CAAMP 2012

This past weekend we had the chance to attend the CAAMP conference in Vancouver. CAAMP is Canada’s national mortgage industry association and the leading provider of value, service and advocacy for mortgage professionals.

 

www.caamp.org

 

We were fortunate to see many different speakers which all provided a different outlook and value to our industry. Here are a few points we took away from the conference:

• People have a perception that Mortgage Brokers are for people with bad credit. When really Mortgage Brokers are for everyone.
• By 2015 interest rates are estimated to be between 2.5% - 4%.
• In 2013, we may see a decline in housing prices. This is due to the recent mortgage rule changes. (We don’t foresee this happening in Northern B.C. to the affect that it may happen in larger cities).
• Unsecured debt is not a problem in Canada.

We were also presented results from a recent survey conducted by Maritz. Here are some of the key points:

• 83% of homeowners have 25% plus equity in their home.
• 60% of consumers do not have a good or full understanding of broker’s services.
•    5-7 years is the average amount of time that Canadians shave off their original amortization by doing things like pre-payments.
• Funny Stat: Most people say they are comfortable about their debt levels but worry about their neighbours.

Overall we had a great time at the conference. We met many great people and saw some wonderful presenters.

 

Michelle Mohr, Amanda Lang & Jamie Cunningham

Just for a Laugh

 

Happy 4 day week!

 

Understanding Your Closing Costs

When buying a home people should be prepared for all costs associated with the purchase. Here is a breakdown of some of the costs that you may incur when buying a home:

Legal Fees: Usually range around $1000. You can choose either a Lawyer or Notary to complete your transaction.

Home Inspection: Optional but very important as it provides a detailed analysis of the property. It helps educate you on your property and potentially save you money over the long run.

Property Transfer Tax: A fee paid to the Provincial Government for recording a title transfer or a mortgage registration. In B.C. it’s 1% of the purchase price up to $200,000 plus 2% on the portion that is greater than $200,000.

Note: If you are a first time home buyer and meet the first time home buyer qualifications, you can qualify for a full exemption if the property value is not more than $425,000, it’s your principle residence and the property is 1.24 acres or smaller.

http://www.sbr.gov.bc.ca/business/property_taxes/property_transfer_tax/first_Time_home_buyer.htm

Title Insurance: If there is not a survey certificate available on the property then title insurance may be a requirement from the mortgage lender. It provides protection against problems that could be seen on a survey and it also is a way to protect the purchaser against title fraud.

Mortgage Insurance:  This is only needed if you are buying a home with less than a 20% down payment. It can be included in your mortgage.

http://www.cmhc-schl.gc.ca/en/co/buho/
http://www.genworth.ca/homeownership/index.asp
http://www.canadaguaranty.ca/homebuyers

HST: When buying a brand new home you will be faced with paying HST. Sometimes it is included in the purchase price but other times it is not. Make sure to know exactly how it is set out in the contract. There is a rebate that can be claimed if you are purchasing a new home.

http://www.cra-arc.gc.ca/tx/bsnss/tpcs/gst-tps/cnstrctn/nwhsng/bc/menu-eng.html

Property Tax & Prepaid Utilities: If the previous owner prepaid property taxes or city utilities, they will be credited the prepaid portion on closing. If they paid all their property taxes in June, expect a adjustment amount after any purchase closing after June.

Utility Hook Ups: When hooking up hydro or gas you may be required by the service provider to pay fees to have your account set up.

Appliances: This may not be a cost that you will incur if you wrote in the purchase agreement to keep the appliances that are currently in the home. However not all sellers want to leave their appliances behind.

When setting your budget, you also need to consider the ongoing costs that will become a part of your monthly home ownership expenses, which include:

• Home insurance
• Property taxes (they can be added into your mortgage payment)
• Utilities – gas/hydro
• Ongoing maintenance

**These fees will not be incurred by every homeowner and are subject to change.

Mortgage Insurance vs. Term Insurance

You have an accepted offer on a house, your financing has been approved and the last thing you need to do, aside from moving in, is sign the mortgage commitment. While signing the commitment your broker is going to bring up mortgage insurance.

Mortgage Insurance

Mortgage insurance primary function is paying off the mortgage in the event the mortgage holder dies. How it works is you purchase a policy for the amount you owe on your home and if you die, the insurer pays off the mortgage lender. It also will help in times of critical illness or disability. The coverage is optional.

·        Will be offered from your brokers company (example: Invis offers iProtect) and/or the lender who finances your mortgage (example: Merix, MCAP, Street Capital).

·        Offers Life insurance, critical illness insurance and disability insurance.

·        Mortgage Insurance will be wrapped into your mortgage payment.

·        Premiums are calculated based on: age at time of application, initial mortgage balance at time of application. If you are a smoker the premium will increase.

Term Insurance

Term insurance is an insurance contract which will last for a set time period. If the insured were to die during the contract then the beneficiary would be paid out the amount of the term policy. The money can be used to pay off the mortgage however it is the beneficiary’s decision on what they would like to do with the proceeds.

·        Term insurance is offered at investment offices, insurance offices and actually right in our own office.

·        Offers term life insurance, critical Illness and disability insurance.

·        A medical may need to be done to be approved for term insurance.

·        You can decide on any amount you would like to be insured for and for how long.

·        The premium for the insurance is guaranteed to remain the same for the chosen term.

·        Term insurance can cover not only your mortgage, but anything you want. So rather then paying for insurance on your loans & line of credit, you can bundle it all together in one term policy.

Mortgage insurance and life insurance do serve the same purpose but there are differences between the two:

 

·        Mortgage insurance only insures the person(s) on the mortgage, where with term insurance you can insure anyone.

 

·        Mortgage insurance is convenient as it is set up through your lender or broker while doing the mortgage. With a term policy you will have to spend additional time setting it up.

 

·        Mortgage insurance is not portable if set up with the lender. Therefore if your term is up and if you decide to change lenders you will need to re-apply for mortgage insurance. Term insurance will remain with you no matter how many times you change lenders.

 

·        With mortgage insurance the payout is based on the mortgage amount owing at the time of death. A term policy stays the same throughout the term.

 

·        With mortgage insurance the bank is the beneficiary where with a term policy you can name your own beneficiary.

 

There are many factors you need to consider when choosing insurance. Everyone’s needs are different and it is worth looking in to all of the options available.

 

Bank of Canada

You may have heard The Bank of Canada has decided to keep it's interest rate at one percent for the 17th consecutive time today. What does this mean for you?

 

The BOC (Bank of Canada) has control of the overnight rate, which determines the interest rate that major financial lenders and institutions lend and borrow one day funds between each other. When the BOC changes the overnight rate, it changes the cost of short term funds; this in turn will change the lenders prime rate.

 

The overnight rate also influences other interest rates, such as those for consumer loans and mortgages. They can also affect the exchange rate of the Canadian dollar. All variable mortgages are based on prime rate so if a any changes are made it may affect your interest rate.

 

Example:

BOC Overnight Rate: 1%

Bank Prime Rate: 3%

Your Variable Rate: 2.2% (prime -.8)

 

BOC decides to to increase overnight rate by .25%

 

BOC Overnight Rate: 1.25%

Bank Prime Rate: 3.25%

Your Variable Rate: 2.45% (prime -.8)

 

We don't expect any changes to the overnight rate until late 2013. The Bank of Canada has 8 scheduled meetings per year. To view upcoming meetings please check out their website http://www.bankofcanada.ca/monetary-policy-introduction/key-interest-rate/schedule/ .

 

The next scheduled meeting is December 4, 2012

 

Mortgage Loan Insurance

What is Mortgage Loan Insurance?

Mortgage loan insurance is required by lenders when homebuyers make a down payment of less than 20% of the purchase price. The mortgage insurance protects the lenders in case of default but allows homebuyers to get in with a lower down payment. When you are applying for a mortgage and planning to put less than 20% down, you will have to be approved not only by the lender but also the insurer. Currently, there are only three insurers in Canada which include CMHC, Genworth and Canada Guaranty.

It is important to note that although you may have been pre-approved, the approval is only based on your lender and not the insurer. The insurer will only review the application once you have an accepted offer on a home. They may require additional info such as an appraisal on the property or a co-signer. The lender and the insurer work together closely to come up with an approval based on your situation.

To obtain mortgage insurance there is an insurance premium that will have to be paid. The insurance premium can be included in your mortgage or can be paid upfront as a one time fee. The mortgage insurance premium is calculated as percentage of the loan and is based on the size of your down payment.

With the recent mortgage rule changes the insurers are taking more time to review files and being more thorough which is taking more time for an approval.
For more information remember you can always contact us or please take a look at the links below.

 

CMHC: http://www.cmhc-schl.gc.ca/en/co/moloin/moloin_005.cfm

Genworth: http://www.genworth.ca/homeownership/index.asp

Canada Guaranty: http://www.canadaguaranty.ca/homebuyers/

Paying off your mortgage...quick!

Throughout the mortgage process, one question that will be asked is how you would like your mortgage payments set up. There are many options that you can pick from which include, monthly, semi-monthly, bi-weekly, accelerated bi-weekly, weekly or accelerated weekly. We often find that clients put very little consideration into this. However it is a decision that could possibly save you thousands of dollars in interest charges and shave years off your mortgage. If you look at the chart below you will see the difference in amortization interest savings between paying monthly compared to accelerated bi-weekly. This is the first step to paying off your mortgage…quick!

Example: Mortgage $200,000

Term: 5 years

Amortized: 25 years

Interest Rate: 3.09%

	Monthly	Bi-Weekly	Accelerated Bi-Weekly
Payment	$955.76	$441.12	$477.88
Term Interest Cost	$28,588.80	$28,440.43	$28,059.05
Term Interest Savings	$0	$148.37	$529.75
Amortization Interest Cost	$86,723.96	$85,935.25	$75,521.26
Amortization Interest Savings	$0	$148.37	$11,204.21
Years	25	25	22.2

 

Next is taking advantage of the pre-payment options. Each and every time you put extra money onto your mortgage it goes directly to your principle. This means you are lowering your principle quicker and paying less interest in the long run.  Most lenders will allow you to make pre-payments in minimum increments of $100 up to 20% (varies depending on lender) of your total mortgage. As well, you have the option to increase your payments up to 20% (varies depending on lender).

Example: Mortgage $200,000

Term: 5 years

Amortized: 25 years

Interest Rate: 3.09%

	Minimum	Additional $25	Additional $50	Additional $100
Bi- Weekly Payment	$441.12	$466.12	$491.12	$541.12
Amortization Interest Savings	$148.37	$7,450.82	$13,693.71	$23,578.53
End of Term Balance	$171,243.20	$167,733.75	$164,223.47	$157,202.82

 

**This is a fictional example and numbers may be different depending on lenders. It’s worth it to sit down and review your mortgage with a broker and see how you can save money and shave years off your mortgage.**

 

 

Importance of a Pre-Approval

 

One of the first things you should do when you decide to buy a home, even before you start your search, is talk to a Mortgage Broker. Here’s why:

• With a pre-approved mortgage, you’ll have a better idea how much you can borrow, how much home you can afford and what your monthly payments will be.

• Mortgage Broker’s will lead you step by step through the purchasing process and familiarize you with the rules and costs associated to buying a home.

• If you choose a fixed interest rate, you are guaranteed that rate to be held for up to 120-days, so you are protected if interest rates should rise.

• When it comes time to make an offer, you’ll be able to act more quickly.

When you meet with your Mortgage Broker you will need to provide the following documentation:     

 

• A job letter from your current employer stating your wage, position and start date & a current pay stub. If you work over time or are self employed bring in the last 2 years of your income tax and notice of assessments.

• Proof of your down payment and legal fees (3 months worth of bank statements)

• Information on any other real estate you may own. (mortgage statement, property tax notice and rental agreement)

Every situation and mortgage is different so other documentation may need to be provided but that will be discussed in your pre-approval meeting. This will help prepare you for when you find a house and make the process stress free.