An interesting article was published in the Globe & Mail last week regarding mortgage prepayment penalties and the onerous nature in which the Big Banks calculate theirs.
Statistically, 65% of mortgages will be broken and borrowers will pay a penalty before the five year term is up.
Many people think that the differences in how lenders calculate fixed-rate mortgage penalties are all the same. This is simply not the case.
In the current rate environment, when fixed rates are more favourable for borrowers than variable rate mortgages, it’s important to know that being with a chartered bank may potentially cost you a lot more in the end.
I don’t believe that the vast majority of Canadian mortgage borrowers have any idea that there are significant differences in the way fixed-rate mortgage penalties are calculated, and the largest Canadian lenders, have been in no hurry to explain it to them.
A few reasons mortgages are broken early;
As with entering just about anything in life understanding where the exits are and just what is involved in getting through them is often the most important part of the process.
A conscientious and well informed independent mortgage planner should be able to explain how penalties are charged by any lender they are recommending.
The First Time Home Buyers Incentive officially came into effect last week and will start providing interest-free shared-equity loans to interested buyers in the form of down payment assistance.
To recap how the program works, participants must put down at least 5% of the home’s value with their own money, while the government (through the Canada Mortgage and Housing Corporation) would contribute an additional 5% of the down payment if the purchase is an existing home, or 10% if it is a new build.
The buyers don’t need to make any monthly payments, though the loan must be repaid after 25 years or when the home is sold.
CMHC also shares proportionately in any future gains or losses in home value. ie. they put in 5% now, they get 5% of whatever the value is when the loan is being repaid.
Most people come to me while they are in the process of shopping around for the lowest rate on their mortgage.
Looking for the lowest rate is what everyone is taught to do.
Rarely do people know that the mortgage rate is only ONE of the factors to consider when shopping for a mortgage. And if they are not shopping around it is because they “trust” the bank they deal with – but should they?
Life is busy, and shopping for a mortgage can be a daunting task.
I work for you. My job is to dive in to find out your financial goals and then match those goals with the best lender for your situation.
As an Accredited Mortgage Professional, I keep up to date and educated on the most recent information such as;
When shopping for the best mortgage, most Canadians stop too soon, and they only compare the rate and miss many more valuable comparables such as:
The biggest savings is often found where people don’t look, in the fine print.
The fine print in a mortgage is hard to understand, to begin with, not to mention trying to compare one bank’s fine print to another.
I can prove that there is anywhere from $35,000.00 – $50,000.00 or more in fees and higher interest costs over 10 years of your mortgage, separating the worst lenders from the best lenders.
This is my value, and this is what I can bring to the table.
The advice that you need to avoid huge penalties and fees, the simplicity of selecting the right lender for your situation with the lowest rate all while saving you loads of time trying to learn all this on your own.
I find the right lenders and show you your options, and you get to choose from there.
The lender that you pick then pays me for helping to put it all together.
You see, I save them time and money as well, and in return for that savings, they pay me for my services, so you don’t have to.
Most of the lenders pay the same or are so close; there is little to no financial advantage to me recommending one lender over another.
All of This Is To Say:
You get the advice you deserve, the bank saves time and pays me for my services.
This is a win, win, win for everyone involved.
My experience with matching clients with lenders has given me a vast pool of expertise. Practice makes perfect – and I am a professional when it comes to selecting the ideal mortgage for you.
If you have any mortgage related questions, reach out to me today, and I can answer them for you!
The decision may not be as hard as you may think. A balanced approach to both investing and debt reduction may provide you with the best
The investing world uses dollar-cost averaging. In the mortgage world we use mortgage payment optimization to achieve the same effect. Reach out to me, and we can automate additional principal payments to your mortgage and knock years off your amortization, Which will save you thousands of dollars in interest.
(Special) – The banks are very busy these days with Canadians lining up to make their annual Registered Retirement Savings Plan (RRSP) contributions. While contributing to your RRSP for retirement generally is a good idea it may not necessarily the best option for everyone in all circumstances.
Many Canadians at this time of year may be facing some difficult financial decisions, such a choosing between coming up with a lump sum of money to contribute to their RRSP or paying down the mortgage and/or contributing to a Tax Free Savings Account (TFSA).
One of the difficulties many Canadians have is coming up with a lump sum of money at one time to put in their RRSP. That’s why many advisers suggest people set up a system of making regular automatic contributions to their RRSP, or other retirement savings vehicles like a TFSA.
Automatic saving allows you to benefit from dollar cost averaging. This is an investment strategy of buying regular amounts of mutual funds or other investments every month or week, limiting exposure to market volatility and allowing investors to purchase more when markets are down and less when markets are up.
Financial experts would probably agree that paying down mortgage debt is a good idea, but realistically people should take a balanced approach and save for their retirement as well.
Scott Evans, an adviser with BlueShore Financial in Vancouver, says interest rates are an important factor in the decision whether to pay down the mortgage or contribute to your RRSP.
The Bank of Canada is slowing down rate increases and if you expect a higher rate of growth from investments than the rate of interest you are paying on your mortgage, then you may want to put more in your RRSP and less toward your mortgage.
“It’s not only about your objectives but your risk tolerance level and the rates you are paying,” Evans says. “It’s all about what you are comfortable with and what’s going to let you sleep at night.”
The RRSP and the TFSA both are effective financial savings tools and strategies but they serve different purposes and have different tax treatments, which can determine which one is right for you.
In general, your marginal tax rate — tax on income including government-tested income such as Old Age Security — will determine whether it’s better to invest in an RRSP or a TFSA.
If you expect that your tax rate will be lower when you retire than it is today, then an RRSP is probably best but if you expect to be in a higher tax bracket when you retire than you are now, the TFSA is probably the best option.
The reason is that contributions and earnings accrued in your RRSP are not taxed until they are withdrawn, which usually is not until retirement, at which time you probably will be in a lower tax bracket than you were in your working years.
Age also is a consideration.
Younger people these days generally are using a TFSA to save money because their incomes are often too low to take advantage of the tax deductions of contributing to an RRSP. As their careers develop and their incomes increase, they then can begin contributing to their RRSPs.
Focusing on saving and paying down debt at the same time may seem contradictory but a financial professional can help you find the balance that is right for you.
“Make sure you have and use the correct savings vehicles and your investments and financial strategies match your goals and tolerance to risk,” Evans advises. “It’s all about what you’re comfortable with.”
Talbot Boggs is a Toronto-based business communications professional who has worked with national news organizations, magazines and corporations in the finance, retail, manufacturing and other industrial sectors.
Copyright 2019 Talbot Boggs
Talbot Boggs , The Canadian Press
The pronounced downturn in the country’s real estate market has not been enough to get the Canada Mortgage and Housing Corporation to lower the red flag it has been flying for the past nine quarters. The housing agency continues to see a high degree of vulnerability in the overall market.
The Canada Mortgage and Housing Corporation has declared the overall Canadian housing market to be “vulnerable” for the tenth consecutive quarter. This assessment factors in overall housing demand, pricing, new housing startups and other economic factors to determine the overall health of the Canadian housing market.
OTTAWA — Canada Mortgage and Housing Corporation says the country’s overall real estate market remains “vulnerable” despite an easing in overvaluation in cities like Toronto and Victoria in the third quarter.
The federal agency says this is the tenth quarter in a row where it has given the overall Canadian housing market a “vulnerable” assessment.
CMHC’s finding is based on a number of factors including the level of imbalances in the housing market related to overbuilding, overvaluation, overheating and price acceleration when compared with historical averages.
It says it has changed Toronto and Victoria’s overvaluation rating from high to moderate when it measured it against factors such as population growth, personal disposable income and interest rates.
The degree of overall vulnerability remains high in Hamilton, Ont., and Vancouver, where the housing market has cooled in recent quarters but property prices remain high compared to these economic fundamentals.
The Canadian Press
Getting your mortgage pre-approved will make everything easier in the long-run, but there are some things you should hold off on doing if you’re in the middle of a pre-approval period.
If you are looking to get pre-approved in Abbotsford or Chilliwack, start here first:
When you think of the first steps involved in buying a home, you’re probably thinking about talking to a real estate agent and viewing homes. In fact, these aren’t the first steps towards buying a home. The first steps happen months before, in the office of your mortgage broker.
That’s right, the very first step to buying a home should be applying for mortgage pre-approval. Applying for mortgage pre-approval in advance will allow you to address problems with your application, avoid embarrassing situations, and side-step the potential for financial hardship.
One of the key benefits of early mortgage pre-approval is that for the first time you’ll have an accurate view of your buying power. Your mortgage broker will use your income information and your down payment information to determine your maximum purchase price, and you’ll have a firm idea of how much home you can afford.
Once you know your maximum purchase price, you’ll know whether your buying power matches the types of homes and neighbourhoods you have in your sights.
If it doesn’t, you can increase your down payment, which will increase your buying power. There are three primary ways to increase your down payment amount.
First, you could save more money. The biggest drawback to this method is that it typically takes the longest amount of time.
Second, you could ask for a financial gift from your family. About 15 percent of homes purchased between 2014 and 2016 used a down payment gift according to the latest stats from Mortgage Professionals Canada.
Third, you could take advantage of the Home Buyers’ Plan, which is a government program that allows first-time homebuyers to borrow up to $25,000 from their Registered Retirement Savings Plan (RRSP) to put towards their home down payment. The extra $25,000 could increase your buying power significantly.
Let’s say you had saved a $25,000 down payment, and have a combined family income of $125,000. Your maximum purchase price is $500,000. But if use the Home Buyers’ Plan and double your down payment to $50,000, your maximum purchase price will increase to $634,100. In some neighbourhoods that may be the difference between buying the home of your dreams and making some serious compromises.
The money you withdraw from your RRSP under the Home Buyers’ Plan can be used for your down payment, closing costs, or even to purchase furniture after you move. The money must be repaid over a 15-year period.
Whether you take the time to save more money for your down payment, ask your family for a monetary gift, or take advantage of the Home Buyers’ Plan, applying for early pre-approval will give you a clear idea of how much home you can afford so that you can adjust your expectations accordingly.
Applying for early mortgage preapproval can expand your home buying options, especially if you weren’t open to a home in need of renovations. Applying for pre-approval can give you a leg up on your application for the Canadian Home Renovation Plan, which allows homebuyers to finance an additional 10% of the total purchase price for home improvements or renovations. The maximum amount you can finance is $40,000, and this amount is added to your mortgage amount and paid off over time.
With up to $40,000.00 available for renovating your home, there are limitless ways to customize your home to your liking. What renovation would you do, Kitchen Bathroom, or new flooring?
So if you’ve previously turned away from homes in need of new kitchens or bathrooms, the Canadian Home Renovation Plan could help you turn that no into a yes, and expand your home buying options dramatically. The program requires you to communicate with contractors and obtain quotes, so starting early is a good idea.
While Canada has been living in the era of ultra-low interest rates for almost a decade, mortgage interest rates have been slowly creeping up over the past year and a half. If you know you want to buy a home soon, and you want to take advantage of today’s low rates, applying for mortgage pre-approval will help you achieve this goal. Mortgage pre-approval comes with the option to lock in a specific mortgage rate for a certain number of days, usually 120 days. Rate holds are usually applied to fixed-rate mortgages. If rates rise during your rate hold, you are entitled to the lower rate. If rates drop, your mortgage broker will renegotiate the lower rate on your behalf.
Most people are aware of down payment requirements when it comes to searching for a home, but what about closing costs? Closing costs include legal fees, land transfer tax, property taxes, home inspection fees, and more. A good rule of thumb is to budget between 1.5% and 4% of the selling price for closing costs.
If you haven’t budgeted for closing costs yet, now is the time to start. If your home buying budget is $300,000, you’ll need at least $4,500 saved for closing costs, on top of the $15,000 minimum down payment.
When you apply for mortgage pre-approval, your mortgage broker can supply you with a list of common closing costs for your area, and advise you on whether you have enough money saved. If you don’t, an early mortgage pre-approval means you have plenty of time to get your ducks in a row before you begin searching for your new home in earnest.
A good mortgage broker will provide you with a checklist of everything you need for your final mortgage application, but going through the pre-approval process is a good way to determine whether there are any red flags to address right away.
Common items like proof of down payment, income verification, and your credit score will all be checked during the pre-approval process, which will give you time to rectify any errors well in advance. Your mortgage broker will also advise you on common mistakes to avoid between getting pre-approved and final approval. Common mistakes to avoid include:
These are major life changes that can affect your ability to qualify for a mortgage. In most cases, you should wait to make these life changes until after you become a homeowner.
Your credit score is a major part of your mortgage approval, so the time to check your credit score and report is during the pre-approval process.
You can order a copy of your credit report from one of the two major credit reporting agencies in Canada: Equifax or Transunion. Alternatively, you can request a free copy of your credit score and report from a company like Borrowell.
It’s important to ensure the information listed on your credit report is correct, and if you catch any errors, report them immediately to both credit agencies. Common mistakes include:
Credit accounts that are not attributed to your account
Credit accounts that are attributed to your account but do not belong to you
Some errors, such as a misspelt name will not directly affect your credit score, but others, like misattributed credit accounts, can negatively affect your credit score. Since your credit score is an integral part of the mortgage pre-approval process, it’s important to get these errors fixed promptly. The process of fixing errors on your credit report and seeing the change reflected on your credit score can take up to six months, which is why it’s a good idea to apply for mortgage pre-approval early.
In all of these cases, getting early mortgage pre-approval will take the pressure off and give you time to make sure you are ready for the home buying process. Buying a home is stressful, and early mortgage pre-approval helps alleviate some of that stress.
If you’re looking at buying a condo in Abbotsford or Chilliwack this year, there are a couple other considerations if you have pets. Not all condos are pet-friendly. Some condo complexes even ban pets outright, or sett limits on number, breed or size. Prior to submitting an offer, it’s important to research the condo corporation’s by-laws and procedures to ensure you don’t have to make the choice between the home of your dreams and your furry family member.
Learn more by reading my article here: https://www.clearhome.ca/links/?b=MattRobinson&l=1802
Congratulations on making the decision to become a homeowner. Owning a home has a lot of added benefits such as artistic freedom, more privacy, tax deductions, equity, and stable payments. Before you can start reaping these benefits, however, you must first find your dream home. This can be done by familiarising yourself with the current market. As your Chilliwack mortgage broker, Matt Robinson with Dominion Lending Centres can update you with the current residential trends, and inform you on when the best time to buy is.
According to the Canadian Real Estate Association, the number of homes sold in April 2018 was 361 units, which is a 3% decrease from April 2017. Comparing the homes sold from January to April this year was 1,108 units, which is a 2.4% decline from the year prior. In addition, the average price of homes sold in April was $533,020, which is about a 16% increase from 2017, and on a year-to-year basis, the average sold price was $516,393, which is a 17.5% increase from last year.
Zolo.ca, states that the median listing price for singe-detached homes was $662,400, the median price for condominiums was $253,850, and the price for townhomes was $446,000. The change in price per year has increased 6.9%, and comparing asking prices from May 2017 to the present, has since increased 24.2%.
If you are looking to buy a home and obtain a Chilliwack mortgage, now would be the time before the market continues to increase. You could even use past residential pricing as a negotiation tool for cheaper rates and better deals.
Get Started Today
For more information on the current residential market, please contact your Chilliwack mortgage lender. With rates constantly fluctuating, Matt Robinson can go through your finances, let you know your affordability, and suggest when the best time to buy would be. His team at Dominion Lending Centres would love to work with you and help finance your dream home. So don’t wait, call his office today to get started at 604-852-1703.
As your local Abbotsford mortgage lender, I understand the confusion behind understanding mortgage rates and why they fluctuate. Mortgage rates can be determined by a number of different factors including, but not limited to:
Being aware of the current market and understanding how these factors can affect the rise and fall of interest rates can help determine what the cost of your Abbotsford mortgage will be. For more information on factors that affect the economy, please contact Matt Robinson at Dominion Lending Centres at 604-852-1703.
Fixed Rate Mortgage
A fixed-rate mortgage is where your monthly rates are set and will never change throughout the duration of your loan term. These rates are determined by the Government of Canada bond yields. Bond prices and bond yields have an opposite effect on each other. This means that if bond prices are decreasing then bond yields are increasing. Bond prices will decrease if the economy is doing well.
Bond yields have a direct relationship with fixed rates. So if the economy is doing well then bond prices are decreasing, bond yields are increasing and fixed rates are increasing. If the economy is booming then consumers are purchasing more, which creates a higher demand. An increase in demand means an increase in rates.
Variable Rate Mortgage
Variable mortgages have rates that can fluctuate month to month, which is dependent on the lender’s prime rate. The Bank of Canada determines these rates since they choose the target overnight lending rate. The overnight lending rate is the interest banks accrue when borrowing or lending against themselves. If the overnight rate changes then so do the cost of borrowing and lending, which affects the prime rate. Variable rates are influenced by the prime rate, which means if the prime rate increases, then so will your variable rate.
To get a more detailed explanation of mortgage rates and how they fluctuate, please contact your local Abbotsford mortgage broker today. Matt Robinson is the local broker that will educate you and help guide you throughout the home loan process. So don’t wait, call his office today at 604-852-1703 to get started.