Case Studies

1. SCENARIOPrivate Purchase

This couple had been looking to purchase their own home for years. They had been declined by several banks and other mortgage brokers due to current bankruptcy issues on her end and several judgments that had been filed on his credit bureau. They had a large down payment saved. Both Mr. & Mrs. are self-employed. His business is finally showing lucrative results.

Problem

They both have previous credit issues. Many banks will not lend to someone who has previously suffered a bankruptcy. Additionally you must have been discharged for 1 to 3 years (depending on the lender) and have at least two reestablished trade lines (credit cards, personal loans etc.) for at least one or two years after the discharge.

Solution

We sourced their mortgage to a lender that would lend in the area they wanted to purchase with 35% down payment on the purchase price. She was the principal titleholder while he only went on as guarantor until he was able to clear up the judgements or they disappeared from his credit bureau. This lender required six months of bank statements to verify active business being generated by both parties, his T1 Generals for the last 2 years and her 2011 & 2012 NOA’s (Notice of Assessments that you get from the CRA Canada Revenue Agency after you file your taxes) to verify no taxes were owing to Canada Revenue.

Results

Our private investors & resources allowed this couple to purchase the home of their dreams despite their credit issues. Learn more about private lending. Call us today to see if you would qualify!

2. SCENARIOPrivate Purchase

Combining a first mortgage and a private second mortgage with high rates despite clients having income issues. Mr. & Mrs. had been experiencing income issues and between the two of them they found it hard to show their income.  Mr. was having a hard time finding work and was showing little income on his previous years Notice of Assessments. Mrs. had been receiving permanent disability from an insurance payment due to an accident. It was easy to see how they ended up with a second mortgage with rates of 12% and interest only (meaning the payments monthly never go to the principal balance and always go to interest – so in the end you end up owing the same amount that you borrowed) Despite this they had been able to pay their mortgages every month.

Problem

During this time some of their other debts fell behind. Even after Mr. was able to find a permanent job, They inquired to both mortgage lenders and tried to consolidate the two together. Both lenders informed them that they would pay huge penalties for breaking the mortgages.

Solution

We had them go into an open mortgage for 6 months with their first mortgage so that when it came due there would be no penalty to break it. We timed this accordingly so that when their second came due we were able to combine the two mortgages into one complete first.

Results

In the end it saved them a total of $500 per month and this mortgage does go to Principal plus interest. They are now caught up on their other bills!

3. SCENARIOPurchase With A Co-applicant

Clients came to us and were putting 5% down payment on a house they wanted to purchase. Mr. had previous credit issues and had just started a new job (fortunately it was in the same line of work as his previous employment)

Problem

When putting 5% down on a purchase, this is considered a high-ratio mortgage to the lender. This type of mortgage not only goes thru the lender channels but the lender in turn sends this deal in to a mortgage insurer such as CMHC or Genworth. The insurer will “insure” this mortgage on behalf of the lender so that if the client defaults payment, the lender will be covered. There is a fee involved in this process which is added onto the amount of the mortgage and the borrower pays over the life of the mortgage. In this case the insurer requested that a co-applicant be added on due to the previous credit issued of the main applicant.

Solution

A co-applicant has to be a family member. In this case the brother was asked and able to go on title as well in what we refer to as a Co-Borrower Release product. In one year, perhaps two, we will review the file and submit the applicants updated info with projections that the credit is stronger.

Results

Our clients are in their new happy home! NOTE: the co-applicant does not pay anything for the mortgage however if his brother were to default he would hold the brunt and have to pay the mortgage payments. Also, if the co-applicant is seeking any credit he must disclose that he is on title on this mortgage. In order to be a co-applicant you must know where you are at in your financial situation and that any upcoming situations don’t prevent you from getting the loan or credit you might need.

4. SCENARIOPurchase Plus Improvements

Our client was purchasing a home that was outdated and needed many upgrades.

Problem

The “plus improvements” portion of the mortgage is not released to you until the work is done.

Solution

In order to meet the demands of the lender our buyer received quotes from the various trades that will be involved in the upgrades. The total amount required for the upgrades is added onto the mortgage amount, which is what the house will be worth after all of the renovations are complete. In most cases, your tradesman requires their fee once the work is done. We advised our client to find trades that would do the work and were ok to get paid once he received payment by the lender. NOTE – you usually have 60/90 days after closing date to get the work completed. We submit the quotes to the lender and in most cases they are approved with only few questions asked or verified.

Results

After closing date, the lender mandates that you get an appraisal to confirm all the work has been done and the new property value. Once this is done, your solicitor will release the funds for the added home improvements to you.

5. SCENARIOStated income for business for self individuals that own income properties

Mr. & Mrs. had two rental properties of which one was coming up for renewal. Mrs. is in business for herself showing a gross income of $75K however her line 150 (income earned for the year) was only $17K.

Problem

In today’s mortgage world, lenders are very stringent on business for self clients. Prior to, most individuals were allowed to “state” an amount earned without having to provide financial documents. Today, “stated” income allows us to review the income of the client and to increase the amount they make over and above their line 150 on their tax return. There is a "reasonable" yearly income amount that is deemed appropriate for that line of work or type of business and must be approved by the lender. Clients have to provide their NOA’s (Notice of Assessments) to show no taxes are owing to CRA (some lenders are lenient on this as well). Additionally, if you have an income/rental property, you are only able to finance as high as 80% of the loan to value. This can be tricky. Usually the stumbling block is the Total Debt Servicing Ratio of the client. With smaller income amounts being claimed on line 150, their stated amounts are increased to make the deal work. There is a lot of information collected with these types of applications (rental agreements, etc.)

Solution

We found a lender that would allow us to use a Net Worth Requirement demonstrating ownership of eligible assets and using 12 or 24 months worth of monthly Principal & interest payments, based on a 5-year interest rate and 25 year amortization. The other rental property is considered an eligible asset and in turn we used the equity built up in that home to get this mortgage to work.

Results

The client was able to look at their overall financial picture and make some changes to accommodate what lenders were going to be requiring with her other rental property and additionally how much she claims on her taxes so that her income is more in line with acceptable lending standards.