Earlier this month, we talked about the CMHC and how things were changing for people looking to get a mortgage for their dream home.
This week, I took all the questions you had about mortgages on social media and from this newsletter, and interviewed one of my favourite mortgage lenders, Alex Lavender, to get the answers for you.
I have heard a lot in the news about CMHC changing its rules. Is it true the minimum down-payment is now 10%?
Unfortunately, due to the way the media portrays things there has been a lot of misconception around this topic since the news was released. Mortgage default insurance is required on any mortgage with less than a 20% down payment and there are three mortgage default insurers in Canada: CMHC, Genworth and Canada Guarantee.
CMHC changed their policies on July 1st, including the elimination of $0 down or borrowed down payment mortgages. As well, the minimum credit score requirement rose from 600 to 680. With that being said, the other two insurers did not follow suit with CMHC allowing for a way to get around these changes. Their down payment has remained unchanged at 5% of the purchase price.
Is it possible to add some money for renovations into my mortgage?
Yes, it is, you can add up to $40,000—or 20% of the purchase price on to your mortgage—for renovations. The quotes for the work must be provided up front before a lender will issue a mortgage commitment so it is something that needs to be obtained as quickly as possible.
The most common misconception of this program is that the renovations need to be paid for first and then you are reimbursed. After the sale of the house closes you have 120 days to complete the work from your own funds, once the work is completed it needs to be proven to the lender either through paid invoices or an inspection. After this occurs you will be reimbursed the money you spent on the improvements.
Why should we use a broker over our bank?
This is a very common question I get asked. The most valuable reason is that I work for you, not the bank.
I am not tied to any specific financial institution, meaning I can search the marketplace to find you the lender with not only the best rates—but with the best terms to fit your exact needs.
Another major reason is accessibility. I don’t work 9-5, so I am always available when you need me, just like your realtor. If you're writing an offer on a Saturday evening and need mortgage advice, I’ll be there.
What does it cost to use a mortgage broker?
Our services are 100% free, just like when you use a realtor to help you purchase a home.
Mortgage brokers are compensated by the lender whenever a mortgage funds. If you don’t qualify for traditional financing and you want to explore alternative or private financing options then there could be a fee charged in those scenarios.
Can I be approved If I have been turned down by my bank?
Yes, you can. You may be able to get approved through a traditional lender even if your bank has turned you down.
Since I have access to a wide array of lenders it may be the difference in a lender's policies that allows you to get approved, where another lender would decline.
If you are unable to get approved for a traditional mortgage, then I have options through alternative and private lenders to help almost everyone get approved. These lenders typically do charge higher interest rates and require a larger down payment, but they are a useful option and can be used as a short term solution to help achieve the dream of homeownership.
Advice from a realtor:
When it comes to buying a house, one of the first steps on the journey is getting pre-approved for a mortgage.
There is a lot of information out there that can be hard to sort through for many new and seasoned buyers. If you find that you have questions about this process, you can always hit that reply button. There’s no cost to having your questions answered!