Self-employed mortgage solutions

Qualifying for a mortgage

It is no longer as easy as it once was for the self-employed to obtain mortgage financing. If you have tried to secure a mortgage recently with an institutional lender, you may have already found that out for yourself.

In the past, all you had to do was state your income to your lender without any third party verification. As long as you had a great credit rating, that was good enough, But not any longer. Now you have to provide documentation to prove you have the ability to make your mortgage payments.

There are still good options available with traditional lenders, such as banks or credit unions but you will have to prove that you are declaring a “reasonable income” for your profession on your tax returns and also have a great credit rating. These two factors combined could be a challenge for many who are self-employed as their accountants may be minimizing their income declared for tax purposes which is great unless you are planning to secure new mortgage financing.

With these standard mortgage programs you will either require a minimum 35% equity or if you have less than a 20% down payment, a lender will require a minimum of two years proof of income as self-employed.

The good news, there are many alternative lender options for self-employed clients who no longer qualify with a traditional lender. These lenders are the market’s response to consumer demand spurred on by the tighter mortgage regulations.

These are reputable companies who offer alternative mortgage products to consumers who can no longer qualify with conventional lenders. They fill an important role in fulfilling the dreams of home ownership for Canadians or have assisted with financing needs in other ways such as accessing equity or refinancing to pay off high interest debt.

Many of these lenders, who currently offer prime mortgages, are now expanding their offerings beyond traditional mortgages to fill this gap in the market and are generally only accessible through mortgage brokers.

My best piece of advice for someone who is self-employed and looking to obtain a mortgage whether it is to purchase a property for the first time or moving up, refinancing a mortgage or looking to purchase an investment property – be prepared! Meet with your mortgage broker well in advance to discuss what is required to obtain a pre-approval for your financing.

You may have to work a little harder and provide more documentation but there are still many options available to the self-employed so please give me a call 1-888-561-2679 to ensure that you are in the very best position when it comes time to arrange your mortgage financing.

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.


How to deal with it if you have income tax owing

Income tax owing?

For people who are self-employed, the tax filing date hasn’t changed and taxes must be filed by June 15, 2022.

Any payments for the current tax year are due by April 30, 2021, which applies to balances and instalments under Part 1 of the Income Tax Act. For everyone else the payment date and filing date is April 30, 2022.

When you are self-employed and do not have tax deductions coming off your paycheques and haven’t made other provisions to cover your tax debt at the end of the year, you could have a problem. Tax debt is serious and should be dealt with immediately.

The Canada Revenue Agency has far reaching powers when you owe money to them. If you owe them, they will find a way to collect. They charge penalties and interest on your overdue taxes. They can withhold payment of your Child Tax Credit and GST rebate. They can take money from your bank account or garnishee your wages.

If you own real estate, the CRA can register a lien against your property if what you owe to them has been outstanding for an extended period of time. This is done to guarantee that you pay your outstanding debt. When a lien is registered against your property it can prohibit you from refinancing or selling your property until the outstanding debt is paid in full.

An important issue to consider is that if you are self-employed and your income tax is not current, you will not be able to secure mortgage financing to purchase a home, buy a vacation property, transfer your mortgage or access equity in your property. Even our alternative and private lenders will not advance a mortgage unless any CRA tax arrears are paid in full.

Canadian banks and credit unions will not provide an unsecured loan for the payment of income tax debt and they generally cannot refinance an existing mortgage to cover the debt either.

The CRA will generally not accept any arrangement other than a full payment and this is due and payable at the time of your assessment or reassessment. They cannot set a precedent that would allow them to accept less from everyone else. They have one of the highest rates of collection activity in Canada as our taxes fund public goods and services. So what do you do if you can’t pay them in full?

Contact them immediately. You may be able to negotiate a payment schedule if you can’t pay the full amount but they generally will not let it be outstanding for over a few months. Know that they will continue to charge the interest and penalties on the past due amount.

This is important to note, if you are filing for bankruptcy, or filing a consumer proposal, it does not discharge a lien against your property. If you go bankrupt on your CRA debt, the lien remains and – even worse – accrues interest over time. Even after your discharge from bankruptcy, the lien remains in force, until you eventually sell your home.

If you are a homeowner then having an experienced mortgage broker working for you can save you both time and money when seeking a solution to your CRA problem. If you simply can’t pay the full amount of your back taxes, consider refinancing your mortgage and using the equity in your home, a consolidation loan is possible which can include tax arrears and other debts.

Mortgage brokers have access to lenders that will allow a refinance of your existing mortgage or second mortgage options to pay off outstanding CRA debt.

If you are a homeowner and are having issues paying off what is owed to the CRA this year, please give me a call to discuss at 1-888-561-2679 or email me at: [email protected].

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.

getting to know reverse mortgage options

Reverse mortgage options

There are several different and flexible reverse mortgage options available depending upon your individual needs. Here are the facts about each product to help you decide which option might be right for you.

Standard Reverse Mortgage

This is the most popular product which allows you to access up to 55% of the value of your home and is deal for homeowners 55+ who are looking for an initial lump sum. If you do not take the full approved advance amount initially then will be able to access the remaining funds through subsequent advances in the future.

This product is best used for paying off stressful debt, renovations which could increase the value of your home or even buying a second home.

There is also another similar program that provides you with access to a higher percentage of your home equity but it is only offered in urban centres throughout Alberta, British Columbia, Ontario and Quebec.

Income Plan

This product is for homeowners that are looking to supplement their retirement income as it provides monthly advances in addition to a one-time lump sum.

The minimum initial advance is $20,000 or more and the planned advances start at $1000 monthly or $3000 quarterly. The amounts can be increased to fit your needs.

This products is best used for boosting your day-to-day lifestyle, increasing monthly cash flow or avoid drawing on your valuable investments by leveraging the equity you already have in your home without having to move or sell.

Open Reverse Mortgage

This is a short-term reverse mortgage loan which provides you with the flexibility to convert into a standard reverse mortgage at any time (with a fee) if you decide you want to keep the solution longer term.

The minimum loan is $25,000 and up to 55% of the equity in your home. This is a short-term financing solution without any prepayment charges.

This product is best used for bridge financing or as a short-term cash flow solution while avoiding high prepayment penalties.

To be eligible for any of the products you must be a Canadian homeowner 55+ and the home must be your primary residence.

No matter which product you select, here are the steps. Give me a call at 1-888-561-2679 or email me at [email protected] to setup an initial consultation and receive your free estimate.

If this is the best solution for you, we will then arrange an appraisal of your property to determine your qualification amount and set up the legal process to complete the reverse mortgage.

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.


Questions to ask yourself when renewing your mortgage

Renewing your mortgage

When your current mortgage is getting close to its maturity date, you will need re-negotiate your mortgage.

This is the opportunity to decide on the new term length, negotiate the new mortgage interest rate and even move your mortgage to a new lender.

Most lenders (federally regulated) are required to provide you with a new mortgage offer at least three weeks before your maturity date, if they are interested in renewing your mortgage as they are not obligated to offer you a renewal should there be a change in your circumstances or a late payment history.

Statistics show more than 50% of homeowners renew their mortgage with the current lender without negotiating the terms. This doesn’t give the lenders much incentive to offer the best rates at renewal time. They are betting on the fact that you won’t shop around or won’t want to go through the hassle of applying for a mortgage with a new lender.

Signing the mortgage renewal offer without exploring other options is not in your best interest. Yes, it’s easier to remain with your current lender as you don’t have to go through the hassle of providing new documents etc. but you could find better rates and terms with another lender perhaps saving you thousands of dollars in interest costs.

Here a few questions to ask yourself before you sign that mortgage renewal offer:

• Have you explored all your options? We can look for opportunities that could better meet your needs right now.

• Are you comfortable with your payments? If you’ve been feeling financially strapped each month making your mortgage payments, this could be the time to reduce them to a more easily managed level. On the other hand, if you’re earning more, why not pay down your mortgage faster and save thousands of dollars in interest over time?

• Do you need cash flow for other things? Your priorities may have shifted since you first bought your home, and your cash flow needs can shift too. Things like paying for a child’s university education, planning a career change, or a major purchase such as a vacation property may call for spending money on things other than your home. You may be able to refinance your mortgage to take this into account.

• Can you handle fluctuating rates? Some homeowners are nervous about any hikes in interest rates, while others are comfortable to go with the flow. Rates are tough to predict. It’s best to base your decision on your personal situation, not what you read in the news, and tailor your mortgage renewal around your needs. We can help you decide whether to opt for fixed or variable rates.

• Will you sell soon? If so you might want to consider a shorter-term mortgage or one that has flexible terms so you’re not penalized if you sell your house before the mortgage comes due. Not all mortgages can be moved to a new property.

• Are you thinking about a major renovation? Before you renew, look at all your financing options, which may include getting an additional line of credit or keeping your monthly mortgage payments low so you have money on hand to finance the renovations.

• When do you want to be “mortgage-free”? If you’re planning extended time away from work or perhaps an early retirement, it may make sense to pay down your mortgage sooner rather than later. While increasing your payments will raise your monthly costs now, you’ll ultimately save on interest in the long term and can prepare for that fabulous, mortgage-free lifestyle.

• Could you use your home equity to fulfill other goals? Refinancing a mortgage can be one way to free up cash you need for other things, which could even include buying another property. Mortgage renewal time is an ideal occasion to review all your options.

• Are you getting the best rates and terms? In a competitive mortgage environment, your good credit history can make refinancing work to your advantage. We analyze mortgage markets daily to ensure you don’t miss any money-saving opportunities.

Questions about your mortgage renewal? Please give me a call at 1-888-561-2679 or email to [email protected]

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.

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About the Author

April Dunn is the owner and a Mortgage Broker with The Red Door Mortgage Group – Mortgage Architects. She has been assisting clients to purchase, refinance or renew their mortgages for over 20 years.

April has experience as a Credit Union manager, a Residential Mortgage Manager with a large financial institution and as a licensed Mortgage Broker. By specializing in Strategic Mortgage Planning she has the tools available to build a customized mortgage plan, with the features and options that meet your needs.

April provides a full range of residential and commercial mortgage financing options for clients all over the province of British Columbia and across Canada through the Mortgage Architects network.

Contact e-mail address: [email protected] or by phone at: 888-561-2679.

Website:  www.reddoormortgage.com

The views expressed are strictly those of the author and not necessarily those of Castanet. Castanet does not warrant the contents.

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