Mortgage Renewal

[MISSCUTEZ]

I signed a 5 year locked in term and now I'm suppose to renew this January. I'm not too sure on that as I have not seen anything from my bank. They only sent something back in June about the various rates and to call or come in for more detail.

So I'm trying to figure out how likely I will have my mortgage renewed without problems.

The original mortgage was 317,000 and I now owe $307,000... I know I made the stupid choice of paying monthly. I've never had a late payment or any complaints from the bank.

I have a full time job making $34k a year. I have a second job which is through an agency, the company will not hire anyone directly however as long as you want to work you have a job (some people have been there over 3/4 years). At the second job before taxes I make $366 a week.

Will the bank use both jobs as my income or only my FT?
I ask because $53k looks better than $34k a year.
In addition should I bring my tax files for the last two years to show that I can manage the mortgage? Reason I mention this, I charge rent and file that "income" with my taxes.


I guess my concern is that the property was purchased with my ex and his name is coming off and my sister is coming on.

She works FT and makes $50k + a year.

Right now my TU credit score is 732 and Equifax is 704
In addition to the mortgage I owe $5600 on credit cards and $4600 government student loan. In total I owe $5600 out of the $11000 credit I have available on credit cards. I have no negative info with the exception of one late payment which is from 2008/2009.


My sister has a credit score of 710 and owes $7000 on credit cards and roughly $10,000 in government student loans. No late or negative info on her file.


I know this does not change things, but majority of the credit debt was acquired through upgrades for the house. In addition they have special terms with the creditors for no interest or payments for 12-15 months. We also used one of the cards to do a 1 year 0% balance transfer.

I'm not sure if I'm over stressing or if I should be worried about my pending renewal. Also considering one name is coming off and another person being added, does that mean its a new application or still a renewal?
When should I contact the bank about my renewal or should I wait to get something from them.

Sorry if I went all over and hopefully you can shed some light on this for me.

[Porta]

I'm sure there may be investment bankers that would have more accurate advice, but as a homeowner having gone through a few mortgage renewals I might be able to offer some advice.

First, a bank is going to look at your total income and review that against what statistics show as a safe region of borrowing power. You have a relatively high mortgage amount, and even though you haven't maxxed your credit limit, it is "available". You should negotiate lowering that credit limit as it will look favourably on you. A bank will also factor in other expenses you have not listed to get an idea of how much of your income is going towards costs (including your mortgage).

The fact that your husband will not be on the mortgage this time around is where things get tricky, and you really should have a lawyer involved. Are you separated or divorced, and at that time was title granted in your name? If not, title is something you may need to resolve and at that time, you may need to determine whether a bank will give you a mortgage based on your income or not. I assume your mortgage is already secured (CHMC), but if you have built enough equity based on the value of your home, perhaps your eligible for a CHMC-free mortgage this time around and that could work in your favour.

The real key to all of this of course, is that your income will be reflected in your income tax return. This is the document that a bank will look to in order to get an accurate idea of your true income. This means that all income should be properly reported, including rental income and your agency income. Provided that you have been doing that, then your income would be reflected as higher than 34k, but probably less than $53k after reported expenses associated with rental and agency income.

The last thing to note when renewing your mortgage is to shop around for interest rates. There was literally a fire sale on rates months ago, and since they've gone up a bit but they're still relatively low, so the sooner you do this the better. You don't necessarily have to go with the same bank, and it won't hurt to check out mortgage brokers as well... especially since your title status is changing. I would recommend starting with the mortgage broker first in terms of getting advice... not your bank. You don't want to alert them to your status until you're ready and prepared to renew.

And yes, switch from monthly. It's killing you in interest... ideally try to go with rapid weekly.

Hope that helps...

[MISSCUTEZ]

Hi Porta....

Thanks for the info!!!!!

I originally wanted to do biweekly or weekly, however as a first time buyer and work matters at the time of the mortgage I did not want to take any risk.

I forgot to mention that a lot has changed since the purchase of the house. When I got the house I was working somewhere else and my income was $38k+ a year (not that big of a difference). As mentioned my ex and I have split and his income was triple mine. Was a good split and he will remove his name from the mortgage and title with no issues or wanting money as the house was really my purchase and investment. His contribution was his credit history and income (just saying). For sure we all will have to go to a lawyer to make these changes. We split for the last two years of the mortgage which at that time I just continued to manage everything as normal. We did not make any changes at the time as we did not want to deal with the hassle and or penalties.

So really his name was still on file, but I was doing it on my own. No money from him and just the persons renting in the house.

You lost me at CMHC-free mortgage????? What is this and what benefit does it provide?

As for the income tax, all 5 years with the mortgage have the rental income noted with CRA... The only thing is the agency work is new... I took that up in the last 3 months trying to pay down on some of the debt and also to make my income look better for the renewal.

Once everything gets rolling I'm closing one of the cards that's for $4000 as I do not use it and I only kept it open to make my debt ratio not look as bad (he he he... I know some things). I have about another $2500 before the end of the month to slap on to the outstanding debt. On one of the accounts I will decrease the credit limit to the minimum.

Sounds like going to a mortgage broker is a better deal... But back to the bank, when do they usually send out info for renewal?

[Porta]

At the end of the day, it's going to be numbers on official papers that will count. Your renewal date should be reflected within your mortgage papers, but most banks also make that information available through your online banking tools. You need to renew your mortgage before the end of the term, and banks are required to send you a renewal notice at least 21 days prior to the end of the term. Depending on your situation, the mortgage could auto-renew using the same payment frequency, interest rate and term so if you don't get in charge of the situation before the renewal term comes to a close, you could end up stuck with the same agreement all over again and when it comes time to make changes, you could get hit with hefty penalties to make those changes. One of those changes includes the change in Title... which your ex husband will likely want you to do sooner than later otherwise he could have problems buying property... and that will end up in legal problems (and costs) for you.

So... you should start shopping around for rates at least 4 months prior to the end of your mortgage term. If you have less than that left, don't waste any time.

CHMC mortgages apply when less than 20% of the value of the home is tied up in a mortgage and/or in low income situations. It's insurance that is applied to a mortgage and helps financial institutions protect themselves from default. Generally speaking, it translates into higher interest rates. As an example, during the rate fire sale a few months ago, people could get mortgage rates as low as 3.9% provided that they were not CHMC mortgages. How much the rate goes up depends on how much of the value of your home is tied up in a mortgage, and the percentage gets lower as the amount of your equity gets higher. After 20%, you no longer require a CHMC mortgage unless other circumstances apply, such as low income. Low income is determined based on your income, how much debt you carry, the amount of your mortgage owing, etc.

You should check out the following website: http://www.cmhc-schl.gc.ca/en/co/buh...hostst_002.cfm. While you're not a first-time homebuyer, a lot of the information is relevant, and it contains a great deal of information about what you're looking to do.

Good luck!

[MortgageQueen]

Porta has some pretty good advice (kudos Porta)
You should not however negotiate a lower credit limit right now. Wait until your mortage is finalised. . . . .and while rates did "tank" awhile ago, there is still rates available at 2.99
It's unlikely your bank will offer you that though. There are several things you need to do and consider in this scenario.
1st, we need to find out if the new mortgage rules will affect you adversely or not. Your income with your sisters should be fine though, so that's one less thing to worry about.

[MortgageMaster]

Hello: Lenders look at income and debt ratio. For a part-time job you must have worked at for at least 2 years for it to count as usuable income. For a full-time job they want 2 years of employment at the same firm or in the same related field. To support a $307000 mortgage you will require at least $100000 total income (possibly more depending on the how the debts affect the TDS and GDS ratios). Because your husband is coming off the application and your sister coming on you will have to file a new application whether with your own bank or a new lender. You need to talk to a qualified person as soon as possible.
I would like to clear up a couple of points that were made. A mortgage that is CMHC insured will actually get you a lower rate (it is insured and less risk to the lender ) than a convential one. The CHMC amount is tacked on at the front of the mortgage and stays with the mortgage as long as it is alive. Depending on the value of your house and with a new mortgage you may have to pay it again. If you are able to get a convential moratgage they may require you to have an appraisal down to determine the home value.
Do not lower your credit card levels at this time - before you get a mortgage. By doing this you have less credit available and this lowers your credit utilization value. This in turn can lower your credit score.

[Porta]

Thanks Mortgage Queen, and Mortgage Master for clearing up some points for me! I've learned some things from this thread as well!

[Timmyscottie]

Far too often, individuals simply sign their renewal notifications without giving them a second thought. It seems like far too much time and effort to find a new lender or mortgage option.

[MortgageMaster]

Far too often, individuals simply sign their renewal notifications without giving them a second thought. It seems like far too much time and effort to find a new lender or mortgage option.

If a person goes to a mortgage agent the agent does all the footwork. The credit file is only pulled once and the agent then looks for the lowest rate for that particular credit situation. Lenders are quite competitive now and raelly low rates are avaiable especially for a deal that closes within 30 days of the accepted application. The bank won't give you a low rate unless you ask for a better deal from them.