Large mortgages present unique challenges in the Canadian Mortgage Market. Sliding scales, director approval, multiple reviews, it all adds up to difficultly getting larger mortgages approved. If you’ve found getting approved for a large mortgage is causing you trouble, watch this video:
Transcription of Video Blog:
Hey everybody, Rowan Smith of the Mortgage Center. I want to talk about large mortgages. Different cities across the country face very different property values from Vancouver, Toronto, versus somewhere in Manitoba or what not could face a 10 fold price difference. So when someone’s buying a home in Vancouver, I often will hear people remark “Well, how did that person get that mortgage?
How did they get it approved?” They’re looking at a home that’s $1.8 million and they know the person only put $400,000 down so how did they get that $1.4 million mortgage?
Well, for starters they probably had a heck of a lot of income, a lot of job security and a lot of fallback position. That’s other assets, things like RSPs, shares in other companies, stocks, bonds, mutual funds, all the like stuff, that type of thing. So in the event that something goes south in the mortgage they can always go back to those fallback position resources to draw funds to make the mortgage payments.
So it’s more a financial debt. So if someone you’ve heard of has a $1.4 or just basically anything over $800,000 of mortgage, they probably are very financially sound and have very good income. Now, where this comes into play is when you’re looking to buy a high end home the rule is 5% down, so most borrowers think “Well, if I can put 4% down, then I should be able to qualify.”
When you get up that high and I’m talking a balance $800,000, $900,000 up over a million bucks, you’re not really just facing one person who has to approve that deal. At that level you’ve got to get managerial approval at the bank. You probably have to get approval at the insurer. If it’s CMAC insured, you’re definitely going to have to get managerial approval at that level. If it’s even a bigger mortgage $1.5 and $1.6 million it’s going to go to the national director.
So there’s a lot of hurdles to jump through. So if you’re looking to buy a larger or rather a higher end home, you’re going to want to get more days for subject approval. Typically I ask my borrowers for four to five business days. Saturdays and Sundays don’t help us because the banks aren’t working on those days.
So if you write the offer on a Tuesday, get until the following Monday in order remove your subjects. That’s for a standard purchase. If you’re purchasing something that’s a high end home where you’re going to need a mortgage in excess of $800,000 to $900,000. if that’s the situation you better get 10 business days.
Usually the sellers of those homes understand that putting financing together for a home of the magnitude you’re purchasing is more difficult. Giving longer subject removal periods of time, even in the hot market in Vancouver hasn’t been that difficult if it’s justified.
So if you have anybody looking for a high end home, I can help them arrange the financing. Sometimes we can dot our I’s and cross our T’s in advance of them actually writing the offer so there’s much smoother and a clear picture whether or not it’s going to go through in the first place.
For the Mortgage Center, I’m Rowan Smith.