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How to boost your chances of getting a mortgage in Canada

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The recent changes to mortgage financing rules set by the federal and provincial governments may make it more difficult for a prospective borrower to avail themselves of financing than ever before. That’s not the only thing potential home owners or property investors need to be concerned with, however.

Pauline Tonkin, an accredited mortgage professional, at national mortgage company Dominion Lending Centres, shared that the property one opts to purchase affects the success of a mortgage application.

“When lenders underwrite your application for approval they look at you as a borrower but they also evaluate the property,” she noted.

Here are some aspects to consider before you purchase.

1. The type of property

The lender will look at the age of the building, the history of maintenance or lack thereof and the location – especially for condos. Some lenders will limit their exposure with a maximum number of units in a building or avoid lending on buildings over a certain age for the property.

Properties with more than 4 units in them will be considered commercial real estate and the lender will assess them accordingly, while heritage homes need a more comprehensive review and special consideration for financing.

Leasehold and co-op properties also have specific requirements regarding the maximum loan to value ratio of the loan. Apart from additional documentation, a higher down payment may be required. Interest rates, meanwhile, will vary.

2. The location of the property

If the location limits the potential resale value for the property in the event of a default, lenders will be less likely to approve a loan. Some lenders will also lower the amount hey are willing to lend for a home located out of key market areas. They may also add a premium to the interest rate.

For properties with limited (or no) access to municipal utilities – e.g. water, heat, light and sewer – more pieces of information are required to assess the risk. Things like insurance coverage, water testing, seasonal access, and the condition of the property will be strongly considered by the lender.

3. The use for the property

If the owner-occupied house has a suite, rental income may be considered, There are also other lending criteria for a previous grow-op that can come with higher interest rates and costs.

In the case of a condo, the property may have a commercial component in the building, like shops below or a leasing space in the unit for business. In such cases, some lenders may not be convinced to finance. In other cases, the lender may allow with approval by the insurer (CMHC, for example).

A second home purchased for recreational use will require a review to see if the property has seasonal or year-round access.

If the property requires renovations, the extent and cost to the value of the property will be considered.

It is helpful to seek advice from mortgage brokers before one starts looking at any property. This gives an opportunity to discuss detailed requirements for the type of property you wish to purchase.

 

Related stories:
Canadians weigh in on different mortgage types
Three ways to secure the best mortgage rate

 

Are you looking to invest in property? If you like, we can get one of our mortgage experts to tell you exactly how much you can afford to borrow, which is the best mortgage for you or how much they could save you right now if you have an existing mortgage. Click here to get help choosing the best mortgage rate


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Victoria real estate agent disciplined for false advertising, encouraging cash deal to avoid taxes

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A Victoria real estate agent is facing $9,000 in fines and a 60-day licence suspension after breaking several professional rules during the sale of her father’s half-million-dollar property, according to a decision by the Real Estate Council of B.C. 

Whitney Garside’s missteps — outlined this week in a disciplinary decision posted on the council’s website — included falsely advertising the property as being almost twice its actual size and advising the buyer they could avoid the property transfer tax if they paid cash directly to the seller.

The property on Burnett Road in Victoria was being sold in 2016 by the real estate agent’s father. That relationship was disclosed and isn’t among the reasons she has been disciplined.

According to the disciplinary consent order, Garside told the buyer — whose name is redacted — that by paying $42,000 cash on the side, the value of the property could be reduced to avoid paying the property transfer tax.

That cash arrangement was not shared with Garside’s brokerage, Re/Max Camosun, a failure that contravened the Real Estate Services Act.

The council also ruled that she “failed to act honestly and with reasonable care and skill” when she advised the buyer the property transfer tax could be avoided by paying cash directly to the seller. 

The council’s discipline committee also found that Garside committed professional misconduct when she failed to recommend the seller and buyer seek independent legal advice, specifically regarding the property transfer tax and the cash agreement.

Another issue the council considered professional misconduct involved the size of the property in question.

The council ruled that Garside published false and misleading advertising and failed to act with reasonable care and skill when the property was advertised as 8,712 square feet, when in fact a portion of the lot belonged to the Ministry of Transportation, and the actual size was just 4,711 square feet.

The discipline committee ordered Garside’s licence be suspended for 60 days, which will be completed Jan. 3, 2021.

She has also been ordered to complete real estate ethics and remedial classes at her own expense.

Garside was also fined $7,500 as a disciplinary penalty and $1,500 in enforcement expenses.

She agreed to waive her right to appeal the council’s discipline committee’s decision in September.

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Frisco apartment community sells to Canadian investor

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A Canada-based investor has purchased a Frisco apartment community as part of a larger Texas deal.

The 330-unit Satori Frisco apartments opened last year on Research Road in Frisco.

BSR Real Estate Investment Trust bought the four-story rental community that was built by Atlanta-based Davis Development.

Satori Frisco was more than 90% leased at the time of sale. The property includes a two-story fitness center, a car care center, a dog park and a resort-style swimming pool.

The Frisco property sold along with Houston’s Vale luxury apartments in a deal valued at $129 million.

“BSR recently exited the smaller Beaumont and Longview, Texas, markets and also sold noncore properties in other markets,” John Bailey, BSR’s chief executive officer, said in a statement. “We are now using our strong liquidity position to invest in Vale and Satori Frisco, modern communities in core growth markets with the amenities our residents desire.”

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House prices on Prince Edward Island continue steady climb

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Residential real estate prices on Prince Edward Island continue to climb at a rate higher than the national average, according to the latest report from a national organization. 

The Canadian Real Estate Association released monthly figures for November 2020 on Tuesday.

They show that the average price for a resale home on P.E.I. is about 21 per cent higher than it was a year earlier. 

Only Quebec had a bigger year-over-year increase, at about 23 per cent. Overall across Canada, prices were up 13.8 per cent year over year in the ninth month of the COVID-19 pandemic.

“For the fifth straight month, year-over-year sales activity was up in almost all Canadian housing markets compared to the same month in 2019,” the report noted.

“Meanwhile, an ongoing shortage of supply of homes available for purchase across most of Ontario, Quebec and the Maritime provinces means sellers there hold the upper hand in sales negotiations.”

That lack of houses coming onto the market compared to the demand means that in those provinces, there is “increased competition among buyers for listings and … fertile ground for price gains.”

There have been anecdotal reports for months that Prince Edward Island’s low rate of COVID-19 infection and looser rules around social activities have been encouraging people to buy homes on the Island. 

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