This morning I was up with the birds (literally) and really wanted to sleep a bit longer. I decided to listen to a podcast rather than get up. The podcast, ironically, was about procrastination.  Her general message was that procrastinating often makes us feel bad. There are things we want to accomplish or feel we should do but we choose the immediate gratification / dopamine hit of time in front of the TV or mindless scrolling (or more time in bed) rather than the satisfaction that comes with achieving our larger goals and dreams. She talked about procrastinating with both our actions and making decisions. The irony that I was listening to the podcast rather than getting up and tackling my day was not lost on me. There were a few comments the podcaster made that struck home. Making a decision, any decision, is better than no decision. Human nature (for many of us) is that when facing a tough decision we freeze. We over-analyze the “what-ifs” and potential outcomes. We worry about what others may think of our choices. We may not even know what our options are. While procrastinating opportunities are lost or we dig ourselves in a bit deeper. The last year in particular has been challenging with higher interest rates and a steadily increasing cost of living. Many families are struggling to cover their bills and put food on the table. I’ve written columns before about how if you have equity in your home it might be wise to consider a consolidation of your consumer debt to free up cash flow. Making lifestyle changes can be easier said than done. I believe that staying the course and getting your mortgage paid off as soon as possible is always the best plan, but there comes a time when you also need to look at how your finances are affecting your physical and mental health. When we get behind with our bills or are teetering on the edge of not being able to cover everything this month we are also concerned about what people might think. We are worried about a call from our creditors asking for a payment. We project a certain lifestyle and feel the pressure to maintain this even though we can’t actually afford it right now. We lose sleep at night thinking about the “what-ifs”. If you are in this situation and have equity in your home, I encourage you to take action to explore your options sooner rather than later. I have worked with clients who have never missed a payment ever but their credit scores were in the 500 range (not good) because they are over-extended and maxed out on multiple loans, credit cards and / or credit lines. Had they reached out sooner we would have had more options to help them with a fresh start. This doesn’t mean we can’t find options, but there are certainly more available when credit scores are higher. As a rule I don’t get into the discussion of why you would work with a mortgage broker versus a bank but this is one of those times. I do place many of my clients with chartered banks when that is the right fit. When you approach your bank your situation might not be a fit for their lending guidelines. They may tell you they are not able to help you and that you will have to sell your home or look at a consumer proposal or bankruptcy. Selling your home may be the right answer, but before you jump to that place take a look at other options. Pick up the phone. Don’t procrastinate. If you are working with a mortgage broker they are able to explore multiple lenders and programs to help you try to find a solution to put you on the right track sooner rather than later.

I’ve written about mortgage documentation in several columns over the years. This week I had an interesting call with several of my colleagues about trends we are seeing in the mortgage world around paperwork right now.  There are people who think that mortgage brokers are able to cut corners and have an easier time getting a mortgage approved. Ironically, I believe we are held to a higher standard which sometimes translates to frustration for clients as we are doing our due diligence with document collection. When starting with new clients part of my conversation includes an overview of the documents we will need as well as an explanation of why. This conversation also includes a bit of an apology because I know how challenging this process can sometimes be. “My bank has never asked for that” is something I hear often. What clients don’t consider is that their bank has a full historical view of their day to day banking as opposed to new lenders who are just being introduced to these clients. If you were asked to lend someone half a million dollars would you do it on a handshake? Would you assume they will repay you in a timely manner (as agreed) because they seem like good people? Likely no to both questions. That’s one part of the puzzle. The other piece to the puzzle is the increasing trend of fraud in the mortgage world. From my perspective, my reputation and livelihood are too important to entertain clients that I suspect are not quite as they appear. I explain I am very particular about gathering documents upfront to make sure we are not going to run into any unexpected or unpleasant surprises. From time to time we come across documents that are glaringly obvious attempts at fraud. With today’s technology fictitious documents are becoming easier to create and harder to detect. As brokers we represent both our clients and the lenders we are placing their mortgage with. I discovered fraudulent documents on one of my files recently and cancelled the application and notified the lender. My (ex) client was very very angry. He didn’t see what the big deal was. He went to a local branch and his mortgage was approved. Where is the harm? If part of the fraud includes income documents, will this client actually be able to make his mortgage payments down the road? Because he did have a substantial down payment relative to his income, does he have a sideline that isn’t declared or legal? I absolutely agree that collecting the required documents for your mortgage can seem frustrating, and you may question why your mortgage person is asking for the weird and wonderful collection of paperwork they are asking for. Or you may question why they are asking for more and more paperwork. Please understand that these requests are coming from the lender and we are doing our best as the middleman to help ease the process for you. Lenders want to be confident that they are making solid decisions with their approvals and are doing their best to prevent mortgage fraud.

As a mortgage broker I am able to work with clients all over BC. I grew up in Mackenzie, a small community in northern BC, and still have ties to the area. I worked with the realtors there before I moved to the Okanagan, and we continue to work together over fifteen years later. This week we’ve seen a surge in homes selling in Mackenzie and I’ve had interesting conversations with both of the realtors I work with. They had questions around how I figure out price points for clients when I am working on a pre-approval. More specifically, they asked about whether or not I collected documents from my clients before they had an accepted offer to purchase. My answer was that I absolutely gather the bulk of the documents we will need ahead of sending my clients out shopping. I also pull credit reports about 95 per cent of the time before I send people out looking for a home. Why? Even with clients that I know to be squeaky clean and solid financially, over the years I’ve had to deal with surprises that might have affected their approval. Recently I was working with a client that has been with the same employer for 25 years, has over $300,000 in his account, and whose credit score was 821 (900 is a perfect score). Slam dunk, right? As it turned out, he has a fairly common name. At the very bottom of his credit report was an outstanding collection to an insurance provider. I was surprised to see it as I know he is meticulous with his finances. He had never had any dealings with that particular company, and it took him almost three weeks to get confirmation from the company that it was not his debt, and another few days to have his credit bureau corrected. Another client I worked with had everything in order and looked like she was ready to write an offer at the $650,000 price point. I pulled her credit report and found a vehicle loan with a payment of $785 per month. When I asked her about it she said she hadn’t mentioned it because she didn’t make the payments. She had co-signed a loan for her daughter. When you co-sign a loan, you are jointly and severally responsible for the amount outstanding. That means that should the other person ever default on a payment you are responsible for making the payment. This means that we have to factor that payment in when calculating what you qualify to borrow. In her case, this dropped her purchase price considerably. I’ve also run into situations where clients tell me how much they earn, and when they send their documents in the T4s and paystubs don’t support what they’ve told me. In one case the gentleman said he told me what he figured he would make this year. As a general rule lenders won’t use predicted income (other than a few specialty products); they work with historical information and what can be confirmed via employment letters and contracts. So why is all of this important? If I send you out shopping for a home, I want to be certain that I am able to arrange a suitable option for you. If I send you out shopping for a home, you get excited about the possibilities and write an offer. Now the sellers of that home are also excited and are out looking for their next property. We’ve tied up two or potentially more homes, and realtors have spent hours working to show homes and make magic happen to bring offers together. If I haven’t done my due diligence and missed something that will affect your approval we have wasted a lot of time and energy for everyone involved. Sometimes clients just want to know generally the price point they are looking at and want to know if there is anything they need to deal with before heading out shopping. If they are looking at buying a home six months or a year down the road it is a different conversation and I don’t ask for documents upfront. When you are working on a pre-approval and your mortgage person asks for a full document package upfront, don’t roll your eyes. Fully disclose your financial situation. This helps us put you in the best position to be successful once you’ve found a home you love. PSA: If you haven’t already dealt with the Speculation Tax Declaration, take a minute and do it today.

One of the things that I love about my work is that I am able to connect with all types of homebuyers.  I am able to support first-time homebuyers as they make the leap into the housing market, clients looking to upsize from their first homes, clients who are wanting to refinance for renovations or to consolidate consumer debt, and more established clients who are looking to downsize. Lately it feels that clients who are wanting to downsize are having a tough time. They want to be able to confidently write a subject-free offer on their next home but are concerned about listing their current home for sale in the event it doesn’t sell in time. They don’t want to list their current home for sale and potentially find themselves without a suitable property to buy. What is the answer? If the current home is mortgage-free, there are several mortgage options available. There are also private lenders that will register a mortgage over both the current home and the home being purchased (provided the numbers work). Provided the current home is mortgage-free we can look at registering a credit line against that home in preparation for finding the next home to buy. When the clients find their next home we can use a combination of the funds from that credit line plus a mortgage on the new property to move forward with the next home. This strategy is not for everyone. In the Okanagan, people who are making this move may be downsizing, but downsizing to what in terms of purchase price? Often the next home is still priced near or over $1,000,000. To carry financing on a purchase at that price can cost upwards of $7,000.00 per month plus significant fees if using a private mortgage option. One creative option clients used recently was listing and selling their current home knowing that they were prepared to wait for the right home to pop up. As they neared their sale date they had not found their next home yet, so they rented a storage container and packed everything up temporarily. They were fortunate that they were able to stay with family for several months until the right home popped up. This put them in a brilliant position to buy with no financing subject in their offer. Another option that clients have used recently was truly downsizing in both price and space. Their home in Kelowna was appraised at $1,750,000. Based on their financial picture we were able to secure a credit line for $800,000. It took just over a year but they fell in love with a beautiful patio home in West Kelowna. Their new home was priced at just under $700,000 so they knew they had the funds available if they listed their home and it did not sell in time. Over the last few months I have spent time at several open houses in West Kelowna with realtors I know. It has been interesting to chat with people about the specific things they are looking for in their retirement home. Part of what we have talked about are future life plans. Many people have talked about wanting to do more travelling and / or spending winters in warmer places. As people ease into retirement their needs change. Homes in age-restricted gated communities with amenities like pools and recreation centres are becoming more popular. This coming weekend (Saturday March 16,2024 from 12:00pm to 2:00 pm) I will be at 3407 Ironwood Drive in West Kelowna, which is listed by Sharon Walton with Royal LePage Kelowna (MLS ®10302186). If you are looking to right-size for retirement, a home like this might be exactly what you are looking for.

There were several announcements made recently that I am very excited about – changes that will help make it easier for people to afford to buy and afford homes.  Effective April 1, 2024 the BC Provincial Government has increased the purchase price for First Time Home Buyers (FTHB) and buyers purchasing newly built homes to qualify for the Property Transfer Tax (PPT) Exemption. Up until then, FTHB who bought a home with a fair market value of $500,000 or less (assuming they met all of the program qualifications) were exempt from paying PPT. PPT on a home priced at $500,000 would normally incur PPT of $8,000 so this is a considerable help for FTHB. After April 1st, the exemption will now be granted for FTHB purchasing homes up to a fair market value of $835,000. There will be a partial exemption up to $860,000. On a home with a purchase price of $800,000 this means a savings of $14,000 for FTHB. This is particularly significant because this is a closing cost that cannot be added to the mortgage; it must be paid up front. Using this same example, the minimum down payment on an $800,000 home is $55,000. One of the biggest challenges people face is trying to save their down payment, so this increase in the exemption will be a huge help for many clients. There are other exemptions to the PPT that have changed. People buying newly built homes, regardless of whether they are FTHB or not, can be exempt from paying the PTT. Up until April 1, 2024 the purchase price for this exemption is $750,000. Effective April 1st, this exemption will increase to $1,100,000 with a partial exemption up to $1,150,000. The second program that is being introduced April 1, 2024 is the Secondary Suite Incentive Program. In a nutshell, the provincial government will provide a forgiveable loan of up to fifty per cent of the cost of renovations to add a secondary suite to an existing home, to a maximum of $40,000. Applications for this program will be accepted starting April 17, 2024. For the loan to be fully forgiven there are conditions that must be met: The unit must be built in the same location the homeowner lives The unit must be rented out below market rates for five years I attended a learning session with one of my favorite lenders this week about the program and they are still trying to sort out how we will be able to combine this with a purchase or a refinance to help clients get the funds they need to participate in the program. There are many details we do not have yet, but you can find the initial information at Secondary Suite Incentive Program | BC Housing . There are many listings my clients look at that can be easily renovated to facilitate a secondary suite so it will be interesting to see how we can use the program to help clients generate income to help cover their mortgages while at the same time creating more affordable housing options for renters.

“Why do they need THAT?” “It wasn’t like this the last time I bought a house”. One of the common frustrations shared by mortgage applicants is the amount of paperwork required to get a mortgage. With interest rates higher right now I’m finding lenders are being even more particular about what they require to approve mortgage applications. While it may seem like a tremendous amount of documentation is required, we need to step back and think about the fact that we are asking a lender for several hundred thousand dollars. Would you lend this amount of money to someone you barely know? Lenders don’t ask for additional paperwork to make your life difficult. They are doing their due diligence to ensure that you will be able to repay your mortgage. Under Canada’s anti-money laundering legislation and anti-terrorist financing regime, potential lenders are required to document large or suspicious deposits. How can you make this a little more straightforward on your end? If you are getting ready to buy a home, make sure your paperwork is organized. Process-wise, I send my clients a list up front of the documentation they will most likely need for their mortgage approval. It may seem like overkill in some cases, but by being organized upfront I am often able to have an approval within a few days … and sometimes even the same day. Regardless of how prepared we are upfront, lenders will sometimes ask for additional information, so don’t be surprised if you are asked for even more documentation. Many lenders require verification of two years consistent employment so it is helpful to dig out T4s and Notices of Assessment from Canada Revenue Agency for the last two years. You will need to ask your employer for a letter that outlines your salary, position, and start date. You will also be asked for a current pay stub. You will need to demonstrate where your down payment is coming from. Lenders need a ninety-day history, so that means you will need to provide bank statements for the last three months. It is key that the statements you provide clearly show your name and account number. DO NOT scratch out the transaction list as lenders will not accept this. If you have any large deposits during the last three months (generally over $2,000) you will also have to show a ninety-day history for those funds. If you are self-employed, you will likely require additional information. Depending on the mortgage product you are using, expect to be asked for your Notices of Assessment and complete T1 Generals for the previous two years. If you are incorporated, you will likely be asked for confirmation of that. A mortgage broker recently used an analogy with one of his clients. The client was a tradesperson. The broker explained that if the client didn’t have all of the materials and supplies needed he would not be able to complete his construction project. For a mortgage broker, your paperwork is the equivalent of those materials and supplies. Without the proper paperwork, we cannot get your mortgage approved. If you are thinking about buying a home, or already out looking, the more prepared you are with your paperwork the smoother your approval will go. And your mortgage professional will be very grateful.

It feels like I’m harping on the subject of mortgage renewals, and that may well be the case. Many of my conversations with clients right now are deep dives into renewal options. One of my calls this week really struck me. I was talking to Jim (name changed of course), a new client whose mortgage is currently with one of the big banks. After we worked through the initial questions I start with, he shared that the renewal department of his current bank had started calling him in December. His mother had just had a stroke and he was at the hospital with her. He tried to tell the renewal officer that it was a bad time. The person calling kept pushing him to commit to locking into a 5 year fixed term for his renewal and told him this ”great rate” would not be available if he didn’t commit that day. He hung up. The renewal officer called repeatedly, sometimes up to three times per day. Once I had a better idea of Jim’s situation and plans for the future we chatted about options for him. As it turns out, he is on the home stretch towards having his mortgage paid out. More important is his plan to retire in three years, sell this home, and move to a smaller home that he already owns in the Oliver area. He had no idea that he could even choose a three-year term. He has always gone with a five-year term thinking that was his only option. We played with some figures to see how he could pay his mortgage off within his three-year plan. In his case, he will be staying with his current lender because that makes the most sense given his timeframe to retire and sell his home. The eye-opening takeaway for me was the high-pressure sales tactic used by the renewal officer. Not all banks nor renewal officers operate the same way, but they often don’t take the time to get to know the clients they are working with never mind offer them options and solutions with the clients’ needs in mind. If you have a mortgage renewal coming up over the next few months I encourage you to reach out to a mortgage professional to look into your options. Your renewal is the best time to make changes to your mortgage so it is important to invest some time to make sure you make the decision that is best for you, not your bank.

During the week between Christmas and New Years I spent time reflecting on my past year and did my planning for the upcoming year. This included a review of my financial situation as well as a look-back over the fun things I did, what I feel went well and what I would like to do differently for the coming year, as well as setting new goals for 2024.  One of the things I took a look at was my mortgage. I have stayed with my variable rate over the last year (ouch) but I did make a dent in the principal which was satisfying to see. There are a significant number of Canadian mortgages coming up for renewal in 2024 and 2025. For my clients that I’ve chatted with already there is a bit of sticker shock with where interest rates are now. Interestingly, when I compare the stress-test rate we used to qualify the clients originally it is not far off from the interest rates available now. Mortgage renewals are not just about getting the best rate. I had a great conversation with a friend of mine the week before Christmas. We did a quick review of her current finances and talked about her plans for the next few years. Her mortgage comes up for renewal mid-March. Her first question was with respect to the best rate that I could get for her. I reviewed several lenders and went over the rates they were offering for a fixed rate five-year term. Her mortgage was originally insured (default insurance with CMHC) so several of the options were very appealing. When we dove into her finances and her plans for the next few years we ended up looking at several other options. In her case she is carrying significant balances on her credit line and credit card. She has been renovating her home and has more work to do. She also needs to replace her furnace and hot water tank. Her goal is to sell her home over the next few years then move somewhere very warm for her retirement. Based on this information, we looked at other lenders that offer hybrid mortgages. Hybrid mortgages offer both an amortizing portion and a credit line. We are going to refinance to pay off her credit line and credit card and pull some funds for the work she has left to do. More importantly, we are going to move forward with a three year term instead of a five year term. She wants the stability of a fixed rate but the flexibility of a shorter term so she doesn’t have a significant penalty to pay if she sells her home shortly before the three year term is up. We are not moving forward with the lowest rate I could find but rather with the package that best fits her financial goals. If your mortgage is coming up for renewal (or even if it isn’t) my recommendation is that you connect with a mortgage professional to review your options rather than just signing the renewal offer that your current lender sends out. Wishing you all a wonderful 2024!