Mortgage Rate Hype

As you have seen in the media, BMO is offering a 5 year fixed rate of 2.99%. This mortgage is a no-frills mortgage product which means they have taken away all of the flexibility of the mortgage to offer you this low rate. This mortgage only allows you 10% pre-payment options (when the standard is 20%) and you cannot pay off this mortgage unless through a bona fide sale.

What the hype should be about is that Mortgage Brokers have many great lenders offering lower rates than 2.99% for 5 years with all of the normal mortgage frills. With these mortgages some of the features include full pre-payment options, portability & it's assumable.

It's worth it to check out your options and don't let the media lead you astray. You may think taking a no-frill product won't affect you, but a lot can change in 5 years so why not take a great rate and have all the mortgage features available to you if you need them.

Purchase Plus Improvements

Can’t find your dream home, buy a house and make it your dream home! Most people don’t realize that you can get additional funds with your mortgage to do improvements.

Purchase plus improvements is a great way to take advantage of low rates and make your house into your dream home. Once you put an offer on a house, you will need to get quotes based on the improvements you would like to complete. It’s important to only pick improvements you know you will actually have completed. We then send the quotes to the lender and they will include the extra funds into your mortgage proceeds. When the home purchase completes the mortgage funds will be advanced however the lawyer will hold back the improvement money. The reason for this is the lender wants to be sure that you complete the renovations and not just take a trip to Hawaii instead. So you will need to hire a contractor who is okay with not being paid until everything is complete or have some funds to pay for everything (get some points on your credit cards), once the improvements are complete the lawyer will then release the funds to you.

Here are a few points to keep in mind when doing purchase plus improvements:

• If going through Genworth as your mortgage insurer the max improvements they will allow is 20% of the purchase price. With CMHC it’s 10% of the purchase price.
• Appliances do not count as improvements to the property.
• Every lender has their own guidelines when it comes to doing purchase plus improvements. Some require an appraisal before and after the improvements are made, some require receipts once complete and others require an appraiser to verify the work is complete.
• Some lenders set a time frame for how soon you have to complete the improvements.
• You will receive the best available rate offered by the lender. Your rate does not get increased because you are borrowing extra funds.

If you would like more information on purchase plus improvements please feel free to call either of us anytime!

Importance of using a Realtor

When purchasing or selling a home using a realtor is extremely benefical. They are experts in real estate and help make the process as easy and stressfree as possible.

Here are some reasons why we strongly support hiring a realtor when making the largest investment in your life:

• They will educate you through out the process. Plus walk with you every step of the way to ensure you understand all details of the property and terms of the contract.
• They know the real estate market, know the area and the history of the area
• They will negotiate on your behalf which helps take the emotion out of it, if you were to do it yourself.
• They make sure you receive top dollar for your home when selling and that you don't over pay when purchasing.
• They will advertise and market you house for you when you're selling. 
• When it comes to putting an offer on a home, the realtor will do up a purchase agreement and ensure you have correct subjects that suit the property you are buying.
• When selling your home a realtor can help you with staging and give your tips on what may make your house sell sooner than later.
• They work for you and at the end of the day have your best interests at heart.

If you have any further questions here are a few realtors you can contact for information.

Mark Dial                                                                                     
Re/max                                                                                            
250-981-3425

Summer Cirko
Re/max
250-649-6789                                                                            

Colin Breadner                                                                                 
Re/max                                                                                              
250-552-3949  

Stacey Herlehy
Doucette Realty
250-552-8828                                                                              
                                                                                                     

Mortgage Check-up

Most people sign up for their initial mortgage, pay their payment as required and forget about the details until renewal time. A mortgage is the biggest debt you’re most likely going to have and it should be something you review at least once a year just to make sure you are maximizing your potential.

Here are a few examples to explain what we mean:

·       Payment frequency – Perhaps when you signed your mortgage documents you were being paid monthly, so it was easier to make your payment monthly. However now that may have changed and you’re paid bi-weekly. Changing your payment frequency is great way to pay off your mortgage faster and save on interest.

·       Refinancing – Maybe in the last few years you have incurred some personal debt. That debt may have interest rates up to 29% if its credit card debt. Looking to consolidate it into your mortgage may be a good option and we can help you decide that.

·       Rate change – Rates may have changed drastically and it may be in your best interest to see what the cost would be to lock in at a lower rate.

·       Pre-payment options – Most lenders offer pre-payment privileges and it may be something you forgot you even have available to you. A mortgage check up is a good time to have a refresher on that info and see if you can take advantage of them.

No matter who your mortgage is currently with we can perform a mortgage check-up with you. We provide unbiased advice and work to save you money. By reviewing your mortgage annually it is the first step in becoming mortgage free faster.

Breakdown on Fixed and Variable Rates

A common question mortgage brokers receive is what is the difference between fixed and variable rates? Deciding between the two options when getting your mortgage can be a hard decision.

A fixed rate mortgage will guarantee you a locked in rate for whatever term you choose. The rate will remain unchanged through out that term which allows you to always know what to expect when it comes to your required payment.

A variable rate mortgage is based on prime rate. You can receive a discount off prime rate or you may have a premium added to the rate. You will receive a variable rate for a set term however if prime rate changes, so does your interest rate. The Bank of Canada determines where prime rate is set. They have 8 scheduled meetings a year to determine if any changes should be made to prime rate. This means your mortgage payment can fluctuate throughout the term. With a variable rate mortgage you can lock in to a fixed rate term at anytime, however you will be locking in at present day rates offered. Variable rate may not be the best choice for you if you feel you will always be worrying about when you should lock in.

There are different situations when either option may work better for you. The penalties do differ between fixed and variable. With a fixed rate mortgage your penalty could be either 3 months interest or interest rate differential, where with a variable rate mortgage it will only be 3 months interest. It is always a good idea to refer to a mortgage broker to help gain insight on what may work best for you.

Co-signer vs. Guarantor

When getting a mortgage you may be asked from either the lender or mortgage insurer to include a co-signer or guarantor.

Both have the same obligation to pay another person's mortgage if the primary applicant(s) fail to do so. However a co-signer will be put on the mortgage and also on title to the property, where as a guarantor will be put on the mortgage but not on title.

The reasons you may need a co-signer or guarantor:

-          bruised credit or lack of credit

-          income qualification

-          job stability

-          to add strength to the deal

If you are required to add a co-signer or guarantor they will need to have a full credit application taken and also provide supporting documentation. Some lenders don’t allow guarantors so the only option may to be to add a co-signer.

When that time comes to remove the co-signer or guarantor, you will need to do a full credit application with your lender. If you qualify on your own then the lender will move the mortgage into your name. If you had a co-signer then you will also need to visit a lawyer to have your co-signer removed from title. If you had a guarantor you will just need to take their name off of the mortgage. Your mortgage broker will counsel you on what to do in order to remove the guarantor or co-signer.

If you have any questions please do not hesitate to contact us.

Mortgage Penalties 101

It's important to understand all aspects of your mortgage prior to signing. If you choose a closed term you are making yourself subject to penalties if you decide to pay out your mortgage prior to the term being up. You should be aware of how these penalties could be calculated.

What could cause you to be penalized?

• Paying off your mortgage prior to the maturity date.
• Going over your pre-payment privilege amount per year. For example if your lender allows you to do lump sums of up to 20% per year and you put down more than that.

There are two different ways of calculating a penalty:

Interest Rate Differential (IRD)
The calculation of interest rate differential will depend on the lender and the terms of your mortgage contract. It's "an amount based on the difference between two interest rates. The first is the interest rate for your existing mortgage term. The second is today’s interest rate for a term that is similar in length to the time remaining on your existing term. For example, if you have three years left on a five-year term, your lender would use the interest rate it is currently offering for a three-year term to determine the second rate for comparison in the calculation." http://www.fcac-acfc.gc.ca/eng/resources/faq/qaview-eng.asp?id=285

Three Months Interest Penalty
This is calculated based on your balance of your mortgage on the date you want to pay it off. They will use that balance to calculate 3 months worth of interest and that will be your penalty.
For example: Mortgage amount $200,000
                      Interest rate 3%
                      Penalty would be $1500

Some lenders also prohibit you from breaking your mortgage early unless you have a bona fide sale. These mortgages are generally known as "no frills mortgages". So be aware of these conditions prior to accepting the mortgage.

Refer to these websites to see an estimate of your penalty.

• Bank of Montreal
• CIBC
• ING Direct
• Manulife Bank
• Royal Bank
• Scotiabank
• TD Canada Trust
• National Bank of Canada

If you have any questions please do not hesitate to contact us.

That low rate mortgage could actually cost you more!

Cheapest is not always best. We know that’s true when we’re shopping for anything else. But we still tend to believe that lowest rate is the one and only factor in choosing a mortgage.


Most Canadian homeowners would be shocked to discover that their low-rate mortgage could actually cost them more in the long run. Why? Because the right mortgage is about a lot more than just rate. It’s true that even a small reduction in rate can mean interest savings over the life of your mortgage. And mortgage brokers are experts at seeking out competitive rates from a wide range of lenders. But they also look deeper. Sometimes those cut rate mortgages come with higher fees, penalties, or restrictive terms, which could prove more costly over the long term than a slightly higher-rate mortgage with flexible terms. One of the best ways to save interest, for example, is to use pre-payment options. If you get a quarterly bonus, a tax refund, or a seasonal income boost, then you have some excellent opportunities to slash your mortgage costs. Putting extra money against your mortgage principal could save you thousands of dollars in interest. If your cut-rate mortgage doesn’t permit pre-payments, that’s a huge missed opportunity. We will help determine the features and privileges that best meet your personal situation, looking at:

 

· Refinancing penalties

· Fixed vs. variable rate 

· Term  

· Pre-payment options

· Payment flexibility

· Restriction

· Fees

· Portability

· Assumability 

 

Most people spend more time choosing the right car than choosing the right mortgage, although it’s likely the largest expense they'll likely ever undertake. Make sure you have a mortgage that is custom built for your personal situation. Cheapest isn’t always best. And obviously the most expensive mortgage is rarely the best choice either. But the right combination of rate and features – matched to your needs – is the fastest route to mortgage freedom. It’s our job to help you with that route planning: a map for your financial future. Whether you’re buying your first home, getting ready for renewal, refinancing a mortgage, taking out some equity for debt consolidation, renovations, or investing – it’s a good time to get some fresh, timely, expert perspective.

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.**