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First, take a look at the list below to see who’s classified as “self-employed” when it comes to getting a mortgage:
Types of Mortgages Available to the Self-Employed:
The two main types of mortgages available to those who are self-employed are a “Qualified Business for Self Mortgage” and a “Stated Income Mortgage.”
While the Qualified Business for Self Mortgage is what most people want to fall into, it’s a little more of a stringent one to qualify for. That said, it provides the most favourable rates, terms, conditions, and features.
On the other hand, the Stated Income Mortgage provides more flexibility in the qualification process, because it allows for the consideration of other sources of income that may not have been appropriately declared in your tax returns. For example, most of the time it will take into account any provided internal financial statements or plans, business contracts with customers, bank statements with additional cash going into your personal or business bank account, accounting records, and/or other forms of income verification that in general, most banks will not consider. As such, this also makes it a great option for a First Time Home Buyer or someone looking to refinance their home.
The good news is that pretty much anyone can qualify. But just like with any mortgage or loan, there’s a list of requirements you must satisfy.
How to Get Prepared for the Mortgage Process
While you may not require each and every one of these documents in all circumstances, the more prepared you can be to meet your Mortgage Broker, the better. Then it’s simply a matter of signing the application and you’re off to the races!
At the end of the day, each person’s financial profile is unique. It’s best to speak to an expert Mortgage Agent who can give you specialist advice and work out which mortgage best suits your specific situation.
Posted January 25, 2021
Canadian wallets have taken a wallop as a result of the COVID-19 pandemic. According to a recently released Financial Literacy Month survey from the Financial Planners of Canada:
Although the country’s economic recovery is underway, many Canadians may feel uncertain about their employment prospects, especially as local coronavirus flare-ups disrupt business activity.
Planning ahead can offer some peace of mind during uncertain times. Here are 5 coronavirus relief programs every homeowner should be aware of: four government programs that can help make up for financial shortfalls arising from illness, childcare responsibilities or lost wages; plus one additional option – mortgage deferral – that’s worth thinking hard about with the help of a mortgage professional.
Who qualifies: Workers who logged a minimum of 120 insurable hours during the past 52 weeks, who lost their job through no fault of their own, or who left work temporarily due to maternity or parental leave, sickness, etc.
Approximate benefit amount: At least $500 per week, $300 per week for extended parental benefits
How to apply: Get more program details on the federal government’s Employment Insurance and Leave page.
Who qualifies: Workers who aren’t eligible for EI (including self-employed freelancers and gig-economy workers), who can’t work, or whose income has dropped by 50%, as a result of the COVID-19 pandemic. This benefit replaces the Canada Emergency Recovery Benefit (CERB), which ended in late September.
Approximate benefit amount: $500 per week for up to 26 weeks
How to apply: Learn more about CRB on the federal government’s Canada Recovery Benefit page.
Who qualifies: Workers who are unable to work because they caught COVID-19; or who must self-isolate due to COVID-19-related reasons; or who must stay home due to another condition or medical treatment that makes them more susceptible to COVID-19.
Approximate benefit amount: $500 per week, with a two-week maximum
How to apply: Find out if you qualify for CRSB on the federal government’s Canada Recovery Sickness Benefit page.
Who qualifies: Workers who have to stop working or who must work less than 50% of the week due to caregiving a child/family member under age 12 whose school or daycare is closed due to COVID-19, or who is sick or required to quarantine for COVID-19-related medical reasons.
Approximate benefit amount: A maximum of $500 a week for up to 26 weeks per household
How to apply: Learn if you qualify for this income support program on the federal government’s Canada Recovery Caregiving Benefit page.
TIP: Don’t forget that some COVID-relief benefits are considered taxable income.
Finally, let’s take a look at one non-government COVID-relief program that was in the news a lot this last year:
Who qualifies: Homeowners experiencing financial hardship can apply for up to six months of mortgage-payment deferrals from participating lenders. Deferred payments (including principal and interest) are added to your mortgage and repaid (by you) down the road. This means that you’re likely to end up paying more over time than if you had not sought a deferral.
One alternative worth considering is mortgage refinancing .
Refinancing at today’s lower interest rates may lower your monthly payments, with or without extending your amortization period.
If you’re also carrying high-interest consumer debt , refinancing allows you to pull equity from your home to pay it off. You’re trading high-interest “bad” debt for low-interest “good” debt and eliminating a couple monthly bills that may have been causing you financial stress.
A mortgage professional can help you determine what mortgage solution is best for your situation.
Approximate savings: Varies
How to apply: Visit the 8Twelve Mortgage site for more info or to reach a Mortgage Strategist who can offer personalized advice tailored to your circumstances.
If you have concerns about your financial health and wellness this November, research your options today – you’ll feel more secure knowing what help is available should you need it.
Posted January 18, 2021
Canadians have faced surprises and uncertainty in 2020, reinforcing the value of basic financial awareness and planning. Here are 5 things you need to know right now to get ahead in 2021.
FAST STAT: Canadian households owe $1.77 for every dollar of disposable income. (Source: Statistics Canada)
If the idea of tallying up your debt makes you want to bury your head in the sand, first, know that you’re not the first person to feel this way. Second, fight the urge and add it all up.
The most common forms of debt include mortgages, car loans, personal loans, lines of credit, credit cards , student loans and money owed to Canada Revenue Agency (CRA). Knowing how much you owe – and at what interest rates – allows you to prioritize debt reduction goals and strategies .
FAST STAT: The average Canadian household spent just over $86,000 on living expenses in 2017, the most recent year for which data was collected. (Source: Statistics Canada)
Subtracting your fixed and variable expenses from your income will help you determine whether or not your spending habits are sustainable and if they align with your short-, mid- and long-range goals. Check online for budget worksheets or download one to your smartphone to get started.
If you’re not doing this already, adjust your budget so you can allocate savings to a household emergency fund to cover you in the event of job loss, illness and other unforeseen circumstances. The FCAC recommends saving three to six months of income or of living expenses (whichever you prefer).
FAST FACT: 29.2% of mortgage holders increased their credit score in the first quarter of 2020. (Source: Canada Mortgage and Housing Corporation)
Strong credit benefits you in a number of ways. If you’re a homeowner (current or aspiring), it’s your ticket to the best mortgage rates . If you’re a tenant, it can make or break your rental application. As a consumer, it can impact whether or not you’ll be approved for a credit card , car loan or line of credit.
According to Equifax, one of Canada’s two primary credit reporting agencies: “credit scores from 660 to 724 are considered good; 725 to 759 are considered very good; and 760 and up are considered excellent.”
Monitor your credit score regularly to ensure you’re on track with your financial goals.
Back this up by ordering your credit report annually and checking to ensure all listed creditors are legit; this can alert you to potential identity theft.
FAST STAT: Canadian employment income fell by nearly 9% in the second quarter of 2020, but household disposable income grew by 11% as a result of government support programs. (Source: Statistics Canada)
As Canada experiences the second wave of the COVID-19 pandemic , the government and many financial institutions continue to address financial concerns stemming from illness, reduced income and/or job loss.
Plan ahead by knowing what support you may be entitled to if your income is impacted by the pandemic:
FAST STAT: Canada regained 378,000 jobs in September 2020. Pandemic-related job losses are down to (a still-significant) 720,000 jobs compared to pre-pandemic February 2020. (Source: Statistics Canada)
The good news is that Canada is well on the road to economic recovery. But, as the country continues to respond to regional virus surges with actions including business restrictions, it’s good to plan for the unexpected.
This may include an honest assessment of your employment prospects: the restaurant, entertainment, hospitality and tourism sectors don’t look great right now, while tech, gaming, groceries and home decor all are booming.
Consider what skills could help you transfer to a new industry, or if now would be the time to get more training or education. Consider how you might fund more education – mortgage refinancing or a CHIP reverse mortgage are two options.
Could you build your income by taking on a side hustle like food or grocery delivery, starting an Etsy shop or starting your own business walking dogs or tutoring online?
A Plan B can provide peace of mind during uncertainty, but another side benefit is, it may just lead you to fulfilling new opportunities you hadn’t even considered.
Want to learn more about financial literacy? Visit the FCAC’s Financial Literacy Month site.
Posted January 11, 2021
Home equity is one of those terms you hear a lot. You may have a general sense that it’s a good thing that’s tied to homeownership, but not know the nuts and bolts of it. No fear: here’s an explain-it-to-me-like-I’m-12 look at home equity.
Home equity refers to your ownership stake in your home. It’s calculated as the home’s current market value less what you owe on the property via your mortgage and any liens.
For example: If your home’s market value is $500,000 and there’s $240,000 remaining on your mortgage, your home equity is $260,000 or 52% of its value.
Home equity changes over time. Examples of how this works are:
It’s also possible to lose equity, say, if housing values drop or if the home itself loses value due to disrepair or bad renovation choices .
If that $500,000 home we talked about earlier now has a market value of $450,000 and the same $240,000 mortgage, your home equity is now $210,000 or 46.6% of the property’s value.
Fortunately, home values generally tend to appreciate (increase) over time.
Home equity can be used as collateral in a home equity loan or a home equity line of credit (HELOC), also known as a second mortgage.
Another way to use your home equity is to borrow additional funds at mortgage renewal time, or by refinancing your existing mortgage.
Canadians over age 55 can leverage their home equity with a reverse mortgage .
Because these types of loans are secured against home equity, they are offered at interest rates well below unsecured loans such as credit cards or personal lines of credit. Many Canadians leverage their home equity to boost their overall financial health. Examples of this include:
Although you’re adding to what you owe on your home, it’s money well spent because, to use the examples above, you’d either be saving money outright (elimination of high-interest debt), be boosting future income (education and training) or building home equity in the mid- to longer term (the other two examples).
Home equity is a financial tool you can leverage if it is needed – or simply watch grow!
With today’s low-interest environment, 2020 can be a great year if you’d like to utilize some of the equity you’ve built in your home.
Got questions? Contact 8Twleve Mortgage for personal advice and product recommendations specific to your needs and lifestyle.
Posted January 5, 2021
You may already know the BOC issues the bank notes you tuck into your wallet, but did you know it indirectly determines the interest rate you pay on your mortgage or consumer debt, too?
While the BOC doesn’t set mortgage rates, credit card rates or any other consumer lending rates, it sets a target for the “overnight rate” (also known as the “policy interest rate”), which is what major financial institutions charge one another in their daily short term (or “overnight”) transactions. The big banks use the overnight rate ( currently targeted at 0.25 %) to set their prime lending rate, the interest rate they give to their best customers, (i.e. those with stellar credit and a solid income).
A variety of factors play into the interest rate you’ll pay for your mortgage, including:
Check out this informative article by Bank of Canada , for more insights into the process.
Interest rates are low right now, so borrowing money to buy a house can be done “on the cheap.”
If you’re house-hunting in a hot market like Victoria, Toronto, Ottawa or Montreal, home prices won’t be dipping in 2020 ( so long, coronavirus-related price drops ), but you’ll find some great mortgage rates, given the lending climate the Bank of Canada has promoted.
If you own your own home and have no plans to move, now might be a good time to consider refinancing your mortgage. Making a switch in order to take advantage of today’s low interest rates could save you thousands of dollars over the next few years.
Want to learn more? Reach out to 8Twelve’s team of skilled mortgage professionals. You can trust your 8Twelve Mortgage Strategist to help you get the best mortgage for your needs.
Posted January 5, 2021
The COVID-19 pandemic has forced many Canadians into a financial reckoning. One recent poll of 1,500 Canadians found two-thirds would be in (or already were in) a “severe financial crisis” due to job loss or income reduction. A full 30% said they would skip credit card payments if they absolutely had to. No one wants to be in the situation of having to choose between their mortgage and credit cards, or, for that matter, any other monthly essentials, so let’s take a look at one strategy that may help “crisis-proof” your finances.
One of the advantages of homeownership is the ability to tap into the equity you’ve put into your home. A second mortgage, third mortgage or reverse mortgage all allow you to borrow money at interest rates lower than what you’d pay on a credit card or unsecured line of credit.
Used correctly as a short-term solution that is part of a longer-term strategy, these types of mortgages can help homeowners get out of debt sooner.
Here’s a quick overview of three mortgage options and how they may work for your needs.
A second mortgage lets you borrow money using your home equity as security. To qualify for a second mortgage, a homeowner must have at least 20% equity in their home and can borrow up to 80% of the home’s appraised value. (Equity is the difference between your home’s appraised worth and what you owe on your existing mortgage. Your home equity increases as you pay down your mortgage, and/or as the value of your home goes up.)
A second mortgage exists independently of the first mortgage. Expect interest rates to be a bit higher, too. You’ll be making payments on both mortgages concurrently. Most second mortgages have terms of between 3 and 18 months.
Use your second mortgage to consolidate and pay off high-interest consumer debt, or for a major investment like post-secondary education or home renovations. When your primary mortgage is up for renewal, you should use this opportunity to pay off your second mortgage by rolling it into your primary mortgage.
This strategy reduces the amount of interest you pay on your debt load, improves your credit score by lowering your debt-to-income ratio, and will get you better mortgage rates when it’s time to renew your primary mortgage.
For homeowners over age 55, a reverse mortgage can provide an additional income stream to augment retirement savings or work income. If you have a mortgage remaining on your home, you’ll have to use your reverse mortgage funds to pay it off. The remaining funds can be used to cover your debts, or, for that matter, fund home improvements, investments, post-secondary education for your children or grandkids or other priorities.
Second mortgages, third mortgages and reverse mortgages aren’t for every situation, but used correctly, could help you save thousands of dollars in interest, get debt-free faster, and stay on track with your financial goals.
Want to learn more? Reach out to 8Twelve’s team of skilled mortgage professionals. You can trust your 8Twelve Mortgage Strategist to help you get the best mortgage for your needs.
Posted On January 5, 2021
The penalty to break a mortgage is typically the greater of
With the IRD, your mortgage lender will want you to pay the equivalent of what they will lose by releasing you from your mortgage and lending the money at current rates. Unfortunately, not all lenders calculate IRD the same way so you should always get the actual penalty from your lender. Check your lender’s website for their prepayment penalty calculator.
If you want to look at breaking your mortgage, we can review the terms and conditions of your mortgage and do an assessment of your situation to determine if your benefit outweighs the cost. There is no cost or obligation. Often penalties are rolled into the new mortgage, so you don’t have to be out of pocket. At 8Twelve Mortgage, our licenced Mortgage Strategists will provide you the advice, education and resources you’ll need to make smart financial choices.
Posted January 2, 2021
For those with high-interest credit card debt, the COVID-19 pandemic has made a stressful situation even more challenging. But there is good news, too: According to Statistics Canada, Canada is making headway in job recovery . With many of us back on financial track, September is a good time to work on tackling credit card debt and improving credit. Here’s a two-step action plan that could work for you.
High-interest credit card debt is hard to get out of. Once you fall into the pattern of carrying a balance, compound interest adds up fast. If you only pay the minimum each month, it can take years – or decades – to clear your debt.
This chart explains how a $1,000 credit card balance at an 18% annual percentage rate (APR) would take over five years to pay off, assuming no additional purchases are made.
But let’s say you’re in greater debt than $1,000. This Forbes article identifies some strategies for paying off a significant amount of credit card debt, such as: tackling credit cards one at a time; transferring high-interest balances onto a 0% APR credit card and chipping away at the balance before the 0% promo rate ends; or, finally, clearing them once and for all via credit card debt consolidation.
The latter is the solution we recommend, and here’s why:
If you own your own home, you can use your equity to restructure your mortgage. Let’s say you have $20,000 in credit card debt. If it’s time for your mortgage renewal (or if you consider mortgage refinancing), you could take out $20,000 in home equity and have it added to your mortgage. This allows you to clear that high-interest credit card debt immediately, replacing it with one affordable monthly mortgage payment at today’s record low mortgage rates.
You’ll end up paying less interest each month and can devote more of your income to savings or investments while paying off your mortgage sooner.
The second piece to this strategy is income. Don’t use your home as a piggy bank. Sure, real estate tends to appreciate over time, but you won’t make headway on your mortgage if you get into a cycle of racking up credit card debt followed by dipping into your home equity to clear it.
If you find yourself carrying a credit card balance on a regular basis, you’re spending more money than you make . This is a common problem with two solutions:
One is to spend less .
The other is to earn more. Think: side hustle. Make a few extra bucks each month and you’ll be able to pay for those extras you used to put on plastic.
Take dog walking – just four walks a week at $25 per walk translates into an extra $400 a month.
Not into dogs? What about house-sitting cats?
Or virtual tutoring?
The point is, a steady side hustle can bring in cold hard cash and if you dedicate those funds to your expenditures – or better yet, towards ramping up your mortgage payments – you’ll reach your goals sooner than relying on your main income alone.
Bonus: All the ideas above are social-distancing friendly, by the way!
Want to learn more about debt consolidation? Contact 8Twelve Mortgage for solutions tailored to your unique needs.
Posted December 21, 2020
COVID-19 has changed the way Canadians buy real estate. Say goodbye to open houses, Realtor showings and in-person paperwork with your mortgage broker, and say hello to virtual tours, video conferencing and e-signatures. Industry experts say technology was set to play a larger role in the homebuying process anyway, but social distancing has accelerated the pace. Here’s how tech is helping get Canadians home.
As any house hunter knows, real estate listings rely on more than just photos these days. Slideshows, video and 3D renderings are visual elements that buyers have come to expect. While most serious buyers say they would want an eventual in-person viewing, a May 2020 Nanos/Ontario Real Estate Association survey shows that 42% of Ontario house hunters would be open/somewhat open to buying a home using only online tools to view it.
Anurag Kumar and his wife took possession of their first home in April 2020, at the height of the pandemic. Kumar says he and his wife were already amenable to tech-based house hunting strategies: “We went on virtual tours, and video conferences and e-signatures were the other major tools we used,” along with a few socially distanced home viewings.
Home inspections were down 50 to 70 percent during this year’s early spring real estate market, however, home inspectors were able to work by following social distancing and by donning hazmat suits and respirators. Communication with prospective homebuyers was maintained via phone or video call. If Canada sees another wave of coronavirus this coming fall/winter, this may be the workaround the industry continues to use.
For homeowners seeking mortgage refinancing, appraisals are heading towards tech-based collaboration between homeowner and home appraiser. Guidelines from the Appraisal Institute of Canada direct homeowners to take interior photos, and to conduct video-based walkthrough “inspections” for appraisers via video-call using apps like Zoom, Skype, Facetime or WhatsApp.
The financial side of home buying has experienced a similar fast-tracking of technology, says 8Twelve Mortgage COO and Principal Broker, Akber Abbas – although some organizations have been better equipped to respond than others.
“As a mortgage brokerage, we were well-suited for COVID. We were moving towards a paperless environment and being cloud-ready in Canadian data centres. Back in 2018, we had started putting plans together to enable us to maintain our operations and continuity,” he explains.
“When COVID hit, everyone [at 8Twelve Mortgage] was able to literally pick up their laptops, being in a secure environment, and start working from home. We were able to service clients. We were still able to get approvals moving forward,” says Abbas, contrasting that with tech-adverse companies that were ill-equipped for social distancing. “Some brokerages in Canada didn’t have CRM solutions in place, or e-signatures, or even Zoom video conferencing. These were all part of our repertoire,” he says.
COVID has forced those who were caught by surprise to catch-up fast, whether it’s home mortgage lenders embracing video conferencing, or banks onboarding businesses faster for remote deposit capture of checks to facilitate electronic payments.
Canadians are living in unprecedented times. For companies like 8Twelve Mortgage, tech solutions have proven pandemic-ready, helping first-time homeowners secure the best mortgage rates and established homeowners restructure a mortgage without delay. “The market is catching up to where our business capabilities were,” says Abbas.
According to first-time homeowner Anurag Kumar, technology is only as good as the people wielding it. “We can use all the technology we want, but the human touch is different – trust me, I work in IT, so that’s something I am not supposed to say. Our 8Twelve Mortgage agent, Muhammad Mirza, helped us throughout the process by answering our calls at night, our emails, and through video calls and so on. He gave us his professional help and guidelines,” every step of the way, says Kumar, sharing his experience via email from his first home in Milton, ON.