Avoid These 11 Deadly Mistakes When Applying for a Mortgage

Everyday people have their mortgage loan turned down because of one or more of these mistakes.  By taking these few minutes to acquaint yourself with the "11 Deadly Mistakes When Applying For A Mortgage" you can save thousands of dollars on your mortgage.

 

1. Not Knowing How Much Money You Can Put Down 

It's important to know how much you can afford to pay in down payment and closing costs when you apply for your mortgage.  The more you put down the better the terms you're likely to get. At the same time you also need to stay within your means and comfort level.

2. Working With A Mortgage Broker Who Has A Poor Performance Record

Industry insiders know that the most common reason that a sale fails to go through is that the mortgage fails to go through.  Ask your mortgage broker about her/his performance record.

3. Not Understanding The Process

Most of us don't shop for a mortgage very often.  As a result it isn't something we become familiar with.  Work with a mortgage broker who will take the time to answer your questions and uses terms you understand.

 

4. Working With A Lender Who has Only One Mortgage Loan Product

Not all lenders have a range of options when it comes to mortgage loan products.  What if that lender doesn't offer the type of mortgage you need? Or worse yet, what if you need to change mortgage loan products after you've started the process?  Working with a mortgage broker who has many lenders enables you to address these issues without starting the process over again.

5. Making Large Purchases Prior to Your Mortgage Application

Many people think that it is in their best interest to get large purchases completed prior to applying for their mortgage.  As total debt is a key component in determining the amount of home you qualify for it is best to wait until after your home purchase has closed to make such purchases.

6. Over Shopping Your Loan

Each time you call a lender seeking the best possible rate and terms you have your credit report pulled.  Every time your credit report is pulled you risk decreasing your credit score and thus possibly decreasing the likelihood of getting the best rate and terms.  Experts recommend that you select a mortgage broker with a number of lenders and do your shopping with her/him.

7. Hiding Things From Your Mortgage Broker

Most of us have experienced times of financial difficulty at some point.  While it can be embarrassing to discuss issues like this, your mortgage broker is there to help you get loan approved despite such issues.  Your mortgage broker can only help you with those things with which s/he is aware.

8. Making Late Payments

Late payments, especially those within the last year, can be very detrimental to getting the best rate, terms and even the difference of being approved at all.  While this might seem like unnecessary advice, ALWAYS pay on time.

9. Over Using Credit Cards

Credit cards are a convenient way to make purchases, but if not paid off or balances kept low you might find it more difficult to get the best rates and terms on your mortgage.  Keeping your total debt as low as possible helps you get the mortgage that best meets your specific needs.

10. Cosigning On Someone Else's Loan

While it can be a great service to a friend or loved one, signing to guarantee someone else's loan is often a big head ache for the cosigner.  Before cosigning you decide if you're willing and/or able to assume the liability.

11. Not Getting All The Facts

It is important to learn the total cost of your mortgage loan, both at closing and for the life of the loan.  While mortgages can look a lot alike there can be subtle differences which can save or cost you thousands of dollars.  Get all the facts and know what to expect.

Mortgage regulations have changed significantly over the last few years, making your options wider than ever.  Subtle changes in the way you approach mortgage shopping, and even small differences in the way you structure your mortgage, can cost or save you literally thousands of dollars and years of expense.

Get the Right Information - Whether you are about to buy your first home, or are planning to make a move to your next home, it is critical that you be informed about the factors involved.

Posted by Steven Porter. Steven is a licensed Mortgage Agent with Mortgage Architects and retired, licensed, real estate broker with 30 years experience in residential real estate. Certified Reverse Mortgage Specialist (CRMS); Seniors Real Estate Specialist (SRES) and Accredited Buyer Representative (ABR). Steven can be reached at 1-905-875-2582; steven.porter@mtgarc.ca or online at 1800Mortgages.ca

What you need to know about the Principal Residence Tax Exemption

When it comes time to sell the family home, few homeowners give any thought to the possibility of having to pay taxes on the realized profit resulting from the sale. After all, everyone knows that you are not required to pay capital gains tax on your home, right?

While it is true that you do not pay capital gains tax on your personal dwelling, you need to keep in mind that there are very specific rules around this exemption. Should you fail to follow these rules, you may be required to pay capital gains tax on all, or some portion of, the profit from the sale of your home. In this Home Trust Mortgages Blog article, we’ll take a closer look at these rules to help clear up any confusion.

Principal Residence Defined

It is the existence of the Principal Residence Exemption that allows you to forego paying any form of capital gains tax on the profit you make when selling your home. Having said that, you must ensure that your home meets the strict definition of “principal residence” for the entire time that you own the property. More than one homeowner has learned the hard way that after selling what they consider to be their home and main residence, the tax man does not share the same view and capital gains are now owing.

To avoid this costly situation, let’s first look at what qualifies as your principal residence.

For starters, the Canada Revenue Agency allows for considerable leniency regarding the type of home that can serve as your principal residence. Everything from trailers to condos are permitted, but whatever form your principal residence takes, there are four requirements all homes must meet in order to be recognised as your principal residence. 

These are:

• The home must be owned by you or jointly with another person.
• You, your current or former spouse or common-law partner, or any of your children, must have lived in the home at some point for each year that you are claiming the home as your principal residence.
• The home must be a housing unit, a leasehold interest in a housing unit, or a share of the capital stock of a co-operative housing corporation acquired only to get the right to inhabit a housing unit owned by that corporation.
• You declare the home as your principal residence by listing it as your address on official documents such as your tax return.

In addition to the requirements listed above, you may only designate one principal residence per family at a time.

The key point to remember is that maintaining ownership alone is not sufficient to preserve the principal residence designation. For any period that you, your spouse, or your children are not living in the property, and even if you retain ownership, the property cannot be considered your principal residence for that time period.

Consider, for example, situations where owners might not live in the property for several years; this may be the result of a temporary relocation to another area for work or schooling. During this time, unless your spouse or your child continues to live in the house, the property is not considered to be your principal residence.

This means that when you sell the property, for any year that your home is not your principal residence, you will be required to pay capital gains tax for that period. The Canada Revenue Agency has a worksheet available to help determine the taxable amount for such situations.

If you have questions on this or anything else having to do with your principal residence designation, see the Canada Revenue website to avoid an unexpected tax bill when you sell your home.

Note: On October 3, 2016, the Government announced an administrative change to Canada Revenue Agency’s reporting requirements for the sale of a principal residence. For more information, go to Reporting the sale of your principal residence for individuals (other than trusts).

By Pino Decina, EVP Residential Mortgage Lending, Home Trust Company


Posted by Steven Porter. Steven is a licensed Mortgage Agent with Mortgage Architects and retired, licensed, real estate broker with 30 years experience in residential real estate. Certified Reverse Mortgage Specialist (CRMS); Seniors Real Estate Specialist (SRES) and Accredited Buyer Representative (ABR). Steven can be reached at 1-905-875-2582; steven.porter@mtgarc.ca or online at 1800Mortgages.ca