13 Feb

What is the difference between a co-borrower and guarantor?

General

Posted by: Joel Olson

A co-borrower is on the Title with the main borrower. A guarantor is not on the Title, but is responsible for the loan. It is rare for a lender to allow a guarantor, so most require individuals to be co-borrowers. There are some considerations on tax and estate in each situation.

When a borrower is not on title, but on the loan:

Pros:

  • You can qualify for exemption from Property Transfer Tax on another purchase if you ever buy again
  • The main borrower may qualify for an exemption with only them on title

Cons:

  • In the case of a Separation, there can be some more involved legal work to split the matrimonial home.
  • In the case of a death, the property does not automatically go to the other borrower, so this can create additional estate problems.
13 Feb

What are the responsibilities of a co-signer?

General

Posted by: Joel Olson

When you are co-signing for a mortgage, we look at your entire financial situation – credit and income. This means that we need just as many documents from you as we need from the main applicant. Mortgages have changed a lot over the last decade, so you can expect that you will be required to supply more documents than you may have when you first applied for a mortgage. However, once the mortgage has been signed you will be only be called upon if the the main applicant starts missing payments. Most people find the process of getting approved more involved than they thought; however, they find being on the Title for the long-term to be less involved than they thought. It’s important to note that most lenders will require all borrowers to be on the Title. Read here for more information on the difference between a guarantor and a co-signer. 

13 Feb

Why do you need both the T1 Generals and Notice of Assessments?

General

Posted by: Joel Olson

Your T1 Generals are what has been inputted by you or your accountant but has not yet been confirmed. The NOA confirms that the government has confirmed your income. The good news is that if you can’t find them, we can retrieve your NOA for you in order to make sure you have no income tax owing.

13 Feb

What Extra Costs are Part of My Mortgage?

General

Posted by: Joel Olson

Lawyer Costs: We estimate that it’s about $1500. This includes all the legal fees, title insurance, etc. This is not something we charge, it’s just an estimate of what your lawyer will charge.

Property Transfer Tax: This is a tax applicable in both British Columbia and Ontario. The tax is charged as 1% of the first $200,000 of the purchase price and 2% of the balance of the purchase price. If you have never owned property anywhere in the world, you will probably qualify for an exemption on this. In the case of two people buying a home, we have a strategy where you may also be exempt on your next house. This will save you thousands, so be sure to make sure we have talked about this, if we haven’t already.

Here’s some more information on Property Transfer Taxes: http://www2.gov.bc.ca/gov/content/taxes/property-taxes/property-transfer-tax/understand/exemptions

Property Tax: You will have to pay the seller back for any property taxes they have paid. For example if the owner paid $2000 in July, and you buy in December, you will have to pay $1000 back. A very confusing part of this can be if the lender is paying your property taxes. In this case, upon starting the loan they will begin collecting for the next tax year. With most tax years beginning in July, there is a strong possibility that when you buy a home you will be behind in the tax year. As a result, you can expect that your property tax payments will reflect that in the coming year. If you are less than four months until property taxes are due, you will have to pay your property taxes upfront at the lawyer at the time of closing.

CMHC or Default Insurance Fee: You will see this on your documents at the lawyer. This is not a cost you have to pay, it is added to your mortgage. There is no way around it, as the government adds this to every mortgage where less than 20% is put down as a down payment. This insurance protects the lender so that if you default on your payments, the government pays back the money the lender has lost. This is not to be confused with house insurance or life and disability insurance.

Lender and Broker Fees: These are fees charged by the lender and deducted from the money you are getting. The broker fees are not actually given to us, the brokers, in their entirety. The broker fees are also paid to the lender and then shared with the brokers.

 

13 Feb

Can we use a US Borrower to Co-Sign?

General

Posted by: Joel Olson

In most cases, we cannot use US Borrowers who reside in the US. The reason being is that there is no way for a Canadian Lender to recover losses in the case of a default. The only situations where this could be considered are:

  • If we viewed it is a recreational property for a US Borrower, in which case 35% down would be applicable.
  • If the US Borrower receives their income from a Canadian Source.
13 Feb

Why must I show ownership and give bank statements that are not blacked out?

General

Posted by: Joel Olson

Bank Statements must be able to clearly show the account numbers and indicate that those accounts belong to you. If we are not able to clearly show the account belongs to you, there is no evidence for a lender to verify those accounts truly belong to you.

This is, of course, risky in the case of a loan, but even more so in the case of a government audit that would most surely fail, and the fines are not small- but can be in multiple millions. Lenders must also have bank statements that are not altered. In other words, nothing may be blacked out or whited out. This is due to both anti-money laundering law and fraud law. A lender must have documents with all the information on it or there is no way for them to prove that what was altered was not something that would prove it was a fraudulent document. It is less their rule and more of an OFSI or government rule. We appreciate the fact that people are very unlikely doing something fraudulent with the account and are only covering up information with the strict intention of keeping their information private and secure. This is a legitimate concern that we share. However, the other part of this equation is that because these documents are required unaltered, the government insists on a high-level of security on everything. Every portal, every email, is mandated to have strict encryption codes, security features, and failure to do so results not in just a fine to a lender, but a hefty one to me personally (Think 100k). Thus, you can be assured that your information is not just safe, it is impossible for it to be floating somewhere unarmed.