The fine print in your mortgage may have costly or irritating restrictions that you won’t know about unless you read or ask a mortgage professional.
Some examples:
* Restrictions on breaking your mortgage before the term is up
* Restrictions on breaking your mortgage for the first 3 years
* A penalty surcharge of 1% for mortgages broken within the first 12 or 36 months
* “Reinvestment fees” (on top of mortgage penalties)
* Interest rate differential (IRD) penalties based on an onerous bond yield calculation
* IRD penalties on variable-rate mortgages (usually IRD penalties apply to fixed mortgages)
* IRD penalties based on a costly posted vs. discounted rate formula
* Inability to port unless the purchase and sale take place on the exact same day (which can be hard to arrange)
* A poor conversion rate guarantee
* No refinances during the first year
* No free switches (for transfer-eligible mortgages)
* Amortization limits of 25 years
* Minimum amortizations of 15-18 years
* Restrictions on converting from a variable rate to a fixed rate for the first six months
* No ability to break your “open” HELOC without a penalty
* Inability to port across provincial lines
* High administrative fees when porting
* 100% clawback of cash-back if the mortgage is broken before maturity
* Requirement for a full banking relationship with the lender
* No lump-sum pre-payment privileges
* No annual payment increase allowance
* Pre-payments restricted to one specific day a year (instead of any payment date)
And the list could go on…
Keep a lookout for restrictions like this when comparing different mortgages.
It’s even more important when sizing up cut-rate mortgages because the lower the rate, the greater the likelihood that a mortgage will be somehow restricted.
from www.canadianmortgagetrends.com
Thursday, September 30, 2010
Monday, September 27, 2010
In a variable at Prime -.10 or higher?
Did you redo your mortgage in the last year or so? Did you choose a variable rate mortgage? Are you in at Prime -.10% or higher i.e. Prime +.20%?
Then it's definitely time to look at a full review of your mortgage. There's potential of HUGE savings in interest by simply doing nothing different than what you're doing right now.
Below is an example of an email I sent to a client not too long ago doing a standard yearly review of their mortgage. One of the many services incorporated for free when you choose me as your trusted mortgage adviser!
Just today I read an article by Yves St-Maurice, Desjardins’ Director and Deputy Chief Economist and one thing that really stood out was this comment - "We’ll likely see no further Bank of Canada rate hikes till spring, and probably no more US rate increases "before 2012..."
---
"Looking back you are in a variable situation at Prime +.30% (3.05% today). In the last year the discounts off of prime have come down quite a bit. We’re looking at Prime -.70% now (2.05%). This is a full percentage point less than what you have now.
Seeing how just yesterday I read a report that the predictions on prime to raise in the next couple years has been dropped to about 1-2%, the thought of you locking in is probably not in your best interest long term. Today’s lock in rate at your lending institution on a five year is 3.99%, almost 2% higher.
Here’s what I propose you should do to take full maximum affect and pay down your mortgage much faster without no changes at all to what you’re doing today.
With the rate being a full 1% lower, the monthly payment would decrease by approx. $96/m. If you kept your mortgage payments at the exact same level you’re at now, you would decrease your overall amortization by 4.5 years! This is a huge interest savings. Now if you were to increase your payments by say $200/m, overall just an extra $100/m, your overall amortization will decrease by just over 8 years! Huge potential for savings.
The cost of doing this and breaking your mortgage is roughly $2,850. This will be recouped within 10 months.
Overall this could be very beneficial to you and your overall goals. And will guarantee to save you a large sum of interest overall, leaving far more money in your pocket."
Sounds pretty good!!
Call or email me for more information and to see if this is the right way to go for you. 604-786-9099 christos@bcmortgageinfo.ca
Then it's definitely time to look at a full review of your mortgage. There's potential of HUGE savings in interest by simply doing nothing different than what you're doing right now.
Below is an example of an email I sent to a client not too long ago doing a standard yearly review of their mortgage. One of the many services incorporated for free when you choose me as your trusted mortgage adviser!
Just today I read an article by Yves St-Maurice, Desjardins’ Director and Deputy Chief Economist and one thing that really stood out was this comment - "We’ll likely see no further Bank of Canada rate hikes till spring, and probably no more US rate increases "before 2012..."
---
"Looking back you are in a variable situation at Prime +.30% (3.05% today). In the last year the discounts off of prime have come down quite a bit. We’re looking at Prime -.70% now (2.05%). This is a full percentage point less than what you have now.
Seeing how just yesterday I read a report that the predictions on prime to raise in the next couple years has been dropped to about 1-2%, the thought of you locking in is probably not in your best interest long term. Today’s lock in rate at your lending institution on a five year is 3.99%, almost 2% higher.
Here’s what I propose you should do to take full maximum affect and pay down your mortgage much faster without no changes at all to what you’re doing today.
With the rate being a full 1% lower, the monthly payment would decrease by approx. $96/m. If you kept your mortgage payments at the exact same level you’re at now, you would decrease your overall amortization by 4.5 years! This is a huge interest savings. Now if you were to increase your payments by say $200/m, overall just an extra $100/m, your overall amortization will decrease by just over 8 years! Huge potential for savings.
The cost of doing this and breaking your mortgage is roughly $2,850. This will be recouped within 10 months.
Overall this could be very beneficial to you and your overall goals. And will guarantee to save you a large sum of interest overall, leaving far more money in your pocket."
Sounds pretty good!!
Call or email me for more information and to see if this is the right way to go for you. 604-786-9099 christos@bcmortgageinfo.ca
Monday, September 20, 2010
BMO's 'low frill's mortgage
You may see this crazy low rate from BMO being advertised out in the market.
As usual things aren't always as good as they seem.
There are so many ties to the mortgage that you as a consumer should be fully aware of.
Here's a few of them:
-The only way to get out of the mortgage is buy a bona fide sale of you home
-I read this morning that you actually have to qualify at a much higher rate of 5.39%. So very hard to qualify for
-Pre-payment privileges are sliced in half
-Max amortization is 25 years which can hinder a strategic plan of obtaining a longer amortization. Read more below on this.
-No skip a payment option needed if really needed. So this may put you in default if the need ever arose.
These are the main reasons why this mortgage may not be for you. Please consult with a professional mortgage broker such as myself to weigh in on ALL your options. Not just one lenders option. Right now I have access to the same rates with all the options!
In regards to the longer amortization as part of a strategic plan.
Especially if you are not paying for the option to have a longer amortization I like to explain to my clients that it's not a bad option to take. The reason is that you will always have that lower payment to fall back on in case you were in need of some extra cash flow per month. Lose your job etc. The key though is to pay your payments from the start at what the 25 year amortization would be.
I myself took a 30 year amortization on my mortgage and have taken advantage of increased payments etc. and have dropped my overall amortization by almost 10 years.
As usual things aren't always as good as they seem.
There are so many ties to the mortgage that you as a consumer should be fully aware of.
Here's a few of them:
-The only way to get out of the mortgage is buy a bona fide sale of you home
-I read this morning that you actually have to qualify at a much higher rate of 5.39%. So very hard to qualify for
-Pre-payment privileges are sliced in half
-Max amortization is 25 years which can hinder a strategic plan of obtaining a longer amortization. Read more below on this.
-No skip a payment option needed if really needed. So this may put you in default if the need ever arose.
These are the main reasons why this mortgage may not be for you. Please consult with a professional mortgage broker such as myself to weigh in on ALL your options. Not just one lenders option. Right now I have access to the same rates with all the options!
In regards to the longer amortization as part of a strategic plan.
Especially if you are not paying for the option to have a longer amortization I like to explain to my clients that it's not a bad option to take. The reason is that you will always have that lower payment to fall back on in case you were in need of some extra cash flow per month. Lose your job etc. The key though is to pay your payments from the start at what the 25 year amortization would be.
I myself took a 30 year amortization on my mortgage and have taken advantage of increased payments etc. and have dropped my overall amortization by almost 10 years.
Canadians in good shape!
Here's some interesting results that were received in a recent study sponsored by Genworth Financial:
Sixty-five percent of homeowners pay off their credit card balances each month (versus 48% of non-homeowners). Furthermore, a quarter of those homeowners with mortgages have managed to make a lump-sum payment or accelerate their mortgage payments in the past year.
Nearly half (44%) of homeowners were able to pay all of their bills and save some money in the past year, suggesting a strong correlation between home ownership and financial fitness.
The Financial Fitness survey was conducted in conjunction with the Canadian Association of Credit Counseling Services. Compared to the same survey undertaken in 2007 when the economy was booming, Canadians are even more likely now to say their financial fitness is good (55% versus 50%).
Other key survey findings show:
• Mortgage holders more likely to have accelerated or made a lump-sum payment include those with incomes $75-$99k (32%) or $100k+ (30%), and women more than men (26% versus 21%).
• 49% of homeowners made down payments of 20% or more on their purchase
• 13% of homeowners say they are in great financial shape
• 12% of homeowners say they have requested a credit report within the past 12 months
• 59% of Canadians say they pay their credit cards in full each month
• 39% of Canadians say that in the past year they were able to pay their bills and save some money. A further 41% were able to pay their bills but not save
• First-time buyers/those who intend to buy a home as well as those requiring mortgage insurance are more likely to have spoken to a financial planner/coach in the past 12 months
Sixty-five percent of homeowners pay off their credit card balances each month (versus 48% of non-homeowners). Furthermore, a quarter of those homeowners with mortgages have managed to make a lump-sum payment or accelerate their mortgage payments in the past year.
Nearly half (44%) of homeowners were able to pay all of their bills and save some money in the past year, suggesting a strong correlation between home ownership and financial fitness.
The Financial Fitness survey was conducted in conjunction with the Canadian Association of Credit Counseling Services. Compared to the same survey undertaken in 2007 when the economy was booming, Canadians are even more likely now to say their financial fitness is good (55% versus 50%).
Other key survey findings show:
• Mortgage holders more likely to have accelerated or made a lump-sum payment include those with incomes $75-$99k (32%) or $100k+ (30%), and women more than men (26% versus 21%).
• 49% of homeowners made down payments of 20% or more on their purchase
• 13% of homeowners say they are in great financial shape
• 12% of homeowners say they have requested a credit report within the past 12 months
• 59% of Canadians say they pay their credit cards in full each month
• 39% of Canadians say that in the past year they were able to pay their bills and save some money. A further 41% were able to pay their bills but not save
• First-time buyers/those who intend to buy a home as well as those requiring mortgage insurance are more likely to have spoken to a financial planner/coach in the past 12 months
Wednesday, September 1, 2010
Variable and fixed rate forecasts
Big bank economists have chopped their rate-hike forecasts again. TD made the biggest adjustment earlier today. It slashed its 2011 year-end overnight rate estimate by one whole percentage point. This underlines how dramatically expectations can change in just a few short months.
On average, major economists now expect a 150 basis point increase in the overnight rate over the next 16 months. Their outlooks, if accurate, imply a 4.25% prime rate by December 31, 2011. Prime rate is currently 2.75%.
Based on a 70 basis point average discount from prime, this suggests 5-year variable rates in the 3.55% range by year-end 2011. That's lower than today's typical discounted 5-year fixed rate.
As for the next rate hike, the signals are mixed. Canadian bond dealers are all expecting a 1/4 point increase at the Bank of Canada's September 8 rate meeting. The financial markets, however, are pricing in just a 30% probability of a hike.
After the next rate increase, most analysts now seem to expect the BoC to pause for a while. "The coming policy pause could now easily last a year," says BMO.
Fixed-Rate Mortgage Forecast
Banks foresee 5-year bond yields climbing 127 basis points in the same 16-month time frame. That would put the 5-year yield at 3.41% by the end of next year.
Assuming a typical 120 basis point spread above yields, this suggests deep-discounted 5-year fixed rates could rise to roughly 4.61% by year-end 2011.
On average, major economists now expect a 150 basis point increase in the overnight rate over the next 16 months. Their outlooks, if accurate, imply a 4.25% prime rate by December 31, 2011. Prime rate is currently 2.75%.
Based on a 70 basis point average discount from prime, this suggests 5-year variable rates in the 3.55% range by year-end 2011. That's lower than today's typical discounted 5-year fixed rate.
As for the next rate hike, the signals are mixed. Canadian bond dealers are all expecting a 1/4 point increase at the Bank of Canada's September 8 rate meeting. The financial markets, however, are pricing in just a 30% probability of a hike.
After the next rate increase, most analysts now seem to expect the BoC to pause for a while. "The coming policy pause could now easily last a year," says BMO.
Fixed-Rate Mortgage Forecast
Banks foresee 5-year bond yields climbing 127 basis points in the same 16-month time frame. That would put the 5-year yield at 3.41% by the end of next year.
Assuming a typical 120 basis point spread above yields, this suggests deep-discounted 5-year fixed rates could rise to roughly 4.61% by year-end 2011.
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