About a week ago I had talked about lenders trying to decrease the discount off of prime.
One major lender, one of the largest mortgage lenders in Canada, had tried hoping that others would follow suite.
Well it didn't happen, or hasn't happened as of yet. Some of the lenders that moved slightly are back to where they were just prior.
I believe it was this one lenders kick at the can to try and slow down the variable business as for the lenders they're not huge money makers as a fixed rate is. Currently they are way offside with their variable discount and I can only imagine that they will soon be back to normal.
Wednesday, May 25, 2011
Tuesday, May 17, 2011
Deposits on a home purchase
When you purchase a property you will need to have a certain amount set aside for subject removal that will go towards your down payment on completion.
This money, whether it be $10k or up to $100k+, depending on the value of the home being purchased, has to be provided at the time of subject removal. This can be within a week or two of writing an offer and the offer being accepted.
What you need to know is that you have to come up with this money. Lenders do not generally lend you this money.
You should have the discussion about the deposit with your Realtor as early as writing the offer so you can determine what an amount is appropriate and attainable.
This money, whether it be $10k or up to $100k+, depending on the value of the home being purchased, has to be provided at the time of subject removal. This can be within a week or two of writing an offer and the offer being accepted.
What you need to know is that you have to come up with this money. Lenders do not generally lend you this money.
You should have the discussion about the deposit with your Realtor as early as writing the offer so you can determine what an amount is appropriate and attainable.
Wednesday, May 11, 2011
CAAMP Spring Survey - Interesting Facts
This is the fact sheet for the CAAMP Spring survey that was just released. There's some good information.
There is currently $855 billion in mortgages on principal residences and $215 billion in Home Equity Lines of Credit (HELOC)
• Individuals with HELOCs only have an average 65 per cent equity in their homes
• HELOC prevalence is highest among middle age homeowners
• Equity takeouts amount to $26 billion annually, with most funds used for renovations ($9.4 billion), followed by investments ($5.0 billion)
• The average down payment for a home purchased in the last 12 months was 30%, up from 26% for homes purchased two years ago
• Among all borrowers, 63 per cent have fixed rate mortgages, 30 per cent have variable rate mortgages and 6 per cent have a combination of both
• Less than a quarter (22 per cent) of all borrowers have amortization periods longer than 25 years
• 34 per cent of those who most recently renewed or renegotiated their mortgages did so before their term expired. The average time to pay off a mortgage is 7.4 years less than the original amortization
• 200,000 homeowners paid off their mortgages in the last 12 months
• The average mortgage interest rate discount is 1.44 per cent for those who chose a five year fixed rate mortgage in the last twelve months with the average mortgage rate being 4.04%
• Of those who renewed their mortgages in the last twelve months, 65 per cent are paying lower rates than previously
• 66 per cent of all mortgage borrowers can tolerate a monthly mortgage increase of $300 or more
• Among borrowers who took out a new mortgage in the last 12 months, 27% obtained it from a mortgage broker. Overall mortgage broker share stands at 23%
• Canadian appetite for home buying has returned to pre-recession levels, following a slide over the past three surveys. Almost 60 per cent respondents thought that now was a good time to buy
• Optimism is returning to the market with almost half (46 per cent) of those questioned saying that they expect prices to rise
Here's the final report
There is currently $855 billion in mortgages on principal residences and $215 billion in Home Equity Lines of Credit (HELOC)
• Individuals with HELOCs only have an average 65 per cent equity in their homes
• HELOC prevalence is highest among middle age homeowners
• Equity takeouts amount to $26 billion annually, with most funds used for renovations ($9.4 billion), followed by investments ($5.0 billion)
• The average down payment for a home purchased in the last 12 months was 30%, up from 26% for homes purchased two years ago
• Among all borrowers, 63 per cent have fixed rate mortgages, 30 per cent have variable rate mortgages and 6 per cent have a combination of both
• Less than a quarter (22 per cent) of all borrowers have amortization periods longer than 25 years
• 34 per cent of those who most recently renewed or renegotiated their mortgages did so before their term expired. The average time to pay off a mortgage is 7.4 years less than the original amortization
• 200,000 homeowners paid off their mortgages in the last 12 months
• The average mortgage interest rate discount is 1.44 per cent for those who chose a five year fixed rate mortgage in the last twelve months with the average mortgage rate being 4.04%
• Of those who renewed their mortgages in the last twelve months, 65 per cent are paying lower rates than previously
• 66 per cent of all mortgage borrowers can tolerate a monthly mortgage increase of $300 or more
• Among borrowers who took out a new mortgage in the last 12 months, 27% obtained it from a mortgage broker. Overall mortgage broker share stands at 23%
• Canadian appetite for home buying has returned to pre-recession levels, following a slide over the past three surveys. Almost 60 per cent respondents thought that now was a good time to buy
• Optimism is returning to the market with almost half (46 per cent) of those questioned saying that they expect prices to rise
Here's the final report
Wednesday, May 4, 2011
It's NOT always about the lowest rate - Follow up
To start off. I am in no way putting down any one lender or financial institution. All I'm doing is simply giving you the facts so you, the public, are more cognisant of what truly lies behind a mortgage.
This is some of the not so good that lie behind one lending institutes great low rate mortgage. That is, if you can even obtain that great low rate.
• Interest rate premiums will apply when certain debt servicing requirements are not met and if your credit score isn't as high as they want. (with other institutes I have access to, the rate you see is the rate you get)
• No transfers of your mortgage to a new home without a penalty. The lender will only do a refinance meaning the client must pay their own legal fees. (this is not good. You should be able to take your mortgage with you and do a blend of rates with no penalty. They show you a great rate, however, you may end up paying much more in the end. If you took the rate slightly higher with this option then you would end up way ahead)
• Registers all mortgages as Collateral Mortgages. (See here why these are not good http://gitersos.blogspot.com/2011/04/collateral-mortgages.html)
• Lender does not collect property taxes on the client’s behalf.(Not necessarily a bad thing, however, I would highly recommend this option as making small payments to build up a property tax payment is much easier than waiting until the end of the year to pay one large lump sum)
• Pre-payment privileges are 20% on the anniversary date ONLY. (Most other lenders allow you to prepay up to 15-25% with as many payments a year as needed with a minimum payment of $100 a time. This option is much better as you are continuously paying your mortgage down which means that you are pay less interest overall)
• If the mortgage amount is less than 65% of the homes value then they may be able to waive an appraisal. An appraisal comes with a cost of $250(most lenders I deal with will not need an appraisal. The only time an appraisal is a must is when you put 20% or more down, and it's a rental property or your going under a self employed, stated income program.
• Pre approvals/rate holds are only 90 days not the typical 120
• The branch will do a call and try and sell extra products i.e. life insurance prior to funding
• Clients have to go to the branch and set up an account prior to closing adding extra steps to the process and taking up your time
• The lender may request you to pay out and close revolving credit product(s) i.e credit cards. I've seen an instance where a young client had to CLOSE her only two revolving credit cards with a mere $2,500 limit/balance on each. The credit bureau will be impacted negatively when you close accounts. And then she'll need to re-apply for a new credit card to keep her credit in check, which will then take more points off her score and take up time to do so.
I've also had another client with a line of credit and NO balance and the lender wanted it closed.
This is some of the not so good that lie behind one lending institutes great low rate mortgage. That is, if you can even obtain that great low rate.
• Interest rate premiums will apply when certain debt servicing requirements are not met and if your credit score isn't as high as they want. (with other institutes I have access to, the rate you see is the rate you get)
• No transfers of your mortgage to a new home without a penalty. The lender will only do a refinance meaning the client must pay their own legal fees. (this is not good. You should be able to take your mortgage with you and do a blend of rates with no penalty. They show you a great rate, however, you may end up paying much more in the end. If you took the rate slightly higher with this option then you would end up way ahead)
• Registers all mortgages as Collateral Mortgages. (See here why these are not good http://gitersos.blogspot.com/2011/04/collateral-mortgages.html)
• Lender does not collect property taxes on the client’s behalf.(Not necessarily a bad thing, however, I would highly recommend this option as making small payments to build up a property tax payment is much easier than waiting until the end of the year to pay one large lump sum)
• Pre-payment privileges are 20% on the anniversary date ONLY. (Most other lenders allow you to prepay up to 15-25% with as many payments a year as needed with a minimum payment of $100 a time. This option is much better as you are continuously paying your mortgage down which means that you are pay less interest overall)
• If the mortgage amount is less than 65% of the homes value then they may be able to waive an appraisal. An appraisal comes with a cost of $250(most lenders I deal with will not need an appraisal. The only time an appraisal is a must is when you put 20% or more down, and it's a rental property or your going under a self employed, stated income program.
• Pre approvals/rate holds are only 90 days not the typical 120
• The branch will do a call and try and sell extra products i.e. life insurance prior to funding
• Clients have to go to the branch and set up an account prior to closing adding extra steps to the process and taking up your time
• The lender may request you to pay out and close revolving credit product(s) i.e credit cards. I've seen an instance where a young client had to CLOSE her only two revolving credit cards with a mere $2,500 limit/balance on each. The credit bureau will be impacted negatively when you close accounts. And then she'll need to re-apply for a new credit card to keep her credit in check, which will then take more points off her score and take up time to do so.
I've also had another client with a line of credit and NO balance and the lender wanted it closed.
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