Posted in advice on locking in your mortgage, Bank of Canada, Bank of canada rates, BC Mortgages, Benchmark interest rate, Canadian Mortgage News, fixed or variable rate or both, Fixed rates, fixed term mortgages, Home Loans, Interest \rate Increases, Interior Mortgage Expert - Lisa Alentejano, kelowna mortgage, Kelowna Mortgage Broker, Kelowna Mortgage Financing - Lisa Alentejano, Mortgage Rates, Pre Approval Mortgage, rate fixed mortgage

FIXED VS VARIABLE MORTGAGES

THINGS TO CONSIDER

Fixed and Variable rate mortgages both have their advantages and disadvantages!

Historically speaking, homeowners tend to pay lower rates with variable mortgages, but these mortgages are also vulnerable to fluctuations because they’re tied to the Bank
of Canada’s prime rate (which is announced eight times per year). Fixed rates, on the other hand are primarily influenced by the yield on Canadian government bonds (bond yields) , and are typically higher than variable rates, but their rate is consistent throughout the term of the mortgage. Below are a few questions to help you determine which type
of mortgage is right for you.

CAN I AFFORD TO TAKE A VARIABLE RATE MORTGAGE

There is some risk associated with variable rate mortgages, so if  you go this route, you must be able to mitigate the risk if rates do rise.  One method of protecting yourself involves setting your payment to a fixed amount that’s higher than the minimum requirement.  For example, setting your payments based on the current 5 year fixed rate will allow you to provide a buffer in the event that rates rise and, because you’re paying more than the minimum amount, you’ll be paying more of your principal as well.

DOES A VARIABLE RATE MORTGAGE FIT MY RISK PROFILE?

Once you have decided you can afford a variable rate mortgage,  the next thing to assess is whether a variable rate mortgage fits your personality, lifestyle and comfort zone. If you’re the type of person that can’t sleep at night knowing that your rate and payment may change by 0.25%, then a variable rate mortgage may not be the best option for you.

WHAT TYPE OF VARIABLE RATE MORTGAGE SHOULD I CHOOSE?

There are three main factors to consider when choosing a variable rate mortgage:

  1. Payment frequency – Make sure you are aware of the options available before deciding. Some lenders may not allow certain variations of payment frequency (i.e.accelerated biweekly or weekly payments).
  2. Rate changes – Some lenders change their variable rates in line with the Bank of Canada eight times per year while others do it quarterly.
  3. Conversion to fixed rate – Does the lender allow the mortgage to be converted to a fixed rate mortgage at anytime? If so, what rate are you guaranteed on conversion – the best discounted rate or the posted rate?

If you would like to discuss all of your options in detail please contact me directly at 250-819-6536 or 1-888-819-6536 or email me at lisa@mortgageplayground.com

Lisa Alentejano

Posted in advice on locking in your mortgage, Bank of Canada, Bank of canada rates, BC Mortgages, Benchmark interest rate, Canadian Economy, Canadian Housing Market - Lisa Alentejano, Canadian Mortgage News, Debt, Mortgage Affordability, Mortgage Broker Kamloops, Why use a mortgage broker

Bank of Canada Hold Key Rate “household debt” remains biggest risk

OTTAWA — The Bank of Canada kept its key interest rate on hold Thursday, as expected, but said while the outlook for the Canadian economy has “marginally improved,” household debt “remains the biggest domestic risk.”

The central bank acknowledged, in the statement accompanying its rate decision, that “heightened uncertainty around the global economic outlook has decreased,” since its monetary policy report in January.

“With tentative signs of stabilization in European bank funding and sovereign debt markets, conditions in global financial markets have improved and risk aversion has decreased,” it said.

“However, the global economy is still expected to grow below its trend rate as the deleveraging process in advanced economies proceeds.”

The Bank of Canada said the outlook for the domestic economy “is marginally improved” since its January report. “Although the economy will likely grow faster than forecast in the first quarter due to temporary factors, underlying economic momentum remains around trend, balancing domestics strength and external weakness.”

As for inflation, the bank said “the profile . . . is somewhat firmer than previously anticipated as a result of reduced economic slack and higher oil prices.”

“After moderating in the second quarter, total inflation is expected, along with core inflation, to be around 2% over the forecast horizon, . . . “

The central bank has held its benchmark lending rate at a near-record low 1% since September 2010, in an effort to bolster the economic recovery from the 2008-09 recession.

But cheaper borrowing costs — especially for mortgages — have led to record high consumer debt. Bank of Canada governor Mark Carney, along with Finance Minister Jim Flaherty, has urged consumers not to borrow beyond their needs, as interest rates will eventually begin rising again.

“Canadian household spending is expected to remain high relative to GDP as households add to their debt burden, “which remains the biggest domestic risk,” the bank said Thursday.

The Bank of Canada’s next interest rate decision will be on April 17.

Posted in advice on locking in your mortgage, Applying for a mortgage - Lisa Alentejano services the interior, British Columbia Mortgages, Canadian Economy, Canadian Home Buyers Academy, Canadian Mortgage News, First Time Home Buyer Steps, Hombuyers Downpayment, Home Buyer Closing Costs, Home Loans, Kamloops broker, Kamloops First Time Home Buyer Tips, Kamloops home mortgages, Kamloops Mortgage Broker - Lisa Alentejano, Kamloops Mortgages, Mortgage Affordability, Mortgage Broker Kamloops, Mortgages - Get a second opinion, Pre Approval Mortgage, Protecting your biggest investment your mortgage, Real Estate Market, Refinance Your Mortgage, Refinancing, Save your money, Why use a mortgage broker

CANADIAN HOME BUYERS ACADEMY

Working For You!

 

 

Are you interested in making some cash when you buy or sell your next home? Maybe you simply want to learn more about Real Estate in Canada? Have You been looking for general information on buying and financing a home but cant seem to find the information in one specifac place that has consistent information.  Take a good look at this program, I think you will find alot of great information and tools for you to use.

I am proud to be a part of this worthy and valuable program.

Go check it out here http://www.canadianhomebuyersacademy.ca

Posted in advice on locking in your mortgage, Applying for a mortgage - Lisa Alentejano services the interior, Canadian Mortgage News, Fixed rates, fixed term mortgages, Home Loans, Kamloops Mortgage Broker, Kamloops Mortgages, Low Interest Rates, Mortgage Affordability, Mortgage Broker Kamloops, Mortgage Consultant Kamloops, mortgage financing kamloops, Mortgage Playground - Lisa Alentejano, Mortgage Consultant, Mortgages - Get a second opinion, Pre Approval Mortgage, Protecting your biggest investment your mortgage, Refinancing, Renewing your mortgage, Save your money

2 Out of 3 Don’t Shop at Renewal

Thank you to one of my fellow brokers for writing this article.    Consumers are becoming slightly more educated about shopping for a mortgage, but clearly not enough, that means we have alot more work to do to make sure consumers are much more informed about their options when shopping for a mortgage wherever they are in the mortgage process.  READ ON…

Every now and then we see a mortgage stat that’s a jaw-dropper.

This finding from Manulife Bank is one of them. It suggests there are a lot more people with money to burn than one might expect.

Manulife recently surveyed 1,000 Canadian homeowners between the ages of 30 to 59. Among respondents with a mortgage, two-thirds (65%) did not compare mortgages from more than one lender when they last renewed.

More specifically:

  • 20% stayed with their current lender after maturity and did not negotiate
  • 45% stayed with their current lender and tried to negotiate a good deal, but did not shop around
  • 35% compared mortgages from several lenders and choose the best overall lender and product.

The youngest group (ages 30-39) was most likely to shop around (41%), but was also most likely to
accept their current lender’s offer without negotiating (24%).

We asked Doug Conick, President & CEO of Manulife Bank, why on earth people would give so much power to their lender.

“Most people lead very busy lives and may not have the time or expertise to fully investigate their options,” he said.

“Through our debt survey we’ve found that only about 3 out of 10 Canadians work with a financial adviser to manage their debt more effectively.”

“With busy lives and a lack of advice for most, this decision often gets left until very close to the renewal date, causing borrowers to follow the path of least resistance and renew with their current lender.”

“The unfortunate thing,” he added, “is that this could end up costing them a lot of extra money and keep them in debt longer than they need to be.”

That’s for sure.

In our experience, people who auto-renew often pay 1/2%-3/4% more than necessary, or worse! In fact, we’ve seen innumerable people sign renewal letters at their bank’s “special offer” rate, which is usually well above the market. (Example: Today’s 5-year fixed “special offer” bank rates are 3.94% to 4.09%. That’s up to 80 basis points above competitive rates on the street.)

Even a 1/4% rate difference amounts to over $4,000 more in interest over five years, on a $200,000 mortgage with a 20-year amortization. That’s money that could normally go towards prepaying a fat chunk of principal.

It’s hard to fathom why anyone would let a lender pick their pocket like this. At the very least, folks must find it within their strength to lift up the phone and call an independent mortgage planner.

Even if you’d rather stay with your current lender at renewal, seek out a second opinion. You absolutely owe it to yourself to keep your lender honest by surveying the market.

Of course, this all begs the question of why someone would ever want to deal exclusively with a lender that aims to maximize the interest they pay…but that’s a story for another day.


Sidebar: The report also confirmed, yet again, the various studies which show that people underutilize their prepayment privileges.

In the last year, out of respondents with a mortgage, 70% did not make any extra payments.

By far, the most common reason cited for not making an extra mortgage payment was “a lack of extra money.”

 canadianmortgagetrends
Posted in advice on locking in your mortgage, Applying for a mortgage - Lisa Alentejano services the interior, Bank of canada rates, BC Mortgages, BCMortgage, Kamloops Mortgage Broker - Lisa Alentejano, Kamloops mortgage consultant, kamloops mortgage financing, Kamloops Mortgages, paying a penalty to break my mortgage, Protecting your biggest investment your mortgage, Refinance Your Mortgage, Refinancing, Renewing your mortgage, Save your money, should you lock in your mortgage, Why use a mortgage broker

Renewing and refinancing mortgages is saving Canadians big bucks

Canadians saved $2.7-billion in the past year renewing or refinancing their mortgages and the betting money among consumers seems to be that interest rates are not going up any time soon, according to a new survey.

The Canadian Association of Accredited Mortgage Professionals says 37% of Canadians opted for a variable rate mortgage in the last year, pushing up the overall percentage of Canadians floating with prime — and vulnerable to Bank of Canada rate hikes — to 31%.

But the group maintains Canadians are not overexposed to a potential rising rate environment with the survey finding 84% say they could handle a rate increase that boosted their mortgage payments by $200 per month. The average amount of room Canadians say they could afford on top of their current costs is $750 per month.

“Overall, our survey paints a picture of Canadians generally and homeowners in particular as very focused on their finances,” said Jim Murphy, president of CAAMP. “They are planning ahead, aggressively paying down their mortgage in advance of any economic jolt.”

Government policy that cracked down on refinancing rules may also be having an effect on the market. Earlier this year Ottawa tweaked the rules on refinancing, restricting consumers to 85% debt on the value of their home, down from 90%.

CAAMP said Canadians have become conservative about taking equity out of their home with 10% of mortgage holders doing so in the last year, a drop from 40% a year earlier.

“There is no need for policy makers to introduce new measures that would reduce housing activity,” said Mr. Murphy, his comments clearly aimed at suggestions the market needs even more governance and tighter measures such as increased minimum downpayments.

It’s clear Canadians are enjoying the low interest rate environment that CAAMP says lowered the average mortgage rate to 3.92% from 4.22%. The effect is that among the 1.35 million mortgage borrowers who renewed or refinanced in the past year, the savings was $2.7-billion.

“Some people are coming out of 5% plus mortgages and saving a lot of money,” says Rob McLister, editor of Canadian Mortgage Trends. Someone with a $500,000 mortgage going from 5% to 3.29% with 20-year amortization could save almost $40,000 in interest over a five-year term, he says.

Mr. McLister is seeing a growing line of people looking to break a mortgage and willing to pay the interest penalty.

CAAMP said 32% of Canadians reported making some sort of change to their mortgage in the past year with almost two-thirds of those people saying they were refinancing or renewing their mortgages. Among those who renewed, 78% got a rate reduction.

 

Canadians who are looking for that better rate appear ready to shop around with 21% of respondents who renewed or refinanced their mortgages in the last year saying they switched lenders.

Mortgage rates continue to be at or near all-time lows with a flatter yield curve reducing the steep discount on variable rates and making locking in more attractive. The website ratesupermarket.ca says the best variable rate product on the market now is 2.48% while a five-year fixed rate closed mortgage is now as low as 3.19%.

“What you are facing is whether you lock in today and know what my rate will be for the next five years or go variable and gamble,” says Mr. McLister. “There is risk there.”

Sal Guatieri, senior economist with BMO Capital Markets, said the savings are positive because it is putting extra money in the pockets of Canadians. “I almost expect more people to jump into variable given the long-term interest rate environment looks so benign,” says Mr. Guatieri.

Posted in advice on locking in your mortgage, Bank of Canada, Bank of canada rates, BC Mortgages, Best Rate Mortgages, Canadian Economy, Canadian Mortgage News, Debt, fixed or variable rate or both, Fixed rates, Interest \rate Increases, Jim Flaherty, Kamloops broker, Kamloops First Time Home Buyer Tips, kamloops mortgage, Kamloops Mortgage Broker, Kamloops mortgage consultant, kamloops mortgage financing, Kamloops Mortgages, Kelowna Mortgage Broker, Kelowna Mortgage Financing - Lisa Alentejano, Low Interest Rates, mark carney, Mortgage Affordability, Mortgage Broker Kamloops, mortgage financing kamloops, Mortgage Language, Mortgage Rates, Mortgages - Get a second opinion, paying a penalty to break my mortgage, Pre Approval Mortgage, Protecting your biggest investment your mortgage, rate fixed mortgage, Real Estate Market, Refinance Your Mortgage, Renewing your mortgage, salmon Arm mortgages, should you lock in your mortgage, variable rate mortgages, Vernon Mortgage, Why use a mortgage broker

Mortgage Rates – How to protect yourself when they increase – Video message!

Heres a video I personally did on how to take a proative approach to protect and prepare yourself with rising interest rates in the future and save thousands of dollars! Click below to view video

Inflation Hedge Strategy - Learn to protect yourself from rising rates

Lisa Alentejano

Posted in advice on locking in your mortgage, Bank of Canada, BC Mortgages, Benchmark interest rate, Best Rate Mortgages, fixed or variable rate or both, Fixed rates, Kamloops broker, Low Interest Rates, mark carney, Mortgage Affordability, rate fixed mortgage, variable rate mortgages, Variable rates

Increase to Variable Rate Mortgages

Why could I get Prime minus .90 last week and today it is Prime minus .25?– A great question, says the Mortgage Brokers Association of BC (MBABC), especially when fixed interest mortgage rates are remaining the same.  The quick answer?  As with many things, it all boils down to money.

Over the last couple of months, banks and other lenders have been offering historically low variable interest rates to qualified homebuyers in an effort to attract new clients and mortgage business.  In the short term, lenders have been prepared to accept these low profit margins with the knowledge that, as the prime rate inevitably rises, so too will their profit on variable mortgages – a similar ‘loss leader’ tactic used by retailers to get consumers into their door.

“However”, says Geoff Parkin, MBABC’s president, “the recent announcement by Bank of Canada governor, Mark Carney has changed the mortgage lending landscape.”   Carney stated that, because of poor performing global markets and continuing economic uncertainty, the benchmark interest rate would remain unchanged.  The long-term outlook indicates continuing low fixed interest rates with no significant increases to the Prime rate.  “In a nutshell”, says Parkin, “the bank’s theory of anticipating rising profits on variable rates was proven wrong.  They’ve had to quickly respond to this situation by reducing the variable rate discount in order to gain back profit.”

What does this mean for consumers who have variable rate mortgages?  Much of the same, says Parkin.  “We continue to see low fixed rates and the variable rate is under 3.0%.  There may still be value in going variable over fixed, but because consumers all have different financial situations and mortgage needs, we recommend they obtain expert financial advice from their MBABC mortgage broker.”