such as Toronto is not cheap. To make matters even more difficult, banks and other lenders have the right to go back and deny mortgage loans even on the day of closing, and even after all the agreements have been signed. This is why many first time homebuyers, experienced homebuyers, homeowners, and commercial or industrial property owners and buyers are turning toMaxium to get help and information on a last-minute mortgage when their original approvals fall through.

A last minute mortgage can be available to you even if you have bad credit, poor income, self-employed, or are new to Canada.He can help whether you need an emergency mortgage in Toronto, the GTA, London, Kitchener, Waterloo, Cambridge, Barrie, Woodbridge, Hamilton, Burlington, Mississauga, Oakville, Brampton, or other parts of Ontario. He has lenders who are ready and willing to help you with your last-minute mortgage needs.

Maxiumis an expert in helping home buyers and commercial property buyers find fast closing mortgage loans.He will provide you with the right advice and information about your mortgage options by quickly shopping your application to the lenders who he knows can fund a mortgage in as little as 2 days.

Maybe you purchased a home or commercial property that is closing in as little as a few days or a few weeks and your mortgage fell through last minute with a bank or another mortgage broker. Fortunately, you can still save your home purchase and get a quick close mortgage from one of our many quick closing mortgage lenders.

Why would a bank cancel a mortgage last minute?

It may not be common public knowledge, but did you know that a bank or mortgage lender can cancel applications for loans and mortgages for housing at the very last minute? This piece of information is something that most borrowers simply don’t know about. Even after you signed their commitment contract and even on the day of closing, lenders have the legal rights to go back on the mortgage commitments they issue and deny mortgages with very little reason at all. This makes it even harder to find a feasible property and break into today’s Canadian housing market without the right assistance and resources.

Here are several of the most common key reasons why banks and lenders cancel mortgages.
Discrepancies or wrong information in your mortgage application (can also be the fault of your realtor or mortgage broker)
Discrepancies in your current housing or living details
Changes in your employment status (job loss, new job started, etc.) and other financial
Changes in your debt payments, debt status, or an additional new loan. Continue to pay everything on time.
New negative findings on your credit bureau agency report
Issues with the property appraisal report
Property is not insurable and other property insurance issues
Title issues or other legal issues
Changes and/or additional findings in the physical condition of the property
Errors or inaccuracies on your mortgage application (might be caused by an inexperienced realtor or mortgage broker)
Misrepresentations or inconsistent information during your mortgage phone or in-person interview when compared to the original application
Issues surrounding your down payment and the sources where it is coming from
Online search results that portray the borrower in a negative or questionable fashion severe enough to deter a lender from lending to them
Discrepancies in subject property from the information disclosed on the application
Federal and Provincial government and banking policy changes
Pandemics like COVID-19 in 2020 or other Acts of God
Sudden drops in the pricing and values of housing and commercial real estate based on the area and place where your home or commercial is located
Increases to the Federally regulated stress-test
Your mortgage broker put you into the wrong mortgage program to begin with
Recent changes in your life no longer qualify you for that specific lender product and you may need to re-qualify under a different program

Every mortgage lender has a different policy when it comes to reasons for cancelling a mortgage. Maxium will work with you to try to help you steer clear of any potential unexpected pitfalls and keep you informed about the progress of your mortgage loan right up to the moment that it closes and gets funded.

What do I do if my mortgage falls through last minute?

This is one of the scariest questions to be asking yourself when your closing date is fast approaching. Luckily, he has the information you need to get fast and reliable help and put you into the right mortgage lender’s program.

Based on pricing alone and despite efforts by the federal government to slow down the growth of home prices, housing in major cities like Toronto and the surrounding areas can still be tough to afford. From out of reach pricing to difficult to qualify for mortgages, it may seem like the odds are stacked up against you. Even banks these days are cancelling mortgages as late as on the actual day of closing, even after making you jump through all the hopes to get your application approved in the first place.

Fortunately, Maxium is specialized in helping home buyers looking to buy a new place to live or as an investment property get emergency mortgage assistance even after they got turned down by the banks. Our quick close mortgage services have helped many Canadians living in Toronto, Mississauga, Oakville, Burlington, Milton, Brampton, and other parts of Ontario such as Ottawa, Hamilton, Barrie, Vaughan, Richmond Hill, Thornhill, Woodbridge, Maple, and elsewhere get approved after they’ve been turned down by other lenders. He will provide you with a free last minute mortgage consultation anytime you need it. He will help analyze your financial situation quickly and get you into the best possible mortgage options available to you given the situation.

Whether you are looking for a service to help you with quick close mortgages Toronto from a private lender, mainstream bank, or an alternative institutional lender, our mortgage brokers will help take care of the entire approval process from start to finish and ensure that he qualifies you for the best mortgage program available to you. Our goal is to service your needs and help you get into your home and get approved for a home loan program that will close when you need it to, even if you need a last-minute home loan free of any additional stress. He will also help you build and plan out a program for a better financial future when you refinance or renew your mortgage down the road.

Can I get an emergency commercial mortgage loan for a commercial or industrial property?

Yes you can! In addition to brokering quick closing mortgages for housing and residential properties, Maxium has partnered with brokers who also specializes in providing brokering services for quick close commercial mortgage and last-minute industrial mortgages in Toronto for your industrial property. He can also help you secure funding on a commercial property or industrial property in other parts of the GTA, and all across Ontario. Fortunately as a brokerage with an experienced and seasoned commercial lending team, he has access to some of the top commercial mortgage programs that can help us help our customers quickly and effectively. These programs may not all be readily accessible to the public, which is where a mortgage broker comes in. By providing you with access to lenders that you would not normally be able to find on your own, this is how mortgage brokers can become your best allies. He will work to find the right program and mortgage product for you.

What’s the average closing time on a mortgage?

Even though a mortgage from a bank can take several weeks or more to get approved and funded, you can get a mortgage for residential housing approved and closed in as little as 48 hours with a private mortgage program. Private mortgage lenders are not forced to adhere to the federal government’s mortgage stress test rules and tend to have much more flexible lending programs. These last minute quick closing mortgage programs are made available to borrowers through mortgage brokers. Contact Maxium for help with determining if a short-term private mortgage program is the best option for you or if one of our many other lenders can provide a quick closing mortgage for you in time for your deadline.

Unless you are paying for your house, investment property, or commercial property with an all cash program, then buying a property can be a long and cumbersome process without the right help and guidance. In some cases, it can take up to 45 days or 2 months to close on a mortgage. This is why it is important that you reach out to a qualified brokerage with access to the right resources and housing the right team of experienced and knowledgeable mortgage brokers and underwriters who will be able to help you out of a sticky situation. Maxium calls this out Emergency Mortgage Program, also known as the Quick Close Program. No matter what you call it, he have the solution to help experienced homebuyers, first time homebuyers and homeowners get a mortgage quickly and painlessly.

Maxium is a mortgage expert ready and eager to help answer all of your mortgage related questions. Our mortgage brokers work with banks and alternative institutional mortgage lenders to find the right program for your needs and financial situation. Our lender partners allow our brokers to get your mortgage approved and financed at great rates in a matter of a few days in many cases. Even some private mortgage lenders can be great resources and offer relatively competitive rates for a quick closing mortgage. In this housing market, a last minute mortgage in Toronto or other cities located near a major city can be even easier to get approved and closed quickly. This is due to the fact that certain lenders are much quicker at approving a fast closing mortgage on a property near a larger and more stable real estate housing market.

If you are an existing homeowner and are looking for quick-closing mortgage refinance program for a first mortgage or a last-minute second mortgage loan for when the housing market is growing, he have access to many lenders with which he can help you get approved in a matter of hours and get your first mortgage home refinancing or 2nd mortgage funded in as little as 48 hours in some cases.

In some cases you may be better off choosing a mortgage brokerage that has local presence in your are rather than strictly a national presence since a local brokerage might in some cases have access to more private lenders willing to lend on homes and properties in your neighbourhood. That’s not to say that national brokerages do not have access to the same or even more private lenders. In fact, some brokerages operating at a national level could very well be able to provide you with even better options.

How to get a mortgage fast?

Just because the offer you made on your dream home or commercial investment property is accepted, that does not mean that you can take possession of it and get the keys to the property to move in, or start renting it out, or begin any desired renovations. You first need to get your financing in order in time for closing. That’s where Maxium Dsouza comes in to play. He has access and ability to contact a plethora of lender products and programs to help our customers get the right mortgage or home refinance for their needs.

Need a mortgage fast so that you can win in today’s housing market? With help from the right mortgage broker who has the right resources, such as Maxium Dsouza, you can have the content of your application properly prepared quickly and submitted to those lenders who we know will be able to help you close on your mortgage as fast as possible. He have access to lenders who use a more efficient resources and digital processes which helps save a lot of time off of the overall mortgage approval process.

Ask yourself the following questions about some of the basic things that you can do to help ensure that you get approved for a quick-close mortgage as fast and smoothly as possible:
Provide only accurate and up to date information to your mortgage broker and do not hide anything from them. Hiding information from your broker can only work against you when it comes down to actually funding your mortgage loan.
Do I have all of my documents in order? Get your documents and information in order. Documents vary depending on a variety of factors, but they can include your income and financial documents, tax documents, letter of employment or job letter, business license or articles of incorporation if you own your own business or need a self-employed mortgage, current mortgage statement and property tax bill in the case of a mortgage refinance, your agreement of purchase and sale along with the original MLS listing in the event of a new purchase, and more.
What’s my credit score and history? Know your current Equifax credit score and TransUnion credit score and review your current credit bureaus from each of those two credit bureaus. Review your credit reports and information surrounding your credit score and credit history ahead of time. This important step can help you can catch any errors and inaccuracies and get those fixed so that they don’t pose a problem or delay your mortgage application.
Do I anticipate any major upcoming life changes before my mortgage is due to close? Avoid any major life changes while your mortgage application is being processed and until after your mortgage is funded and closed. Life changes such as a job change or job loss, increased new payments for debts and loans, worsened credit, and other big changes can get your mortgage approval canceled without advanced notice. So, don’t quit your job. Don’t forget to pay your bills and debt payments on time. Don’t take out any new lines of credit or get any new credit cards. Don’t make any large purchases. And try to skip any other major life changes that can put your mortgage application at risk. If any major life changes happen during your mortgage application, contact your mortgage broker as soon as possible. Your mortgage broker will go back and review your application to help mitigate any potential issues ahead of time and ensure that you are not at risk of losing your mortgage.
How much can I afford as a down payment? Make sure you have at least 20% for a down payment. If you have less than 20% available for a down payment, that you need to ensure that your credit score is high enough that you will be able to qualify for mortgage default insurance policy from an insurer like the Canadian Mortgage and Housing Corp. (CMHC), Genworth, or Canada Guaranty.
Do I have the right mortgage broker helping me with my mortgage loan? It is important to stay in touch with your lender regularly, unless you are working with a mortgage broker, then they will be keeping in constant contact with your lender on your behalf to ensure that no last minute surprises come up and mitigate any potential challenges in advance.

What kind of documents do I need to prepare to speed up the mortgage process?

Here is a list of the most commonly requested standard documents that most banks or institutional mortgage lenders will need in order to get a quick approval or emergency mortgages processed. In the case of a fast-closing private mortgage, many of these documents may not be required:

Notice of Assessments (NOA’s) for the most recent 2 tax years

T4’s for the most recent 2 tax years if you are an hourly or salaried employee of a company

T4A’s for the most recent 2 tax years if you are a commissioned employee or worker

Most recent 2 pay stubs if you are an employee

A job letter dated less than 30 days ago if you are an employee

T1 Generals if you are self-employed or own your own business

A business license is you are self-employed as a Sole Proprietor or Partnership

Articles of Incorporation if you are a shareholder/owner of a corporation

Business Financial Statements for the most recent 2 tax years if you own your own business/corporation

3 to 6 months of personal bank account statements

3 to 6 months of business bank statements if you are self-employed or in business for yourself

Current most recent mortgage statements if you currently own any other properties or are seeking approval for a mortgage refinance

Most recent Final Property or Housing Tax Bill if you currently own any other properties or are seeking approval for a mortgage refinance

2 pieces of identification

Be ready to sign a credit check consent form so that your mortgage broker or the lender can pull your credit report from your credit bureau agency

Rent rolls or rent/lease agreements if you currently own any properties that you rent out and are using that rental income to offset your expenses or add to your income or improve your financial position

Proof of down payment sources to show the lender how and where your down payment is coming from or where the funds are flowing through

There may be other documents that you will be required to provide, but a knowledgeable and experienced mortgage broker will be qualified to provide you with services and additional help and guide you through this process and inform you ahead of time what documents are required for your application. You can also check out our Mortgage Document Checklist to see a list of some of the more common documents you might be asked for.

Why should I review my current credit history before applying for a last-minute mortgage loan?

Did you know that approximately 25% of consumers have at least 1 or more errors on either one or both of their credit bureau reports? This can really negatively affect your credit score and your chances of getting a mortgage approved. Even if you, as a consumer, do get approved for your mortgage, errors on your credit report, like a non-discharged consumer proposal that was paid off 7 years ago, can come to haunt you days before or even on the day of closing to the point where the lender might cancel your mortgage last-minute.

By reviewing both of your credit report and getting ahead of any error or inconsistencies, you can greatly improve your chances of getting approved for a mortgage that won’t fall apart last minute.

It’s no secret that housing in Ontario, especially in major cities like Toronto, Mississauga, Brampton, Vaughan, Ottawa, and Barrie can be really expensive. Saving 20% for a down payment can therefore be unattainable for many hopeful homebuyers. If you are planning on finding housing and putting less that 20% as a down payment you will likely need to have a credit score of at least 650 and higher. Keep in mind that as of August 2020 5% is still the minimum down payment you can put down, though there have been talks of this potentially changing to 10% in the near future. Any other applicant or co-signer who’s on the application with you will also need to have a strong credit history and good credit score.

This is because institutional lenders do not have any programs that allow them to lend more than 80% of the purchase price or value of the property without the borrower being approved and obtaining a policy for mortgage default insurance through one of Canada’s 3 housing mortgage default insurers, CMHC (Canadian Mortgage and Housing Corporation, Genworth MI Canada, or Canada Guaranty Mortgage Insurance Company. None of those companies will insure your mortgage unless you and all applicant and co-signers have a decent credit score and credit history. Otherwise, you will be required to put down at least 20% in order to have an institutional lender approve your mortgages request.

In some cases, private mortgage lenders will lend up to 85% of the purchase price or home value, but those housing mortgages for housing can come at substantially higher interest rates and carry extra fees with them.

If you do have a troubled credit history or a low credit score, here are some sure-fire steps that you can take to help improve your credit score and get approved for a better mortgage and receive lower quoted rates and better term options in the future on housing purchases or refinances.

What life changes do I need to avoid while my mortgage loan is in process

With the recent tightening of mortgage regulations, many lenders are now reviewing the entire mortgage application and requalifying borrowers days before their housing mortgage is due to fund, even though they may have been approved months earlier. These days lenders are pulling everything from new credit bureau checks to requesting updated employment verification documents and recent bank statements.

Here are some important life changes to try to avoid until after your mortgage loan is funded in order to minimize the risk of experiencing a last-minute denied mortgage and ensure the security of your approval:

Quitting, losing, or changing jobs
Changing your sources for the down payments
Getting or applying for any new credit including credit cards, lines of credit, store credit cards, and more
Purchasing any other housing and obtaining other housing financing
Please don’t miss ANY payments on any of your accounts, bills, or loans and consumer debts that may get reported on your credit bureaus. Ensure you are paying everything on time. Pay your debts on time
Do not bounce any payments or any cheques
Do not buy or lease or finance a car or make any other large purchases
Please do not make any large or irregular deposits into your bank account because that will raise red flags with your lender prior to closing

This is why it is important to try to maintain your lifestyle as much as possible until your mortgage funds, or inform your lender at the time of application if you know of any upcoming life changes that will occur before the closing date of your mortgage finance. Here is a list of some of the more common reasons why banks deny mortgage after they are already approved.

If you anticipate or experience any life changes of the sort, then please inform your mortgage broker as soon as possible so that they can help mitigate the risk of you being denied your mortgage last minute.

By working with a professional mortgage broker, you will help increase your chances of successfully getting the best mortgage loans products and options for your needs and ensuring that you will get the funding that you need when you need it.

Please contact Maxium Dsouza if you need to talk about a last-minute quick closing emergency mortgage. He has access to lenders that have emergency mortgage programs. These programs enable him to be able to replace a mortgage loan that fell apart at the last minute.

Why Work With Maxium Dsouza

Low Rates

Access to low rates.

Fast Service

Pride on quick close, easy & honest service. Our clients always come first.

Bad Credit

specialized in dealing with bad credit & bank decline He turns a “no” into a “YES!”

Easy Application

*No credit checks. No complicated application and no income required!

Call or text Maxium today at 437-353-9977 or email us at info@maxiumdsouza.ca to speak about your situation.

Getting approved for a mortgage when you’re self employed

Over the last few decades, self-employment levels in Canada have risen dramatically. More and more Canadians have been abandoning traditional job structures and choosing to generate an income in a nonconventional way. According to statistics, over 500,000 Canadians transition into the ranks of self-employment every year. In 2018, 2.9 million Canadians had registered as self-employed and made up over 15% of the nation’s total employment.

What Does It Mean To Be Self-Employed?

There are many definitions of being self-employed and each one differs from the next. Some self-employed individuals are business owners, others have professional careers such as IT Contractors or Doctors, some are commissioned workers, others are freelancers, some own a farm and others own rental properties. Each of these classifications are considered a form of self-employment yet they operate using a completely different business structure. Thus, it can be difficult to factually quantify how many self-employed people there currently are in Toronto or Ontario or Canada. However, we do know that according to Service Canada, the average self-employed individual tends to have a higher median income and net worth than the average employee working in traditional jobs.

How to get a mortgage if you’re self employed?

Although there are many benefits to being self-employed, it also goes hand in hand with quite a few more difficulties and challenges. One of the most prominent issues self-employed individuals encounter is a more complicated and convoluted process when acquiring a mortgage. Despite the ever increasing numbers of the self-employed workers, lenders have yet to figure out how to make it more simple for them to get approved for a mortgage in Canada and qualify for competitive mortgage rates.

Actually, rather than simplifying the process, the Office of the Superintendent of Financial Institutions (OSFI) released guideline B-12 in 2014, which called for federally chartered lenders to inspect self-employed borrowers even more closely. Under this guideline, it made it more difficult for self employed borrowers to qualify for a mortgage.

The reason behind the tightening of restrictions for self-employed individuals is that it is harder for them to prove their income. Lenders want to ensure borrowers will be able to keep up with loan payments and require them to prove their income, net worth and credit score. Salaried employees can easily fulfill these requirements by showing their T4, a letter of employment and some recent pay stubs. However, most people who work for themselves do not receive a T4 or letter of employment and need to use other means of income verification.

Self-employed individuals typically rely on stated income applications when applying for a mortgage. A stated income application is used by borrowers who might have a more difficult time showing their income using the traditional avenues. It is formulated based on how much the individual claims to earn and requires a signed income declaration and proof of self-employment. For your lender to accept your stated income application, it will need to be supported by the following documentation:

Income tax return from the last two to three years. If your tax return is showing a loss in revenue for the time frame you are using, lenders are not going to look favourably on your mortgage application. It is not necessary to show a large positive revenue but a loss could really hurt your approval chances.

Notice of Assessment from the Canada Revenue Agency (CRA) to demonstrate that you do not have any outstanding tax payments. Showing you are up to date on your tax payments is evidence in your favour showing that you are a reliable borrower.

Proof that your HST and/or GST are paid.

Proof that your business is licenced (a copy of your business license or articles of incorporation as evidence) Accurate financial statements for your business (income, revenue, expenses and break-even point)

Contracts or agreements to demonstrate your expected revenue for the next few years (if applicable, it is very beneficial to be able to prove your income will remain consistent for the future).

Have a minimum down payment of 15% ready (10% for Genworth Canada) Evidence to support how much of the business you own. Personal and business bank statements for the past 6 months to 12 months to prove your and your business’s revenues and earnings.

Besides analyzing the stated income, lenders often review a borrower’s debt service ratios before they hand out an approval. A debt service ratio measures one’s ability to make monthly debt payments on time. It is also beneficial for self-employed borrowers to have a good credit score before applying for a new mortgage. Borrowers can check their credit score online with a credit bureau like Equifax or TransUnion so they know exactly what they are dealing with. However, if you have a weak credit score, a good mortgage broker will still have access to alternative lenders who would be able to consider your mortgage application with less restrictions than a traditional bank.

Do Lenders Approve All Self-Employed Individuals In The Same Way?

Some mortgage insurers like Genworth Canada classify self-employed individuals in various groups such as commission sales, corporations, sole proprietors, and partnerships. The classifications directly affect the mortgage qualification process for these individuals. Owners of incorporated businesses pay themselves a salary and are able to fall under the same qualification umbrella as other employed individuals. Thus, unincorporated businesses and sole proprietorships might benefit greatly from incorporating themselves for the purposes of obtaining a mortgage if they are applying for mortgage insurance through Genworth Canada, though we recommend speaking with a certified accountant and corporate lawyer before making that decision.

When applying for a mortgage, lenders look at the gross earnings of self-employed or commission based workers, and salaried employees quite differently. For the self-employed, some lenders consider the net income rather than looking at the gross income.

The Canadian Mortgage and Housing Corporation also limits lenders to observing only the last three years of income. For commission based employees, some lenders look at 80% of their gross earnings and the average income from previous year’s tax documents. Some lenders may also permit self-employed borrowers to add certain tax deductions (car expenses, house expenses, capital cost analysis) back to increase their income. Other lenders may allow for a percentage to be added back to account for these business expenses.

If self employed borrowers think they may experience a challenge when applying for a mortgage, they can use a salaried employee as a co-signer. However, the co-signer will also have title ownership of the property so this may only be a good idea if they are someone you trust.

Getting A Self Employed Mortgage With Maxium Dsouza

Although the path to homeownership can be more challenging for self employed Canadians, it is far from unattainable. With the right preparation and the sound advice of a mortgage broker, you can make your dream of owning a home a reality. Maxium Dsouza specializes in supporting self-employed borrowers during their challenging mortgage application process.

Whether you are a business owner struggling to get approved or a commission based employee who does not even know where to start, Maxium Dsouza will help you create a suitable plan of action and make sure you get the best mortgage rates and terms that are available for you.

If you are interested in accessing your home equity and consolidating your high interest debts, please call Maxium Dsouza at 437-353-9977 or email him at 437-353-9977.

A private mortgage is a mortgage which is issued to a homeowner by a non-institutional lender such as private individuals and mortgage investment corporations. The private lender loans money to borrowers who need fast mortgage approval or short-term financing, do not qualify for a mortgage due to bad credit, are rejected by banks, or have low taxable income all the while being able to afford payments. At the time of this article, Maxium can arrange private mortgages with rates as low as 5.99% without the hassle of lengthy applications and institutional lending processes.

Lending guidelines for mortgages in Canada can exclude borrowers who do not meet certain criteria such as credit ratings. In some cases, these borrowers may have poor credit but are more than capable of paying back a loan, in which case they would consider a private mortgage which is not funded by a bank. Private lenders help borrowers get the money they need while looking beyond their poor credit score. On the other hand, private mortgages can also be used to fund a renovation or construction project and private mortgages are ideal for short term mortgage financing, flipping homes or private bridge financing.

When Would Someone Consider a Private Mortgage?

There are a number of reasons why a borrower may want to consider a private mortgage. In certain cases, a borrower may not be approved for financing by a traditional lender due to bad credit history. Some borrowers may also consider taking out private mortgages if they need fast mortgage approval. Private mortgages can be funded in as little as 24 hours! Reasons someone may want to take out a private mortgage include:

Bad Credit
Unable to meet the income requirements of Lenders
Require a short-term loan
Debt consolidation
Investment opportunity

What Are the Differences Between a Private Mortgage and a Traditional Mortgage?

Private mortgages offer interest-only payments with a variety of privileges which make them a good option for borrowers who require temporary bridge financing for many reasons. While traditional mortgage payments go towards the principal and interest, private mortgage payments can go towards the interest. That being said, interest rates for private mortgages are also generally higher than institutional mortgage interest rates as private mortgage lenders take higher risks.

Most private mortgage rates are locked in between 1 and 3 years while traditional mortgages are long-term, although some private mortgage lenders do offer loans that have longer terms, Maxium Dsouza takes pride in himself on providing optimized, customized solutions for clients individual needs.

Private mortgages are considered short-term solutions which can help borrowers by giving them access to quick cash or helping them improve their credit ratings. A private loan can be quick and easy to obtain with the right lender. They are a great option for borrowers who need a loan to pay off debt with bad credit, want to renovate, free up cash flow and more.

Contact Maxiums Today

If you’re wondering how to get a mortgage with bad credit, need instant over the phone mortgage quote for an investment, or are having trouble qualifying for a traditional mortgage, a private mortgage may be the option for you.

To apply for a private mortgage or to learn more about your options, call or text Maxium today at 437-353-9977 or email us at info@maxiumdsouza.ca to speak about your situation.

Thousands of Canadians are optimistic of owning their own home someday. They are hard at work, saving their money, building up a deposit, and finally applying for a mortgage. But the mortgage market has been entirely changed in recent years by the implementation of a mortgage stress test. The stress test is designed to safeguard homeowners and mortgage applicants, to ensure that in the future they can pay off their mortgages, and this guide will introduce you to what you need to know about how it works and what it does.

What Exactly Is A Stress Test?

For those who have little experience in the financial sector, the word ‘stress test’ may seem a little confusing, but it’s quite a common phrase among banks and other financial institutions. A stress test is essentially a method for forecasting a worst-case scenario, which can be applied to a variety of different financial conditions. The stress test takes account of the fact that interest rates which rise by the time the mortgage term of a borrower is up for renewal when it comes to mortgages. It is in order to ensure that the borrower will be able to maintain its mortgage payment in the event that, upon renewal, the rate rises dramatically to avoid potential mortgage default, missed payments or sales power in the event that payments become unmanageable.

Why Do We Need Stress Tests?

In the minds of many, stress checks can appear pointless, but they are actually very useful and are intended to protect ordinary individuals who want to make use of financial resources such as loans and mortgages. They help you find out whether or not you can afford to pay off the money you’re borrowing, even though there’s a tragedy. It can be very useful and comforting to know in advance that you will be able to pay off your loans or mortgages, both for you and for the bank or lender giving you the money in the first place. Stress tests can help minimize defaults, debts, and financial drama in short.

So, What About The Mortgage Stress Test?

In 2017, the Canadian mortgage stress test was formally adopted. Since then, if they want to get a mortgage from an A lender at AAA rates, any prospective homebuyer searching for a mortgage, regardless of whether it is an uninsured or high-ratio mortgage, and homeowner looking to refinance their current mortgage, has had to undergo the stress test. The mortgage stress test was implemented at a crucial moment to help Canadians see whether or not they will be able to handle potentially higher mortgage payments in the future, because interest rates have been so low in recent times and are destined to go up in the years to come.

How Does The Stress Test Work?

The stress test can be broken down as follows: the bank can give you an interest rate if you apply for a mortgage through a bank, which is often measured based on your credit score and income to debt ratio. However, the bank will then measure your mortgage qualifying at a much higher rate for the purposes of the stress test, essentially creating a ‘worst-case scenario’ for you as a borrower, and then checking to see whether you will be able to handle the payments at that high rate, while your real rate would be much lower.

Either of two possible rates may be used by the bank: the Bank of Canada’s five-year rate or the rate produced by the bank plus 2 percent. The one used for the stress test would be whichever rate is higher. So, for example, if you are applying for a mortgage and the bank gives you a 1.79 percent rate, they can either use the 5-year rate of the Bank of Canada, which is 4.79 percent in this case as of the date this article is published. In that case, the stress test rate will be 5.19 percent, determined by adding 2 percent to your recommended rate of 3.19 percent for the purposes of the stress test, as the stress test is based on the greater of 4.79 percent or 2 percent applied to your actual contract rate. Let’s presume the rate you are offered is 3.19 percent. However, some lenders may allow you to circumvent the stress-test rule and allow you to use the contract rate as the stress test rate, such as some credit unions and trust companies. The rate for this is usually higher, however.
As of the date of publication of this report, DUCA Credit Union has the lowest non-stress test rate of 2.54 percent. So even though it’s higher than a 1.59 percent bank rate, you will be able to apply for a much higher mortgage sum with 2.54 percent as the qualifying rate rather than the 4.79 percent stress test rate that will allow you to actually get a mortgage rate as low as 1.59 percent. So, between decreased monthly payments or a higher mortgage amount, it just depends on what you want.

Example of the Mortgage Stress Test

Let’s look at a specific example.

Let’s say that you and your wife are either looking to purchase a new home or refinance your current property and want to know what the maximum amount of mortgage you will apply for is.
Let’s also assume that you and your spouse’s total annual household income is $120,000.
Let’s also assume that you and your spouse have no current debts.

Scenario #1:

Interest rate: 1.59% (Stress Test Mandatory)
Annual Property Taxes: $5,000
Qualifying Rate: 4.79% (Stress-Test Rate)

Maximum Mortgage Amount Qualified For: $523,869

Monthly Payment for a mortgage of $523,869 amortized over 25 years at 1.59% interest: $2,116.06 per month

Scenario #2:

Interest rate: 2.54% (No Stress Test Needed)
Annual Property Taxes: $5,000
Qualifying Rate: 2.54% (No Stress Test)

Maximum Mortgage Amount Qualified For: $751,918

Monthly Mortgage Payment for $751,918 amortized over 25 years at 2.54% interest: $3,383.35 per month

As we can see, although the interest rate is higher by 0.95%, you would be able to qualify for a mortgage loan of $751,918 instead of only $523,869. That’s an additional $228,049 in mortgage that you would be able to get in this example. It’s important to note that the difference in monthly mortgage payment between an interest rate of 1.59% and 2.54%on a $751,918 mortgage amortized over 25 years is 346.13 per month. That’s right! If you were to qualify for a $751,918 in mortgage amount at an interest rate of 1.59%, your monthly mortgage payment would be $3,037.22 per month instead of $3,383.35 per month at an interest rate of 2.54%.

How Do I Pass The Stress Test?

And how does the bank really find out what you can afford and whether or not the worst-case scenario described in the stress test could be coped with?

Well, they make use of two main variables. Gross debt service ratio, or GDS, is the first of these variables, which is actually the amount of your income that would go towards housing expenses such as heating costs, condo fees, property taxes, and mortgage repayments. The second factor is the overall debt service ratio, the TDS, which is determined by adding loans, credit cards, etc. to your existing debts and adding income taxes, heating costs, condo fees, and mortgage payments to your property.
To apply for a loan, you need to have a GDS of 32 percent or less and a TDS of 40 percent or less in certain instances. They can see that you should have enough discretionary income, even taking into account loans and bills, to pay for your mortgage if you can meet these criteria. Bear in mind that the banks will use the stress test qualifying interest rate for your stress test qualifying rate, which will be greater than the rate that you would actually have to pay.

What Are The Effects Of The Stress Test?

For a good cause, the stress test was done which will help discourage individuals from going into debt that they would not be able to pay back, potentially finding themselves in very frightening financial circumstances. Since the stress test was adopted, however, there have been some negative side effects. First-time buyers, who will now find it even harder to get approved for a mortgage to purchase their first home, are one of the major problems.
First-time buyers would have been able to apply for greater mortgages before the test was implemented and thus had a broader range of possible properties to choose from. The overall value of your mortgage as a first-time purchaser is decreased with the new rules. The stress test has obviously made it harder for many potential buyers to break into the market, with a competitive housing market in many areas of Canada.

Can I Get Around The Mortgage Stress Test?

The mortgage stress test has been a legal requirement for Schedule 1 banks since its inception, so when applying for a mortgage at a bank, there is not really any way to bypass it or get around it. The laws have to be followed by all major banks and the vast majority of lenders do the same. So you’ll actually have to go through the stress test if you’re applying for a mortgage, unless you deal with a mortgage broker who has access to many lenders who are willing to circumvent the stress test and in many cases still provide you with great low interest rates. By saving a larger down payment, decreasing your debts, and finding a house within your means, you will improve your odds of being successful in passing the stress test.

Get in touch with a Maxium Maurice Dsouza – Mortgage Broker today by email at info@maxiumdsouza.ca or call at 437-353-9977 to directly speak to him.