Canadian Mortgage Blog

Recession over, says Bank of Canada

2009-07-24T09:31:00.000-06:00

But unemployment expected to increase

There is a light at the end of the economic tunnel with the Bank of Canada announcing the end of the recession.

After contracting since the last quarter of 2008, the economy will grow by an annual rate of 1.3 per cent from July to September, stated the bank's quarterly Monetary Policy Report. This is in stark contrast to the bank's prediction in April that the economy would shrink by one per cent in the same period.

By the fourth quarter, the bank predicted the economy should be growing at a rate of three per cent.

"Stimulative monetary and fiscal policies, improved financial conditions, firmer commodity prices, and a rebound in business and consumer confidence are spurring domestic demand growth," stated the bank's report.

"However, the higher Canadian dollar, as well as ongoing restructuring in key industrial sectors, is significantly moderating the pace of overall growth."

If the bank's forecast comes true, the recession will have lasted just nine months.

However, Bank Governor Mark Carney cautioned employment won't bounce back as quickly. In fact, he predicted unemployment would continue to climb.

Scotia Branch & their Life Time Senior Customer

2009-07-21T07:09:00.008-06:00

Recently Christine Hanson and I had some clients that were seniors. Christine was worried when they said they were going to go to their local Scotiabank branch to get the short term mortgage they required for their purchase, while they waited for the sale of their free and clear existing home to happen. Christine has been a real estate agent since the 90's, and knows well enough that it is a less efficient, streamlined process through a branch. This time, however, that wasn't the half of it!

The clients were 88 & 63 years old. Mr. had 3 great pensions, equaling more than enough to qualify them for the mortgage. The loan officer and the branch he has dealt with for-ever, wanted him to get a letter from his doctor, indicating that he was in good health. Keep in mind this was a 6 month term --- and they owned their home FREE and CLEAR (no mortgages registered on title).

Christine called me and asked if this was normal, and well.... no? We both had never heard of this in our entire careers? What was going on? On condition day, Christine called me and asked if I could help.

I actually spoke to my underwriter at..... yes! Scotiabank broker services, and she had the mortgage written up and finalized in less than 24 business hours.

What is the lesson? Beware of bank and credit union branches. When they place irregular conditions on your mortgage financing, OR they decline you, get a second opinion from a broker. We typically have much MORE experience & education than a branch 'loan officer' (who is not a licensed expert because they fall under the "Bank Act" - therefore no education or training).

I am very happy to say our clients are thrilled with their new home purchase and waiting for Christine to sell their existing home in Calgary.

Real Estate Agent & Mortgage Broker Services

2009-07-19T08:18:00.005-06:00

I have been a mortgage professional for seven years, licensed in both Alberta and British Columbia. Through the years I have worked with some very good real estate agents, and some not so great. The best real estate agent that I have ever done business with, Betty Anne Tarini is moving to Kelowna and taking her great customer service with her. This saddens me, because I was always very comfortable with her on my team.

Because of this, I have decided to get my real estate license, and service my own clients. This will be in addition to doing mortgages as well. I am very happy to be able to offer a full service real estate service to my clients, beginning with a pre-approval and ending with a new home or home sale!

I will be licensed and start working as a realtor at the end of August, so if you find yourself in need of a realtor with many years experience in Real Estate - don't for get me!

Lowest Rate doesn't always mean BEST mortgage product

2009-07-19T07:55:00.004-06:00

Wow! What a summer in Calgary so far. Calgary Stampede has come and gone...

and as a locally born Calgarian - I can say "thank god its over!" The highlight of my week was being invited to meet Kenny Chesney after his concert - that one will go down in my history books!

What's happening with Real Estate? Well, apparently there are a lot of things shaking. Sales are up and housing prices are slowly climbing back up. Good news, right? Well, if you are a first time buyer .. maybe not so much. It is still a buyers market, but with rates slowly creeping back up the mortgage market is a frenzy of competition.

Over the last few months I have lost a substantial number of loans to the banks, at the branch level. This is unprecedented... don't get me wrong, as mortgage professionals, we were accustomed to losing business to RBC, who has been notorious in the past for reducing their rates well beyond anything we can do, just to get the "deal".

What I see happening with the first time buyers and sometimes the move up buyers, is that banks and credit unions at the branch level are discounting the lowest discounted rates we can offer. What these buyers are not always aware of, is that these products are quite often a wolf in sheep's clothing. If you go to the branch to get a mortgage, be careful to ask these key points:

What is my payout penalty if I sell my home, or refinance before the end of the term? All fixed rate mortgages should come with a penalty of 3 months interest or IRD, whichever is greater. Beware of mortgages that do not allow you to payout your mortgage early.

What are the pre-payment policies with this mortgage? Most mortgages offered in Canada come with either a 15/15 or 20/20 pre-payment allowance. What this means is you are entitled to increase your monthly payments by up to 15 or 20% AND you can pay up to 15 or 20% of the ORIGINAL mortgage amount every calendar year. Beware of mortgages that do not allow this.

The lowest discounted rates out there, will sometimes exclude these very crucial policies. Therefore, not all the lowest rate products, are really the best products for you. If you want the best advice, service and turn around times, give me a call.

**I live for referrals, if you know anyone that may benefit from my free service, feel free to pass on my contact information!

Understanding the 5% Free Down Payment Program

2009-05-19T10:11:00.014-06:00

Zero Down Payment Mortgages are Gone.
So isn't the 5% down payment program the same thing?

In a nutshell, the answer is yes and no. Let me explain.

Zero Down Payments gave buyers the lowest discounted rates with an exorbinately high CMHC or Genworth Insurance premium, sometimes as high as 7%. That equates to well over a normal down payment for most people. In effect, what was happening with the Zero Down Mortgage product, was that lenders were loaning buyers 100% of the purchase price PLUS the (up to) 7% insurance premium, resulting in a mortgage amount of 107% of the value of the property. This is not a good thing, especially in an unstable market.

The 5% FREE Down Payment program is totally less risky for the lender. If you have excellent credit, and demonstrated job stability, you may qualify. The interest rates charged for this product are NOT discounted, they are Bank Posted.
(see my website rate chart for today's posted rates)

The CMHC and Genworth Insurance premiums are only 2.90% (+ .20 for every 5 years you go up over the 25 year amortization), so it is very reasonable. What this does is enable the lender to protect their interest, and the insurers are confident that there is some equity in the property when the consumer purchases the property. The lenders will actually give the seller, the 5% down payment. There are stipulations that involve you paying back a portion of that 5% down payment, if you sell your property before the end of the first term. Terms are ONLY 5 year and 7 year fixed rate mortgages.

1.5% of the purchase price, must be available for potential closing costs. You may not have been able to save 5% down for a purchase, but lenders and insurers still want to see this amount in your account, for closing costs and any unforeseen costs that may arise from your purchase. You must demonstrate that you are ready and able to cover any costs upon closing. So be prepared to show this amount available in your bank account, it cannot be borrowed or gifted.

For Example: If you are buying a condo for $275,000 you must show $4,125 available in your account for closing. You do not need to give this money to anyone, just prove you have it available in case you need it.

Hope this program is a little easier to understand now.

New Home Buyers Need to Understand Amortizations

2009-05-19T09:12:00.000-06:00

THERE IS A LARGE misunderstanding among new home buyers about extended amortizations.

An amortization should be looked at two ways:

1. As a first time home buyer, an extended amortization can enable you to get into a home that you otherwise would not qualify for, due to limited or lower income. This in no way means that you will take 30 or 35 years to pay off that mortgage. In Canada, we have TERMS with our amortization schedules. You choose a TERM, i.e., 3 yr fixed or 5 yr fixed, or 5 yr variable, etc. At the end of your TERM, you will be able to renew AND renegotiate your rate and amortization. So, let’s say that in the 5 years of your TERM, you get pay increases, or other income that will allow you to afford a lower amortization. It is at the end of the existing term that you would request it be lowered.

2. The second use of an amortization is the opposite. Let’s say you have sold your existing home and realized a large equity appreciation (profit). You are using that appreciation (money) as a down payment on your next home. This larger down payment on a move up home, allows you to seriously reduce your amortization and start planning for mortgage freedom. This is when you sit down with me and we discuss the many strategies that are in place to pay your mortgage down as quickly as you can.