Buying your first home and getting your first mortgage can be an overwhelming experience.
If this is your first home buying experiencing, applying for a mortgage can be the most intimidating part of the process , so where do you start?
In the past, the home buyer turned to their banks for their mortgage needs, but now you have more options at your disposal with over 40% of consumers turning to mortgage brokers for their mortgages needs instead of the banks.
Mortgage brokers are provincially licensed and regulated by CMBA . They can help you with all aspects of a mortgage, from figuring out how much you can truly afford, to determining the best mortgage product for you, to finding ways to save you money and pay off your mortgage faster.
Many lenders’ rates and mortgages can only be accessed through a mortgage broker. Not having the selection of lenders, and simply choosing to get a mortgage with a bank, can mean choosing harsher prepayment penalties for breaking your mortgage in the future, as well as a higher interest rate; which can cost buyers thousands upon thousands of dollars over the life of their mortgage.
A mortgage broker is also able to better tailor a mortgage product to your specific needs, whether that be working with a lender who is more flexible when it comes to self-employed income; one who has more flexible prepayment terms; or one that has more options for consumers that possibly have suffered some credit challenges in the past. Because mortgage brokers have access to more lenders, they’re better able to find a lender and a mortgage based on your specific needs and financial situation to get you the lowest mortgage rates today.
Mortgage brokers offer convenience, which lets you meet around your schedule, not the banks hours.
Mortgage brokers also operate on commission and are paid by the lenders who ultimately grant you your mortgage, so there is no cost to the consumer. Referrals are the life blood of our business so it is in our best interest to serve you as best we can.
Bottom line, using a mortgage broker gives you the freedom of CHOICE and comparables to consider, using a bank gives you no other choice but ONE, theirs.
There has been a lot of changes with regards to qualifying for a mortgage as of late, but I was happy to see that there is now some relief available for Canadian first time home buyers when it comes to buying a home and saving for a downpayment.
The BC Government has implemented the BC Home Owner Mortgage and Equity Program granted to Canadian citizens or permanent residents who have never previously owned a property and only apply to homes worth less than $750,000. A buyer must be able to pre-qualify for a mortgage (that’s where I come in) and have a gross household income of less than $150,000. Applications open Jan. 16, and the program ends March 31, 2020.
The government would put a second mortgage on a property to reflect the amount it loaned, but not require any interest payments or payments on the principal for the first five years. After that, the 20-year repayment plan would be set at the prime lending rate plus 0.5 per cent, leaving the homeowner to pay back both the original mortgage and the down-payment loan at the same time. There is no restriction to pay the loan out in part or full at any time.
The loans are available for condos, townhouses or detached homes. On a property worth $600,000, the government loan could help a buyer meet or exceed the federally set minimum down payment of $35,000. In one example, provided by B.C. Housing, a person who saved $30,000 could apply to get an additional $30,000 from the province, giving the buyer a $60,000 down payment.
Another example for reference is; as the minimum downpayment requirement is 5%, you, the consumer, would have to come up with 2.5%, then the government would match the additional 2.5% required to make up the total 5% downpayment. There are different sources of downpayment to consider as well; RRSP, Borrowed, gifted from a family member or your own savings.
As always if you’re considering purchasing a home in the near future, the best thing to do is be informed. My consultations are free and there is no obligation. If you are simply looking to explore your options or curious and have some questions, please do not hesitate to email me at email@example.com or call me toll-free at 1-888-819-6536.
Investors hoping for a spike in rental demand will be disappointed with the government’s decision to keep mortgage insurance rules as they are — the Finance minister offering a budget that does nothing to tighten qualifying terms for potential homebuyers.
While moving to cut 19,200 bureaucratic jobs over the next three years with an eye toward slashing $5 billion a year from the federal budget, Jim Flaherty left the current regime of mortgage rules in place.
The reprieve, at least for now, was anticipated by mortgage industry leaders from one end of the country to the next, but effectively denies landlords any increase in demand for their units resulting from stricter qualifying standards for homebuyers.
It means rent increases are also unlikely.
With today’s budget announcement, Flaherty effectively rejected a chorus of banker calls for a 25-year amortization cap, down from the 30 years the government now allows. Some economists also wanted the government to increase down payment requires to a minimum 7- or 10-per cent.
Both suggestions were billed as a way of cutting record levels of household debt and slow down the consumer rush to buy homes.
Exactly a week prior to Thursday’s communiqué, Flaherty used a media scrum to suggest he would resist calls for stricter rules.
“I find it a bit off that some of the bank executives are taking the position that the Minister of Finance or the government somehow should tell them how to run their business,” Jim Flaherty told reporters just outside Ottawa Thursday. “They decide what they want to charge in interest rates.
“The new housing market produces a lot of jobs in Canada so there’s a balance that needs to be addressed.”
Still, The government did move to shore up some areas of mortgage industry oversight: it will bring in legislation to provide increased oversight of CMHC commercial activities; and legislation for covered bonds, which will be administered by CMHC.\
Todays market is bringing alot of questions about whether you should consider refinancing your mortgage for a better rate. There are many different reasons people might re-negotiate their current mortgage. You may be considering using some of the equity in your home you have built up and use it to buy a rental property, Make and RRSP contribution or investment, pay off some high interest rate debt or just renegotiate your current rate for a better more competitive rate and lower monthly payment.
Below are some ways in which you can get a good idea on what kind of penalty you may be faced should you want to refinance your current mortgage. Again these are used simply as a guideline and are in no way exact. The lending institution you are currently dealing with will give you the exact amounts relating to your specifac situation.
Many closed mortgages include a clause stating that the payout privilege on the mortgage will be a three-month interest penalty, or interest differential, whichever is greater.
For the calculations below, using the following scenario:
$300,000 remaining on the mortgage
3 years into a 5-year fixed term at 5.5%
Today’s interest rate: 3.5%
We’ll just be using the simple interest amount – the actual amount of the penalty could be a little less than the amount quoted in the examples.
Three Month Interest Penalty :
Mortgage Balance X Interest Rate X 3 months
Plugging in the variables above, we would get:
= $300,000 X 0.055 X 0.25 (5.5% = 0.055, 3/12 = 0.25)
= $4125.00 would be the 3 month interest penalty
Now we have to calculate the interest differential – and that’s where penalties can be quite substantial – especially since interest rates have dropped considerably lately.
Interest Differential Penalty:
Current Mortgage Balance X Interest Rate Differencial X Time remaining
=$300,000 X 0.02 X 2
(0.02 = 2% which is the difference from 5.5%-3.5%, and 2 years left in term)
=$12,000.00 would be the Interest Differential Penalty
In the example above, the bank would then use the Interest Differential Penalty since that amount is the greater of the two. Remember that the way banks calculates their penalties sometimes is a mystery to me and can be greater than the figures above so make sure you ask.
Please remember that its not always about RATE, although important, there are other important steps you need to take into consideration when considering paying a penalty and shopping for a mortgage. Let a mortgage expert, put strategic steps and the right product in place that will ultimately make sure its in your best interest to pay a penalty and that your saving money.
I would also invite you to take a look at this link.I am part of a community of mortgage brokers that created a forum to get our best ideas together a create a simple and educational strategy showcased here on this website. A program I implement with all my clients, wherever they are in the mortgage process. Its a program created in mind to help consumers pay more attention to their mortgage and implement simple easy steps to save thousands of dollars. When was the last time your bank phone you up at any time to show you how to save money on your mortgage. I think i know the answer…..Please click the link and learn something valuable today then contact me to get started.
I am a licensed mortgage broker with years of financial experience, able to help you with your mortgage any where in Canada and Alberta. Remember my services are free and never should you feel there is any obligation. So please pick up the phone and contact me directly I would love to hear from you 1-888-819-6536. If your more comfortable with email please feel free to email me your questions at firstname.lastname@example.org
Expert, unbiased advice is what i offer to all of my clients.
A deteriorating European economy and weak global growth will keep the Bank of Canada from raising rates for at least another year, though an interest rate cut looks highly unlikely, according to a Reuters survey.
The Reuters poll of 41 economists and strategists released on Tuesday showed the median forecast for the next interest rate hike was pushed back by three months to the first quarter of 2013 from the fourth quarter of 2012 projected in a November poll. The Bank of Canada’s target for the overnight rate — its main policy rate — has been at 1% for more than a year.
“The longer we spend struggling with slower growth and the longer we go without the Europeans coming to some cohesive policy solution, the worse the economic drag will be,” said David Tulk, chief Canada macro strategist at TD Securities.
“You get the sense that growth I think is likely to remain lower for longer, just like interest rates.”
Investors in the first quarter of 2012 are expected to focus on the heavy supply of eurozone debt coming due, with fears about a possible lack of demand at auctions. Italian and Spanish bond sales in particular are viewed as the next big tests.
Some Canadian economic data has also been worrisome. A Bank of Canada business survey on Monday showed an increasing number of firms are pessimistic about the rate of sales growth, further reducing pressure for the central bank to take interest rates higher.
The most recent domestic jobs report also disappointed, reversing a trend that saw Canada outperform the United States both during and after the global financial crisis.
Monthly employment data on Friday showed Canada missed forecasts while the U.S. beat them. This gives the Bank of Canada even less impetus to tighten policy before the U.S. Federal Reserve, which has said it expects to keep its key interest rate near zero through mid-2013.
But many analysts expect an even longer pause, and bet the Fed’s next move will be to stimulate the economy, rather than tighten monetary policy.
“If the Fed comes out with its published interest rate forecast at the end of the month and says the consensus points to an even longer hold than the middle of 2013 then that could handicap the Bank of Canada to an even greater extent,” said Derek Holt, vice president of economics at Scotia Capital.
Yet many analysts say the case for an interest rate cut is difficult. Governor Mark Carney has repeatedly warned about the dangers of Canadians borrowing too much as a result of very low interest rates. Data last month showed the level of household debt swelled to another record high in the third quarter.
“A cut in the policy rate anytime in 2012 is extremely unlikely. It would take a global recession of 2008 proportions for the BoC to even consider cutting policy rates,” said Carlos Leitao, chief economist at Laurentian Bank Securities in Montreal. “In our view, 1% is the new, effective, zero-bound.”
Of the 41 contributors, 35 see a rate hike happening after the second quarter of 2012. Five forecasters — BNP Paribas, Capital Economics, Goldman Sachs, IFR Markets and ING Financial — predicted a rate cut across the forecast horizon, up from only three forecasters in the last poll. All five expect the cut by mid-2012.
The possibility of an ease has been anticipated in overnight index swaps for some time, though the timing has been pushed out.
Forecasts for official interest rates at the end of 2012 also dropped from the previous poll — with the median target declining to 1%, from 1.25% in November — indicating one less rate increase next year than was previously assumed.
Interest rate expectations for the four quarters of 2012 have been downgraded continuously in all nine global Reuters polls conducted since last January, with the target for the first quarter of 2012 revised down to 1% from 2.25%.
The poll showed a 99% probability there won’t be a change in rates at the next policy announcement on Jan 17.
A majority of homeowners in British Columbia won’t know what has happened to their property value over the past year until they receive their annual BC Assessment notice in early January 2012.
Each year, BC Assessment sends out Property Assessment Notices on December 31 for nearly two million properties in British Columbia. Local real estate sales determine the property values that BC Assessment reports based on a market value approach with a July 1 valuation date.
However, some BC property owners have received an early indication of what to expect when BC Assessment releases their 2012 Assessment Roll figures on Tuesday, January 3, 2012.
On December 5, 2011, BC Assessment sent out approximately 10,000 “Extreme Value Change” information letters to BC property owners where the assessed value of their property increased by 30% or more above their local area.
These BCA information letters are sent to property owners as part of the pre-roll consultation process for significant value change where the assessed value of a property increases more than the average increase in an area.
“Generally speaking, for property owners whose 2012 assessments have increased 30% or more above the average increase for their local community, we have provided advanced letters informing them of this change,” said Tim Morrison, Communications Coordinator for BC Assessment, in an interview with BuyRIC.com.
“For example, if the average market increase for a specific property type within a specific jurisdiction was 5% and your property increase was 35% or higher, then you would likely receive an advanced letter.”
This advanced information indicates that approximately 10,000 BC property owners across the province will see a 30% or higher than average increase in their 2012 assessment notices.
The most significant 2012 property assessment increases in British Columbia occurred in Vancouver. BC Assessment sent out approximately 1,800 of these “Extreme Value Change” letters to Vancouver property owners and approximately 800 to the North Shore, including West Vancouver and North Vancouver property owners.
Morrison added, “We provide impacted property owners with advanced notification in order to make them aware that the change will likely result in an increase in their 2012 property taxes as determined by their local municipality.”
“We want to ensure that people know that they can contact us, so that we can work with them in explaining our market analysis techniques used to assess their properties.”
BC Assessment serves to ensure accurate, fair, and equitable annual assessments throughout British Columbia. Local governments and other taxing authorities are responsible for property taxation and, after determining their own budget needs in the spring, will decide their property tax rates based on the assessment roll for their jurisdiction.
These “Extreme Value Change” information letters are part of BC Assessments “no surprises” focus to engage BC property owners and local governments on changes that might have a big impact on property valuations.
Ongoing audits, reviews, and market analyses are part of BC Assessment’s quality assurance commitment to property owners.
Heres an interesting article on things to consider when locking in your mortgage or at least considering renewing your mortgage for a better rate. Lots of things to look at when rates are at an all time low. You can imagine consumers are taking a good look at their mortgage and where they want to go with it. Small differences in rates can save you thousands over the longer term. As most of us have a mortgage for years, take advantage of at least looking at your current mortgage and consider whether making a change could be beneficial. As always any questions or comments please feel free to contact me at 1-888-819-6536.
The gap between short-term and long-term rates has shrunk enough that it might be time for anyone renewing a mortgage to consider locking in.
Moves last week by the major banks to reduce the discount on variable-rate mortgages comes as the discounts for long-term mortgages have gotten as steep as they have ever been.
“What seems to be happening is they are focusing their attention on fixed rates. We are starting to see some aggressive competition on four-and five-year products,” says Gary Siegle, a mortgage broker and Invis Inc. regional manager in Calgary.
How aggressive? Try as much as 190 basis points. A five-year, fixed-rate mortgage with a posted rate of 5.39% is now being offered for 3.49%.
For whatever reason, the four-year, fixed-rate mortgages are being priced even more aggressively.
Mr. Siegle says he can lock consumers into a four-year, fixed mortgage for as low as 3.09%.
The discounting comes as variable-rate products, linked to prime, have become more expensive. Short-term money has become more expensive in the bond market, forcing banks to reduce discounts.
The banks traditionally move their prime rate with the Bank of Canada rate. With no flexibility there and existing customers getting huge discounts based on old deals, banks are forced to raise rates for new loans as short-term money gets more expensive.
The trend began in April when FirstLine Mortgages, a subsidiary of Canadian Imperial Bank of Commerce known for its low rates, cut its discount on variable rates.
Others banks were slow to follow, hoping to make money on volume. But refinancings have dried up under tougher mortgage rules and sales have slowed, creating the need to tighten profit margins on variable-rate products.
Today, the discount on a variable-rate mortgage is about 55 basis points off the prime rate of 3% – in other words, 2.45%. Compare that to 3.09% on a four-year mortgage and the premium to lock in is not that much.
“This gap is about as narrow as it goes,” says CIBC deputy chief economist Benjamin Tal. “It reflects a flat yield curve, which makes it difficult to make money in this business.”
Mr. Tal says variable-rate mortgages tend to be more attractive when there are inflation expectations not yet expressed in short-term rates. This time, he says, the bond market is depressed, anticipating recession, and that has shrunk spreads dramatically.
The one thing keeping people in short-term money is the sense that there is no urgency to move because the U.S. Federal Reserve Board has pledged not to raise rates for two years, which also effectively ties the hands of the Bank of Canada.
“We know the five-year rate is attractive, but we also know short-term rates are not raising,” Mr. Tal says.
What does that mean on a practical, dollars-and-cents basis?
Let’s use the Canadian Real Estate Association’s 2011 average sale price forecast of about $360,000 and assume a 20% down payment and a $288,000 mortgage.
At 2.45%, your monthly mortgage payment based on a 25-year amortization would be $1,282.98. At 3.09%, your monthly payment rises to $1,376.28.
But even at the gap, you would pay about an extra $7,000 in interest to lock in over four years.
Ultimately, the $7,000 amounts to an insurance policy. You get payment certainty for four years, but at a price.
If rates climb 200 basis points on your variable-rate mortgage, it could cost you $22,000 more in interest over four years. The reality is that rates wouldn’t jump at once and, therefore, increases would likely be gradual.
Moshe Milevsky, the York University finance professor who wrote the oft-quoted study that variable-rate mortgages do better than fixedrate mortgages 88% of the time, said if you start thinking about it like insurance, it comes down to your risk tolerance.
“There are people who pay a lot for protection on their portfolio; there are people who pay a lot for life insurance,” Prof. Mr. Milevsky says. “If the premiums are low enough, you might say, ‘Sure, I’ll pay.’ But if you have a tight budget, every basis point counts, and it might not be worth it.”
To me, he still has the ultimate answer for the tough decision whether or not to lock in.
“I still don’t get why more Canadians don’t split their mortgage,” Prof. Milevsky says. In other words, locking in half of the mortgage and floating with prime on the other half.
“When is a bank going to come to the realization Canadians hate making this choice?”
He’s right. Even with rates this low and the gap between short-term and long-term rates this narrow, it is still a tough call