Emotional Mortgaging

Tracy Head • May 19, 2023

For the last few months I have felt a bit of a return to normal in the mortgage world. Fixed rates have

been trending down and we’ve seen some great rate specials available. More importantly, it has felt like a more balanced market where people are taking a bit more time to do their due diligence and make more educated and thoughtful (as opposed to emotional / panicked) decisions about their home

purchases.


The last few weeks I’ve felt a subtle shift. The housing market is starting to heat up a little, in that I’ve seen a few situations where there are multiple competing offers. Inventory still seems a little low which is likely fuelling  this. I have been dealing with two families that have taken completely different approaches. The first family is looking to right-size their home and move from a condo to a single family home. They already have two littles and a third on the way. They are wanting more space and a better neighbourhood to raise their children in.


They wrote an offer on a lovely home before they looked into their mortgage options. They came to me with an accepted offer and are madly in love with the home they wrote the offer on. They are willing to move heaven and earth to make it happen. The challenge is that they have not had an offer on their condo yet. They both make great income and have investments that will cover the necessary down payment. The trick is that if they have haven’t sold and have to move forward with their purchase they will have to use a private lender to make it happen because their ratios are too high carrying both properties.


Two years ago I might not have been so concerned but with the market being a bit slower there is

significant risk that their condo might not sell in the time frame they need it to.


If this happens and they choose to go the private lender route, they are looking at roughly $20,000 in

fees and closing costs and an interest rate of ten per cent. Monthly payments are $4400.00. They will not be able to rent out their condo because of restrictions in their strata. With strata, property taxes, and their mortgage payment they are looking at about $2600.00 per month. If they end up having to carry both of the mortgages for more than a few months they are going to burn through their savings very quickly. They may end up having to drop the price of the condo significantly which means they might take a loss on the condo as their mortgage balance is close to the break even mark after realtor fees.


They are determined to move forward regardless and quite honestly it concerns me. Another family I am working with has taken a different view. Similar situation and they can more than cover both mortgages if they have to. They have done a very thoughtful analysis of their finances and lifestyle and have taken the approach that it will all come together if it is meant to, and that if their current home doesn’t sell they will not put themselves in jeopardy to buy this particular home.


This approach makes me much more comfortable. What is the danger in the first situation? If for some reason they do move forward and their condo doesn’t sell for several months I don’t think they will be able to afford the payments on both homes. If they fall behind they will have no buffer left and could potentially end up in foreclosure. Maybe it doesn’t get that drastic, but the stress of carrying both properties will be overwhelming.


Before you write an offer on a home, I cannot stress how important it is to connect with a mortgage

professional to get your financial ducks in a row. Knowing what you qualify for (and if you qualify for

that matter) and the costs of making a move will help set you up for success.

There is often a way to arrange temporary financing to cover both homes, but the big question is does it make sense to move forward if you are madly in love with the home? Only you can make that decision.

Tracy Head

Mortgage Broker

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Mitigating Mortgage Moments

By Tracy Head • February 7, 2025
This week I had a panicked call from a realtor I work with on a regular basis. One of her sellers had a sale that looked like it was going to collapse. He was counting on the sale of that home for the down payment of his next home. She called mid-day Wednesday. The sale was supposed to complete on Friday. She asked if I could talk to the purchaser and potentially arrange financing for her. Before you read the next part, this is not intended to single out any particular bank or mortgage person. It could just as easily be a mortgage broker or a branch employee. The back story is that the purchaser had been working with a mortgage specialist from one of the chartered banks since mid-December. The specialist gave the client the go-ahead to remove her financing subject January 17th. The specialist then said they needed to extend the closing date by a week. Then by another week. Then she told the client she would have to come up with twenty per cent for her down payment. The client scrambled and came up with the additional money needed for her financing to be approved. I might not have believed this story except I did see the email chain. So what actually happened? My guess is that the mortgage specialist did not have an approval in place with the insurer or her bank when she gave the client the ok to remove her financing. The client had not seen nor signed any mortgage paperwork before removing her financing subject; she was trusting that her mortgage person had things well in hand being as she was told she was approved and things were fine. The buyer in this case is a first-time home buyer and did not know any different. I have pulled off the odd miracle in my days but I had serious doubts about being able to help this client in one day, especially being as she was buying in a smaller remote community so we had fewer options. We were working on her application and 6:00 pm Wednesday evening had word that the bank she was originally working with had come through and would be sending mortgage instructions to the lawyer the following morning (we are now at the day prior to closing). When you are purchasing a home and applying for mortgage financing, I feel it is so important to work with a team of professionals that have your back. As someone who has never bought a home before or maybe hasn’t done so in many years its important to do your homework and understand the process. If you think things are going sideways with your financing please make sure you ask questions to better understand what’s happening. If you have a feeling that something is really wrong, don’t wait until you have no other options. When you choose a mortgage professional to work with (and realtor for that matter) do a bit of homework. Ask your friends who they have used and what their experience was like.  Buying a home is stressful enough on a good day, but what this poor client has been through could have been avoided had she had a better idea of what the home-buying process was supposed to look like.

Private Lenders

By Tracy Head • January 24, 2025
The easy fix isn’t always the right fix. I’ve been wondering how long it would take to see the fallout as clients who have been paying really low interest rates come up for renewal. We have all experienced a steep increase in the cost of living. Even though rates now are sitting where most clients qualified with the stress test when they originally got their mortgages, for many people life has happened in the meantime. What do I mean by that? Often clients are having to push right to the top of what they qualify for just to get into the housing market. As we are going through the mortgage approval process we talk about keeping big consumer purchases (financing a car or furniture as an example) to a minimum as additional loan payments reduce borrowing power. Once clients are into a home life does indeed happen. The older car dies and a new car is necessary. Little ones come along and that can affect family income and add a daycare bill to the bottom line. Property taxes increase. Grocery prices skyrocket. You know the list. Balances start creeping up on credit cards or lines of credit. There are lots of different mortgage products to help with consolidation of debt. Lately the challenge has been that even if clients have significant equity in their homes with the increased interest rates they may not qualify with traditional lenders. Alternative lenders and private lenders come into play as options in this case. I’ll leave the alternative lenders to another day because I have a cautionary tale about private lenders. Not all private lenders are created equal. I have several that I work with when my clients need a solution in the private world. There is a time and a place where a private mortgage is the ideal fit. As long as you have an exit strategy (a plan as to how it will be paid out in a relatively short time frame ie: one year) this can be a great option for clients. Then there is the private lender that hurts my heart. Heavy catchy marketing bombards us from multiple venues. Their jingle is running through my head as I write this. For them the bottom line is that if you have adequate equity in your home you are approved. Cool. That fixes the immediate problem. However, more times than I like to think about, this lender creates far bigger problems for people. Despite the fact that you have equity in your home you still have to make the payments on these private mortgages. Interest rates are usually around the 14% mark so payments are high and you are not making any headway with paying down the mortgage. If there is no significant increase in your income you struggle and find yourself in a financial bind again. They set up another mortgage with an even higher rate. When you sign on for a private mortgage your are responsible for covering your legal fees, the lender’s legal fees, and there is also a lender fee that is included. Even a small private mortgage can end up costing almost $10,000 to put in place. If you couldn’t cover expenses with your first mortgage (at reasonable rates) guess what happens when you start adding in more and bigger payments on top of your normal expenses? For most people the only out at this point is selling their home. That is a very hard conversation for me to have with clients, especially when they’ve been in their home for many years. If you are finding that there is more month than money, sitting down and reviewing your expenses is the first step to take. Are there any areas that you are able to cut back? Do you have any options for increasing your income?  If the answer is no, talking to a mortgage professional sooner rather than later may help identify some options before you end up in a never-ending cycle of sleepless nights and missed payments.
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