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What Banks Need to Check/Review Before Approving your Mortgage?

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Learning invaluable lessons from the battered and broken American real estate market and lending industry, Canadian lenders have tightened their restrictions and raised their qualifying standards for new mortgages. Although average Canadian house prices have steadily increased over time, and mortgage lending rates hover near record lows, mortgage lenders have lost their risk tolerance. In addition to all the standard criteria, banks may look into other details of your personal and financial histories. To assure your qualification, anticipate your lender checking.

 

Your job security – This type of assessment does not always depend on how much your boss loves you or where you stand in this month’s rankings of its employees. You may hold all the records and own all the trophies declaring you as wonder-widget-worker of the world, but if the bottom just fell out of the worldwide widget market, a lender will look askance your job security. Time at your employer is also a factor if you are less than three months on the job; you are most likely subject to a probationary period that lenders do not look kindly at. Even if you can get your employer to confirm that you are not on probation, your past employment history should reflect at least two years in the same industry. For your peace of mind, look closely at your employment or drive if the forecasts seem grim, develop contingency plans so that you do not have to postpone your house purchase or put your new home at risk of foreclosure due to job loss.

Your credit score – Check with your lender to learn which of the several credit reporting agencies they use, and then request a copy of your credit report from that agency. Experts say that approximately 25% of credit reports contain serious errors, and as many as 79% contain some error. Many have flat-out frauds from fly-by-night collection agencies and predatory buyers of toxic assets. Take bold and aggressive steps to purge and cleanse your credit report, talk to the credit company, and, if needed, retain an attorney to work with reluctant creditors. Take similarly aggressive steps to pay-off small obligations or any balances over 50% of the allowable limits, protecting yourself against nickel-and-diming your debt ratios out of their proper proportions. Because banks and other mortgage lenders very strictly enforce the letter of their rules, a couple of credit score points may disqualify you or raise your interest rate if you are close to the bank’s minimum guidelines. You can get a copy of your credit report directly from TransUnion or Equifax (the two credit reporting agencies in Canada) without registering an inquiry on your record. Too many credit checks, or questions, from different lenders, do affect your score.

Your net worth – Your credit report alone does not include enough information for the lender accurately to assess your credit-worthiness. For example, it does not give much information about your savings and retirement accounts, properties you own, or equities you control. If you have average cash flow and debt ratios, but your net worth is considerably more than the average Canadian family’s, you may qualify as a “preferred borrower.” Naturally, the converse also applies: If most of your numbers fall into the standard parameters, but you have forfeited most of your assets for the sake of retiring old obligations, your smaller-than-average net worth may affect your down-payment requirements or your interest rate.

Your debt ratios – Ask your lender about how he calculates your debt ratios. In general, lenders stick to an industry-standard calculation where your monthly income and expenses follow a 32%/40% ratio. What that means is that the cost of carrying the actual mortgage you may need (PITH: Principal and Interest payments on a mortgage + property Taxes + Heat + home insurance) do not exceed 32% of combined take-home income. Also calculated is the PITH + the cost of carrying your current outstanding debts such as loans, lines of credit, and credit cards. This value should not exceed 40% of your combined take-home income. These numbers do have room for exceptions to be made, but the rest of the risk, as mentioned earlier, factors must be positive.

 

To sum up, the above be aware of how the banks lend their mortgage monies. Unless you have 100% down payment for your purchase, you will need the banks to approve and lend you money to make that dream home a reality. There are steps to take to ensure your application is in the best shape to merit the industry’s lowest available rates. If, however you find that you may be falling short in one or two places, don’t despair; there are programs out there to help you get into a home. The drawback may be at a higher rate. These programs often are set up for 1 or 2 years, enough time to get back on track and re-apply at that time for the “Triple-A” lending rates. A qualified Mortgage Agent has the tools and experience to evaluate your unique situation from as early as when you first decide you want to buy a home. Contact one before you make any other plans as they can evaluate and advise you on how the above risk factors can be managed. A few months of preparation can save you thousands in mortgage payments over your mortgage term in some cases.

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Don’t be a stranger! Sooke real estate agent won’t shy away from your questions – Sooke News Mirror

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When you’re buying your first house, you’re likely to have a thousand questions. You may even ask the same questions more than once. The same goes for selling — whether it’s your first sale or your fifth, you’ll likely ask the same questions over and over.

Most real estate agents can answer your questions the first time you ask, but it takes a special kind of ‘people person’ to treat you with genuine compassion the fourth time you ask.

“I want my clients to feel comfortable reaching out to me for anything, even if they’ve asked me before,” says Paula Wensley, a real estate agent with Macdonald Realty Ltd. “My goal is to reduce stress for my clients so they don’t lose sleep — they’ll probably lose sleep anyway, but I can do my best to make the process easier.”

Find the right fit

Paula is relatively new to Sooke but she’s no stranger to southern Vancouver Island, having lived in many Island communities over the years. That local knowledge comes in handy when helping clients find their forever-home.

“I’ve had some amazing experiences with clients who weren’t happy with where they lived, but didn’t know where to move,” she says.

They’d describe their personalities, lifestyles and goals, and ask Paula ‘Where can you see us? What community would suit us?’ Using her knowledge of local communities and her talents for connecting with clients, she’d make a recommendation.

“One client reached out a year after they’d moved in just to say thanks. She said ‘we wouldn’t have found this community without you.’ It’s amazing to have that kind of impact.”

3rd generation in real estate

Paula comes from a family of real estate agents including her grandpa, dad, uncles and cousins, so she draws from a wealth of experience beyond her years. Before real estate she worked as a property manager and commercial sales assistant, so she’s seen the industry from all sides.

“I try to offer a fresh approach — I’m up to date on new negotiating techniques and other strategies,” she says.

Paula finds she connects well with clients who prefer a bit more time and attention to their individual needs. If you have a unique situation or just want a little extra help with your listing, Paula will give you her full attention.

“I don’t see myself in sales, I see it as a service. It’s not just a conveyor belt of clients.”

Follow Paula Wensley on Facebook for her latest insights on the tight real estate market, and visit paulawensley.com to browse current listings from Mill Bay to Sidney to Sooke. Get in touch by calling 250-388-5882 or at pwensley@macrealty.com.

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Real Estate Transactions: Exclusive Use Servitudes Deemed Invalid – Real Estate and Construction – Canada – Mondaq News Alerts

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To print this article, all you need is to be registered or login on Mondaq.com.

While exclusive use clauses remain common in leases, they can no
longer be drafted in the form of servitude agreements in
transactions.

In April 2020, in the case of Société
immobilière Duguay Inc.
v. 547264 Ontario
Limited
1, the Court of Appeal of Quebec
ruled in favour of dismissing a Superior Court
judgment2, thereby granting an application for
declaratory judgment and striking off “exclusive
use
” clauses drafted in the form of servitude agreements
restricting the types of business that could be carried out on a
property. As a result, this case puts an end, in commercial
transactions, to the use of servitude agreements to protect certain
exclusive businesses or commercial uses from third parties in a
given location.

Exclusive use clauses have long been included in leasing
agreements, such as those in shopping centers, to define the
permitted uses of the leased property and prohibit or limit one
tenant from carrying on the same type of business or
principal use” as another tenant. The bottom
line is to protect the market within a property and ensure the
commercial success of all tenants. The Civil Code of Quebec
(C.C.Q.) does not currently define or regulate such clauses
directly; these are usually the result of negotiations between the
landlord and the tenants. Exclusive use clauses have also been used
in commercial real estate transactions, in the form of servitude
agreements. Under Quebec civil law, Article 1177 C.C.Q. defines a
servitude as “a charge imposed on an immovable, the
servient land, in favour of another immovable, the dominant land,
belonging to a different owner
.”

The Duguay matter is the most recent case in which the
Quebec courts had to determine whether exclusive use agreements in
commercial real estate transactions were valid in civil law. In
this case, the Respondents owned a shopping centre and various
contiguous or nearby lots, which they leased for commercial
purposes. In 1998 and 2000, the Respondents sold two of those lots
to a third party for the purpose of opening a clothing store. The
notarized deed of sale included a servitude agreement stipulating
that the buildings of the shopping centre owned by the Respondents
could not be used to carry on business activities that would
compete with those of the buyer (i.e. a family clothing store),
while the properties acquired by the buyer could not, for their
part, be used for the principal business activities then taking
place at the Respondents’ shopping centre and on the
neighbouring lots they owned (i.e. a grocery store, drugstore,
movie theatre and department store). In 2012, the two properties
were sold by the initial buyer to the Appellant, with the new deed
of sale providing that both properties remain subject to the
exclusive use servitudes set out in 1998 and 2000. Following this
subsequent sale, the Appellant asked the Superior Court to declare
that the “servitude agreement” was not enforceable and to
order its striking out on the grounds that it did not constitute
servitudes, but rather, personal obligations.

The Court of Appeal found that, since the purpose that the
Respondents claimed to be pursuing through these exclusive use
agreements, namely to promote the commercial diversity of their
shopping centre, served largely to ensure that the businesses in
the shopping centre they owned were not subject to commercial
competition, they could not be construed as constituting valid
servitudes under the C.C.Q. The Court of Appeal found that the
rights flowing from these agreements do not relate to the
Respondents’ real estate property, but rather to the
Respondents’ financial and commercial interests.

As a result, although the exclusive use servitude agreements
could be deemed creative in commercial real estate transactions,
the Court of Appeal of Quebec ruled in favour of the Appellant,
finding that such agreements restricting commercial use do not
constitute valid servitudes, as they do not encumber the dominant
land as required by Article 1177 C.C.Q., but only apply to the
servient land. According to the Court of Appeal, these stipulations
must be characterized as personal obligations binding on the first
buyer and the Respondent but not the Appellant as the subsequent
buyer. Moreover, the Court of Appeal found that the Respondents had
not demonstrated that the Appellant agreed to undertake these
agreements as personal obligations when purchasing the
properties.

Footnotes

1 Société immobilière Duguay inc. v.
547264 Ontario Limited, 2020 QCCA 571

2 Société immobilière Duguay inc. v.
547264 Ontario Limited, 2018 QCCS 2099 (CanLII)

Originally published by August-September 2020 issue of
Canadian Lawyer InHouse magazine

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

POPULAR ARTICLES ON: Real Estate and Construction from Canada

Construction Dispute Resolution In Ontario

Miller Thomson LLP

The Canadian Construction Documents Committee (“CCDC”) forms of contract provide for a dispute resolution process that is generally contained in Part 8 of the contract.

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LACKIE: There are signs of a softening real-estate market – Toronto Sun

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How could house-poor Canadians, already saddled with alarming levels of consumer debt, manage their way through this, let alone out the other side?

But they did. And it was, quite frankly, astonishing.

According to CMHC, Canadians deferred $1 billion worth of mortgages per month during the pandemic, while the Canadian Bankers Association reports that more than 760,000 Canadians either skipped a mortgage payment or took advantage of a deferral program.

As of Sept. 13, more than $78 billion had been paid out to Canadians in the form of the Canada Emergency Response Benefit.

Yet, by the time the emergency lockdown restrictions started to relax, the real estate market was in full swing.

The June and July sales figures broke records set a year earlier, and the Toronto market spread its heat to the suburban and rural markets. In cottage country, properties were selling with multiple offers just hours after hitting the market.

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Could this really just be the result of pent-up demand? Of fundamental changes in consumer appetites? A hunger for more space, more land, less density?

There were tons of theories.

Maybe all along we haven’t fully appreciated the level of demand, I wondered.

Maybe people weren’t as hurt by lost earnings as one might have expected?

Maybe the busy summer was the combined effect of insatiable demand met with people hustling to get set up to more comfortably ride out the fall’s all but guaranteed second wave.

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