When it comes to understanding a mortgage for a self employed individual it is critical to recognize that the core principles of the mortgage remain the same whether you are self-employed or employed as a traditional employee. The process of securing a mortgage for a self-employed individual can be a bit different due to the nature of their income. Unlike a traditional employee who receives a steady pay cheque, self-employed workers typically experience variable income streams that can fluctuate widely from month to month or year to year. This can make it slightly more challenging for a lender to assess the clients' ability to repay the loan.  In order to obtain financing for a self-employed individual, the job of a Mortgage Broker is to work with the client to gauge how best to demonstrate their financial stability and reliability to lenders. Every lender will have different policies on which type of self-employed clients they will work with and how they assess the client's income as presented. This is why many self-employed individuals may find it challenging to obtain a mortgage, even from their bank they have dealt with for many years. Many times there will be additional documentation required beyond the standard requests for someone that is self-employed. Lenders will often look for documentation such as the companies financials, 2 to 3 years of tax returns with N O As, 6 to 12 months of bank statements and ownership documentation to show at least 2 years of self-employment, like the Master Business License or Articles of Incorporation for an incorporated business. The down payment required for a self-employed individual can be as little as 10% depending on the structure of the clients self-employment; however, we traditionally see a mortgage for a self-employed individual requiring a down payment of 20% due to the client's income structure. The source of the down payment is also important with a self-employed individual as lenders may not allow gifted down payment and require that the down payment be fully from the client's own resources. There are many mortgage programs available for a self-employed individual, the availability of the different programs mainly comes down to how the client pays themselves from their business. The simplest way to calculate the clients' income is by looking at the client's verifiable income; this is how much is shown on the client's tax return and in many cases it does not provide much qualifying power as their net income may be low. The reason for this is that self-employed individuals have a different way of declaring their income due to advantages provided by write-offs and other tax benefits; especially if the individual is incorporated. An individual that is incorporated or owns an incorporated business has a few options when it comes to paying themselves from the business, and may even pay themselves only enough to cover their personal expenses while electing to keep money within the business. The benefit to this is a lower taxation expense; however, the trade-off is that there may be issues qualifying for a mortgage based on the clients' income; this is where a 'stated' or 'declared' income mortgage product comes in. These mortgages may require the client to declare their income and the lender will use different methods to verify and ensure that the declared income is realistic and will provide an opportunity for the client to repay the mortgage. These mortgages may feature slightly higher interest rates and have fees; although, when compared with the tax savings, the higher interest and fees make much more sense than paying more tax to the Government. It is always recommended that clients discuss their financial situation with their accountant and financial advisor, as well as their mortgage broker; in order to structure their finances in such a way that provides the most benefit to the self-employed individual. Having professionals in each field involved in the process and providing feedback is crucial. More and more people in Canada are choosing to be self-employed and lenders are responding with different mortgage products and programs in order to provide these individuals with an opportunity to obtain financing for a dream home for them and their families. In conclusion, a mortgage for a self-employed individual is the same as a mortgage for a client that is employed in a traditional manner, the difference comes down to how the client's income can be calculated. There are different options available, however, some of these options may not be available based on the client's verifiable income. It is important that a self-employed individual work with a Mortgage Broker in order to review the different mortgage products available to them and ensure they have the most suitable option in place for them and their family. Feel free to reach out at (905) 440-5392 with any questions on self-employed mortgages or anything else mortgage related!

Let's say you have a mortgage commitment from a lender, and prior to the closing date, rates change and come down a bit. Today, we will discuss how this change in rates can potentially benefit you and save you some money in interest expense; or how a rate change can affect how much more you could potentially qualify for if you have a pre-approval with a rate hold.

Rates are rarely static with any lender and can change weekly or even daily. When you have a mortgage commitment, you are protected from rate increases as long as there are no material changes in the application prior to the closing date; however, if rates come down before closing, you may be able to take advantage of this new lower rate.

It is important to discuss any potential rate adjustments with your Mortgage Broker since every lender is different, and some allow for multiple rate adjustments on a file, and some allow only one or even none. It is also important to consider how close to closing the rate adjustment opportunity is, as if it is too close to the closing date, the lender may not have time to make the adjustment and issue new documentation for the lawyer. When dealing with a lender that only allows one rate adjustment, the decision of when to request it is to be made strategically to limit the possibility of adjusting the rate down and then watching them fall further without the ability to make another change.

Even though rates are always changing, it should not be expected to see a drastic change in rates between when you receive the mortgage commitment and the closing date; however, even a small change can make a difference in not only your interest expense over the term of your mortgage; but, also the amount of the monthly payment, which will increase your cash flow with each payment.

For our example, we will use a $500,000 mortgage amount with a 5 year fixed rate that is amortized over 25 years. The original interest rate on the mortgage commitment is 4.99% and a few weeks before closing the lender reduces their rate to 4.89% on the same term and mortgage product. Your Mortgage Broker would check with the lender if a rate adjustment, or float down, as it is known in the industry, is available and would present the following to you to see if you would like to have the rate adjustment applied.

The rate reduction would result in a payment that would be $28 lower per month and would not only save you $2,400 over the 5 year term; but, would also result in $700 more principal being paid, for a net savings of $3,100. Not to bad for a simple request from the lender.

When it comes to how a rate decrease affects a pre-approval, it isn't that it changes the pre-approval itself since the rate on the pre-approval certificate is held and in effect for 4 months; it can however change the amount that you would qualify for if you find and secure a property with an accepted offer to purchase while the lower rate is active. This can be helpful if your qualifying amount on your pre-approval is a bit lower than what is required to purchase a property in the location you are looking at; sometimes a couple extra thousand dollars is enough to get an accepted offer.

For example, let's say you have a pre-approval for a maximum purchase price of $700,000 and a rate of 4.99% held and rates come down to 4.79% while you are shopping for a property. The purchase amount that you would potentially be able to qualify for with this new rate would be $711,000, or an increase of $11,000. It is important to note that you must ensure to discuss this with your Mortgage Broker so that they can adjust qualifying based on actual amounts for the property; and of course, even with a pre-approval, a condition of financing is a must in order to protect yourself.

So, you've come across these terms - variable rate mortgage and adjustable rate mortgage, and you're curious to know what exactly sets them apart. Well, let's dive right in and explore the differences between these two commonly used terms in the world of mortgages. When talking about mortgages, the interest rate is a crucial element to consider. It determines the amount of interest you'll pay on your mortgage and affects your monthly payments. Both variable rate mortgages and adjustable rate mortgages have interest rates that can change over time based on the lender's prime rate, but there are some key distinctions between the two. A variable rate mortgage (also known as a static payment variable mortgage) is a mortgage where even as the interest rate changes, your payment remains the same. What does change is how your payment is allocated between principal and interest. As interest rates rise, more of your payment will go towards interest with less towards principal; and vice versa when rates come down. The payment on a variable rate mortgage may need to change if interest rates go too high and the payment isn’t enough to cover any principal at all; which can result in a mortgage that grows instead of reduces. Lenders will commonly contact clients to advise them of options in order to not let this happen; some lenders will even automatically adjust the payment as well to ensure there is always a little bit of principal being paid down. On the other hand, an adjustable rate mortgage is a mortgage where the payment fluctuates in lockstep with interest rate changes. When interest rates go up, so too does your payment; although, when rates come down, your payment does as well. This type of mortgage ensures that your amortization remains the same and you are always paying down principal even when rates are going up. There can be some pain and decreased cash flow when rates are going up; however, a decrease in rates will result in some breathing room due to an increase in cash flow. The frequency of rate adjustments on a variable or adjustable rate mortgage can vary; many lenders typically adjust the rate in the next month following the rate adjustment; while others will adjust it right away. If you have a variable or adjustable rate mortgage, it is important to know when your lender makes their change so you are well prepared. Most lenders adjust their prime rate based on the Bank Of Canada’s policy interest rate, which has the potential to be adjusted as many as 8 times a year; it is recommended to know when these meetings are; the next one is April 10th, 2024. When deciding between a variable rate mortgage and an adjustable rate mortgage, there are a few factors to consider. Firstly, think about your financial situation and how comfortable you are with potential changes in your monthly payments. If you're on a tight budget and prefer a more predictable payment structure, a fixed-rate mortgage may be a better fit. On the other hand, if you have some flexibility and are prepared for potential rate adjustments, a variable rate or adjustable rate mortgage could be worth considering. If you are prepared for some risk and still want the certainty of a fixed payment then a variable rate mortgage may be the most suitable option; however, it is important to understand the risks of that fixed payment. Remember, choosing the right mortgage type is a significant financial decision that should be based on your unique circumstances and goals. Consulting with a knowledgeable mortgage professional can provide insight and guidance to help you make an informed choice. Feel free to reach out at any time to discuss your options as well as your current situation to make sure it is the right fit for you and your family. In conclusion, the key difference between a variable rate mortgage and an adjustable rate mortgage lies in their payment adjustment mechanisms. With a variable rate mortgage you will have some payment certainty; but, this payment may not cover any principal versus an adjustable rate mortgage where you will always be paying down principal; however, may be in for a bit of a ride if rates adjust. Understanding these differences and carefully evaluating your financial situation and market conditions can help you choose the right mortgage option for you and your family.

A Home Equity Line of Credit, or HELOC, as it is commonly referred to is a method of tapping into your home's equity, much like a mortgage refinance or 2nd mortgage; except there are some key differences between them.

A HELOC is a type of mortgage that is still secured by the property; however works more like a credit card than a normal mortgage. A HELOC allows a client to draw funds as required, instead of a normal mortgage that is commonly one lump sum at the start. A HELOC is a type of re-advanceable loan, or revolving loan.

The flexibility of a HELOC is one of the main benefits of the product since you are accessing funds as they are required, and therefore you will only incur interest costs on funds you actually use, not the full limit available. This can be particularly useful for home renovations, unexpected expenses or other significant financial needs that may arise. Sometimes it is better to have access to funds as needed; rather than just have a large sum of money in an account.

Another benefit of a HELOC is that they can be paid back at anytime without penalties. This is different from most regular mortgages, where you are only able to pay back the full balance at the end of the term; otherwise you may incur a prepayment penalty, which can be substantial. With a HELOC you can make as small or as large of a payment as you want, as long as you are covering the minimum amount required by the lender. The minimum payment is normally the monthly interest plus an amount required to payoff some of the principal. Every lender is different in how they structure their minimum payments.

A further benefit of a HELOC can also be viewed as a drawback at the same time. Unlike many other types of revolving loans, such as credit cards and standard Lines of Credit that feature high interest rates on balances, a HELOC features fairly low interest rates; however, these rates are normally higher than the interest rate on a regular mortgage and a HELOC's interest rates are variable, not fixed. Since they are variable, fluctuations in the lender's prime rate will affect the amount of interest that is charged and the ability to cover even just the interest costs may be affected in a rising rate environment. 

As an example, if we look at a HELOC when prime rates were historically low in 2020 and 2021, versus when prime rates peaked in 2023; we can see a drastic difference in the interest cost incurred on a HELOC. The common rate of interest on a HELOC is prime plus a half percent or a full percent; for the purpose of our example we will use prime plus a half percent and a HELOC balance of $250,000. When prime was at it's lowest, the interest rate on the HELOC would have been 2.95% and the monthly interest costs would have been roughly $614. That same HELOC would have featured a rate of 7.7% in 2023 and the monthly interest cost would have been $1,604; or almost a thousand dollars more per month.

Many people drew large amounts from their HELOCs when rates were low for things like investments, renovations or a down payment on a second home or investment property and may have been unprepared and affected negatively when the prime rate started rising. Since a HELOC is secured by the home just like a regular mortgage; failure to repay could result in a foreclosure or power of sale of the property.

It is important to discuss your financial needs and plans with a Mortgage Broker in order to ensure you have the proper product in place for your future needs. If your HELOC may be drawn to it's limit for an extended period; it may be better to look at a regular mortgage instead. Everybody's situation is different and there is no one size fits all HELOC or mortgage.

It is important to note that just like a standard Line of Credit, which is not secured by property, a HELOC is a Demand Loan, which means that the lender can demand repayment at anytime or even adjust the interest rate or limit whenever they would like. If the lender sees that a client is potentially at risk of not being able to cover their expenses; they may look to limit their exposure to loss just in case. This is different from a regular mortgage, where the lender cannot make changes during the term of the mortgage.

Mortgage renewals are a reality of most mortgages and is an important step in managing your finances; the importance of paying attention to them should definitely not be overlooked; however, this happens far too often. To start off, let's clarify what a mortgage renewal actually means. When you first took out your mortgage, you agreed to certain terms and conditions, including the length of your mortgage term. This term typically lasts for a period of 1 to 5 years, during which time you make regular mortgage payments. However, once your term is coming to an end, you have the option to renew your mortgage with your current lender or consider switching to a new lender if that makes more sense. Now, you might be wondering why you would consider switching lenders when your term ends. Well, there are a few reasons for this. Firstly, shopping around for a new mortgage can allow you to potentially secure a lower interest rate; you might be able to save a substantial amount of money by switching to a new lender with a lower rate. Secondly, you might be interested in changing your mortgage terms or exploring different options that better suit your current financial goals. Many lenders may allow you to adjust your amortization while switching the mortgage over to them; this could either save you extra money by lowering the amortization; or you may be able to increase cash flow by extending the amortization back out. This is a great opportunity to reassess your needs and make any necessary adjustments. The first step in the renewal process is to review the options presented by your current lender; they will provide you with a renewal offer, which outlines the new terms and conditions they have available for you. It's crucial to carefully review this offer and compare it to other available options in the market. This is where a Mortgage Broker comes in handy during the renewal process. Remember, the goal is to secure the best possible terms, features and interest rate for your mortgage; they have access to many different lenders and can compare the rates and required mortgage features on your behalf. It should be noted that renewal offers can go a couple of ways; one is that your current lender sends the renewal notice with higher rates in the hopes that the ease of being able to sign the renewal offer while assuming they are giving you their best offer is preferred. On the other hand; your lender may be offering very competitive retention rates in order to be proactive and keep your business. A Mortgage Broker will be able to highlight this quickly with you and see if it is beneficial to switch or just stay where you are. When it comes to renewing your mortgage, it's essential to start the process well in advance of your current term's expiry date. This will give you enough time to explore your options, gather necessary documents, and ensure a smooth transition while being prepared for when your lender presents their offer. Roughly four to six months before your term ends is a good timeframe to begin preparing for your renewal process. With that being said, your lender may delay the renewal notice being sent out until as little as 30 days before renewal; even if your renewal is close and depending on the options with the current lender, a switch may be able to still take place, even in a time crunch. If you choose to remain with your current lender; the renewal process may be quite simple; in many cases you make your choice on the renewal document, sign and return it; or communicate with your lender in whichever way they prefer. After the renewal date has passed, you will then switch to the new terms and payment with that lender. On the other hand; if you decide to switch your mortgage to a new lender; it's time to gather the necessary documents. Your broker will provide you with a list of documents required for the switch process. This typically includes recent pay stubs, employment letters, other relevant financial information and property documentation. There may also be an appraisal of your property required for the new lender to ensure the value is in line with what is expected. The switch process is more involved and may feature fees that the straight renewal doesn't; however, you may find that the savings far outweigh the cost. It is important that your broker calculates your savings and ensures that you actually will be farther ahead and saving money with the new mortgage when all fees and costs are included. In summary, the mortgage renewal process involves carefully reviewing your renewal offer and comparing it with other options available to you to ensure that the mortgage still aligns with your financial goals; a process that is made easier with the help of a Mortgage Broker. It is recommended not to take the easy route and 'just sign' the renewal notice since you may not be offered the best rate and options that are available. The consultation with Mortgage Foundations and review of your options is no cost to you and in many cases their services are paid for by the lender; so, you really do have nothing to lose in the process. Remember, renewing your mortgage is an opportunity to reassess your needs and potentially secure better terms. Mortgage Foundations can help you understand the process and assist in exploring your options, so you can make informed decisions that align with your financial goals.

So, let's talk about the benefits of getting a mortgage pre-approval. If you're thinking about buying a home, this is definitely something you'll want to look into. It can save you time, money, and a whole lot of stress in the long run, so it's definitely worth considering. First off, what exactly is a mortgage pre-approval? Well, it's basically a process where a lender reviews your financial information and determines how much money they're willing to lend you for a mortgage. This is different from a pre-qualification, which is more of an estimate based on some basic information you provide. A pre-approval is a more thorough evaluation, which gives you a more accurate idea of how much house you can afford. So, what are the advantages of getting pre-approved for a mortgage? Let's start with the most obvious one - knowing your budget. When you get pre-approved, you'll have a clear understanding of how much money you can borrow from the bank. This will help you focus your house-hunting efforts on properties that are within your price range. You won't waste time looking at houses that are way out of your budget, and you'll have a better chance of finding a home that suits your needs and your financial situation. Another benefit of a mortgage pre-approval is that it gives you an edge when it comes to making an offer on a house. When sellers see that you're pre-approved, it shows them that you're a serious buyer who has already done some legwork. They'll be more likely to take your offer seriously and consider it over others. In a competitive real estate market, this can make a huge difference and give you a better chance of getting the house you want. Getting pre-approved for a mortgage also helps you streamline the buying process. Since you've already gathered and submitted all the necessary paperwork and financial information, you'll be ahead of the game when it's time to start the official mortgage application process. This means less stress and less scrambling to find documents at the last minute. Plus, it shows the seller that you're a reliable and organized buyer, which can work in your favor during negotiations. Now let's talk about interest rates. When you're pre-approved for a mortgage, you have the advantage of understanding what interest rate you qualify for. This can be crucial in helping you plan your budget and determine if you can comfortably afford the monthly payments. It also gives you the opportunity to shop around and compare rates from different lenders. With a pre-approval in hand, you can confidently negotiate with lenders and potentially secure a more favorable interest rate. Important to note that even though the lender will hold your rate as shown on the pre-approval in case the rates increase; if the rates decrease by the time you secure a property, the lower rate will likely apply on the commitment from the lender. Speaking of negotiating, getting pre-approved can also strengthen your bargaining power. When you show sellers that you have the financial backing to secure a mortgage, they may be more willing to negotiate on the price or other terms of the sale. This can potentially save you money in the long run and help you get a better deal on your dream home. Another benefit of a mortgage pre-approval is that it allows you to act quickly when you find the right property. In a competitive market, good homes can go fast. By already having your financing in place, you can submit an offer right away and increase your chances of being the successful bidder. This can be especially important if you're in a seller's market where there are more buyers than available properties. Furthermore, a pre-approval can provide you with peace of mind. Knowing that you have the financial backing to secure a mortgage can alleviate some of the stress associated with the home-buying process. It puts you in a position of power and control, allowing you to confidently make decisions and move forward with your plans. This peace of mind is invaluable when navigating the sometimes overwhelming world of real estate. Lastly, it's important to note that a mortgage pre-approval is not a guarantee that you will ultimately get a mortgage. The final approval is typically contingent on a property appraisal and other factors. However, the pre-approval does indicate that you're on the right track and increases your chances of securing a mortgage when you need it. It is important to always consider a condition of financing on any offer to purchase; you may have been pre-approved; but, the property, location and all other aspects have not been, since they have not been known by the lender. So, in summary, there are numerous benefits to getting a mortgage pre-approval. It helps you understand your budget, gives you an advantage in the home-buying process, streamlines the application process, helps you secure a better interest rate, strengthens your bargaining power, allows you to act quickly, provides peace of mind, and increases your chances of getting a mortgage. If you're thinking about buying a home, take the time to get pre-approved - it's definitely worth it in the long run.