April 18, 2024 • 10 mins
WATCH
▶️ Watch this episode on Youtube
***
EPISODE DESCRIPTION
In this episode, Tom & Brandon share 10 things you should absolutely never do when getting a mortgage, because they will affect your application in a negative way.
What was discussed: → Making big purchases or opening new forms of credit. → Making risky investments or moving/changing/playing with funds and accounts. → Changing your job status and co-signing for other mortgages.
***
MORTGAGE INQUIRIES
📞 Book a Call 📧 Email us→ experts@northshoregroup.ca 📝 Start an Application
***
CONNECT
📸 Connect on Instagram (Brandon)
***
SAY THANKS
🙏 Leave a review on Apple Podcasts
***
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:07):
on how to save more money inmortgages and real estate.
Let's go, buddy.
Number one, and this is a huge one
for me, do not buy a new vehicle,whether it's a truck, van, car, or
motorcycle.
If you're financing it, it is
going to hurt your Yeah.
And one thing people don't realize
(00:29):
is it's not the amount of moneyyou're paying for the vehicle.
It's actually the monthly paymentthat's going to hurt your
application.
So typically speaking, if you have
a monthly payment of $500 a month,that can impact your mortgage
qualification by up to $100,000 ofmortgage amount.
For sure.
And a lot of people think in terms
of bi-weekly because that's howcar dealerships and everyone has
set this up to make it veryattractive, but they don't make
that monthly and they don'tconsider that on how it hurts
(00:50):
their mortgage application.
So people will say, okay, well, I
need this car to get to work.
I need X to get here.
And the reality is you don'tnecessarily need that brand new
vehicle to do it.
I can tell you that in building my
portfolio right now, I'm up to asecond property and I'm driving a
2011 Volkswagen Jetta that I paid$1,500 cash for.
It gets me there.
It's not sexy, but I think growing
(01:12):
that rental portfolio is sexier.
So point number two, watch your
credit card spending and don't letpayments fall behind.
So when say watch your credit cardspending, what we really mean is
watch your utilization.
So what this is, is if you have
$1,000 limit, don't spend overthat $500 marker each month.
And if you do make a paymentagainst it.
The other key piece here is wewant you to pay off your credit
(01:33):
card in full every month.
And if you're thinking this is
going to be really hard for mefrom where I'm at, just start
making the biggest payment you canand be aggressive with that right
now.
If you're not currently spending
on your credit card, there's nosense in starting and don't make
the minimum payments.
That is the biggest catch with
credit cards because essentiallyyou're just going to be paying the
interest on things.
(01:54):
Another quick tip here is to set
your payments on autopay.
The reason for this being, we just
had a client who missed hispayment and he had overutilized
his credit card and itdramatically dropped his credit
profile from being an A clientdown to a B client, which meant he
could no longer get the mortgagehe was approved for.
And this was really scary for hisfamily.
And thankfully, we were able towork around things with the lender
(02:15):
and get an exception on it.
But if you don't have brokers like
us or someone in your corner toleverage those relationships, this
can really screw you up and setyou up for losing your deposit and
missing out on your dream home.
And I think with that client that
you're talking about specifically,he missed a payment and he went
over limit if I'm correct, right?Yeah.
Yeah.
So both of those things are going
to really impact your creditscore.
(02:36):
And I think with that clientspecifically, it dropped his score
by 100 points.
So it can really have a big
impact.
So this next point is probably the
most common and the biggest killeramongst them all.
But before we get there, pleasehit that subscribe button.
So that way you get notified onthe next video.
They don't miss out on saving moremoney with mortgages and real
estate.
100%.
And this one tempting.
You have a bad day and you say,
(02:57):
fuck it, I'm going to throw in thetowel.
But do not quit jobs, change jobsor become self employed while
you're waiting to purchase home.
Yeah, absolutely.
And the reason why is because whenwe qualify you for your mortgage
right off the bat, it's based offof what your income is at the
time, where you're working andwhat you're doing for employment.
So if you're going from, let's saya T4 employee, and you decide, you
(03:19):
know what, I'm going to be anentrepreneur and be self-employed
now.
Well, that can severely impact
your application because typicallywe can't even use your income at
that point.
And also different types of roles
get qualified differently.
Some things, it's a two-year
average.
Commission, for instance, would be
a two-year average.
Self-employed, you'd be two years
on your T1.
There's programs around this, but
usually they require at least onefull year.
(03:40):
So you want to avoid stepping onthis landmine.
A lot of people think, well, I wasin tech before.
Now I'm doing my own tech startup.
It's the same industry.
Why would the lender care?Well, the lender care is because
before you were in tech and youhad a multimillion dollar company
backing you and making sure youhad a paycheck every two weeks.
Now you are solely responsible forrunning the expenses of that
(04:00):
company and paying yourself.
And as you can see, there's a lot
of exposed risk in scenario numbertwo.
There's also a greater upside andwe're not discrediting that or
entrepreneurship, but in the eyesof the lender, all they care about
is That's exactly it.
And we love entrepreneurship, but
please just save it until afteryour mortgage closes.
Point four is do not make riskyinvestments with the money you
have saved for your down payment.
(04:20):
So there's a lot of tools you can
use for your down payment, likethe RRSP or the first home savings
account that are investmentvehicles that you should be buying
some form of investment within.
The key point here is you do not
want your down payment to diminishby the time you need to access it.
So let's say for instance, you'recontributing $8,000 to your first
home savings account.
What you buy in that account, you
(04:42):
don't need it to go up to $10,000in the couple months you're
waiting to buy or the year.
What you really want to avoid is
that dropping to 6,000 because nowyou've lost that chunk of your
down payment that you're Yeah.
And what I typically recommend
clients to is let's say we'reclosing 30, 60 days out.
I actually recommend pulling itfrom your account once you have
your home solidified and allconditions have been waived
(05:04):
because that hedges against therisk of your investment falling as
you're waiting for your propertyto close.
And this next point kind of tiesinto the one we just talked about.
Don't play with your down paymentand use all of it for your
furniture and appliances.
Yes, you need furniture and you
need all of this stuff for yournew home, but don't dip into that
down payment because at the end ofthe day, we need that to close
(05:25):
your mortgage.
100%.
And you're going to see acontinuing thread here.
But in that temptation to get newfurniture, to get new things,
you're going to go to stores likeThe Brick, like Home Depot that
are going to offer you new sourcesof credit.
Do not take new sources of creditright now.
Number one, it will hurt yourcredit profile.
And if a lender repulls yourthey'll see credit, that you're
credit Number seeking.
if will hurt your two, credit And
if a lender profile.
(05:46):
repulls your they'll see credit,
that you're credit seeking.
Number two, if you borrow against
these cards, that impacts yourratios as well and will also
impact your overall borrowingportfolio.
So while it can be tempted to grabthat new couch, put it on a card
that doesn't have like a paymentfor six months, it does still show
on your credit profile and canhurt your overall application.
Point number seven, do not makelarge deposits into your bank
account.
So this one's very common for
clients to do.
And it's because no one really
(06:07):
educates people on what not to dowith this, because what they're
doing is maybe they'retransferring money from one
account over to the other.
Any little movement in your
account for large sums of depositsand transactions, we have to trace
under the anti-money launderingact.
Every lender will ask for theselarge deposits going into your
account.
So try not to really move them
around and try not to deposit lumpsum of cash into your account
(06:28):
because we have to trace it at theof the day.
Exactly.
And the magic number here is 90
days.
So let's say you were a really
good drug dealer or you werescared of the banks and you're
sitting on tens of thousands ofdollars stuffed into your
mattress.
Don't go put that in the bank
right before you're closing.
You're going to want to put that
(06:49):
in slowly over a period of timeand stop 90 days before.
Point number eight is anotherlandmine that people often do in
an effort to be helpful to us, andthat is consolidating all their
funds in one account.
As Tom mentioned before, we need
to show a history of funds.
And so when you pull things from
your TFSA, your RRSP, your firsthome savings account, the checking
account your grandma set up foryou, and you try to consolidate
(07:10):
all into one account to make itclean for us, it actually makes it
very messy.
And we need to now pull 90 day
statements from all these otheraccounts.
Once we have the down paymentsigned off on, by all means,
consolidate those funds and makeit easy to transfer to your
lawyer.
But before we give you that green
light, just leave it alone.
Point number nine, do not co-sign
a loan for anyone.
So this one is huge because
(07:31):
essentially if you're co-signingfor anybody, friend, family,
doesn't matter.
If you're on title of that
mortgage, that will count towardsyour current application.
And I've seen this before wheresomeone felt like they were going
to be helpful to their friend andthey co-signed on their mortgage
and their friend was super happyabout it.
But then it came time to actuallyfund that person's mortgage.
I'm like, whoa, you're now on amortgage somewhere else.
(07:52):
Did you buy something you didn'ttell me about?
She's like, no, I just co-signedto help my friend out.
I was like, well, flip side ofthis now is your friend is going
to have to co-sign on yours tomake this work.
So now they're both on eachother's mortgages.
They don't want to be there.
She would have been on her own and
now has this extra thing to dealwith down the line.
(08:13):
Yeah, people are doing it out of abig heart, which I understand.
But if you're going to do that,try to do it after you close the
loan.
And keep in mind going forward as
well, like even if you've closedon your mortgage, maybe you want
to buy an investment property inthe future, or maybe you want to
qualify for a bigger mortgagebecause you're moving up the
property ladder.
These are things you do need to
consider whenever you're cosigningfor a mortgage.
last point here is a little bit ofa bonus one because it's something
(08:37):
to look out for once your mortgageis funded.
And that is do not make any majorpurchases or financing decisions.
You want to get comfortable withyour new household budget.
You're going to have new propertytax, new utilities, new mortgage
payment.
A lot of these things that you're
going to have to adjust andprobably tweak your spending
habits to.
If you add something into the mix
that's financed or a largepayment, it can add unneeded
stress.
So what I would say is just kind
of get the lay of the land, spenda couple months, get used to
(08:59):
making these payments, and thenmake sure you have the comfort
level in your budget to add thesethings back in.
like an exhausting list.
An easy thing to remember is just
take up any big decision with yourmortgage broker or bank rep,
whoever you're working with,before making that decision.
Because at the end of the day, thelast thing you want is there for
it to be an issue at closing.
(09:21):
Exactly.
And if you're getting ready to buyyour first or your next investment
property, hit the subscribe buttonand follow along for more tips
from the Canadian Mortgage Guide.
on how to save more money inmortgages and real estate.
Let's go, buddy.
Number one, and this is a huge one
for me, do not buy a new vehicle,whether it's a truck, van, car, or
motorcycle.
If you're financing it, it is
going to hurt your Yeah.
And one thing people don't realize
(00:29):
is it's not the amount of moneyyou're paying for the vehicle.
It's actually the monthly paymentthat's going to hurt your
application.
So typically speaking, if you have
a monthly payment of $500 a month,that can impact your mortgage
qualification by up to $100,000 ofmortgage amount.
For sure.
And a lot of people think in terms
of bi-weekly because that's howcar dealerships and everyone has
set this up to make it veryattractive, but they don't make
that monthly and they don'tconsider that on how it hurts
(00:50):
their mortgage application.
So people will say, okay, well, I
need this car to get to work.
I need X to get here.
And the reality is you don'tnecessarily need that brand new
vehicle to do it.
I can tell you that in building my
portfolio right now, I'm up to asecond property and I'm driving a
2011 Volkswagen Jetta that I paid$1,500 cash for.
It gets me there.
It's not sexy, but I think growing
(01:12):
that rental portfolio is sexier.
So point number two, watch your
credit card spending and don't letpayments fall behind.
So when say watch your credit cardspending, what we really mean is
watch your utilization.
So what this is, is if you have
$1,000 limit, don't spend overthat $500 marker each month.
And if you do make a paymentagainst it.
The other key piece here is wewant you to pay off your credit
(01:33):
card in full every month.
And if you're thinking this is
going to be really hard for mefrom where I'm at, just start
making the biggest payment you canand be aggressive with that right
now.
If you're not currently spending
on your credit card, there's nosense in starting and don't make
the minimum payments.
That is the biggest catch with
credit cards because essentiallyyou're just going to be paying the
interest on things.
(01:54):
Another quick tip here is to set
your payments on autopay.
The reason for this being, we just
had a client who missed hispayment and he had overutilized
his credit card and itdramatically dropped his credit
profile from being an A clientdown to a B client, which meant he
could no longer get the mortgagehe was approved for.
And this was really scary for hisfamily.
And thankfully, we were able towork around things with the lender
(02:15):
and get an exception on it.
But if you don't have brokers like
us or someone in your corner toleverage those relationships, this
can really screw you up and setyou up for losing your deposit and
missing out on your dream home.
And I think with that client that
you're talking about specifically,he missed a payment and he went
over limit if I'm correct, right?Yeah.
Yeah.
So both of those things are going
to really impact your creditscore.
(02:36):
And I think with that clientspecifically, it dropped his score
by 100 points.
So it can really have a big
impact.
So this next point is probably the
most common and the biggest killeramongst them all.
But before we get there, pleasehit that subscribe button.
So that way you get notified onthe next video.
They don't miss out on saving moremoney with mortgages and real
estate.
100%.
And this one tempting.
You have a bad day and you say,
(02:57):
fuck it, I'm going to throw in thetowel.
But do not quit jobs, change jobsor become self employed while
you're waiting to purchase home.
Yeah, absolutely.
And the reason why is because whenwe qualify you for your mortgage
right off the bat, it's based offof what your income is at the
time, where you're working andwhat you're doing for employment.
So if you're going from, let's saya T4 employee, and you decide, you
(03:19):
know what, I'm going to be anentrepreneur and be self-employed
now.
Well, that can severely impact
your application because typicallywe can't even use your income at
that point.
And also different types of roles
get qualified differently.
Some things, it's a two-year
average.
Commission, for instance, would be
a two-year average.
Self-employed, you'd be two years
on your T1.
There's programs around this, but
usually they require at least onefull year.
(03:40):
So you want to avoid stepping onthis landmine.
A lot of people think, well, I wasin tech before.
Now I'm doing my own tech startup.
It's the same industry.
Why would the lender care?Well, the lender care is because
before you were in tech and youhad a multimillion dollar company
backing you and making sure youhad a paycheck every two weeks.
Now you are solely responsible forrunning the expenses of that
(04:00):
company and paying yourself.
And as you can see, there's a lot
of exposed risk in scenario numbertwo.
There's also a greater upside andwe're not discrediting that or
entrepreneurship, but in the eyesof the lender, all they care about
is That's exactly it.
And we love entrepreneurship, but
please just save it until afteryour mortgage closes.
Point four is do not make riskyinvestments with the money you
have saved for your down payment.
(04:20):
So there's a lot of tools you can
use for your down payment, likethe RRSP or the first home savings
account that are investmentvehicles that you should be buying
some form of investment within.
The key point here is you do not
want your down payment to diminishby the time you need to access it.
So let's say for instance, you'recontributing $8,000 to your first
home savings account.
What you buy in that account, you
(04:42):
don't need it to go up to $10,000in the couple months you're
waiting to buy or the year.
What you really want to avoid is
that dropping to 6,000 because nowyou've lost that chunk of your
down payment that you're Yeah.
And what I typically recommend
clients to is let's say we'reclosing 30, 60 days out.
I actually recommend pulling itfrom your account once you have
your home solidified and allconditions have been waived
(05:04):
because that hedges against therisk of your investment falling as
you're waiting for your propertyto close.
And this next point kind of tiesinto the one we just talked about.
Don't play with your down paymentand use all of it for your
furniture and appliances.
Yes, you need furniture and you
need all of this stuff for yournew home, but don't dip into that
down payment because at the end ofthe day, we need that to close
(05:25):
your mortgage.
100%.
And you're going to see acontinuing thread here.
But in that temptation to get newfurniture, to get new things,
you're going to go to stores likeThe Brick, like Home Depot that
are going to offer you new sourcesof credit.
Do not take new sources of creditright now.
Number one, it will hurt yourcredit profile.
And if a lender repulls yourthey'll see credit, that you're
credit Number seeking.
if will hurt your two, credit And
if a lender profile.
(05:46):
repulls your they'll see credit,
that you're credit seeking.
Number two, if you borrow against
these cards, that impacts yourratios as well and will also
impact your overall borrowingportfolio.
So while it can be tempted to grabthat new couch, put it on a card
that doesn't have like a paymentfor six months, it does still show
on your credit profile and canhurt your overall application.
Point number seven, do not makelarge deposits into your bank
account.
So this one's very common for
clients to do.
And it's because no one really
(06:07):
educates people on what not to dowith this, because what they're
doing is maybe they'retransferring money from one
account over to the other.
Any little movement in your
account for large sums of depositsand transactions, we have to trace
under the anti-money launderingact.
Every lender will ask for theselarge deposits going into your
account.
So try not to really move them
around and try not to deposit lumpsum of cash into your account
(06:28):
because we have to trace it at theof the day.
Exactly.
And the magic number here is 90
days.
So let's say you were a really
good drug dealer or you werescared of the banks and you're
sitting on tens of thousands ofdollars stuffed into your
mattress.
Don't go put that in the bank
right before you're closing.
You're going to want to put that
(06:49):
in slowly over a period of timeand stop 90 days before.
Point number eight is anotherlandmine that people often do in
an effort to be helpful to us, andthat is consolidating all their
funds in one account.
As Tom mentioned before, we need
to show a history of funds.
And so when you pull things from
your TFSA, your RRSP, your firsthome savings account, the checking
account your grandma set up foryou, and you try to consolidate
(07:10):
all into one account to make itclean for us, it actually makes it
very messy.
And we need to now pull 90 day
statements from all these otheraccounts.
Once we have the down paymentsigned off on, by all means,
consolidate those funds and makeit easy to transfer to your
lawyer.
But before we give you that green
light, just leave it alone.
Point number nine, do not co-sign
a loan for anyone.
So this one is huge because
(07:31):
essentially if you're co-signingfor anybody, friend, family,
doesn't matter.
If you're on title of that
mortgage, that will count towardsyour current application.
And I've seen this before wheresomeone felt like they were going
to be helpful to their friend andthey co-signed on their mortgage
and their friend was super happyabout it.
But then it came time to actuallyfund that person's mortgage.
I'm like, whoa, you're now on amortgage somewhere else.
(07:52):
Did you buy something you didn'ttell me about?
She's like, no, I just co-signedto help my friend out.
I was like, well, flip side ofthis now is your friend is going
to have to co-sign on yours tomake this work.
So now they're both on eachother's mortgages.
They don't want to be there.
She would have been on her own and
now has this extra thing to dealwith down the line.
(08:13):
Yeah, people are doing it out of abig heart, which I understand.
But if you're going to do that,try to do it after you close the
loan.
And keep in mind going forward as
well, like even if you've closedon your mortgage, maybe you want
to buy an investment property inthe future, or maybe you want to
qualify for a bigger mortgagebecause you're moving up the
property ladder.
These are things you do need to
consider whenever you're cosigningfor a mortgage.
last point here is a little bit ofa bonus one because it's something
(08:37):
to look out for once your mortgageis funded.
And that is do not make any majorpurchases or financing decisions.
You want to get comfortable withyour new household budget.
You're going to have new propertytax, new utilities, new mortgage
payment.
A lot of these things that you're
going to have to adjust andprobably tweak your spending
habits to.
If you add something into the mix
that's financed or a largepayment, it can add unneeded
stress.
So what I would say is just kind
of get the lay of the land, spenda couple months, get used to
(08:59):
making these payments, and thenmake sure you have the comfort
level in your budget to add thesethings back in.
like an exhausting list.
An easy thing to remember is just
take up any big decision with yourmortgage broker or bank rep,
whoever you're working with,before making that decision.
Because at the end of the day, thelast thing you want is there for
it to be an issue at closing.
(09:21):
Exactly.
And if you're getting ready to buyyour first or your next investment
property, hit the subscribe buttonand follow along for more tips
from the Canadian Mortgage Guide.
Popular Podcasts
Stuff You Should Know
If you've ever wanted to know about champagne, satanism, the Stonewall Uprising, chaos theory, LSD, El Nino, true crime and Rosa Parks, then look no further. Josh and Chuck have you covered.
Dateline NBC
Current and classic episodes, featuring compelling true-crime mysteries, powerful documentaries and in-depth investigations. Follow now to get the latest episodes of Dateline NBC completely free, or subscribe to Dateline Premium for ad-free listening and exclusive bonus content: DatelinePremium.com
The Breakfast Club
The World's Most Dangerous Morning Show, The Breakfast Club, With DJ Envy, Jess Hilarious, And Charlamagne Tha God!