Savings/Rrsps/Stocks & Securities/Csbs & Gics

Down Payment

Down Payment Verification

Savings/RRSPs/Stocks & Securities/CSBs & GICs:

3-month bank statement and/or GIC/portfolio statement is required confirming down payment is from applicant's own resources and

All recent lump sum deposits in excess of 2% of the purchase price must be verified to confirm the moneys were not borrowed.

The statements must reflect the account number, owner identification, banking institution and address as well as account number.

When LTV is <= 65%, the most recent bankbook or statement from a Canadian Financial Institution showing the required funds are available will meet the documentation requirements if the following conditions are met:

Full appraisal has been obtained

All applicants have a minimum beacon score of 650

All applicants have a minimum 2- year tenure at a current employer, AND

Broker arrears are within tolerance (if broker sourced).

Sale of Property:

A copy of the Agreement of Purchase and Sale and

The Statement of Adjustments or Direction to Pay from the Solicitor is required to confirm the net proceeds.

Retained Earnings:

The mortgagor must confirm he/she is the sole owner by way of "Articles of Incorporation" and

The financial statements and the company bank statements confirming that the cash is available must be provided and

25% will be deducted from retained earnings for the down payment calculation.

Gift Letter:

If the down payment is via a "gift", the giftor must be an immediate relative(i.e. parent, grandparent or sibling).

Gifts from spouses are not acceptable.

Conventional Mortgages:

A letter must contain the following information:

The amount of the gift

A statement that the gift is non-repayable and is from non-borrowed funds

The full names of the mortgagor and giftor(s),

The relationship between the mortgagor and the giftor(s) and

The reason for the gift.the deposit or cheque confirming the funds have been received must be obtained.

CMHC/Genworth Mortgages/Canada Guaranty:

In addition to the requirements outlined above for Conventional mortgages, CMHC/Genworth/CG mortgages require the following information:

A standard CMHC/Genworth/CG gift letter must be obtained and

The gifted funds must have been deposited into the mortgagor account at least 15 days prior to closing.

Deposit With Offer

Confirmation must be obtained (via bank statements, GIC's, etc.) to ensure that these funds were not borrowed and came from the mortgagor's own resources. In the case of new construction and condominium purchases, where the deposits are incremental (also known as 'staged deposits'), verification that these funds were not borrowed and came from the mortgagor's own resources.

Equity Take out from another owned property

A copy of the mortgage terms and conditions (i.e. commitment letter).

Secured Line of Credit

A copy of the loan document from the financial institution outlining terms and conditions and the security used for the loan.

Closing Costs

MCAP will include the closing costs into the TDS calculation using 3% payment based on the Purchase Price times 1.5%

If the TDS exceeds the maximum for the Product/Program selected, the closing costs are removed from the TDS and the borrower must confirm the funds are available and are from a non-borrowed source based on 3 months accumulated savings.

Rent To Own

• Signed Rent-to-Own Agreement (cannot be current dated) which includes:
• Supporting letter of economic rent from a certified appraiser that was done at the time of the agreement
• Registration of the Agreement against the property
• Provision for the prospective purchase to be entitled to some refund of the amounts set aside as down payment in the event the sale does not proceed (demonstrates purchase price is not being over-stated to take into account the down payment)
• Confirmation that the purchaser(s) are entitled to refunds of amounts set aside as down payment
• Rent payments in excess of market rent are eligible as a source of down payment
• Value is to be based on the sale price outlined in the Purchase Agreement and not on present value of the subject property
• Must be considered to be from a borrower’s own resources

Other

Pre-Authorized Payment Requirements

To set up pre-authorized payments on an MCAP mortgage, MCAP requires the completion of the Pre-Authorized Debit (PAD) Agreement which is included with MCAP's Commitment Letter or can also be found on MCAP's websites and Professor.
In addition to the PAD Agreement, MCAP also requires either: 1. a void cheque or 2. proof of account ownership:
1. If a void cheque is provided, it must be pre-printed, personalized and reflect the name of at least one of the mortgagors. Counter cheques and cheques drawn on business accounts are not acceptable.
2. If proof of account ownership is provided, it must be either an original or internet bank statement clearly displaying the financial institution's name and the name, branch & account number of at least one of the mortgagors. Business accounts are not acceptable for pre-authorized payments.

Income

Income Overview

Maximum Number of Incomes

Conventional:

A maximum number of four incomes can be used on the same mortgage.

Income Types
If you receive income in addition to your base hourly/salary/commission rate, such as overtime or part-time income, MCAP is able to use this for qualification purposes granting the income has been received consistently for 2 years.
Income Confirmation Salaried

Job letter, which is dated, on company letterhead and signed by someone of authority (i.e. immediate manager, HR department, owner, etc.).

Letter confirms the name of the employee, length of employment, position, year-to-date commissions, bonuses, pending increases, car allowances, and prospect for continued employment.

Current paystub

Commission

Job letter, which is dated, on company letterhead and signed by someone of authority (i.e. immediate manager, HR department, owner, etc.).

Letter confirms the name of the employee, length of employment, position, year-to-date commissions, bonuses, pending increases, car allowances, and prospect for continued employment.

Current paystub

In addition, the mortgagor must supply:

Tax returns or Notice of Assessment over the last 2 years for Conventional or CMHC/Genworth Mortgages;

Last year's tax return or Notice of Assessment, if the LTV is less than 60% (purchases only)

If income is decreasing year over year, with a 20 per cent or more decrease in any one year, the most current year's income is to be used. Otherwise, the average income may be used.
Note: If the income in the most recent year is the highest, the average must be used.

Business for Self

Provided that the company has been in operation for 2 years or more, the following information is required:

• A minimum of 2 years Notice of Assessments (NOA's) from the previous 2 years,
  AND one of the following:
• Satisfactory Business Credit Report demonstrating 2 years operation, or
• 2 years GST returns, or
• Confirmation of active business bank accounts indicating 2 year satisfactory operation, or
• 2 years audited or accountant prepared financial statements.

The mortgagor has the option to:

Gross up the total income by 15% (based on Line 150 of the NOA), or

Use eligible add-backs to gross up the total income subject to the following:

All eligible add-backs are to be confirmed by way of an accountant prepared Review Engagement or Audited Financial Statement

The Business for Self applicant must have a minimum beacon score of 650

The loan to value ratio must not exceed 90%

Eligible add-backs to Net Income Before Taxes are:

• Business use of home

• Motor vehicle Expense from business for self-applicant only and any related payments must be included in the TDS
• Depreciation/Amortization of equipment providing the equipment does not need to be replaced in the near future.

Note: If the mortgagor earns both salaried and self-employed income, only the self-employed portion of the income may be grossed up by 15%.

Note: If income is decreasing year over year, with a 20 per cent or more decrease in any one year, the most current year's income is to be used. Otherwise, the average income may be used.
Note: If the income in the most recent year is the highest, the average must be used.
Disability

The mortgagor must supply confirmation that the disability is permanent, and that the income will be received on an on-going and regular basis. Note: Workers compensation is not considered as disability income since it is usually paid on a short-term basis.

DND

If the borrower is a member of Canada’s Department of National Defence (DND), we can accept their most recent pay stub in lieu of a job letter and the employment can be confirmed on the credit bureau. Most recent pay stub must include all of the information that would normally be obtained in a job letter (e.g. the employee's name and salary).

If the employment cannot be confirmed on the bureau, a secondary piece of confirmation is required.

Second/Part-time

Second and part-time income should only be used when it makes rational sense that the income will continue from a 2 job-feasibility. The income must have been received consistently for 2 years to use any portion. This can be proven via employment letters and T4s

Alimony/Child Support

100% may be used provided income represents < 30% of gross income

• Consideration must also be given to:
• Age of the children for which child support is being received and likelihood the support will continue
• Fully executed court order or separation agreement signed by both parties and executed by lawyer/notary, AND
• Confirmation of support income via bank statements or income tax filing for the previous year showing:
• Low Ratio: 3 months history, consecutively
• High Ratio: 6 months history, consecutively

Family Business

Current paystub

Most recent 2 years NOA’s

2 year average must be used

Investment

2 year average can be used when:

• Investment is not being liquidated
• Income is not from capital gains
• Income used does not exceed 5% of the total investments

If the most recent year’s income is less than than the previous year, the most recent year’s income must be used

50% of the income derived from a mortgage receivable can be used to qualify only if the mortgage receivable has been in place for a minimum of 2 years and will continue for the term of the proposed mortgage

If the investments are being used for equity they cannot be used as income

Most recent 2 years NOA’s

If the income is derived from a mortgage receivable:

Copy of the mortgage document and confirmation of regular payments

Seasonal

2 year average must be used

If the most recent year’s income is lower than the previous year, the most recent year’s income must be used

100% of EI income will be considered provided:

• 70% of total income derives from the salary paid by the company
• No more than 30% comes from EI
• Letter of employment
• Current paystub
• Most recent 2 years NOA’s or T4’s

Union

• 2 year NOA average:
• If the most recent year’s income is lower than the previous year, the most recent year’s income must be used
• Letter of employment from the current employer
• If just started with their current employer through the Union, a letter from the union is required
• Letter from the Union confirming applicant is a member is good standing
• Current paystub
• Most recent 2 years NOA’s

RRIF

Current RRIF statement(s) to determine balance and annuities

RRIF balance must support the annual draw for a minimum of 5 years

Most recent 2 years NOA’s Underwriter Exception:

If RRIF is new and 2 year average not available, a current RRSP statement is required to confirm balance supports the draw for a minimum 5 years

Pension Income

MCAP will use 100% of the pension income when qualifying a mortgage provided that the pension is permanent.
If the source is Company or Government pension, MCAP will require one of the following:

T4A for the most recent income tax year and

3 months bank statements reflecting automatic deposit.

Car Allowance

Car allowances are not acceptable unless the allowances are included in the T4 as income. Please provide a copy of the most recent years T4(s) showing the car allowance as a taxable benefit.

Foster Care Income

When qualifying a mortgage, 100 per cent of foster parent income will be considered subject to acceptable underwriting assessment and the following requirements:
1. The borrowers must have at least two years' experience as foster parents.
2. The only acceptable forms of income and employment verification for foster care parents are:

A letter of employment or contract from the Ministry responsible for foster care, confirming income, tenure and current approved status, and

A pay stub.

3. The maximum number of children in care will not exceed six, including any of foster parents' own children.
4. The borrowers must live on-site.
Note: MCAP will not finance off-site operators. Properties should be located in an acceptable urban neighbourhood.
5. Maximum GDS 30% as opposed to the usual 32%.
6. Maximum TDS 40%.
7. Maximum LTV 95%.
Note: If foster care income accounts for more than 50 per cent of the borrowers' total income, MCAP will require a minimum down payment of 15 per cent.

Maternity/Parental leave Income

Policy on Maternity/Parental Leave Income
For a borrower on maternity/parental leave, MCAP will use 60 per cent of the estimated return to work income when qualifying a mortgage.
Note: If the borrower is returning to work withintwo months of the mortgage closing date, MCAP will use 100 per centof the estimated return to work income when qualifying a mortgage.
The return to work income must be confirmed via a letter of employment indicating the following:

The position the borrower is returning to,

the expected start date, and

the salary/income the borrower will earn upon return.

Non-Taxable Income

Outlined below are MCAP guidelines regarding income that is not taxed at the source. These eligible sources of income can be grossed up to ensure a fair and equitable calculation of debt servicing ratios for all borrowers.
Gross Up / The following outlines the gross-up amount a borrower is eligible for:
If non-taxable income is… / Gross-up by… / Example Calculation
Less than $30,000 / 25% / Annual Gross Income =
Non-taxable monthly payment amount X 1.25 X 12
Greater than or equal to $30,000 / 35% / Annual Gross Income =
Non-taxable monthly payment amount X 1.35 X 12
Acceptable Forms of Non-taxable Income / The forms of non-taxable income eligible for the gross-up at MCAP are:
Disability income that is provided by either a private insurer or the government and guaranteed for the life of the applicant
Indian Act exemption for employment income (on Reserve income)
Non-taxable pension income
Documentation Requirements / In addition to standard documentation requirements, the Underwriter must confirm that the income is eligible as non-taxable as defined by the Income Tax Act of Canada (Canada Customs and Revenue Agency). The following documents can be used to verify eligibility:
Pay stub/statement
Canada Customs and Revenue Agency Notice of Assessment
Letter from the organization providing the non-taxable income
T5007 (Worker Compensation and Social Assistance Payments)

Overtime Income

Letter of employment, MCAP will require current pay stubs showing overtime worked and T4 or T1A over the last 2 years.

Bonus

A minimum of 2 years Notice of Assessments (NOA's) or T4's from the last 2 years, employment letter confirming base salary and that the bonuses are expected to remain consistent at the level provided or is expected to increase

Loan Details & Qualifying Requirements

Commitment Period

Maximum Commitment Periods

Based on "line of business", MCAP commitment periods are as follows:

All Residential "A" Mortgages terms have a 120-day maximum commitment period

Min/ Max loan amount

The maximum and minimum loan amounts for conventional mortgages are as follows:

Maximum Loan Amount: 2Million, but over 1M require CMHC premium to be paid (no sliding scale)

Minimum Loan Amount: $50,000 (for all regions). The Home Account Plus Mortgage has a minimum loan amount of $10,000.00

Payment Frequency

For qualified of payment frequency options. These payment frequency options include:

Weekly *

Bi-Weekly *

Semi-monthly ** and

Monthly.

* Accelerated

** Semi-monthly means making only two mortgage payments per month. There must be 15 days in between the two payment dates. MCAP cannot have the 28th, 29th, 30th or 31st of any given month as a payment date.

Example: Deal is closing 26th of month. Client selects monthly payments and wishes to make payments on 4th of month. IAD will be set on the 4th day of the following month and 1st payment commences one month later on the 4th of month.

For bi-weekly or weekly payments, any day of the week may be selected by the customer.

All payments must be paid via a Pre-Authorized Debit (PAD) plan.

Privilege Payments

MCAP offers two payment privilege options that allow mortgagors to pay down their mortgages at a faster rate:

Lump Sum Payment

Increase in Payment

A mortgagor can take advantage of both privilege payments in any given mortgage year.

Lump Sum Payments

Provided there is no default, the mortgagor has the privilege of prepaying partial amounts of a mortgage principal, with no penalty, on any payment date.

The payments must each be in a minimum amount of $100, and total no more than 20% of the original principal mortgage amount.

The payments can be made during the 12-month period following the interest adjustment date, each anniversary date or renewal date.

This penalty-free privilege cannot be carried over from previous years.

Increase in Payment

Provided there is no default, the mortgagor has the privilege of increasing the regular payment amounts to a maximum of 20% of the current mortgage principal and interest payment.