Some of the most common strategies for families and parents to assist children with down payment funds are means of gifted funds or co-signing. The Canadian banking system is very conservative in this process. All banks have to follow the Anti-Money Laundering process in Canada, so here are a few ways to allow significant funds to be transferred to families to purchase a home.

Gifted funds – This is the most common way parents help children in today’s market. Parents are not on the mortgage or the title but can assist with gifting funds to children. The process is for a gift letter to be signed by children and the parents confirming the number of funds that are gifted, and this letter comes with your mortgage approval from whatever bank is the best fit. Then, fifteen business days before the completion of the purchase, the funds must be deposited into the child’s account. Gifted funds from parents can come from savings, investments, home equity line of credit or reverse mortgage.

Parents have two options for accessing funds from home equity:

• The first option is to take a mortgage or home equity line of credit against your existing home, handled as a traditional mortgage process. Providing documentation for income, debts and assets, as well as home appraisal, is required for this process. A HELOC is tax-free, and the equity takeout would not be taxed.
• The second option is a Reverse Mortgage. The Reverse Mortgage is the fastest growing product in Canada for those 55 and up as the rates are better than current HELOC rates with the banks, and no stress test applies. Often to get a HELOC, pensions only allow for a low limit due to the stress test, and you would also have to make monthly payments with a mortgage or HELOC. With a Reverse Mortgage, you can access up to 55% of your home equity, and no fees are required until you move out of the home. There is no income, assets or debt confirmation for this process; they base the approval on age and equity in the house. A home appraisal is required.

Co-Signing – This process is in place most commonly when parents do not have funds to assist with a gift. Parents then can come on to the mortgage application and on the title to the new property. The primary purpose of this is to assist with a qualification in today’s interest rate market, as the stress test makes it very difficult for young families to qualify in today’s real estate market. As co-signers, parents are on the mortgage and the title, requiring the same information as the primary borrowers, such as income and debts. There is no set time that parents can be on the mortgage and title. Still, the most common is for the first term of the mortgage. Then children would ideally release the parents from the mortgage and title once rates have come down. After that, the mortgage balance is less, making it easier to qualify on their own.

The Primex team can help figure out what is best for you with having access to over 90 mortgage lenders, it is easy to find a product that is right for you and your family. We also help with coordinating on your behalf. Confidentiality is key and I can assure that your personal and financial information is never shared across family members. You can CLICK HERE to book a call with Trish to start the process.

604-552-6190

Support@primexmortgages.com

Trish & The Primex team

When it comes to home ownership, many of us dream of the day we will be mortgage-free. While most mortgages operate on a 25-year amortization schedule, there are some ways you can pay off your mortgage quicker!

1. Review Your Payment Schedule: Taking a look at your payment schedule can be an easy way to start paying down your mortgage faster, such as moving to an accelerated bi-weekly payment schedule. While this will lead to slightly higher monthly payments, the overall result is approximately one extra payment on your mortgage per calendar year. This can reduce the total amortization by multiple years, which is an effective way to whittle down your amortization faster.
2. Increase Your Mortgage Payments*: This is another fairly simple change you can execute today to start having more of an impact on your mortgage. Most lenders offer some sort of prepayment privilege that allows you to increase your payment amount without penalty. This payment increase allowance can range from 10% to 20% payment increase from the original payment amount. If you earned a raise at work, or have come into some money, consider putting those funds right into your mortgage to help reduce your mortgage balance without you feeling like you are having to change your spending habits.
3. Make Extra Payments*: For those of you who have prepayment privileges on your mortgage, this is a great option for paying it down faster. The extra payment option allows you to do an annual lump-sum payment of 15-20% of the original loan amount to help clear out some of your loan! Some mortgages will allow you to increase your payment by this prepayment privilege percentage amount as well. This is another great way to utilize any extra money you may have earned, such as from a bonus at work or an inheritance.
4. Negotiate a Better Rate: Depending on whether you have a variable or a fixed mortgage, you may want to consider looking into getting a better rate to reduce your overall mortgage payments and money to interest. This is ideally done when your mortgage term is up for renewal and with rates starting to come back down, it could be a great opportunity to adjust your mortgage and save! This may be done with your existing lender OR moving to a new lender who is offering a lower rate (known as a switch and transfer).
5. Refinance to a Shorter Amortization Period: Lastly, consider the term of your mortgage. If your mortgage is coming up for renewal, this is a great time to look at refinancing to a shorter amortization period. While this will lead to higher monthly payments, you will be paying less interest over the life of the loan. Knowing what you can afford and how quickly you want to be mortgage-free can help you determine the best new amortization schedule.

*These options are only available for some mortgage products. Check your mortgage package or reach out to us to ensure these options are available to you and avoid any potential penalties.

If you’re looking to pay your mortgage off faster, don’t hesitate to reach out to us at Primex Mortgages today! We can help review the above options and assist in choosing the most effective course of action for your situation.

You can reach us at 604-552-6190 or support@primexmortgages.com

CLICK HERE to book a quick call to review your mortgage with Trish!

Trish & The Primex Team

Approximately 20% of Canadians are self-employed, that’s about 7.9 million people. Making this an important segment in the mortgage and financing space. When it comes to self-employed individuals seeking a mortgage, there are some key things to note as this process can differ from the standard mortgage.

Qualifying for a Mortgage

In order to obtain a mortgage as a self-employed individual, most lenders require personal tax Notices of Assessment and respective T1 generals be included with the mortgage application for the previous two years. Typically, individuals who can provide this proof of income – and with acceptable income levels – have little issue obtaining a mortgage product and rates available to the traditional borrower.

Self-Employed Categories

• For those self-employed individuals who cannot provide the Revenue Canada documents, you will be required to put down 20% and may have higher interest rates.
• If you can provide the tax documents and don’t have enough stated income, due to write-offs, then you have to do a minimum of 10% down with standard interest rates.
  • If you are able to put down less than 20% down payment when relying on stated income, the default insurance premiums are higher.
• If you can provide the tax documents, and you have high enough income, then there are no restrictions.

Documentation Requirements

For those individuals who are self-employed, you must provide the following, in addition to your standard documentation:

• For incorporated businesses – two years of accountant prepared financial statements (Income Statement and Balance Sheet)
• Two most recent years of Personal NOAs (Notice of Assessments) and tax returns
• Potentially 6-12 months of business bank statements
• Confirmation that GST/Source Deductions are current

Calculating Income

When it comes to calculating income for a self-employed application, lenders will either take an average of two years’ net income or your most recent annual income if it’s lower.

If you’re self-employed and looking to qualify for a mortgage, reach out to us at Primex Mortgages today! We can work with you to ensure you have the necessary documentation, talk about your options and obtain a pre-approval to help you understand how much you qualify for.

You can call us at 604-552-6190 or you can CLICK HERE to book a call with Trish!

A second mortgage is a mortgage that is taken out against a property that already has a home loan (mortgage) on it. Generally people take out second mortgages to satisfy short-term cash or liquidity requirements, have an investment opportunity or to pay off higher-interest debts (such as credit cards and student loans) that a second mortgage might offer.

If you are considering a second mortgage for any reason, here are a few key points to keep in mind:

Second Mortgages and Home Equity: Your second mortgage and what you can qualify for hinges on the equity that you have built up in your home. Second mortgages allow you to access between 65 and 80 percent of your home equity, depending on your qualifications.

For example, if you seeking 80% Loan-to-Value loan (“LTV”):

House Value =                                                  $850,000

80% LTV (maximum mortgage amount)           $680,000

less: First Mortgage                                           ($550,000)

Amount Available Through Second Mortgage     $130,000

Second Mortgages and Interest Rates: When it comes to a second mortgage, these are typically higher risk loans for lenders. As a result, most second mortgages will have a higher interest rate than a traditional first mortgage. There is also the option of working with alternative and private lenders depending on your situation and financial standing.

Second Mortgage Payments: One advantage when it comes to a second mortgage is that they have attractive payment factors. For instance, you can opt for interest-only payments, or you can select to pay the interest plus the principal loan amount. Work with your mortgage broker to discuss options and what would work best for your situation.

Second Mortgage Additional Fees: A second mortgage often comes with additional fees that you should be aware of before going into the transaction. These fees can vary widely but often range from 1-2% of the mortgage amount.  These fees are in place as they are higher risk loans that do not make you qualify with the stress test guidelines with traditional mortgages. Other fees to consider include appraisal fees, legal fees to set up the second mortgage and any lender or broker administration fees (particularly with alternative or private lenders).

Second mortgages are a great option for many homeowners and, in some cases, may be a better solution than a refinance or a Home Equity Loan (HELOC). This allows you to keep more favorable terms in place with your current mortgage and avoid penalties to access your equity.

If you are interested in finding out if a second mortgage is right for you, contact us at Primex Mortgages today! We are more than happy to crunch numbers to figure out what would work best for you.

Trish & The Primex Team

A second mortgage may be something to consider if you’ve built equity in your property and need access to a loan. Consider using this equity for refinancing, renovations, or debt consolidation.

What is a Second Mortgage?

A secondary loan taken out on a property for which you already have a mortgage. This is not the same as purchasing another property with a new mortgage. It’s very different from a traditional mortgage because you are using your existing home equity to qualify. It’s important to note that it still comes with its own interest rate, monthly payments, terms, closing costs, etc.

Second Mortgage or Refinance?

Both refinancing and second mortgages take advantage of existing home equity – So what is the difference? Refinancing is typically done when you’re at the end of your current mortgage term to avoid any penalties. The purpose is to take advantage of a lower interest rate, change your mortgage terms, or borrow against your home equity. Second mortgages are taken when you borrow a lump sum of money against the equity in your home and use it for whatever you see fit.

What Are the Advantages?

There are several advantages when it comes to taking out a second mortgage, including:

• Have access to a large loan sum (in some cases up to 90% of your home equity, which is more than you can typically borrow on other traditional loans)
• Better interest rate than a credit card
• Use the money however you see fit, without any caveats

What Are the Disadvantages?

As always, when it comes to taking out an additional loan, there are a couple things to consider:

• Interest rates tend to be higher
• Additional financial pressure from carrying a second loan and another set of monthly bills

Before looking into any additional loans, be sure to reach out and speak with us. It’s always a good idea to review your current financial situation and determine if this is the best solution before proceeding.

Have you considered debt consolidation? If you are a Canadian living in debt, you are not alone. According to Statistics Canada, household debt grew faster than income last year, with Canadians owing $1.83 for every dollar of household disposable income to debt(1). Canadian households use almost 13.48% of income for debt re-payment(2).

So how can one ever get out of debt? Debt consolidation.

What is debt consolidation?

Debt consolidation means paying off smaller loans with a larger loan, at a lower interest rate. For example, credit card debt with interest of 19.99% can be paid off by a 5-year Reverse Mortgage with an interest rate of 7.70%* from HomeEquity Bank. (*5 year fixed rate as of June 28 , 2022. For current rates, please contact us).

A lot of confusion surrounds debt consolidation; many of us just don’t know enough about it. Consider the two sides:

The Pros

• The lower the interest rate, the sooner you get out of debt. A lower monthly interest allows you to pay more towards your actual loan, getting you debt-free faster.

• You only have to make one monthly debt payment. This is more manageable than keeping track of multiple debt payments with different interest rates.

• Your credit score remains untarnished because your higher interest loans, such as a credit card, are paid off.

The Cons

• Consolidating your debt doesn’t give you the green light to continue spending. Consolidating helps you get out of debt; continuing to spend as you did before puts you even further into debt.

• A larger loan with a financial institution will require prompt payments. If you were struggling to pay your debts before, you may still be challenged with payments. The CHIP Reverse Mortgage may be a better option; it doesn’t require any payments until you decide to move or sell your home.

• You may require a co-signer who will have to pay the loan if you’re unable. Note that the CHIP Reverse Mortgage does not require a co-signer, as long as you qualify for it and are on the property title.

So how do you know if debt consolidation is the option for you? Start by contacting us at 604-552-6190 and ask if a CHIP Reverse Mortgage could be the right solution for you!

SOURCES:

1 Debt-to-disposable-income ratio eases down from record 185% | CBC News

2 Key household debt-to-income ratio down in Q1 as income rises faster than debt | The Star