Earlier this week, a real estate agent asked me to help his self employed buyer qualify for a high ratio mortgage. The challenge here is he has been incorporated only one year, and before that he was salaried in the same line of work.
To be frank, for now his buyer needs to understand there is no “A lender” who will do a 10% DP mortgage for him at this time – reasons being he has only been self employed one year, and also there is insufficient income declared. Yes, in the old days, there were solutions, but not now.
However, we can work with an alternative lender, like HomeTrust and put together a bundled solution – i.e. a first mortgage probably to 80% LTV and a concurrent second mortgage for the remaining required ten percent.
The target market for its bundle is the borrower who can’t get an insured mortgage for 90% LTV. That could include someone with harder-to-document income, like a self-employed borrower for example. Rob McLister from Canadian Mortgage Trends wrote a good article about this solution when it was first launched.
There is no CMHC insurance of 2.4%, instead the lender charges a fee of 2.5% which can be added into the mortgage. HomeTrust arranges the second mortgage with an affiliate, and offers the entire borrowed amount at 4.99% for one year. Last one I did we used a 30 year amortization period.
Suppose you find a property for $450,000. The monthly payment at 4.99% is just over $2,200. It’s only about $300 more per month than it would be if he qualified for a mortgage with an ‘A lender’ at 2.74%. (And he does not qualify that way)
In this time of very tough lender guidelines, it is excellent that HomeTrust have come up with this solution. There are a couple of other lenders out there offering bundles, but only HomeTrust goes to 90% LTV last time I checked.