Trevor Hickey, B.A. - Calgary Mortgage Brokers | Mortgage Brokers Calgary | Calgary 2nd Mortgages

This article is written by Trevor Hickey, B.A. who works with Concord Mortgage Group Ltd., which is a team of Calgary mortgage brokers.  If you are self employed you will find that applying for a mortgage can be a very arduous task.  Ironically the banks would rather lend to your employees before they’d lend to you.  Here is a rough guideline of the types of documents you will need if you are applying with a bank and what they will be looking for.

1) Length of self-employment – lenders typically like 2 years of self employment (as a minimum).  However, if you have been in business for over 3 years the lenders will require income proof as opposed to allowing you to “state” your income.  The reason for this is because in any business there are one-time start-up costs and many new business owners write many of these off – this makes your income within the first 2 years seem much less than it really is, so the banks let you “state” or tell them what your income is rather than proving it.

2) Years of industry experience.  The more experience – the better.  Banks find it hard to believe that a person can start up a company and make $50-$100k within the first couple years without any prior experience in that industry. 

3) Tax documents.  If your company is incorporated in Alberta your tax documents (ie. personal income tax returns) will show dividends rather than a breakdown of total income minus expenses.  If this is the case then the banks typically will want your financial statements so that they can see this breakdown and determine what your income really is. 

If your company is not incorporated and you simply just started a company without registering it then your personal income tax returns will show your total income and your expenses.  If this is the case, then the lenders (banks) typically will just want to see the personal income tax returns to prove your income.

Either way – lenders will typically want 2-3 years of income proof to determine your income.

4) Add-backs.  Add-backs are things that you write off that do not actually cost you anything, which banks then allow you to add back to your income, which allows you to borrow more money from them.  Ie. depreciation on a building, even if the building is getting older and losing value you won’t necessarily need to build another building in the near future.  If, however, you use tools and equipment that will break-down over time and that you will have to replace then when you write this type of expense off the banks won’t allow you to claim that you were just writing it off for tax purposes and that you should be allowed to add it back to your income because you will need to eventually have to use that money that you wrote off in order to buy new tools etc.

5) Assets and liabilities.  If you claim that you make $100,000 a year your assets and liabilities should show this.  Ie. if you claim to have made $100,000 for the past 10 years and you rent your home, have one credit card with a limit of $1000, and a 1980 truck, and no savings or investments - this doesn’t add up.  If you made $1,000,000 over 10 years, where did it all go?  Also, if you make $100,000 a year, then why is your credit card maximum only $1,000?

If you would like any free advice or a free consultation, please call or email Trevor Hickey, B.A. at the information below (or visit http://www.mortgagebrokercalgary.info to email Trevor Hickey a question).

Trevor Hickey, B.A.

Mortgage Associate

Concord Mortgage Group Ltd.

#107 – 1905 Centre Street NW

Calgary, Alberta

T2E 2S7

Bus: (403) 290-1990

Cell: (403) 860-8738

Fax: 1-888-587-1426

Email: trevor@concordmortgage.ca

Website: www.mortgagebrokercalgary.info - Calgary Mortgage Brokers

Other articles by Trevor Hickey:

1) What is a reverse mortgage?

2) Can a mortgage help your health?

3) Can you get a mortgage without having payments?

4) Can a Calgary mortgage help you win the Stanley Cup?

5) Have equity but no idea how to make money with it – Edition #1:

6) Are you a millionaire?

7) Can a mortgage be your friend?

8 ) Money can’t buy you happiness – but can it make you happier?

9) How to save money on your Calgary mortgage?

10) Have equity – want to make money?

11) Do you want to lend mortgage money in Calgary, Alberta?

12) Calgary Alberta Private Lenders

13) Is there equity in your home?

14) Why use a broker?

15) Calgary mortgage loan tips – Low rates for your Calgary, Alberta mortgage

Popularity: 26% [?]

The million dollar question – fixed or variable?

The short answer is this: if you can’t afford the loss – don’t go for the reward!  First off, lets define what a fixed rate is: a fixed rate is a rate that you agree upon with a lender to borrow funds from for a pre-determined length of time.  Ie. today in Calgary, Alberta the 5 year fixed rate is approximately 3.79% – this means that a lender will lend you money for 5 years at 3.79%.

A variable rate is a floating rate that changes throughout your term.  Today in Calgary, Alberta the 5 year variable rate is Prime minus (-) 0.4%.  This means that if prime changes then your interest rate changes.  But what is prime?  Prime is what the banks can borrow money from the central government bank plus a premium ie. if the government will lend the banks money at 1%, the banks will then lend that money out at Prime, which is 1% plus ie. 1% (profit for the bank), so Prime is then 2%. 

Now, it is not mandatory that the banks lend you the money at Prime, Prime minus, or Prime plus – Prime is just a number that the bank can lend in relation to.  So (as seen above) you can borrow money today in Calgary from a Calgary mortgage broker at Prime minus (-) 0.4% 

Now, we’ve all heard in the news that the economy is heating up/cooling down and therefore the government will increase/decrease the interest rates so that they can curb inflation/promote market activity.  So, if you take a variable rate you have to be ready for both an increase and decrease in the rates.  But, as I mentioned before – if you aren’t prepared to take the increase in interest rates then don’t take the variable rate.

Now, there are some typical situations where fixed rates are better for some and variable are open to others. 

Scenario 1:

A student comes to a Calgary mortgage broker and the student can afford the current fixed rates but not much higher.  In this situation I would advise that the student is unlikely to have a sudden burst in income and therefore if rates were to increase substantially, the student would be unable to make the payments.  GO FIXED.

Scenario 2:

A couple walks into a Calgary mortgage brokers office and has substantial income, they want to purchase a rental home and they want to see if they’ll save any money by trying to predict interest rates.  They won’t be devastated if the rates increase, but they’re pretty sure the rates will go down and are prepared to take the risk.  HERE THEY CAN GO FIXED OR VARIABLE.

If you need any advice or you would like a free quote – please call Trevor Hickey, B.A. (or email) at the information below.  Thank you!

Trevor Hickey, B.A.

Mortgage Associate

Concord Mortgage Group Ltd.

#107 – 1905 Centre Street NW

Calgary, Alberta

T2E 2S7

Bus: (403) 290-1990

Cell: (403) 860-8738

Fax: 1-888-587-1426

Email: trevor@concordmortgage.ca

Website: www.mortgagebrokercalgary.info - Calgary Mortgage Brokers

Other articles by Trevor Hickey:

1) What is a reverse mortgage?

2) Can a mortgage help your health?

3) Can you get a mortgage without having payments?

4) Can a Calgary mortgage help you win the Stanley Cup?

5) Have equity but no idea how to make money with it – Edition #1:

6) Are you a millionaire?

7) Can a mortgage be your friend?

8 ) Money can’t buy you happiness – but can it make you happier?

9) How to save money on your Calgary mortgage?

10) Have equity – want to make money?

11) Do you want to lend mortgage money in Calgary, Alberta?

12) Calgary Alberta Private Lenders

13) Is there equity in your home?

14) Why use a broker?

15) Calgary mortgage loan tips – Low rates for your Calgary, Alberta mortgage

Popularity: 85% [?]

My name is Trevor Hickey and I am a Calgary Mortgage broker in Calgary, Alberta with Concord Mortgage Group Ltd. The following is a run-through of the general mortgage process, followed by the basis for decision making that most lenders use.
General Overview:
1) Application to broker
2) Verification of information
3) Application to lender
4) Approval
5) Funding

Remember these mortgage operations may not be the same for all companies; however, for my company in Calgary, Alberta this is how I operate as a Calgary mortgage broker.
Application to Calgary Mortgage broker
You can make a Calgary Mortgage broker application directly to a bank and therefore bypass this step; however, you may not want the bank to know everything that you have to disclose. Some information is illegal for them to discriminate against and a broker can help prevent harmful (but useless) information from going to the lender.
An application Calgary refinance application can usually be done over the phone, email, fax or in person. The main categories are:
1) ID
a. A lot of people think that a Calgary Mortgage broker has no right in asking for information such as date of birth and social insurance numbers.
In Calgary private lending there is one golden rule that trumps all others “the one with the gold makes the rules”. If the Calgary private lender wants to know your information and you don’t give it to them you are simply declined for the loan.
In my experience EVERY SINGLE lender that I have worked with will want your details such as your DOB or SIN, so if your Calgary mortgage brokers or bank asks for it – give it to them.
2) Contact information
a. The Calgary mortgage brokers and lender will need to know how to contact you. Give the Calgary mortgage brokers everything, your home, cell, work, fax, email – what your preferred mode of contact it etc. If it is an emergency you will want your Calgary mortgage brokers to be able to contact you.
3) Job information (past and present)
a. Need at least 3 years of work history.
4) Assets (what you own)
a. The more the better – often these are not verified so you don’t need to worry about have proof of ownership for stocks or vehicles etc.
5) Liabilities (what you owe)
a. Usually the lenders just look at what is registered on your credit bureau.
6) Real estate owned
a. Be honest, tell your Calgary mortgage brokers about everything you own.
7) Mortgages/loans secured against the respective properties
Desired loan/mortgages
a. What is it that you want?
b. What property is it secured against?

Verification of information
Next the Calgary mortgage brokers will want to ensure you are being honest. It’s okay to be wrong on your numbers by a little bit but try and keep it close. It’s better to quote higher than lower. Don’t say that you have no liabilities when you have a ton of credit cards.
Some Calgary private lenders have very little or none of this step. I have heard of some private lenders that don’t check income, credit or even mortgage balances. Usually you pay through the nose in exchange for the lack of questions.

Application to Calgary private lender
Here is where your Calgary mortgage brokers will transfer the relevant parts of your application and your documents to the Calgary private lenders. The benefit of working with Calgary mortgage brokers is that Calgary mortgage brokers will know what private lender is the best fit and therefore prevent a lot of time being wasted by going to non-relevant Calgary private lenders.

Approval
Here is where, if your application and documents match, and if they are in line with the Calgary private lenders’ guidelines then you will receive an approval.

Funding
Here is when the funds are advanced and they are paid to the respective parties ie. To pay off credit cards, fees, lawyer, Calgary mortgage brokers, other previous mortgages etc.

Basis for Decision Making
Most private lenders use the following for a basis for making a decision on whether or not they should approve a loan or not.
TDS/GDS
LTV/Equity
Income stability
Credit
TDS/GDS
Stands for “Total Debt Servicing/Gross Debt Servicing”. Here is where the private lenders compare your income to your required debts.
The only difference between the GDS and TDS is that the GDS does not include debts such as credit cards, car payments, unsecured lines of credit payments etc. and the TDS does include those things. By far the more important of the two is the TDS.
Again we are Calgary mortgage brokers so these are conventions in my neck of the woods.
How to calculate GDS/TDS (usually 32%/42% or less for bank-type lenders):
Income: $100,000.00/year
÷ 12
$8,333.33/month

GDS = Debts (not including credit cards, auto loans, unsecured loans etc) ÷ Income
Mortgage payment: $2,000.00/month
Property tax: $200.00/month
Credit cards: $350.00/month
Auto loans: $350.00/month
Total Debts: $2,200.00/month

GDS = $2,200.00 ÷ $8,333.33 = 26.4%

TDS = Debts ÷ Income
Mortgage payment: $2,000.00/month
Property tax: $200.00/month
Credit cards: $350.00/month
Auto loans: $350.00/month
Total Debts: $2,900.00/month

GDS = $2,900.00 ÷ $8,333.33 = 34.8%
LTV/Equity
LTV stands for loan to value (total loans secured against property ÷ value of property). Equity is the difference between the value and what is owed (value of property – total loans secured against property).
At the end of the process you need a positive equity position ie:
Value: $400,000
Total loans: $200,000
Equity: $200,000 <– Positive equity position

Value: $400,000
Total loans: $425,000
Equity: -$25,000 <– negative equity position

Good Calgary mortgage brokers know that the lower the equity the lesser the risk. Calgary private lenders like lots of equity because that allows them more insurance in case the client doesn’t pay and the lender has to take the house back. In the worst case scenario the Calgary private lender has not been paid anything (so the private lender is owed even more money than was the case in the beginning), and the house value has dropped either due to the market, vandalism, poor upkeep or all three.
There are 2 types of lenders:
Institutional ie. Banks
Typically, regardless of the equity the lenders will keep their rates the same. So they would give you a rate of ie. 4% whether there is $100,000 in equity remaining or $25,000.
Private Lenders – people like you and me who lend out money to other people.
This market is more flexible in terms of offering rate discounts as the equity increases; however, they are not as flexible to the market ie. If bank rates increase or decrease these typically don’t move at all.
Income stability
Calgary private lenders are always looking for stability of income. Private lenders don’t like to lend to people who have sporadic work history and might not be able to service their loans. Calgary private lenders are especially weary of self employed borrowers since they can be unemployed at any time. Typically lenders like 2 years of consistent work history for self employment clients and at 3 months (or until the probation period is finished or waived) for employed clients.

Credit
Calgary private lenders like to see consistent credit history. There are a few tricks that can help you improve and maintain your credit. The topic is so deep though that I have written a full paper on how to do this. Go to http://www.mortgagebrokercalgary.info/mortgage/trevor-hickeys-free-credit-repair-manual/ for a copy of my free credit repair manual.

If you have any questions or you (or someone you know) need financing please contact Trevor Hickey, B.A. at the information below. Thanks!

Trevor Hickey, B.A.

Mortgage Associate

Concord Mortgage Group Ltd.

#107 – 1905 Centre Street NW

Calgary, Alberta

T2E 2S7

Bus: (403) 290-1990

Cell: (403) 860-8738

Fax: 1-888-587-1426

Email: trevor@concordmortgage.ca

Website: www.mortgagebrokercalgary.info - Calgary Mortgage Brokers

Other articles by Trevor Hickey:

1) What is a reverse mortgage?

2) Can a mortgage help your health?

3) Can you get a mortgage without having payments?

4) Can a Calgary mortgage help you win the Stanley Cup?

5) Have equity but no idea how to make money with it – Edition #1:

6) Are you a millionaire?

7) Can a mortgage be your friend?

8 ) Money can’t buy you happiness – but can it make you happier?

9) How to save money on your Calgary mortgage?

10) Have equity – want to make money?

11) Do you want to lend mortgage money in Calgary, Alberta?

12) Calgary Alberta Private Lenders

13) Is there equity in your home?

14) Why use a broker?

15) Calgary mortgage loan tips – Low rates for your Calgary, Alberta mortgage

Popularity: 65% [?]

What are Calgary mortgage brokers? And why should you use them? A mortgage broker is a person that finds mortgages for you. Instead of you going from bank to bank or lender to lender the broker does this. Also, whenever you get your credit checked it drops in points. So if several lenders check your credit you could lose alot of points and then be unable to get a mortgage.
Calgary mortgage brokers can check your credit once and then go to hundreds of lenders. So you get the advice of hundreds of lenders with just one or two credit hits.

Trevor Hickey

Mortgage Associate

Concord Mortgage Group Ltd.

#107 – 1905 Centre Street NW

Calgary, Alberta

T2E 2S7

Bus: (403) 290-1990

Cell: (403) 860-8738

Fax: 1-888-587-1426

Email: trevor@concordmortgage.ca

Website: www.mortgagebrokercalgary.info

Other articles by Trevor Hickey:

1) What is a reverse mortgage?

2) Can a mortgage help your health?

3) Can you get a mortgage without having payments?

4) Can a Calgary mortgage help you win the Stanley Cup?

5) Have equity but no idea how to make money with it – Edition #1:

6) Are you a millionaire?

7) Can a mortgage be your friend?

8 ) Money can’t buy you happiness – but can it make you happier?

9) How to save money on your Calgary mortgage?

10) Have equity – want to make money?

11) Do you want to lend mortgage money in Calgary, Alberta?

12) Calgary Alberta Private Lenders

13) Is there equity in your home?

14) Why use a broker?

15) Calgary mortgage loan tips – Low rates for your Calgary, Alberta mortgage

Popularity: 6% [?]