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BANK VS BROKER

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.

Feel free to contact me with any questions you may have at 1-888-819-6536 or lisa@mortgageplayground.com

 

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BC First Time Home Buyer Downpayment Loans

save_moneyThere 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 lisa@mortgageplayground.com or call me toll-free at 1-888-819-6536.

Lisa Alentejano

 

 

 

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Do your homework first… read the fine print – Rate of 2.99 to good to be true?

Although you will never hear any bank say that publicly, this is what is going on. Recently there has been some industry chatter about a few banks offering a sub 3% 5 year fixed product. One particular institution is bragging about their 6 billion dollar portfolio under administration, this product, and how great it is. At first glance you might think ” WOW, that’s awesome!” However as with all mortgages, you have to dig a bit deeper to find out the real nuts and bolts of this sub 3% offer. It’s a great offer alright for the bank, not for you; the consumer.

Based on an average mortgage size of $250,000, that’s 24,000 Canadians that negotiated directly with the bank who will feel ripped off once they find out about their terms and conditions. I am very pro client / consumer, and my job is to look out for their best interests so I simply can’t endorse this product. Consumers though need to know why they shouldn’t either. This product is priced well below the market average for 5 year product, and does not come without it’s “catches”. It’s definitely buyer beware and the bank will not tell you this.

Some of the features (or non-features you might say) are:

Minimal or no pre-payment privileges

This product has extremely low pre-payment features. On a monthly increase basis this could mean nothing to less than half of what the industry norm is. Lump sum payments may also be nothing or less than half the industry norm and if allowed only once per year. Pre-payment features are extremely beneficial and allow for strategies to be put in place. Lack of strategy means lack of interest savings for clients and consumers.

Fully Closed

When I say fully closed, I mean just that. A borrower cannot get out of the mortgage, unless they sell their place if at all. Who wants to sell their place if they want to refinance? I don’t know too many people that would. If borrowers do sell their place, a substantial penalty such as a 6 month interest penalty typically applies.  Borrowers may be offered  a reduced penalty (3 month) if they choose to refinance with that same bank however this still does not offer a borrower access to the entire mortgage market. It also confines them to more inferior product. If a borrower is going to pay a penalty, they rightfully should have the opportunity to entertain superior product. The average mortgage is in place roughly 3 years before being paid out or refinanced. Life just happens. More than likely a borrower will need to do something with their mortgage during their current mortgage term.  To be locked down by these terms and clauses makes absolutely no sense.

No guarantee of best rates upon renewal or refinance

Banks know that consumers may not know the mortgage market at any particular point in time. What’s happening in the mortgage world is usually not on the forefront of people’s minds. When it comes time to renew or refinance borrowers can be offered a rate as high as 1% above the market norm and not realize it. When a borrower asks the bank to do better, they may be offered a discount further however that .5% “special” discount doesn’t look so good when the rest of the market is priced much lower. This amounts to more interest the borrower has to pay over the course of their mortgage. This is more money for the bank that should be staying with you.

Your mortgage will also be registered as a collateral charge.

Beware of this one as it is a very sly practice among banks. What does a collateral charge mean to a borrower? The bank will instruct the lawyer to register the title as a running account. More than likely you running account will have a global limit of the property value itself. This doesn’t mean you are going to get this money, it just means that your property is fully tied up. If you choose another lender at renewal, legal fees apply. A second mortgage or Line of Credit can’t be put behind this product because the bank has tied up ALL of your equity. No matter which way you turn, the bank has shackled you to more costs and fees.

The lesson here is that rate is not everything. Product and Strategy is. Borrowers need flexible product to execute strategy.

Contact me for more information or apply online at http://www.mortgageplayground.com

 

 

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No BoC rate hike until Q1 2013: poll

No BOC rate hike until Q1 2013

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.

 

© Thomson Rerters 2012

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BC Assessment Sends Out 10,000 Extreme Value Change Letters for 2012

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.

BC Assessment 2012 Roll - Extreme Value Change Property Letters

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.

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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
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Bank of Canada will most likely hold key interest rate

Canada’s strong economic growth in the first quarter is likely a temporary blip that will give way to more moderate expansion during the rest of the year.

While most analysts agree that should keep interest rates on hold when the Bank of Canada announces it latest policy stance on Tuesday, a number of others are getting nervous about the central bank’s slow pace in normalizing monetary conditions, saying it increasingly runs the risk of fueling higher inflation and destabilizing the economy.

“In order to control prices and avoid wild swings in the economy, we are of the opinion that the Bank of Canada should be more aggressive in the normalization of its monetary policy than what the market expects,” Pierre Lapointe, a global macro strategist at Brockhouse Cooper, said in a note to clients on Monday.

Canada’s gross domestic product expanded at an annualized rate of 3.9% during the first three months of the year, its fastest pace since the first quarter of 2010 when the economy grew 5.6%, according to Statistics Canada.

Falling just shy of the 4% expected by economists, the country’s latest GDP figures were aided by strong growth in the mining and oil and gas industries as almost all major sectors with the exception of retail, and arts, entertainment and recreation.

Business investments in plants and equipment were up 3.2%, the fifth straight increase, while exports were up 1.6% in the first quarter, and imports rose 2.2%.

Jim Flaherty, Canada’s Finance Minister, said the GDP numbers were encouraging when asked about them during a news conference at a Chrysler plant in Etobicoke on Monday morning.

“We knew the first quarter was going to be strong, and it is strong,” he said. “It’s in line with expectations. I’m particularly encouraged by the fact that government capital spending is a smaller part of the growth.”

But Mr. Flaherty, who said he plans on tabling “essentially the same budget” as the one in March that was rejected by the opposition to spark the recent federal election, also acknowledged that Canada’s growth for the rest of the year would be more modest.

Several economists, including David Madani of Capital Economics, agreed that the country’s economic pick-up is not sustainable.

With the temporary boost to growth from higher energy and auto production already realized, Mr. Madani expects second-quarter growth as a low as 1.5%.

He said Canada faces several headwinds and forecasts that slower US economic growth and the strong Canadian dollar will continue to restrain exports, particularly in industries dependent on auto sales and housing construction in the US.

“More importantly, Canadian domestic demand appears increasingly vulnerable to a shaky housing market, where still rising prices test the limits of housing affordability and already high household debt levels,” he said in a note to clients.

Under those circumstances, Mr. Madani said the Bank of Canada is unlikely to raise interest rates anytime soon. Consensus estimates, meanwhile, predict the central bank only raising its key lending rate 25 basis points to 1.25% by the end of the third quarter and to just 1.75% by year-end.

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